U.S. SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended December 31, 2003.

For the transition period from _________ to _________.

Commission file number 001-13183

Roberts Realty Investors, Inc.

Issuer’s telephone number:  (770) 394-6000

Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 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 þ No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ

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

     State the aggregate market value of the voting common equity held by non-affiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the common equity was sold, or the average bid and asked prices of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. (See definition of affiliate in Rule 405.)

$24,580,431

     Note: If a determination as to whether a particular person or entity is an affiliate cannot be made without involving unreasonable effort and expense, the aggregate market value of the common stock held by non-affiliates may be calculated on the basis of assumptions reasonable under the circumstances, provided that the assumptions are set forth in this Form.

     Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 5,241,028 shares of common stock (as of February 29, 2004).

     Documents Incorporated by Reference. None

TABLE OF CONTENTS

PART I

ITEM 1. DESCRIPTION OF BUSINESS.

     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. We will make forward-looking statements in Items 1, 2, 5, 7 and 7A of this report. See “Disclosure Regarding Forward-Looking Statements” at the end of Item 7 for a description of some of the important factors that may affect actual outcomes.

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 February 29, 2004, Roberts Realty owns a 72.6% 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 8, 2004, we own:

§		seven existing multifamily apartment communities that are stabilized containing a total of 1,694 apartment homes;
§		one community containing 319 apartment homes currently under construction (we expect to complete construction by June 30, 2004);
§		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 community);
§		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 (we intend to occupy the office building by May 1, 2004).

     Seven of our communities – Addison Place, Bradford Creek, Plantation Trace, Preston Oaks, River Oaks, St. Andrews at the Polo Club and Veranda Chase – totaling 1,694 apartment homes, are stabilized. We began leasing on March 13, 2004 at our 319-unit Charlotte, North Carolina community. All of our communities are located in metropolitan Atlanta, Georgia, except our Charlotte community and St. Andrews at the Polo Club, which is located in the city of Wellington, Palm Beach County, Florida.

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     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 February 29, 2004, our seven stabilized communities totaling 1,694 apartment homes had a physical occupancy rate of 92.9%.

     We are constructing 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 2004. In June 2001, we purchased land and a partially constructed office building on Northridge Parkway in North Fulton County, Georgia. We will use a portion of one floor of the building as our corporate headquarters and currently expect to move into those premises by May 1, 2004. We will lease the remaining space on that floor to Roberts Properties and Roberts Construction, and we plan to lease the other two floors to 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 has adversely affected operating results at our stabilized communities. 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.

     On August 27, 2003, we paid a special distribution of $0.55 per share to shareholders and $0.55 per unit to unitholders in the operating partnership of record on August 18, 2003. We paid the special distribution from the profit generated by the sale of our Highland Park community.

     In addition to experiencing lower operating revenues at our existing properties, we are completing three properties under construction and one property in the planning and design phase. In total, these four new properties required an investment of approximately $13.4 million of our equity that is currently not producing any cash flow. The decreased revenues from our existing properties, together with our growth program, have reduced our cash flow from operations. We believe that our cash flow from operations will begin to improve as we finish our new properties under development and construction. Until there is a sustained and broad-based economic recovery resulting in positive job growth, however, the Atlanta apartment market will remain soft, and we will continue to experience the negative effects of lower rents.

     In light of these factors, our board of directors suspended payment of our regular quarterly dividends for the fourth quarter of 2001 and all of 2002 and 2003. We cannot predict when, or if, we will resume paying regular quarterly dividends. We expect to continue to sell properties from time to time and to pay special distributions to our shareholders and unitholders from the net sale proceeds as we did in 2003 from the proceeds of the Highland Park sale.

     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 90% of our taxable income. Our common stock is traded on the American Stock Exchange under the symbol “RPI.”

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     We have engaged two entities owned by Mr. Charles S. Roberts, our Chairman of the Board and Chief Executive Officer, 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 the 24-unit second phase of Preston Oaks and the 200-unit St. Andrews at the Polo Club. We expect that affiliates of Mr. Roberts will continue to develop and construct properties for us. Roberts Construction is the general contractor of our Charlotte community and will oversee the completion of construction. Roberts Construction began construction on both the Addison Place Shoppes and the corporate office building before we purchased them, and we have retained Roberts Construction to finish construction on these projects. We have retained Roberts Properties to develop our Northridge community and Roberts Construction to construct it.

     Our executive offices are located at 8010 Roswell Road, Suite 280, Atlanta, Georgia 30350, and our telephone number is (770) 394-6000. We do not maintain a corporate website. As of February 29, 2004, we have 42 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 include the former limited partners in the limited partnerships that were merged into the operating partnership; Mr. Roberts; and the former owner of a retail center we acquired and later sold.

     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 for those units at their fair market value, based upon the then current trading price of the shares. We have adopted a policy of issuing shares in exchange for units. 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, 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 objective is to increase the long-term total return to our shareholders through appreciation in the value of our properties and the payment of dividends or capital distributions when we sell properties. To achieve this objective, we are pursuing the following growth strategies:

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	(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 and/or acquire new multifamily apartment communities in Georgia, North Carolina and Florida.

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 investment strategy. As of February 29, 2004, we employ 35 property management personnel, including property managers, leasing managers, leasing consultants, maintenance supervisors and technicians. 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:

	§		to increase average occupancy and rental rates as market conditions permit;
	§		to minimize resident turnover and delinquent rental payments through strict review of each applicant’s creditworthiness;
	§		to control operating expenses and increase net operating income at each of our communities; and
	§		provide superior service to our residents.

     Development Strategy. We intend to continue to develop high quality apartment communities for long-term ownership. During the past 20 years, the Roberts Companies have developed, constructed, and/or managed over 4,400 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. 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, assuming substantial improvement in the Atlanta economy, offer a continuing opportunity for us to achieve favorable long-term returns on the development of well-located, high quality apartment home communities.

     We have retained Roberts Properties to develop our Northridge community. We also expect that Roberts Properties will continue to develop other communities for us in the future. Although the experience of the Roberts Companies will be most helpful to us in the Atlanta area, we believe that their experience will enable us to continue to develop multifamily apartment communities in North Carolina and Florida.

     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

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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:

	§		households, population and employment growth;
	§		prevailing rental and occupancy rates in the immediate market area and the perceived potential for growth in those rates;
	§		costs that affect profitability of the investment, including construction, financing, operating and maintenance costs;
	§		income levels in the area;
	§		existing employment bases;
	§		traffic volume, transportation access, proximity to commercial centers and regional malls; and
	§		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.

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 the ownership and operation of our apartment communities and other real estate assets, we may be potentially liable for:

	(a)		remediation and removal costs; and
	(b)		damages to persons or property arising from the existence or maintenance of hazardous or toxic substances.

     The preliminary environmental assessments of our apartment 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

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     Under the Americans 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 our 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 25, 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 our communities 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 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 property, 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.

     The Terrorism Risk Insurance Act of 2002 was signed into law on November 26, 2002. The law provides that losses resulting from certified acts of terrorism will be partially reimbursed by the United States after a statutory deductible amount is paid by the insurance company providing coverage. The law also requires that the insurance company offer coverage for terrorist acts for an additional premium. We accepted the offer to include this coverage in our property and casualty policies.

     We believe that our properties 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 we 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

     Our investment policies, financing policies and conflict of interest policies are set by our board of directors. The board of directors has adopted the policies summarized below, including the Code of Ethics and Business Conduct we adopted on March 17, 2004 pursuant to new requirements of the American Stock Exchange. 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

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(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 as well as acquiring additional multifamily apartment communities that we anticipate will produce additional cash flow.

     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 Georgia, North Carolina and Florida. 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 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:

	§		hiring Mr. Roberts or Roberts Properties to develop and construct real estate under a fee arrangement;
	§		acquiring undeveloped property from Mr. Roberts or his affiliates for future development; or
	§		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.

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     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:

	§		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
	§		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. In addition, under the applicable rules of the American Stock Exchange, related party transactions are subject to appropriate review and oversight by our Audit Committee, which is composed of Wm. Jarell Jones, its chairman, Dennis H. James, and George W. Wray, Jr.

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New Code of Ethics and Business Conduct

     On March 17, 2004, our board of directors adopted a Code of Business Conduct and Ethics as required by the rules of the American Stock Exchange and the federal Sarbanes-Oxley Act. Our code is designed to deter wrongdoing and to promote:

	(1)		honest and ethical conduct, including the ethical handling of corporate opportunities and actual or apparent conflicts of interest between personal and professional relationships;
	(2)		full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications we make;
	(3)		compliance with applicable governmental laws, rules and regulations;
	(4)		confidentiality; protection and proper use of company assets;
	(5)		equal employment opportunities and prohibition of discrimination or harassment;
	(6)		the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and
	(7)		accountability for adherence to the code.

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.

     In September 1998 our board authorized a stock repurchase plan. See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Stock Repurchase Plan, for an explanation of this plan and our repurchases of our shares since 1998.

     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 in our markets, see Item 2, Properties – Competition.

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ITEM 2. PROPERTIES.

General

     As of March 8, 2004, we own:

	§		seven existing multifamily apartment communities that are stabilized containing a total of 1,694 apartment homes;
	§		one community containing 319 apartment homes that is under construction;
	§		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 community);
	§		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.

     We sold our 188-unit Highland Park community on August 6, 2003.

     We believe that in the long-term, the demand for multifamily housing in Atlanta will increase due to Atlanta’s growing population, although recent job losses in Atlanta have resulted in a weaker apartment market. 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 composed 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 estimated population of the Atlanta Region increased by 7.0% from 3,429,400 persons in 2000 to 3,669,300 persons in 2003, making it one of the largest metropolitan areas in the country and the largest in the Southeast. The population of the Atlanta Region, including Coweta, Forsyth and Paulding counties, is projected to grow to 4,223,300 persons in 2010.

     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 Atlanta Region added 12,393 units in 2003, 14,823 units in 2002 and 16,237 units in 2001.

     The following table summarizes basic information about our communities.

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[Continued from above table, first column(s) repeated]

(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)

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.

(3)

Addison Place was completed in two phases. The 118-unit first phase of Addison Place was completed in October 1999, and the 285-unit second phase was completed in September 2001.

(4)

St. Andrews at the Polo Club was purchased on November 6, 2001. The 200-unit community was purchased during its initial lease-up phase.

(5)

Veranda Chase completed its lease-up phase in June 2003.

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     Annual operating data regarding our stabilized communities at December 31, 2003 are summarized in the following table. The second phase of Addison Place is described separately for this purpose. 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.

[Continued from above table, first column(s) repeated]

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          As described below, our Atlanta communities are located in Gwinnett and Fulton counties and four submarkets, or geographic areas, within these counties. We also have one community in Charlotte and one in Palm Beach County, Florida. The Charlotte community and St. Andrews at the Polo Club are 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 the Duluth submarket; thus those communities compete not only with unaffiliated apartment communities but also with each other.

Gwinnett County

          From 1990 to 2003, Gwinnett’s population increased 84.6% to 658,200 persons. Gwinnett’s strong employment base, transportation networks, excellent public education system and affordable home prices contribute to the county’s growth. Gwinnett is home to approximately 235 international firms, over 860 manufacturing firms and 1,300 high technology firms that generate many of its 378,413 jobs. The average household income of the county is approximately $81,000. Gwinnett County is home to our communities located in the City of Duluth and unincorporated Gwinnett.

     Duluth Area – Plantation Trace, River Oaks and Bradford Creek Communities

          Duluth. Our Plantation Trace, River Oaks and Bradford Creek communities are located in the City of Duluth, in western Gwinnett County. Duluth has exceeded even Gwinnett County as a whole in percentage of population growth; its population has increased more than 200% since 1990. Duluth is located just west of 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, a sand volleyball court, a 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 with 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, 2003, rental rates ranged from $795 to $2,025 per month, with a weighted

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average monthly rent of $891 per unit and $0.67 per square foot. Local real estate taxes were $225,000 in 2003. The physical occupancy rate for the entire Plantation Trace community as of December 31, 2003 was 96.4%.

          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, a sand volleyball court, a multi-station playground, a free-form swimming pool, a stone paver pool deck and a 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, 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 1,279 square feet. As of December 31, 2003, the community was 88.5% occupied, and rental rates ranged from $850 to $1,135 per month, with a weighted average monthly rent of $905 per unit and $0.71 per square foot. Local real estate taxes were $202,000 in 2003.

          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, a clubroom, a laundry room, two lighted tennis courts, a free-form swimming pool, a 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 990 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 1,579 square feet each. The weighted average unit size is 1,355 square feet. As of December 31, 2003, the community was 92.8% occupied, and rental rates ranged from $750 to $995 per month, resulting in a weighted average monthly rent of $952 per unit and $0.70 per square foot. Local real estate taxes were $177,000 in 2003.

     Unincorporated Gwinnett – Veranda Chase (formerly Old Norcross)

          Veranda Chase. The Veranda Chase community, completed in 2002, is 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. It is near I-85, GA-316 and Gwinnett Place Mall, a 1,100,000 square foot regional mall. This community consists of 15 two- and three-story buildings and has 250 garden-style apartments. It includes details such as stacked stone accents, traditional siding and oversized porches in each unit. Amenities include a clubhouse, an exercise room with weight equipment, a

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swimming pool, a lighted tennis court, a children’s playground, extensive nature trails along beautiful streams and private wooded views.

          Veranda Chase has 73 one-bedroom units of approximately 970 square feet each, 45 two-bedroom standard units of approximately 1,334 square feet each, 66 two-bedroom roommate units of approximately 1,378 square feet each, and 66 three-bedroom units of approximately 1,633 square feet each. The weighted average unit size is 1,318 square feet. As of December 31, 2003, the community was 92.4% occupied. Rental rates range from $840 to $1,215 per month, resulting in a weighted average monthly rent of $870 per unit and $0.66 per square foot. Local real estate taxes were $226,000 in 2003.

Fulton County

          Fulton County is the largest county in the Atlanta Region in terms of population, employment, housing units and land area.

     Perimeter Center/North Springs Area – Preston Oaks and Northridge 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 Children’s Healthcare of Atlanta. 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 InterContinental Hotels Group, UPS, Cingular and Hewlett-Packard have located their worldwide or regional headquarters within the Perimeter Center area.

          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 our other existing communities, with a custom swimming pool, a lighted tennis court, a 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 with 902 square feet each, 92 two-bedroom units ranging from 1,225 to 1,285 square feet and 61 three-bedroom units with 1,440 square feet each. Phase two consists of 24 one-bedroom apartment units with 902 square feet each. The weighted average unit size is 1,207 square feet.

          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.

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          As of December 31, 2003, Preston Oaks was 96.1% occupied, and its rental rates ranged from $915 to $1,315 per month, resulting in a weighted average monthly rent of $980 per unit and $0.81 per square foot. Local real estate taxes were $218,000 in 2003.

          Northridge. The Northridge community will be located on a 10.9 acre site located adjacent to our former Highland Park community. We intend to construct a 220-unit upscale apartment community consisting of one- and two-bedroom apartments with covered parking for residents. We expect to start construction by the end of 2004, and we estimate the total cost to be approximately $24 million.

     Alpharetta Area – Addison Place

          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 neighborhoods have been a major factor in the emergence of the Georgia 400 corridor as a center for corporate headquarters. North Fulton’s population was 340,301 at the end of 2002 and is projected to grow 16.6% to approximately 397,000 by 2007. The average North Fulton household income in 2003 was $112,000. The Windward project, which straddles Georgia 400, is the region’s largest mixed-use development. Based on our market research, we believe North Fulton County has been adversely affected by the economic downturn. Our indicators include, among others, unemployment rates, apartment vacancies, business failures and mortgage foreclosures.

          Addison Place Phases I and II. Addison Place is a 403-unit community located on Abbotts Bridge Road near the intersection of Abbotts Bridge and Jones Bridge roads. The first phase contains 118 townhouses consisting of 60 two-bedroom townhouses of approximately 1,497 square feet each and 58 three-bedroom townhouses of approximately 1,903 square feet each. The second phase of Addison Place contains 285 garden-style apartment homes. It includes 11 different floor plans, including 60 one-bedroom units 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 is 1,498 square feet. The buildings are of a traditional design with stacked stone accents, brick and vinyl siding. The community features two swimming pools, a modern fitness and exercise facility, a business center, men’s and women’s saunas and a playground.

          As of December 31, 2003, Addison Place was 91.7% occupied, and its monthly rental rates ranged from $760 to $1,925 per month, with a weighted average monthly rent of $1,053 per unit and $0.70 per square foot. Local real estate taxes were $381,000 in 2003.

Charlotte, North Carolina

          The following information is based on statistics and estimates published by the Charlotte Chamber of Commerce. Between 1990 and 2003, Mecklenburg County’s population grew from 511,363 to 773,299 persons. It is projected to grow to 1,063,127 persons by 2012. Employment has grown to a total of 387,822 residents employed in 2002. Nine of the nation’s top 200 banks operate in Charlotte, including Bank of America, N.A. and Wachovia Corporation (formerly First Union Corporation). Other major employers include Carolinas Healthcare System, Charlotte-Mecklenburg School System, Duke

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Energy Corporation and USAirways. Additionally, 286 of the nation’s largest industrial and service corporations listed by FORTUNE magazine have facilities in the area.

          Our Charlotte community is located on a 23.8-acre site at the intersection of Lancaster Highway (old NC-521) and John J. Delaney Drive in the Ballantyne area, the largest mixed-use development in Mecklenburg County. This community will have 319 garden-style apartments, consisting of 110 one-bedroom units ranging from 766 square feet to 1,030 square feet, 143 two-bedroom units ranging from 1,144 square feet to 1,550 square feet, 48 three-bedroom units at 1,783 square feet and 18 four-bedroom units at 2,081 square feet, along with 36 direct-entry garages. The weighted average unit size is 1,267 square feet. We estimate the cost of construction on this development to be approximately $30,800,000, of which $24,000,000 is being funded with a construction loan that we obtained in February 2002. The community is located near I-485 and I-77, which offer convenient access to downtown Charlotte and I-85.

Palm Beach County, Florida – St. Andrews at the Polo Club

          According to the Palm Beach Development Board, Palm Beach County is the third most populated county in Florida behind Dade and Broward counties to the south. The population of Palm Beach County grew from 870,000 persons in 1990 to 1,190,000 persons in 2002, a 37% increase, and is projected to grow to 1,500,000 persons by 2005. It is considered the most affluent county in Florida. West Palm Beach and Boca Raton are the two largest cities in the county, with the downtown West Palm Beach area undergoing a multi-billion dollar renaissance, which includes the recently completed mixed-use project City Place.

          St. Andrews at the Polo Club. St. Andrews at the Polo Club community is located on a 13.7-acre site adjacent to the Palm Beach Polo and Country Club in Wellington, Palm Beach County, Florida. The property is conveniently located 1.5 miles from The Mall at Wellington Green, a new 1.3 million square foot regional mall that opened in October 2001. The 200-unit community includes 160 garden apartments and 40 townhouse units, and each of the 200 units has its own garage. The interiors of each apartment include luxurious features such as nine- and ten-foot-high ceilings, wood-burning fireplaces, crown molding, glass-enclosed showers and a top-of-the-line General Electric appliance package. Amenities for the residents include a swimming pool, a spa and gazebo bar area, a business center, an indoor racquetball court, a lighted tennis court and a clubhouse with a fitness center.

          The unit mix includes 80 two-bedroom garden apartments ranging from 1,223 square feet to 1,404 square feet, 80 three-bedroom garden apartments ranging from 1,492 square feet to 1,627 square feet, and 40 townhouses of approximately 1,427 square feet each. The weighted average unit size is 1,545 square feet. As of December 31, 2003, the property was 91.2% occupied. Rental rates ranged from $1,210 to $1,830 per month, resulting in a weighted average monthly rent of $1,251 per unit and $0.81 per square foot. Local real estate taxes were $507,000 in 2003.

          The table on the following page summarizes the amenities of each of the existing communities and of our Charlotte community, which is now under construction.

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Summary of Amenities of the Communities

[Continued from above table, first column(s) repeated]

*   In select units (1) Phase II only (2) Phase I only

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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 the River Oaks, Plantation Trace and Bradford Creek communities, currently consists of approximately 19 multifamily communities, including ours. 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 19 existing communities in the area, seven were completed in the last six 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 11 of the other 16 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 one to 12 years of age. We believe that Preston Oaks competes with all 25 of these communities.

     Northridge. We believe the North Springs multifamily submarket includes the area within an approximately two-mile radius around this planned 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 which we sold on August 6, 2003. Of the approximately 34 existing communities in the market area, only five have been built since 1989. The remaining communities range in age from 15 years to over 20 years. We believe our Northridge community will draw residents from all of the other 34 communities located in the market area, but only 11 of the 34 communities will compete closely with the Northridge community.

     Addison Place. We believe the Alpharetta multifamily submarket includes the area within an approximately four-mile radius around this 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 12 communities, including Addison Place. We believe that Addison Place draws residents from all of the approximately 11 other communities located in the market area, which compete closely with Addison Place.

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     Veranda Chase. We believe the Veranda Chase multifamily submarket includes the area within an approximately two-mile radius around the Veranda Chase community. It is generally bounded by Herrington Road to the east, Club Drive to the south, Steve Reynolds Boulevard to the west and Sugarloaf Parkway to the north and east, and it currently consists of approximately 24 communities, including Veranda Chase. We believe that Veranda Chase draws 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 seven of the 23 other communities compete closely with Veranda Chase.

     Charlotte. We consider the Charlotte multifamily submarket to include the area within an approximately two-mile radius around the community. It is generally bounded by 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 our community. We believe that once construction of our Charlotte community is complete, it will draw residents from all of the approximately eight other existing communities located in the market area.

     St. Andrews at the Polo Club. We consider the West Palm Beach County submarket to include the area within an approximate three mile radius around this community. It is generally bordered by the Florida Turnpike to the east, Lake Worth Road to the south, Okechobee Road to the north, and the Loxahatchee National Wildlife Refuge to the west. The submarket consists of nine existing apartment communities (including ours), and two new communities currently under construction. Of the nine existing communities, four were built during the last five years. St. Andrews competes with six of the nine communities in its market area.

Summary of Debt Secured by Our Properties

     See Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Debt Summary Schedule, for an explanation of our current debt structure, including for each loan: the principal balance at December 31, 2003 and at its scheduled maturity, interest rate, maturity date, amortization schedule and monthly principal and interest payment.

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.

     See Item 13, Certain Relationships and Related Transactions – Payments to the Roberts Companies, for more information about the payment of fees to the Roberts Companies in connection with the development and construction of our communities and properties.

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Other Real Estate Assets

     In addition to the communities, we also own a retail center and a corporate office building, both of which are under construction. Addison Place retail center is a 42,090 square foot retail center at the intersection of Abbotts Bridge Road and Jones Bridge Road in Alpharetta, Georgia and located directly in front of our Addison Place apartment community. We entered into a cost plus 5% contract with Roberts Construction to build the retail center, which we expect to be completed by the third quarter of 2004.

     On June 28, 2001, we acquired a partially constructed office building located adjacent to our Northridge land on which we are developing a new community. The three-story, 39,907 square foot building will serve as our corporate headquarters, and we intend to occupy a portion of one floor in the building by May 1, 2004. We will lease the remaining space on that floor to Roberts Properties and Roberts Construction, and we plan to lease the other two floors to unaffiliated tenants. We have entered into a contract with Roberts Construction to finish constructing the building at cost. We also intend to retain Roberts Construction to perform tenant finish work for approximately $600,000. We expect to begin leasing activities in the second quarter of 2004.

     See Item 13, Certain Relationships and Related Transactions – Payments to the Roberts Companies, for more information about the payment of fees to the Roberts Companies in connection with the development and construction of these projects.

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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matter was submitted to a vote of security holders during the fourth quarter of 2003.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Our 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 during 2003 and 2002, as well as the quarterly dividends declared per share:

     On February 29, 2004, there were approximately 352 holders of record of our common stock.

     As of February 29, 2004, we had 5,241,028 shares outstanding (excluding shares held in treasury). In addition, 1,980,218 shares are reserved for issuance to unitholders from time to time upon their exercise of redemption rights as explained in Item 1, Description of Business – The Operating Partnership. There is no established public trading market for the units. As of February 29, 2004, the operating partnership had 212 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.

     On August 27, 2003, we paid a special distribution of $0.55 per share to shareholders and $0.55 per unit to unitholders in the operating partnership of record on August 18, 2003. We paid the special distribution from the profit generated by the sale of Highland Park. Our board of directors suspended payment of our regular quarterly dividends for the fourth quarter of 2001 and all of 2002 and 2003. We cannot predict when, or if, we will resume paying regular quarterly dividends. We expect to continue to sell properties from time to time and to pay special distributions to our shareholders and unitholders from the net sale proceeds as we did in 2003 from the proceeds of the Highland Park sale.

     To maintain our qualification as a REIT under the Internal Revenue Code, we must make annual distributions to shareholders of at least 90% 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 twelve months ended December 31, 2003, 2002 and 2001, we issued a total of 1,512, 3,077 and 18,290 shares, respectively, net of forfeitures of restricted common stock to certain employees as incentive compensation. The restrictions on transfer lapse at specified dates three years after the respective grant date. The grants were exempt from registration as private placements under section 4(2) of the Securities Act of 1933. 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.

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ITEM 6. SELECTED FINANCIAL DATA.

OPERATING DATA:
(Dollars in Thousands, Except Per Share Amounts)

Footnotes are on the following page.

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(Amounts have been restated, as appropriate, to give effect to discontinued operations.)

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

Overview

            We own multifamily residential properties as a self-administered and self-managed equity real estate investment trust. At December 31, 2003, we owned seven completed and stabilized multifamily apartment communities, consisting of 1,694 apartment homes and one other community under construction consisting of 319 apartment homes. Also, we have a community under development consisting of 220 apartment homes, which when completed, will increase the size of our portfolio to 2,233 apartment homes.

            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. As of December 31, 2003, our average stabilized occupancy was 92.6%. As of February 29, 2004, our average stabilized occupancy was 92.9%. 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 from our stabilized communities. 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.

            On August 6, 2003, we sold our Highland Park community for $17,988,000, resulting in a gain of approximately $6,070,000, net of minority interest of $2,432,000. Net sales proceeds were approximately $6,932,000 after deduction of:

	(a)		$9,930,000 for the mortgage note payable assumed by the buyer,
	(b)		closing costs and prorations totaling $227,000, and
	(c)		a partnership profits interest distribution of $899,000 paid to Roberts Properties under the partnership agreement of the operating partnership.

            On August 27, 2003, we paid a special distribution of $0.55 per share to shareholders and $0.55 per unit to unitholders in the operating partnership of record on August 18, 2003. We paid the special distribution from the profit generated by the sale of Highland Park. Previously, our board of directors suspended payment of our regular quarterly dividends for the fourth quarter of 2001 and all of 2002 and 2003. We cannot predict when, or if, we will resume paying regular quarterly dividends. We expect to continue to sell properties from time to time and to pay special distributions to our shareholders and unitholders from the net sale proceeds as we did in 2003 from the proceeds of the Highland Park sale.

            We sold our 9.5-acre East Fox Court land in November 2002 for $3,200,000 plus reimbursement of $302,000 of previously paid sewer costs. We were able to take advantage of its appreciation in value and elected to divest it because it did not fit with our long-term development plans. Because there was no debt on the property, the full amount of proceeds was available for our general corporate working capital purposes.

            Part of our business plan and growth strategy involves divesting smaller properties that are less efficient to lease and maintain. Following this strategy, we sold our 146-unit Ivey Brook community in June 2000 and our 152-unit Rosewood Plantation community in January 2001 and redeployed the net cash proceeds into new properties where we expect the yield and long-term growth to be greater.

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            In 2001 we used the proceeds from the sale of our Rosewood Plantation community plus loan proceeds to purchase two parcels of undeveloped land (one of which was the East Fox Court land we later sold); a partially constructed retail center; and a partially constructed office building, for a total of approximately $13.4 million as part of a Section 1031 tax-deferred exchange. We are developing and intend to build a 220-unit apartment community on the second parcel of land located in north Atlanta. We expect construction to be complete in the third quarter of 2004 on our Addison Place retail center, a 42,090 square foot retail center located at the entrance of our Addison Place apartment community. We anticipate finishing construction of our office building in the second quarter of 2004 and intend to use a portion of one floor of the building as our corporate headquarters. We will lease the remaining space on that floor to Roberts Properties and Roberts Construction, and we plan to lease the other two floors to unaffiliated tenants.

            We sold Crestmark in July 2001 and reinvested the proceeds in November 2001 through a Section 1031 tax-deferred exchange into the 200-unit St. Andrews at the Polo Club apartment community located in the City of Wellington, Florida. This exchange redeployed our equity from Douglas County, Georgia to Palm Beach County, Florida, a substantially stronger growth market.

            We will continue to seek opportunities to maximize shareholder value. As noted above, these efforts may include periodically selling some of our apartment communities as we have done in the past and making distributions to our shareholders from the sales proceeds.

Results of Operations for the Years Ended December 31, 2003, 2002 and 2001

     Results for All Communities

            Our operating performance for all of our communities is summarized in the following table:

            For the year ended December 31, 2003, we recorded net income of $2,690,000 or $0.52 per share compared to a net loss of ($2,516,000) or ($0.51) per share for the year ended December 31, 2002 and net income of $7,440,000 or $1.53 per share for the year ended December 31, 2001. The $5,206,000 increase from a net loss of ($2,516,000) in 2002 to net income of $2,690,000 in 2003 is due primarily to the following:

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	(a)		a gain of $6,070,000, net of minority interest, on the sale of Highland Park in August 2003;
	(b)		a $1,861,000 increase in operating revenues due to the completion of Veranda Chase in November 2002;
	(c)		a $935,000 increase in operating revenues at Addison Place;
	(d)		an $83,000 decrease in general and administrative expenses; and
	(e)		a $38,000 increase in interest income due to higher cash balances;
			offset by:

(f)

an increase of $1,197,00 in interest expense associated with:

	•		Veranda Chase, which was completed in the fourth quarter of 2002; offset by:
	•		the sale of Highland Park in August 2003;

	(g)		a gain of $1,043,000, net of minority interest, on the sale of our East Fox property in November 2002;
	(h)		a $723,000 increase in property operating expenses (excluding depreciation and general and administrative expenses) primarily due to the completion of Veranda Chase in November 2002;
	(i)		a $287,000 decrease in the minority interest in the loss before gains on the sale of real estate assets and extraordinary items;
	(j)		a $269,000 decrease in same-property operating revenues;
	(k)		a $179,000 decrease in operating revenues at St. Andrews at the Polo Club; and
	(l)		an increase of $177,000 in depreciation expense due to the completion of Veranda Chase in November 2002, offset by the sale of Highland Park in August 2003.

            The $9,956,000 decrease from net income of $7,440,000 in 2001 to a net loss of ($2,516,000) in 2002 is due primarily to the following:

	(a)		gains on the sales of real estate assets, net of minority interest, of $5,188,000 on the sale of Rosewood Plantation in January 2001 and $2,793,000 on the sale of Crestmark in July 2001;
	(b)		a $660,000 decrease in same-property operating revenues;
	(c)		a $1,958,000 decrease in operating revenues due to the sale of Crestmark in July 2001;
	(d)		an increase of depreciation expense due to the completion of Addison Place Phase II in September 2001, the purchase of St. Andrews at the Polo Club in November 2001, and the completion of Veranda Chase in November 2002, offset by the sale of Crestmark in July 2001;

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(e)

higher interest expense associated with:

	•		Addison Place Phase II, which was completed in the third quarter of 2001;
	•		the purchase of St. Andrews at the Polo Club in November 2001;
	•		Veranda Chase, which was completed in the fourth quarter of 2002; offset by:
	•		the sale of Crestmark in July 2001;

	(f)		an increase of $1,495,000 in property operating expenses (excluding depreciation and general and administrative expenses) primarily due to the purchase of St. Andrews at the Polo Club in November 2001, the completion of Addison Place Phase II in September 2001, the completion of Veranda Chase in November 2002, offset by a $676,000 decrease in property operating expenses due to the sale of Crestmark in July 2001;
	(g)		a $423,000 increase in general and administrative expenses;
	(h)		a $224,000 decrease in interest income due to lower cash balances after funds were invested in real estate assets and to lower interest rates; and
	(i)		an increase of $111,000 in amortization of loan costs;
			offset by:

	(j)		increases in operating revenues at St. Andrews at the Polo Club by $2,561,000 and at Addison Place by $449,000;
	(k)		a $405,000 increase in operating revenues from Veranda Chase; and
	(l)		a $1,292,000 increase in the minority interest in the loss from continuing operations before gains on sale of real estate assets.

     Same-Property Operating Performance

            Same-property results for the four communities that were fully stabilized during the three years ended December 31, 2003, 2002 and 2001 (Bradford Creek, River Oaks, Plantation Trace and Preston Oaks) are summarized in the table below.

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            Our 2003 same-property operating performance, when compared to 2002, includes a 2.8% decrease in operating revenues, a 0.3% increase in average occupancy from 91.6% to 91.9%, a 3.6% decrease in average monthly rent and a 1.3% decrease in our lease renewal percentage.

            Our 2002 same-property operating performance, when compared to 2001, includes a 5.8% decrease in operating revenues, a 1.5% decrease in average occupancy from 93.1% to 91.6%, a 5.4% decrease in average monthly rent and a 3.3% increase in our lease renewal percentage.

     Comparison of Statements of Operations

            The following discussion compares our statements of operations for the years ended December 31, 2003, 2002 and 2001.

            Property operating revenue increased $2,360,000 or 14.0% from $16,833,000 for the year ended December 31, 2002 to $19,193,000 for the year ended December 31, 2003. The increase is due primarily to the following:

	(a)		a $1,861,000 increase in operating revenues due to the completion of Veranda Chase in November 2002;
	(b)		a $935,000 increase in operating revenues at Addison Place;
			offset by:

	(c)		a $269,000 decrease in same-property operating revenues; and
	(d)		a $179,000 decrease in operating revenues at St. Andrews at the Polo Club.

            Property operating revenue increased $855,000 or 5.4% from $15,978,000 for the year ended December 31, 2001 to $16,833,000 for the year ended December 31, 2002. The increase is due primarily to the following:

(a)

a $2,561,000 increase in operating revenues due to the purchase of St. Andrews at the Polo Club in November 2001;

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	(b)		a $449,000 increase in operating revenues at Addison Place due to the completion of Addison Place Phase II in September 2001;
	(c)		a $405,000 increase in operating revenues due to the completion of Veranda Chase in November 2002;
			offset by:

	(d)		a $1,958,000 decrease in operating revenues due to the sale of Crestmark in July 2001;
	(e)		a $660,000 decrease in same-property operating revenues.

            Property operating expenses (excluding depreciation and general and administrative expenses) increased $723,000 or 10.6% from $6,842,000 for the year ended December 31, 2002 to $7,565,000 for the year ended December 31, 2003. The increase in property operating expenses is due primarily to the following:

	(a)		a $62,000 increase in same-property operating expenses;
	(b)		a $593,000 increase in operating expenses due to the completion of Veranda Chase in November 2002; and
	(c)		a $27,000 increase in operating expenses at St. Andrews at the Polo Club.

            Property operating expenses (excluding depreciation and general and administrative expenses) increased $1,425,000 or 26.3% from $5,417,000 for the year ended December 31, 2001 to $6,842,000 for the year ended December 31, 2002. The increase in property operating expenses is due primarily to the following:

	(a)		a $1,205,000 increase due to the purchase of the St. Andrews at the Polo Club community in November 2001;
	(b)		a $400,000 increase due to the completion of Addison Place Phase II in September 2001;
	(c)		a $366,000 increase due to the completion of Veranda Chase in November 2002;
	(d)		a $202,000 increase in same-property expenses;
			offset by:

(e)

a $676,000 decrease due to the sale of Crestmark in July 2001.

            General and administrative expenses decreased $83,000 or 3.9% from $2,155,000 for the year ended December 31, 2002 to $2,072,000 for the year ended December 31, 2003 and include salaries; legal, accounting and tax fees; recruiting, travel and lodging expenses; director fees; marketing and printing fees and other costs. This decrease is due primarily to decreases in corporate office salaries, recruiting costs; and travel expenses. General and administrative expenses as a percentage of operating revenues decreased from 12.8% for the year ended December 31, 2002 to 10.8% for the year ended December 31, 2003.

            General and administrative expenses increased $423,000 or 24.4% from $1,732,000 for the year ended December 31, 2001 to $2,155,000 for the year ended December 31, 2002 and include salaries;

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legal, accounting and tax fees; recruiting travel and lodging expenses; director fees; marketing and printing costs; and other costs. This increase is due primarily to increases in corporate office salaries, recruiting and marketing costs, and travel expenses. General and administrative expenses as a percentage of operating revenues increased from 10.8% for the year ended December 31, 2001 to 12.8% for the year ended December 31, 2002.

     Depreciation expense increased $177,000 or 2.7% from $6,556,000 for the year ended December 31, 2002 to $6,733,000 for the year ended December 31, 2003. The increase is due primarily to the completion of Veranda Chase in November 2002.

     Depreciation expense increased $1,561,000 or 31.3% from $4,995,000 for the year ended December 31, 2001 to $6,556,000 for the year ended December 31, 2002. The increase is due primarily to the purchase of St. Andrews at the Polo Club in November 2001, the completion of the second phase of Addison Place in September 2001, the completion of Veranda Chase in November 2002, offset by the sale of Crestmark in July 2001.

     Interest expense increased $1,197,000 or 18.8% from $6,381,000 for the year ended December 31, 2002 to $7,578,000 for the year ended December 31, 2003. The increase is due primarily to an increase of $1,043,000 associated with the loan to finance Veranda Chase.

     Interest expense increased $1,856,000 or 41.0% from $4,525,000 for the year ended December 31, 2001 to $6,381,000 for the year ended December 31, 2002. The increase is due primarily to:

	(a)		an increase of $693,000 in interest expense due to the completion of Addison Place Phase II in September 2001;
	(b)		an increase of $1,229,000 associated with the loan obtained to finance the purchase of St. Andrews at the Polo Club in November 2001;
	(c)		$501,000 associated with the loan to finance Veranda Chase;
			offset by:
	(d)		a decrease of $539,000 due to the sale of Crestmark in July 2001.

     On January 4, 2001, we sold the 152-unit Rosewood Plantation community for $14,800,000. The sale resulted in a gain of $5,188,000, net of minority interest of $2,554,000. Net sales proceeds were $5,820,000 after deducting $7,400,000 for the mortgage note payable assumed by the buyer, $476,000 for a loan paydown, $364,000 for closing costs and prorations and $740,000 for a partnership profits interest paid to Roberts Properties. Unamortized loan costs of $93,000 were charged to expense as expenses related to retirement of debt. In April 2002, we settled a claim under the warranty provisions of the sale contract and paid the buyer $150,000, which is shown in the 2002 financial statements as a reduction of the gain on sale of real estate assets (before minority interest of $48,000).

     On May 30, 2001, we purchased from Roberts Properties approximately 9.5 acres of undeveloped land located at the corner of Jones Bridge Road and East Fox Court, in Alpharetta, Georgia across Jones Bridge Road from Addison Place. Roberts Properties had purchased the property for $1,070,000, and the $1,447,000 price we paid includes approximately $377,000 in development-related work previously performed by Roberts Properties. The purchase price was reduced by $356,000 as a result of a sewer moratorium.

     On June 20, 2001, we purchased approximately 6.84 acres of land from REES 59 for $4,470,000, including closing costs, to construct a 42,090 square foot retail center at the intersection of Abbotts

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Bridge Road and Jones Bridge Road in Alpharetta, Georgia in front of the Addison Place community. REES 59 had previously purchased the land for $3,514,000 from Roberts Properties Jones Bridge, LLC, of which Mr. Roberts owned a 90% interest. The purchase was funded by the Rosewood Plantation sales proceeds as part of a Section 1031 tax-deferred exchange.

     On June 28, 2001, we purchased approximately 10.9 acres from Roberts Properties to construct a 220-unit upscale apartment community located adjacent to our former 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 partially funded by sales proceeds from the sale of Rosewood Plantation. We estimate that the total cost of the project will be approximately $24,000,000.

     On June 28, 2001, we purchased a partially constructed office building and approximately 3.9 acres of land from Roberts Properties for $2,147,000, including closing costs. We intend to complete construction and use a portion of one floor of the building as our corporate headquarters. We will lease the remaining space on that floor to Roberts Properties and Roberts Construction, and we plan to lease the other two floors to unaffiliated tenants.

     On July 11, 2001, we completed the sale of our 334-unit Crestmark community for $25,000,000. The sale resulted in a gain of $2,793,000, net of minority interest of $1,325,000. Net cash proceeds were $8,013,000 after deducting $15,485,000 for the mortgage note payable assumed by the buyer, $574,000 for closing costs and prorations and $928,000 for a partnership profits interest paid to Roberts Properties. Unamortized loan costs of $169,000 were charged to expense as expenses related to retirement of debt.

     On November 6, 2001, we purchased the 200-unit St. Andrews at the Polo Club apartment community located in the City of Wellington, Palm Beach County, Florida from an unrelated party for a purchase price of $27,778,000, including closing costs, as part of a Section 1031 tax-deferred exchange partially funded by net proceeds from the sale of Crestmark. To provide the balance of the funds needed to purchase St. Andrews at the Polo Club, we obtained a $21,000,000 permanent loan from State Farm Life Insurance Company. The loan bears a fixed interest rate of 6.95% per annum and has a 10-year term.

     On November 21, 2002, we sold the 9.5 acres of land located at the corner of Jones Bridge Road and East Fox Court, in Alpharetta, Georgia for $3,200,000 plus a reimbursement of previously paid sewer costs of $302,000. The sale resulted in a gain of $1,043,000, net of minority interest of $480,000.

     On February 28, 2003, we 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 our Addison Place community, which resulted in a gain of $77,000, net of minority interest of unitholders in the operating partnership.

     On August 6, 2003, we completed the sale of our Highland Park community for $17,988,000, resulting in a gain of approximately $6,070,000, net of minority interest of $2,432,000. Net sales proceeds were approximately $6,932,000 after deduction of $9,930,000 for the mortgage note payable, which was assumed by the buyer, closing costs and prorations totaling $227,000, and a partnership profits interest of $899,000 paid to Roberts Properties under the amended partnership agreement of the operating partnership.

Liquidity and Capital Resources

     Comparison of Years Ended December 31, 2003, 2002 and 2001. Cash and cash equivalents increased $3,041,000 from $5,542,000 as of December 31, 2002 to $8,583,000 as of December 31, 2003. The increase was due to a decrease in cash used in investing activities, offset by a decrease in cash provided by financing activities and a decrease in cash provided by operating activities. Cash and cash

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equivalents increased $2,925,000 from $2,617,000 as of December 31, 2001 to $5,542,000 as of December 31, 2002. The increase was due to our investing and financing activities offset by a decrease in cash provided by operating 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 decreased $798,000 from $2,769,000 during 2002 to $1,971,000 during 2003. The decrease in cash flow from operations is due primarily to a decrease in operating income from our same-properties and higher interest expense.

     Net cash provided by operating activities decreased $3,217,000 from $5,986,000 during 2001 to $2,769,000 during 2002. The decrease is primarily due to a decrease in operating income from our same-properties, a decrease from the sale of Crestmark in July 2001, and higher interest expense, offset by the additional cash flow from St. Andrews at the Polo Club.

     On August 27, 2003, we paid a special distribution of $0.55 per share to shareholders and $0.55 per unit to unitholders of record on August 18, 2003. We paid this special distribution from the profit generated by the sale of our 188-unit Highland Park community. Previously, our board of directors suspended payment of our regular quarterly dividends for the fourth quarter of 2001 and all of 2002 and 2003. We cannot predict when, or if, we will resume paying regular quarterly dividends. We expect to continue to sell properties from time to time and to pay special distributions to our shareholders and unitholders from the net sale proceeds as we did in 2003 from the proceeds of the Highland Park sale.

     In addition to experiencing lower operating revenues at our existing properties, we are completing three properties under construction and one property in the planning and design phase. In total, these four new properties required an investment of approximately $13.4 million of our equity that is currently not producing any cash flow. The decreased revenue, together with our growth program, has reduced our cash flow from operations. We believe that our cash flow from operations will begin to improve as we complete our new properties under development and construction. Until there is a sustained and broad-based economic recovery resulting in positive job growth, however, the Atlanta apartment market will remain soft, and we will continue to experience the negative effects of lower rents.

     Net cash used in investing activities decreased $11,482,000 from $16,221,000 during 2002 to $4,739,000 during 2003. The decrease is due primarily to the following:

	(a)		construction and development costs of $11,667,000 in 2003 related to Veranda Chase, Charlotte, the corporate office building and the Addison Place retail center compared to construction and development costs of $19,542,000 in 2002 related to Veranda Chase, Charlotte, the corporate office building and the Addison Place retail center;
			offset by:
	(b)		proceeds of $381,000 from the sale of land and reimbursement for land improvements for right-of-way projects at the Addison Place community in February 2003 and proceeds of $6,932,000 from the sale of Highland Park in August 2003 compared to proceeds of $3,471,000 from the sale of East Fox Court land in 2002.

     Net cash used in investing activities decreased $33,463,000 from $49,684,000 during 2001 to $16,221,000 during 2002. The decrease is due primarily to the following:

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	(a)		construction and development costs of $19,542,000 in 2002 related to Veranda Chase, Charlotte, the corporate office building and Addison Place retail center compared to acquisition, construction and development costs of $64,364,000 in 2001 related to our Addison Place Phase II, Veranda Chase, Charlotte, East Fox Court and Northridge communities, the Addison Place Shoppes, the corporate office building, and the purchase of St. Andrews at the Polo Club;
			offset by:
	(b)		proceeds of $3,471,000 from the sale of East Fox Court land in 2002 compared to proceeds of $6,368,000 and $8,312,000 from the sales of Rosewood Plantation and Crestmark, respectively, in 2001.

     Net cash provided by financing activities decreased $10,568,000 from $16,377,000 of net cash provided in 2002 to $5,809,000 of net cash provided during 2003. This decrease is due primarily to the following:

	(a)		a decrease of $6,120,000 from the $18,687,000 proceeds received from construction loans in 2002 compared to $12,567,000 received in 2003;
	(b)		an increase in cash used for dividends and distributions paid to $3,962,000 in 2003 compared to none in 2002;
	(c)		an increase in payoffs of land notes payable of $2,400,000 due to the payoff of the $3,700,000 Addison Place retail center land loan in 2003 compared to the payoff of the $1,300,000 East Fox Court land loan in 2002;
	(d)		net increase of $2,372,000 from the refinancing of the Highland Park mortgage loan in 2002, compared to a net increase of $2,263,000 from the refinancing of the River Oaks mortgage loan in 2003;
			offset by:
	(e)		net repayments of $2,000,000 on the line of credit in 2002, compared to no borrowings or repayments on the line of credit in 2003.

     Net cash provided by financing activities decreased $28,443,000 from $44,820,000 of net cash provided in 2001 to $16,377,000 of net cash provided during 2002. This decrease is due primarily to the following:

	(a)		net increase of $3,730,000 from the refinancing of the Preston Oaks mortgage loan, plus $21,000,000 from the mortgage loan to finance the St. Andrews at the Polo Club acquisition in 2001, compared to a net increase of $2,372,000 from the refinancing of Highland Park in 2002;
	(b)		net repayments of $2,000,000 on the line of credit in 2002, compared to borrowings on the line of credit of $2,000,000 in 2001;
	(c)		a decrease related to no borrowings for land loans in 2002 compared to the $6,700,000 proceeds received from land notes payable in connection with borrowings to finance the construction of Addison Shoppes and the Northridge community, plus $1,300,000 to fund the purchase of the East Fox Court land in 2001;

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			offset by:
	(d)		an increase of $1,135,000 from the $18,687,000 proceeds received from construction loans in 2002 compared to the $17,552,000 received in 2001;
	(e)		a decrease in payoffs of land notes payable of $700,000 due to the payoff of the $1,300,000 East Fox Court land loan in 2002 compared to the payoff of the $2,000,000 Veranda Chase loan in 2001;
	(f)		a decrease in cash used to repurchase treasury stock due to the repurchase of 69,500 shares for $554,000 in 2001 compared to none in 2002; and
	(g)		a decrease in cash used for dividends and distributions paid from $3,190,000 in 2001 compared to none in 2002.

     The table and accompanying footnotes on the following two pages explain our current debt structure, including for each loan: the principal balance at December 31, 2003 and at its scheduled maturity, interest rate, maturity date, amortization schedule and monthly principal and interest payment.

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ROBERTS REALTY INVESTORS, INC.
DEBT SUMMARY SCHEDULE
(Listed in order of maturity)
December 31, 2003

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(1)		The interest rate shown for variable-rate debt is as of December 31, 2003. The revolving $1 million credit line with Bank of North Georgia has an interest rate floor of 4.00%. The revolving $2 million credit line with Compass Bank has an interest rate floor of 3.75%. The construction loan on the Addison Place Shoppes with Compass Bank has an interest rate floor of 3.50%.
(2)		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 loan is drawn and required principal payments are made prior to maturity.
(3)		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. Remaining principal payments on the loan are scheduled as follows: 2004 - $152,000; 2005 - $59,000, plus the balloon payment due of $22,071,000.
(4)		The loans secured by the Preston Oaks and River Oaks 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 loans are prepaid after expiration of the yield maintenance period, but more than 90 days before the maturity date, the prepayment premium will be 1% of the unpaid principal balance of the notes. The loans may be prepaid in full during the last 90 days before their maturity dates without any prepayment premium.
(5)		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 required principal payments are made prior to 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.
(6)		The loan secured by the Bradford Creek community 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. The loan may be prepaid in full during the last 90 days before its maturity date without any prepayment premium.
(7)		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% of the principal amount being prepaid 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.
(8)		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.

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Our existing loans will require balloon payments, in addition to monthly principal amortization, coming due over the years 2004 to 2012 as summarized below:

Debt Maturity Schedule:

            On August 21, 2003, we closed a $10,750,000 loan from L.J. Melody & Company, a mortgage banking firm, to refinance the River Oaks property. Because we increased the loan amount from $8,500,000 to $10,750,000, we received net cash proceeds of approximately $2,100,000. As planned, L.J. Melody immediately assigned the loan to the Federal Home Loan Mortgage Corporation (Freddie Mac). The terms of the 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 paid an origination fee of $74,875 to L.J. Melody & Company in connection with this loan. Dennis H. James, a director of Roberts Realty, is Managing Director – Southeast Region, with L.J. Melody & Company.

            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 June 1, 2004. The other credit facility, in the amount of $2,000,000, expires August 1, 2004. 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 May 30, 2003, we closed a $6,500,000 construction loan to fund the construction of the Addison Place retail center. The loan is secured by the land and improvements and matures on April 30, 2006. Monthly payments are interest only at the 30-day LIBOR plus 185 basis points. At December 31, 2003, $3,391,000 was drawn on the loan.

            On June 28, 2001, we closed a $3,000,000 loan secured by the Northridge land located next to our former 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, 2004. We intend to roll the loan into a construction loan upon starting construction of the project. There is no assurance that this financing will be available or, if it is available, that it will be on favorable terms.

            During the first quarter of 2004, we agreed to settle a lawsuit we filed against an architectural firm contracted to work on our Addison Place Phase II and Charlotte properties. We will receive proceeds of approximately $500,000 as a result of the settlement and are required to pay $120,000 to the defendant for use of their architectural plans. The $120,000 represents amounts the defendants previously billed us but we had not paid because of this business dispute. The $120,000 amount we are required to pay is included in accounts payable and accrued expenses in the December 31, 2003 balance sheet in our

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consolidated financial statements included in this report. We expect to recognize the $500,000 in settlement proceeds in the first quarter of 2004.

          Although we currently have sufficient cash and available funds under our lines of credit to fund all debt maturities during 2004, we anticipate that we will secure permanent financing on the Northridge office building prior to the maturity date of the construction loan and roll the loan on the Northridge land into a construction loan upon starting construction of the project. With respect to the debt that matures after 2004, 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 it 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 each property’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.

Contractual Obligations

          The following table presents contractual obligations of Roberts Realty by the period the payments are due (dollars in thousands, unaudited):

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Critical Accounting Policies

          Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (GAAP). A summary of the significant accounting policies we use is included in Note 2 to the consolidated financial statements. A summary of recent accounting pronouncements and the expected impact on our financial statements is also included in Note 2. Because we are in the business of owning, operating, and developing apartment communities, our critical accounting policies relate to cost capitalization and derivatives and hedging activities. The following is a summary of our overall accounting policy in this area.

     Cost Capitalization

          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 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, “Capitalization of Interest Cost,” for our real estate assets. During the development and construction of a new apartment community, we capitalize related interest costs, as well as other carrying costs such as property taxes and insurance. We begin to expense these items as the construction of the community becomes substantially complete and the apartment homes become available for initial occupancy. Accordingly, we gradually reduce the amounts we capitalize as we complete construction. During the lease-up period, as a community transitions from initial occupancy to stabilized occupancy, revenues are generally insufficient to cover interest, carrying costs and operating expenses. The size and duration of this lease-up deficit depends on how quickly construction is completed, how quickly we lease the apartments available for occupancy, and what rent levels we achieve at the community. 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. Capitalization of interest and other carrying costs such as property taxes and insurance ceases entirely upon completion of development and construction activities.

     Derivatives and Hedging Activities

          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 Addison Place Phase II permanent loan and our $17,000,000 Veranda Chase construction loan.

          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 on the

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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. Any ineffective portions of cash flow hedges are recognized immediately in earnings. We intend to hold the interest rate swap arrangements and related debt agreements until maturity. In the event the interest rate swap agreement is terminated, we would discontinue prospectively reclassifying amounts in accumulated other comprehensive income to earnings based upon when the hedged transactions are recognized in earnings. 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.

          In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities.” SFAS No. 149 amends and clarifies the accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is generally effective for contracts entered into or modified after September 30, 2003 and for hedging relationships designated after September 30, 2003. The adoption of SFAS No. 149 did not have a material effect on our financial position, results of operations and cash flows.

          The fair value of our interest rate swap agreements at December 31, 2003 was a liability of $3,255,000, which is a result of lower market interest rates compared to the synthetically fixed rates. This liability was recorded as a decrease in shareholders’ equity of $2,353,000 (accumulated other comprehensive income), net of minority interest of $902,000. We have no other derivative or hedging instruments. For additional information related to this topic, see Item 7A, Quantitative and Qualitative Disclosure About Market Risk.

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 2003 or 2002. 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.

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 (loss) (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

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gain a clear understanding of our operating results, FFO should be evaluated in conjunction with net income (loss) (determined in accordance with GAAP).

          FFO is used by industry analysts and investors as a supplemental measure of an equity REIT’s operating performance. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. Because real estate values instead have historically risen or fallen with market conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. Thus NAREIT created FFO as a supplemental measure of REIT operating performance that excludes historical cost depreciation, among other items, from GAAP net income. We believe that the use of FFO, combined with the required primary GAAP presentations, improves the understanding of operating results of REITs among the investing public and makes comparisons of REIT operating results more meaningful. Our management evaluates the operating performance of our apartment communities in part based on FFO.

          In 2001, we incurred expenses of $604,000 related to the retirement of debt that were treated as an extraordinary item in accordance with GAAP. Extraordinary items are excluded when calculating FFO. As of January 1, 2003, we adopted SFAS 145, which no longer characterizes such costs as extraordinary and which requires prior periods to be restated. According, we have restated FFO for 2001. Adoption of SFAS 145 had no effect on our net income (loss) or financial position.

          The following table reconciles net income (loss) to FFO (dollars in thousands, unaudited).