UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-13183

ROBERTS REALTY INVESTORS, INC.

(Exact name of registrant as specified in its charter)

Georgia		58-2122873
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
450 Northridge Parkway, Suite 302 Atlanta, Georgia		30350
(Address of principal executive offices)		(Zip Code)

(770) 394-6000

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 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.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at April 27, 2011
Common Stock, $.01 par value per share		10,357,831 shares

 

 

TABLE OF CONTENTS

		PAGE
NOTE REGARDING FORWARD-LOOKING STATEMENTS			2
PART I — FINANCIAL INFORMATION			3
ITEM 1. FINANCIAL STATEMENTS			3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			28
ITEM 4. CONTROLS AND PROCEDURES			28
PART II — OTHER INFORMATION			29
ITEM 1. LEGAL PROCEEDINGS			29
ITEM 1A. RISK FACTORS			29
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			30
ITEM 3. DEFAULTS UPON SENIOR SECURITIES			30
ITEM 4. (REMOVED AND RESERVED)			30
ITEM 5. OTHER INFORMATION			30
ITEM 6. EXHIBITS			30
Exhibit 31
Exhibit 32

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future economic performance, plans and objectives of management for future operations, and projections of revenues and other financial items that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. The words “expect,” “intend,” “estimate,” “anticipate,” “believe,” and similar expressions are intended to identify forward-looking statements. We make forward-looking statements in the notes to the unaudited condensed consolidated financial statements included in this report and in Part I, Item 2 of this report.

Some of the forward-looking statements relate to our intent, belief, or expectations regarding our strategies and business plan, including development and construction of new multifamily communities, the possible sale of properties, the ways we may finance our future development and construction activities, and the extensions of our loans that mature in the next 12 months. Other forward-looking statements relate to trends affecting our financial condition and results of operations, our anticipated capital needs and expenditures, and how we may address these needs. These statements involve risks, uncertainties, and assumptions, including the financing environment for construction loans for new multifamily communities; our possible inability to negotiate extensions of our short-term debt; whether the employment rate in Atlanta will rebound as we expect; the challenging conditions for retail shopping centers and office buildings in our market area; uncertainties regarding the performance of upscale multifamily communities in our Atlanta submarket; and other factors discussed in this report and in our other filings with the SEC. These forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those that are anticipated in the forward-looking statements. See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2010, as well as Part II, Item 1A, Risk Factors, below, 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.

PART I — FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS.

ROBERTS REALTY INVESTORS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

		March 31,				December 31,
		2011				2010
		(Unaudited)				(Unaudited)
ASSETS
REAL ESTATE ASSETS:
Land		$	9,268,326			$	9,268,326
Buildings and improvements			14,163,327				14,163,327
Furniture, fixtures and equipment			466,364				460,909
			23,898,017				23,892,562
Less: accumulated depreciation			(4,276,793	)			(4,136,145	)
Operating real estate assets			19,621,224				19,756,417
Construction in progress and real estate under development			43,231,070				42,936,767
Net real estate assets			62,852,294				62,693,184
CASH AND CASH EQUIVALENTS			3,110,162				3,716,393
RESTRICTED CASH			1,139,220				1,229,040
DEFERRED FINANCING & LEASING COSTS — Net of accumulated amortization of $218,753 and $190,193 at March 31, 2011 and December 31, 2010, respectively			151,999				180,559
LEASE INTANGIBLES — Net of accumulated amortization of $340,384 and $324,847 at March 31, 2011 and December 31, 2010, respectively			112,789				128,326
OTHER ASSETS — Net			195,655				231,831
		$	67,562,119			$	68,179,333
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Mortgage notes payable		$	16,620,697			$	16,697,509
Land notes payable			14,310,000				14,400,000
Accounts payable and accrued expenses			717,445				484,853
Due to affiliates			47,806				38,305
Security deposits and prepaid rents			69,460				80,036
Total liabilities			31,765,408				31,700,703
COMMITMENTS AND CONTINGENCIES (Note 10)
NONCONTROLLING INTEREST — OPERATING PARTNERSHIP			6,228,628				6,372,817
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, 10,357,831 and 10,349,065 shares issued and outstanding at March 31, 2011 and December 31, 2010, respectively			103,579				103,491
Additional paid-in capital			31,338,154				31,305,781
Treasury shares, at cost			(71,332	)			(71,332	)
Accumulated deficit			(1,802,318	)			(1,232,127	)
Total shareholders’ equity			29,568,083				30,105,813
		$	67,562,119			$	68,179,333

See notes to the condensed consolidated financial statements.

ROBERTS REALTY INVESTORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		Three Months Ended March 31,
		2011				2010
		(Unaudited)				(Unaudited)
OPERATING REVENUES:
Rental operations		$	342,505			$	425,412
Other operating income			55,870				69,523
Total operating revenues			398,375				494,935
OPERATING EXPENSES:
Personnel			312				11,265
Utilities			62,890				57,460
Repairs and maintenance			38,202				20,071
Real estate taxes			101,823				138,725
Marketing, insurance and other			18,120				21,678
General and administrative expenses			351,847				423,459
Gain on disposal of asset			(3,350	)			(1,250	)
Depreciation and amortization			156,235				151,816
Total operating expenses			726,079				823,224
LOSS FROM OPERATIONS			(327,704	)			(328,289	)
OTHER INCOME (EXPENSE):
Interest income			5,297				14,877
Interest expense			(339,755	)			(329,344	)
Amortization of deferred financing & leasing costs			(28,560	)			(32,905	)
Total other expense			(363,018	)			(347,372	)
LOSS FROM CONTINUING OPERATIONS			(690,722	)			(675,661	)
LOSS FROM DISCONTINUED OPERATIONS			—				(204,091	)
NET LOSS			(690,722	)			(879,752	)
LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST			(120,531	)			(157,388	)
LOSS AVAILABLE FOR COMMON SHAREHOLDERS		$	(570,191	)		$	(722,364	)
LOSS PER COMMON SHARE — BASIC AND DILUTED (Note 5):
Loss from continuing operations — basic and diluted		$	(.06	)		$	(.05	)
Loss from discontinued operations — basic and diluted			—				(.02	)
Net loss — basic and diluted		$	(.06	)		$	(.07	)

See notes to the condensed consolidated financial statements.

ROBERTS REALTY INVESTORS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three Months Ended March 31,
		2011				2010
		(Unaudited)				(Unaudited)
OPERATING ACTIVITIES:
Net loss		$	(690,722	)		$	(879,752	)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations			—				204,091
Depreciation and amortization			184,795				184,721
Amortization of deferred compensation			8,803				—
Amortization of above and below market leases			(2,975	)			(2,870	)
(Gain) loss on disposal of assets			(7,200	)			2,677
Decrease (increase) in other assets			46,300				(6,757	)
Decrease in due to affiliates			(2,867	)			(3,663	)
Increase in accounts payable, accrued expenses and other liabilities relating to operations			236,646				275
Net cash used in operating activities from continuing operations			(227,220	)			(501,278	)
Net cash used in operating activities from discontinued operations			—				(32,489	)
Net cash used in operating activities			(227,220	)			(533,767	)
INVESTING ACTIVITIES:
Payment of leasing costs			(5,455	)			—
Decrease (increase) in restricted cash			89,820				(320,282	)
Decrease (increase) in accounts payable, accrued expenses and other liabilities relating to investing activities			(2,261	)			5,385
Development and construction of real estate assets			(294,303	)			(430,457	)
Net cash used in investing activities			(212,199	)			(745,354	)
FINANCING ACTIVITIES:
Principal repayments on mortgage notes payable			(76,812	)			(108,192	)
Payment of loan costs			—				(14,977	)
Principal repayments of land notes payable			(90,000	)			—
Decrease in accounts payable, accrued expenses and other liabilities relating to financing activities			—				(12,944	)
Net cash used in financing activities			(166,812	)			(136,113	)
NET DECREASE IN CASH AND CASH EQUIVALENTS			(606,231	)			(1,415,234	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		$	3,716,393			$	7,905,771
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	3,110,162			$	6,490,537
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest, net of capitalized interest of $81,940 and $156,609 for the three months ended March 31, 2011 and March 31, 2010, respectively		$	253,176			$	387,804
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES AND FINANCING ACTIVITIES:
Development and construction of real estate assets due to but not paid to affiliates		$	17,387			$	42,622
Conversion of operating partnership units to common shares		$	17,970			$	97,699
Adjustments to noncontrolling interest in the operating partnership		$	(5,688	)		$	(135,647	)
Unrealized gain on available-for-sale securities		$	—			$	3,424

See notes to the condensed consolidated financial statements.
.

ROBERTS REALTY INVESTORS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION

Roberts Realty Investors, Inc. (“Roberts Realty”), a Georgia corporation, was formed on July 22, 1994 to serve as a vehicle for investments in, and ownership of, a professionally managed real estate portfolio of multifamily residential communities. Roberts Realty owns and manages its real estate assets as a self-administered, self-managed equity real estate investment trust (“REIT”).

Roberts Realty conducts all of its operations and owns all of its assets in and through Roberts Properties Residential, L.P., a Georgia limited partnership (the “operating partnership”), or the operating partnership’s three wholly owned subsidiaries, which are Delaware limited liability companies. Roberts Realty controls the operating partnership as its sole general partner and owner of a majority interest. Roberts Realty had an 82.60% ownership interest in the operating partnership at March 31, 2011 and an 82.21% ownership interest in the operating partnership at March 31, 2010.

At March 31, 2011, Roberts Realty owned the following real estate assets, all of which are located in the north Atlanta metropolitan area:

•

three neighborhood retail centers totaling 112,322 square feet;

•

one commercial office building totaling 37,864 square feet, part of which serves as Roberts Realty’s corporate headquarters; and

•

five tracts of land totaling 106 acres in various phases of development and construction.

2.

BASIS OF PRESENTATION

Roberts Realty’s management has prepared the accompanying interim unaudited financial statements in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and in conformity with the rules and regulations of the SEC. In the opinion of management, the interim financial statements reflect all adjustments of a normal and recurring nature that are necessary to fairly state the interim financial statements. The results of operations for the interim periods do not necessarily indicate the results that may be expected for the year ending December 31, 2011. These financial statements should be read in conjunction with Roberts Realty’s audited financial statements and the accompanying notes in Roberts Realty’s Annual Report on Form 10-K for the year ended December 31, 2010. Roberts Realty has omitted disclosures from these notes to condensed consolidated financial statements that substantially duplicate the disclosures contained in the notes to the audited financial statements included in the annual report. In the condensed consolidated financial statements included in this report, Roberts Realty has made certain reclassifications of prior year’s balances with respect to discontinued operations to conform to the current format.

Holders of operating partnership units generally have the right to require the operating partnership to redeem their units for shares of Roberts Realty common stock. Upon submittal of units for redemption, the operating partnership has the option either (a) to acquire those units in exchange for shares, currently on the basis of 1.647 shares for each unit submitted for redemption, or (b) to pay cash for those units at their fair market value, based upon the then current trading price of the shares and using the same exchange ratio. Roberts Realty has adopted a policy of issuing shares in exchange for all units submitted for redemption.

The noncontrolling interest of the unitholders in the operating partnership on the accompanying balance sheets is calculated by multiplying the noncontrolling interest ownership percentage at the balance sheet date by the operating partnership’s net assets (total assets less total liabilities). The noncontrolling interest ownership percentage is calculated at any point in time by dividing (x) (the number of units outstanding multiplied by 1.647) by (y) the total number of shares plus (the number of units outstanding multiplied by 1.647). The noncontrolling interest ownership percentage will change as additional shares and/or units are issued or as units are redeemed for shares of Roberts Realty common stock. The noncontrolling interest of the unitholders in the income or loss of the operating partnership on the accompanying condensed consolidated statements of operations is calculated based on the weighted average percentage of units outstanding during the period, which was 17.45% for the three months ended March 31, 2011 and 17.89% for the three months ended March 31, 2010. There were 1,324,416 units outstanding as of March 31, 2011 and 1,329,738 units outstanding as of December 31, 2010. The noncontrolling interest of the unitholders was $6,228,628 at March 31, 2011 and $6,372,817 at December 31, 2010.

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 810, Consolidation, Roberts Realty records noncontrolling interest in the operating partnership on its condensed consolidated balance sheets at the greater of its carrying amount or redemption value at the end of each reporting period. Any changes in the value from period to period are charged to “additional paid-in-capital” in Roberts Realty’s condensed consolidated statements of shareholders’ equity. The following table details the components of noncontrolling interest related to unitholders in the operating partnership for the three months ended March 31, 2011 and 2010:

		Three Months Ended March 31,
		2011				2010
Beginning balance		$	6,372,817			$	8,760,795
Net loss attributable to noncontrolling interest			(120,531	)			(157,388	)
Redemptions of noncontrolling partnership units			(17,970	)			(97,699	)
Adjustments to noncontrolling interest in operating partnership			(5,688	)			(135,647	)
Ending balance		$	6,228,628			$	8,370,061

3.

DISCONTINUED OPERATIONS

On June 30, 2010, Roberts Realty sold its 44,293 square foot Addison Place Shops retail center to the lender for the $6,000,000 of debt secured by the property. As a result of this sale, Roberts Realty has no further obligations to the lender for the Addison Place retail center loan. Accordingly, the operations of the Addison Place retail center have been accounted for as discontinued operations.

The following table summarizes the discontinued operations for the three months ended March 31, 2010 (unaudited):

Discontinued Operations

		Three Months Ended
		March 31, 2010
		(Unaudited)
OPERATING REVENUES:
Rental operations		$	71,387
Other operating income			14,884
Total operating revenues			86,271
OPERATING EXPENSES:
Personnel			2,135
Utilities			12,886
Repairs and maintenance			2,993
Real estate taxes			32,143
Marketing, insurance and other			5,670
General and administrative expenses			52,612
Loss on leasehold improvements and leasing costs			83,557
Depreciation and amortization			43,315
Total operating expenses			235,311
LOSS FROM OPERATIONS			(149,040	)
OTHER EXPENSE:
Interest expense			(52,500	)
Amortization of deferred financing & leasing costs			(2,551	)
Total other expense			(55,051	)
LOSS FROM DISCONTINUED OPERATIONS		$	(204,091	)

4.

NOTES PAYABLE

Roberts Realty has two types of debt:

1.

Mortgage notes secured by its operating properties; and

2.

Land loans used to purchase undeveloped land.

The details of each of the two types of debt are summarized below. For the land loans and the Northridge Office Building loan, the operating partnership is the borrower, and Roberts Realty is the guarantor. The other permanent mortgage notes are nonrecourse, and a wholly owned subsidiary of the operating partnership is the borrower.

Mortgage Notes. The permanent mortgage notes payable secured by Roberts Realty’s operating properties at March 31, 2011 and December 31, 2010 were as follows (in order of maturity date):

						Interest
						Rate as of				Principal Outstanding
Property Securing Mortgage		Maturity				3/31/11				3/31/11				12/31/10
Grand Pavilion Retail Center			7/11/13				5.43	%		$	6,433,286			$	6,433,286
Northridge Office Building			8/10/13				4.50	%			2,818,333				2,858,333
Spectrum at the Mall of Georgia			5/01/14				5.68	%			4,856,968				4,881,585
Bassett Retail Center			10/01/19				8.47	%			2,512,110				2,524,305
Totals										$	16,620,697			$	16,697,509

As Roberts Realty has previously stated in its annual and quarterly reports, its objective is to exit the retail business to focus exclusively on developing, constructing, and managing multifamily apartment communities. Given that objective and Grand Pavilion’s approximately $625,000 in annual negative cash flow, Roberts Realty has elected not to make debt service payments since July 2010 on that retail center and has allowed the loan to go into default. In August 2010, Roberts Realty asked the lender to place the Grand Pavilion loan with the special servicer. On December 16, 2010, Roberts Realty received a formal notice of default from counsel for the special servicer of the loan. Roberts Realty is seeking to transfer the Grand Pavilion retail center to the lender as soon as possible in satisfaction of the approximately $6,433,286 principal amount of debt (plus associated fees and costs) secured by the property. Because the loan is nonrecourse, Roberts Realty would have no further obligations to the lender for this loan.

Land Loans. The loans secured by Roberts Realty’s land parcels at March 31, 2011 and December 31, 2010 were as follows (in order of maturity date):

						Interest
Land Parcel						Rate as of				Principal Outstanding
Securing Mortgage		Maturity				3/31/11				3/31/11				12/31/10
Peachtree Parkway			07/31/11				5.00	%		$	8,175,000			$	8,175,000
Highway 20			04/08/12				5.50	%			3,135,000				3,225,000
Bradley Park			04/30/12				4.50	%			3,000,000				3,000,000
Total										$	14,310,000			$	14,400,000

Maturing Short-Term Debt. As listed in the table above, Roberts Realty has three loans with a total principal balance of $14,310,000 that mature within the next 12 months. For an explanation of management’s plan to address Roberts Realty’s maturing short-term debt, see Note 10 — Commitments and Contingencies — Management’s Business Plan.

5.

SHAREHOLDERS’ EQUITY

Exchanges of Units for Shares. During the three months ended March 31, 2011, a total of 5,322 operating partnership units were exchanged for 8,766 shares. During the three months ended March 31, 2010, a total of 37,324 operating partnership units were exchanged for 61,474 shares. Each redemption was reflected in the accompanying condensed consolidated financial statements based on the closing price of Roberts Realty’s stock price on the date of conversion.

Treasury Stock. Roberts Realty did not repurchase any shares during the three month periods ended March 31, 2011 and 2010.

Restricted Stock. Shareholders of Roberts Realty approved and adopted the 2006 Roberts Realty Investors, Inc. Restricted Stock Plan (the “Plan”) in August 2006. The Plan provides for the grant of stock awards to employees, directors, consultants, and advisors, including employees of Roberts Properties, Inc. (“Roberts Properties”) and Roberts Properties Construction, Inc. (“Roberts Construction,” and together with Roberts Properties, the “Roberts Companies”). Mr. Charles S. Roberts, the President, Chief Executive Officer, and Chairman of the Board of Roberts Realty, owns all of the outstanding stock of the Roberts Companies. Under the Plan as amended, Roberts Realty may grant up to 654,000 shares of restricted common stock, subject to the anti-dilution provisions of the Plan. The maximum number of shares of restricted stock that may be granted to any one individual during the term of the Plan may not exceed 20% of the aggregate number of shares of restricted stock that may be issued. The Plan is administered by the compensation committee of Roberts Realty’s board of directors.

FASB ASC Topic 718, Compensation — Stock Compensation, requires share-based compensation cost to be measured at the date of grant based on the fair value of the award and to be recognized in the statements of operations as an expense on a straight line basis over the requisite service period, which is the vesting period.

There was no restricted stock activity for the three months ended March 31, 2011. There were 50,000 unvested shares of restricted stock outstanding at March 31, 2011. During 2010, Roberts Realty granted 50,000 shares under the Plan to an employee of Roberts Properties. The grant includes a service based vesting period of two years. Compensation expense related to the restricted stock grant was $8,803 in the three months ended March 31, 2011.

Earnings Per Share. The following table shows the reconciliations of loss available for common shareholders and the weighted average number of shares and units used in Roberts Realty’s basic and diluted earnings per share computations.

		Three Months Ended
		March 31,
		2011				2010
Loss from continuing operations available for common shareholders — basic		$	(570,191	)		$	(554,785	)
Loss from continuing operations attributable to noncontrolling interest			(120,531	)			(120,876	)
Loss from continuing operations — diluted		$	(690,722	)		$	(675,661	)
Loss from discontinued operations for common shareholders — basic			—				(167,579	)
Loss from discontinued operations attributable to noncontrolling interest			—				(36,512	)
Loss from discontinued operations — diluted		$	—			$	(204,091	)
Net loss — diluted		$	(690,722	)		$	(879,752	)
Weighted average number of shares — basic			10,351,500				10,255,463
Dilutive securities — weighted average number of units			2,187,687				2,233,724
Weighted average number of shares — diluted			12,539,187				12,489,187

6.

SEGMENT REPORTING

FASB ASC Topic 280-10, Segment Reporting — Overall, established standards for reporting financial and descriptive information about operating segments in annual financial statements. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Roberts Realty’s chief operating decision maker is Mr. Roberts, its Chief Executive Officer.

Roberts Realty develops, constructs, owns, and manages multifamily apartment communities; owns land; and owns and manages retail centers and one office building. (Roberts Realty does not currently own any operating multifamily communities and did not own any operating multifamily communities in 2011 or 2010.) All of Roberts Realty’s properties are located in Atlanta, Georgia. Roberts Realty has the following three reportable operating segments:

1.

the retail/office segment, which consists of operating retail centers and an office building;

2.

the land segment, which consists of various tracts of land; and

3.

the corporate segment, which consists primarily of operating cash, cash equivalents, and miscellaneous other assets.

The following tables summarize the operating results of Roberts Realty’s reportable segments for the three months ended March 31, 2011 and 2010. The retail/office segment is composed of the Grand Pavilion, Bassett, and Spectrum at the Mall of Georgia retail centers, along with the Northridge office building. Roberts Realty’s Addison Place Shops retail center, which it sold on June 30, 2010, is reflected as discontinued operations within the retail/office segment. The land segment is composed of five tracts of land totaling 106 acres that are in various phases of development and construction. The corporate segment consists primarily of cash and cash equivalents, miscellaneous other assets, and general and administrative expenses.

Three Months Ended March 31, 2011

		Retail/Office				Land				Corporate				Total
Rental operations		$	339,336			$	3,169			$	—			$	342,505
Other operating income			55,828				—				42				55,870
Total operating revenues from consolidated entities			395,164				3,169				42				398,375
Operating expenses			237,887				43,712				288,245				569,844
Depreciation and amortization expense			156,185				—				50				156,235
Total operating expenses from consolidated entities			394,072				43,712				288,295				726,079
Other (expense) income			(253,644	)			(114,671	)			5,297				(363,018	)
Consolidated loss from continuing operations			(252,552	)			(155,214	)			(282,956	)			(690,722	)
Consolidated loss from discontinued operations (Note 3)			—				—				—				—
Consolidated net loss			(252,552	)			(155,214	)			(282,956	)			(690,722	)
Consolidated loss attributable to noncontrolling interest			(44,070	)			(27,085	)			(49,376	)			(120,531	)
Consolidated loss available for common shareholders		$	(208,482	)			(128,129	)			(233,580	)			(570,191	)
Total assets at March 31, 2011		$	20,423,845			$	43,272,117			$	3,866,157			$	67,562,119

Three Months Ended March 31, 2010

		Retail/Office				Land				Corporate				Total
Rental operations		$	422,243			$	3,169			$	—			$	425,412
Other operating income			64,831				—				4,692				69,523
Total operating revenues from consolidated entities			487,074				3,169				4,692				494,935
Operating expenses			272,484				57,504				341,420				671,408
Depreciation and amortization expense			151,645				—				171				151,816
Total operating expenses from consolidated entities			424,129				57,504				341,591				823,224
Other (expense) income			(250,967	)			(111,282	)			14,877				(347,372	)
Consolidated loss from continuing operations			(188,022	)			(165,617	)			(322,022	)			(675,661	)
Consolidated loss from discontinued operations (Note 3)			(204,091	)			—				—				(204,091	)
Consolidated net loss			(392,113	)			(165,617	)			(322,022	)			(879,752	)
Consolidated loss attributable to noncontrolling interest			(70,149	)			(29,629	)			(57,610	)			(157,388	)
Consolidated loss available for common shareholders		$	(321,964	)		$	(135,988	)		$	(264,412	)		$	(722,364	)
Total assets at March 31, 2010		$	29,872,000			$	53,935,807			$	7,605,077			$	91,412,884

7. RELATED PARTY TRANSACTIONS

Transactions with Mr. Charles S. Roberts and His Affiliates

Roberts Realty enters into contractual commitments in the normal course of business with the Roberts Companies. The contracts between Roberts Realty and the Roberts Companies relate to the development and construction of real estate assets, and from time to time, the acquisition of real estate. The board of directors has adopted a policy that all conflicting interest transactions must be authorized by a majority of the disinterested directors, but only if there are at least two directors who are disinterested with respect to the matter at issue. Under the charter for the audit committee of Roberts Realty’s board of directors, related party transactions are also subject to review and oversight by the audit committee.

Roberts Realty, its predecessor limited partnerships, and other limited partnerships sponsored by Mr. Roberts have previously entered into agreements with Roberts Properties and Roberts Construction to provide these services for 23 apartment communities with a total of 4,648 units that were sold for a total sales price of $431,701,143. All of these communities were sold for a substantial profit.

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 a design and development agreement with Roberts Properties for the project listed in the following table, for which we made payments to Roberts Properties in 2011.

Total

Amounts

Remaining

Contract

Incurred from

Contractual

Amount

1/1/11 to 3/31/11

Commitment

Highway 20

$

1,050,000

$

175,000

$

550,000

Construction Contracts with Roberts Construction. Roberts Realty has entered into cost plus 10% (5% for overhead and 5% for profit) contracts with Roberts Construction for the Bradley Park, Northridge, Peachtree Parkway, North Springs, and Highway 20 properties. Progress payments are paid monthly to Roberts Construction based on the work that has been completed. The following table lists the amounts incurred on these contracts during the three months ended March 31, 2011.

		Amounts Incurred for				Amounts Incurred for
		Labor and Materials				5% Profit and
		Costs from				5% Overhead from
		1/1/11 to 3/31/11				1/1/11 to 3/31/11
Bradley Park		$	6,415			$	641
Northridge			3,589				359
Peachtree Parkway			4,179				418
North Springs			958				96
Highway 20			3,167				317
Totals		$	18,308			$	1,831

Other Payments. At the request of Roberts Realty, Roberts Construction performed repairs and tenant improvements for new leases at the retail centers and office building. For the three months ended March 31, 2011, Roberts Realty paid Roberts Construction $16,035 for labor and materials costs plus $1,652 (5% for profit and 5% for overhead). Other affiliates of Mr. Roberts received cost reimbursements of $58,274 for the three months ended March 31, 2011.

Office Leases. Roberts Realty leases office space in the Northridge office building to the Roberts Companies. Effective as of January 1, 2011, Roberts Realty renewed its leases with the Roberts Companies. Under the renewed leases, Roberts Properties leases 4,431 rentable square feet, and Roberts Construction leases 1,920 rentable square feet. Both leases are for a one-year term with a new rental rate of $17.50 per rentable square foot. Roberts Realty recognized total rental income from Roberts Properties and Roberts Construction of $27,786 for the three months ended March 31, 2011.

8.

IMPAIRMENT LOSS ON REAL ESTATE ASSETS

Roberts Realty periodically evaluates its real estate assets, on a property-by-property basis, for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable in accordance with FASB ASC Topic 360-10, Property, Plant, and Equipment — Overall.

FASB ASC Topic 360-10 requires impairment losses to be recorded on long-lived assets used in operations and land parcels when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. The expected future cash flows depend on estimates made by management, including (1) changes in the national, regional, and/or local economic climates, (2) rental rates, (3) competition, (4) operating costs, (5) tenant occupancy, (6) holding period, and (7) an estimated construction budget. A change in the assumptions used to determine future economic events could result in an adverse change in the value of a property and cause an impairment to be recorded. Due to uncertainties in the estimation process, actual results could differ materially from those estimates. Roberts Realty’s determination of fair value is based on a discounted future cash flow analysis, which incorporates available market information as well as other assumptions made by Roberts Realty’s management. Because the factors Roberts Realty’s management uses in generating these cash flows are difficult to predict and are subject to future events that may alter its assumptions, Roberts Realty may not achieve the discounted or undiscounted future operating and residual cash flows it estimates in its impairment analyses or those established by appraisals, and Roberts Realty may be required to recognize future impairment losses on its properties held for use.

Non-Cash Impairments on Operating Real Estate Assets. During the three months ended March 31, 2011 and 2010, Roberts Realty determined that the carrying amounts on its operating real estate assets were recoverable. Accordingly, Roberts Realty did not record an impairment loss during the 2011 and 2010 periods.

Non-Cash Impairments on Land Parcels. During the three months ended March 31, 2011 and 2010, Roberts Realty determined that the carrying amounts on its land parcels were recoverable. Accordingly, Roberts Realty did not record an impairment loss during the 2011 and 2010 periods.

9.

FAIR VALUE MEASUREMENTS

FASB ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value and establishes a framework for measuring fair value. The objective of fair value is to determine the price that would be received upon the sale of an asset. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes observable and unobservable inputs used to measure fair value into three levels:

•

Level 1 — quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities;

•

Level 2 — observable prices that are based on inputs not quoted in active markets, but corroborated by market data; and

•

Level 3 — unobservable inputs that are used when little or no market data is available.

The fair value hierarchy gives the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs. In determining fair value, Roberts Realty uses valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. Considerable judgment is necessary to interpret Level 2 and 3 inputs in determining fair value of financial and non-financial assets and liabilities. Accordingly, the fair values presented in the financial statements may not reflect the amounts ultimately realized on a sale or other disposition of these assets.

Roberts Realty held no assets required to be measured at fair value on a recurring basis as of March 31, 2011.

10.

COMMITMENTS AND CONTINGENCIES

Roberts Realty has entered into various contracts for the development and construction of its projects. The contracts with Roberts Properties and Roberts Construction are described in Note 7 — Related Party Transactions. The construction contracts require Roberts Realty to pay Roberts Construction the labor and materials costs plus 10% (5% overhead and 5% profit).

In addition to the construction contracts with Roberts Construction, Roberts Realty has entered into architectural and engineering contracts with third parties for the Northridge, Bradley Park, Peachtree Parkway, and Highway 20 projects. At March 31, 2011, outstanding commitments on these contracts totaled $231,315.

At March 31, 2011, Roberts Realty had a $500,000 letter of credit outstanding. The letter of credit is required by the lender for Roberts Realty’s Spectrum retail center and is held as a reserve fund for the payment of leasing costs. Roberts Realty assumed this obligation when it acquired the Spectrum retail center in October 2005. The letter of credit expires on September 26, 2011.

Roberts Realty and the operating partnership are subject to various legal proceedings and claims that arise in the ordinary course of business. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of these matters will not have a material adverse effect on Roberts Realty’s financial position or results of operations. Roberts Realty has a disputed claim related to its Bradley Park property in the amount of $127,174 by an architect that has gone out of business. Roberts Realty disputes the amount and quality of the work performed and believes this dispute will more than likely lead to litigation.

As a result of the mergers of various predecessor limited partnerships into the operating partnership, the former partners of those predecessor limited partnerships received operating partnership units. Holders of units have the right to require the operating partnership to redeem their units for shares, subject to certain conditions. Upon submittal of units for redemption, the operating partnership will have the option either (a) to pay cash for those units at their fair market value, which will be based upon the then current trading price of the shares, or (b) to acquire those units in exchange for shares (on a 1.647-for-one basis). Roberts Realty has adopted a policy that it will issue shares in exchange for all future units submitted. At March 31, 2011, there were 1,324,416 units outstanding that could be exchanged for shares, subject to the conditions described above.

Under Roberts Realty’s 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 March 31, 2011.

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 Realty’s operating properties and development projects have not revealed any environmental liability that Roberts Realty believes would have a material adverse effect on its business, assets, or results of operations, nor is Roberts Realty aware of any such environmental liability.

Management’s Business Plan. Management continues to focus on improving Roberts Realty’s liquidity and balance sheet. Roberts Realty’s primary liquidity requirements are related to its continuing negative operating cash flow and maturing short-term debt. Roberts Realty’s negative cash flow is primarily due to its five tracts of land and low occupancy rates at two of its retail centers and its office building. Roberts Realty has three loans with a total principal balance of $14,310,000 that mature within the next 12 months. Management’s plan is to renew these loans as they come due and extend their maturity dates at least 12 months. Management believes that its long history of operating and developing real estate and its current plans for developing its existing land holdings will allow it to successfully extend 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 Realty’s cash could adversely affect Roberts Realty’s ability to execute its plans as described further below. Management believes that the most important uses of Roberts Realty’s capital resources will be:

(a)

to provide working capital to cover its negative operating cash flow; and

(b)

to invest in the development of its land parcels to enable it to raise the required equity to construct these new multifamily communities.

Management is focusing on its core business of developing, constructing, managing, and selling high quality multifamily communities for cash flow and long-term appreciation. Management has significantly reduced Roberts Realty’s debt and decreased its negative cash flow and intends to continue these efforts.

Retail Centers and Office Building. Because the retail sector took the brunt of the severe recession, Roberts Realty’s retail centers have struggled with occupancy as tenants have failed. Management anticipates that the performance of the retail centers will continue to be weak for the foreseeable future. Similarly, the market for office space in Atlanta is overbuilt and continues to be very challenging. In spite of this difficult environment, however, management is committed to increasing the occupancy of both the retail centers and office building so they can be positioned for sale. In addition to considering the sale of the Bassett and Spectrum retail centers and the office building, Roberts Realty may form a joint venture with a company that specializes in retail or office properties to use their expertise in leasing these property types. Roberts Realty also intends to pursue joint ventures with potential partners that include local investors, pension funds, life insurance companies, hedge funds, and foreign investors.

As Roberts Realty has previously stated in its annual and quarterly reports, its objective is to exit the retail business to focus exclusively on developing, constructing and managing multifamily apartment communities. Given that objective and the approximately $625,000 in annual negative cash flow from its Grand Pavilion retail center, Roberts Realty has elected not to make debt service payments since July 2010 on that retail center and has allowed the loan to go into default. In August 2010, Roberts Realty asked the lender to place the Grand Pavilion loan with the special servicer. On December 16, 2010, Roberts Realty received a formal notice of default from the special servicer of the loan. Roberts Realty is seeking to transfer the Grand Pavilion retail center to the lender as soon as possible in satisfaction of the approximately $6,433,286 principal amount of debt secured by the property. Because the loan is nonrecourse, Roberts Realty would have no further obligations to the lender for this loan. This transaction would move Roberts Realty closer to exiting the retail business, reduce the principal amount of its debt by $6,433,286, and reduce its annual negative operating cash flow by approximately $625,000.

Land Parcels Held for Development and Construction. Roberts Realty intends to move forward with the development and construction of its next two multifamily communities: Bradley Park and Northridge. Despite the very challenging economic conditions, management believes this is an opportune time to create new multifamily assets. Management believes that in this difficult economic climate, Roberts Realty can build at lower construction costs and create value for shareholders as Roberts Realty has historically done during economic downturns and recessions. Roberts Realty is currently seeking to raise the equity and obtain the construction loans for the Bradley Park and Northridge communities. Roberts Realty currently estimates that it will need approximately $35,715,000 in debt and equity to complete the construction of its Northridge and Bradley Park multifamily 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 and partnerships, and raising private equity. Roberts Realty is also in discussions with possible joint venture participants such as pension funds, life insurance companies, hedge funds, foreign investors, and local investors. Roberts Realty may also sell one or more land parcels to Roberts Properties or to a newly formed affiliate of Roberts Properties or of Roberts Realty that would raise private equity for the specific purpose of funding the purchase of the land parcel and constructing a multifamily community.

Possible Sale, Merger, or Business Combination. In an effort to maximize shareholder value, Roberts Realty is open to any transaction that would be in the best interests of its shareholders. Roberts Realty has engaged in discussions with both private companies and individuals regarding a possible sale, merger, or other business combination. Roberts Realty has entered into mutual confidentiality agreements with six different entities and discussions are ongoing with several of them. To date, Roberts Realty has not entered into any letter of intent or definitive agreement for such a transaction. Management remains open to any reasonable proposal for a sale, merger, or other business combination that would reward shareholders and maximize their value.

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

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 (a) Part I, Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2010; (b) Part II, Item 1A, Risk Factors, in this report; and (c) 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 are a self-administered, self-managed equity real estate investment trust, or REIT. Our primary business is to develop, construct, own, and manage multifamily apartment communities. The operating partnership, either directly or through one of its wholly owned subsidiaries, owns all of our properties. At March 31, 2011, we were its sole general partner and owned an 82.60% interest in the operating partnership. We expect to continue to conduct our business in this organizational structure. We currently own the following properties, all of which are located in metropolitan Atlanta, Georgia:

•

five tracts of land totaling 106 acres that are zoned for 1,232 multifamily units;

•

three retail shopping centers; and

•

one office building, part of which serves as our corporate headquarters.

As we have done in the past, we are focusing on our core business of developing, constructing, and managing high quality multifamily apartment communities for cash flow and long-term appreciation. We plan to exit the retail business. We have significantly reduced our debt and our negative cash flow in the past year, and we intend to continue these efforts.

Continuing Negative Operating Cash Flow and Maturing Short-Term Debt

Our primary liquidity requirements relate to (a) our continuing negative operating cash flow and (b) our maturing short-term debt. The primary reason for our negative operating cash flow is that we have five tracts of land totaling 106 acres that do not produce revenue but incur carrying costs of interest expense and real estate taxes. These five tracts have a combined carrying value of $43,231,070 and are encumbered with land loans totaling $14,310,000. We have substantial equity in these tracts of land, which are an integral part of our multifamily community development and construction program. Because the performance of our retail centers and office building is insufficient to cover our operating expenses, including the carrying costs of our land, we expect to continue to generate negative operating cash flow and to operate at a loss until we raise the equity and obtain the construction loans we need to make substantial progress in constructing and leasing up our planned multifamily communities as described in Liquidity and Capital Resources — Business Plan below.

To address these issues, we made substantial progress during the past year in improving our liquidity and balance sheet, and we intend to continue to do so. The June 2010 sale of the Addison Place retail center and Westside land reduced our debt by $12,000,000 and reduced our annual negative operating cash flow by approximately $800,000, and our decision not to make any more payments on the Grand Pavilion retail center loan further reduced our annual negative operating cash flow by approximately $625,000. Additionally, the transfer of the Grand Pavilion retail center to the lender as we intend would further reduce the principal amount of our debt by $6,433,286. Because the loan is nonrecourse, we would have no further obligations to the lender for this loan.

We had total debt of $30,930,697 as of March 31, 2011 and have three loans with a total principal balance of $14,310,000 that mature within the next 12 months: (a) the $8,175,000 Peachtree Parkway loan that matures on July 31, 2011; (b) the $3,135,000 Highway 20 loan that matures on April 8, 2012; and (c) the $3,000,000 Bradley Park loan that matures on April 30, 2012. If we are unable to renew these loans, we may repay all or part of it from the funds we are seeking to raise as described in Liquidity and Capital Resources — Business Plan below.

Results of Operations

Comparison of Three Months Ended March 31, 2011 to Three Months Ended March 31, 2010

The following table highlights our operating results and should be read with the condensed consolidated financial statements and the accompanying notes included in this report.

		Three Months Ended
		March 31,								$(Decrease)
		2011				2010				Increase
		(Unaudited)				(Unaudited)
TOTAL OPERATING REVENUES		$	398,375			$	494,935			$	(96,560	)
OPERATING EXPENSES:
Property operating expenses			217,997				247,949				(29,952	)
General and administrative expenses			351,847				423,459				(71,612	)
Depreciation and amortization			156,235				151,816				4,419
Total operating expenses			726,079				823,224				(97,145	)
LOSS FROM OPERATIONS			(327,704	)			(328,289	)			(585	)
OTHER EXPENSE			(363,018	)			(347,372	)			15,646
LOSS FROM CONTINUING OPERATIONS		$	(690,722	)		$	(675,661	)		$	15,061
LOSS FROM DISCONTINUED OPERATIONS		$	—			$	(204,091	)		$	(204,091	)
NET LOSS		$	(690,722	)		$	(879,752	)		$	(189,030	)

Net loss decreased $189,030 when compared to the 2010 period. This was primarily due to the $204,091 loss from discontinued operations at the Addison Place retail center. We explain below the major variances between the 2011 and 2010 periods.

Total operating revenues decreased by $96,560 from $494,935 in the 2010 period to $398,375 in the current period primarily as a result of a lower occupancy level at the Grand Pavilion and Spectrum retail centers and overall lower rental rates on new leases and renewals.

Property operating expenses — consisting of personnel, utilities, repairs and maintenance, real estate taxes, and marketing and insurance expense — decreased $29,952 from $247,949 in the 2010 period to $217,997 in the current period. This decrease was due primarily to a $36,902 decrease in property taxes resulting from successful property tax appeals and a $10,953 decrease in personnel expense offset by an $18,131 increase in repairs and maintenance.

General and administrative expenses decreased by $71,612 from $423,459 in the 2010 period to $351,847 in the current period primarily due to lower salaries expense, professional services, and bad debt expenses.

Other expense increased $15,646 from $347,372 in the 2010 period to $363,018 in the current period. This increase was primarily due to the reduction of $9,580 in interest income due to lower cash balances and an increase of $10,411 of interest expense because less interest was capitalized on construction in progress and real estate under development in the current period.

Liquidity and Capital Resources

Overview

At March 31, 2011, we had $67,562,119 in total assets, of which $3,110,162 was cash and cash equivalents. In addition, we held $1,139,220 in restricted cash. Of our restricted cash at March 31, 2011, $300,532 was reserved for the payment of interest and certain other costs on specific outstanding loans, and $508,011 was a certificate of deposit pledged to secure a letter of credit for tenant improvements at the Spectrum retail center. As of April 27, 2011, we held $2,847,170 in cash and cash equivalents and $1,127,595 in restricted cash. Of our restricted cash balance, $288,907 was reserved for the payment of interest and certain other costs on specific outstanding loans, and $508,011 is included in the Spectrum certificate of deposit.

We believe that the most important uses of our capital resources will be to provide working capital to enable us to cover our negative operating cash flow as we pursue our business plan; and to invest in the development of two new multifamily communities (Northridge and Bradley Park) to enable us to raise the required debt and equity to construct these communities. We currently estimate that we will need approximately $35,715,000 in debt and equity to complete the construction of our Northridge and Bradley Park multifamily communities. Our current cash resources are inadequate to meet these needs. To address these needs, we are considering the alternatives described in Business Plan below.

We continue to focus on improving our liquidity and balance sheet. In that regard, the sale of the Addison Place retail center and Westside land on June 30, 2010 reduced our debt by $12,000,000 and reduced our annual negative operating cash flow by approximately $800,000, and our decision not to make any more payments on the Grand Pavilion loan reduced our annual negative operating cash flow by approximately $625,000. Additionally, the transfer of the Grand Pavilion retail center to the lender would further reduce the principal amount of our debt by $6,433,286.

Our primary liquidity requirements are related to our continuing negative operating cash flow and our maturing short-term debt. We have three loans with a current aggregate principal balance of $14,310,000 that mature within the next 12 months, as listed in the following table in their order of maturity:

						Principal Payments
						Due Within
Property Securing Loan		Maturity Date				12 Months
Peachtree Parkway			7/31/11			$	8,175,000
Highway 20			4/08/12				3,135,000
Bradley Park			4/30/12				3,000,000
Total						$	14,310,000

We are currently generating negative operating cash flow, and we expect to continue to generate negative operating cash flow and to operate at a loss for the foreseeable future. The three primary reasons for our negative operating cash flow are:

•

We own five tracts of land totaling 106 acres with an aggregate carrying value of $43,231,070 that secure land loans totaling $14,310,000. Because land does not generate revenue, a substantial portion of our negative cash flow is a result of the carrying costs (interest expense and real estate taxes) on our land.

•

Due to the continued weakness in the national and local economy, two of our three retail centers and our office building are producing negative cash flow, and the other retail center is positively cash flowing.

•

Our general and administrative expenses were $1,866,594 for 2010 and $351,847 for the three months ended March 31, 2011; these expenses included the costs of being an SEC reporting company and having our shares listed on the NYSE Amex Equities exchange. These costs include accounting and related fees to our independent auditor as well as to another accounting firm required for our compliance with Section 404(a) of the Sarbanes-Oxley Act, legal fees, listing fees, director compensation, and directors and officers insurance premiums. We estimate that these additional costs related to being a publicly traded company are approximately $515,000 per year.

Short- and Long-Term Liquidity Outlook

Our operating revenues are not adequate to provide short-term (12 months) liquidity for the payment of all direct rental operating expenses, interest, and scheduled amortization of principal on our mortgage debt. We are currently using our cash balance of $2,847,170 to meet our short-term liquidity requirements, including general and administrative expenses, principal reductions on our debt, and improvements at our existing properties. With respect to the $14,310,000 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. We may be required to repay part of the outstanding principal of one or more of these loans in connection with that 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, the sale of properties, or the equity we raise in a private offering.

Business Plan

Overview and Outlook

We intend to maximize shareholder value and to address our needs for liquidity and capital resources by executing our business plan. As we have done in the past, we are focusing on our core business of developing, constructing, and managing high quality multifamily apartment communities for cash flow and long-term appreciation. We plan to exit the retail business. We significantly reduced our debt and our negative cash flow in 2010, and we intend to continue these efforts. We explain below our strategies for each type of property we own.

Development and Construction of Multifamily Communities

We are now optimistic about the market for new apartments in the metro Atlanta submarkets where our land is located. We believe the economic climate for our business in these markets is improving for the following reasons:

•

Rents for the “Class A” or upscale apartments communities of the type that we build should increase appreciably during 2011, and the current high level of rental concessions should decrease over time as the market continues to improve.

•

Occupancy rates for Class A apartments in Atlanta should continue to increase in 2011.

•

The number of new apartments constructed in Atlanta was substantially lower in 2010 than in recent years and is expected to remain low in 2011.

•

Employment in metro Atlanta is expected to grow, although slowly compared to historical levels.

•

Nationally, home ownership rates are declining, and we believe that this trend, coupled with rising interest rates and larger required down payments for single-family home loans, will lead to higher demand for apartments generally and in our market areas.

We believe that these favorable trends will increase the availability of debt and equity capital for the construction of new apartments in our market areas, particularly for companies like ours that have weathered the recession, own tracts of land in areas we believe are well-suited for upscale apartments, and have a long history of developing, constructing, leasing up, and selling upscale multifamily communities at substantial profits. For the reasons explained in Item 1A, Risk Factors, in our Annual Report on Form 10-K for the year ended December 31, 2010, as well as Part II, Item 1A, Risk Factors, below, however, our beliefs and expectations about these favorable trends may not prove to be accurate.

We are currently holding five land parcels for development and construction:

1.

Northridge, an 11-acre site located close to the GA 400 and Northridge Road interchange in Sandy Springs zoned for 220 multifamily units. We have purchased the land disturbance permit, completed clearing, and commenced grading the site.

2.

Bradley Park, a 22-acre site located in Forsyth County zoned for 154 multifamily units. We have completed our architectural drawings, purchased our land disturbance permit, and are ready to begin grading the site.

3.

Peachtree Parkway, a 25-acre site fronting Peachtree Parkway (Highway 141) in Gwinnett County zoned for 292 multifamily units that is located across the street from The Forum, a 580,000 square foot upscale shopping center.

4.

Highway 20, a 38-acre site located in Cumming zoned for 210 multifamily units. We have started the necessary design and development work for this community.

5.

North Springs, a 10-acre site located on Peachtree Dunwoody Road in Sandy Springs across from the North Springs commuter rail station; the property is zoned for 356 multifamily units, 210,000 square feet of office space, and 56,000 square feet of retail space.

Now that the Atlanta apartment market is beginning to recover from the recession, we believe this is an opportune time to create new multifamily assets. We believe that we can build at lower construction costs and create value for our shareholders as we have historically done during economic downturns and recessions and as the economy recovers. We intend to move forward with the development and construction of our next two multifamily communities — Northridge and Bradley Park. Although we cannot make substantial progress on constructing these projects until we raise the required equity and obtain construction financing, we believe that the market for construction financing is improving in light of the positive factors noted above. We currently estimate that we will need approximately $35,715,000 in debt and equity to complete the construction of our Northridge and Bradley Park multifamily communities.

To provide the equity we need for construction of one or more of these communities as well as to repay or partially extend our Peachtree Parkway loan, we may sell one or more of our land parcels to independent purchasers. Potential buyers have recently expressed interest in purchasing some of our properties, and we believe that they have the financial resources to do so. We are also considering forming joint ventures and partnerships, and raising private equity. We are in discussions with possible joint venture participants such as pension funds, life insurance companies, hedge funds, foreign investors, and local investors.

We may also sell one or more land parcels to Roberts Properties, Inc. (“Roberts Properties”), which is owned by Mr. Charles S. Roberts, our President, Chief Executive Officer, and Chairman of the Board, or to a newly formed affiliate of either Roberts Properties or Roberts Realty that would raise equity in a private offering for the specific purpose of funding the purchase of the land parcel and constructing a multifamily community. Under our Code of Business Conduct and Ethics, the terms of any sale of a property to Mr. Roberts or his affiliates would be negotiated and approved by our audit committee, which is composed of the two independent members of our board of directors.

Retail Centers and Office Building

We currently own three retail centers and an office building, which have the occupancy percentages provided below:

1.

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.

2.

Spectrum at the Mall of Georgia, a 30,050 square foot retail center located directly across from the Mall of Georgia in Gwinnett County that is 56.8% occupied.

3.

Grand Pavilion, a 62,323 square foot retail center located in Johns Creek that is 15.0% occupied. As previously explained, we are no longer making payments on the nonrecourse loan secured by this retail center, and we are seeking to transfer it to the lender as soon as possible in satisfaction of the $6,433,286 principal amount of debt secured by the property.

4.

Northridge Office Building, a 37,864 square foot building located in Sandy Springs that is 64.5% occupied. We occupy a portion of the building as our corporate headquarters.

Because the retail sector took the brunt of the severe recession, our retail centers have struggled with occupancy as tenants have failed. The risks of owning retail centers have dramatically increased since we purchased these retail centers, and we anticipate that the performance of our retail centers will continue to be weak for the foreseeable future. As a result, we are focusing on our core business of developing, constructing, and managing high quality multifamily apartment communities, and we intend to exit the retail business. In spite of this difficult environment, however, we are committed to increasing the occupancy of our Spectrum retail center, which is operating at a loss, and our Bassett retail center, which is positively cash flowing. In addition to considering the sale of the Bassett and Spectrum retail centers, we may form a joint venture with a company that specializes in retail properties to use their leasing expertise. We also may pursue joint ventures with potential partners that include local investors, pension funds, life insurance companies, hedge funds, and foreign investors.

Like the conduit loan secured by the Grand Pavilion retail center, the conduit loans secured by the Bassett and Spectrum retail centers are nonrecourse. If we are unable to improve the financial performance of one or both of these centers, particularly if the retail sector fails to improve or worsens, we may seek to modify these loans. As a last resort, we may transfer one or both of these retail centers to the lender in satisfaction of the debt to avoid any further negative operating cash flow from these assets.

Similar to the retail market, the market for office space in suburban Atlanta is overbuilt and continues to be very challenging. We are considering the sale of our Northridge office building and may also pursue joint ventures with potential partners that include local investors, pension funds, life insurance companies, hedge funds, and foreign investors.

Possible Sale, Merger, or Business Combination of the Entire Company

In our efforts to maximize shareholder value, we are open to any transaction that would be in the best interests of our shareholders. During the past two years, we have engaged in discussions with both private companies and individuals regarding a possible sale, merger, or other business combination. We have entered into mutual confidentiality agreements with six different entities, and discussions are ongoing with several of them. To date, however, we have not entered into a letter of intent or definitive agreement for such a transaction. We remain open to any reasonable proposal for a sale, merger, or other business combination that would reward our shareholders and maximize their value.

Comparison of Three Months Ended March 31, 2011 to Three Months Ended March 31, 2010

Cash and cash equivalents decreased $606,231 during the first three months of 2011 compared to a decrease of $1,415,234 during the 2010 period. The respective changes in cash are described below.

Net cash used in operating activities in the 2011 period was $227,220 compared to $533,767 used during the 2010 period. This change was primarily the result of an increase in the change of accounts payable, accrued expenses, and other liabilities in the amount of $236,371 coupled with the $32,489 of cash used by the discontinued operations of the Addison Place retail center in the 2010 period.

Net cash used in investing activities was $212,199 during the 2011 period compared to $745,354 of cash used during the 2010 period. This decrease was primarily due to:

•

a $410,102 decrease in the change in restricted cash that resulted from the establishment and use of our required interest reserve and other costs on our Bradley Park and Peachtree Parkway loans; and

•

a $136,154 decrease in development and construction of real estate assets.

Net cash used in financing activities was $166,812 for the 2011 period compared to $136,113 of cash used during the 2010 period. The increase in cash used in financing activities primarily resulted from our principal repayments on our Highway 20 land loan.

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

		Remaining				Principal				Nonrecourse				Principal				Recourse
		Principal				Payments on				Loans with				Payments				Loans with
		Payments				Nonrecourse				Balloon				on Recourse				Balloon
Year		Per Year				(CMBS) Loans				Payments				Loans				Payments
2011		$	8,771,905			$	296,905							$	8,475,000			Peachtree Pkwy
2012			6,412,738				297,738								6,115,000			Bradley Park, Highway 20
2013			8,795,313				6,256,980			Grand Pavilion(1)					2,538,333			Northridge Office
2014			4,644,299				4,644,299			Spectrum
2015			66,125				66,125
Thereafter			2,240,317				2,240,317			Bassett
Total		$	30,930,697

Short-Term Debt

We have a total of $14,310,000 in debt that matures within the next 12 months. All of that debt matures on or before April 30, 2012. See Short- and Long-Term Liquidity Outlook above for how we intend to refinance or repay these loans.

Long-Term Debt

With respect to the debt that matures after April 30, 2012, we anticipate that we will refinance the principal balance of that debt at maturity and that we will not have funds on hand sufficient to repay it at maturity. See Short- and Long-Term Liquidity Outlook above for how we intend to refinance or repay these long-term loans when they mature.

Effect of Floating Rate Debt

We have four loans that bear interest at floating rates. These loans had an aggregate outstanding balance of $17,128,333 at March 31, 2011. Loans totaling $13,993,333 bear interest at 300 basis points over the 30-day LIBOR with interest rate floors of 4.50% to 5.00%, and a $3,135,000 loan bears interest at the prime rate with an interest rate floor of 5.50%. Changes in LIBOR and the prime rate that increase the interest rates on these loans above their respective interest rate floors will increase our interest expense. For example, a 1.0% increase in the interest rates on these loans above their respective interest rate floors would increase our interest expense by approximately $171,283 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 enter into construction contracts in the normal course of business with Roberts Properties Construction, Inc. (“Roberts Construction”), which is owned by Mr. Charles S. Roberts, our President, Chief Executive Officer, and Chairman of the Board. We currently have five ongoing construction contracts with Roberts Construction. The terms of the construction contracts are cost plus 10% (5% profit and 5% overhead).

No Quarterly Dividends

We have not paid regular quarterly dividends since the third quarter of 2001, and we have no plans to resume paying regular quarterly dividends for the foreseeable future. We will make distributions, however, to the extent required to maintain our status as a REIT for federal income tax purposes. We made cash distributions of $2,360,397 in 2009 for this purpose following the sale of our 403-unit Addison Place multifamily community for $60,000,000 in June 2008.

Critical Accounting Policies and Estimates

We prepare our financial statements in accordance with U.S. generally accepted accounting principles. A critical accounting policy is one that requires significant judgment or difficult estimates, and is important to the presentation of our financial condition or results of operations. Because we are in the business of owning, operating, and developing multifamily communities, retail centers, and other commercial properties, our critical accounting policies relate to cost capitalization and asset impairment evaluation. The following is a summary of our overall accounting policy in these areas.

Cost Capitalization

We state our real estate assets at the lower of depreciated cost or fair value, if deemed impaired. We expense ordinary repairs and maintenance as incurred. We capitalize and depreciate major replacements and betterments over their estimated useful lives. Depreciation expense is computed on a straight line basis over the estimated useful lives of 27.5 years for buildings and improvements, 15 years for land improvements, and five to seven years for furniture, fixtures, and equipment.

We capitalize direct costs associated with the development and construction of our real estate assets. We expense all internal costs associated with the acquisition and operation of these assets to general and administrative expense in the period we incur these costs. For our real estate assets, we capitalize interest on qualifying construction expenditures in accordance with FASB Accounting Standards Codification (ASC) Topic 835-20, Interest — Capitalization of Interest. During the development and construction of a property, we capitalize related interest costs, as well as other carrying costs such as real estate taxes and insurance. We begin to expense these items as the property becomes substantially complete and available for initial occupancy. During the lease-up period, as a property transitions from initial occupancy to stabilized occupancy, revenues are generally insufficient to cover interest, carrying costs and operating expenses, resulting in an operating deficit. The size and duration of this lease-up deficit depends on the rate at which construction is completed, the pace at which we lease the property, and what rent levels we achieve.

Asset Impairment Evaluation

We periodically evaluate our real estate assets, on a property-by-property basis, for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable in accordance with FASB ASC Topic 360-10, Property, Plant, and Equipment — Overall.

FASB ASC Topic 360-10 requires impairment losses to be recorded on long-lived assets used in operations and land parcels held for use when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. The expected future cash flows depend on estimates made by management, including (1) changes in the national, regional, and/or local economic climates, (2) rental rates, (3) competition, (4) operating costs, (5) tenant occupancy, (6) holding period, and (7) an estimated construction budget. A change in the assumptions used to determine future economic events could result in an adverse change in the value of a property and cause an impairment to be recorded. Due to uncertainties in the estimation process, actual results could differ from those estimates. Our determination of fair value is based on a discounted future cash flow analysis, which incorporates available market information as well as other assumptions made by our management. Because the factors we use in generating these cash flows are difficult to predict and are subject to future events that may alter our assumptions, we may not achieve the discounted or undiscounted future operating and residual cash flows we estimate in our impairment analyses or those established by appraisals, and we may be required to recognize future impairment losses on our properties held for use.

During the three months ended March 31, 2011 and 2010, we determined that the carrying amounts on our operating real estate assets and our land parcels were recoverable. Accordingly, we did not record any impairment losses on those assets during these periods.

ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not required for smaller reporting companies.

ITEM 4.		CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

Based on our management’s evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, as of March 31, 2011, 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.

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. As disclosed in our Annual Report on Form 10-K for the year ended December 31, 2010, management concluded that our internal control over financial reporting was effective as of December 31, 2010.

Changes in Internal Controls

There was no change in our internal control over financial reporting that occurred during the quarter ended March 31, 2011 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.

PART II — OTHER INFORMATION

ITEM 1.		LEGAL PROCEEDINGS.

None of Roberts Realty, the operating partnership, or our properties is presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against any of them. Routine litigation arising in the ordinary course of business is not expected to result in any material losses to us or the operating partnership. We have a disputed claim related to our Bradley Park property in the amount of $127,174 by an architect that has gone out of business. We dispute the amount and quality of the work performed and believe this dispute will more than likely lead to litigation.

ITEM 1A.		RISK FACTORS

In addition to the other information set forth in this quarterly report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2010, as well as the risk factor described below. These risk factors could materially affect our business, financial condition, or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results.

We face the maturity of our short-term debt, and we may be unable to repay, extend, or refinance this debt.

We have three loans with a total principal balance of $14,310,000 that mature within the next 12 months. Our $8,175,000 Peachtree Parkway loan matures on July 31, 2011; our $3,135,000 Highway 20 loan matures on April 8, 2012; and our $3,000,000 Bradley Park loan matures on April 30, 2012. If we are unable to refinance our debt at maturity on acceptable terms, or at all, or if we are unable to pursue successfully the strategies to reduce negative cash flow described elsewhere in this report, we might be forced to 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 mortgagee 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.

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

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 purchase price. As of April 27, 2011, we have repurchased 59,638 shares and have the authority to repurchase an additional 540,362 shares under the plan. We did not repurchase any shares in 2010 or 2011. The plan does not have an expiration date.

ITEM 3.		DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.		(REMOVED AND RESERVED).

ITEM 5.		OTHER INFORMATION.

None.

ITEM 6.		EXHIBITS.

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

Exhibit No.				Description of Exhibit
	31			Certifications of Charles S. Roberts and Charles R. Elliott pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	32			Certifications of Charles S. Roberts and Charles R. Elliott pursuant to 10 U.S.C. Section 1350, 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.

SIGNATURES

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

Date: May 6, 2011