ROBERTS REALTY INVESTORS INC - 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Form 10-Q


þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934
		For the quarterly period ended September 30, 2002

OR

o		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
		SECURITIES EXCHANGE ACT OF 1934
		For the transition period from _______________ to _______________

Commission File No. 001-13183

Roberts Realty Investors, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Georgia		58-2122873

(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)

8010 Roswell Road, Suite 120, Atlanta, Georgia		30350

(Address of Principal Executive Offices)		(Zip Code)

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

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

Yes þ No o

The number of outstanding shares of the registrant’s Common Stock on October 31, 2002 was 4,955,679 (net of shares held in treasury).

TABLE OF CONTENTS


PART I
	ITEM 1. FINANCIAL STATEMENTS.
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
	ITEM 4. CONTROLS AND PROCEDURES
PART II
	ITEM 1. LEGAL PROCEEDINGS.
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
	ITEM 5. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
SIGNATURES
EXHIBIT INDEX
EX-10.1 PROMISSORY NOTE
EX-10.2 FIRST AMENDMENT TO DEED
EX-10.3 SECOND AMENDMENT TO PROMISSORY NOTE
EX-10.4 SECOND AMENDMENT TO DEED
EX-10.5 THIRD AMENDMENT TO PROMISSORY NOTE
EX-10.6 THIRD AMENDMENT TO DEED

TABLE OF CONTENTS


		PAGE

PART I FINANCIAL INFORMATION			1
	ITEM 1. FINANCIAL STATEMENTS		1
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		13
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		30
	ITEM 4. CONTROLS AND PROCEDURES		30
PART II OTHER INFORMATION			31
	ITEM 1. LEGAL PROCEEDINGS		31
	ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS		31
	ITEM 3. DEFAULTS UPON SENIOR SECURITIES		31
	ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS		31
	ITEM 5. OTHER INFORMATION		31
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K		31

PART I

ITEM 1. FINANCIAL STATEMENTS.

ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)


					September 30,			December 31,
					2002			2001

					(Unaudited)
ASSETS
REAL ESTATE ASSETS – At cost:
	Land				$	20,886		$	19,729
	Buildings and improvements					118,006			109,166
	Furniture, fixtures and equipment					13,761			12,891

						152,653			141,786
	Less accumulated depreciation					(26,395	)		(21,463	)

		Operating real estate assets				126,258			120,323
	Land held for future development					1,950			1,741
	Construction in progress and real estate under development					41,818			38,809

				Net real estate assets		170,026			160,873
CASH AND CASH EQUIVALENTS						1,564			2,617
RESTRICTED CASH						353			336
DEFERRED FINANCING COSTS – Net of accumulated amortization of $713 and $464 at September 30, 2002 and December 31, 2001, respectively						1,267			1,225
OTHER ASSETS – Net						673			452

					$	173,883		$	165,503

LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
	Mortgage notes payable				$	100,626		$	78,877
	Construction notes payable					24,366			31,704
	Land notes payable					6,700			8,000
	Lines of credit					800			2,000
	Swap contract liability					4,815			2,880
	Accounts payable and accrued expenses					2,907			1,859
	Due to affiliates (including retainage payable of $1,132 and $1,143 at September 30, 2002 and December 31, 2001, respectively)					1,541			2,397
	Security deposits and prepaid rents					389			416

			Total liabilities			142,144			128,133

COMMITMENTS AND CONTINGENCIES (Note 6)
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP						9,998			11,996

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, 5,309,317 and 5,266,567 shares issued at Sept. 30, 2002 and Dec. 31, 2001, respectively					53			53
	Additional paid-in capital					24,761			24,410
	Less treasury shares, at cost (362,588 shares at September 30, 2002 and December 31, 2001)					(2,764	)		(2,764	)
	Unamortized restricted stock compensation					(134	)		(202	)
	Retained earnings					3,123			5,833
	Accumulated other comprehensive income					(3,298	)		(1,956	)

				Total shareholders’ equity		21,741			25,374

					$	173,883		$	165,503

The accompanying notes are an integral part of these consolidated financial statements.

ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands, Except Per Share Amounts)


			Three Months						Nine Months
			Ended September 30,						Ended September 30,

			2002			2001			2002			2001

			(Unaudited)						(Unaudited)
OPERATING REVENUES:
	Rental operations		$	4,440		$	3,850		$	13,210		$	12,948
	Other operating income			269			251			798			891

		Total operating revenues		4,709			4,101			14,008			13,839

OPERATING EXPENSES:
	Personnel			582			376			1,506			1,304
	Utilities			324			264			891			817
	Repairs, maintenance and landscaping			311			238			907			803
	Real estate taxes			522			296			1,505			1,066
	Marketing, insurance and other			325			182			859			594
	General and administrative expenses			561			439			1,575			1,296
	Depreciation of real estate assets			1,791			1,260			5,120			3,925

		Total operating expenses		4,416			3,055			12,363			9,805

INCOME FROM OPERATIONS				293			1,046			1,645			4,034

OTHER INCOME (EXPENSE):
	Interest income			8			73			30			340
	Interest expense			(1,738	)		(1,148	)		(5,002	)		(3,749	)
	Loss on disposal of assets			(12	)		1			(25	)		(29	)
	Amortization of deferred financing costs			(75	)		(53	)		(251	)		(139	)

		Total other expense		(1,817	)		(1,127	)		(5,248	)		(3,577	)

INCOME (LOSS) BEFORE MINORITY INTEREST, GAIN ON SALE OF REAL ESTATE ASSET AND EXTRAORDINARY ITEM				(1,524	)		(81	)		(3,603	)		457
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP				483			26			1,146			(149	)

INCOME (LOSS) BEFORE GAIN ON SALE OF REAL ESTATE ASSET AND EXTRAORDINARY ITEM				(1,041	)		(55	)		(2,457	)		308
GAIN (LOSS) ON SALE OF REAL ESTATE ASSET, net of minority interest of unitholders in the operating partnership				0			2,793			(102	)		7,982

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM				(1,041	)		2,738			(2,559	)		8,290
EXTRAORDINARY ITEM – Loss on early extinguishment of debt, net of minority interest of unitholders in the operating partnership				0			(114	)		0			(406	)

NET INCOME (LOSS)			$	(1,041	)	$	2,624		$	(2,559	)	$	7,884

INCOME PER COMMON SHARE – BASIC AND DILUTED:
	Income (loss) before extraordinary item		$	(0.21	)	$	0.56		$	(0.52	)	$	1.70
	Extraordinary item			0.00			(0.02	)		0.00			(0.08	)

	Net income (loss)		$	(0.21	)	$	0.54		$	(0.52	)	$	1.62

	Weighted average common shares – basic			4,931,425			4,875,908			4,921,298			4,862,899
	Weighted average common shares – diluted			7,220,324			7,213,515			7,220,774			7,229,830

The accompanying notes are an integral part of these consolidated financial statements.

ROBERTS REALTY INVESTORS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)


				Nine Months Ended
				September 30,

				2002			2001

				(Unaudited)			(Unaudited)
OPERATING ACTIVITIES:
	Net income (loss)			$	(2,559	)	$	7,884
	Adjustments to reconcile net income to net cash provided by operating activities:
		Minority interest of unitholders in the operating partnership			(1,146	)		149
		Loss (gain) on sale of real estate asset			102			(7,982	)
		Loss on disposal of assets			25			29
		Depreciation and amortization			5,371			4,073
		Extraordinary item, loss on early extinguishment of debt			0			406
		Amortization of deferred compensation			58			66
	Change in assets and liabilities:
		(Increase) decrease in restricted cash			(16	)		52
		(Increase) decrease in other assets			(221	)		371
		Increase in accounts payable and accrued expenses relating to operations			1,277			729
		Decrease in security deposits and prepaid rent			(27	)		(202	)

			Net cash provided by operating activities		2,864			5,575

INVESTING ACTIVITIES:
	Proceeds from sale of real estate assets				0			6,760
	Acquisition and construction of real estate assets				(15,536	)		(30,505	)

			Net cash used in investing activities		(15,536	)		(23,745	)

FINANCING ACTIVITIES:
	Proceeds from mortgage notes payable				22,500			12,700
	Principal repayments on mortgage notes payable				(752	)		(616	)
	Proceeds from land notes payable				0			5,700
	Payoff of land notes payable				(1,300	)		(2,000	)
	Payment of loan costs				(290	)		(621	)
	Proceeds from construction loans				15,161			13,399
	Payoff of construction loan				(22,500	)		0
	Proceeds from lines of credit				802			2,000
	Payoff of lines of credit				(2,002	)		0
	Payoff of mortgage notes, including prepayment penalty				0			(8,970	)
	Repurchase of treasury stock				0			(554	)
	Payment of dividends and distributions				0			(2,396	)

			Net cash provided by financing activities		11,619			18,642

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(1,053	)		472
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD					2,617			1,495

CASH AND CASH EQUIVALENTS, END OF PERIOD				$	1,564		$	1,967

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
	Cash paid for interest			$	6,672		$	5,145

The accompanying notes are an integral part of these consolidated finan

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