• Net Cash Provided by Operating Activities from Continuing Operations. In the past, Addison Place provided a significant portion of the net cash provided by operating activities from continuing operations. Accordingly, we expect net cash provided by operating activities from continuing operations to be materially lower in calendar year 2009 than in 2008.

• Reduced Revenues. Revenues for Addison Place were $2,703,362 through June 24, 2008, or approximately 50.9% of our total revenue for calendar year 2008. Accordingly, our revenues will be materially lower in 2009 than in 2008.

• Reduced Income from Operations. Income from operations provided by Addison Place was $1,500,431 through June 24, 2008. Including the results of Addision Place, our total loss from operations for calendar year 2008 was $3,025,287. Accordingly, we expect our loss from operations to be materially greater in 2009 than in 2008.

• Reduction in Number of Employees and Associated Costs. Our number of employees has decreased from 12 to five, and our related costs will decrease materially. Due to our status as a public company, with its associated costs that are largely unrelated to our asset base, the percentage decrease in our overall general and administrative expenses will be materially less than the percentage of our revenues represented by Addison Place.

• Reduced Mortgage Notes Payable. As of the date we closed the sale of Addison Place, we reduced our mortgage debt by a total of $28,833,212.

• Reduced Monthly Mortgage Payments. Monthly mortgage payments for Addison Place were $195,000, or 43.1%, of our total monthly mortgage payments for May 2008, the last month during which we owned Addison Place for the full month. Our monthly mortgage payments have been reduced by this amount.

Loan Renewals in Third Quarter of 2008
During the quarter ended September 30, 2008, we renewed four loans totaling $18,245,000 and extended the maturities to various dates during 2010 as well as reduced the principal amount of the four loans by a total of $1,552,000. Special Distribution Declared in December 2008 and Paid in January 2009 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 decided to pay 80% of the distributions to shareholders in common stock to preserve our cash during this extraordinary credit crunch. In particular, we need cash for the following purposes:
(a) to repay, if necessary, part of the $12,252,000 that we will owe to a lender on April 30, 2009 and will seek to refinance or extend;

(b) to provide the equity required to develop and construct two new apartment communities as we plan; and

(c) to provide working capital to enable us to cover our negative operating cash flow until we complete our development and construction program.

On January 29, 2009, we issued 3,754,732 shares in the stock portion of the distribution described above. Taking into account this distribution as well as exchanges by unitholders of units for shares, as of March 23, 2009:
• we have 10,122,418 outstanding shares of common stock, and

• the operating partnership has 1,436,987 outstanding units of limited partnership interest, with each unit being convertible into 1.647 shares of our common stock.

The trading price of our common stock adjusted downward in December 2008 in light of the substantial cash and stock distributions we announced on December 18, 2008 and paid on January 29, 2009.

Trends and Outlook
Short-Term Loans Maturing in April 2009
We have two loans from Wachovia Bank, N.A. that mature on April 30, 2009. These two loans total $12,252,000: the $8,175,000 loan secured by our Peachtree Parkway land and the $4,077,000 loan secured by our Highway 20 land. We intend to refinance these loans with the same lender or with another lender or lenders. We may be required to pay down the loans in connection with a refinancing. To fund any required principal payments, we may use cash from one or more of the following sources: our existing cash, contributions of a joint venture partner, net proceeds from the sale of another property, or equity we raise in a private offering. If we are unable to refinance these loans in some manner or to reach agreement with the lender to extend these loans, the lender could foreclose on our Peachtree Parkway, Highway 20, and North Springs properties, which would have material adverse financial and business consequences for us. In that event, we could be forced to dispose of all or a substantial portion of our properties in highly unfavorable circumstances.
On March 19, 2009, we entered into a loan commitment letter with a local bank to provide a $3.5 million loan to refinance the Highway 20 land, subject to customary closing conditions. Consistent with our business plan to lower the amount of debt on our balance sheet, at closing we would reduce the debt secured by our Highway 20 land by $577,000. The loan would mature on or about October 31, 2010.
Continued Negative Cash Flow
We own six tracts of undeveloped land totaling 148.4 acres. Five of these tracts
- Peachtree Parkway, Westside, Highway 20, Sawmill Village, and North Springs, which we carry on our balance sheet at a combined value of $53,623,000 - are currently encumbered with land loans totaling $21,252,000. Our Northridge land is the only one of our six tracts of undeveloped land that is not encumbered with a land loan. Because undeveloped land does not generate revenue, the majority of our negative cash flow is due to the carrying costs (interest expense and property taxes) on our undeveloped land. In addition, the financial performance of our four neighborhood retail centers and office building continues to be challenged by the weakness in the national and local economy. For these reasons, as well as the absence of the operating cash flow we previously received from our Addison Place apartment community, we expect to continue to generate negative operating cash flow and to operate at a loss for the foreseeable future. Although we believe we have excellent, well-located assets, a significant amount of our assets consists of undeveloped land that is generating negative cash flow due to carrying costs as noted above. Our business plan to reduce our negative cash flow includes the following:
• converting land loans to construction loans on two of our properties, given that construction loans fund interest out of draws on the loans;

• developing and constructing new apartment communities on the land we own, as described below, with the expectation that we will begin to generate positive cash flow as we construct the communities and begin to lease them up;

• increasing the occupancy percentages of our retail and office properties; and

• selling one or more assets.

We may sell one or more assets to independent purchasers or to Roberts Properties or an affiliate of Roberts Properties, and we are considering forming joint ventures and raising equity privately. We would use all or substantial portions of the equity contribution of our joint venture partner, or of the equity we raise privately, to pay down our debt. We are in discussions with possible joint venture participants such as life insurance companies, hedge funds, foreign investors, and local investors as well as Roberts Properties. Although this strategy will not completely eliminate our negative cash flow, we believe that it should put us in a stronger position as we pursue our development/construction activities.
Development and Construction Plans
We are moving forward with the development and construction of our next two apartment communities: Northridge and Sawmill Village. Despite the very challenging economic conditions, we believe this is a good time to create multifamily assets, and our banks have told us that they will consider making construction loans for that purpose. Because of the rapid slowdown in the economy, we believe we can build at a lower construction cost than in the recent past. We have created value for our shareholders in the past by building when construction costs were lower, generally during economic downturns or recessions. We believe that any capital we need to fund the construction of a new multifamily property, in addition to a construction loan and our cash on hand, would come from the proceeds of a sale of another property, the contributions of a joint venture partner, or equity we raise privately. 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. Results of Operations
Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2007
Loss from continuing operations (net of the minority interest of the unitholders in the operating partnership) increased $1,224,687 or 37.5% from a $3,264,844 loss for the year ended December 31, 2007 to a $4,489,531 loss for the year ended December 31, 2008. We explain below the major variances between the year ended December 31, 2008 and the year ended December 31, 2007.
Total operating revenues increased $144,977 or 5.9% from $2,454,537 for the year ended December 31, 2007 to $2,599,514 for the year ended December 31, 2008. This increase in operating revenues is due primarily to rent increases and new leases.
Operating expenses, consisting of personnel, utilities, repairs and maintenance, landscaping, property taxes, marketing, insurance, and other expenses, increased $65,151 or 5.4% from $1,202,340 for the year ended December 31, 2007 to $1,267,491 for the year ended December 31, 2008. This increase in operating expenses is due primarily to utilities, repairs and maintenance, and property taxes.
General and administrative expenses increased $141,710 or 8.4% from $1,680,955 for the year ended December 31, 2007 to $1,822,665 for the year ended December 31, 2008. This increase was due primarily to increases in professional services and in corporate overhead expenses.
Bad debt expense increased $139,510 from $2,130 for the year ended December 31, 2007 to $141,640 for the year ended December 31, 2008. This increase was due primarily to the write-off of past due rent from retail tenants that vacated their retail space before the maturity of their leases.

The write-off of the fair value/market value of leases decreased $14,752 or 32.4% from $45,598 for the year ended December 31, 2007 to $30,846 for the year ended December 31, 2008. This decrease was due to a greater write-off in 2007 than in 2008 of the unamortized balance of the leases of retail tenants whose leases were either terminated or not renewed during each year.
During 2008, we recorded a $2,555,000 impairment loss on real estate, consisting of a $1,255,000 impairment loss on our Northridge office building and a $1,300,000 impairment loss on our Spectrum retail center. We had no impairment losses during the 2007 period.
Depreciation and amortization expense decreased $35,419 or 2.6% from $1,343,009 for the year ended December 31, 2007 to $1,307,590 for the year ended December 31, 2008. This decrease was due primarily to a reduction of the amortization of the fair market value of leases for the Bassett, Spectrum, and Grand Pavilion retail centers of $76,546, offset by an increase of $51,836 in depreciation expense related to tenant improvements.
Interest income increased $162,040 or 118% from $137,160 for the year ended December 31, 2007 to $299,200 for the year ended December 31, 2008. This increase was due primarily to a significant increase in cash available for investment from the sale of our Addison Place apartment community in June 2008. Interest expense decreased $1,076,279, or 42.7%, from $2,518,355 for the year ended December 31, 2007 to $1,442,076 for the year ended December 31, 2008. This decrease was due primarily to:
• an increase of $502,305 of interest that was capitalized on our Northridge, Sawmill Village, and Peachtree Parkway land in accordance with SFAS No. 34, "Capitalization of Interest Cost"; and

• a $559,812 reduction in interest paid on six floating rate loans (Addison Place Shops, Northridge office building, Peachtree Parkway, Highway 20, Sawmill Village, and Westside) due to a decrease in the average 30-day LIBOR rate in 2008 compared to 2007.

These amounts were offset by a $24,942 increase in interest paid on our line of credit due to a higher balance outstanding on our line of credit during 2008 compared to 2007.
Legal settlement decreased $78,000 for the year ended December 31, 2007 compared to the year ended December 31, 2008. During 2007, we received $78,000 to settle the early lease terminations of two of our former retail tenants located at our Spectrum retail center. There were no legal settlements during 2008. Amortization of deferred financing and leasing costs increased $51,151, or 33.8%, from $151,225 for the year ended December 31, 2007 to $202,376 for the year ended December 31, 2008. This increase was due primarily to an increase of loan costs on our land loans as well as an increase of leasing costs for our four retail centers and office building.

Liquidity and Capital Resources
Overview
We made significant progress during 2008 with regard to our liquidity and balance sheet flexibility. On June 24, 2008, we closed the sale of our 403-unit Addison Place apartment community for $60,000,000, which resulted in net cash proceeds of $29,654,952. From these net proceeds, we paid cash distributions to our shareholders and unitholders of $5,005,586 on August 5, 2008 and of $2,362,909 on January 29, 2009. In addition, we improved our balance sheet flexibility by renewing four loans totaling $18,245,000, extending the maturities of those loans to various dates during 2010, and paying down the principal amount of those loans by a total of $1,552,000. We currently have only two land loans totaling $12,252,000 that mature in 2009. These two loans are the $8,175,000 loan on our Peachtree Parkway land and the $4,077,000 loan on our Highway 20 land, both of which mature on April 30, 2009. On August 28, 2008, we renewed our $2,500,000 unsecured, revolving line of credit to provide funds for short-term working capital purposes. The line of credit matures on September 1, 2009. As of March 23, 2009, there was no outstanding balance on the line of credit.
Sources and Uses of Capital
At December 31, 2008, we had $113,357,563 in total assets, of which $16,454,995, or 14.5%, consisted of cash. As of March 23, 2009, we held $13,145,000 in cash and cash equivalents. We believe that our most important uses of our capital resources will be:
(a) to repay, if necessary, part of the $12,252,000 that we will owe on April 30, 2009;

(b) to provide the equity required to develop and construct two new apartment communities; and

(c) to provide working capital to enable us to cover our negative operating cash flow until we complete our development and construction program.

Our cash resources are inadequate to cover the above uses fully. 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. 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 mortgage debt. We are currently using the cash proceeds from the sale of Addison Place to meet our short-term liquidity requirements, including general and administrative expenses, and improvements and renovations at existing properties. If we are unable to secure construction and permanent financing or otherwise refinance our short-term debt, we may be forced to sell one or more properties to repay our short-term debt. We expect to meet our long-term liquidity requirements, including future developments and debt maturities, from the proceeds of construction and permanent loans, and if necessary, from the sale of properties. We believe that any capital we need to fund the construction of a new multifamily property, in addition to a construction loan and our current cash balances, would come from the proceeds of a sale of another property, the contributions of a joint venture partner, or equity we raise privately.
Comparison of Twelve Months Ended December 31, 2008 to Twelve Months Ended December 31, 2007
Cash and cash equivalents increased $15,851,122 during the year ended December 31, 2008 compared to a decrease of $3,804,602 during the year ended December 31, 2007. The change is due to an increase in cash provided by investing activities of $55,907,421 offset by an increase in cash used in operating activities of $23,840 and an increase in cash used in financing activities of $36,227,857, as described in more detail below.

Net cash used in operating activities increased $23,840 from using $1,069,262 of cash during the year ended December 31, 2007 to using $1,093,102 of cash during the year ended December 31, 2008. This increase is due to:
• a $1,597,055 increase in the loss from continuing operations (before minority interest);

• a $614,199 decrease in cash provided by discontinued operations (Addison Place);

• a $240,819 decrease in amounts due to affiliates;

• a $99,344 decrease in security deposits and prepaid rent.

• a $58,185 decrease in the amortization of above and below market leases;

• a $52,817 decrease in the amortization of deferred compensation;

• a $70,328 decrease in depreciation and amortization expense

• a $36,838 decrease related to the forfeiture of restricted stock by a former employee; and

• a $14,752 decrease in the write-off of the fair market value of leases;

These amounts were offset by:
• a $2,555,000 increase in impairment loss on real estate;

• a $189,180 increase in accounts payable and accrued expenses relating to operations; and

• a $16,317 decrease in other assets.

Net cash provided by investing activities increased $55,907,421 from using $2,289,835 of cash during the year ended December 31, 2007 to $53,617,586 of cash provided by investing activities during the year ended December 31, 2008. This increase is due to:
• a $58,525,621 increase in cash provided by discontinued operations (Addison Place), of which $58,488,164 was provided by the sale of Addison Place on June 24, 2008 (before the payment of mortgage notes outstanding); and

• a $20,506 decrease related to the payment of leasing costs.

These amounts were offset by:
• a $1,567,557 increase in the development and construction of real estate assets;

• a $550,931 increase in restricted cash;

• a $407,516 decrease in accounts payable and accrued expenses related to investing activities; and

• a $112,702 decrease in due to affiliates.

Net cash used in financing activities increased $36,227,857 from using $445,505 of cash during the year ended December 31, 2007 to using $36,673,362 of cash during the year ended December 31, 2008. This increase is due to:
• a $28,623,577 increase in cash used by discontinued operations (Addison Place), of which $28,833,212 consisted of mortgage notes repaid or assumed by the buyer in connection with the sale of Addison Place on June 24, 2008;

• a $5,005,586 distribution paid to shareholders and unitholders on August 5, 2008;

• $815,000 used to repay land notes;

• An increase during 2008 of $777,696 used to repay construction notes;

• $400,000 used to repay the line of credit during 2008 compared to proceeds received of $400,000 during 2007;

• an increase during 2008 of $108,100 used to pay loan costs;

• an increase during 2008 of $70,698 used to repay an insurance premium note payable;

• $15,886 used to purchase treasury stock; and

• an increase of $11,314 in the principal repayment of mortgage notes payable.

Debt Summary
The table and accompanying footnotes on the following two pages explain our debt structure, including for each loan: the principal balance at December 31, 2008 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.

                         ROBERTS REALTY INVESTORS, INC.

                             DEBT SUMMARY SCHEDULE
                 (Listed in order of maturity by type of loan)
                            As of December 31, 2008

                                                                          Interest       Maturity       Balance at          Monthly          Dec. 31, 2008
                                         Lender         Interest Terms    Rate(1)          Date          Maturity           Payment             Balance

Permanent Mortgage Loans
                                     LaSalle Bank       Fixed-rate             5.43 %     07/11/13     $  6,016,331     $        40,565     $     6,625,209
Grand Pavilion Shopping Center (2)                      permanent
                                     LaSalle Bank       Fixed-rate             5.68 %     05/01/14        4,545,747              31,273           5,059,141
Spectrum Shopping Center (2)                            permanent
                                     LaSalle Bank       Fixed-rate             8.47 %     10/01/19        1,943,343              21,853           2,607,670
Bassett Shopping Center (2)                             permanent


Totals                                                                                                 $ 12,505,421     $        93,691     $    14,292,020


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           3,165,000


Totals                                                                                                 $  8,911,667                         $     9,165,000


Land Loans
Peachtree Parkway (6)                Wachovia Bank      LIBOR plus 400         5.88 %     04/30/09     $  8,175,000       Interest only     $     8,175,000
Highway 20 (6)                       Wachovia Bank      LIBOR plus 400         5.83 %     04/30/09        4,077,000      Interest only            4,077,000
Westside (4)                         Compass Bank       LIBOR plus 200         3.75 %     02/27/10        6,000,000       Interest only           6,000,000
Sawmill Village                      Bank of N. Ga.     LIBOR plus 175         2.22 %     02/28/10        3,000,000       Interest only           3,000,000


Totals                                                                                                 $ 21,252,000                         $    21,252,000


Line of Credit
Revolving $2,500,000 Line of
Credit (7)                           Compass Bank       LIBOR plus 200                    09/01/09     $          0       Interest only     $             0


Grand Totals                                                                                           $ 42,669,088                         $    44,709,020

(1) The interest rate shown for variable-rate debt is as of December 31, 2008.

(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 an option.

(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) As of March 23, 2009, this loan bears interest at LIBOR plus 425 basis points.

(7) This loan has an interest rate floor of 4.0%.

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, 2008

. . .