UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-13183
ROBERTS REALTY INVESTORS, INC.
(Exact name of registrant as specified in its charter)
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Georgia
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58-2122873 |
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.) |
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450 Northridge Parkway, Suite 302
Atlanta, Georgia
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30350 |
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(Address of principal executive offices)
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(Zip Code) |
(770) 394-6000
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each class
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Name of each exchange on which registered |
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Common Stock, $.01 par value per share
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NYSE Amex Equities |
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or Section 15(d) of the Exchange Act. Yes o No þ
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 whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T
during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
Yes o 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 registrants 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. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No þ
As of June 30, 2010, the aggregate market value of the registrants common stock held by
non-affiliates of the registrant was $10,714,146 based on the closing sale price of $1.56 per share
as reported on the NYSE Amex Equities exchange.
Indicate the number of shares outstanding of each of the registrants classes of common stock,
as of the latest practicable date.
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Class
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Outstanding at March 8, 2011 |
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Common Stock, $.01 par value per share
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10,357,831 shares |
DOCUMENTS INCORPORATED BY REFERENCE
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Document
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Parts into which incorporated |
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None
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N/A |
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act). 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, intend,
estimate, anticipate, believe and similar expressions are intended to identify
forward-looking statements. We make forward-looking statements in Items 1, 1A, 2, 5 and 7 of this
report.
Some of the forward-looking statements relate to our intent, belief, or expectations regarding
our strategies and business plan, including development and construction of new multifamily
communities and the possible sale of properties, and the ways we may finance our future development
and construction activities. Other forward-looking statements relate to loan extensions, trends
affecting our financial condition and results of operations, our anticipated capital needs and
expenditures, and how we may address these needs. These statements involve risks, uncertainties,
and assumptions, including the financing environment for construction loans for new multifamily
communities; our possible inability to negotiate an extension of our short-term debt; whether the
employment rate in Atlanta will rebound as we expect; the challenging conditions for retail
shopping centers and office buildings in our market area; uncertainties regarding the performance
of upscale multifamily communities in our Atlanta submarket; and other factors discussed in this
report and in our other filings with the SEC. These forward-looking statements are not guarantees
of future performance and involve risks and uncertainties. Actual results may differ materially
from those that are anticipated in the forward-looking statements. See Item 1A, Risk Factors, for
a description of some of the important factors that may affect actual outcomes.
For these forward-looking statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. You
should not place undue reliance on the forward-looking statements, which speak only as of the date
of this report. All subsequent written and oral forward-looking statements attributable to us or
any person acting on our behalf are expressly qualified in their entirety by the cautionary
statements contained or referred to in this section. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
* * * * * * * *
Unless the context indicates otherwise, all references in this report to Roberts Realty,
we, us and our refer to Roberts Realty Investors, Inc. and our subsidiary, Roberts Properties
Residential, L.P., which we refer to as the operating partnership, except that in the discussion of
our capital stock and related matters, these terms refer solely to Roberts Realty Investors, Inc.
and not to the operating partnership. All references to the the operating partnership refer to
Roberts Properties Residential, L.P. only.
2
PART I
General
Roberts Realty Investors, Inc. is a self-administered, self-managed equity real estate
investment trust, or REIT. Our primary business is to develop, construct, own, and manage
multifamily apartment communities. We currently own the following properties, all of which are
located in metropolitan Atlanta, Georgia:
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five tracts of land totaling 106 acres that are zoned for 1,232 multifamily units; |
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three retail shopping centers; and |
As we have done in the past, we are focusing on our core business of developing, constructing, and
managing high quality multifamily apartment communities for cash flow and long-term appreciation.
We plan to exit the retail business. We significantly reduced our debt and our negative cash flow
in 2010, and we intend to continue these efforts.
Recent Developments
Loan Renewals
From June 2010 through December 2010, we renewed the following four loans. As a result of
these renewals, we have now extended all of our loan maturities to 2012 and later, except for our
$8,175,000 Peachtree Parkway land loan that matures on July 31, 2011.
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On December 29, 2010, we renewed and extended our $3,000,000 Bradley Park land loan
to April 30, 2012. |
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On October 29, 2010, we renewed our Highway 20 land loan and paid down the principal
amount of the loan by $185,000. The renewed $3,315,000 Highway 20 loan has a maturity
date of April 8, 2012. |
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On September 30, 2010, we renewed the $2,898,333 loan for our Northridge office
building and extended the loans maturity date to August 10, 2013. |
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On June 21, 2010, we renewed our $8,175,000 Peachtree Parkway land loan and extended
its maturity date to July 31, 2011. |
Grand Pavilion Retail Center Nonrecourse Loan
As we have previously stated in our annual and quarterly reports, we intend to exit the retail
shopping center business to focus exclusively on developing, constructing, and managing multifamily
apartment communities. Given that objective and the approximately $625,000 in annual negative cash
flow from our Grand Pavilion retail center, we have elected not to make debt service payments since
July 2010 on that retail center and have allowed the loan to go into default. We are seeking to
transfer the Grand Pavilion retail center to the lender as soon as possible in satisfaction of the
$6,433,286 principal amount of debt secured by the property. Because the loan is nonrecourse, we
would have no further
obligations to the lender for this loan. This transaction would move us closer to exiting the
retail business, reduce the principal amount of our debt by $6,433,286, and reduce our annual
negative operating cash flow by approximately $625,000.
3
Sale of Addison Place Shops Retail Center and Westside Land
On June 30, 2010, we sold our 44,293 square foot Addison Place retail center and our 44-acre
Westside land parcel to the lender for the $12,000,000 of debt secured by these two properties. As
a result of these sales, we have no further obligations to the lender for these two loans.
In approving the sale of the Addison Place retail center to the lender for the debt, our board
of directors took into account the continuing poor performance of the Addison Place retail center
due to the weak economic conditions and an oversupply of retail centers in its market area. The
sale of the Addison Place retail center was also consistent with our objective to exit the retail
business. With respect to Westside, our board evaluated the long-term nature of our investment in
the property, the current real estate market conditions, and the uncertainty associated with the
timing of the start of development, which could be years into the future. Equally important, our
board considered our need to preserve our cash to continue with our business plan to maximize
shareholder value sooner rather than later and focus on our apartment business. Together, the sale
of the Addison Place retail center and Westside reduced our debt by $12,000,000 and reduced our
annual negative operating cash flow by approximately $800,000.
Liquidity Outlook
We continue to focus on improving our liquidity and balance sheet. We had $3,218,774 in cash
as of March 8, 2011. Our primary liquidity requirements relate to (a) our continuing negative
operating cash flow and (b) our maturing short-term debt. The primary reason for our negative
operating cash flow is that we have five tracts of land totaling 106 acres that do not produce
revenue but incur carrying costs of interest expense and real estate taxes.
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Principal Amount |
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Land |
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Carrying Value (1) |
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of Land Loans |
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Northridge |
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$ |
6,517,178 |
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Unencumbered |
North Springs |
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13,100,000 |
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(2) |
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Bradley Park |
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7,066,457 |
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$ |
3,000,000 |
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Peachtree Parkway |
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10,418,758 |
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8,175,000 |
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Highway 20 |
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5,834,374 |
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3,225,000 |
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Totals |
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$ |
42,936,767 |
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$ |
14,400,000 |
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(1) |
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Carrying value means the book value of the properties as reflected on our
financial statements. |
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(2) |
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The North Springs land also secures the Peachtree Parkway loan. |
We have substantial equity in these tracts, which are an integral part of our multifamily
community development and construction program described in Business Plan below. Because the
performance of our retail centers and office building is insufficient to cover our operating
expenses, including the carrying costs of our land, we expect to continue to generate negative
operating cash flow and to operate at a loss until we raise the
equity and obtain the construction loans we
need to make substantial progress in constructing and leasing up our planned multifamily
communities as described in our business plan below.
4
We had total debt of $31,097,509 as of December 31, 2010 and have one loan that matures within
the next 12 months: our $8,175,000 Peachtree Parkway loan that matures on July 31, 2011. If we
are unable to renew this loan, we may repay all or part of it from the funds we are seeking to
raise as described in our business plan below.
Business Plan
Overview and Outlook
We intend to maximize shareholder value and to address our needs for liquidity and capital
resources by executing our business plan. As we have done in the past, we are focusing on our core
business of developing, constructing, and managing high quality multifamily apartment communities
for cash flow and long-term appreciation. We plan to exit the retail business. We significantly
reduced our debt and our negative cash flow in 2010, and we intend to continue these efforts. We
explain below our strategies for each type of property we own.
Development and Construction of Multifamily Communities
We are now optimistic about the market for new apartments in the metro Atlanta submarkets
where our land is located. We believe the economic climate for our business in these markets is
improving for the following reasons:
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Rents for the Class A or upscale apartments communities of the type that we
build should increase appreciably during 2011, and the current high level of rental
concessions should decrease over time as the market continues to improve. |
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Occupancy rates for Class A apartments in Atlanta should continue to increase in
2011. |
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The number of new apartments constructed in Atlanta was substantially lower in
2010 than in recent years and is expected to remain low in 2011. |
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Employment in metro Atlanta is expected to grow, although slowly compared to
historical levels. |
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Nationally, home ownership rates are declining, and we believe that this trend,
coupled with rising interest rates and larger required down payments for
single-family home loans, will lead to higher demand for apartments generally and
in our market areas. |
We believe that these favorable trends will increase the availability of debt and equity
capital for the construction of new apartments in our market areas, particularly for companies like
ours that have weathered the recession, own tracts of land in areas we believe are well-suited for
upscale apartments, and have a long history of developing, constructing, leasing up, and selling
upscale multifamily communities at substantial profits. For the reasons explained in Item 1A, Risk
Factors, however, our beliefs and expectations about these favorable trends may not prove to be
accurate.
We are currently holding five land parcels for development and construction:
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Northridge, an 11-acre site located close to the GA 400 and Northridge
Road interchange in Sandy Springs zoned for 220 multifamily units. We have
purchased the land disturbance permit, completed clearing, and commenced grading
the site. |
5
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Bradley Park, a 22-acre site located in Forsyth County zoned for 154
multifamily units. We have completed our architectural drawings, purchased our
land disturbance permit, and are ready to begin grading the site. |
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Peachtree Parkway, a 25-acre site fronting Peachtree Parkway (Highway
141) in Gwinnett County zoned for 292 multifamily units that is located across the
street from The Forum, a 580,000 square foot upscale shopping center. |
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Highway 20, a 38-acre site located in Cumming zoned for 210 multifamily
units. We have started the necessary design and development work for this
community. |
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North Springs, a 10-acre site located on Peachtree Dunwoody Road in
Sandy Springs across from the North Springs commuter rail station; the property is
zoned for 356 multifamily units, 210,000 square feet of office space, and 56,000
square feet of retail space. |
Now that the Atlanta apartment market is beginning to recover from the recession, we believe
this is an opportune time to create new multifamily assets. We believe that we can build at lower
construction costs and create value for our shareholders as we have historically done during
economic downturns and recessions and as the economy recovers. We intend to move forward with the
development and construction of our next two multifamily communities Northridge and Bradley
Park. Although we cannot make substantial progress on constructing these projects until we raise
the required equity and obtain construction financing, we believe that the market for construction
financing is improving in light of the positive factors noted above. We currently estimate that we
will need approximately $35,718,000 in debt and equity to complete the construction of our
Northridge and Bradley Park multifamily communities.
To provide the equity we need for construction of one or more of these communities as well as
to repay or partially extend our Peachtree Parkway loan, we may sell one or more of our land
parcels to independent purchasers. Potential buyers have recently expressed interest in purchasing
some of our properties, and we believe that they have the financial resources to do so. We are
also considering forming joint ventures and partnerships, and raising private equity. We are in
discussions with possible joint venture participants such as pension funds, life insurance
companies, hedge funds, foreign investors, and local investors.
We may also sell one or more land parcels to Roberts Properties, Inc. (Roberts Properties),
which is owned by Mr. Charles S. Roberts, the President, Chief Executive Officer, and Chairman of
the Board of Roberts Realty, or to a newly formed affiliate of either Roberts Properties or Roberts
Realty that would raise equity in a private offering for the specific purpose of funding the
purchase of the land parcel and constructing a multifamily community. Under our Code of Business
Conduct and Ethics, the terms of any sale of a property to Mr. Roberts or his affiliates would be
negotiated and approved by our audit committee, which is composed of the two independent members of
our board of directors.
Retail Centers and Office Building
We currently own three retail centers and an office building, which have the occupancy
percentages provided below:
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Bassett Shopping Center, a 19,949 square foot retail center located
directly across from the Mall of Georgia in Gwinnett County that is 82.9% occupied. |
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Spectrum at the Mall of Georgia, a 30,050 square foot retail center
located directly across from the Mall of Georgia in Gwinnett County that is 56.8%
occupied. |
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Grand Pavilion, a 62,323 square foot retail center located in Johns
Creek that is 15.0% occupied. As previously explained, we are no longer making
payments on the nonrecourse loan secured by this retail center, and we are seeking
to transfer it to the lender as soon as possible in satisfaction of the $6,433,286
principal amount of debt secured by the property. |
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4. |
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Northridge Office Building, a 37,864 square foot building located in
Sandy Springs that is 64.5% occupied. We occupy a portion of the building as our
corporate headquarters. |
Because the retail sector took the brunt of the severe recession, our retail centers have
struggled with occupancy as tenants have failed. The risks of owning retail centers have
dramatically increased since we purchased these retail centers, and we anticipate that the
performance of our retail centers will continue to be weak for the foreseeable future. As a
result, we are focusing on our core business of developing, constructing, and managing high quality
multifamily apartment communities, and we intend to exit the retail business. In spite of this
difficult environment, however, we are committed to increasing the occupancy of our Spectrum retail
center, which is operating at a loss, and our Bassett retail center, which is positively cash
flowing. In addition to considering the sale of the Bassett and Spectrum retail centers, we may
form a joint venture with a company that specializes in retail properties to use their leasing
expertise. We also may pursue joint ventures with potential partners that include local investors,
pension funds, life insurance companies, hedge funds, and foreign investors.
Like the conduit loan secured by the Grand Pavilion retail center, the conduit loans secured
by the Bassett and Spectrum retail centers are nonrecourse. If we are unable to improve the
financial performance of one or both of these centers, particularly if the retail sector fails to
improve or worsens, we may seek to modify these loans. As a last resort, we may transfer one or
both of these retail centers to the lender in satisfaction of the debt to avoid any further
negative operating cash flow from these assets.
Similar to the retail market, the market for office space in suburban Atlanta is overbuilt and
continues to be very challenging. We are considering the sale of our Northridge office building
and may also pursue joint ventures with potential partners that include local investors, pension
funds, life insurance companies, hedge funds, and foreign investors.
Possible Sale, Merger, or Business Combination of the Entire Company
In our efforts to maximize shareholder value, we are open to any transaction that would be in
the best interests of our shareholders. During the past two years, we have engaged in discussions
with both private companies and individuals regarding a possible sale, merger, or other business
combination. We have entered into mutual confidentiality agreements with six different entities,
and discussions are ongoing with several of them. To date, however, we have not entered into a
letter of intent or definitive agreement for such a transaction. We remain open to any reasonable
proposal for a sale, merger, or other business combination that would reward our shareholders and
maximize their value.
Transactions with Charles S. Roberts and His Affiliates
Mr. Roberts has years of experience in developing multifamily communities, and we expect to
continue to engage in transactions with Mr. Roberts, Roberts Properties, Roberts Properties
Construction, Inc. (Roberts Construction, which is owned by Mr. Roberts, and together with
Roberts Properties, the
Roberts Companies) or other affiliates of Mr. Roberts. We describe all current agreements
and arrangements with Mr. Roberts or the Roberts Companies in Item 13, Certain Relationships and
Related Transactions, and Director Independence below.
7
We have paid fees to the Roberts Companies for various services and will continue to do so in
the future. We have purchased properties from Roberts Properties, and we have retained the Roberts
Companies for development services and construction services for some of our land parcels, as well
as to renovate and reposition apartment communities that we have purchased. Roberts Realty, its
predecessor limited partnerships, and other limited partnerships sponsored by Mr. Roberts have
previously entered into agreements with Roberts Properties and Roberts Construction to provide
these services for the following 23 apartment communities with a total of 4,648 units that were
sold for a total sales price of $431,701,143. All of these communities were sold for a substantial
profit.
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Number |
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Year |
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Sales Price |
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Name of Community |
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of Units |
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Sold |
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Sales Price |
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Per Unit |
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+ * Addison Place Townhomes (Phase I) |
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118 |
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2008 |
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$ |
20,000,000 |
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$ |
169,492 |
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+ * Addison Place Apartments (Phase II) |
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285 |
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2008 |
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40,000,000 |
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140,351 |
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+ * Ballantyne Place |
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319 |
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2005 |
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37,250,000 |
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116,771 |
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* St. Andrews at The Polo Club |
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200 |
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2004 |
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36,000,000 |
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180,000 |
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+ * Preston Oaks (Phase I) |
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189 |
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2004 |
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23,762,500 |
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125,728 |
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+ * Preston Oaks (Phase II) |
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24 |
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2004 |
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3,017,500 |
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125,728 |
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+ * Bradford Creek |
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180 |
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2004 |
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18,070,000 |
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100,389 |
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+ * Veranda Chase |
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250 |
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2004 |
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23,250,000 |
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93,000 |
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+ * Plantation Trace (Phase I) |
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182 |
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2004 |
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16,866,400 |
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92,673 |
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+ * Plantation Trace Townhomes (Phase
II) |
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50 |
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2004 |
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4,633,600 |
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92,673 |
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+ * River Oaks |
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216 |
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2004 |
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20,000,000 |
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92,593 |
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+ * Highland Park |
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188 |
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2003 |
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17,988,143 |
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95,682 |
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+ * Rosewood Plantation |
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152 |
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2001 |
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14,800,000 |
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97,368 |
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+ * Crestmark Club (Phase I) |
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248 |
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2001 |
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18,562,874 |
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74,850 |
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+ * Crestmark Club (Phase II) |
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86 |
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2001 |
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6,437,126 |
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74,850 |
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+ * Ivey Brook |
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146 |
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2000 |
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14,550,000 |
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99,658 |
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+ * Bentley Place |
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117 |
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1999 |
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8,273,000 |
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70,709 |
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* Windsong |
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232 |
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1998 |
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9,750,000 |
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42,026 |
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* Laurelwood |
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207 |
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1997 |
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10,601,000 |
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51,213 |
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+ Wynfield Trace |
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146 |
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1995 |
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10,865,000 |
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74,418 |
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+ Bridgewater |
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532 |
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1995 |
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39,535,000 |
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74,314 |
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+ Autumn Ridge |
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113 |
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1995 |
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7,750,000 |
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68,584 |
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+ Governors Pointe |
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468 |
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1986 |
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29,739,000 |
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63,545 |
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Total |
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4,648 |
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$ |
431,701,143 |
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+ |
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The communities marked with a + were built on raw land that was purchased, zoned and
developed by the Roberts Companies. |
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* |
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The communities marked with an * were designed, developed, constructed, renovated and managed
by the Roberts Companies for Roberts Realty Investors, Inc. |
Our 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 NYSE Amex Equities exchange, related party transactions are subject to
appropriate review and oversight by the audit committee of our board of directors. In entering
into transactions with the Roberts Companies related to the communities listed above, we complied
with these policies.
8
Investment Policies
Our investment objectives are to achieve stable cash flow and, over time, to increase cash
flow and portfolio value by continuing to develop multifamily communities. We may also acquire
additional multifamily communities that we anticipate will produce additional cash flow, although
we currently have no plans to do so. Our policy is to develop real estate projects where we
believe 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. Our governing documents do not limit our future
development or investment activities to any geographic area, product type, or specified percentage
of our assets. We currently have no plans to invest in the securities of other issuers. We will
not make any investments if the proposed investment would cause us to be an investment company
under the Investment Company Act of 1940. We do not own any mortgages, and we do not intend to
invest in mortgages or to engage in the originating, servicing, or warehousing of 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 aggregate fair market value of our assets at any given time. We may re-evaluate
our borrowing policies from time to time in light of then current economic conditions, relative
costs of debt and equity capital, market value of the operating partnerships 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 the need to seek additional capital, we
may raise capital through additional equity offerings, debt financings, or asset sales, or a
combination of these methods. 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 partnerships portfolio as a whole.
Other Policies
We have the authority to offer our securities and to repurchase and otherwise reacquire our
securities, and we may engage in those activities in the future. Roberts Realty has adopted a
policy that it 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.
Under our stock repurchase program, as of March 8, 2011, we are authorized to repurchase up to
540,362 shares of our outstanding common stock. Under the plan, we may repurchase shares from time
to time by means of open market purchases and in solicited and unsolicited privately negotiated
transactions, depending on availability, our cash position, and price.
Tax Structure
We have elected to be taxed as a REIT under the Internal Revenue Code. To continue to qualify
as a REIT, we must continue to meet certain tests that, among other things, generally require that
our assets consist primarily of real estate assets, our income be derived primarily from real
estate assets, and
that we distribute at least 90% of our REIT taxable income (other than net capital gains) to
our stockholders annually. Provided we maintain our qualification as a REIT, we generally will not
be subject to U.S. federal income taxes at the corporate level on our net income to the extent that
we distribute that net income to our shareholders annually.
9
We intend to continue to qualify as a REIT unless, because of changing circumstances or
changes in the Internal Revenue Code or in applicable regulations, our board of directors decides
that it is no longer in our best interests to qualify as a REIT. In that event, we would be
required under our articles of incorporation to obtain the consent of the holders of a majority of
the outstanding shares of our common stock.
The Operating Partnership
We conduct our business through Roberts Properties Residential, L.P., which either directly or
through one of its wholly owned subsidiaries owns all of our properties and which we refer to as
the operating partnership. The agreement of limited partnership of the operating partnership
provides that it is not required to be dissolved until 2093. Roberts Realty is the sole general
partner of the operating partnership and as of March 8, 2011 owned an 82.6% interest in the
operating partnership. 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 and to the holders of units as unitholders.
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 (a)
1.647 shares for each unit submitted for redemption, or (b) 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 shareholder to 3.7% of the
outstanding shares of our common stock, with two exceptions. First, Mr. Roberts can beneficially
own up to 35% of the outstanding shares. Second, any shareholder who beneficially owned more than
3.7% of our outstanding common shares on July 22, 2004, the date that we filed an amendment to our
articles of incorporation revising the ownership limits, can retain indefinitely the shares the
shareholder owned as of that date but cannot increase that ownership in the future (other than by
exchanging the units the shareholder owned on that date for shares). Accordingly, a unitholder,
including Mr. Roberts, cannot redeem units if upon their redemption he would hold more shares than
permitted under the applicable percentage limit (subject to the exceptions as noted).
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 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.
Competition
Multifamily Communities
The tracts of land on which we are developing or plan to develop new multifamily communities
are located in developed areas that include other multifamily communities. The number of
competitive
multifamily communities in a particular area could have a material adverse effect on our
rental rates and our ability to lease multifamily units at any newly developed or acquired
community. We face competition from other real estate investors, including insurance companies,
pension and investment funds, partnerships and investment companies, and other multifamily REITs,
to acquire and develop multifamily communities and to acquire land for future development. As an
owner of multifamily communities, we will face competition for prospective residents from other
multifamily community owners whose communities may be perceived to offer a better location or
better amenities, or whose rent may be perceived as a better value given the quality, location, and
amenities that the prospective resident seeks. In addition, despite the adverse conditions in the
single-family housing market, we may lose both current and prospective renters who see the current
market as an opportunity to buy a single-family home at a reduced price.
10
Office Building and Retail Centers
Our office building and retail centers face competition from similar office buildings and
retail centers within their geographic areas to lease new space, renew leases, or re-lease spaces
as leases expire. In addition, the recession forced prospective office and retail tenants to
curtail expansion plans, and some tenants have been forced to close their businesses or file
bankruptcy. Other properties that compete with ours may be newer, better located, better
capitalized, or have better tenants than our properties. Any new competitive properties that are
developed within our local markets, or older competitive properties that have lost tenants, may
result in increased competition for customer traffic and creditworthy tenants by way of lower
rental rates or more attractive lease terms, especially in this weak economic environment. We may
not be able to lease our properties, renew leases, or obtain new tenants for space that needs to be
re-leased as leases expire, and the terms of renewals or new leases (including the cost of required
renovations or concessions to tenants) may be less favorable to us than current lease terms.
Increased competition for tenants may require us to make capital improvements to properties that we
would not have otherwise made. In addition, our retail centers face competition from alternate
forms of retailing, including home shopping networks, mail order catalogues, and on-line based
shopping services, which may limit the number of retail tenants that desire to seek space in
shopping centers generally.
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 its 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 remediate the
substances promptly, may adversely affect the owners ability to sell the real estate or to borrow
using the real estate as collateral. In connection with the ownership and operation of our
operating properties and other real estate assets, we may be potentially liable for remediation and
removal costs and for damages to persons or property arising from the existence or maintenance of
hazardous or toxic substances.
The preliminary environmental assessments of our operating properties 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.
11
Insurance
We carry comprehensive property, general liability, fire, extended coverage, environmental,
and rental loss insurance on all of our existing properties, with policy specifications, insured
limits, and deductibles customarily carried for similar properties. We carry similar insurance
with respect to our properties under development or properties under construction, but with
appropriate exceptions given the nature of these properties. We believe that our properties are
adequately covered by insurance.
Segment Information
We currently have three reportable operating segments:
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the retail/office segment consisting of three retail centers and one office
building; |
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the land segment consisting of five tracts of land totaling 106 acres that are
in various phases of development and construction; and |
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the corporate segment consisting primarily of operating cash and cash
equivalents plus miscellaneous other assets. |
For more detailed information about these segments, please see Note 7, Segment Reporting, in the
audited consolidated financial statements included in Item 15 of this report. For information
about our properties, please see Item 2, Properties, below.
Corporate Information
Roberts Realty Investors, Inc. is a Georgia corporation formed in 1994. Our executive offices
are located at 450 Northridge Parkway, Suite 302, Atlanta, Georgia 30350, and our telephone number
is (770) 394-6000. We are redesigning a new corporate website that we expect to be operational in
June 2011. We file annual, quarterly, and current reports, proxy statements, and other information
with the SEC that is available to the public at the SECs website at www.sec.gov. As of March 8,
2011, we have two full-time employees.
12
Investors or potential investors in Roberts Realty should carefully consider the risks
described below. These risks are not the only ones we face. Additional risks of which we are
presently unaware or that we currently consider immaterial may also impair our business operations
and hinder our financial performance, including our ability to make distributions to our investors.
We have organized our summary of these risks into five subsections:
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real estate related risks; |
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environmental and other legal risks; and |
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risks for investors in our stock. |
This section includes forward-looking statements.
Financing Risks
We face the maturity of an $8,175,000 loan on July 31, 2011, and we may be unable to refinance or
extend this debt.
As of March 8, 2011, we have one loan that matures within the next 12 months: our $8,175,000
Peachtree Parkway land loan, which matures on July 31, 2011 and is secured by our Peachtree Parkway
and North Springs properties. If we are unable to refinance or extend this loan at maturity on
acceptable terms, or at all, we may have to use a substantial portion of our remaining cash (which
was $3,218,774 as of March 8, 2011) to repay part of the loan and dispose of one or more of our
properties to raise the remainder of the funds we would need to repay the loan in full. Those
events could have a material adverse effect on our ability to pay amounts due on our remaining debt
and to pay future distributions to our investors.
If we are unable to meet mortgage payments on any mortgaged property, the mortgage holder could
foreclose upon the property and take other actions.
If we are unable to meet mortgage payments on any mortgaged property, the mortgage holder
could foreclose upon the property, appoint a receiver, and receive an assignment of rents and
leases, or pursue other remedies, all with a consequent loss of our revenues and asset value. (All
of our retail shopping center loans are nonrecourse.) Foreclosures could also create taxable
income without accompanying cash proceeds, thereby hindering our ability to meet the REIT
distribution requirements of the Internal Revenue Code.
We may not be able to obtain the debt and equity we need to carry out our planned development and
construction program.
To start construction of multifamily communities on our Bradley Park and Northridge land
parcels, we will need a substantial amount of additional debt and equity capital. We currently
estimate that it would take approximately $82,745,000 to complete the construction of our Bradley
Park, Northridge, Peachtree Parkway, and Highway 20 multifamily communities. We have not yet
estimated the construction costs for the North Springs property. We believe that the equity we
need to fund the construction of a new multifamily property, in addition to a construction loan,
would come from the
proceeds of a sale of another property, the contributions of a joint venture partner, or from
raising private equity. We are not able to provide any assurance that we will be able to raise the
debt and equity needed to complete the construction of even one new multifamily community. If we
are unable to obtain debt and equity on favorable terms, we will be unable to carry out our planned
development and construction program, and our returns to investors will be reduced accordingly.
13
Rising interest rates could materially and adversely affect the cost of our indebtedness.
We have incurred and may again in the future incur debt that bears interest at a variable
rate. As of March 8, 2011, we have $17,158,333 in debt that bears interest at a floating interest
rate. Accordingly, increases in interest rates would increase our interest costs, which could
materially and adversely affect our results of operations and our ability to pay amounts due on our
debt and future distributions to our investors.
We face the normal risks associated with debt financing.
We are subject to the normal risks associated with debt financing, including the risks that
our cash flow will be insufficient to meet required payments of principal and interest and that we
will not be able to renew, repay, or refinance our debt when it matures or that the terms of any
renewal or refinancing will not be as favorable as the existing terms of that debt. The payment
terms contained in each mortgage note secured by one of our properties do not fully amortize the
loan balance, and a balloon payment of the balance will be due upon its maturity. If we are unable
to pay our obligations to our secured lenders, they could proceed against any or all of the
collateral securing our indebtedness to them. In addition, a breach of the restrictions or
covenants contained in our loan documents could cause an acceleration of our indebtedness. We may
not have, or be able to obtain, sufficient funds to repay our indebtedness in full upon
acceleration. If we are unable to refinance our debt upon acceleration or at scheduled maturity on
acceptable terms or at all, we face the risks described in the first risk factor above.
Increased debt and leverage could affect our financial position and impair our ability to make
distributions to our investors.
Our organizational documents do not limit the amount of debt that 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. In the future, however, we may
re-evaluate our borrowing policies in light of then current economic conditions, relative costs of
debt and equity capital, market value of our real estate assets, growth and acquisition
opportunities, and other factors. Modification of this policy may adversely affect the interests
of our shareholders. Additional leverage may:
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increase our vulnerability to general adverse economic and industry conditions; |
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limit our flexibility in planning for, or reacting to, changes in our business,
which may place us at a competitive disadvantage compared to our competitors that have
less debt; and |
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limit, along with the possible financial and other restrictive covenants in our
indebtedness, our ability to borrow additional funds. |
Any of the foregoing could materially and adversely affect our results of operations and our
ability to pay amounts due on our debt and distributions to our investors.
14
We could be negatively affected by the condition of Fannie Mae or Freddie Mac.
Fannie Mae and Freddie Mac are a major source of financing for secured multifamily rental real
estate. We and other multifamily companies depend heavily on Fannie Mae and Freddie Mac to finance
growth by purchasing multifamily loans. In September 2008, the U.S. government assumed control of
Fannie Mae and Freddie Mac and placed both companies into a government conservatorship under the
Federal Housing Finance Agency. In December 2009, the Obama administration pledged to cover
unlimited losses through December 31, 2012 for both companies, lifting an earlier cap of $400
billion. Since that time, the chairman of the House Financial Services Committee has called for a
new system of housing finance and the elimination of Fannie Mae and Freddie Mac. The House
Financial Services Committee has held two hearings on the topic, and Congress scheduled a series of
hearings for February and March. On February 11, 2011, the Obama administration released its
blueprint for winding down Fannie Mae and Freddie Mac, and for reforming the system of housing
finance. It outlined three possible courses for reform without recommending a specific one: (1) a
privatized system of housing finance with the governments insurance role limited to assistance for
narrowly targeted groups of borrowers; (2) a privatized system of housing finance with government
assistance limited to narrowly targeted groups of borrowers and as a guarantee mechanism in times
of crisis; and (3) a privatized system of housing finance with government assistance limited to
low- and moderate-income borrowers and as catastrophic reinsurance behind significant private
capital. A decision by the government to eliminate Fannie Mae or Freddie Mac or reduce government
support for apartment mortgage loans may adversely affect interest rates, capital availability,
development of multi-family communities and the value of multi-family residential real estate.
Real Estate-Related Risks
Our business currently operates at a loss.
Between 2003 and 2010, we sold nine multifamily communities for a total of $260,838,143. From
the net proceeds of these sales, we have paid cash distributions totaling $43,836,983, or $6.02 per
share/unit, to our shareholders and unitholders, as well as stock dividends of $4,693,415, or $1.25
per share, to shareholders. Having sold all of our apartment communities during this period, we
currently do not have any multifamily communities in our portfolio. As a result, we have
experienced and continue to experience negative operating cash flow. Because land does not
generate revenue, a substantial portion of our negative cash flow is due to the carrying costs
(interest expense and property taxes) on our land. In addition, the financial performance of our
office building and our neighborhood retail centers continues to be challenged by the weakness in
the national and local economy. For these reasons, we expect to continue to generate negative
operating cash flow and to operate at a loss until we are able to construct and lease up our
planned multifamily communities as described elsewhere in this report.
Real estate properties are illiquid and are difficult to sell in a poor market environment like the
present.
Real estate investments are relatively illiquid, which limits our ability to react quickly to
adverse changes in economic or other market conditions. Our ability to dispose of assets depends
on prevailing economic and market conditions. We may be unable to sell our properties to repay
debt, to raise capital we need to fund our planned development and construction program, or to fund
distributions to investors.
15
Construction risks inherent in the development and construction of new properties could negatively
affect our financial performance.
We currently estimate that it would cost approximately $82,745,000 to complete construction of
the Bradley Park, Northridge, Peachtree Parkway, and Highway 20 multifamily communities. We have
not yet estimated the construction costs for our North Springs property. Development and
construction costs may exceed our original estimates due to events beyond our control, including:
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increased costs for or any unavailability of materials or labor; |
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environmental impact studies by the government; |
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increased interest costs due to rising interest rates; and |
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any financial instability of the developer (Roberts Properties), general contractor
(Roberts Construction) or any subcontractor. |
We may also be unable to complete development or construction of a property on schedule, which
could result in increased debt service expense or construction costs and loss of rents until the
property is ready for occupancy. Additionally, the time required to recoup our development and
construction costs and to realize a return, if any, on those costs can be prolonged and delayed.
Further, we typically enter into construction contracts on a cost plus basis. Because these
contracts do not provide for a guaranteed maximum price, we must bear the entire amount of any
increase in costs above the amounts we initially estimate, and these costs may be material.
We face leasing risks in our planned development and construction program.
The success of a multifamily development project depends in part on leasing to residents with
acceptable rental rates within the lease-up period. If the multifamily communities we build are
not leased on schedule and at the expected rental rates, the yields, returns, and value creation on
the communities could be adversely affected. Whether or not residents are willing to enter into
leases on the terms and conditions we project and on the timetable we expect will depend on a large
variety of factors, many of which are outside our control.
We are currently concentrated in metropolitan Atlanta, and adverse changes in economic or market
conditions in Atlanta could negatively affect our financial performance and condition.
All our properties are located in metropolitan Atlanta, Georgia, and adverse changes in
economic or market conditions in this area could negatively affect our performance. These factors
include the following:
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the failure of the employment rate to rebound to prior levels; |
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declining neighborhood values in the submarkets in which our properties are located; |
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additional zoning and other regulatory conditions; |
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competition from other properties; |
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increasing property taxes; |
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weather problems, including periods of prolonged drought; |
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limited future economic growth due to judicial or other governmental action that
restricts withdrawals from Lake Lanier, Atlantas primary water supply; and |
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price increases for materials or labor. |
Deteriorating general economic or social conditions or any natural disasters in the
metropolitan Atlanta area could materially and adversely affect the value of our portfolio, our
results of operations, and our ability to pay amounts due on our debt and to make distributions to
our investors.
16
We face conflicts of interest because of our business dealings with our Chief Executive Officer and
his affiliates.
Our business practice is to retain Roberts Properties to develop our properties and Roberts
Construction to construct our properties. Mr. Charles S. Roberts owns all of the equity interests
in these two companies. We have in the past and may again in the future acquire properties from
Mr. Roberts or his affiliates. One of our goals for 2011 is to sell one or more properties to
decrease our negative cash flow and increase our cash balances. We may sell one or more properties
to Roberts Properties or an affiliate of Roberts Properties. Although each agreement between
Roberts Realty or the operating partnership on one hand and Roberts Properties or its affiliates on
the other hand must be approved by our audit committee and the independent members of our board of
directors, conflicts of interest inherent in these business transactions could result in our paying
more for property or services than we would pay an independent seller or provider (or receiving
less than we would receive from an independent buyer). These agreements and transactions have not
had and will not have the benefit of arms-length negotiation of the type normally conducted
between unrelated parties. These business relationships also expose us to the following risks,
among others:
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the possibility that the Roberts Companies might incur severe financial problems or
even become bankrupt; |
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the possibility that the Roberts Companies may at any time have economic or business
interests or goals that are or that become inconsistent with our business interests or
goals; or |
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the possibility that the Roberts Companies may be in a position to take action
contrary to our instructions or requests or contrary to our policies or objectives. |
Further, Mr. Roberts may face conflicts of interest in dealing with lenders who have made loans
both to us and to private entities he owns or controls.
We face substantial competition.
All of our properties are located in developed areas where we face substantial competition
from other properties and from other real estate companies that own or may develop or renovate
competing properties. The substantial number of competitive properties and real estate companies
in our market areas could have a material adverse effect on our ability to maintain and increase
occupancy levels and rental rates, and to attract creditworthy residents and commercial tenants.
As a result, these factors could materially and adversely affect the value of our real estate
portfolio, our results of operations, our ability to pay amounts due on our mortgage debt, and our
ability to pay distributions to our investors.
The ability of our potential residents to buy single-family homes at depressed prices could
adversely affect our revenues from the multifamily communities we develop and construct.
Our multifamily communities have historically competed with numerous housing alternatives in
attracting residents, including other multifamily communities, single-family rental homes, as well
as owner occupied single-family homes. The affordability of owner occupied single-family homes
caused by low mortgage interest rates and historically high foreclosure rates may adversely affect
our ability to retain our residents, lease multifamily units, and increase or maintain our rental
rates. We expect the desire and ability of prospective residents to purchase a single-family home
to continue to be a substantial competitive risk.
Changes in market or economic conditions may affect our business negatively.
General economic conditions and other factors beyond our control may adversely affect real
property income and capital appreciation. The current economic climate, punctuated by a slumping
housing market and limited availability of credit, leaves us vulnerable to adverse conditions
beyond our control and has resulted in a weak real estate market in metropolitan Atlanta.
17
Our office and retail tenants may go bankrupt or be unable to make lease payments.
The operating revenues from our office and retail properties depend on entering into leases
with and collecting rents from tenants. Economic conditions have adversely affected existing
tenants as well as prospective tenants in our market and, accordingly, could affect their ability
to pay rents and possibly to occupy their space. Tenants may be forced to file for bankruptcy
protection, and the bankruptcy court may reject those leases or terminate them. If leases expire
and are not renewed, replacement tenants may not be available under the same terms and conditions
as the previous tenant. In addition, if market rental rates are lower than the previous
contractual rates, our revenues, and cash flows could be adversely affected. As a result, if a
significant number of our retail or office tenants fail to pay their rent due to bankruptcy,
weakened financial condition, or otherwise, it would negatively affect our financial performance
and cash flow.
Losses from natural catastrophes may exceed our insurance coverage.
We carry comprehensive liability, fire, flood, extended coverage, and rental loss insurance on
our properties, which we believe is customary in amount and type for real property assets. We
intend to obtain similar coverage for properties acquired in the future. Some losses of a
catastrophic nature, such as losses from floods or high winds, may be subject to limitations. We
may not be able to maintain our insurance at a reasonable cost or in sufficient amounts to protect
us against potential losses. Further, our insurance costs could increase in future periods. If we
suffer a substantial loss, our insurance coverage may not be sufficient to pay the full current
market value of the lost investment. Inflation, changes in building codes and ordinances,
environmental considerations, and other factors also might make it impractical to use insurance
proceeds to replace a damaged or destroyed property.
Our business depends on key personnel.
Our success depends on our ability to attract and retain the services of executive officers
and key personnel. We face substantial competition for qualified personnel in the real estate
industry and the loss of our key personnel, particularly Mr. Roberts, could have an adverse effect
on us. We do not carry key person insurance on any of our executive officers or other key
employees.
If we are unable to increase our occupancy and rental rates at our office and retail properties,
the performance of those properties will continue to suffer.
Our office building and our retail properties are not fully leased and occupied. If we are
unable to lease the remaining vacant space of our properties as we intend, our financial
performance will continue to suffer.
Our real estate assets may be subject to further impairment charges.
We have recorded non-cash impairment losses on a number of our assets, and we may have to
record additional impairment losses in the future. Although we believe we have applied reasonable
estimates and judgments in determining the proper classification of our real estate assets,
these estimates require the use of estimated market values, which are currently difficult to
assess. If changes in circumstances require us to adjust our valuation assumptions for our its
assets, we could be required to record additional impairment losses. Any future impairment could
have a material adverse affect on our results of operations for the period in which we record the
impairment losses.
18
Terrorism could impair our business.
Terrorist attacks and other acts of violence or war could have a material adverse effect on
our business and operating results. Attacks that directly affect one or more of our properties
could significantly affect our ability to operate those properties and impair our ability to
achieve the results we expect. Our insurance coverage may not cover losses caused by a terrorist
attack. In addition, the adverse effects that such violent acts and threats of future attacks
could have on the U.S. economy could similarly have a material adverse effect on our business and
results of operations.
Tax Risks
Our company may fail to qualify for REIT status under federal income tax laws.
Our qualification as a REIT for federal income tax purposes depends upon our ability to meet
on a continuing basis, through actual annual operating results, distribution levels and diversity
of stock ownership, various qualification tests, and organizational requirements for REITs under
the Internal Revenue Code. We believe that we have qualified for taxation as a REIT for federal
income tax purposes since our inception in 1994, and we plan to continue to meet the requirements
to qualify as a REIT in the future. Many of these requirements, however, are highly technical and
complex. We cannot guarantee, therefore, that we have qualified or will continue to qualify in the
future as a REIT. The determination that we qualify as a REIT for federal income tax purposes
requires an analysis of various factual matters that may not be totally within our control. Even a
technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the
IRS might make changes to the tax laws and regulations, and the courts might issue new decisions
that make it more difficult, or impossible, for us to remain qualified as a REIT.
If we fail to qualify for taxation as a REIT in any taxable year, and certain relief
provisions of the Internal Revenue Code did not apply, we would be subject to tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate rates, leaving less
money available for distributions to investors. In addition, distributions to shareholders in any
year in which we failed to qualify would not be deductible for federal income tax purposes.
Failing to qualify as a REIT would also eliminate our requirement to make distributions to
shareholders. We would be disqualified from taxation as a REIT for the four taxable years
following the year during which we ceased to qualify as a REIT, unless we were entitled to relief
under specific statutory provisions. We cannot predict whether in all circumstances we would be
entitled to such statutory relief. Our failure to qualify as a REIT likely would have a
significant adverse effect on the value of our common stock.
Our operating partnership may fail to be treated as a partnership for federal income tax purposes.
Management believes that our operating partnership qualifies, and has qualified since its
formation in 1994, as a partnership for federal income tax purposes and not as a publicly traded
partnership taxable as a corporation. We can provide no assurance, however, that the IRS will not
challenge the treatment of the operating partnership as a partnership for federal income tax
purposes or that a court would not sustain such a challenge. If the IRS were successful in
treating the operating partnership as a corporation for federal income tax purposes, then the
taxable income of the operating
partnership would be taxable at regular corporate income tax rates. In addition, the
treatment of the operating partnership as a corporation could cause us to fail to qualify as a
REIT.
19
We may choose to pay dividends in our own stock, in which case shareholders may be required to pay
tax in excess of the cash they receive.
We may declare and distribute taxable dividends that are payable in part in our stock, as we did in
the December 2008 and January 2009. Taxable shareholders receiving those dividends will be
required to include the full amount of the dividend as income to the extent of our current and
accumulated earnings and profits for federal income tax purposes. As a result, a U.S. shareholder
may be required to pay tax with respect to those dividends in excess of the cash received. If a
U.S. shareholder sells the stock that the shareholder receives as a dividend to pay this tax, the
sales proceeds may be less than the amount included in income with respect to the dividend,
depending on the market price of our stock at the time of the sale. In addition, the trading price
of our stock would experience downward pressure if a significant number of our shareholders sell
shares of our stock to pay taxes owed on dividends.
A redemption of units is taxable.
Holders of units in our operating partnership should keep in mind that a redemption of units
will be treated as a sale of units for federal income tax purposes. The exchanging holder will
generally recognize gain in an amount equal to the value of the common shares, plus the amount of
liabilities of the operating partnership allocable to the units being redeemed, less the holders
tax basis in the units. It is possible that the amount of gain recognized or the resulting tax
liability could exceed the value of the shares received in the redemption.
Environmental and Other Legal Risks
We may have liability under environmental laws.
Under federal, state, and local environmental laws, ordinances, and regulations, we may be
required to investigate and clean up the effects of releases of hazardous or toxic substances or
petroleum products at our properties, regardless of our knowledge or responsibility, simply because
of our current or past ownership or operation of the real estate. Therefore, we may have liability
with respect to properties we have already sold. If environmental problems arise, we may have to
take extensive measures to remedy the problems, which could adversely affect our cash flow and our
ability to pay distributions to our investors because:
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we may have to pay for property damage and for investigation and clean-up costs
incurred in connection with the contamination; |
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the law typically imposes clean-up responsibility and liability regardless of
whether the owner or operator knew of or caused the contamination; |
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even if more than one person may be responsible for the contamination, each person
who shares legal liability under the environmental laws may be held responsible for all
of the clean-up costs; and |
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governmental entities or other third parties may sue the owner or operator of a
contaminated site for damages and costs. |
These costs could be substantial and in extreme cases could exceed the value of the contaminated
property. The presence of hazardous or toxic substances or petroleum products and the failure to
remediate that contamination properly may materially and adversely affect our ability to borrow
against,
sell, or lease an affected property. In addition, applicable environmental laws create liens on
contaminated sites in favor of the government for damages and costs it incurs in connection with a
contamination.
20
We face risks in complying with Section 404 of the Sarbanes-Oxley Act of 2002.
Effective internal controls are necessary for us to provide reliable financial reports and
effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we
could be subject to regulatory action or other litigation, and our operating results could be
adversely affected. Since 2007, we have been required to document and test our internal control
procedures to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which
requires our management to assess annually the effectiveness of our internal control over financial
reporting.
During the course of our testing, we may identify deficiencies that we may not be able to
remediate in a timely manner. In addition, if we fail to maintain the adequacy of our internal
accounting controls, as those standards are modified, supplemented or amended from time to time, we
may not be able to ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404. Failure to achieve and maintain
an effective internal control environment could cause us to face regulatory action and also cause
investors to lose confidence in our reported financial information, either of which could have an
adverse effect on our stock price.
Failure to comply with the Americans with Disabilities Act or other similar laws could result in
substantial costs.
A number of federal, state, and local laws and regulations (including the Americans with
Disabilities Act) may require modifications to existing buildings or restrict certain renovations
by requiring improved access to such buildings by disabled persons and may require other structural
features that add to the cost of buildings under construction. Legislation or regulations adopted
in the future may impose further burdens or restrictions on us with respect to improved access for
disabled persons. The costs of compliance with these laws and regulations may be substantial, and
restrictions on construction or completion of renovations may limit implementation of our
investment strategy in certain instances or reduce overall returns on our investments, which could
have a material adverse effect on us and our ability to pay distributions to investors and to pay
our mortgage debt as required.
Risks for Investors in Our Stock
We do not pay regular quarterly dividends, and we do not anticipate making distributions to
investors for the indefinite future, other than possibly to preserve our REIT status if so
required.
Unlike other REITs that pay regular quarterly dividends, we have not paid a quarterly dividend
since the third quarter of 2001, and we presently have no plans to resume paying regular quarterly
dividends. Since 2001, we have paid distributions only from the net cash proceeds of property
sales. In light of our negative cash flow from operations, we will pay distributions only (a) from
the net cash proceeds of a property sale or (b) if we need to do so to maintain our status as a
REIT for federal income tax purposes.
The market price of our stock is subject to fluctuation as a result of our operating results, the
operating results of other REITs, and changes in the stock market in general.
The daily trading volume of our common stock on the NYSE Amex Equities exchange has
historically been relatively light, and the market price may not reflect the fair market value of
our
common stock (or our net asset value) at any particular moment. Prior sales data do not
necessarily indicate the prices at which our common stock would trade in a more active market. The
market value of our common stock may or may not reflect the markets perception of our operating
results, the potential for growth in the value of our properties as we develop and construct
multifamily communities, the potential for future cash dividends from property sales, and the real
estate market value of our underlying assets. In addition, general market conditions or market
conditions of real estate companies in general could adversely affect the value of our common
stock.
21
Additional issuances of equity securities may dilute the investment of our current shareholders.
Issuing additional equity securities to finance future developments and acquisitions instead
of incurring additional debt could dilute the interests of our existing shareholders. Our ability
to execute our business plan depends on our access to an appropriate blend of capital, which could
include a line of credit and other forms of secured and unsecured debt; equity financing; or joint
ventures.
Restrictions on changes of control could prevent a beneficial takeover for investors.
A number of the provisions in our articles of incorporation and bylaws have or may have the
effect of deterring a takeover of the company. In particular, to qualify as a REIT for federal
income tax purposes, we must comply with various requirements and avoid various prohibited events.
A company cannot be a REIT if, during the last half of a taxable year, more than 50% in value of
its outstanding stock is owned by five or fewer individual shareholders, taking into account
certain constructive ownership tests. To help the company comply with that test, our articles of
incorporation provide in substance that (a) Mr. Roberts cannot own more than 35% of the outstanding
shares of our common stock, and (b) no other person can own more than 3.7% of our outstanding
common stock. These provisions, which are intended to limit the ownership of our common stock by
five persons to no more than 49.8% of our outstanding shares, have or may have the effect of
deterring a takeover of the company.
In addition, our articles of incorporation and bylaws have other provisions that have or may
have the effect of deterring a takeover of the company, including:
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our classified board of directors, which may render more difficult a change in
control of the company or removal of incumbent management, because the term of office
of only one-third of the directors expires in a given year; |
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the ability of our board of directors to issue preferred stock; |
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provisions in the articles of incorporation to the effect that no transaction of a
fundamental nature, including mergers in which the company is not the survivor, share
exchanges, consolidations, or sale of all or substantially all of the assets of the
company, may be effectuated without the affirmative vote of at least three-quarters of
the votes entitled to vote generally in any such matter; |
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provisions in the articles of incorporation to the effect that they may not be
amended (except for certain limited matters) without the affirmative vote of at least
three-quarters of the votes entitled to be voted generally in the election of
directors; |
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provisions in the bylaws to the effect that they may be amended by either the
affirmative vote of three-quarters of all shares outstanding and entitled to vote
generally in the election of the directors, or the affirmative vote of a majority of
the companys directors then holding office, unless the shareholders prescribed that
any such bylaw may not be amended or repealed by the board of directors; |
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Georgia anti-takeover statutes under which the company may elect to be protected;
and |
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provisions to the effect that directors elected by the holders of common stock may
be removed only by the affirmative vote of shareholders holding at least 75% of all of
the votes entitled to be cast for the election of directors. |
22
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ITEM 1B. |
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UNRESOLVED STAFF COMMENTS. |
Not applicable.
23
General
We own the following properties, all of which are located in north metropolitan Atlanta,
Georgia.
Retail and Office
The occupancy percentages shown for each property are as of March 8, 2011.
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1. |
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Bassett Shopping Center, a 19,949 square foot retail center located
directly across from the Mall of Georgia in Gwinnett County that is 82.9% occupied. |
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2. |
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Spectrum at the Mall of Georgia, a 30,050 square foot retail center
located directly across from the Mall of Georgia in Gwinnett County that is 56.8%
occupied. |
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3. |
|
Grand Pavilion, a 62,323 square foot retail center located in Johns
Creek that is 15.0% occupied. As explained in Item 1 above, we are no longer
making payments on the nonrecourse loan secured by this retail center, and we are
seeking to transfer it to the lender in satisfaction of the loan. |
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4. |
|
Northridge Office Building, a 37,864 square foot building located in
Sandy Springs. We occupy a portion of the third floor of the building as our
corporate headquarters, and we have entered into leases for the remaining space on
the third floor with Roberts Properties and Roberts Construction. In addition, we
have signed leases with two unrelated companies for portions of the first and
second floors. The building is 64.5% occupied. |
Land
Land Parcels Held for Development and Construction
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1. |
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Northridge, an 11-acre site located close to the GA 400 and Northridge
interchange in Sandy Springs zoned for 220 multifamily units. |
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2. |
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Bradley Park, a 22-acre site located in Forsyth County zoned for 154
multifamily units. |
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3. |
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Peachtree Parkway, a 25-acre site fronting Peachtree Parkway (Highway
141) in Gwinnett County zoned for 292 multifamily units. |
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4. |
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Highway 20, a 38-acre site located in Cumming zoned for 210 multifamily
units. |
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5. |
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North Springs, a 10-acre site located on Peachtree Dunwoody Road in
Sandy Springs zoned for 356 multifamily units, 210,000 square feet of office space,
and 56,000 square feet of retail space. |
24
Demographic Data
We believe the long-term demand for multifamily housing in Atlanta will continue to increase
as Atlantas population grows. We believe that the outlook for Atlantas multifamily market is
positive and the trends for the apartment industry as a whole are on the upswing. We believe that
the projected long-term decrease in home ownership rates will result in more renters, which will in
turn increase the demand
for multifamily housing. The following information is based on statistical estimates
published by the Atlanta Regional Commission, which we refer to as the ARC. The ARC is the
regional planning and governmental coordination agency for the 10-county Atlanta Region, which is
composed of Cherokee, Clayton, Cobb, DeKalb, Douglas, Fayette, Fulton, Gwinnett, Henry, and
Rockdale counties. The estimated population of the Atlanta Region increased by 20.3% from
3,429,379 persons in 2000 to 4,124,300 persons in 2009, making it one of the largest metropolitan
areas in the country and the largest in the Southeast. Total housing units in the Atlanta Region
increased by 365,381 units, or 28.1%, from 1,302,256 in 2000 to 1,677,637 in 2009. Multifamily
homes in the Atlanta Region increased 34.3% from 384,740 units in 2000 to 516,594 units in 2009.
The following table provides information about our office and retail properties as of December
31, 2010.
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Approximate |
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Average |
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Physical |
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Retail or |
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Rentable |
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Base Rent |
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Occupancy |
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Office |
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Year |
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Area |
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per |
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as of |
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Property |
|
Location |
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Acquired (1) |
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(Square Feet) |
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|
Square Foot |
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12/31/10 |
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Retail: |
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Bassett Center |
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Gwinnett County |
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2005 |
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19,949 |
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$ |
19.56 |
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100.0 |
% |
Spectrum Center |
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Gwinnett County |
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2005 |
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30,050 |
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26.30 |
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56.8 |
% |
Grand Pavilion (2) |
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Johns Creek |
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2005 |
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62,323 |
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18.69 |
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15.0 |
% |
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Total Retail |
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112,322 |
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$ |
21.87 |
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41.3 |
% |
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Northridge
Office Building (3) |
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Sandy Springs |
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2001 |
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37,864 |
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$ |
19.83 |
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64.5 |
% |
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(1) |
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We acquired the retail properties listed in this table from unrelated sellers. |
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(2) |
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As disclosed elsewhere in this report, the Grand Pavilion loan is in default, and we are
seeking to transfer the property securing the loan to the lender in satisfaction of the loan.
The loan is nonrecourse, and we do not intend to make any further payments on this loan. |
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(3) |
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Our corporate headquarters occupies 7,084 square feet of the Northridge office building. |
The following table provides information about the scheduled lease expirations in our
office and retail properties (excluding Grand Pavilion):
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Expiring |
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% of Total |
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Number of |
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Approximate |
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Approximate |
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Expiring |
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% of Total |
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Expiring |
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Rentable Area |
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Rentable Area |
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Annualized |
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Annualized |
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Year |
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Leases (1) |
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(Square Feet) |
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|
(Square Feet) |
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|
Base Rent |
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|
Base Rent |
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|
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2011 |
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4 |
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|
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10,956 |
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20.1 |
% |
|
$ |
190,591 |
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|
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15.6 |
% |
2012 |
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9 |
|
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13,469 |
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|
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24.8 |
% |
|
|
369,865 |
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|
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30.2 |
% |
2013 |
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3 |
|
|
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21,821 |
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40.2 |
% |
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480,292 |
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39.2 |
% |
2014 |
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2 |
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6,901 |
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12.7 |
% |
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152,840 |
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|
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12.5 |
% |
2015 |
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1 |
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|
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1,200 |
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2.2 |
% |
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31,200 |
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|
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2.5 |
% |
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|
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Total |
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19 |
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54,347 |
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|
|
100.0 |
% |
|
$ |
1,224,788 |
|
|
|
100.0 |
% |
|
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|
|
|
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|
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(1) |
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Lease expiration table does not include option periods. |
25
As described below, our operating properties and five tracts of land are located
primarily along the Georgia 400 corridor in submarkets within Fulton, Gwinnett, and Forsyth
counties. Each heading identifies the property or properties within the specified county and
submarket. We obtained population and employment data for each Atlanta submarket from the ARC.
Fulton County
Fulton County is the largest county in the Atlanta Region in terms of population, employment,
housing units, and land area. Four of our nine properties are located in north Fulton County.
Johns Creek
Grand Pavilion is a 62,323 square foot retail center located at the intersection of Kimball
Bridge Road and State Bridge Road in Johns Creek. At March 8, 2011, the property was 15.0%
occupied. For 2010, we recorded a $2,180,632 non-cash impairment loss on this retail center. At
December 31, 2010, Grand Pavilion had a carrying value of $5,373,582. As disclosed elsewhere in
this report, we are seeking to transfer the Grand Pavilion retail center to the lender as soon as
possible in satisfaction of the approximately $6,433,286 principal amount of debt secured by the
property. Because the loan is nonrecourse, we would have no further obligations to the lender for
this loan.
Perimeter Center/North Springs Area
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 Perimeter Mall and North Point Mall. The Phipps
Plaza/Lenox Mall/Buckhead area and downtown Atlantas Central Business District are also readily
accessible via Georgia 400, which connects to I-85 South near downtown Atlanta. The Perimeter
Center submarket is one of the largest office, retail, and housing submarkets in the southeastern
United States. It is Atlantas largest employment center outside of Atlantas Central Business
District and includes approximately 32 million square feet of office and retail space.
North Springs. Our North Springs land parcel is a 9.8-acre mixed-use development located on
Peachtree Dunwoody Road across the street from the North Springs commuter rail station. The
property is zoned for three individual buildings, which includes one building consisting of 236
multifamily units, a second building with 120 condominium units, and a third building consisting of
210,000 square feet of office space with 56,000 square feet of street-level retail space. In
addition, we have completed the development work and have removed approximately 137,000 cubic yards
of dirt from the property. We do not intend to begin construction on our North Springs property
during 2011. For 2010, we recorded a $2,644,963 non-cash impairment loss on this property. At
December 31, 2010, North Springs had a carrying value of $13,100,000.
Northridge Office Building. Situated on 3.9 acres on Northridge Parkway in a heavily wooded,
park-like setting, our three-story, 37,864 square foot office building serves as our corporate
headquarters. We occupy 7,084 square feet on the third floor and lease 6,351 square feet on the
third floor to Roberts Properties and Roberts Construction. We have two unaffiliated tenants
occupying part of the first and second floors. At March 8, 2011, the property was 64.5% occupied.
Northridge Multifamily Community. Our Northridge land parcel is a 10.9-acre site located
close to the GA 400 and Northridge interchange in Sandy Springs. The property is zoned for 220 one
and two-bedroom multifamily units and will provide covered parking for its residents. We own the
property free
of any encumbrances. We have purchased the land disturbance permit, completed clearing, and
commenced grading the site. Assuming we obtain the equity and construction financing we need, we
expect to start construction by the third quarter of 2011 with an estimated remaining construction
cost of approximately $21,646,000. At December 31, 2010, Northridge had a carrying value of
$6,517,178.
26
Gwinnett County
From 2000 to 2009, Gwinnett Countys population increased 28.7% to 757,300. Gwinnetts strong
transportation networks, excellent public education system, and affordable home prices have
contributed to the countys growth, with its employment base of 295,315 jobs.
Peachtree Corners Area
The Peachtree Corners area of Gwinnett County is readily accessible from I-285, I-85, and
Georgia 400, providing convenient proximity and access to both urban and suburban employment bases
and retail conveniences. The upscale 580,000 square foot Forum shopping center anchors the
shopping district located within Peachtree Corners. A major technology employment center in the
area is Technology Park Atlanta, a 500-acre master-planned office development that is home to 138
companies with 3.8 million square feet of office space.
Peachtree Parkway. Our 25.1-acre Peachtree Parkway land parcel is zoned for 292 multifamily
units. The property is located on Peachtree Parkway between the intersections of Peachtree Corners
Circle and Medlock Bridge Road, across the street from the Forum shopping center. We have
completed the development work on this property. Peachtree Parkway had a carrying value of
$10,418,758 at December 31, 2010.
Mall of Georgia Area
The Mall of Georgia is the largest mall in the Southeast at 2.2 million square feet. It is
located in Buford, approximately 30 miles northeast of Atlanta. The Mall anchors a major retail
area containing more than 3.0 million square feet of retail space.
Bassett Shopping Center. Our Bassett Shopping Center is a 19,949 square foot retail center
located across from the Mall of Georgia. The property is anchored by Bassett Furniture, which
occupies approximately 75% of the retail center. The property was 82.9% occupied at March 8, 2011.
Spectrum Shopping Center. Our Spectrum Shopping Center is a 30,050 square foot retail center
located on Highway 20 directly across from the main entrance to the Mall of Georgia. The property
was 56.8% occupied at March 8, 2011.
Forsyth County/Cumming
The city of Cumming is a rapidly growing area located north of Alpharetta approximately 30
miles north of Atlanta in Forsyth County near Georgia 400. Between 2000 and 2009, the population
of Forsyth County increased 75.5% from 98,407 to 172,700.
Bradley Park. Our Bradley Park land parcel is a 22-acre site that is zoned for 154
multifamily units. The property is located at the intersection of Georgia Highway 9 and Old
Atlanta Road in Forsyth County. This 154-unit community will be similar in size to Rosewood
Plantation and Ivey Brook, two other 150-unit communities we previously developed and sold for a
substantial return. We have completed our architectural drawings and have obtained our land
disturbance permit. Assuming we raise
the equity we need and can obtain a construction loan, we expect to begin construction on this
property by the third quarter of 2011, with an estimated remaining construction cost of
approximately $14,072,000.
27
Highway 20. Our Highway 20 land parcel is a 38.2-acre site that is zoned for 210 multifamily
units. The property is located on Georgia Highway 20 at the intersection of Elm Street, just north
of Cummings town square and three blocks from the elementary, middle, and high schools.
Summary of Debt Secured by Our Properties
See Item 7, Managements Discussion and Analysis of Financial Condition and Results of
Operation Liquidity and Capital Resources Debt Summary Schedule, for an explanation of our
current debt structure, including the following information for each loan: (a) principal balance at
December 31, 2010, (b) principal balance at its scheduled maturity date, (c) interest rate, (d)
maturity date, and (e) monthly principal and interest payment.
Possible Additional Communities to Be Developed
From time to time, Roberts Properties plans the development of other multifamily 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. In other instances, Roberts
Properties may contract to buy a property and then assign the contract to us immediately before
closing so that we can acquire it. In prior years, we have acquired properties from Mr. Roberts or
his affiliates after complying with our conflict of interest policies and our code of ethics and
business conduct. Please see Item 1, Business; Item 10, Directors, Executive Officers and
Corporate Governance; and Item 13, Certain Relationships and Related Transactions, and Director
Independence in this report for more information about these matters. We presently do not have any
plans to acquire additional properties or communities from Mr. Roberts or his affiliates.
|
|
|
ITEM 3. |
|
LEGAL PROCEEDINGS. |
None of Roberts Realty, the operating partnership, or our properties is 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. We have a disputed claim related to our
Bradley Park property in the amount of $127,124 by an architect that has gone out of business. We
dispute the amount and quality of the work performed and believe this dispute will more than likely
lead to litigation.
|
|
|
ITEM 4. |
|
(REMOVED AND RESERVED). |
28
PART II
|
|
|
ITEM 5. |
|
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES. |
Market Data for 2010 and 2009
Our common stock trades on the NYSE Amex Equities exchange under the symbol RPI. The
following table provides the quarterly high and low sales prices per share reported on the NYSE
Amex Equities exchange during 2010 and 2009, as well as the dividends declared per share during
each quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
Year |
|
Quarter Ended |
|
High |
|
|
Low |
|
|
Declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
First Quarter |
|
$ |
1.70 |
|
|
$ |
1.16 |
|
|
None |
|
|
Second Quarter |
|
|
2.61 |
|
|
|
1.25 |
|
|
None |
|
|
Third Quarter |
|
|
1.84 |
|
|
|
1.40 |
|
|
None |
|
|
Fourth Quarter |
|
|
1.55 |
|
|
|
1.25 |
|
|
None |
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
First Quarter |
|
$ |
1.40 |
|
|
$ |
0.62 |
|
|
None |
|
|
Second Quarter |
|
|
1.44 |
|
|
|
0.73 |
|
|
None |
|
|
Third Quarter |
|
|
1.74 |
|
|
|
0.75 |
|
|
None |
|
|
Fourth Quarter |
|
|
1.70 |
|
|
|
1.20 |
|
|
None |
Shareholder Data
As of March 8, 2011, there were approximately 232 holders of record of our common stock.
As of March 8, 2011, we had 10,357,831 shares outstanding. In addition, 2,181,356 shares are
reserved for issuance to unitholders from time to time upon the exercise of their redemption rights
as explained in Item 1, Business The Operating Partnership. There is no established public
trading market for the units. As of March 8, 2011, the operating partnership had 99 unitholders of
record.
Distribution Policy
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 our board of directors.
We have not paid regular quarterly dividends since the third quarter of 2001. While we have
in the past paid distributions from the net cash proceeds of property sales, we presently have no
plans to pay a distribution or to resume paying regular quarterly dividends. We expect to
distribute the net cash proceeds from any 2011 property sales to shareholders and unitholders only
to the extent necessary to maintain our status as a REIT for federal income tax purposes. Any
distributions beyond that amount will be at the sole discretion of our board of directors. 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 IRS distribution requirements.
29
Stock Repurchase Plan
Our board of directors has established a stock repurchase plan under which the company is
authorized to repurchase up to 600,000 shares of our outstanding common stock from time to time by
means of open market purchases and in solicited and unsolicited privately negotiated transactions,
depending on availability, our cash position, and price. As of March 8, 2011, we have purchased
59,638 shares and have the authority to repurchase an additional 540,362 shares under the plan. We
repurchased no shares in the fourth quarter of 2010. The plan does not have an expiration date.
Sales of Unregistered Shares
In 2009 and 2010, we did not sell any shares of stock that were not registered under the
Securities Act.
|
|
|
ITEM 6. |
|
SELECTED FINANCIAL DATA. |
Not required for smaller reporting companies.
30
|
|
|
ITEM 7. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. |
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995. The
statements in this report that are not historical facts are forward-looking statements that involve
a number of known and unknown risks, uncertainties, and other factors, all of which are difficult
or impossible to predict and many of which are beyond our control, that may cause our actual
results, performance, or achievements to be materially different from any future results,
performance, or achievements expressed or implied by those forward-looking statements. These risks
are detailed in Part I, Item 1A, Risk Factors, in this report and our other SEC filings. Please
also see the cautionary statements included in the Note Regarding Forward-Looking Statements at the
beginning of this report.
Overview
We currently own five tracts of land, three retail centers, and one office building, all of
which are located in metropolitan Atlanta, Georgia. For the year ended December 31, 2010, we had a
net loss of $11,438,394, which included $6,345,637 of non-cash charges consisting of $5,329,615 in
non-cash impairment losses on real estate assets and $1,016,022 in non-cash depreciation and
amortization expense. Additionally, in the last 12 months, we have paid down our debt by $623,159,
and as of March 8, 2011, we held $3,218,774 in cash and cash equivalents.
Recent Developments
Loan Renewals
From June 2010 through December 2010, we renewed the following four loans. As a result of
these renewals, we have now extended all of our loan maturities to 2012 and later, except for our
$8,175,000 Peachtree Parkway land loan that matures on July 31, 2011.
|
|
|
Our $3,000,000 Bradley Park land loan now matures on April 30, 2012. |
|
|
|
Our $3,315,000 Highway 20 loan now matures on April 8, 2012. |
|
|
|
Our $2,898,333 Northridge office building loan now matures on August 10, 2013. |
|
|
|
Our $8,175,000 Peachtree Parkway land loan now matures on July 31, 2011. |
Grand Pavilion Retail Center Nonrecourse Loan
We are seeking to transfer the Grand Pavilion retail center to the lender as soon as possible
in satisfaction of the approximately $6,433,286 principal amount of debt secured by the property.
Because the loan is nonrecourse, we would have no further obligations to the lender for this loan.
This transaction would move us closer to exiting the retail business, reduce the principal amount
of our debt by $6,433,286, and reduce our annual negative operating cash flow by approximately
$625,000.
Sale of Addison Place Shops Retail Center and Westside Land
On June 30, 2010, we sold our 44,293 square foot Addison Place Shops retail center and our
44-acre Westside land parcel to the lender for the $12,000,000 of debt secured by these two
properties. As a result of this sale, we have no further obligations to the lender for these two
loans. Together, the sale of
the Addison Place retail center and Westside reduced our debt by $12,000,000 and reduced our
annual negative operating cash flow by approximately $800,000.
31
Continuing Negative Operating Cash Flow and Maturing Short-Term Debt
Our primary liquidity requirements relate to (a) our continuing negative operating cash flow
and (b) our maturing short-term debt. The primary reason for our negative operating cash flow is
that we have five tracts of land totaling 106 acres that do not produce revenue but incur carrying
costs of interest expense and real estate taxes. These five tracts have a combined carrying value
of $42,936,767 and are encumbered with land loans totaling $14,400,000. We have substantial equity
in these tracts, which are an integral part of our multifamily community development and
construction program. Because the performance of our retail centers and office building is
insufficient to cover our operating expenses, including the carrying costs of our land, we expect
to continue to generate negative operating cash flow and to operate at a loss until we raise the
equity and obtain the construction loans we need to make substantial progress in constructing and
leasing up our planned multifamily communities as described in Item 1, Business, Business Plan,
beginning on page 5 above.
To address these issues, we have made substantial progress during the past 12 months in
improving our liquidity and balance sheet, and we intend to continue to do so. As noted above, the
sale of the Addison Place retail center and Westside reduced our debt by $12,000,000 and reduced
our annual negative operating cash flow by approximately $800,000, and our decision not to make any
more payments on the Grand Pavilion loan further reduced our annual negative operating cash flow by
approximately $625,000. Additionally, the transfer of the Grand Pavilion retail center to the
lender would further reduce the principal amount of our debt by $6,433,286.
We had total debt of $31,097,509 as of December 31, 2010 and have one loan that matures within
the next 12 months: our $8,175,000 Peachtree Parkway loan that matures on July 31, 2011. If we
are unable to renew this loan, we may repay all or part of it from the funds we are seeking to
raise as described in our business plan in Item 1, Business, Business Plan, beginning on page 5
above.
Results of Operations
Comparison of 2010 to 2009
The following table highlights our operating results and should be read with the consolidated
financial statements and the accompanying notes included in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
Increase |
|
|
|
2010 |
|
|
2009 |
|
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING REVENUES |
|
$ |
1,798,764 |
|
|
$ |
1,963,821 |
|
|
$ |
(165,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
797,576 |
|
|
|
965,042 |
|
|
|
(167,466 |
) |
General and administrative expenses |
|
|
1,866,594 |
|
|
|
1,890,475 |
|
|
|
(23,881 |
) |
Impairment loss on real estate assets |
|
|
4,825,595 |
|
|
|
12,226,412 |
|
|
|
(7,400,817 |
) |
Depreciation and amortization expense |
|
|
783,997 |
|
|
|
718,118 |
|
|
|
65,879 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
8,273,762 |
|
|
|
15,800,047 |
|
|
|
(7,526,285 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(6,474,998 |
) |
|
|
(13,836,226 |
) |
|
|
(7,361,228 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE |
|
|
(4,444,086 |
) |
|
|
(1,299,455 |
) |
|
|
3,144,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS |
|
$ |
(10,919,084 |
) |
|
$ |
(15,135,681 |
) |
|
$ |
(4,216,597 |
) |
|
|
|
|
|
|
|
|
|
|
32
Loss from continuing operations decreased $4,216,597 in 2010 when compared to 2009. We
recorded a non-cash impairment loss of $4,825,595 in 2010 compared to a non-cash impairment loss of
$12,226,412 in 2009. This $7,400,817 difference in non-cash impairment loss was the primary cause
for the decrease in loss from continuing operations for 2009, offset by a $3,144,631 increase in
other expense, which was $4,444,086 in 2010 compared to $1,299,455 in 2009. This increase was
primarily due to the $2,989,396 loss on early extinguishment of debt on the sale of Westside. We
explain below the major variances between 2009 and 2010.
Total operating revenues decreased $165,057 from $1,963,821 in 2009 to $1,798,764 in 2010.
This decrease was primarily due to lower occupancy at our retail centers.
Property operating expenses consisting of personnel, utilities, repairs and maintenance,
real estate taxes, marketing, insurance, and other decreased $167,466 from $965,042 in 2009 to
$797,576 in 2010. This decrease was due primarily to a $169,688 decrease in property taxes, offset
by a net increase in personnel and repairs and maintenance expense of $34,387.
During 2009, we recorded $12,226,412 in non-cash impairment losses consisting of:
|
|
|
a $3,975,273 non-cash impairment loss on our North Springs land; |
|
|
|
a $1,411,000 non-cash impairment loss on our Grand Pavilion retail center; |
|
|
|
a $3,754,907 non-cash impairment loss on our Peachtree Parkway land; |
|
|
|
a $2,385,284 non-cash impairment loss on our Northridge land; and |
|
|
|
a $699,948 non-cash impairment loss on our Bassett retail center. |
During 2010, we recorded $4,825,595 in non-cash impairment losses, consisting of a $2,644,963
non-cash impairment loss on our North Springs land; and a $2,180,632 non-cash impairment loss on
our Grand Pavilion retail center.
Other expense increased $3,144,631 from $1,299,455 in 2009 to $4,444,086 in 2010. This
increase primarily consisted of:
|
|
|
A $2,989,396 loss on the extinguishment of debt from the sale of Westside. |
|
|
|
A $115,074 increase in interest expense from $1,255,794 for 2009 to $1,370,868
for 2010. This increase was due to $59,750 of interest related to the Bradley Park
property being expensed in 2010 rather than capitalized, along with higher interest
rates on some of our loans. This increase was partially offset by the sale of
Westside and a $623,159 reduction in the outstanding principal amount of our loans
during 2010. |
|
|
|
An $80,118 decrease in interest income from $121,901 in 2009 to $41,783 in 2010.
This decrease was due primarily to a reduction in our cash balances over the past
12 months and lower interest rates earned on those cash balances. |
33
Liquidity and Capital Resources
Overview
At December 31, 2010, we had $68,179,333 in total assets, of which $3,716,393 was cash and
cash equivalents. In addition, we held $1,229,040 in restricted cash. Of our restricted cash at
December
31, 2010, $436,796 was reserved for the payment of interest and certain other costs on
specific outstanding loans, and $507,386 was a certificate of deposit pledged to secure a letter of
credit for tenant improvements at the Spectrum retail center. As of March 8, 2011, we held
$3,218,774 in cash and cash equivalents and $1,142,003 in restricted cash. Of our restricted cash
balance, $311,636 was reserved for the payment of interest and certain other costs on specific
outstanding loans, and $507,795 is the Spectrum certificate of deposit. We believe that the most
important uses of our capital resources will be to provide working capital to enable us to cover
our negative operating cash flow as we pursue our business plan; and to invest in the development
of two new multifamily communities (Northridge and Bradley Park) to enable us to raise the required
debt and equity to construct these communities. We currently estimate that we will need
approximately $35,718,000 in debt and equity to complete the construction of our Northridge and
Bradley Park multifamily communities. Our current cash resources are inadequate to meet these
needs. To address these needs, we are considering the alternatives described in Item 1, Business
Business Plan, beginning on page 5 above.
We continue to focus on improving our liquidity and balance sheet. In that regard, the sale
of the Addison Place retail center and Westside on June 30, 2010 reduced our debt by $12,000,000
and reduced our annual negative operating cash flow by approximately $800,000, and our decision not
to make any more payments on the Grand Pavilion loan reduced our annual negative operating cash
flow by approximately $625,000. Additionally, the transfer of the Grand Pavilion retail center to
the lender would further reduce the principal amount of our debt by $6,433,286.
Our primary liquidity requirements relate to our continuing negative operating cash flow and
our maturing short-term debt. As of March 8, 2011, we have one loan totaling $8,175,000 that
matures within the next 12 months. That loan matures on July 31, 2011.
We are currently generating negative operating cash flow, and we expect to continue to
generate negative operating cash flow and to operate at a loss for the foreseeable future. The
three primary reasons for our negative operating cash flow are:
|
|
|
We own five tracts of land totaling 106 acres with an aggregate carrying value
of $42,936,767 that secure land loans totaling $14,400,000. Because land does not
generate revenue, a substantial portion of our negative cash flow is a result of
the carrying costs (interest expense and real estate taxes) on our land. |
|
|
|
Due to the continued weakness in the national and local economy, two of our
three retail centers and our office building are producing negative cash flow, and
the other retail center is positively cash flowing. |
|
|
|
Our general and administrative expenses for 2010 were $1,866,594 and included
the costs of being an SEC reporting company and having our shares listed on the
NYSE Amex Equities exchange. These costs include accounting and related fees to
our independent auditor as well as to another accounting firm required for our
compliance with Section 404(a) of the Sarbanes-Oxley Act, legal fees, listing fees,
director compensation, and directors and officers insurance premiums. We estimate
that these additional costs related to being a publicly traded company are
approximately $515,000 per year. |
Short- and Long-Term Liquidity Outlook
Our operating revenues are not adequate to provide short-term (12 months) liquidity for the
payment of all direct rental operating expenses, interest, and scheduled amortization of principal
on our mortgage debt. We are currently using our cash balance of $3,218,774 to meet our short-term
liquidity
requirements, including general and administrative expenses, principal reductions on our debt,
and improvements at our existing properties. With respect to the $8,175,000 in debt that matures
in the next 12 months, we intend to refinance this loan with the same lender or with another
lender. We may be required to repay part of the outstanding principal of this loan in connection
with a refinancing. To fund such repayment, we may use cash from one or more of the following
sources: our existing cash, contributions from a joint venture partner, net proceeds from the sale
of another property, or equity we raise in a private offering. (See Item 1, Business Business
Plan, beginning on page 5 above.) We expect to meet our long-term liquidity requirements,
including future developments and debt maturities, from the proceeds of construction and permanent
loans, the sale of properties, and the equity we raise in a private offering.
34
Comparison of 2010 to 2009
Cash and cash equivalents decreased $4,189,378 during 2010 compared to a decrease of
$8,549,224 in 2009. The respective changes in cash are described below.
Net cash used in operating activities in 2010 was $2,353,933 compared to $2,128,179 used
during 2009. This increase of $225,754 was primarily due to a $17,599 decrease in cash used by
discontinued operations from the Addison Place retail center, which we sold in 2010; and a $243,353
increase in cash used by operating activities for continuing operations.
Net cash used in investing activities was $1,093,836 during 2010 compared to $2,916,297 of
cash used during 2009. This change was primarily due to:
|
|
|
$90,755 decrease in cash used in discontinued operations due to the sale of the
Addison Place retail center; |
|
|
|
a $1,138,270 decrease in cash used for development and construction of real
estate assets; |
|
|
|
a $451,106 decrease in the change in restricted cash; and |
|
|
|
a $57,904 decrease in the change of accounts payable and accrued expenses
related to investing activities. |
Net cash used in financing activities was $741,609 for 2010 compared to $3,504,748 of cash
used during 2009. The decrease in cash used resulted from:
|
|
|
a $2,360,397 decrease in distributions paid to shareholders and unitholders (we
did not make any distributions in 2010 compared to $2,360,397 in 2009); |
|
|
|
a $365,193 decrease in repayment of debt (we repaid $988,352 of debt during 2009
compared to $623,159 in 2010); and |
|
|
|
a decrease of $55,446 in the purchase of treasury stock (we did not purchase any
shares of treasury stock in 2010 compared to the purchase of $55,446 of treasury
stock in 2009). |
Debt Summary
The table and accompanying footnotes on the following page explain our debt structure,
including for each loan the principal balance at December 31, 2010 and at its scheduled maturity
date, the interest rate, the amount of the monthly principal and interest payment, and the maturity
date. For each loan, the operating partnership, or its wholly owned subsidiary, is the borrower
and Roberts Realty is the guarantor. The amount shown in the column titled Balance at Maturity
assumes we make any required principal payments prior to maturity.
35
ROBERTS REALTY INVESTORS, INC.
DEBT SUMMARY SCHEDULE
(Listed in order of maturity by type of loan)
As of December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
Maturity |
|
Balance at |
|
|
Monthly |
|
|
Dec. 31, 2010 |
|
|
|
Interest Terms |
|
Rate (1) |
|
|
Date |
|
Maturity |
|
|
Payment (1) |
|
|
Balance |
|
|
|
Permanent Mortgage Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Pavilion Shopping Center (2)(3)(5) |
|
Fixed-rate permanent |
|
|
5.43 |
% |
|
07/11/13 |
|
$ |
6,016,331 |
|
|
$ |
40,565 |
|
|
$ |
6,433,286 |
|
Northridge Office Building (4) |
|
LIBOR plus 300 b. p. |
|
|
4.50 |
% |
|
08/10/13 |
|
$ |
2,445,000 |
|
|
$ |
24,409 |
|
|
|
2,858,333 |
|
Spectrum Shopping Center (2)(5) |
|
Fixed-rate permanent |
|
|
5.68 |
% |
|
05/01/14 |
|
|
4,545,747 |
|
|
|
31,273 |
|
|
|
4,881,585 |
|
Bassett Shopping Center (2)(5) |
|
Fixed-rate permanent |
|
|
8.47 |
% |
|
10/01/19 |
|
|
1,943,344 |
|
|
|
21,853 |
|
|
|
2,524,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
$ |
14,950,422 |
|
|
$ |
118,100 |
|
|
$ |
16,697,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peachtree Parkway (6) |
|
LIBOR plus 300 b. p. |
|
|
5.00 |
% |
|
07/31/11 |
|
$ |
8,175,000 |
|
|
$ |
35,198 |
|
|
$ |
8,175,000 |
|
Highway 20 (7) |
|
Prime rate |
|
|
5.50 |
% |
|
04/08/12 |
|
|
2,955,000 |
|
|
|
45,384 |
|
|
|
3,225,000 |
|
Bradley Park (8) |
|
LIBOR plus 300 b. p. |
|
|
4.50 |
% |
|
04/30/12 |
|
|
3,000,000 |
|
|
|
11,625 |
|
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
$ |
14,130,000 |
|
|
$ |
92,207 |
|
|
$ |
14,400,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Totals |
|
|
|
|
|
|
|
|
|
$ |
29,080,422 |
|
|
$ |
210,307 |
|
|
$ |
31,097,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The interest rates and monthly payments are as of December 31, 2010. |
|
(2) |
|
The lender acts as trustee for the registered holders of commercial mortgage-backed
securities. |
|
(3) |
|
As disclosed elsewhere in this report, the Grand Pavilion loan is in default, and we
are seeking to transfer the property securing the loan to the lender in satisfaction of
the loan. The loan is nonrecourse, and we do not intend to make any further payments on
this loan. |
|
(4) |
|
This loan has an interest rate floor of 4.50% and the monthly payment on this loan
consists of a fixed principal amount of $13,333 per month plus interest at the stated
rate on the unpaid balance. |
|
(5) |
|
This loan has a 30-year amortization schedule and additional monthly payments are
required to sustain escrow reserves. |
|
(6) |
|
This loan has an interest rate of LIBOR plus 3.00%, with a floor of 5.0%. |
|
(7) |
|
This loan bears interest at the prime rate with a floor of 5.50%. |
|
(8) |
|
This loan has an interest rate floor of 4.50%. |
36
Debt Maturities
Our existing loans will be amortized with scheduled monthly payments, as well as balloon
payments at maturity, through 2019 as summarized below:
Debt Maturity Schedule
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Principal |
|
|
Nonrecourse |
|
Principal |
|
|
Recourse |
|
|
Principal |
|
|
Payments on |
|
|
Loans with |
|
Payments |
|
|
Loans with |
|
|
Payments |
|
|
Nonrecourse |
|
|
Balloon |
|
on Recourse |
|
|
Balloon |
Year |
|
Per Year |
|
|
(CMBS) Loans |
|
|
Payments |
|
Loans |
|
|
Payments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 |
|
$ |
8,931,451 |
|
|
$ |
326,451 |
|
|
|
|
$ |
8,605,000 |
|
|
Peachtree Pkwy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
|
|
6,412,738 |
|
|
|
297,738 |
|
|
|
|
|
6,115,000 |
|
|
Highway 20, Bradley Park |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013 |
|
|
8,795,313 |
|
|
|
6,256,980 |
|
|
Grand Pavilion(1) |
|
|
2,538,333 |
|
|
Northridge Office |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2014 |
|
|
4,644,299 |
|
|
|
4,644,299 |
|
|
Spectrum |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 |
|
|
66,124 |
|
|
|
66,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter |
|
|
2,247,584 |
|
|
|
2,247,584 |
|
|
Bassett |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
31,097,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As discussed elsewhere in this report, the Grand Pavilion loan is in default, and we are
seeking to transfer the property securing the loan to the lender in satisfaction of the loan.
The loan is nonrecourse, and we do not intend to make any further payments on this loan. The
table above reflects the original July 11, 2013 maturity date of the Grand Pavilion loan. If
this loan were shown as payable as of January 1, 2011, the principal payments in 2011 would
increase by $6,239,318, while principal payments would decrease by $145,992 in 2012 and
$6,093,326 in 2013. |
Short-Term Debt
We have a total of $8,175,000 in debt that matures on or before March 8, 2012. See Short- and
Long-Term Liquidity Outlook above for how we intend to refinance or repay these loans.
Long-Term Debt
With respect to the debt that matures after March 8, 2012, we anticipate that we will
refinance the principal balance of that debt at maturity and that we will not have funds on hand
sufficient to repay it at maturity. See Short- and Long-Term Liquidity Outlook above for how we
intend to refinance or repay these long-term loans when they mature.
Effect of Floating Rate Debt
We have four loans that bear interest at floating rates. These loans had an aggregate
outstanding balance of $17,158,333 at March 8, 2011. Loans totaling $13,993,333 bear interest at
300 basis points over the 30-day LIBOR with interest rate floors of 4.50% to 5.00%, and a
$3,165,000 loan bears interest
at the prime rate with an interest rate floor of 5.50%. Changes in LIBOR and the prime rate
that increase the interest rates on these loans above their respective interest rate floors will
increase our interest expense. For example, a 1.0% increase in the interest rates on these loans
above their respective interest rate floors would increase our interest expense by approximately
$171,583 per year and reduce our liquidity and capital resources by that amount.
37
Contractual Commitments
Roberts Properties provides us with various development services that include market studies,
business plans, design, finish selection, interior design, and construction administration. We
enter into construction contracts in the normal course of business with Roberts Construction and
currently have five ongoing construction contracts with Roberts Construction. The terms of the
construction contracts are cost plus 10% (5% profit and 5% overhead).
No Quarterly Dividends
We have not paid regular quarterly dividends since the third quarter of 2001, and we have no
plans to resume paying regular quarterly dividends for the foreseeable future. We will make
distributions, however, to the extent required to maintain our status as a REIT for federal income
tax purposes. We made cash distributions of $2,360,397 in 2009 for this purpose following the sale
of our 403-unit Addison Place multifamily community for $60,000,000 in June 2008.
Critical Accounting Policies and Estimates
We prepare our financial statements in accordance with U.S. generally accepted accounting
principles. See Recent Accounting Pronouncements below for a summary of recent accounting
pronouncements and the expected impact on our financial statements. A critical accounting policy
is one that requires significant judgment or difficult estimates, and is important to the
presentation of our financial condition or results of operations. Because we are in the business
of owning, operating, and developing multifamily communities, retail centers, and other commercial
properties, our critical accounting policies relate to cost capitalization and asset impairment
evaluation. The following is a summary of our overall accounting policy in these areas.
Cost Capitalization
We state our real estate assets at the lower of depreciated cost or fair value, if deemed
impaired. We expense ordinary repairs and maintenance as incurred. We capitalize and depreciate
major replacements and betterments 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 real estate
assets. We expense all internal costs associated with the acquisition and operation of these
assets to general and administrative expense in the period we incur these costs. For our real
estate assets, we capitalize interest on qualifying construction expenditures in accordance with
FASB Accounting Standards Codification (ASC) Topic 835-20, Interest Capitalization of Interest.
During the development and construction of a property, we capitalize related interest costs, as
well as other carrying costs such as real estate taxes and insurance. We begin to expense these
items as the property becomes substantially complete and available for initial occupancy. During
the lease-up period, as a property transitions from initial occupancy to stabilized occupancy,
revenues are generally insufficient to cover interest, carrying costs and operating expenses,
resulting in an operating deficit. The size and duration of
this lease-up deficit depends on the rate at which construction is completed, the pace at
which we lease the property, and what rent levels we achieve.
38
Asset Impairment Evaluation
We periodically evaluate our real estate assets, on a property-by-property basis, for
impairment when events or changes in circumstances indicate the carrying amount of an asset may not
be recoverable in accordance with FASB ASC Topic 360-10, Property, Plant, and Equipment Overall.
FASB ASC Topic 360-10 requires impairment losses to be recorded on long-lived assets used in
operations and land parcels held for use 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. The expected future cash flows depend on estimates made by management, including
(1) changes in the national, regional, and/or local economic climates, (2) rental rates, (3)
competition, (4) operating costs, (5) tenant occupancy, (6) holding period, and (7) an estimated
construction budget. A change in the assumptions used to determine future economic events could
result in an adverse change in the value of a property and cause an impairment to be recorded. Due
to uncertainties in the estimation process, actual results could differ from those estimates. Our
determination of fair value is based on a discounted future cash flow analysis, which incorporates
available market information as well as other assumptions made by our management. Because the
factors we use in generating these cash flows are difficult to predict and are subject to future
events that may alter our assumptions, we may not achieve the discounted or undiscounted future
operating and residual cash flows we estimate in our impairment analyses or those established by
appraisals, and we may be required to recognize future impairment losses on our properties held for
use.
During 2010, we determined that the carrying amount of the Grand Pavilion retail center was
not recoverable as a result of a change in the estimated holding period due to the current economic
and market conditions. Accordingly, we recorded a non-cash impairment loss of $2,180,632 on the
Grand Pavilion retail center during 2010. In addition, we recorded a non-cash impairment loss of
$504,020 on the Addison Place Shops retail center. During 2009, we recorded non-cash impairment
losses of $1,411,000 on the Grand Pavilion retail center, $1,884,922 on the Addison Place retail
center, and $699,948 on the Bassett retail center. As a result of the sale of the Addison Place
retail center on June 30, 2010, the non-cash impairment losses on the Addison Place retail center
during 2010 and 2009, respectively, are reflected in loss from discontinued operations.
During 2010, we determined that the carrying amount of the North Springs property was not
recoverable due to the economic and real estate market conditions at that time. The determination
of the fair value of the North Springs property was based on a discounted cash flow analysis
assuming a future sale of the property at the estimated value of the propertys office, retail,
condominium, and multifamily unit density, as well as the value of the entitlements, development
work, and other improvements that have been made to the property. As a result of this analysis,
during 2010, we recorded a non-cash fair value adjustment of $2,644,963 on the North Springs
property. For 2009, we recognized non-cash fair value adjustments related to our land parcels of
$2,385,284 on the Northridge property, $3,975,273 on the North Springs property, and $3,754,907 on
the Peachtree Parkway property.
Recent Accounting Pronouncements
Please refer to Note 2, Summary of Significant Accounting Policies Recent Accounting
Pronouncements, in the notes to the consolidated financial statements included in this report for a
discussion of other recent accounting standards and pronouncements.
39
Stock Repurchase Plan
We have a stock repurchase plan under which we are authorized to repurchase up to 600,000
shares of our outstanding common stock. As of March 8, 2011, we have purchased 59,638 shares and
have the authority to repurchase an additional 540,362 shares under the plan. For more information
about this plan, see Item 5, Market for Registrants Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities Stock Repurchase Plan, above.
|
|
|
ITEM 7A. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. |
Not required for smaller reporting companies.
40
|
|
|
ITEM 8. |
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. |
Our financial statements are listed under Item 15(a) and are filed as part of this annual
report on the pages indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
F-1 |
|
|
|
|
|
|
Consolidated Financial Statements as of December 31, 2010 and
2009 and for the Years Ended December 31, 2010 and 2009: |
|
|
|
|
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
|
|
|
|
F-3 |
|
|
|
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
|
|
|
F-5 |
|
|
|
|
|
|
|
|
|
F-7 |
|
|
|
|
|
|
|
|
|
ITEM 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. |
Not applicable.
|
|
|
ITEM 9A. |
|
CONTROLS AND PROCEDURES. |
Disclosure Controls and Procedures
Based on our managements evaluation, with the participation of our Chief Executive Officer
and Chief Financial Officer, as of December 31, 2010, the end of the period covered by this report,
our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls
and procedures (as defined in Rule 13a-15(e) under the Exchange Act) were effective to ensure that
information required to be disclosed by us in reports that we file or submit under the Exchange Act
is recorded, processed, summarized, and reported within the time periods specified in the rules and
forms of the SEC and is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting and for the assessment of the effectiveness of internal control over financial
reporting. Our internal control over financial reporting is a process designed, as defined in Rule
13a-15(f) under the Exchange Act, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial statements for external purposes
in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Projections of any evaluation of effectiveness to future periods are
subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
41
In connection with the preparation of our annual consolidated financial statements, our
management assessed the effectiveness of our internal control over financial reporting as of
December 31, 2010. Management based this assessment on the criteria established in Internal
Control over Financial Reporting Guidance for Smaller Public Companies issued by the Committee
of Sponsoring Organizations of the Treadway Commission (which is sometimes referred to as the COSO
Framework). Managements assessment included an evaluation of the design of our internal control
over financial reporting and testing of the operational effectiveness of our internal control over
financial reporting. Based on this assessment, our management has concluded that our internal
control over financial reporting was effective as of December 31, 2010.
This annual report on Form 10-K does not include an attestation report of our independent
registered public accounting firm regarding internal control over financial reporting. Under
applicable SEC rules, our managements report is not subject to attestation by our independent
registered public accounting firm.
Changes in Internal Controls
There was no change in our internal control over financial reporting that occurred during the
quarter ended December 31, 2010 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.
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.
|
|
|
ITEM 9B. |
|
OTHER INFORMATION. |
None.
42
PART III
|
|
|
ITEM 10. |
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. |
Directors and Executive Officers
The following table provides information about our directors and executive officers as of the
date of this report.
|
|
|
|
|
|
|
|
|
|
|
Term as |
|
|
|
|
|
|
Director |
|
|
Name |
|
Age |
|
Expires |
|
Position |
|
|
|
|
|
|
|
Charles S. Roberts |
|
64 |
|
2012 |
|
Chairman of the Board, Chief Executive Officer, and President |
|
|
|
|
|
|
|
Charles R. Elliott |
|
57 |
|
2012 |
|
Director, Chief Financial Officer, Secretary, and Treasurer |
|
|
|
|
|
|
|
Wm. Jarell Jones |
|
62 |
|
2011 |
|
Director, Chairman of Audit Committee and Chairman of Nominating and Governance Committee |
|
|
|
|
|
|
|
John L. Davis |
|
45 |
|
2013 |
|
Director, Chairman of the Compensation Committee |
Biographical Information
Charles S. Roberts has served as our Chairman of the Board, Chief Executive Officer, and
President since he founded the company in 1994. Mr. Roberts owns, directly or indirectly, all of
the outstanding stock of, and is the president and sole director of, each of the Roberts Companies.
In 1970, Mr. Roberts established Roberts Properties, Inc. to develop, construct, and manage
multifamily residential communities. Mr. Roberts and Roberts Properties have won numerous local,
regional, and national awards for the development of these communities. Mr. Roberts has been a
national speaker on the topic of developing upscale multifamily housing and has been recognized as
a leader in this industry. Roberts Properties Management, Inc. was recognized as the Property
Management Company of the Year by the National Association of Home Builders. On a regional level,
Roberts Properties has been awarded eight times the prestigious Southeast Builders Conference
Aurora Award for the best rental apartment community. On a national level, Roberts Properties was
twice awarded the prestigious Pillars of the Industry Award from the National Association of Home
Builders for the best upscale apartments and was awarded the coveted Golden Aurora Award for best
overall development in the Southeast.
Mr. Roberts served as chairman of the board of directors of Big Trees Forest Preserve, a
30-acre urban forest in Sandy Springs, Georgia dedicated to conservation, preservation, and
education, from 2006 to 2009. During this period, he personally donated over $100,000 to the
Preserve in support of its mission.
As a result of his decades of experience in design, development, and construction, coupled
with his knowledge of architectural history, Mr. Roberts was appointed as a commissioner to the
Landmarks
Preservation Commission of the historic Town of Palm Beach, Florida. He served as a Landmarks
Preservation Commissioner from 2007 through 2010.
43
Mr. Roberts has worked with numerous charitable organizations and has participated in a wide
variety of philanthropic endeavors. He has been actively involved with the Cystic Fibrosis
Foundation for more than 20 years and served as Auction Chairman of the 2008 Sixty-Five Roses Ball,
which raised more than $500,000. Mr. Roberts has also been a strong sponsor of the Unicorn
Childrens Foundation, which has raised more than $150,000 from his donations in kind. Mr. Roberts
was a founding sponsor of the Fulton County Beat the Odds program, which provided college
scholarships and other assistance to Fulton County high school students who triumphed over lifes
hardships to excel both academically and personally. As a lifelong supporter of the YMCA, Mr.
Roberts donated $75,000 for the construction of an Aerobics Center at the Alpharetta, Georgia YMCA.
The nominating and governance committee of our board of directors has concluded that Mr.
Roberts should serve as a director because he is our founder and largest shareholder, he has served
as our Chairman of the Board, Chief Executive Officer, and President since 1994, and he has 40
years of experience in real estate development, construction, and management, particularly with
respect to multifamily communities.
John L. Davis, a director since November 2008, is the President of Bravo Realty Consulting,
Inc., a company that he formed in 2007 to provide consulting services for small and middle market
real estate companies looking for debt and equity. Mr. Davis has 20 years of experience in the
commercial banking industry. From May 2005 to November 2007, he served as a Senior Director of
Wrightwood Capital, a structured debt and equity provider. Prior to 2005, he was a Senior Vice
President with Compass Bank for 10 years. Before he joined Compass Bank, he was a banker for seven
years with Hibernia Bank in New Orleans. During his tenure with Compass Bank, Mr. Davis was our
relationship manager and was involved in all facets of our business relationship with Compass Bank.
Mr. Davis is also a principal in several entities that own and operate various healthcare
businesses, primarily skilled nursing facilities and geriatric-psychiatric hospitals.
The nominating and governance committee of our board of directors has concluded that Mr. Davis
should serve as a director because he has extensive banking experience, particularly as a real
estate lender. This experience is particularly valuable to us as we seek to extend our current
financing and obtain new financing to construct new multifamily communities. The committee also
values his extensive business experience and his substantial knowledge about our business and
properties. The committee also took into account that he is independent under SEC Rule 10A-3 and
under Section 803A of the NYSE Amex Equities exchange listing standards and that his financial
expertise qualifies him to serve on our audit committee.
Charles R. Elliott served as a director from October 1994 to February 1995 and became a
director again in 2000. Effective May 31, 2006, Mr. Elliott again became our Chief Financial
Officer, Secretary, and Treasurer. Previously, he was our Secretary and Treasurer from our
inception until July 15, 2002, and our Chief Financial Officer from April 1995 until July 15, 2002,
when he became our Senior Vice President Real Estate. He left Roberts Realty as a full-time
employee on August 30, 2002 and returned on a full-time basis from February 17, 2003 to September
30, 2003 as our Chief Operating Officer. Mr. Elliott joined Roberts Properties in August 1993 as
Chief Financial Officer and served in that role until April 1995, when he joined Roberts Realty as
our Chief Financial Officer. He worked for Hunneman Real Estate Corporation in Boston,
Massachusetts from 1979 to 1993. He holds an undergraduate degree in Accounting and a masters
degree in Finance.
44
The nominating and governance committee of our board of directors has concluded that Mr.
Elliott should serve as a director because of his experience in serving as our Chief Financial
Officer for much of our existence and his expertise in real estate finance, acquisitions, and
dispositions, which we believe will continue to be particularly valuable to us in the current
economic climate.
Wm. Jarell Jones, a director since October 1994, is an attorney and has practiced law with the
firm of Wm. Jarell Jones, P.C., in Georgia since November 1993, with an office in Statesboro,
Georgia through 2007 and with an office in St. Simons from 2002 until the present. Mr. Jones is
also a Certified Public Accountant, and in 1976 he formed the public accounting firm of Jones &
Kolb in Atlanta, Georgia and served as Senior Tax Partner and Co-Managing Partner until December
1988. In 1990, Mr. Jones moved to Statesboro and practiced law with the firm of Edenfield, Stone &
Cox until November 1992 and then with the firm of Jones & Rutledge from November 1992 until
November 1993. Mr. Jones was formerly a director for six years and the Chairman for two years of
the Downtown Statesboro Development Authority. Mr. Jones is also the President and sole
shareholder of Palmetto Realty Company, a real estate development and brokerage company primarily
involved in the development of single-family residential lots in coastal South Carolina and
Georgia. Palmetto Realty is a registered real estate broker in Georgia and South Carolina and
serves as a qualified intermediary and exchange accommodation titleholder for like-kind exchanges.
Mr. Jones is also a partner and investor in several real estate developments primarily involved in
residential lot and home sales in coastal Georgia and South Carolina. Mr. Jones personally
guaranteed the loans for these developments along with his other partners who were the real estate
developers of these developments. With the collapse of the residential real estate market over the
past three years, particularly in those areas, the developments were unable to generate sufficient
cash flow to maintain the properties and keep the development/construction loans current.
Additionally, the market value of all of these properties plummeted far below the amount of the
debt and the real estate developers were unable to secure refinancing of any of these properties or
work out any suitable modifications with the lenders. As a result of these difficulties and his
personal guaranties of the loans, Mr. Jones personally filed a bankruptcy petition under Chapter 11
of the United States Bankruptcy Code on September 2, 2010 in the United States Bankruptcy Court for
the Southern District of Georgia.
The nominating and governance committee of our board of directors has concluded that Mr. Jones
should serve as a director because of his legal and accounting expertise and his service as
chairman of several committees of the board of directors, including the audit committee. The
committee also took into account that Mr. Jones is independent under SEC Rule 10A-3 and under
Section 803A of the NYSE Amex Equities exchange listing standards and is an audit committee
financial expert.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires Roberts Realtys directors,
executive officers, and persons who own beneficially more than 10% of our outstanding common stock
to file with the SEC initial reports of ownership and reports of changes in their ownership of our
common stock. Directors, executive officers and greater than 10% shareholders are required by SEC
regulations to furnish us with copies of the forms they file. To our knowledge, based solely on a
review of the copies of such reports furnished to us, during the fiscal year ended December 31,
2010, our directors, executive officers and greater than 10% shareholders complied with all
applicable Section 16(a) filing requirements.
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 NYSE Amex Equities exchange and the Sarbanes-Oxley Act. Our code is
designed to deter wrongdoing and to promote:
|
|
|
honest and ethical conduct, including the ethical handling of corporate
opportunities and actual or apparent conflicts of interest between personal and
professional relationships; |
45
|
|
|
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; |
|
|
|
compliance with applicable governmental laws, rules, and regulations; |
|
|
|
protection and proper use of company assets; |
|
|
|
equal employment opportunities and prohibition of discrimination or harassment; |
|
|
|
the prompt internal reporting of violations of the code to an appropriate person or
persons identified in the code; and |
|
|
|
accountability for adherence to the code. |
We will provide a copy of the code of business conduct and ethics free of charge to any person who
requests it in writing. Please direct your request to our Chief Financial Officer, 450 Northridge
Parkway, Suite 302, Atlanta, Georgia 30350.
Audit Committee
The audit committee of our board of directors is composed of Mr. Jones, its chairman, and Mr.
Davis. The board has determined that Mr. Jones is an audit committee financial expert as defined
under applicable SEC rules and is independent under the listing standards of the NYSE Amex
Equities exchange, on which the shares of our common stock are listed.
46
|
|
|
ITEM 11. |
|
EXECUTIVE COMPENSATION. |
Compensation of Executive Officers
Our executive officers are Charles S. Roberts, our Chairman of the Board, Chief Executive
Officer, and President, and Charles R. Elliott, our Chief Financial Officer, Secretary, and
Treasurer. Biographical information for Mr. Roberts and Mr. Elliott is included in Item 10 above.
Under applicable SEC rules, Mr. Roberts and Mr. Elliott are our named executive officers.
Neither of our executive officers has an employment agreement.
Summary Compensation Table for 2010 and 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal |
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Total |
|
Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
|
Charles S. Roberts, |
|
|
2010 |
|
|
|
225,000 |
(1) |
|
|
240,000 |
(2) |
|
|
465,000 |
|
Chief Executive Officer, |
|
|
2009 |
|
|
|
225,000 |
(1) |
|
|
|
|
|
|
225,000 |
|
President, and Chairman
of the Board |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Elliott, |
|
|
2010 |
|
|
|
18,805 |
(3) |
|
|
|
|
|
|
18,805 |
|
Chief Financial Officer, |
|
|
2009 |
|
|
|
49,990 |
(3) |
|
|
|
|
|
|
49,990 |
|
Secretary, and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We do not compensate Mr. Roberts for his service as a director. |
|
(2) |
|
On December 20, 2010, the compensation committee of our board of directors approved the
payment of a $115,000 bonus for the specific achievements accomplished in 2009 and a $125,000
bonus for the achievements accomplished in 2010. The compensation committee took into account
Mr. Roberts efforts in leading (a) our renewals and extensions of various maturing loans in
the total amount of $17.4 million in a volatile credit environment and a deteriorating real
estate market and (b) our sale of a retail center and a land parcel for the $12.0 million of
debt secured by those properties. The compensation committee also considered that Mr. Roberts
has not received an increase in his annual salary since January 2007, and that we have never
provided him with any employee benefits such as medical and life insurance, retirement plan
contributions, deferred compensation, vacations, or holidays. Mr. Roberts also does not
receive any auto allowance or reimbursement for mileage. |
|
(3) |
|
We pay Mr. Elliott $70 per hour for his service as our Chief Financial Officer, Secretary,
and Treasurer. Mr. Elliott receives no employee benefits, such as medical and life insurance,
retirement plan contributions, deferred compensation, vacation or holidays, and we pay him
only for the actual number of hours he works. In addition, Mr. Elliott received our standard
director fees of $18,000 during each of 2010 and 2009, which amounts are included in the
salary amounts shown in the table. |
47
Compensation of Directors
The following table summarizes the compensation we paid to our non-employee directors in 2010.
The table includes any person who served during 2010 as a director who was not a named executive
officer, even if he is no longer serving as a director.
Director Compensation for 2010
|
|
|
|
|
|
|
|
|
|
|
Fees Earned |
|
|
|
|
|
|
or Paid in Cash |
|
|
Total |
|
Name |
|
($) |
|
|
($) |
|
|
|
|
|
|
|
|
|
|
John L. Davis (1) |
|
|
18,000 |
|
|
|
18,000 |
|
|
|
|
|
|
|
|
|
|
Wm. Jarell Jones |
|
|
30,000 |
|
|
|
30,000 |
|
|
|
|
(1) |
|
Mr. Davis earned $24,000 for additional work he performed as a director in 2009 that we
paid to him on January 29, 2010. |
During 2010, we paid our directors other than Mr. Roberts an annual fee of $18,000 for
attendance, in person or by telephone, at meetings of the board of directors and its committees.
We paid additional compensation of $1,000 per month to Mr. Jones for serving as the chairman of the
audit committee, the nominating and governance committee, and, during his tenure in that role, the
compensation committee. In addition, we reimburse our directors for reasonable travel expenses and
out-of-pocket expenses incurred in connection with their activities on our behalf. These
reimbursements are not reflected in the table above.
48
|
|
|
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS. |
Ownership of Common Stock and Units
The table on the following page describes the beneficial ownership of shares of our common
stock as of March 8, 2011 for:
|
|
|
each person or entity known by us to be the beneficial owner of more than 5% of the
outstanding shares of common stock; |
|
|
|
each director and our named executive officers; and |
|
|
|
our directors and executive officers as a group. |
Except as noted in the footnotes, each person named in the following table directly owns all
shares and units of partnership interest in Roberts Properties Residential, L.P., our operating
partnership, and has sole voting and investment power. Mr. Roberts, the only person known by us to
beneficially own more than 5% of our common stock, has an address in care of our principal office.
The Number of Shares Beneficially Owned column in the table includes the shares owned by the
persons named but does not include shares they may acquire by exchanging units for shares of common
stock as explained in the following paragraphs. The Number of Shares Underlying Units Beneficially
Owned column in the table reflects all shares that each person has the right to acquire by
exchanging units for shares, subject to the limitations described in the following paragraphs. In
the case of persons who own shares and units (and all directors and executive officers as a group),
the percentages in the Percent of Class column are not equal to the number of shares then owned by
the person divided by the number of outstanding shares. Instead, under SEC rules, the shares that
the person or group can acquire in exchange for units are deemed to be outstanding and to be
beneficially owned by the person or group holding those units when calculating the percentage
ownership of that person or group, although shares that other persons can acquire in exchange for
units are not treated as outstanding for purposes of that calculation.
Unitholders generally have the right to require the operating partnership to redeem their
units. To preserve our qualification as a real estate investment trust, our articles of
incorporation limit beneficial ownership by Mr. Roberts to 35% of the outstanding shares.
Accordingly, Mr. Roberts cannot redeem units for shares if upon their redemption he would hold more
than 35% of our outstanding shares.
Any unitholder who submits units for redemption will receive, at our election, either: (a) a
number of shares equal to the number of units submitted for redemption multiplied by the applicable
conversion factor, which is currently 1.647 shares for each unit submitted for redemption, or (b)
cash equal to the average of the daily market prices of the common stock for the 10 consecutive
trading days before the date of submission multiplied by the number of units submitted. Our policy
is to issue shares in exchange for units submitted for redemption.
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Units |
|
|
|
|
|
|
|
|
Name of |
|
Beneficially |
|
|
Beneficially |
|
|
|
|
|
|
Percent of |
|
Beneficial Owner |
|
Owned |
|
|
Owned |
|
|
Total |
|
|
Class (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles S. Roberts |
|
|
3,228,504 |
|
|
|
1,166,920 |
(2) |
|
|
4,395,424 |
|
|
|
38.14 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Davis |
|
|
27,852 |
|
|
|
0 |
|
|
|
27,852 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wm. Jarell Jones |
|
|
53,130 |
(3) |
|
|
0 |
|
|
|
53,130 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Elliott |
|
|
46,200 |
|
|
|
0 |
|
|
|
46,200 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and
executive officers
as a group: (4
persons)
(3) |
|
|
3,355,686 |
|
|
|
1,166,920 |
|
|
|
4,522,606 |
|
|
|
39.24 |
% |
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
The total number of shares outstanding used in calculating this percentage is 10,357,831, the
number of shares outstanding as of March 8, 2011. |
|
(2) |
|
Reflects Mr. Roberts beneficial ownership of 708,512 units, each of which is exchangeable
for 1.647 shares of our common stock. |
|
(3) |
|
Includes 3,332 shares owned by Mr. Jones wife, to which Mr. Jones disclaims beneficial
ownership. |
50
Equity Compensation Plan Information
The following table provides equity compensation plan information at December 31, 2010. At
our annual shareholders meeting on August 21, 2006, our shareholders approved and adopted the 2006
Roberts Realty Investors, Inc. Restricted Stock Plan. The Plan provides for the grant of stock
awards to our employees, directors, consultants, and advisors, including employees of Roberts
Properties and Roberts Construction. The maximum number of shares of restricted stock that may be
granted to any one individual during the term of the Plan may not exceed 20% of the aggregate
number of shares of restricted stock that may be issued under the Plan. As amended on January 27,
2009, we could grant up to 654,000 shares of restricted common stock under the Plan, subject to the
anti-dilution provisions of the Plan. Subsequent grants of restricted stock have reduced the
number of shares available to be granted under the Plan to the number shown.
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
securities |
|
|
Weighted- |
|
|
|
|
|
|
to be issued |
|
|
average |
|
|
Number of securities |
|
|
|
upon exercise of |
|
|
exercise price of |
|
|
remaining available for future |
|
|
|
outstanding |
|
|
outstanding |
|
|
issuances under equity |
|
|
|
options, warrants |
|
|
options, warrants |
|
|
compensation plans (excluding |
|
|
|
and rights |
|
|
and rights |
|
|
securities reflected in column (a) |
|
Plan category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans approved by
security holders |
|
|
N/A |
|
|
|
N/A |
|
|
|
596,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved
by security holders |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
596,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other than our restricted stock plan described above, we have no equity compensation plans
under which we could issue stock, restricted stock or restricted stock units, phantom stock, stock
options, SARs, stock options in tandem with SARs, warrants, convertible securities, performance
units and performance shares, or similar instruments.
|
|
|
ITEM 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
DIRECTOR INDEPENDENCE. |
General
Roberts Realty conducts its business through Roberts Properties Residential, L.P., which we
refer to as the operating partnership. Roberts Realty owns an 82.6% interest in the operating
partnership as of March 8, 2011 and is its sole general partner. Mr. Charles S. Roberts, our
Chairman of the Board, Chief Executive Officer, and President, owns all of the outstanding shares
of each of the Roberts Companies. As explained below, we have entered into transactions with the
Roberts Companies and paid them to perform services for us.
51
Under applicable SEC rules, this Item 13 describes any transaction that has occurred since
January 1, 2009, or any currently proposed transaction, in which we were or are to be a participant
and the amount involved exceeds $120,000, and in which our officers, directors, and certain other
related persons as defined in the SEC rules had or will have a direct or indirect material
interest. Notes 3 and 10 to our audited consolidated financial statements included in this report
provide further detail regarding some of the transactions described in this section.
Transactions with the Roberts Companies
Overview. We have paid fees to the Roberts Companies for various services and will continue
to do so in the future. We have purchased properties from Roberts Properties, and we have retained
the Roberts Companies for development services and construction services for some of our land
parcels, as well as to renovate and reposition apartment communities that we have purchased.
Roberts Realty, its predecessor limited partnerships, and other limited partnerships sponsored by
Mr. Roberts have previously entered into agreements with Roberts Properties and Roberts
Construction to provide these services for the following 23 apartment communities with a total of
4,648 units that were sold for a total sales price of $431,701,143. All of these
communities were sold for a substantial profit.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Year |
|
|
|
|
|
|
Sales Price |
|
Name of Community |
|
of Units |
|
|
Sold |
|
|
Sales Price |
|
|
Per Unit |
|
|
|
+ * Addison Place Townhomes (Phase I) |
|
|
118 |
|
|
|
2008 |
|
|
$ |
20,000,000 |
|
|
$ |
169,492 |
|
+ * Addison Place Apartments (Phase II) |
|
|
285 |
|
|
|
2008 |
|
|
|
40,000,000 |
|
|
|
140,351 |
|
+ * Ballantyne Place |
|
|
319 |
|
|
|
2005 |
|
|
|
37,250,000 |
|
|
|
116,771 |
|
* St. Andrews at The Polo Club |
|
|
200 |
|
|
|
2004 |
|
|
|
36,000,000 |
|
|
|
180,000 |
|
+ * Preston Oaks (Phase I) |
|
|
189 |
|
|
|
2004 |
|
|
|
23,762,500 |
|
|
|
125,728 |
|
+ * Preston Oaks (Phase II) |
|
|
24 |
|
|
|
2004 |
|
|
|
3,017,500 |
|
|
|
125,728 |
|
+ * Bradford Creek |
|
|
180 |
|
|
|
2004 |
|
|
|
18,070,000 |
|
|
|
100,389 |
|
+ * Veranda Chase |
|
|
250 |
|
|
|
2004 |
|
|
|
23,250,000 |
|
|
|
93,000 |
|
+ * Plantation Trace (Phase I) |
|
|
182 |
|
|
|
2004 |
|
|
|
16,866,400 |
|
|
|
92,673 |
|
+ * Plantation Trace Townhomes (Phase
II) |
|
|
50 |
|
|
|
2004 |
|
|
|
4,633,600 |
|
|
|
92,673 |
|
+ * River Oaks |
|
|
216 |
|
|
|
2004 |
|
|
|
20,000,000 |
|
|
|
92,593 |
|
+ * Highland Park |
|
|
188 |
|
|
|
2003 |
|
|
|
17,988,143 |
|
|
|
95,682 |
|
+ * Rosewood Plantation |
|
|
152 |
|
|
|
2001 |
|
|
|
14,800,000 |
|
|
|
97,368 |
|
+ * Crestmark Club (Phase I) |
|
|
248 |
|
|
|
2001 |
|
|
|
18,562,874 |
|
|
|
74,850 |
|
+ * Crestmark Club (Phase II) |
|
|
86 |
|
|
|
2001 |
|
|
|
6,437,126 |
|
|
|
74,850 |
|
+ * Ivey Brook |
|
|
146 |
|
|
|
2000 |
|
|
|
14,550,000 |
|
|
|
99,658 |
|
+ * Bentley Place |
|
|
117 |
|
|
|
1999 |
|
|
|
8,273,000 |
|
|
|
70,709 |
|
* Windsong |
|
|
232 |
|
|
|
1998 |
|
|
|
9,750,000 |
|
|
|
42,026 |
|
* Laurelwood |
|
|
207 |
|
|
|
1997 |
|
|
|
10,601,000 |
|
|
|
51,213 |
|
+ Wynfield Trace |
|
|
146 |
|
|
|
1995 |
|
|
|
10,865,000 |
|
|
|
74,418 |
|
+ Bridgewater |
|
|
532 |
|
|
|
1995 |
|
|
|
39,535,000 |
|
|
|
74,314 |
|
+ Autumn Ridge |
|
|
113 |
|
|
|
1995 |
|
|
|
7,750,000 |
|
|
|
68,584 |
|
+ Governors Pointe |
|
|
468 |
|
|
|
1986 |
|
|
|
29,739,000 |
|
|
|
63,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
4,648 |
|
|
|
|
|
|
$ |
431,701,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
+ |
|
The communities marked with a + were built on raw land that was purchased, zoned and
developed by the Roberts Companies. |
|
* |
|
The communities marked with an * were designed, developed, constructed, renovated and managed
by the Roberts Companies for Roberts Realty Investors, Inc. |
52
Lease of Office Space in Northridge Office Building. We own a three-story, 37,864 square
foot building on Northridge Parkway in Sandy Springs, Georgia that serves as our corporate
headquarters. We occupy a portion of the third floor in the building, and we leased the remaining
space on that floor to the Roberts Companies at a rate of $20.00 per rentable square foot under
leases that extended through December 31, 2009. We recognized total rental income from the Roberts
Companies of $143,800 for the year ended December 31, 2009.
Effective as of January 1, 2010, we renewed our leases with the Roberts Companies. Under the
renewed leases, Roberts Properties leases 4,431 rentable square feet, and Roberts Construction
leases 1,920 rentable square feet. Both leases were for a one-year term with a rental rate of
$18.53 per rentable square foot. The effective rental rate was consistent with an October 2009
lease agreement between us and an unrelated third party at the Northridge office building. We
recognized total rental income from Roberts Properties and Roberts Construction of $96,342 for the
year ended December 31, 2010.
Effective as of January 1, 2011, we renewed our leases with the Roberts Companies for a
one-year term with a new rental rate of $17.50 per rentable square foot.
Restrictive Covenant on Peachtree Parkway Land. We own a 25.1-acre parcel of undeveloped land
in Gwinnett County. The land is zoned for 292 multifamily units and is located across Peachtree
Parkway from the upscale Forum Shopping Center. In acquiring the Peachtree Parkway land parcel, we
assumed and became bound by a restrictive covenant recorded in the Gwinnett County records in favor
of Roberts Properties and Roberts Construction that provides that if the then-owner of the property
develops it for residential use, Roberts Construction, or any other entity designated by Mr.
Roberts, will be engaged as the general contractor for the project on a cost plus basis and will be
paid the cost of constructing the project plus 10% (5% profit and 5% overhead). (The restrictive
covenant also provided that Roberts Properties, or any entity designated by Mr. Roberts, would be
engaged as the development company for the project, but we have paid the development fees to
Roberts Properties in full satisfaction of that part of the covenant.)
These terms and conditions are consistent with our previous agreements with Roberts Properties
and Roberts Construction for development and construction services for residential communities.
The covenant expires on October 29, 2014.
Purchase of Property Adjacent to Peachtree Parkway Land. On December 17, 2009, we purchased a
1.004-acre parcel of land on Peachtree Corners Circle for a cash purchase price of $199,500, or
$198,705 per acre. We also purchased an adjacent 0.154-acre strip along Peachtree Corners Circle
for a cash purchase price of $67,500. We paid a total of $267,000 for these parcels, which we
refer to together as the purchased property. Two independent appraisals were performed on the
purchased property for our board of directors, and the average of the two appraised values was
$445,000. The purchase price of each parcel was equal to 60% of the average appraised value for
that parcel. The purchased property is located adjacent to our Peachtree Parkway property. We
approached Peachtree Corners Circle, LLC regarding the property because it would improve the access
for our Peachtree Parkway land parcel. Mr. Roberts owned a controlling interest in Peachtree
Corners Circle, LLC. Mr. Roberts agreed to sell the property to us for 60% of the average of the
two appraised values.
Under the current site plan for the community we plan to develop on the Peachtree Parkway land
parcel, the community has only one existing entrance, at Peachtree Parkway (Highway 141) across
from the upscale Forum shopping center. The purchased property enables the community to have a
second entrance on Peachtree Corners Circle, which provides convenient access to two major
thoroughfares, Medlock Bridge Road and Peachtree Parkway. This second entrance also satisfies the
fire marshals preference to have two entry points for a community of this size or for a future
mixed-use or high-density commercial development.
53
In addition, the purchased property will enable us to relocate a 140-foot cell phone tower.
On the current site plan, the cell tower is located next to the communitys pool and playground
amenities, with an easement that allows road access to the cell tower for maintenance. Moving the
cell tower to the purchased property will limit its visibility and eliminate an easement running
through the heart of the community. The cell tower could then be accessed from Peachtree Corners
Circle for maintenance. Providing this second entrance enhances the sites potential for both a
mixed-use and a high-density commercial development if we elect to sell, form a joint venture, or
subdivide our Peachtree Parkway land parcel. The site will be more attractive to investors and
national retailers who typically require multiple access points for large-scale developments.
On January 26, 2010, we entered into a contract with an unrelated party to purchase a
0.442-acre parcel of land on Medlock Bridge Road adjacent to our Peachtree Parkway property. We
closed the purchase on March 29, 2010. The cash purchase price was $125,000 or $282,805 per acre.
The price per acre we paid to the unrelated party was 42.3% greater than the purchase price per
acre that we paid to Peachtree Corners Circle, LLC for the 1.004-acre parcel we purchased in
December 2009.
Restrictive Covenant on North Springs Land Parcel. We own a 9.8-acre parcel of land in Fulton
County that we refer to as North Springs. The North Springs property is zoned for 120 condominium
units, 236 multifamily units, 210,000 square feet of office space and 56,000 square feet of retail
space. In acquiring the North Springs property, we assumed and became bound by a restrictive
covenant recorded in the Fulton County records in favor of Roberts Properties and Roberts
Construction. The covenant has the same terms and conditions as the restrictive covenant related
to the Peachtree Parkway land described above, except that the covenant expires on January 3, 2015.
(As described under Development Fees below, we have paid the development fees to Roberts
Properties in full satisfaction of that part of the covenant).
Development Fees. Roberts Properties provides various development services that include
market studies; business plans; assistance with permitting, land use and zoning issues, easements,
and utility issues; as well as exterior design, finish selection, interior design, and construction
administration. We have entered into design and development agreements with Roberts Properties for
the two projects listed in the following table for which we made payments to Roberts Properties in
2009 and 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Amounts |
|
|
Amounts |
|
|
Remaining |
|
|
|
Contract |
|
|
Incurred in |
|
|
Incurred in |
|
|
Contractual |
|
|
|
Amount |
|
|
2009 |
|
|
2010 |
|
|
Commitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley Park |
|
$ |
770,000 |
|
|
$ |
308,000 |
|
|
$ |
|
|
|
$ |
|
|
Highway 20 |
|
|
1,050,000 |
|
|
|
|
|
|
|
225,000 |
|
|
|
725,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,820,000 |
|
|
$ |
308,000 |
|
|
$ |
225,000 |
|
|
$ |
725,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
Construction Contracts. We have entered into cost plus 10% (5% for overhead and 5% for
profit) contracts with Roberts Construction for the Bradley Park, Northridge, Peachtree Parkway,
North Springs, and Highway 20 properties. Progress payments are paid monthly to Roberts
Construction based on the work that has been completed. We currently do not have estimates of the
costs to complete each of these projects due to the uncertainty of the timing of obtaining
construction financing and the uncertainty regarding the unit size, features, amenities and other
variables of the communities we may ultimately construct. The following table lists the amounts
incurred on these contracts during 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts |
|
|
Amounts Incurred for |
|
|
|
Incurred for |
|
|
5% Profit and |
|
|
|
Labor and Materials Costs |
|
|
5% Overhead |
|
|
|
for the Twelve Months |
|
|
for the Twelve Months |
|
|
|
Ended December 31, |
|
|
Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley Park |
|
$ |
39,039 |
|
|
$ |
298,840 |
|
|
$ |
3,904 |
|
|
$ |
29,884 |
|
Northridge |
|
|
160,148 |
|
|
|
205,541 |
|
|
|
16,015 |
|
|
|
20,554 |
|
Peachtree Parkway |
|
|
2,981 |
|
|
|
4,993 |
|
|
|
298 |
|
|
|
499 |
|
North Springs |
|
|
8,039 |
|
|
|
73,691 |
|
|
|
804 |
|
|
|
7,369 |
|
Highway 20 |
|
|
|
|
|
|
288 |
|
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
210,207 |
|
|
$ |
583,353 |
|
|
$ |
21,021 |
|
|
$ |
58,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Payments to Roberts Construction. At our request, Roberts Construction performed
repairs and tenant improvements for new leases at our retail centers and office building. In 2010,
we incurred $161,939 for labor and materials costs and $16,194 for the 10% (5% profit and 5%
overhead) paid to Roberts Construction. In 2009, we incurred $178,982 for labor and materials
costs and $17,898 for the 10% (5% profit and 5% overhead) paid to Roberts Construction.
Other Fees & Reimbursements to Roberts Properties. We reimbursed Roberts Properties $7,987 in
2010 and $33,173 in 2009 for our operating costs and other expenses.
We entered into a reimbursement arrangement for services provided by Roberts Properties,
effective February 4, 2008, as amended January 1, 2011. Under the terms of the arrangement, we
reimburse Roberts Properties the cost of providing consulting services in an amount equal to an
agreed-upon hourly billing rate for each employee multiplied by the number of hours that the
employee provided services to us. The reimbursement arrangement allows us to obtain services from
experienced and knowledgeable personnel without having to bear the cost of employing them on a
full-time basis. Under this arrangement, we incurred $203,601 in 2010 and $119,008 in 2009.
Determination of Director Independence
We have established an Audit Committee, a Nominating and Governance Committee and a
Compensation Committee. Our Audit Committee is composed of Mr. Jones (Chairman) and Mr. Davis.
Our board of directors has determined that each member of the Committee is independent under SEC
Rule 10A-3 and Section 803A of the NYSE Amex Equities exchange listing standards. Our Compensation
Committee is composed of Mr. Davis (Chairman) and Mr. Jones, and our Nominating and Governance
Committee is composed of Mr. Jones (Chairman) and Mr. Davis. Our board of directors has determined
that each of Mr. Davis and Mr. Jones is independent within the meaning of Section 803A of the
NYSE Amex Equities exchange listing standards. There were no transactions, relationships, or
arrangements not disclosed in this Item 13 pursuant to Item 404(a) of Regulation S-K that our board
considered in making the determinations of independence described in this paragraph.
55
Approval of Transactions with Related Persons
We have two types of policies and procedures for the review, approval, or ratification of any
transaction we are required to report in the preceding portion of this Item 13. The first is our
longstanding policy that conflicting interest transactions by directors as defined under Georgia
law 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. The second is that under our Code of Business
Conduct and Ethics, related party transactions are subject to appropriate review and oversight by
the audit committee of our board of directors. We describe each of these policies in more detail
below.
The board of directors is subject to provisions of Georgia law that are designed to eliminate
or minimize potential conflicts of interest. 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 directors 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. We have stated this policy in
our annual reports on Form 10-K since we became required to file reports with the SEC. In
addition, under the applicable rules of the NYSE Amex Equities exchange, related party transactions
are subject to appropriate review and oversight by the audit committee of our board of directors.
Under our Code of Business Conduct and Ethics, a conflict of interest occurs when an
individuals private interest interferes or appears to interfere with the interests of the company.
A conflict of interest can arise when a director or officer takes actions or has interests that
may make it difficult to perform his or her work for us objectively and effectively. For example,
a conflict of interest would arise if a director or officer, or a member or his or her family,
receives improper personal benefits as a result of his or her position in the company.
Our Code of Business Conduct and Ethics provides that a conflict of interest situation
involving directors or executive officers may include the following:
|
|
|
any significant ownership interest in any service provider; |
|
|
|
any consulting or employment relationship with any service provider, supplier, or
competitor; |
|
|
|
any outside business activity that detracts from an individuals ability to devote
appropriate time and attention to his or her responsibilities with the company; |
|
|
|
the receipt of excessive entertainment or other than nominal gifts from any company
with which the company has current or prospective business dealings; |
|
|
|
being in the position of supervising, reviewing, or having any influence on the job
evaluation, pay, or benefit of any immediate family member; and |
|
|
|
selling anything to the company or buying anything from the company. |
Anything that would present a conflict for a director, officer, or employee would likely also
present a conflict if it were related to a member of his or her family. The Code of Business
Conduct and Ethics provides that any conflict of interest situation, including those described
above, should be discussed with the appropriate contact person. For officers and directors, that
person is the chairman of the audit committee, Mr. Wm. Jarell Jones.
56
Under the Code of Business Conduct and Ethics, the approval of conflicting interest
transactions is two-pronged. As noted above, our board of directors has adopted and has always
followed 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 NYSE Amex
Equities exchange, related party transactions are subject to appropriate review and oversight by
the audit committee of our board of directors. The Code of Business Conduct and Ethics provides
that any transaction or relationship that is approved as described in this paragraph is in
compliance with the Code, and that approval as described in this paragraph is not to be regarded as
a waiver of the Code.
The Code of Business Conduct and Ethics specifically provides that we may engage in
transactions of various types with Mr. Roberts, the Roberts Companies and/or other affiliates of
Mr. Roberts, including the development or acquisition of real estate, so long as the transaction or
agreement complies with the policy described above. We followed these policies in approving the
transactions and agreements with the Roberts Companies described in this Item 13.
|
|
|
ITEM 14. |
|
PRINCIPAL ACCOUNTING FEES AND SERVICES. |
Reznick Group (Reznick) is our independent registered public accounting firm.
Audit Fees
For 2010
The aggregate fees billed by Reznick for professional services rendered for the audit of our
annual financial statements for 2010, and for the review of the financial statements included in
our quarterly reports on Form 10-Q during 2010, were $150,000.
For 2009
The aggregate fees billed by Reznick for professional services rendered for the audit of our
annual financial statements for 2009, and for the review of the financial statements included in
our quarterly reports on Form 10-Q during 2009, were $135,750.
Audit-Related Fees
We did not engage Reznick to provide, and Reznick did not bill us for, professional services
that were reasonably related to the performance of the audit of our 2010 or 2009 financial
statements, but which are not reported in the previous paragraph.
Tax Fees
For 2010
The aggregate fees billed by Reznick for professional services rendered related to tax
compliance, tax advice and tax planning for 2010, were $18,000.
57
For 2009
The aggregate fees billed by Reznick for professional services rendered related to tax
compliance, tax advice and tax planning for 2009, were $18,000.
All Other Fees
Reznick did not bill us for any services for the fiscal years ended December 31, 2010 and
December 31, 2009 other than for the services described above.
Pre-Approval Policy
Our audit committee pre-approval guidelines with respect to pre-approval of audit and
non-audit services are summarized below.
General. The audit committee is required to pre-approve the audit and non-audit services
performed by the independent auditor in order to assure that the provision of such services does
not impair the auditors independence. Unless a type of service to be provided by the independent
auditor has received general pre-approval, it will require specific pre-approval by the audit
committee. Any proposed services exceeding pre-approved cost levels requires specific pre-approval
by the audit committee.
Audit Services. The annual audit services engagement terms and fees are subject to the
specific pre-approval of the audit committee. In addition to the annual audit services engagement
specifically approved by the audit committee, the audit committee has granted general pre-approval
for other audit services, which are those services that only the independent auditor reasonably can
provide.
Audit-related Services. Audit-related services are assurance and related services that are
reasonably related to the performance of the audit or review of our financial statements and that
are traditionally performed by the independent auditor. The audit committee believes that the
provision of audit-related services does not impair the independence of the auditor.
Tax Services. The audit committee believes that the independent auditor can provide tax
services to us, such as tax compliance, tax planning and tax advice, without impairing the
auditors independence. The audit committee will not permit the retention of the independent
auditor in connection with a transaction initially recommended by the independent auditor, the
purpose of which may be tax avoidance and the tax treatment of which may not be supported in the
Internal Revenue Code and related regulations.
All Other Services. The audit committee has granted pre-approval to those permissible
non-audit services classified as all other services that it believes are routine and recurring
services, and would not impair the independence of the auditor.
Pre-Approval Fee Levels. To facilitate managements day-to-day conduct of our business, the
audit committee deemed it advisable and in our best interests to permit certain routine, non-audit
services without the necessity of pre-approval by the audit committee. Therefore, the audit
committee expects to establish a pre-approval fee level per engagement. Any proposal for services
exceeding this level will require specific pre-approval by the audit committee. Although
management may engage non-audit services from our independent auditor within this limit, management
cannot enter into any engagement that would violate the SECs rules and regulations related to
auditor independence. These non-audit service engagements are to be reported to the audit
committee as promptly as practicable.
58
PART IV
|
|
|
ITEM 15. |
|
EXHIBITS, FINANCIAL STATEMENT SCHEDULES. |
(a) |
|
(1) and (2). Financial Statements and Schedules. |
|
|
The financial statements listed below are filed as part of this annual report on the pages
indicated. |
INDEX TO FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page |
|
|
|
|
|
|
F-1 |
|
|
|
CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2010 AND 2009 AND FOR THE YEARS
ENDED DECEMBER 31, 2010 AND 2009: |
|
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
|
F-3 |
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
F-5 |
|
|
|
|
|
|
F-7 |
|
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and
Shareholders of Roberts Realty Investors, Inc.:
We have audited the accompanying consolidated balance sheets of Roberts Realty Investors, Inc., a
Georgia corporation, and its subsidiary (together, the Company), as of December 31, 2010 and
2009, and the related consolidated statements of operations, shareholders equity, and cash flows
for each of the years in the two-year period ended December 31, 2010. These consolidated financial
statements are the responsibility of the Companys management. Our responsibility is to express an
opinion on the financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control
over financial reporting. Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances but
not for the purpose of expressing an opinion on the effectiveness of the Companys internal control
over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Roberts Realty Investors, Inc. and its
subsidiary as of December 31, 2010 and 2009, and the consolidated results of their operations and
their cash flows for each of the years in the two-year period ended December 31, 2010, in
conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Group, P.C.
Atlanta, Georgia
March 17, 2011
F-1
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE ASSETS: |
|
|
|
|
|
|
|
|
Land |
|
$ |
9,268,326 |
|
|
$ |
9,268,326 |
|
Buildings and improvements |
|
|
14,163,327 |
|
|
|
16,343,959 |
|
Furniture, fixtures and equipment |
|
|
460,909 |
|
|
|
447,283 |
|
|
|
|
|
|
|
|
|
|
|
23,892,562 |
|
|
|
26,059,568 |
|
Less: accumulated depreciation |
|
|
(4,136,145 |
) |
|
|
(3,426,076 |
) |
|
|
|
|
|
|
|
Operating real estate assets |
|
|
19,756,417 |
|
|
|
22,633,492 |
|
Construction in progress and real estate under development |
|
|
42,936,767 |
|
|
|
44,440,391 |
|
Land held for investment |
|
|
|
|
|
|
9,009,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate assets |
|
|
62,693,184 |
|
|
|
76,083,007 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS |
|
|
3,716,393 |
|
|
|
7,905,771 |
|
|
|
|
|
|
|
|
|
|
RESTRICTED CASH |
|
|
1,229,040 |
|
|
|
1,292,328 |
|
|
|
|
|
|
|
|
|
|
INVESTMENTS |
|
|
|
|
|
|
38,177 |
|
|
|
|
|
|
|
|
|
|
DEFERRED FINANCING & LEASING COSTS Net of accumulated amortization
of $190,193 and $449,640 at December 31, 2010 and December 31, 2009, respectively |
|
|
180,559 |
|
|
|
214,590 |
|
|
|
|
|
|
|
|
|
|
LEASE INTANGIBLES Net of accumulated amortization
of $324,847 and $467,850 at December 31, 2010 and December 31, 2009, respectively |
|
|
128,326 |
|
|
|
203,808 |
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS Net |
|
|
231,831 |
|
|
|
157,053 |
|
|
|
|
|
|
|
|
|
|
ASSETS RELATED TO DISCONTINUED OPERATIONS |
|
|
|
|
|
|
6,486,629 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
68,179,333 |
|
|
$ |
92,381,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Mortgage notes payable |
|
$ |
16,697,509 |
|
|
$ |
17,045,668 |
|
Land notes payable |
|
|
14,400,000 |
|
|
|
20,675,000 |
|
Accounts payable and accrued expenses |
|
|
484,853 |
|
|
|
472,535 |
|
Due to affiliates |
|
|
38,305 |
|
|
|
52,193 |
|
Security deposits and prepaid rents |
|
|
80,036 |
|
|
|
107,292 |
|
Liabilities related to discontinued operations |
|
|
|
|
|
|
6,103,103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
31,700,703 |
|
|
|
44,455,791 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 11) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING INTEREST OPERATING PARTNERSHIP |
|
|
6,372,817 |
|
|
|
8,760,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY: |
|
|
|
|
|
|
|
|
Preferred shares, $.01 par value, 20,000,000 shares authorized, no shares issued
and outstanding |
|
|
|
|
|
|
|
|
Common shares, $.01 par value, 100,000,000 shares authorized, 10,349,065 and
10,205,749 shares issued and outstanding at December 31, 2010 and December 31,
2009, respectively |
|
|
103,491 |
|
|
|
102,058 |
|
Additional paid-in capital |
|
|
31,305,781 |
|
|
|
30,948,377 |
|
Treasury shares, at cost |
|
|
(71,332 |
) |
|
|
(71,332 |
) |
Accumulated other comprehensive income |
|
|
|
|
|
|
9,722 |
|
(Accumulated deficit) retained earnings |
|
|
(1,232,127 |
) |
|
|
8,175,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
30,105,813 |
|
|
|
39,164,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
68,179,333 |
|
|
$ |
92,381,363 |
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-2
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
OPERATING REVENUES: |
|
|
|
|
|
|
|
|
Rental operations |
|
$ |
1,544,711 |
|
|
$ |
1,682,503 |
|
Other operating income |
|
|
254,053 |
|
|
|
281,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
1,798,764 |
|
|
|
1,963,821 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Personnel |
|
|
13,905 |
|
|
|
33,160 |
|
Utilities |
|
|
193,217 |
|
|
|
179,485 |
|
Repairs and maintenance |
|
|
148,851 |
|
|
|
95,209 |
|
Real estate taxes |
|
|
377,925 |
|
|
|
547,613 |
|
Marketing, insurance and other |
|
|
75,446 |
|
|
|
90,190 |
|
General and administrative expenses |
|
|
1,866,594 |
|
|
|
1,890,475 |
|
(Gain) loss on disposal of asset |
|
|
(11,768 |
) |
|
|
19,385 |
|
Impairment loss on real estate assets |
|
|
4,825,595 |
|
|
|
12,226,412 |
|
Depreciation and amortization expense |
|
|
783,997 |
|
|
|
718,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
8,273,762 |
|
|
|
15,800,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(6,474,998 |
) |
|
|
(13,836,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (EXPENSE) INCOME: |
|
|
|
|
|
|
|
|
Loss on extinguishment of debt |
|
|
(2,989,396 |
) |
|
|
|
|
Gain on sale of available for sale securities |
|
|
18,230 |
|
|
|
|
|
Interest income |
|
|
41,783 |
|
|
|
121,901 |
|
Interest expense |
|
|
(1,370,868 |
) |
|
|
(1,255,794 |
) |
Amortization of deferred financing and leasing costs |
|
|
(143,835 |
) |
|
|
(165,562 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(4,444,086 |
) |
|
|
(1,299,455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS |
|
|
(10,919,084 |
) |
|
|
(15,135,681 |
) |
|
|
|
|
|
|
|
|
|
LOSS FROM DISCONTINUED OPERATIONS |
|
|
(519,310 |
) |
|
|
(2,304,747 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
|
(11,438,394 |
) |
|
|
(17,440,428 |
) |
|
|
|
|
|
|
|
|
|
LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST |
|
|
(2,030,315 |
) |
|
|
(3,264,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS AVAILABLE TO COMMON SHAREHOLDERS |
|
$ |
(9,408,079 |
) |
|
$ |
(14,175,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS PER COMMON SHARE BASIC AND DILUTED (Note 6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations basic and diluted |
|
$ |
(0.88 |
) |
|
$ |
(1.21 |
) |
Loss from discontinued operations basic and diluted |
|
|
(0.04 |
) |
|
|
(0.19 |
) |
|
|
|
|
|
|
|
Net loss basic and diluted |
|
$ |
(0.92 |
) |
|
$ |
(1.40 |
) |
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-3
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 2010 AND 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
Number |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Total |
|
|
|
of Shares |
|
|
|
|
|
|
Paid-In |
|
|
Treasury |
|
|
Comprehensive |
|
|
Retained |
|
|
Shareholders |
|
|
|
Issued |
|
|
Amount |
|
|
Capital |
|
|
Shares |
|
|
Income |
|
|
Earnings |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF DECEMBER 31, 2008 |
|
|
10,086,769 |
|
|
$ |
100,868 |
|
|
$ |
30,389,994 |
|
|
$ |
(15,886 |
) |
|
$ |
|
|
|
$ |
22,351,532 |
|
|
$ |
52,826,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,722 |
|
|
|
|
|
|
|
9,722 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,175,580 |
) |
|
|
(14,175,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,165,858 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,446 |
) |
|
|
|
|
|
|
|
|
|
|
(55,446 |
) |
Conversion of operating partnership
units to common shares |
|
|
118,980 |
|
|
|
1,190 |
|
|
|
119,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,768 |
|
Adjustment for noncontrolling
interest in
the operating partnership |
|
|
|
|
|
|
|
|
|
|
438,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
438,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF DECEMBER 31, 2009 |
|
|
10,205,749 |
|
|
$ |
102,058 |
|
|
$ |
30,948,377 |
|
|
$ |
(71,332 |
) |
|
$ |
9,722 |
|
|
$ |
8,175,952 |
|
|
$ |
39,164,777 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,722 |
) |
|
|
|
|
|
|
(9,722 |
) |
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,408,079 |
) |
|
|
(9,408,079 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,417,801 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted shares issued |
|
|
50,000 |
|
|
|
500 |
|
|
|
(500 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense |
|
|
|
|
|
|
|
|
|
|
1,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,174 |
|
Conversion of operating partnership
units to common shares |
|
|
93,316 |
|
|
|
933 |
|
|
|
143,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,753 |
|
Adjustment for noncontrolling
interest in
the operating partnership |
|
|
|
|
|
|
|
|
|
|
212,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
212,910 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF DECEMBER 31, 2010 |
|
|
10,349,065 |
|
|
$ |
103,491 |
|
|
$ |
31,305,781 |
|
|
$ |
(71,332 |
) |
|
$ |
|
|
|
$ |
(1,232,127 |
) |
|
$ |
30,105,813 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-4
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(11,438,394 |
) |
|
$ |
(17,440,428 |
) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Loss from discontinued operations |
|
|
519,310 |
|
|
|
2,304,747 |
|
Depreciation and amortization |
|
|
927,832 |
|
|
|
883,680 |
|
Loss on extinguishment of debt |
|
|
2,989,396 |
|
|
|
|
|
Impairment loss on real estate assets |
|
|
4,825,595 |
|
|
|
12,226,412 |
|
Gain on sale of available for sale securities |
|
|
(18,230 |
) |
|
|
|
|
Amortization of above and below market leases |
|
|
(11,669 |
) |
|
|
10,796 |
|
Amortization of deferred compensation |
|
|
1,174 |
|
|
|
|
|
Loss on disposal of assets |
|
|
11,162 |
|
|
|
19,385 |
|
(Increase) decrease in other assets |
|
|
(64,790 |
) |
|
|
68,922 |
|
Increase in due to affiliates |
|
|
9,442 |
|
|
|
16,898 |
|
Increase (decrease)in accounts payable, accrued expenses
and other liabilities relating to operations |
|
|
24,423 |
|
|
|
(71,808 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities from continuing operations |
|
|
(2,224,749 |
) |
|
|
(1,981,396 |
) |
Net cash used in operating activities from discontinued operations |
|
|
(129,184 |
) |
|
|
(146,783 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(2,353,933 |
) |
|
|
(2,128,179 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchases of investments |
|
|
|
|
|
|
(28,455 |
) |
Sale of available for sale securities |
|
|
46,685 |
|
|
|
|
|
Payment of leasing costs |
|
|
(1,200 |
) |
|
|
(10,486 |
) |
Decrease (increase) in restricted cash |
|
|
58,288 |
|
|
|
(392,818 |
) |
Decrease in accounts payable, accrued expenses and
other liabilities relating to investing activities |
|
|
(6,303 |
) |
|
|
(64,207 |
) |
Development and construction of real estate assets |
|
|
(1,184,706 |
) |
|
|
(2,322,976 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities from continuing operations |
|
|
(1,087,236 |
) |
|
|
(2,818,942 |
) |
Net cash used in investing activities from discontinued operations |
|
|
(6,600 |
) |
|
|
(97,355 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(1,093,836 |
) |
|
|
(2,916,297 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Principal repayments on mortgage notes payable |
|
|
(348,159 |
) |
|
|
(411,352 |
) |
Payment of loan costs |
|
|
(110,117 |
) |
|
|
(113,886 |
) |
Principal repayments of land notes payable |
|
|
(275,000 |
) |
|
|
(577,000 |
) |
Purchase of treasury stock |
|
|
|
|
|
|
(55,446 |
) |
Payment of distributions on common shares |
|
|
|
|
|
|
(1,809,307 |
) |
Payment of distributions on noncontrolling interest |
|
|
|
|
|
|
(551,090 |
) |
Decrease in restricted cash relating to financing activities |
|
|
5,000 |
|
|
|
|
|
(Decrease) increase in accounts payable, accrued expenses and other liabilities relating to
financing activities |
|
|
(13,333 |
) |
|
|
13,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(741,609 |
) |
|
|
(3,504,748 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH AND CASH EQUIVALENTS |
|
|
(4,189,378 |
) |
|
|
(8,549,224 |
) |
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD |
|
$ |
7,905,771 |
|
|
$ |
16,454,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF PERIOD |
|
$ |
3,716,393 |
|
|
$ |
7,905,771 |
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-5
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest of $491,775 and $762,847 for the
twelve months ended December 31, 2010 and December 31, 2009, respectively |
|
$ |
1,265,480 |
|
|
$ |
1.423,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development and construction of real estate assets due to but not paid to affiliates |
|
$ |
5,019 |
|
|
$ |
33,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion of operating partnership units to common shares |
|
$ |
144,753 |
|
|
$ |
120,768 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to noncontrolling interest in the operating partnership |
|
$ |
212,910 |
|
|
$ |
438,805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale securities |
|
$ |
|
|
|
$ |
9,722 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH SALE OF LAND HELD FOR INVESTMENT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of land held for investment |
|
$ |
9,009,124 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in other assets net |
|
$ |
64 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of land notes payable |
|
$ |
(6,019,792 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH SALE OF REAL ESTATE ASSETS RELATED TO
DISCONTINUED OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of real estate assets related to discontinued operations |
|
$ |
5,627,178 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in assets related to discontinued operations |
|
$ |
122,778 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Extinguishment of liabilities related to discontinued operations |
|
$ |
(6,019,792 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-6
ROBERTS REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. |
|
BUSINESS AND ORGANIZATION |
|
|
Roberts Realty Investors, Inc. (Roberts Realty), a Georgia corporation, was formed on July
22, 1994 to serve as a vehicle for investments in, and ownership of, a professionally
managed real estate portfolio of multifamily residential communities. Roberts Realty owns
and manages its real estate assets as a self-administered, self-managed equity real estate
investment trust (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), or the operating partnerships three wholly owned subsidiaries, which are
Georgia limited liability companies. Roberts Realty controls the operating partnership as
its sole general partner and owner of a majority interest. Roberts Realty had an 82.53%
ownership interest in the operating partnership at December 31, 2010 and an 81.72% ownership
interest in the operating partnership at December 31, 2009. |
|
|
At December 31, 2010, Roberts Realty owned the following real estate assets, all of which
are located in the north Atlanta metropolitan area: |
|
|
|
three neighborhood retail centers totaling 112,322 square feet; |
|
|
|
one commercial office building totaling 37,864 square feet, part of which
serves as Roberts Realtys corporate headquarters; and |
|
|
|
five tracts of land totaling 106 acres in various phases of development and
construction. |
|
|
On June 30, 2010, Roberts Realty sold its 44,293 square foot Addison Place Shops retail
center and its 44-acre Westside land parcel to the lender for the debt. See Note 4,
Discontinued Operations and Note 5, Notes Payable. |
2. |
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|
|
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 noncontrolling interest of
the unitholders in the operating partnership. |
|
|
Holders of operating partnership units generally have the right to require the operating
partnership to redeem their units for shares of Roberts Realty common stock. Upon submittal
of units for redemption, the operating partnership has the option either (a) to acquire
those units in exchange for shares, currently on the basis of 1.647 shares for each unit
submitted for redemption (see Note 6, Shareholders Equity Special Cash and Stock
Distributions Declared in December 2008 and Paid in January 2009), or (b) to pay cash for
those units at their fair market value, based upon the then current trading price of the
shares and using the same exchange ratio. Roberts Realty has adopted a policy of issuing
shares in exchange for all units submitted for redemption. |
|
|
The noncontrolling interest of the unitholders in the operating partnership on the
accompanying balance sheets is calculated by multiplying the noncontrolling interest
ownership percentage at the balance sheet date by the operating partnerships net assets
(total assets less total liabilities). The noncontrolling interest ownership percentage is
calculated at any point in time by dividing (x) (the number of units outstanding multiplied
by 1.647) by (y) the total number of shares plus (the number of units outstanding multiplied
by 1.647). The noncontrolling interest ownership
percentage will change as additional shares and/or units are issued or as units are redeemed
for shares of Roberts Realty common stock. The noncontrolling 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 percentage of units outstanding
during the period, which was 17.75% for 2010 and 18.72% for 2009. There were 1,329,738
units outstanding as of December 31, 2010 and 1,386,394 units outstanding as of December 31,
2009. The noncontrolling interest of the unitholders was $6,372,817 at December 31, 2010
and $8,760,795 at December 31, 2009. |
F-7
|
|
Real Estate Assets and Depreciation. Real estate assets are recorded at depreciated cost
less reductions for impairment, if any. On January 1, 2009, Roberts Realty adopted
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
Topic 820-10, Fair Value Measurements and Disclosures Overall, to measure its
non-financial asset and liabilities at fair value on a nonrecurring basis. Roberts Realty
reviews its real estate assets for impairment whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. If the real estate asset is
considered to be impaired, the impairment to be recognized is measured at the amount by
which the carrying amount exceeds the fair value as determined from an appraisal, discounted
cash flow analysis, or other valuation technique. The analysis conducted by Roberts Realty
in determining the impairment losses is described in Note 8 Impairment Losses on Real
Estate Assets. |
|
|
The purchase price of acquired real estate assets is allocated to land, building, and
intangible assets in accordance with FASB ASC Topic 805, Business Combinations. Roberts
Realty allocates the purchase price of an acquired asset based on the relative fair values
of the land, building, and intangible assets. For tangible assets classified as real estate
assets, the values are determined as though the land was undeveloped and the buildings were
vacant. Intangible assets typically consist of above or below market leases, customer
relationships and the value of in-place leases. The fair value of any above or below market
leases is amortized into operating revenues over the terms of the respective leases. The
combined net value of above and below market leases acquired, net of accumulated
amortization, was ($27,793) and ($39,462), and the unamortized remaining values are included
in other assets on the consolidated balance sheets at December 31, 2010 and 2009,
respectively. The value of in-place leases is amortized over the term of the respective
lease. Intangible assets that are subject to amortization (a) are reviewed for potential
impairment whenever events or circumstances indicate that carrying amounts may not be
recoverable and (b) are tested at least annually. Roberts Realty determined that, based on
estimated future cash flows, the carrying amount of the fair value of the leases relating to
the Retail/Office segment exceeded its fair value by $4,153 in 2010 and $5,254 in 2009. |
|
|
Expenditures directly related to the development, acquisition, and improvement of real
estate assets are capitalized at cost as land, buildings, and improvements. During the
construction period, interest expense, real estate taxes, and insurance are capitalized.
Interest expense is capitalized on qualifying assets during construction using a weighted
average interest rate for all indebtedness. Interest capitalized was $491,775 for 2010 and
$762,847 for 2009. Leasing costs, including commissions and legal costs, are capitalized
and amortized over the term of the lease. Ordinary repairs and maintenance are expensed as
incurred. Major replacements and betterments are capitalized and depreciated over their
estimated useful lives; buildings are generally depreciated over 27.5 years; land
improvements are depreciated over 15 years; and furniture, fixtures, and equipment are
depreciated over 5 to 7 years. The amortization of the value of the in-place leases and any
tenant improvement allowance is included in the depreciation and amortization expense on the
operating statement with the operating real estate depreciable assets. Depreciation expense
was $783,997 in 2010 and $718,118 in 2009. |
F-8
|
|
Roberts Realty recognizes gains on sales of assets in accordance with FASB ASC Topic 360-20,
Property, Plant, and Equipment Real Estate Sales. If any significant continuing
obligation exists at the date of the sale, Roberts Realty defers a portion of the gain
attributable to the continuing obligation until the continuing obligation has expired or is
removed. There were no such continuing obligations on the sales of Roberts Realtys assets
as of December 31, 2010 and 2009. |
|
|
Cash and Cash Equivalents. Roberts Realty considers all highly liquid investments with a
maturity of three months or less at the time of purchase to be cash equivalents. Roberts
Realty maintains cash and cash equivalent balances with financial institutions that may at
times exceed the limits for insurance provided by the Federal Depository Insurance
Corporation. Roberts Realty has not experienced any losses related to these balances, and
management believes its credit risk is minimal. |
|
|
Restricted Cash. Restricted cash consists of retail and office security deposits, lender
escrows held by third parties, and an interest reserve held by the lender. |
|
|
Investments. Roberts Realty classifies its marketable equity securities as
available-for-sale, and marketable equity securities are reported at fair value in
Investments on the consolidated balance sheets. Unrealized gains and losses on
available-for-sale securities are excluded from income and are reported as other
comprehensive income in shareholders equity. During 2010, Roberts Realty sold its
available-for-sale securities and recognized an $18,230 gain from the sale. Roberts Realty
measures the fair value of its marketable equity securities at quoted market prices in
accordance with FASB ASC Topic 820-10, Fair Value Measurements. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds |
|
|
Realized |
|
|
Cost |
|
|
|
from Sale |
|
|
Gains |
|
|
Basis |
|
Marketable equity securities |
|
$ |
46,685 |
|
|
$ |
18,230 |
|
|
$ |
28,455 |
|
|
|
As of December 31, 2009, available-for-sale securities consisted of the following: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
Gross |
|
|
|
|
|
|
Cost |
|
|
Unrealized |
|
|
Unrealized |
|
|
Market |
|
|
|
Basis |
|
|
Gains |
|
|
Losses |
|
|
Value |
|
Marketable equity securities |
|
$ |
28,455 |
|
|
$ |
9,858 |
|
|
$ |
(136 |
) |
|
$ |
38,177 |
|
|
|
Deferred Financing Costs. Deferred financing costs include fees and costs incurred to
obtain financing and are amortized on the straight-line method over the terms of the related
debt. Although accounting principles generally accepted in the U.S. (GAAP) require that
the effective-yield method be used to amortize financing costs, the effect of using the
straight-line method is not materially different from the results that would have been
obtained using the effective-yield method. Amortization of deferred financing costs was
$132,084 for 2010 and $153,989 for 2009. |
F-9
|
|
Revenue Recognition. Roberts Realty leases its multifamily properties under operating
leases with terms generally one year or less. (Roberts Realty currently owns no multifamily
communities and did not own any multifamily communities in 2009 or 2010.) Commercial leases
for Roberts Realtys retail and office properties generally have terms of three to five
years, with options to renew for an additional three to five years. Roberts Realty
recognizes revenue for reimbursements from retail tenants of operating expenses consisting
primarily of real estate taxes, property insurance, and various common area expenses such as
electricity, water, sewer, and trash removal. Rental income from multifamily properties is
recognized when collected, and rental
income from retail and office properties is recognized when earned, which materially
approximates revenue recognition on a straight-line basis. At December 31, 2010, future
minimum rentals to be received by Roberts Realty under its retail and office leases,
excluding reimbursements for operating expenses, are as follows: |
|
|
|
|
|
Year |
|
Amount |
|
|
|
2011 |
|
$ |
1,274,214 |
|
2012 |
|
|
977,061 |
|
2013 |
|
|
445,810 |
|
2014 |
|
|
243,150 |
|
2015 |
|
|
23,400 |
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,963,635 |
|
|
|
|
|
|
|
Income Taxes. Roberts Realty has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the Code), since 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 each year at least 90% of its taxable income, as defined in the Code,
to its shareholders and satisfies certain other requirements. As long as Roberts Realty
continues to maintain its qualification as a REIT, it generally will not be subject to
federal income tax on distributed net income in the future. Accordingly, no provision has
been made for federal and state income taxes in the accompanying consolidated financial
statements. A reconciliation of Roberts Realtys net loss to its taxable loss for the years
ending December 31, 2010 and 2009 is shown below. |
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(9,408,079 |
) |
|
$ |
(14,175,580 |
) |
|
|
|
|
|
|
|
|
|
Adjustments to net loss: |
|
|
|
|
|
|
|
|
Loss from sale of real estate assets |
|
|
1,940,814 |
|
|
|
|
|
Political campaign contributions |
|
|
|
|
|
|
1,016 |
|
Gain from disposal of assets |
|
|
(7,590 |
) |
|
|
(16,396 |
) |
Depreciation |
|
|
174,470 |
|
|
|
170,579 |
|
Prepaid rents |
|
|
17,163 |
|
|
|
32,310 |
|
Unearned compensation |
|
|
966 |
|
|
|
|
|
Interest expense |
|
|
(404,475 |
) |
|
|
(620,182 |
) |
Bad debt |
|
|
(166,783 |
) |
|
|
336,317 |
|
Meals and entertainment |
|
|
725 |
|
|
|
763 |
|
Impairment loss |
|
|
4,383,505 |
|
|
|
11,469,079 |
|
Fair market value of leases |
|
|
|
|
|
|
4,271 |
|
Charitable contribution carryover |
|
|
2,056 |
|
|
|
4,268 |
|
Other |
|
|
219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable (loss) income before
net operating losses and
dividends paid deduction |
|
$ |
(3,467,009 |
) |
|
$ |
(2,793,555 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid deduction |
|
|
|
|
|
|
|
|
Net operating loss deduction |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable loss |
|
$ |
(3,467,009 |
) |
|
$ |
(2,793,555 |
) |
|
|
|
|
|
|
|
F-10
|
|
Tax Status of Distributions. Roberts Realty did not declare a dividend or special
distribution during 2010 or 2009. The special cash and stock distributions declared in
December 2008 and paid in January 2009 were deemed to have been paid in 2008 for tax
purposes. |
|
|
Earnings Per Share. Basic earnings per share is calculated using the weighted average
number of common shares outstanding during the periods presented. Diluted earnings per
share is calculated to reflect the potential dilution of all instruments or securities that
are convertible into shares of common stock. For Roberts Realty, this includes the shares
that are issuable in exchange for units that are outstanding during the periods presented. |
|
|
Use of Estimates. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements, and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. |
|
|
Recent Accounting Pronouncements. Under FASB ASC Topic 810, Consolidation, Roberts Realty
records noncontrolling interest in the operating partnership on its condensed consolidated
balance sheets at the greater of its carrying amount or redemption value at the end of each
reporting period. Any changes in the value from period to period are charged to additional
paid-in-capital in Roberts Realtys consolidated statements of shareholders equity. The
following table details the components of noncontrolling interest related to unitholders in
the operating partnership for the twelve months ended December 31, 2010 and 2009: |
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
8,760,795 |
|
|
$ |
12,585,216 |
|
Net loss attributable to noncontrolling interest |
|
|
(2,030,315 |
) |
|
|
(3,264,848 |
) |
Redemptions of noncontrolling partnership units |
|
|
(144,753 |
) |
|
|
(120,768 |
) |
Adjustments to noncontrolling interest in
operating partnership |
|
|
(212,910 |
) |
|
|
(438,805 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
6,372,817 |
|
|
$ |
8,760,795 |
|
|
|
|
|
|
|
|
|
|
Net income attributable to noncontrolling interests in the operating partnership is no
longer deducted when determining net income. The adoption of this standard had no effect on
Roberts Realtys net income available for common shareholders or its earnings per share. |
|
|
On February 24, 2010, the FASB issued ASU 2010-09, Subsequent Events: Amendments to Certain
Recognition and Disclosure Requirements. This guidance amends FASB ASC Topic 855,
Subsequent Events, so that SEC filers no longer are required to disclose the date through
which subsequent events have been evaluated in originally issued and revised financial
statements. SEC filers must evaluate subsequent events through the date the financial
statements are issued. The adoption of this guidance did not have a material effect on
Roberts Realtys financial statements. |
|
|
Certain reclassifications of prior years balances have been made to conform to the current
format. |
F-11
3. |
|
ACQUISITIONS AND DISPOSITIONS |
|
|
On December 17, 2009, Roberts Realty entered into two sales contracts with Peachtree Corners
Circle, LLC and purchased a 1.004-acre parcel of land on Peachtree Corners Circle and an
adjacent 0.154-acre strip along Peachtree Corners Circle for a total cash purchase price of
$267,000. Mr. Roberts owned a controlling interest in Peachtree Corners Circle, LLC. The
transaction is described in Note 10 Related Party Transactions. |
|
|
On June 30, 2010, Roberts Realty sold its 44,293 square foot Addison Place Shops retail
center and its 44-acre Westside land parcel to the lender for the debt. See Note 4,
Discontinued Operations and Note 5, Notes Payable. |
4. |
|
DISCONTINUED OPERATIONS |
|
|
Roberts Realty reports the results of operations and the gains or losses from sold
properties in accordance with FASB ASC Topic 360-10, Property, Plant, and Equipment
Overall (SFAS No. 144). Gains and losses and results of operations from sold properties are
listed separately on the consolidated statements of operations. Interest expense on any
sold property, along with all expenses related to the retirement of debt, are included in
discontinued operations in the year incurred on the consolidated statements of operations. |
|
|
On June 30, 2010, Roberts Realty sold its 44,293 square foot Addison Place Shops retail
center to the lender for the $6,000,000 of debt secured by the property. As a result of
this sale, Roberts Realty has no further obligations to the lender for the Addison Place
retail center loan. Accordingly, the operations of the Addison Place retail center have
been accounted for as discontinued operations. |
|
|
During 2010, the Addison Place retail center was adjusted to its fair value, and a non-cash
impairment loss of $504,020 was recorded. See Note 8, Impairment Loss on Real Estate
Assets. The property was sold for its debt, which exceeded the carrying value of the
property. Therefore, Roberts Realty recorded a $269,836 gain on the extinguishment of debt. |
F-12
|
|
The following table summarizes the discontinued operations for the twelve months ended
December 31, 2010 and 2009: |
Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
OPERATING REVENUES: |
|
|
|
|
|
|
|
|
Rental operations |
|
$ |
141,849 |
|
|
$ |
300,431 |
|
Other operating income |
|
|
30,073 |
|
|
|
53,788 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
171,922 |
|
|
|
354,219 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Personnel |
|
|
3,330 |
|
|
|
7,261 |
|
Utilities |
|
|
26,059 |
|
|
|
41,154 |
|
Repairs and maintenance |
|
|
10,934 |
|
|
|
11,903 |
|
Real estate taxes |
|
|
17,483 |
|
|
|
91,412 |
|
Marketing, insurance and other |
|
|
12,836 |
|
|
|
21,955 |
|
General and administrative expenses |
|
|
96,951 |
|
|
|
93,998 |
|
Loss on leasehold improvements and leasing costs |
|
|
83,557 |
|
|
|
10,678 |
|
Impairment loss on real estate assets |
|
|
504,020 |
|
|
|
1,884,922 |
|
Depreciation and amortization |
|
|
83,847 |
|
|
|
271,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
839,017 |
|
|
|
2,435,029 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(667,095 |
) |
|
|
(2,080,810 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
Gain on extinguishment of debt |
|
|
269,836 |
|
|
|
|
|
Interest expense |
|
|
(117,708 |
) |
|
|
(212,917 |
) |
Amortization of deferred financing & leasing costs |
|
|
(4,343 |
) |
|
|
(11,020 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
147,785 |
|
|
|
(223,937 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM DISCONTINUED OPERATIONS |
|
$ |
(519,310 |
) |
|
$ |
(2,304,747 |
) |
|
|
|
|
|
|
|
|
|
Roberts Realty has two types of debt: |
|
1. |
|
Mortgage notes secured by its operating properties; and |
|
2. |
|
Land loans used to purchase undeveloped land. |
|
|
The details of each of the two types of debt are summarized below. For each loan excluding
the permanent mortgage notes, the operating partnership or its wholly owned subsidiary is
the borrower, and Roberts Realty is the guarantor. |
F-13
|
|
Mortgage Notes. The permanent mortgage notes payable secured by Roberts Realtys operating
properties at December 31, 2010 and 2009 were as follows (in order of maturity date): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
Rate as of |
|
|
Principal Outstanding |
|
Property Securing Mortgage |
|
Maturity |
|
|
12/31/10 |
|
|
12/31/10 |
|
|
12/31/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Pavilion Retail Center |
|
|
7/11/13 |
|
|
|
5.43 |
% |
|
|
6,433,286 |
|
|
|
6,499,986 |
|
Northridge Office Building |
|
|
8/10/13 |
|
|
|
4.50 |
% |
|
|
2,858,333 |
|
|
|
3,005,000 |
|
Spectrum at the Mall of Georgia |
|
|
5/01/14 |
|
|
|
5.68 |
% |
|
|
4,881,585 |
|
|
|
4,972,913 |
|
Bassett Retail Center |
|
|
10/01/19 |
|
|
|
8.47 |
% |
|
|
2,524,305 |
|
|
|
2,567,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
16,697,509 |
|
|
$ |
17,045,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 29, 2005, Roberts Realty purchased Grand Pavilion, a 62,323 square foot retail
center, and assumed the existing mortgage with a balance of $6,995,000, a fixed interest
rate of 5.43%, and a maturity date of July 11, 2013. The loan is secured by the property
and is being amortized over 30 years. |
|
|
As Roberts Realty has previously stated in its annual and quarterly reports, its objective
is to exit the retail business to focus exclusively on developing, constructing, and
managing multifamily apartment communities. Given that objective and Grand Pavilions
approximately $625,000 in annual negative cash flow, Roberts Realty has elected not to make
debt service payments since July 2010 on that retail center and has allowed the loan to go
into default. In August 2010, Roberts Realty asked the lender to place the Grand Pavilion
loan with the special servicer. On December 16, 2010, Roberts Realty received a formal
notice of default from counsel for the special servicer of the loan. Roberts Realty is
seeking to transfer the Grand Pavilion retail center to the lender as soon as possible in
satisfaction of the approximately $6,433,286 principal amount of debt (plus associated fees
and costs) secured by the property. Because the loan is nonrecourse, Roberts Realty would
have no further obligations to the lender for this loan. |
|
|
On October 27, 2005, Roberts Realty purchased Spectrum at the Mall of Georgia, a 30,050
square foot retail center, and assumed the existing mortgage with a balance of $5,306,000, a
fixed interest rate of 5.68%, and a maturity date of May 1, 2014. The nonrecourse loan is
secured by the property and is being amortized over 30 years. |
|
|
On September 30, 2005, Roberts Realty purchased Bassett Retail Center, a 19,949 square foot
retail center, and assumed the existing mortgage with a balance of $2,715,000, a fixed
interest rate of 8.47%, and a maturity date of October 1, 2019. The nonrecourse loan is
secured by the property and is being amortized over 30 years. |
|
|
Roberts Realtys Northridge office building secures a loan with a principal balance of
$2,858,333 as of December 31, 2010 and $3,005,000 as of December 31, 2009. On September 30,
2010, Roberts Realty renewed its $2,898,333 Northridge office building loan and extended the
maturity date of the loan to August 10, 2013. Under the terms of the renewal, Roberts
Realty will make monthly payments consisting of a fixed principal amount of $13,333 and
interest at the 30-day LIBOR rate plus 300 basis points, with an interest rate floor of
4.50% per annum. |
F-14
|
|
Land Loans. The loans secured by Roberts Realtys land parcels at December 31,
2010 and 2009 were as follows (in order of maturity date): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
Land Parcel |
|
|
|
Rate as of |
|
|
Principal Outstanding |
|
Securing Mortgage |
|
Maturity |
|
12/31/10 |
|
|
12/31/10 |
|
|
12/31/09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westside (sold 06/30/10) |
|
N/A |
|
|
|
|
|
|
|
|
|
$ |
6,000,000 |
|
Peachtree Parkway |
|
07/31/11 |
|
|
5.00 |
% |
|
$ |
8,175,000 |
|
|
|
8,175,000 |
|
Highway 20 |
|
04/08/12 |
|
|
5.50 |
% |
|
|
3,225,000 |
|
|
|
3,500,000 |
|
Bradley Park |
|
04/30/12 |
|
|
4.50 |
% |
|
|
3,000,000 |
|
|
|
3,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
14,400,000 |
|
|
$ |
20,675,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Roberts Realtys Peachtree Parkway land secures a loan with a principal balance of
$8,175,000 as of December 31, 2010. On June 21, 2010, Roberts Realty renewed this loan and
extended its maturity date to July 31, 2011. At the closing, Roberts Realty established a
$396,690 interest reserve with the lender to fund the interest payments for the next 12
months. Under the terms of the renewed loan, Roberts Realty will make monthly payments of
interest only at the 30-day LIBOR rate plus 300 basis points, with an interest rate floor of
5.00% per annum. The loan is secured by Roberts Realtys Peachtree Parkway property and its
North Springs property. |
|
|
Roberts Realtys Highway 20 land secures a loan with a principal balance of $3,225,000 as of
December 31, 2010. On October 29, 2010, Roberts Realty renewed this loan and paid down its
principal amount by $185,000. The renewed loan has a maturity date of April 8, 2012. Under
the terms of the renewal, Roberts Realty will make monthly payments consisting of a fixed
principal amount of $30,000 for the first 12 months along with interest at the prime rate,
with an interest rate floor of 5.50% per annum. The last six monthly payments will be
interest only at the above-described rates. |
|
|
Roberts Realtys Bradley Park land secures a loan with a principal balance of $3,000,000 as
of December 31, 2010. On February 9, 2010, Roberts Realty renewed this loan and extended
its maturity date to April 28, 2011. On December 29, 2010, Roberts Realty again renewed and
extended this loan to April 30, 2012. The loan requires monthly payments of interest only
at the 30-day LIBOR index rate plus 300 basis points, with an interest rate floor of 4.50%. |
|
|
The scheduled principal payments of all debt outstanding at December 31, 2010 are as
follows: |
|
|
|
|
|
2011 |
|
$ |
8,931,451 |
|
2012 |
|
|
6,412,738 |
|
2013 |
|
|
8,795,313 |
(1) |
2014 |
|
|
4,644,299 |
|
2015 |
|
|
66,124 |
|
Thereafter |
|
|
2,247,584 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
31,097,509 |
|
|
|
|
|
|
|
|
(1) |
|
As discussed above under Mortgage Notes, the Grand Pavilion loan is in default, and
Roberts Realty is seeking to transfer the property securing the loan to the lender in
satisfaction of the loan. The loan is nonrecourse, and Roberts Realty does not intend
to make any further payments on this loan. The table above reflects the original July
11, 2013 maturity date of the Grand Pavilion loan. If this loan were shown as payable
as of January 1, 2011, the principal payments in 2011 would increase by $6,239,318,
while principal payments would decrease by $145,992 in 2012 and $6,093,326 in 2013. |
F-15
|
|
At December 31, 2010, the weighted average interest rate on Roberts Realtys short-term
debt was 5.0%. The amount of interest expense that was capitalized was $491,775 for 2010
and $762,847 for 2009. Fixed rate mortgage debt with an aggregate carrying value of
$13,839,176 at December 31, 2010 has an estimated approximate fair value of $13,779,346
based on interest rates available to Roberts Realty for debt with similar terms and
maturities, excluding any adjustment for nonperformance risk. Real estate assets having a
combined depreciated cost of $14,476,134 served as collateral for the outstanding mortgage
debt at December 31, 2010. |
|
|
Sale of Addison Place Shops and Westside Land to Lender, and Resulting Release from
Liability for Loans. On June 30, 2010, Roberts Realty sold its 44,293 square
foot Addison Place Shops retail center to the lender for the $6,000,000 of debt secured by
the property. As a result of this sale: |
|
|
|
Roberts Realty has no further obligations to the lender for this loan; and |
|
|
|
Roberts Realty recorded a $269,836 gain on extinguishment of debt, which was
included in discontinued operations. |
|
|
On June 30, 2010, Roberts Realty sold its 44-acre Westside land, which was held for
investment, to the lender for the $6,000,000 of debt secured by the property. As a result
of this sale: |
|
|
|
Roberts Realty has no further obligation to the lender for this loan; and |
|
|
|
Roberts Realty recorded a $2,989,396 loss on extinguishment of debt. |
|
|
Special Cash and Stock Distributions Declared in December 2008 and Paid in January 2009. On
December 18, 2008, Roberts Realtys board of directors declared a special distribution of
$9,058,000, or $1.56 per share, to shareholders of record at the close of business on
December 29, 2008. The distribution was paid in a combination of 20% in cash, or $0.31 per
share, and 80% in common stock, equal to $1.25 per share. On January 29, 2009, Roberts
Realty issued 3,754,732 shares to shareholders in the stock portion of the distribution and
paid a total of $1,809,307 in cash to shareholders in the cash portion of the distribution.
Unitholders received the same cash distribution as shareholders of $0.31 per unit, which
totaled $551,090. As a result of this special stock distribution to shareholders, the
conversion ratio for the exchange of units for shares was adjusted from (a) one share for
each unit exchanged to (b) 1.647 shares for each unit exchanged. This change was effective
as of January 29, 2009, but applied retroactively to the December 29, 2008 record date. |
|
|
Exchanges of Units for Shares. In accordance with the revised conversion ratio explained in
the previous paragraph, a total of 319,080 units were exchanged for 525,527 shares on
December 30 and 31, 2008. (These exchanges occurred after the December 29, 2008 record date
for the special distribution.) Of those 525,527 shares, 319,080 shares were issued on the
exchange date, and the remainder were issued on January 29, 2009 concurrently with the
special distribution. |
|
|
During 2009, a total of 72,236 units were exchanged for 118,980 shares. During 2010, a
total of 56,656 units were exchanged for 93,316 shares. Each redemption was reflected in
the accompanying consolidated financial statements at the closing price of Roberts Realtys
stock price on the date of conversion. |
|
|
Restricted Stock. Shareholders of Roberts Realty approved and adopted the 2006 Roberts
Realty Investors, Inc. Restricted Stock Plan (the Plan) in August 2006. The Plan provides
for the grant of stock awards to employees, directors, consultants, and advisors, including
employees
of Roberts Properties, Inc. (Roberts Properties) and Roberts Properties Construction, Inc.
(Roberts Construction, and together with Roberts Properties, the Roberts Companies).
Mr. Charles S. Roberts, the President, Chief Executive Officer, and Chairman of the Board of
Roberts Realty, owns all of the outstanding stock of the Roberts Companies. Under the Plan
as amended, Roberts Realty may grant up to 654,000 shares of restricted common stock,
subject to the anti-dilution provisions of the Plan. The maximum number of shares of
restricted stock that may be granted to any one individual during the term of the Plan may
not exceed 20% of the aggregate number of shares of restricted stock that may be issued.
The Plan is administered by the compensation committee of Roberts Realtys board of
directors. |
F-16
|
|
FASB ASC Topic 718, Compensation Stock Compensation, requires share-based compensation
cost to be measured at the date of grant based on the fair value of the award and to be
recognized in the statements of operations as an expense on a straight line basis over the
requisite service period, which is the vesting period. |
|
|
There were 50,000 unvested shares of restricted stock outstanding at December 31, 2010.
During 2010, Roberts Realty granted 50,000 shares under the Plan to an employee of Roberts
Properties. The grant includes a service based vesting period of two years. Compensation
expense related to the restricted stock grant was $1,174 in 2010. There was no compensation
expense or restricted stock activity for 2009, and there were no unvested shares of
restricted stock outstanding at December 31, 2009 |
|
|
The following table shows the restricted stock activity for 2010: |
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted Grant |
|
|
|
Unvested Shares of |
|
|
Date Fair Value |
|
|
|
Restricted Stock |
|
|
Per Share |
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
50,000 |
|
|
$ |
1.43 |
|
Forfeited |
|
|
|
|
|
|
|
|
Vested |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010 |
|
|
50,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly Dividends. Roberts Realty has not paid regular quarterly dividends since the
third quarter of 2001. |
|
|
Treasury Stock. In September 1998, Roberts Realtys board of directors authorized a stock
repurchase plan of up to 400,000 shares of our outstanding common stock. Roberts Realty
repurchased 362,588 shares for $2,764,000 prior to 2002. On December 2, 2008, Roberts
Realtys board of directors amended the stock repurchase program to authorize the company to
repurchase up to 300,000 shares of its outstanding common stock (including the remaining
37,412 shares under the plan before that amendment). Roberts Realty subsequently announced
on January 13, 2009 that its board of directors amended its stock repurchase plan to
authorize Roberts Realty to repurchase up to 600,000 shares of its outstanding common stock.
Under the plan, as of December 31, 2010, Roberts Realty had authority to repurchase an
additional 540,362 shares under the plan. The plan does not have an expiration date. |
|
|
Roberts Realty repurchased 59,638 shares of its common stock for $55,446 during 2009. In
addition, Roberts Realty received 4,680 shares on January 29, 2009 in the stock distribution
of $1.25 per share based on the treasury stock Roberts Realty held on the record date of
December 29, 2008. Roberts Realty did not repurchase any shares during 2010. |
F-17
|
|
Earnings Per Share. The following table shows the reconciliations of loss available for
common shareholders and the weighted average number of shares and units used in Roberts
Realtys basic and diluted earnings per share computations. |
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available for
common shareholders basic |
|
$ |
(8,980,947 |
) |
|
$ |
(12,302,282 |
) |
|
|
|
|
|
|
|
|
|
Loss from continuing operations attributable to
noncontrolling interest |
|
|
(1,938,137 |
) |
|
|
(2,833,399 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations diluted |
|
$ |
(10,919,084 |
) |
|
$ |
(15,135,681 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations for common
shareholders basic |
|
|
(427,132 |
) |
|
|
(1,873,298 |
) |
|
|
|
|
|
|
|
|
|
Loss from discontinued operations attributable to
noncontrolling interest |
|
|
(92,178 |
) |
|
|
(431,449 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations diluted |
|
$ |
(519,310 |
) |
|
$ |
(2,304,747 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss diluted |
|
$ |
(11,438,394 |
) |
|
$ |
(17,440,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares basic |
|
|
10,273,383 |
|
|
|
10,151,536 |
|
|
|
|
|
|
|
|
|
|
Dilutive securities weighted average number of
units |
|
|
2,217,448 |
|
|
|
2,337,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares diluted |
|
|
12,490,831 |
|
|
|
12,489,187 |
|
|
|
|
|
|
|
|
|
|
FASB ASC Topic 280-10, Segment Reporting Overall, 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 Realtys chief operating decision maker is Mr. Roberts, its Chief Executive
Officer. |
|
|
Roberts Realty develops, constructs, owns, and manages multifamily apartment communities;
owns land; and owns and manages retail centers and one office building. (Roberts Realty
does not currently own any operating multifamily communities and did not own any operating
multifamily communities in 2009 or 2010.) All of Roberts Realtys properties are located in
Atlanta, Georgia. Roberts Realty has three reportable operating segments: the retail/office
segment; the land segment; and the corporate segment. |
|
1. |
|
the retail/office segment, which consists of operating retail centers
and an office building; |
|
2. |
|
the land segment, which consists of various tracts of land; and |
|
3. |
|
the corporate segment, which consists primarily of operating cash, cash
equivalents, and miscellaneous other assets. |
F-18
|
|
The following tables summarize the operating results of Roberts Realtys reportable segments
for 2010 and 2009. The retail/office segment is composed of the Grand Pavilion, Bassett,
and Spectrum at the Mall of Georgia retail centers, along with the Northridge office
building. Roberts
Realtys Addison Place Shops retail center, which it sold on June 30, 2010, is reflected as
discontinued operations within the retail/office segment. The land segment is composed of
five tracts of land totaling 106 acres that are in various phases of development and
construction. Roberts Realty sold its 44-acre Westside property on June 30, 2010, and the
loss associated with that sale is reflected in other expense within the land segment. The
corporate segment consists primarily of cash and cash equivalents, miscellaneous other
assets, and general and administrative expenses. |
Twelve Months Ended December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail/Office |
|
|
Land |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues continuing |
|
$ |
1,532,036 |
|
|
$ |
12,675 |
|
|
$ |
|
|
|
$ |
1,544,711 |
|
Other operating income |
|
|
244,050 |
|
|
|
|
|
|
|
10,003 |
|
|
|
254,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues from consolidated entities |
|
|
1,776,086 |
|
|
|
12,675 |
|
|
|
10,003 |
|
|
|
1,798,764 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses continuing |
|
|
3,012,037 |
|
|
|
2,903,087 |
|
|
|
1,574,641 |
|
|
|
7,489,765 |
|
Depreciation and amortization expense |
|
|
782,314 |
|
|
|
|
|
|
|
1,683 |
|
|
|
783,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses from consolidated entities |
|
|
3,794,351 |
|
|
|
2,903,087 |
|
|
|
1,576,324 |
|
|
|
8,273,762 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income |
|
|
(1,026,166 |
) |
|
|
(3,477,932 |
) |
|
|
60,012 |
|
|
|
(4,444,086 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from continuing operations |
|
|
(3,044,431 |
) |
|
|
(6,368,344 |
) |
|
|
(1,506,309 |
) |
|
|
(10,919,084 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from discontinued operations (Note 4) |
|
|
(519,310 |
) |
|
|
|
|
|
|
|
|
|
|
(519,310 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss |
|
|
(3,563,741 |
) |
|
|
(6,368,344 |
) |
|
|
(1,506,309 |
) |
|
|
(11,438,394 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss attributable to noncontrolling interest |
|
|
(632,564 |
) |
|
|
(1,130,381 |
) |
|
|
(267,370 |
) |
|
|
(2,030,315 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss available for common shareholders |
|
$ |
(2,931,177 |
) |
|
$ |
(5,237,963 |
) |
|
$ |
(1,238,939 |
) |
|
$ |
(9,408,079 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at December 31, 2010 |
|
$ |
20,545,950 |
|
|
$ |
42,997,659 |
|
|
$ |
4,635,724 |
|
|
$ |
68,179,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail/Office |
|
|
Land |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues continuing |
|
$ |
1,669,828 |
|
|
$ |
12,675 |
|
|
$ |
|
|
|
$ |
1,682,503 |
|
Other operating income |
|
|
266,066 |
|
|
|
|
|
|
|
15,252 |
|
|
|
281,318 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues from consolidated entities |
|
|
1,935,894 |
|
|
|
12,675 |
|
|
|
15,252 |
|
|
|
1,963,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses continuing |
|
|
3,115,533 |
|
|
|
10,392,145 |
|
|
|
1,574,251 |
|
|
|
15,081,929 |
|
Depreciation and amortization expense |
|
|
704,565 |
|
|
|
|
|
|
|
13,553 |
|
|
|
718,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses from consolidated entities |
|
|
3,820,098 |
|
|
|
10,392,145 |
|
|
|
1,587,804 |
|
|
|
15,800,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income |
|
|
(1,028,736 |
) |
|
|
(387,770 |
) |
|
|
117,051 |
|
|
|
(1,299,455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from continuing operations |
|
|
(2,912,940 |
) |
|
|
(10,767,240 |
) |
|
|
(1,455,501 |
) |
|
|
(15,135,681 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from discontinued operations (Note 4) |
|
|
(2,304,747 |
) |
|
|
|
|
|
|
|
|
|
|
(2,304,747 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss |
|
|
(5,217,687 |
) |
|
|
(10,767,240 |
) |
|
|
(1,455,501 |
) |
|
|
(17,440,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss attributable to noncontrolling interest |
|
|
(976,751 |
) |
|
|
(2,015,627 |
) |
|
|
(272,470 |
) |
|
|
(3,264,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net loss available for common shareholders |
|
$ |
(4,240,936 |
) |
|
$ |
(8,751,613 |
) |
|
$ |
(1,183,031 |
) |
|
$ |
(14,175,580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at December 31, 2009 |
|
$ |
30,096,403 |
|
|
$ |
53,512,273 |
|
|
$ |
8,772,687 |
|
|
$ |
92,381,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-19
8. |
|
IMPAIRMENT LOSS ON REAL ESTATE ASSETS |
|
|
Impairment Loss on Real Estate Assets |
|
|
Roberts Realty periodically evaluates its real estate assets, on a property-by-property
basis, for impairment when events or changes in circumstances indicate the carrying amount
of an asset may not be recoverable in accordance with FASB ASC Topic 360-10, Property,
Plant, and Equipment Overall. |
|
|
FASB ASC Topic 360-10 requires impairment losses to be recorded on long-lived assets used in
operations and land parcels 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. The expected future cash flows depend on estimates made by management, including
(1) changes in the national, regional, and/or local economic climates, (2) rental rates, (3)
competition, (4) operating costs, (5) tenant occupancy, (6) holding period, and (7) an
estimated construction budget. A change in the assumptions used to determine future
economic events could result in an adverse change in the value of a property and cause an
impairment to be recorded. Due to uncertainties in the estimation process, actual results
could differ materially from those estimates. Roberts Realtys determination of fair value
is based on a discounted future cash flow analysis, which incorporates available market
information as well as other assumptions made by Roberts Realtys management. Because the
factors Roberts Realtys management uses in generating these cash flows are difficult to
predict and are subject to future events that may alter its assumptions, Roberts Realty may
not achieve the discounted or undiscounted future operating and residual cash flows it
estimates in its impairment analyses or those established by appraisals, and Roberts Realty
may be required to recognize future impairment losses on its properties held for use. |
|
|
Non-Cash Impairments on Operating Real Estate Assets. During 2010, Roberts Realty
determined that the carrying amount of the Grand Pavilion retail center was not recoverable
as a result of a change in the estimated holding period due to the economic and real estate
market conditions at that time. Accordingly, Roberts Realty recorded a non-cash impairment
loss of $2,180,632 on the Grand Pavilion retail center during 2010. In addition, Roberts
Realty recorded a non-cash impairment loss of $504,020 on the Addison Place Shops retail
center. During 2009, Roberts Realty recorded non-cash impairment losses of $1,411,000 on
the Grand Pavilion retail center, $1,884,922 on the Addison Place retail center, and
$699,948 on the Bassett retail center. As a result of the sale of the Addison Place retail
center on June 30, 2010, the non-cash impairment losses on the Addison Place retail center
during 2010 and 2009, respectively, are reflected in loss from discontinued operations. See
Note 4 Discontinued Operations. |
|
|
Non-Cash Impairments on Land Parcels. During 2010, Roberts Realty determined that the
carrying amount of the North Springs property was not recoverable due to the current
economic and market conditions. The determination of the fair value of the North Springs
property was based on a discounted cash flow analysis assuming a future sale of the property
at the estimated value of the propertys office, retail, condominium, and multifamily unit
density, as well as the value of the entitlements, development work, and other improvements
that have been made to the property. As a result of this analysis, during 2010, Roberts
Realty recorded a fair value adjustment of $2,644,963 on the North Springs property. For
2009, Roberts Realty recognized non-cash fair value adjustments related to its land parcels
of $2,385,284 on the Northridge property, $3,975,273 on the North Springs property, and
$3,754,907 on the Peachtree Parkway property. |
F-20
9. |
|
FAIR VALUE MEASUREMENTS |
|
|
FASB ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value and
establishes a framework for measuring fair value. The objective of fair value is to
determine the price that would be received upon the sale of an asset. FASB ASC Topic 820
establishes a fair value hierarchy that prioritizes observable and unobservable inputs used
to measure fair value into three levels: |
|
|
|
Level 1 quoted prices (unadjusted) in active markets that are accessible at
the measurement date for assets or liabilities; |
|
|
|
Level 2 observable prices that are based on inputs not quoted in active
markets, but corroborated by market data; and |
|
|
|
Level 3 unobservable inputs that are used when little or no market data is
available. |
|
|
The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest
priority to Level 3 inputs. In determining fair value, Roberts Realty uses valuation
techniques that maximize the use of observable inputs and minimize the use of unobservable
inputs to the extent possible. Considerable judgment is necessary to interpret Level 2 and
3 inputs in determining fair value of financial and non-financial assets and liabilities.
Accordingly, the fair values presented in the financial statements may not reflect the
amounts ultimately realized on a sale or other disposition of these assets. |
|
|
The following table provides the balances for those assets required to be measured at fair
value on a recurring basis, which consisted of marketable securities, as of December 31,
2009. Roberts Realty held no assets required to be measured at fair value on a recurring
basis as of December 31, 2010. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
Description |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable equity
securities |
|
$ |
38,177 |
|
|
$ |
38,177 |
|
|
|
|
|
|
|
|
|
|
|
Assets measured at fair value on a nonrecurring basis consist of real estate assets that
have incurred non-cash impairment losses so that their carrying value is equal to or less
than their estimated fair value. The following tables provide the balances for those assets
required to be measured at fair value on a nonrecurring basis as of December 31, 2010 and
December 31, 2009. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
Description |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating real estate assets |
|
$ |
5,373,582 |
|
|
|
|
|
|
|
|
|
|
$ |
5,373,582 |
|
Real estate under development |
|
|
13,100,000 |
|
|
|
|
|
|
|
|
|
|
|
13,100,000 |
|
Assets related to
discontinued operations |
|
|
5,627,178 |
|
|
|
|
|
|
|
|
|
|
|
5,627,178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
24,100,760 |
|
|
|
|
|
|
|
|
|
|
$ |
24,100,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
Description |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating real estate assets |
|
$ |
11,989,644 |
|
|
|
|
|
|
|
|
|
|
$ |
11,989,644 |
|
Real estate under development |
|
|
31,991,110 |
|
|
|
|
|
|
|
|
|
|
|
31,991,110 |
|
Assets related to
discontinued operations |
|
|
6,288,508 |
|
|
|
|
|
|
|
|
|
|
|
6,288,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
50,269,262 |
|
|
|
|
|
|
|
|
|
|
$ |
50,269,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10. |
|
RELATED PARTY TRANSACTIONS |
Transactions with Mr. Charles S. Roberts and His Affiliates
|
|
Roberts Realty enters into contractual commitments in the normal course of business with the
Roberts Companies. The contracts between Roberts Realty and the Roberts Companies relate to
the development and construction of real estate assets, and from time to time, the
acquisition of real estate. 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. Under the charter for the audit committee of Roberts Realtys board
of directors, related party transactions are also subject to review and oversight by the
audit committee. |
|
|
Roberts Realty and its predecessor limited partnerships have previously entered into
agreements with Roberts Properties and Roberts Construction to provide design, development,
and construction services for 16 apartment communities with a total of 2,750 units that were
sold for a total sales price of $287,461,143 from 1999 to 2008. All of these communities
were sold for a substantial profit. In entering into transactions with the Roberts
Companies, Roberts Realty complied with the policies described in the preceding paragraph. |
|
|
Design and Development Agreements with Roberts Properties. Roberts Properties provides
various development services that include market studies; business plans; assistance with
permitting, land use and zoning issues, easements, and utility issues; as well as exterior
design, finish selection, interior design, and construction administration. Roberts Realty
has entered into design and development agreements with Roberts Properties for the two
projects listed in the following table for which we made payments to Roberts Properties in
2009 and 2010: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
Amounts |
|
|
Amounts |
|
|
Remaining |
|
|
|
Contract |
|
|
Incurred in |
|
|
Incurred in |
|
|
Contractual |
|
|
|
Amount |
|
|
2009 |
|
|
2010 |
|
|
Commitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley Park |
|
$ |
770,000 |
|
|
$ |
308,000 |
|
|
$ |
|
|
|
$ |
|
|
Highway 20 |
|
|
1,050,000 |
|
|
|
|
|
|
|
225,000 |
|
|
|
725,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,820,000 |
|
|
$ |
308,000 |
|
|
$ |
225,000 |
|
|
$ |
725,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-22
|
|
Construction Contracts with Roberts Construction. Roberts Realty has entered into cost plus
10% (5% for overhead and 5% for profit) contracts with Roberts Construction for the Bradley
Park, Northridge, Peachtree Parkway, North Springs, and Highway 20 properties. Progress
payments are paid monthly to Roberts Construction based on the work that has been completed. The following table lists the amounts incurred on these contracts in 2010 and 2009. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts |
|
|
|
Amounts |
|
|
Incurred for |
|
|
|
Incurred for |
|
|
5% Profit and |
|
|
|
Labor and Materials Costs from |
|
|
5% Overhead from |
|
|
|
Twelve Months Ended |
|
|
Twelve Months Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bradley Park |
|
$ |
39,039 |
|
|
$ |
298,840 |
|
|
$ |
3,904 |
|
|
$ |
29,884 |
|
Northridge |
|
|
160,148 |
|
|
|
205,541 |
|
|
|
16,015 |
|
|
|
20,554 |
|
Peachtree Parkway |
|
|
2,981 |
|
|
|
4,993 |
|
|
|
298 |
|
|
|
499 |
|
North Springs |
|
|
8,039 |
|
|
|
73,691 |
|
|
|
804 |
|
|
|
7,369 |
|
Highway 20 |
|
|
|
|
|
|
288 |
|
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
$ |
210,207 |
|
|
$ |
583,353 |
|
|
$ |
21,021 |
|
|
$ |
58,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Acquisitions. On December 17, 2009, Roberts Realty entered into two sales contracts
with Peachtree Corners Circle, LLC, and purchased a 1.004-acre parcel of land on Peachtree
Corners Circle and an adjacent 0.154-acre strip along Peachtree Corners Circle
(collectively, the purchased property) for a total cash purchase price of $267,000. Mr.
Roberts owned a controlling interest in Peachtree Corners Circle, LLC. Mr. Roberts agreed
to sell the property to Roberts Realty for 60% of the average of the two appraised values to
allow Roberts Realty to improve its property. Two independent appraisals were performed on
the purchased property for Roberts Realtys board of directors, and the average of the two
appraised values was $445,000. The purchase price of each parcel was equal to 60% of the
average appraised value. The purchased property is located adjacent to Roberts Realtys
Peachtree Parkway land parcel. |
|
|
Other Payments. At the request of Roberts Realty, Roberts Construction performed repairs
and tenant improvements for new leases at the retail centers and office building. For the
twelve months ended December 31, 2010, Roberts Realty paid Roberts Construction $161,939 for
labor and materials costs plus $16,194 (5% for profit and 5% for overhead). Other
affiliates of Mr. Roberts received cost reimbursements of $211,588 for the twelve months
ended December 31, 2010. |
|
|
Office Leases. Roberts Realty leases office space in the Northridge office building to the
Roberts Companies. Effective as of January 1, 2011, Roberts Realty renewed its leases with
the Roberts Companies. Under the renewed leases, Roberts Properties leases 4,431 rentable
square feet, and Roberts Construction leases 1,920 rentable square feet. Both leases are
for a one-year term with a new rental rate of $17.50 per rentable square foot. Roberts
Realty recognized total rental income from Roberts Properties and Roberts Construction of
$96,342 for the twelve months ended December 31, 2010 and $143,800 for the twelve months
ended December 31, 2009. |
11. |
|
COMMITMENTS AND CONTINGENCIES |
|
|
Roberts Realty has entered into various contracts for the development and construction of
its projects. The contracts with Roberts Properties and Roberts Construction are described
in Note 10 Related Party Transactions. The construction contracts require Roberts Realty
to pay Roberts Construction the labor and materials costs plus 10% (5% overhead and 5%
profit). |
|
|
In addition to the construction contracts with Roberts Construction, Roberts Realty has
entered into architectural and engineering contracts with third parties for the Northridge,
Bradley Park,
and Peachtree Parkway projects. At December 31, 2010, outstanding commitments on these
contracts totaled $237,964. |
F-23
|
|
At December 31, 2010, Roberts Realty had a $500,000 letter of credit outstanding. The
letter of credit is required by the lender for Roberts Realtys Spectrum retail center and
is held as a reserve for the payment of leasing costs. Roberts Realty assumed this
obligation when it acquired the Spectrum retail center in October 2005. The letter of
credit expires on September 26, 2011. |
|
|
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 that the final outcome of these
matters will not have a material adverse effect on Roberts Realtys financial position or
results of operations. Roberts Realty has a disputed claim related to its Bradley Park
property in the amount of $127,124 by an architect that has gone out of business. Roberts
Realty disputes the amount and quality of the work performed and believes this dispute will
more than likely lead to litigation. |
|
|
As a result of the mergers of various predecessor limited partnerships into the operating
partnership, the former partners of those predecessor limited partnerships received
operating partnership units. Holders of units have the right to require the operating
partnership to redeem their units for shares, subject to certain conditions. Upon submittal
of units for redemption, the operating partnership will have the option either (a) to pay
cash for those units at their fair market value, which will be based upon the then current
trading price of the shares, or (b) to acquire those units in exchange for shares (on a
1.647-for-one basis). Roberts Realty has adopted a policy that it will issue shares in
exchange for all future units submitted. At December 31, 2010, there were 1,329,738 units
outstanding that could be exchanged for shares, subject to the conditions described above. |
|
|
Under Roberts Realtys bylaws, it is obligated to indemnify its officers and directors for
certain events or occurrences arising as a result of its officers and directors serving in
these capacities. 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
indemnification arrangement is minimal, and Roberts Realty has recorded no liabilities for
this indemnification arrangement as of December 31, 2010. |
|
|
Under various federal, state, and local environmental laws and regulations, Roberts Realty
may be required to investigate and clean up the effects of hazardous or toxic substances at
its properties, including properties that have previously been sold. The preliminary
environmental assessments of Roberts Realtys operating properties, development projects,
and land held for investment have not revealed any environmental liability that Roberts
Realty believes would have a material adverse effect on its business, assets, or results of
operations, nor is Roberts Realty aware of any such environmental liability. |
|
|
Managements Business Plan. Management continues to focus on improving Roberts Realtys
liquidity and balance sheet. Roberts Realtys primary liquidity requirements are related to
its continuing negative operating cash flow and maturing short-term debt. Roberts Realtys
negative cash flow is primarily due to its five tracts of land and low occupancy rates at
two of its retail centers and its office building. Roberts Realty has one loan with a
principal balance of $8,175,000 that matures within the next 12 months. Managements plan
is to renew this loan before its July 31, 2011 due date and extend its maturity date at
least 12 months. Management believes that its long history of operating and developing real
estate and its current plans for developing its existing land holdings will allow it to
successfully extend this loan or find
alternative funding and raise additional capital for development. However, current economic
conditions and the tight lending environment create uncertainty regarding whether the
maturing loan will be extended or refinanced as planned. If Roberts Realty were required to
use its current cash balances to pay down this loan, those repayments and the corresponding
reductions in Roberts Realtys cash could adversely affect Roberts Realtys ability to
execute its plans as described further below. |
F-24
|
|
Management believes that the most important uses of Roberts Realtys capital resources will
be: |
|
(a) |
|
to provide working capital to cover its negative operating cash
flow; and |
|
(b) |
|
to invest in the development of its land parcels to enable it
to raise the required equity to construct these new multifamily communities. |
|
|
Management is focusing on its core business of developing, constructing, managing, and
selling high quality multifamily communities for cash flow and long-term appreciation.
Management has significantly reduced Roberts Realtys debt and decreased its negative cash
flow and intends to continue these efforts. |
|
|
Retail Centers and Office Building. Because the retail sector took the brunt of the severe
recession, Roberts Realtys retail centers have struggled with occupancy as tenants have
failed. Management anticipates that the performance of the retail centers will continue to
be weak for the foreseeable future. Similarly, the market for office space in Atlanta is
overbuilt and continues to be very challenging. In spite of this difficult environment,
however, management is committed to increasing the occupancy of both the retail centers and
office building so they can be positioned for sale. In addition to considering the sale of
the Bassett and Spectrum retail centers and the office building, Roberts Realty may form a
joint venture with a company that specializes in retail or office properties to use their
expertise in leasing these property types. Roberts Realty also intends to pursue joint
ventures with potential partners that include local investors, pension funds, life insurance
companies, hedge funds, and foreign investors. |
|
|
As Roberts Realty has previously stated in its annual and quarterly reports, its objective
is to exit the retail business to focus exclusively on developing, constructing and managing
multifamily apartment communities. Given that objective and the approximately $625,000 in
annual negative cash flow from its Grand Pavilion retail center, Roberts Realty has elected
not to make debt service payments since July 2010 on that retail center and has allowed the
loan to go into default. In August 2010, Roberts Realty asked the lender to place the Grand
Pavilion loan with the special servicer. On December 16, 2010, Roberts Realty received a
formal notice of default from the special servicer of the loan. Roberts Realty is seeking
to transfer the Grand Pavilion retail center to the lender as soon as possible in
satisfaction of the approximately $6,433,286 principal amount of debt secured by the
property. Because the loan is nonrecourse, Roberts Realty would have no further obligations
to the lender for this loan. This transaction would move Roberts Realty closer to exiting
the retail business, reduce the principal amount of its debt by $6,433,286, and reduce its
annual negative operating cash flow by approximately $625,000. |
|
|
Land Parcels Held for Development and Construction. Roberts Realty intends to move forward
with the development and construction of its next two multifamily communities: Bradley Park
and Northridge. Despite the very challenging economic conditions, management believes this
is an opportune time to create new multifamily assets. Management believes that in this
difficult economic climate, Roberts Realty can build at lower construction costs and create
value for shareholders as Roberts Realty has historically done during economic downturns and
recessions. Roberts Realty is currently seeking to raise the equity and obtain the
construction loans for the Bradley Park and Northridge communities. Roberts Realty
currently estimates that it will need
approximately $35,718,000 in debt and equity to complete the construction of its Northridge
and Bradley Park multifamily communities. |
F-25
|
|
To provide the equity for construction, Roberts Realty may sell one or more of its land
parcels to independent purchasers. Roberts Realty is also considering forming joint
ventures and partnerships, and raising private equity. Roberts Realty is also in
discussions with possible joint venture participants such as pension funds, life insurance
companies, hedge funds, foreign investors, and local investors. Roberts Realty may also
sell one or more land parcels to Roberts Properties or to a newly formed affiliate of
Roberts Properties or of Roberts Realty that would raise private equity for the specific
purpose of funding the purchase of the land parcel and constructing a multifamily community. |
|
|
Possible Sale, Merger, or Business Combination. In an effort to maximize shareholder value,
Roberts Realty is open to any transaction that would be in the best interests of its
shareholders. In 2009 and 2010, Roberts Realty has engaged in discussions with both private
companies and individuals regarding a possible sale, merger, or other business combination.
Roberts Realty has entered into mutual confidentiality agreements with six different
entities and discussions are ongoing with several of them. To date, Roberts Realty has not
entered into any letter of intent or definitive agreement for such a transaction.
Management remains open to any reasonable proposal for a sale, merger, or other business
combination that would reward shareholders and maximize their value. |
12. |
|
SUMMARIZED QUARTERLY FINANCIAL INFORMATION
(UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
March 31 |
|
|
June 30 |
|
|
Sept 30 |
|
|
Dec 31 |
|
Year Ended December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
494,935 |
|
|
$ |
487,318 |
|
|
$ |
409,834 |
|
|
$ |
406,677 |
|
Loss from operations |
|
|
(325,612 |
) |
|
|
(247,196 |
) |
|
|
(5,306,856 |
) |
|
|
(595,334 |
) |
Loss from continuing operations |
|
|
(675,661 |
) |
|
|
(3,580,649 |
) |
|
|
(5,682,952 |
) |
|
|
(979,822 |
) |
(Loss) income from discontinued operations |
|
|
(204,091 |
) |
|
|
(318,423 |
) |
|
|
3,204 |
|
|
|
|
|
Net loss |
|
|
(879,752 |
) |
|
|
(3,899,072 |
) |
|
|
(5,679,748 |
) |
|
|
(979,822 |
) |
Per share (diluted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.05 |
) |
|
$ |
(0.29 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.08 |
) |
Loss from discontinued operations |
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.07 |
) |
|
$ |
(0.31 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.08 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
489,762 |
|
|
$ |
504,323 |
|
|
$ |
479,939 |
|
|
$ |
489,797 |
|
Loss from operations |
|
|
(1,883,484 |
) |
|
|
(3,770,082 |
) |
|
|
(470,362 |
) |
|
|
(7,712,298 |
) |
Loss from continuing operations |
|
|
(2,145,161 |
) |
|
|
(4,125,887 |
) |
|
|
(813,866 |
) |
|
|
(8,050,767 |
) |
Loss from discontinued operations |
|
|
(102,425 |
) |
|
|
(2,045,039 |
) |
|
|
(46,222 |
) |
|
|
(111,061 |
) |
Net loss |
|
|
(2,247,586 |
) |
|
|
(6,170,926 |
) |
|
|
(860,088 |
) |
|
|
(8,161,828 |
) |
Per share (diluted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(0.17 |
) |
|
|
(0.33 |
) |
|
|
(0.07 |
) |
|
|
(0.64 |
) |
Loss from discontinued operations |
|
|
(0.01 |
) |
|
|
(0.16 |
) |
|
|
|
|
|
|
(0.02 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.18 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-26
|
|
Office Leases. Roberts Realty leases office space in the Northridge office building to the
Roberts Companies. Effective as of January 1, 2011, Roberts Realty renewed its leases with
the Roberts Companies. Under the renewed leases, Roberts Properties leases 4,431 rentable
square feet, and Roberts Construction leases 1,920 rentable square feet. Both leases are
for a one-year term with a new rental rate of $17.50 per rentable square foot. |
F-27
(a)(3). Exhibits required by Item 601 of Regulation S-K.
We have filed some of the exhibits required by Item 601 of Regulation S-K with previous
registration statements or reports. As specifically noted in the following Index to Exhibits,
those previously filed exhibits are incorporated into this annual report on Form 10-K by reference.
All exhibits contained in the following Index to Exhibits that are designated with an asterisk are
incorporated into this annual report by reference in our initial Registration Statement on Form
10-SB filed with the SEC on March 22, 1996; the applicable exhibit number in that Registration
Statement is provided beside the asterisk. The exhibits listed from Exhibit 10.1.1 through Exhibit
10.9.2 are management contracts or compensatory plans or arrangements.
We will provide a copy of any or all of the following exhibits to any shareholder who requests
them, for a cost of ten cents per page.
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
|
|
|
Plan of Disposition: |
|
|
|
2.1 |
|
|
Agreement for Deed In Lieu of Foreclosure by and between Compass Bank, Roberts
Properties Residential, L.P. and Roberts Realty Investors, Inc. dated as of
June 30, 2010 (Addison Place Shops and Westside). [Incorporated by reference
to Item 2.1 in our current report on Form 8-K dated June 30, 2010.] |
|
|
|
|
|
|
|
|
|
Articles of Incorporation, Bylaws and Certificates and Articles of Merger: |
|
|
|
|
|
|
3.1 |
|
|
Amended and Restated Articles of Incorporation of Roberts Realty Investors,
Inc. filed with the Georgia Secretary of State on July 22, 2004.
[Incorporated by reference to Exhibit 3.1 in our quarterly report on Form 10-Q
for the quarter ended September 30, 2004.] |
|
|
|
|
|
|
3.2 |
|
|
Bylaws of Roberts Realty Investors, Inc. [* 2.2] |
|
|
|
|
|
|
3.3 |
|
|
Amended and Restated Bylaws of Roberts Realty Investors, Inc. [Incorporated
by reference to Exhibit 3.1 in our current report on Form 8-K dated February
4, 2008.] |
|
|
|
|
|
|
4.1 |
|
|
Agreement of Limited Partnership of Roberts Properties Residential, L.P.,
dated as of July 22, 1994. [* 3.1] |
|
|
|
|
|
|
4.1.1 |
|
|
First Amended and Restated Agreement of Limited Partnership of Roberts
Properties Residential, L.P., dated as of October 1, 1994, as amended. [*
3.1.1] |
|
|
|
|
|
|
4.1.2 |
|
|
Amendment #1 to First Amended and Restated Agreement of Limited Partnership of
Roberts Properties Residential, L.P., dated as of October 13, 1994. [* 3.1.2] |
|
|
|
|
|
|
4.1.3 |
|
|
Amendment #2 to First Amended and Restated Agreement of Limited Partnership of
Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit
10.1 in our Registration Statement on Form S-3 filed July 8, 1999,
registration number 333-82453.] |
|
|
|
|
|
|
4.2 |
|
|
Certificate of Limited Partnership of Roberts Properties Residential, L.P.
filed with the Georgia Secretary of State on July 22, 1994. [* 3.2] |
|
|
|
|
|
|
4.2.1 |
|
|
Certificate of Merger filed with the Georgia Secretary of State on October 13,
1994, merging Roberts Properties River Oaks, L.P.; Roberts Properties Rosewood
Plantation, L.P.; Roberts Properties Preston Oaks, L.P.; and Roberts
Properties Highland Park, L.P. with and into Roberts Properties Residential,
L.P. (1994 Consolidation). [* 3.2.1] |
60
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
4.2.2 |
|
|
Certificate of Merger filed with the Georgia Secretary of State on March 24,
1995, merging Roberts Properties Holcomb Bridge, L.P. with and into Roberts
Properties Residential, L.P. (Holcomb Bridge Merger). [* 3.2.2] |
|
|
|
|
|
|
4.2.3 |
|
|
Certificate of Merger filed with the Georgia Secretary of State on May 16,
1995, merging Roberts Properties Plantation Trace, L.P. with and into Roberts
Properties Residential, L.P. (Plantation Trace Merger). [* 3.2.3] |
|
|
|
|
|
|
4.2.4 |
|
|
Certificate of Merger filed with the Georgia Secretary of State on September
27, 1995, merging Roberts Properties-St. Simons, Ltd. with and into Roberts
Properties Residential, L.P. (Windsong Merger). [* 3.2.4] |
|
|
|
|
|
|
4.2.5 |
|
|
Certificate of Merger filed with the Georgia Secretary of State on March 21,
1996, merging Roberts Properties Bentley Place, L.P. with and into Roberts
Properties Residential, L.P. (Bentley Place Merger). [Incorporated by
reference to Exhibit 4.2.5 in our quarterly report on Form 10-QSB for the
quarter ended June 30, 1996.] |
|
|
|
|
|
|
4.2.6 |
|
|
Certificate of Merger filed with the Georgia Secretary of State on June 26,
1996, merging The Crestmark Club, L.P. with and into Roberts Properties
Residential, L.P. (Crestmark Merger). [Incorporated by reference to Exhibit
4.2.6 in our quarterly report on Form 10-QSB for the quarter ended June 30,
1996.] |
|
|
|
|
|
|
4.2.7 |
|
|
Certificate and Articles of Merger filed with the Georgia Secretary of State
on April 1, 1997 merging Roberts Properties Management, L.L.C. with and into
Roberts Properties Residential, L.P. [Incorporated by reference to Exhibit
4.2.7 in our current report on Form 8-K dated April 1, 1997.] |
|
|
|
|
|
|
|
|
|
Material Agreements with Affiliates: |
|
|
|
|
|
|
|
|
|
Corporate Office Building |
|
|
|
|
|
|
10.1.1 |
|
|
Office Lease between Roberts Properties Residential, L.P. and Roberts
Properties, Inc. dated March 27, 2006. [Incorporated by reference to Exhibit
10.4 in our quarterly report on Form 10-Q for the quarter ended March 31,
2006.] |
|
|
|
|
|
|
10.1.2 |
|
|
Office Lease between Roberts Properties Residential, L.P. and Roberts
Properties Construction, Inc. dated March 27, 2006. [Incorporated by
reference to Exhibit 10.3 in our quarterly report on Form 10-Q for the quarter
ended March 31, 2006.] |
|
|
|
|
|
|
10.1.3 |
|
|
Lease renewal agreement by and between Roberts Properties Residential, L.P.
and Roberts Properties Construction, Inc. dated March 21, 2007. [Incorporated
by reference to Exhibit 10.1 in our quarterly report on Form 10-Q for the
quarter ended March 31, 2007.] |
|
|
|
|
|
|
10.1.4 |
|
|
Lease renewal agreement by and between Roberts Properties Residential, L.P.
and Roberts Properties, Inc. dated March 21, 2007. [Incorporated by reference
to Exhibit 10.2 in our quarterly report on Form 10-Q for the quarter ended
March 31, 2007.] |
|
|
|
|
|
|
10.1.5 |
|
|
Lease renewal agreement by and between Roberts Properties Residential, L.P.
and Roberts Properties Construction, Inc. dated January 18, 2008.
[Incorporated by reference to Exhibit 10.1.6 in our annual report on Form 10-K
for the year ended December 31, 2007.] |
|
|
|
|
|
|
10.1.6 |
|
|
Lease renewal agreement by and between Roberts Properties Residential, L.P.
and Roberts Properties, Inc. dated January 18, 2008. [Incorporated by
reference to Exhibit 10.1.7 in our annual report on Form 10-K for the year
ended December 31, 2007.] |
61
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.1.7 |
|
|
Lease renewal agreement by and between Roberts Properties Residential, L.P.
and Roberts Properties, Inc. dated January 30, 2009. [Incorporated by
reference to Exhibit 10.1.8 in our annual report on Form 10-K for the year
ended December 31, 2008.] |
|
|
|
|
|
|
10.1.8 |
|
|
Lease renewal agreement by and between Roberts Properties Residential, L.P.
and Roberts Properties Construction, Inc. dated January 30, 2009.
[Incorporated by reference to Exhibit 10.1.9 in our annual report on Form 10-K
for the year ended December 31, 2008.] |
|
|
|
|
|
|
10.1.9 |
|
|
First Amendment to Lease dated December 30, 2009 by and between Roberts
Properties, Inc. and Roberts Properties Residential, L.P. [Incorporated by
reference to Exhibit 10.1 in our current report on Form 8-K dated December 30,
2009.] |
|
|
|
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10.1.10 |
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First Amendment to Lease dated December 30, 2009 by and between Roberts
Properties Construction, Inc. and Roberts Properties Residential, L.P.
[Incorporated by reference to Exhibit 10.2 in our current report on Form 8-K
dated December 30, 2009.] |
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10.1.11 |
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Amendment to Lease dated as of January 1, 2011 by and between Roberts
Properties, Inc. and Roberts Properties Residential, L.P. [Incorporated by
reference to Exhibit 10.1 in our current report on Form 8-K dated January 24,
2011.] |
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10.1.12 |
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Amendment to Lease dated as of January 1, 2011 by and between Roberts
Properties Construction, Inc. and Roberts Properties Residential, L.P.
[Incorporated by reference to Exhibit 10.2 in our current report on Form 8-K
dated January 24, 2011.] |
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Northridge |
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10.2.1 |
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Construction Agreement between Roberts Properties Residential, L.P. and
Roberts Properties Construction, Inc. (Northridge). [Incorporated by
reference to Exhibit 10.1.18 in our quarterly report on Form 10-Q for the
quarter ended March 31, 2003.] |
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Peachtree Parkway |
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10.3.1 |
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Restrictive Covenant by Roberts Properties Peachtree Parkway, L.P., assumed by
Roberts Properties Residential, L.P. on December 29, 2004. [Incorporated by
reference to Exhibit 10.3 in our current report on Form 8-K dated January 5,
2005.] |
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10.3.2 |
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Design and Development Agreement among Roberts Properties Residential, L.P.,
Georgianna Jean K. Valentino and Roberts Properties, Inc. for the Peachtree
Parkway land parcel, dated as of April 14, 2005. [Incorporated by reference
to Exhibit 10.1 in our current report on Form 8-K dated April 12, 2005.] |
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10.3.3 |
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Amendment Number 1 to Design and Development Agreement between Roberts
Properties Residential, L.P. and Roberts Properties, Inc. dated as of December
6, 2006 (Peachtree Parkway). [Incorporated by reference to Exhibit 10.1 in
our current report on Form 8-K dated December 6, 2006.] |
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10.3.4 |
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Construction Contract among Roberts Properties Residential, L.P., Georgianna
Jean K. Valentino and Roberts Properties Construction, Inc. for the Peachtree
Parkway land parcel, dated as of April 14, 2005. [Incorporated by reference
to Exhibit 10.3 in our current report on Form 8-K dated April 12, 2005.] |
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Exhibit No. |
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Description |
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10.3.6 |
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Amendment Number 1 to Construction Contract between Roberts Properties
Residential, L.P. and Roberts Properties Construction, Inc. dated as of
December 6, 2006 (Peachtree Parkway). [Incorporated by reference to Exhibit
10.2 in our current report on Form 8-K dated December 6, 2006.] |
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10.3.6 |
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Sales Contract dated December 17, 2009 between Peachtree Corners Circle, LLC
and Roberts Properties Residential, L.P. (1.004-acre parcel on Peachtree
Corners Circle). [Incorporated by reference to Exhibit 10.1 in our current
report on Form 8-K dated December 17, 2009.] |
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10.3.7 |
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Sales Contract dated December 17, 2009 between Peachtree Corners Circle, LLC
and Roberts Properties Residential, L.P. (0.154-acre strip along Peachtree
Corners Circle). [Incorporated by reference to Exhibit 10.2 in our current
report on Form 8-K dated December 17, 2009.] |
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North Springs (formerly Peachtree Dunwoody) |
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10.4.1 |
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Restrictive Covenant by Roberts Properties Peachtree Dunwoody, LLC, assumed by
Roberts Properties Residential, L.P. on January 20, 2005. [Incorporated by
reference to Exhibit 10.2 in our current report on Form 8-K dated January 21,
2005.] |
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10.4.2 |
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Design and Development Agreement between Roberts Properties Residential, L.P.
and Roberts Properties, Inc. for the North Springs (formerly Peachtree
Dunwoody) land parcel, dated as of April 14, 2005. [Incorporated by reference
to Exhibit 10.2 in our current report on Form 8-K dated April 12, 2005.] |
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10.4.3 |
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Construction Contract between Roberts Properties Residential, L.P. and Roberts
Properties Construction, Inc. for the North Springs (formerly Peachtree
Dunwoody) land parcel, dated as of April 14, 2005. [Incorporated by reference
to Exhibit 10.4 in our current report on Form 8-K dated April 12, 2005.] |
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Bradley Park |
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10.5.1 |
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Design and Development Agreement between Roberts Properties Residential, L.P.
and Roberts Properties, Inc. for the Bradley Park (formerly Sawmill) land
parcel in Cumming, Georgia, dated as of August 4, 2005. [Incorporated by
reference to Exhibit 10.1 in our current report on Form 8-K dated August 9,
2005.] |
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10.5.2 |
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Construction Contract between Roberts Properties Residential, L.P. and Roberts
Properties Construction, Inc. for the Bradley Park (formerly Sawmill) land
parcel in Cumming, Georgia, dated as of August 4, 2005. [Incorporated by
reference to Exhibit 10.2 in our current report on Form 8-K dated August 9,
2005.] |
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Highway 20 |
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10.6.1 |
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Design and Development Agreement between Roberts Properties Residential, L.P.
and Roberts Properties, Inc. for the Highway 20 land parcel in Cumming,
Georgia, dated as of February 21, 2006. [Incorporated by reference to Exhibit
10.1 in our current report on Form 8-K dated February 21, 2006.] |
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10.6.2 |
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Construction Contract between Roberts Properties Residential, L.P. and Roberts
Properties Construction, Inc. for the Highway 20 land parcel in Cumming,
Georgia, dated as of February 21, 2006. [Incorporated by reference to Exhibit
10.2 in our current report on Form 8-K dated February 21, 2006.] |
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Exhibit No. |
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Description |
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Compensation Agreements and Arrangements, and Restricted Stock Plan |
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10.7.1 |
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Determination of compensation arrangements for the interim Chief Financial
Officer of Roberts Realty Investors, Inc. [Incorporated by reference to Item
5.02 in our current report on Form 8-K dated May 31, 2006.] |
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10.7.2 |
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2006 Roberts Realty Investors, Inc. Restricted Stock Plan, as amended
effective January 27, 2009. [Incorporated by reference to Exhibit 4.1 in the
companys post-effective amendment to its Registration Statement on Form S-8
filed with the SEC on January 29, 2009.] |
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10.7.3 |
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Revised Form of Restricted Stock Award Agreement (supersedes the form of
restricted stock award agreement attached as Exhibit A to Annex A to our proxy
statement for our 2006 annual meeting filed with the SEC on July 20, 2006).
[Incorporated by reference to Exhibit 10.3 in our quarterly report on Form
10-Q for the quarter ended March 31, 2007.] |
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Other Agreements with Affiliates |
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10.8.1 |
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Reimbursement arrangement between Roberts Realty Investors, Inc. and Roberts
Properties, Inc., effective February 8, 2008. [Incorporated by reference to
Exhibit 10.1 in our current report on Form 8-K dated February 4, 2008.] |
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10.8.2 |
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Reimbursement arrangement between Roberts Realty Investors, Inc. and Roberts
Properties, Inc., effective January 1, 2011. [Incorporated by reference to
Exhibit 10.3 in our current report on Form 8-K dated January 24, 2011.] |
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Peachtree Parkway / North Springs (formerly Peachtree Dunwoody) / Highway 20 Financing Documents: |
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10.9.1 |
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Promissory Note in the principal amount of $8,175,000, dated December 6, 2006,
executed by Roberts Properties Residential, L.P. in favor of Wachovia Bank,
National Association (Peachtree Parkway). [Incorporated by reference to
Exhibit 10.3 in our current report on Form 8-K dated December 6, 2006.] |
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10.9.2 |
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Deed to Secure Debt and Assignment of Rents dated December 6, 2006, executed
by Roberts Properties Residential, L.P. in favor of Wachovia Bank, National
Association (Peachtree Parkway). [Incorporated by reference to Exhibit 10.4
in our current report on Form 8-K dated December 6, 2006.] |
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10.9.3 |
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Unconditional Guaranty dated December 6, 2006, executed by Roberts Realty
Investors, Inc. in favor of Wachovia Bank, National Association (Peachtree
Parkway). [Incorporated by reference to Exhibit 10.5 in our current report on
Form 8-K dated December 6, 2006.] |
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10.9.4 |
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Second Consolidated Amendatory Agreement and Agreement Regarding Cross-Default
and Cross-Collateralization of Loans dated April 28, 2008 by and between
Roberts Properties Residential, L.P. and Wachovia Bank, National Association
(Peachtree Parkway). [Incorporated by reference to Exhibit 10.1 in our
current report on Form 8-K dated April 28, 2008.] |
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10.9.5 |
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Deed to Secure Debt and Assignment of Rents dated April 28, 2008, executed by
Roberts Properties Residential, L.P. in favor of Wachovia Bank, National
Association (North Springs). [Incorporated by reference to Exhibit 10.3 in
our current report on Form 8-K dated April 28, 2008.] |
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Exhibit No. |
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Description |
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10.9.6 |
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Letter Agreement from Wachovia Bank, N.A. dated April 27, 2009. [Incorporated
by reference to Exhibit 10.1 in our current report on Form 8-K dated April 27,
2009.] |
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10.9.7 |
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Third Consolidated Amendatory Agreement dated July 17, 2009 by and among
Roberts Properties Residential, L.P., Roberts Realty Investors, Inc. and
Wachovia Bank, National Association (Peachtree Parkway). [Incorporated by
reference to Exhibit 10.1 in our current report on Form 8-K dated July 17,
2009.] |
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10.9.8 |
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Second Amendment to Deed to Secure Debt and Assignment of Rents and Other Loan
Documents dated July 17, 2009 by and between Roberts Properties Residential,
L.P. and Wachovia Bank, National Association (Peachtree Parkway).
[Incorporated by reference to Exhibit 10.2 in our current report on Form 8-K
dated July 17, 2009.] |
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10.9.9 |
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Fourth Consolidated Amendatory Agreement dated June 21, 2010 by and among
Roberts Properties Residential, L.P., Roberts Realty Investors, Inc. and Wells
Fargo Bank, National Association (Peachtree Parkway). [Incorporated by
reference to Item 10.1 in our current report on Form 8-K dated June 21, 2010.] |
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10.9.10 |
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Third Amendment to Deed to Secure Debt and Assignment of Rents and Other Loan
Documents dated June 21, 2010 by and between Roberts Properties Residential,
L.P. and Wells Fargo Bank, National Association (Peachtree Parkway).
[Incorporated by reference to Item 10.2 in our current report on Form 8-K
dated June 21, 2010.] |
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Other Exhibits: |
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21 |
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Subsidiaries of Roberts Realty Investors, Inc. |
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23 |
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Consent of Independent Registered Public Accounting Firm Reznick Group, P.C. |
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24 |
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Power of Attorney (contained on the signature page hereof). |
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31 |
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Certifications of Charles S. Roberts and Charles R. Elliott pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002. |
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32 |
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Certifications of Charles S. Roberts and Charles R. Elliott pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. This exhibit is not filed
for purposes of Section 18 of the Securities Exchange Act of 1934 but is
instead furnished as provided by applicable rules of the Securities and
Exchange Commission. |
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: March 17, 2011
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ROBERTS REALTY INVESTORS, INC. |
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By:
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/s/ Charles S. Roberts
Charles S. Roberts, Chairman of the Board,
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Chief Executive Officer and President |
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints jointly and severally, Charles S. Roberts and Charles R. Elliott, and each one of
them, his attorneys-in-fact, each with the power of substitution, for him in any and all
capacities, to sign any and all amendments to this Annual Report (Form 10-K) and to file the same,
with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorneys-in-fact, or his substitute
or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
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Signature |
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Title |
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Date |
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/s/ Charles S. Roberts
Charles S. Roberts
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Chairman of the Board, Chief
Executive
Officer and President
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March 17, 2011 |
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/s/ Charles R. Elliott
Charles R. Elliott
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Secretary, Treasurer, Chief
Financial
Officer (Principal Financial
Officer and Principal Accounting
Officer) and Director
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March 17, 2011 |
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/s/ John L. Davis
John L. Davis
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Director
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March 17, 2011 |
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/s/ Wm. Jarell Jones
Wm. Jarell Jones
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Director
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March 17, 2011 |
66