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, 2009
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
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(I.R.S. Employer |
incorporation or organization)
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Identification No.) |
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450 Northridge Parkway, Suite 302 |
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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
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Smaller reporting company þ |
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(Do not check if a smaller reporting company) |
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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, 2009, the aggregate market value of the registrants common stock held by
non-affiliates of the registrant was $5,657,703 based on the closing sale price of $0.84 per share
as reported on the NYSE Amex Equities.
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 February 18, 2010 |
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Common Stock, $.01 par value per share
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10,276,223 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, 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, 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 plans,
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 the loan extensions we expect to obtain from one or more of
our lenders, 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 industry and economic conditions, competition, and
other factors discussed in this and our other filings with the SEC. These forward-looking
statements are not guarantees of future performance and involve risks and uncertainties, and actual
results may differ materially from those that are anticipated in the forward-looking statements.
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
ITEM 1. BUSINESS.
General
Roberts Realty Investors, Inc. is a Georgia corporation formed in 1994 to own and operate
multifamily properties as a self-administered, self-managed equity real estate investment trust, or
REIT. We listed our shares on the American Stock Exchange, now known as the NYSE Amex Equities
exchange, in December 1998. We own and manage four neighborhood retail centers, one office
building, and six tracts of undeveloped land, all of which are located in Georgia. Until June 24,
2008, we also owned the 403-unit Addison Place multifamily community. We currently have four
reportable operating segments:
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the multifamily segment consists of the Addison Place multifamily
community, which was sold on June 24, 2008 and is reflected as discontinued
operations; |
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the retail/office segment consists of four operating retail centers and
one office building; |
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the land segment consists of six tracts of undeveloped land totaling
149.6 acres that are either under development and construction or held for
investment; and |
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the corporate segment consists 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.
Our common stock is traded on the NYSE Amex Equities under the symbol RPI. 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 our corporate website and expect that it will be
operational later this year. As of February 26, 2010, we have five full-time employees.
The Operating Partnership
We conduct our business through Roberts Properties Residential, L.P., which we refer to as the
operating partnership. Roberts Realty is the sole general partner of the operating partnership,
which either directly or through one of its wholly owned subsidiaries owns all of our properties.
As of February 18, 2010, Roberts Realty owned an 82.21% interest in the operating partnership. We
expect to continue to conduct our business in this organizational structure. 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 the holders of units as unitholders. The holders of units include (a)
Mr. Charles S. Roberts, the President, Chief Executive Officer, and Chairman of the Board of
Roberts Realty, and (b) the former limited partners in the limited partnerships that were merged
into the operating partnership between 1994 and 1996.
3
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
holder 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. That shareholder can also exchange any units in the operating partnership he owned on
that date for shares of common stock. Otherwise, unitholders cannot redeem their units if doing so
would cause the number of shares they own to exceed those ownership limits. Shares issued for
units are registered with the SEC and are freely transferable, other than by affiliates.
Whenever we issue shares, we are obligated to contribute the net proceeds from that issuance
to the operating partnership, and the operating partnership is obligated to issue 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. The operating partnership has not
issued additional units to outside investors or added limited partners since 1996.
Recent Developments
On July 17, 2009, we extended the maturity date of our $8,175,000 Peachtree Parkway land loan
with Wachovia Bank, N.A. from July 31, 2009 to July 31, 2010. In addition, in February 2010 we
extended the maturity date of our $3,000,000 Bradley Park loan to April 28, 2011 and the maturity
date of our $6,000,000 Westside loan to April 28, 2010. For more information about our loans, see
Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operation
Liquidity and Capital Resources Debt Summary Schedule.
Trends and Outlook
We continue to focus on improving our liquidity and balance sheet. Our primary liquidity
requirements relate to our continuing negative operating cash flow and our maturing short-term
debt. As of February 18, 2010, we have five loans totaling $26,666,667 that mature within the next
12 months. We own six tracts of undeveloped land totaling 149.6 acres. Our Northridge land is
unencumbered and has a carrying value of $6,042,647. The remaining tracts of land Bradley Park,
Peachtree Parkway, Highway 20, North Springs, and Westside have a combined carrying value of
$47,508,953 and are currently encumbered with land loans totaling $20,675,000. Because undeveloped
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) of our undeveloped land. In addition, the
financial performance of our four neighborhood retail centers and office building continues to be
challenged by the ongoing weakness in the national and local economy. For these reasons, as well
as the lack of operating cash flow we previously received from the Addison Place multifamily
community (which we sold in June 2008 for $60,000,000), we expect to continue to generate negative
operating cash flow and to operate at a loss for the foreseeable future.
4
Business Plan
We intend to maximize shareholder value and to address our needs for liquidity and capital
resources by executing the business plan described below. We are focusing on our core business of
developing, building, leasing, operating, and selling high quality multifamily communities for cash
flow and long-term appreciation. We have reduced our debt and are working to decrease our negative
cash flow. We intend to continue these efforts. We intend to pursue our business plan
opportunistically with maximum flexibility in light of the challenging local and national economic
climate, the difficult current and expected real estate and credit markets, and many other factors.
In the following paragraphs, we explain our strategies for each type of property we own:
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four retail centers, including one retail center held for redevelopment; |
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five land parcels held for development and construction; and |
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one land parcel held for investment. |
Retail Centers and Office Building. We currently own four retail centers and an office
building, which have the occupancy percentages provided below as of February 1, 2010:
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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 61.4%
occupied. |
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Addison Place Shops, a 44,293-square-foot retail center located in
Johns Creek that is 28.4% occupied. |
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Grand Pavilion, a 62,323 square foot retail center located in Johns
Creek that is 24.1% occupied, which we are holding for redevelopment. |
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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 has taken the brunt of this severe recession, our retail centers
have struggled with occupancy as tenants have continued to fail. The risks of owning retail
centers have dramatically increased since we bought or built these centers, and we anticipate that
the performance of our retail centers will continue to be weak until the economy strengthens.
Similarly, the market for office space in Atlanta is overbuilt and continues to be very
challenging. In spite of this difficult environment, however, we are committed to increasing the
occupancy of both our retail centers and our office building so they can be positioned for sale.
In addition to considering the sale of these assets, we may form a joint venture with a
company that specializes in retail or office properties to use their expertise in leasing these
property types. We also intend to pursue joint ventures with potential partners that include local
investors, pension funds, life insurance companies, hedge funds, and foreign investors.
The conduit loans secured by the Basset, Spectrum, and Grand Pavilion retail centers are
non-recourse. If we are unable to increase the occupancy levels and financial performance of these
centers as we intend, particularly if the retail sector fails to improve or worsens, we may seek
modifications of these loans. As a last resort, we may transfer one or all of these retail centers
back to the lender in settlement of the debt to avoid any further negative operating cash flow from
these assets.
We have always intended to develop the Grand Pavilion retail center as a mixed-use project
with a substantial multifamily and retail component. We currently plan to lease the vacant space
in the center under terms that permit us to terminate or buy out the leases in future years to
accommodate the development and construction of a mixed-use project. Any redevelopment of this
nature would require a rezoning of the property.
5
Land Parcels Held for Development and Construction. We are currently holding five land
parcels for development and construction:
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Northridge, a 10.9-acre site located close to the GA 400 and Northridge
Road interchange in Sandy Springs that is zoned for 220 multifamily units. |
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Bradley Park (formerly Sawmill Village), a 22.0-acre site located in
Forsyth County that is zoned for 154 multifamily units. |
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Peachtree Parkway, a 24.7-acre site fronting Peachtree Parkway (Highway
141) in Gwinnett County that is zoned for 292 multifamily units and located across
the street from The Forum, a 580,000 square foot upscale shopping center. |
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Highway 20, a 38.2-acre site located in Cumming that is zoned for 210
multifamily units. |
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North Springs, a 9.8-acre site located on Peachtree Dunwoody Road in
Sandy Springs across from the North Springs MARTA station that is zoned for 356
multifamily units, 210,000 square feet of office space, and 56,000 square feet of
retail space. |
We are moving forward with the development and construction of our next two multifamily
communities: Bradley Park and Northridge. We estimate the remaining construction costs of these
projects to be approximately $14,249,000 for Bradley Park and $21,799,000 for
Northridge. These estimates include contractor fees payable to Roberts Properties Construction,
Inc. (Roberts Construction), of which Mr. Roberts owns all of the outstanding stock. These
estimates will likely change, perhaps by a material amount, as we construct each property.
Despite the very challenging economic conditions, we believe this is an opportune time to
create new multifamily assets. We believe that in this difficult economic climate we can build at
lower construction costs and create value for our shareholders as we have historically done during
economic downturns and recessions. We are currently seeking to obtain construction loans for the
Bradley Park and Northridge communities. Given our negative cash flow, the severe credit crunch,
and the extreme difficulty in obtaining construction loans for multifamily communities in Atlanta
at present, we may be unable to do so until the economy improves and credit becomes more readily
available for construction loans.
To provide the equity we need for construction of one or more of these communities, we may
sell one or more of our land parcels to independent purchasers. We are also considering forming
joint ventures, partnerships, and raising equity privately. 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)
or to a newly formed affiliate of Roberts Properties that would raise equity privately for the
specific purpose of funding the purchase of the land parcel and constructing a multifamily
community on it. Mr. Roberts owns all of the outstanding stock of Roberts Properties. (We refer
to Roberts Properties and Roberts Construction together as the Roberts Companies.) 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.
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We would pay down our debt with all or substantial portions of: the purchase price paid by a
purchaser of a property (including Mr. Roberts or his affiliate); the equity contribution of a
joint venture partner; or the equity we raise privately.
Land Parcel Held for Investment. We currently own one land parcel, Westside, that we are
holding for investment. Westside is a 44.0-acre site located on Westside Parkway in Alpharetta
that is zoned for 326 multifamily units and a density of 500,000 square feet for a university
education center or office. Westside is located directly across GA 400 from the North Point Mall,
a 1,370,000 square foot super-regional shopping mall. Westside is not a core holding, and we are
considering the sale of the property or the formation of a joint venture.
Possible Sale of the Entire Company. In our efforts to maximize shareholder value, we remain
open to any transaction that would be in the best interests of our shareholders, although we have
not decided to put the company up for sale. In 2009 and 2010, we have engaged in discussions with
both private companies and individuals regarding a possible sale, merger, or other business
combination. In three cases we entered into mutual confidentiality agreements. To date, we have
not entered into any letter of intent or agreement for such a transaction, primarily because the
valuation discussions did not reflect the values we believe are inherent in our real estate assets.
We remain open to any reasonable proposal for a sale, merger, or other business combination that
would reward our shareholders and maximize their value.
Determination of Investment, Financing, and Conflict of Interest Policies
Our board of directors sets our investment policies, financing policies, and conflict of
interest policies, which are summarized below. Our board may amend or revise them from time to
time without a vote of our shareholders or any vote of the partners of the operating partnership,
except that:
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we cannot change our policy of holding our assets and conducting our business
exclusively through the operating partnership without amending the operating
partnership agreement, which will generally require the consent of the holders of a
majority in interest of the limited partners in the operating partnership including, if
applicable, Roberts Realty; and |
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any changes in our conflict of interest policies must be approved by a majority of
the independent directors and otherwise be consistent with applicable legal
requirements. |
Investment Policies
Investments in Real Estate or Interests in Real Estate. We conduct all of our investment
activities through the operating partnership and will continue to do so as long as the operating
partnership exists. (The agreement of limited partnership of the operating partnership provides
that it is not required to be dissolved until 2093.) Our investment objectives are to achieve
stable cash flow 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.
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Possible Acquisition of Properties from Mr. Roberts or His Affiliates. Mr. Roberts and
Roberts Properties have been engaged in the development of multifamily and commercial real estate
since 1970, and Mr. Roberts expects that he and Roberts Properties will continue to engage in
multifamily and commercial real estate development. Provided that any transaction or agreement
complies with the policies discussed under Conflict of Interest Policies below, we may engage in
transactions of various types with Mr. Roberts, the Roberts Companies and/or other affiliates of
Mr. Roberts to develop or acquire real estate. Those transactions may include the following:
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we may hire Mr. Roberts or the Roberts Companies to develop and construct real
estate assets under a fee arrangement; |
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we may acquire undeveloped property from Mr. Roberts or his affiliates for future
development; or |
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we may acquire from Mr. Roberts or his affiliates partially or completely
constructed properties, whether in their lease-up phase or already leased and
stabilized. |
We have no current plans to acquire either undeveloped property or partially or completely
constructed properties from Mr. Roberts or his affiliates. All agreements with Mr. Roberts or the
Roberts Companies to develop and construct real estate assets are described elsewhere in this
report.
Securities of or Interest in Persons Primarily Engaged in Real Estate Activities and Other
Issuers. The operating partnership or we may invest in securities of other entities engaged in
real estate activities or invest in securities of other issuers, including investments by us and
the operating partnership for the purpose of exercising control over those entities. The operating
partnership or we may acquire all or substantially all of the securities or assets of other REITs
or similar entities where those investments would be consistent with our investment policies. We
currently have no plans to invest in the securities of other issuers. In making any of the
investments described in this paragraph, we would comply with the percentage of ownership
limitations and gross income tests necessary for REIT qualification under the Internal Revenue
Code. We will not make any investments if the proposed investment would cause the operating
partnership or us to be an investment company under the Investment Company Act of 1940.
No Investments in Mortgages. 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, however, from
time to time re-evaluate our borrowing policies in light of then current economic conditions,
relative costs of debt and equity capital, market value of the operating 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 financing, or asset sales, or a
combination of these methods. As long as the operating partnership is in existence, we will
contribute the net proceeds of all equity capital we raise to the operating partnership in exchange
for units or other interests in the operating partnership.
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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.
Conflict of Interest Policies
The board of directors is subject to provisions of Georgia law that are designed to eliminate
or minimize potential conflicts of interest. We can give no assurances that these policies will
always eliminate the influence of those conflicts. If these policies are not successful, the board
could make decisions that might fail to reflect fully the interests of all shareholders.
Under Georgia law, a director may not misappropriate corporate opportunities that he learns of
solely by serving as a member of the board of directors. In addition, under Georgia law, a
transaction effected by us or any entity we control (including the operating partnership) in which
a director, or specified related persons and entities of the director, have a conflicting interest
of such financial significance that it would reasonably be expected to exert an influence on the
directors judgment may not be enjoined, set aside, or give rise to damages on the grounds of that
interest if either:
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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 |
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the transaction is established to have been fair to us. |
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, related party transactions are subject to appropriate
review and oversight by the audit committee of our board of directors.
We have paid fees to the Roberts Companies for various types of services and will continue to
do so in the future. We have purchased property from Roberts Properties, and we have retained
Roberts Properties for development services and Roberts Construction for construction services for
some of our undeveloped land parcels. Roberts Realty and its predecessor limited partnerships
entered into agreements with Roberts Properties and Roberts Construction to provide design,
development, and construction services for the following multifamily communities, all of which have
now been sold for a profit. In entering into agreements related to these communities, Roberts
Realty complied with the policies described above.
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Number |
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Year |
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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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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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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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Ballantyne Place |
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319 |
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2005 |
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37,250,000 |
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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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River Oaks |
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216 |
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2004 |
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20,000,000 |
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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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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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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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Veranda Chase |
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250 |
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2004 |
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23,250,000 |
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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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Highland Park |
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188 |
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2003 |
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17,988,143 |
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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 |
|
Rosewood Plantation |
|
|
152 |
|
|
|
2001 |
|
|
|
14,800,000 |
|
Crestmark Club (Phase II) |
|
|
86 |
|
|
|
2001 |
|
|
|
6,437,126 |
|
Ivey Brook |
|
|
146 |
|
|
|
2000 |
|
|
|
14,550,000 |
|
Bentley Place |
|
|
117 |
|
|
|
1999 |
|
|
|
8,273,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,750 |
|
|
|
|
|
|
$ |
287,461,143 |
|
|
|
|
|
|
|
|
|
|
|
|
Other Policies
The operating partnership and 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. We
have adopted a policy that we will issue shares to unitholders who exercise their rights of
redemption. In the future, we may make loans to joint ventures in which we participate to meet
working capital needs. We have not engaged in trading, underwriting, agency distribution, or sale
of securities of other issuers, and we do not intend to do so. We intend to continue to make
investments in a manner so that we will not be treated as an investment company under the
Investment Company Act of 1940.
Under our stock repurchase program, as of February 18, 2010, 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.
At all times, we intend to make investments in a manner to be consistent with the requirements
of the Internal Revenue Code for us to 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.
Competition
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 acquire land for future development. As an
owner of multifamily communities, we 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 residents who see the
current market as an opportunity to buy a single-family home at a reduced price financed at an
attractive interest rate.
10
Our four neighborhood retail centers and office building face competition from similar retail
centers and office buildings within their geographic areas to lease new space, renew leases, or
re-lease spaces as leases expire. In addition, the current economic slowdown has forced
prospective retail and office tenants to curtail expansion plans, and existing 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 may 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 the property.
Those laws often impose liability without regard to whether the owner knew of, or was responsible
for, the presence of the hazardous or toxic substances. The costs of remediation or removal of the
substances may be substantial, and the presence of the substances, or the failure to 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 and other properties 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.
The Terrorism Risk Insurance Act of 2002 was enacted on November 26, 2002 and was subsequently
extended through December 31, 2014 by the enactment of the Terrorism Risk Insurance Program
Reauthorization Act of 2007. The law provides that losses resulting from certified acts of
terrorism will be partially reimbursed by the United States after a statutory deductible amount is
paid by the insurance company providing coverage. The law also requires that the insurance company
offer coverage for terrorist acts for an additional premium. We accepted the offer to include this
coverage in our property and casualty policies.
We believe that our properties are adequately covered by insurance. Some types of losses
(such as losses arising from acts of war) are not generally insured because they are either
uninsurable or not economically insurable. If an uninsured loss or a loss in excess of insured
limits occurs, we could lose our capital invested in a property, as well as the anticipated future
revenues from the property, and we would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any loss of that kind would adversely affect our
operations and financial position.
12
ITEM 1A. RISK FACTORS
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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1. |
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Financing Risks. |
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2. |
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Real Estate Related Risks. |
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3. |
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Tax Risks. |
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4. |
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Environmental and Other Legal Risks. |
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5. |
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Risks for Investors in Our Stock. |
This section includes forward-looking statements.
Financing Risks
We face the maturity of our short-term debt within the next 12 months, and we may be unable to
refinance or extend this debt.
As of February 18, 2010, we have five loans totaling $26,666,667 that mature within the next
12 months. Of the five loans, two loans totaling $12,000,000 mature in late April 2010. Our
$6,000,000 Westside land loan matures on April 28, 2010, and our $6,000,000 Addison Shops loan
matures on April 30, 2010. If we are unable to refinance or extend these loans at maturity on
acceptable terms, or at all, we may have to use a substantial portion of our remaining $7,623,045
in cash (as of February 1, 2010) to repay part of the debt and dispose of one or more of our
properties on disadvantageous terms, which might result in losses to us. Those losses could have a
materially adverse effect on our ability to pay amounts due on our debt and to pay distributions to
our investors. Further, 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. 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 $64,912,000 to finish the construction of Bradley Park,
Northridge, and Peachtree Parkway, our next three multifamily communities. We have not yet
estimated the construction costs for the remaining two land parcels we hold for development and
construction: Highway 20 and North Springs.
We believe that any capital 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 equity we raise privately. 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 as we expect. 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 February 18, 2010, we have $29,666,667 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 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:
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|
|
the risk that our cash flow will be insufficient to meet required payments of
principal and interest; and |
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|
the risk 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 and
the REIT industry, 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
recently created Federal Housing Finance Agency. The U.S. government has not determined which of
Fannie Maes and Freddie Macs businesses to retain and which to dissolve. A decision by the
government to reduce Fannie Maes or Freddie Macs acquisitions of multifamily loans could
adversely affect interest rates, capital availability, and the development of multifamily
communities. Governmental actions could also make it easier for individuals to finance loans for
single-family homes, which would make renting a less attractive option and adversely affect our
occupancy or rental rates.
If we hedge our variable-rate debt, our hedging activities may not effectively protect us from
fluctuations in interest rates.
We generally enter into fixed rate debt instruments for our completed multifamily communities.
In certain situations, we may in the future use derivative financial instruments in the form of
interest rate swaps to hedge interest rate exposure on variable-rate debt. We have not used these
instruments for trading or speculative purposes, but rather to increase the predictability of our
financing costs. Contracts may also be ineffective when market interest rates produce a lower
interest cost than we incur under the hedging contracts. Furthermore, the settlement of interest
rate hedging contracts has involved and may in the future involve material charges. These charges
are typically related to the extent and timing of fluctuations in interest rates. Despite our
efforts to minimize our exposure to interest rate fluctuations, we cannot guarantee that we will
maintain coverage for all of our outstanding indebtedness at any particular time. If we do not
effectively protect ourselves from this risk, we may be subject to increased interest costs
resulting from interest rate fluctuations. We currently do not have any outstanding derivative
financial instruments in the form of interest rate swaps to hedge interest rate exposure on our
variable rate debt.
The failure of any bank in which we deposit our funds or of a money market fund in which we invest
our funds could cause the loss of a portion of our cash.
The failure of any bank in which we deposit our funds or of a money market fund in which we
invest our funds could reduce the amount of cash we have available for our corporate and business
purposes described elsewhere in this report. We have diversified our cash and cash equivalents
among several banking institutions and money market funds in an attempt to minimize exposure to any
one of these entities or funds. However, the Federal Deposit Insurance Corporation, or FDIC, only
insures amounts up to $250,000 per depositor per insured bank, and our money market funds are or
may be uninsured. We currently have cash and cash equivalents deposited in certain financial
institutions in excess of federally insured levels and in money market funds that are or may be
uninsured. If any of the banking institutions in which we have deposited funds ultimately fails,
we may lose our bank deposits over $250,000, and we may be unable to access our money market funds
when we need them and may suffer a loss when we do access them. The loss of our deposits could
reduce the amount of cash we have available for our corporate and business purposes and could
result in a financial loss.
15
Real Estate Related Risks
Our business currently operates at a loss.
Between 2003 and 2008, we sold nine multifamily communities for a total of $261,078,000. From
the net proceeds of these sales, we have paid cash distributions totaling $45,571,334, 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. 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
undeveloped 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 undeveloped land. We expect the
financial performance of our four neighborhood retail centers and office building to continue to be
challenged by the current weakness in the national and local economy.
As a result, we expect to continue to operate at a loss for the foreseeable future, and our
cash position will continue to be adversely affected unless we successfully implement the
strategies to reduce our negative cash flow described in Item 1, Business Business Plan, above.
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. The current credit crunch has made it particularly
difficult to sell our properties because interested buyers may be unable to obtain the financing
they need. 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.
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 $64,912,000 to complete the
construction of Bradley Park, Northridge, and Peachtree Parkway, our next three multifamily
communities. We have not yet estimated the construction costs for the remaining two land parcels
we hold for development and construction: Highway 20 and North Springs. 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; |
|
|
|
environmental impact studies by the government; |
|
|
|
increased interest costs due to rising interest rates; and |
|
|
|
any financial instability of the developer (Roberts Properties, Inc.), general
contractor (Roberts Properties Construction, Inc.) 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 such 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.
16
We face leasing risks in our planned development and construction program.
The success of a real estate 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.
Currently, 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, but are not limited to, the following:
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|
|
increasing unemployment or 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; |
|
|
|
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 |
|
|
|
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 distributions to our
investors.
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 2010 is to sell one or more properties to
decrease our negative cash flow, and 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.
17
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.
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.
18
Our retail and office tenants may go bankrupt or be unable to make lease payments.
Our operating revenues from our retail and office 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 or current replacement 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 retail and office properties,
the performance of those properties will continue to suffer.
Our retail and office 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.
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.
19
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 or
unitholders 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 eliminate our requirement to make distributions
to shareholders or unitholders, as well. 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. It is not possible to 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 would cause us to fail to
qualify as a REIT.
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 may acquire properties that are subject to liabilities for which we have no recourse, or only
limited recourse, against the seller.
These liabilities can include:
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claims by tenants, vendors, or other persons dealing with the former owners of the
properties; |
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liabilities incurred in the ordinary course of business; and |
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claims for indemnification by directors, officers, and others indemnified by the
former owners of the properties. |
If we have to expend time and money to deal with these claims, our business could be materially and
adversely affected.
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
harmed. Beginning with 2007, we were 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.
Beginning with our 2010 fiscal year, our independent registered public accounting firm will be
required to issue an attestation report on 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 by
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.
21
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 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.
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.
22
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. |
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.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.
23
ITEM 2. PROPERTIES.
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 February 1, 2010.
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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 61.4%
occupied. |
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3. |
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Addison Place Shops, a 44,293-square-foot retail center located in
Johns Creek that is 28.4% occupied. |
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4. |
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Grand Pavilion, a 62,323 square foot retail center located in Johns
Creek that is 24.1% occupied. |
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5. |
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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, each of which is
owned by Mr. Roberts. 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, a 10.9-acre site located close to the GA 400 and Northridge
interchange in Sandy Springs that is zoned for 220 multifamily units. |
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2. |
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Bradley Park, a 22.0-acre site located in Forsyth County that is zoned
for 154 multifamily units. |
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3. |
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Peachtree Parkway, a 24.7-acre site fronting Peachtree Parkway (Highway
141) in Gwinnett County that is zoned for 292 multifamily units. |
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4. |
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Highway 20, a 38.2-acre site located in Cumming that is zoned for 210
multifamily units. |
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5. |
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North Springs, a 9.8-acre site located on Peachtree Dunwoody Road in
Sandy Springs that is zoned for 356 multifamily units, 210,000 square feet of
office space, and 56,000 square feet of retail space. |
24
Land Parcel Held for Investment
Westside, a 44.0-acre site located on Westside Parkway in Alpharetta that is zoned for
326 multifamily units and a density of 500,000 square feet for a university education
center or office. Westside is located directly across GA 400 from the North Point Mall,
a 1,370,000 square foot super-regional shopping mall.
Demographic and Employment Data
We believe the long-term demand for multifamily housing in Atlanta will increase as Atlantas
population grows. We believe that the outlook for Atlantas multifamily market remains positive in
the long run. 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 19.5% from 3,429,379 persons in 2000 to
4,099,600 persons in 2008, 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 348,858 units, or
26.8%, from 1,302,256 in 2000 to 1,651,114 in 2008. Multifamily homes in the Atlanta Region
increased 31.6% from 384,740 units in 2000 to 506,189 units in 2008.
The tables on the following page provide information about our operating properties.
25
The following table provides information about our retail and office properties as of December 31,
2009.
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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 |
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Location |
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Acquired(1) |
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(Square Feet) |
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Square Foot |
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12/31/09 |
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Retail: |
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Grand Pavilion |
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Johns Creek |
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2005 |
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62,323 |
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$ |
18.95 |
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24.1 |
% |
Bassett Center |
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Gwinnett County |
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2005 |
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19,949 |
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21.00 |
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82.9 |
% |
Spectrum Center |
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Gwinnett County |
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2005 |
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30,050 |
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26.51 |
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56.8 |
% |
Addison Place Shops |
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Johns Creek |
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2005 |
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44,293 |
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23.50 |
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28.4 |
% |
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Total Retail |
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156,615 |
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$ |
22.49 |
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39.1 |
% |
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Northridge
Office Building (2) |
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Sandy Springs |
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2001 |
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37,864 |
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$ |
20.54 |
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64.5 |
% |
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(1) |
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We acquired the first three retail properties listed in this table from unrelated sellers.
We developed and constructed the Addison Place Shops retail center, which was largely
completed in May 2005; the 5,088 square foot Building D at the Addison Place Shops was
completed in 2008. |
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(2) |
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Our corporate headquarters occupies 6,245 square feet of the Northridge office building. |
The following table provides information about the scheduled lease expirations in our retail and
office properties:
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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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2010 |
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7 |
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15,681 |
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21.5 |
% |
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$ |
306,528 |
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18.1 |
% |
2011 |
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2 |
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2,360 |
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3.2 |
% |
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61,884 |
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3.7 |
% |
2012 |
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9 |
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13,630 |
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18.7 |
% |
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371,159 |
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21.9 |
% |
2013 |
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5 |
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24,221 |
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33.2 |
% |
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541,960 |
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32.0 |
% |
2014 |
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3 |
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10,291 |
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14.1 |
% |
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242,222 |
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14.3 |
% |
2015 and later |
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2 |
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6,761 |
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9.3 |
% |
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169,185 |
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10.0 |
% |
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Total |
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28 |
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72,944 |
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100.0 |
% |
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$ |
1,692,938 |
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100.0 |
% |
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(1) |
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Lease expiration table does not include option periods. |
26
As described below, our operating properties and six tracts of undeveloped land are located
primarily along the Georgia 400 corridor in submarkets within Fulton, Gwinnett, or 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. Six of our 11 properties are located in north Fulton County.
Johns Creek
The City of Johns Creek is located in the northeast corner of Fulton County. It is currently
the 10th largest city in the state of Georgia, with a 2008 population of 69,268. The
Johns Creek area is easily accessible via Georgia 400 and offers convenient proximity and access to
both urban and suburban employment bases and retail conveniences, including major regional malls
such as North Point Mall and Perimeter Mall.
We have two properties located within Johns Creek:
Addison Place Shops. The 44,293 square foot Addison Place Shops retail center is located at
the intersection of Jones Bridge Road and Abbotts Bridge Road. At February 1, 2010, the Addison
Place Shops was 28.4% occupied. For 2009, we recorded a $1,884,922 non-cash impairment loss on
this retail center. At December 31, 2009, the Addison Place Shops had a carrying value of
$6,288,508.
Grand Pavilion. Grand Pavilion is a 62,323 square foot retail center located at the
intersection of Kimball Bridge Road and State Bridge Road. At February 1, 2010, the property was
24.1% occupied. For 2009, we recorded a $1,411,000 non-cash impairment loss on this retail center.
At December 31, 2009, Grand Pavilion had a carrying value of $7,722,933.
Alpharetta
Alpharetta is located in the northern part of Fulton County and is one of the fastest growing
cities in the Atlanta metropolitan area, with a 2008 population of 52,392. The Alpharetta area is
easily accessible from Georgia 400 and offers convenient proximity and access to both urban and
suburban employment centers and retail conveniences, including major regional malls such as North
Point Mall and Perimeter Mall.
Westside. Our 44.0-acre Westside land parcel is located between Haynes Bridge Road and
Mansell Road within a 220-acre master planned development known as Westside. Westside is a new
upscale mixed-use development that includes condominiums, office space, retail, university
education and retirement housing, as well as Encore Park for the Arts, a 45-acre arts complex
including a performing arts center and a 12,000-seat amphitheater. The Verizon Wireless
Amphitheater at Encore Park, which opened in 2008, is the heart of a major complex for the
performing and visual arts. Our land is zoned for 326 multifamily units and 500,000 square feet
for a university education center or office. Westside is located directly across GA 400 from the
North Point Mall, a 1,370,000 square foot regional shopping mall.
27
A 14.5-acre portion of our land is currently restricted from development to allow the
Metropolitan Atlanta Rapid Transit Authority (MARTA) the opportunity to determine if it wants to
buy the land and develop a rail station. Because the existing MARTA rail lines are located on the
east side of Georgia 400 and our property is located on the west side of Georgia 400, we believe
that MARTA will not want to purchase the land and that we will be able to develop the land
consistent with the current zoning. The MARTA restriction expires on the earlier to occur of
MARTAs decision to forgo acquiring the property or December 31, 2010. Because of the restriction,
we are holding the Westside land as an investment for future development.
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 MARTA 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 2010.
For 2009, we recorded a $3,975,273 non-cash impairment loss on this property. At December 31,
2009, North Springs had a carrying value of $15,735,247.
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 6,245 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 February 1, 2010, 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 obtained the land disturbance permit and cleared the
site. We have also commenced grading the site and, assuming we obtain construction financing, we
expect to start construction by mid-year with an estimated remaining construction cost of
approximately $21,799,000. For 2009, we recorded a $2,385,284 non-cash impairment loss on this
property. At December 31, 2009, Northridge had a carrying value of $5,981,536.
Gwinnett County
From 2000 to 2008, Gwinnett Countys population increased 27.9% to 752,800. Gwinnetts strong
transportation networks, excellent public education system, and affordable home prices have
contributed to the countys growth, with its employment base of 322,771 jobs.
28
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 feet 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 24.7-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. For 2009, we recorded a $3,754,907 non-cash
impairment loss on this property, and Peachtree Parkway had a carrying value of $10,274,327 at
December 31, 2009.
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 February 1,
2010. For 2009, we recorded a $699,948 non-cash impairment loss on this retail center, and Basset
had a carrying value of $3,390,762 at December 31, 2009.
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 61.4% occupied at February 1, 2010.
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 2008, the population
of Forsyth County increased 66.8% from 98,407 to 164,100.
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 can obtain a construction loan, we expect to begin construction on
this property by the middle of 2010, with an estimated remaining construction cost of approximately
$14,249,000.
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.
29
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, 2009, (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.
ITEM 4. RESERVED.
30
PART II
ITEM 5.
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES.
Market Data for 2008 and 2009
Our common stock trades on the NYSE Amex Equities under the symbol RPI. The following table
provides the quarterly high and low sales prices per share reported on the NYSE Amex Equities
during 2009 and 2008, as well as the dividends declared per share during each quarter. The sales
prices per share in 2008 have been adjusted to reflect the cash and stock distributions described
in footnote (1) to the table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
Quarter Ended |
|
High |
|
|
Low |
|
Declared |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
First Quarter |
|
$ |
3.75 |
|
|
$ |
2.25 |
|
|
None |
|
|
|
Second Quarter |
|
|
3.50 |
|
|
|
2.57 |
|
|
None |
|
|
|
Third Quarter |
|
|
3.13 |
|
|
|
1.95 |
|
$ |
0.66 |
(1) |
|
|
Fourth Quarter |
|
|
2.25 |
|
|
|
0.53 |
|
$ |
1.56 |
(1) |
|
|
|
(1) |
|
On June 24, 2008, we sold our 403-unit Addison Place multifamily community for $60,000,000 to
an unrelated buyer. Net cash proceeds at closing totaled $29,654,952, from which we paid a
distribution equal to $0.66 per share/unit, or $5,005,586 in total, to our shareholders and
unitholders on August 5, 2008. On December 18, 2008, our board of directors declared a
special distribution of $9,058,000, or $1.56 per share. The distribution was paid on January
29, 2009 in a combination of 20% in cash, or $0.31 per share, and 80% in our common stock,
equal to $1.25 per share, to shareholders of record at the close of business on December 29,
2008. We paid a total of $2,362,909 in cash to shareholders and unitholders. We issued to
shareholders a total of 3,754,732 shares valued at an aggregate amount of $7,246,633. |
Shareholder Data
As of February 18, 2010, there were approximately 231 holders of record of our common stock.
As of February 18, 2010, we had 10,267,223 shares outstanding. In addition, 2,221,964 shares
are reserved for issuance to unitholders from time to time upon their exercise of redemption rights
as explained in Item 1, Business The Operating Partnership. There is no established public
trading market for the units. As of February 18, 2010, the operating partnership had 105
unitholders of record.
31
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 2010 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.
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 February 18, 2010, 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 2009. The plan does not have an
expiration date.
Sales of Unregistered Shares
In 2008 and 2009, 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.
32
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 develop, own, and operate real estate assets as a self-administered, self-managed equity
real estate investment trust, or REIT. We conduct our business through Roberts Properties
Residential, L.P., which we refer to as the operating partnership. Roberts Realty is the sole
general partner of the operating partnership, which either directly or through one of its wholly
owned subsidiaries owns all of our properties. As of February 18, 2010, Roberts Realty owned an
82.21% interest in the operating partnership. We expect to continue to conduct our business in
this organizational structure.
At February 1, 2010, we owned the following real estate assets, all of which are located in
the north Atlanta metropolitan area:
|
|
|
five tracts of land totaling 105.6 acres in various phases of development and
construction (Northridge, Bradley Park (formerly referred to as Sawmill Village),
Peachtree Parkway, North Springs, and Highway 20); |
|
|
|
three neighborhood retail centers totaling 94,292 square feet (Bassett,
Spectrum, and the Addison Place Shops); |
|
|
|
a commercial office building totaling 37,864 square feet, part of which serves
as our corporate headquarters (Northridge office building); |
|
|
|
a 62,323 square foot retail center held for redevelopment (Grand Pavilion retail
center); and |
|
|
|
a tract of undeveloped land totaling 44 acres that we hold for investment
(Westside). |
For the year ended December 31, 2009, we had a net loss of $17,440,428, which included $15,101,198
of non-cash charges consisting of $14,111,334 in non-cash impairment losses on real estate assets
and $989,864 in non-cash depreciation expense. Additionally, in the last 12 months, we have paid
down our debt by $988,352, and as of February 1, 2010, we held $7,623,045 in cash and cash
equivalents.
Recent Developments
On July 17, 2009, we extended the maturity date of our $8,175,000 land loan with Wachovia
Bank, N.A. from July 31, 2009 to July 31, 2010. In addition, in February 2010 we extended the
maturity date of our $3,000,000 Bradley Park loan to April 28, 2011 and the maturity date of our
$6,000,000 Westside loan to April 28, 2010.
33
Maturing Short-Term Debt; Continuing Negative Operating Cash Flow
We continue to focus on improving our liquidity and balance sheet. Our primary liquidity
requirements are related to our continuing negative operating cash flow and our maturing short-term
debt. As of February 26, 2010, we have five loans totaling $26,666,667 that mature within the next
12 months. We own six tracts of undeveloped land totaling 149.6 acres. Our Northridge land is
unencumbered and has a carrying value of $6,042,647. The remaining tracts of land Bradley Park,
Peachtree Parkway, Highway 20, North Springs, and Westside have a combined carrying value of
$47,508,953 and are currently encumbered with land loans totaling $20,675,000. Because undeveloped
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) of our undeveloped land. In addition, the
financial performance of our four neighborhood retail centers and office building continues to be
challenged by the ongoing weakness in the national and local economy. For these reasons, as well
as the lack of operating cash flow we previously received from the Addison Place multifamily
community (which we sold in June 2008 for $60,000,000), we expect to continue to generate negative
operating cash flow and to operate at a loss for the foreseeable future. For an explanation of our
plans to address these issues, see Item 1, Business Business Plan.
Results of Operations
Comparison of 2009 to 2008
Please read the following table, which highlights some of our operating results, along with
the consolidated financial statements and the accompanying notes included in this report.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
Increase |
|
|
|
2009 |
|
|
2008 |
|
|
(Decrease) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OPERATING REVENUES |
|
$ |
2,318,039 |
|
|
$ |
2,599,514 |
|
|
$ |
(281,475 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
|
1,308,774 |
|
|
|
1,439,977 |
|
|
|
(131,203 |
) |
General and administrative expenses |
|
|
1,825,104 |
|
|
|
1,822,665 |
|
|
|
2,439 |
|
Impairment loss on real estate assets |
|
|
14,111,334 |
|
|
|
2,555,000 |
|
|
|
11,556,334 |
|
Depreciation and amortization |
|
|
989,864 |
|
|
|
1,307,590 |
|
|
|
(317,726 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
18,235,076 |
|
|
|
7,125,232 |
|
|
|
11,109,844 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(15,917,037 |
) |
|
|
(4,525,718 |
) |
|
|
11,391,319 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER EXPENSE |
|
|
(1,523,391 |
) |
|
|
(1,345,252 |
) |
|
|
178,139 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS |
|
$ |
(17,440,428 |
) |
|
$ |
(5,870,970 |
) |
|
$ |
11,569,458 |
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations increased $11,569,458 in 2009 when compared to 2008. We
recorded a non-cash impairment loss of $14,111,334 in 2009 compared to a non-cash impairment loss
of $2,555,000 in 2008. This $11,556,334 difference in non-cash impairment loss was the primary
cause for the increase in loss from continuing operations for 2009. We explain below the major
variances between 2008 and 2009.
Total operating revenues decreased $281,475 from $2,599,514 in 2008 to $2,318,039 in 2009.
This decrease was primarily due to lower occupancy at our retail centers.
34
Property operating expenses consisting of personnel, utilities, repairs and maintenance,
real estate taxes, marketing, insurance, and bad debt expense decreased $131,203 from $1,439,977
in 2008 to $1,308,774 in 2009. This decrease was due primarily to an $86,860 decrease in property
taxes and a $68,551 decrease in repairs and maintenance in 2009, partially offset by a $42,538
increase in bad debt expense from defaulting tenants in our retail centers.
During 2008, we recorded a $2,555,000 non-cash impairment loss (a $1,255,000 non-cash
impairment loss on the Northridge office building and a $1,300,000 non-cash impairment loss on the
Spectrum retail center). During 2009, we recorded $14,111,334 in non-cash impairment losses,
consisting of:
|
|
|
a $3,975,273 non-cash impairment loss on our North Springs land; |
|
|
|
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; |
|
|
|
a $1,884,922 non-cash impairment loss at our Addison Place Shops retail center; |
|
|
|
a $1,411,000 non-cash impairment loss at our Grand Pavilion retail center; and |
|
|
|
a $699,948 non-cash impairment loss at our Bassett retail center. |
Depreciation expense, a non-cash charge, decreased $317,726 from $1,307,590 in 2008 to
$989,864 in 2009 as a result of the impairment charges taken in previous periods.
Other expense increased the $178,139 from $1,345,252 in 2008 to $1,523,391 in 2009. This was
primarily due to an increase in interest expense and a decrease in interest income.
|
|
|
Interest expense increased $26,635 from $1,442,076 for 2008 to $1,468,711 for 2009.
This increase was due to $177,000 of interest related to the Peachtree Parkway property
being expensed in 2009 rather than capitalized. This increase was partially offset by
lower interest rates on our outstanding loans in 2009 and a $988,352 reduction in the
principal amount of our loans in 2009. |
|
|
|
Interest income decreased $177,299 from $299,200 in 2008 to $121,901 in 2009. This
decrease was due primarily to a decrease in interest rates and a reduction in our cash
balances over the past 12 months. |
Liquidity and Capital Resources
Overview
At December 31, 2009, we had $92,381,363 in total assets, of which $7,905,771 was cash and
cash equivalents. As of February 1, 2010, we held $7,623,045 in cash and cash equivalents. We
believe that the most important uses of our capital resources will be:
|
(a) |
|
to provide working capital to enable us to cover our negative operating cash
flow as we pursue our business plan outlined below; and |
|
(b) |
|
to invest in the development
of two new multifamily communities to enable us to raise the required
equity to construct these communities. |
Our cash resources are inadequate to meet all of the above needs. To raise additional capital, we
may sell one or more assets to a third party or to Roberts Properties or an affiliate of Roberts
Properties, and we are considering forming joint ventures and raising equity privately.
35
We continue to focus on improving our liquidity and balance sheet. Our primary liquidity
requirements are related to our continuing negative operating cash flow and our maturing short-term
debt. As of February 26, 2010, we have five loans with a current principal balance of $26,666,667
that mature within the next 12 months, as listed in the following table in order of maturity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal Payments |
|
Property Securing Loan |
|
Maturity Date |
|
|
Due Within 12 Months |
|
|
|
|
|
|
|
|
|
|
Addison Place Shops retail center |
|
|
4/30/10 |
|
|
$ |
6,000,000 |
|
Westside land parcel held for investment |
|
|
4/28/10 |
|
|
|
6,000,000 |
|
Peachtree Parkway land parcel held for multifamily development (1) |
|
|
7/31/10 |
|
|
|
8,175,000 |
|
Northridge office building |
|
|
9/10/10 |
|
|
|
2,991,667 |
|
Highway 20 land parcel held for multifamily development |
|
|
10/18/10 |
|
|
|
3,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
26,666,667 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
This loan is also secured by a lien on our North Springs land parcel, which is zoned for
mixed use development. |
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 six tracts of undeveloped land totaling 149.6 acres (which includes our
44-acre Westside land parcel that we hold for investment). Because undeveloped
land does not generate revenue, a substantial portion of our negative cash flow is
due to the carrying costs on our undeveloped land (interest expense and real estate
taxes). |
|
|
|
Due to the continued weakness in the local economy, two of our four retail
centers and our office building are operating at a loss, and the other two retail
centers are operating on an approximately breakeven basis. |
|
|
|
Our general and administrative expenses include the costs of being an SEC
reporting company and having our shares listed on the NYSE Amex Equities, and are
disproportionately large for a company with our small market capitalization. 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 of the
Sarbanes-Oxley Act, legal fees, listing fees, director compensation, and directors
and officers insurance premiums. We estimate that these additional costs are
approximately $550,000 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 the remaining cash proceeds of $7,623,045 from the
sale of Addison Place to meet our short-term liquidity requirements, including general and
administrative expenses, and improvements at our existing properties. With respect to the
$26,666,667 in debt that matures in the next 12 months, we intend to refinance each of these loans
with the same lender or with another lender as we have done over the past 12 months. We may be
required to repay part of the outstanding principal of one or more of these loans in connection
with a refinancing. To fund these repayments, 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. We expect to meet our long-term
liquidity requirements, including future developments and debt maturities, from the proceeds of
construction and permanent loans and from the sale of properties.
36
Comparison of 2009 to 2008
Cash and cash equivalents decreased $8,549,224 during 2009 compared to an increase of
$15,851,122 in 2008. The change in cash is described below.
Net cash used in operating activities in 2009 was $2,128,179 compared to $1,093,102 used
during 2008. This $1,035,077 increase was primarily due to:
|
|
|
a $605,600 decrease in cash provided by discontinued operations from the Addison
Place multifamily community, which we sold in 2008; and |
|
|
|
a $429,477 increase in cash used from continuing operations, primarily resulting
from lower occupancy levels at our retail centers. |
Net cash used in investing activities was $2,916,297 during 2009 compared to $53,617,586 of
cash provided during 2008. This change was primarily due to a $58,477,108 decrease in cash
provided by the sale of Addison Place on June 24, 2008 (before the payment of mortgage notes
outstanding), partially offset by:
|
|
|
a $1,463,131 decrease in development and construction of real estate assets; |
|
|
|
a $202,224 decrease in the change in restricted cash; and |
|
|
|
a $293,309 decrease in the change of accounts payable and accrued expenses
related to investing activities. |
Net cash used in financing activities was $3,504,748 for 2009 compared to $36,673,362 of cash
used during 2008. The decrease in cash used resulted from:
|
|
|
a $29,019,538 decrease as a result of the sale of Addison Place on June 24, 2008
(of which $28,833,212 related to the repayment of mortgage notes or notes assumed
by the buyer); |
|
|
|
a $2,645,189 decrease in distributions paid to shareholders and unitholders (we
made $5,005,586 in distributions in 2008 compared to $2,360,397 in 2009); and |
|
|
|
a $1,461,901 decrease in repayment of debt. We repaid $2,450,253 of debt during
2008 compared to $988,352 of debt repaid during 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, 2009 and at its scheduled maturity,
interest rate, maturity date, and monthly principal and interest payment. 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 the full amount of
each loan is drawn and we make any required principal payments prior to maturity.
37
ROBERTS REALTY INVESTORS, INC.
DEBT SUMMARY SCHEDULE
(Listed in order of maturity by type of loan)
As of December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
Maturity |
|
|
Balance at |
|
|
Monthly |
|
|
Dec. 31, 2009 |
|
|
|
Lender |
|
Interest Terms |
|
Rate(1) |
|
|
Date |
|
|
Maturity |
|
|
Payment |
|
|
Balance |
|
|
Permanent Mortgage Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Pavilion Shopping
Center (2) |
|
LaSalle Bank |
|
Fixed-rate permanent |
|
|
5.43 |
% |
|
|
07/11/13 |
|
|
$ |
6,016,331 |
|
|
$ |
40,565 |
|
|
$ |
6,499,986 |
|
Spectrum Shopping Center (2) |
|
LaSalle Bank |
|
Fixed-rate permanent |
|
|
5.68 |
% |
|
|
05/01/14 |
|
|
|
4,545,747 |
|
|
|
31,273 |
|
|
|
4,972,913 |
|
Bassett Shopping Center (2) |
|
LaSalle Bank |
|
Fixed-rate permanent |
|
|
8.47 |
% |
|
|
10/01/19 |
|
|
|
1,943,343 |
|
|
|
21,853 |
|
|
|
2,567,769 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
12,505,421 |
|
|
$ |
93,691 |
|
|
$ |
14,040,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addison Place Shops (3) |
|
Compass Bank |
|
LIBOR plus 200 |
|
|
3.50 |
% |
|
|
04/30/10 |
|
|
$ |
6,000,000 |
|
|
Interest only |
|
|
$ |
6,000,000 |
|
Northridge Office Building (4) (5) |
|
Bank of N. Ga. |
|
LIBOR plus 200 |
|
|
3.75 |
% |
|
|
09/10/10 |
|
|
|
2,911,667 |
|
|
$ |
13,333 |
|
|
|
3,005,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
8,911,667 |
|
|
|
|
|
|
$ |
9,005,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Westside (4)(6) |
|
Compass Bank |
|
LIBOR plus 200 |
|
|
3.75 |
% |
|
|
02/27/10 |
|
|
$ |
6,000,000 |
|
|
Interest only |
|
|
$ |
6,000,000 |
|
Bradley Park (7) |
|
Bank of N. Ga. |
|
LIBOR plus 175 |
|
|
1.98 |
% |
|
|
02/28/10 |
|
|
|
3,000,000 |
|
|
Interest only |
|
|
|
3,000,000 |
|
Peachtree Parkway (8) |
|
Wachovia Bank |
|
LIBOR plus 350 |
|
|
5.50 |
% |
|
|
07/31/10 |
|
|
|
8,175,000 |
|
|
Interest only |
|
|
$ |
8,175,000 |
|
Highway 20 (9) |
|
Touchmark National Bank |
|
Prime rate |
|
|
5.50 |
% |
|
|
10/18/10 |
|
|
|
3,500,000 |
|
|
Interest only |
|
|
|
3,500,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
20,675,000 |
|
|
|
|
|
|
$ |
20,675,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Totals |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
42,092,088 |
|
|
|
|
|
|
$ |
43.720.668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The interest rate shown for debt is as of December 31, 2009. |
|
(2) |
|
The lender acts as trustee for the actual lender. Additional monthly payments are
required to sustain escrow reserves. Prepayment of the loan is not financially
feasible. |
|
(3) |
|
This loan has an interest rate floor of 3.50%. |
|
(4) |
|
Each of these loans has an interest rate floor of 3.75%. |
|
(5) |
|
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. |
|
(6) |
|
On February 23, 2010, the maturity date of the Westside loan was extended to April 28,
2010 with the same terms as before. |
|
(7) |
|
On February 9, 2010, the maturity date of the Bradley Park loan was extended to April
28, 2011. The loan currently bears an interest rate of 30-day LIBOR plus 225 basis
points, with an interest rate floor of 5.0%. |
|
(8) |
|
This loan has an interest rate of LIBOR plus 3.50%, with a LIBOR floor of 2.0%. |
|
(9) |
|
This loan bears interest at the prime rate with a floor of 5.50%. |
38
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
As of December 31, 2009
|
|
|
|
|
|
|
|
|
Principal |
|
|
|
Year |
|
Payments |
|
|
Properties with Balloon Payments |
|
2010 |
|
$ |
29,925,567 |
|
|
Westside (1), Bradley Park (2), Highway 20, Peachtree Parkway, Addison Shops, Northridge Office Building |
2011 |
|
|
282,376 |
|
|
|
2012 |
|
|
297,738 |
|
|
|
2013 |
|
|
6,256,980 |
|
|
Grand Pavilion |
2014 |
|
|
4,644,299 |
|
|
Spectrum |
Thereafter |
|
|
2,313,708 |
|
|
Bassett |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
43,720,668 |
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
On February 23, 2010, the maturity date of the Westside loan was extended to April 28, 2010. |
|
(2) |
|
On February 9, 2010, the maturity date of the Bradley Park loan was extended to April 28, 2011. |
Short-Term Debt
We have a total of $26,666,667 in debt that matures on or before February 26, 2011. 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 February 26, 2011, 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 six loans that bear interest at floating rates. These loans had an aggregate
outstanding balance of $29,666,667 at February 26, 2010. Loans totaling $26,166,667 bear interest
at rates ranging from 200 to 350 basis points over the 30-day LIBOR with interest rate floors, and
a $3,500,000 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 $296,667 per year and reduce our liquidity and capital resources
by that amount.
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
have a remaining contractual commitment of $950,000 in development fees to Roberts Properties. We
also 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). We cannot yet estimate the
total construction costs on North Springs and Highway 20. As of February 1, 2010, we estimate our
remaining contractual commitment at $12,955,112 for Bradley Park,
$19,937,154 for Northridge, and
$27,105,020 for Peachtree Parkway.
39
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 and $5,005,586 in 2008 for this
purpose.
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. The cost of buildings and improvements includes interest, real estate taxes, insurance,
and development fees incurred during the construction period. 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 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
projects. We expense all internal costs associated with the acquisition and operation of these
assets to general and administrative expense in the period we incur those 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
(SFAS No. 34). 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 how quickly construction is completed, how quickly we lease the property and
what rent levels we achieve.
40
Purchase Valuation
We allocate the purchase price of acquired real estate assets to land, building, and
intangible assets based on their relative fair values. 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, 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 value of in-place leases is amortized over
the term of the respective lease.
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
(SFAS No. 144). During the year ended December 31, 2009, the decline in market values led us to
evaluate the recoverability of our real estate assets. We determined that the previous carrying
values on three retail centers and three land parcels would not be fully recovered.
FASB ASC Topic 360-10 requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash flows estimated to
be generated by those assets are less than the assets carrying amounts. The expected future cash
flows of an operating property depend on estimates made by management, including (1) changes in the
national, regional, and/or local economic climates, (2) competition, (3) operating costs, (4)
tenant occupancy, and (5) holding period. 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 probability-weighted
discounted future cash flow analysis, which incorporates available market information as well as
other assumptions made by our management. With respect to our retail centers, we estimated lower
lease rates and occupancy rates in the cash flow assumptions due to market and economic conditions.
As a result of these estimates, 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 Shops retail center, and
$699,948 on the Bassett retail center. During 2008, we recorded non-cash impairment losses of
$1,255,000 on the Northridge office building and $1,300,000 on the Spectrum retail center.
In accordance with FASB ASC Topic 360-10, we value land parcels at the lower of carrying value
or fair value. As a result of changing market conditions in the real estate industry, we reduced
the fair value of three properties: Peachtree Parkway, Northridge, and North Springs. Our
determination of the fair value of the Peachtree Parkway property and the Northridge property is
based on a discounted future cash flow analysis. The expected cash flows of these properties
depend on estimates made by our management, including (1) changes in the national, regional, and/or
local economic climates, (2) rental rates, (3) competition, (4) operating costs, (5) occupancy, and
(6) an estimated construction budget. In our determination of the fair value of the North Springs
property, we took into account the estimated value of the propertys office, retail, condominium,
and multifamily unit density, in addition to the value of the entitlements, development work, and
other improvements that have been made to the property. For 2009, we recognized non-cash
impairment losses 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.
41
Derivatives and Hedging Activities
We generally enter into fixed rate debt instruments on our permanent loans. In certain
situations, we may use derivative financial instruments in the form of interest rate swaps to hedge
interest rate exposure on variable-rate debt. We do not use those instruments for trading or
speculative purposes. We are not currently using derivative financial instruments in the form of
interest rate swaps to hedge interest rate exposure on our variable-rate debt. We do not have any
off-balance sheet arrangements.
FASB ASC Topic 815-10, Derivatives and Hedging Overall (SFAS No. 133), establishes
accounting and reporting standards for derivative instruments and for hedging activities by
requiring that all derivatives be recognized on the balance sheet and measured at fair value.
Gains or losses resulting from changes in the fair value of derivatives are recognized in earnings
or recorded in other comprehensive income and are recognized in the income statement when the
hedged item affects earnings, depending on the purpose of the derivatives and whether they qualify
for hedge accounting treatment. Any ineffective portions of cash flow hedges are recognized
immediately in earnings.
Recent Accounting Pronouncements
In June 2009, the FASB issued FASB Statement No. 168, The FASB Accounting Standards
CodificationTM and the Hierarchy of Generally Accepted Accounting Principles a
replacement of FASB Statement No. 162, which was titled The Hierarchy of Generally Accepted
Accounting Principles (the Codification). The Codification is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. The Codification is the
single source of authoritative accounting principles recognized by the FASB to be applied by
non-governmental entities in the preparation of financial statements in conformity with GAAP.
Although the adoption of this statement did not materially affect our financial statements, we have
revised the references to accounting literature within the notes to the condensed consolidated
financial statements and elsewhere in this report to conform to the Codification. For convenience,
we have also included a corresponding parenthetical reference to the pre-Codification literature.
Please refer to Note 2 of the notes to the consolidated financial statements for a discussion of
other recent accounting standards and pronouncements.
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 February 18, 2010, 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.
42
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, 2009 and 2008 and for the Years Ended December 31, 2009 and 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
|
|
|
|
F-3 |
|
|
|
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
|
|
|
F-5 |
|
|
|
|
|
|
|
|
|
F-6 |
|
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, 2009, 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.
43
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.
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, 2009. 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, 2009.
This annual report on Form 10-K does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting. Managements report
was not subject to attestation by our registered public accounting firm pursuant to temporary rules
of the SEC that permit us to provide only managements report in this annual report.
Changes in Internal Controls
There was no change in our internal control over financial reporting that occurred during the
quarter ended December 31, 2009 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.
44
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 |
|
63 |
|
2012 |
|
Chairman of the Board, Chief Executive Officer, and President |
|
|
|
|
|
|
|
Charles R. Elliott |
|
56 |
|
2012 |
|
Director, Chief Financial Officer, Secretary, and Treasurer |
|
|
|
|
|
|
|
Wm. Jarell Jones |
|
61 |
|
2011 |
|
Director, Chairman of Audit Committee, Chairman of Nominating and Governance Committee, and Chairman of Compensation Committee |
|
|
|
|
|
|
|
John L. Davis |
|
44 |
|
2010 |
|
Director |
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. In April 1995, Roberts Properties Management, Inc. (which we acquired
in 1997) 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 the prestigious
Southeast Builders Conference Aurora Award for the best rental apartment community eight times. 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 low-rise apartments. In 1993,
Roberts Properties was awarded the coveted Golden Aurora Award for best overall development in the
Southeast.
From 2006 to 2009, Mr. Roberts served as president 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. Since 2007, Mr. Roberts has also served on the Landmarks Preservation
Commission of the Town of Palm Beach, Florida.
45
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 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, most recently as a Senior Vice-President of Accounting and
Finance. He holds an undergraduate degree in Accounting and a masters degree in Finance.
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 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 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.
46
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, his experience as a
developer and real estate investor, 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 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,
2009, 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 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; |
|
|
|
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.
47
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, on which the shares of our common stock are listed.
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 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name and Principal |
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Total |
|
Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Charles S. Roberts, |
|
|
2009 |
|
|
|
225,000 |
(1) |
|
|
|
|
|
|
225,000 |
|
Chief Executive Officer, |
|
|
2008 |
|
|
|
225,000 |
(1) |
|
|
250,000 |
(2) |
|
|
475,000 |
|
President, and Chairman of the Board |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Elliott, |
|
|
2009 |
|
|
|
49,990 |
(3) |
|
|
|
|
|
|
49,990 |
|
Chief Financial Officer, Secretary, |
|
|
2008 |
|
|
|
163,795 |
(3) |
|
|
75,000 |
(4) |
|
|
238,795 |
|
and Treasurer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We do not compensate Mr. Roberts for his service as a director. |
|
(2) |
|
On June 24, 2008, our board of directors approved the payment of a $250,000 bonus to Mr.
Roberts, at the closing of the sale of our 403-unit Addison Place multifamily community. |
|
(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, i.e. medical, vacation, holidays,
etc., and we pay him only for the actual number of hours he works. In addition, Mr. Elliott
received our standard director fees of $12,000 during 2008 and $18,000 during 2009, which
amounts are included in the salary amounts shown in the table. |
|
(4) |
|
On June 24, 2008, our board of directors approved the payment of a $75,000 bonus to Mr.
Elliott, at the closing of the sale of our 403-unit Addison Place multifamily community. |
48
Compensation of Directors
The following table summarizes the compensation we paid to our non-employee directors in 2009.
The table includes any person who served during 2009 as a director who was not a named executive
officer, even if he is no longer serving as a director. Mr. Ben A. Spalding resigned from our
board of directors effective September 29, 2009.
Director Compensation for 2009
|
|
|
|
|
|
|
|
|
|
|
Fees Earned |
|
|
|
|
|
|
or Paid in Cash |
|
|
Total |
|
Name |
|
($) |
|
|
($) |
|
|
|
|
|
|
|
|
|
|
John L. Davis |
|
|
42,000 |
(1) |
|
|
42,000 |
(1) |
|
|
|
|
|
|
|
|
|
Wm. Jarell Jones |
|
|
30,000 |
|
|
|
30,000 |
|
|
|
|
|
|
|
|
|
|
Ben A. Spalding |
|
|
13,500 |
|
|
|
13,500 |
|
|
|
|
(1) |
|
In January 2010, our board of directors and nominating and governance committee approved the
payment to Mr. Davis of additional compensation of $24,000 for additional work he performed as
a director in 2009 that required a significant amount of time beyond his normal director
duties. We paid this additional amount to Mr. Davis on January 29, 2010. |
During 2009, 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 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.
49
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 January 29, 2010 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.
Except as described in this paragraph, 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 ownership by any one holder 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). The ownership limit will
apply when a unitholder elects to exchange his or her units for shares. If exchanging units would
cause a unitholder to exceed the applicable ownership limit (other than by exchanging units the
unitholder owned on July 22, 2004 as explained above), the unitholder will receive cash to the
extent required to bring him or her within this ownership limit. In Mr. Roberts case, he will
receive cash if upon redemption of his units he would own more than 35% of the outstanding shares
of our common stock.
50
A 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Underlying |
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Units |
|
|
|
|
|
|
|
|
Name of |
|
Beneficially |
|
|
Beneficially |
|
|
|
|
|
|
Percent of |
|
Beneficial Owner |
|
Owned |
|
|
Owned |
|
|
Total |
|
|
Class(1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles S. Roberts |
|
|
3,281,571 |
(2) |
|
|
1,166,920 |
(3) |
|
|
4,448,491 |
|
|
|
38.91 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John L. Davis |
|
|
27,852 |
|
|
|
0 |
|
|
|
27,852 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wm. Jarell Jones |
|
|
53,130 |
(4) |
|
|
0 |
|
|
|
53,130 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles R. Elliott |
|
|
49,000 |
|
|
|
0 |
|
|
|
49,000 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All directors and
executive officers
as a group: (4
persons)
(4) |
|
|
3,411,553 |
|
|
|
1,166,920 |
|
|
|
4,578,473 |
|
|
|
40.04 |
% |
|
|
|
* |
|
Less than 1%. |
|
(1) |
|
The total number of shares outstanding used in calculating this percentage is 10,267,223, the
number of shares outstanding as of February 18, 2010. |
|
(2) |
|
Includes 53,067 shares owned by a family limited liability company of which Mr. Roberts is
the manager. Mr. Roberts disclaims beneficial ownership of those shares. |
|
(3) |
|
Reflects Mr. Roberts beneficial ownership of 708,512 units, each of which is exchangeable
for 1.647 shares of our common stock. |
|
(4) |
|
Includes 3,332 shares owned by Mr. Jones wife, to which Mr. Jones disclaims beneficial
ownership. |
51
Equity Compensation Plan Information
The following table provides equity compensation plan information at December 31, 2009. 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 to take into account our recent stock distribution, we may grant up to 654,000 shares of
restricted common stock under the Plan, subject to the anti-dilution provisions of the Plan. As of
February 18, 2010, 646,212 shares remain available to be granted under the Plan.
Equity Compensation Plan Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
securities |
|
|
Weighted- |
|
|
Number of securities |
|
|
|
to be issued |
|
|
average |
|
|
remaining available for future |
|
|
|
upon exercise of |
|
|
exercise price of |
|
|
issuances under equity |
|
|
|
outstanding |
|
|
outstanding |
|
|
compensation plans (excluding |
|
|
|
options, warrants |
|
|
options, warrants |
|
|
securities reflected in |
|
|
|
and rights |
|
|
and rights |
|
|
column (a) |
|
Plan category |
|
(a) |
|
|
(b) |
|
|
(c) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans approved by
security holders |
|
|
N/A |
|
|
|
N/A |
|
|
|
646,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation
plans not approved
by security holders |
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
646,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
52
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 is its sole general partner. Mr. Charles S.
Roberts 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 have paid them to perform services
for us.
Under applicable SEC rules, this Item 13 describes any transaction that has occurred since
January 1, 2008, 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 9 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 types of services and will
continue to do so in the future. We have purchased property from Roberts Properties, and we have
retained Roberts Properties for development services and Roberts Construction for construction
services for some of our undeveloped properties. Roberts Realty and its predecessor limited
partnerships entered into agreements with Roberts Properties and Roberts Construction to provide
design, development, and construction services for the following multifamily communities, all of
which have now been sold for a profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Year |
|
|
|
|
Name of Community |
|
of Units |
|
|
Sold |
|
|
Sales Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addison Place Townhomes (Phase I) |
|
|
118 |
|
|
|
2008 |
|
|
$ |
20,000,000 |
|
Addison Place Apartments (Phase II) |
|
|
285 |
|
|
|
2008 |
|
|
|
40,000,000 |
|
Ballantyne Place |
|
|
319 |
|
|
|
2005 |
|
|
|
37,250,000 |
|
Plantation Trace (Phase I) |
|
|
182 |
|
|
|
2004 |
|
|
|
16,866,400 |
|
River Oaks |
|
|
216 |
|
|
|
2004 |
|
|
|
20,000,000 |
|
Bradford Creek |
|
|
180 |
|
|
|
2004 |
|
|
|
18,070,000 |
|
Preston Oaks (Phase II) |
|
|
24 |
|
|
|
2004 |
|
|
|
3,017,500 |
|
Plantation Trace Townhomes (Phase II) |
|
|
50 |
|
|
|
2004 |
|
|
|
4,633,600 |
|
Veranda Chase |
|
|
250 |
|
|
|
2004 |
|
|
|
23,250,000 |
|
Preston Oaks (Phase I) |
|
|
189 |
|
|
|
2004 |
|
|
|
23,762,500 |
|
Highland Park |
|
|
188 |
|
|
|
2003 |
|
|
|
17,988,143 |
|
Crestmark Club (Phase I) |
|
|
248 |
|
|
|
2001 |
|
|
|
18,562,874 |
|
Rosewood Plantation |
|
|
152 |
|
|
|
2001 |
|
|
|
14,800,000 |
|
Crestmark Club (Phase II) |
|
|
86 |
|
|
|
2001 |
|
|
|
6,437,126 |
|
Ivey Brook |
|
|
146 |
|
|
|
2000 |
|
|
|
14,550,000 |
|
Bentley Place |
|
|
117 |
|
|
|
1999 |
|
|
|
8,273,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,750 |
|
|
|
|
|
|
$ |
287,461,143 |
|
|
|
|
|
|
|
|
|
|
|
|
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. Roberts Realty recognized total rental income from the Roberts
Companies of $143,800 for each of the years ended December 31, 2009 and 2008.
53
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 are for a one-year term with a new rental rate of
$18.53 per rentable square foot. The effective rental rate is consistent with an October 2009
lease agreement between Roberts Realty and an unrelated third party at the Northridge office
building. The Roberts Companies have the right to expand their rentable square footage at the new
rental rate.
Restrictive Covenant on Peachtree Parkway Land. We own a 24.7-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 Properties, or any entity designated by Mr. Roberts, will be engaged as the
development company for the project. As described under Development Fees below, we
have paid the development fees to Roberts Properties in full satisfaction of this part
of the covenant. |
|
|
|
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). |
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.
Recent Purchase of Property Adjacent to Peachtree Parkway Land. On December 17, 2009, we
entered into two sales contracts with Peachtree Corners Circle, LLC. 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.
54
In addition, the purchased property would 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 would 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. The
cash purchase price will be $125,000 or $282,805 per acre. This price per acre is 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. We paid a $5,000 earnest money deposit and expect to close
the purchase by March 15, 2010.
Restrictive Covenant on North Springs Land Parcel. We own a 9.8-acre parcel of undeveloped
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 the part of the covenant in favor of Roberts Properties.
Development Fees. From time to time, we pay Roberts Properties fees for various development
services that include market studies, business plans, design, finish selection, interior design,
and construction administration. We have entered into design and development agreements with
Roberts Properties on the four projects listed in the following table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
Incurred |
|
|
|
|
|
|
Total |
|
|
From 1/1/08 |
|
|
Remaining |
|
|
|
Contract |
|
|
through |
|
|
Contractual |
|
|
|
Amount |
|
|
2/1/2010 |
|
|
Commitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Springs |
|
$ |
1,780,000 |
|
|
$ |
791,111 |
|
|
$ |
0 |
|
Peachtree Parkway |
|
|
1,460,000 |
|
|
|
300,000 |
|
|
|
0 |
|
Bradley Park |
|
|
770,000 |
|
|
|
670,000 |
|
|
|
0 |
|
Highway 20 |
|
|
1,050,000 |
|
|
|
0 |
|
|
|
950,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,060,000 |
|
|
$ |
1,761,111 |
|
|
$ |
950,000 |
|
|
|
|
|
|
|
|
|
|
|
Although we have paid Roberts Properties the full contractual amount for development services for
some of the above land parcels, Roberts Properties will continue to provide services as appropriate
as we complete the development of the land parcels and begin construction.
55
Construction Contracts. We have entered into cost plus 10% (5% profit and 5% overhead)
contracts with Roberts Construction for Addison Shops Building D, Bradley Park, Northridge,
Peachtree Parkway, Highway 20, and North Springs. We have not yet estimated the costs of the
Highway 20 and North Springs projects. We have incurred the following costs on these contracts
since January 1, 2008: $4,921 for Highway 20 and $112,736 for North Springs. We have incurred or
estimated the costs for Addison Shops Building D, Bradley Park, and Northridge. The following
table summarizes those costs, the amount we have incurred since January 1, 2008, and the estimated
remaining amounts.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual/ |
|
|
Amount |
|
|
Estimated |
|
|
|
Estimated |
|
|
Incurred from |
|
|
Remaining |
|
|
|
Contract |
|
|
1/1/2008 to |
|
|
Contractual |
|
|
|
Amount |
|
|
2/1/2010 |
|
|
Commitment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Addison Place Shops Bldg D |
|
$ |
421,731 |
|
|
$ |
35,391 |
|
|
$ |
0 |
|
Bradley Park |
|
|
13,363,000 |
|
|
|
400,014 |
|
|
|
12,955,112 |
|
Northridge |
|
|
20,401,000 |
|
|
|
463,846 |
|
|
|
19,937,154 |
|
Peachtree Parkway |
|
|
27,212,000 |
|
|
|
34,337 |
|
|
|
27,105,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
61,397,731 |
|
|
$ |
933,588 |
|
|
$ |
59,997,286 |
|
|
|
|
|
|
|
|
|
|
|
Other Fees & Reimbursements. At our request, Roberts Construction performed repairs and
tenant improvements for new leases at our retail centers and office building. From January 1, 2008
to February 1, 2010, we incurred $474,658 for labor and materials plus 10% (5% profit and 5%
overhead) from Roberts Construction, and we incurred $74,569 for reimbursement of operating costs
and expenses from Roberts Properties.
We entered into a reimbursement arrangement for services provided by Roberts Properties,
effective February 4, 2008. Under the terms of the arrangement, we will reimburse Roberts
Properties the cost of providing consulting services in an amount equal to an appropriate hourly
billing rate for an 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.
From January 1, 2008 through February 1, 2010, we incurred $301,848 under this policy.
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 listing standards. Our Compensation Committee is
composed of Mr. Jones (Chairman) and Mr. Davis, 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
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.
56
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 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, 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 other than nominal gifts or excessive entertainment 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 Code of Ethics Contact Person. For officers and
directors, that person is the chairman of the audit committee, Mr. Wm. Jarell Jones.
57
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 long
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, 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 to develop or acquire 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 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 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.
For 2008
The aggregate fees billed by Reznick for professional services rendered for the audit of our
annual financial statements for 2008, and for the review of the financial statements included in
our quarterly reports on Form 10-Q during 2008, were $144,000.
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 2009 or 2008 financial
statements, but which are not reported in the previous paragraph.
Tax Fees
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.
58
For 2008
The aggregate fees billed by Reznick for professional services rendered related to tax
compliance, tax advice and tax planning for 2008, were $78,025.
All Other Fees
Reznick did not bill us for any services for the fiscal years ended December 31, 2009 and
December 31, 2008 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.
59
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, 2009 AND 2008 AND FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008: |
|
|
|
|
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
|
|
|
|
F-3 |
|
|
|
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
|
|
|
F-5 |
|
|
|
|
|
|
|
|
|
F-6 |
|
60
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, 2009 and
2008, 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, 2009. 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, 2009 and 2008, and the consolidated results of their operations and
their cash flows for each of the years in the two-year period ended December 31, 2009, in
conformity with accounting principles generally accepted in the United States of America.
/s/ Reznick Group, P.C.
Atlanta, Georgia
March 1, 2010
F-1
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
REAL ESTATE ASSETS: |
|
|
|
|
|
|
|
|
Land |
|
$ |
11,375,734 |
|
|
$ |
11,375,734 |
|
Buildings and improvements |
|
|
21,530,802 |
|
|
|
25,521,272 |
|
Furniture, fixtures and equipment |
|
|
704,558 |
|
|
|
619,181 |
|
|
|
|
|
|
|
|
|
|
|
33,611,094 |
|
|
|
37,516,187 |
|
Less accumulated depreciation |
|
|
(4,689,094 |
) |
|
|
(3,861,074 |
) |
|
|
|
|
|
|
|
Operating real estate assets |
|
|
28,922,000 |
|
|
|
33,655,113 |
|
Construction in progress and real estate under development |
|
|
44,440,391 |
|
|
|
52,305,712 |
|
Land held for investment |
|
|
9,009,124 |
|
|
|
9,009,124 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net real estate assets |
|
|
82,371,515 |
|
|
|
94,969,949 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS |
|
|
7,905,771 |
|
|
|
16,454,995 |
|
|
|
|
|
|
|
|
|
|
RESTRICTED CASH |
|
|
1,322,408 |
|
|
|
925,521 |
|
|
|
|
|
|
|
|
|
|
INVESTMENTS |
|
|
38,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DEFERRED FINANCING & LEASING COSTS Net of accumulated amortization
of $568,793 and $570,894 at December 31, 2009 and December 31, 2008, respectively |
|
|
267,864 |
|
|
|
316,124 |
|
|
|
|
|
|
|
|
|
|
LEASE INTANGIBLES Net of accumulated amortization
of $467,850 and $465,087 at December 31, 2009 and December 31, 2008, respectively |
|
|
203,808 |
|
|
|
322,954 |
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS Net |
|
|
271,820 |
|
|
|
368,020 |
|
|
|
|
|
|
|
|
|
|
|
$ |
92,381,363 |
|
|
$ |
113,357,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
|
|
|
Mortgage notes payable |
|
$ |
14,040,668 |
|
|
$ |
14,292,020 |
|
Construction notes payable |
|
|
9,005,000 |
|
|
|
9,165,000 |
|
Land notes payable |
|
|
20,675,000 |
|
|
|
21,252,000 |
|
Accounts payable and accrued expenses |
|
|
498,020 |
|
|
|
655,701 |
|
Due to affiliates |
|
|
66,441 |
|
|
|
52,878 |
|
Security deposits and prepaid rents |
|
|
146,881 |
|
|
|
141,550 |
|
Distribution payable |
|
|
|
|
|
|
2,362,909 |
|
Accrued expenses related to discontinued operations |
|
|
23,781 |
|
|
|
23,781 |
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
44,455,791 |
|
|
|
47,945,839 |
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONCONTROLLING INTEREST OPERATING PARTNERSHIP |
|
|
8,760,795 |
|
|
|
12,585,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, 10,205,749 and
10,086,769 shares issued and outstanding at December 31, 2009 and December 31,
2008, respectively |
|
|
102,058 |
|
|
|
100,868 |
|
Additional paid-in capital |
|
|
30,948,377 |
|
|
|
30,389,994 |
|
Treasury shares, at cost |
|
|
(71,332 |
) |
|
|
(15,886 |
) |
Accumulated other comprehensive income |
|
|
9,722 |
|
|
|
|
|
Retained earnings |
|
|
8,175,952 |
|
|
|
22,351,532 |
|
|
|
|
|
|
|
|
|
Total shareholders equity |
|
|
39,164,777 |
|
|
|
52,826,508 |
|
|
|
|
|
|
|
|
|
|
|
$ |
92,381,363 |
|
|
$ |
113,357,563 |
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-2
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
OPERATING REVENUES: |
|
|
|
|
|
|
|
|
Rental operations |
|
$ |
1,982,934 |
|
|
$ |
2,246,946 |
|
Other operating income |
|
|
335,105 |
|
|
|
352,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
2,318,039 |
|
|
|
2,599,514 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
|
|
|
Personnel |
|
|
40,421 |
|
|
|
53,550 |
|
Utilities |
|
|
220,639 |
|
|
|
213,873 |
|
Repairs and maintenance |
|
|
107,112 |
|
|
|
175,663 |
|
Real estate taxes |
|
|
639,025 |
|
|
|
725,885 |
|
Marketing, insurance and other |
|
|
112,145 |
|
|
|
98,520 |
|
General and administrative expenses |
|
|
1,825,104 |
|
|
|
1,822,665 |
|
Bad debt expense |
|
|
184,178 |
|
|
|
141,640 |
|
Write-off of
lease intangibles (net) |
|
|
5,254 |
|
|
|
30,846 |
|
Impairment loss on real estate assets |
|
|
14,111,334 |
|
|
|
2,555,000 |
|
Depreciation and amortization expense |
|
|
989,864 |
|
|
|
1,307,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
18,235,076 |
|
|
|
7,125,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(15,917,037 |
) |
|
|
(4,525,718 |
) |
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
Interest income |
|
|
121,901 |
|
|
|
299,200 |
|
Interest expense |
|
|
(1,468,711 |
) |
|
|
(1,442,076 |
) |
Amortization of deferred financing and leasing costs |
|
|
(176,581 |
) |
|
|
(202,376 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(1,523,391 |
) |
|
|
(1,345,252 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM CONTINUING OPERATIONS |
|
|
(17,440,428 |
) |
|
|
(5,870,970 |
) |
|
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS |
|
|
|
|
|
|
28,914,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME |
|
|
(17,440,428 |
) |
|
|
23,043,474 |
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST |
|
|
(3,264,848 |
) |
|
|
5,422,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS |
|
$ |
(14,175,580 |
) |
|
$ |
17,621,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME PER COMMON SHARE BASIC AND DILUTED (Note 6): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations basic |
|
$ |
(1.40 |
) |
|
$ |
(0.46 |
) |
Income from discontinued operations basic |
|
|
|
|
|
|
2.27 |
|
|
|
|
|
|
|
|
Net (loss) income basic |
|
$ |
(1.40 |
) |
|
$ |
1.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations diluted |
|
$ |
(1.40 |
) |
|
$ |
(0.47 |
) |
Income from discontinued operations diluted |
|
|
|
|
|
|
2.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income diluted |
|
$ |
(1.40 |
) |
|
$ |
1.84 |
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-3
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares |
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Total |
|
|
|
Number of |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
Share- |
|
|
|
Shares |
|
|
|
|
|
|
Paid-In |
|
|
Treasury |
|
|
Comprehensive |
|
|
Retained |
|
|
holders |
|
|
|
Shares Issued |
|
|
Amount |
|
|
Capital |
|
|
Shares |
|
|
Income |
|
|
Earnings |
|
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS OF DECEMBER 31, 2007 |
|
|
5,812,463 |
|
|
$ |
58,125 |
|
|
$ |
27,590,845 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
10,404,000 |
|
|
$ |
38,052,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,621,344 |
|
|
|
17,621,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,621,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of treasury shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,886 |
) |
|
|
|
|
|
|
|
|
|
|
(15,886 |
) |
Distributions declared |
|
|
3,754,732 |
|
|
|
37,547 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,673,812 |
) |
|
|
(5,636,265 |
) |
Conversion
of operating partnership units to common shares |
|
|
537,422 |
|
|
|
5,375 |
|
|
|
421,625 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
427,000 |
|
Restricted shares issued to employees, net of forfeitures |
|
|
(17,848 |
) |
|
|
(179 |
) |
|
|
(36,659 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(36,838 |
) |
Amortization of deferred compensation |
|
|
|
|
|
|
|
|
|
|
21,001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,001 |
|
Adjustment for noncontrolling interest in the operating partnership |
|
|
|
|
|
|
|
|
|
|
2,393,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,393,182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-4
ROBERTS REALTY INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(17,440,428 |
) |
|
$ |
23,043,474 |
|
Adjustments to reconcile net (loss) income to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Income from discontinued operations |
|
|
|
|
|
|
(28,914,444 |
) |
Depreciation and amortization |
|
|
1,166,445 |
|
|
|
1,499,165 |
|
Amortization of above and below market leases |
|
|
10,796 |
|
|
|
26,375 |
|
Amortization of deferred compensation |
|
|
|
|
|
|
21,001 |
|
Loss on disposal of assets |
|
|
24,810 |
|
|
|
|
|
Write-off of lease intangibles (net) |
|
|
5,254 |
|
|
|
30,846 |
|
Impairment loss on real estate assets |
|
|
14,111,334 |
|
|
|
2,555,000 |
|
Forfeiture of restricted stock |
|
|
|
|
|
|
(36,838 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
Decrease in other assets |
|
|
71,851 |
|
|
|
1,383 |
|
Increase (decrease) in due to affiliates |
|
|
25,746 |
|
|
|
(123,973 |
) |
(Decrease) increase in accounts payable and other liabilities relating to operations |
|
|
(103,987 |
) |
|
|
199,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities from continuing operations |
|
|
(2,128,179 |
) |
|
|
(1,698,702 |
) |
Net cash provided by operating activities from discontinued operations |
|
|
|
|
|
|
605,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(2,128,179 |
) |
|
|
(1,093,102 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Purchase of equity securities |
|
|
(28,455 |
) |
|
|
|
|
Payment of leasing costs |
|
|
(21,072 |
) |
|
|
(34,087 |
) |
Increase in restricted cash |
|
|
(396,887 |
) |
|
|
(599,111 |
) |
Decrease in accounts payable and other liabilities relating to investing |
|
|
(64,207 |
) |
|
|
(357,516 |
) |
Development and construction of real estate assets |
|
|
(2,405,676 |
) |
|
|
(3,868,808 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities from continuing operations |
|
|
(2,916,297 |
) |
|
|
(4,859,522 |
) |
Net cash provided by investing activities from discontinued operations |
|
|
|
|
|
|
58,477,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(2,916,297 |
) |
|
|
53,617,586 |
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Principal repayments on mortgage notes payable |
|
|
(251,352 |
) |
|
|
(234,150 |
) |
Payment of loan costs |
|
|
(113,886 |
) |
|
|
(182,099 |
) |
Repayment of construction note payable |
|
|
(160,000 |
) |
|
|
(911,030 |
) |
Repayment of land notes payable |
|
|
(577,000 |
) |
|
|
(815,000 |
) |
Repayment of insurance premium note payable |
|
|
|
|
|
|
(90,073 |
) |
Repayment of line of credit |
|
|
|
|
|
|
(400,000 |
) |
Purchase of treasury shares |
|
|
(55,446 |
) |
|
|
(15,886 |
) |
Payment of distribution to shareholders and unitholders |
|
|
(2,360,397 |
) |
|
|
(5,005,586 |
) |
Increase in accounts payable and other liabilities relating to financing activities |
|
|
13,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities from continuing operations |
|
|
(3,504,748 |
) |
|
|
(7,653,824 |
) |
Net cash used in financing activities from discontinued operations |
|
|
|
|
|
|
(29,019,538 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(3,504,748 |
) |
|
|
(36,673,362 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
(8,549,224 |
) |
|
|
15,851,122 |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR |
|
|
16,454,995 |
|
|
|
603,873 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS, END OF YEAR |
|
$ |
7,905,771 |
|
|
$ |
16,454,995 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for interest, net of capitalized interest of $762,847 and $1,193,766 for 2009 and 2008, respectively |
|
$ |
1,423,621 |
|
|
$ |
2,449,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Development and construction of real estate assets due to, but not paid to, affiliates |
|
$ |
33,749 |
|
|
$ |
45,932 |
|
|
|
|
|
|
|
|
Conversion of operating partnership units to common shares |
|
$ |
120,768 |
|
|
$ |
427,000 |
|
|
|
|
|
|
|
|
Adjustments for noncontrolling interest in the operating partnership |
|
$ |
454,603 |
|
|
$ |
2,393,182 |
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale securities |
|
$ |
9,722 |
|
|
$ |
|
|
|
|
|
|
|
|
|
See notes to the consolidated financial statements.
F-5
ROBERTS REALTY INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. |
|
BUSINESS AND ORGANIZATION |
Roberts Realty Investors, Inc. (Roberts Realty), 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 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 81.72%
ownership interest in the operating partnership at December 31, 2009 and an 80.76% ownership
interest in the operating partnership at December 31, 2008.
At December 31, 2009, Roberts Realty owned the following real estate assets, all of which
are located in the north Atlanta metropolitan area:
|
|
|
four neighborhood retail centers totaling 156,615 square feet; |
|
|
|
one commercial office building totaling 37,864 square feet, part of which
serves as Roberts Realtys corporate headquarters; |
|
|
|
five tracts of land totaling 105.6 acres in various phases of development and
construction; and |
|
|
|
a 44-acre tract of land that is held for investment. |
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.
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). See Note 6, Shareholders Equity Special Cash and Stock Distributions Declared
in December 2008 and Paid in January 2009. 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. 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
18.72% for 2009 and 23.53% for 2008. There were 1,386,394 units outstanding as of December
31, 2009 and 1,458,630 units outstanding as of December 31, 2008. The noncontrolling
interest of the unitholders was $8,760,795 at December 31, 2009 and $12,585,216 at December
31, 2008.
F-6
Holders of operating partnership units generally have the right to require the operating
partnership to redeem their units for shares of Roberts Realty. 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.
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 (FASB Staff Position (FSP)
Statement of Financial Accounting Standard (SFAS) 157-2), 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 and Fair
Value Measurements.
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 (SFAS No.
141 (revised 2007)). 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 ($39,462) and ($28,677), and the unamortized
remaining values are included in other assets on the consolidated balance sheets at December
31, 2009 and 2008, respectively. The value of in-place leases is amortized over the term of
the respective lease. Intangible assets that are subject to amortization are reviewed for
potential impairment whenever events or circumstances indicate that carrying amounts may not
be recoverable and 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 $5,254 in 2009 and $30,846 in 2008.
Accordingly, a non-cash impairment loss of that amount was recognized and is included in the
write-off of fair value/market value of leases (net) in the statement of operations.
F-7
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 $762,847 for 2009 and
$1,193,766 for 2008. 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 $875,973 in 2009 and $1,142,026 in 2008.
Roberts Realty recognizes gains on sales of assets in accordance with FASB ASC Topic 360-20,
Property, Plant, and Equipment Real Estate Sales (SFAS No. 66). 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, 2009 and 2008.
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. During 2009, Roberts Realty purchased $28,455 in marketable equity securities.
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 sheet. Unrealized holding gains and losses on available-for-sale securities are
excluded from income and are reported as other comprehensive income in shareholders equity.
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
$153,989 for 2009 and $195,417 for 2008.
F-8
Revenue Recognition. Roberts Realty leases its multifamily properties under operating
leases with terms generally one year or less. 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, 2009, 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 |
|
|
|
|
|
|
2010 |
|
$ |
1,537,299 |
|
2011 |
|
|
1,346,016 |
|
2012 |
|
|
1,178,036 |
|
2013 |
|
|
593,420 |
|
2014 |
|
|
351,885 |
|
Thereafter |
|
|
316,237 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,322,893 |
|
|
|
|
|
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) income to its taxable loss for
the years ending December 31, 2009 and 2008 is shown below.
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(14,175,580 |
) |
|
$ |
17,621,344 |
|
|
|
|
|
|
|
|
|
|
Adjustments to net income: |
|
|
|
|
|
|
|
|
Gains from sale of real estate assets |
|
|
|
|
|
|
1,123,656 |
|
Political campaign contributions |
|
|
1,580 |
|
|
|
|
|
Loss from disposal of assets |
|
|
(16,000 |
) |
|
|
|
|
Depreciation |
|
|
170,000 |
|
|
|
(213,000 |
) |
Prepaid rents |
|
|
32,000 |
|
|
|
(83,000 |
) |
Unearned compensation |
|
|
|
|
|
|
2,000 |
|
Interest expense |
|
|
(620,000 |
) |
|
|
(912,000 |
) |
Bad debt |
|
|
336,000 |
|
|
|
(5,000 |
) |
Section 754 deduction |
|
|
|
|
|
|
(487,000 |
) |
Meals and entertainment |
|
|
1,000 |
|
|
|
1,000 |
|
Impairment loss |
|
|
11,469,000 |
|
|
|
1,953,000 |
|
Fair market value of leases |
|
|
4,000 |
|
|
|
23,000 |
|
Charitable contribution carryover |
|
|
4,000 |
|
|
|
(1,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable (loss) income before net operating losses and dividends paid deduction |
|
$ |
(2,794,000 |
) |
|
$ |
19,023,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid deduction |
|
|
|
|
|
|
(12,607,000 |
) |
Net operating loss carryforward |
|
|
|
|
|
|
(6,416,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable loss |
|
$ |
(2,794,000 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
F-9
Tax Status of Distributions. On June 24, 2008, Roberts Realtys board of directors declared
a special distribution of $5,005,586, or $0.66 per share/unit, to the shareholders and
unitholders of record on July 10, 2008. On August 5, 2008, Roberts Realty paid a total of
$3,824,446 to shareholders and $1,181,140 to unitholders. On December 18, 2008, Roberts
Realtys board of directors declared a special distribution of $9,058,000, or $1.56 per
share. On January 29, 2009, Roberts Realty made, to shareholders of record at the close of
business on December 29, 2008, a distribution in a combination of 20% in cash, or $0.31 per
share ($1,811,819 in total), and 80% in its common stock, equal to $1.25 per share
(3,754,732 shares in total valued at an aggregate amount of $7,246,633). Unitholders
received $0.31 per share in cash ($551,090 in total) and are now entitled to receive 1.647
shares for each unit submitted for conversion. Of the dividends paid, Roberts Realty
designated the percentage of the total dividends outlined in the table below as the
following types of income:
|
|
|
|
|
|
|
2008 |
|
|
Long-term capital gains |
|
|
65.5 |
% |
Unrecaptured section 1250 gains |
|
|
34.5 |
% |
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. In June 2009, the FASB issued FASB Statement No. 168, The
FASB Accounting Standards Codification (ASC) and the Hierarchy of Generally Accepted
Accounting Principles a replacement of FASB Statement No. 162, which was titled The
Hierarchy of Generally Accepted Accounting Principles (the Codification). The
Codification is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The Codification is the single source of authoritative
accounting principles recognized by the FASB to be applied by non-governmental entities in
the preparation of financial statements in conformity with GAAP. Although the adoption of
this statement did not materially affect Roberts Realtys financial statements, Roberts
Realty has revised the references to accounting literature within the notes to the condensed
consolidated financial statements and elsewhere in this report to conform to the
Codification. For convenience, Roberts Realty has also included a corresponding
parenthetical reference to the pre-Codification literature.
On January 1, 2009, Roberts Realty adopted FASB ASC Topic 810-10, Consolidation Overall
(SFAS No. 160), which, in conjunction with other existing generally accepted accounting
principles, established criteria used to evaluate the characteristics of noncontrolling
interests in consolidated entities to determine whether noncontrolling interests are
classified and accounted for as permanent equity or temporary equity (presented between
liabilities and permanent equity on the consolidated balance sheet). In conjunction with
the issuance of FASB ASC Topic 810-10, EITF Topic No. D-98, Classification and Measurement
of Redeemable Securities, was revised to clarify the treatment of noncontrolling interests
with redemption provisions. If a noncontrolling interest has a redemption feature that
permits the issuer to settle in either cash or common shares at the option of the issuer but
the equity settlement feature is deemed to be outside of the control of the issuer, then
those noncontrolling interests are classified as temporary equity. Roberts Realty
determined that the noncontrolling interests related to the unitholders in the operating
partnership met the criteria to be classified and accounted for as temporary equity
(reflected outside of total equity).
F-10
The adoption of FASB ASC Topic 810-10 resulted in (a) the renaming of minority interest of
unitholders in the operating partnership to noncontrolling interests operating
partnership, on our consolidated balance sheets, (b) the reclassification of minority
interest of unitholders in the operating partnership to income (loss) attributable to
noncontrolling interests, on our consolidated statements of operations, and (c) additional
disclosures. These accounting changes were required to be retroactively applied for all
periods presented.
Noncontrolling interests on our consolidated balance sheets are recorded at the greater of
their carrying amount or redemption value at the end of each reporting period. Any changes
in the value from period to period are charged to paid-in-capital in our consolidated
statements of shareholders equity. The following table details the components of
noncontrolling interests related to unitholders in the operating partnership for the twelve
months ended December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Beginning balance |
|
$ |
12,585,216 |
|
|
$ |
11,715,497 |
|
Net (loss) income attributable to noncontrolling interest |
|
|
(3,264,848 |
) |
|
|
5,422,130 |
|
Redemptions of noncontrolling partnership units |
|
|
(120,768 |
) |
|
|
(426,999 |
) |
Distribution payable |
|
|
|
|
|
|
(1,732,230 |
) |
Adjustments to noncontrolling interest in operating partnership |
|
|
(438,805 |
) |
|
|
(2,393,182 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance |
|
$ |
8,760,795 |
|
|
$ |
12,585,216 |
|
|
|
|
|
|
|
|
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.
In June 2009, the FASB issued FASB ASC Topic 810-10, Consolidation Overall (SFAS No. 167).
FASB ASC Topic 810-10 changes the consolidation analysis for variable interest entities
(VIEs) and requires a qualitative analysis to determine the primary beneficiary of the
VIE. The determination of the primary beneficiary of a VIE is based on whether the entity
has the power to direct matters which most significantly impact the activities of the VIE
and has the obligation to absorb losses, or the right to receive benefits, of the VIE which
could potentially be significant to the VIE. FASB ASC Topic 810-10 further amends FIN 46R
to require an ongoing reconsideration of the primary beneficiary and also amends the events
triggering a reassessment. FASB ASC Topic 810-10 requires additional disclosures for VIEs,
including providing additional disclosures about a reporting entitys involvement with VIEs,
how a reporting entitys involvement with a VIE affects the reporting entitys financial
statements, and significant judgments and assumptions made by the reporting entity to
determine whether it must consolidate the VIE. FASB ASC Topic 810-10 became effective for
Roberts Realty on January 1, 2010. Roberts Realty currently has no VIEs, and FASB ASC Topic
810-10 will have no effect on Roberts Realtys consolidated financial statements.
Effective June 30, 2009, Roberts Realty adopted the provisions of the Codification. This
new guidance had no impact on Roberts Realtys Consolidated Financial Statements. Roberts
Realty has evaluated subsequent events in Note 12 Subsequent Events through the filing
date of this annual report on Form 10-K for the period ended December 31, 2009.
Certain reclassifications of prior years balances have been made to conform to the current
format.
F-11
3. |
|
ACQUISITIONS AND DISPOSITIONS |
On June 24, 2008, Roberts Realty sold its Addison Place multifamily community for
$60,000,000 or an average of $148,883 per unit, resulting in a gain of $28,347,666, of which
$6,670,206 is attributable to noncontrolling interest. Net sales proceeds were $29,654,952
after deduction of:
|
(a) |
|
$20,271,949 for a mortgage note payable assumed by the buyer, |
|
|
(b) |
|
$8,561,263 for a loan payoff, |
|
|
(c) |
|
$490,599 for an early termination fee, and |
|
|
(d) |
|
$1,021,237 for closing costs and prorations. |
On August 5, 2008, Roberts Realty paid a special distribution of $0.66 per share/unit or
$5,005,586 to the shareholders and unit holders of record on July 10, 2008.
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 9 Related Party Transactions.
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.
F-12
For 2009, there were no discontinued operations. For 2008, income from discontinued
operations consisted of the operating activities of the 403-unit Addison Place multifamily
community, which Roberts Realty sold on June 24, 2008. The sales price for Addison Place
was $60,000,000, which resulted in a net gain on sale of $28,347,666. The following table
summarizes the revenue and expenses classified as discontinued operations for 2008
(unaudited):
|
|
|
|
|
|
|
Year Ended |
|
|
|
December 31, 2008 |
|
OPERATING REVENUES: |
|
|
|
|
Rental operations |
|
$ |
2,544,434 |
|
Other operating income |
|
|
170,737 |
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
|
2,715,171 |
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
Personnel |
|
|
302,565 |
|
Utilities |
|
|
136,715 |
|
Repairs and maintenance |
|
|
306,781 |
|
Real estate taxes |
|
|
287,463 |
|
Marketing, insurance and other |
|
|
140,079 |
|
General and administrative expenses |
|
|
41,137 |
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,214,740 |
|
|
|
|
|
|
INCOME FROM OPERATIONS |
|
|
1,500,431 |
|
|
|
|
|
|
OTHER EXPENSE: |
|
|
|
|
Interest expense |
|
|
(915,624 |
) |
Amortization of deferred financing & leasing costs |
|
|
(18,029 |
) |
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(933,653 |
) |
|
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS BEFORE GAIN ON SALE
OF REAL ESTATE ASSET |
|
|
566,778 |
|
|
|
|
|
|
GAIN ON SALE OF REAL ESTATE ASSET |
|
|
28,347,666 |
|
|
|
|
|
|
|
|
|
|
INCOME FROM DISCONTINUED OPERATIONS |
|
$ |
28,914,444 |
|
|
|
|
|
Roberts Realty has three types of debt:
|
1. |
|
Mortgage notes secured by its operating properties; |
|
|
2. |
|
Construction loans secured by other real estate assets; and |
|
|
3. |
|
Land loans used to purchase undeveloped land. |
The details of each of the three 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.
Mortgage Notes. The permanent mortgage notes payable secured by Roberts Realtys operating
properties at December 31, 2009 and 2008 were as follows (in order of maturity date):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed |
|
|
|
|
|
|
|
|
|
|
Interest |
|
|
|
|
|
|
|
|
|
|
Rate as of |
|
|
Principal Outstanding |
|
Property Securing Mortgage |
|
Maturity |
|
|
12/31/09 |
|
|
12/31/09 |
|
|
12/31/08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grand Pavilion Retail Center |
|
|
07/11/13 |
|
|
|
5.43 |
% |
|
|
6,499,986 |
|
|
|
6,625,210 |
|
Spectrum at the Mall of Georgia |
|
|
05/01/14 |
|
|
|
5.68 |
% |
|
|
4,972,913 |
|
|
|
5,059,141 |
|
Bassett Retail Center |
|
|
10/01/19 |
|
|
|
8.47 |
% |
|
|
2,567,769 |
|
|
|
2,607,669 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
$ |
14,040,668 |
|
|
$ |
14,292,020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-13
On September 29, 2005, Roberts Realty purchased Grand Pavilion, a 62,323 square foot retail
center, and assumed the existing mortgage from LaSalle Bank 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.
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 from LaSalle Bank with a
balance of $5,306,000, a fixed interest rate of 5.68%, and a maturity date of May 1, 2014.
The 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 from LaSalle Bank with a balance of
$2,715,000, a fixed interest rate of 8.47%, and a maturity date of October 1, 2019. The
loan is secured by the property and is being amortized over 30 years.
Construction Loans. Roberts Realtys Northridge office building secures a loan with a
principal balance of $3,005,000 as of December 31, 2009 and $3,165,000 as of December 31,
2008. On July 23, 2008, Roberts Realty paid down the principal amount of the loan by
$374,000 and extended the maturity date to September 10, 2010. Under the extended term,
monthly payments consist of a fixed principal amount of $13,333 and interest at the 30-day
LIBOR rate plus 200 basis points, with an interest rate floor of 3.75%. The loan has a
balloon payment at maturity of $2,911,667 plus accrued interest.
Roberts Realtys Addison Place Shops retail center secures a loan with a principal balance
of $6,000,000 as of December 31, 2009 and 2008. On August 28, 2008, Roberts Realty paid
down the principal amount of the loan by $363,000 and extended the maturity date to April
30, 2010. Under the extended term, monthly payments consist of interest only at the 30-day
LIBOR rate plus 200 basis points, with an interest rate floor of 3.50%. The loan has a
balloon payment at maturity of $6,000,000 plus accrued interest.
Land Loans. Roberts Realtys Westside land secures a loan with a principal balance of
$6,000,000 as of December 31, 2009 and 2008. On August 28, 2008, Roberts Realty paid down
the principal amount of the loan by $480,000 and extended the maturity date to February 27,
2010. Under the extended term, monthly payments consist of interest only at the 30-day
LIBOR rate plus 200 basis points, with an interest rate floor of 3.75%. The loan has a
balloon payment at maturity of $6,000,000 plus accrued interest.
Roberts Realtys Bradley Park land secures a loan with a principal balance of $3,000,000 as
of December 31, 2009. On July 23, 2008, Roberts Realty paid down the principal amount of
the loan by $335,000 and extended the maturity date to February 28, 2010. Under the
extended term, monthly payments consist of interest only at the 30-day LIBOR rate plus 175
basis points, with a balloon payment at maturity of $3,000,000 plus accrued interest.
Roberts Realtys Highway 20 land secures a loan with a principal balance of $3,500,000 as of
December 31, 2009 and $4,077,000 as of December 31, 2008. On April 8, 2009, Roberts Realty
refinanced its $4,077,000 loan and paid down the principal amount of the loan by $577,000.
The maturity date was extended to October 18, 2010.
Roberts Realtys Peachtree Parkway land secures a loan with a principal balance of
$8,175,000 as of December 31, 2009 and 2008. On July 17, 2009, Roberts Realty closed an
amendment to its $8,175,000 loan that extended the maturity date of the loan to July 31,
2010 on substantially the same terms as before, except as specifically described below.
F-14
In connection with the amendment, Roberts Realty established at closing a $450,000 cash
collateral account as an interest reserve. The loan requires monthly payments of interest
only at the 30-day LIBOR index rate plus 350 basis points, with a LIBOR index rate floor of
2.00%. The loan remains secured by Roberts Realtys 23.5 acre parcel fronting Peachtree
Parkway (Highway 141) in Gwinnett County, Georgia and is cross-collateralized with an
additional security interest in Roberts Realtys 9.8-acre North Springs land parcel on
Peachtree Dunwoody Road in Sandy Springs, Georgia. The lender agreed to release its
security interest in the North Springs land parcel if Roberts Realty pays down the loan by
$4,425,000 to reduce its principal balance to $3,750,000.
Line of Credit. Roberts Realty $2,500,000 unsecured, revolving line of credit matured on
September 1, 2009. There was no outstanding balance on its maturity date, and Roberts
Realty did not renew the line of credit.
The scheduled principal payments of all debt outstanding at December 31, 2009 are as
follows:
|
|
|
|
|
2010 |
|
$ |
29,925,567 |
|
2011 |
|
|
282,376 |
|
2012 |
|
|
297,738 |
|
2013 |
|
|
6,256,980 |
|
2014 |
|
|
4,644,299 |
|
Thereafter |
|
|
2,313,708 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
43,720,668 |
|
|
|
|
|
At December 31, 2009, the weighted average interest rate on Roberts Realtys short-term debt
was 4.22%. The amount of interest expense that was capitalized was $762,847 for 2009 and
$1,193,766 for 2008. Fixed rate mortgage debt with an aggregate carrying value of
$14,040,668 at December 31, 2009 has an estimated approximate fair value of $13,932,679
based on interest rates available to Roberts Realty for debt with similar terms and
maturities. Real estate assets having a combined depreciated cost of $17,070,177 served as
collateral for the outstanding mortgage debt at December 31, 2009.
Special Cash Distributions Declared in June 2008 and Paid in August 2008. On June 24, 2008,
Roberts Realtys board of directors declared a special distribution of $5,005,586, or $0.66
per share/unit, to the shareholders and unitholders of record on July 10, 2008. On August
5, 2008, Roberts Realty paid a total of $3,824,446 to shareholders and $1,181,140 to
unitholders.
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
described above and paid a total of $1,811,819 in cash to shareholders in the cash portion
of the distribution. Unitholders received the same cash distribution of $0.31 per share as
shareholders, 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,
effective January 29, 2009 but retroactive to the December 29, 2008 record date, from (a)
one share for each unit exchanged to (b) 1.647 shares for each unit exchanged.
F-15
Exchanges of Units for Shares. During 2008, a total of 11,895 units were exchanged for an
equal number of 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. 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. and Roberts Properties Construction, Inc., which are
non-owned affiliates of Roberts Realty. Under the Plan as amended, Roberts Realty may grant
up to 654,000 shares of restricted common stock under the Plan, 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 under the Plan. The Plan
is administered by the compensation committee of Roberts Realtys board of directors.
During the third quarter of 2006, Roberts Realty adopted the provisions of FASB ASC Topic
718, Compensation Stock Compensation (SFAS No. 123R), which requires share-based
compensation cost be measured at the date of grant based on the fair value of the award and
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 was no stock compensation
expense for 2009, and stock compensation income was $21,001 for 2008 as a result of
forfeiture of shares.
There were no grants, forfeitures, or vesting of shares during 2009, and there were no
unvested shares of restricted stock outstanding at December 31, 2009. There was no
restricted stock activity during 2009. The following table shows the restricted stock
activity for 2008 (in shares):
|
|
|
|
|
|
|
|
|
|
|
Number of Unvested |
|
|
Weighted Grant |
|
|
|
Shares of |
|
|
Date Fair Value |
|
|
|
Restricted Stock |
|
|
Per Share |
|
|
Balance December 31, 2007 |
|
|
19,386 |
|
|
$ |
7.70 |
|
Granted |
|
|
2,000 |
|
|
|
6.50 |
|
Forfeited |
|
|
(19,848 |
) |
|
|
7.67 |
|
Vested |
|
|
(1,538 |
) |
|
|
6.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008 |
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly Dividends. Roberts Realty has not paid regular quarterly dividends since the
third quarter of 2001.
F-16
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, 2009, 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 8,400 shares of its common stock for $15,886 during 2008 and
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 described above.
Earnings Per Share.
In calculating earnings per share, the effects of the issuance of additional shares of
common stock (a) in the special stock distribution described above and (b) the concurrent
issuance of additional shares to holders of units who exchanged them for shares in 2008
after the December 29, 2008 record date of the special stock distribution have been
retroactively reflected in each of the historical periods presented as if those shares were
issued and outstanding at the beginning of the earliest period presented. Accordingly, all
activities before the December 24, 2008 ex-dividend date of the special distribution,
including share issuances, repurchases and forfeitures, have been adjusted to reflect the
effective increase in the number of shares.
The following table reconciles (a) our shares issued and outstanding at December 31, 2009
and 2008 according to the official records of our transfer agent to (b) our shares
outstanding at December 31, 2009 and 2008 as shown in the consolidated financial statements:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Shares issued and outstanding according to transfer agent |
|
|
10,205,749 |
|
|
|
6,125,590 |
|
|
|
|
|
|
|
|
|
|
Shares issued January 29, 2009, pursuant to the special distribution declared on December 18, 2008 to shareholders of record on December 29, 2008 |
|
|
|
|
|
|
3,754,732 |
|
|
|
|
|
|
|
|
|
|
Shares issued January 29, 2009, to unitholders who exchanged units for shares in 2008 after the December 29, 2008 record date |
|
|
|
|
|
|
206,447 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares outstanding as shown in the consolidated financial statements |
|
|
10,205,749 |
|
|
|
10,086,769 |
|
|
|
|
|
|
|
|
F-17
The reconciliations of income available to common shareholders and weighted average shares
and units used in Roberts Realtys basic and diluted earnings per share computations are
detailed below.
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Net loss available for common shareholders basic |
|
$ |
(14,175,580 |
) |
|
$ |
(4,489,531 |
) |
|
|
|
|
|
|
|
|
|
Loss attributable to noncontrolling interest |
|
|
(3,264,848 |
) |
|
|
(1,381,439 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations diluted |
|
$ |
(17,440,428 |
) |
|
$ |
(5,870,970 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations basic |
|
|
|
|
|
|
22,110,875 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations attributable to noncontrolling interest |
|
|
|
|
|
|
6,803,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations diluted |
|
$ |
|
|
|
$ |
28,914,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income diluted |
|
$ |
(17,440,428 |
) |
|
$ |
23,043,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares basic |
|
|
10,151,536 |
|
|
|
9,763,210 |
|
Dilutive securities weighted average units |
|
|
2,337,651 |
|
|
|
2,731,276 |
|
|
|
|
|
|
|
|
Weighted average shares diluted |
|
|
12,489,187 |
|
|
|
12,494,486 |
|
|
|
|
|
|
|
|
FASB ASC Topic 280-10, Segment Reporting Overall (SFAS No. 131), established standards for
reporting financial and descriptive information about operating segments in annual financial
statements. Operating segments are defined as components of an enterprise about which
separate financial information is available that is evaluated regularly by the chief
operating decision maker in deciding how to allocate resources and in assessing performance.
Roberts Realtys chief operating decision maker is Mr. Roberts, its Chief Executive
Officer.
Roberts Realty develops, constructs, owns, and manages multifamily communities, neighborhood
retail centers, and one office building, all of which are currently located in Georgia. As
a result, Roberts Realty has four reportable operating segments:
|
1. |
|
the multifamily segment, which consists of operating multifamily
communities; |
|
2. |
|
the retail/office segment, which consists of operating retail centers
and an office building; |
|
3. |
|
the land segment, which consists of various tracts of land that are
either under development and construction or held for investment; and |
|
4. |
|
the corporate segment, which consists primarily of operating cash, cash
equivalents, and miscellaneous other assets. |
F-18
The following table summarizes the operating results of Roberts Realtys reportable segments
for 2009. The retail/office segment is composed of the Addison Place Shops, Grand Pavilion
retail center, Bassett retail center, Spectrum at the Mall of Georgia retail center, and the
Northridge office building. The land segment is composed of (a) five tracts of undeveloped
land totaling 105.6 acres in various phases of development; and (b) one tract of undeveloped
land totaling 44 acres that is held for investment. The corporate segment consists
primarily of cash and cash equivalents, miscellaneous other assets, and general and
administrative expenses. There was no activity in the multifamily segment for 2009. In
2008, the multifamily segment was composed of the Addison Place multifamily community, which
Roberts Realty sold on June 24, 2008.
Twelve Months Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail/ |
|
|
|
|
|
|
|
|
|
|
|
|
Office |
|
|
Land |
|
|
Corporate |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues continuing |
|
$ |
1,970,259 |
|
|
$ |
12,675 |
|
|
$ |
|
|
|
$ |
1,982,934 |
|
Other operating income |
|
|
319,853 |
|
|
|
|
|
|
|
15,252 |
|
|
|
335,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues from consolidated entities |
|
|
2,290,112 |
|
|
|
12,675 |
|
|
|
15,252 |
|
|
|
2,318,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses continuing |
|
|
5,278,816 |
|
|
|
10,392,145 |
|
|
|
1,574,251 |
|
|
|
17,245,212 |
|
Depreciation and amortization expense |
|
|
976,311 |
|
|
|
|
|
|
|
13,553 |
|
|
|
989,864 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses from consolidated entities |
|
|
6,255,127 |
|
|
|
10,392,145 |
|
|
|
1,587,804 |
|
|
|
18,235,076 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income |
|
|
(1,252,672 |
) |
|
|
(387,770 |
) |
|
|
117,051 |
|
|
|
(1,523,391 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from continuing operations |
|
|
(5,217,687 |
) |
|
|
(10,767,240 |
) |
|
|
(1,455,501 |
) |
|
|
(17,440,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations (Note 4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(5,217,687 |
) |
|
|
(10,767,240 |
) |
|
|
(1,455,501 |
) |
|
|
(17,440,428 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to noncontrolling interest |
|
|
(976,751 |
) |
|
|
(2,015,627 |
) |
|
|
(272,470 |
) |
|
|
(3,264,848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
The following table summarizes the operating results of Roberts Realtys reportable segments
for 2008. The multifamily segment is composed of the Addison Place multifamily community,
which was sold on June 24, 2008 and is reflected in discontinued operations. The
retail/office segment is composed of the Addison Place Shops, Grand Pavilion retail center,
Bassett retail center, Spectrum at the Mall of Georgia retail center, and the Northridge
office building. The land segment is composed of (a) five tracts of undeveloped land
totaling 104 acres in various phases of development; and (b) one tract of undeveloped land
totaling 44 acres that is held for investment. The corporate segment consists primarily of
cash and cash equivalents, miscellaneous other assets, and general and administrative
expenses.
Twelve Months Ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail/ |
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily |
|
|
Office |
|
|
Land |
|
|
Corporate |
|
|
Total |
|
|
Operating revenues continuing |
|
$ |
|
|
|
$ |
2,234,271 |
|
|
$ |
12,675 |
|
|
$ |
|
|
|
$ |
2,246,946 |
|
Other operating income |
|
|
|
|
|
|
346,296 |
|
|
|
|
|
|
|
6,272 |
|
|
|
352,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues from consolidated entities |
|
|
|
|
|
|
2,580,567 |
|
|
|
12,675 |
|
|
|
6,272 |
|
|
|
2,599,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses continuing |
|
|
|
|
|
|
3,790,721 |
|
|
|
342,305 |
|
|
|
1,684,616 |
|
|
|
5,817,642 |
|
Depreciation and amortization expense |
|
|
|
|
|
|
1,292,617 |
|
|
|
|
|
|
|
14,973 |
|
|
|
1,307,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses from consolidated entities |
|
|
|
|
|
|
5,083,338 |
|
|
|
342,305 |
|
|
|
1,699,589 |
|
|
|
7,125,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (expense) income |
|
|
|
|
|
|
(1,430,308 |
) |
|
|
(174,841 |
) |
|
|
259,897 |
|
|
|
(1,345,252 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated loss from continuing operations |
|
|
|
|
|
|
(3,933,079 |
) |
|
|
(504,471 |
) |
|
|
(1,433,420 |
) |
|
|
(5,870,970 |
) |
|
Income from discontinued operations (Note 4) |
|
|
28,914,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28,914,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
28,914,444 |
|
|
|
(3,933,079 |
) |
|
|
(504,471 |
) |
|
|
(1,433,420 |
) |
|
|
23,043,474 |
|
|
Income (loss) attributable to noncontrolling interest |
|
|
6,803,569 |
|
|
|
(925,453 |
) |
|
|
(118,702 |
) |
|
|
(337,284 |
) |
|
|
5,422,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available for common shareholders |
|
$ |
22,110,875 |
|
|
$ |
(3,007,626 |
) |
|
$ |
(385,769 |
) |
|
$ |
(1,096,136 |
) |
|
$ |
17,621,344 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets at December 31, 2008 |
|
$ |
|
|
|
$ |
34,938,022 |
|
|
$ |
61,400,184 |
|
|
$ |
17,019,357 |
|
|
$ |
113,357,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
8. |
|
IMPAIRMENT LOSS ON REAL ESTATE ASSETS AND FAIR VALUE MEASURMENTS |
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 (SFAS No. 144). During the year ended December 31, 2009, the
deterioration of the economy and resulting decline in real estate market values led
management to evaluate the recoverability of its real estate assets. Management determined
that the previous carrying values on three retail centers and three land parcels would not
be fully recovered.
Non-Cash Impairments on Operating Real Estate Assets. FASB ASC Topic 360-10 requires
impairment losses to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets carrying amounts. The expected future cash flows of an
operating property depend on estimates made by management, including (1) changes in the
national, regional, and/or local economic climates, (2) competition, (3) rental rates, (4)
operating costs, (5) tenant occupancy, and (6) holding period. A change in the assumptions
used to determine future cash flows 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. Roberts Realtys determination
of fair value is based on a probability-weighted discounted future cash flow analysis, which
incorporates available market information as well as other assumptions made by management.
With respect to its retail centers, Roberts Realty used lower estimates for lease rates and
occupancy rates in the cash flow assumptions due to market and economic conditions. As a
result of these estimates, 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 Shops retail
center, and $699,948 on the Bassett retail center. During 2008, Roberts Realty recorded
non-cash impairment losses of $1,255,000 on the Northridge office building and $1,300,000 on
the Spectrum retail center.
Non-Cash Impairments on Real Estate Under Development. In accordance with FASB ASC Topic
360-10, Roberts Realty values land parcels at the lower of carrying value or fair value. As
a result of changing market conditions in the real estate industry, Roberts Realty reduced
the fair value of three properties: Peachtree Parkway, Northridge, and North Springs.
Roberts Realtys determination of the fair value of the Peachtree Parkway property and the
Northridge property is based on a discounted future cash flow analysis. The expected cash
flows of these properties 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) occupancy, and (6) an estimated construction budget. In its
determination of the fair value of the North Springs property, Roberts Realty took into
account the estimated value of the propertys office, retail, condominium, and multifamily
unit density, in addition to the value of the entitlements, development work, and other
improvements that have been made to the property. For 2009, Roberts Realty recognized
non-cash impairment losses 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-21
Fair Value Measurements
FASB ASC Topic 820, Fair Value Measurement and Disclosures (SFAS No. 157), 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 that may ultimately be realized on a sale or other disposition of these assets.
Assets that are measured at fair value on a recurring basis consist of marketable
securities. The following table provides the balances for those assets required to be
measured at fair value on a recurring basis during the year ended December 31, 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
Description |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Marketable securities |
|
$ |
38,177 |
|
|
$ |
38,177 |
|
|
|
|
|
|
|
|
|
Assets measured at fair value on a nonrecurring basis consist of real estate assets that
have been written-down to estimated fair value during 2009 and 2008. The table provides the
balances for those assets required to be measured at fair value on a nonrecurring basis
during the years ended December 31, 2009 and 2008.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 |
|
Description |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Operating real estate assets |
|
$ |
18,278,152 |
|
|
|
|
|
|
|
|
|
|
$ |
18,278,152 |
|
Real estate under
development |
|
|
31,991,110 |
|
|
|
|
|
|
|
|
|
|
|
31,991,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
50,269,262 |
|
|
|
|
|
|
|
|
|
|
$ |
50,269,262 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008 |
|
Description |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Operating real estate assets |
|
$ |
10,887,790 |
|
|
|
|
|
|
|
|
|
|
$ |
10,887,790 |
|
F-22
9. |
|
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
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. 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 appropriate review and oversight by the audit committee. In entering into the
transactions described below, Roberts Realty complied with those policies.
Roberts Realty and its predecessor limited partnerships entered into agreements with Roberts
Properties and Roberts Construction to provide design, development, and construction
services for the following multifamily communities, all of which have now been sold for a
profit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
|
Year |
|
|
|
|
Name of Community |
|
of Units |
|
|
Sold |
|
|
Sales Price |
|
|
Addison Place Townhomes (Phase I) |
|
|
118 |
|
|
|
2008 |
|
|
$ |
20,000,000 |
|
Addison Place Apartments (Phase II) |
|
|
285 |
|
|
|
2008 |
|
|
|
40,000,000 |
|
Ballantyne Place |
|
|
319 |
|
|
|
2005 |
|
|
|
37,250,000 |
|
Plantation Trace (Phase I) |
|
|
182 |
|
|
|
2004 |
|
|
|
16,866,400 |
|
River Oaks |
|
|
216 |
|
|
|
2004 |
|
|
|
20,000,000 |
|
Bradford Creek |
|
|
180 |
|
|
|
2004 |
|
|
|
18,070,000 |
|
Preston Oaks (Phase II) |
|
|
24 |
|
|
|
2004 |
|
|
|
3,017,500 |
|
Plantation Trace Townhomes (Phase II) |
|
|
50 |
|
|
|
2004 |
|
|
|
4,633,600 |
|
Veranda Chase |
|
|
250 |
|
|
|
2004 |
|
|
|
23,250,000 |
|
Preston Oaks (Phase I) |
|
|
189 |
|
|
|
2004 |
|
|
|
23,762,500 |
|
Highland Park |
|
|
188 |
|
|
|
2003 |
|
|
|
17,988,143 |
|
Crestmark Club (Phase I) |
|
|
248 |
|
|
|
2001 |
|
|
|
18,562,874 |
|
Rosewood Plantation |
|
|
152 |
|
|
|
2001 |
|
|
|
14,800,000 |
|
Crestmark Club (Phase II) |
|
|
86 |
|
|
|
2001 |
|
|
|
6,437,126 |
|
Ivey Brook |
|
|
146 |
|
|
|
2000 |
|
|
|
14,550,000 |
|
Bentley Place |
|
|
117 |
|
|
|
1999 |
|
|
|
8,273,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
2,750 |
|
|
|
|
|
|
$ |
287,461,143 |
|
|
|
|
|
|
|
|
|
|
|
|
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 on the four
projects listed in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amounts |
|
|
|
|
|
|
Total |
|
|
Incurred in |
|
|
Remaining |
|
|
|
Contract |
|
|
2008 and |
|
|
Contractual |
|
|
|
Amount |
|
|
2009 |
|
|
Commitment |
|
|
North Springs |
|
$ |
1,780,000 |
|
|
$ |
791,111 |
|
|
$ |
0 |
|
Peachtree Parkway |
|
|
1,460,000 |
|
|
|
300,000 |
|
|
|
0 |
|
Bradley Park |
|
|
770,000 |
|
|
|
670,000 |
|
|
|
0 |
|
Highway 20 |
|
|
1,050,000 |
|
|
|
0 |
|
|
|
950,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
5,060,000 |
|
|
$ |
1,761,111 |
|
|
$ |
950,000 |
|
|
|
|
|
|
|
|
|
|
|
F-23
Construction Contracts with Roberts Construction. Roberts Realty has entered into cost plus
10 percent (5% for overhead and 5% for profit) contracts with Roberts Construction on
Addison Shops Building D, Bradley Park, Northridge, Peachtree Parkway, Highway 20, and North
Springs. For Addison Shops Building D, Bradley Park, Northridge, and Peachtree Parkway, the
table below summarizes certain information regarding the estimated contract amount and
amounts incurred on these contracts. For Highway 20 and North Springs, Roberts Realty has
not completed the estimated costs of the projects. Roberts Realty has incurred the
following costs in 2008 and 2009: $4,921 on Highway 20 and $111,766 on North Springs.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual/ |
|
|
Amounts |
|
|
Estimated |
|
|
|
Estimated |
|
|
Incurred in |
|
|
Remaining |
|
|
|
Contract |
|
|
2008 and |
|
|
Contractual |
|
|
|
Amount |
|
|
2009 |
|
|
Commitment |
|
|
Addison Place Shops Bldg D |
|
$ |
421,731 |
|
|
$ |
35,391 |
|
|
$ |
|
|
Bradley Park |
|
|
13,363,000 |
|
|
|
393,286 |
|
|
|
12,961,840 |
|
Northridge |
|
|
20,401,000 |
|
|
|
439,994 |
|
|
|
19,961,006 |
|
Peachtree Parkway |
|
|
27,212,000 |
|
|
|
34,048 |
|
|
|
27,105,309 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
61,397,731 |
|
|
$ |
902,719 |
|
|
$ |
60,028,155 |
|
|
|
|
|
|
|
|
|
|
|
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 Fees. At the request of Roberts Realty, Roberts Construction performed repairs and
tenant improvements for new leases at the retail centers and office building. Roberts
Realty paid Roberts Construction for labor and materials plus 10% (5% for profit and 5% for
overhead) in the amounts of $196,880 in 2009 and $261,603 in 2008. Affiliates of Mr.
Roberts received miscellaneous fees and cost reimbursements of $152,181 during 2009 and
$207,853 during 2008.
Office Leases. Roberts Realty has entered into lease agreements with each of the Roberts
Companies at a rate of $20.00 per rentable square foot through December 31, 2009. For each
of 2009 and 2008, Roberts Realty recognized total rental income from Roberts Properties and
Roberts Construction of $143,800.
10. |
|
COMMITMENTS AND CONTINGENCIES |
Roberts Realty has five projects in various phases of development and has entered into
various contracts for the development and construction of these projects. The contracts
with Roberts Properties and Roberts Construction are described in Note 9 Related Party
Transactions. The construction contracts with Roberts Construction require Roberts Realty
to pay Roberts Construction a general contractor fee equal to cost plus 10% (5% overhead and
5% profit). Roberts Realty estimates the remaining construction costs of the Bradley Park,
Northridge, and Peachtree Parkway projects, including contractor fees payable to Roberts
Construction, to be approximately $14,249,000 for Bradley Park,
$21,799,000 for Northridge, and $28,864,000
for Peachtree Parkway. Roberts Realty
has not yet estimated the costs of the Highway 20 and North Springs projects because the
architectural design, land planning, floor plans, and other details have not been finalized.
F-24
In addition to the construction contracts with Roberts Construction, Roberts Realty entered
into architectural and engineering contracts with third parties for the Northridge, Bradley
Park, and Peachtree Parkway projects. At December 31, 2009, outstanding commitments on
these contracts totaled $228,546.
At December 31, 2009, Roberts Realty had one $500,000 letter of credit outstanding. The
letter of credit is required by the lender for Roberts Realtys Spectrum retail center and
is held in a reserve fund by the lender for the payment of leasing costs. Roberts Realty
assumed this obligation under the loan documents when it acquired the Spectrum retail center
in October 2005. The letter of credit expires on October 26, 2010.
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.
As a result of the mergers of various limited partnerships into the operating partnership,
the former partners of these limited partnerships received 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, 2009, there were 1,386,394 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, 2009.
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 liability of that type.
F-25
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 six tracts of undeveloped land and low occupancy
at two of its retail centers. As of February 26, 2010, Roberts Realty has five loans with a
principal balance of $26,666,667 that mature within the next 12 months. Managements plan
is to renew these loans as they come due and extend their maturity dates at least twelve
months. Management of Roberts Realty 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 its maturing loans 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 loans will be extended
or refinanced as planned. If Roberts Realty were required to use its current cash balances
to pay down existing loans, those repayments and the corresponding reductions in Roberts
Realtys cash could adversely affect Roberts Realtys ability to execute its plans as
described further below. 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 two new multifamily communities to enable
Roberts Realty to raise the required equity to construct these communities. |
Management is focusing on its core business of developing, building, leasing, operating, and
selling high quality multifamily communities for cash flow and long-term appreciation.
Management has reduced its debt and is working to decrease its negative cash flow.
Management intends to continue these efforts.
Retail Centers and Office Building. Because the retail sector has taken the brunt of this
severe recession, Roberts Realtys retail centers have struggled with occupancy as tenants
have continued to fail. Management anticipates that the performance of the retail centers
will continue to be weak until the economy strengthens. 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 these assets, 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.
Land Parcels Held for Development and Construction. Roberts Realty is moving 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 obtain construction loans for the
Bradley Park and Northridge communities.
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, partnerships, and raising equity privately. Roberts Realty is 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 that
would raise equity privately for the specific purpose of funding the purchase of the land
parcel and constructing a multifamily community on it.
F-26
Roberts Realty would pay down its debt with all or substantial portions of: the purchase
price paid by a purchaser of a property; the equity contribution of a joint venture partner;
or the equity Roberts Realty raises privately.
Possible Sale of the Entire Company. In an effort to maximize shareholder value, Roberts
Realty remains open to any transaction that would be in the best interests of its
shareholders, although management has not decided to put the company up for sale. Roberts
Realty has engaged in discussions with both private companies and individuals regarding a
possible sale, merger, or other business combination. In three cases Roberts Realty entered
into mutual confidentiality agreements. To date, Roberts Realty has not entered into any
letter of intent or agreement for such a transaction, primarily because discussions with
interested parties did not reflect the values management believes are inherent in its real
estate assets. Management remains open to any reasonable proposal for a sale, merger, or
other business combination that would reward shareholders and maximize their value.
11. |
|
SUMMARIZED QUARTERLY FINANCIAL INFORMATION (UNAUDITED) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended |
|
|
|
March 31 |
|
|
June 30 |
|
|
Sept 30 |
|
|
Dec 31 |
|
Year Ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
588,128 |
|
|
$ |
594,520 |
|
|
$ |
561,323 |
|
|
$ |
574,068 |
|
Loss from operations |
|
|
(1,930,164 |
) |
|
|
(5,758,860 |
) |
|
|
(461,114 |
) |
|
|
(7,766,899 |
) |
Loss from continuing operations |
|
|
(2,247,586 |
) |
|
|
(6,170,926 |
) |
|
|
(860,088 |
) |
|
|
(8,161,828 |
) |
Income (loss) from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(2,247,586 |
) |
|
|
(6,170,926 |
) |
|
|
(860,088 |
) |
|
|
(8,161,828 |
) |
Per share (diluted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.18 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.66 |
) |
Loss from discontinued operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(0.18 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.07 |
) |
|
$ |
(0.66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating revenues |
|
$ |
628,234 |
|
|
$ |
663,301 |
|
|
$ |
653,434 |
|
|
$ |
654,545 |
|
Loss from operations |
|
|
(442,690 |
) |
|
|
(379,573 |
) |
|
|
(1,692,344 |
) |
|
|
(2,011,111 |
) |
Loss from continuing operations |
|
|
(889,302 |
) |
|
|
(768,196 |
) |
|
|
(1,921,564 |
) |
|
|
(2,291,908 |
) |
Income (loss) from discontinued operations |
|
|
324,357 |
|
|
|
28,590,513 |
|
|
|
45 |
|
|
|
(471 |
) |
Net (loss) income |
|
|
(564,945 |
) |
|
|
27,822,317 |
|
|
|
(1,921,519 |
) |
|
|
(2,292,379 |
) |
Per share (diluted): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
$ |
(0.07 |
) |
|
$ |
(0.06 |
) |
|
$ |
(0.15 |
) |
|
$ |
(0.19 |
) |
Income from discontinued operations |
|
|
0.03 |
|
|
|
2.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(0.04 |
) |
|
$ |
2.23 |
|
|
$ |
(0.15 |
) |
|
$ |
(0.19 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
F-27
Bradley Park Land Loan Renewal. On February 9, 2010, Roberts Realty renewed its $3,000,000
Bradley Park land loan and extended the maturity date of the loan to April 28, 2011. The
loan requires monthly payments of interest only at the 30-day LIBOR index rate plus 225
basis points, with an interest rate floor of 5.0%.
Westside Land Loan Extension. On February 23, 2010, Roberts Realty extended the maturity
date of its $6,000,000 Westside land loan to April 28, 2010. The remaining terms are the
same as before.
Office Leases. Effective as of January 1, 2010, 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 $18.53 per rentable square foot. The
effective rental rate is consistent with an October 2009 lease agreement between Roberts
Realty and an unrelated third party at the Northridge office building. The Roberts
Companies have the right to expand their rentable square footage at the new rental rate.
F-28
(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 |
|
|
|
|
|
|
|
|
|
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] |
|
|
|
|
|
|
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] |
61
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
4.2.4 |
|
|
Certificate of Merger filed with the Georgia Secretary of State on
September 27, 1995, merging Roberts Properties-St. Simons, L.P. 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.] |
|
|
|
|
|
|
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.] |
62
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
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.] |
|
|
|
|
|
|
10.1.10 |
|
|
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.] |
|
|
|
|
|
|
|
|
|
Addison Place Shops |
|
|
|
|
|
|
10.2.1 |
|
|
Construction Agreement by and between Roberts Properties Residential,
L.P. and Roberts Properties Construction, Inc. dated May 11, 2007
(Addison Place Shops). [Incorporated by reference to Exhibit 10.1 in our
current report on Form 8-K dated May 11, 2007.] |
|
|
|
|
|
|
|
|
|
Northridge |
|
|
|
|
|
|
10.3.1 |
|
|
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.] |
|
|
|
|
|
|
|
|
|
Peachtree Parkway |
|
|
|
|
|
|
10.4.1 |
|
|
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.] |
|
|
|
|
|
|
10.4.2 |
|
|
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.] |
|
|
|
|
|
|
10.4.3 |
|
|
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.] |
|
|
|
|
|
|
10.4.4 |
|
|
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.] |
|
|
|
|
|
|
10.4.6 |
|
|
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.] |
|
|
|
|
|
|
10.4.6 |
|
|
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.] |
63
|
|
|
|
|
Exhibit No. |
|
Description |
|
|
|
|
|
|
10.4.7 |
|
|
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.] |
|
|
|
|
|
|
|
|
|
North Springs (formerly Peachtree Dunwoody) |
|
|
|
|
|
|
10.5.1 |
|
|
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.] |
|
|
|
|
|
|
10.5.2 |
|
|
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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10.5.3 |
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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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10.6.1 |
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Design and Development Agreement between Roberts Properties Residential,
L.P. and Roberts Properties, Inc. for the 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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10.6.2 |
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Construction Contract between Roberts Properties Residential, L.P. and
Roberts Properties Construction, Inc. for the 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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10.7.1 |
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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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10.7.2 |
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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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10.8.1 |
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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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10.8.2 |
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2006 Roberts Realty Investors, Inc. Restricted Stock Plan. [Incorporated by
reference to Annex A to the registrants definitive proxy statement filed
July 20, 2006.] |
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10.8.3 |
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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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10.8.4 |
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Compensation arrangement for Wm. Jarell Jones, effective February 4, 2008.
[Incorporated by reference to Exhibit 10.2 in our current report on Form 8-K
dated February 4, 2008.] |
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10.8.5 |
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Modification of compensation arrangement for Wm. Jarell Jones, effective July
1, 2008. [Incorporated by reference to Item 1.02 in our current report on
Form 8-K dated August 22, 2008.] |
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10.8.6 |
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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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Other Agreements with Affiliates |
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10.9.1 |
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Reimbursement arrangement approved and ratified on February 15, 2005 between
the registrant and Roberts Properties, Inc., a wholly owned affiliate of
Charles S. Roberts, the registrants Chief Executive Officer, President, and
Chairman of the Board of Directors, for the use of an aircraft owned by
Roberts Properties, Inc. [Incorporated by reference to Item 1.01 in our
current report on Form 8-K dated February 15, 2005.] |
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10.9.2 |
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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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Addison Place Financing and Sale Related Documents: |
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10.10.1 |
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Promissory Note executed by Roberts Properties Residential, L.P. in favor of
The Prudential Insurance Company of America, dated October 25, 1999, in the
original principal amount of $9,500,000 (Addison Place Townhomes).
[Incorporated by reference to Exhibit 10.14.04 in our annual report on Form
10-K for the year ended December 31, 1999.] |
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10.10.2 |
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Deed to Secure Debt and Security Agreement executed by Roberts Properties
Residential, L.P. in favor of The Prudential Insurance Company of America,
dated October 25, 1999, and related collateral documents (Addison Place
Townhomes). [Incorporated by reference to Exhibit 10.14.05 in our annual
report on Form 10-K for the year ended December 31, 1999.] |
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Exhibit No. |
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Description |
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10.10.3 |
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Guaranty executed by Roberts Realty Investors, Inc. in favor of The
Prudential Insurance Company of America, dated October 25, 1999 (Addison
Place Townhomes). [Incorporated by reference to Exhibit 10.14.06 in our
annual report on Form 10-K for the year ended December 31, 1999.] |
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10.10.4 |
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Multifamily Note in the principal amount of $21,000,000, dated April 19,
2005, executed by Roberts Properties Residential, L.P. in favor of Primary
Capital Advisors LC (Addison Place Apartments). [Incorporated by reference
to Exhibit 10.1 in our current report on Form 8-K dated April 19, 2005.] |
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10.10.5 |
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Multifamily Deed to Secure Debt, Assignment of Rents, and Security Agreement
dated April 19, 2005 made by Roberts Properties Residential, L.P. in favor of
Primary Capital Advisors LC (Addison Place Apartments). [Incorporated by
reference to Exhibit 10.2 in our current report on Form 8-K dated April 19,
2005.] |
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10.10.6 |
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Guaranty dated April 19, 2005 made by Roberts Realty Investors, Inc. in favor
of Primary Capital Advisors LC (Addison Place Apartments). [Incorporated by
reference to Exhibit 10.3 in our current report on Form 8-K dated April 19,
2005.] |
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10.10.7 |
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Sales Contract dated April 16, 2008 between Roberts Properties Residential,
L.P. and The Connor Group, A Real Estate Investment Firm, LLC. [Incorporated
by reference to Exhibit 10.1 in our current report on Form 8-K dated
April 16, 2008.] |
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Peachtree Parkway / North Springs (formerly Peachtree Dunwoody) / Highway 20 Financing Documents: |
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10.11.1 |
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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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10.11.2 |
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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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10.11.3 |
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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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10.11.4 |
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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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10.11.5 |
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Third 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
(Highway 20). [Incorporated by reference to Exhibit 10.2 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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10.11.6 |
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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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10.11.7 |
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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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10.11.8 |
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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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10.11.9 |
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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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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 1, 2010
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ROBERTS REALTY INVESTORS, INC.
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By: |
/s/ Charles S. Roberts
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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 1, 2010 |
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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 1, 2010 |
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/s/ John L. Davis
John L. Davis
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Director
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March 1, 2010 |
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/s/ Wm. Jarell Jones
Wm. Jarell Jones
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Director
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March 1, 2010 |
68