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U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

[ü] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003

OR

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission File No. 001-13183

Roberts Realty Investors, Inc.

     Indicate by check whether the registrant: (1) has filed all reports to be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ü]    No [  ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ]    No [ ü]

The number of outstanding shares of the registrant’s Common Stock on May 1, 2003 was 5,135,241 (net of shares held in treasury).

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PART I

ITEM 1. FINANCIAL STATEMENTS.

ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

See notes to the consolidated financial statements.

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ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)

See notes to the consolidated financial statements.

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ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

See notes to the consolidated financial statements.

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ROBERTS REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		BUSINESS AND ORGANIZATION
		Roberts Realty Investors, Inc., a Georgia corporation, was formed July 22, 1994 to serve as a vehicle for investments in, and ownership of, a professionally managed real estate portfolio consisting primarily of multifamily apartment communities. Roberts Realty owns and operates multifamily residential properties as a self-administered, self-managed equity real estate investment trust (a “REIT”). Seven of Roberts Realty’s completed apartment communities are located in the Atlanta metropolitan area, with the eighth located in Palm Beach County, Florida.
		Roberts Realty conducts all of its operations and owns all of its assets in and through Roberts Properties Residential, L.P., a Georgia limited partnership (the “operating partnership”), of which Roberts Realty is the sole general partner and had a 71.1% and 70.6% ownership interest at March 31, 2003 and December 31, 2002, respectively. As the sole general partner and owner of a majority interest of the operating partnership, Roberts Realty controls the operating partnership.
		At March 31, 2003, Roberts Realty owned eight completed multifamily apartment communities totaling 1,882 apartment homes (1,682 in the Atlanta metropolitan area and 200 in Palm Beach County, Florida); an additional 319 apartment homes were under construction in Charlotte, North Carolina; and a 220-unit apartment community in Atlanta was in the planning and design phase. In addition, Roberts Realty has a 39,907 square foot commercial office building and a 42,090 square foot retail center under construction at March 31, 2003.
		Roberts Realty elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with the taxable year ended December 31, 1994. As a result, Roberts Realty generally will not be subject to federal and state income taxation at the corporate level to the extent it distributes annually to its shareholders at least 90% of its taxable income, as defined in the Internal Revenue Code, and satisfies certain other requirements. Accordingly, the accompanying consolidated financial statements include no provision for federal and state income taxes.
		Roberts Realty enters into contractual commitments in the normal course of business with Roberts Properties, Inc. (“Roberts Properties”) and Roberts Properties Construction, Inc. (“Roberts Construction”), which are affiliates of Roberts Realty that are wholly owned by Mr. Charles S. Roberts, the President, Chief Executive Officer, and Chairman of the Board of Roberts Realty. These contracts relate to the development and construction of real estate assets. (See Note 6.)
2.		BASIS OF PRESENTATION
		The accompanying consolidated financial statements include the consolidated accounts of Roberts Realty and the operating partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements of Roberts Realty have been adjusted for the minority interest of the unitholders in the operating partnership.
		The minority 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 and redeemed. The minority interest of the unitholders in the earnings or loss of the operating partnership

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		on the accompanying statements of operations is calculated based on the weighted average number of units outstanding during the period, which was 29.2% and 32.0% for the three months ended March 31, 2003 and 2002, respectively. The minority interest of the unitholders was $8,905,000 at March 31, 2003 and $9,361,000 at December 31, 2002.
		Holders of partnership 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. Roberts Realty has adopted a policy that it will issue shares in exchange for all future units submitted.
		Roberts Realty’s management has prepared the accompanying interim unaudited financial statements in accordance with generally accepted accounting principles for interim financial information and in conformity with the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the interim financial statements reflect all adjustments of a normal and recurring nature that are necessary to fairly state the interim financial statements. The results of operations for the interim periods do not necessarily indicate the results that may be expected for the year ending December 31, 2003. These financial statements should be read in conjunction with Roberts Realty’s audited financial statements and the notes to them included in Roberts Realty’s Annual Report on Form 10-K for the year ended December 31, 2002.
3.		ACQUISITIONS AND DISPOSITIONS
		On February 27, 2001, Roberts Realty signed an exchange agreement with an intermediary to acquire land located at the intersection of Abbotts Bridge Road and Jones Bridge Road in front of its Addison Place community in Alpharetta, Georgia. The land was previously owned by Roberts Properties Jones Bridge, LLC, of which Mr. Roberts owned a 90% interest. Roberts Realty acquired the property on June 30, 2001 for approximately $4,460,000 and, in connection with these transactions, Roberts Properties Jones Bridge, LLC received $3,498,000 for the property. Roberts Realty is constructing a 42,090 square foot retail center on a 5-acre parcel of the property and paid Roberts Construction approximately $1,900,000 for construction-related work through March 31, 2003. Roberts Realty entered into a cost plus 5% contract with Roberts Construction to complete the retail center.
		On June 28, 2001, Roberts Realty purchased approximately 10.9 acres from Roberts Properties to construct a 220-unit upscale apartment community located adjacent to its Highland Park community. The purchase price was $5,376,000 including closing costs, and the transaction was part of a Section 1031 tax-deferred exchange. The total cost of the project is estimated to be $24,000,000. Roberts Realty has retained Roberts Properties to complete the design and development work for a fee of $2,500 per unit, or $550,000. Roberts Realty has entered into a cost plus 10% contract with Roberts Construction to build the 220 apartment units.
		On June 28, 2001, Roberts Realty purchased a partially constructed office building and approximately 3.9 acres of land from Roberts Properties for $2,147,000, including closing costs. Roberts Realty intends to complete construction and estimates total project costs of $6,300,000, including the amount paid at closing. Roberts Construction will complete construction of the building for a fixed price of $3,054,000 and will perform tenant finish work for approximately $600,000. The balance of $499,000 of project costs will be paid to unrelated parties. Roberts Construction will not earn a profit on the construction of the building or on the tenant finish work. Roberts Properties did not earn a profit on the sale of the land to Roberts Realty nor will it be paid a development fee for this project. Roberts Realty will use a portion of the building as its corporate headquarters and lease the remaining space to Roberts Properties, Roberts Construction and other unaffiliated tenants.

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		On February 28, 2003, Roberts Realty received an aggregate of $381,000 in connection with the sale of land, reimbursement for land improvements and conveyances of temporary construction easements to Fulton County, Georgia for road right-of-way projects at the Addison Place community, which resulted in a gain of $77,000, net of minority interest of unitholders in the operating partnership.
4.		NOTES PAYABLE
		Lines of Credit. Roberts Realty has unsecured lines of credit with two banks aggregating $3,000,000 to provide funds for short-term working capital needs. One facility, in the amount of $1,000,000, expires May 20, 2003. The other facility, in the amount of $2,000,000, expires August 1, 2003. At March 31, 2003, there were no borrowings under either line of credit.
		Mortgage Notes. The permanent mortgage notes payable secured by Roberts Realty’s completed apartment communities at March 31, 2003 and December 31, 2002 were as follows:

(1)		The interest rate on this loan has been synthetically fixed at the rate shown.
(2)		On December 23, 2002, Roberts Realty signed a commitment to refinance the River Oaks mortgage note with a new $10,750,000 loan from L.J. Melody & Company, a mortgage banking firm of which a director is an executive vice president. The terms of the new loan include a ten-year term with a fixed interest rate of 5.54% payable in monthly installments of $61,307 based on a 30-year amortization schedule. Roberts Realty expects to close the new loan in August 2003 at which time L.J. Melody will immediately assign the loan to Freddie Mac.
		Construction Loans. On April 26, 2001, Roberts Realty closed a $17,000,000 construction/permanent loan to fund the construction of its 250-unit Veranda Chase community located in Atlanta. The loan is secured by the land and improvements, has a seven-year term, and bears an interest rate of the 30-day LIBOR plus 150 basis points. Monthly payments are interest only for the first three years of the loan and thereafter include principal and interest based on a 30-year amortization schedule for the remaining four years. At the closing of the loan, Roberts Realty entered into a separate agreement that synthetically fixed the interest rate at 7.38% (Note 5) for the first five years of the loan. At March 31, 2003, $16,504,000 was drawn on the loan. This obligation will be reclassified with mortgages notes

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		payable in the consolidated balance sheet when it is fully drawn and installment payments are established.
		On June 28, 2001, Roberts Realty closed a $5,280,000 loan to fund the construction of the Northridge commercial office building. The loan is secured by the land and improvements, has a 35-month term, and bears interest at the 30-day LIBOR plus 200 basis points. At March 31, 2003, $3,124,000 was drawn on the loan.
		On February 21, 2002, Roberts Realty closed a $24,000,000 construction/permanent loan to fund the construction of its 319-unit apartment community in Charlotte, North Carolina. The loan is secured by the land and improvements and matures on March 10, 2006, with Roberts Realty having the option to exercise two additional one-year extensions. Monthly payments are interest only through March 10, 2005 at the 30-day LIBOR plus 200 basis points; thereafter, principal and interest will be payable in monthly installments calculated using a 30-year amortization schedule and an assumed interest rate of 7.0% plus actual interest. At March 31, 2003, $10,675,000 was drawn on the loan.
		Land Loans. On June 28, 2001, Roberts Realty closed a $3,000,000 land loan to fund the initial construction of the Northridge apartment community. The loan matures on July 10, 2003, is secured by the Northridge land, and bears an interest rate of the 30-day LIBOR plus 175 basis points. At March 31, 2003, $3,000,000 was drawn on the loan. Roberts Realty intends to extend the maturity date of the loan prior to maturity and roll it into a construction loan upon starting construction of the project.
		On September 6, 2001, Roberts Realty closed a $2,700,000 loan to fund the initial construction of the Addison Place Shoppes retail center. The loan, which is secured by the land and the improvements, was increased to $3,700,000 on December 21, 2001, bears interest at the 30-day LIBOR plus 185 basis points, and, as amended, matures on May 30, 2003. At March 31, 2003, $3,700,000 was drawn on the loan. Roberts Realty expects to close a 35-month construction loan and use the proceeds of the initial draw to repay this land loan before May 30, 2003.
		Interest capitalized was $334,000 and $579,000 for the three months ended March 31, 2003 and 2002, respectively.
		Real estate assets having a combined depreciated cost of $113,503,000 served as collateral for the outstanding mortgage debt at March 31, 2003.
5.		DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
		Effective January 1, 2001, Roberts Realty adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income, and recognized in the income statement when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment.
		Roberts Realty generally enters into fixed rate debt instruments. In certain situations, Roberts Realty may utilize derivative financial instruments in the form of interest rate swaps to hedge interest rate exposure on variable-rate debt. Such instruments are not used for trading or speculative purposes. Roberts Realty has entered into interest rate swap agreements to effectively fix the interest rates on its Addison Place – Phase II mortgage loan and its Veranda Chase construction/permanent loan (see Note 4

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		– Notes Payable). The swap agreements expire May 10, 2005 and May 5, 2006, respectively. The swap agreements have been designated as cash flow hedges and, accordingly, are recorded at fair value in the consolidated balance sheet, and the related gains or losses are deferred in shareholders’ equity, net of minority interest, as a component of other comprehensive income. Amounts received or paid in connection with the swap agreements are recognized as adjustments to interest related to the designated debt.
		At March 31, 2003, Roberts Realty recorded a liability of $4,594,000 relating to the estimated fair value of the swaps as a result of lower market interest rates. This resulted in a decrease in shareholders’ equity of $3,266,000 (accumulated other comprehensive income), net of minority interest of $1,328,000. At December 31, 2002, the liability relating to the estimated fair value of the swaps was $4,813,000, which resulted in a decrease in shareholders’ equity of $3,398,000 (accumulated other comprehensive income), net of minority interest of $1,415,000. Provided that Roberts Realty holds these instruments until maturity, as it intends, it will not pay any interest other than that stated in the loan and swap agreements. The liability recorded at March 31, 2003 will be reduced as Roberts Realty performs under these instruments, as the difference between the market interest rate and the fixed rates decreases, and as these obligations mature.
6.		COMMITMENTS AND CONTINGENCIES
		Roberts Realty and the operating partnership are subject to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes the final outcome of such matters will not have a material adverse effect on Roberts Realty’s financial position or results of operations.
		Roberts Realty enters into contractual commitments in the normal course of business with Roberts Properties and Roberts Construction that relate to the development and construction of real estate assets.
		Roberts Construction constructed Veranda Chase under a cost plus 10% contract and is constructing the Charlotte apartment community under a cost plus 10% arrangement. In 2001, Roberts Realty entered into a cost plus 5% contract with Roberts Construction related to the construction of the 42,090 square foot Addison Place Shoppes retail center. Also, in 2001, Roberts Realty entered into a fixed price contract with Roberts Construction related to the construction of the Northridge corporate office building. At March 31, 2003, the remaining commitments under construction contracts were $12,098,000 as summarized in the following table:

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7.		SHAREHOLDERS’ EQUITY
		Exchanges of Units for Shares. During the three months ended March 31, 2003 and 2002, a total of 38,325 and 12,770 partnership units, respectively, were exchanged for an equal number of shares. Each conversion was reflected in the accompanying consolidated financial statements at book value.
		Restricted Share Awards. During the three months ended March 31, 2003 and 2002, Roberts Realty granted 827 and 2,047 shares, respectively, of restricted stock to certain employees. The market value of these restricted stock grants totaled $5,000 and $15,000, 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-year vesting period and are being amortized to compensation expense ratably over the vesting period. In the three months ended March 31, 2003, 3,980 shares of restricted stock with an original market value of $30,000 were forfeited by employees who terminated employment before vesting.
		Dividends. Roberts Realty suspended the quarterly dividend payment for all four quarters of 2003 and all four quarters of 2002.
		Earnings Per Share. Reconciliations of net loss to common shareholders and weighted average shares and units used in Roberts Realty’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. Roberts Realty’s chief operating decision maker is its chief executive officer.
		Roberts Realty owns, operates, develops and constructs multifamily apartment communities located in Georgia and Florida and is constructing a community in North Carolina. These apartment communities generate rental revenue and other income through the leasing of apartment homes. Roberts Realty evaluates the performance of each of its apartment communities on an individual basis. However, because each of the apartment communities has similar economic characteristics, residents, and products

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		and services, the apartment communities have been aggregated into one reportable segment. This segment comprises 100% of Roberts Realty’s total revenues for each of the three months ended March 31, 2003 and 2002.
		Roberts Realty is constructing a 42,090 square foot retail center located adjacent to its Addison Place apartment community and a 39,907 square foot office building located adjacent to its Northridge apartment land.
9.		NEW ACCOUNTING PRONOUNCEMENTS
		In June 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 142, “Goodwill and Other Intangible Assets” (effective January 1, 2002), which specifies that goodwill and some intangible assets will no longer be amortized but instead will be subject to periodic impairment testing. The adoption of SFAS No. 142 did not have a material impact on the financial position or results of operations.
		In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No.144 establishes new rules for measuring impairment of long-lived assets and accounting for discontinued operations. SFAS No. 144 supersedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,” and among other factors, establishes criteria beyond that previously specified in SFAS No. 121 to determine when a long-lived asset is to be considered held for sale. On January 1, 2002, Roberts Realty adopted SFAS No. 144, which did not have a material effect on financial position or results of operations. However, SFAS No. 144 may modify the presentation of the operating results from real estate held for sale in Roberts Realty’s statement of operations in the future.
		In April 2002, the FSAB issued SFAS No. 145 “Rescission of SFAS Nos. 4, 44, 64 and Amendment of SFAS No. 13 and Technical Corrections.” SFAS No. 145 prevents treatment as extraordinary, gains or losses on extinguishment of debt not meeting the criteria of Accounting Principles Board Opinion No. 30. SFAS No. 145 is effective for fiscal years beginning after May 15, 2002. The adoption will affect the classifications of those amounts in the financial statements of subsequent periods and comparative prior periods. Effective January 1, 2003, Roberts Realty adopted SFAS No. 145, which did not have a material impact on Roberts Realty’s financial position or results of operations.
		In June 2002, the FSAB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” SFAS No. 146 addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force (“EITF”) Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including certain costs incurred in a restructuring).” SFAS No. 146 requires recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred as opposed to when the entity commits to an exit plan under EITF Issue No. 94-3. SFAS No. 146 is effective for exit or disposal activities initiated after December 31, 2002. Roberts Realty believes the adoption of SFAS No. 146 will not have a material impact on its financial position or results of operations.
		In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others – an Interpretation of SFAS Nos. 5, 57, and 107, and recession of FASB Interpretation No. 34” (“FIN 45”). FIN 45 elaborates on the disclosures to be made by a guarantor in its financial statements. It also requires a guarantor to recognize a liability for the fair value of the obligation undertaken in issuing the guarantee at the inception of a guarantee. The disclosure requirements of FIN 45 are effective for Roberts Realty as of December 31, 2002. The recognition provisions of FIN 45 will be applied on a

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		prospective basis to guarantees issued after December 31, 2002. Roberts Realty does not expect the requirements of FIN 45 to have a material impact on its financial position or results of operations.
10.		COMPREHENSIVE LOSS
		Roberts Realty’s comprehensive loss, which consists of net loss and the change in the fair value of the swap contract payable, is calculated as follows:

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

     This report contains “forward-looking statements” within the meaning of the federal securities laws. 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 and operate 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 May 1, 2003, we own a 71.1% interest in the operating partnership and are its sole general partner. We expect to continue to conduct our business in this organizational structure.

     As of May 1, 2003, we own:

	•		seven existing multifamily apartment communities that are stabilized containing a total of 1,632 apartment homes;
	•		one existing community containing 250 apartment homes that is completing its lease-up phase;
	•		one community under construction that will contain 319 apartment homes;
	•		a 10.9-acre site currently in the planning and design phase on which we intend to build a 220-unit apartment community (referred to in this report as the Northridge apartment land);
	•		a 42,090 square foot retail center currently under construction; and
	•		a 39,907 square foot office building currently under construction, a part of which we intend to use as our corporate office building.

     Seven of our communities – Addison Place, Bradford Creek, Highland Park, Plantation Trace, Preston Oaks, River Oaks, and St. Andrews at the Polo Club – totaling 1,632 apartment homes, are stabilized. Veranda Chase, consisting of 250 apartment homes, is 91.8% leased as of May 1, 2003, and we expect it to be stabilized in the second quarter of 2003. Construction of our Charlotte community is progressing steadily, and we expect it to be substantially complete by the fourth quarter of 2003. We anticipate leasing activity at our Charlotte community to begin in the second quarter of 2003. All of our communities are located in metropolitan Atlanta, Georgia, except the Charlotte community and St. Andrews at the Polo Club, which is located in the city of Wellington, Palm Beach County, Florida.

     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 May 1, 2003, our seven stabilized communities totaling 1,632 apartment homes had a physical occupancy rate of 89.4%.

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     We are constructing Addison Place Shoppes, a 42,090 square foot retail center, located at the entrance to our Addison Place apartment community in Alpharetta, Georgia. We expect to complete construction in the third quarter of 2003. In June 2001, we purchased land and a partially constructed office building on Northridge Parkway in North Fulton County, Georgia. When construction of the office building is completed, which we expect to occur in the third quarter of 2003, we will use a portion of the building as our corporate headquarters and lease the remaining space to Roberts Properties, Inc., Roberts Properties Construction, Inc. and unaffiliated tenants. We are in the planning and design phase of the Northridge community.

     In Atlanta, our primary market, negative job growth and historically low mortgage interest rates have contributed to lower demand for apartments, while the supply of multifamily units has increased. To maintain our physical occupancy, we offer residents incentives in the form of concessions and lower rents, which result in decreased revenues and income from operations. We expect rent concessions and lower rents to continue for the foreseeable future, and we cannot offer any assurances regarding the effects of these conditions on our business or when multifamily market conditions might improve. To the extent that these conditions continue and perhaps worsen, particularly in Atlanta, our business, operating results and liquidity will be affected adversely.

     Our board of directors suspended payment of our quarterly dividends for all four quarters of 2002. Based on current conditions, the board voted to suspend payment of quarterly dividends for 2003. In addition to experiencing lower occupancy and operating revenues at our existing properties, we are completing a major growth program with three properties under construction and one property in the planning and design phase. In total, these four new properties required an investment of approximately $12.5 million of our equity that is currently not producing any cash flow. The decreased revenues, together with our growth program, have resulted in decreased cash flow for our company. We believe that our cash flow from operations will begin to increase as we finish the lease-up at Veranda Chase and complete our new properties under development and construction. Until there is a sustained and broad-based economic recovery resulting in positive job growth, the Atlanta apartment market will remain soft, and we will continue to experience the negative effects of lower occupancy and lower rents.

     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 all of our existing communities, except (a) the 24-unit second phase of Preston Oaks, which was constructed by an independent contractor, and (b) the 200 unit St. Andrews at the Polo Club apartment community, which we acquired on November 6, 2001 while still in the lease-up phase. We expect that affiliates of Mr. Roberts will continue to develop and construct properties for us where feasible. Roberts Construction is the general contractor of our Charlotte community and will oversee the completion of its construction. Roberts Construction began construction on the Addison Place Shoppes and the corporate office building before we purchased these properties, and we have retained Roberts Construction to finish construction. We retained Roberts Properties to develop our Northridge community and we entered into a cost plus 10% contract with Roberts Construction to build the 220 apartment units.

Results of Operations

     Comparison of Three Months Ended March 31, 2003 to the Three Months Ended March 31, 2002.

     For the three months ended March 31, 2003, we recorded a net loss of ($877,000), or $(0.17) per share, compared to a net loss of ($733,000) or $(0.15) per share, for the three months ended March 31, 2002. Our results include:

(a)

a $493,000 increase in interest expense due primarily to Veranda Chase (which was substantially completed during the third quarter of 2002), a larger loan secured by Highland

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			Park (which was refinanced during the fourth quarter of 2002), and a decrease in capitalized interest associated with the Northridge property;
	(b)		a $243,000 increase in depreciation expense due primarily to Veranda Chase;
	(c)		a $71,000 increase in property taxes due primarily to Veranda Chase;
			offset by:
	(d)		a $485,000 increase in total operating revenues due primarily to Veranda Chase; and
	(e)		a $77,000 gain, net of minority interest, from the sale of land and reimbursement for land improvements for road right-of-way projects at the Addison Place community in February 2003, compared to a $102,000 loss, net of minority interest, associated with a settlement in 2002 in connection with the sale of Rosewood Plantation.

     The operating performance for all our apartment communities is summarized in the following table:

     Five of our communities (Bradford Creek, Highland Park, Plantation Trace, Preston Oaks, and River Oaks) were fully stabilized during both the three-month periods ended March 31, 2003 and 2002. Our same-property operating revenues decreased by $65,000, or 2.2%, from $2,919,000 for the three months ended March 31, 2002 to $2,854,000 for the three months ended March 31, 2003. Our same-property operating expenses decreased by $45,000, or 4.4% from $1,031,000 for the three months ended March 31, 2002 to $986,000 for the three months ended March 31, 2003. Property operating expenses include personnel, utilities, real estate taxes, insurance, maintenance, landscaping, marketing, and property administration expenses. Stabilized occupancy for our same-property communities was 91.6% for the three months ended March 31, 2003 compared to 91.3% for the three months ended March 31, 2002. The increase in stabilized occupancy was offset by higher rent concessions and resulted in lower net revenues.

     The following discussion compares our statements of operations for the three months ended March 31, 2003 and 2002.

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     Total operating revenues increased $485,000 or 10.4% from $4,668,000 for the three months ended March 31, 2002 to $5,153,000 for the three months ended March 31, 2003. The increase in operating revenues is due primarily to the following:

	(a)		a $589,000 increase in operating revenues from Addison Place (which completed its lease-up in September 2002) and Veranda Chase (which began its lease-up in the second quarter of 2002);
			offset by:
	(b)		a decrease in operating revenues of $65,000 from same-properties and of $37,000 from St. Andrews at the Polo Club for the three months ended March 31, 2003 compared to the same period in 2002, due primarily to higher rent concessions.

     Property operating expenses, which include personnel, utilities, real estate taxes, insurance, maintenance, landscaping, marketing, and property administration expenses, increased $190,000 or 10.7% from $1,768,000 for the three months ended March 31, 2002 to $1,958,000 for the three months ended March 31, 2003. The increase is due primarily to Veranda Chase, offset by a decrease in operating expenses at our same-properties.

     General and administrative expenses increased $14,000 or 2.7% from $525,000 for the three months ended March 31, 2002 to $539,000 for the three months ended March 31, 2003 and include salaries, legal, accounting and tax fees, marketing and printing fees, travel, director fees and other costs. General and administrative expenses as a percentage of operating revenues decreased from 11.2% for the three months ended March 31, 2002 to 10.5% for the three months ended March 31, 2003.

     Depreciation expense increased $244,000 or 14.9% from $1,639,000 for the three months ended March 31, 2002 to $1,883,000 for the three months ended March 31, 2003. The increase is due primarily to Veranda Chase. We record depreciation expense as apartment homes are completed and available for occupancy.

     Interest expense increased $493,000 or 31.1% from $1,583,000 for the three months ended March 31, 2002 to $2,076,000 for the three months ended March 31, 2003, due primarily to the following:

	•		the completion of construction of Veranda Chase in the fourth quarter 2002 and the discontinued capitalization of construction period interest;
	•		the refinancing of Highland Park in November 2002 with a higher loan amount; and
	•		a decrease in capitalized interest associated with the Northridge property.

Liquidity and Capital Resources

     Comparison of Three Months Ended March 31, 2003 to Three Months Ended March 31, 2002. Cash and cash equivalents decreased $17,000 during the three months ended March 31, 2003 compared to an increase of $660,000 during the three months ended March 31, 2002. The change is due to a decrease in cash provided by operating activities of $725,000 and a decrease in cash provided by financing activities of $2,595,000 offset by a decrease in cash used in investing activities of $2,643,000.

     A primary source of our liquidity is cash flow from operations. Operating cash flows have historically been determined by the number of apartment homes, rental rates and operating expenses for those apartment homes. Net cash provided by operating activities decreased $725,000 from $1,251,000 during the three months ended March 31, 2002 to $526,000 during the three months ended March 31, 2003. The decrease in cash flow from operations is due primarily to the payment of 2002 real estate taxes for St. Andrews at the Polo Club in the first quarter of 2003. We did not pay real estate taxes in the first quarter of 2002 because we had recently

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purchased this property in November 2001. Generally, depreciation and amortization expenses are the most significant adjustments to net income in arriving at cash provided by operating activities.

     To address the decline in our cash flow from operations, our board of directors suspended payment of our quarterly dividends for all four quarters of 2002. Based on current conditions, our board of directors voted to suspend payment of quarterly dividends for 2003. In addition to experiencing lower occupancy and operating revenues at our existing properties, we are completing a major growth program with three properties under construction and one property in the planning and design phase. In total, these four new properties required an investment of approximately $12.5 million of our equity that is currently not producing any cash flow. The decreased revenue, together with our growth program, has resulted in decreased cash flow for our company. We believe that our cash flow from operations will begin to increase as we finish the lease-up at Veranda Chase and complete our new properties under development and construction. Until there is a sustained and broad-based economic recovery resulting in positive job growth the Atlanta apartment market will remain soft and we will continue to experience the negative effects of lower occupancies and rents.

     Net cash used in investing activities decreased $2,643,000 from $5,308,000 during the three months ended March 31, 2002 to $2,665,000 during the three months ended March 31, 2003. This decrease is attributable to decreased spending on construction of $2,262,000 (primarily because we completed Veranda Chase in the fourth quarter 2002) and to the cash proceeds from the sale of land and reimbursement for land improvements for right-of-way projects at the Addison Place community in February 2003.

     Net cash provided by financing activities decreased $2,595,000 from $4,717,000 during the three months ended March 31, 2002 to $2,122,000 during the three months ended March 31, 2003. The decrease is due primarily to the following:

	(a)		a $2,409,000 decrease in construction loan borrowings for our Charlotte community (the initial funding of this loan was in February 2002);
	(b)		a $2,171,000 decrease in construction loan borrowings for Veranda Chase because we completed construction in the fourth quarter 2002;
			offset by:
	(c)		the $2,000,000 payoff of a line of credit in the first quarter of 2002.

     The table and accompanying footnotes on the following two pages explain our current debt structure, including for each loan: the principal balance at May 1, 2003 and at its scheduled maturity, interest rate, maturity date, and monthly principal and interest payment.

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ROBERTS REALTY INVESTORS, INC.
DEBT SUMMARY SCHEDULE
(Listed in order of maturity)
May 1, 2003

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(1)		The interest rate shown for variable-rate debt is as of May 1, 2003.
(2)		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.
(3)		Each of the loans secured by the River Oaks 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.
(4)		Each of the loan secured by the Preston Oaks and Highland Park communities 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.
(5)		The St. Andrews at the Polo Club loan may not be prepaid for a period of three years (no earlier than December 1, 2004). We must give written notice at least 30 days before the date selected by us as the prepayment date, at which time the entire outstanding principal may be prepaid along with a prepayment fee equal to the greater of (a) 1% of the entire principal amount to be prepaid 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. The loan may be prepaid in full after September 1, 2011 without any prepayment premium.
(6)		The loan secured by Addison Place Phase II is a floating rate loan with no prepayment premium for early termination. The interest rate on the loan was synthetically fixed with an interest rate swap agreement, which may result in a prepayment premium depending upon market interest rates. The prepayment premium (if any) is equal to the present value of the difference between the existing fixed interest rate on the interest rate swap agreement and the current replacement rate for a similar structure in the marketplace at the time of prepayment. There is no minimum prepayment fee. Principal payments on the loan are scheduled as follows: 2003 — $145,000; 2004 — $152,000; 2005 — $59,000, plus the balloon payment due of $22,071,000.
(7)		The construction loan for Veranda Chase is not yet fully drawn. The amount shown in the column titled “Balance at Maturity” assumes the full amount of this loan is drawn and is the balance due at maturity. The loan is a floating rate loan with no prepayment premium for early termination. The interest rate on the loan was synthetically fixed with an interest rate swap agreement, which may result in a prepayment premium depending upon market interest rates. The prepayment premium (if any) is equal to the present value of the difference between the existing fixed interest rate on the interest rate swap agreement and the current replacement rate for a similar structure in the marketplace at the time of prepayment. There is no minimum prepayment fee.
(8)		The construction loans for Charlotte, and the office building are not yet fully drawn. The amount shown in the column titled “Balance at Maturity” assumes the full amount of each of these loans is drawn and is the balance due at maturity.

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     Our existing loans will require balloon payments (in addition to monthly principal amortization) coming due over the years 2003 to 2012 as summarized below:

Debt Maturity Schedule:

     We intend to refinance or extend the loans that are scheduled to mature in 2003 as described in the following paragraphs. In certain instances our plans are subject to lender approval that we have not yet obtained, and we cannot provide assurances that we will obtain that approval.

     We have lines of credit with two banks aggregating $3,000,000 to provide funds for short-term working capital purposes. One facility in the amount of $1,000,000 expires May 20, 2003. The other credit facility in the amount of $2,000,000 expires August 1, 2003. No principal or interest is currently outstanding on either facility. Although we intend to renew both lines of credit, there is no assurance that the banks will offer renewals or, if those renewals are offered, that they will be on favorable terms.

     On September 6, 2001, we closed on a $2,700,000 loan to fund the initial construction of the Addison Place Shoppes retail center. The loan, which is secured by the land and improvements, was increased to $3,700,000 on December 21, 2001 and, as amended, has a maturity date of May 30, 2003. We expect to close a 35-month construction loan and use the proceeds of the initial draw to repay this land loan before May 30, 2003. If this financing does not occur as we expect, we can provide no assurance that other financing will be available or, if it is available, that it will be on favorable terms.

     On June 28, 2001, we closed a $3,000,000 loan secured by the Northridge land located next to our Highland Park community. We intend to construct a 220-unit apartment community on this property. The loan has a balance of $3,000,000 and matures on July 10, 2003. We intend to extend the maturity date of the loan prior to maturity and roll it into a construction loan upon starting construction of the project. There is no assurance that financing will be available or, if it is available, that it will be on favorable terms.

     On December 23, 2002, we signed a commitment to refinance the River Oaks mortgage note with a new $10,750,000 loan from L.J. Melody & Company, a mortgage banking firm of which a director is an executive vice president. The terms of the new loan include a ten-year term with a fixed interest rate of 5.54% payable in monthly installments of $61,307 based on a 30-year amortization schedule. The existing loan on River Oaks matures in November 2003 and as of May 1, 2003 has a current balance of $8,533,000. We expect to close the new loan in August 2003 at which time L.J. Melody will immediately assign the loan to Freddie Mac.

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     With respect to the debt that matures after 2003, 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.

     Other than as described above, we anticipate that aggregate property 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, and interest and amortization of principal on related mortgage notes payable. We intend to meet our other short-term liquidity requirements, including improvements and renovations at existing communities, generally through our net cash provided by operations. In the event cash provided by operations is not sufficient, we intend to curtail improvement and renovation activities or use cash reserves. We expect to meet our long-term liquidity requirements, including future developments and debt maturities, from the proceeds of construction and permanent loans.

Stock Repurchase Plan

     Our board of directors has authorized the repurchase of up to 400,000 shares of our outstanding common stock. We repurchased 362,588 shares for $2,764,000 prior to 2002 and we currently have authority to repurchase an additional 37,412 shares. We did not repurchase any shares during 2002 or during the three months ended March 31, 2003. We intend to ask our board of directors for authorization to repurchase an additional 300,000 shares of our stock. We will continue to repurchase our shares from time to time by means of open market purchases depending on availability, our cash position, and the price per share.

Inflation

     Substantially all apartment leases are for an initial term of not more than 12 to 14 months and thus may enable us to seek increases in rents after the expiration of each lease. We believe the short-term nature of these leases reduces our risk of the adverse effects of inflation.

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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 believe that FFO is an important measure of our operating performance. We believe that FFO provides useful information to investors because it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare one equity REIT with another on the basis of operating performance. 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 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). The following table reconciles net income to FFO (dollars in thousands).

Critical Accounting Policies

     Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). A summary of recent accounting pronouncements and the expected impact on our financial statements is included in Note 9. Because we are in the business of owning, operating, and developing apartment communities, our critical accounting policies relate to cost capitalization and asset impairment evaluation. The following is a summary of our overall accounting policy in this area.

     Our real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. The cost of buildings and improvements includes interest, property taxes, insurance, and development fees incurred during the construction period. Ordinary repairs and maintenance are expensed as incurred; major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation expense is computed on a straight-line basis over the estimated useful lives of 27.5 years for buildings and improvements, 15 years for land improvements, and five to seven years for furniture, fixtures and equipment. We periodically evaluate our real estate assets to determine if there has been any impairment in the carrying value of the assets in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the

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Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. At March 31 2003, we did not own any real estate assets that meet the impairment criteria of SFAS No. 144.

     We capitalize direct costs associated with the development and construction of our apartment communities. We expense all internal costs associated with the acquisition of operating apartment communities to general and administrative expense in the period we incur those costs. We capitalize interest on qualifying construction expenditures in accordance with SFAS No. 34 for our real estate assets. We capitalize interest and other carry costs such as property taxes and insurance during the construction period and begin to expense those items as the residential apartment homes in a community become substantially complete and available for occupancy. Capitalization of interest and other carry costs such as property taxes and insurance ceases entirely upon completion of development and construction activities.

     Revenues earned during the lease-up period for a community transitioning from construction to a stabilized occupancy level are generally insufficient to cover operating expenses, associated interest expense, and other carry costs until a sufficient level of those revenues are achieved through leasing activities. These net expenses are generally referred to as lease-up deficits. The timing of completion of construction activities for portions of a community and the velocity and rental rate level of leasing activity can have a material impact on the amount and duration of the lease-up deficits. The leasing absorption of our communities in lease-up has been slowed as a result of the weakness in the national economy, particularly in our primary market of Atlanta.

Hedging Strategy

     We generally enter into fixed rate debt instruments. In certain situations, we may utilize derivative financial instruments in the form of interest rate swaps to hedge interest rate exposure on variable-rate debt. We do not use such instruments for trading or speculative purposes. We entered into two interest rate swap agreements to effectively fix the variable interest rates on our $22,500,000 and $17,000,000 construction/permanent loans.

     Effective January 1, 2001, we adopted SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized in the balance sheet and measured at fair value. Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income, and recognized in the income statement when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment. Our swap agreements have been designated as cash flow hedges and, accordingly, are recorded at fair value in the consolidated balance sheet, and the related gains or losses are deferred in stockholders’ equity, net of minority interest, as a component of other comprehensive income. Amounts received or paid in connection with the swap agreements are recognized as adjustments to interest related to the designated debt. The net effect of this accounting is that interest on the variable rate-debt is generally recorded based on fixed interest rates.

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

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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:

	•		The current unfavorable market and economic conditions in Atlanta, Charlotte and Palm Beach County could continue to depress our occupancy and rental rates and adversely affect our financial performance.
	•		Further unfavorable changes in market and occupancy conditions, perhaps as a result of war or terrorism, could depress our occupancy and rental rates even further and worsen our financial performance.
	•		Increased competition in the Atlanta, Charlotte and Palm Beach County markets could limit our ability to lease our apartment homes or increase or maintain rents.
	•		Conflicts of interest inherent in business transactions between or among Roberts Realty and/or the operating partnership on one hand, and Mr. Roberts and/or his affiliates on the other hand, could result in our paying more for property or services than we would pay an independent seller or provider.
	•		Construction risks inherent in our Charlotte and Northridge communities, our corporate office building and our Addison Shoppes retail center, and the other communities we may develop in the future, could adversely affect our financial performance.
	•		If we are unable to lease-up our Veranda Chase, Charlotte and Northridge communities as we expect, our financial performance will be adversely affected.
	•		We may be unable to extend the maturity dates or otherwise refinance some or all of our $6,700,000 in outstanding land loans that mature in 2003, or we may be able to do so only on unfavorable terms. If we are unable to extend these maturity dates or refinance this debt and we are required to pay off these loans, we could be required to sell one or more of our properties to fund these repayments, and doing so could materially and adversely affect our financial performance.
	•		We might not be able to obtain replacement financing to make balloon payments on our long-term debt as it matures, or we might have to refinance our debt on less favorable terms.
	•		We have approximately $21,037,000 in debt at May 1, 2003 that bears interest at variable interest rates (excluding loans on which we have synthetically fixed the interest rate), and if interest rates were to increase, our cash position and financial position could be materially and adversely affected.
	•		Because our organizational documents do not limit the amount of debt we may incur, we could increase the amount of our debt as a percentage of the estimated value of our properties.
	•		Our operations could be adversely affected if we lose key personnel, particularly Mr. Roberts.
	•		We could incur costs from environmental problems even though we did not cause, contribute to or know about them.
	•		Compliance or failure to comply with the Americans with Disabilities Act and other similar laws could result in substantial costs.