ITEM 1. DESCRIPTION OF BUSINESS.
GENERAL
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. As of March 23, 2001, Roberts Realty owns a 66.9% interest in the operating partnership and is its sole general partner. We expect to continue to conduct our business in this organizational structure, which is sometimes called an "umbrella partnership" or "UPREIT."
As of March 23, 2001, we own seven existing multifamily apartment communities containing a total of 1,481 apartment homes and three communities under construction that will contain approximately 854 apartment homes. Seven of our communities - River Oaks, Plantation Trace, Preston Oaks, Highland Park, Crestmark, Addison Place phase one, and Bradford Creek - containing a total of 1,481 apartment units, are stabilized. Addison Place's second phase, totaling 285 apartment homes, Ballantyne, totaling 319 apartment homes, and Old Norcross, totaling 250 apartment homes, are under construction. All of our communities are located in metropolitan Atlanta, Georgia, except the Ballantyne community, which is located in Charlotte, North Carolina.
We consider a community to have achieved stabilized occupancy on the earlier of (a) attainment of 95% occupancy as of the first day of any month, or (b) one year after completion of construction. As of December 31, 2000, we owned eight stabilized communities containing a total of 1,633 apartment homes that had a physical occupancy rate of 95.9%. We sold the 152-unit Rosewood Plantation Community on January 4, 2001.
Roberts Realty is 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% (90% for 2001 and thereafter) of our taxable income. Our common stock is traded on the American Stock Exchange under the symbol "RPI."
We have engaged two entities owned by Mr. Charles S. Roberts, our Chairman of the Board, Chief Executive Officer, and President, to perform services for the operating partnership. These entities are Roberts Properties, Inc. and Roberts Properties Construction, Inc., which we sometimes refer to as the Roberts Companies. The Roberts Companies developed and constructed each of our seven existing communities, except the 24-unit second phase of Preston Oaks, which was constructed by an independent contractor. We expect that affiliates of Mr. Roberts will continue to develop future properties and construct properties where feasible. Roberts Construction started construction of the Ballantyne community, is currently acting as the general contractor, and will oversee construction of the community.
Our executive offices are located at 8010 Roswell Road, Suite 120, Atlanta, Georgia 30350, and our telephone number is (770) 394-6000. As of March 23, 2001, we have 45 full-time employees.
THE OPERATING PARTNERSHIP
We conduct our business and own all of our real estate assets through the operating partnership. We control the operating partnership as its sole general partner. Our ownership interest in the operating partnership entitles us to share in cash distributions from, and in the profits and losses of, the operating partnership generally in proportion to our ownership percentage. In this report we refer to units of limited partnership interest in the operating partnership
as "units." The holders of units are: former limited partners in the limited partnerships that were merged into the operating partnership, Mr. Roberts, and the former owner of one of the retail centers we formerly owned.
Holders of units in the operating partnership, sometimes referred to in this report as unitholders, generally have the right to require the operating partnership to redeem their units. A unitholder who submits 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 units submitted. We have adopted a policy of acquiring units in exchange for shares. We also have the right, at our election, to issue shares in exchange for all outstanding units. Our articles of incorporation limit ownership by any one holder to 6% of the outstanding shares of our common stock, par value $0.01 per share, other than by Mr. Roberts, who is limited to 25%. As a result, unitholders cannot redeem their units if doing so would violate those ownership limits. Shares issued for units are registered with the SEC and are freely transferable, other than by affiliates.
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 units to us. The operating partnership agreement permits the operating partnership, without the consent of the unitholders, to sell additional units and add limited partners.
GROWTH STRATEGIES
Our business plan and growth strategy are focused on creating cash flow and capital appreciation by building and managing new apartment homes of the highest quality and value in excellent high-growth neighborhoods. Our business objectives are:
o to maximize the current return to our shareholders in the form of quarterly dividends through increases in cash flow; and
o to increase long-term total returns to our shareholders through appreciation in the value of the common stock.
To achieve these objectives, we intend to pursue the following growth strategies:
(a) maximize cash flow from operations by seeking through intensive management to maintain high occupancy levels, obtain regular rent increases, manage resident turnover efficiently and control operating expenses; and
(b) develop new multifamily apartment communities in metropolitan Atlanta, North Carolina, Florida and other parts of the Southeast.
We will engage others, including the Roberts Companies, to help us pursue these strategies, which are described in more detail below.
PROPERTY MANAGEMENT STRATEGY. We believe that managing our communities intensively is a fundamental element of our growth strategy. As of March 23, 2001, we employ 44 property management personnel, including property managers, leasing managers, leasing consultants, maintenance supervisors and technicians, and accounting personnel. We believe our property management expertise will enable us to continue to deliver quality services, thereby promoting resident satisfaction, maintaining high resident retention, and enhancing the value of each of the communities. Our property management strategy will continue to be:
o to increase the average occupancy and rental rates as market conditions permit;
o to minimize resident turnover and delinquent rental payments through strict review of each applicant's creditworthiness; and
o to control operating expenses to increase net operating income at each of the communities.
DEVELOPMENT STRATEGY. We intend to continue to develop high quality apartment communities for long-term ownership. During the past 16 years, the Roberts Companies have developed, constructed, and/or managed over 4,200 residential units. We believe that the number and quality of the apartment units developed by the Roberts Companies, the relationships Mr. Roberts and employees of the Roberts Companies have developed with local permitting and governmental authorities, and the Roberts Companies' experience with the development, construction and financing process will minimize the barriers to new development often faced by less experienced developers and national developers attempting to enter the Atlanta market. These barriers include governmental growth control, a difficult rezoning and permitting process, and the limited availability of well-located sites. We believe that these restraints on construction, coupled with the predicted continued growth in population, job growth, and household formations, present an excellent opportunity for us to achieve favorable returns on the development of well-located, high quality apartment home communities.
Roberts Properties is developing the Addison Place phase two, Ballantyne and Old Norcross communities. We expect that Roberts Properties will continue to develop communities for us in the future, including a 220 - unit apartment community on a 10.7 acre property located on Northridge Parkway that we plan to acquire from Roberts Properties. Although the experience of the Roberts Companies will be most helpful to us in the Atlanta area, we believe that experience will enable us to develop multifamily apartment communities in other areas in the Southeast, including Charlotte.
Although we presently intend to engage the Roberts Companies in our development and construction activities, we may hire other development or construction companies in Atlanta and elsewhere if we deem it to be in our best interests to do so. The most likely development scenario for the operating partnership is for it to acquire properties already under development from Roberts Properties and/or an entity formed by Mr. Roberts or his affiliates. We may engage the Roberts Companies to develop properties on a fee basis, we may enter into joint venture agreements with the Roberts Companies, or we may acquire communities developed by the Roberts Companies and owned by other affiliates of Mr. Roberts. We may also enter into similar arrangements with others who are independent of Mr. Roberts.
In analyzing the potential development of a particular community, we will evaluate geographic, demographic, economic, and financial data, including:
o households, population and employment growth;
o prevailing rental and occupancy rates in the immediate market area and the perceived potential for growth in those rates;
o costs that affect profitability of the investment, including construction, financing, operating and maintenance costs;
o income levels in the area;
o existing employment bases;
o traffic volume, transportation access, proximity to commercial centers and regional malls; and
o proximity to and quality of the area's schools.
We will also consider physical elements regarding a particular site, including the probability of zoning approval (if required), availability of utilities and infrastructure, and other physical characteristics of the site.
For information regarding the development and construction of Addison Place phase two, Ballantyne, and Old Norcross, see Part I, Item 2, Properties.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Under various federal, state, and local laws and regulations, an owner of real estate is liable for the costs of removal or remediation of hazardous or toxic substances on the property. Those laws often impose liability without regard to whether the owner knew of, or was responsible for, the presence of the hazardous or toxic substances. The costs of remediation or removal of the substances may be substantial, and the presence of the substances, or the failure to promptly remediate the substances, may adversely affect the owner's ability to sell the real estate or to borrow using the real estate as collateral. In connection with its ownership and operation of the communities and its other real estate assets, the operating partnership may be potentially liable for:
(a) those remediation and removal costs; and
(b) damages to persons or property arising from the existence or maintenance of those hazardous or toxic substances.
We have conducted preliminary evaluations of the environmental condition of our communities and surrounding properties.
In April 1998, Wallace Enterprises, Inc., an adjacent landowner, notified us that a petroleum product release had been discovered on the property adjacent to our Crestmark community. Wallace repaired the source of the release and the Georgia Environmental Protection Division, or EPD, has approved its corrective action plan. Our environmental attorneys and consultants have advised us that Wallace is responsible for cleaning up the release to the extent required by the EPD regulations. Our environmental consultants have informed us that despite a possible groundwater impact at Crestmark, no threat to human health or safety is suggested. We and our environmental consultants are monitoring the EPD files to ensure Wallace's compliance with the EPD regulations.
The preliminary environmental assessments of our other communities and other real estate assets have not revealed any environmental liability that we believe would have a material adverse effect on our business, assets, or results of operations, nor are we aware of any liability of that type. Nevertheless, these assessments may not have revealed all environmental liabilities, and we may have material environmental liabilities that we do not know about. Future uses or conditions - including changes in applicable environmental laws and regulations - may cause us to have environmental liability.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT AND SIMILAR LAWS
Under the American with Disabilities Act of 1990, or the ADA, all places of public accommodation are required to meet federal requirements related to access and use by disabled persons. Although we believe that the communities are substantially in compliance with present requirements of the ADA, we may incur additional costs of complying with the ADA. A number of additional federal, state and local laws may also require modifications to the communities, or restrict further renovations to them, with respect to access by disabled persons. For example, the Fair Housing Amendments Act of 1988 requires apartment communities first occupied after March 13, 1990 to be accessible to the handicapped. Noncompliance with this Act could result in the imposition of fines or an award of damages to private litigants. We believe that the communities that are subject to the Act comply with that law.
Additional legislation may impose further burdens or restrictions on owners with respect to access by disabled persons. We cannot estimate the ultimate amount of the cost of compliance with the ADA or that legislation, and, while those costs are not expected to have a material adverse effect on us, those costs could be substantial. Limitations or restrictions on the completion of renovations may limit application of our investment strategy in some instances or reduce overall returns on our investments.
INSURANCE
We carry comprehensive general liability, fire, extended coverage and rental loss insurance on all of our existing communities, with policy specifications, insured limits and deductibles customarily carried for similar properties. We carry similar insurance with respect to our properties under development or properties under construction, but with appropriate exceptions given the nature of these properties. We believe that our communities are adequately covered by insurance. There are, however, some types of losses (such as losses arising from acts of war) that are not generally insured because they are either uninsurable or not economically insurable. If an uninsured loss or a loss in excess of insured limits occurs, we could lose our capital invested in a property, as well as the anticipated future revenues from the property, and would continue to be obligated on any mortgage indebtedness or other obligations related to the property. Any loss of that kind would adversely affect us.
INVESTMENT, FINANCING, AND CONFLICT OF INTEREST POLICIES
The investment policies, financing policies and conflict of interest policies set by our board of directors are summarized below. Our board may amend or revise them from time to time without a vote of our shareholders or any vote of the partners of the operating partnership, except that:
(a) we cannot change our policy of holding our assets and conducting our business exclusively through the operating partnership without amending the operating partnership agreement, which will generally require the consent of the holders of a majority in interest of the limited partners in the operating partnership including, if applicable, Roberts Realty; and
(b) changes in our conflicts of interest policies must be approved by a majority of the independent directors and otherwise be consistent with legal requirements.
INVESTMENT POLICIES
INVESTMENTS IN REAL ESTATE OR INTERESTS IN REAL ESTATE. We conduct all of our investment activities through the operating partnership and will do so for so long as the operating partnership exists. (The agreement of limited partnership of the operating partnership provides that it is not required to be dissolved until 2093.) Our investment objectives are to achieve stable cash flow available for distributions and, over time, to increase cash flow and portfolio value by continuing to develop multifamily apartment communities for long-term ownership.
Our policy is to develop assets where we believe that favorable investment opportunities exist based on market conditions at the time of the investment.
We expect to pursue our investment objectives primarily through the direct ownership of properties by the operating partnership, although, as discussed below, we may also pursue indirect property ownership opportunities. We intend to develop multifamily apartment communities primarily in the Atlanta and Charlotte metropolitan areas, Florida, and other parts of the Southeast. Future development or investment activities will not be limited by our governing documents to any geographic area, product type, or specified percentage of our assets.
POSSIBLE ACQUISITION OF COMMUNITIES DEVELOPED BY MR. ROBERTS OR HIS AFFILIATES. Mr. Roberts and Roberts Properties have been engaged in the development of residential and commercial real estate since the early 1970s, and Mr. Roberts expects that he and Roberts Properties will continue to engage in real estate development. Provided that any transaction or agreement must comply with the policies discussed under "Conflict of Interest Policies," we and/or the operating partnership may engage in transactions of various types with Mr. Roberts, Roberts Properties, and/or other affiliates of Mr. Roberts to develop or acquire real estate. Those transactions may include:
o hiring Mr. Roberts or Roberts Properties to develop real estate under a fee arrangement;
o acquiring undeveloped property from Mr. Roberts or his affiliates for future development; or
o acquiring from Mr. Roberts or his affiliates partially or completely constructed properties, whether in their lease-up phase or already leased-up.
No particular arrangements have been determined, other than the communities now under construction and development as described elsewhere in this report.
SECURITIES OF OR INTEREST IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE ACTIVITIES AND OTHER ISSUERS. We and the operating partnership also may invest in securities of other entities engaged in real estate activities or invest in securities of other issuers, including investments by us and the operating partnership for the purpose of exercising control over those entities. We or the operating partnership may acquire all or substantially all of the securities or assets of other REITs or similar entities where those investments would be consistent with our investment policies. We do not currently intend to invest in the securities of other issuers. In making any of the investments described in this paragraph we intend to comply with the percentage of ownership limitations and gross income tests necessary for REIT qualification under the Internal Revenue Code. Also, we will not make any investments if the proposed investment would cause us or the operating partnership to be an "investment company" under the Investment Company Act of 1940.
NO INVESTMENTS IN MORTGAGES. We do not own any mortgages and do not currently intend to invest in mortgages or to engage in originating, servicing, or warehousing mortgages.
FINANCING POLICIES
Our organizational documents do not limit the amount of indebtedness we may incur. We have an informal policy that we will not incur indebtedness in excess of 75% of what the board of directors believes is the fair market value of our assets at any given time. We may, however, from time to time re-evaluate our borrowing policies in light of then current economic conditions, relative costs of debt and equity capital, market value of the operating partnership's real estate assets, growth and acquisition opportunities and other factors. Modification of this policy may adversely affect the interests of our shareholders.
To the extent that the board of directors determines to seek additional capital, we may raise capital through additional equity offerings, debt financing, or retention of cash flow, or a combination of these methods. Our retention of cash flow is subject to provisions in the Internal Revenue Code requiring a REIT to distribute a specified percentage of taxable income, and we must also take into account taxes that would be imposed on undistributed taxable income. As long as the operating partnership is in existence, we will contribute the net proceeds of all equity capital we raise to the operating partnership in exchange for units or other interests in the operating partnership.
We have not established any limit on the number or amount of mortgages on any single property or on the operating partnership's portfolio as a whole.
CONFLICT OF INTEREST POLICIES
The board of directors is subject to provisions of Georgia law that are designed to eliminate or minimize potential conflicts of interest. We can give no assurances, however, that these policies will always eliminate the influence of those conflicts. If these policies are not successful, the board could make decisions that might fail to reflect fully the interests of all shareholders.
Under Georgia law, a director may not misappropriate corporate opportunities that he learns of solely by serving as a member of the board of directors. In addition, under Georgia law, a transaction effected by us or any entity we control (including the operating partnership) in which a director, or specified related persons and entities of the director, have a conflicting interest of such financial significance that it would reasonably be expected to exert an
influence on the director's judgment may not be enjoined, set aside or give rise to damages on the grounds of that interest if either:
o the transaction is approved, after disclosure of the interest, by the affirmative vote of a majority of the disinterested directors, or by the affirmative vote of a majority of the votes cast by disinterested shareholders; or
o the transaction is established to have been fair to us.
The board of directors has adopted a policy that all conflicting interest transactions must be authorized by a majority of the disinterested directors, but only if there are at least two directors who are disinterested with respect to the matter at issue.
OTHER POLICIES
We and the operating partnership have authority to offer our securities and to repurchase and otherwise reacquire our securities, and we may engage in those activities in the future. We have adopted a policy that we will issue shares to unitholders who exercise their rights of redemption. In the future, we may make loans to joint ventures in which we participate to meet working capital needs. We have not engaged in trading, underwriting, agency distribution, or sale of securities of other issuers, and we do not intend to do so. We intend to make investments in a manner so that we will not be treated as an investment company under the Investment Company Act of 1940.
We announced our intention to repurchase up to 300,000 shares of our outstanding common stock on September 3, 1998. We repurchased 152,588 shares in 2000 for $1,156,000; 121,200 shares in 1999 for $909,000; and 19,300 shares in 1998 for $145,000. During 1999, we paid $28,000 to redeem 3,917 units from unitholders who resided outside the state of Georgia. We did not redeem any shares in the year ended December 31, 2000. In October 2000, we announced our intention to repurchase another 50,000 shares.
At all times, we intend to make investments in a manner to be consistent with the requirements of the Internal Revenue Code for us to qualify as a REIT unless, because of changing circumstances or changes in the Internal Revenue Code or in applicable regulations, the board of directors decides that it is no longer in our best interests to qualify as a REIT.
For a description of the competition we face, see Part 1, Item 2, Properties - Competition.
ITEM 2.
ITEM 2. PROPERTIES.
GENERAL
As of March 23, 2001, we own seven existing multifamily apartment communities containing a total of 1,481 apartment homes, and three communities under development or construction that will contain approximately 854 apartment homes. Seven of our existing communities - River Oaks, Plantation Trace, Preston Oaks, Highland Park, Crestmark, Addison Place phase one, and Bradford Creek - containing a total of 1,481 apartment units, are stabilized. Addison Place's second phase, totaling 285 apartment homes, Old Norcross, totaling 250 apartment homes, and Ballantyne, totaling 319 apartment homes, are under construction. All of our communities are located in metropolitan Atlanta, Georgia, except the Ballantyne community, which is located in Charlotte, North Carolina.
As of December 31, 2000, we owned eight stabilized communities containing a total of 1,633 apartment homes that had a physical occupancy rate of 95.9%. We sold the 146-unit Ivey Brook community on June 23, 2000 and the 152-unit Rosewood Plantation community on January 4, 2001.
We believe that the demand for multifamily housing in Atlanta will increase due to Atlanta's growing population. According to the Atlanta Regional Commission, which we refer to as the ARC, both population and job growth in Atlanta are projected to be above the national average for the foreseeable future. The ARC is the regional planning and governmental coordination agency for the 10-county Atlanta Region, which is comprised of Fulton, DeKalb, Gwinnett, Cobb, Clayton, Rockdale, Henry, Douglas, Cherokee, and Fayette counties.
The following information is based on statistical estimates published by the ARC. The population of the Atlanta Region is projected to grow 40.9% for the period from 1990 to 2010, from 2,557,800 persons in 1990 to 3,603,000 persons in 2010. The estimated population of the Atlanta Region increased by 29.2% from 2,557,800 persons in 1990 to 3,304,000 persons in 2000, making it one of the largest metropolitan areas in the country and the largest in the Southeast.
Employment of the Atlanta Region is projected to grow 54.7% for the period from 1990 to 2010, from 1,426,000 jobs in 1990 to 2,206,000 jobs in 2010. Estimated employment of the Atlanta Region increased by 34.5% from 1,426,000 jobs in 1990 to 1,918,500 jobs in 1999. According to the Georgia Department of Labor, the estimated December 2000 unemployment rate of the Atlanta Region was 2.4%, which was below the estimated December 2000 Georgia unemployment rate of 3.0% and the estimated December 2000 U.S. unemployment rate of 3.7%.
Housing units in the Atlanta Region increased an estimated 30.5%, from 1,052,430 units in 1990 to 1,373,058 units in 2000. Multifamily homes in the Atlanta Region increased 21.7% from 342,441 units in 1990 to 416,682 units in 2000.
The following table summarizes basic information about our communities.
(1) Plantation Trace was completed in two phases. The 182-unit first phase was completed in 1990 and the 50-unit second phase was completed in 1998. (2) Crestmark was completed in two phases. The 248-unit first phase was completed in 1993 and the 86-unit second phase was completed in 1997. (3) Preston Oaks was completed in two phases. The 189-unit first phase was completed in 1995 and the 24-unit second phase was completed in 1998. (4) The 118-unit first phase of Addison Place completed its lease-up phase in May 2000, and its 12-month historical occupancy percentage is not comparable.
Annual operating data regarding our stabilized communities at December 31, 2000 are summarized in the following table. The second phases of Crestmark, Preston Oaks, and Plantation Trace are described separately for this purpose. (Ivey Brook and Rosewood Plantation are omitted due to their sales in June 2000 and January 2001, respectively.) Except for those figures noted with an asterisk, the occupancy rates shown represent the average physical occupancy of the applicable community calculated by dividing the total number of vacant days by the total possible number of vacant days for each year and then subtracting the resulting number from 100%. The figures noted with asterisks reflect the applicable data on December 31 of the specified year and are not annualized because the applicable community was under construction and in its initial lease-up period during at least a portion of that year. During lease-up, units are leased as they are constructed and made ready for occupancy building by building, thus annualization of data is not possible during that period. Throughout this table, "N/A" means "not applicable," i.e., no unit in the community was available to be occupied during the relevant year.
(1) Plantation Trace Phase II completed its lease-up phase in November 1998 and Preston Oaks Phase II completed its lease-up in August 1998. Beginning with 1999, both phases of Plantation Trace and Preston Oaks are combined. (2) We acquired Crestmark in June 1996. Phase II of Crestmark completed its lease-up in September 1997. Beginning with 1998, both phases of Crestmark are combined.
As described below, our Atlanta communities are located in Gwinnett, Fulton and Douglas Counties and six submarkets, or geographic areas, within these counties. We also have one community in Charlotte. The Ballantyne community now under construction in Charlotte is described after the Georgia properties. Each heading identifies the community or communities within the specified county and submarket. We obtained population and employment data for each Atlanta submarket from the ARC. Multiple communities are located in each of the Duluth and Perimeter Center/North Springs submarkets; thus those communities compete not only with unaffiliated apartment communities but also with each other. Please see "Summary of Debt Secured by the Communities," which follows the description of the individual communities, for an explanation of the terms of our secured indebtedness.
GWINNETT COUNTY
Gwinnett County was one of the fastest growing counties in the U.S. in the 1980's, and from 1985 until 1990 it ranked first in the nation in growth among counties with a population of more than 100,000. Since 1990, Gwinnett's population has increased 59% to a current level of 562,300. Gwinnett's strong employment base, transportation networks, excellent public education system, and affordable home prices contribute to the county's remarkable growth. Gwinnett is home to approximately 235 international firms, over 750 manufacturing and 758 high technology firms that generate many of its 339,060 jobs. Since 1990, Gwinnett has added 187,060 jobs, which is second only to Fulton County in the Atlanta region. The average household income of the county is approximately $78,000. Gwinnett County is home to communities located in the City of Duluth and unincorporated Gwinnett.
Duluth Area - Plantation Trace, River Oaks, and Bradford Creek Communities
DULUTH. The City of Duluth is located in central Gwinnett County and is home to the Plantation Trace, River Oaks, and Bradford Creek communities. Duluth has exceeded even Gwinnett County as a whole in percentage of population growth; based on estimates, its population has increased more than 200% since 1990. Duluth is located near I-85 and Gwinnett Place Mall, a 1,100,000 square foot regional mall.
PLANTATION TRACE. Plantation Trace is a 232-unit garden apartment community that was completed in two phases: a 182-unit first phase in 1990 and a 50-unit second phase in 1998, sometimes referred to below as Phase II. Plantation Trace consists of 31 two and three story Nantucket-style stone and wood sided buildings located on a 29.2-acre site on Pleasant Hill Road approximately one-half mile west of its intersection with Peachtree Industrial Boulevard. In 1990, the 182-unit first phase received the Aurora Award from the Southeast Builders' Conference for "Best Rental Apartment Community in the Southeast."
The Plantation Trace community, with its award-winning traditional architecture and landscaped grounds, features a clubhouse, a modern fitness and exercise facility, two lighted tennis courts, sand volleyball court, multi-station playground, two free-form swimming pools, a small wading pool, a stone paver pool deck and a covered whirlpool spa. In addition to upscale amenities, Plantation Trace offers such interior features as nine foot ceilings, crown molding, pickled wood cabinetry in the kitchen and bath, marble vanity tops, fireplaces, vaulted ceilings and Palladian windows in select units, designer wallcoverings and full laundry rooms with washer and dryer connections. Phase II provides the Plantation Trace community direct access to the Chattahoochee River, as well as to jogging trails around the existing lake and nature areas along the river.
Plantation Trace has a variety of floor plans, including 28 one bedroom units ranging from 901 to 929 square feet, 48 two bedroom standard and 66 two bedroom roommate units ranging from 1,228 to 1,298 square feet, and 40 three bedroom units ranging from 1,471 to 1,494 square feet. Phase II contains 7 one bedroom units of approximately 966 square feet each, 6 two bedroom units of approximately 1,433 square feet each, 18 two bedroom townhouses of approximately 1,490 square feet each, 12 three bedroom townhouses of approximately 1,948 square feet each, 7 four bedroom townhouses of approximately 2,314 square feet each, and 33 garages of 200 square feet each. The weighted average unit size is 1,340 square feet. As of December 31, 2000, rental rates ranged from $785 to $1,790 per month, with a weighted average monthly rent of $994 per unit and $0.74 per square foot. Local real estate taxes were $222,000 in 2000. The physical occupancy rate for the entire Plantation Trace community as of December 31, 2000 was 98.3%.
RIVER OAKS. River Oaks, which was completed in 1992, consists of 22 two and three story Charleston-style brick and wood sided buildings located on a 31.6 acre site on Pleasant Hill Road adjacent to the Chattahoochee River to the west and the Plantation Trace community to the east. The River Oaks community, with its traditional architecture and landscaped grounds, features a large clubhouse with a fitness center, two lighted tennis courts, sand volleyball court, multi-station playground, free-form swimming pool, stone paver pool deck, and whirlpool spa. In addition to upscale amenities, River Oaks offers such interior features as nine foot ceilings, crown molding, garden tubs, pickled pine cabinetry in the kitchen and bath, marble vanity tops, fireplaces and vaulted ceilings in select units, designer wallcoverings, and full laundry rooms with washer and dryer connections.
River Oaks has a variety of floor plans, including 40 one bedroom units at approximately 907 square feet, 32 two bedroom roommate units, 24 two bedroom deluxe units, and 48 two bedroom standard units ranging from 1,276 to 1,309 square feet, and 72 three bedroom units with approximately 1,457 square feet. The weighted average unit size is 1,278 square feet. As of December 31, 2000, the community was 98.5% occupied, and rental rates ranged from $830 to $1,075 per month, with a weighted average monthly rent of $953 per unit and $0.75 per square foot. Local real estate taxes were $199,000 in 2000.
BRADFORD CREEK. Bradford Creek, which was completed in 1998, consists of 9 two and three story buildings located on an approximately 22.5 acre property near the southeast corner of Peachtree Industrial Boulevard and Howell Ferry Road in Duluth, approximately one-mile southeast of Plantation Trace and River Oaks. The Bradford Creek community, with its unique mountain lodge architecture and traditional landscaping, features a large clubhouse with a fitness center, clubroom, laundry room, two lighted tennis courts, free-form swimming pool, stone paver pool deck, a 12-acre nature area, a courtyard highlighted by a water fountain, and a gated entrance. In addition to the upscale amenities, Bradford Creek offers such interior features as nine foot ceilings and a computer room in select units, crown moldings, garden tubs, white raised-panel cabinetry in the kitchen and bath, marble vanity tops, breakfast bars, designer wallcoverings, and full laundry rooms with washer and dryer connections. Each building was constructed using cobblestone and vinyl siding and offers private patios or balconies along with gables and varying paint colors.
Bradford Creek contains 28 one bedroom units of approximately 1,001 square feet each, 46 two bedroom standard units of approximately 1,302 square feet each, 47 two bedroom roommate units of approximately 1,344 square feet each, and 59 three bedroom units of approximately 1,589 square feet each. The weighted average unit size is 1,355 square feet. As of December 31, 2000, the community was 95.8% occupied, and rental rates ranged from $840 to $1,130 per month, resulting in a weighted average monthly rent of $987 per unit and $0.73 per square foot. Local real estate taxes were $175,000 in 2000.
Unincorporated Gwinnett - Old Norcross
The Old Norcross community will be located on a 35.3 acre site at the intersection of Old Norcross Road and Herrington Road in unincorporated Gwinnett County near the western Lawrenceville area. This community will have approximately 250 garden-style apartments. The site for the community is located near I-85, GA-316, and Gwinnett Place Mall, an 1,100,000 square foot regional mall. We estimate the total construction cost of this project to be approximately $16,000,000, which we plan to finance by obtaining a construction loan.
Old Norcross will have 73 one-bedroom units with 970 square feet, 45 two bedroom standard units with 1,340 square feet, 66 two-bedroom units with 1,385 square feet, 46 three-bedroom units with 1,636 square feet and 20 three-bedroom units with a bay window with 1,621 square feet.
Old Norcross' amenities include a clubhouse offering an exercise room with weight equipment. The recreational area includes a swimming pool, lighted tennis court, children's playground, walking trails through the nature area, and a lake.
FULTON COUNTY
Fulton County is the largest county in the Atlanta Region in terms of population, employment, housing units, and land area. Between 1990 and 1999, Fulton's net population increase, 96,000 persons, ranked third in the region behind Gwinnett and Cobb Counties. Unemployment in Fulton County was 3.7% in 2000, which was below the national rate of 4.0%.
Perimeter Center/North Springs Area - Preston Oaks and Highland Park Communities
PERIMETER CENTER/NORTH SPRINGS. The Perimeter Center/North Springs area offers convenient proximity and access to both urban and suburban employment bases and retail conveniences. Georgia 400 and I-285 provide direct access within minutes to major regional malls such as North Point Mall and Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area and downtown Atlanta's Central Business District are readily accessible via the Georgia 400 extension, which connects to I-85 South near downtown Atlanta.
Within this corridor is a large base of residential, commercial and office developments. The south quadrant of the area includes medical facilities such as Northside Hospital, St. Joseph's Hospital, and Egleston Scottish Rite Children's Hospital. Perimeter Center encompasses office developments that exceed 18,500,000 square feet of space, with such upscale facilities as Ravinia, Northpark Town Center, Concourse, and Perimeter Center Office Park. Several prominent companies such as Holiday Inn, UPS, and Hewlett-Packard have located their worldwide or regional headquarters within the Perimeter Center area.
This area, which includes portions of Fulton and DeKalb Counties, has an average household income of approximately $99,000, which is considerably higher than the metropolitan Atlanta average of $44,913. The median value of a single-family home in this area exceeds $200,000.
PRESTON OAKS. Preston Oaks is a 213-unit garden apartment community that was completed in two phases: a 189-unit first phase in August 1995, and a 24-unit second phase in 1998. Preston Oaks consists of nine two and three story buildings located on Mt. Vernon Highway in the Perimeter Center area. The traditional architecture consists of stacked stone and vinyl siding incorporating details of gabled roofs, Palladian windows, columns, and bay windows.
The community is located on an 11.5-acre site and features extensive landscaping. The amenities are similar to those of the other existing communities, with custom swimming pool, lighted tennis court, fitness center with individual workout stations, and a large clubhouse. Interior features include garden tubs, oversized walk-in closets, pickled pine cabinetry in the kitchen and bath, crown molding, mirrored walls, and chair railing in the dining rooms. Phase one consists of 36 one-bedroom units, 92 two-bedroom units, and 61 three-bedroom units. Phase two consists of 24 one bedroom apartment units with 959 square feet each.
Preston Oaks is conveniently located less than one mile from Perimeter Mall, a 1,200,000 square foot regional mall, and in close proximity to the area's numerous office developments. Several stand-alone restaurants and major retail centers either exist or are being developed near the community.
As of December 31, 2000, Preston Oaks was 99.1% occupied, and its rental rates ranged from $885 to $1,255 per month, resulting in a weighted average monthly rent of $1,038 per unit and $0.86 per square foot. Local real estate taxes were $235,000 in 2000.
HIGHLAND PARK. This community consists of 188 upscale apartment units in a total of eight buildings on a 10.9-acre site. Located on Dunwoody Place in the North Springs area of Sandy Springs, Highland Park benefits from its close proximity to Georgia 400, which provides direct access within minutes to major retail and employment areas to the north such as North Point Mall and the Windward mixed use project, and to the south such as Perimeter Mall and Perimeter Center.
Highland Park has 42 one-bedroom units with 902 square feet, 32 two bedroom standard units with 1,225 square feet, 62 two-bedroom roommate units with 1,285 square feet, and 52 three bedroom units with 1,440 square feet. The weighted average unit size is 1,232 square feet.
The buildings are of a traditional design with stacked stone accents and vinyl siding with the facades varying from building to building. Exterior features include gables, bay windows, various paint colors with white trim, and private patios or balconies. Extensive landscaping includes mature trees, flowers, and shrubbery. The interiors feature crown molding in the living/dining rooms, designer wallcoverings, separate laundry rooms, breakfast bars, garden tubs, and private balconies. Recreational amenities include a swimming pool, tennis court, and fitness center.
As of December 31, 2000, Highland Park was 98.3% occupied and its monthly rental rates ranged from $855 to $1,165 per month, resulting in a weighted average monthly rent of $986 per unit and $0.80 per square foot. Local real estate taxes were $194,000 in 2000.
Alpharetta Area - Addison Place Community
Alpharetta. The Alpharetta area offers convenient proximity and access to both urban and suburban employment bases and retail conveniences. Georgia 400 provides direct access within minutes to major regional malls such as North Point Mall and Perimeter Center Mall. The Phipps Plaza/Lenox Mall/Buckhead area and downtown Atlanta's Central Business District are readily accessible via the Georgia 400 extension, which connects to I-85 South near downtown Atlanta.
Within this corridor is a large base of residential, commercial and office developments. North Point Mall's success accelerated the already high rate of residential development, which caters to the upscale consumer. North Fulton's prestigious neighborhoods have been a major factor in the emergence of the Georgia 400 corridor as a center for corporate headquarters. Between 1990 and 2000, North Fulton added approximately 124,100 residents and 41,401 housing units. The average household income of North Fulton County in 1999 was $117,000. The Windward project, which straddles Georgia 400, is the region's largest mixed-use development.
ADDISON PLACE PHASE I. The 118-unit first phase of Addison Place is located on 19.2 acres on Abbotts Bridge Road near the intersection of Abbotts Bridge and Jones Bridge roads. This first phase contains 60 two bedroom townhouses of approximately 1,497 square feet each and 58 three bedroom townhouses of approximately 1,903 square feet each. As of December 31, 2000, the first phase of Addison Place was 97.5% occupied and rental rates ranged from $1,185 to $1,450 per month, with a weighted average monthly rent of $1,288 per unit and $0.76 per square foot. The architectural style, land planning, landscaping, and amenities of this first phase are similar to those of our other communities. Local real estate taxes were $196,000 in 2000.
The construction of this first phase was completed under a cost-plus 10% construction contract with Roberts Properties Construction providing for 5% profit and 5% overhead. The total cost of construction, including the fee to Roberts Properties Construction, was approximately $9,647,000. We anticipate that there was approximately $874,000 in net profit to Roberts Properties Construction on the construction contract. We funded the development and construction of this first phase from our working capital and a $9,500,000 construction loan.
ADDISON PLACE PHASE II. The second phase of Addison Place will contain 285 garden-style apartment homes. It will include 11 different floor plans, including 60 one bedroom ranging from 765 to 1,034 square feet, 147 two bedroom units ranging from 1,150 to 1,550 square feet, 58 three bedroom units at approximately 1,706 square feet, and 20 four bedroom units at approximately 2,074 square feet, along with 40 direct-entry garages. The weighted average unit size will be 1,415 square feet. The architectural style, land planning, and landscaping of Phase II will be similar to Phase I. The amenities in Phase II will feature a free-form swimming pool, 2 tennis courts, a modern fitness and exercise facility, a business center, men's and women's saunas, and a playground.
We estimate the total construction cost for the second phase of Addison Place to be approximately $20,605,000, which we plan to finance by obtaining a permanent loan.
DOUGLAS COUNTY
Douglas County, one of the 10 counties in the Atlanta Region, is located west of Atlanta and encompasses 202 square miles. The county is surrounded by Fulton, Cobb, Carroll, and Paulding Counties, with the Chattahoochee River as its southeastern border. Its population was estimated at 93,500 in 1999, an increase of 30% since 1990. Between 1990 and 1998, Douglas County added 9,150 jobs and between 1990 and 1999, the county added 21,800 persons and 8,300 housing units. Douglas County benefits from its accessibility to downtown Atlanta to the east via I-20 and to Hartsfield International Airport to the southeast via Thornton Road/Camp Creek Parkway. Just across the county line to the east lies the Fulton Industrial District, the Southeast's largest contiguous industrial park. The Fulton Industrial District consists of more than 50,000,000 square feet of both manufacturing and warehouse space and stretches six miles north and south along Fulton Industrial Boulevard. It represents 20% of Atlanta's total inventory of warehouse/industrial space, and an additional 1,000,000 square feet is under construction. Numerous Fortune 500 companies are represented in the Fulton Industrial District, employing more than 100,000 people.
Thornton Road/I-20 Area - Crestmark Community
THORNTON ROAD/I-20 AREA. Thornton Road is the third exit west of I-285 on I-20 and connects I-20 with Hartsfield International Airport to the southeast and the significant residential base of Douglas, West Cobb, and Paulding counties to the north and east. Several office and business parks that total more than 2,000,000 square feet of space and house corporations such as BellSouth, Mitsubishi, Robert Bosch Corporation, TDK Electronics, and Saab-Scania contribute to a large employment base of approximately 20,000 people within the Thornton Road area. Restaurant, hospitality and retail conveniences support the existing employment and residential base in the Thornton Road corridor. The area also benefits from its close proximity to the Fulton Industrial District as well as the Six Flags Over Georgia amusement park, both of which are less than three miles away. At the northwest corner of the Thornton Road/I-20 interchange is the Columbia/HCA Parkway Medical Center, a 320-bed acute care medical facility that employs approximately 600 people.
CRESTMARK. Crestmark is a 334-unit garden apartment community that was completed in two phases: a 248-unit first phase in 1993 and an 86-unit second phase in 1997. Crestmark consists of 16 three and four story stacked stone and wood sided buildings, 17 garages and 24 storage units located on a 32.2 acre site on Thornton Road, approximately one-half mile north of its intersection with I-20 in Douglas County. In 1993, Crestmark received two Aurora Awards from the Southeast Builders' Conference, one for "Best Landscape Design in the Southeast" and another for "Best Recreational Facility in the Southeast."
The Crestmark community, with its award-winning traditional architecture and landscaped grounds, features a large 14,000 square foot clubhouse with a club room, full kitchen, fitness center and aerobics room, a business center and conference room, two lighted tennis courts, multi-station playground, walking and jogging trail, two free-form swimming pools, stone paver pool decks, and a whirlpool spa. In addition to the upscale amenities, Crestmark offers such interior features as nine foot ceilings, crown and chair-rail molding, pickled wood cabinetry in the kitchen and baths, marble vanity tops, fireplaces, vaulted and trey ceilings, Palladian and bay windows in select units, designer wallcoverings, and full laundry rooms with washer and dryer connections.
Crestmark has a variety of floorplans including 29 one bedroom standard units with 704 square feet, 50 one bedroom deluxe units with 816 square feet, 19 one bedroom units of 901 square feet in the second phase, 33 two bedroom standard units with 1,005 square feet, 86 two bedroom deluxe units with 1,110 square feet, 21 two bedroom standard units of 1,223 square feet in the second phase, 22 two bedroom roommate units of 1,285 square feet in the second phase, 50 three bedroom units with 1,295 square feet and 24 three bedroom units of 1,437 square feet in the second phase. The weighted average unit size is 1,079 square feet. As of December 31, 2000, the community was 97.9% occupied, and rental rates ranged from $775 to $1,015 per month, with a weighted average monthly rent of $845 per unit and $0.78 per square foot. Local real estate taxes were $215,000 in 2000.
CHARLOTTE, NORTH CAROLINA - BALLANTYNE
The following information is based on statistics and estimates published by the Charlotte Chamber of Commerce. Between 1990 and 2000, Charlotte's population grew by 33.2%, which was well above the national estimated growth rate of 10%. Since 1988, employment in Charlotte has grown 24%. Nine of the nation's top 200 banks operate in Charlotte, including Bank of America, N.A. and First Union Corporation. Other major employers include Carolinas Healthcare System, Charlotte-Mecklenburg School System, Duke Energy Corporation, and USAirways. Additionally, nearly 300 of the nation's largest industrial and service corporations listed by FORTUNE magazine have facilities in the area.
The Ballantyne community will be located on a 23.8-acre site at the intersection of Lancaster Highway (old NC-521) and John J. Delaney Drive. The Ballantyne area is the largest mixed-use development in Mecklenburg County. This community will have 319 garden-style apartments. The Ballantyne community will consist of 110 one-bedroom units ranging from 765 square feet to 1,034 square feet, 143 two-bedroom units ranging from 1,150 square feet to 1,550 square feet, 48 three-bedroom units at 1,706 square feet, and 18 four-bedroom units at 2,074 square feet, along with 36 direct-entry garages. We estimate the cost of construction on this development to be $23,100,000. The community is located near I-485 and I-77, which offers convenient access to downtown Charlotte and I-85.
The table on the following page summarizes the amenities of each of the existing communities and Addison Place Phase II, Old Norcross, and Ballantyne, which are now under construction.
* In select units (1) Phase II only (2) Phase I only
COMPETITION
All of the communities are located in developed areas, and numerous other apartment projects are located within the market area of each community. The number of competitive apartment communities in the area could have a material adverse effect on our ability to lease our apartments at the rental rates anticipated, and we can give no assurances regarding the development of additional competing multifamily communities in the future. The remainder of this section summarizes the competition for each of the communities. The following information reflects our study of apartment communities in each submarket that we believe to be closely competitive with our community or communities within that submarket. This section includes summary information we obtained from various sources - including developers and real estate brokers, as well as on-site visits - regarding those apartment communities. Although we have attempted to verify the information and believe that it is substantially accurate on the whole, information regarding a particular community may be incorrect due to the sources relied upon or erroneous information supplied by competitors.
PLANTATION TRACE, RIVER OAKS, AND BRADFORD CREEK. The Duluth submarket, which we consider to include the area within a two mile radius from these communities, currently consists of approximately 17 multifamily communities, including River Oaks, Plantation Trace, and Bradford Creek. Although the Bridgewater apartment community - which was previously developed and sold by an affiliate of Mr. Roberts - is located more than two miles from Plantation Trace, it is also included in the Duluth market area because it offers units with attached garages and its architecture and amenities are similar to Plantation Trace. Of the approximately 17 existing communities in the area, five were completed in the last three years, including Bradford Creek and the second phase of Plantation Trace. Due to the quality of construction, age of the communities, type of amenities, resident profiles and rental rates, we believe that only nine of the other 14 communities are in direct competition with Plantation Trace, River Oaks and Bradford Creek.
PRESTON OAKS. We believe that the north central Perimeter multifamily submarket includes the area within a two-mile radius around this community. It is generally bounded by Roswell Road to the west, Ashford Dunwoody Road to the east, Spalding Drive to the north and Glenridge Drive to the south, and it currently consists of approximately 26 multifamily communities, including Preston Oaks. Of the 25 other existing communities in the market area, only six were built before 1983. The remaining 19 communities range from approximately two to nine years of age. We believe that Preston Oaks competes with all 25 of these communities.
HIGHLAND PARK. We believe the North Springs multifamily submarket includes the area within an approximately two-mile radius around this community. It is generally bounded by the Chattahoochee River to the north and west, Georgia 400 to the east and Dalrymple Road to the south, and currently consists of 34 communities, including Highland Park. Of the approximately 34 existing communities in the market area, only five have been built since 1989. The remaining communities range in age from 13 years to over 20 years. We believe Highland Park will draw residents from all of the other 33 communities located in the market area, but only 11 of the 33 communities will compete closely with Highland Park.
CRESTMARK. We consider the Thornton Road multifamily submarket to be the area within an approximately two-mile radius around the Crestmark community. It is generally bounded by I-20 to the south, Blairs Bridge Road to the east, and Georgia Highway 78 to the north and west, and it currently consists of approximately nine communities, including Crestmark. Of the approximately nine existing communities in the market area, four have been built since 1990. We believe that Crestmark will draw residents from all of the approximately eight other communities located in the market area, but due to their amenities, quality of construction and resident profile, only five of the eight other communities will compete closely with Crestmark.
ADDISON PLACE. We believe the Alpharetta multifamily submarket includes the area within an approximately two-mile radius around the Abbotts Bridge community. It is generally bounded by the Chattahoochee River to the east, Old Alabama to the south, Georgia 400 to the west, and Windward Parkway to the north, and it currently consists of approximately 15 communities, including Addison Place. We believe that Addison Place will draw residents from
all of the approximately 14 other communities located in the market area, but due to their amenities, quality of construction and resident profile, only 13 of the 14 other communities will compete closely with Addison Place.
BALLANTYNE. We consider the Ballantyne multifamily submarket to include the area within an approximately two-mile radius around the community. It is generally bounded by the Providence Road to the east, Providence Road West to the south, Lancaster Highway (old NC-521) to the west, and I-485 to the north, and it currently consists of approximately nine communities, including Ballantyne. We believe that once construction of Ballantyne is complete, it will draw residents from all of the approximately eight other existing communities located in the market area and will compete with the four communities under construction in the market area.
OLD NORCROSS. We believe the Old Norcross multifamily submarket includes the area within an approximately two-mile radius around the Old Norcross community. It is generally bounded by Herrington Road to the east, Club Drive to the south, Steve Reynolds Boulevard to the west, and Sugarloaf to the north and east, and it currently consists of approximately 24 communities, including Old Norcross. We believe that Old Norcross will draw residents from all of the approximately 23 other communities located in the market area, but due to their amenities, quality of construction and resident profile, only 15 of the 23 other communities will compete closely with Old Norcross.
SUMMARY OF DEBT SECURED BY THE COMMUNITIES
Information regarding our indebtedness secured by the communities at December 31, 2001 is as follows (excluding the Ivey Brook and Rosewood Plantation communities because the properties were sold in June 2000 and January 2001, respectively, and the mortgage debts repaid):
(1) Each of the loans secured by the Plantation Trace and Addison Place Phase I communities may be prepaid upon payment of a premium equal to the greater of (a) 1% multiplied by a fraction having as its numerator the number of months to maturity and its denominator the number of months in the full term of the loan, or (b) the present value of the loan less the amount of principal and accrued interest being repaid. Each loan may be prepaid in full during the last 30 days before its maturity date without any prepayment premium.
(2) Each of the loans secured by the River Oaks, Preston Oaks, Highland Park and Bradford Creek communities may be prepaid in full upon payment of a premium equal to the greater of (a) 1% of the outstanding principal balance of the loan, or (b) the sum of the present value of the scheduled monthly payments to the maturity date and the present value of the balloon payment due on the maturity date, less the outstanding principal balance of the loan on the date of prepayment. Each loan may be prepaid in full during the last 90 days before its maturity date without any prepayment premium.
(3) The loan secured by the Crestmark community may be prepaid upon the payment of a premium equal to the greater of (a) 1% of the outstanding principal balance, or (b) the product obtained by multiplying the amount of principal being prepaid by the excess (if any) of the monthly note rate over the assumed reinvestment rate by the present value factor. If the loan is prepaid after expiration of the yield maintenance period, but more than 90 days before the maturity date, the prepayment premium shall be 1% of the unpaid principal balance of the note. The loan may be prepaid in full during the last 90 days before its maturity date without any prepayment premium.
POSSIBLE ADDITIONAL COMMUNITIES TO BE DEVELOPED
From time to time Roberts Properties plans the development of other apartment communities to be located on property owned by Roberts Properties or other affiliates of Mr. Roberts, or on property that one of those entities is interested in acquiring. Mr. Roberts may elect to raise the required equity by syndicating a limited partnership or limited liability company. Alternatively, we may seek to raise the equity required to purchase and develop the community by selling shares. If Mr. Roberts elects to raise equity through a limited partnership or limited liability company, Mr. Roberts may seek to cause the partnership to be merged into the operating partnership at a later date. A transaction of that nature would require the consent of a majority in interest of the limited partners of the partnership and of a majority of the disinterested members of our board of directors, and we can give no assurances regarding whether Mr. Roberts will ultimately determine to seek a merger in that manner, or whether such a merger would in fact be approved by the requisite majority in interest of limited partners in the partnership and by a majority of the disinterested members of the Board.
As described above in Part I, Item 1, Description of Business - Growth Strategies - Development Strategy, three other multifamily apartment communities that are anticipated to total 854 apartment homes are in the development or construction stage. We also plan to acquire a 10.7 acre parcel on Northridge Parkway in north Atlanta from Roberts Properties for the development and construction of a 220-unit community. See Part III, Item 13, Certain Relationships and Related Transactions - Payments to the Roberts Companies - Pending Transactions with Affiliates of Mr. Roberts for more information about this transaction.
OTHER REAL ESTATE ASSETS
The operating partnership sold its two retail centers totaling 15,698 square feet on July 17, 1998 for $2,400,000 in cash resulting in a gain, net of minority interest, of $300,000. Net sales proceeds were $2,182,000, after deducting for closing costs and prorations of $218,000. We reinvested the net proceeds in new apartment communities. The purchaser was unaffiliated with us, and the transaction was negotiated at arms-length. The net book value of the property was $1,715,000 at June 30, 1998. We paid Roberts Properties $92,500 for consulting fees in connection with the sale. The retail centers together composed less than 1% of our assets and generated less than 2% of our gross revenues for 1998.
As noted in Part III, Item 13, Certain Relationships and Related Transactions - Payments to the Roberts Companies - Pending Transactions with Affiliates of Mr. Roberts, we intend to develop a 47,200 square foot retail center near our Addison Place community.
ITEM 3.
ITEM 3. 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 or the operating partnership.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of security holders during the fourth quarter of 2000.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The common stock trades on the American Stock Exchange, or AMEX, under the symbol "RPI." The following table sets forth the quarterly high and low closing sales prices per share reported on the AMEX, as well as the quarterly dividends declared per share:
Dividends Quarter Ended High Low Declared ------------- ---- --- -------- First Quarter 7.6875 6.5625 $0.1350 Second Quarter 7.1250 6.5625 0.3850* Third Quarter 7.7500 7.1250 0.1100 Fourth Quarter 7.9375 7.6875 0.1100
First Quarter $7.6250 $7.1250 $0.1500 Second Quarter 7.7500 7.2500 0.1500 Third Quarter 8.5000 7.5000 0.6500** Fourth Quarter 7.8125 7.3125 0.1350
* Includes a special dividend of $0.25 per share. ** Includes a special dividend of $0.50 per share.
On March 23, 2001 there were approximately 479 holders of record of the common stock.
As of March 23, 2001, we had 4,846,228 shares outstanding. In addition, 2,381,728 shares are reserved for issuance to unitholders from time to time upon their exercise of redemption rights as explained in Part I, Item 1, Description of Business - The Operating Partnership. There is no established public trading market for the units. As of March 1, 2001, the operating partnership had 281 unitholders of record.
We depend upon distributions from the operating partnership to fund our distributions to shareholders. Distributions by the operating partnership, and thus distributions by us, will continue to be at the discretion of the board of directors and will be equal in amount for each unit and share. We and the operating partnership declared quarterly distributions for 1999 that totaled $1.085 per share/unit per annum, including a special distribution of $0.50 per share/unit in August 1999 as a result of the sale of our Bentley Place community. We and the operating partnership declared quarterly distributions for 2000 that totaled $0.7400 per share/unit per annum, including a special distribution of $0.25 per share/unit in June 2000 as a result of the sale of our Ivey Brook community. Approximately 23.85% of those 2000 distributions represented ordinary income, 57.14% represented capital gain, and the remaining 19.01% represented a return of capital.
We elected to become a REIT beginning with the partial year ended December 31, 1994. To maintain our qualification as a REIT under the Internal Revenue Code, we must make annual distributions to shareholders of at least 95% of our taxable income, which does not include net capital gains. Under some circumstances, we may be required to make distributions in excess of cash available for distribution to meet those distribution requirements.
During the fourth quarter of 2000, we issued a total of 5,745 shares of restricted common stock to seven employees as incentive compensation. The restrictions on transfer lapse at specified dates ranging between three and four years after the respective grant date. The grants were exempt from registration as private placements under section 4(2) of the Securities Act. We affixed appropriate legends to the share certificates we issued in these transactions. All recipients of these securities had adequate access, through their relationships with us, to information about us. All of these securities are deemed to be restricted securities for purposes of the Securities Act.
(1) Property operating expenses include personnel, utilities, real estate taxes, insurance, maintenance, landscaping, marketing, and property administration expenses (real estate taxes include an adjustment of $588,000 in 1997 to reduce estimated property tax accruals for two properties that received favorable tax assessments).
(2) Because we acquired Roberts Properties Management, LLC on April 1, 1997, we paid no management fees to a related party after April 1, 1997; however, we incurred additional general and administrative expenses as a result of managing our properties internally.
(3) On April 1, 1997, we acquired Roberts Management, the property management company that managed our multifamily apartment communities since our inception. The operating partnership issued 590,000 units valued at $10.00 per unit or $5,900,000 to purchase Roberts Management. We manage our own properties using Roberts Management's property management systems and the property management personnel formerly employed by Roberts Management. Although we no longer pay 5% of gross property revenues to Roberts Management for property management services, we do bear the actual overhead cost of managing the properties internally. Because Roberts Management, a related party, managed only properties we owned, the transaction was accounted for as the settlement of a contract and expensed for the year ended December 31, 1997.
(4) The extraordinary items resulted from costs associated with the early extinguishment of indebtedness. The extraordinary items have been reduced by the portion related to the minority interest of the unitholders.
(5) We began paying dividends and distributions on our common stock and units beginning on April 15, 1996.
(6) Funds from Operations, or 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 use the current NAREIT definition of FFO. Effective January 1, 2000, NAREIT amended its definition of FFO to include all non-recurring items, except those defined as extraordinary items under GAAP and gains and losses from sales of depreciable operating property. We consider FFO to be an important measure of our operating performance; however, FFO does not represent amounts available for management's discretionary use for payment of 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, FFO should be evaluated in conjunction with net income (determined in accordance with GAAP). FFO represents funds from operations available for shareholders and unitholders. We did not use the current NAREIT definition of FFO to compute the 1997 figure. The 1997 figure was calculated using the old NAREIT definition of FFO which excluded non-recurring items.
(7) Represents the average physical occupancy of the stabilized communities 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%.
ITEM 7. 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 are intended to 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. 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 December 31, 2000, we owned eight completed and stabilized multifamily apartment communities, consisting of 1,633 apartment homes.
As part of our business plan and growth strategy, we sold our 117-unit Bentley Place community in August 1999 and our 232-unit Windsong community in January 1998. Our decision to sell these two communities was based on their age and locations in markets that are 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. We sold our 146-unit Ivey Brook community in June 2000 and our 152-unit Rosewood Plantation community in January 2001. Our decision to sell these two communities was based on their small size and our decision to redeploy the net cash proceeds into new properties where we expect the yield and long-term growth to be greater.
In June 1998, we used the equity from the sale of Windsong and cash to purchase three separate parcels of land for $11.3 million. We are developing and building three new multifamily communities totaling 854 apartment homes, which will increase the size of our portfolio 58% from 1,481 to 2,335 apartment homes. One of our communities under construction is located in Charlotte, North Carolina, and is the first step in our diversification strategy. The other two communities are located in north Atlanta. We began construction of the 285-unit second phase of Addison Place Phase II during the third quarter of 1999, and we commenced construction of a 250-unit apartment home community located in north Atlanta during the July 2000.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
For the year ended December 31, 2000, we recorded net income of $2,832,000 or $0.58 per share compared to net income of $716,000 or $0.15 per share for the year ended December 31, 1999 and net income of $708,000 or $0.15 per share for the year ended December 31, 1998. The $2,116,000 increase in net income from $716,000 in 1999 to $2,832,000 in 2000 is due primarily to the following:
(a) Addison Place Phase I becoming stabilized on July 1, 2000;
(b) a $161,000 increase in water revenue from $357,000 in 1999 to $518,000 in 2000;
(c) lower interest expense as a result of a decrease in total debt due to the sale of Ivey Brook and an increase in construction period interest due to having more properties under construction in 2000 than in 1999;
(d) the increase in the gain on sale of real estate assets due to the sale of Ivey Brook in June 2000 compared to the gain on the sale of Bentley Place in August 1999; and
(e) the increase in average stabilized occupancy from 93.7% in 1999 to 95.9% in 2000;
offset by:
(f) higher general and administrative costs; and
(g) a $135,000 increase in personnel costs from $1,785,000 in 1999 to $1,920,000 in 2000.
The $8,000 increase in net income from $708,000 in 1998 to $716,000 in 1999 is due primarily to the following:
(a) the start of leasing operations at Addison Place Phase I in April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek in August 1998 and the second phases of Preston Oaks in July 1998 and Plantation Trace in November 1998; and
(c) a $307,000 increase in water revenue from $50,000 in 1998 to $357,000 in 1999;
offset by:
(d) higher interest expense due to:
o the permanent financing of Bradford Creek in June 1998;
o the refinancing of Rosewood Plantation for a higher loan amount in June 1998;
o the refinancing of Plantation Trace for a higher loan amount in September 1998;
o the refinancing of Crestmark for a higher loan amount in September 1998;
o construction loan interest on Addison Place Phase I in 1999 1999; and
o the permanent financing of Addison Place Phase I in October 1999;
(e) higher general and administrative costs;
(f) increased depreciation expense; and
(g) the decline in average stabilized occupancy from 96.3% in 1998 to 93.7% in 1999.
Our operating performance for all communities is summarized in the following 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 following: (a) 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; (b) Windsong only through January 9, 1998, which is the date the property was sold, (c) Ivey Brook only through June 23, 2000, which is the date the property was sold; and (d) Bentley Place only through August 23, 1999, which is the date the property was sold. (4) Represents the total of property operating expenses divided by property operating revenues, expressed as a percentage.
Our 2000 same-property operating performance, when compared to 1999, includes a 7.1% increase in operating revenues, an 8.8% increase in net operating income, a 1.4% increase in average occupancy from 94.4% to 95.8%, and a 2.8% decline in our lease renewal percentage. Same-property results for the seven communities that were fully stabilized during both years ended December 31, 2000 and 1999 (Crestmark, Bradford Creek, Highland Park, River Oaks, Rosewood Plantation, and the first phases of Plantation Trace and Preston Oaks) are summarized in the table below.
Our 1999 same-property operating performance, when compared to 1998, included a 4.2% increase in operating revenues, a 5.6% increase in net operating income, a 0.6% decrease in average occupancy from 94.9% to 95.5%, and a 3.6% decrease in our lease renewal percentage. Same-property results for the seven communities that were fully stabilized during both years ended December 31, 1999 and 1998 (Bentley Place, Highland Park, River Oaks, Rosewood Plantation, and the first phases of Crestmark, Plantation Trace, and Preston Oaks) are summarized in the following 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 the stabilized communities 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 years ended December 31, 2000, 1999 and 1998.
Property operating revenue increased $794,000 or 4.1% from $19,384,000 for the year ended December 31, 1999 to $20,178,000 for the year ended December 31, 2000. The increase in operating revenue is due primarily to the following:
(a) the stabilization of Addison Place Phase I;
(b) a 2.2% increase in the average stabilized occupancy rate;
(c) a $161,000 increase in water revenue from $357,000 in 1999 to $518,000 in 2000; and
(d) a $1,171,000 or 7.1% increase in same-property operating revenue;
offset by:
(e) the sale of Ivey Brook in 2000 compared to the sale of Bentley Place in 1999.
Property operating revenue increased $2,030,000 or 11.7% from $17,354,000 for the year ended December 31, 1998 to $19,384,000 for the year ended December 31, 1999. The increase in operating revenue is due primarily to the following:
(a) the start of leasing operations at Addison Place Phase I in April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek in August 1998 and the second phases of Preston Oaks in July 1998 and Plantation Trace in November 1998;
(c) a $617,000 or 4.2% increase in same-property operating revenue; and
(d) a $307,000 increase in water revenue from $50,000 in 1998 to $357,000 in 1999, with $255,000 of the $307,000 increase being attributable to the seven properties that were stabilized during both 1998 and 1999;
offset by:
(e) the sale of the two retail centers in 1998 compared to the sale of Bentley Place in 1999; and
(f) decreased average physical occupancy from 96.3% in 1998 to 93.7% in 1999.
During 1998, we implemented a program to bill residents for their individual water consumption. We completed the installation of water-metering equipment in the fourth quarter of 1998 at a total cost of $377,000. Water revenues were $518,000 during 2000, $357,000 during 1999 and $50,000 during 1998. We expect to install water-metering equipment in all new apartment homes we develop.
Property operating expenses (excluding depreciation and general and administrative expenses) increased $71,000 or 1.1% from $6,688,000 for the year ended December 31, 1999 to $6,759,000 for the year ended December 31, 2000. The increase in property operating expenses is due primarily to the following:
(a) Addison Place Phase I operating for 12 months in 2000 while operating only 9 months in 1999; and
(b) same property operating expenses increasing 3.8% or $212,000 from $5,548,000 in 1999 to $5,760,000 in 2000;
offset by the sales of Ivey Brook in 2000 and Bentley Place in 1999.
Property operating expenses (excluding depreciation and general and administrative expenses) increased $496,000 or 8.0% from $6,192,000 for the year ended December 31, 1998 to $6,688,000 for the year ended December 31, 1999. The increase in property operating expenses is due primarily to the following:
(a) the start of leasing operations at Addison Place Phase I in April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek in August 1998 and the second phases of Preston Oaks in July 1998 and Plantation Trace in November 1998; and
(c) a $75,000, or 1.4% increase in same-property operating expenses;
offset by the sales of Bentley Place in 1999 and the two retail centers in 1998.
General and administrative expenses increased $233,000 or 11.9% from $1,964,000 for the year ended December 31, 1999 to $2,197,000 for the year ended December 31, 2000 and include legal accounting and tax fees, marketing and printing fees, salaries, director fees and other costs. This increase is due primarily to increased legal costs and incentive based employee trips. General and administrative expenses as a percentage of operating revenues increased from 10.1% for the year ended December 31, 1999 to 10.9% for the year ended December 31, 2000.
General and administrative expenses increased $237,000 or 13.7% from $1,727,000 for the year ended December 31, 1998 to $1,964,000 for the year ended December 31, 1999 and include legal, accounting and tax fees, marketing and printing fees, salaries, director fees, and other costs. The increase is due primarily to increased personnel costs including amortization of restricted stock, accounting and tax fees related to the registration statement we filed with the SEC that became effective in August 1999, expenses of SEC and other shareholder reports, marketing, and directors fees. General and administrative expenses as a percentage of operating revenues increased from 10.0% for the year ended December 31, 1998 to 10.1% for the year ended December 31, 1999.
Depreciation expense decreased $66,000 or 1.2% from $5,529,000 for the year ended December 31, 1999 to $5,463,000 for the year ended December 31, 2000. This decrease is due primarily due to the sales of Ivey Brook in 2000 and Bentley Place in 1999.
Depreciation expense increased $512,000 or 10.2% from $5,017,000 for the year ended December 31, 1998 to $5,529,000 for the year ended December 31, 1999. The increase is due primarily to the completion of construction of Bradford Creek and the second phases of Preston Oaks and Plantation Trace in 1998 and the completion of construction of the first phase of Addison Place in 1999, offset by the sale of the two retail centers in 1998 and the sale of Bentley Place in 1999.
Interest expense decreased $293,000 or 5.6% from $5,244,000 for the year ended December 31, 1999 to $4,951,000 for the year ended December 31, 2000. This decrease is due primarily to a decrease in total debt due to the sale of Ivey Brook and an increase in construction period interest as a result of having more properties under construction in 2000 than in 1999.
Interest expense increased $689,000 or 15.1% from $4,555,000 for the year ended December 31, 1998 to $5,244,000 for the year ended December 31, 1999. The increase is due primarily to:
(a) the financing of Bradford Creek in June 1998 and the first phase of Addison Place in October 1999;
(b) the refinancing of the mortgage loan secured by the Rosewood Plantation community in June 1998 for a higher loan amount; and
(c) the refinancing of the mortgage loans secured by the Plantation Trace and Crestmark communities in September 1998, each for higher loan amounts, offset by the mortgage note that we repaid when we sold Bentley Place in 1999.
On January 9, 1998, we 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. 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. We paid Roberts Properties a consulting fee of $288,000 at closing. We reinvested the net cash proceeds from the sale of Windsong in undeveloped land in June 1998 as part of a Section 1031 tax-deferred exchange.
On July 17, 1998, we completed the sale of two retail centers for $2,400,000 in cash resulting in a gain, net of minority interest, of $300,000. Net sales proceeds were $2,182,000, after deducting for closing costs of $183,000 and prorations of $35,000. We paid Roberts Properties a consulting fee of $92,500 at closing.
On August 23, 1999, we sold the Bentley Place community for $8,273,000 in cash resulting in a gain, net of minority interest, of $1,023,000. Net sales proceeds were $3,726,000 after deduction for loan repayment, including prepayment fee, of $4,166,000, and closing costs, accrued interest, and prorations totaling $381,000. Partnership profits interests of $242,000 were paid to Roberts Properties under the amended partnership agreement of the operating partnership. We used the remaining net sales proceeds of $3,484,000 to fund a special distribution to shareholders and unitholders on August 30, 1999. Unamortized loan cost of $93,000 and a prepayment fee of $198,000 payable at closing were charged to expense as an extraordinary item. The extraordinary item (early extinguishment of debt) for the year ended December 31, 1999 was $291,000 (including the minority interests' share of $107,000).
On June 23, 2000, we sold the Ivey Brook community for $14,550,000 in cash resulting in a gain, net of minority interest, of $2,285,000. Net sales proceeds were $8,097,000 after deduction for the loan assumed by the buyer of $6,190,000, and closing costs and accrued interest, totaling $263,000. Partnership profits interests of $726,000 were paid to Roberts Properties under the amended partnership agreement of the operating partnership. We used the remaining net proceeds of $7,371,000 to fund a special distribution to shareholders and unitholders on July 27, 2000 and to fund construction projects. Unamortized loan costs of $103,000 were charged to expense as an extraordinary item, including the minority interests' share of $35,000. In addition, during the fourth quarter of 2000, the Company received $198,000 from a settlement relating to the sale of Bentley Place which was recorded as an additional gain (before minority intersts of $67,000).
On January 4, 2001, we sold our 152-unit Rosewood Plantation community for $14,800,000. The sale resulted in a gain of $5,188,000, net of minority interest of unitholders in the operating partnership. We acquired the community in October 1994. Net sale proceeds were $5,789,000 after deduction for loan repayment of $7,875,000, profits interests of $740,000 paid to Roberts Properties, and closing costs and prorations of $396,000.
We refinanced the mortgage notes payable secured by the Rosewood Plantation and Crestmark communities in June and September 1998, respectively, before their contractual maturity. We charged the yield maintenance fee and the unamortized loan costs related to the mortgage notes payable at the time of the refinancing to expense as an extraordinary item. The extraordinary item (early extinguishment of debt), including the extraordinary gain of $110,000 on the buyer's assumption of debt related to the sale of Windsong, for the year ended December 31, 1998 was $792,000 (including the minority interests' share of $305,000).
LIQUIDITY AND CAPITAL RESOURCES
COMPARISON OF YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998. Cash and cash equivalents decreased $178,000 from $1,673,000 as of December 31, 1999 to $1,495,000 as of December 31, 2000. The decrease was due to an increase in cash used by financing activities, offset by a decrease in cash used in investing activities and an increase in cash provided by operating activities. Cash and cash equivalents decreased $2,433,000 from $4,106,000 as of December 31, 1998 to $1,673,000 as of December 31, 1999. The decrease was due to a decrease in cash used in investing activities and an increase in cash provided by operating activities, offset by an increase in cash used in financing activities.
A primary source of liquidity for us is cash flow from operations. Operating cash flows have historically been determined by the number of apartment homes, rental rates, and operating expenses with respect to those apartment homes. Net cash provided by operations increased $568,000 from $5,917,000 during 1999 to $6,485,000 during 2000. The increase in cash flow from operations is due primarily to additional cash flow from the communities leased up in 1999 and the stabilization of the first phase of Addison Place in 2000, offset by the sale of Ivey Brook in 2000. Net cash provided by operating activities increased $622,000 from $5,295,000 during 1998 to $5,917,000 during 1999. The increase in cash flow from operations is due primarily to additional cash flow from the communities leased-up in 1998 and the commencement of leasing operations at the first phase of Addison Place in 1999, offset by the sales of the two retail centers in 1998 and Bentley Place in 1999.
Net cash used in investing activities increased $4,562,000 from $7,003,000 during 1999 to $11,565,000 during 2000. This increase is due primarily to the following:
(a) proceeds of $7,569,000 from the sale of Ivey Brook and from a settlement relating to the sale of Bentley Place in 2000 compared to proceeds of $7,918,000 in 1999 from the sale of Bentley Place; and
(b) construction and development costs of $17,496,000 in 2000 related to the first and second phases of Addison Place, Old Norcross and Ballantyne, compared to construction and development costs of $13,971,000 in 1999 related to Bradford Creek, the first and second phases of Addison Place, and the second phase of Plantation Trace.
Net cash used in investing activities decreased $11,232,000 from $18,235,000 during 1998 to $7,003,000 during 1999. This decrease is due primarily to the following:
(a) the purchase of three separate parcels of land for $11,359,000 in 1998; and
(b) construction costs of $12,915,000 in 1999 related to the first and second phases of Addison Place, Bradford Creek, and the second phase of Plantation Trace, compared to construction costs of $13,913,000 in 1998 related to Bradford Creek, the second phases of Preston Oaks and Plantation Trace, and the first phase of Addison Place;
offset by:
(c) proceeds of $7,918,000 from the sale of Bentley Place in 1999 compared to proceeds of $7,521,000 in 1998 in from the sales of Windsong and the two retail centers.
Net cash provided by financing activities increased $6,249,000 from net cash used in financing activities of $1,347,000 during 1999 to net cash provided by financing activities of $4,902,000 during 2000. This increase is due primarily to the following:
(a) proceeds from the construction loan on the second phase of Addison Place of $14,152,000;
(b) a decrease of $2,501,000 in distributions and dividends paid from $8,148,000 in 1999 to $5,647,000 during 2000; and
(c) proceeds of $2,000,000 from the land loan secured by our Old Norcross property;
offset by:
(d) the payoff of the Addison Place land loan of $3,000,000 from the proceeds of the construction loan on the second phase of Addison Place; and
(e) the payoff of the line of credit balance of $2,000,000.
Net cash provided by (used in) financing activities decreased $11,276,000 from $9,929,000 of net cash provided in 1998 to $1,347,000 of net cash used during 1999. This decrease is due primarily to the following:
(a) the closing of a $9,500,000 loan in October 1999 on Addison Place Phase I with a fixed interest rate of 6.95% per annum and a term of ten years, which provided net cash proceeds of $1,321,000 after paying off the construction loan ($8,019,000) and accrued interest ($38,000); the $1,321,000 net proceeds will be used to pay the balance of construction costs; the lender required us to obtain a letter of credit in the amount of $843,000 until the property obtains 95% physical occupancy (at December 31, 1999, the physical occupancy of the property was 55.9%);
(b) the closing of a $3,000,000 land loan secured by Addison Place Phase II with a variable interest rate of LIBOR plus 150 basis points, a one-year term, which provided net cash proceeds of $2,977,000; the proceeds will be used to fund the initial construction of the second phase of Addison Place; and
(c) net borrowings of $1,235,000 from the $2,000,000 line of credit;
offset by:
(d) the closing of an $8,400,000 loan in June 1998 on Bradford Creek with a fixed interest rate of 7.15% per annum and a term of ten years, which provided net cash proceeds of $8,282,000;
(e) the refinancing of a $6,317,000 loan on Rosewood Plantation in June 1998 for $8,100,000 with a fixed interest rate of 6.62% per annum (compared with 7.38% per annum on the old loan), a term of ten years, which provided net cash proceeds of $1,474,000;
(f) the refinancing of a $7,686,000 loan on Plantation Trace in September 1998 for $11,900,000 (which included the 50-unit second phase of Plantation Trace), with a fixed interest rate of 7.09% per annum (compared with 7.75% per annum on the old loan), a term of ten years, which provided net cash proceeds of $3,092,000; an additional $150,000 was escrowed by lender until completion of construction of the additional amenities, which occurred during the second quarter of 1999;
(g) the refinancing of two loans totaling $13,520,000 on Crestmark in September 1998; the new loan amount is $16,000,000 with a fixed interest rate of 6.57% per annum (compared with 7.54% per annum on the old loans), a term of ten years, and net cash proceeds of $1,680,000; and
(h) an increase of $3,826,000 in dividends and distributions paid, from $4,322,000 during 1998 to $8,148,000 during 1999.
EXISTING DEBT STRUCTURE AS OF DECEMBER 31, 2001. The following facts highlight our existing debt structure:
(a) each of our eight communities is financed with fixed-rate debt;
(b) the average interest rate for all nine communities is 6.97% per annum as of December 31, 2000;
(c) no debt is scheduled to mature before October 2002;
(d) the average term to maturity is six years; and
(e) debt principal will amortize at a rate of approximately $1,000,000 per year.
The following table summarizes the mortgage debt for each of our eight communities:
Each of our existing mortgage loans will require balloon payments (in addition to monthly principal amortization) coming due over the years 2002 to 2009 as summarized below:
2002 $ 8,025,000 2003 16,057,000 2008 38,232,000 2009 8,387,000 ---------
Total $ 70,701,000 ==============
We anticipate that we will repay only a small portion of the principal of that indebtedness before maturity and that we will not have funds on hand sufficient to repay that indebtedness at maturity. Therefore, it will be necessary for us to refinance that debt through (a) debt financing collateralized by mortgages on individual communities or groups of communities and/or (b) equity offerings.
On May 3, 2000, we closed on a $22,500,000 construction loan to fund the construction of the second phase of Addison Place. The loan has a 5-year term and bears an interest rate of LIBOR plus 150 basis points. When the loan closed, we entered into an interest rate swap agreement that synthetically fixed the interest rate at 8.62%. At December 31, 2000, $14,152,000 was drawn on the loan.
On February 1, 2000, we closed a $2,000,000 land loan to fund the initial construction of the Old Norcross community. The loan is secured by the Old Norcross land, has a 12-month term, and bears an interest rate of LIBOR plus 150 basis points. We renewed the loan in February 2001 for an additional six month period. We plan to pay off the land loan with the proceeds of a construction loan.
The Company renewed a $2,000,000 revolving unsecured line of credit in June 2000 to provide funds for short-term working capital purposes. The line of credit has a one-year term and bears an interest rate of LIBOR plus 150 basis points. There was no outstanding balance on the line of credit at December 31, 2000.
On February 1, 2001, we refinanced the Preston Oaks mortgage note with a new $12,700,000 loan having a seven-year term with a fixed interest rate of 7.18% payable in monthly installments of $86,034 based on a 30-year amortization schedule.
On February 27, 2001, we signed an exchange agreement with Real Estate Exchange Services to acquire land previously owned by Roberts Properties Jones Bridge, LLC., a non-owned affiliate. We loaned Real Estate Exchange Services $3,514,000 to acquire the property and hold title until July 2, 2001. We intend that on July 2, 2001, a qualified intermediary for federal income tax purposes will purchase the property and then sell it to us to complete a Section 1031 tax-deferred exchange funded from the net proceeds from our sale of Rosewood Plantation.
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 developments and debt maturities, from the proceeds of construction and permanent loans.
HEDGING STRATEGY
We generally enter into fixed rate debt instruments; however, in certain situations, we may utilize derivative financial instruments in the form of interest rate swaps to hedge interest rate exposure on variable debt. We do not utilize such instruments for trading or speculative purposes.
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 repurchased 152,588 shares in 2000 at a total cost of $1,156,000; 121,200 shares in 1999 at a total cost of $909,000; and 19,300 shares in 1998 at a total cost of $145,000. In October 2000, we issued a press release announcing that our board of directors had authorized the repurchase of up to an additional 50,000 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.
REDEMPTIONS OF UNITS FOR CASH
During the years ended December 31, 1999, and 1998, a total of 3,917 and 14,341 units were redeemed for cash of $28,000 and $122,000, respectively, from unitholders who resided outside the state of Georgia. We redeemed no units for cash in the year ended December 31, 2000.
SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATIONS
Funds from Operations, or 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 utilized 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 for payment of 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, FFO should be evaluated in conjunction with net income (determined in accordance with GAAP). FFO represents funds from operations available for shareholders and unitholders. The following table reconciles net income to FFO (dollars in thousands).
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS"), "Accounting for Derivative Instruments and Hedging Activities." The effective date of this statement was delayed by SFAS No. 137 and the statement was amended by SFAS No. 138. SFAS No. 133, as amended, requires us to recognize all derivatives on the balance sheet at fair value. Because we have an interest rate swap that we designated as a hedge of our exposure to changes in the LIBOR rate on our $22,500,000 construction loan, and the swap was deemed to be highly effective in hedging our exposure, the adoption of SFAS No. 133, as amended, is not expected to have a material impact on our results of operations, but it is expected to result in a $842,000 decrease in shareholders' equity (accumulated other comprehensive income) relating to the estimated fair value of the swap at January 1, 2001. We have no other derivative instruments or hedging activities.
The SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 was required to be implemented in the fourth quarter of 2000. The adoption of SAB 101 did not have any impact on our results of operations and our financial position.
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. The short-term nature of these leases serves to reduce the risk to us of the adverse effects of inflation.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
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 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. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those that are anticipated in the forward-looking statements. These risks include the following:
o Unfavorable changes in market and economic conditions in Atlanta and Charlotte could hurt our occupancy and rental rates.
o Increased competition in the Atlanta and Charlotte markets could limit our ability to lease our apartments homes or increase or maintain rents.
o 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.
o 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.
o 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.
o 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.
o Our operations could be adversely affected if we lost key personnel, particularly Mr. Roberts.
o We could incur costs from environmental problems even though we did not cause, contribute to, or know about them.
o Compliance or failure to comply with the Americans with Disabilities Act and other similar laws could result in substantial costs.
In addition, the market price of the common stock may from time to time fluctuate widely as a result of, among other things:
o our operating results; o the operating results of other REITs, particularly apartment REITs; and o 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 the S-3 Registration Statement we filed with the SEC on August 2, 1999.
ITEM 7A. 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. In order to reduce our interest rate risk, we entered into an interest rate swap agreement to hedge exposure to the LIBOR rate for the construction loan. This agreement synthetically fixed the interest rate at 8.62% (see Note 4 to the Consolidated Financial Statements). 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 4 to the Consolidated Financial Statements. All of our long-term borrowings are under fixed rate instruments, and our line of credit rate and land loan rates are 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.
The table below presents principal reductions and related weighted average interest rates by year of expected maturity for our debt obligations.
We estimate that the fair value of our debt approximates carrying value based upon our effective current borrowing rate for issuance of debt with similar terms and remaining maturities. At December 31, 2000, the fair value of our interest rate swap was ($842,000).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements are listed under Item 14(a) and are filed as part of this annual report on the pages indicated.
Report of Independent Public Accountants (Arthur Andersen LLP)......F-1
Consolidated Financial Statements and Schedule as of December 31, 2000 and 1999 and for the Years Ended December 31, 2000, 1999 and 1998:
Balance Sheets......................................................F-2
Statements of Operations............................................F-3
Statements of Shareholders' Equity..................................F-4
Statements of Cash Flows............................................F-5
Notes to Financial Statements ......................................F-6
Schedule III - Real Estate and Accumulated Depreciation.............S-1
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
Charles S. Roberts, age 54, has served as our Chairman of the Board, Chief Executive Officer, and President since July 1994. Mr. Roberts' term as a director expires at the 2003 annual meeting of shareholders. Mr. Roberts owns, directly or indirectly, all of the outstanding stock of, and is the president and sole director of, Roberts Properties, Inc. and Roberts Properties Construction, Inc. Mr. Roberts also owned substantially all of the outstanding interests in Roberts Properties Management, L.L.C. until its acquisition by Roberts Properties Residential, L.P. on April 1, 1997.
In October 1970, Mr. Roberts established Roberts Properties, Inc. to develop, construct, and manage real estate. Beginning in 1985, Mr. Roberts and Roberts Properties began to focus on developing upscale multifamily residential communities and have won numerous local, regional and national awards for the development of these communities. Mr. Roberts is a frequent national speaker on the topic of developing upscale multifamily housing and has been recognized as a leader in this industry. In April 1995, Roberts Properties Management, Inc. was recognized as the Property Management Company of the Year by the National Association of Home Builders. On a regional level, Roberts Properties was awarded the prestigious Southeast Builders Conference Aurora Award for the best rental apartment community eight out of nine years during the period 1988 through 1996. On a national level, Roberts Properties was awarded the prestigious Pillars of the Industry Award from the National Association of Home Builders for the best low-rise apartments in 1991 and 1992. In 1993, Roberts Properties was awarded the coveted Golden Aurora Award for best overall development in the Southeast.
James M. Goodrich, age 60, a director since October 1994, is a consulting engineer and private investor. Dr. Goodrich's term expires at the 2003 annual meeting of shareholders. Dr. Goodrich is a trustee of the North American Electric Reliability Council, whose mission is to promote the reliability of the electricity supply for North America. In 1975, Dr. Goodrich founded Energy Management Associates, which provides operations and financial planning software and related consulting services to the electric and gas utility industries. Dr. Goodrich was Executive Vice President of Energy Management Associates from 1975 until October 1993 and was a member of its board of directors until 1992, when it was sold to Electronic Data Systems Corporation. Prior to his experience with Energy Management Associates, Dr. Goodrich served in the United States Navy for five years as an officer on the staff of Admiral Hyman Rickover; this position involved technical support of the design and development of nuclear power plants for the Navy. Dr. Goodrich holds a Ph.D. in Nuclear Engineering, a master's degree in Engineering-Economic Systems, and a bachelor of arts degree, all from Stanford University. He also holds a master's degree in Engineering Science from George Washington University. Dr. Goodrich has appeared as an expert witness before numerous state public utility commissions, the Federal Energy Regulatory Commission, federal courts, and arbitration panels.
Wm. Jarell Jones, age 52, a director since October 1994, is an attorney and has practiced law with the firm of Wm. Jarell Jones, P.C., in Statesboro, Georgia since November 1993. Mr. Jones' term expires at the 2002 annual meeting of shareholders. Mr. Jones is also a Certified Public Accountant, and in 1976 he formed the public accounting firm of Jones & Kolb in Atlanta, Georgia and served as Senior Tax Partner and Co-Managing Partner until December 1988. In 1990 Mr. Jones moved to Statesboro and practiced law with the firm of Edenfield, Stone & Cox until November 1992 and then with the firm of Jones & Rutledge from November 1992 until November 1993. Mr. Jones is the Chief Executive Officer of JQUAD, Inc., a family owned holding company of timber, farming, and development interests. Mr. Jones was a former director for six years and the former Chairman for two years of the Downtown Statesboro Development Authority.
Ben A. Spalding, age 66, a director since October 1994, is Executive Vice President of DHR International, Inc., an executive search firm. Mr. Spalding was the sole shareholder of Spalding & Company, a former NASD member broker-dealer that served from 1980 to 1996 as the exclusive broker-dealer for limited partnerships sponsored by Mr. Roberts. Mr. Spalding's term expires at the 2001 annual meeting of shareholders. Mr. Spalding served as President of Spalding & Company from 1980 until 1994. For the 20-year period through 1983,
Mr. Spalding served in several positions with Johnson & Johnson in the health care field, most recently as Healthcare Division Sales Manager for several states in the Southeast. Mr. Spalding has a bachelor's degree in Business Administration from Bellarmine College. He has served in numerous positions with civic and charitable organizations, including serving as a National Trustee of the Cystic Fibrosis Foundation and a member of the Board of Trustees of the Metro-Atlanta Crime Commission. He received the Cystic Fibrosis Dick Goldschmidt Award in 1986 for his efforts on behalf of the Cystic Fibrosis Foundation.
George W. Wray, Jr., age 64, a director since February 1995, is a private investor and Senior Partner of the Wray Partnership, a family investment group. Mr. Wray's term expires at the 2001 annual meeting of shareholders. He was employed with International Silver Company from the early 1960s to July 1993, most recently as a Vice President engaged in sales management for the eastern United States. From the July 1993 acquisition of International Silver Company by World Crisa Corporation (a division of Vitro S.A.) through September 1997, Mr. Wray was an independent sales agent for the successor organization. Mr. Wray also served as a Vice President of Spalding & Company, an NASD registered broker-dealer, from 1991 to 1997 and was a registered associate of Spalding & Company from 1983 to 1997. Mr. Wray holds a bachelor's degree in Industrial Relations from the University of North Carolina at Chapel Hill and serves as an elder of the Peachtree Presbyterian Church in Atlanta.
Dennis H. James, age 53, a director since June 1995, is a Managing Director of L. J. Melody & Company (formerly Shoptaw-James, Inc.), a commercial mortgage banking firm. Mr. James' term expires at the 2002 annual meeting of shareholders. Mr. James has over 25 years experience in the mortgage banking industry and has been involved in the production of income property straight debt loans, participating mortgages, debt/equity joint ventures and sales. As Managing Director of L. J. Melody & Company, he is responsible for the Southeast Region's overall production and investor relations. He has served on both the Allstate Life Insurance Company Correspondent Advisory Council and State Farm Life Insurance Advisory Council. Mr. James has a bachelor's degree in Industrial Management from Georgia Tech, and his professional education includes attendance at numerous real estate institutes.
Weldon R. Humphries, age 63, a director since February 1998, is a private investor. Mr. Humphries' term expires at the 2001 annual meeting of shareholders. Mr. Humphries recently retired from a distinguished twenty-year career with Manor Care, Inc. (NYSE: MNR), where he was employed from January 1978 to November 1997 as Senior Vice President responsible for asset management, acquisitions and development, and with Choice Hotels International, Inc. (NYSE: CHH), where he served as Senior Vice-President responsible for asset management, acquisitions and development from November 1997 to January 1998. Mr. Humphries began his career as a senior mortgage analyst with Connecticut General Life Insurance Company and later worked for Arvida Corporation, where he was responsible for all real estate financing, development and marketing. Mr. Humphries has a BBA in Marketing from the University of Houston and an MBA in Finance from the University of Hartford. He also served as an officer in the United States Marine Corps.
Charles R. Elliott, age 47, Roberts Realty's Secretary and Treasurer since its inception, is our Chief Financial Officer and has served in that capacity since April 1995. Mr. Elliott also served as a director of Roberts Realty from October 1994 to February 1995 and he again became a director in 2000. He worked for Hunneman Real Estate Corporation in Boston, Massachusetts from 1979 to 1993, most recently as a Senior Vice-President of Accounting and Finance. Mr. Elliott joined Roberts Properties in August 1993 as Chief Financial Officer and served in that role until April 1995. He holds an undergraduate degree in Accounting and a master's degree in Finance.
Ronald L. Johnson, age 44, has served as our Vice President - Property Maintenance since January 1999. He also served as a Vice President of Quality Management from April 1997 through 1998. He worked for Roberts Properties Management, L.L.C. as Vice President of Quality Management from 1996 to April 1997 (when we acquired Roberts Properties Management) and as Maintenance Supervisor from 1991 to 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Roberts Realty's directors and executive officers and persons who own beneficially more than 10% of our outstanding common stock to file with the SEC initial reports of ownership and reports of changes in their ownership of our common stock. Directors, executive officers and greater than 10% shareholders are required by SEC regulations to furnish us with copies of the forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2000, except for Ronald Johnson, our directors, executive officers and greater than 10% shareholders complied with all applicable Section 16(a) filing requirements. Mr. Johnson, our Vice President - Property Maintenance, failed to file a Form 3 in January 1999 when he became an officer of our company, as well as three Forms 4 in 2000 after exchanging units for shares and selling shares.
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION OF EXECUTIVE OFFICERS
Mr. Charles S. Roberts, our Chairman of the Board, Chief Executive Officer and President, and Mr. Charles R. Elliott, our Secretary and Treasurer since inception and our Chief Financial Officer since April 1995, are our only executive officers whose total salary and bonus exceeded $100,000 during 2000. Mr. Roberts and Mr. Elliott are our "named executive officers."
SUMMARY COMPENSATION TABLE
Annual Compensation --------------------------------- Name and Principal Position Year Salary ($) Bonus ($) --------------------------- ---- ---------- ---------
Charles S. Roberts 2000 $150,000 $ 0 Chairman of the Board, Chief 1999 150,000 0 Executive Officer, and President 1998 155,769 0
Charles R. Elliott 2000 123,000 30,000 Secretary, Treasurer and 1999 101,577 30,000 Chief Financial Officer 1998 93,642 30,000
We are not a party to any employment agreements. Certain fees and other payments are payable to affiliates of Mr. Roberts under various agreements and arrangements. See Part III, Item 13, Certain Relationships and Related Transactions - Payments to the Roberts Companies.
COMPENSATION OF DIRECTORS
We pay our directors who are not officers of Roberts Realty fees for their services as directors. Mr. Roberts and Mr. Elliott, who are the only directors who are officers, are not paid any director fees. Non-officer directors receive an annual fee of $12,000 for attendance, in person or by telephone, at meetings of the Board of Directors. In addition, we reimburse our directors for reasonable travel expenses and out-of-pocket expenses incurred in connection with their activities on our behalf.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed of Mr. Humphries, Mr. James and Mr. Jones. None of them was during 2001, or at any previous time, an officer, or employee of Roberts Realty or Roberts Properties Residential, L.P.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table describes the beneficial ownership of shares of our common stock as of March 23, 2001 for:
o each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock;
o each director and each of our named executive officers; and
o our directors and executive officers as a group.
Except as noted in the footnotes, the person owns all shares and partnership units directly and has sole voting and investment power. Each of the persons known by us to beneficially own more than 5% of the common stock has an address in care of our principal office. The Number of Shares Owned column in the table includes the shares owned by the persons named but does not include shares they may acquire by exchanging units of partnership interest in Roberts Properties Residential, L.P., our operating partnership, for shares of common stock as explained in the following paragraph. The Number of Units Beneficially Owned column in the table reflects all shares that each person has the right to acquire by exchanging units for shares. Under SEC rules, the shares that can be acquired in exchange for units are deemed to be outstanding and to be beneficially owned by the person or group holding those units when computing the percentage ownership of that person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.
Except as described in this paragraph, unitholders generally have the right to require the operating partnership to redeem their units. Our articles of incorporation limit ownership by any one holder to 6% of our outstanding shares, other than by Mr. Roberts, who is limited to 25%. Accordingly, a unitholder cannot redeem units if upon their redemption he would hold more shares than permitted under the applicable percentage limit. Given the total number of shares and units they own, each of Mr. Roberts, Dr. Goodrich and Mr. Wray may be unable to redeem all the units they own unless and until other unitholders redeem a sufficient number of units to cause the number of outstanding shares of common stock to be increased to a level sufficient to permit their redemption. A unitholder who submits units for redemption will receive, at our election, either (a) an equal number of shares or (b) 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 units submitted. Our policy is to issue shares in exchange for units submitted for redemption.
- ------------------------------------------- *Less than 1%. (Footnotes begin on following page.)
(1) The total number of shares outstanding used in calculating this percentage is 4,846,228, the number of shares outstanding as of March 23, 2001.
(2) Includes 2,744 shares owned by Mr. Roberts' minor daughter. A trust for his minor daughter of which he is the sole trustee owns 29,500 units.
(3) Includes 214,065 shares owned by a partnership, over which shares Mr. Wray has voting and investment power as the managing partner of such partnership; 27,257 shares owned by his wife and 5,058 shares owned by a trust of which she is a co-trustee. Mr. Wray disclaims beneficial ownership of the 27,257 shares owned by Mrs. Wray and 5,058 shares owned by a trust of which she is a co-trustee. The partnership previously referenced owns 95,568 units.
(4) Includes 110,507 shares owned jointly by Dr. Goodrich and his wife; 108,478 shares owned by Goodrich Enterprises, Inc., all of the outstanding shares of which are owned by Dr. and Mrs. Goodrich and their sons; and 24,879 shares owned by a trust for the benefit of a son of Dr. and Mrs. Goodrich and of which Mrs. Goodrich is trustee. Dr. Goodrich's beneficial ownership of units includes 48,075 units owned jointly by Dr. and Mrs. Goodrich and 6,835 units owned by a trust for the benefit of a son of Dr. and Mrs. Goodrich of which Mrs. Goodrich is trustee. Dr. Goodrich disclaims beneficial ownership of the units and shares owned by the trust.
(5) Includes 7,564 shares owned by partnerships of which Mr. Spalding's wife is the managing partner. Mr. Spalding's beneficial ownership of units includes 2,917 units owned by Mrs. Spalding and 24,401 units owned by partnerships of which Mrs. Spalding is the managing partner. Mr. Spalding disclaims beneficial ownership of all units and shares owned by his wife or partnerships of which she is the managing partner.
(6) Owned by a trust of which Mr. Humphries is a co-trustee along with his spouse.
(7) Includes 256,985 shares and 50,992 units as to which directors share voting and investment power with another family member; also includes an aggregate of 64,758 shares and 34,153 units beneficially owned by three directors' wives, as to which shares such directors disclaim beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
GENERAL
Roberts Realty conducts its business through Roberts Properties Residential, L.P., which we refer to as the operating partnership; owns a 66.9% interest in it; and is its sole general partner. Mr. Charles S. Roberts owns all of the outstanding shares of both Roberts Properties, Inc. and Roberts Properties Construction, Inc., which we refer to together as the Roberts Companies. These companies perform certain services for us as explained below. Notes 1 and 9 to our Consolidated Financial Statements provide further detail regarding some of the transactions described in this section.
PAYMENTS TO THE ROBERTS COMPANIES
Overview. We have paid substantial fees to the Roberts Companies for various types of services and will continue to do so in the future. These various arrangements are summarized below.
Development Fees. From time to time we pay Roberts Properties fees for various development services that include market studies, business plans, design, finish selection, interior design and construction administration. The operating partnership paid Roberts Properties a fee of $1,595,000, or $5,000 per unit, for designing, developing, and overseeing construction of our 319-unit Ballantyne community in Charlotte, North Carolina. The operating partnership paid Roberts Properties a fee of $2,015,000, or $5,000 per unit, for designing, developing, and overseeing construction of our 403-unit Addison Place project in Atlanta, Georgia. The operating partnership will pay Roberts Properties a fee of $1,250,000, or $5,000 per unit, for designing, developing, and overseeing construction of our 250-unit Old Norcross project in Gwinnett County, Georgia. Through December 31, 2000, Roberts Realty had incurred $1,141,250 of the $1,250,000 development fee.
Construction Contracts. Roberts Realty enters into contracts in the normal course of business with Roberts Properties Construction, Inc. ("Roberts Construction").
Ballantyne. We have entered into a cost plus 10% contract with Roberts Construction for construction of our Ballantyne community. Roberts Construction started construction of the Ballantyne community in the fourth quarter of 1999, and we have paid Roberts Construction $1,360,000 through March 31, 2001 for its initial work on the project. Roberts Construction will serve as the general contractor for the construction of this community. We estimate the cost of construction to be $23,100,000.
Old Norcross. We have entered into a cost plus 10% contract with Roberts Construction for construction of our Old Norcross community. Through March 31, 2001 we paid Roberts Construction $1,088,000 for its initial work on the Old Norcross project. We estimate the cost of construction on this project to be $16,000,000.
Other Communities. The following table summarizes certain information regarding payments to Roberts Construction for other construction projects through March 23, 2001. Under all of these contracts, we pay Roberts Construction its cost, plus a fee of 10% of its cost.
We paid Roberts Construction $33,000 in 2000 for labor and materials to perform repairs and maintenance for our communities.
Partnership Profits Interest. Between 1994 and 1996, the operating partnership acquired nine limited partnerships of which Mr. Roberts was the sole general partner. Each partnership owned an apartment community that had been developed or was in the development process. 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. As the holder of the profits 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 maximum amount of $86,775. Pursuant to this arrangement, Roberts Properties received distributions of $726,000 (or 5% of gross proceeds) upon the sale of Ivey Brook in June 2000 and $740,000 (or 5% of the gross proceeds) upon the sale of Rosewood Plantation in January 2001. 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 value of each of the properties, or in the case of the Crestmark Phase II, land, up to the maximum amount. The amount to be distributed to Roberts Properties with respect to each affected property will 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:
o the debt assumed, or taken subject to, by the operating partnership in connection with its acquisition of the property; o the equity issued by the operating partnership in acquiring the property; and o all subsequent capital improvements to the property made by the operating partnership.
The percentages that apply to the sales proceeds, or fair market value, of the affected properties are shown in the following table:
River Oaks 5% Preston Oaks Phase I 5% Highland Park 5% Crestmark Phase I 5% Plantation Trace Phase I 6%
In the case of the Crestmark Phase II land, the maximum amount would be $86,775.
If Roberts Realty exercises its option to acquire all of the outstanding units for shares, it must simultaneously purchase the profits 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.
During 2000, we made a profits interest distribution of $726,000 to Roberts Properties.
Pending Transactions with Affiliates of Mr. Roberts. On February 27, 2001, we signed an exchange agreement with Real Estate Exchange Services to acquire land previously owned by Roberts Properties Jones Bridge, LLC, of which Mr. Roberts owns the majority of the equity interest. The 6.84 acre property is located at the intersection of Abbotts Bridge Road and Jones Bridge Road near Addison Place. We loaned Real Estate Exchange Services $3,514,000 to acquire the property and hold title until July 2, 2001. We intend that on July 2, 2001, a qualified intermediary for federal income tax purposes will purchase the property and then sell it to us to complete a Section 1031 tax-deferred exchange. We plan to develop 47,200 square foot retail center on the property.
On March 20, 2001, our board of directors approved our purchase from Roberts Properties of 10.7 acres on Northridge Parkway in north Atlanta adjacent to our Highland Park community for the construction of a 220-unit apartment community. The purchase price will be $4,700,000. We plan to retain Roberts Properties to design, develop, and oversee construction of the project for a fee of $1,100,000, or $5,000 per unit,. We also plan to enter into a cost plus 10% contract with Roberts Construction for construction of the project. The independent members of our board of directors approved the foregoing arrangements with Roberts Properties after reviewing two independent appraisals.
Other Fees. During 2000, we paid affiliates of Mr. Roberts miscellaneous fees and cost reimbursements totaling $192,000.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. and 2. Financial Statements and Schedules.
The financial statements and schedules listed below are filed as part of this annual report on the pages indicated.
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PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (Arthur Andersen LLP).............F-1
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE AS OF DECEMBER 31, 2000 AND 1999 AND FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998:
Balance Sheets..................................................F-2
Statements of Operations........................................F-3
Statements of Shareholders' Equity..............................F-4
Statements of Cash Flows........................................F-5
Notes to Financial Statements...................................F-6
Schedule III - Real Estate and Accumulated Depreciation.........S-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Roberts Realty Investors, Inc.:
We have audited the accompanying consolidated balance sheets of Roberts Realty Investors, Inc. (a Georgia corporation) and its subsidiary as of December 31, 2000 and 1999 and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Roberts Realty Investors, Inc. and its subsidiary as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia March 5, 2001
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
ROBERTS REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
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1. BUSINESS AND ORGANIZATION OF THE COMPANY
Roberts Realty Investors, Inc. (the "Company"), 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. The Company owns and operates multifamily residential properties as a self-administered, self-managed equity real estate investment trust (a "REIT"). All of the Company's completed apartment homes are located in the Atlanta metropolitan area.
The Company conducts all of its operations and owns all of its assets in and through Roberts Properties Residential, L.P., a Georgia limited partnership (the "Operating Partnership"), of which the Company is the sole general partner and had a 66.9% and 65.0% ownership interest at December 31, 2000 and 1999, respectively. As the sole general partner and owner of a majority interest of the Operating Partnership, the Company controls the Operating Partnership.
The Company, as the general partner of the Operating Partnership, does not hold any limited partner interests in the Operating Partnership. Units of limited partnership interest ("Units") in the Operating Partnership outstanding at December 31, 2000 and 1999 were 2,403,495 and 2,594,836, respectively. Units held by the minority interest as a percentage of total Units and shares of common stock ("Shares") of the Company outstanding were 33.1% and 35.0% at December 31, 2000 and 1999, respectively. The minority interest percentage reflects the number of Shares and Units outstanding and will change as additional Shares and Units are issued.
At December 31, 2000, the Company owned eight completed multifamily apartment communities totaling 1,633 apartment homes in Atlanta, and an additional 854 apartment homes were under construction (535 in Atlanta and 319 in Charlotte). On June 23, 2000, the Company sold a 146-unit apartment community located in Atlanta, Georgia.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The accompanying consolidated financial statements include the consolidated accounts of the Company and the Operating Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements of the Company have been adjusted for the minority interest of the unitholders in the Operating Partnership.
The minority interest of the Unitholders in the Operating Partnership on the accompanying balance sheets is 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 and Units outstanding and will change as additional Shares and 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 Units outstanding during the period, which was 33.7%, 36.4% and 38.5% for the years ended December 31, 2000, 1999 and 1998, respectively. The minority interest of the Unitholders was $10,607,000 and $12,013,000 at December 31, 2000 and 1999, respectively.
Holders of Units generally have the right to require the Operating Partnership to redeem their Units for Shares. Upon submittal of Units for redemption, the Operating Partnership has the option either (a) to acquire those Units in exchange for Shares, on a one-for-one basis, or (b) to pay cash for those Units at their fair market value, based upon the then current trading price of the Shares. The Operating Partnership has adopted a policy that it will issue Shares in exchange for all future Units submitted.
USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REAL ESTATE ASSETS AND DEPRECIATION. Real estate assets are recorded at depreciated cost less reductions for impairment, if any. In identifying potential impairment, management considers such factors as declines in a property's operating performance or market value, a change in use, or adverse changes in general market conditions. In determining whether an asset is impaired, management estimates the future cash flows expected to be generated from the asset's use and its eventual disposition. If the sum of these estimated future cash flows on an undiscounted basis is less than the asset's carrying cost, the asset is written down to its fair value. None of the Company's real estate assets have required write-downs.
Expenditures directly related to the development, acquisition and improvement of real estate assets are capitalized at cost as land, buildings and improvements. Ordinary repairs and maintenance are expensed as incurred. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Buildings are generally depreciated over 27.5 years. Land improvements are depreciated over 15 years, and furniture, fixtures and equipment are depreciated over 5 to 7 years.
REVENUE RECOGNITION. The Company leases its residential properties under operating leases with terms generally one year or less. Rental income is recognized when earned, which is not materially different than revenue recognition on a straight-line basis.
CASH AND CASH EQUIVALENTS. All investments purchased with an original maturity of three months or less are considered to be cash equivalents.
RESTRICTED CASH. Restricted cash consists of resident security deposits ($388,000). The 1999 restricted cash consists of resident security deposits ($359,000) and monies restricted by lenders from proceeds on mortgage financings ($843,000). Because the physical occupancy of Addison Place phase I was less than 95% at the time of closing, the lender required the Company to obtain a letter of credit in the amount of $843,000.
DEFERRED FINANCING COSTS. Deferred financing costs include fees and costs incurred to obtain financings and are amortized on the straight-line method over the terms of the related debt.
INTEREST AND REAL ESTATE TAXES. Interest and real estate taxes incurred during the construction period are capitalized and depreciated over the estimated useful lives of the constructed assets. Interest capitalized was $1,477,000, $621,000 and $580,000 for the years ended December 31, 2000, 1999, and 1998, respectively.
INCOME TAXES. The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with the taxable year ended December 31, 1994. As a result, the Company 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 Code, to its shareholders and satisfies certain other requirements. As a result of recently enacted tax legislation, effective for tax years beginning after December 31, 2000, the distribution requirement has been reduced from 95% to 90% of a REIT's ordinary taxable income. Provided we maintain our qualification as a REIT, the Company generally will not be subject to federal income tax on distributed net income in the future. Accordingly, no provision has been made for federal and state income taxes in the accompanying consolidated financial statements.
EARNINGS PER SHARE. Basic earnings per share is computed based upon the weighted average number of common Shares outstanding during the period. Diluted earnings per share is computed to reflect the potential dilution of all instruments or securities which are convertible into Shares of common stock.
NEW ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS") "Accounting for Derivative Instruments and Hedging Activities." The effective date of this statement was delayed by SFAS No. 137, and the statement was amended by SFAS No. 138. SFAS No. 133, as amended, requires the Company to recognize all derivatives on the balance sheet at fair value. Since the Company has an interst rate swap that it has designated as a hedge of its exposure to changes in the LIBOR rate on its $22,500,000 construction loan, and the swap was deemed to be highly effective in hedging the Company's exposure, the adoption of SFAS No. 133, as amended, is not expected to have a material impact on the Company's results of operations, but is expected to result in a $842,000 decrease in shareholders' equity (accumulated other comprehensive income) relating to the estimated fair value of the swap at January 1, 2001. Roberts Realty has no other derivative instruments or hedging activities.
The Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 was required to be implemented in the fourth quarter of 2000. The adoption of SAB 101 did not have any impact on the Company's results of operations and financial position.
RECLASSIFICATIONS. Certain prior years amounts have been reclassified to conform with the 2000 presentation.
3. ACQUISITIONS AND DISPOSITIONS
On January 9, 1998, the Company 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. Partnership profits interests of $288,000 were paid to Roberts Properties, Inc. The Company reinvested the net sales proceeds in replacement properties in connection with a Section 1031 tax-deferred exchange as described below. The purchaser is not affiliated with the Company. See Note 9 - Related Party Transactions.
On June 22, 1998, the Company purchased approximately 23.8 acres of undeveloped land in the Ballantyne area of Charlotte, North Carolina for $3,540,000 from a local Charlotte investment group. The Company began construction of a 319-unit multifamily apartment community on the property during the fourth quarter of 1999. See Note 9 - Related Party Transactions.
On June 24, 1998, the Company purchased approximately 49.1 acres of undeveloped land located in north Fulton County, Georgia for $5,294,000 from Roberts Properties, Inc. ("Roberts Properties"), an affiliate owned by Mr. Roberts. The Company is constructing a 403-unit multifamily apartment community on the property. Construction of the 118-unit first phase began in the third quarter of 1998 and was completed in the fourth quarter of 1999. Construction of the 285-unit second phase began in the second quarter of 1999. See Note 9 - Related Party Transactions.
On June 25, 1998, the Company purchased approximately 35.3 acres of undeveloped land located in Gwinnett County, Georgia for $2,525,000 from Roberts Properties Old Norcross, Ltd. The Company is constructing a 250-unit multifamily apartment community on the property, which began in the second quarter of 2000. See Note 9 - Related Party Transactions.
On July 17, 1998, the Company completed the sale of its two retail centers for $2,400,000 in cash resulting in a gain, net of minority interest, of $300,000. Net sales proceeds were $2,182,000, after deducting for closing costs and prorations of $218,000. Partnership profits interests of $92,500 were paid to Roberts Properties. The purchaser is unaffiliated with the Company. See Note 9 - Related Party Transactions.
On August 23, 1999, the Company sold the Bentley Place community for $8,273,000 in cash resulting in a gain, net of minority interest, of $1,023,000. Net sales proceeds were $3,726,000 after deduction for loan repayment and including prepayment fee, totaling $4,166,000, and closing costs, accrued interest, and prorations totaling $381,000. Partnership profits interests of $242,000 were paid to Roberts Properties under the amended partnership agreement of the Operating Partnership. The Company used the remaining net sales proceeds of $3,484,000 to fund a special distribution to shareholders and unitholders on August 30, 1999. The purchaser is not affiliated with the Company. See Note 9 - Related Party Transactions.
On June 23, 2000, the Company completed the sale of its Ivey Brook community to Ivey Brook Apartments, Inc. for $14,550,000. Ivey Brook is a 146-unit apartment community located in Atlanta, Georgia. Net cash proceeds were $7,371,000, resulting in a gain, net of minority interest, of $2,285,000 after deducting $6,190,000 for the mortgage note payable which was assumed by the buyer, $263,000 for closing costs, and accrued interest and $726,000 for a partnership profits interest paid to Roberts Properties in July 2000. We used the net proceeds of $7,371,000 to fund a special distribution to shareholders and unitholders on July 27, 2000 and to fund construction projects. See Note 9 - Related Party Transactions.
In the fourth quarter of 2000, the Company received $198,000 from a settlement relating to the sale of Bentley Place which was recorded as an additional gain (before minority intersts of $67,000).
Unaudited pro forma amounts for the years ended December 31, 2000 and 1999 assuming the sales of Ivey Brook and Bentley Place had taken place as of January 1 for the periods presented, are presented below (dollars in thousands, except per share amounts). The unaudited pro forma information is not necessarily indicative of the results of operations of the Company had the acquisition and sales occurred at the beginning of the periods presented, nor is it indicative of future results.
2000 1999 ---- ----
Total operating revenues $19,286 $16,859 Income (loss) before extraordinary items 515 (370) Net income (loss) 515 (370)
Per Share Data - Basic and Diluted
Loss before extraordinary items $0.11 $(0.08) Net loss 0.11 (0.08)
4. NOTES PAYABLE
LINE OF CREDIT. The Company renewed a $2,000,000 revolving unsecured line of credit (the "Line") in June 2000 to provide funds for short-term working capital purposes. The Line has a one-year term and bears an interest rate of LIBOR plus 150 basis points. The amount outstanding under the Line was $0 and $1,235,000 at December 31, 2000 and 1999, respectively.
MORTGAGE NOTES. Mortgage notes payable were secured by the following communities at December 31, 2000 and 1999:
CONSTRUCTION LOAN. On May 3, 2000, the Company closed a $22,500,000 construction loan to fund the construction of the second phase of Addison Place. The loan has a 5-year term and bears an interest rate of LIBOR plus 150 basis points. When the loan closed, the Company entered into an interest rate swap agreement that synthetically fixed the interest rate at 8.62% (Note 2). At December 31, 2000, $14,152,000 was drawn on the loan.
LAND LOANS. In October 1999, the Company closed a $3,000,000 land loan to fund the initial construction of the second phase of Addison Place. The loan was secured by the land for the second phase of Addison Place, had a six-month term, and an interest rate of LIBOR plus 150 basis points. The loan was repaid from the proceeds of a construction loan on the second phase of Addison Place - as discussed above.
On February 1, 2000, the Company closed a $2,000,000 land loan to fund the initial construction of the Old Norcross community. The loan is secured by the Old Norcross land, has a 12-month term and bears an interest rate of LIBOR plus 150 basis points. The loan was renewed in February 2001 for an additional six month term.
The scheduled principal payments of all debt outstanding at December 31, 2000 for each of the years ending December 31 are as follows:
2001 $3,001,000 2002 9,088,000 2003 16,971,000 2004 942,000 2005 14,628,000 Thereafter 49,060,000 ----------
Mortgage notes payable $93,690,000 ==========
Real estate assets having a combined depreciated cost of approximately $93,881,000 serve as collateral for the outstanding mortgage debt at December 31, 2000.
5. EXTRAORDINARY ITEMS
The 2000 extraordinary item relates to the write-off of unamortized loan costs for the extinguishment of the mortgage loan secured by the Ivey Brook community, which the Company sold on June 23, 2000. This extraordinary item is net of $35,000 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 period.
The 1999 extraordinary item relates to the write-off of unamortized loan costs and prepayment fee to the lender for the extinguishment of the mortgage loan secured by the Bentley Place community, which the Company sold on August 23, 1999. This extraordinary item is net of $107,000, 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 period.
The 1998 extraordinary items are comprised of (1) the write-off of unamortized debt premium associated with the January 9, 1998 buyer's assumption of the mortgage note secured by the Windsong community upon sale of the property, (2) the write-off of unamortized loan costs and prepayment fee to the lender for the refinancing of the mortgage note secured by the Rosewood Plantation community on June 23, 1998, and (3) the write-off of unamortized loan costs and prepayment fee to the lender for the refinancing of the mortgage notes secured by the Crestmark community on September 30, 1998. These extraordinary items are net of $306,000, which was allocated to the minority interest of the unitholders in the Operating Partnership, based on the weighted average number of Units outstanding during the period.
6. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management using available market information and appropriate valuation methodologies. Because considerable judgment is necessary to interpret market data and develop the related estimates of fair value, the estimates presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The fair value of the Company's interest rate swap on its construction loan was ($842,000) at December 31, 2000.
Cash and cash equivalents, accounts payable, accrued expenses, security deposits and other liabilities, due to their short-term nature, are carried at amounts which reasonably approximate their fair values at December 31, 2000 and 1999. Fixed rate mortgage debt, the construction loan, the variable rate line of credit, and the variable rate land loan with carrying values of $93,690,000 and $88,850,000 at December 31, 2000 and 1999, respectively, are estimated by management to approximate fair value based upon interest rates available to the Company for debt with similar terms and maturities.
7. SHAREHOLDERS' EQUITY
EXCHANGES OF UNITS FOR SHARES. During the years ended December 31, 2000, 1999, and 1998, a total of 191,341 185,858, and 330,468 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 UNITS FOR CASH. During the years ended December 31, 1999, and 1998, a total of 3,917 and 14,341 Units were redeemed for cash of $28,000 and $122,000, respectively. No Units were redeemed for cash in 2000.
RESTRICTED SHARE AWARDS. During the years ended December 31, 2000, 1999, and 1998, the Company granted 10,261, 9,802 and 13,061 Shares of restricted stock to certain employees. The market value of these restricted stock grants totaled $77,000, $79,000 and $111,000, respectively, which was recorded as unamortized deferred compensation and is shown as a separate component of shareholders' equity. These restricted Shares vest 100% at the end of a three or four-year vesting period and are being amortized to compensation expense ratably over the vesting period.
TREASURY SHARE REPURCHASES. During the years ended December 31, 2000, 1999, and 1998, the Company repurchased 152,588, 121,200 and 19,300 Shares at a total cost of $1,156,000, $909,000 and $145,000, respectively.
DIVIDENDS. On December 19, 2000, the Company's board of directors declared a quarterly distribution in the amount of $0.11 per common Share and Unit payable on January 12, 2001 to shareholders and unitholders of record on December 29, 2000. Of the total dividends declared for 2000 totaling $0.74 per share, approximately $0.18 per share represents ordinary income, $0.42 per share represents capital gain and $0.14 per share represents a return of capital to the shareholders. On November 16, 1999, the Company's board of directors declared a quarterly distribution in the amount of $0.135 per common Share and Unit payable on January 14, 2000 to shareholders and unitholders of record on December 30, 1999. Of the total dividends declared for 1999 totaling $1.085 per share, approximately $0.12 per share represents ordinary income, $0.21 per share represents capital gain and $0.75 per share represents a return of capital to the shareholders. On December 15, 1998, the board of directors declared a quarterly distribution in the amount of $0.145 per common Share and Unit payable on January 15, 1999 to shareholders and unitholders of record on December 31, 1998. Of the total dividends declared for 1998 totaling $0.5775 per share, approximately $0.16 per share represents ordinary income, $0.05 per share represents capital gain and $0.37 per share represents a return of capital to the shareholders.
EARNINGS PER SHARE. Reconciliations of income available to common shareholders and weighted average Shares and Units used in the Company's basic and diluted earnings per share computations are detailed below (dollars in thousands).
8. SEGMENT REPORTING
SFAS No. 131 established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its chief executive officer.
The Company owns, operates, and develops multifamily apartment communities in two major markets located in Georgia and North Carolina. These apartment communities generate rental revenue and other income through leasing of apartment homes to a diverse group of residents. The Company evaluates the performance of each of its apartment communities on an individual basis. However, because each of the apartment communities have similar economic characteristics, residents, and products and services, the apartment communities have been aggregated into one reportable segment. This segment comprises 100%, 100% and 99%, respectively, of the Company's total revenues for each of the three years ended December 31, 2000, 1999, and 1998.
The primary financial measure for the Company's reportable business segment is net operating income ("NOI"), which represents total property revenues less total property operating expenses, excluding general and administrative and depreciation expenses. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. NOI from apartment communities totaled $13,419,000, $12,696,000, and $11,162,000 for the years ended December 31, 2000, 1999 and 1998, respectively. All other segment measurements are disclosed in the Company's consolidated financial statements.
9. RELATED PARTY TRANSACTIONS
LAND ACQUISITIONS. On June 22, 1998, the Company purchased the Ballantyne land for $3,540,000 from a local Charlotte investment group unrelated to the Company. As part of the closing costs, the Operating Partnership paid Roberts Properties an acquisition fee of $166,000 for finding the property, negotiating the sales contract, conducting due diligence and closing the transaction. In addition, the Operating Partnership paid Roberts Properties a fee of $1,595,000, or $5,000 per unit, for designing, developing, and overseeing construction of the Ballantyne project. The independent members of the board of directors approved the foregoing arrangements with Roberts Properties.
On June 24, 1998, the Company purchased the Addison Place land for $5,294,000 from Roberts Properties. As part of the closing costs, the Operating Partnership paid Roberts Properties an acquisition fee of $250,000 for finding the property, negotiating the sales contract, conducting due diligence and closing the transaction. In addition, the Operating Partnership paid Roberts Properties a fee of $2,015,000, or $5,000 per unit, for designing, developing, and overseeing construction of the Addison Place project. The independent members of the board of directors approved the foregoing arrangements with Roberts Properties after reviewing two independent appraisals. Roberts Properties acquired the property for $4,343,000 on March 6, 1997.
On June 25, 1998, the Company purchased the Old Norcross land for $2,525,000 from Roberts Properties Old Norcross, Ltd.. Mr. Roberts, who was the general partner of Roberts Properties Old Norcross, Ltd., received none of the sale proceeds as general partner or otherwise. As part of the closing costs, the Operating Partnership paid Roberts Properties an acquisition fee of $119,250 for finding the property, negotiating the sales contract, conducting due diligence and closing the transaction. In addition, the Operating Partnership will pay Roberts Properties a fee of $1,250,000, or $5,000 per unit, for designing, developing, and overseeing construction of the Old Norcross project. Through December 31, 2000, the Company had paid $1,141,250 of the $1,250,000 development fees. The independent members of the board of directors approved the foregoing arrangements with Roberts Properties after reviewing two independent appraisals.
CONSTRUCTION CONTRACTS. The Company enters into contractual commitments in the normal course of business related to the construction of real estate assets with Roberts Properties Construction, Inc. ("Roberts Construction"). Mr. Roberts owns all of the outsatnding shares of Roberts Construction. Roberts Construction constructed the first phase of Addison Place under a cost plus 10% contract. Roberts Construction is currently constructing the second phase of Addison Place, consisting of 285 apartment homes, under a cost plus 10% arrangement. Roberts Construction started construction of the Ballantyne community in 1999 and is the general contractor on the project. In 2000, the Company entered into a contract with Roberts Construction related to construction of the Old Norcross project in Atlanta. Under both the Ballantyne and Old Norcross contracts, the Company will pay Roberts Construction cost plus 10%. The contractual amounts for projects started and/or completed with Roberts Construction during the last three years, from inception through December 31, 2000 are summarized in the following table:
The Company paid Roberts Construction for labor and materials to perform capital improvements for the communities in the amount of $33,000, $420,000 and $52,000 in 2000, 1999 and 1998, respectively.
DEVELOPMENT FEES. Roberts Properties received fees for various development services including market studies, business plans, design, finish selection, interior design and construction administration (including amounts described in "Land Acquisitions" above). Fees incurred totaled $2,148,000, $2,603,000 and $0 for the years ended December 31, 2000, 1999 and 1998, respectively.
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 ("Profits Interests").
As the holder of the Profits Interests, 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 the Company, 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:
o the debt assumed, or taken subject to, by the Operating Partnership in connection with its acquisition of the property;
o the equity issued by the Operating Partnership in acquiring the property; and
o all subsequent capital improvements to the property made by the Operating Partnership.
The percentages that apply to the sales prices, or fair market values, of the affected properties are shown in the following table:
River Oaks 5% Rosewood Plantation 5% Preston Oaks Phase I 5% Highland Park 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.
If the Company exercises its option to acquire all of the outstanding Units for Shares, it must simultaneously purchase the Profits Interests 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.
During 2000, 1999, and 1998, Profits Interests of $726,000, $242,000, and $348,000, respectively, were paid to Roberts Properties.
OTHER FEES. During 2000, 1999 and 1998, affiliates of Mr. Roberts received fees and cost reimbursements for services related to (1) leasing administration services at the Shoppes of River Oaks and Shoppes of Plantation Trace ($21,000), (2) the acquisition and rezoning of a 1.1 acre parcel of undeveloped land located adjacent to the existing Preston Oaks community ($25,000), (3) the sale of the Shoppes of River Oaks ($33,000), and (4) miscellaneous fees and cost reimbursements ($728,000). These fees and costs incurred totaled $192,000, $242,000, and $373,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
LOAN ORIGINATION FEES. A director of the Company is executive vice president of a commercial mortgage banking firm that has originated loans for the Company. Loan origination fees incurred totaled $0, $0, and $63,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company 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, the Company believes that the final outcome of these matters will not have a material adverse effect on the Company's financial position or results of operations.
As a result of the mergers of various limited partnerships into the Operating Partnership, the former partners of these limited partnerships received Units. Holders of Units have the right to require the Operating Partnership to redeem their Units for Shares, subject to certain conditions. Upon submittal of Units for redemption, the Operating Partnership will have the option either (a) to pay cash for those Units at their fair market value, which will be based upon the then current trading price of the Shares, or (b) to acquire those Units in exchange for Shares (on a one-for-one basis). The Company has adopted a policy that it will issue Shares in exchange for all future Units submitted. There were 2,403,495 Units outstanding at December 31, 2000 that could be exchanged for Shares, subject to the conditions described above.
The Company enters into contractual commitments in the normal course of business related to the development of real estate assets. Management does not believe that the completion of these commitments will result in a material adverse effect on the Company's financial position or results of operations.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December 31, 2000, 1999, and 1998 were as follows:
A. On January 9, 1998, the Company sold the Windsong community. As a condition of the sale, the purchaser assumed the mortgage note payable associated with the property in the amount of $3,959,000.
B. On June 23, 2000, the Company sold the Ivey Brook community. As a condition of the sale, the purchaser assumed the mortgage note payable associated with the property in the amount of $6,190,000.
12. SUBSEQUENT EVENTS
On January 4, 2001, the Company sold the Rosewood Plantation community for $14,800,000. The sale resulted in a gain of $5,188,000, net of minority interest of Unitholders in the Operating Partnership. The Company acquired the community in October 1994. Rosewood Plantation is a 152-unit apartment home community located in Gwinnett County in the Atlanta metropolitan area. Net sale proceeds were $5,789,000 after deduction for loan repayment of $7,875,000, Profits Interests of $740,000 and closing costs and prorations of $396,000. The purchaser, is not affiliated with the Company.
On February 1, 2001, the Company refinanced the mortgage note with Primary Capital Advisors which serves as permanent financing for the Preston Oaks community. This $12,700,000 loan has a 7 year term with a fixed interest rate of 7.18% payable in monthly installments of $86,034 based on a 30-year amortization schedule.
On February 27, 2001, the Company signed an exchange agreement with Real Estate Exchange Services to acquire land previously owned by Roberts Properties Jones Bridge, LLC. At the time the agreement was entered into, the Company loaned Real Estate Exchange Services $3,514,000 to acquire the property and hold title until July 2, 2001. On July 2, 2001, a Qualified Intermediary will purchase the property and then sell it to the Company in order to complete a Section 1031 tax-deferred exchange. The Company will use the net proceeds from the Rosewood Plantation sale to purchase this property.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
ROBERTS REALTY INVESTORS, INC.
S-1
The accompanying notes are an integral part of this schedule.
(A) A portion of Addison Place phase two and the Old Norcross property were under construction as of December 31, 2000. Construction in progress and real estate under development of $28,439 as of December 31, 2000 (which is excluded from Schedule III) includes these properties as well as the Ballantyne development in Charlotte, NC, which was unencumbered at December 31, 2000.
(B) The Company enters into contractual commitments in the normal course of business related to the construction of real estate assets with Roberts Construction - see Note 9 to the Consolidated Financial Statements.
(C) Gross capitalized costs of real estate assets are summarized as follows:
S-2
3. Exhibits.
We have filed some of the exhibits required by Item 601 of Regulation S-K with previous registration statements or reports. As specifically noted in the following Index to Exhibits, those previously filed exhibits are incorporated into this annual report on Form 10-K by reference. All exhibits contained in the following Index to Exhibits that are designated with an asterisk are incorporated into this annual report by reference from our initial Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the applicable exhibit number in that Registration Statement is provided beside the asterisk.
WE WILL PROVIDE A COPY OF ANY OR ALL OF THE FOLLOWING EXHIBITS TO ANY SHAREHOLDER WHO REQUESTS THEM, FOR A COST OF TEN CENTS PER PAGE.
EXHIBIT NO. DESCRIPTION - ------- ------------
3.1 Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of State on July 22, 1994. [* 2.1]
3.2 Bylaws of Roberts Realty Investors, Inc. [* 2.2]
4.1 Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994. [* 3.1]
4.1.1 First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 1, 1994. [* 3.1.1]
4.1.2 Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 13, 1994. [* 3.1.2]
4.1.3 Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 10.1 from our Registration Statement on Form S-3 filed July 8, 1999, registration number 333-82453.]
4.2 Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia Secretary of State on July 22, 1994. [* 3.2]
4.2.1 Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging Roberts Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.; Roberts Properties Preston Oaks, L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts Properties Residential, L.P. (1994 Consolidation). [* 3.2.1]
4.2.2 Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts Properties Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb Bridge Merger). [* 3.2.2]
4.2.3 Certificate of Merger filed with the Georgia Secretary of State on May 16, 1995, merging Roberts Properties Plantation Trace, L.P. with and into Roberts Properties Residential, L.P. (Plantation Trace Merger). [* 3.2.3]
4.2.4 Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging Roberts Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong Merger). [* 3.2.4]
4.2.5 Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts Properties Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place Merger). [Incorporated by reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.6 Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The Crestmark Club, L.P. with and into Roberts Properties Residential, L.P. (Crestmark Merger). [Incorporated by reference to Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.7 Certificate and Articles of Merger filed with the Georgia Secretary of State on April 1, 1997 merging Roberts Properties Management, L.L.C. with and into Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]
10.1.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00 (Preston Oaks). [* 6.11.1]
10.1.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents (Preston Oaks). [* 6.11.2]
10.2.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00 (Highland Park). [* 6.18.1]
10.2.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life Insurance Company of Wausau, dated January 31, 1996, in the original principal amount of $1,500,000.00 (Highland Park). [* 6.18.2]
10.2.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated January 31, 1996, and related collateral documents (Highland Park). [* 6.18.3]
10.3.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated October 17, 1996, in the original principal amount of $7,250,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.3 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life & Annuity Insurance Company, dated October 17, 1996, in the original principal amount of $2,000,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.4 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated October 17, 1996, and related collateral documents (River Oaks). [Incorporated by reference to Exhibit 10.3.5 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.4.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, in the original principal amount of $11,900,000 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents (Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.3 Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated September 29, 1998 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.5.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents (Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.3 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America, dated June 1, 1998 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.8 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.6.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to Exhibit 10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30, 1998 (Crestmark). [Incorporated by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.7.1 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.2 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.3 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Addison Place). [Incorporated by reference to Exhibit 10.14.11 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.4 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.5 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.6 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.01 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.7 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.02 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.8 Agreement and Plan of Merger by and between Roberts Properties Residential, L.P. and Roberts Properties Management, L.L.C., dated April 1, 1997 [Incorporated by reference to Exhibit 2.1 from our current report on Form 8-K dated April 1, 1997.]
10.8.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.4 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.04 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.5 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.05 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.6 Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated October 25, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.06 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.7 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.07 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.8 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.08 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.9 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.09 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.8.10 Deed to Secure Debt, Security Agreement and Assignment of Leases and Rents Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.10 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.9.1 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.1 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.2 Continuing Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.3 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.4 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.5 Continuing Guaranty executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.06 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.16.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.1 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.2 Future Advance Deed to Secure Debt, Assignment of Rents and Leases and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.2 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.3 Continuing Guaranty (Unlimited) executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.3 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.17.1 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Charles R. Elliott, dated March 20, 2001.
10.17.2 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Ronald L. Johnson, dated February 2, 2001.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (contained on the signature page hereof).
(b) Current Reports on Form 8-K during the quarter ended December 31, 2000.
We filed no Current Reports on Form 8-K during the quarter ended December 31, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts --------------------------------- Charles S. Roberts, Chairman of the Board, Chief Executive Officer and President
Date: March 29, 2001
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, Charles S. Roberts and Charles R. Elliott, and each one of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report (Form 10-K) and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
EXHIBIT INDEX
We have filed some of the exhibits required by Item 601 of Regulation S-K with previous registration statements or reports. As specifically noted in the following Index to Exhibits, those previously filed exhibits are incorporated into this annual report on Form 10-K by reference. All exhibits contained in the following Index to Exhibits that are designated with an asterisk are incorporated into this annual report by reference from our initial Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the applicable exhibit number in that Registration Statement is provided beside the asterisk..
EXHIBIT NO. DESCRIPTION - ------- -----------
3.1 Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of State on July 22, 1994. [* 2.1]
3.2 Bylaws of Roberts Realty Investors, Inc. [* 2.2]
4.1 Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994. [* 3.1]
4.1.1 First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 1, 1994. [* 3.1.1]
4.1.2 Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 13, 1994. [* 3.1.2]
4.1.3 Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 10.1 from our Registration Statement on Form S-3 filed July 8, 1999, registration number 333-82453.]
4.2 Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia Secretary of State on July 22, 1994. [* 3.2]
4.2.1 Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging Roberts Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.; Roberts Properties Preston Oaks, L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts Properties Residential, L.P. (1994 Consolidation). [* 3.2.1]
4.2.2 Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts Properties Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb Bridge Merger). [* 3.2.2]
4.2.3 Certificate of Merger filed with the Georgia Secretary of State on May 16, 1995, merging Roberts Properties Plantation Trace, L.P. with and into Roberts Properties Residential, L.P. (Plantation Trace Merger). [* 3.2.3]
4.2.4 Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging Roberts Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong Merger). [* 3.2.4]
4.2.5 Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts Properties Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place Merger). [Incorporated by reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.6 Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The Crestmark Club, L.P. with and into Roberts Properties Residential, L.P. (Crestmark Merger). [Incorporated by reference to Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.7 Certificate and Articles of Merger filed with the Georgia Secretary of State on April 1, 1997 merging Roberts Properties Management, L.L.C. with and into Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]
10.1.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00 (Preston Oaks). [* 6.11.1]
10.1.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents (Preston Oaks). [* 6.11.2]
10.2.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00 (Highland Park). [* 6.18.1]
10.2.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life Insurance Company of Wausau, dated January 31, 1996, in the original principal amount of $1,500,000.00 (Highland Park). [* 6.18.2]
10.2.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated January 31, 1996, and related collateral documents (Highland Park). [* 6.18.3]
10.3.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated October 17, 1996, in the original principal amount of $7,250,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.3 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life & Annuity Insurance Company, dated October 17, 1996, in the original principal amount of $2,000,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.4 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated October 17, 1996, and related collateral documents (River Oaks). [Incorporated by reference to Exhibit 10.3.5 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.4.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, in the original principal amount of $11,900,000 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents (Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.3 Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated September 29, 1998 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.5.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents (Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.3 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America, dated June 1, 1998 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.8 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.6.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to Exhibit 10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30, 1998 (Crestmark). [Incorporated by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.7.1 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.2 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.3 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Addison Place). [Incorporated by reference to Exhibit 10.14.11 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.4 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.5 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.6 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.01 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.7 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.02 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.8 Agreement and Plan of Merger by and between Roberts Properties Residential, L.P. and Roberts Properties Management, L.L.C., dated April 1, 1997 [Incorporated by reference to Exhibit 2.1 from our current report on Form 8-K dated April 1, 1997.]
10.8.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.4 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.04 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.5 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.05 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.6 Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated October 25, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.06 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.7 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.07 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.8 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.08 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.9 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.09 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.8.10 Deed to Secure Debt, Security Agreement and Assignment of Leases and Rents Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.10 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.9.1 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.1 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.2 Continuing Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.3 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.4 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.5 Continuing Guaranty executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.06 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.16.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.1 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.2 Future Advance Deed to Secure Debt, Assignment of Rents and Leases and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.2 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.3 Continuing Guaranty (Unlimited) executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.3 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.17.1 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Charles R. Elliott, dated March 20, 2001.
10.17.2 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Ronald L. Johnson, dated February 2, 2001.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (contained on the signature page hereof).
(b) Current Reports on Form 8-K during the quarter ended December 31, 2000.
We filed no Current Reports on Form 8-K during the quarter ended December 31, 2000.
ITEM 7. 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 are intended to 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. 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 December 31, 2000, we owned eight completed and stabilized multifamily apartment communities, consisting of 1,633 apartment homes.
As part of our business plan and growth strategy, we sold our 117-unit Bentley Place community in August 1999 and our 232-unit Windsong community in January 1998. Our decision to sell these two communities was based on their age and locations in markets that are 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. We sold our 146-unit Ivey Brook community in June 2000 and our 152-unit Rosewood Plantation community in January 2001. Our decision to sell these two communities was based on their small size and our decision to redeploy the net cash proceeds into new properties where we expect the yield and long-term growth to be greater.
In June 1998, we used the equity from the sale of Windsong and cash to purchase three separate parcels of land for $11.3 million. We are developing and building three new multifamily communities totaling 854 apartment homes, which will increase the size of our portfolio 58% from 1,481 to 2,335 apartment homes. One of our communities under construction is located in Charlotte, North Carolina, and is the first step in our diversification strategy. The other two communities are located in north Atlanta. We began construction of the 285-unit second phase of Addison Place Phase II during the third quarter of 1999, and we commenced construction of a 250-unit apartment home community located in north Atlanta during the July 2000.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
For the year ended December 31, 2000, we recorded net income of $2,832,000 or $0.58 per share compared to net income of $716,000 or $0.15 per share for the year ended December 31, 1999 and net income of $708,000 or $0.15 per share for the year ended December 31, 1998. The $2,116,000 increase in net income from $716,000 in 1999 to $2,832,000 in 2000 is due primarily to the following:
(a) Addison Place Phase I becoming stabilized on July 1, 2000;
(b) a $161,000 increase in water revenue from $357,000 in 1999 to $518,000 in 2000;
(c) lower interest expense as a result of a decrease in total debt due to the sale of Ivey Brook and an increase in construction period interest due to having more properties under construction in 2000 than in 1999;
(d) the increase in the gain on sale of real estate assets due to the sale of Ivey Brook in June 2000 compared to the gain on the sale of Bentley Place in August 1999; and
(e) the increase in average stabilized occupancy from 93.7% in 1999 to 95.9% in 2000;
offset by:
(f) higher general and administrative costs; and
(g) a $135,000 increase in personnel costs from $1,785,000 in 1999 to $1,920,000 in 2000.
The $8,000 increase in net income from $708,000 in 1998 to $716,000 in 1999 is due primarily to the following:
(a) the start of leasing operations at Addison Place Phase I in April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek in August 1998 and the second phases of Preston Oaks in July 1998 and Plantation Trace in November 1998; and
(c) a $307,000 increase in water revenue from $50,000 in 1998 to $357,000 in 1999;
offset by:
(d) higher interest expense due to:
o the permanent financing of Bradford Creek in June 1998;
o the refinancing of Rosewood Plantation for a higher loan amount in June 1998;
o the refinancing of Plantation Trace for a higher loan amount in September 1998;
o the refinancing of Crestmark for a higher loan amount in September 1998;
o construction loan interest on Addison Place Phase I in 1999 1999; and
o the permanent financing of Addison Place Phase I in October 1999;
(e) higher general and administrative costs;
(f) increased depreciation expense; and
(g) the decline in average stabilized occupancy from 96.3% in 1998 to 93.7% in 1999.
Our operating performance for all communities is summarized in the following 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 following: (a) 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; (b) Windsong only through January 9, 1998, which is the date the property was sold, (c) Ivey Brook only through June 23, 2000, which is the date the property was sold; and (d) Bentley Place only through August 23, 1999, which is the date the property was sold. (4) Represents the total of property operating expenses divided by property operating revenues, expressed as a percentage.
Our 2000 same-property operating performance, when compared to 1999, includes a 7.1% increase in operating revenues, an 8.8% increase in net operating income, a 1.4% increase in average occupancy from 94.4% to 95.8%, and a 2.8% decline in our lease renewal percentage. Same-property results for the seven communities that were fully stabilized during both years ended December 31, 2000 and 1999 (Crestmark, Bradford Creek, Highland Park, River Oaks, Rosewood Plantation, and the first phases of Plantation Trace and Preston Oaks) are summarized in the table below.
Our 1999 same-property operating performance, when compared to 1998, included a 4.2% increase in operating revenues, a 5.6% increase in net operating income, a 0.6% decrease in average occupancy from 94.9% to 95.5%, and a 3.6% decrease in our lease renewal percentage. Same-property results for the seven communities that were fully stabilized during both years ended December 31, 1999 and 1998 (Bentley Place, Highland Park, River Oaks, Rosewood Plantation, and the first phases of Crestmark, Plantation Trace, and Preston Oaks) are summarized in the following 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 the stabilized communities 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 years ended December 31, 2000, 1999 and 1998.
Property operating revenue increased $794,000 or 4.1% from $19,384,000 for the year ended December 31, 1999 to $20,178,000 for the year ended December 31, 2000. The increase in operating revenue is due primarily to the following:
(a) the stabilization of Addison Place Phase I;
(b) a 2.2% increase in the average stabilized occupancy rate;
(c) a $161,000 increase in water revenue from $357,000 in 1999 to $518,000 in 2000; and
(d) a $1,171,000 or 7.1% increase in same-property operating revenue;
offset by:
(e) the sale of Ivey Brook in 2000 compared to the sale of Bentley Place in 1999.
Property operating revenue increased $2,030,000 or 11.7% from $17,354,000 for the year ended December 31, 1998 to $19,384,000 for the year ended December 31, 1999. The increase in operating revenue is due primarily to the following:
(a) the start of leasing operations at Addison Place Phase I in April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek in August 1998 and the second phases of Preston Oaks in July 1998 and Plantation Trace in November 1998;
(c) a $617,000 or 4.2% increase in same-property operating revenue; and
(d) a $307,000 increase in water revenue from $50,000 in 1998 to $357,000 in 1999, with $255,000 of the $307,000 increase being attributable to the seven properties that were stabilized during both 1998 and 1999;
offset by:
(e) the sale of the two retail centers in 1998 compared to the sale of Bentley Place in 1999; and
(f) decreased average physical occupancy from 96.3% in 1998 to 93.7% in 1999.
During 1998, we implemented a program to bill residents for their individual water consumption. We completed the installation of water-metering equipment in the fourth quarter of 1998 at a total cost of $377,000. Water revenues were $518,000 during 2000, $357,000 during 1999 and $50,000 during 1998. We expect to install water-metering equipment in all new apartment homes we develop.
Property operating expenses (excluding depreciation and general and administrative expenses) increased $71,000 or 1.1% from $6,688,000 for the year ended December 31, 1999 to $6,759,000 for the year ended December 31, 2000. The increase in property operating expenses is due primarily to the following:
(a) Addison Place Phase I operating for 12 months in 2000 while operating only 9 months in 1999; and
(b) same property operating expenses increasing 3.8% or $212,000 from $5,548,000 in 1999 to $5,760,000 in 2000;
offset by the sales of Ivey Brook in 2000 and Bentley Place in 1999.
Property operating expenses (excluding depreciation and general and administrative expenses) increased $496,000 or 8.0% from $6,192,000 for the year ended December 31, 1998 to $6,688,000 for the year ended December 31, 1999. The increase in property operating expenses is due primarily to the following:
(a) the start of leasing operations at Addison Place Phase I in April 1999;
(b) the completion of the initial lease-up phase at Bradford Creek in August 1998 and the second phases of Preston Oaks in July 1998 and Plantation Trace in November 1998; and
(c) a $75,000, or 1.4% increase in same-property operating expenses;
offset by the sales of Bentley Place in 1999 and the two retail centers in 1998.
General and administrative expenses increased $233,000 or 11.9% from $1,964,000 for the year ended December 31, 1999 to $2,197,000 for the year ended December 31, 2000 and include legal accounting and tax fees, marketing and printing fees, salaries, director fees and other costs. This increase is due primarily to increased legal costs and incentive based employee trips. General and administrative expenses as a percentage of operating revenues increased from 10.1% for the year ended December 31, 1999 to 10.9% for the year ended December 31, 2000.
General and administrative expenses increased $237,000 or 13.7% from $1,727,000 for the year ended December 31, 1998 to $1,964,000 for the year ended December 31, 1999 and include legal, accounting and tax fees, marketing and printing fees, salaries, director fees, and other costs. The increase is due primarily to increased personnel costs including amortization of restricted stock, accounting and tax fees related to the registration statement we filed with the SEC that became effective in August 1999, expenses of SEC and other shareholder reports, marketing, and directors fees. General and administrative expenses as a percentage of operating revenues increased from 10.0% for the year ended December 31, 1998 to 10.1% for the year ended December 31, 1999.
Depreciation expense decreased $66,000 or 1.2% from $5,529,000 for the year ended December 31, 1999 to $5,463,000 for the year ended December 31, 2000. This decrease is due primarily due to the sales of Ivey Brook in 2000 and Bentley Place in 1999.
Depreciation expense increased $512,000 or 10.2% from $5,017,000 for the year ended December 31, 1998 to $5,529,000 for the year ended December 31, 1999. The increase is due primarily to the completion of construction of Bradford Creek and the second phases of Preston Oaks and Plantation Trace in 1998 and the completion of construction of the first phase of Addison Place in 1999, offset by the sale of the two retail centers in 1998 and the sale of Bentley Place in 1999.
Interest expense decreased $293,000 or 5.6% from $5,244,000 for the year ended December 31, 1999 to $4,951,000 for the year ended December 31, 2000. This decrease is due primarily to a decrease in total debt due to the sale of Ivey Brook and an increase in construction period interest as a result of having more properties under construction in 2000 than in 1999.
Interest expense increased $689,000 or 15.1% from $4,555,000 for the year ended December 31, 1998 to $5,244,000 for the year ended December 31, 1999. The increase is due primarily to:
(a) the financing of Bradford Creek in June 1998 and the first phase of Addison Place in October 1999;
(b) the refinancing of the mortgage loan secured by the Rosewood Plantation community in June 1998 for a higher loan amount; and
(c) the refinancing of the mortgage loans secured by the Plantation Trace and Crestmark communities in September 1998, each for higher loan amounts, offset by the mortgage note that we repaid when we sold Bentley Place in 1999.
On January 9, 1998, we 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. 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. We paid Roberts Properties a consulting fee of $288,000 at closing. We reinvested the net cash proceeds from the sale of Windsong in undeveloped land in June 1998 as part of a Section 1031 tax-deferred exchange.
On July 17, 1998, we completed the sale of two retail centers for $2,400,000 in cash resulting in a gain, net of minority interest, of $300,000. Net sales proceeds were $2,182,000, after deducting for closing costs of $183,000 and prorations of $35,000. We paid Roberts Properties a consulting fee of $92,500 at closing.
On August 23, 1999, we sold the Bentley Place community for $8,273,000 in cash resulting in a gain, net of minority interest, of $1,023,000. Net sales proceeds were $3,726,000 after deduction for loan repayment, including prepayment fee, of $4,166,000, and closing costs, accrued interest, and prorations totaling $381,000. Partnership profits interests of $242,000 were paid to Roberts Properties under the amended partnership agreement of the operating partnership. We used the remaining net sales proceeds of $3,484,000 to fund a special distribution to shareholders and unitholders on August 30, 1999. Unamortized loan cost of $93,000 and a prepayment fee of $198,000 payable at closing were charged to expense as an extraordinary item. The extraordinary item (early extinguishment of debt) for the year ended December 31, 1999 was $291,000 (including the minority interests' share of $107,000).
On June 23, 2000, we sold the Ivey Brook community for $14,550,000 in cash resulting in a gain, net of minority interest, of $2,285,000. Net sales proceeds were $8,097,000 after deduction for the loan assumed by the buyer of $6,190,000, and closing costs and accrued interest, totaling $263,000. Partnership profits interests of $726,000 were paid to Roberts Properties under the amended partnership agreement of the operating partnership. We used the remaining net proceeds of $7,371,000 to fund a special distribution to shareholders and unitholders on July 27, 2000 and to fund construction projects. Unamortized loan costs of $103,000 were charged to expense as an extraordinary item, including the minority interests' share of $35,000. In addition, during the fourth quarter of 2000, the Company received $198,000 from a settlement relating to the sale of Bentley Place which was recorded as an additional gain (before minority intersts of $67,000).
On January 4, 2001, we sold our 152-unit Rosewood Plantation community for $14,800,000. The sale resulted in a gain of $5,188,000, net of minority interest of unitholders in the operating partnership. We acquired the community in October 1994. Net sale proceeds were $5,789,000 after deduction for loan repayment of $7,875,000, profits interests of $740,000 paid to Roberts Properties, and closing costs and prorations of $396,000.
We refinanced the mortgage notes payable secured by the Rosewood Plantation and Crestmark communities in June and September 1998, respectively, before their contractual maturity. We charged the yield maintenance fee and the unamortized loan costs related to the mortgage notes payable at the time of the refinancing to expense as an extraordinary item. The extraordinary item (early extinguishment of debt), including the extraordinary gain of $110,000 on the buyer's assumption of debt related to the sale of Windsong, for the year ended December 31, 1998 was $792,000 (including the minority interests' share of $305,000).
LIQUIDITY AND CAPITAL RESOURCES
COMPARISON OF YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998. Cash and cash equivalents decreased $178,000 from $1,673,000 as of December 31, 1999 to $1,495,000 as of December 31, 2000. The decrease was due to an increase in cash used by financing activities, offset by a decrease in cash used in investing activities and an increase in cash provided by operating activities. Cash and cash equivalents decreased $2,433,000 from $4,106,000 as of December 31, 1998 to $1,673,000 as of December 31, 1999. The decrease was due to a decrease in cash used in investing activities and an increase in cash provided by operating activities, offset by an increase in cash used in financing activities.
A primary source of liquidity for us is cash flow from operations. Operating cash flows have historically been determined by the number of apartment homes, rental rates, and operating expenses with respect to those apartment homes. Net cash provided by operations increased $568,000 from $5,917,000 during 1999 to $6,485,000 during 2000. The increase in cash flow from operations is due primarily to additional cash flow from the communities leased up in 1999 and the stabilization of the first phase of Addison Place in 2000, offset by the sale of Ivey Brook in 2000. Net cash provided by operating activities increased $622,000 from $5,295,000 during 1998 to $5,917,000 during 1999. The increase in cash flow from operations is due primarily to additional cash flow from the communities leased-up in 1998 and the commencement of leasing operations at the first phase of Addison Place in 1999, offset by the sales of the two retail centers in 1998 and Bentley Place in 1999.
Net cash used in investing activities increased $4,562,000 from $7,003,000 during 1999 to $11,565,000 during 2000. This increase is due primarily to the following:
(a) proceeds of $7,569,000 from the sale of Ivey Brook and from a settlement relating to the sale of Bentley Place in 2000 compared to proceeds of $7,918,000 in 1999 from the sale of Bentley Place; and
(b) construction and development costs of $17,496,000 in 2000 related to the first and second phases of Addison Place, Old Norcross and Ballantyne, compared to construction and development costs of $13,971,000 in 1999 related to Bradford Creek, the first and second phases of Addison Place, and the second phase of Plantation Trace.
Net cash used in investing activities decreased $11,232,000 from $18,235,000 during 1998 to $7,003,000 during 1999. This decrease is due primarily to the following:
(a) the purchase of three separate parcels of land for $11,359,000 in 1998; and
(b) construction costs of $12,915,000 in 1999 related to the first and second phases of Addison Place, Bradford Creek, and the second phase of Plantation Trace, compared to construction costs of $13,913,000 in 1998 related to Bradford Creek, the second phases of Preston Oaks and Plantation Trace, and the first phase of Addison Place;
offset by:
(c) proceeds of $7,918,000 from the sale of Bentley Place in 1999 compared to proceeds of $7,521,000 in 1998 in from the sales of Windsong and the two retail centers.
Net cash provided by financing activities increased $6,249,000 from net cash used in financing activities of $1,347,000 during 1999 to net cash provided by financing activities of $4,902,000 during 2000. This increase is due primarily to the following:
(a) proceeds from the construction loan on the second phase of Addison Place of $14,152,000;
(b) a decrease of $2,501,000 in distributions and dividends paid from $8,148,000 in 1999 to $5,647,000 during 2000; and
(c) proceeds of $2,000,000 from the land loan secured by our Old Norcross property;
offset by:
(d) the payoff of the Addison Place land loan of $3,000,000 from the proceeds of the construction loan on the second phase of Addison Place; and
(e) the payoff of the line of credit balance of $2,000,000.
Net cash provided by (used in) financing activities decreased $11,276,000 from $9,929,000 of net cash provided in 1998 to $1,347,000 of net cash used during 1999. This decrease is due primarily to the following:
(a) the closing of a $9,500,000 loan in October 1999 on Addison Place Phase I with a fixed interest rate of 6.95% per annum and a term of ten years, which provided net cash proceeds of $1,321,000 after paying off the construction loan ($8,019,000) and accrued interest ($38,000); the $1,321,000 net proceeds will be used to pay the balance of construction costs; the lender required us to obtain a letter of credit in the amount of $843,000 until the property obtains 95% physical occupancy (at December 31, 1999, the physical occupancy of the property was 55.9%);
(b) the closing of a $3,000,000 land loan secured by Addison Place Phase II with a variable interest rate of LIBOR plus 150 basis points, a one-year term, which provided net cash proceeds of $2,977,000; the proceeds will be used to fund the initial construction of the second phase of Addison Place; and
(c) net borrowings of $1,235,000 from the $2,000,000 line of credit;
offset by:
(d) the closing of an $8,400,000 loan in June 1998 on Bradford Creek with a fixed interest rate of 7.15% per annum and a term of ten years, which provided net cash proceeds of $8,282,000;
(e) the refinancing of a $6,317,000 loan on Rosewood Plantation in June 1998 for $8,100,000 with a fixed interest rate of 6.62% per annum (compared with 7.38% per annum on the old loan), a term of ten years, which provided net cash proceeds of $1,474,000;
(f) the refinancing of a $7,686,000 loan on Plantation Trace in September 1998 for $11,900,000 (which included the 50-unit second phase of Plantation Trace), with a fixed interest rate of 7.09% per annum (compared with 7.75% per annum on the old loan), a term of ten years, which provided net cash proceeds of $3,092,000; an additional $150,000 was escrowed by lender until completion of construction of the additional amenities, which occurred during the second quarter of 1999;
(g) the refinancing of two loans totaling $13,520,000 on Crestmark in September 1998; the new loan amount is $16,000,000 with a fixed interest rate of 6.57% per annum (compared with 7.54% per annum on the old loans), a term of ten years, and net cash proceeds of $1,680,000; and
(h) an increase of $3,826,000 in dividends and distributions paid, from $4,322,000 during 1998 to $8,148,000 during 1999.
EXISTING DEBT STRUCTURE AS OF DECEMBER 31, 2001. The following facts highlight our existing debt structure:
(a) each of our eight communities is financed with fixed-rate debt;
(b) the average interest rate for all nine communities is 6.97% per annum as of December 31, 2000;
(c) no debt is scheduled to mature before October 2002;
(d) the average term to maturity is six years; and
(e) debt principal will amortize at a rate of approximately $1,000,000 per year.
The following table summarizes the mortgage debt for each of our eight communities:
Each of our existing mortgage loans will require balloon payments (in addition to monthly principal amortization) coming due over the years 2002 to 2009 as summarized below:
2002 $ 8,025,000 2003 16,057,000 2008 38,232,000 2009 8,387,000 ---------
Total $ 70,701,000 ==============
We anticipate that we will repay only a small portion of the principal of that indebtedness before maturity and that we will not have funds on hand sufficient to repay that indebtedness at maturity. Therefore, it will be necessary for us to refinance that debt through (a) debt financing collateralized by mortgages on individual communities or groups of communities and/or (b) equity offerings.
On May 3, 2000, we closed on a $22,500,000 construction loan to fund the construction of the second phase of Addison Place. The loan has a 5-year term and bears an interest rate of LIBOR plus 150 basis points. When the loan closed, we entered into an interest rate swap agreement that synthetically fixed the interest rate at 8.62%. At December 31, 2000, $14,152,000 was drawn on the loan.
On February 1, 2000, we closed a $2,000,000 land loan to fund the initial construction of the Old Norcross community. The loan is secured by the Old Norcross land, has a 12-month term, and bears an interest rate of LIBOR plus 150 basis points. We renewed the loan in February 2001 for an additional six month period. We plan to pay off the land loan with the proceeds of a construction loan.
The Company renewed a $2,000,000 revolving unsecured line of credit in June 2000 to provide funds for short-term working capital purposes. The line of credit has a one-year term and bears an interest rate of LIBOR plus 150 basis points. There was no outstanding balance on the line of credit at December 31, 2000.
On February 1, 2001, we refinanced the Preston Oaks mortgage note with a new $12,700,000 loan having a seven-year term with a fixed interest rate of 7.18% payable in monthly installments of $86,034 based on a 30-year amortization schedule.
On February 27, 2001, we signed an exchange agreement with Real Estate Exchange Services to acquire land previously owned by Roberts Properties Jones Bridge, LLC., a non-owned affiliate. We loaned Real Estate Exchange Services $3,514,000 to acquire the property and hold title until July 2, 2001. We intend that on July 2, 2001, a qualified intermediary for federal income tax purposes will purchase the property and then sell it to us to complete a Section 1031 tax-deferred exchange funded from the net proceeds from our sale of Rosewood Plantation.
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 developments and debt maturities, from the proceeds of construction and permanent loans.
HEDGING STRATEGY
We generally enter into fixed rate debt instruments; however, in certain situations, we may utilize derivative financial instruments in the form of interest rate swaps to hedge interest rate exposure on variable debt. We do not utilize such instruments for trading or speculative purposes.
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 repurchased 152,588 shares in 2000 at a total cost of $1,156,000; 121,200 shares in 1999 at a total cost of $909,000; and 19,300 shares in 1998 at a total cost of $145,000. In October 2000, we issued a press release announcing that our board of directors had authorized the repurchase of up to an additional 50,000 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.
REDEMPTIONS OF UNITS FOR CASH
During the years ended December 31, 1999, and 1998, a total of 3,917 and 14,341 units were redeemed for cash of $28,000 and $122,000, respectively, from unitholders who resided outside the state of Georgia. We redeemed no units for cash in the year ended December 31, 2000.
SUPPLEMENTAL DISCLOSURE OF FUNDS FROM OPERATIONS
Funds from Operations, or 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 utilized 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 for payment of 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, FFO should be evaluated in conjunction with net income (determined in accordance with GAAP). FFO represents funds from operations available for shareholders and unitholders. The following table reconciles net income to FFO (dollars in thousands).
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS"), "Accounting for Derivative Instruments and Hedging Activities." The effective date of this statement was delayed by SFAS No. 137 and the statement was amended by SFAS No. 138. SFAS No. 133, as amended, requires us to recognize all derivatives on the balance sheet at fair value. Because we have an interest rate swap that we designated as a hedge of our exposure to changes in the LIBOR rate on our $22,500,000 construction loan, and the swap was deemed to be highly effective in hedging our exposure, the adoption of SFAS No. 133, as amended, is not expected to have a material impact on our results of operations, but it is expected to result in a $842,000 decrease in shareholders' equity (accumulated other comprehensive income) relating to the estimated fair value of the swap at January 1, 2001. We have no other derivative instruments or hedging activities.
The SEC issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 was required to be implemented in the fourth quarter of 2000. The adoption of SAB 101 did not have any impact on our results of operations and our financial position.
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. The short-term nature of these leases serves to reduce the risk to us of the adverse effects of inflation.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
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 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. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those that are anticipated in the forward-looking statements. These risks include the following:
o Unfavorable changes in market and economic conditions in Atlanta and Charlotte could hurt our occupancy and rental rates.
o Increased competition in the Atlanta and Charlotte markets could limit our ability to lease our apartments homes or increase or maintain rents.
o 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.
o 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.
o 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.
o 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.
o Our operations could be adversely affected if we lost key personnel, particularly Mr. Roberts.
o We could incur costs from environmental problems even though we did not cause, contribute to, or know about them.
o Compliance or failure to comply with the Americans with Disabilities Act and other similar laws could result in substantial costs.
In addition, the market price of the common stock may from time to time fluctuate widely as a result of, among other things:
o our operating results; o the operating results of other REITs, particularly apartment REITs; and o 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 the S-3 Registration Statement we filed with the SEC on August 2, 1999.
ITEM 7A.
ITEM 7A. 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. In order to reduce our interest rate risk, we entered into an interest rate swap agreement to hedge exposure to the LIBOR rate for the construction loan. This agreement synthetically fixed the interest rate at 8.62% (see Note 4 to the Consolidated Financial Statements). 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 4 to the Consolidated Financial Statements. All of our long-term borrowings are under fixed rate instruments, and our line of credit rate and land loan rates are 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.
The table below presents principal reductions and related weighted average interest rates by year of expected maturity for our debt obligations.
We estimate that the fair value of our debt approximates carrying value based upon our effective current borrowing rate for issuance of debt with similar terms and remaining maturities. At December 31, 2000, the fair value of our interest rate swap was ($842,000).
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements are listed under Item 14(a) and are filed as part of this annual report on the pages indicated.
Report of Independent Public Accountants (Arthur Andersen LLP)......F-1
Consolidated Financial Statements and Schedule as of December 31, 2000 and 1999 and for the Years Ended December 31, 2000, 1999 and 1998:
Balance Sheets......................................................F-2
Statements of Operations............................................F-3
Statements of Shareholders' Equity..................................F-4
Statements of Cash Flows............................................F-5
Notes to Financial Statements ......................................F-6
Schedule III - Real Estate and Accumulated Depreciation.............S-1
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS
Charles S. Roberts, age 54, has served as our Chairman of the Board, Chief Executive Officer, and President since July 1994. Mr. Roberts' term as a director expires at the 2003 annual meeting of shareholders. Mr. Roberts owns, directly or indirectly, all of the outstanding stock of, and is the president and sole director of, Roberts Properties, Inc. and Roberts Properties Construction, Inc. Mr. Roberts also owned substantially all of the outstanding interests in Roberts Properties Management, L.L.C. until its acquisition by Roberts Properties Residential, L.P. on April 1, 1997.
In October 1970, Mr. Roberts established Roberts Properties, Inc. to develop, construct, and manage real estate. Beginning in 1985, Mr. Roberts and Roberts Properties began to focus on developing upscale multifamily residential communities and have won numerous local, regional and national awards for the development of these communities. Mr. Roberts is a frequent national speaker on the topic of developing upscale multifamily housing and has been recognized as a leader in this industry. In April 1995, Roberts Properties Management, Inc. was recognized as the Property Management Company of the Year by the National Association of Home Builders. On a regional level, Roberts Properties was awarded the prestigious Southeast Builders Conference Aurora Award for the best rental apartment community eight out of nine years during the period 1988 through 1996. On a national level, Roberts Properties was awarded the prestigious Pillars of the Industry Award from the National Association of Home Builders for the best low-rise apartments in 1991 and 1992. In 1993, Roberts Properties was awarded the coveted Golden Aurora Award for best overall development in the Southeast.
James M. Goodrich, age 60, a director since October 1994, is a consulting engineer and private investor. Dr. Goodrich's term expires at the 2003 annual meeting of shareholders. Dr. Goodrich is a trustee of the North American Electric Reliability Council, whose mission is to promote the reliability of the electricity supply for North America. In 1975, Dr. Goodrich founded Energy Management Associates, which provides operations and financial planning software and related consulting services to the electric and gas utility industries. Dr. Goodrich was Executive Vice President of Energy Management Associates from 1975 until October 1993 and was a member of its board of directors until 1992, when it was sold to Electronic Data Systems Corporation. Prior to his experience with Energy Management Associates, Dr. Goodrich served in the United States Navy for five years as an officer on the staff of Admiral Hyman Rickover; this position involved technical support of the design and development of nuclear power plants for the Navy. Dr. Goodrich holds a Ph.D. in Nuclear Engineering, a master's degree in Engineering-Economic Systems, and a bachelor of arts degree, all from Stanford University. He also holds a master's degree in Engineering Science from George Washington University. Dr. Goodrich has appeared as an expert witness before numerous state public utility commissions, the Federal Energy Regulatory Commission, federal courts, and arbitration panels.
Wm. Jarell Jones, age 52, a director since October 1994, is an attorney and has practiced law with the firm of Wm. Jarell Jones, P.C., in Statesboro, Georgia since November 1993. Mr. Jones' term expires at the 2002 annual meeting of shareholders. Mr. Jones is also a Certified Public Accountant, and in 1976 he formed the public accounting firm of Jones & Kolb in Atlanta, Georgia and served as Senior Tax Partner and Co-Managing Partner until December 1988. In 1990 Mr. Jones moved to Statesboro and practiced law with the firm of Edenfield, Stone & Cox until November 1992 and then with the firm of Jones & Rutledge from November 1992 until November 1993. Mr. Jones is the Chief Executive Officer of JQUAD, Inc., a family owned holding company of timber, farming, and development interests. Mr. Jones was a former director for six years and the former Chairman for two years of the Downtown Statesboro Development Authority.
Ben A. Spalding, age 66, a director since October 1994, is Executive Vice President of DHR International, Inc., an executive search firm. Mr. Spalding was the sole shareholder of Spalding & Company, a former NASD member broker-dealer that served from 1980 to 1996 as the exclusive broker-dealer for limited partnerships sponsored by Mr. Roberts. Mr. Spalding's term expires at the 2001 annual meeting of shareholders. Mr. Spalding served as President of Spalding & Company from 1980 until 1994. For the 20-year period through 1983,
Mr. Spalding served in several positions with Johnson & Johnson in the health care field, most recently as Healthcare Division Sales Manager for several states in the Southeast. Mr. Spalding has a bachelor's degree in Business Administration from Bellarmine College. He has served in numerous positions with civic and charitable organizations, including serving as a National Trustee of the Cystic Fibrosis Foundation and a member of the Board of Trustees of the Metro-Atlanta Crime Commission. He received the Cystic Fibrosis Dick Goldschmidt Award in 1986 for his efforts on behalf of the Cystic Fibrosis Foundation.
George W. Wray, Jr., age 64, a director since February 1995, is a private investor and Senior Partner of the Wray Partnership, a family investment group. Mr. Wray's term expires at the 2001 annual meeting of shareholders. He was employed with International Silver Company from the early 1960s to July 1993, most recently as a Vice President engaged in sales management for the eastern United States. From the July 1993 acquisition of International Silver Company by World Crisa Corporation (a division of Vitro S.A.) through September 1997, Mr. Wray was an independent sales agent for the successor organization. Mr. Wray also served as a Vice President of Spalding & Company, an NASD registered broker-dealer, from 1991 to 1997 and was a registered associate of Spalding & Company from 1983 to 1997. Mr. Wray holds a bachelor's degree in Industrial Relations from the University of North Carolina at Chapel Hill and serves as an elder of the Peachtree Presbyterian Church in Atlanta.
Dennis H. James, age 53, a director since June 1995, is a Managing Director of L. J. Melody & Company (formerly Shoptaw-James, Inc.), a commercial mortgage banking firm. Mr. James' term expires at the 2002 annual meeting of shareholders. Mr. James has over 25 years experience in the mortgage banking industry and has been involved in the production of income property straight debt loans, participating mortgages, debt/equity joint ventures and sales. As Managing Director of L. J. Melody & Company, he is responsible for the Southeast Region's overall production and investor relations. He has served on both the Allstate Life Insurance Company Correspondent Advisory Council and State Farm Life Insurance Advisory Council. Mr. James has a bachelor's degree in Industrial Management from Georgia Tech, and his professional education includes attendance at numerous real estate institutes.
Weldon R. Humphries, age 63, a director since February 1998, is a private investor. Mr. Humphries' term expires at the 2001 annual meeting of shareholders. Mr. Humphries recently retired from a distinguished twenty-year career with Manor Care, Inc. (NYSE: MNR), where he was employed from January 1978 to November 1997 as Senior Vice President responsible for asset management, acquisitions and development, and with Choice Hotels International, Inc. (NYSE: CHH), where he served as Senior Vice-President responsible for asset management, acquisitions and development from November 1997 to January 1998. Mr. Humphries began his career as a senior mortgage analyst with Connecticut General Life Insurance Company and later worked for Arvida Corporation, where he was responsible for all real estate financing, development and marketing. Mr. Humphries has a BBA in Marketing from the University of Houston and an MBA in Finance from the University of Hartford. He also served as an officer in the United States Marine Corps.
Charles R. Elliott, age 47, Roberts Realty's Secretary and Treasurer since its inception, is our Chief Financial Officer and has served in that capacity since April 1995. Mr. Elliott also served as a director of Roberts Realty from October 1994 to February 1995 and he again became a director in 2000. He worked for Hunneman Real Estate Corporation in Boston, Massachusetts from 1979 to 1993, most recently as a Senior Vice-President of Accounting and Finance. Mr. Elliott joined Roberts Properties in August 1993 as Chief Financial Officer and served in that role until April 1995. He holds an undergraduate degree in Accounting and a master's degree in Finance.
Ronald L. Johnson, age 44, has served as our Vice President - Property Maintenance since January 1999. He also served as a Vice President of Quality Management from April 1997 through 1998. He worked for Roberts Properties Management, L.L.C. as Vice President of Quality Management from 1996 to April 1997 (when we acquired Roberts Properties Management) and as Maintenance Supervisor from 1991 to 1996.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires Roberts Realty's directors and executive officers and persons who own beneficially more than 10% of our outstanding common stock to file with the SEC initial reports of ownership and reports of changes in their ownership of our common stock. Directors, executive officers and greater than 10% shareholders are required by SEC regulations to furnish us with copies of the forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us, during the fiscal year ended December 31, 2000, except for Ronald Johnson, our directors, executive officers and greater than 10% shareholders complied with all applicable Section 16(a) filing requirements. Mr. Johnson, our Vice President - Property Maintenance, failed to file a Form 3 in January 1999 when he became an officer of our company, as well as three Forms 4 in 2000 after exchanging units for shares and selling shares.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
COMPENSATION OF EXECUTIVE OFFICERS
Mr. Charles S. Roberts, our Chairman of the Board, Chief Executive Officer and President, and Mr. Charles R. Elliott, our Secretary and Treasurer since inception and our Chief Financial Officer since April 1995, are our only executive officers whose total salary and bonus exceeded $100,000 during 2000. Mr. Roberts and Mr. Elliott are our "named executive officers."
SUMMARY COMPENSATION TABLE
Annual Compensation --------------------------------- Name and Principal Position Year Salary ($) Bonus ($) --------------------------- ---- ---------- ---------
Charles S. Roberts 2000 $150,000 $ 0 Chairman of the Board, Chief 1999 150,000 0 Executive Officer, and President 1998 155,769 0
Charles R. Elliott 2000 123,000 30,000 Secretary, Treasurer and 1999 101,577 30,000 Chief Financial Officer 1998 93,642 30,000
We are not a party to any employment agreements. Certain fees and other payments are payable to affiliates of Mr. Roberts under various agreements and arrangements. See Part III, Item 13, Certain Relationships and Related Transactions - Payments to the Roberts Companies.
COMPENSATION OF DIRECTORS
We pay our directors who are not officers of Roberts Realty fees for their services as directors. Mr. Roberts and Mr. Elliott, who are the only directors who are officers, are not paid any director fees. Non-officer directors receive an annual fee of $12,000 for attendance, in person or by telephone, at meetings of the Board of Directors. In addition, we reimburse our directors for reasonable travel expenses and out-of-pocket expenses incurred in connection with their activities on our behalf.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is composed of Mr. Humphries, Mr. James and Mr. Jones. None of them was during 2001, or at any previous time, an officer, or employee of Roberts Realty or Roberts Properties Residential, L.P.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table describes the beneficial ownership of shares of our common stock as of March 23, 2001 for:
o each person or entity known by us to be the beneficial owner of more than 5% of the outstanding shares of common stock;
o each director and each of our named executive officers; and
o our directors and executive officers as a group.
Except as noted in the footnotes, the person owns all shares and partnership units directly and has sole voting and investment power. Each of the persons known by us to beneficially own more than 5% of the common stock has an address in care of our principal office. The Number of Shares Owned column in the table includes the shares owned by the persons named but does not include shares they may acquire by exchanging units of partnership interest in Roberts Properties Residential, L.P., our operating partnership, for shares of common stock as explained in the following paragraph. The Number of Units Beneficially Owned column in the table reflects all shares that each person has the right to acquire by exchanging units for shares. Under SEC rules, the shares that can be acquired in exchange for units are deemed to be outstanding and to be beneficially owned by the person or group holding those units when computing the percentage ownership of that person or group, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person or group.
Except as described in this paragraph, unitholders generally have the right to require the operating partnership to redeem their units. Our articles of incorporation limit ownership by any one holder to 6% of our outstanding shares, other than by Mr. Roberts, who is limited to 25%. Accordingly, a unitholder cannot redeem units if upon their redemption he would hold more shares than permitted under the applicable percentage limit. Given the total number of shares and units they own, each of Mr. Roberts, Dr. Goodrich and Mr. Wray may be unable to redeem all the units they own unless and until other unitholders redeem a sufficient number of units to cause the number of outstanding shares of common stock to be increased to a level sufficient to permit their redemption. A unitholder who submits units for redemption will receive, at our election, either (a) an equal number of shares or (b) 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 units submitted. Our policy is to issue shares in exchange for units submitted for redemption.
- ------------------------------------------- *Less than 1%. (Footnotes begin on following page.)
(1) The total number of shares outstanding used in calculating this percentage is 4,846,228, the number of shares outstanding as of March 23, 2001.
(2) Includes 2,744 shares owned by Mr. Roberts' minor daughter. A trust for his minor daughter of which he is the sole trustee owns 29,500 units.
(3) Includes 214,065 shares owned by a partnership, over which shares Mr. Wray has voting and investment power as the managing partner of such partnership; 27,257 shares owned by his wife and 5,058 shares owned by a trust of which she is a co-trustee. Mr. Wray disclaims beneficial ownership of the 27,257 shares owned by Mrs. Wray and 5,058 shares owned by a trust of which she is a co-trustee. The partnership previously referenced owns 95,568 units.
(4) Includes 110,507 shares owned jointly by Dr. Goodrich and his wife; 108,478 shares owned by Goodrich Enterprises, Inc., all of the outstanding shares of which are owned by Dr. and Mrs. Goodrich and their sons; and 24,879 shares owned by a trust for the benefit of a son of Dr. and Mrs. Goodrich and of which Mrs. Goodrich is trustee. Dr. Goodrich's beneficial ownership of units includes 48,075 units owned jointly by Dr. and Mrs. Goodrich and 6,835 units owned by a trust for the benefit of a son of Dr. and Mrs. Goodrich of which Mrs. Goodrich is trustee. Dr. Goodrich disclaims beneficial ownership of the units and shares owned by the trust.
(5) Includes 7,564 shares owned by partnerships of which Mr. Spalding's wife is the managing partner. Mr. Spalding's beneficial ownership of units includes 2,917 units owned by Mrs. Spalding and 24,401 units owned by partnerships of which Mrs. Spalding is the managing partner. Mr. Spalding disclaims beneficial ownership of all units and shares owned by his wife or partnerships of which she is the managing partner.
(6) Owned by a trust of which Mr. Humphries is a co-trustee along with his spouse.
(7) Includes 256,985 shares and 50,992 units as to which directors share voting and investment power with another family member; also includes an aggregate of 64,758 shares and 34,153 units beneficially owned by three directors' wives, as to which shares such directors disclaim beneficial ownership.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
GENERAL
Roberts Realty conducts its business through Roberts Properties Residential, L.P., which we refer to as the operating partnership; owns a 66.9% interest in it; and is its sole general partner. Mr. Charles S. Roberts owns all of the outstanding shares of both Roberts Properties, Inc. and Roberts Properties Construction, Inc., which we refer to together as the Roberts Companies. These companies perform certain services for us as explained below. Notes 1 and 9 to our Consolidated Financial Statements provide further detail regarding some of the transactions described in this section.
PAYMENTS TO THE ROBERTS COMPANIES
Overview. We have paid substantial fees to the Roberts Companies for various types of services and will continue to do so in the future. These various arrangements are summarized below.
Development Fees. From time to time we pay Roberts Properties fees for various development services that include market studies, business plans, design, finish selection, interior design and construction administration. The operating partnership paid Roberts Properties a fee of $1,595,000, or $5,000 per unit, for designing, developing, and overseeing construction of our 319-unit Ballantyne community in Charlotte, North Carolina. The operating partnership paid Roberts Properties a fee of $2,015,000, or $5,000 per unit, for designing, developing, and overseeing construction of our 403-unit Addison Place project in Atlanta, Georgia. The operating partnership will pay Roberts Properties a fee of $1,250,000, or $5,000 per unit, for designing, developing, and overseeing construction of our 250-unit Old Norcross project in Gwinnett County, Georgia. Through December 31, 2000, Roberts Realty had incurred $1,141,250 of the $1,250,000 development fee.
Construction Contracts. Roberts Realty enters into contracts in the normal course of business with Roberts Properties Construction, Inc. ("Roberts Construction").
Ballantyne. We have entered into a cost plus 10% contract with Roberts Construction for construction of our Ballantyne community. Roberts Construction started construction of the Ballantyne community in the fourth quarter of 1999, and we have paid Roberts Construction $1,360,000 through March 31, 2001 for its initial work on the project. Roberts Construction will serve as the general contractor for the construction of this community. We estimate the cost of construction to be $23,100,000.
Old Norcross. We have entered into a cost plus 10% contract with Roberts Construction for construction of our Old Norcross community. Through March 31, 2001 we paid Roberts Construction $1,088,000 for its initial work on the Old Norcross project. We estimate the cost of construction on this project to be $16,000,000.
Other Communities. The following table summarizes certain information regarding payments to Roberts Construction for other construction projects through March 23, 2001. Under all of these contracts, we pay Roberts Construction its cost, plus a fee of 10% of its cost.
We paid Roberts Construction $33,000 in 2000 for labor and materials to perform repairs and maintenance for our communities.
Partnership Profits Interest. Between 1994 and 1996, the operating partnership acquired nine limited partnerships of which Mr. Roberts was the sole general partner. Each partnership owned an apartment community that had been developed or was in the development process. 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. As the holder of the profits 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 maximum amount of $86,775. Pursuant to this arrangement, Roberts Properties received distributions of $726,000 (or 5% of gross proceeds) upon the sale of Ivey Brook in June 2000 and $740,000 (or 5% of the gross proceeds) upon the sale of Rosewood Plantation in January 2001. 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 value of each of the properties, or in the case of the Crestmark Phase II, land, up to the maximum amount. The amount to be distributed to Roberts Properties with respect to each affected property will 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:
o the debt assumed, or taken subject to, by the operating partnership in connection with its acquisition of the property; o the equity issued by the operating partnership in acquiring the property; and o all subsequent capital improvements to the property made by the operating partnership.
The percentages that apply to the sales proceeds, or fair market value, of the affected properties are shown in the following table:
River Oaks 5% Preston Oaks Phase I 5% Highland Park 5% Crestmark Phase I 5% Plantation Trace Phase I 6%
In the case of the Crestmark Phase II land, the maximum amount would be $86,775.
If Roberts Realty exercises its option to acquire all of the outstanding units for shares, it must simultaneously purchase the profits 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.
During 2000, we made a profits interest distribution of $726,000 to Roberts Properties.
Pending Transactions with Affiliates of Mr. Roberts. On February 27, 2001, we signed an exchange agreement with Real Estate Exchange Services to acquire land previously owned by Roberts Properties Jones Bridge, LLC, of which Mr. Roberts owns the majority of the equity interest. The 6.84 acre property is located at the intersection of Abbotts Bridge Road and Jones Bridge Road near Addison Place. We loaned Real Estate Exchange Services $3,514,000 to acquire the property and hold title until July 2, 2001. We intend that on July 2, 2001, a qualified intermediary for federal income tax purposes will purchase the property and then sell it to us to complete a Section 1031 tax-deferred exchange. We plan to develop 47,200 square foot retail center on the property.
On March 20, 2001, our board of directors approved our purchase from Roberts Properties of 10.7 acres on Northridge Parkway in north Atlanta adjacent to our Highland Park community for the construction of a 220-unit apartment community. The purchase price will be $4,700,000. We plan to retain Roberts Properties to design, develop, and oversee construction of the project for a fee of $1,100,000, or $5,000 per unit,. We also plan to enter into a cost plus 10% contract with Roberts Construction for construction of the project. The independent members of our board of directors approved the foregoing arrangements with Roberts Properties after reviewing two independent appraisals.
Other Fees. During 2000, we paid affiliates of Mr. Roberts miscellaneous fees and cost reimbursements totaling $192,000.
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. and 2. Financial Statements and Schedules.
The financial statements and schedules listed below are filed as part of this annual report on the pages indicated.
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PAGE
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS (Arthur Andersen LLP).............F-1
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE AS OF DECEMBER 31, 2000 AND 1999 AND FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998:
Balance Sheets..................................................F-2
Statements of Operations........................................F-3
Statements of Shareholders' Equity..............................F-4
Statements of Cash Flows........................................F-5
Notes to Financial Statements...................................F-6
Schedule III - Real Estate and Accumulated Depreciation.........S-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Roberts Realty Investors, Inc.:
We have audited the accompanying consolidated balance sheets of Roberts Realty Investors, Inc. (a Georgia corporation) and its subsidiary as of December 31, 2000 and 1999 and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. These financial statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Roberts Realty Investors, Inc. and its subsidiary as of December 31, 2000 and 1999 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia March 5, 2001
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
The accompanying notes are an integral part of these consolidated financial statements.
ROBERTS REALTY INVESTORS, INC.
NOTES TO FINANCIAL STATEMENTS
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1. BUSINESS AND ORGANIZATION OF THE COMPANY
Roberts Realty Investors, Inc. (the "Company"), 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. The Company owns and operates multifamily residential properties as a self-administered, self-managed equity real estate investment trust (a "REIT"). All of the Company's completed apartment homes are located in the Atlanta metropolitan area.
The Company conducts all of its operations and owns all of its assets in and through Roberts Properties Residential, L.P., a Georgia limited partnership (the "Operating Partnership"), of which the Company is the sole general partner and had a 66.9% and 65.0% ownership interest at December 31, 2000 and 1999, respectively. As the sole general partner and owner of a majority interest of the Operating Partnership, the Company controls the Operating Partnership.
The Company, as the general partner of the Operating Partnership, does not hold any limited partner interests in the Operating Partnership. Units of limited partnership interest ("Units") in the Operating Partnership outstanding at December 31, 2000 and 1999 were 2,403,495 and 2,594,836, respectively. Units held by the minority interest as a percentage of total Units and shares of common stock ("Shares") of the Company outstanding were 33.1% and 35.0% at December 31, 2000 and 1999, respectively. The minority interest percentage reflects the number of Shares and Units outstanding and will change as additional Shares and Units are issued.
At December 31, 2000, the Company owned eight completed multifamily apartment communities totaling 1,633 apartment homes in Atlanta, and an additional 854 apartment homes were under construction (535 in Atlanta and 319 in Charlotte). On June 23, 2000, the Company sold a 146-unit apartment community located in Atlanta, Georgia.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION. The accompanying consolidated financial statements include the consolidated accounts of the Company and the Operating Partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements of the Company have been adjusted for the minority interest of the unitholders in the Operating Partnership.
The minority interest of the Unitholders in the Operating Partnership on the accompanying balance sheets is 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 and Units outstanding and will change as additional Shares and 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 Units outstanding during the period, which was 33.7%, 36.4% and 38.5% for the years ended December 31, 2000, 1999 and 1998, respectively. The minority interest of the Unitholders was $10,607,000 and $12,013,000 at December 31, 2000 and 1999, respectively.
Holders of Units generally have the right to require the Operating Partnership to redeem their Units for Shares. Upon submittal of Units for redemption, the Operating Partnership has the option either (a) to acquire those Units in exchange for Shares, on a one-for-one basis, or (b) to pay cash for those Units at their fair market value, based upon the then current trading price of the Shares. The Operating Partnership has adopted a policy that it will issue Shares in exchange for all future Units submitted.
USE OF ESTIMATES. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
REAL ESTATE ASSETS AND DEPRECIATION. Real estate assets are recorded at depreciated cost less reductions for impairment, if any. In identifying potential impairment, management considers such factors as declines in a property's operating performance or market value, a change in use, or adverse changes in general market conditions. In determining whether an asset is impaired, management estimates the future cash flows expected to be generated from the asset's use and its eventual disposition. If the sum of these estimated future cash flows on an undiscounted basis is less than the asset's carrying cost, the asset is written down to its fair value. None of the Company's real estate assets have required write-downs.
Expenditures directly related to the development, acquisition and improvement of real estate assets are capitalized at cost as land, buildings and improvements. Ordinary repairs and maintenance are expensed as incurred. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Buildings are generally depreciated over 27.5 years. Land improvements are depreciated over 15 years, and furniture, fixtures and equipment are depreciated over 5 to 7 years.
REVENUE RECOGNITION. The Company leases its residential properties under operating leases with terms generally one year or less. Rental income is recognized when earned, which is not materially different than revenue recognition on a straight-line basis.
CASH AND CASH EQUIVALENTS. All investments purchased with an original maturity of three months or less are considered to be cash equivalents.
RESTRICTED CASH. Restricted cash consists of resident security deposits ($388,000). The 1999 restricted cash consists of resident security deposits ($359,000) and monies restricted by lenders from proceeds on mortgage financings ($843,000). Because the physical occupancy of Addison Place phase I was less than 95% at the time of closing, the lender required the Company to obtain a letter of credit in the amount of $843,000.
DEFERRED FINANCING COSTS. Deferred financing costs include fees and costs incurred to obtain financings and are amortized on the straight-line method over the terms of the related debt.
INTEREST AND REAL ESTATE TAXES. Interest and real estate taxes incurred during the construction period are capitalized and depreciated over the estimated useful lives of the constructed assets. Interest capitalized was $1,477,000, $621,000 and $580,000 for the years ended December 31, 2000, 1999, and 1998, respectively.
INCOME TAXES. The Company elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"), commencing with the taxable year ended December 31, 1994. As a result, the Company 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 Code, to its shareholders and satisfies certain other requirements. As a result of recently enacted tax legislation, effective for tax years beginning after December 31, 2000, the distribution requirement has been reduced from 95% to 90% of a REIT's ordinary taxable income. Provided we maintain our qualification as a REIT, the Company generally will not be subject to federal income tax on distributed net income in the future. Accordingly, no provision has been made for federal and state income taxes in the accompanying consolidated financial statements.
EARNINGS PER SHARE. Basic earnings per share is computed based upon the weighted average number of common Shares outstanding during the period. Diluted earnings per share is computed to reflect the potential dilution of all instruments or securities which are convertible into Shares of common stock.
NEW ACCOUNTING PRONOUNCEMENTS. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133 ("SFAS") "Accounting for Derivative Instruments and Hedging Activities." The effective date of this statement was delayed by SFAS No. 137, and the statement was amended by SFAS No. 138. SFAS No. 133, as amended, requires the Company to recognize all derivatives on the balance sheet at fair value. Since the Company has an interst rate swap that it has designated as a hedge of its exposure to changes in the LIBOR rate on its $22,500,000 construction loan, and the swap was deemed to be highly effective in hedging the Company's exposure, the adoption of SFAS No. 133, as amended, is not expected to have a material impact on the Company's results of operations, but is expected to result in a $842,000 decrease in shareholders' equity (accumulated other comprehensive income) relating to the estimated fair value of the swap at January 1, 2001. Roberts Realty has no other derivative instruments or hedging activities.
The Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), Revenue Recognition, which provides guidance on the recognition, presentation, and disclosure of revenue in financial statements. SAB 101 was required to be implemented in the fourth quarter of 2000. The adoption of SAB 101 did not have any impact on the Company's results of operations and financial position.
RECLASSIFICATIONS. Certain prior years amounts have been reclassified to conform with the 2000 presentation.
3. ACQUISITIONS AND DISPOSITIONS
On January 9, 1998, the Company 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. Partnership profits interests of $288,000 were paid to Roberts Properties, Inc. The Company reinvested the net sales proceeds in replacement properties in connection with a Section 1031 tax-deferred exchange as described below. The purchaser is not affiliated with the Company. See Note 9 - Related Party Transactions.
On June 22, 1998, the Company purchased approximately 23.8 acres of undeveloped land in the Ballantyne area of Charlotte, North Carolina for $3,540,000 from a local Charlotte investment group. The Company began construction of a 319-unit multifamily apartment community on the property during the fourth quarter of 1999. See Note 9 - Related Party Transactions.
On June 24, 1998, the Company purchased approximately 49.1 acres of undeveloped land located in north Fulton County, Georgia for $5,294,000 from Roberts Properties, Inc. ("Roberts Properties"), an affiliate owned by Mr. Roberts. The Company is constructing a 403-unit multifamily apartment community on the property. Construction of the 118-unit first phase began in the third quarter of 1998 and was completed in the fourth quarter of 1999. Construction of the 285-unit second phase began in the second quarter of 1999. See Note 9 - Related Party Transactions.
On June 25, 1998, the Company purchased approximately 35.3 acres of undeveloped land located in Gwinnett County, Georgia for $2,525,000 from Roberts Properties Old Norcross, Ltd. The Company is constructing a 250-unit multifamily apartment community on the property, which began in the second quarter of 2000. See Note 9 - Related Party Transactions.
On July 17, 1998, the Company completed the sale of its two retail centers for $2,400,000 in cash resulting in a gain, net of minority interest, of $300,000. Net sales proceeds were $2,182,000, after deducting for closing costs and prorations of $218,000. Partnership profits interests of $92,500 were paid to Roberts Properties. The purchaser is unaffiliated with the Company. See Note 9 - Related Party Transactions.
On August 23, 1999, the Company sold the Bentley Place community for $8,273,000 in cash resulting in a gain, net of minority interest, of $1,023,000. Net sales proceeds were $3,726,000 after deduction for loan repayment and including prepayment fee, totaling $4,166,000, and closing costs, accrued interest, and prorations totaling $381,000. Partnership profits interests of $242,000 were paid to Roberts Properties under the amended partnership agreement of the Operating Partnership. The Company used the remaining net sales proceeds of $3,484,000 to fund a special distribution to shareholders and unitholders on August 30, 1999. The purchaser is not affiliated with the Company. See Note 9 - Related Party Transactions.
On June 23, 2000, the Company completed the sale of its Ivey Brook community to Ivey Brook Apartments, Inc. for $14,550,000. Ivey Brook is a 146-unit apartment community located in Atlanta, Georgia. Net cash proceeds were $7,371,000, resulting in a gain, net of minority interest, of $2,285,000 after deducting $6,190,000 for the mortgage note payable which was assumed by the buyer, $263,000 for closing costs, and accrued interest and $726,000 for a partnership profits interest paid to Roberts Properties in July 2000. We used the net proceeds of $7,371,000 to fund a special distribution to shareholders and unitholders on July 27, 2000 and to fund construction projects. See Note 9 - Related Party Transactions.
In the fourth quarter of 2000, the Company received $198,000 from a settlement relating to the sale of Bentley Place which was recorded as an additional gain (before minority intersts of $67,000).
Unaudited pro forma amounts for the years ended December 31, 2000 and 1999 assuming the sales of Ivey Brook and Bentley Place had taken place as of January 1 for the periods presented, are presented below (dollars in thousands, except per share amounts). The unaudited pro forma information is not necessarily indicative of the results of operations of the Company had the acquisition and sales occurred at the beginning of the periods presented, nor is it indicative of future results.
2000 1999 ---- ----
Total operating revenues $19,286 $16,859 Income (loss) before extraordinary items 515 (370) Net income (loss) 515 (370)
Per Share Data - Basic and Diluted
Loss before extraordinary items $0.11 $(0.08) Net loss 0.11 (0.08)
4. NOTES PAYABLE
LINE OF CREDIT. The Company renewed a $2,000,000 revolving unsecured line of credit (the "Line") in June 2000 to provide funds for short-term working capital purposes. The Line has a one-year term and bears an interest rate of LIBOR plus 150 basis points. The amount outstanding under the Line was $0 and $1,235,000 at December 31, 2000 and 1999, respectively.
MORTGAGE NOTES. Mortgage notes payable were secured by the following communities at December 31, 2000 and 1999:
CONSTRUCTION LOAN. On May 3, 2000, the Company closed a $22,500,000 construction loan to fund the construction of the second phase of Addison Place. The loan has a 5-year term and bears an interest rate of LIBOR plus 150 basis points. When the loan closed, the Company entered into an interest rate swap agreement that synthetically fixed the interest rate at 8.62% (Note 2). At December 31, 2000, $14,152,000 was drawn on the loan.
LAND LOANS. In October 1999, the Company closed a $3,000,000 land loan to fund the initial construction of the second phase of Addison Place. The loan was secured by the land for the second phase of Addison Place, had a six-month term, and an interest rate of LIBOR plus 150 basis points. The loan was repaid from the proceeds of a construction loan on the second phase of Addison Place - as discussed above.
On February 1, 2000, the Company closed a $2,000,000 land loan to fund the initial construction of the Old Norcross community. The loan is secured by the Old Norcross land, has a 12-month term and bears an interest rate of LIBOR plus 150 basis points. The loan was renewed in February 2001 for an additional six month term.
The scheduled principal payments of all debt outstanding at December 31, 2000 for each of the years ending December 31 are as follows:
2001 $3,001,000 2002 9,088,000 2003 16,971,000 2004 942,000 2005 14,628,000 Thereafter 49,060,000 ----------
Mortgage notes payable $93,690,000 ==========
Real estate assets having a combined depreciated cost of approximately $93,881,000 serve as collateral for the outstanding mortgage debt at December 31, 2000.
5. EXTRAORDINARY ITEMS
The 2000 extraordinary item relates to the write-off of unamortized loan costs for the extinguishment of the mortgage loan secured by the Ivey Brook community, which the Company sold on June 23, 2000. This extraordinary item is net of $35,000 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 period.
The 1999 extraordinary item relates to the write-off of unamortized loan costs and prepayment fee to the lender for the extinguishment of the mortgage loan secured by the Bentley Place community, which the Company sold on August 23, 1999. This extraordinary item is net of $107,000, 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 period.
The 1998 extraordinary items are comprised of (1) the write-off of unamortized debt premium associated with the January 9, 1998 buyer's assumption of the mortgage note secured by the Windsong community upon sale of the property, (2) the write-off of unamortized loan costs and prepayment fee to the lender for the refinancing of the mortgage note secured by the Rosewood Plantation community on June 23, 1998, and (3) the write-off of unamortized loan costs and prepayment fee to the lender for the refinancing of the mortgage notes secured by the Crestmark community on September 30, 1998. These extraordinary items are net of $306,000, which was allocated to the minority interest of the unitholders in the Operating Partnership, based on the weighted average number of Units outstanding during the period.
6. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management using available market information and appropriate valuation methodologies. Because considerable judgment is necessary to interpret market data and develop the related estimates of fair value, the estimates presented herein are not necessarily indicative of the amounts that could be realized upon disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.
The fair value of the Company's interest rate swap on its construction loan was ($842,000) at December 31, 2000.
Cash and cash equivalents, accounts payable, accrued expenses, security deposits and other liabilities, due to their short-term nature, are carried at amounts which reasonably approximate their fair values at December 31, 2000 and 1999. Fixed rate mortgage debt, the construction loan, the variable rate line of credit, and the variable rate land loan with carrying values of $93,690,000 and $88,850,000 at December 31, 2000 and 1999, respectively, are estimated by management to approximate fair value based upon interest rates available to the Company for debt with similar terms and maturities.
7. SHAREHOLDERS' EQUITY
EXCHANGES OF UNITS FOR SHARES. During the years ended December 31, 2000, 1999, and 1998, a total of 191,341 185,858, and 330,468 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 UNITS FOR CASH. During the years ended December 31, 1999, and 1998, a total of 3,917 and 14,341 Units were redeemed for cash of $28,000 and $122,000, respectively. No Units were redeemed for cash in 2000.
RESTRICTED SHARE AWARDS. During the years ended December 31, 2000, 1999, and 1998, the Company granted 10,261, 9,802 and 13,061 Shares of restricted stock to certain employees. The market value of these restricted stock grants totaled $77,000, $79,000 and $111,000, respectively, which was recorded as unamortized deferred compensation and is shown as a separate component of shareholders' equity. These restricted Shares vest 100% at the end of a three or four-year vesting period and are being amortized to compensation expense ratably over the vesting period.
TREASURY SHARE REPURCHASES. During the years ended December 31, 2000, 1999, and 1998, the Company repurchased 152,588, 121,200 and 19,300 Shares at a total cost of $1,156,000, $909,000 and $145,000, respectively.
DIVIDENDS. On December 19, 2000, the Company's board of directors declared a quarterly distribution in the amount of $0.11 per common Share and Unit payable on January 12, 2001 to shareholders and unitholders of record on December 29, 2000. Of the total dividends declared for 2000 totaling $0.74 per share, approximately $0.18 per share represents ordinary income, $0.42 per share represents capital gain and $0.14 per share represents a return of capital to the shareholders. On November 16, 1999, the Company's board of directors declared a quarterly distribution in the amount of $0.135 per common Share and Unit payable on January 14, 2000 to shareholders and unitholders of record on December 30, 1999. Of the total dividends declared for 1999 totaling $1.085 per share, approximately $0.12 per share represents ordinary income, $0.21 per share represents capital gain and $0.75 per share represents a return of capital to the shareholders. On December 15, 1998, the board of directors declared a quarterly distribution in the amount of $0.145 per common Share and Unit payable on January 15, 1999 to shareholders and unitholders of record on December 31, 1998. Of the total dividends declared for 1998 totaling $0.5775 per share, approximately $0.16 per share represents ordinary income, $0.05 per share represents capital gain and $0.37 per share represents a return of capital to the shareholders.
EARNINGS PER SHARE. Reconciliations of income available to common shareholders and weighted average Shares and Units used in the Company's basic and diluted earnings per share computations are detailed below (dollars in thousands).
8. SEGMENT REPORTING
SFAS No. 131 established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company's chief operating decision maker is its chief executive officer.
The Company owns, operates, and develops multifamily apartment communities in two major markets located in Georgia and North Carolina. These apartment communities generate rental revenue and other income through leasing of apartment homes to a diverse group of residents. The Company evaluates the performance of each of its apartment communities on an individual basis. However, because each of the apartment communities have similar economic characteristics, residents, and products and services, the apartment communities have been aggregated into one reportable segment. This segment comprises 100%, 100% and 99%, respectively, of the Company's total revenues for each of the three years ended December 31, 2000, 1999, and 1998.
The primary financial measure for the Company's reportable business segment is net operating income ("NOI"), which represents total property revenues less total property operating expenses, excluding general and administrative and depreciation expenses. Current year NOI is compared to prior year NOI and current year budgeted NOI as a measure of financial performance. NOI from apartment communities totaled $13,419,000, $12,696,000, and $11,162,000 for the years ended December 31, 2000, 1999 and 1998, respectively. All other segment measurements are disclosed in the Company's consolidated financial statements.
9. RELATED PARTY TRANSACTIONS
LAND ACQUISITIONS. On June 22, 1998, the Company purchased the Ballantyne land for $3,540,000 from a local Charlotte investment group unrelated to the Company. As part of the closing costs, the Operating Partnership paid Roberts Properties an acquisition fee of $166,000 for finding the property, negotiating the sales contract, conducting due diligence and closing the transaction. In addition, the Operating Partnership paid Roberts Properties a fee of $1,595,000, or $5,000 per unit, for designing, developing, and overseeing construction of the Ballantyne project. The independent members of the board of directors approved the foregoing arrangements with Roberts Properties.
On June 24, 1998, the Company purchased the Addison Place land for $5,294,000 from Roberts Properties. As part of the closing costs, the Operating Partnership paid Roberts Properties an acquisition fee of $250,000 for finding the property, negotiating the sales contract, conducting due diligence and closing the transaction. In addition, the Operating Partnership paid Roberts Properties a fee of $2,015,000, or $5,000 per unit, for designing, developing, and overseeing construction of the Addison Place project. The independent members of the board of directors approved the foregoing arrangements with Roberts Properties after reviewing two independent appraisals. Roberts Properties acquired the property for $4,343,000 on March 6, 1997.
On June 25, 1998, the Company purchased the Old Norcross land for $2,525,000 from Roberts Properties Old Norcross, Ltd.. Mr. Roberts, who was the general partner of Roberts Properties Old Norcross, Ltd., received none of the sale proceeds as general partner or otherwise. As part of the closing costs, the Operating Partnership paid Roberts Properties an acquisition fee of $119,250 for finding the property, negotiating the sales contract, conducting due diligence and closing the transaction. In addition, the Operating Partnership will pay Roberts Properties a fee of $1,250,000, or $5,000 per unit, for designing, developing, and overseeing construction of the Old Norcross project. Through December 31, 2000, the Company had paid $1,141,250 of the $1,250,000 development fees. The independent members of the board of directors approved the foregoing arrangements with Roberts Properties after reviewing two independent appraisals.
CONSTRUCTION CONTRACTS. The Company enters into contractual commitments in the normal course of business related to the construction of real estate assets with Roberts Properties Construction, Inc. ("Roberts Construction"). Mr. Roberts owns all of the outsatnding shares of Roberts Construction. Roberts Construction constructed the first phase of Addison Place under a cost plus 10% contract. Roberts Construction is currently constructing the second phase of Addison Place, consisting of 285 apartment homes, under a cost plus 10% arrangement. Roberts Construction started construction of the Ballantyne community in 1999 and is the general contractor on the project. In 2000, the Company entered into a contract with Roberts Construction related to construction of the Old Norcross project in Atlanta. Under both the Ballantyne and Old Norcross contracts, the Company will pay Roberts Construction cost plus 10%. The contractual amounts for projects started and/or completed with Roberts Construction during the last three years, from inception through December 31, 2000 are summarized in the following table:
The Company paid Roberts Construction for labor and materials to perform capital improvements for the communities in the amount of $33,000, $420,000 and $52,000 in 2000, 1999 and 1998, respectively.
DEVELOPMENT FEES. Roberts Properties received fees for various development services including market studies, business plans, design, finish selection, interior design and construction administration (including amounts described in "Land Acquisitions" above). Fees incurred totaled $2,148,000, $2,603,000 and $0 for the years ended December 31, 2000, 1999 and 1998, respectively.
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 ("Profits Interests").
As the holder of the Profits Interests, 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 the Company, 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:
o the debt assumed, or taken subject to, by the Operating Partnership in connection with its acquisition of the property;
o the equity issued by the Operating Partnership in acquiring the property; and
o all subsequent capital improvements to the property made by the Operating Partnership.
The percentages that apply to the sales prices, or fair market values, of the affected properties are shown in the following table:
River Oaks 5% Rosewood Plantation 5% Preston Oaks Phase I 5% Highland Park 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.
If the Company exercises its option to acquire all of the outstanding Units for Shares, it must simultaneously purchase the Profits Interests 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.
During 2000, 1999, and 1998, Profits Interests of $726,000, $242,000, and $348,000, respectively, were paid to Roberts Properties.
OTHER FEES. During 2000, 1999 and 1998, affiliates of Mr. Roberts received fees and cost reimbursements for services related to (1) leasing administration services at the Shoppes of River Oaks and Shoppes of Plantation Trace ($21,000), (2) the acquisition and rezoning of a 1.1 acre parcel of undeveloped land located adjacent to the existing Preston Oaks community ($25,000), (3) the sale of the Shoppes of River Oaks ($33,000), and (4) miscellaneous fees and cost reimbursements ($728,000). These fees and costs incurred totaled $192,000, $242,000, and $373,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
LOAN ORIGINATION FEES. A director of the Company is executive vice president of a commercial mortgage banking firm that has originated loans for the Company. Loan origination fees incurred totaled $0, $0, and $63,000 for the years ended December 31, 2000, 1999 and 1998, respectively.
10. COMMITMENTS AND CONTINGENCIES
The Company 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, the Company believes that the final outcome of these matters will not have a material adverse effect on the Company's financial position or results of operations.
As a result of the mergers of various limited partnerships into the Operating Partnership, the former partners of these limited partnerships received Units. Holders of Units have the right to require the Operating Partnership to redeem their Units for Shares, subject to certain conditions. Upon submittal of Units for redemption, the Operating Partnership will have the option either (a) to pay cash for those Units at their fair market value, which will be based upon the then current trading price of the Shares, or (b) to acquire those Units in exchange for Shares (on a one-for-one basis). The Company has adopted a policy that it will issue Shares in exchange for all future Units submitted. There were 2,403,495 Units outstanding at December 31, 2000 that could be exchanged for Shares, subject to the conditions described above.
The Company enters into contractual commitments in the normal course of business related to the development of real estate assets. Management does not believe that the completion of these commitments will result in a material adverse effect on the Company's financial position or results of operations.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December 31, 2000, 1999, and 1998 were as follows:
A. On January 9, 1998, the Company sold the Windsong community. As a condition of the sale, the purchaser assumed the mortgage note payable associated with the property in the amount of $3,959,000.
B. On June 23, 2000, the Company sold the Ivey Brook community. As a condition of the sale, the purchaser assumed the mortgage note payable associated with the property in the amount of $6,190,000.
12. SUBSEQUENT EVENTS
On January 4, 2001, the Company sold the Rosewood Plantation community for $14,800,000. The sale resulted in a gain of $5,188,000, net of minority interest of Unitholders in the Operating Partnership. The Company acquired the community in October 1994. Rosewood Plantation is a 152-unit apartment home community located in Gwinnett County in the Atlanta metropolitan area. Net sale proceeds were $5,789,000 after deduction for loan repayment of $7,875,000, Profits Interests of $740,000 and closing costs and prorations of $396,000. The purchaser, is not affiliated with the Company.
On February 1, 2001, the Company refinanced the mortgage note with Primary Capital Advisors which serves as permanent financing for the Preston Oaks community. This $12,700,000 loan has a 7 year term with a fixed interest rate of 7.18% payable in monthly installments of $86,034 based on a 30-year amortization schedule.
On February 27, 2001, the Company signed an exchange agreement with Real Estate Exchange Services to acquire land previously owned by Roberts Properties Jones Bridge, LLC. At the time the agreement was entered into, the Company loaned Real Estate Exchange Services $3,514,000 to acquire the property and hold title until July 2, 2001. On July 2, 2001, a Qualified Intermediary will purchase the property and then sell it to the Company in order to complete a Section 1031 tax-deferred exchange. The Company will use the net proceeds from the Rosewood Plantation sale to purchase this property.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
ROBERTS REALTY INVESTORS, INC.
S-1
The accompanying notes are an integral part of this schedule.
(A) A portion of Addison Place phase two and the Old Norcross property were under construction as of December 31, 2000. Construction in progress and real estate under development of $28,439 as of December 31, 2000 (which is excluded from Schedule III) includes these properties as well as the Ballantyne development in Charlotte, NC, which was unencumbered at December 31, 2000.
(B) The Company enters into contractual commitments in the normal course of business related to the construction of real estate assets with Roberts Construction - see Note 9 to the Consolidated Financial Statements.
(C) Gross capitalized costs of real estate assets are summarized as follows:
S-2
3. Exhibits.
We have filed some of the exhibits required by Item 601 of Regulation S-K with previous registration statements or reports. As specifically noted in the following Index to Exhibits, those previously filed exhibits are incorporated into this annual report on Form 10-K by reference. All exhibits contained in the following Index to Exhibits that are designated with an asterisk are incorporated into this annual report by reference from our initial Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the applicable exhibit number in that Registration Statement is provided beside the asterisk.
WE WILL PROVIDE A COPY OF ANY OR ALL OF THE FOLLOWING EXHIBITS TO ANY SHAREHOLDER WHO REQUESTS THEM, FOR A COST OF TEN CENTS PER PAGE.
EXHIBIT NO. DESCRIPTION - ------- ------------
3.1 Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of State on July 22, 1994. [* 2.1]
3.2 Bylaws of Roberts Realty Investors, Inc. [* 2.2]
4.1 Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994. [* 3.1]
4.1.1 First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 1, 1994. [* 3.1.1]
4.1.2 Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 13, 1994. [* 3.1.2]
4.1.3 Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 10.1 from our Registration Statement on Form S-3 filed July 8, 1999, registration number 333-82453.]
4.2 Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia Secretary of State on July 22, 1994. [* 3.2]
4.2.1 Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging Roberts Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.; Roberts Properties Preston Oaks, L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts Properties Residential, L.P. (1994 Consolidation). [* 3.2.1]
4.2.2 Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts Properties Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb Bridge Merger). [* 3.2.2]
4.2.3 Certificate of Merger filed with the Georgia Secretary of State on May 16, 1995, merging Roberts Properties Plantation Trace, L.P. with and into Roberts Properties Residential, L.P. (Plantation Trace Merger). [* 3.2.3]
4.2.4 Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging Roberts Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong Merger). [* 3.2.4]
4.2.5 Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts Properties Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place Merger). [Incorporated by reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.6 Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The Crestmark Club, L.P. with and into Roberts Properties Residential, L.P. (Crestmark Merger). [Incorporated by reference to Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.7 Certificate and Articles of Merger filed with the Georgia Secretary of State on April 1, 1997 merging Roberts Properties Management, L.L.C. with and into Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]
10.1.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00 (Preston Oaks). [* 6.11.1]
10.1.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents (Preston Oaks). [* 6.11.2]
10.2.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00 (Highland Park). [* 6.18.1]
10.2.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life Insurance Company of Wausau, dated January 31, 1996, in the original principal amount of $1,500,000.00 (Highland Park). [* 6.18.2]
10.2.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated January 31, 1996, and related collateral documents (Highland Park). [* 6.18.3]
10.3.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated October 17, 1996, in the original principal amount of $7,250,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.3 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life & Annuity Insurance Company, dated October 17, 1996, in the original principal amount of $2,000,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.4 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated October 17, 1996, and related collateral documents (River Oaks). [Incorporated by reference to Exhibit 10.3.5 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.4.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, in the original principal amount of $11,900,000 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents (Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.3 Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated September 29, 1998 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.5.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents (Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.3 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America, dated June 1, 1998 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.8 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.6.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to Exhibit 10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30, 1998 (Crestmark). [Incorporated by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.7.1 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.2 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.3 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Addison Place). [Incorporated by reference to Exhibit 10.14.11 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.4 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.5 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.6 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.01 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.7 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.02 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.8 Agreement and Plan of Merger by and between Roberts Properties Residential, L.P. and Roberts Properties Management, L.L.C., dated April 1, 1997 [Incorporated by reference to Exhibit 2.1 from our current report on Form 8-K dated April 1, 1997.]
10.8.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.4 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.04 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.5 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.05 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.6 Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated October 25, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.06 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.7 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.07 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.8 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.08 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.9 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.09 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.8.10 Deed to Secure Debt, Security Agreement and Assignment of Leases and Rents Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.10 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.9.1 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.1 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.2 Continuing Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.3 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.4 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.5 Continuing Guaranty executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.06 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.16.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.1 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.2 Future Advance Deed to Secure Debt, Assignment of Rents and Leases and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.2 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.3 Continuing Guaranty (Unlimited) executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.3 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.17.1 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Charles R. Elliott, dated March 20, 2001.
10.17.2 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Ronald L. Johnson, dated February 2, 2001.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (contained on the signature page hereof).
(b) Current Reports on Form 8-K during the quarter ended December 31, 2000.
We filed no Current Reports on Form 8-K during the quarter ended December 31, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ROBERTS REALTY INVESTORS, INC.
By: /s/ Charles S. Roberts --------------------------------- Charles S. Roberts, Chairman of the Board, Chief Executive Officer and President
Date: March 29, 2001
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints jointly and severally, Charles S. Roberts and Charles R. Elliott, and each one of them, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report (Form 10-K) and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
EXHIBIT INDEX
We have filed some of the exhibits required by Item 601 of Regulation S-K with previous registration statements or reports. As specifically noted in the following Index to Exhibits, those previously filed exhibits are incorporated into this annual report on Form 10-K by reference. All exhibits contained in the following Index to Exhibits that are designated with an asterisk are incorporated into this annual report by reference from our initial Registration Statement on Form 10-SB filed with the SEC on March 22, 1996; the applicable exhibit number in that Registration Statement is provided beside the asterisk..
EXHIBIT NO. DESCRIPTION - ------- -----------
3.1 Articles of Incorporation of Roberts Realty Investors, Inc. filed with the Georgia Secretary of State on July 22, 1994. [* 2.1]
3.2 Bylaws of Roberts Realty Investors, Inc. [* 2.2]
4.1 Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of July 22, 1994. [* 3.1]
4.1.1 First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 1, 1994. [* 3.1.1]
4.1.2 Amendment #1 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P., dated as of October 13, 1994. [* 3.1.2]
4.1.3 Amendment #2 to First Amended and Restated Agreement of Limited Partnership of Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 10.1 from our Registration Statement on Form S-3 filed July 8, 1999, registration number 333-82453.]
4.2 Certificate of Limited Partnership of Roberts Properties Residential, L.P. filed with the Georgia Secretary of State on July 22, 1994. [* 3.2]
4.2.1 Certificate of Merger filed with the Georgia Secretary of State on October 13, 1994, merging Roberts Properties River Oaks, L.P.; Roberts Properties Rosewood Plantation, L.P.; Roberts Properties Preston Oaks, L.P.; and Roberts Properties Highland Park, L.P. with and into Roberts Properties Residential, L.P. (1994 Consolidation). [* 3.2.1]
4.2.2 Certificate of Merger filed with the Georgia Secretary of State on March 24, 1995, merging Roberts Properties Holcomb Bridge, L.P. with and into Roberts Properties Residential, L.P. (Holcomb Bridge Merger). [* 3.2.2]
4.2.3 Certificate of Merger filed with the Georgia Secretary of State on May 16, 1995, merging Roberts Properties Plantation Trace, L.P. with and into Roberts Properties Residential, L.P. (Plantation Trace Merger). [* 3.2.3]
4.2.4 Certificate of Merger filed with the Georgia Secretary of State on September 27, 1995, merging Roberts Properties-St. Simons, L.P. with and into Roberts Properties Residential, L.P. (Windsong Merger). [* 3.2.4]
4.2.5 Certificate of Merger filed with the Georgia Secretary of State on March 21, 1996, merging Roberts Properties Bentley Place, L.P. with and into Roberts Properties Residential, L.P. (Bentley Place Merger). [Incorporated by reference to Exhibit 4.2.5 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.6 Certificate of Merger filed with the Georgia Secretary of State on June 26, 1996, merging The Crestmark Club, L.P. with and into Roberts Properties Residential, L.P. (Crestmark Merger). [Incorporated by reference to Exhibit 4.2.6 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
4.2.7 Certificate and Articles of Merger filed with the Georgia Secretary of State on April 1, 1997 merging Roberts Properties Management, L.L.C. with and into Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit 4.2.7 from our current report on Form 8-K dated April 1, 1997.]
10.1.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, in the original principal amount of $8,711,000.00 (Preston Oaks). [* 6.11.1]
10.1.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated September 20, 1995, and related collateral documents (Preston Oaks). [* 6.11.2]
10.2.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated January 31, 1996, in the original principal amount of $6,678,000.00 (Highland Park). [* 6.18.1]
10.2.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Employers Life Insurance Company of Wausau, dated January 31, 1996, in the original principal amount of $1,500,000.00 (Highland Park). [* 6.18.2]
10.2.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Employers Life Insurance Company of Wausau, dated January 31, 1996, and related collateral documents (Highland Park). [* 6.18.3]
10.3.1 Real Estate Note A executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated October 17, 1996, in the original principal amount of $7,250,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.3 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.2 Real Estate Note B executed by Roberts Properties Residential, L.P. in favor of Nationwide Life & Annuity Insurance Company, dated October 17, 1996, in the original principal amount of $2,000,000.00 (River Oaks). [Incorporated by reference to Exhibit 10.3.4 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.3.3 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company and Nationwide Life & Annuity Insurance Company, dated October 17, 1996, and related collateral documents (River Oaks). [Incorporated by reference to Exhibit 10.3.5 from our annual report on Form 10-KSB for the year ended December 31, 1996.]
10.4.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, in the original principal amount of $11,900,000 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.04 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated September 29, 1998, and related collateral documents (Plantation Trace). [Incorporated by reference to Exhibit 10.07.05 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.4.3 Limited Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated September 29, 1998 (Plantation Trace). [Incorporated by reference to Exhibit 10.07.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.5.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company, dated June 1, 1998, in the original principal amount of $8,400,000.00 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.6 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Nationwide Life Insurance Company of America, dated June 1, 1998, and related collateral documents (Bradford Creek). [Incorporated by reference to Exhibit 10.8.7 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.5.3 Guaranty between Roberts Realty Investors, Inc. and Nationwide Life Insurance Company of America, dated June 1, 1998 (Bradford Creek). [Incorporated by reference to Exhibit 10.8.8 from our quarterly report on Form 10-Q for the quarter ended June 30, 1998.]
10.6.1 Real Estate Note executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, in the original principal amount of $16,000,000 (Crestmark). [Incorporated by reference to Exhibit 10.10.06 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Freddie Mac, dated September 30, 1998, and related collateral documents (Crestmark). [Incorporated by reference to Exhibit 10.10.07 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.6.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Freddie Mac, dated September 30, 1998 (Crestmark). [Incorporated by reference to Exhibit 10.10.08 from our quarterly report on Form 10-Q for the quarter ended September 30, 1998.]
10.7.1 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.1 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.2 Amended and Restated Consulting Agreement between Roberts Properties Residential, L.P. and Roberts Properties Group, Inc., dated June 26, 1996. [Incorporated by reference to Exhibit 10.23.2 from our quarterly report on Form 10-QSB for the quarter ended June 30, 1996.]
10.7.3 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Addison Place). [Incorporated by reference to Exhibit 10.14.11 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.4 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.5 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Old Norcross). [Incorporated by reference to Exhibit 10.16.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.6 Design and Development Agreement between Roberts Properties Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.01 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.7 Construction Administration Agreement between Roberts Residential, L.P. and Roberts Properties, Inc. (Ballantyne). [Incorporated by reference to Exhibit 10.17.02 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.7.8 Agreement and Plan of Merger by and between Roberts Properties Residential, L.P. and Roberts Properties Management, L.L.C., dated April 1, 1997 [Incorporated by reference to Exhibit 2.1 from our current report on Form 8-K dated April 1, 1997.]
10.8.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.2 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated April 12, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.3 Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated April 12, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.8.4 Promissory Note executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, in the original principal amount of $9,500,000 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.04 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.5 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of The Prudential Insurance Company of America, dated October 25, 1999, and related collateral documents (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.05 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.6 Guaranty executed by Roberts Realty Investors, Inc. in favor of The Prudential Insurance Company of America, dated October 25, 1999 (Addison Place Phase I). [Incorporated by reference to Exhibit 10.14.06 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.7 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, in the original principal amount of $3,000,000 (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.07 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.8 Deed to Secure Debt and Security Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated October 25, 1999, and related collateral documents (Addison Place Phase II). [Incorporated by reference to Exhibit 10.14.08 from our annual report on Form 10-K for the year ended December 31, 1999.]
10.8.9 Promissory Note executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.09 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.8.10 Deed to Secure Debt, Security Agreement and Assignment of Leases and Rents Agreement executed by Roberts Properties Residential, L.P. in favor of First Union National Bank, dated May 3, 2000 (Addison Place phase II). [Incorporated by reference to Exhibit 10.14.10 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.9.1 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.01 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.1 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.02 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.2 Continuing Guaranty executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated June 1, 1999. [Incorporated by reference to Exhibit 10.15.03 from our quarterly report on Form 10-Q dated August 13, 1999.]
10.15.3 Line of Credit Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000, in the original principal amount of $2,000,000. [Incorporated by reference to Exhibit 10.15.04 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.4 Loan Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.05 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.15.5 Continuing Guaranty executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated June 1, 2000. [Incorporated by reference to Exhibit 10.15.06 from our quarterly report on Form 10-Q for the quarter ended June 30, 2000.]
10.16.1 Promissory Note executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.1 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.2 Future Advance Deed to Secure Debt, Assignment of Rents and Leases and Security Agreement executed by Roberts Properties Residential, L.P. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.2 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.16.3 Continuing Guaranty (Unlimited) executed by Roberts Realty Investors, Inc. in favor of Compass Bank, dated January 31, 2000 (Old Norcross). [Incorporated by reference to Exhibit 10.16.3 from our quarterly report on Form 10-Q for the quarter ended March 31, 2000.]
10.17.1 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Charles R. Elliott, dated March 20, 2001.
10.17.2 Restricted Stock Award Agreement between Roberts Realty Investors, Inc. and Ronald L. Johnson, dated February 2, 2001.
21 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Power of Attorney (contained on the signature page hereof).
(b) Current Reports on Form 8-K during the quarter ended December 31, 2000.
We filed no Current Reports on Form 8-K during the quarter ended December 31, 2000.