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, 2008; (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 develop, own, and operate real estate assets for lease as a self-administered, self-managed equity real estate investment trust, or REIT. We conduct our business through Roberts Properties Residential, L.P., which we refer to as the operating partnership. The operating partnership, either directly or through one of its wholly owned subsidiaries, owns all of our properties. At March 31, 2009, we owned an 81.08% interest in the operating partnership and are its sole general partner. We expect to continue to conduct our business in this organizational structure.

At May 7, 2009, we owned the following real estate assets, all of which are located in the north Atlanta metropolitan area:

· five tracts of undeveloped land totaling 104 acres in various phases of development and construction (Northridge, Sawmill Village, Peachtree Parkway, North Springs, and Highway 20);

· three neighborhood retail centers totaling 94,337 square feet (Bassett and Spectrum, both located near the Mall of Georgia, and the Addison Place Shops);

· a commercial office building totaling 37,864 square feet that is in its lease-up phase, part of which serves as our corporate headquarters (Northridge office building);

· a 62,323 square foot retail center held for redevelopment (Grand Pavilion retail center); and

· a tract of undeveloped land totaling 44 acres that we hold for investment (Westside).

Recent Developments

Recent Loan Renewals and Extensions

Until April 8, 2009, we had two loans from Wachovia Bank, N.A. that were scheduled to mature on April 30, 2009. These two loans totaled $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 obtained a loan commitment on March 19, 2009 from Touchmark National Bank to provide a $3,500,000 loan to refinance the Highway 20 Loan, subject to customary closing conditions. On April 8, 2009, we closed the Touchmark loan and repaid the Highway 20 loan in full, using the loan proceeds and our working capital. Consistent with our financial strategy to de-leverage our balance sheet and extend our debt maturities well into 2010, we reduced our debt by $577,000 and extended the maturity date to October 8, 2010. Under the extended

term, monthly payments consist of interest only at the Prime Rate with a floor of 5.50%, with a balloon payment at maturity of $3,500,000 plus accrued interest.

On April 27, 2009, Wachovia agreed to extend the maturity date of the $8,175,000 Peachtree Parkway loan to July 31, 2009. We paid Wachovia an extension fee of $10,219, or 12.5 basis points. Except for the extension of the maturity date, there were no other changes to the terms of the loan. We are currently in discussions with Wachovia to further extend the maturity date of the loan by one year, although we can offer no assurances in that regard.

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 $23,175,000 of debt maturing within the next twelve months 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 May 7, 2009:

· we have 10,126,380 outstanding shares of common stock, and

· the operating partnership has 1,434,582 outstanding units of limited partnership interest, with each unit being convertible into 1.647 shares of our common stock.

Short-Term Loans Maturing within the Next Twelve Months

As of May 7, 2009, we have four loans that mature within the next twelve months, other than our $2,500,000 line of credit that has no outstanding balance. These four loans total $23,175,000:

· the $8,175,000 Peachtree Parkway land loan, which matures on July 30, 2009;

· the $6,000,000 Westside land loan, which matures on February 27, 2010;

· the $3,000,000 Sawmill Village land loan, which matures on February 28, 2010; and

· the $6,000,000 Addison Place Shops construction loan, which matures on April 30, 2010.

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, and to fund any such paydown 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, Westside, Sawmill, and Addison Place Shops 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.

Continuing Negative Operating 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 $54,095,891 - 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 continue to be challenged by the continued weakness in the national and local economy. Therefore, 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.

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 we are finalizing our construction loans. We are in discussions with two regional banks on Northridge and one regional bank on Sawmill Village. We can offer no assurances, however, that we will be able to close one or more construction loans. 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.

Results of Operations

Comparison of Three Months Ended March 31, 2009 to Three Months Ended March 30, 2008

Loss from continuing operations increased $1,358,284, or 152.7%, from $889,302 for the three months ended March 31, 2008 to $2,247,586 for the three months ended March 31, 2009. We explain below the major variances between the three months ended March 31, 2008 and the three months ended March 31, 2009.

Total operating revenues decreased $40,106, or 6.4%, from $628,234 for the three months ended March 31, 2008 to $588,128 for the three months ended March 31, 2009. This decrease in operating revenues is due primarily to the decrease of straight line rent and above and below market rent of $20,778. The remaining decrease of $19,328 is due primarily to a decrease in our occupancy rate.

Operating expenses, consisting of personnel, utilities, repairs and maintenance, landscaping, property taxes, marketing, insurance, and other expenses, decreased $25,075, or 7.9%, from $316,772 for the three months ended March 31, 2008 to $291,697 for the three months ended March 31, 2009. This decrease in operating expenses is due primarily to a $20,858 decrease in property taxes.

General and administrative expenses increased $94,944, or 22.1%, from $429,651 for the three months ended March 31, 2008 to $524,595 for the three months ended March 31, 2009. This increase was due primarily to an increase of $100,067 in legal and stock exchange listing fees associated with the special distribution described above.

At March 31, 2009, we recorded a $1,411,000 impairment loss on the Grand Pavilion retail center. We had no impairment losses during the 2008 period.

Depreciation expense decreased $33,501, or 10.3%, from $324,501 for the three months ended March 31, 2008 to $291,000 for the three months ended March 31, 2009. This decrease was due to $35,140 in amortization of previous impairment charges and a $10,435 reduction of the amortization of fair value of leases at the Bassett, Spectrum, and Grand Pavilion retail centers, offset by an increase of $10,985 in depreciation expense related to tenant improvements.

Interest income increased $39,376, or 510.3%, from $7,717 for the three months ended March 31, 2008 to $47,093 for the three months ended March 31, 2009. This increase was due primarily to a significant increase in cash available for investment from the sale of the Addison Place apartment community.

Interest expense decreased $118,915, or 28.5%, from $417,712 for the three months ended March 31, 2008 to $298,797 for the three months ended March 31, 2009. This decrease was due to:

(a) a decrease in the 30-day LIBOR rate on our six floating rate loans (Addison Place Shops, Northridge office building, Peachtree Parkway, Highway 20, Sawmill, and Westside); and

(b) a $2,826,553 reduction of the principal amount of our debt over the past twelve months.

Amortization of deferred financing and leasing costs increased $29,101, or 79.5%, from $36,617 for the three months ended March 31, 2008 to $65,718 for the three months ended March 31, 2009. This

increase was due primarily to an increase in loan costs on our Peachtree Parkway and Highway 20 loan renewals in April 2009 as well as an increase in 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 $2,360,397 on January 29, 2009. In addition, in April 2009 we improved our balance sheet flexibility by refinancing the $4,077,000 loan on our Highway 20 land loan with another lender. In that refinancing, we extended the maturity of the loan to October 8, 2010 and paid down the principal amount of the loan by $577,000. We currently have four loans that mature within the next twelve months: three land loans totaling $17,175,000 that are secured by our Peachtree Parkway, Westside, Sawmill Village, and North Springs properties, and a $6,000,000 construction loan secured by the Addison Place Shops. The $2,500,000 line of credit matures on September 1, 2009. As of May 7, 2009, there was no outstanding balance on the line of credit.

Sources and Uses of Capital

At March 31, 2009, we had $109,021,219 in total assets, of which $13,085,601 or 12.0%, consisted of cash. As of May 7, 2009, we held $11,331,471 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 $23,175,000 that we will owe within the next twelve months;

(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 the operating cash balance, 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 Three Months Ended March 31, 2009 to Three Months Ended March 31, 2008

Cash and cash equivalents decreased $3,369,394 during the three months ended March 31, 2009 compared to an increase of $223,623 during the three months ended March 31, 2008. The decrease in cash and cash equivalents in 2009 is due to an increase in cash used by investing activities of $180,168, an increase in cash used in operating activities of $447,408, and an increase in cash used in financing activities of $2,965,441, as described in more detail below.

Net cash used in operating activities increased $447,408 from $268,317 of cash provided during the three months ended March 31, 2008 to using $179,091 of cash during the three months ended March 31, 2009. The increase in cash used is due to:

· a $1,358,284 increase in the loss from continuing operations (before noncontrolling interest);

· a $527,365 decrease in cash provided by discontinued operations (Addison Place);

· a $11,672 decrease in other assets;

· a $9,323 decrease in amounts due to affiliates;

· a $4,401 decrease in depreciation and amortization; and

· a $5,223 decrease in the amortization of deferred compensation.

These amounts were offset by:

· a $1,411,000 increase in impairment loss on real estate;

· $28,838 related to the forfeiture of restricted stock by a former employee;

· a $26,591 increase in security deposits and prepaid rent; and

· a $2,820 increase in accounts payable and accrued expenses relating to operations.

Net cash used by investing activities increased $180,168 from using $550,376 of cash during the three months ended March 31, 2008 to using $730,544 of cash for investing activities during the three months ended March 31, 2009. The increase in cash used is due to:

· a $137,161 increase in the development and construction of real estate assets;

· a $58,386 decrease in accounts payable and accrued expenses related to investing activities; and

· a $2,132 decrease in cash used by discontinued operations (Addison Place).

These amounts were offset by a $17,121 decrease in payment of lease costs.

Net cash used in financing activities increased $2,965,441 from $505,682 of cash provided during the three months ended March 31, 2008 to using $2,459,759 of cash during the three months ended March 31, 2009. The increase in cash used is due to:

· a $2,360,397 distribution paid to shareholders and unitholders;

· a $750,000 decrease in the line of credit payable;

· $10,000 used to pay loan costs;

· $7,982 used to purchase treasury stock; and

· a $5,980 increase in principal repayment on mortgage notes payable.

These amounts were offset by:

· a $103,997 decrease in cash used by discontinued operations (Addison Place);

· a $44,681 decrease in the repayment of insurance premium note payable; and

· a $20,240 increase in accounts payable and accrued expenses related to financing activities.

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 May 7, 2009

                 Principal
Calendar Year     Payments     Properties with Balloon Payments

2009            $  8,413,455   Peachtree Parkway
2010              21,784,045   Highway 20, Sawmill Village, Westside, Addison Shops,
                               Northridge Office Building
2011                 282,376
2012                 297,737
2013               6,256,980   Grand Pavilion retail center
Thereafter         6,958,006   Bassett and Spectrum retail centers

Total           $ 43,992,599

Short-Term Debt

We have a total of $23,175,000 in debt that matures on or before May 7, 2010. See "Material Events in 2009 - Short-Term Loans Maturing within the Next Twelve Months" above for how we intend to refinance or repay these loans.

Long-Term Debt

With respect to the debt that matures after May 7, 2009, we anticipate that we will repay only a small portion of the principal of that debt before maturity and that we will not have funds on hand sufficient to repay it at maturity. Our goal during the next twelve months is to lower the amount of debt on our balance sheet and significantly reduce our negative cash flow. We may sell one or more assets to independent purchasers or to Roberts Properties or an affiliate of Roberts Properties. We are also considering forming joint ventures and raising equity privately. We would use all or a substantial portion 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.

Effect of Floating Rate Debt

We have six loans and one line of credit that bear interest at floating rates. These loans had an aggregate outstanding balance of $29,786,667 at May 7, 2009, of which $26,286,667 bear interest at rates ranging from 175 to 425 basis points over the 30-day LIBOR rate and $3,500,000 bear an interest rate of Prime Rate with a floor of 5.50%. Changes in LIBOR and the prime rate that increase the interest rates on these loans will increase our interest expense. For example, a 1.0% increase in the interest rates on

those loans would increase our interest expense by approximately $297,867 per year and adversely affect our liquidity and capital resources to that degree.

Contractual Commitments

We pay Roberts Properties fees for various development services that include market studies, business plans, design, finish selection, interior design, and construction administration. We have a remaining contractual commitment of $1,042,500 in development fees to Roberts Properties. We also enter into construction contracts in the normal course of business with Roberts Construction. We have five ongoing construction contracts with Roberts Construction. Terms of the construction contracts are cost plus 10%, but we cannot yet estimate the total construction costs and thus the fees to Roberts Construction.

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.

Inflation

Because our retail and office leases typically include an escalation factor that provides for annual rents to increase by a specified percentage, we believe this reduces our risk of the adverse effects of inflation.

Critical Accounting Policies and Estimates

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

Cost Capitalization

We state our real estate assets at the lower of depreciated cost or fair value, if deemed impaired. The cost of buildings and improvements includes interest, property taxes, insurance, and development fees incurred during the construction period. We expense ordinary repairs and maintenance as incurred. We capitalize and depreciate major replacements and betterments over their estimated useful lives. Depreciation expense is computed over the estimated useful lives of 27.5 years for buildings and improvements, 15 years for land improvements, and five to seven years for furniture, fixtures, and equipment.

We capitalize direct costs associated with the development and construction of our real estate projects. We expense all internal costs associated with the acquisition and operation of these assets to general and administrative expense in the period we incur those costs. We capitalize interest on qualifying construction expenditures in accordance with SFAS No. 34, "Capitalization of Interest Cost," for our real estate assets. During the development and construction of a property, we capitalize related

interest costs, as well as other carrying costs such as property taxes and insurance. We begin to expense these items as the property becomes substantially complete and available for initial occupancy. Accordingly, we gradually reduce the amounts we capitalize as we complete construction. During the lease-up period, as a property transitions from initial occupancy to stabilized occupancy, revenues are generally insufficient to cover interest, carrying costs and operating expenses, resulting in an operating deficit. The size and duration of this lease-up deficit depends on how quickly construction is completed, how quickly we lease the property and what rent levels we achieve. Capitalization of interest and other carrying costs such as property taxes and insurance ceases entirely upon completion of development and construction activities.

Purchase Valuation

We allocate the purchase price of acquired real estate assets to land, building, and intangible assets based on their relative fair values. For tangible assets, classified as real estate assets, the values are determined as though the land was undeveloped and the buildings were vacant. Intangible assets typically consist of above or below market leases, customer relationships and the value of in-place leases. The fair value of any above or below market leases is amortized into operating revenues over the terms of the respective leases. The value of in-place leases is amortized over the term of the respective lease.

Asset Impairment Evaluation

We periodically evaluate our real estate assets to determine if there has been any impairment in the carrying value of the assets in accordance with SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 requires impairment losses to be recorded on long-lived assets used in . . .