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 June 30, 2009, we owned an 81.46% interest in the operating partnership and are its sole general partner. We expect to continue to conduct our business in this organizational structure.
At August 5, 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, 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 Renewal and Extension
On July 17, 2009, we closed an amendment to our $8,175,000 land loan with Wachovia Bank, N.A. that extended the maturity date of the loan from July 31, 2009 to July 31, 2010. In connection with the amendment, we paid Wachovia an extension fee of $40,875, or 50 basis points, and established at closing a $450,000 cash collateral account at Wachovia as an interest reserve. The loan requires monthly payments of interest only at the 30-day LIBOR index rate plus 350 basis points, with a LIBOR index rate floor of 2.00% per annum. The loan remains secured by our 23.5-acre parcel fronting Peachtree Parkway and cross-collateralized with the additional security interest in our 9.84-acre North Springs property.

Short-Term Loans Maturing within the Next Twelve Months As of August 5, 2009, we have four loans that mature within the next twelve months totaling $23,175,000:
• 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;

• the $6,000,000 Addison Place Shops construction loan, which matures on April 30, 2010; and

• the $8,175,000 Peachtree Parkway land loan, which matures on July 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 any of these loans or to reach agreement with the lender to extend the loan, the lender could foreclose on the property or properties that secure its loan, 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 $51,717,337 - are currently encumbered with land loans totaling $20,675,000. 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, a substantial portion 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 continued 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 (which we sold in June 2008), 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 to better position these assets for sale; and

• selling one or more land assets.

We may sell one or more land 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 with Roberts Properties.

Development and Construction Plans
We are moving forward with the development and construction of our next two apartment communities: Sawmill Village and Northridge. Despite the very challenging economic conditions, we believe this is a good time to create multifamily assets, and we are working to obtain 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 June 30, 2009 to Three Months Ended June 30, 2008
Loss from continuing operations increased $5,402,730 from $768,196 for the three months ended June 30, 2008 to $6,170,926 for the three months ended June 30, 2009. We explain below the major variances between the three months ended June 30, 2008 and the three months ended June 30, 2009.
Total operating revenues decreased $68,781, or 10.4%, from $663,301 for the three months ended June 30, 2008 to $594,520 for the three months ended June 30, 2009. Of this decrease, $55,602 was due to the decrease in occupancy at our retail centers. The remaining decrease of $13,179 was due to a decrease of straight line rent and above and below market rent.
Operating expenses, consisting of personnel, utilities, repairs and maintenance, landscaping, property taxes, marketing, insurance, and other expenses, decreased $1,858, or 0.6%, from $297,935 for the three months ended June 30, 2008 to $296,077 for the three months ended June 30, 2009. This decrease in operating expenses was due primarily to a $36,226 decrease in landscaping, repairs, and maintenance, offset by a $24,020 increase in property taxes and $10,678 in loss on fixed assets.
General and administrative expenses increased $39,744, or 9.6%, from $415,101 for the three months ended June 30, 2008 to $454,845 for the three months ended June 30, 2009. This increase was primarily due to:
• a $48,533 increase in legal expense;

• an $18,455 increase in bad debt expense; and

• a $10,218 increase in loans fees for the Peachtree Parkway extension;

offset by:
• a $17,250 decrease in director compensation; and

• a $15,778 decrease in restricted stock compensation.

For the three months ended June 30, 2009, we recorded $5,363,512 in impairment losses. We had no impairment losses during the 2008 period. The impairment losses consisted of:
• a $2,157,402 loss on the North Springs land;

• a $1,884,922 loss on the Addison Place Shops;

• a $699,948 loss at Bassett retail center; and

• a $621,240 loss on the Peachtree Parkway land.

Depreciation expense decreased $90,892, or 27.6%, from $329,838 for the three months ended June 30, 2008 to $238,946 for the three months ended June 30, 2009. This decrease was due to $83,264 in amortization of previous impairment charges and a $10,494 reduction of the amortization of fair value of leases at the Bassett, Spectrum, and Grand Pavilion retail centers, offset by an increase of $3,775 in depreciation expense related to tenant improvements.
Interest income increased $10,784, or 56.1%, from $19,231 for the three months ended June 30, 2008 to $30,015 for the three months ended June 30, 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 increased $45,462, or 12.7%, from $357,690 for the three months ended June 30, 2008 to $403,152 for the three months ended June 30, 2009. This increase was due to $101,879 of interest expensed on the Peachtree Parkway land in accordance with Statement of Financial Accounting Standards ("SFAS") No. 34, "Capitalization of Interest Cost." This was offset by:
• 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

• a $2,533,482 reduction of the principal amount of our debt over the past twelve months.

Amortization of deferred financing and leasing costs decreased $11,235, or 22.4%, from $50,164 for the three months ended June 30, 2008 to $38,929 for the three months ended June 30, 2009. This decrease was due to the full amortization of loan costs over the past year.
Comparison of Six Months Ended June 30, 2009 to Six Months Ended June 30, 2008 Loss from continuing operations increased $6,761,015, or 407.9%, from $1,657,497 for the six months ended June 30, 2008 to $8,418,512 for the six months ended June 30, 2009. We explain below the major variances between the six months ended June 30, 2008 and the six months ended June 30, 2009.
Total operating revenues decreased $108,887, or 8.4%, from $1,291,536 for the six months ended June 30, 2008 to $1,182,649 for the six months ended June 30, 2009. Of this decrease, $94,206 was due to the decrease in occupancy at our retail centers. The remaining decrease of $14,681 was due to a decrease of straight line rent and above and below market rent.
Operating expenses, consisting of personnel, utilities, repairs and maintenance, landscaping, property taxes, marketing, insurance, and other expenses, decreased $26,933, or 4.4%, from $614,707 for the six months ended June 30, 2008 to $587,774 for the six months ended June 30, 2009. This decrease in operating expenses was due primarily to a $43,918 decrease in landscaping, repairs, and maintenance, partially offset by a $10,678 loss on disposal of asset and $3,162 increase in property taxes.

General and administrative expenses increased $134,689, or 15.9%, from $844,752 for the six months ended June 30, 2008 to $979,441 for the six months ended June 30, 2009. This increase was due primarily to an increase of $148,600 in legal fees and additional stock exchange listing fees associated with the special distribution described above, partially offset by $16,500 in director compensation.
For the six months ended June 30, 2009, we recorded $6,774,512 in impairment losses. We had no impairment losses during the 2008 period. The impairment losses consisted of:
• a $2,157,402 loss on the North Springs land;

• a $1,884,922 loss at Addison Shops retail center;

• a $1,411,000 loss at Grand Pavilion retail center;

• a $699,948 loss at Bassett retail center; and

• a $621,240 loss on the Peachtree Parkway land.

Depreciation expense decreased $124,394, or 19.0%, from $654,339 for the six months ended June 30, 2008 to $529,945 for the six months ended June 30, 2009. This decrease was due to $115,207 in amortization of previous impairment charges and a $20,929 reduction of the amortization of fair value of leases at the Bassett, Spectrum, and Grand Pavilion retail centers, offset by an increase of $14,761 in depreciation expense related to tenant improvements.
Interest income increased $50,159, or 186.1%, from $26,949 for the six months ended June 30, 2008 to $77,108 for the three months ended June 30, 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 $73,453, or 9.5%, from $775,403 for the six months ended June 30, 2008 to $701,950 for the six months ended June 30, 2009. This increase was due to $101,879 of interest that was expensed on the Peachtree Parkway land in accordance with SFAS No. 34. This was offset by:
• 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

• a $2,533,482 reduction of the principal amount of our debt over the past twelve months.

Amortization of deferred financing and leasing costs increased $17,866, or 20.6%, from $86,781 for the six months ended June 30, 2008 to $104,647 for the six months ended June 30, 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 the past year 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. In July 2009, we also extended our $8,175,000 Peachtree Parkway loan to July 31, 2010. 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. Our $2,500,000 line of credit matures on September 1, 2009. As of August 5, 2009, there was no outstanding balance on the line of credit.

Sources and Uses of Capital
At June 30, 2009, we had $101,969,872 in total assets, of which $10,954,230, or 10.7%, consisted of cash. As of August 5, 2009, we held $10,033,622 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 three 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 Six Months Ended June 30, 2009 to Six Months Ended June 30, 2008 Cash and cash equivalents decreased $5,500,765 during the six months ended June 30, 2009 compared to an increase of $25,555,102 during the six months ended June 30, 2008. The decrease in cash and cash equivalents in 2009 was due to an increase in cash used in operating activities of $630,173, an increase in cash used by investing activities of $57,007,054, and a decrease in cash used in financing activities of $26,581,360, as described in more detail below.

Net cash used in operating activities increased $630,173 from $75,491 of cash used during the six months ended June 30, 2008 to using $705,664 of cash during the six months ended June 30, 2009. The increase was primarily due to:
• an $6,761,015 increase in net loss from continuing operations (before noncontrolling interest);

• a $628,481 decrease in cash provided by discontinued operations (Addison Place);

• a $106,496 decrease in depreciation and amortization;

• a $53,755 decrease in accounts payable and accrued expenses relating to operations;

• a $21,001 decrease in amortization of deferred compensation;

• a $3,333 decrease in other assets; and

• a $1,172 decrease in amortization of above and below market leases.

These amounts were offset by:
• an $6,774,512 increase in impairment loss on real estate;

• a $131,052 increase in amounts due to affiliates;

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

• a $10,678 loss on disposal of asset.

Net cash used in investing activities increased $57,007,054 from providing $55,451,513 of cash during the six months ended June 30, 2008 to using $1,555,541 of cash for investing activities during the six months ended June 30, 2009. This decrease was primarily due to:
• a $58,583,695 decrease due to the sale of the Addison Place on June 24, 2008 (before the payment of mortgage notes outstanding);

• a $56,694 decrease in accounts payable and accrued expenses related to investing activities; and

• a $23,854 increase in restricted cash.

These amounts were offset by a $1,630,236 decrease in the development and construction of real estate assets and a $26,953 decrease in payment of leasing costs.
Net cash used in financing activities decreased $26,581,360 from $29,820,920 of cash used during the six months ended June 30, 2008 to using $3,239,560 of cash during the six months ended June 30, 2009. The decrease in cash used was due to:
• a $29,019,538 decrease due to the sale of Addison Place on June 24, 2008 (of which $28,833,212 related to the repayment of mortgage notes or notes assumed by the buyer);

• a $400,000 decrease in payments on the line of credit;

• a $90,073 decrease in the repayment of insurance premium note payable;

• a $53,172 decrease in loan cost payments; and

• a $13,334 decrease in repayment of construction note payable.

These amounts were offset by:
• $2,360,397 in distributions paid to shareholders and unitholders in January 2009;

• a $577,000 principal payment made on the Highway 20 loan in April 2009;

• $43,474 used to purchase treasury stock;

• a $9,635 increase in principal repayment on mortgage notes payable; and

• a $4,251 decrease 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 August 5, 2009

Calendar       Principal
Year            Payments                       Properties with Balloon Payments

2009          $    137,565
2010            29,959,045      Highway 20, Sawmill Village, Westside, Addison Shops,
                                Northridge Office Building, Peachtree Parkway
2011               282,376
2012               297,737
2013             6,256,980      Grand Pavilion retail center
Thereafter       6,958,006      Bassett and Spectrum retail centers


Total         $ 43,891,709

Short-Term Debt
We have a total of $23,175,000 in debt that matures on or before August 5, 2010. See "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 August 5, 2010, 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 with 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 $29,746,667 at August 5, 2009. Loans totaling $26,246,667 bear interest at rates ranging from 175 to 350 basis points over the 30-day LIBOR rate, and a $3,500,000 loan bears interest at the 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 these loans would increase our interest expense by approximately $297,467 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 $329,963 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, . . .