UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q

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

OR

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

Commission File No. 001-13183

Roberts Realty Investors, Inc.

     Registrant’s telephone number, Including Area Code:  (770) 394-6000

     Indicate by check whether the registrant: (1) has filed all reports 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 [ü]   No [  ]

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

Yes [  ]   No [ü]

The number of outstanding shares of the registrant’s common stock on November 9, 2004 was 5,307,566 (net of shares held in treasury).

TABLE OF CONTENTS

PART I

ITEM 1. FINANCIAL STATEMENTS.

ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

See notes to the consolidated financial statements.

ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Amounts)

See notes to the consolidated financial statements.

2

ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)

See notes to the consolidated financial statements.

3

ROBERTS REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.		BUSINESS AND ORGANIZATION
		Roberts Realty Investors, Inc., a Georgia corporation, was formed July 22, 1994 to serve as a vehicle for investments in, and ownership of, a professionally managed real estate portfolio consisting primarily of multifamily apartment communities. Roberts Realty owns and operates multifamily residential properties as a self-administered, self-managed equity real estate investment trust (a “REIT”).
		Roberts Realty conducts all of its operations and owns all of its assets in and through Roberts Properties Residential, L.P., a Georgia limited partnership (the “operating partnership”), of which Roberts Realty is the sole general partner and had a 73.4% and 72.3% ownership interest at September 30, 2004 and December 31, 2003, respectively. As the sole general partner and owner of a majority interest of the operating partnership, Roberts Realty controls the operating partnership.
		At September 30, 2004, Roberts Realty owned one completed multifamily apartment community totaling 403 apartment homes in the Atlanta metropolitan area; a 319-unit apartment community in Charlotte, North Carolina was in its lease-up phase; and a 220-unit apartment community in Atlanta was in the planning and design phase. In addition, Roberts Realty owns a 39,907 square foot commercial office building which is in its lease-up phase, a 42,090 square foot retail center under construction, and two undeveloped commercial sites adjacent to the retail center.
		Roberts Realty elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with the taxable year ended December 31, 1994. As a result, Roberts Realty generally will not be subject to federal and state income taxation at the corporate level to the extent it distributes annually to its shareholders at least 90% of its taxable income, as defined in the Internal Revenue Code, and satisfies certain other requirements. Accordingly, the accompanying consolidated financial statements include no provision for federal and state income taxes.
		Roberts Realty enters into contractual commitments in the normal course of business with Roberts Properties, Inc. (“Roberts Properties”) and Roberts Properties Construction, Inc. (“Roberts Construction”), which are affiliates of Roberts Realty that are wholly owned by Mr. Charles S. Roberts, the President, Chief Executive Officer, and Chairman of the Board of Roberts Realty. These contracts relate to the development and construction of real estate assets. See Note 7 – Related Party Transactions.
2.		BASIS OF PRESENTATION
		The accompanying consolidated financial statements include the consolidated accounts of Roberts Realty and the operating partnership. All significant inter-company accounts and transactions have been eliminated in consolidation. The financial statements of Roberts Realty have been adjusted for the minority interest of the unitholders in the operating partnership.
		The minority interest of the unitholders in the operating partnership on the accompanying balance sheets is calculated based on the minority interest ownership percentage multiplied by the operating partnership’s net assets (total assets less total liabilities). The minority interest percentage reflects the number of shares and units outstanding and will change as additional shares and units are issued and redeemed. The minority interest of the unitholders in the earnings or loss of the operating partnership on the accompanying statements of operations is calculated based on the weighted average number of units outstanding during the period, which was 26.6% and 28.1% for the three months ended September 30, 2004 and 2003, respectively, and 27.0% and 28.6% for the nine months ended September 30, 2004

4

		and 2003, respectively. The minority interest of the unitholders was $14,640,000 at September 30, 2004 and $9,214,000 at December 31, 2003.
		Holders of partnership units generally have the right to require the operating partnership to redeem their units for shares. Upon submittal of units for redemption, the operating partnership has the option either (a) to acquire those units in exchange for shares, on a one-for-one basis, or (b) to pay cash for those units at their fair market value, based upon the then current trading price of the shares. Roberts Realty has adopted a policy that it will issue shares in exchange for all units submitted in the future.
		Restricted Cash on the accompanying consolidated balance sheets at September 30, 2004 consists of tenant deposits and proceeds from the sale of St. Andrews at the Polo Club community set aside to reinvest in other properties through a Section 1031 tax-deferred exchange. At December 31, 2003, Restricted Cash consists of tenant deposits.
		Roberts Realty’s management has prepared the accompanying interim unaudited financial statements in accordance with generally accepted accounting principles for interim financial information and in conformity with the rules and regulations of the Securities and Exchange Commission. In the opinion of management, the interim financial statements reflect all adjustments of a normal and recurring nature that are necessary to fairly state the interim financial statements. The results of operations for the interim periods do not necessarily indicate the results that may be expected for the year ending December 31, 2004. These financial statements should be read in conjunction with Roberts Realty’s audited financial statements and the notes to them included in Roberts Realty’s Annual Report on Form 10-K for the year ended December 31, 2003.
3.		ACQUISITIONS AND DISPOSITIONS
		On February 27, 2001, Roberts Realty signed an exchange agreement with an intermediary to acquire land previously owned by Roberts Properties Jones Bridge, LLC, of which Mr. Roberts owned a 90% interest. Roberts Realty is constructing a 42,090 square foot retail center on the 6.84-acre property, which is located in Alpharetta, Georgia. Roberts Realty acquired the property on June 20, 2001 for approximately $4,470,000. In connection with these transactions, Roberts Properties Jones Bridge, LLC received $3,498,000 for the property. Through September 30, 2004, Roberts Realty paid Roberts Construction approximately $3,242,000 for construction-related work on the property. Roberts Realty entered into a cost-plus 5% contract with Roberts Construction to complete the retail center. See Note 7 – Related Party Transactions.
		On June 28, 2001, Roberts Realty purchased approximately 10.9 acres from Roberts Properties to construct a 220-unit upscale apartment community located adjacent to its office building. 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. The total cost of the project is estimated to be $24,000,000. Roberts Realty paid Roberts Properties to complete the design and development work for a fee of $2,500 per unit, or $550,000. Roberts Realty entered into a cost-plus 10% contract with Roberts Construction to build the 220 apartment units. See Note 7 – Related Party Transactions.
		On June 28, 2001, Roberts Realty purchased a partially constructed office building and approximately 3.9 acres of land from Roberts Properties for $2,147,000, including closing costs. Roberts Realty did not pay Roberts Properties a development fee for this project. Roberts Realty entered into a fixed cost contract with Roberts Construction to construct the building shell and parking deck for $4,670,000, of which $1,616,000 was incurred at closing. Roberts Construction will perform tenant finish work at cost and will not earn a profit on the construction of the building or the parking deck. Construction is substantially complete on the building shell, parking deck and tenant finish on one floor. Roberts Realty

5

		occupies a portion of one floor of the building as its corporate headquarters. Roberts Realty entered into leases for the remaining space on that floor with Roberts Properties and Roberts Construction and plans to lease the other two floors to unaffiliated tenants.
		On February 28, 2003, Roberts Realty received an aggregate of $381,000 in connection with the sale of land, reimbursement for land improvements and conveyances of temporary construction easements to Fulton County, Georgia for road right-of-way projects at the Addison Place community, which resulted in a gain of $77,000, net of minority interest of unitholders in the operating partnership.
		On August 6, 2003, Roberts Realty sold its 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.
		On June 2, 2004, Roberts Realty sold five of its Atlanta apartment communities – Bradford Creek, Plantation Trace, Preston Oaks, River Oaks, and Veranda Chase, totaling 1,091 units – to Colonial Properties Trust. The sales price was $109,150,000 or an average of $100,045 per apartment unit, resulting in a gain of $32,404,000, net of minority interest of $11,985,000. Net sales proceeds were approximately $46,906,000, or $6.49 per share/unit, after deduction of:

	(a)		$58,802,000 for the mortgage note payable assumed by the buyer,
	(b)		closing costs and prorations totaling $260,000, and
	(c)		a partnership profits interest distribution of $3,182,000 paid to Roberts Properties under the amended partnership agreement of the operating partnership.

		On June 18, 2004, Roberts Realty paid a distribution of $4.50 per share to shareholders and unitholders of record on June 14, 2004. Roberts Realty has retained $14,407,000 of the net proceeds, or $1.99 per share/unit, for the purchase and development of other communities and for working capital.
		On July 29, 2004, Roberts Realty sold its St. Andrews at the Polo Club community in Palm Beach County, Florida for $36,000,000 or an average of $180,000 per apartment unit, resulting in a gain of $8,254,000, net of minority interest of $3,053,000. Net sales proceeds were approximately $15,115,000 after deduction of $20,412,000 for the mortgage note payable assumed by the buyer, and closing costs and pro-rations totaling $473,000. Roberts Realty intends to reinvest the proceeds in other properties through a Section 1031 tax-deferred exchange, which will permit its shareholders to defer paying the tax they would otherwise incur on the gain.
4.		DISCONTINUED OPERATIONS
		For the three and nine months ended September 30, 2004 and 2003, income from discontinued operations relates to (a) the 188-unit Highland Park community that Roberts Realty sold on August 6, 2003; (b) the five apartment communities totaling 1,091 units that Roberts Realty sold on June 2, 2004; and (c) the 200-unit St. Andrews at the Polo Club community that Roberts Realty sold on July 29, 2004. The tables on the following pages provide information regarding these discontinued operations.

6

The following table summarizes information for the seven apartment communities as of September 30, 2004 and December 31, 2003 (dollars in thousands, unaudited):

7

The following table summarizes revenue and expense information for the seven communities for the three and nine month periods ended September 30, 2004 and 2003 (dollars in thousands, unaudited):

5.		NOTES PAYABLE
		Roberts Realty has three types of debt: an unsecured line of credit; mortgage notes secured by an apartment community; and construction/permanent loans secured by an apartment community and other properties. These loans are summarized below.
		Line of Credit. Roberts Realty has a $2,000,000 unsecured line of credit, which expires August 1, 2005. At September 30, 2004, there were no borrowings under this line of credit.

8

Mortgage Notes. The permanent mortgage notes payable secured by Roberts Realty’s completed apartment community at September 30, 2004 and December 31, 2003 were as follows:

		Construction Loans. On June 28, 2001, Roberts Realty closed a $5,280,000 loan to fund the construction of the Northridge commercial office building. The loan is secured by the land and improvements and bears interest at the 30-day LIBOR plus 200 basis points. On May 28, 2004, Roberts Realty extended the maturity date of the loan until May 28, 2005 and reduced to $4,530,000 the maximum principal amount available to be borrowed under the loan. At September 30, 2004, $4,233,000 was drawn on the loan, and Roberts Realty expects that it will have a $4,530,000 principal balance at maturity.
		On February 21, 2002, Roberts Realty closed a $24,000,000 construction/permanent loan to fund the construction of Ballantyne Place, its 319-unit apartment community in Charlotte, North Carolina. The loan is secured by the land and improvements and matures on March 10, 2006, with Roberts Realty having the option to exercise two additional one-year extensions. Monthly payments are interest only through March 10, 2005 at the 30-day LIBOR plus 200 basis points; thereafter, interest will be payable monthly on the same basis but principal will also be payable in monthly installments calculated using a 30-year amortization schedule and an assumed interest rate of 7.0%. At September 30, 2004, $21,148,000 was drawn on the loan.
		On May 30, 2003, Roberts Realty 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 September 30, 2004, $4,333,000 was drawn on the loan.
		Interest capitalized was $108,000 and $356,000 for the three months ended September 30, 2004 and 2003, respectively, and $635,000 and $981,000 for the nine months ended September 30, 2004 and 2003, respectively.
		Real estate assets having a combined depreciated cost of $34,356,000 served as collateral for the outstanding mortgage debt at September 30, 2004.
6.		DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES.
		Effective January 1, 2001, Roberts Realty adopted Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133 establishes accounting and reporting standards for derivative instruments and for hedging activities by requiring that all derivatives be recognized on the balance sheet and measured at fair value.

9

		Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings or recorded in other comprehensive income, and recognized in the income statement when the hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify for hedge accounting treatment.
		Roberts Realty generally enters into fixed rate debt instruments. In certain situations, Roberts Realty may utilize derivative financial instruments in the form of interest rate swaps to hedge interest rate exposure on variable-rate debt. Roberts Realty does not use these instruments for trading or speculative purposes. Roberts Realty entered into an interest rate swap agreement to fix the interest rate on its Addison Place – Phase II mortgage loan (see Note 5 – Notes Payable). The swap agreement expires May 10, 2005, when the loan matures. The swap agreement has been designated as a cash flow hedge and, accordingly, is recorded at fair value in the consolidated balance sheets, and the related gains or losses are deferred in shareholders’ equity, net of minority interest, as a component of other comprehensive income. Amounts received or paid in connection with the swap agreements are recognized as adjustments to interest related to the designated debt. Any ineffective portion of cash flow hedges are recognized immediately in earnings. Roberts Realty intends to hold the interest rate swap arrangement and related debt agreement for the Addison Place – Phase II mortgage loan until maturity. In the event the interest rate swap agreement is terminated, Roberts Realty would discontinue prospectively reclassifying amounts in accumulated other comprehensive income to earnings based upon when the hedged transactions are recognized in earnings.
		At December 31, 2003, the liability relating to the estimated fair value of the swap was $3,255,000, which, together with the estimated fair value of the swap related to the mortgage loan secured by Roberts Realty’s Veranda Chase community, resulted in a decrease in shareholders’ equity of $2,353,000 (accumulated other comprehensive income), net of minority interest of $902,000. On June 2, 2004, when Roberts Realty sold the Veranda Chase community, the buyer assumed the mortgage debt along with the related swap agreement.
		At September 30, 2004, Roberts Realty’s recorded liability was $759,000 relating to the estimated fair value of the Addison Place – Phase II swap because of lower market interest rates as compared to the interest rate of the swap instrument. The effect of this liability is a corresponding decrease in shareholders’ equity of $557,000 (accumulated other comprehensive income), net of minority interest of $202,000. If Roberts Realty holds this instrument until maturity, it will not pay any interest other than that stated in the loan and swap agreement. The liability recorded at September 30, 2004 has been and will continue to be reduced as Roberts Realty complies with its obligations under this instrument, as the difference between the market interest rate and the fixed rate decreases, and as the obligation matures.
7.		RELATED PARTY TRANSACTIONS
		Roberts Realty has engaged the Roberts Companies, which are owned by Mr. Charles S. Roberts, its Chairman of the Board, Chief Executive Officer, and President, to perform services for the operating partnership. Roberts Construction is the general contractor of Roberts Realty’s Ballantyne Place community and will oversee the completion of its construction. Roberts Construction began construction on the Addison Place Shops retail center and the corporate office building before Roberts Realty purchased these properties, and Roberts Realty has retained Roberts Construction to finish construction. Roberts Realty retained Roberts Properties to develop the Northridge community and entered into a cost-plus 10% contract with Roberts Construction to build the 220 apartment units.
		Roberts Construction is constructing Ballantyne Place under a cost plus 10% arrangement. In 2001, Roberts Realty entered into a cost plus 5% contract with Roberts Construction related to the construction of the 42,090 square foot Addison Place Shops. Also in 2001, Roberts Realty entered into a fixed price contract with Roberts Construction related to the construction of the Northridge office

10

building. At September 30, 2004, the remaining commitments under construction contracts were $4,089,000 as summarized in the following table:

Roberts Realty plans to fund the remaining contractual commitments for the Addison Place Shops, Northridge office building and Ballantyne Place from the remaining amounts available to be borrowed under the construction loans secured by those properties.

At September 30, 2004 and December 31, 2003, the amounts due to Roberts Construction are summarized in the following table:

		Roberts Realty entered into leases for office space on the third floor of the Northridge office building with Roberts Properties and Roberts Construction for a total of $4,200 per month for the period of June 1, 2004 to August 31, 2004; for a total of $5,250 per month for the period of September 1, 2004 to December 31, 2004; and for a total of $5,950 per month for the period of January 1, 2005 to March 31, 2005. Roberts Realty intends to negotiate longer-term leases with Roberts Properties and Roberts Construction before the expiration of the current leases.
8.		COMMITMENTS AND CONTINGENCIES
		Roberts Realty and the operating partnership are subject to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes the outcome of such matters will not have a material adverse effect on Roberts Realty’s financial position or results of operations.
		Under Roberts Realty’s bylaws, it is obligated to indemnify its officers and directors for certain events or occurrences arising as a result of the officer or director’s serving in such capacity. The maximum potential amount of future payments Roberts Realty could be required to make under this indemnification arrangement is unlimited. Roberts Realty currently has a directors and officers liability insurance policy that may limit its exposure and enable it to recover a portion of any future amounts paid. Because of the insurance policy coverage, Roberts Realty believes the estimated fair value of this

11

		indemnification arrangement is minimal, and Roberts Realty has recorded no liabilities for this indemnification arrangement as of September 30, 2004.
		On May 6, 2004, Roberts Realty obtained a $21,000,000 loan commitment from the Federal Home Loan Mortgage Corporation (Freddie Mac) to refinance the 285-unit second phase of the company’s Addison Place apartment community. The loan will have a ten-year term and bear interest at a fixed rate of 6.35%. Roberts Realty expects to close the new loan when the existing $22,200,000 loan matures in May 2005.
		On July 15, 2004, Roberts Realty obtained a $23,000,000 loan commitment from Freddie Mac to refinance its 319-unit apartment community, Ballantyne Place. The loan will have a ten-year term and bear interest at a fixed rate of 6.06%. Roberts Realty expects to close the new loan in July 2005.
		See Note 7 for information about commitments under construction contracts with Roberts Construction.
9.		SHAREHOLDERS’ EQUITY
		Exchanges of Units for Shares. During the three months ended September 30, 2004 and 2003, 12,024 and 47,284 partnership units, respectively, were exchanged for an equal number of shares. During the nine months ended September 30, 2004 and 2003, 83,901 and 118,981 partnership units, respectively, were exchanged for an equal number of shares. Each exchange was reflected in the accompanying consolidated financial statements at book value.
		Restricted Share Awards. During the three months ended September 30, 2004 and 2003, Roberts Realty granted 0 and 1,563 shares, respectively, of restricted stock to certain employees. The market value of these restricted stock grants totaled $0 and $11,000, respectively. During the nine months ended September 30, 2004 and 2003, Roberts Realty granted 1,390 and 2,873 shares, respectively, of restricted stock to certain employees. The market value of these restricted stock grants totaled $10,000 and $19,000, respectively. These transactions have been recorded as unamortized deferred compensation and are shown as a separate component of shareholders’ equity. These restricted shares vest 100% at the end of a three-year vesting period and are being amortized to compensation expense ratably over the vesting period. During the nine months ended September 30, 2004 and 2003, employees who terminated employment before vesting forfeited 6,657 and 6,466 shares, respectively, of restricted stock with original market values of $50,000 and $45,000, respectively.
		Dividends and Distributions. On August 27, 2003, Roberts Realty paid a special distribution of $0.55 per share/unit to shareholders/unitholders in the operating partnership of record on August 18, 2003. Roberts Realty has not paid regular quarterly dividends since the third quarter of 2001. Of the dividends declared for 2003 totaling $0.55 per share, approximately $0.52 per share represents capital gain and $0.03 per share represents a return of capital to the shareholders.
		On June 18, 2004, Roberts Realty paid a special distribution of $4.50 per share/unit to shareholders/unitholders in the operating partnership of record on June 14, 2004.

12

Earnings Per Share. Reconciliations of net income to common shareholders and weighted average shares and units used in Roberts Realty’s basic and diluted earnings per share computations are detailed in the following table (dollars in thousands, unaudited).

10.		SEGMENT REPORTING
		SFAS No. 131 established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Roberts Realty’s chief operating decision maker is its chief executive officer.
		Roberts Realty owns, operates, develops and constructs multifamily apartment communities located in Georgia and North Carolina. These apartment communities generate rental revenue and other income through the leasing of apartment homes. Roberts Realty evaluates the performance of each of its apartment communities on an individual basis. However, because each of the apartment communities has similar economic characteristics, residents, and products and services, the apartment communities have been aggregated into one reportable segment. This segment comprises 99% of Roberts Realty’s total revenues for each of the three and nine months ended September 30, 2004 and 2003.
		Roberts Realty is constructing a 42,090 square foot retail center located adjacent to its Addison Place apartment community and a 39,907 square foot office building in its lease-up phase located adjacent to its Northridge apartment land. At September 30, 2004, Roberts Realty does not meet the criteria that would require these assets to be accounted for as separate segments.

13

11.		COMPREHENSIVE INCOME
		Roberts Realty’s comprehensive income, which consists of net loss and the change in the fair value of the swap contract payable, is calculated as follows (dollars in thousands, unaudited):

12.		SUBSEQUENT EVENTS
		Sale of Land. On October 29, 2004, Roberts Realty sold a 1.2 acre parcel of land located adjacent to its Addison Place community to an unrelated third party for $895,000, resulting in a gain of approximately $102,000, net of minority interest of $37,000. Net sales proceeds were approximately $890,000 after deduction of closing costs and prorations totaling $5,000.

14

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

          This report contains “forward-looking statements” within the meaning of the federal securities laws. These statements relate to future economic performance, plans and objectives of management for future operations and projections of revenues and other financial items that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The words “expect,” “estimate,” “anticipate,” “believe” and similar expressions are intended to identify forward-looking statements. Those statements involve risks, uncertainties and assumptions, including industry and economic conditions, competition and other factors discussed in this and our other filings with the SEC. If one or more of these risks or uncertainties materialize or underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. See “Disclosure Regarding Forward-Looking Statements” at the end of this Item for a description of some of the important factors that may affect actual outcomes.

Recent Sales of Six Apartment Communities

     Sale of Five Apartment Communities to Colonial Properties Trust on June 2, 2004

          On June 2, 2004, we sold five of our Atlanta apartment communities – Bradford Creek, Plantation Trace, Preston Oaks, River Oaks, and Veranda Chase, totaling 1,091 units – to Colonial Properties Trust. The sales price was $109,150,000 or an average of $100,045 per apartment unit, resulting in a gain of $32,404,000, net of minority interest of $11,985,000. Net sales proceeds were approximately $46,906,000, or $6.49 per share/unit, after deduction of:

	(a)		$58,802,000 for the mortgage note payable assumed by the buyer, and
	(b)		closing costs and prorations totaling $260,000, and
	(c)		a partnership profits interest distribution of $3,182,000 paid to Roberts Properties under the amended partnership agreement of the operating partnership.

          On June 18, 2004, we paid a distribution of $4.50 per share to shareholders and unitholders of record on June 14, 2004. We have retained $14,407,000 of the net proceeds, or $1.99 per share/unit, for the purchase and development of other communities and for working capital.

     Sale of St. Andrews at the Polo Club on July 29, 2004

          On July 29, 2004, we sold our St. Andrews at the Polo Club community in Palm Beach County, Florida to an unrelated third party for $36,000,000, resulting in a gain of $8,254,000, net of minority interest of $3,053,000. Net sales proceeds were approximately $15,115,000 after deduction of:

	(a)		$20,412,000 for the mortgage note payable assumed by the buyer, and
	(b)		closing costs and prorations totaling $473,000.

          We intend to reinvest the net proceeds of the sale of St. Andrews at the Polo Club in other properties through a Section 1031 tax-deferred exchange, which will permit our shareholders to defer paying the tax they would otherwise incur on the gain.

15

     Substantial Effect on Future Operating Results

          In light of the sale of five communities to Colonial during June 2004 and the sale of St. Andrews at the Polo Club in July 2004, we have accounted for the operations of those communities as discontinued operations for the three and nine months ended September 30, 2004 and 2003. Accordingly, the analysis and discussion in this Item 2 focuses on the continuing operations of our remaining properties. Investors should take the sale of these communities into account in reviewing this report. For more detail regarding the effects of these sales, see (a) Anticipated Effects of Sale of Six Apartment Communities on our Future Results of Operations, and (b) Liquidity and Capital Resources below. Our financial results for the quarter ended September 30, 2004 and other prior periods reflect our ownership of these six apartment communities for part or all of those periods, and the results of operations of these apartment communities are material to the overall results reflected and discussed in this report.

Overview

          We own and operate multifamily residential properties as a self-administered, self-managed equity real estate investment trust, or REIT. We conduct our business through Roberts Properties Residential, L.P., which we refer to as the operating partnership. The operating partnership owns all of our properties. As of November 9, 2004, we own a 73.6% interest in the operating partnership and are its sole general partner. We expect to continue to conduct our business in this organizational structure.

          As of November 9, 2004, we own:

	•		one existing 403-unit multifamily apartment community in Alpharetta, Georgia that is stabilized;
	•		one 319-unit apartment community in lease-up in Charlotte;
	•		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 (referred to in this report as the Addison Place Shops);
	•		an undeveloped commercial site adjacent to the retail center; and
	•		a 39,907 square foot office building in lease-up, a part of which we occupy as our corporate office building.

          Construction of Ballantyne Place, our Charlotte community, is substantially complete. We began leasing activity at Ballantyne Place in March 2004 and as of November 9, 2004 the community is 38.9% leased. 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 November 9, 2004, our stabilized community, Addison Place, had a physical occupancy rate of 97.8%.

          We are constructing Addison Place Shops, 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 first quarter of 2005. We own an office building on Northridge Parkway in North Fulton County, Georgia. We occupy a portion of one floor of the building as our corporate headquarters; and we have entered into leases for the remaining space on that floor with Roberts Properties and Roberts Construction and plan to lease the other two floors to unaffiliated tenants. We are in the planning and design phase of the Northridge community.

16

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

          We have paid no regular quarterly dividends since the third quarter of 2001. We presently intend not to resume paying regular quarterly dividends. Instead, we anticipate paying distributions from time to time out of the proceeds of property sales as we have done in 2003 and 2004. We may, however, reinvest the net proceeds of any property sale in other properties through a Section 1031 tax-deferred exchange, which will permit our shareholders to defer paying the tax they would otherwise incur on the gain of the sale. We intend to reinvest the net sale proceeds of the sale of our St. Andrews at the Polo Club community in that manner.

          We have two properties in lease-up, one property under construction and one property in the planning and design phase. In total, these four new properties required an investment of approximately $17.0 million of our equity that is currently producing minimal cash flow. As we complete and lease up these four properties, we will begin to generate cash flow from operations from these properties.

          We have engaged two entities owned by Mr. Charles S. Roberts, our Chairman of the Board, Chief Executive Officer, and President, to perform services for the operating partnership. These entities are Roberts Properties, Inc. and Roberts Properties Construction, Inc., which we sometimes refer to as the Roberts Companies. We expect that affiliates of Mr. Roberts will continue to develop and construct properties for us where feasible. Roberts Construction constructed our Addison Place community and is the general contractor of our Ballantyne Place community, where it oversees the completion of its construction. Roberts Construction began construction on the Addison Place Shops and the corporate office building before we purchased these properties, and we have retained Roberts Construction to finish construction. We retained Roberts Properties to develop our Northridge community and we entered into a cost-plus 10% contract with Roberts Construction to build the 220 apartment units.

Results of Operations

          The comparisons below do not include the results of our discontinued operations that are reflected as assets and liabilities held for sale in the accompanying consolidated balance sheets and as income from discontinued operations in the accompanying consolidated statements of operations.

     Comparison of the Three Months Ended September 30, 2004 to the Three Months Ended September 30, 2003

          For the three months ended September 30, 2004, we recorded a net loss from continuing operations of ($1,049,000), or ($0.20) per share, compared to a net loss from continuing operations of ($428,000), or ($0.08) per share, for the three months ended September 30, 2003. Our results include:

	(a)		a $495,000 increase in depreciation expense due primarily to Ballantyne Place, which we began depreciating in July 2004; and the Northridge office building, which we began depreciating in August 2004;
	(b)		a $312,000 increase in interest expense due primarily to a reduction of capitalized interest related to Ballantyne Place and the Northridge office building; and
	(c)		a $354,000 increase in property operating expenses due primarily to the operations of Ballantyne Place, which began leasing activities in March 2004;
			partially offset by:

17

	(d)		a $117,000 decrease in general and administrative expenses due primarily to lower legal fees, salaries and office rent;
	(e)		a $128,000 increase in operating revenues due primarily to Ballantyne Place, which began leasing activity in March 2004; and
	(f)		a $75,000 increase in interest income due to the higher cash balances obtained from property sales.

          The operating performance for our office building and two apartment communities as of September 30, 2004 – Addison Place and Ballantyne Place – is summarized in the following table:

          One of our communities, Addison Place, was fully stabilized during both the three-month periods ended September 30, 2004 and 2003. Our same-property operating revenues decreased by $29,000, or 2.2%, from $1,289,000 for the three months ended September 30, 2003 to $1,260,000 for the three months ended September 30, 2004. Our same-property operating expenses increased by $82,000, or 20.2%, from $405,000 for the three months ended September 30, 2003 to $487,000 for the three months ended September 30, 2004, due primarily to increased landscaping and maintenance costs. Stabilized occupancy for our same-property community was 95.6% for the three months ended September 30, 2004 compared to 95.8% for the three months ended September 30, 2003.

          The following discussion compares our statements of operations for the three months ended September 30, 2004 and 2003.

          Total operating revenues increased $128,000, or 9.9%, from $1,297,000 for the three months ended September 30, 2003 to $1,425,000 for the three months ended September 30, 2004. The increase in operating revenues is due primarily to Ballantyne Place, which began leasing activity in March 2004.

          Property operating expenses for all of our communities increased $354,000, or 83.9%, from $422,000 for the three months ended September 30, 2003 to $776,000 for the three months ended September 30, 2004. The increase is due primarily to Ballantyne Place, which began leasing activity in March 2004.

18

          General and administrative expenses decreased $117,000, or 21.9%, from $535,000 for the three months ended September 30, 2003 to $418,000 for the three months ended September 30, 2004. These expenses include salaries, legal, accounting and tax fees, marketing and printing fees, travel, director fees and other costs. The decrease resulted primarily from lower legal fees, salaries and office rent in the 2004 period.

          Depreciation expense increased $495,000, or 120.1%, from $412,000 for the three months ended September 30, 2003 to $907,000 for the three months ended September 30, 2004. The increase is due primarily to Ballantyne Place which we began depreciating in July 2004.

          Interest expense increased $312,000, or 61.9%, from $504,000 for the three months ended September 30, 2003 to $816,000 for the three months ended September 30, 2004, due primarily to a decrease in capitalized interest associated with Ballantyne Place and the Northridge office building.

     Comparison of the Nine Months Ended September 30, 2004 to the Nine Months Ended September 30, 2003

          For the nine months ended September 30, 2004, we recorded a loss from continuing operations of ($1,764,000), or ($0.33) per share, compared to a loss from continuing operations of ($1,445,000), or ($0.28) per share, for the nine months ended September 30, 2003. Our results include:

	(a)		a $564,000 increase in property operating expenses due primarily to the operations of Ballantyne Place, which began leasing activity in March 2004;
	(b)		a $480,000 increase in interest expense due primarily to a reduction of capitalized interest related to Ballantyne Place and the Northridge office building; and
	(c)		a $344,000 increase in depreciation expense due to Ballantyne Place which we began depreciating in July 2004;
			partially offset by:
	(d)		a legal settlement in April 2004, which generated $340,000 of other income;
	(e)		a $337,000 decrease in general and administrative expenses due primarily to lower legal fees, salaries, recruiting costs and office rent;
	(f)		a $300,000 increase in operating revenues due primarily to Ballantyne Place, which began leasing activity in March 2004; and
	(g)		a $119,000 increase in interest income due to higher cash balances.

19

          The operating performance for our office building and two apartment communities as of September 30, 2004 – Addison Place and Ballantyne Place – is summarized in the following table:

          One of our communities, Addison Place, was fully stabilized during both the nine-month periods ended September 30, 2004 and 2003. Our same-property operating revenues increased by $89,000, or 2.5%, from $3,625,000 for the nine months ended September 30, 2003 to $3,714,000 for the nine months ended September 30, 2004. Our same-property operating expenses increased by $124,000, from $1,179,000 for the nine months ended September 30, 2003 to $1,303,000 for the nine months ended September 30, 2004. Stabilized occupancy for our same-property community was 93.4% for the nine months ended September 30, 2004 compared to 88.6% for the nine months ended September 30, 2003.

          The following discussion compares our statements of operations for the nine months ended September 30, 2004 and 2003.

          Total operating revenues increased $300,000, or 8.2%, from $3,640,000 for the nine months ended September 30, 2003 to $3,940,000 for the nine months ended September 30, 2004. The increase in operating revenues is due to Ballantyne Place, which began leasing activity in March 2004, and increased occupancy at Addison Place.

          Property operating expenses increased $564,000, or 46.1%, from $1,224,000 for the nine months ended September 30, 2003 to $1,788,000 for the nine months ended September 30, 2004. The increase is due primarily to the operations of Ballantyne Place, which began leasing activity in March 2004.

          General and administrative expenses decreased $337,000, or 20.8%, from $1,618,000 for the nine months ended September 30, 2003 to $1,281,000 for the nine months ended September 30, 2004, as a result of lower legal fees, salaries, recruiting costs and office rent. General and administrative expenses include salaries, legal, accounting and tax fees, marketing and printing fees, travel, director fees and other costs.

          Depreciation expense increased $344,000, or 25.4%, from $1,355,000 for the nine months ended September 30, 2003 to $1,699,000 for the nine months ended September 30, 2004. The increase is due to Ballantyne Place which we began depreciating in July 2004.

20

          Interest expense increased $480,000, or 31.8%, from $1,511,000 for the nine months ended September 30, 2003 to $1,991,000 for the nine months ended September 30, 2004, due primarily to lower capitalized interest related to Ballantyne Place and the Northridge office building.

     Anticipated Effects of Sale of Six Apartment Communities on our Future Results of Operations

          As described above, in June and July 2004 we sold five Atlanta apartment communities and our only Florida community. Those communities are Bradford Creek, Plantation Trace, Preston Oaks, River Oaks, Veranda Chase and St. Andrews at the Polo Club. These sales will affect our future results of operations generally as follows:

Reduced Revenues. Revenues for the six apartment communities were $14.3 million for 2003, or approximately 69.9% of our revenue. Accordingly, our revenues will be materially lower in the remainder of 2004 and future years than in 2003. We note, however, that Ballantyne Place, our Charlotte property, has begun to generate revenues as it is leasing up and that we have entered into an agreement to purchase the 122-unit Hampton Bridge community in Duluth, Georgia.

Reduced Income from Operations. Income from operations provided by the six apartment communities was $3.5 million for 2003, or approximately 124.1% of our total income from operations. Accordingly, we expect our income from operations will be materially lower in the remainder of 2004 and future years than in 2003.

Reduction in Number of Employees and Associated Costs. Our number of employees has decreased from approximately 44 to approximately 17, and our related costs will decrease materially. Due to our status as a public company, with its associated costs that are largely unrelated to our asset base, the percentage decrease in our overall general and administrative expenses will be materially less than the percentage of our revenues represented by the communities we have sold.

Liquidity and Capital Resources

     Comparison of Nine Months Ended September 30, 2004 to Nine Months Ended September 30, 2003

          Cash and cash equivalents increased $7,806,000 during the nine months ended September 30, 2004 compared to an increase of $3,557,000 during the nine months ended September 30, 2003. The change is due to an increase in cash provided by investing activities of $39,819,000 offset by an increase in cash used in financing activities of $32,953,000 and a decrease in cash provided by operating activities of $2,617,000.

          A primary source of our liquidity is cash flow from operations. The number of apartment homes, rental rates and operating expenses for those apartment homes has historically determined operating cash flows. Net cash provided by operating activities decreased $2,617,000 from $44,000 during the nine months ended September 30, 2003 to $(2,573,000) during the nine months ended September 30, 2004. This decrease is primarily attributable to the following:

	(a)		a decrease of $1,111,000 in cash provided by operating activities from discontinued operations resulting from the sale of five apartment communities on June 2, 2004 and the sale of St. Andrews at the Polo Club on July 29, 2004;
	(b)		the payment of a $690,000 loan commitment fee relating to the permanent financing of Ballantyne Place;
	(c)		the payment of a $420,000 loan commitment fee relating to the refinancing commitment of Addison Place Phase II; and

21

(d)

the payment of a $250,000 earnest money deposit for the purchase of an apartment community. (This earnest money deposit was refunded after September 30, 2004.)

Generally, depreciation and amortization expenses are the most significant adjustments to net income (loss) in arriving at cash provided by operating activities.

          On August 27, 2003, we paid a special distribution of $0.55 per share/unit to shareholders/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. On June 18, 2004, Roberts Realty paid a special distribution of $4.50 per share/unit to shareholders/unitholders of record on June 14, 2004. We paid this distribution from the profits generated by the sale of five apartment communities to Colonial Properties Trust. We have paid no regular quarterly dividends since the third quarter of 2001, and we presently intend not to resume paying regular quarterly dividends.

          We are completing three properties under construction, and we have one property in the planning and design phase. In total, these four new properties required an investment of approximately $17.0 million of our equity that is currently producing minimal cash flow. As we complete and lease up the properties that are currently under construction and development, we will begin to generate cash flow from operations from these properties. Until there is a sustained and broad-based economic recovery resulting in positive job growth, the Atlanta apartment market will remain soft, and we will continue to experience the negative effects of lower rents.

          Net cash provided by investing activities increased $39,819,000 from $(21,000) during the nine months ended September 30, 2003 to $39,798,000 during the nine months ended September 30, 2004. This increase is primarily attributable to the following:

	(a)		net cash proceeds of $46,906,000 from the sale of Bradford Creek, Plantation Trace, Preston Oaks, River Oaks and Veranda Chase in June 2004; and
	(b)		net cash proceeds of $15,113,000 from the sale of St. Andrews at the Polo Club in July 2004;
			partially offset by:
	(c)		net cash proceeds of $14,695,000 held in escrow related to the sale of St. Andrews at the Polo Club in July 2004;
	(d)		net cash proceeds of $6,932,000 from the sale of Highland Park in August 2003;
	(e)		net cash 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
	(f)		increased spending on construction during 2004 of $192,000.

          Net cash used in financing activities increased $32,953,000 from $(3,534,000) during the nine months ended September 30, 2003 to $29,419,000 during the nine months ended September 30, 2004. The increase is primarily attributable to the following:

	(a)		payment of $32,429,000 in special distributions during 2004;
	(b)		proceeds from mortgage notes payable of $10,750,000 in 2003 compared to none in 2004; and
	(c)		a $2,956,000 decrease in construction loan borrowings;

22

			partially offset by:
	(d)		a $8,487,000 payoff of a mortgage note payable in August 2003 compared to none in 2004;
	(e)		payment of $3,957,000 in special distributions during 2003; and
	(f)		a $3,000,000 payoff of a land loan in the second quarter of 2004 compared to the $3,700,000 payoff of a land loan in the second quarter of 2003.

     Debt Summary

          The table and accompanying footnotes on the following two pages explain our current debt structure, including for each loan: the principal balance at September 30, 2004 and at its scheduled maturity, interest rate, maturity date, and monthly principal and interest payment.

23

ROBERTS REALTY INVESTORS, INC.
DEBT SUMMARY SCHEDULE
(Listed in order of maturity)
September 30, 2004

24

(1)		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 - $42,000; 2005 - $59,000, plus the balloon payment due of $22,071,000.
(2)		On May 6, 2004, we obtained a $21,000,000 loan commitment from Freddie Mac to refinance Addison Place Phase II. The loan will have a ten-year term and bear interest at a fixed interest rate of 6.35%. We expect to close the new loan upon the maturity of the existing loan in May 2005.
(3)		The interest rate shown for variable-rate debt is as of September 30, 2004. The revolving $2 million credit line with Compass Bank and the construction loan on the office building with Bank of North Georgia have an interest rate floor of 3.75%. The construction loan on the Addison Place Shops with Compass Bank has an interest rate floor of 3.50%.
(4)		The construction loans for Addison Place Shops, Ballantyne Place 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.
(5)		On July 15, 2004, we obtained a $23,000,000 loan commitment from Freddie Mac to refinance Ballantyne Place. The loan will have a ten-year term and bear interest at a fixed interest rate of 6.06%. We expect to close the new loan in July 2005.
(6)		The loan secured by Addison Place Phase I 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. The loan may be prepaid in full during the last 30 days before its maturity date without any prepayment premium.

25

     Debt Maturities

          Our existing loans will require balloon payments (in addition to monthly principal amortization) coming due over the years 2005 to 2009 as summarized below:

Debt Maturity Schedule:

     Short-Term Debt

          Unsecured Line of Credit. We have a $2,000,000 unsecured line of credit, which expires August 1, 2005, to provide funds for short-term working capital purposes. At September 30, 2004, there were no borrowings under this line of credit.

          Northridge Office Building. On June 28, 2001, we closed a $5,280,000 loan to fund the construction of the Northridge office building. The loan is secured by the land and improvements and bears interest at the 30-day LIBOR plus 200 basis points. On May 28, 2004, we extended the maturity date of the loan until May 28, 2005 and reduced to $4,530,000 the maximum principal amount available to be borrowed under the loan. At September 30, 2004, $4,233,000 was drawn on the loan, and we anticipate that it will have a $4,530,000 principal balance at maturity. We intend to refinance the construction loan on this property with permanent financing before its maturity date. To do so, we may be required to pay down its principal balance. There is no assurance that this financing will be available or, if it is available, that it will be on favorable terms.

          Addison Place Phase II. On May 6, 2004, we obtained a $21,000,000 loan commitment from Freddie Mac to refinance our $22,071,000 Addison Place Phase II mortgage loan. The new loan will have a ten-year term and bear interest at a fixed interest rate of 6.35%. We expect to close the new loan upon the maturity of the existing loan on May 10, 2005. We intend to repay the remaining balance of approximately $1,071,000 on the existing loan from working capital.

     Long-Term Debt

          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

26

sufficient to repay that indebtedness at maturity. We currently intend to refinance our maturing debt through debt financing collateralized by mortgages on individual communities or groups of communities, although we might also seek to raise funds through equity offerings if market conditions are favorable at the time.

     Floating Rate Debt

          Our loans, other than the loans secured by Addison Place, bear interest at floating rates. These loans, which had an aggregate outstanding balance of $29,714,000 at September 30, 2004, bear interest at rates ranging from 185 to 200 basis points over the 30-day LIBOR rate. Changes in LIBOR that increase the interest rates on these loans, as has occurred recently, have increased our interest expense and will do so in the future if rates continue to rise. For example, a 1.0% increase in the interest rates on those loans would increase our interest expense by approximately $25,000 per month and adversely affect our liquidity and capital resources to that degree.

     Contractual Commitments

          We enter into contractual commitments in the normal course of business with Roberts Properties and Roberts Construction that relate to the development and construction of real estate assets.

          Roberts Construction is constructing the Ballantyne Place apartment community under a cost plus 10% arrangement. In 2001, we entered into a cost plus 5% contract with Roberts Construction related to the construction of the 42,090 square foot Addison Place Shops. Also in 2001, we entered into a fixed price contract with Roberts Construction related to the construction of the Northridge office building. At September 30, 2004, the remaining commitments under construction contracts were $4,089,000, as summarized in the following table:

          We plan to fund the remaining contractual commitments for the Addison Place Shops, Northridge office building and Ballantyne Place community from the remaining amounts available to be borrowed under the construction loans secured by those properties.

     Settlement of Lawsuit

          On April 8, 2004, we settled a lawsuit we filed against an architectural firm hired to work on our Addison Place Phase II and Ballantyne Place properties. We received proceeds of $500,000 as a result of the settlement and were 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.

27

     Anticipated Effects of Sale of Six Apartment Communities on our Liquidity and Capital Resources

          As described above, we sold six apartment communities in June and July 2004. We anticipate that these sales will generally affect our future liquidity and capital resources as follows:

Net Cash Provided by Operating Activities from Continuing Operations. A significant portion of the net cash provided by operating activities from continuing operations has in the past been provided by the six apartment communities that we recently sold. Accordingly, we expect net cash provided by operating activities from continuing operations to be materially lower in the remainder of 2004 and future years than in 2003.

Reduced Revenue. Revenues for the six apartment communities were $14.3 million for 2003, or approximately 69.9% of our revenue. Accordingly, we expect our revenues to be materially lower in the remainder of 2004 and future years than in 2003.

Reduced Mortgage Notes Payable. As a result of the sale of six communities, we have reduced our mortgage debt (and associated interest rate swap agreement for the Veranda Chase loan) by a total of $79.2 million.

Reduced Monthly Mortgage Payments. Monthly mortgage payments for the six apartment communities were $514,000, or 62.0%, of our total monthly mortgage payments for May 2004, the last month during which we owned all six communities. Our monthly mortgage payments have been reduced by this amount.

Reduced Interest Expense. Interest expense for the six apartment communities was $5.6 million, or 69.9%, of our interest for 2003. Accordingly, our interest expense will be materially lower in 2004 than in 2003.

     Anticipated Effects of the Purchase of Properties on our Liquidity and Capital Resources

          To preserve our ability to do a tax-deferred exchange pursuant to Section 1031 of the Internal Revenue Code, we have identified several replacement properties for St. Andrews at the Polo Club that we sold in July 2004. The identified replacement properties consist of residential properties and undeveloped land. We anticipate that we will make one or more offers on these identified properties in the near future. If we are able to acquire any of these properties, as we intend, we will develop and manage them. We expect to have material capital needs relating to the properties we acquire, but we cannot presently quantify the amount of those capital needs.

          We anticipate that aggregate operating revenues will be adequate to provide short-term (12 months) liquidity for the payment of direct rental operating expenses, interest and scheduled amortization of principal on related mortgage notes payable (other than the May 2004 maturity of the Northridge office building construction loan as noted above). We intend to meet our other short-term liquidity requirements, including general and administrative expenses, improvements and renovations at existing communities, with cash reserves. We expect to meet our long-term liquidity requirements, including future developments and debt maturities, from the proceeds of construction and permanent loans, and if necessary from the sale of properties.

Stock Repurchase Plan

          Our board of directors has authorized the repurchase of up to 400,000 shares of our outstanding common stock. We repurchased 362,588 shares for $2,764,000 prior to 2002, and we currently have authority to repurchase an additional 37,412 shares. We did not repurchase any shares during 2002, 2003 or

28

during the nine months ended September 30, 2004. Although we have not formally discontinued the stock repurchase program, we presently intend not to resume the repurchase of additional shares of our outstanding common stock.

Inflation

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

Supplemental Disclosure of Funds From Operations

          Funds from Operations, or FFO, is defined by the National Association of Real Estate Investment Trusts as net income (loss), computed in accordance with generally accepted accounting principles, excluding gains (or losses) from debt restructuring and sales of property and non-recurring items, plus real estate related depreciation and amortization. We believe that FFO is an important measure of our operating performance. We believe that FFO provides useful information to investors because it is a widely accepted financial indicator used by certain investors and analysts to analyze and compare one equity REIT with another on the basis of operating performance. We compute FFO in accordance with the current NAREIT definition, which may differ from the methodology for calculating FFO utilized by other equity REITs and, accordingly, may not be comparable to those other REITs. FFO does not represent amounts available for management’s discretionary use for payment of capital replacement or expansion, debt service obligations, property acquisitions, development and distributions or other commitments and uncertainties. FFO should not be considered as an alternative to net income (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 gain a clear understanding of our operating results, FFO should be evaluated in conjunction with net income (loss) (determined in accordance with GAAP). The following table reconciles net income (loss) to FFO (dollars in thousands, unaudited).

29

Contractual Obligations – Substantial Reduction in Long-Term Debt Obligations

     Our sales of six apartment communities as disclosed elsewhere in this report have substantially reduced our long-term debt obligations from those reported in our annual report on Form 10-K for the year ended December 31, 2003. The following table presents our long-term debt obligations by the period the payments are due, calculated from September 30, 2004 (dollars in thousands, unaudited):

Critical Accounting Policies and Estimates

          Our financial statements are prepared in accordance with accounting principles generally accepted in the United States, or GAAP. Because we are in the business of owning, operating, and developing apartment communities, our critical accounting policies relate to cost capitalization, asset impairment evaluation, 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 Statement of Financial Accounting Standards (“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.

30

     Asset Impairment Evaluation

          We periodically evaluate our real estate assets to determine if there has been any impairment in the carrying value of the assets in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” SFAS No. 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. At September 30, 2004, we did not own any real estate assets that meet the impairment criteria of SFAS No. 144.

     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 an interest rate swap agreement to fix the variable interest rate on our $22,172,000 Addison Place Phase II permanent 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 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 agreement has been designated as a cash flow hedge and, accordingly, is recorded at fair value in the consolidated balance sheet, and the related gain or loss is 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 arrangement and related debt agreement until maturity on our Addison Place Phase II loan. 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 agreement are recognized as adjustments to interest related to the designated debt. The net effect of this accounting is that interest on the variable rate-debt is generally recorded based on fixed interest rates.

Disclosure Regarding Forward-Looking Statements

          This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements appear in a number of places in this report and include all statements that are not historical facts. Some of the forward-looking statements relate to our intent, belief, or expectations regarding our strategies and plans for operations and growth, including development and construction of new multifamily apartment communities in our existing markets and elsewhere in the Southeast. Other forward-looking statements relate to trends affecting our financial condition and results of operations, and our anticipated capital needs and expenditures. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ materially from those that are anticipated in the forward-looking statements. These risks include the following:

•

As we announced on September 17, 2004, we have experienced operating losses and anticipate that they will continue for the remainder of 2004 and at least the first three quarters of 2005. The cash flow generated from our remaining newer assets is not currently sufficient to cover our overhead, and we intend to use our cash reserves to fund the operating losses. If these losses persist for longer than we expect, our cash position and financial position could be materially and adversely affected.

31

	•		The current unfavorable market and economic conditions in Atlanta and Charlotte could depress our occupancy and rental rates and adversely affect our financial performance.
	•		Further unfavorable changes in market and occupancy conditions, perhaps as a result of war or terrorism, could depress our occupancy and rental rates even further and worsen our financial performance.
	•		Increased competition in the Atlanta and Charlotte markets could limit our ability to lease our apartment homes or increase or maintain rents.
	•		Conflicts of interest inherent in business transactions between or among Roberts Realty and/or the operating partnership on one hand, and Mr. Roberts and/or his affiliates on the other hand, could result in our paying more for property or services than we would pay an independent seller or provider.
	•		Construction risks inherent in our development and construction of our Northridge community, our corporate office building and our Addison Place retail center, and the other communities we may develop in the future, could adversely affect our financial performance.
	•		If we are unable to lease-up Ballantyne Place, our Northridge community, our Addison Place retail center, and our corporate office building as we expect, our financial performance will be adversely affected. We note in particular that the Atlanta suburban office market is particularly soft and that we may be unable to lease any portion of our corporate headquarters building to third party tenants without significant concessions.
	•		We may be unable to secure permanent financing or otherwise refinance some or all of our construction loan on our office building that matures on May 28, 2005, or we may be able to do so only on unfavorable terms that may include making a material principal payment that will reduce our working capital. We expect that loan to have a principal balance of approximately $4,530,000 at its maturity.
	•		We may be unable to obtain replacement financing to make balloon payments on our long-term debt as it matures, or we might have to refinance our debt on less favorable terms.
	•		We have approximately $29,714,000 in debt at September 30, 2004 that bears interest at variable interest rates (excluding loans on which we have synthetically fixed the interest rate), and if interest rates were to increase, our cash position and financial position could be materially and adversely affected.
	•		As a result of the death of our director George Wray in August 2004, we no longer meet the American Stock Exchange requirement that we have at least three members of the audit committee of our board of directors. Although we are seeking to find one or more independent directors to serve on our board and expect the Amex to allow us sufficient time to do so, our failure to do so could result in our stock being delisted from the Amex.
	•		Because our organizational documents do not limit the amount of debt we may incur, we could increase the amount of our debt as a percentage of the estimated value of our properties.
	•		Our operations could be adversely affected if we lose key personnel, particularly Mr. Roberts.

32

	•		We could incur costs from environmental problems even though we did not cause, contribute to or know about them.
	•		Compliance or failure to comply with the Americans with Disabilities Act and other similar laws could result in substantial costs.

          In addition, the market price of our common stock may from time to time fluctuate materially as a result of, among other things:

	•		our operating results;
	•		the operating results of other REITs, particularly apartment REITs; and
	•		changes in the performance of the stock market in general.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

          Because some of our debt bears interest at rates that are not fixed, we are exposed to market risk from changes in interest rates, which may adversely affect our financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, we manage exposures through our regular operating and financing activities. We do not use financial instruments for trading or other speculative purposes. We are exposed to interest rate risk primarily through our borrowing activities, which are described in Notes 5 and 6 to the consolidated financial statements included in this report. Our Addison Place Phase II loan, which had an outstanding principal balance of $22,172,000 at September 30, 2004, has a synthetically fixed interest rate. When we closed this loan, we entered into an interest rate swap agreement that synthetically fixed the interest rate. The fair value of this interest rate swap agreement at September 30, 2004 was a liability of $759,000 because of a lower market interest rate compared to the synthetically fixed rate. If we hold this instrument until maturity, as we intend, we will not pay any interest other than that stated in the loan and swap agreement. The liability recorded at September 30, 2004 will be reduced as we perform under this instrument, as the difference between the market interest rate and the fixed rate decreases, and as this obligation matures. Our other permanent mortgage loan, with an aggregate outstanding principal balance of $9,087,000 at September 30, 2004, bears interest at a fixed rate.

          The remaining construction loans, which had an aggregate outstanding balance of $29,714,000 at September 30, 2004, bear interest ranging from 185 to 200 basis points over the 30-day LIBOR rate. Our line of credit, which had an aggregate outstanding balance of $0, has an interest rate of 175 basis points over the 30-day LIBOR rate. Given our interest rate swap agreement and the current interest rate environment, we believe there is no material market risk exposure to our consolidated financial position, results of operations or cash flows.

ITEM 4. CONTROLS AND PROCEDURES.

          As of September 30, 2004, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as defined in Exchange Act Rule 13a-15(e). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our current disclosure controls and procedures are effective as of September 30, 2004.

          There were no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2004 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

33

          The design of any system of controls and procedures is based in part upon certain assumptions about the likelihood of future events. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

PART II

ITEM 1. LEGAL PROCEEDINGS.

          Neither we, the operating partnership, nor our apartment communities, are presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against any of them. Routine litigation arising in the ordinary course of business is not expected to result in any material losses to us and the operating partnership.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

          None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

          None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

July 2004 Amendment to Articles of Incorporation

          We held our annual meeting on July 21, 2004. Shareholders were asked to vote (1) to elect two directors to serve three-year terms and (2) to approve and adopt an amendment to our articles of incorporation that (a) increased the stock ownership limitation of Charles S. Roberts from 25% to 35% of the outstanding shares of common stock, (b) decreased the stock ownership limitation for all other shareholders of the company from 6% to 3.7% of the outstanding shares of common stock, and (c) eliminated outdated provisions. (For more information regarding this amendment, see Item 2 above, Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities – July 2004 Amendment to Articles of Incorporation.) We solicited proxies for the meeting pursuant to Section 14(a) of the Securities Exchange Act of 1934, and there was no solicitation in opposition to management’s solicitations.

          Both of management’s nominees for directors as listed in the proxy statement were elected with the following votes (there were no abstentions or broker non-votes):

          Our articles of incorporation require the board of directors to be divided into three classes. The terms of office of Mr. Dennis H. James and Mr. Wm. Jarell Jones expire at the annual meeting in 2005, and the terms of office of Mr. Charles S. Roberts and Mr. Charles R. Elliott expire at the annual meeting in 2006. Those directors continue in office.

34

          The amendment to our articles of incorporation passed with the following votes:

ITEM 5. OTHER INFORMATION.

          None.

ITEM 6. EXHIBITS.

          The exhibits described in the following Index to Exhibits are filed as part of this report on Form 10-Q.

35

SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 11, 2004

	ROBERTS REALTY INVESTORS, INC.
	By:	/s/ Greg M. Burnett
		Greg M. Burnett, Chief Financial Officer
		(The Registrant’s Principal Financial and Chief Accounting Officer, who is duly authorized to sign this report)

36

EXHIBIT INDEX

37