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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, 2003
 

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
incorporation or organization)		   (I.R.S. Employer
Identification Number)
 
8010 Roswell Road, Suite 280, 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

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

Yes o   No þ

The number of outstanding shares of the registrant’s Common Stock on November 4, 2003 was 5,213,448 (net of shares held in treasury).

 

 

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     15  
 
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     32  
 
ITEM 6.
   EXHIBITS AND REPORTS ON FORM 8-K     32  

 

 

PART I

ITEM 1. FINANCIAL STATEMENTS.
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)

                         
            September 30,   December 31,
            2003   2002
           
 
            (Unaudited)        
ASSETS
                
 
REAL ESTATE ASSETS – At cost:
                
 
Land
   $ 20,411     $ 20,482  
 
Buildings and improvements
     118,698       118,511  
 
Furniture, fixtures and equipment
     13,368       13,072  
 
    
     
 
 
     152,477       152,065  
 
Less accumulated depreciation
     (29,308 )     (24,437 )
 
    
     
 
   
Operating real estate assets
     123,169       127,628  
 
Construction in progress and real estate under development
     42,681       35,015  
 
    
     
 
       
Net real estate assets
     165,850       162,643  
CASH AND CASH EQUIVALENTS
     9,099       5,542  
RESTRICTED CASH
     343       309  
DEFERRED FINANCING COSTS – Net of accumulated amortization of $651 and $668 at September 30, 2003 and December 31, 2002, respectively
     1,213       1,191  
ASSETS HELD FOR SALE
     —       8,570  
OTHER ASSETS – Net
     494       752  
 
    
     
 
 
   $ 176,999     $ 179,007  
 
    
     
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
                
 
LIABILITIES:
                
 
Mortgage notes payable
   $ 94,307     $ 92,834  
 
Construction notes payable
     38,101       27,891  
 
Land notes payable
     3,000       6,700  
 
Swap contract liability
     3,890       4,813  
 
Accounts payable and accrued expenses
     2,128       2,178  
 
Due to Roberts Construction (including retainage payable of $940 and $1,122 at September 30, 2003 and December 31, 2002, respectively)
    1,479       2,258  
 
Security deposits and prepaid rents
     420       413  
 
Liabilities related to assets held for sale
     —       10,080  
 
    
     
 
     
Total liabilities
     143,325       147,167  
 
    
     
 
COMMITMENTS AND CONTINGENCIES (Note 8)
               
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP
     9,361       9,361  
 
    
     
 
 
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, 5,578,959 and 5,459,391 shares issued at September 30, 2003 and December 31, 2002, respectively
     56       55  
 
Additional paid-in capital
     25,987       25,408  
 
Less treasury shares, at cost (362,588 shares at September 30, 2003 and December 31, 2002)
     (2,764 )     (2,764 )
 
Unamortized restricted stock compensation
     (79 )     (139 )
 
Retained earnings
     3,922       3,317  
 
Accumulated other comprehensive loss
     (2,809 )     (3,398 )
 
    
     
 
       
Total shareholders’ equity
     24,313       22,479  
 
    
     
 
 
   $ 176,999     $ 179,007  
 
    
     
 

See notes to the consolidated financial statements.

 

 

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

                                     
        Three Months Ended   Nine Months Ended
        September 30,   September 30,
       
 
        2003   2002   2003   2002
       
 
 
 
        (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
OPERATING REVENUES:
                                
 
Rental operations
   $ 4,618     $ 3,923     $ 13,420     $ 11,664  
 
Other operating income
     298       241       861       716  
 
    
     
     
     
 
   
Total operating revenues
     4,916       4,164       14,281       12,380  
 
    
     
     
     
 
OPERATING EXPENSES:
                                
 
Personnel
     542       520       1,467       1,336  
 
Utilities
     297       292       867       809  
 
Repairs, maintenance and landscaping
     347       282       924       807  
 
Real estate taxes
     472       475       1,508       1,361  
 
Marketing, insurance and other
     297       291       842       764  
 
General and administrative expenses
     535       561       1,618       1,575  
 
Depreciation of real estate assets
     1,586       1,671       5,086       4,764  
 
    
     
     
     
 
   
Total operating expenses
     4,076       4,092       12,312       11,416  
 
    
     
     
     
 
INCOME FROM OPERATIONS
     840       72       1,969       964  
 
    
     
     
     
 
OTHER INCOME (EXPENSE):
                                
 
Interest income
     23       8       55       30  
 
Interest expense
     (1,898 )     (1,600 )     (5,703 )     (4,586 )
 
Loss on disposal of assets
     (10 )     (12 )     (21 )     (23 )
 
Amortization of deferred financing costs
     (80 )     (71 )     (225 )     (239 )
 
    
     
     
     
 
   
Total other expense
     (1,965 )     (1,675 )     (5,894 )     (4,818 )
 
    
     
     
     
 
LOSS BEFORE MINORITY INTEREST AND GAIN (LOSS) ON SALE OF REAL ESTATE ASSETS
     (1,125 )     (1,603 )     (3,925 )     (3,854 )
MINORITY INTEREST OF UNITHOLDERS IN THE OPERATING PARTNERSHIP
     316       508       1,123       1,226  
 
    
     
     
     
 
LOSS BEFORE GAIN (LOSS) ON SALE OF REAL ESTATE ASSETS
     (809 )     (1,095 )     (2,802 )     (2,628 )
GAIN (LOSS) ON SALE OF REAL ESTATE ASSETS, net of minority interest of unitholders in the operating partnership
     —       —       77       (102 )
 
    
     
     
     
 
LOSS FROM CONTINUING OPERATIONS
     (809 )     (1,095 )     (2,725 )     (2,730 )
INCOME FROM DISCONTINUED OPERATIONS, net of minority interest of unitholders in the operating partnership (Note 4)
     6,078       54       6,184       171  
 
    
     
     
     
 
NET INCOME (LOSS)
   $ 5,269     $ (1,041 )   $ 3,459     $ (2,559 )
 
    
     
     
     
 
INCOME (LOSS) PER COMMON SHARE – BASIC AND DILUTED:
                                
 
Loss from continuing operations
   $ (0.16 )   $ (0.22 )   $ (0.53 )   $ (0.55 )
 
Income from discontinued operations
     1.17       0.01       1.20       0.03  
 
    
     
     
     
 
 
Net income (loss)
   $ 1.01     $ (0.21 )   $ 0.67     $ (0.52 )
 
    
     
     
     
 
 
Weighted average common shares – basic
     5,195,129       4,931,425       5,156,597       4,921,298  
 
Weighted average common shares – diluted (effect of operating partnership units)
     7,224,517       7,220,324       7,223,969       7,220,774  

See notes to the consolidated financial statements.

2

 

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

                         
            Nine Months Ended
            September 30,
           
            2003   2002
           
 
            (Unaudited)   (Unaudited)
OPERATING ACTIVITIES:
                
 
Net income (loss)
   $ 3,459     $ (2,559 )
 
Adjustments to reconcile net income (loss) to net cash provided by operating activities of continuing operations:
                
   
Income from discontinued operations, net of minority interest
     (6,184 )     (171 )
   
Minority interest of unitholders in the operating partnership
     (1,123 )     (1,226 )
   
(Gain) loss on sale of real estate assets
     (77 )     102  
   
Loss on disposal of assets
     21       23  
   
Depreciation and amortization
     5,311       5,003  
   
Amortization of deferred compensation
     38       58  
 
Change in assets and liabilities:
                
   
Increase in restricted cash
     (34 )     (9 )
   
Decrease (increase) in other assets
     258       (28 )
   
(Decrease) increase in accounts payable and accrued expenses relating to operations
     (50 )     1,122  
   
Increase (decrease) in security deposits and prepaid rent
     7       (25 )
 
    
     
 
     
Net cash provided by operating activities from continuing operations
     1,626       2,290  
 
    
     
 
     
Net cash provided by operating activities from discontinued operations
     377       574  
 
    
     
 
       
Net cash provided by operating activities
     2,003       2,864  
INVESTING ACTIVITIES:
                
 
Proceeds from sale of real estate assets
     7,313       —  
 
Acquisition and construction of real estate assets
     (9,475 )     (15,536 )
 
    
     
 
     
Net cash used in investing activities
     (2,162 )     (15,536 )
 
    
     
 
FINANCING ACTIVITIES:
                
 
Proceeds from mortgage notes payable
     10,750       22,500  
 
Payoff of mortgage notes payable
     (8,487 )     —  
 
Principal repayments on mortgage notes payable
     (852 )     (752 )
 
Payoff of land notes payable
     (3,700 )     (1,300 )
 
Payment of loan costs
     (248 )     (290 )
 
Proceeds from construction loans
     10,210       15,161  
 
Payoff of construction loan
     —       (22,500 )
 
Proceeds from lines of credit
     —       802  
 
Payoff of line of credit
     —       (2,002 )
 
Payment of dividends and distributions
     (3,957 )     —  
 
    
     
 
     
Net cash provided by financing activities
     3,716       11,619  
 
    
     
 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
     3,557       (1,053 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
     5,542       2,617  
 
    
     
 
CASH AND CASH EQUIVALENTS, END OF PERIOD
   $ 9,099     $ 1,564  
 
    
     
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                
 
Cash paid for interest
   $ 7,322     $ 6,672  
 
    
     
 

See notes to the consolidated financial statements.

3

 

ROBERTS REALTY INVESTORS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BUSINESS AND ORGANIZATION
 
    Roberts Realty Investors, Inc., a Georgia corporation, was formed July 22, 1994 to serve as a vehicle for investments in, and ownership of, a professionally managed real estate portfolio consisting primarily of multifamily apartment communities. Roberts Realty owns and operates multifamily residential properties as a self-administered, self-managed equity real estate investment trust (a “REIT”). Six of Roberts Realty’s seven completed apartment communities are located in the Atlanta metropolitan area, with the seventh located in Palm Beach County, Florida.
 
    Roberts Realty conducts all of its operations and owns all of its assets in and through Roberts Properties Residential, L.P., a Georgia limited partnership (the “operating partnership”), of which Roberts Realty is the sole general partner and had a 72.2% and a 70.6% ownership interest at September 30, 2003 and December 31, 2002, respectively. As the sole general partner and owner of a majority interest of the operating partnership, Roberts Realty controls the operating partnership.
 
    At September 30, 2003, Roberts Realty owned seven completed multifamily apartment communities totaling 1,694 apartment homes (1,494 in the Atlanta metropolitan area and 200 in Palm Beach County, Florida); an additional 319 apartment homes were under construction in Charlotte, North Carolina; and a 220-unit apartment community in Atlanta was in the planning and design phase. In addition, Roberts Realty has a 39,907 square foot commercial office building and a 39,205 square foot retail center under construction at September 30, 2003.
 
    Roberts Realty elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, beginning with the taxable year ended December 31, 1994. As a result, Roberts Realty generally is not subject to federal and state income taxation at the corporate level to the extent it distributes annually to its shareholders at least 90% of its taxable income, as defined in the Internal Revenue Code, and satisfies certain other requirements. Accordingly, the accompanying consolidated financial statements include no provision for federal and state income taxes.
 
    Roberts Realty enters into contractual commitments in the normal course of business with Roberts Properties, Inc. (“Roberts Properties”) and Roberts Properties Construction, Inc. (“Roberts Construction”), which are affiliates of Roberts Realty that are wholly owned by Mr. Charles S. Roberts, the President, Chief Executive Officer, and Chairman of the Board of Roberts Realty. (Roberts Properties and Roberts Construction are sometimes referred to as the Roberts Companies.) These contracts relate to the development and construction of real estate assets. (See Note 7.)
 
    2. BASIS OF PRESENTATION
 
    The accompanying consolidated financial statements include the consolidated accounts of Roberts Realty and the operating partnership. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements of Roberts Realty have been adjusted for the minority interest of the unitholders in the operating partnership.
 
    The minority interest of the unitholders in the operating partnership on the accompanying balance sheets is calculated based o