POST PROPERTIES INC/ POST APARTMENT HOMES L.P.
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, DC 20549
Form 10-K
[X] ANNUAL REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2006
OR
[ ] TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-12080
Commission file number 0-28226
POST PROPERTIES, INC.
POST APARTMENT HOMES,
L.P.
(Exact name of registrants as
specified in their charters)
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Georgia
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58-1550675
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Georgia
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58-2053632
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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4401 Northside Parkway,
Suite 800, Atlanta, Georgia 30327
(Address of principal executive
office zip code)
(404) 846-5000
(Registrants telephone
number, including area code)
Securities registered pursuant to
section 12(b) of the Act:
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Name of Each Exchange on
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Title of each class
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Which Registered
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Common Stock, $.01 par value
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New York Stock Exchange
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81/2%
Series A Cumulative
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New York Stock Exchange
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Redeemable Preferred Shares,
$.01 par value
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75/8%
Series B Cumulative
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New York Stock Exchange
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Redeemable Preferred Shares,
$.01 par value
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Securities registered pursuant to
Section 12(g) of the Act: None
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Name of Each Exchange on
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Title of each class
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Which Registered
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None
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None
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Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
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Post Properties, Inc.
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Yes[X]
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No[ ]
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Post Apartment Homes, L.P.
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Yes[ ]
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No[X]
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Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
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Post Properties, Inc.
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Yes[ ]
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No[X]
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Post Apartment Homes, L.P.
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Yes[ ]
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No[X]
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Indicate by check mark whether the Registrants (1) have
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
Registrants were required to file such reports), and
(2) have been subject to such filing requirements for the
past 90 days.
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Post Properties, Inc.
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Yes[X]
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No[ ]
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Post Apartment Homes, L.P.
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Yes[X]
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No[ ]
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Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or
information statements incorporated by reference in
Part III of this
Form 10-K
or any amendment to this
Form 10-K. [ ]
The aggregate market value of the shares of common stock held by
non-affiliates (based upon the closing sale price on the New
York Stock Exchange) on June 30, 2006 was approximately
$1,906,489,600. As of February 15, 2007, there were
43,565,126 shares of common stock, $.01 par value,
outstanding.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large accelerated
filer in
Rule 12b-2
of the Exchange Act.
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Post Properties, Inc.
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Large Accelerated Filer[X]
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Accelerated
Filer[ ]
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Non-Accelerated
Filer[ ]
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Post Apartment Homes, L.P.
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Large Accelerated
Filer[ ]
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Accelerated
Filer[ ]
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Non-Accelerated Filer[X]
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the Exchange Act).
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Post Properties, Inc.
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Yes[ ]
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No[X]
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Post Apartment Homes, L.P.
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Yes[ ]
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No[X]
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DOCUMENTS INCORPORATED BY
REFERENCE
Portions of the Post Properties, Inc.s Proxy Statement in
connection with its Annual Meeting of Shareholders to be held
May 24, 2007 are incorporated by reference in Part III.
TABLE OF
CONTENTS
FINANCIAL INFORMATION
PART I
The
Company
Post Properties, Inc. and its subsidiaries develop, own and
manage upscale multifamily apartment communities in selected
markets in the United States. As used in this report, the term
Company includes Post Properties, Inc. and its
subsidiaries, including Post Apartment Homes, L.P. (the
Operating Partnership), unless the context indicates
otherwise. The Company, through its wholly-owned subsidiaries,
is the general partner and owns a majority interest in the
Operating Partnership which, through its subsidiaries, conducts
substantially all of the on-going operations of the Company. At
December 31, 2006, approximately 44.5%, 18.8%, 12.1% and
9.7% (on a unit basis) of the Companys communities were
located in the Atlanta, Georgia, Dallas, Texas, the greater
Washington, D.C. and Tampa, Florida metropolitan areas,
respectively. At December 31, 2006, the Company owned
21,745 apartment units in 61 apartment communities, including
545 apartment units in two communities held in unconsolidated
entities and 1,181 apartment units in four communities (and the
expansion of one community) currently under construction
and/or in
lease-up.
The Company is also developing 230 for-sale condominium homes
and is converting apartment homes in four communities initially
consisting of 597 units (including 121 units in one
community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary. The Company
is a fully integrated organization with multifamily development,
operations and asset management expertise. The Company has
approximately 790 employees, 16 of whom are parties to a
collective bargaining agreement.
The Company is a self-administrated and self-managed equity real
estate investment trust (a REIT). A REIT is a legal
entity which holds real estate interests and is generally not
subject to federal income tax on the income it distributes to
its shareholders.
The Companys and the Operating Partnerships
executive offices are located at 4401 Northside Parkway,
Suite 800, Atlanta, Georgia 30327 and their telephone
number is
(404) 846-5000.
Post Properties, Inc., a Georgia corporation, was incorporated
on January 25, 1984, and is the successor by merger to the
original Post Properties, Inc., a Georgia corporation, which was
formed in 1971. The Operating Partnership is a Georgia limited
partnership that was formed in July 1993 for the purpose of
consolidating the operating and development businesses of the
Company and the
Post®
apartment portfolio described herein.
The
Operating Partnership
The Operating Partnership, through the operating divisions and
subsidiaries described below, is the entity through which all of
the Companys operations are conducted. At
December 31, 2006, the Company, through wholly-owned
subsidiaries, controlled the Operating Partnership as the sole
general partner and as the holder of 98.4% of the common units
in the Operating Partnership (the Common Units) and
100% of the preferred units (the Perpetual Preferred
Units). The other limited partners of the Operating
Partnership who hold Common Units are those persons who, at the
time of the Companys initial public offering, elected to
hold all or a portion of their interests in the form of Common
Units rather than receiving shares of common stock. Holders of
Common Units may cause the Operating Partnership to redeem any
of their Common Units for, at the option of the Operating
Partnership, either one share of Common Stock or cash equal to
the fair market value thereof at the time of such redemption.
The Operating Partnership presently anticipates that it will
cause shares of common stock to be issued in connection with
each such redemption (as has been done in all redemptions to
date) rather than paying cash. With each redemption of
outstanding Common Units for common stock, the Companys
percentage ownership interest in the Operating Partnership will
increase. In addition, whenever the Company issues shares of
common and preferred stock, the Company will contribute any net
proceeds to the Operating Partnership, and the Operating
Partnership will issue an equivalent number of Common Units or
Perpetual Preferred Units, as appropriate, to the Company.
As the sole shareholder of the Operating Partnerships sole
general partner, the Company has the exclusive power under the
limited partnership agreement of the Operating Partnership to
manage and conduct the business of the Operating Partnership,
subject to the consent of a majority of the outstanding Common
Units in connection with the sale of all or substantially all of
the assets of the Operating Partnership or in connection with a
dissolution of the Operating Partnership. The board of directors
of the Company manages the affairs of the Operating Partnership
by directing the affairs of the Company. In general, the
Operating Partnership cannot be terminated, except in connection
with a sale of all or substantially all of the assets of the
Company, until January 2044 without the approval of each limited
partner who received Common Units of the Operating Partnership
in connection with the Companys initial public offering.
The Companys indirect limited and general partner
interests in the Operating Partnership entitle it to share in
cash
1
Post Properties, Inc.
Post Apartment Homes, L.P.
distributions from, and in the profits and losses of, the
Operating Partnership in proportion to the Companys
percentage interest in the Operating Partnership and indirectly
entitle the Company to vote on all matters requiring a vote of
the Operating Partnership.
As part of the formation of the Operating Partnership, a holding
company, Post Services, Inc. (Post Services) was
organized as a separate corporate subsidiary of the Operating
Partnership. Through Post Services and its subsidiaries, the
Operating Partnership will develop and sell for-sale condominium
homes and provide other services to third parties. Post Services
is a taxable REIT subsidiary as defined in the
Internal Revenue Code. The Operating Partnership owns 100% of
the voting and nonvoting common stock of Post Services, Inc.
Business
Strategy
The Companys mission is to deliver superior satisfaction
and value to its residents, associates and investors, with a
vision to be the first choice in quality multifamily living. Key
elements of the Companys business strategy are as follows:
Investment,
Disposition and Acquisition Strategy
The Companys investment, disposition and acquisition
strategy is aimed to achieve a real estate portfolio that has
uniformly high quality, low average age properties and cash flow
diversification. The Company plans to achieve its objectives by
reducing its asset concentration in Atlanta, Georgia, while at
the same time, building critical mass in other core markets
where it may currently lack the portfolio size to achieve
operating efficiencies and the full value of the
Post®
brand. The Company defines critical mass for this purpose as at
least 2,000 apartment units or $200 million of investment
in a particular market. The Companys goal ultimately is to
reduce its concentration in Atlanta, Georgia, measured by
dollars invested, to not more than 30% of the portfolio.
The Company plans to achieve its objectives by selling older and
least competitively located properties, and it may also consider
selling joint venture interests in some of its core properties
or selectively converting some of these properties to for-sale
(condominium) housing depending on market conditions. The
Company expects that this strategy will provide capital to
reinvest in new communities in dynamic neighborhoods and may
also allow for leveraged returns through joint venture
structures that preserve
Post®
branded property and asset management.
The Company is focusing on a limited number of major cities and
has regional value creation capabilities. The Company has
investment and development personnel to pursue acquisitions,
development, rehabilitations and dispositions of apartment
communities and select multifamily for-sale (condominium)
opportunities that are consistent with its market strategy. The
Companys value creation capabilities include the regional
value creation teams in Atlanta, Georgia (focusing on the
Southeast), Washington, DC (focusing on the mid-Atlantic market
and New York, New York) and Dallas, Texas (focusing on the
Southwest, currently limited to the Texas market). The Company
operates in nine markets as of December 31, 2006. The
Company expects to enter the Raleigh, North Carolina market in
2007.
Key elements of the Companys investment and acquisition
strategy include instilling a disciplined team approach to
development and acquisition decisions and selecting sites and
properties in infill suburban and urban locations in strong
primary markets that serve the higher-end multifamily consumer.
The Company plans to develop, construct and continually maintain
and improve its apartment communities consistent with quality
standards management believes are synonymous with the
Post®
brand. New acquisitions will be limited to properties that meet,
or that are expected to be repositioned and improved to meet,
its quality and location requirements. The Company will
generally pursue acquisitions either to rebalance its property
portfolio, using the proceeds of asset sales to redeploy capital
in markets where critical mass is desired, or to pursue
opportunistic purchases on a selective basis where market
conditions warrant.
Post®
Brand Name Strategy
The
Post®
brand name has been cultivated for more than 35 years, and
its promotion has been integral to the Companys success.
Company management believes that the
Post®
brand name is synonymous with quality upscale apartment
communities that are situated in desirable locations and that
provide a high level of resident service. The Company believes
that it provides its residents with a high level of service,
including attractive landscaping and numerous amenities,
including controlled access, high-speed connectivity,
on-site
business centers,
on-site
courtesy officers, urban vegetable gardens and fitness centers
at a number of its communities.
Key elements in implementing the Companys brand name
strategy include extensively utilizing the trademarked brand
name and coordinating its advertising programs to increase brand
name recognition. During recent years, the Company implemented
new marketing campaigns, started new customer service programs
designed to maintain high levels of resident satisfaction and
have provided employees and residents new opportunities for
community involvement, all intended to enhance what it believes
is a valuable asset.
2
Post Properties, Inc.
Post Apartment Homes, L.P.
In early 2005, the Company launched a new for-sale housing
brand, Post Preferred
Homestm,
which serves as the unified marketing umbrella for the
Companys for-sale ventures, including developing new
communities and converting existing assets into upscale for-sale
condominium housing in several key markets. The Companys
for-sale ventures are marketed under the Post Preferred
Homestm
brand to differentiate for-sale product from the Companys
rental portfolio while capitalizing on the Companys unique
brand heritage.
Service
and Associate Development Strategy
The Companys service orientation strategy includes
utilizing independent third parties to regularly measure
resident satisfaction and providing performance incentives to
its associates linked to delivering a high level of service and
enhancing resident satisfaction. The Company also achieves its
objective by investing in the development and implementation of
training programs focused on associate development, improving
the quality of its operations and the delivery of resident
service.
Operating
Strategy
The Companys operating strategy includes striving to be an
innovator and a leader in anticipating customer needs while
achieving operating consistency across its properties. The
Company also will continue to explore opportunities to improve
processes and technology that drive efficiency in its business.
Since 2005, the Company implemented new property operating,
centralized procurement and revenue pricing software for this
purpose.
Financing
Strategy
The Companys financing strategy is to maintain a strong
balance sheet and to maintain its investment grade credit
rating. The Company plans to achieve its objectives by generally
maintaining total effective leverage (debt and preferred equity)
as a percentage of undepreciated real estate assets to not more
than 55%, by generally limiting variable rate indebtedness as a
percentage of total indebtedness to not more than 25% of
aggregate indebtedness, and by maintaining adequate liquidity
through its unsecured lines of credit. At December 31,
2006, the Companys total effective leverage (debt and
preferred equity) as a percentage of undepreciated real estate
assets and its total variable rate indebtedness as a percentage
of total indebtedness were below these percentages.
Operating
Divisions
The major operating divisions of the Company include Post
Apartment Management, Post Investment Group and Post Corporate
Services. Each of these operating divisions is discussed below.
Post
Apartment Management
Post Apartment Management is responsible for the
day-to-day
operations of all
Post®
communities including community leasing, property management,
personnel recruiting, training and development, maintenance and
security. Post Apartment Management also conducts short-term
corporate apartment leasing activities and is the largest
division in the Company (based on the number of employees).
Post
Investment Group
Post Investment Group is responsible for all development,
acquisition, rehabilitation, disposition, for-sale (condominium)
and asset management activities of the Company. For development,
this includes site selection, zoning and regulatory approvals,
project design and construction management. This division is
also responsible for apartment community acquisitions as well as
property dispositions and strategic joint ventures that the
Company undertakes as part of its investment strategy. The
division recommends and executes major value added renovations
and redevelopments of existing communities as well as direction
for investment levels within each city and any new geographic
market areas and new product types that the Company may consider.
Post
Corporate Services
Post Corporate Services provides executive direction and control
to the Companys other divisions and subsidiaries and has
responsibility for the creation and implementation of all
Company financing, capital and risk management strategies. All
accounting, management reporting, compliance, information
systems, human resources, legal, risk management and insurance
services required by the Company and all of its affiliates are
centralized in Post Corporate Services.
Operating
Segments
The Post Apartment Management division of the Company manages
the owned apartment communities based on the operating segments
associated with the various stages in the apartment ownership
lifecycle. The Companys primary
3
Post Properties, Inc.
Post Apartment Homes, L.P.
operating segments are described below. In addition to these
segments, all commercial properties and other ancillary service
and support operations are reviewed and managed separately and
in the aggregate by Company management.
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Fully stabilized communities those apartment
communities which have been stabilized (the earlier of the point
at which a property reaches 95% occupancy or one year after
completion of construction) for both the current and prior year.
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Communities stabilized during prior year communities
which reached stabilized occupancy in the prior year.
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Condominium conversion communities those portions of
existing apartment communities being converted into condominiums
that are reflected in continuing operations under
SFAS No. 144 (see note 1 to the consolidated
financial statements).
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Development, rehabilitation and
lease-up
communities those communities that are under
development, rehabilitation and in
lease-up but
were not stabilized by the beginning of the current year,
including communities that stabilized during the current year.
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Acquired communities those communities acquired in
the current or prior year.
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A summary of segment operating results for 2006, 2005 and 2004
is included in note 15 to the Companys consolidated
financial statements. Additionally, segment operating
performance for such years is discussed in Item 7,
Managements Discussion and Analysis of Financial
Condition and Results of Operations in this annual report
on
Form 10-K.
Summary
of Investment and Disposition Activity
During the five-year period from January 1, 2002 through
December 31, 2006, the Company and its affiliates have
developed and completed 2,608 apartment units in 10 apartment
communities including the expansion of three communities, and
sold 30 apartment communities containing an aggregate of 13,174
apartment units. During the same period, the Company acquired 5
apartment communities containing 1,487 units. The Company
and its affiliates have sold apartment communities after holding
them for investment periods that generally range up to twenty
years after acquisition or development. The following table
shows a summary of the Companys development and sales
activity during these periods.
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2006
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2005
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2004
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2003
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2002
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Units developed and completed
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468
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2,140
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Units acquired
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669
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(1)
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319
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499
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Units sold
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(1,342
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)(2)
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(3,051
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)(4)
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(3,880
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(2,236
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(2,665
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Units sold as condominiums or
currently being converted into for-sale condominiums
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(731
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)(5)
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Total units completed and owned by
the Company and its affiliates (including units held for sale)
at year-end
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20,564
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(3)
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21,237
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(6)
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24,700
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28,081
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29,849
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Total revenues from continuing
operations (in thousands)
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$
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300,096
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$
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280,496
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$
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266,792
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$
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251,851
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$
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247,705
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(1)
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Excludes 150 units currently
in lease-up,
as the community was undergoing renovation upon purchase.
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(2)
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Includes a net reduction of 2
apartment units to reflect the addition of four apartment units
at one community and a reduction of six apartment units at
another community to facilitate an expansion.
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(3)
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Excludes 1,181 apartment units
currently under development or in
lease-up at
December 31, 2006.
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(4)
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Includes reduction of 4 apartment
units that were combined with other units.
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(5)
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Represents all units within
communities that began conversion into condominiums in 2005. Of
these units, 219 and 282 units were sold in 2005 and 2006,
respectively.
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(6)
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Excludes 205 apartment units under
development at December 31, 2005.
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4
Post Properties, Inc.
Post Apartment Homes, L.P.
Current
Development Activity
At December 31, 2006, the Company had three communities and
one community expansion under development and
lease-up,
containing 1,031 apartment units, and 230 for-sale condominium
homes under development in two communities. These communities
are summarized in the table below.
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Costs
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Incurred
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Estimated
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Number
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Estimated
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as of
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Quarter of
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Quarter of
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Quarter of
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Estimated
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Units
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of
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Construction
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December 31,
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Construction
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First Units
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Stabilized
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Units
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Quarter
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Under
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Units
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Community
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Location
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Units
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Cost
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2006
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Start
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Available
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Occupancy(1)
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Leased(2)
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Sell-out
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Contract(3)
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Closed
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($ in millions)
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($ in millions)
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Apartments:
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Post
Alexandertm
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Atlanta, GA
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307
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$
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62.8
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$
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17.3
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2Q 2006
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1Q 2008
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1Q 2009
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N/A
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N/A
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N/A
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Post Carlyle
Squaretm
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Washington, D.C.
Area
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205
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59.0
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54.4
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4Q 2004
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4Q 2006
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4Q 2007
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43
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N/A
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N/A
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N/A
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Post
Eastsidetm
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Dallas, TX
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435
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53.9
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8.2
|
|
|
|
4Q 2006
|
|
|
|
4Q 2007
|
|
|
|
1Q 2009
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post Hyde
Park®
(expansion)(4)
|
|
Tampa, FL
|
|
|
84
|
|
|
|
18.6
|
|
|
|
5.5
|
|
|
|
4Q 2006
|
|
|
|
1Q 2008
|
|
|
|
4Q 2008
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Apartments
|
|
|
|
|
1,031
|
|
|
$
|
194.3
|
|
|
$
|
85.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Condominiums at
Carlyle
Squaretm
|
|
Washington, D.C.
Area
|
|
|
145
|
|
|
$
|
45.3
|
|
|
$
|
36.5
|
|
|
|
4Q 2004
|
|
|
|
2Q 2007
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
2Q 2008
|
|
|
|
94
|
|
|
|
|
|
Mercer
Squaretm
|
|
Dallas, TX
|
|
|
85
|
|
|
|
17.3
|
|
|
|
8.5
|
|
|
|
2Q 2006
|
|
|
|
3Q 2007
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
3Q 2008
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Condominiums
|
|
|
|
|
230
|
|
|
$
|
62.6
|
|
|
$
|
45.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company defines stabilized occupancy as the earlier to occur
of (i) the attainment of 95% physical occupancy on the
first day of any month or (ii) one year after completion of
construction.
|
|
(2)
|
As of January 29, 2007.
|
|
(3)
|
As of January 29, 2007, represents the total number of
units under contract for sale upon completion and delivery of
the units. There can be no assurance that condominium homes
under contract will close.
|
|
(4)
|
Total estimated construction costs for the Post Hyde
Park®
expansion include the estimated replacement costs of six
apartment units at the Companys existing Hyde Park
community that are being demolished to accommodate the expansion.
|
Competition
All of the Companys apartment and for-sale (condominium)
communities are located in developed markets that include other
upscale apartments and for-sale (condominium) projects owned by
numerous public and private companies. Some of these companies
may have substantially greater resources and greater access to
capital than the Company, allowing them to grow at rates greater
than the Company. The number of competitive upscale apartment
and for-sale (condominium) properties and companies in a
particular market could have a material effect on the
Companys ability to lease apartment units at its apartment
communities, including any newly developed or acquired
communities, and on the rents charged, and could have a material
effect on the Companys ability to sell for-sale
(condominium) units and on the selling prices of such units. In
addition, other forms of residential properties, including
single family housing and town homes, provide housing
alternatives to potential residents of upscale apartment
communities or potential purchasers of for-sale (condominium)
units.
The Company competes for residents in its apartment communities
based on its high level of resident service, the quality of its
apartment communities (including its landscaping and amenity
offerings) and the desirability of its locations. Resident
leases at its apartment communities are priced competitively
based on market conditions, supply and demand characteristics,
and the quality and resident service offerings of its
communities. The Company does not seek to compete on the basis
of providing the low-cost solution for all residents.
Americans
with Disabilities Act and Fair Housing Act
The Companys multi-family housing communities and any
newly acquired multi-family housing communities must comply with
Title III of the Americans with Disabilities Act (the
ADA) to the extent that such properties are
public accommodations
and/or
commercial facilities as defined by the ADA.
Compliance with the ADA requirements could require removal of
structural barriers to handicapped access in certain public
areas of the Companys multi-family housing communities
where such removal is readily achievable. The ADA does not,
however, consider residential properties, such as multi-family
housing communities, to be public accommodations or commercial
facilities, except to the extent portions of such facilities,
such as the leasing office, are open to the public. The Company
must also comply
5
Post Properties, Inc.
Post Apartment Homes, L.P.
with the Fair Housing Amendment Act of 1988, or the FHAA, which
requires that apartment communities first occupied after
March 13, 1991 be accessible to persons with disabilities.
Noncompliance with the FHAA and ADA could result in the
imposition of fines, awards of damages to private litigants,
payment of attorneys fees and other costs to plaintiffs,
substantial litigation costs and substantial costs of
remediation. Compliance with the FHAA could require removal of
structural barriers to handicapped access in a community,
including the interiors of multi-family housing units covered
under the FHAA. In addition to the ADA and FHAA, state and local
laws exist that impact the Companys multi-family housing
communities with respect to access thereto by persons with
disabilities. Further, legislation or regulations adopted in the
future may impose additional burdens or restrictions on the
Company with respect to improved access by persons with
disabilities. The ADA, FHAA, or other existing or new
legislation may require the Company to modify its existing
properties. These laws may also restrict renovations by
requiring improved access to such buildings or may require the
Company to add other structural features that increase its
construction costs.
Recently there has been heightened scrutiny of multifamily
housing communities for compliance with the requirements of the
FHAA and ADA. In November 2006, the Equal Rights Center, or ERC,
filed a lawsuit against the Company and the Operating
Partnership alleging various violations of the FHAA and the ADA
at certain properties designed, constructed or operated by the
Company and the Operating Partnership. The ERC seeks
compensatory and punitive damages in unspecified amounts, an
award of attorneys fees and costs of suit, as well as
preliminary and permanent injunctive relief that includes
retrofitting multi-family housing units and public use areas to
comply with the FHAA and ADA and prohibiting construction or
sale of noncompliant units or complexes.
Due to the preliminary nature of the litigation, it is not
possible to predict or determine the outcome of the legal
proceeding, nor is it possible to estimate the amount of loss,
if any, that would be associated with an adverse decision. The
Company cannot ascertain the ultimate cost of compliance with
the ADA, FHAA or other similar state and local legislation and
such costs are not likely covered by insurance policies. The
cost associated with ongoing litigation or compliance could be
substantial and could adversely effect the Companys
business, results of operations and financial condition.
Environmental
Regulations
The Company is subject to federal, state and local environmental
laws, ordinances, and regulations that apply to the development
of real property, including construction activities, the
ownership of real property, and the operation of multifamily
apartment and for-sale (condominium) communities.
The Company has instituted a policy that requires an
environmental investigation of each property that it considers
for purchase or that it owns and plans to develop. The
environmental investigation is conducted by a qualified
third-party environmental consultant in accordance with
recognized industry standards. The environmental investigation
report is reviewed by the Company and counsel prior to purchase
and/or
development of any property. If the environmental investigation
identifies evidence of potentially significant environmental
contamination that merits additional investigation, sampling of
the property is performed by the environmental consultant.
If necessary, remediation or mitigation of contamination,
including removal of contaminated soil
and/or
underground storage tanks, placement of impervious barriers, or
creation of land use or deed restrictions, is undertaken either
prior to development or at another appropriate time. When
performing remediation activities, the Company is subject to a
variety of environmental requirements. In some cases, the
Company obtains state approval of the selected remediation and
mitigation measures by entering into voluntary environmental
cleanup programs administered by state agencies.
In developing properties and constructing apartment and for-sale
(condominium) communities, the Company utilizes independent
environmental consultants to determine whether there are any
flood plains, wetlands or other environmentally sensitive areas
that are part of the property to be developed. If flood plains
are identified, development and construction work is planned so
that flood plain areas are preserved or alternative flood plain
capacity is created in conformance with federal and local flood
plain management requirements. If wetlands or other
environmentally sensitive areas are identified, the Company
plans and conducts its development and construction activities
and obtains the necessary permits and authorizations in
compliance with applicable legal standards. In some cases,
however, the presence of wetlands
and/or other
environmentally sensitive areas could preclude, severely limit,
or otherwise alter the proposed site development and
construction activities.
Storm water discharge from a construction site is subject to the
storm water permit requirements mandated under the Clean Water
Act. In most jurisdictions, the state administers the permit
programs. The Company currently anticipates that it will be able
to obtain and materially comply with any storm water permits
required for new development. The Company
6
Post Properties, Inc.
Post Apartment Homes, L.P.
has obtained and is in material compliance with the construction
site storm water permits required for its existing development
activities.
The Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. sec. 9601 et seq.
(CERCLA), and comparable state laws subject the
owner or operator of real property or a facility and persons who
arranged for off-site disposal activities to claims or liability
for the costs of removal or remediation of hazardous substances
that are released at, in, on, under, or from real property or a
facility. In addition to claims for cleanup costs, the presence
of hazardous substances on or the release of hazardous
substances from a property or a facility could result in a claim
by a private party for personal injury or property damage or
could result in a claim from a governmental agency for other
damages, including natural resource damages. Liability under
CERCLA and comparable state laws can be imposed on the owner or
the operator of real property or a facility without regard to
fault or even knowledge of the release of hazardous substances
and other regulated materials on, at, in, under, or from the
property or facility. Environmental liabilities associated with
hazardous substances also could be imposed on the Company under
other applicable environmental laws, such as the Resource
Conservation and Recovery Act (and comparable state laws), or
common-law principles. The presence of hazardous substances in
amounts requiring response action or the failure to undertake
necessary remediation may adversely affect the owners
ability to use or sell real estate or borrow money using such
real estate as collateral.
Various environmental laws govern certain aspects of the
Companys ongoing operation of its communities. Such
environmental laws include those regulating the existence of
asbestos-containing materials in buildings, management of
surfaces with lead-based paint (and notices to residents about
the lead-based paint), use of active underground petroleum
storage tanks, and waste-management activities. The failure to
comply with such requirements could subject the Company to a
government enforcement action
and/or
claims for damages by a private party.
The Company has not been notified by any governmental authority
of any material noncompliance, claim, or liability in connection
with environmental conditions associated with any of its
apartment and for-sale (condominium) communities. The Company
has not been notified of a material claim for personal injury or
property damage by a private party relating to any of its
apartment and for-sale (condominium) communities in connection
with environmental conditions. The Company is not aware of any
environmental condition with respect to any of its apartment and
for-sale (condominium) communities that could be considered to
be material.
It is possible, however, that the environmental investigations
of the Companys properties might not have revealed all
potential environmental liabilities associated with the
Companys real property and its apartment and for-sale
(condominium) communities or the Company might have
underestimated any potential environmental issues identified in
the investigations. It is also possible that future
environmental laws, ordinances, or regulations or new
interpretations of existing environmental laws, ordinances, or
regulations will impose material environmental liabilities on
the Company; the current environmental conditions of properties
that the Company owns or operates will be affected adversely by
hazardous substances associated with other nearby properties or
the actions of third parties unrelated to the Company; or our
residents
and/or
commercial tenants may engage in activities prohibited by their
leases or otherwise expose the Company to liability under
applicable environmental laws, ordinances, or regulations. The
costs of defending any future environmental claims, performing
any future environmental remediation, satisfying any such
environmental liabilities, or responding to any changed
environmental conditions could materially adversely affect the
Companys financial conditions and results of operations.
Where You
Can Find More Information
The Company makes its annual report on Form
10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K,
and all amendments to such reports filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, available (free of charge) on or through its
Internet website, located at http://www.postproperties.com, as
soon as reasonably practicable after they are filed with or
furnished to the SEC.
|
|
ITEM 1A.
|
RISK
FACTORS
(Dollars In thousands, except per share amounts)
|
The following risk factors apply to Post Properties, Inc. (the
Company) and Post Apartment Homes, L.P. (the
Operating Partnership). All indebtedness described
in the risk factors has been incurred by the Operating
Partnership.
Unfavorable
changes in apartment markets and economic conditions could
adversely affect occupancy levels and rental rates.
Market and economic conditions in the various metropolitan areas
of the United States where the Company operates, particularly
Atlanta, Georgia, Dallas, Texas, Tampa, Florida and the greater
Washington, D.C. area where a substantial
7
Post Properties, Inc.
Post Apartment Homes, L.P.
majority of the Companys apartment communities are
located, may significantly affect occupancy levels and rental
rates and therefore profitability. Factors that may adversely
affect these conditions include the following:
|
|
|
the economic climate, which may be adversely impacted by a
reduction in jobs, industry slowdowns and other factors;
|
|
|
local conditions, such as oversupply of, or reduced demand for,
apartment homes;
|
|
|
declines in household formation;
|
|
|
favorable residential mortgage rates;
|
|
|
rent control or stabilization laws, or other laws regulating
rental housing, which could prevent the Company from raising
rents to offset increases in operating costs; and
|
|
|
competition from other available apartments and other housing
alternatives and changes in market rental rates.
|
Any of these factors could adversely affect the Companys
ability to achieve desired operating results from its
communities.
Development
and construction risks could impact the companys
profitability.
The Company intends to continue to develop and construct
apartment communities and may convert existing apartment
communities into condominiums or develop for-sale (condominium)
housing. Development activities may be conducted through
wholly-owned affiliated companies or through joint ventures with
unaffiliated parties. The Companys development and
construction activities may be exposed to the following risks:
|
|
|
the Company may be unable to obtain, or face delays in
obtaining, necessary zoning, land-use, building, occupancy, and
other required governmental permits and authorizations, which
could result in increased development costs;
|
|
|
the Company may incur construction costs for a property that
exceed original estimates due to increased materials, labor or
other costs or unforeseen environmental conditions, which could
make completion of the property uneconomical, and the Company
may not be able to increase rents or for-sale (condominium) unit
sales prices to compensate for the increase in construction
costs;
|
|
|
the Company may abandon development opportunities that it has
already begun to explore, and it may fail to recover expenses
already incurred in connection with exploring those
opportunities, causing potential impairment losses to be
incurred;
|
|
|
the Company has at times been and may continue to be unable to
complete construction and
lease-up of
a community on schedule and meet financial goals for development
projects;
|
|
|
because occupancy rates and rents at a newly developed community
may fluctuate depending on a number of factors, including market
and economic conditions, the Company may be unable to meet its
profitability goals for that community; and
|
|
|
land costs and construction costs have been increasing in the
Companys markets, and may continue to increase in the
future and, in some cases, the costs of upgrading acquired
communities have, and may continue to, exceed original estimates
and the Company may be unable to charge rents, or sales prices
with respect to for-sale (condominium) product, that would
compensate for these increases in costs.
|
Possible
difficulty of selling apartment communities could limit the
Companys operational and financial flexibility.
Purchasers may not be willing to pay acceptable prices for
apartment communities that the Company wishes to sell. A weak
market may limit the Companys ability to change its
portfolio promptly in response to changing economic conditions.
Also, if the Company is unable to sell apartment communities or
if it can only sell apartment communities at prices lower than
are generally acceptable, then the Company may have to take on
additional leverage in order to provide adequate capital to
execute its development and construction and acquisitions
strategy. Furthermore, a portion of the proceeds from the
Companys overall property sales in the future may be held
in escrow accounts in order for some sales to qualify as like-
kind exchanges under Section 1031 of the Internal Revenue
Code so that any related capital gain can be deferred for
federal income tax purposes. As a result, the Company may not
have immediate access to all of the cash flow generated from
property sales.
8
Post Properties, Inc.
Post Apartment Homes, L.P.
The
Company is subject to increased exposure to economic and other
competitive factors due to the concentration of its investments
in certain markets.
At December 31, 2006, approximately 44.5%, 18.8%, 12.1% and
9.7% (on a unit basis) of the Companys communities were
located in the Atlanta, Georgia, Dallas, Texas, greater
Washington, D.C. and Tampa, Florida metropolitan areas,
respectively. The Company is therefore subject to increased
exposure to economic and other competitive factors specific to
its markets within these geographic areas.
Failure
to generate sufficient cash flows could affect the
Companys debt financing and create refinancing
risk.
The Company is subject to the risks normally associated with
debt financing, including the risk that its cash flow will be
insufficient to make required payments of principal and
interest. Although the Company may be able to use cash flow
generated by its apartment communities or through the sale of
for-sale (condominium) housing to make future principal
payments, it may not have sufficient cash flow to be available
to make all required principal payments and still meet the
distribution requirements that the Company must satisfy in order
to maintain its status as a real estate investment trust or
REIT for federal income tax purposes. The following
factors, among others, may affect the cash flows generated by
the Companys apartment communities and through the sale of
for-sale (condominium) housing:
|
|
|
the national and local economies;
|
|
|
local real estate market conditions, such as an oversupply of
apartment homes or competing for-sale (condominium) housing;
|
|
|
the perceptions by prospective residents or buyers of the
safety, convenience and attractiveness of the Companys
communities and the neighborhoods in which they are located;
|
|
|
the Companys ability to provide adequate management,
maintenance and insurance for its apartment communities;
|
|
|
rental expenses for its apartment communities, including real
estate taxes, insurance and utilities; and
|
|
|
the level of mortgage interest rates and its impact on the
demand for prospective buyers of for-sale (condominium) housing.
|
Expenses associated with the Companys investment in
apartment communities, such as debt service, real estate taxes,
insurance and maintenance costs, are generally not reduced when
circumstances cause a reduction in cash flows from operations
from that community. If a community is mortgaged to secure
payment of debt and the Company is unable to make the mortgage
payments, the Company could sustain a loss as a result of
foreclosure on the community or the exercise of other remedies
by the mortgagee. The Company is likely to need to refinance at
least a portion of its outstanding debt as it matures. There is
a risk that the Company may not be able to refinance existing
debt or that the terms of any refinancing will not be as
favorable as the terms of the existing debt. As of
December 31, 2006, the Company had outstanding mortgage
indebtedness of $364,866 (of which approximately $84,000 matures
in 2007), senior unsecured debt of $560,000 (of which $25,000
matures in 2007) and unsecured line of credit borrowings of
$108,913.
The
Company could become more highly leveraged which could result in
an increased risk of default and in an increase in its debt
service requirements.
The Companys stated goal is to generally maintain total
effective leverage (debt and preferred equity) as a percentage
of undepreciated real estate assets to not more than 55%, to
generally limit variable rate indebtedness as a percentage of
total indebtedness to not more than 25% of aggregate
indebtedness, and to maintain adequate liquidity through the
Companys unsecured lines of credit.
At December 31, 2006, the Companys total effective
leverage (debt and preferred equity) as a percentage of
undepreciated real estate assets and the Companys total
variable rate indebtedness as a percentage of total indebtedness
were below these percentages. If management adjusts the
Companys stated goal in the future, the Company could
become more highly leveraged, resulting in an increase in debt
service that could adversely affect funds from operations, the
Companys ability to make expected distributions to its
shareholders and the Operating Partnerships ability to
make expected distributions to its limited partners and in an
increased risk of default on the obligations of the Company and
the Operating Partnership. In addition, the Companys and
the Operating Partnerships ability to incur debt is
limited by covenants in bank and other credit agreements and in
the Companys outstanding senior unsecured notes. The
Company manages its debt to be in compliance with its stated
policy and with these debt covenants, but subject to compliance
with these covenants, the Company may increase the amount of
outstanding debt at any time without a concurrent improvement in
the Companys ability to service the additional debt.
Accordingly, the Company could become more
9
Post Properties, Inc.
Post Apartment Homes, L.P.
leveraged, resulting in an increased risk of default on its
obligations and in an increase in debt service requirements,
both of which could adversely affect the Companys
financial condition and ability to access debt and equity
capital markets in the future.
Debt
financing may not be available and equity issuances could be
dilutive to the companys shareholders.
The Companys ability to execute its business strategy
depends on its access to an appropriate blend of debt financing,
including unsecured lines of credit and other forms of secured
and unsecured debt, and equity financing, including common and
preferred equity. Debt financing may not be available in
sufficient amounts, or on favorable terms or at all. If the
Company issues additional equity securities to finance
developments and acquisitions instead of incurring debt, the
interests of existing shareholders could be diluted.
The
Companys condominium conversion and for-sale (condominium)
housing business involves unique business risks and
challenges.
The Companys ability to successfully complete a
condominium conversion or other for-sale housing project, sell
the units and achieve managements economic goals in
connection with the transaction is subject to various risks and
challenges, which if they materialize, may have an adverse
effect on the Companys business, results of operations and
financial condition including:
|
|
|
the inability to obtain approvals to rezone the property and
releases from financing obligations and increases in costs
resulting from delays in obtaining such approvals and releases;
|
|
|
understanding the costs necessary to bring a newly developed or
converted for-sale (condominium) property up to standards
required for its intended market position;
|
|
|
lack of demand by prospective buyers;
|
|
|
oversupply of condominiums in a given market;
|
|
|
the inability of buyers to qualify for financing;
|
|
|
lower than anticipated sale prices;
|
|
|
the inability to close on sales of individual units under
contract;
|
|
|
competition from other condominiums and other types of
residential housing; and
|
|
|
liability claims from condominium associations or others
asserting that construction performed was defective, resulting
in litigation
and/or
settlement discussions.
|
In general, profits realized to date from the Companys
sale of condominium homes have been more volatile than the
Companys core apartment rental operations. In addition,
the Company believes that the demand of prospective buyers, the
supply and competition from other condominiums and other types
of residential housing, and the level of mortgage interest rates
and the affordability of housing, among other factors, could
have a significant impact on its ability to sell for-sale units
and on the sales prices achieved. If the Company is unable to
sell for-sale condominium homes, the Company could decide to
rent unsold units or could cause a condominium community to
revert to a rental apartment community. If these risks were to
materialize, it could cause the Company to realize impairment
losses in future periods and it could cause economic returns
that are materially lower than anticipated. In addition, if the
Company is unable to sell for-sale units, the expenses and
carrying costs associated with the ownership of such units would
continue.
Acquired
apartment communities may not achieve anticipated
results.
The Company may selectively acquire apartment communities that
meet its investment criteria. The Companys acquisition
activities and their success may be exposed to the following
risks:
|
|
|
an acquired community may fail to achieve expected occupancy and
rental rates and may fail to perform as expected;
|
|
|
the Company may not be able to successfully integrate acquired
properties and operations; and
|
|
|
the Companys estimates of the costs of repositioning or
redeveloping the acquired property may prove inaccurate, causing
the Company to fail to meet its profitability goals.
|
10
Post Properties, Inc.
Post Apartment Homes, L.P.
Increased
competition and increased affordability of residential homes
could limit the Companys ability to retain its residents,
lease apartment homes or increase or maintain rents.
The Companys apartment communities compete with numerous
housing alternatives in attracting residents, including other
apartment communities and single-family rental homes, as well as
owner occupied single- and multi-family homes. Competitive
housing in a particular area and the increasing affordability of
owner occupied single and multi-family homes caused by declining
housing prices, mortgage interest rates and government programs
to promote home ownership could adversely affect the
Companys ability to retain its residents, lease apartment
homes and increase or maintain rents.
Limited
investment opportunities could adversely affect the
Companys growth.
The Company expects that other real estate investors will
compete to acquire existing properties and to develop new
properties. These competitors include insurance companies,
pension and investment funds, developer partnerships, investment
companies and other apartment REITs. This competition could
increase prices for properties of the type that the Company
would likely pursue, and competitors may have greater resources
than the Company. As a result, the Company may not be able to
make attractive investments on favorable terms, which could
adversely affect its growth.
The
Company may not be able to maintain its current dividend
level.
For the full year of 2007, management of the Company currently
expects to maintain its current quarterly dividend payment rate
to common shareholders of $0.45 per share. At this dividend
rate, the Company currently expects that net cash flows from
operations reduced by annual operating capital expenditures for
2007 will not be sufficient to fund the dividend payments to
common and preferred shareholders by approximately $10,000 to
$15,000. The Company intends to use primarily the proceeds from
2007 asset (including condominium) sales to fund the additional
cash flow necessary to fully fund the dividend payments to
common shareholders. In prior periods, the additional funding,
in excess of cash flows from operating activities less operating
capital expenditures, required to pay the quarterly dividends
was funded through a combination of line of credit borrowings
and proceeds from asset sales. The Companys board of
directors reviews the dividend quarterly, and there can be no
assurance that the current dividend level will be maintained.
Changing
interest rates could increase interest costs and could affect
the market price of the Companys securities.
The Company has incurred, and expects to continue to incur, debt
bearing interest at rates that vary with market interest rates.
Therefore, if interest rates increase, the Companys
interest costs will rise to the extent its variable rate debt is
not hedged effectively. Further, while the Companys stated
goal is to limit variable rate debt to not more than 25% of
total indebtedness, management may adjust these levels over
time. In addition, an increase in market interest rates may lead
purchasers of the Companys securities to demand a higher
annual yield, which could adversely affect the market price of
the Companys common and preferred stock and debt
securities.
Interest
rate hedging contracts may be ineffective and may result in
material charges.
From time to time when the Company anticipates issuing debt
securities, it may seek to limit exposure to fluctuations in
interest rates during the period prior to the pricing of the
securities by entering into interest rate hedging contracts. The
Company may do this to increase the predictability of its
financing costs. Also, from time to time, the Company may rely
on interest rate hedging contracts to limit its exposure under
variable rate debt to unfavorable changes in market interest
rates. If the pricing of new debt securities is not within the
parameters of, or market interest rates produce a lower interest
cost than the Company incurs under, a particular interest rate
hedging contract, the contract may be ineffective. Furthermore,
the settlement of interest rate hedging contracts has at times
involved and may in the future involve material charges. These
charges are typically related to the extent and timing of
fluctuations in interest rates. Despite the Companys
efforts to minimize its exposure to interest rate fluctuations,
the Company cannot guarantee that it will maintain coverage for
all of its outstanding indebtedness at any particular time. If
the Company does not effectively protect itself from this risk,
it may be subject to increased interest costs resulting from
interest rate fluctuations.
Failure
to succeed in new markets may limit the companys
growth.
The Company may from time to time commence development activity
or make acquisitions outside of its existing market areas if
appropriate opportunities arise. The Companys historical
experience in its existing markets does not ensure that it
11
Post Properties, Inc.
Post Apartment Homes, L.P.
will be able to operate successfully in new markets. The Company
may be exposed to a variety of risks if it chooses to enter new
markets. These risks include, among others:
|
|
|
an inability to evaluate accurately local apartment or for-sale
(condominium) housing market conditions and local economies;
|
|
|
an inability to obtain land for development or to identify
appropriate acquisition opportunities;
|
|
|
an inability to hire and retain key personnel; and
|
|
|
lack of familiarity with local governmental and permitting
procedures.
|
Compliance
or failure to comply with laws requiring access to the
Companys properties by persons with disabilities could
result in substantial cost.
The Companys multi-family housing communities and any
newly acquired multi-family housing communities must comply with
Title III of the Americans with Disabilities Act, or the
ADA, to the extent that such properties are public
accommodations
and/or
commercial facilities as defined by the ADA.
Compliance with the ADA requirements could require removal of
structural barriers to handicapped access in certain public
areas of the Companys multi-family housing communities
where such removal is readily achievable. The ADA does not,
however, consider residential properties, such as multi-family
housing communities to be public accommodations or commercial
facilities, except to the extent portions of such facilities,
such as the leasing office, are open to the public.
The Company must also comply with the Fair Housing Amendment Act
of 1988, or the FHAA, which requires that multi-family housing
communities first occupied after March 13, 1991 be
accessible to persons of disabilities. Noncompliance with the
FHAA and ADA could result in the imposition of fines, awards of
damages to private litigants, payment of attorneys fees
and other costs to plaintiffs, substantial litigation costs and
substantial costs of remediation. Compliance with the FHAA could
require removal of structural barriers to handicapped access in
a community, including the interiors of apartment units covered
under the FHAA. In addition to the ADA and FHAA, state and local
laws exist that impact the Companys multi-family housing
communities with respect to access thereto by persons with
disabilities. Further, legislation or regulations adopted in the
future may impose additional burdens or restrictions on the
company with respect to improved access by persons with
disabilities. The ADA, FHAA, or other existing or new
legislation may require the Company to modify its existing
properties. These laws may also restrict renovations by
requiring improved access to such buildings or may require the
Company to add other structural features that increase its
construction costs.
Recently there has been heightened scrutiny of multifamily
housing communities for compliance with the requirements of the
FHAA and ADA. In November 2006, the Equal Rights Center, or ERC,
filed a lawsuit against the Company and the Operating
Partnership alleging various violations of the FHAA and the ADA
at certain properties designed, constructed or operated by the
Company and the Operating Partnership. The ERC seeks
compensatory and punitive damages in unspecified amounts, an
award of attorneys fees and costs of suit, as well as
preliminary and permanent injunctive relief that includes
retrofitting multi-family housing units and public use areas to
comply with the FHAA and ADA and prohibiting construction or
sale of noncompliant units or complexes.
Due to the preliminary nature of the litigation, it is not
possible to predict or determine the outcome of the legal
proceeding, nor is it possible to estimate the amount of loss,
if any, that would be associated with an adverse decision. The
Company cannot ascertain the ultimate cost of compliance with
the ADA, FHAA or other similar state and local legislation and
such costs are not likely covered by insurance policies. The
cost associated with ongoing litigation or compliance could be
substantial and could adversely affect the Companys
business, results of operations and financial condition.
Any
weaknesses identified in the Companys system of internal
controls by the Company and its independent registered public
accounting firm pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002 could have an adverse effect on the
Companys business.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that
companies evaluate and report on their systems of internal
control over financial reporting. In addition, the
Companys independent registered public accounting firm
must report on managements evaluation of those controls.
In future periods, the Company may identify deficiencies in its
system of internal controls over financial reporting that may
require remediation. There can be no assurances that any such
future deficiencies identified may not be material weaknesses
that would be required to be reported in future periods.
12
Post Properties, Inc.
Post Apartment Homes, L.P.
Losses
from natural catastrophes may exceed insurance
coverage.
The Company carries comprehensive liability, fire, flood,
extended coverage and rental loss insurance on its properties,
which are believed to be of the type and amount customarily
obtained on real property assets. The Company intends to obtain
similar coverage for properties acquired or developed in the
future. However, some losses, generally of a catastrophic
nature, such as losses from floods or wind storms, may be
subject to limitations. The Company exercises discretion in
determining amounts, coverage limits and deductibility
provisions of insurance, with a view to maintaining appropriate
insurance on its investments at a reasonable cost and on
suitable terms; however, the Company may not be able to maintain
its insurance at a reasonable cost or in sufficient amounts to
protect it against potential losses. Further, the Companys
insurance costs could increase in future periods. If the Company
suffers a substantial loss, its insurance coverage may not be
sufficient to pay the full current market value or current
replacement value of the lost investment. Inflation, changes in
building codes and ordinances, environmental considerations and
other factors also might make it infeasible to use insurance
proceeds to replace a property after it has been damaged or
destroyed.
Potential
liability for environmental contamination could result in
substantial costs.
The Company is in the business of owning, operating, developing,
acquiring and, from time to time, selling real estate. Under
various federal, state and local environmental laws, as a
current or former owner or operator, the Company could be
required to investigate and remediate the effects of
contamination of currently or formerly owned real estate by
hazardous or toxic substances, often regardless of its knowledge
of or responsibility for the contamination and solely by virtue
of its current or former ownership or operation of the real
estate. In addition, the Company could be held liable to a
governmental authority or to third parties for property and
other damages and for investigation and
clean-up
costs incurred in connection with the contamination. These costs
could be substantial, and in many cases environmental laws
create liens in favor of governmental authorities to secure
their payment. The presence of such substances or a failure to
properly remediate any resulting contamination could materially
and adversely affect the Companys ability to borrow
against, sell or rent an affected property.
Costs
associated with moisture infiltration and resulting mold
remediation may be costly.
As a general matter, concern about indoor exposure to mold has
been increasing as such exposure has been alleged to have a
variety of adverse effects on health. As a result, there has
been a number of lawsuits in the Companys industry against
owners and managers of apartment communities relating to
moisture infiltration and resulting mold. The Company has
implemented guidelines and procedures to address moisture
infiltration and resulting mold issues if and when they arise.
The Company believes that these measures will minimize the
potential for any adverse effect on its residents. The terms of
its property and general liability policies generally exclude
certain mold-related claims. Should an uninsured loss arise
against the Company, the Company would be required to use its
funds to resolve the issue, including litigation costs. The
Company makes no assurance that liabilities resulting from
moisture infiltration and the presence of or exposure to mold
will not have a future impact on its business, results of
operations and financial condition.
The
Companys joint ventures and joint ownership of properties
and partial interests in corporations and limited partnerships
could limit the Companys ability to control such
properties and partial interests.
Instead of purchasing certain apartment communities directly,
the Company has invested and may continue to invest as a
co-venturer. Joint venturers often have shared control over the
operations of the joint venture assets. Therefore, it is
possible that the co-venturer in an investment might become
bankrupt, or have economic or business interests or goals that
are inconsistent with the Companys business interests or
goals, or be in a position to take action contrary to the
Companys instructions, requests, policies or objectives.
Consequently, a co-venturers actions might subject
property owned by the joint venture to additional risk. Although
the Company seeks to maintain sufficient influence of any joint
venture to achieve its objectives, the Company may be unable to
take action without the Companys joint venture
partners approval, or joint venture partners could take
actions binding on the joint venture without the Companys
consent. Additionally, should a joint venture partner become
bankrupt, the Company could become liable for such
partners share of joint venture liabilities.
The
Company may be unable to renew leases or relet units as leases
expire.
When the Companys residents decide not to renew their
leases upon expiration, the Company may not be able to relet
their units. Even if the residents do renew or the Company can
relet the units, the terms of renewal or reletting may be less
favorable than current leases terms. Because virtually all of
the Companys leases are for apartments, they are generally
for no more than one year. If the Company is unable to promptly
renew the leases or relet the units, or if the rental rates upon
renewal or reletting are significantly lower than expected
rates, then the Companys results of operations and
13
Post Properties, Inc.
Post Apartment Homes, L.P.
financial condition will be adversely affected. Consequently,
the Companys cash flow and ability to service debt and
make distributions to security holders would be reduced.
The
Company may fail to qualify as a REIT for federal income tax
purposes.
The Companys qualification as a REIT for federal income
tax purposes depends upon its ability to meet on a continuing
basis, through actual annual operating results, distribution
levels and diversity of stock ownership, the various
qualification tests and organizational requirements imposed upon
REITs under the Internal Revenue Code. The Company believes that
it has qualified for taxation as a REIT for federal income tax
purposes commencing with its taxable year ended
December 31, 1993, and plans to continue to meet the
requirements to qualify as a REIT in the future. Many of these
requirements, however, are highly technical and complex.
Therefore, the Company may not have qualified or may not
continue to qualify in the future as a REIT. The determination
that the Company qualifies as a REIT for federal income tax
purposes requires an analysis of various factual matters that
may not be totally within the Companys control. Even a
technical or inadvertent mistake could jeopardize the
Companys REIT status. Furthermore, Congress and the IRS
might make changes to the tax laws and regulations, and the
courts might issue new decisions that make it more difficult, or
impossible, for the Company to remain qualified as a REIT. The
Company does not believe, however, that any pending or proposed
tax law changes would jeopardize its REIT status.
If the Company were to fail to qualify for taxation as a REIT in
any taxable year, and certain relief provisions of the Internal
Revenue Code did not apply, the Company would be subject to tax
(including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, leaving less money
available for distributions to its shareholders. In addition,
distributions to shareholders in any year in which the Company
failed to qualify would not be deductible by the Company for
federal income tax purposes nor would they be required to be
made. Unless entitled to relief under specific statutory
provisions, the Company also would be disqualified from taxation
as a REIT for the four taxable years following the year during
which it ceased to qualify as a REIT. It is not possible to
predict whether in all circumstances the Company would be
entitled to such statutory relief. The Companys failure to
qualify as a REIT likely would have a significant adverse effect
on the value of its securities.
The
Operating Partnership may fail to be treated as a partnership
for federal income tax purposes.
Management believes that the Operating Partnership qualifies,
and has so qualified since its formation, as a partnership for
federal income tax purposes and not as a publicly traded
partnership taxable as a corporation. No assurance can be
provided, however, that the IRS will not challenge the treatment
of the Operating Partnership as a partnership for federal income
tax purposes or that a court would not sustain such a challenge.
If the IRS were successful in treating the Operating Partnership
as a corporation for federal income tax purposes, then the
taxable income of the Operating Partnership would be taxable at
regular corporate income tax rates. In addition, the treatment
of the Operating Partnership as a corporation would cause the
Company to fail to qualify as a REIT. See The Company may
fail to qualify as a REIT for federal income tax purposes
above.
The
Companys real estate assets may be subject to impairment
charges.
The Company continually evaluates the recoverability of the
carrying value of its real estate assets for impairment
indicators. Factors considered in evaluating impairment of the
Companys existing real estate assets held for investment
include significant declines in property operating profits,
recurring property operating losses and other significant
adverse changes in general market conditions that are considered
permanent in nature. Generally, a real estate asset held for
investment is not considered impaired if the undiscounted,
estimated future cash flows of the asset over its estimated
holding period are in excess of the assets net book value
at the balance sheet date. Assumptions used to estimate annual
and residual cash flow and the estimated holding period of such
assets require the judgment of management.
In 2004 and in prior years, the Company recorded impairment
charges on assets held for investment and assets designated as
held for sale. There can be no assurance that the Company will
not take additional charges in the future related to the
impairment of its assets. For the years ended December 31,
2006, 2005 and 2004, management believes it has applied
reasonable estimates and judgments in determining the proper
classification of its real estate assets. However, should
external or internal circumstances change requiring the need to
shorten the holding periods or adjust the estimated future cash
flows of certain of the Companys assets, the Company could
be required to record additional impairment charges. If any real
estate asset held for investment is considered impaired, a loss
is provided to reduce the carrying value of the asset to its
fair value, less selling costs. Any future impairment could have
a material adverse affect on the Companys results of
operations and funds from operations in the period in which the
charge is taken.
14
Post Properties, Inc.
Post Apartment Homes, L.P.
The
Companys shareholders may not be able to effect a change
in control.
The articles of incorporation and bylaws of the Company and the
partnership agreement of the Operating Partnership contain a
number of provisions that could delay, defer or prevent a
transaction or a change in control that might involve a premium
price for the Companys shareholders or otherwise be in
their best interests, including the following:
Preferred shares. The Companys articles
of incorporation provide that the Company has the authority to
issue up to 20,000,000 shares of preferred stock, of which
2,900,000 were outstanding as of December 31, 2006. The
board of directors has the authority, without the approval of
the shareholders, to issue additional shares of preferred stock
and to establish the preferences and rights of such shares. The
issuance of preferred stock could have the effect of delaying or
preventing a change of control of the Company, even if a change
of control were in the shareholders interest.
Consent Rights of the Unitholders. Under the
partnership agreement of the Operating Partnership, the Company
may not merge or consolidate with another entity unless the
merger includes the merger of the Operating Partnership, which
requires the approval of the holders of a majority of the
outstanding units of the Operating Partnership. If the Company
were to ever hold less than a majority of the units, this voting
requirement might limit the possibility for an acquisition or a
change of control.
Ownership Limit. One of the requirements for
maintenance of the Companys qualification as a REIT for
federal income tax purposes is that no more than 50% in value of
its outstanding capital stock may be owned by five or fewer
individuals, including entities specified in the Internal
Revenue Code, during the last half of any taxable year. To
facilitate maintenance of its qualification as a REIT for
federal income tax purposes, the ownership limit under the
Companys articles of incorporation prohibits ownership,
directly or by virtue of the attribution provisions of the
Internal Revenue Code, by any person or persons acting as a
group of more than 6.0% of the issued and outstanding shares of
the Companys common stock, subject to certain exceptions,
including an exception for shares of common stock held by
Mr. John A. Williams and Mr. John T. Glover, the
Companys former chairman and former vice chairman and
certain investors for which the Company has waived the ownership
limit. Together, these limitations are referred to as the
ownership limit. Further, the Companys
articles of incorporation include provisions allowing it to stop
transfers of and redeem its shares that are intended to assist
the Company in complying with these requirements. While the
Company has committed that it will not utilize the ownership
limit in its articles of incorporation as an anti-takeover
device, these provisions could still deter, delay or defer
someone from taking control of the Company.
Terrorist
attacks and the possibility of wider armed conflict may have an
adverse effect on the Companys business and operating
results and could decrease the value of the Companys
assets.
Terrorist attacks and other acts of violence or war could have a
material adverse effect on the Companys business and
operating results. Attacks or armed conflicts that directly
impact one or more of the Companys apartment communities
could significantly affect the Companys ability to operate
those communities and thereby impair its ability to achieve the
Companys expected results. Further, the Companys
insurance coverage may not cover any losses caused by a
terrorist attack. In addition, the adverse effects that such
violent acts and threats of future attacks could have on the
U.S. economy could similarly have a material adverse effect
on the Companys business and results of operations.
Finally, if the United States enters into and remains engaged in
a wider armed conflict, the Companys business and
operating results could be adversely effected.
|
|
ITEM 1B.
|
UNRESOLVED
STAFF COMMENTS
|
None.
15
Post Properties, Inc.
Post Apartment Homes, L.P.
At December 31, 2006, the Company owned 59
Post®
multifamily apartment communities, including two communities
held in unconsolidated entities and two communities in
lease-up
that were partially operating during 2006. These communities are
summarized below by metropolitan area.
|
|
|
|
|
|
|
|
|
|
|
|
|
Metropolitan Area
|
|
Communities
|
|
|
# of Units
|
|
|
% of Total
|
|
|
Atlanta, GA
|
|
|
24
|
|
|
|
9,300
|
|
|
|
44.5
|
%
|
Dallas, TX
|
|
|
13
|
|
|
|
3,939
|
|
|
|
18.8
|
%
|
Greater Washington, D.C.
|
|
|
7
|
|
|
|
2,538
|
|
|
|
12.1
|
%
|
Tampa, FL
|
|
|
4
|
|
|
|
2,027
|
|
|
|
9.7
|
%
|
Charlotte, NC
|
|
|
4
|
|
|
|
1,388
|
|
|
|
6.6
|
%
|
Houston, TX
|
|
|
2
|
|
|
|
837
|
|
|
|
4.0
|
%
|
New York, NY
|
|
|
2
|
|
|
|
337
|
|
|
|
1.6
|
%
|
Austin, TX
|
|
|
2
|
|
|
|
308
|
|
|
|
1.5
|
%
|
Orlando, FL
|
|
|
1
|
|
|
|
245
|
|
|
|
1.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59
|
|
|
|
20,919
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thirty-five of the communities have in excess of 300 apartment
units, with the largest community having a total of 1,334
apartment units. The average age of the communities is
approximately nine years. The average economic occupancy rate
was unchanged at 94.7% for the years ended December 31,
2006 and 2005, and the average monthly rental rate per apartment
unit was $1,163 and $1,106, respectively, for the 48 communities
stabilized for each of the years ended December 31, 2006
and 2005. See Selected Financial Information.
At December 31, 2006, the Company also had 826 apartment
units in two communities and the expansion of one community
currently under construction.
At December 31, 2006, the Company is also developing two
ground-up
condominium projects, consisting of 230 homes. The Company is
also converting apartment homes in four communities initially
consisting of 597 units (including 121 units in one
community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary, at
December 31, 2006.
16
Post Properties, Inc.
Post Apartment Homes, L.P.
COMMUNITY
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2006
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Year
|
|
No. of
|
|
|
Rental Rates
|
|
|
Economic
|
|
Communities
|
|
Location(1)
|
|
Completed
|
|
Units
|
|
|
Per Unit
|
|
|
Occupancy(2)
|
|
|
Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Ashford®
|
|
Atlanta
|
|
1987
|
|
|
222
|
|
|
$
|
828
|
|
|
|
94.4
|
%
|
Post
Biltmoretm(3)
|
|
Atlanta
|
|
2001
|
|
|
276
|
|
|
|
1,123
|
|
|
|
96.6
|
%
|
Post
Briarclifftm
|
|
Atlanta
|
|
1999
|
|
|
688
|
|
|
|
1,081
|
|
|
|
95.9
|
%
|
Post
Brookhaven®
|
|
Atlanta
|
|
1990-1992(4)
|
|
|
735
|
|
|
|
956
|
|
|
|
93.6
|
%
|
Post
Chastain®(7)
|
|
Atlanta
|
|
1990
|
|
|
558
|
|
|
|
997
|
|
|
|
90.0
|
%
|
Post Collier
Hills®
|
|
Atlanta
|
|
1997
|
|
|
396
|
|
|
|
993
|
|
|
|
94.8
|
%
|
Post
Crest®
|
|
Atlanta
|
|
1996
|
|
|
410
|
|
|
|
1,015
|
|
|
|
95.0
|
%
|
Post
Crossing®
|
|
Atlanta
|
|
1995
|
|
|
354
|
|
|
|
1,076
|
|
|
|
93.7
|
%
|
Post
Dunwoody®
|
|
Atlanta
|
|
1989-1996(4)
|
|
|
530
|
|
|
|
989
|
|
|
|
95.4
|
%
|
Post
Gardens®
|
|
Atlanta
|
|
1998
|
|
|
397
|
|
|
|
1,132
|
|
|
|
93.5
|
%
|
Post
Glen®
|
|
Atlanta
|
|
1997
|
|
|
314
|
|
|
|
1,170
|
|
|
|
92.7
|
%
|
Post Lenox
Park®
|
|
Atlanta
|
|
1995
|
|
|
206
|
|
|
|
1,072
|
|
|
|
93.9
|
%
|
Post
Lindbergh®
|
|
Atlanta
|
|
1998
|
|
|
396
|
|
|
|
1,045
|
|
|
|
94.8
|
%
|
Post
Oaktm
|
|
Atlanta
|
|
1993
|
|
|
182
|
|
|
|
1,010
|
|
|
|
94.8
|
%
|
Post
Oglethorpe®
|
|
Atlanta
|
|
1994
|
|
|
250
|
|
|
|
1,278
|
|
|
|
93.5
|
%
|
Post
Parksidetm
|
|
Atlanta
|
|
2000
|
|
|
188
|
|
|
|
1,303
|
|
|
|
96.3
|
%
|
Post Peachtree
Hills®
|
|
Atlanta
|
|
1992-1994(4)
|
|
|
300
|
|
|
|
1,059
|
|
|
|
95.3
|
%
|
Post
Renaissance®(5)
|
|
Atlanta
|
|
1992-1994(4)
|
|
|
342
|
|
|
|
1,031
|
|
|
|
96.5
|
%
|
Post
Ridge®
|
|
Atlanta
|
|
1998
|
|
|
434
|
|
|
|
1,038
|
|
|
|
94.5
|
%
|
Post
Riverside®
|
|
Atlanta
|
|
1998
|
|
|
523
|
|
|
|
1,437
|
|
|
|
93.5
|
%
|
Post
Springtm
|
|
Atlanta
|
|
2000
|
|
|
452
|
|
|
|
977
|
|
|
|
94.1
|
%
|
Post
Stratfordtm(5)
|
|
Atlanta
|
|
2000
|
|
|
250
|
|
|
|
1,166
|
|
|
|
92.0
|
%
|
Post
Vinings®
|
|
Atlanta
|
|
1989-1991(4)
|
|
|
403
|
|
|
|
846
|
|
|
|
96.4
|
%
|
Post
Woods®
|
|
Atlanta
|
|
1977-1983(4)
|
|
|
494
|
|
|
|
906
|
|
|
|
95.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average
Georgia
|
|
|
|
|
|
|
9,300
|
|
|
|
1,054
|
|
|
|
94.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Abbeytm
|
|
Dallas
|
|
1996
|
|
|
34
|
|
|
|
1,820
|
|
|
|
95.9
|
%
|
Post Addison
Circletm
|
|
Dallas
|
|
1998-2000(4)
|
|
|
1,334
|
|
|
|
980
|
|
|
|
92.4
|
%
|
Post Barton
Creektm
|
|
Austin
|
|
1998
|
|
|
160
|
|
|
|
1,337
|
|
|
|
95.0
|
%
|
Post Coles
Cornertm
|
|
Dallas
|
|
1998
|
|
|
186
|
|
|
|
1,042
|
|
|
|
93.9
|
%
|
Post
Gallerytm
|
|
Dallas
|
|
1999
|
|
|
34
|
|
|
|
2,890
|
|
|
|
91.1
|
%
|
Post
Heightstm
|
|
Dallas
|
|
1998-1999(4)
|
|
|
368
|
|
|
|
1,100
|
|
|
|
92.8
|
%
|
Post Legacy
|
|
Dallas
|
|
2000
|
|
|
384
|
|
|
|
933
|
|
|
|
93.5
|
%
|
Post
Meridiantm
|
|
Dallas
|
|
1991
|
|
|
133
|
|
|
|
1,127
|
|
|
|
94.0
|
%
|
Post Midtown
Square®
|
|
Houston
|
|
1999-2000(4)
|
|
|
529
|
|
|
|
1,043
|
|
|
|
92.8
|
%
|
Post Park
Mesatm
|
|
Austin
|
|
1992
|
|
|
148
|
|
|
|
1,134
|
|
|
|
91.4
|
%
|
Post Rice
Loftstm(5)
|
|
Houston
|
|
1998
|
|
|
308
|
|
|
|
1,311
|
|
|
|
93.6
|
%
|
Post
Squaretm
|
|
Dallas
|
|
1996
|
|
|
218
|
|
|
|
1,175
|
|
|
|
94.4
|
%
|
Post Uptown
Villagetm
|
|
Dallas
|
|
1995-2000(4)
|
|
|
496
|
|
|
|
922
|
|
|
|
93.9
|
%
|
Post
Vineyardtm
|
|
Dallas
|
|
1996
|
|
|
116
|
|
|
|
996
|
|
|
|
94.6
|
%
|
Post
Vintagetm
|
|
Dallas
|
|
1993
|
|
|
161
|
|
|
|
987
|
|
|
|
95.6
|
%
|
Post Wilson
Buildingtm(5)
|
|
Dallas
|
|
1999
|
|
|
143
|
|
|
|
1,195
|
|
|
|
90.2
|
%
|
Post
Worthingtontm(7)
|
|
Dallas
|
|
1993
|
|
|
332
|
|
|
|
1,248
|
|
|
|
66.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average
Texas
|
|
|
|
|
|
|
5,084
|
|
|
|
1,079
|
|
|
|
91.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2006
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Year
|
|
No. of
|
|
|
Rental Rates
|
|
|
Economic
|
|
Communities
|
|
Location(1)
|
|
Completed
|
|
Units
|
|
|
Per Unit
|
|
|
Occupancy(2)
|
|
|
COMMUNITY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Bay at Rocky
Pointtm(6)
|
|
Tampa
|
|
1997
|
|
|
150
|
|
|
|
1,417
|
|
|
|
N/A
|
|
Post Harbour
Placetm
|
|
Tampa
|
|
1999-2002(4)
|
|
|
578
|
|
|
|
1,400
|
|
|
|
95.4
|
%
|
Post Hyde
Park®
|
|
Tampa
|
|
1996
|
|
|
383
|
|
|
|
1,364
|
|
|
|
97.2
|
%
|
Post
Parksidetm
|
|
Orlando
|
|
1999
|
|
|
245
|
|
|
|
1,422
|
|
|
|
95.6
|
%
|
Post Rocky
Point®
|
|
Tampa
|
|
1996-1998(4)
|
|
|
916
|
|
|
|
1,213
|
|
|
|
95.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average
Florida
|
|
|
|
|
|
|
2,272
|
|
|
|
1,322
|
|
|
|
95.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Ballantyne
|
|
Charlotte
|
|
2004
|
|
|
323
|
|
|
|
1,087
|
|
|
|
93.2
|
%
|
Post Gateway
Placetm
|
|
Charlotte
|
|
2000
|
|
|
436
|
|
|
|
1,082
|
|
|
|
94.7
|
%
|
Post Park at Phillips
Place®
|
|
Charlotte
|
|
1998
|
|
|
402
|
|
|
|
1,286
|
|
|
|
94.1
|
%
|
Post Uptown
Placetm
|
|
Charlotte
|
|
2000
|
|
|
227
|
|
|
|
1,124
|
|
|
|
96.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average
North Carolina
|
|
|
|
|
|
|
1,388
|
|
|
|
1,149
|
|
|
|
94.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater
Washington, D.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Carlyle
Squaretm(6)
|
|
D.C.
|
|
2006
|
|
|
205
|
|
|
|
2,148
|
|
|
|
N/A
|
|
Post Corners at Trinity Centre
|
|
Fairfax Co., VA
|
|
1996
|
|
|
336
|
|
|
|
1,432
|
|
|
|
97.5
|
%
|
Post Fallsgrove
|
|
Rockville, MD
|
|
2003
|
|
|
361
|
|
|
|
1,525
|
|
|
|
98.7
|
%
|
Post
Forest®
|
|
Fairfax Co., VA
|
|
1990
|
|
|
364
|
|
|
|
1,363
|
|
|
|
98.0
|
%
|
Post Massachusetts
Avenuetm(3)
|
|
D.C.
|
|
2002
|
|
|
269
|
|
|
|
2,569
|
|
|
|
93.0
|
%
|
Post Pentagon
Rowtm(5)
|
|
Arlington Co., VA
|
|
2001
|
|
|
504
|
|
|
|
2,136
|
|
|
|
96.3
|
%
|
Post Tysons
Cornertm
|
|
Fairfax Co., VA
|
|
1990
|
|
|
499
|
|
|
|
1,596
|
|
|
|
95.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average
Washington, D.C.
|
|
|
|
|
|
|
2,538
|
|
|
|
1,786
|
|
|
|
96.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Luminariatm
|
|
New York
|
|
2002
|
|
|
138
|
|
|
|
3,567
|
|
|
|
95.7
|
%
|
Post
Toscanatm
|
|
New York
|
|
2003
|
|
|
199
|
|
|
|
3,741
|
|
|
|
96.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average
New York
|
|
|
|
|
|
|
337
|
|
|
|
3,670
|
|
|
|
96.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
20,919
|
|
|
$
|
1,248
|
|
|
|
94.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Refers to greater metropolitan
areas of cities indicated.
|
(2)
|
|
Average economic occupancy is
defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage.
|
(3)
|
|
These communities are owned in
unconsolidated entities (Company equity ownership is 35%).
|
(4)
|
|
These dates represent the
respective completion dates for multiple phases of a community.
|
(5)
|
|
The Company has a leasehold
interest in the land underlying these communities.
|
(6)
|
|
During 2006, the communities were
in lease-up
and, therefore, the average economic occupancy information for
these communities is not included above.
|
(7)
|
|
These communities are undergoing
rehabilitation.
|
18
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
The Company has previously disclosed litigation brought by an
alleged Company shareholder against the Company, certain members
of the Companys board of directors, and certain of its
executive officers, seeking, among other things, inspection of
certain corporate records. On December 22, 2006, the
parties to the litigation agreed to settle any and all claims
that the parties had or may have had with respect to the
previously-disclosed actions styled Amy Vasquez v. Robert
L. Anderson, et al., Civil Action
No. 2003-CV-69140,
Clem Fowler v. Robert C. Goddard, III, et al.,
Civil Action
No. 2003-CV-69608,
Superior Court of Fulton County, Georgia, Ronald S.
Leventhal v. Robert C. Goddard, III, et al., Superior
Court of Fulton County, Georgia, Civil Action
No. 2004-CV-85875,
Ronald S. Leventhal v. Robert C. Goddard, III,
et al., United States District Court for the Northern
District of Georgia, Civil Action Number 1:04-CV-1445, Post
Properties, Inc. v. John Does 1-5, Civil Action
No. 2005-CV-105244,
Superior Court of Fulton County, Georgia, and certain other
related matters. In reaching this settlement, the Company and
the individual defendants did not pay any money to the
shareholder and denied any and all liability. All litigation
embraced by the settlement has been dismissed with prejudice.
In November 2006, the Equal Rights Center filed a lawsuit
against the Company and the Operating Partnership in the United
States District Court for the District of Columbia. This suit
alleges various violations of the Fair Housing Act and the
Americans with Disabilities Act at properties designed,
constructed or operated by the Company and the Operating
Partnership in the District of Columbia, Virginia, Colorado,
Florida, Georgia, New York, North Carolina and Texas. The
plaintiff seeks compensatory and punitive damages in unspecified
amounts, an award of attorneys fees and costs of suit, as
well as preliminary and permanent injunctive relief that
includes retrofitting multi-family units and public use areas to
comply with the Fair Housing Act and the Americans with
Disabilities Act and prohibiting construction or sale of
noncompliant units or complexes. Due to the preliminary nature
of the litigation, it is not possible to predict or determine
the outcome of the legal proceeding, nor is it possible to
estimate the amount of loss, if any, that would be associated
with an adverse decision.
The Company is involved in various other legal proceedings
incidental to its business from time to time, most of which are
expected to be covered by liability or other insurance.
Management of the Company believes that any resolution of
pending proceedings or liability to the Company which may arise
as a result of these various other legal proceedings will not
have a material adverse effect on the Companys results of
operations or financial position.
|
|
ITEM 4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
None.
19
Post Properties, Inc.
Post Apartment Homes, L.P.
ITEM X. EXECUTIVE
OFFICERS OF THE REGISTRANT
The persons who are executive officers of the Company and its
affiliates and their positions as of February 15, 2007 are
as follows:
|
|
|
NAME
|
|
POSITIONS AND OFFICES HELD
|
|
David P. Stockert
|
|
President and Chief Executive
Officer
|
Thomas D. Senkbeil
|
|
Executive Vice President and Chief
Investment Officer
|
Thomas L. Wilkes
|
|
Executive Vice President and
President, Post Apartment Management
|
Christopher J. Papa
|
|
Executive Vice President and Chief
Financial Officer
|
Sherry W. Cohen
|
|
Executive Vice President and
Corporate Secretary
|
Arthur J. Quirk
|
|
Senior Vice President and Chief
Accounting Officer
|
The following is a biographical summary of the experience of the
executive officers of the Company:
David P. Stockert. Mr. Stockert is the
President and Chief Executive Officer of the Company.
Mr. Stockert has been the Chief Executive Officer since
July 2002. From January 2001 to June 2002, Mr. Stockert was
President and Chief Operating Officer. From July 1999 to October
2000, Mr. Stockert was Executive Vice President of Duke
Realty Corporation, a publicly traded real estate company. From
June 1995 to July 1999, Mr. Stockert was Senior Vice
President and Chief Financial Officer of Weeks Corporation, also
a publicly traded real estate company that was a predecessor by
merger to Duke Realty Corporation. From August 1990 to May 1995,
Mr. Stockert was an investment banker in the Real Estate
Group at Dean Witter Reynolds Inc. (now Morgan Stanley).
Mr. Stockert is 44 years old.
Thomas D. Senkbeil. Mr. Senkbeil has been
an Executive Vice President and Chief Investment Officer of the
Company since June 2003. From July 2000 to December 2002,
Mr. Senkbeil was President and Chief Operating Officer of
Carter & Associates, a leading regional full-service
real estate firm, overseeing the daily operation of
Carters four business units: Brokerage, Corporate Real
Estate Services, Development, and Property Management and
Leasing. Prior to joining Carter & Associates,
Mr. Senkbeil was Chief Investment Officer and a member of
the board of directors at Duke Realty Corporation and its
predecessor, Weeks Corporation, from June 1992 to July 2000.
Mr. Senkbeil is 57 years old.
Thomas L. Wilkes. Mr. Wilkes has been an
Executive Vice President and President of Post Apartment
Management since January 2001. From October 1997 through
December 2000, he was an Executive Vice President and Director
of Operations for Post Apartment Management responsible for the
operations of Post communities in the Western United States.
Mr. Wilkes was a Senior Vice President of Columbus Realty
Trust from December 1993 through October 1997. Mr. Wilkes
served as President of CRH Management Company, a member of the
Columbus Group, from its formation in October 1990 to December
1993. Mr. Wilkes is a Certified Property Manager.
Mr. Wilkes is 47 years old.
Christopher J. Papa. Mr. Papa has been an
Executive Vice President and Chief Financial Officer of the
Company since December 2003. Prior to joining the Company, he
was an audit partner at BDO Seidman, LLP from June 2003 to
November 2003, the Chief Financial Officer at Plast-O-Matic
Valves, Inc., a privately-held company, from June 2002 to June
2003, and until June 2002, an audit partner at Arthur Andersen
LLP where he was employed for over 10 years. Mr. Papa
is a Certified Public Accountant. Mr. Papa is 41 years
old.
Sherry W. Cohen. Ms. Cohen has been with
the Company for twenty two years. Since October 1997, she has
been an Executive Vice President of Post Corporate Services
responsible for supervising and coordinating legal affairs and
insurance. Since April 1990, Ms. Cohen has also been
Corporate Secretary. She was a Senior Vice President with Post
Corporate Services from July 1993 to October 1997. Prior
thereto, Ms. Cohen was a Vice President of Post Properties,
Inc. since April 1990. Ms. Cohen is 52 years old.
Arthur J. Quirk. Mr. Quirk has been a
Senior Vice President and Chief Accounting Officer of the
Company since January 2003. Mr. Quirk served as the
Companys Vice President and Chief Accounting Officer from
March 2001 to December 2002. From July 1999 to March 2001,
Mr. Quirk was Vice President and Controller of Duke Realty
Corporation, a publicly traded real estate company. From
December 1994 to July 1999, Mr. Quirk was the Vice
President and Controller of Weeks Corporation, also a publicly
traded real estate company that was a predecessor by merger to
Duke Realty Corporation. Mr. Quirk is a Certified Public
Accountant. Mr. Quirk is 48 years old.
20
Post Properties, Inc.
Post Apartment Homes, L.P.
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON STOCK, RELATED SHAREHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
(In thousands, except per share and shareholder/unitholder
amounts)
|
The Companys common stock is traded on the New York Stock
Exchange (NYSE) under the symbol PPS.
The following table sets forth the quarterly high and low prices
per share reported on the NYSE, as well as the quarterly
dividends declared per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
Quarter
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
35.25
|
|
|
$
|
30.13
|
|
|
$
|
0.45
|
|
Second Quarter
|
|
|
37.74
|
|
|
|
30.47
|
|
|
|
0.45
|
|
Third Quarter
|
|
|
40.52
|
|
|
|
35.86
|
|
|
|
0.45
|
|
Fourth Quarter
|
|
|
42.00
|
|
|
|
33.83
|
|
|
|
0.45
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
48.00
|
|
|
$
|
39.69
|
|
|
$
|
0.45
|
|
Second Quarter
|
|
|
46.32
|
|
|
|
40.88
|
|
|
|
0.45
|
|
Third Quarter
|
|
|
48.74
|
|
|
|
44.90
|
|
|
|
0.45
|
|
Fourth Quarter
|
|
|
50.47
|
|
|
|
44.46
|
|
|
|
0.45
|
|
On February 15, 2007, the Company had 1,539 common
shareholders of record and 43,565 shares of common stock
outstanding.
The Company pays regular quarterly dividends to holders of
shares of its common stock. Future dividend payments by the
Company will be paid at the discretion of the board of directors
and will depend on the actual funds from operations of the
Company, the Companys financial condition and capital
requirements, the annual distribution requirements under the
REIT provisions of the Internal Revenue Code of 1986, as amended
(the Code) and other factors that the board of
directors deems relevant. For a discussion of the Companys
credit agreements and their restrictions on dividend payments,
see note 4 to the consolidated financial statements.
During 2006, the Company did not sell any unregistered
securities.
There is no established public trading market for the Common
Units. On February 15, 2007, the Operating Partnership had
49 holders of record of Common Units and 648 Common Units
outstanding, excluding the 43,565 of Common Units owned by the
Company.
For each quarter during 2006 and 2005, the Operating Partnership
paid a cash distribution to holders of Common Units equal in
amount to the dividends paid on the Companys common stock
for such quarter.
During 2006, the Operating Partnership did not sell any
unregistered securities.
In the fourth quarter of 2006, the Companys board of
directors adopted a new stock repurchase program under which the
Company may repurchase up to $200,000 of common or preferred
stock at market prices from time to time until December 31,
2008. Under its previous stock repurchase program which expired
on December 31, 2006, the Company repurchased approximately
109 shares of its common stock totaling approximately
$5,000 at an average price of $45.70 under 10b5-1 stock purchase
plans in 2006. The Company also repurchased approximately
1,031 shares of its common stock totaling approximately
$34,400 at an average price of $33.38 under 10b5-1 stock
purchase plans in 2005. The approximate dollar value of shares
that may yet be purchased under repurchase plans shown below at
December 31, 2006 reflects amounts available under the
Companys old program which has expired and been replaced
with the new program discussed above. The following table
summarizes the Companys purchases of its equity securities
in the three months ended December 31, 2006 (in thousands,
except per share amounts).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Approximate Dollar
|
|
|
|
|
|
|
|
|
|
Shares Purchased as
|
|
|
Value of Shares that
|
|
|
|
|
|
|
|
|
|
Part of Publicly
|
|
|
May Yet Be
|
|
|
|
Total Number of
|
|
|
Average Price
|
|
|
Announced
|
|
|
Purchased Under the
|
|
Period
|
|
Shares Purchased
|
|
|
Paid Per Share
|
|
|
Plans or Programs
|
|
|
Plans or Programs
|
|
|
October 1, 2006 to
October 31, 2006
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
165,600
|
|
November 1, 2006 to
November 30, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
165,600
|
|
December 1, 2006 to
December 31, 2006
|
|
|
109
|
|
|
|
45.70
|
|
|
|
109
|
|
|
|
160,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
109
|
|
|
$
|
45.70
|
|
|
|
109
|
|
|
$
|
160,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
Post
Properties, Inc.
(In
thousands, except per share and apartment unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
STATEMENT OF OPERATIONS
DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
282,650
|
|
|
$
|
264,763
|
|
|
$
|
251,661
|
|
|
$
|
238,323
|
|
|
$
|
234,593
|
|
Other
|
|
|
17,446
|
|
|
|
15,733
|
|
|
|
15,131
|
|
|
|
13,534
|
|
|
|
13,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
300,096
|
|
|
$
|
280,496
|
|
|
$
|
266,792
|
|
|
$
|
251,851
|
|
|
$
|
247,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations(1)
|
|
$
|
30,934
|
|
|
$
|
5,356
|
|
|
$
|
(26,715
|
)
|
|
$
|
(28,280
|
)
|
|
$
|
21,732
|
|
Income from discontinued
operations(2)
|
|
|
70,535
|
|
|
|
136,592
|
|
|
|
114,934
|
|
|
|
42,436
|
|
|
|
39,014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
101,469
|
|
|
|
141,948
|
|
|
|
88,219
|
|
|
|
14,156
|
|
|
|
60,746
|
|
Dividends to preferred shareholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(8,325
|
)
|
|
|
(11,449
|
)
|
|
|
(11,449
|
)
|
Redemption costs on preferred stock
and units
|
|
|
|
|
|
|
|
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders
|
|
$
|
93,832
|
|
|
$
|
134,311
|
|
|
$
|
76,368
|
|
|
$
|
2,707
|
|
|
$
|
49,297
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER COMMON SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations (net of preferred dividends and redemption
costs) basic
|
|
$
|
0.54
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(1.05
|
)
|
|
$
|
0.28
|
|
Income from discontinued
operations basic
|
|
|
1.65
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
1.13
|
|
|
|
1.06
|
|
Net income available to common
shareholders basic
|
|
|
2.19
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
|
|
1.33
|
|
Income (loss) from continuing
operations (net of preferred dividends and redemption
costs) diluted
|
|
|
0.53
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(1.05
|
)
|
|
$
|
0.28
|
|
Income from discontinued
operations diluted
|
|
|
1.62
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
1.13
|
|
|
|
1.06
|
|
Net income available to common
shareholders diluted
|
|
|
2.15
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
|
|
1.33
|
|
Dividends declared
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
3.12
|
|
Weighted average common shares
outstanding basic
|
|
|
42,812
|
|
|
|
40,217
|
|
|
|
39,777
|
|
|
|
37,688
|
|
|
|
36,939
|
|
Weighted average common shares
outstanding diluted
|
|
|
43,594
|
|
|
|
40,217
|
|
|
|
39,777
|
|
|
|
37,688
|
|
|
|
36,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before accumulated
depreciation
|
|
$
|
2,580,092
|
|
|
$
|
2,416,335
|
|
|
$
|
2,502,418
|
|
|
$
|
2,596,376
|
|
|
$
|
2,705,215
|
|
Real estate, net of accumulated
depreciation
|
|
|
2,028,580
|
|
|
|
1,899,381
|
|
|
|
1,977,719
|
|
|
|
2,085,517
|
|
|
|
2,258,037
|
|
Total assets
|
|
|
2,116,647
|
|
|
|
1,981,454
|
|
|
|
2,053,842
|
|
|
|
2,215,451
|
|
|
|
2,508,151
|
|
Total indebtedness
|
|
|
1,033,779
|
|
|
|
980,615
|
|
|
|
1,129,478
|
|
|
|
1,186,322
|
|
|
|
1,414,555
|
|
Shareholders equity
|
|
|
956,454
|
|
|
|
881,009
|
|
|
|
788,070
|
|
|
|
796,526
|
|
|
|
833,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
94,326
|
|
|
$
|
86,761
|
|
|
$
|
79,105
|
|
|
$
|
91,549
|
|
|
$
|
119,763
|
|
Investing activities
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
131,873
|
|
|
|
234,195
|
|
|
|
(48,821
|
)
|
Financing activities
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
(212,189
|
)
|
|
|
(330,800
|
)
|
|
|
(69,355
|
)
|
Total stabilized communities (at
end of period)
|
|
|
55
|
|
|
|
57
|
|
|
|
65
|
|
|
|
70
|
|
|
|
75
|
|
Total stabilized apartment units
(at end of period)
|
|
|
20,019
|
|
|
|
21,237
|
|
|
|
24,700
|
|
|
|
27,613
|
|
|
|
29,199
|
|
Average economic occupancy (fully
stabilized communities)(3)
|
|
|
94.7
|
%
|
|
|
94.5
|
%
|
|
|
93.5
|
%
|
|
|
91.9
|
%
|
|
|
90.9
|
%
|
|
|
|
(1)
|
|
Income (loss) from continuing
operations in 2006 includes final proceeds of $325 related to
the sale of a technology investment, non-cash income of $1,655
relating to the
mark-to-market
of an interest rate swap arrangement, a gain on the sale of
marketable securities of $573 and a gain on the sale of a land
parcel of $503. Income (loss) from continuing operations in 2005
includes a $5,267 gain on sale of technology investment and
severance charges of $796. Income (loss) from continuing
operations in 2004 included the impact of costs associated with
the termination of a debt remarketing agreement (interest
expense) and an early debt extinguishment loss totaling $14,626.
See note 4 to the consolidated financial statements for a
discussion of these costs. Income (loss) from continuing
operations in 2003 included the impact of severance and proxy
costs totaling $26,737.
|
(2)
|
|
Upon the implementation of
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, on January 1, 2002,
the operating results of real estate held for sale and sold are
reported as discontinued operations for all years presented.
Additionally, all gains and losses on the sale of assets
classified as held for sale subsequent to January 1, 2002
are included in discontinued operations.
|
(3)
|
|
Calculated based on fully
stabilized communities as defined for each year (unadjusted for
the impact of assets designated as held for sale in subsequent
years). Average economic occupancy is defined as gross potential
rent less vacancy losses, model expenses and bad debt divided by
gross potential rent for the period, expressed as a percentage.
The calculation of average economic occupancy does not include a
deduction for net concessions and employee discounts (average
economic occupancy, taking account of these amounts, would have
been 94.0%, 93.9%, 93.0%, 90.8% and 89.1% for the years ended
December 31, 2006, 2005, 2004, 2003 and 2002,
respectively). Net concessions were $1,255, $947, $621, $2,518
and $4,215 for the years ended December 31, 2006, 2005,
2004, 2003 and 2002, respectively. Employee discounts were $765,
$398, $442, $535 and $660 for the years ended December 31,
2006, 2005, 2004, 2003 and 2002, respectively. A community is
considered by the Company to have achieved stabilized occupancy
on the earlier to occur of (i) attainment of 95% physical
occupancy on the first day of any month, or (ii) one year
after completion of construction.
|
22
Post Properties, Inc.
Post Apartment Homes, L.P.
Post
Apartment Homes, L.P.
(In
thousands, except per unit and apartment unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
2002
|
|
|
STATEMENT OF OPERATIONS
DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
282,650
|
|
|
$
|
264,763
|
|
|
$
|
251,661
|
|
|
$
|
238,323
|
|
|
$
|
234,593
|
|
Other
|
|
|
17,446
|
|
|
|
15,733
|
|
|
|
15,131
|
|
|
|
13,534
|
|
|
|
13,112
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
300,096
|
|
|
$
|
280,496
|
|
|
$
|
266,792
|
|
|
$
|
251,851
|
|
|
$
|
247,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations(1)
|
|
$
|
31,385
|
|
|
$
|
5,236
|
|
|
$
|
(25,550
|
)
|
|
$
|
(27,212
|
)
|
|
$
|
28,738
|
|
Income from discontinued
operations(2)
|
|
|
71,901
|
|
|
|
143,811
|
|
|
|
122,727
|
|
|
|
47,309
|
|
|
|
44,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
103,286
|
|
|
$
|
149,047
|
|
|
$
|
97,177
|
|
|
$
|
20,097
|
|
|
$
|
73,118
|
|
Distributions to preferred
unitholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(12,105
|
)
|
|
|
(17,049
|
)
|
|
|
(17,049
|
)
|
Redemption costs on preferred units
|
|
|
|
|
|
|
|
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders
|
|
$
|
95,649
|
|
|
$
|
141,410
|
|
|
$
|
81,546
|
|
|
$
|
3,048
|
|
|
$
|
56,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER COMMON UNIT DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations (net of preferred distributions and redemption
costs) basic
|
|
$
|
0.54
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(1.05
|
)
|
|
$
|
0.28
|
|
Income from discontinued
operations basic
|
|
|
1.65
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
1.12
|
|
|
|
1.06
|
|
Net income available to common
unitholders basic
|
|
|
2.19
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
|
|
1.33
|
|
Income (loss) from continuing
operations (net of preferred distributions and redemption
costs) diluted
|
|
$
|
0.53
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
|
$
|
(1.05
|
)
|
|
$
|
0.28
|
|
Income from discontinued
operations diluted
|
|
|
1.62
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
1.12
|
|
|
|
1.06
|
|
Net income available to common
unitholders diluted
|
|
|
2.15
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
|
|
1.33
|
|
Distributions declared
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
3.12
|
|
Weighted average common units
outstanding basic
|
|
|
43,645
|
|
|
|
42,353
|
|
|
|
42,474
|
|
|
|
42,134
|
|
|
|
42,021
|
|
Weighted average common units
outstanding diluted
|
|
|
44,427
|
|
|
|
42,353
|
|
|
|
42,474
|
|
|
|
42,134
|
|
|
|
42,036
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before accumulated
depreciation
|
|
$
|
2,580,092
|
|
|
$
|
2,416,335
|
|
|
$
|
2,502,418
|
|
|
$
|
2,596,376
|
|
|
$
|
2,705,215
|
|
Real estate, net of accumulated
depreciation
|
|
|
2,028,580
|
|
|
|
1,899,381
|
|
|
|
1,977,719
|
|
|
|
2,085,517
|
|
|
|
2,258,037
|
|
Total assets
|
|
|
2,116,647
|
|
|
|
1,981,454
|
|
|
|
2,053,842
|
|
|
|
2,215,451
|
|
|
|
2,508,151
|
|
Total indebtedness
|
|
|
1,033,779
|
|
|
|
980,615
|
|
|
|
1,129,478
|
|
|
|
1,186,322
|
|
|
|
1,414,555
|
|
Partners equity
|
|
|
970,511
|
|
|
|
907,773
|
|
|
|
831,411
|
|
|
|
928,935
|
|
|
|
993,976
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
94,326
|
|
|
$
|
86,761
|
|
|
$
|
79,105
|
|
|
$
|
91,549
|
|
|
$
|
119,763
|
|
Investing activities
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
131,873
|
|
|
|
234,195
|
|
|
|
(48,821
|
)
|
Financing activities
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
(212,189
|
)
|
|
|
(330,800
|
)
|
|
|
(69,355
|
)
|
Total stabilized communities (at
end of period)
|
|
|
55
|
|
|
|
57
|
|
|
|
65
|
|
|
|
70
|
|
|
|
75
|
|
Total stabilized apartment units
(at end of period)
|
|
|
20,019
|
|
|
|
21,237
|
|
|
|
24,700
|
|
|
|
27,613
|
|
|
|
29,199
|
|
Average economic occupancy (fully
stabilized communities)(3)
|
|
|
94.7
|
%
|
|
|
94.5
|
%
|
|
|
93.5
|
%
|
|
|
91.9
|
%
|
|
|
90.9
|
%
|
|
|
|
(1)
|
|
Income (loss) from continuing
operations in 2006 includes final proceeds of $325 related to
the sale of a technology investment, non-cash income of $1,655
relating to the
mark-to-market
of an interest rate swap arrangement, a gain on the sale of
marketable securities of $573 and a gain on the sale of a land
parcel of $503. Income (loss) from continuing operations in 2005
includes a $5,267 gain on sale of technology investment and
severance charges of $796. Income (loss) from continuing
operations in 2004 included the impact of costs associated with
the termination of a debt remarketing agreement (interest
expense) and an early debt extinguishment loss totaling $14,626.
See note 4 to the consolidated financial statements for a
discussion of these costs. Income (loss) from continuing
operations in 2003 included the impact of severance and proxy
costs totaling $26,737.
|
(2)
|
|
Upon the implementation of
SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets, on January 1, 2002,
the operating results of real estate held for sale and sold are
reported as discontinued operations for all years presented.
Additionally, all gains and losses on the sale of assets
classified as held for sale subsequent to January 1, 2002
are included in discontinued operations.
|
(3)
|
|
Calculated based on fully
stabilized communities as defined for each year (unadjusted for
the impact of assets designated as held for sale in subsequent
years). Average economic occupancy is defined as gross potential
rent less vacancy losses, model expenses and bad debt divided by
gross potential rent for the period, expressed as a percentage.
The calculation of average economic occupancy does not include a
deduction for net concessions and employee discounts (average
economic occupancy, taking account of these amounts, would have
been 94.0%, 93.9%, 93.0%, 90.8% and 89.1% for the years ended
December 31, 2006, 2005, 2004, 2003 and 2002,
respectively). Net concessions were $1,255, $947, $621, $2,518
and $4,215 for the years ended December 31, 2006, 2005,
2004, 2003 and 2002, respectively. Employee discounts were $765,
$398, $442, $535 and $660 for the years ended December 31,
2006, 2005, 2004, 2003 and 2002, respectively. A community is
considered by the Company to have achieved stabilized occupancy
on the earlier to occur of (i) attainment of 95% physical
occupancy on the first day of any month, or (ii) one year
after completion of construction.
|
23
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(In thousands, except apartment unit data)
|
Company
Overview
Post Properties, Inc. and its subsidiaries develop, own and
manage upscale multifamily communities in selected markets in
the United States. As used in this report, the term
Company includes Post Properties, Inc. and its
subsidiaries, including Post Apartment Homes, L.P. (the
Operating Partnership), unless the context indicates
otherwise. The Company, through its wholly-owned subsidiaries is
the general partner and owns a majority interest in the
Operating Partnership which, through its subsidiaries, conducts
substantially all of the on-going operations of the Company. At
December 31, 2006, the Company owned 21,745 apartment units
in 61 apartment communities, including 545 apartment units in
two communities held in unconsolidated entities and 1,181
apartment units in four communities (and the expansion of one
community) currently under construction
and/or in
lease-up.
The Company is also developing 230 for-sale condominium homes
and is converting apartment homes in four communities initially
consisting of 597 units (including 121 units in one
community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary. At
December 31, 2006, approximately 44.5%, 18.8%, 12.1% and
9.7% (on a unit basis) of the Companys operating
communities were located in the Atlanta, Dallas, the greater
Washington D.C. and Tampa metropolitan areas, respectively.
The Company has elected to qualify and operate as a
self-administrated and self-managed real estate investment trust
(REIT) for federal income tax purposes. A REIT is a
legal entity which holds real estate interests and is generally
not subject to federal income tax on the income it distributes
to its shareholders.
At December 31, 2006, the Company owned approximately 98.4%
of the common limited partnership interests (Common
Units) in the Operating Partnership. Common Units held by
persons other than the Company represented a 1.6% common
minority interest in the Operating Partnership.
In the four year period prior to 2005, the multifamily apartment
sector was adversely impacted by the supply of multifamily
apartments outpacing demand, due primarily to the availability
of capital and the low interest rate environment, demand for
multifamily apartments that was adversely impacted by weakness
in the overall U.S. economy and the job market, as well as
increased rates of homeownership due primarily to historically
low mortgage interest rates. In particular, the Sunbelt markets
in which a substantial portion of the Companys apartment
communities are located were adversely impacted.
Beginning in 2005, the Companys operating results
benefited from improved fundamentals in the multifamily
apartment market, due primarily to improved job growth and
overall growth in the U.S. economy and job market,
increasing mortgage interest rates and single-family housing
prices which have decreased the affordability of housing, as
well as moderation in the supply of new market-rate apartments
in the primary markets and submarkets where the Company
operates. The rate of improvement in multifamily market
fundamentals continued to accelerate in 2006, as interest rates
continued to increase through the first half of the year, the
for-sale housing markets began to weaken as a result of higher
interest rates and excess inventories, and the
U.S. economic and overall job growth climate and outlook
continued to be favorable throughout the year. This is evidenced
by stronger year over year increases in same store operating
revenues and property net operating income (NOI) of
5.4% and 6.0%, respectively, in 2006 compared to 3.1% and 2.9%,
respectively, in 2005. The Company expects that these factors
will continue to favorably impact apartment market fundamentals
in 2007. The Company is forecasting continued growth in same
store community revenues and NOI at rates similar to 2006 as
more fully discussed in the Outlook section below.
The Company has also been active over the past several years
repositioning its real estate portfolio and building its
development and value creation capabilities centered upon its
Southeast, Southwest and Mid-Atlantic regions. During this time,
the Company has been a net seller of apartment assets in an
effort to exploit opportunities to harvest value and recycle
capital through the sale of non-core assets that no longer met
the Companys growth objectives. The Companys asset
sales program has been consistent with its strategy of reducing
its concentration in Atlanta, Georgia and Dallas, Texas,
building critical mass in fewer markets and leveraging the
Post®
brand in order to improve operating efficiencies. The Company
has redeployed capital raised from its asset sales to strengthen
its balance sheet, by reducing high-coupon preferred equity and
debt, and reinvesting in assets that the Company believes
demonstrate better growth potential.
In this regard, the Company disposed of 3,880, 3,047 and 1,340
apartment units in 2004, 2005 and 2006, respectively, for
aggregate gross proceeds of approximately $243,000, $232,000 and
$175,000 in 2004, 2005 and 2006, respectively. During this same
period, the Company acquired 499, 319 and 819 apartment units
for aggregate gross purchase prices of approximately $85,814,
$37,250 and $152,000 in 2004, 2005 and 2006, respectively.
24
Post Properties, Inc.
Post Apartment Homes, L.P.
The Company also re-commenced development activities in late
2004 with its start of a new 350 unit mixed-use, for-rent
apartment and for-sale condominium project located in
Alexandria, Virginia, the start of two for-rent apartment
projects and one expansion, totaling 826 units, in Atlanta,
Georgia, Dallas, Texas and Tampa, Florida in 2006 and the start
of an 85 unit for-sale condominium project in Dallas, Texas
in 2006. The Company also expects to begin additional
development projects in 2007 and 2008.
In early 2005, the Company entered the for-sale condominium
housing market to exploit the strategic opportunity for Post to
serve those consumers who are choosing to own, rather than rent,
their home. As a result, the Company launched a new for-sale
brand, Post Preferred
Homestm,
which serves as the unified marketing umbrella for the
Companys for-sale ventures, including developing new
communities and converting existing apartment communities into
upscale for-sale housing in several key markets.
In 2005, the Company, through a taxable REIT subsidiary,
commenced the conversion of three existing apartment communities
consisting of a total of 382 units into for-sale
condominium homes, including one in an unconsolidated entity,
located in Atlanta, Georgia, Dallas, Texas and Tampa, Florida.
One of these communities, containing 134 units, located in
Tampa, Florida, was completely sold out in 2005. The other two
communities were substantially sold out by the end of 2006.
During 2006, the Company, through a taxable REIT subsidiary,
also commenced the conversion of a portion of two additional
existing apartment communities consisting of a total of
349 units into for-sale condominium homes, located in
Houston, Texas and Tampa, Florida. These two communities began
closing condominium sales in the second quarter of 2006.
Recently, there has been a softening in the condominium and
single family housing markets due to increasing mortgage
financing rates, increasing supplies of such assets and a
perceived slow down in the residential housing market and
overall economic activity in the U.S. As a result, the pace
of condominium closings slowed in the second half of 2006. It is
likely that condominium closings will continue to be slow at
these communities into 2007. There can be no assurance of the
amount or pace of future for-sale condominium sales and closings.
In 2007, the Company expects to begin closing condominium
contracts at its two newly developed for-sale condominium
projects, containing 230 homes. As of February 15, 2007,
the Company had in excess of 100 condominium homes under
contract at these communities. These homes are expected to begin
closing in the second quarter of 2007. There can be no
assurances that condominium homes under contract at these
communities will close.
The Companys expansion into for-sale condominium housing
exposes the Company to new risks and challenges, which if they
materialize, could have an adverse impact on the Companys
business, results of operations and financial condition. As of
December 31, 2006, the Company had approximately $93,000 of
total estimated capital cost (based on book value and including
the Companys investment in unconsolidated entities)
committed to its for-sale condominium conversion and
ground-up
development projects, including projected development costs
expected to be funded relating to two for-sale projects
currently under construction. In addition, the Company also had,
in the aggregate, approximately $108,711 of land held for future
development and net investments in unconsolidated land entities
as of December 31, 2006, of which a portion may be used to
develop future for-sale condominium projects depending upon
market conditions. There can be no assurance, however, that land
held for future development will be used for such purposes or
whether developments will actually commence. See Risk
Factors elsewhere in this
Form 10-K
for a discussion of these and other Company risk factors.
The following discussion should be read in conjunction with the
selected financial data and with all of the accompanying
consolidated financial statements appearing elsewhere in this
report. This discussion is combined for the Company and the
Operating Partnership as their results of operations and
financial condition are substantially the same except for the
effect of the 1.9% and 5.0% weighted average common minority
interest in the Operating Partnership in 2006 and 2005,
respectively. See the summary financial information in the
section below titled, Results of Operations.
Disclosure
Regarding Forward-Looking Statements
Certain statements made in this report, and other written or
oral statements made by or on behalf of the Company, may
constitute forward-looking statements within the
meaning of the federal securities laws. In addition, the
Company, or the executive officers on the Companys behalf,
may from time to time make forward-looking statements in reports
and other documents the Company files with the SEC or in
connection with oral statements made to the press, potential
investors or others. Statements regarding future events and
developments and the Companys future performance, as well
as managements expectations, beliefs, plans, estimates or
projections relating to the future, are forward-looking
statements within the meaning of these laws. Forward-looking
statements include statements preceded by, followed by or that
include the words believes, expects,
anticipates, plans,
estimates, or similar expressions. Examples of such
statements in this report include the Companys anticipated
performance for the three months ending March 31, 2007 and
the year ending December 31, 2007 (including the
Companys assumptions for such performance and expected
levels
25
Post Properties, Inc.
Post Apartment Homes, L.P.
of costs and expenses to be incurred in 2007), anticipated
apartment community sales in 2007 (including the estimated
proceeds, estimated gains on sales and the use of proceeds from
such sales), anticipated conversion of apartment communities
into condominium homes, development of new for-sale condominium
housing and the related sales of the for-sale condominium homes,
anticipated future acquisition and development activities,
accounting recognition and measurement of guarantees,
anticipated refinancing and other new financing needs, the
anticipated dividend level in 2007, the Companys ability
to meet new construction, development and other long-term
liquidity requirements, and its ability to execute future asset
sales. Forward-looking statements are only predictions and are
not guarantees of performance. These statements are based on
beliefs and assumptions of the Companys management, which
in turn are based on currently available information. Important
assumptions relating to the forward-looking statements include,
among others, assumptions regarding the market for the
Companys apartment communities, demand for apartments in
the markets in which it operates, competitive conditions and
general economic conditions. These assumptions could prove
inaccurate. The forward-looking statements also involve risks
and uncertainties, which could cause actual results to differ
materially from those contained in any forward-looking
statement. Many of these factors are beyond the Companys
ability to control or predict. Such factors include, but are not
limited to, the following:
|
|
|
The success of the Companys business strategies described
on pages 2 to 3 in this Annual Report on
Form 10-K;
|
|
Future local and national economic conditions, including changes
in job growth, interest rates, the availability of financing and
other factors;
|
|
Demand for apartments in the Companys markets and the
effect on occupancy and rental rates;
|
|
The impact of competition on the Companys business,
including competition for residents in the Companys
apartment communities and buyers of the Companys for-sale
condominium homes and development locations;
|
|
The Companys ability to obtain financing, enter into joint
venture arrangements in relation to or self-fund the development
or acquisition of additional apartment communities and for-sale
condominium housing;
|
|
The uncertainties associated with the Companys real estate
development, including actual costs exceeding the Companys
budgets or development periods exceeding expectations;
|
|
Uncertainties associated with the timing and amount of apartment
community sales and the resulting gains/losses associated with
such sales;
|
|
Uncertainties associated with the Companys condominium
conversion and for-sale housing business, including the timing
and volume of condominium sales;
|
|
Conditions affecting ownership of residential real estate and
general conditions in the multi-family residential real estate
market;
|
|
Uncertainties associated with environmental and other regulatory
matters;
|
|
The effects of compliance with the Americans with Disabilities
Act and the Fair Housing Act;
|
|
The effects of changes in accounting policies and other
regulatory matters detailed in the Companys filings with
the Securities and Exchange Commission and uncertainties of
litigation;
|
|
The Companys ability to continue to qualify as a REIT
under the Internal Revenue Code; and
|
|
Other factors, including the risk factors discussed on
pages 8 to 15 in this Annual Report on
Form 10-K.
|
Management believes these forward-looking statements are
reasonable; however, undue reliance should not be placed on any
forward-looking statements, which are based on current
expectations. Further, forward-looking statements speak only as
of the date they are made, and management undertakes no
obligation to update publicly any of them in light of new
information or future events.
Critical
Accounting Policies and New Accounting Pronouncements
In the preparation of financial statements and in the
determination of Company operating performance, the Company
utilizes certain significant accounting polices and these
accounting policies are discussed in note 1 to the
Companys consolidated financial statements. Also discussed
in note 1 to the consolidated financial statements, there
are new accounting pronouncements issued in 2006 and 2005 that
may have an impact on future reported results. The potential
impact of certain new pronouncements on the Company is discussed
below and in the consolidated financial statements. As the
Company is in the business of developing, owning and managing
apartment communities and developing, converting and selling
for-sale condominiums, its critical accounting policies, ones
that are subject to significant management estimates and
judgments, relate to cost capitalization, asset impairment
evaluation and revenue and profit recognition of for-sale
condominium activities.
For communities under development or rehabilitation, the Company
capitalizes interest, real estate taxes, and certain internal
personnel and associated costs directly related to apartment
communities under development and construction. Interest
capitalized to projects under development or construction can
fluctuate significantly from year to year based on the level of
projects under development or construction and to a lesser
extent, changes in the weighted average interest rate used in
the calculation. For the years ended December 31, 2006,
2005 and 2004, the Company capitalized interest totaling
26
Post Properties, Inc.
Post Apartment Homes, L.P.
$9,942, $2,907 and $1,078, respectively. The increase in 2006
primarily relates to a significantly increased development
pipeline as the Company recommenced development activities over
the last few years with four new construction starts in 2006 and
with several additional projects in development. The weighted
average interest rates used in the calculation of the
capitalized interest amounts ranged from 6.6% in 2006 to 7.2% in
2004 and, as a result, were not the primary driver of the
changes in interest capitalization discussed above. In future
periods, the Company anticipates an increase in development
activity in three regional markets which will result in
increased interest capitalization over 2006 levels. Aggregate
interest capitalization is expected to increase in 2007 even as
the average interest rate used in the calculation is expected to
be substantially the same as in 2006. Due to the predominately
fixed rate nature of the Companys debt, future increases
or decreases in short-term interest rates are not expected to
have a significant impact on the weighted average interest rate
used for interest capitalization purposes. Future increases in
short-term and long-term interest rates over time would cause an
increase in the weighted average rate used for capitalization
and cause interest amounts capitalized to increase.
Internal personnel and associated costs are capitalized to the
projects under development or construction based upon the effort
associated with such projects. In 2004, the Company expensed
$2,930 of development personnel and associated costs. In 2005
and 2006, the Company increased its development personnel in
three regional geographic areas in anticipation of increased
development activity in 2006 and in future periods. In 2006 and
2005, the Company expensed $6,424 and $4,711, respectively, of
development personnel and associated costs. If future
development volume increases over 2006 levels, a significant
portion of such costs may be capitalized to development projects.
The Company continually evaluates the recoverability of the
carrying value of its real estate assets using the methodology
summarized in its accounting policies (see note 1 to the
consolidated financial statements). Under current accounting
literature, the evaluation of the recoverability of the
Companys real estate assets requires the judgment of
Company management in the determination of the value of the
future cash flows expected from the assets and the estimated
holding period for the assets. The Company uses market
capitalization rates to determine the estimated residual value
of its real estate assets and, generally, takes a long-term view
of the holding period of its assets unless specific facts and
circumstances warrant shorter holding periods (expected sales,
departures from certain geographic markets, etc.). At
December 31, 2006 and 2005, management believed it had
applied reasonable estimates and judgments in determining the
proper classification of its real estate assets. The Company
believes the actual results of prior year dispositions have
validated the Companys methodology discussed herein.
Should external or internal circumstances change requiring the
need to shorten the holding periods or adjust the estimated
future cash flows of certain of the Companys assets, the
Company could be required to record future impairment charges.
As discussed in note 2 to the consolidated financial
statements, the Company recorded impairment losses in 2004 on
assets held for sale or for investment under the application of
its policies.
In 2005, the Company entered into the for-sale condominium
business. At December 31, 2006, the Company is selling
condominiums at several condominium conversion communities and
at two newly developed communities. Under SFAS No. 66,
the Company recognizes revenue and the resulting profit from
condominium sales based on the relevant facts and circumstances
associated with each condominium project. For condominium
conversion projects, revenues are recognized upon the closing of
each sale transaction (the Completed Contract
Method), as all conditions for full profit recognition are
generally met at the time and the conversion construction
periods are typically very short. In 2005 and 2006, all
condominium sales were at condominium conversion projects.
Under SFAS No. 66, the Company uses the relative sales
value method to allocate costs and recognize profits from
condominium conversion sales. Under the relative sales value
method, estimates of aggregate project revenues and aggregate
project costs are used to determine the allocation of project
cost of sales and the resulting profit in each accounting
period. In subsequent periods, project cost of sale allocations
and profits are adjusted to reflect changes in the actual and
estimated costs and estimated revenues of each project.
Unexpected increases or decreases in estimated project revenues
and project costs could cause future cost of sale and profit
margin amounts recognized in the financial statements to be
different than the amounts recognized in prior periods. As the
Company continues to be active in the condominium business in
future periods, changes in estimates of this nature could have a
significant impact on reported future results from operations.
For newly developed condominiums, the Company will evaluate the
factors specified in SFAS No. 66 to determine the
appropriate method of accounting for each project (either the
Percentage of Completion Method or the
Completed Contract Method). The factors used to
determine the appropriate method are a determination of whether:
the purchaser is legally committed to closing in the real estate
contract; the construction of the project is beyond a
preliminary phase; sufficient units have been contracted to
ensure the project will not revert to a rental project; the
aggregate project sale proceeds and costs can be reasonably
estimated; and the buyer has made an adequate initial and
continuing cash investment under the contract in accordance with
SFAS No. 66. Under the Percentage of Completion
Method, revenues
27
Post Properties, Inc.
Post Apartment Homes, L.P.
and the associated profit would be recognized over the project
construction period based on the ratio of total project costs
incurred to estimated total project costs. The determination of
the profit margins to be reported also requires an estimate of
the estimated aggregate revenues to be generated from
condominium sales. Increases in estimated revenues and decreases
in estimated costs over time would lead to increased profit
recognition in future periods. Likewise, decreases in estimated
revenues and increases in estimated costs over time would lead
to reductions in profit margins in future periods. Additionally,
contracts terminated prior to closing under the Percentage of
Completion Method would result in the reversal of previously
recognized profits and such amounts could be material under
market conditions that may lead to a general market value
decline for condominiums.
At December 31, 2006, the Company had two new condominium
projects under development with approximately 43% of the
condominium homes under contract. As the initial and continuing
cash investments received do not meet the requirements of
SFAS No. 66, as well as other factors, the Company has
concluded that these sales and profits at these projects will be
accounted for under the Completed Contract Method, similar to
the accounting for condominium conversion projects discussed
above.
In November 2006 the Financial Accounting Standards Board
(FASB) ratified EITF Issue
No. 06-8
(EITF
No. 06-8),
Applicability of the Assessment of a Buyers
Continuing Investment under FASB Statement No. 66 for Sales
of Condominiums. EITF
No. 06-8
provides additional guidance on whether the seller of a
condominium unit is required to evaluate the buyers
continuing investment under SFAS No. 66 in order to
recognize profit from the sale under the percentage of
completion method. The EITF concluded that both the buyers
initial and continuing investment must meet the criteria in
SFAS No. 66 in order for condominium sale profits to
be recognized under the percentage of completion method. Sales
of condominiums not meeting the continuing investment test must
be accounted for under the deposit method (a method consistent
with the Companys above stated Completed Contract Method).
EITF
No. 06-8
is effective January 1, 2008. As discussed above, the
Company accounts for condominium sales using similar criteria to
those stated in EITF
No. 06-8.
As a result, the Company does not expect the adoption of EITF
No. 06-8
to have a material impact on the Companys financial
position or results of operations.
The Emerging Issues Task Force issued EITF
No. 04-5
(EITF
No. 04-5),
Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights. EITF
No. 04-5
provides a framework for evaluating whether a general partner or
group of general partners or managing members controls a limited
partnership or limited liability company and therefore should
consolidate the entity. The presumption that the general partner
or group of general partners or managing members controls a
limited partnership or limited liability company may be overcome
if the limited partners or members have (1) the substantive
ability to dissolve the partnership without cause, or
(2) substantive participating rights. EITF
No. 04-5
became effective on September 30, 2005 for new or modified
limited partnerships or limited liability companies and
January 1, 2006 for all existing arrangements. The Company
adopted EITF
No. 04-5
on January 1, 2006 for all existing partnerships and
limited liability companies and the adoption did not have a
material impact on the Companys financial position or
results of operations.
FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement 109, was issued in
July 2006. FIN 48 clarifies guidance on the recognition and
measurement of uncertain tax positions and establishes a more
likely than not standard for the evaluation of whether such tax
positions can be recognized in the Companys financial
statements. Previously recognized tax positions that do not meet
the more likely than not criteria will be required to be
adjusted on the implementation date. FIN 48 is effective
for the Company on January 1, 2007. Additionally,
FIN 48 requires additional disclosure regarding the nature
and amount of uncertain tax positions, if any. The Company has
performed an analysis and does not expect that the adoption of
FIN 48 will have a material impact on the Companys
financial position and results of operations.
Statement of Financial Accounting Standards No. 157
(SFAS No. 157), Fair Value
Measurements, was issued in September 2006.
SFAS No. 157 provides a definition of fair value and
establishes a framework for measuring fair value.
SFAS No. 157 clarified the definition of fair value in
an effort to eliminate inconsistencies in the application of
fair value under generally accepted accounting principles.
Additional disclosure focusing on the methods used to determine
fair value are also required. SFAS No. 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007 and should be applied
prospectively. The Company does not expect that the adoption of
SFAS No. 157 will have a material impact on the
Companys financial position and results of operations.
The Securities and Exchange Commission issued
SAB No. 108 (SAB 108),
Considering the Effects of Prior Year Misstatements When
Quantifying Misstatements in Current Year Financial
Statements, in September 2006. SAB 108 requires that
companies analyze the effect of financial statement
misstatements on both their balance sheet and their income
statement and contains guidance on correcting errors under this
approach. The Company applied the guidance in SAB 108 on
December 31, 2006 and, in accordance with the initial
application provisions of SAB 108, adjusted retained
28
Post Properties, Inc.
Post Apartment Homes, L.P.
earnings as of January 1, 2006. The adjustment was
considered to be immaterial individually and in the aggregate in
prior years based on the Companys historical method of
determining materiality. The application of SAB 108 resulted in
a cumulative effect adjustment to record the prior period impact
of accounting for two ground leases with scheduled rent
increases on a straight-line basis during periods prior to
January 1, 2005, and resulted in an increase in
consolidated real estate assets of approximately $3,900, an
increase in consolidated liabilities of approximately $8,800 and
a decrease in consolidated equity of approximately $4,900
($4,700 net of minority interest).
Results
of Operations
The following discussion of results of operations should be read
in conjunction with the consolidated statements of operations,
the accompanying selected financial data and the community
operations/segment performance information included below.
The Companys revenues and earnings from continuing
operations are generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative
operating performance, the Company categorizes its operating
apartment communities based on the period each community reaches
stabilized occupancy. The Company generally considers a
community to have achieved stabilized occupancy on the earlier
to occur of (1) attainment of 95% physical occupancy on the
first day of any month or (2) one year after completion of
construction.
For the year ended December 31, 2006, the Companys
portfolio of operating apartment communities, excluding two
communities held in unconsolidated entities, consisted of the
following: (1) 48 communities that were completed and
stabilized for all of the current and prior year,
(2) portions of two communities that are being converted
into condominiums that are reflected in continuing operations
under SFAS No. 144 (see note 1 to the
consolidated financial statements), (3) four operating
communities that were acquired in 2006 and 2005, and
(4) four communities in development, rehabilitation and
lease-up.
These operating segments exclude the operations of apartment
communities classified as discontinued operations, condominium
conversion communities classified as discontinued operations and
apartment communities held in unconsolidated entities for the
years presented.
The Company has adopted an accounting policy related to
communities in the
lease-up
stage whereby substantially all operating expenses (including
pre-opening marketing and management and leasing personnel
expenses) are expensed as incurred. During the
lease-up
phase, the sum of interest expense on completed units and other
operating expenses (including pre-opening marketing and
management and leasing personnel expenses) will initially exceed
rental revenues, resulting in a
lease-up
deficit, which continues until such time as rental
revenues exceed such expenses. The
lease-up
deficit for the year ended December 31, 2006 was
approximately $460. There were no
lease-up
deficits in 2005 and 2004, as no communities were in the
lease-up
stage.
In order to evaluate the operating performance of its
communities for the comparative years listed below, the Company
has presented financial information which summarizes the rental
and other revenues, property operating and maintenance expenses
(excluding depreciation and amortization) and net operating
income on a comparative basis for all of its operating
communities and for its stabilized operating communities. Net
operating income is a supplemental non-GAAP financial measure.
The Company believes that the line on the Companys
consolidated statement of operations entitled net
income is the most directly comparable GAAP measure to net
operating income. Net operating income is reconciled to GAAP net
income in the financial information accompanying the tables. The
Company believes that net operating income is an important
supplemental measure of operating performance for a REITs
operating real estate because it provides a measure of the core
operations, rather than factoring in depreciation and
amortization, financing costs and general and administrative
expenses. This measure is particularly useful, in the opinion of
the Company, in evaluating the performance of geographic
operations, operating segment groupings and individual
properties. Additionally, the Company believes that net
operating income, as defined, is a widely accepted measure of
comparative operating performance in the real estate investment
community.
29
Post Properties, Inc.
Post Apartment Homes, L.P.
Comparison
of Year Ended December 31, 2006 to Year Ended
December 31, 2005
The operating performance from continuing operations for all of
the Companys apartment communities summarized by segment
for the years ended December 31, 2006 and 2005 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
% Change
|
|
|
Rental and other property
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
$
|
252,761
|
|
|
$
|
239,817
|
|
|
|
5.4
|
%
|
Development, rehabilitation and
lease-up
communities
|
|
|
9,545
|
|
|
|
10,438
|
|
|
|
(8.6
|
)%
|
Condominium conversion
communities(2)
|
|
|
2,626
|
|
|
|
5,890
|
|
|
|
(55.4
|
)%
|
Acquired communities(3)
|
|
|
10,886
|
|
|
|
2,298
|
|
|
|
373.7
|
%
|
Other property segments(4)
|
|
|
23,876
|
|
|
|
21,798
|
|
|
|
9.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
299,694
|
|
|
|
280,241
|
|
|
|
6.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and
maintenance expenses (excluding depreciation and
amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
|
95,871
|
|
|
|
91,742
|
|
|
|
4.5
|
%
|
Development, rehabilitation and
lease-up
communities
|
|
|
5,291
|
|
|
|
4,361
|
|
|
|
21.3
|
%
|
Condominium conversion
communities(2)
|
|
|
1,901
|
|
|
|
2,013
|
|
|
|
(5.6
|
)%
|
Acquired communities(3)
|
|
|
4,706
|
|
|
|
856
|
|
|
|
449.8
|
%
|
Other expense(5)
|
|
|
29,403
|
|
|
|
29,143
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137,172
|
|
|
|
128,115
|
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property net operating income(6)
|
|
$
|
162,522
|
|
|
$
|
152,126
|
|
|
|
6.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
3,834
|
|
|
$
|
2,911
|
|
|
|
31.7
|
%
|
Other
|
|
|
6,812
|
|
|
|
5,780
|
|
|
|
17.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,646
|
|
|
$
|
8,691
|
|
|
|
22.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring
|
|
$
|
5,858
|
|
|
$
|
4,288
|
|
|
|
36.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average apartment units in service
|
|
|
19,607
|
|
|
|
19,331
|
|
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Communities which reached
stabilization prior to January 1, 2005.
|
(2)
|
|
Portions of existing apartment
communities being converted into condominiums that are reflected
in continuing operations under SFAS No. 144.
|
(3)
|
|
Operating communities acquired
subsequent to January 1, 2005.
|
(4)
|
|
Other property segment revenues
include revenues from commercial properties, revenues from
furnished apartment rentals above the unfurnished rental rates
and any property revenue not directly related to property
operations. Other property segment revenues exclude other
corporate revenues of $402 and $255 for the years ended
December 31, 2006 and 2005, respectively.
|
(5)
|
|
Other expenses include expenses
associated with commercial properties, furnished apartment
rentals and certain indirect central office operating expenses
related to management and grounds maintenance.
|
30
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
(6)
|
|
A reconciliation of property net
operating income to GAAP net income is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Total same store NOI
|
|
$
|
156,890
|
|
|
$
|
148,075
|
|
Property NOI from other operating
segments
|
|
|
5,632
|
|
|
|
4,051
|
|
|
|
|
|
|
|
|
|
|
Consolidated property NOI
|
|
|
162,522
|
|
|
|
152,126
|
|
|
|
|
|
|
|
|
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,261
|
|
|
|
661
|
|
Other revenues
|
|
|
402
|
|
|
|
255
|
|
Minority interest in consolidated
property partnerships
|
|
|
(257
|
)
|
|
|
239
|
|
Depreciation
|
|
|
(67,328
|
)
|
|
|
(70,435
|
)
|
Interest expense
|
|
|
(54,049
|
)
|
|
|
(55,638
|
)
|
Amortization of deferred financing
costs
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
General and administrative
|
|
|
(18,502
|
)
|
|
|
(18,307
|
)
|
Investment, development and other
expenses
|
|
|
(6,424
|
)
|
|
|
(4,711
|
)
|
Severance charges
|
|
|
|
|
|
|
(796
|
)
|
Gains (losses) on sales of
condominiums, net
|
|
|
12,378
|
|
|
|
(531
|
)
|
Equity in income of unconsolidated
real estate entities
|
|
|
1,813
|
|
|
|
1,767
|
|
Other income
|
|
|
3,095
|
|
|
|
5,267
|
|
Minority interest of common
unitholders
|
|
|
(451
|
)
|
|
|
120
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
30,934
|
|
|
|
5,356
|
|
Income from discontinued operations
|
|
|
70,535
|
|
|
|
136,592
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
101,469
|
|
|
$
|
141,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
|
In addition to those expenses which
relate to property operations, the Company incurs annually
recurring and periodically recurring expenditures relating to
acquiring new assets, materially enhancing the value of an
existing asset, or substantially extending the useful life of an
existing asset, all of which are capitalized. Recurring capital
expenditures are those that are generally expected to be
incurred on an annual basis. Periodically recurring capital
expenditures are those that generally occur less frequently than
on an annual basis.
|
|
(8)
|
|
A reconciliation of property
capital expenditures from continuing operations to total
annually recurring and periodically recurring capital
expenditures as presented in the consolidated statements of cash
flows under GAAP is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Annually recurring capital
expenditures
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
10,646
|
|
|
$
|
8,691
|
|
Discontinued operations
|
|
|
499
|
|
|
|
1,230
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital
expenditures per statements of cash flows
|
|
$
|
11,145
|
|
|
$
|
9,921
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital
expenditures
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
5,858
|
|
|
$
|
4,288
|
|
Discontinued operations
|
|
|
106
|
|
|
|
220
|
|
|
|
|
|
|
|
|
|
|
Total periodically recurring
capital expenditures per statements of cash flows
|
|
$
|
5,964
|
|
|
$
|
4,508
|
|
|
|
|
|
|
|
|
|
|
The Operating Partnership reported net income available to
common unitholders of $95,649 and $141,410 for the years ended
December 31, 2006 and 2005, respectively, and the Company
reported net income available to common shareholders of $93,832
and $134,311 for the years ended December 31, 2006 and
2005, respectively. The decline in net income in 2006, compared
to 2005, primarily reflected reduced gains on operating
community sales of approximately $56,101 and reduced gains on
condominium sales of $3,084, offset somewhat by the improved
performance of the Companys fully stabilized communities
and increased interest capitalization due to a growing
development pipeline. These items are discussed in more detail
in the sections below.
Rental and other property revenues increased $19,453 or 6.9%
from 2005 to 2006 primarily due to increased revenues from the
Companys stabilized communities of $12,944 or 5.4% and
acquired communities of $8,588. The revenue increase from
stabilized communities is discussed below. The revenue increase
from acquired communities reflects the acquisition of one
community in June 2005, two communities in March 2006 and one
community in July 2006. Property operating and maintenance
expenses (exclusive of depreciation and amortization) increased
$9,057 or 7.1% primarily due to increased expenses from
stabilized communities and acquisition communities. The expense
increase from stabilized communities is discussed below. The
expense increase from acquisition communities reflects the full
year of expenses from one operating community acquired in June
2005 and a partial year of expenses for the three operating
communities acquired during 2006.
In 2006, gains on sales of real estate assets in discontinued
operations represented the net gains of $225 ($221 net of
minority interest) from condominium sales at the Companys
condominium conversion communities and gains of
31
Post Properties, Inc.
Post Apartment Homes, L.P.
$68,324 ($67,026 net of minority interest) on the sale of
three communities containing 1,340 apartment units. The sales of
the three communities generated net proceeds of approximately
$173,007, including $40,000 of secured indebtedness assumed by
the purchasers. In 2005, gains on sales of real estate assets in
discontinued operations represented the net gains of $16,218
($15,404 net of minority interest) from condominium sales
at the Companys condominium conversion communities and
gains of $124,425 ($117,593 net of minority interest) on
the sale of six communities containing 3,047 apartment units.
The sales of the six communities generated net proceeds of
approximately $229,249, including $81,560 of tax-exempt secured
indebtedness assumed by the purchasers. The Company plans to
continue to be a seller of communities in 2007 depending upon
market conditions and consistent with its investment strategy of
recycling investment capital to fund new development and
acquisition activities in its core markets. See also the Outlook
section below for a discussion of condominium profit
expectations in 2007.
Depreciation expense decreased $3,107, or 4.4% from 2005 to 2006
primarily due to reduced depreciation resulting from certain
furniture and fixtures (with a five year life) at certain
properties becoming fully depreciated in 2005 and the cessation
of depreciation expense in late 2005 on portions of two
communities being converted into condominiums that continue to
be reported in continuing operations under
SFAS No. 144. These decreases in depreciation expense
between periods were offset by increased depreciation in 2006 on
communities acquired in June 2005, March 2006 and July 2006.
Interest expense included in continuing operations decreased
$1,589 or 2.9% from 2005 to 2006. The decreased expense amounts
between periods reflects the impact of increased interest
capitalization on its development projects of $7,035 between
years, offset by higher interest costs on higher debt levels due
to apartment community acquisitions and land acquisitions in
2005 and the first half 2006. Interest expense included in
discontinued operations decreased from $5,421 in 2005 to $2,673
in 2006 primarily due to interest expense associated with six
communities sold in 2005 and one community sold in the third
quarter of 2006.
General and administrative expenses increased $195, or 1.1%,
from 2005 to 2006 primarily due to higher compensation costs
offset by reduced legal, professional fees and the cumulative
effect of the adoption of SFAS 123R for recognizing
stock-based compensation. Higher compensation costs of
approximately $644 reflected annual compensation increases,
increased personnel costs associated with internalizing
compliance activities and annual incentive awards to management.
Legal fees decreased by approximately $55 due to a legal expense
recovery of approximately $179 related to prior year shareholder
litigation. Professional fees decreased approximately $382 in
2006 primarily due to savings in annual audit and Sarbanes/Oxley
compliance costs as the Company internalized more of such
efforts in 2006. In the first quarter of 2006, the Company
implemented SFAS 123R. As the Company had recorded
stock-based compensation expense under SFAS 123 since 2003
using the actual forfeiture method for early terminations of
awards, the implementation of SFAS 123 using the estimated
forfeiture method required by SFAS 123R resulted in a
one-time reduction of general and administrative expenses of
approximately $100 in the first quarter of 2006. The aggregate
one-time reduction of expenses resulting from the adoption of
SFAS 123R totaled $172, with $72 recorded as reductions of
investment and development expenses and property operating
expenses. The one-time effect of implementing SFAS 123R
will not recur in future periods.
Investment, development and other expenses increased $1,713 or
36.4% from 2005 to 2006 primarily due to the continued increase
in development personnel and other costs to establish and grow
the Companys development capabilities in three regional
markets in 2005 and 2006 and the write-off of approximately $484
of pursuit costs related to abandoned investment activities.
Increased gross costs were somewhat offset by $665 of increased
capitalization of development personnel to an increasing
development pipeline in 2006.
Equity in income of unconsolidated real estate entities
increased $46 or 2.6% from 2005 to 2006. Equity in income
increased approximately $153 due to the improved operating
performance of the two stabilized communities held in two
entities offset by reduced net gains from condominium sales and
reduced net operating income in 2006 at the unconsolidated
entity that was converting its apartment community into
condominiums in 2005 and 2006. The reduced net operating income
reflects the reduction in rental units throughout the conversion
process and the reduced net gains from condominium sales
reflects reduced sale prices and margins in 2006 in order to
maintain a modest sales pace. See note 5 to the
consolidated financial statements for a summary of the operating
results of the Companys unconsolidated entities.
Annually recurring and periodically recurring capital
expenditures from continuing operations increased $3,525 or
27.2% from 2005 to 2006. The increase in annually recurring
capital expenditures of $1,955 primarily reflects the impact of
several properties beginning to capitalize the replacement of
carpet, vinyl and blinds in mid-2005 and into 2006 under the
Companys accounting policies (during the first five years
of a community, the Company expenses the replacements of these
items) as well as leasing office upgrades at several communities
in 2006. The increase in periodically recurring capital
expenditures of $1,570 primarily reflects increased tenant
improvements at the Companys office and retail properties
as well as the timing of large structural expenditures between
periods.
32
Post Properties, Inc.
Post Apartment Homes, L.P.
Fully
Stabilized (Same Store) Communities
The Company defines fully stabilized communities as those which
have reached stabilization prior to the beginning of the
previous year. For the 2006 to 2005 comparison, fully stabilized
communities are defined as those communities which reached
stabilization prior to January 1, 2005. This portfolio
consisted of 48 communities with 17,955 units, including 21
communities with 8,284 units (46.1%) located in Atlanta,
Georgia, 12 communities with 3,607 units (20.1%) located in
Dallas, Texas, 3 communities with 1,877 units (10.5%)
located in Tampa, Florida, 4 communities with 1,703 units
(9.5%) located in Washington D.C. and 8 communities with
2,484 units (13.8%) located in other markets. The operating
performance of these communities is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
% Change
|
|
|
Rental and other revenues
|
|
$
|
252,761
|
|
|
$
|
239,817
|
|
|
|
5.4
|
%
|
Property operating and maintenance
expenses (excluding depreciation and amortization)
|
|
|
95,871
|
|
|
|
91,742
|
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store net operating income(1)
|
|
$
|
156,890
|
|
|
$
|
148,075
|
|
|
|
6.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
3,648
|
|
|
$
|
2,625
|
|
|
|
39.0
|
%
|
Other
|
|
|
6,019
|
|
|
|
5,221
|
|
|
|
15.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring
|
|
|
9,667
|
|
|
|
7,846
|
|
|
|
23.2
|
%
|
Periodically recurring
|
|
|
2,822
|
|
|
|
3,094
|
|
|
|
(8.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital
expenditures(A)
|
|
$
|
12,489
|
|
|
$
|
10,940
|
|
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures per
unit(A 17,955 units)
|
|
$
|
696
|
|
|
$
|
609
|
|
|
|
14.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average economic occupancy(3)
|
|
|
94.7
|
%
|
|
|
94.7
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly rental rate per
unit(4)
|
|
$
|
1,163
|
|
|
$
|
1,106
|
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Net operating income of stabilized
communities is a supplemental non-GAAP financial measure. See
page 31 for a reconciliation of net operating income for
stabilized communities to GAAP net income.
|
(2)
|
|
A reconciliation of these segment
components of property capital expenditures to total annually
recurring and periodically recurring capital expenditures as
presented in the consolidated statements of cash flows prepared
under GAAP is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Annually recurring capital
expenditures by operating segment
|
|
|
|
|
|
|
|
|
Same store
|
|
$
|
9,667
|
|
|
$
|
7,846
|
|
Construction and
lease-up
|
|
|
503
|
|
|
|
433
|
|
Condominium conversion communities
|
|
|
2
|
|
|
|
133
|
|
Acquired
|
|
|
271
|
|
|
|
92
|
|
Other segments
|
|
|
702
|
|
|
|
1,417
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital
expenditures per statements of cash flows
|
|
$
|
11,145
|
|
|
$
|
9,921
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital
expenditures by operating segment
|
|
|
|
|
|
|
|
|
Same store
|
|
$
|
2,822
|
|
|
$
|
3,094
|
|
Construction and
lease-up
|
|
|
702
|
|
|
|
296
|
|
Condominium conversion communities
|
|
|
|
|
|
|
75
|
|
Acquired
|
|
|
25
|
|
|
|
5
|
|
Other segments
|
|
|
2,415
|
|
|
|
1,038
|
|
|
|
|
|
|
|
|
|
|
Total periodically recurring
capital expenditures per statements of cash flows
|
|
$
|
5,964
|
|
|
$
|
4,508
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company uses same store
annually recurring and periodically recurring capital
expenditures as cash flow measures. Same store annually
recurring and periodically recurring capital expenditures are
supplemental non-GAAP financial measures. The Company believes
that same store annually recurring and periodically recurring
capital expenditures are important indicators of the costs
incurred by the Company in maintaining same store communities.
The corresponding GAAP measures include information with respect
to the Companys other operating segments consisting of
communities stabilized in the prior year, condominium conversion
communities,
lease-up
communities, and sold communities in addition to same store
information. Therefore, the Company believes that its
presentation of same store annually recurring and periodically
recurring capital expenditures is necessary to demonstrate same
store replacement costs over time. The Company believes that the
most directly comparable GAAP measure to same store annually
recurring and periodically recurring capital expenditures are
the lines on the Companys consolidated statements of cash
flows entitled annually recurring capital
expenditures and periodically recurring capital
expenditures.
|
(3)
|
|
Average economic occupancy is
defined as gross potential rent less vacancy losses, model
expenses and bad debt expenses divided by gross potential rent
for the period, expressed as a percentage. Gross potential rent
is defined as the sum of the gross actual rental rates for
leased units and
|
33
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
the anticipated rental rates for
unoccupied units. The calculation of average economic occupancy
does not include a deduction for net concessions and employee
discounts. Average economic occupancy including these amounts
would have been 94.0% and 93.8% for the years ended
December 31, 2006 and 2005, respectively. For the years
ended December 31, 2006 and 2005, net concessions were
$1,255 and $1,632, respectively, and employee discounts were
$765 and $564, respectively.
|
(4)
|
|
Average monthly rental rate is
defined as the average of the gross actual rental rates for
leased units and the average of the anticipated rental rates for
unoccupied units, divided by total units.
|
Rental and other property revenues increased $12,944 or 5.4%
from 2005 to 2006. This increase resulted primarily from a 5.2%
increase in the average monthly rental rate per apartment unit
as the average economic occupancy of the portfolio was
consistent between years at 94.7%. This increase in average
rental rates resulted in a revenue increase of approximately
$12,256 between years. This increase in revenue related to
rental rates was offset somewhat by increased vacancy losses of
$959 primarily due to vacancy losses being measured at higher
rental rates in 2006. Additionally, other property revenues
increased $1,269 as a result of higher up-front leasing fees and
higher utility reimbursements from residents due to increased
utility expenses, lower net concessions of $377 due to the
favorable impact of straight-lining net rentals due to generally
reduced concessions in a stronger rental market in 2006.
Overall, the improving performance of the operating portfolio
reflects improved market conditions (strong job growth in most
of the Companys markets, a strong and steady
U.S. economy and a weakening for-sale housing market due to
higher interest rates and excess inventories in some markets),
with the Companys operations in all of its markets
reporting increased revenues in excess of 3.5%. In addition in
2006, the Company completed the installation of automated
revenue pricing software at the majority of its operating
communities. The Company believes this automated pricing
software implementation partially contributed to the increased
revenues in 2006. With continuing strong market fundamentals in
place, with the automated pricing software in place at year end
and with anticipated stable occupancy rates expected in 2007,
the Companys strategy will continue to be focused on
increasing average rental rates in 2007. See the
Outlook section below for an additional discussion
of trends for 2007.
Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $4,129 or 4.5% from
2005 to 2006. This increase was primarily due to increased
property tax expenses of $1,830 or 6.4%, increased utility
expenses of $706 or 5.6%, increased personnel expenses of $759
or 3.4%, increased other property expenses of $867 or 31.1%,
increased insurance expenses of $494 or 12.9% offset by
decreased advertising and promotion expenses of $847 or 19.8%.
Property tax expenses increased due to increased property
valuations in 2006 and more favorable tax settlements recorded
in 2005. Utility expenses increased primarily due to generally
higher electric and gas rates. Personnel costs increased
primarily due to annual salary increases. Other property
expenses increased primarily due to costs associated with the
automated revenue pricing software and use of third party call
centers that were phased into the portfolio generally in the
second half of 2006. Insurance expenses increased due to an
approximate 29% increase in property insurance rates on renewal
in the fourth quarter of 2006 primarily related to market
increases in catastrophic coverage in coastal regions. The
decrease in advertising and promotions expense in 2006 primarily
reflects reduced payments to apartment locator services
resulting from more favorable market conditions and lower
resident turnover between periods. See the Outlook
section below for an additional discussion of trends
in 2007.
Comparison
of Year Ended December 31, 2005 to Year Ended
December 31, 2004
For the purposes of comparative operating performance, the
Company categorizes its operating communities based on the
period each community reaches stabilized occupancy, as defined
above. For the 2005 to 2004 comparison, the operating community
categories were based on the status of each community as of
December 31, 2005. As a result, these categories are
different from the operating community categories used in the
2006 to 2005 comparison discussed earlier in this section.
Further, the amounts reported in the table below have been
adjusted from the amounts reported in the Companys
December 31, 2005 financial statements due to the
restatement impact of reclassifying the operating results of
assets designated as held for sale in 2006 to discontinued
operations under SFAS No. 144 (see the related
discussion under the
34
Post Properties, Inc.
Post Apartment Homes, L.P.
caption, Discontinued Operations). The operating
performance from continuing operations for all of the
Companys apartment communities combined for the years
ended December 31, 2005 and 2004 is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
Rental and other property
revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
$
|
234,803
|
|
|
$
|
227,823
|
|
|
|
3.1
|
%
|
Communities stabilized in 2004
|
|
|
7,184
|
|
|
|
7,007
|
|
|
|
2.5
|
%
|
Condominium conversion
communities(2)
|
|
|
5,485
|
|
|
|
5,716
|
|
|
|
(4.0
|
)%
|
Acquired communities(3)
|
|
|
10,808
|
|
|
|
4,477
|
|
|
|
141.4
|
%
|
Other property segments(4)
|
|
|
21,961
|
|
|
|
20,769
|
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
280,241
|
|
|
|
265,792
|
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and
maintenance expenses (excluding depreciation and
amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
|
91,371
|
|
|
|
88,472
|
|
|
|
3.3
|
%
|
Communities stabilized in 2004
|
|
|
2,227
|
|
|
|
2,122
|
|
|
|
4.9
|
%
|
Condominium conversion
communities(2)
|
|
|
1,872
|
|
|
|
2,041
|
|
|
|
(8.3
|
)%
|
Acquired communities(3)
|
|
|
3,578
|
|
|
|
1,313
|
|
|
|
172.5
|
%
|
Other expense(5)
|
|
|
29,067
|
|
|
|
27,472
|
|
|
|
5.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,115
|
|
|
|
121,420
|
|
|
|
5.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property net operating income(6)
|
|
$
|
152,126
|
|
|
$
|
144,372
|
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
2,911
|
|
|
$
|
2,423
|
|
|
|
20.1
|
%
|
Other
|
|
|
5,780
|
|
|
|
4,992
|
|
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
8,691
|
|
|
$
|
7,415
|
|
|
|
17.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring
|
|
$
|
4,288
|
|
|
$
|
3,665
|
|
|
|
17.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average apartment units in service
|
|
|
19,331
|
|
|
|
19,204
|
|
|
|
0.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Communities which reached
stabilization prior to January 1, 2004.
|
(2)
|
|
Communities in the
construction, development or
lease-up
stage during 2004 and, therefore, not considered fully
stabilized for all of the periods presented.
|
(3)
|
|
Communities acquired subsequent to
January 1, 2004.
|
(4)
|
|
Other property segment revenues
include revenues from commercial properties, revenues from
furnished apartment rentals above the unfurnished rental rates
and any property revenue not directly related to property
operations. Other property segment revenues exclude other
corporate revenues of $255 and $1,000 for the years ended
December 31, 2005 and 2004, respectively.
|
(5)
|
|
Other expenses include expenses
associated with commercial properties and furnished apartment
rentals as well as certain indirect central office operating
expenses related to management and grounds maintenance.
|
35
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
(6)
|
|
A reconciliation of property net
operating income to GAAP net income is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
Total same store NOI
|
|
$
|
143,432
|
|
|
$
|
139,351
|
|
Property NOI from other operating
segments
|
|
|
8,694
|
|
|
|
5,021
|
|
|
|
|
|
|
|
|
|
|
Consolidated property NOI
|
|
|
152,126
|
|
|
|
144,372
|
|
|
|
|
|
|
|
|
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
255
|
|
|
|
1,000
|
|
Other revenues
|
|
|
661
|
|
|
|
817
|
|
Minority interest in consolidated
property partnerships
|
|
|
239
|
|
|
|
671
|
|
Depreciation
|
|
|
(70,435
|
)
|
|
|
(73,665
|
)
|
Interest expense
|
|
|
(55,638
|
)
|
|
|
(59,763
|
)
|
Amortization of deferred financing
costs
|
|
|
(4,661
|
)
|
|
|
(4,304
|
)
|
General and administrative
|
|
|
(18,307
|
)
|
|
|
(18,205
|
)
|
Investment, development and other
expenses
|
|
|
(4,711
|
)
|
|
|
(2,930
|
)
|
Severance charges
|
|
|
(796
|
)
|
|
|
|
|
Gains (losses) on sales of
condominiums, net
|
|
|
(531
|
)
|
|
|
|
|
Equity in income of unconsolidated
real estate entities
|
|
|
1,767
|
|
|
|
1,083
|
|
Other income
|
|
|
5,267
|
|
|
|
|
|
Termination of debt remarketing
agreement (interest expense)
|
|
|
|
|
|
|
(10,615
|
)
|
Loss on early extinguishment of
indebtedness
|
|
|
|
|
|
|
(4,011
|
)
|
Minority interest of preferred
unitholders
|
|
|
|
|
|
|
(3,780
|
)
|
Minority interest of common
unitholders
|
|
|
120
|
|
|
|
2,615
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
5,356
|
|
|
|
(26,715
|
)
|
Income from discontinued operations
|
|
|
136,592
|
|
|
|
114,934
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
141,948
|
|
|
$
|
88,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
|
In addition to those expenses which
relate to property operations, the Company incurs annually
recurring and periodically recurring expenditures relating to
acquiring and developing new assets, materially enhancing the
value of an existing asset, or substantially extending the
useful life of an existing asset, all of which are capitalized.
Annually recurring capital expenditures are those that are
generally expected to be incurred on an annual basis.
Periodically recurring capital expenditures are those that
generally occur less frequently than on an annual basis.
|
(8)
|
|
A reconciliation of property
capital expenditures from continuing operations to total
annually recurring and periodically recurring capital
expenditures as presented in the consolidated statements of cash
flows under GAAP is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
Annually recurring capital
expenditures
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
8,691
|
|
|
$
|
7,415
|
|
Discontinued operations
|
|
|
1,230
|
|
|
|
2,469
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital
expenditures per statements of cash flows
|
|
$
|
9,921
|
|
|
$
|
9,884
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital
expenditures
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
4,288
|
|
|
$
|
3,665
|
|
Discontinued operations
|
|
|
220
|
|
|
|
940
|
|
|
|
|
|
|
|
|
|
|
Total periodically recurring
capital expenditures per statements of cash flows
|
|
$
|
4,508
|
|
|
$
|
4,605
|
|
|
|
|
|
|
|
|
|
|
The Operating Partnership reported net income available to
common unitholders of $141,410 and $81,546 for the years ended
December 31, 2005 and 2004, respectively, and the Company
reported net income available to common shareholders of $134,311
and $76,368 for the years ended December 31, 2005 and 2004,
respectively. The improvement in net income in 2005 compared to
2004 primarily reflected increased gains on sales of real estate
assets of $27,498 ($26,958 net of minority interest and
income taxes) and a gain of $5,267 ($5,003 net of minority
interest) on the sale of a technology investment between years.
The change between years was also impacted by accounting charges
in 2004 of $20,987 ($19,637 net of minority interest)
relating to losses on early debt extinguishments, costs of
terminating a debt remarketing agreement (interest expense) and
asset impairment charges compared to debt extinguishment losses
of $3,220 ($3,043 net of minority interest) in 2005.
Additionally, net income was higher in 2005 due to the improved
operating performance of the Companys stabilized
communities and reduced interest expense. These items are
discussed in more detail in the sections below.
Rental and other property revenues increased $14,449 or 5.4%
from 2004 to 2005 primarily due to increased revenues from the
Companys stabilized communities of $6,980 or 3.1% and from
the Companys newly stabilized and acquired communities of
$6,508 or 56.7%. The revenue increase from stabilized
communities is discussed below. The revenue increase from newly
stabilized communities in 2005 reflects a full year of operating
performance in 2005 for the one
36
Post Properties, Inc.
Post Apartment Homes, L.P.
community compared to a partial
lease-up
year in 2004. The revenue increase from acquired communities
reflects the acquisition of one community in May 2005 and one
community in June 2004. Property operating and maintenance
expenses (exclusive of depreciation and amortization) increased
$6,695 or 5.5% primarily due to increased expenses from
stabilized communities and acquisition communities. The expense
increase from stabilized communities is discussed below. The
expense increase from acquisition communities reflects the full
year of expenses from one community acquired in June 2004 and a
partial year of expenses for the community acquired in May 2005.
In 2005, gains on sales of real estate assets from discontinued
operations represent the net gains of $16,218 ($15,404 net
of minority interest) from condominium sales at the
Companys condominium conversion communities and gains of
$124,425 ($117,593 net of minority interest) on the sale of
six communities containing 3,047 units. The sales of the
six communities generated net proceeds of approximately
$229,249, including $81,560 of tax-exempt secured indebtedness
assumed by the purchasers. In 2004, the Company recognized net
gains from discontinued operations of $113,739
($106,039 net of minority interest) from the sale of eight
communities containing 3,880 units, and certain land
parcels. These sales generated net proceeds of approximately
$242,962, including $104,325 of tax-exempt debt assumed by the
purchasers.
Depreciation expense decreased $3,230, or 4.4% from 2004 to 2005
primarily due to reduced depreciation resulting from certain
furniture and fixtures (with a five year life) at certain
properties becoming fully depreciated in 2004 and early 2005
offset by increased depreciation from communities acquired in
2005 and 2004.
Interest expense (excluding $10,615 in 2004 of costs associated
with the termination of a debt remarketing agreement
discussed below) decreased $4,125 or 6.9% from 2004 to 2005 due
to reduced interest costs resulting from the refinancing of
approximately $112,000 of debt at lower fixed interest rates,
net debt repayments of fixed rate unsecured indebtedness of
approximately $100,000 during 2005 and due to $1,829 of
increased capitalized interest to development properties between
years.
In 2004, the Company terminated a remarketing agreement related
to its $100,000, 6.85% Mandatory Par Put Remarketed Securities
(MOPPRS) due March 2015. In connection with the
termination of the remarketing agreement, the Company paid
$10,615, including transaction expenses. Under the terms of the
remarketing agreement, the remarketing agent had the right to
remarket the $100,000 unsecured notes in March 2005 for a
ten-year term at an interest rate calculated as 5.715% plus the
Companys then current credit spread to the ten-year
treasury rate. As a result of the termination of the remarketing
agreement, the underlying debt matured and was repaid in March
2005.
The loss on early extinguishment of indebtedness included in
continuing operations in 2004 of $4,011 represented the debt
repurchase premiums, transactions expenses and the write-off of
unamortized deferred financing costs associated with the early
retirement of debt. In October 2004, the Company purchased and
retired $87,957 of the Companys 8.125% medium term,
unsecured notes through a tender offer. The debt was originally
scheduled to mature in 2005. The Company retired a portion of
this debt prior to maturity to take advantage of favorable lower
interest rates in late 2004 and to reduce its debt refinancing
risk in 2005.
General and administrative expenses increased $102 or 0.6% from
2004 to 2005 primarily due to increased compensation, incentive
compensation and board compensation costs offset by reduced
legal, consulting and corporate governance expenses in 2005. The
increase in annual compensation reflects annual compensation
increases and increased bonuses paid to corporate employees in
2005 due to improved Company performance. The increase in
incentive compensation reflects the increased amortization of
incentive stock awards as option award expense recognition has
increased due to the full phase-in of SFAS No. 123
over an approximately three year vesting period that began in
2003. Additionally, incentive compensation increased due to
increased restricted stock and shareholder value plan award
amortization (phased in over an approximately three year vesting
period as restricted stock and shareholder value plan awards
began to be granted annually beginning in 2003). Increased board
compensation costs resulted from increases in a director
variable deferred compensation plan which resulted from
increases in the Companys stock price. This director plan
was amended in the third quarter of 2005. As a result, future
changes in the Companys stock price are not expected to
have an impact on board compensation costs. These increases were
offset by reduced legal expenses of $834 between years primarily
due to reduced expenses associated with shareholder proxy
proposals, the settlement with the Companys former
chairman and CEO in 2004 and with shareholder litigation between
periods. The decrease in consulting expenses of approximately
$620 between periods related to portfolio valuation and software
selection services incurred in 2004. Corporate governance
expenses decreased approximately $307 due to a reduction in the
costs of Sarbanes/Oxley compliance in the second full year of
those regulations.
Investment, development and other costs increased $2,312 or
78.9% from 2004 to 2005. Investment, development and other costs
of $5,242 in 2005 include $1,546 of executive and administrative
functions, $3,165 of development personnel and associated costs
and land carry costs not allocable to development projects and
$531 of sales and marketing costs
37
Post Properties, Inc.
Post Apartment Homes, L.P.
associated with for-sale condominium developments which are not
capitalized. Investment, development and other costs of $2,930
in 2004 consisted of $1,279 of executive and administrative
functions and $1,651 of development personnel and associated
costs and land carry expenses not allocable to development
projects. The majority of the increase in development personnel
and associated costs of $1,514 was primarily due to the addition
of new development personnel and to establishing development
capabilities in three regional geographic areas in mid to late
2004 and into 2005.
Equity in income of unconsolidated real estate entities
increased from $1,083 in 2004 to $1,767 in 2005. This increase
was primarily due to improving apartment market fundamentals
resulting in improved operating performance of the two
communities held by the entities and increased profits resulting
from condominium sales at one of the unconsolidated entities
that began the conversion of its apartments into for-sale
condominiums in 2005. The first closings of condominium homes
began in the second quarter of 2005. In 2005, the unconsolidated
entity closed 45 condominium homes generating net gains to the
Company of approximately $612.
Annually recurring and periodically recurring capital
expenditures from continuing operations increased $1,899 or
17.1% from 2004 to 2005. The increase in capital expenditures
included one capital project related to corrective improvements
associated with compliance with ADA regulations and the impact
of several properties beginning to capitalize the replacement of
carpet, vinyl and blinds under the Companys accounting
policies (during the first five years of a community, the
Company expenses the replacements of these items).
Fully
Stabilized (Same Store) Communities
The Company defines fully stabilized communities as those which
have reached stabilization prior to the beginning of the
previous year. For the 2005 to 2004 comparison, fully stabilized
communities are defined as those communities which reached
stabilization prior to January 1, 2004. This portfolio
consisted of 48 communities with 18,153 units, including
22 communities with 8,842 units (48.7%) located in
Atlanta, Georgia, 13 communities with 3,939 units (21.7%)
located in Dallas, Texas, three communities with
1,883 units (10.4%) located in Tampa, Florida, three
communities with 1,204 units (6.6%) located in Washington
D.C. and seven communities with 2,285 units (12.6%) located
in other markets. The operating performance of these communities
is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2005
|
|
|
2004
|
|
|
% Change
|
|
|
Rental and other revenues
|
|
$
|
234,803
|
|
|
$
|
227,823
|
|
|
|
3.1
|
%
|
Property operating and maintenance
expenses (excluding depreciation and amortization)
|
|
|
91,371
|
|
|
|
88,472
|
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store net operating income(1)
|
|
$
|
143,432
|
|
|
$
|
139,351
|
|
|
|
2.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
2,540
|
|
|
$
|
2,273
|
|
|
|
11.7
|
%
|
Other
|
|
|
5,345
|
|
|
|
4,840
|
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring
|
|
|
7,885
|
|
|
|
7,113
|
|
|
|
10.9
|
%
|
Periodically recurring
|
|
|
3,328
|
|
|
|
2,927
|
|
|
|
13.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
(A)
|
|
$
|
11,213
|
|
|
$
|
10,040
|
|
|
|
11.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures per
unit (A ÷18,153 units)
|
|
$
|
618
|
|
|
$
|
553
|
|
|
|
11.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average economic occupancy(3)
|
|
|
94.6
|
%
|
|
|
93.7
|
%
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly rental rate per
unit(4)
|
|
$
|
1,057
|
|
|
$
|
1,038
|
|
|
|
1.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Net operating income of stabilized communities is a supplemental
non-GAAP financial measure. See page 35 for a
reconciliation of net operating income for stabilized
communities to GAAP net income.
|
38
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
(2) |
A reconciliation of these segment components of property capital
expenditures to total annually recurring and periodically
recurring capital expenditures as presented in the consolidated
statements of cash flows prepared under GAAP is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2005
|
|
|
2004
|
|
|
Annually recurring capital
expenditures by operating segment
|
|
|
|
|
|
|
|
|
Same store
|
|
$
|
7,885
|
|
|
$
|
7,113
|
|
Communities stabilized in 2004
|
|
|
13
|
|
|
|
25
|
|
Condominium conversion communities
|
|
|
132
|
|
|
|
84
|
|
Acquired
|
|
|
488
|
|
|
|
166
|
|
Other segments
|
|
|
1,403
|
|
|
|
2,496
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital
expenditures per statements of cash flows
|
|
$
|
9,921
|
|
|
$
|
9,884
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital
expenditures by operating segment
|
|
|
|
|
|
|
|
|
Same store
|
|
$
|
3,328
|
|
|
$
|
2,927
|
|
Communities stabilized in 2004
|
|
|
|
|
|
|
|
|
Condominium conversion communities
|
|
|
75
|
|
|
|
263
|
|
Acquired
|
|
|
69
|
|
|
|
5
|
|
Other segments
|
|
|
1,036
|
|
|
|
1,410
|
|
|
|
|
|
|
|
|
|
|
Total periodically recurring
capital expenditures per statements of cash flows
|
|
$
|
4,508
|
|
|
$
|
4,605
|
|
|
|
|
|
|
|
|
|
|
The Company uses same store annually recurring and periodically
recurring capital expenditures as cash flow measures. Same store
annually recurring and periodically recurring capital
expenditures are supplemental non-GAAP financial measures. The
Company believes that same store annually recurring and
periodically recurring capital expenditures are important
indicators of the costs incurred by the Company in maintaining
same store communities. The corresponding GAAP measures include
information with respect to the Companys other operating
segments consisting of communities stabilized in the prior year,
condominium conversion communities,
lease-up
communities, and sold communities in addition to same store
information. Therefore, the Company believes that its
presentation of same store annually recurring and periodically
recurring capital expenditures is necessary to demonstrate same
store replacement costs over time. The Company believes that the
most directly comparable GAAP measure to same store annually
recurring and periodically recurring capital expenditures are
the lines on the Companys consolidated statements of cash
flows entitled annually recurring capital
expenditures and periodically recurring capital
expenditures.
|
|
(3)
|
Average economic occupancy is
defined as gross potential rent less vacancy losses, model
expenses and bad debt expenses divided by gross potential rent
for the period, expressed as a percentage. Gross potential rent
is defined as the sum of the gross actual rental rates for
leased units and the anticipated rental rates for unoccupied
units. The calculation of average economic occupancy does not
include a deduction for net concessions and employee discounts.
Average economic occupancy including these amounts would have
been 94.0% and 93.2% for the years ended December 31, 2005
and 2004, respectively. For the years ended December 31,
2005 and 2004, net concessions were $947 and $716, respectively,
and employee discounts were $398 and $427, respectively.
|
(4)
|
Average monthly rental rate is
defined as the average of the gross actual rental rates for
leased units and the average of the anticipated rental rates for
unoccupied units, divided by total units.
|
Rental and other property revenues increased $6,980 or 3.1% from
2004 to 2005. This increase resulted primarily from a 1.8%
increase in the average monthly rental rate per apartment unit
and an increase in average economic occupancy of the portfolio
from 93.7% to 94.6%. This increase in average rental rates
resulted in a revenue increase of approximately $4,090 between
years. The occupancy increase resulted in lower vacancy losses
of $1,467. Additionally, other property revenues increased
$1,654 as a result of higher up-front leasing fees and higher
utility reimbursements from residents due to increased utility
expenses, but were offset somewhat by higher net concessions of
$231 due to the impact of straight-lining net rentals and
concessions under generally accepted accounting principles.
Overall, the improving performance of the operating portfolio
reflects gradually improving market conditions with the
Companys operations in all of its markets reporting
increased revenues over the prior year.
Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $2,899 or 3.3% from
2004 to 2005. This increase was primarily due to increased
utility expenses of $1,245 or 11.1%, increased maintenance and
repairs expenses of $1,333 or 14.1% and increased ground rent
expenses of $1,286 or 94.1%, offset by decreased property tax
expenses of $771 or 2.6% and decreased insurance expenses of
$617 or 13.9%. Utility expenses increased primarily due to
higher electricity rates at certain properties in the
Companys Texas markets and generally higher rates for all
utilities in the second half of 2005. Repairs and maintenance
expenses increased primarily due to increased exterior painting
costs of $1,165 between periods. The increase in ground rent
expense of $1,286 reflects the impact of straight-lining
long-term ground lease payments associated with leases with
stated rent escalations (the straight-lining of ground rents
resulted in $1,251 of the increase) in 2005. The decrease in
property tax expenses in 2005 reflected reduced tax expense from
favorable tax valuations from taxing authorities in 2005 and
from prior year tax settlements recorded in 2005. Insurance
expenses declined in 2005 due primarily to favorable loss
experience on the Companys property insurance program.
39
Post Properties, Inc.
Post Apartment Homes, L.P.
Discontinued
Operations
In accordance with SFAS No. 144, the operating results
and gains and losses on sales of real estate assets designated
as held for sale are included in discontinued operations in the
consolidated statements of operations. Under
SFAS No. 144, the operating results of assets
designated as held for sale are included in discontinued
operations in the consolidated statements of operations for all
periods presented. Additionally, all gains and losses on the
sale of these assets are included in discontinued operations.
For the year ended December 31, 2006, income from
discontinued operations included the results of operations of
one condominium conversion community and one apartment community
classified as held for sale at December 31, 2006 as well as
the operations of three communities sold in 2006 through their
sale dates. For the years ended December 31, 2005 and 2004,
income from discontinued operations included the results of
operations of operations of the condominium conversion community
and the apartment community classified as held for sale at
December 31, 2006, the three communities sold in 2006, one
condominium conversion community through its sell-out date in
2005 and the results of operations of 14 apartment communities
designated as held for sale and sold in 2005 and 2004 through
their sale dates.
The revenues and expenses of these communities for the years
ended December 31, 2006, 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
12,146
|
|
|
$
|
27,967
|
|
|
$
|
56,411
|
|
Other property revenues
|
|
|
1,282
|
|
|
|
2,805
|
|
|
|
5,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
13,428
|
|
|
|
30,772
|
|
|
|
61,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
(exclusive of items shown separately below)
|
|
|
5,269
|
|
|
|
13,136
|
|
|
|
25,411
|
|
Depreciation
|
|
|
1,639
|
|
|
|
5,813
|
|
|
|
11,645
|
|
Interest
|
|
|
2,673
|
|
|
|
5,421
|
|
|
|
9,321
|
|
Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
2,233
|
|
Minority interest in consolidated
property partnerships
|
|
|
|
|
|
|
14
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
9,581
|
|
|
|
24,384
|
|
|
|
48,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property
operations before minority interest
|
|
|
3,847
|
|
|
|
6,388
|
|
|
|
13,116
|
|
Minority interest
|
|
|
(73
|
)
|
|
|
250
|
|
|
|
(372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property
operations
|
|
$
|
3,774
|
|
|
$
|
6,638
|
|
|
$
|
12,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in revenues and expenses between years results from
the Companys continuing asset sales program and the impact
of the continued reclassification of the operating results
relating to the aggregate number of communities held for sale
and sold during the periods presented. Likewise, the gains on
sales of operating communities and for-sale condominiums
included in discontinued operations for each year fluctuate with
the timing and size of communities and condominium homes sold.
In 2006, the Company sold 23 condominiums at discontinued
conversion communities compared to 237 in 2005. These reduced
condominium sales resulted in reduced condominium gains of
$16,587 between periods. These decreases in 2006 primarily
reflect the complete sell-out of one conversion community in the
third quarter of 2005. A discussion of the gains on operating
communities and for-sale condominium sales for the years
presented is included under the caption Results of
Operations.
As discussed under Liquidity and Capital Resources,
the Company expects to continue to sell real estate assets and
possibly convert certain apartment communities into for-sale
condominiums in future periods as part of its overall
investment, disposition and acquisition strategy depending upon
market conditions. As such, the Company may continue to have
additional assets classified as held for sale; however, the
timing and amount of such asset sales and their impact on the
aggregate revenues and expenses included in discontinued
operations will vary from year to year.
In 2004, the Company recorded asset impairment charges totaling
$2,233 to write-down the cost of two apartment communities,
located in Dallas, Texas, to their estimated fair value when the
assets were classified as held for sale or sold. Additionally,
should the Company change its expectations regarding the holding
period for certain assets or decide to classify certain assets
as held for sale, this could cause the Company to recognize
impairment losses in future periods if the carrying value of
these assets is not deemed recoverable.
40
Post Properties, Inc.
Post Apartment Homes, L.P.
The loss on early extinguishment of indebtedness included in
discontinued operations in 2006 of $495 ($486 net of
minority interest) represents the write-off of unamortized
deferred financing costs and the loss due to the ineffectiveness
of an interest rate cap derivative arrangement associated with
asset sales. In August 2006, a $40,000 secured note was assumed
by the purchaser in conjunction with the sale of an operating
community. In December 2006, the Company retired $18,600 of the
Companys tax-exempt secured notes in conjunction with the
sale of an operating community. In 2005, the Company recorded
losses on the early extinguishment of debt of $3,220
($3,043 net of minority interest) due to the write-off of
deferred loan costs of $2,264 ($2,141 net of minority
interest) relating to the assumption of $81,560 of tax-exempt
mortgage indebtedness upon the sale of three communities. The
Company also realized a $955 ($902 net of minority
interest) loss in connection with the termination of related
interest rate cap agreements that were used as cash flow hedges
of the assumed debt.
Outlook
for 2007
The Companys outlook for 2007 is based on the expectation
that apartment market fundamentals will continue to be favorable
throughout the year as a result of favorable demand stemming
from ongoing job growth and continued strength in the overall
U.S. economy, generally higher mortgage interest rates and
single-family housing prices which have decreased the
affordability of housing, and the expectation of a relatively
moderate level of supply of new market-rate apartments in the
primary markets and submarkets where the Company operates.
Rental and other revenues from fully stabilized communities are
expected to increase compared to 2006, primarily driven by
expected rental rate increases in excess of 6.0%. However,
operating expenses of fully stabilized communities are also
expected to increase in excess of 6.5% in 2007. The Company
expects the primary drivers of this expense increase will be
property taxes and insurance expenses. Insurance expenses are
expected to increase significantly primarily as a result of the
increased costs of catastrophic insurance coverage in coastal
regions. Based on these assumptions for 2007, management expects
stabilized community net operating income to increase in excess
of 5.0% in 2007.
In 2007, management currently expects to sell one apartment
community located in Atlanta, GA. This sale is expected to close
in the first half of 2007 and is expected to generate accounting
gains in 2007. The expected net proceeds from this sale are
intended to be used for various corporate purposes, including
funding of the Companys development pipeline and
repayments of debt maturing in 2007. Additionally, the Company,
through a taxable REIT subsidiary, expects to continue the sale
of condominium homes in its condominium conversion projects that
commenced sales in 2006 and to begin sales of condominium homes
at two newly developed condominium communities that will
complete homes in 2007. The Company expects to realize net
accounting gains in 2007 from these condominium sales. Net
condominium profits are expected to be higher in 2007 due
primarily to the expected volume of condominium sales at the
Companys newly developed, The Condominiums at Carlyle
Squaretm
project in Alexandria, VA.
Management expects interest expense in 2007 to be lower than in
2006 due generally to increased interest capitalization in 2007
resulting from increased project development volume as well as
lower fixed interest rates on unsecured debt that was refinanced
at a lower rate in 2006. Management also expects increases in
excess of 6.8% in general and administrative, investment and
development and property management expenses due in large part
to increased costs of personnel and incentive compensation plans
as well as increased technology expenses supporting the
Companys new technology platforms and initiatives.
The Company has five projects and one expansion under
construction with a total expected cost of approximately
$257,000 and expects to begin additional development projects in
2007. As a result of expected additional development starts in
2007, the Company expects to have increased capitalization of
incremental development personnel and associated costs and, as a
result, somewhat lower expensed investment and development
expenses. The Company is also expecting
lease-up
deficits from two communities in
lease-up in
2007.
Lease-up
deficits will occur throughout 2007 as the two communities seek
to attain stabilized occupancy.
For the first quarter of 2007, management expects to report
lower net income compared to the fourth quarter of 2006. The
reduction in net income in the first quarter is expected to be
driven by reduced gains on sales of apartment communities due to
the timing of asset sales, reduced net operating income on same
store communities, reduced net operating income from
lease-up
deficits at
lease-up
communities and lower condominium profits due to the timing of
unit sales and the availability of new condominium homes later
in 2007. Management expects same store property net operating
income to be lower when compared to the fourth quarter of 2006,
primarily driven by higher projected operating expenses, due
partly to resetting annual accruals for property taxes and
higher utilities and insurance expenses. Same store operating
revenues are expected to be up slightly compared to the fourth
quarter of 2006. General and administrative and other overhead
expenses are expected to be moderately higher compared to the
fourth quarter of 2006 for the reasons discussed above.
41
Post Properties, Inc.
Post Apartment Homes, L.P.
Liquidity
and Capital Resources
The discussion in this Liquidity and Capital Resources section
is the same for the Company and the Operating Partnership,
except that all indebtedness described herein has been incurred
by the Operating Partnership.
The Companys net cash flow from operating activities
increased from $86,761 in 2005 to $94,326 in 2006 primarily due
to the improved operating performance of the Companys
stabilized communities and reduced interest expense resulting
from increased capitalization to development communities in
2006. The Companys net cash provided by operating
activities increased from $79,105 in 2004 to $86,761 in 2005
primarily due to higher net income (before depreciation and
gains on property sales) resulting primarily from the lack of
large expenses in 2005 related to early debt extinguishment
costs and terminations of a debt remarketing agreement (an
aggregate reduction from 2004 of $13,496) and to a lesser extent
the improved operating performance of the Company. The Company
expects cash flows from operating activities to be consistent
with or improve somewhat in 2007 primarily driven by the
expected improved operating performance of the Companys
fully stabilized properties offset somewhat by the continued
dilutive cash flow impact from asset and condominium conversion
sales and modest increases in overhead expenses.
Net cash flows from investing activities changed from $70,293
provided by investing activities in 2005 to $104,464 used in
investing activities in 2006 primarily due to increased
development, apartment acquisition and land acquisition costs in
2006. The Company acquired four apartment communities in 2006
for aggregate net proceeds of approximately $113,324, and also
acquired additional development land of approximately $50,000 in
2006. In addition, the Company incurred approximately $11,313 of
capital improvements relating to the renovations of two of its
apartment communities and construction and development
expenditures have increased in 2006 as the Company initiated new
development starts. Net cash provided by investing activities
decreased from $131,873 in 2004 to $70,293 in 2005 primarily due
to the net repayment in 2004 of loan advances to unconsolidated
entities. In 2005, the Company acquired additional land for
future development, acquired one apartment community and
continued the construction of one community in
Washington, D.C., however, the increased use of funds was
generally offset by increased proceeds from community and
condominium conversion sales. In 2007, the Company expects to
increase development activities (additional starts in 2007 and
higher expenditures at existing developments) in all of its
regional geographic areas primarily financed through debt
borrowings and, potentially, through joint venture arrangements
(see below). The Company also expects to sell one community and
additional condominium homes and to principally reinvest the
proceeds in its development communities and to repay debt.
Net cash flows from financing activities changed from net cash
used of $150,767 in 2005 to net cash provided by financing
activities of $7,391 in 2006 primarily due to higher net
borrowings to fund increasing development and acquisition
activities and increased equity proceeds from stock option
exercises in 2006 resulting from the Companys increased
stock price between periods. Net cash used in financing
activities decreased from $212,189 in 2004 to $150,767 in 2005
primarily due to having less net proceeds from investing
activities to retire outstanding debt. In 2007, the Company
expects that its outstanding debt may increase modestly,
depending on the level of potential asset sales and other joint
venture activity, principally to fund the expected increase in
development activity discussed above.
Since 1993, the Company has elected to be taxed as a real estate
investment trust (REIT) under the Internal Revenue
Code of 1986, as amended (the Code). Management
currently intends to continue operating the Company as a REIT in
2007. As a REIT, the Company is subject to a number of
organizational and operating requirements, including a
requirement to distribute 90% of its adjusted taxable income to
its shareholders. As a REIT, the Company generally will not be
subject to federal income taxes on its taxable income it
distributes to its shareholders.
Generally, the Companys objective is to meet its
short-term liquidity requirement of funding the payment of its
current level of quarterly preferred and common stock dividends
to shareholders through its net cash flows provided by operating
activities, less its annual recurring and periodically recurring
property and corporate capital expenditures. These operating
capital expenditures are the capital expenditures necessary to
maintain the earnings capacity of the Companys operating
assets over time.
For the year ended December 31, 2006, the Companys
net cash flow from operations, reduced by annual operating
capital expenditures, was not sufficient to fully fund the
Companys current level of dividend payments to common and
preferred shareholders by approximately $12,000. The Company
used a combination of proceeds from asset sales and line of
credit borrowings to fund the additional cash flow necessary to
fully fund the Companys annual dividend to common
shareholders of $1.80 per share. The Companys net
cash flow from operations continues to be sufficient to meet the
dividend requirements necessary to maintain its REIT status
under the Code.
For 2007, management of the Company expects to maintain its
current quarterly dividend payment rate to common shareholders
of $0.45 per share. At this dividend rate, the Company
expects that net cash flows from operations reduced
42
Post Properties, Inc.
Post Apartment Homes, L.P.
by annual operating capital expenditures will not be sufficient
to fund the dividend payments to common and preferred
shareholders by approximately $10,000 to $15,000. The Company
intends to use primarily the proceeds from 2007 apartment
community and condominium sales to fund the additional cash flow
necessary to fully fund the dividend payments to common
shareholders. The primary factors leading to the shortfall are
the negative cash flow impact of sales of operating properties
(discussed below), the short-term negative impact of apartment
rehabilitation and
lease-up
activities and the negative impact of condominium conversion
properties prior to the reinvestment of such proceeds. The
Companys board of directors reviews the dividend
quarterly, and there can be no assurance that the current
dividend level will be maintained.
The Company generally expects to utilize net cash flow from
operations, available cash and cash equivalents and available
capacity under its revolving lines of credit to fund its
short-term liquidity requirements, including capital
expenditures, development and construction expenditures, land
and apartment community acquisitions, dividends and
distributions on its common and preferred equity and its debt
service requirements. Available borrowing capacity under the
Companys revolving lines of credit as of December 31,
2006 was created primarily through the Companys asset
sales program. The Company generally expects to fund its
long-term liquidity requirements, including maturities of
long-term debt and acquisition and development activities,
through long-term unsecured and secured borrowings, through
additional sales of selected operating and condominium
conversion properties, and possibly through equity or leveraged
joint venture arrangements. The Company may also continue to use
joint venture arrangements in future periods to reduce its
market concentrations in certain markets, build critical mass in
other markets and to reduce its exposure to certain risks of its
future development activities.
As previously discussed, the Company intends to use the proceeds
from the sale of operating communities and condominium homes,
availability under its unsecured revolving lines of credit, debt
financing and joint venture arrangements as the primary source
of capital to fund its current and future development and
acquisition expenditures. The Company had instituted an active
asset sale and capital recycling program as the primary means to
fund its on-going community development and acquisition program.
Total net sales proceeds from operating community, condominium
and land sales in 2006, 2005 and 2004 were $216,419 (including
$40,000 debt assumed), $281,106 (including $81,560 of debt
assumed) and $242,962 (including $104,325 of debt assumed),
respectively.
In 2006, the Company sold three apartment communities,
containing 1,340 units, as part of its asset sales program
designed to maintain the low average age and high quality of the
portfolio, to reduce the Companys market concentration in
Atlanta, Georgia and to exit the Denver, Colorado market. These
sales generated significant capital gains for tax purposes in
2006. The Company was able to use its regular quarterly dividend
of $0.45 per share to distribute these capital gains to
shareholders. The Company plans to sell at least one apartment
community in 2007 classified as held for sale at
December 31, 2006. This sale is expected to generate net
proceeds in excess of $20,000. The Company also expects to
generate additional sales proceeds from the sale of converted
condominium homes as well as from the sale of newly developed
condominium homes. It is the current intent of management to
continue to recycle capital through selling assets and
reinvesting the proceeds as a strategy to diversify the cash
flows of the Company across its markets and focus on building
critical mass in fewer markets.
The Company used borrowings under its lines of credit and the
proceeds from $150,000 of unsecured notes to retire
approximately $75,000 of maturing unsecured notes and to repay
approximately $64,000 of secured debt. In 2007, the Company has
approximately $109,000 of unsecured and secured debt that
matures. The Company anticipates refinancing some or all of this
debt using its unsecured revolving lines of credit or through
new unsecured or secured debt issuances, depending on the amount
and timing of the Companys capital needs and general
credit market conditions.
At December 31, 2006, the Company had approximately
$108,913 borrowed under its $480,000 combined line of credit
facilities. The credit facilities mature in April 2010. The
terms, conditions and restrictive covenants associated with the
Companys lines of credit facilities are summarized in
note 4 to the consolidated financial statements. At
December 31, 2006, management believed the Company was in
compliance with the covenants of the Companys credit
facility arrangements. Management believes it will have adequate
capacity under its facilities to execute its 2007 business plan
and meet its short-term liquidity requirements.
43
Post Properties, Inc.
Post Apartment Homes, L.P.
Contractual
Obligations
A summary of the Companys future contractual obligations
related to long-term debt, non-cancelable operating leases and
other obligations at December 31, 2006, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligation Due Date
|
|
|
|
|
|
|
1 Year or
|
|
|
2-3
|
|
|
4-5
|
|
|
After 5
|
|
Contractual Obligations
|
|
Total
|
|
|
Less
|
|
|
Years
|
|
|
Years
|
|
|
Years
|
|
|
Long-term debt(1)
|
|
$
|
1,277,162
|
|
|
$
|
169,304
|
|
|
$
|
178,753
|
|
|
$
|
403,044
|
|
|
$
|
526,061
|
|
Lines of credit(1)(2)
|
|
|
129,004
|
|
|
|
6,111
|
|
|
|
12,222
|
|
|
|
110,671
|
|
|
|
|
|
Operating leases(3)
|
|
|
161,078
|
|
|
|
1,983
|
|
|
|
3,487
|
|
|
|
3,506
|
|
|
|
152,102
|
|
Other long-term obligations(4)
|
|
|
21,309
|
|
|
|
5,133
|
|
|
|
6,888
|
|
|
|
5,030
|
|
|
|
4,258
|
|
Development and construction
obligations(5)
|
|
|
126,500
|
|
|
|
94,975
|
|
|
|
31,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,715,053
|
|
|
$
|
277,506
|
|
|
$
|
232,875
|
|
|
$
|
522,251
|
|
|
$
|
682,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts include principal and
interest payments.
|
(2)
|
|
At December 31, 2006, the
Company had issued letters of credit to third parties totaling
$2,805 under its credit facility arrangements.
|
(3)
|
|
Primarily includes ground leases
underlying apartment communities owned by the Company.
|
(4)
|
|
Represents amounts committed to
current and former executive officers under the terms of
employment and settlement agreements.
|
(5)
|
|
Represents estimated remaining
amounts necessary to complete projects under development at
December 31, 2006, including amounts due under general
construction contracts.
|
In addition to these contractual obligations, the Company incurs
annual capital expenditures to maintain and enhance its existing
portfolio of operating properties. Aggregate capital
expenditures for the Companys operating properties totaled
$17,109, $14,429 and $14,515 for the years ended
December 31, 2006, 2005 and 2004, respectively. Based on
the size of the Companys operating property portfolio at
December 31, 2006, the Company expects that its capital
expenditures in 2007 will be modestly higher than the amount
incurred in 2006 as the Company seeks to maintain the operating
performance of its assets.
At December 31, 2006, the Company had an outstanding
interest rate swap derivative financial instrument with a
notional value of approximately $95,510 with a maturity date in
2009. The contractual payment terms of this arrangement are
summarized in Item 7A, Quantitative and Qualitative
Disclosures About Market Risk, in this
Form 10-K.
Additional information regarding the accounting and disclosure
of this arrangement is included in note 13 to the
Companys consolidated financial statements.
Off-Balance
Sheet Arrangements
The Company holds investments in three unconsolidated entities,
in which it has a 35% ownership interest. Two of these
unconsolidated entities have third-party mortgage indebtedness
and the aggregate indebtedness totaled $66,998 at
December 31, 2006.
Long-term
Debt Issuances and Retirements
A summary of the Companys outstanding debt and debt
maturities at December 31, 2006 is included in note 4
to the consolidated financial statements. A summary of changes
in secured and unsecured debt in 2006 is discussed below.
Upon their maturity in March 2006, the Company repaid $50,000 of
6.71% senior unsecured notes. In October 2006, the Company
repaid $25,000 of 7.5% senior unsecured notes. Both notes
were repaid from available borrowings under its unsecured lines
of credit.
In April 2006, the Company closed a $40,000 mortgage note
payable secured by an apartment community located in Denver,
Colorado. The mortgage note accrued interest at LIBOR plus 1.0%,
was scheduled to mature in April 2008 and was pre-payable
without penalty. In August 2006, this mortgage note was assumed
by the purchaser of this community.
In June 2006, the Company issued $150,000 of senior unsecured
notes. The notes bear interest at 6.30% and mature in September
2013. The net proceeds from the unsecured notes were used to
reduce amounts outstanding under the Companys unsecured
lines of credit.
In July 2006, in conjunction with an apartment community
acquisition (see note 4 to the consolidated financial
statements), the Company assumed a secured, fixed rate mortgage
note payable with an outstanding balance of $41,394. The
mortgage note bears interest at a coupon rate of approximately
6.1%, requires monthly principal and interest payments and
matures in November 2011.
44
Post Properties, Inc.
Post Apartment Homes, L.P.
In December 2006, the Company repaid a $45,718, 6.8% secured
mortgage note prior to its schedule maturity date in 2007. Also
in December 2006, the Company repaid $18,600 of tax-exempt
indebtedness associated with the sale of an apartment community.
Stock
Repurchase Program
In late 2006, the Companys board of directors adopted a
new stock repurchase program under which the Company may
repurchase up to $200,000 of common or preferred stock at market
prices from time to time until December 31, 2008. The
Company has in place a 10b5-1 stock purchase plan which expires
in February 2007.
Under its previous stock repurchase program which expired on
December 31, 2006, the Company repurchased approximately
$5,000 and $34,400 of common stock in 2006 and 2005,
respectively. Subsequent to December 31, 2006, the Company
repurchased approximately $3,694 of common stock.
Capitalization
of Fixed Assets and Community Improvements
The Company has a policy of capitalizing those expenditures
relating to the acquisition of new assets and the development
and construction of new apartment communities. In addition, the
Company capitalizes expenditures that enhance the value of
existing assets and expenditures that substantially extend the
life of existing assets. All other expenditures necessary to
maintain a community in ordinary operating condition are
expensed as incurred. Additionally, for new development
communities, carpet, vinyl and blind replacements are expensed
as incurred during the first five years (which corresponds to
the estimated depreciable life of these assets) after
construction completion. Thereafter, these replacements are
capitalized. Further, the Company expenses as incurred interior
and exterior painting of operating communities, unless those
communities are under rehabilitation.
The Company capitalizes interest, real estate taxes, and certain
internal personnel and associated costs related to apartment
communities under development, construction and rehabilitation.
The incremental personnel and associated costs are capitalized
to the projects under development and rehabilitation based upon
the effort associated with such projects. The Company treats
each unit in an apartment community separately for cost
accumulation, capitalization and expense recognition purposes.
Prior to the commencement of leasing activities, interest and
other construction costs are capitalized and included in
construction in progress. The Company ceases the capitalization
of such costs as the residential units in a community become
substantially complete and available for occupancy. This
practice results in a proration of these costs between amounts
that are capitalized and expensed as the residential units in a
development community become available for occupancy. In
addition, prior to the completion of units, the Company
expenses, as incurred, substantially all operating expenses
(including pre-opening marketing expenses) of such communities.
Acquisition of assets and community improvement and other
capitalized expenditures for the years ended December 31,
2006, 2005 and 2004 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
New community development and
acquisition activity(1)
|
|
$
|
295,979
|
|
|
$
|
116,710
|
|
|
$
|
43,708
|
|
Periodically recurring capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Community rehabilitation and other
revenue generating improvements(2)
|
|
|
10,641
|
|
|
|
|
|
|
|
26
|
|
Other community additions and
improvements(3)
|
|
|
5,964
|
|
|
|
4,508
|
|
|
|
4,605
|
|
Annually recurring capital
expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet replacements and other
community additions and improvements(4)
|
|
|
11,145
|
|
|
|
9,921
|
|
|
|
9,884
|
|
Corporate additions and
improvements
|
|
|
3,480
|
|
|
|
1,771
|
|
|
|
681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
327,209
|
|
|
$
|
132,910
|
|
|
$
|
58,904
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized interest
|
|
$
|
9,942
|
|
|
$
|
2,907
|
|
|
$
|
1,078
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized development and
associated costs(5)
|
|
$
|
1,884
|
|
|
$
|
1,219
|
|
|
$
|
998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reflects aggregate land and community development and
acquisition costs, exclusive of assumed debt and the change in
construction payables between years.
|
|
(2)
|
Represents expenditures for major renovations of communities,
water
sub-metering
equipment and other upgrade costs that enhance the rental value
of such units.
|
|
(3)
|
Represents property improvement expenditures that generally
occur less frequently than on an annual basis.
|
|
(4)
|
Represents property improvement expenditures of a type that are
expected to be incurred on an annual basis.
|
|
(5)
|
Reflects development personnel and associated costs capitalized
to construction and development activities.
|
45
Post Properties, Inc.
Post Apartment Homes, L.P.
Current
Development Activity
At December 31, 2006, the Company had three communities
(and the expansion of one community) containing 1,031 apartment
units and 230 for-sale condominiums under development in two
communities. These communities are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
as of
|
|
|
Quarter of
|
|
Quarter of
|
|
Quarter of
|
|
|
|
|
Estimated
|
|
Units
|
|
|
|
|
|
|
|
|
Number
|
|
|
Construction
|
|
|
December 31,
|
|
|
Construction
|
|
First Units
|
|
Stabilized
|
|
Units
|
|
|
Quarter
|
|
Under
|
|
|
Units
|
|
Community
|
|
Location
|
|
of Units
|
|
|
Cost
|
|
|
2006
|
|
|
Start
|
|
Available
|
|
Occupancy(1)
|
|
Leased(2)
|
|
|
Sell-out
|
|
Contract(3)
|
|
|
Closed
|
|
|
|
|
|
|
|
|
($ in millions)
|
|
|
($ in millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Alexandertm
|
|
Atlanta, GA
|
|
|
307
|
|
|
$
|
62.8
|
|
|
$
|
17.3
|
|
|
2Q 2006
|
|
1Q 2008
|
|
1Q 2009
|
|
|
|
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
Post Carlyle
Squaretm
|
|
Washington, D.C. Area
|
|
|
205
|
|
|
|
59.0
|
|
|
|
54.4
|
|
|
4Q 2004
|
|
4Q 2006
|
|
4Q 2007
|
|
|
43
|
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
Post
Eastsidetm
|
|
Dallas, TX
|
|
|
435
|
|
|
|
53.9
|
|
|
|
8.2
|
|
|
4Q 2006
|
|
4Q 2007
|
|
1Q 2009
|
|
|
|
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
Post Hyde Park®
(expansion) (4)
|
|
Tampa, FL
|
|
|
84
|
|
|
|
18.6
|
|
|
|
5.5
|
|
|
4Q 2006
|
|
1Q 2008
|
|
4Q 2008
|
|
|
|
|
|
N/A
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Apartments
|
|
|
|
|
1,031
|
|
|
$
|
194.3
|
|
|
$
|
85.4
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Condominiums at Carlyle
Squaretm
|
|
Washington, D.C. Area
|
|
|
145
|
|
|
$
|
45.3
|
|
|
$
|
36.5
|
|
|
4Q 2004
|
|
2Q 2007
|
|
N/A
|
|
|
N/A
|
|
|
2Q 2008
|
|
|
94
|
|
|
|
|
|
Mercer
Squaretm
|
|
Dallas, TX
|
|
|
85
|
|
|
|
17.3
|
|
|
|
8.5
|
|
|
2Q 2006
|
|
3Q 2007
|
|
N/A
|
|
|
N/A
|
|
|
3Q 2008
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Condominiums
|
|
|
|
|
230
|
|
|
$
|
62.6
|
|
|
$
|
45.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The Company defines stabilized occupancy as the earlier to occur
of (i) the attainment of 95% physical occupancy on the
first day of any month or (ii) one year after completion of
construction.
|
(2)
|
As of January 29, 2007.
|
(3)
|
As of January 29, 2007, represents the total number of
units under contract for sale upon completion and delivery of
the units. There can be no assurance that condominium homes
under contract will close.
|
(4)
|
Total estimated construction costs for the Post Hyde
Park®expansion
include the estimated replacement costs of six apartment units
at the Companys existing Hyde Park community that are
being demolished to accommodate the expansion.
|
Inflation
For each of the last three years and as of December 31,
2006, substantially all of the leases at the communities allow,
at the time of renewal, for adjustments in the rent payable
thereunder, and thus may enable the Company to seek increases in
rents. The substantial majority of these leases are for one year
or less and the remaining leases are for up to two years. At the
expiration of a lease term, the Companys lease agreements
generally provide that the term will be extended unless either
the Company or the lessee gives at least sixty (60) days
written notice of termination. In addition, the Companys
policy generally permits the earlier termination of a lease by a
lessee upon thirty (30) days written notice to the Company
and the payment of an amount equal to two months rent as
compensation for early termination. The short-term nature of
these leases generally serves to offset the risk to the Company
that the adverse effect of inflation may have on the
Companys general, administrative and operating expenses.
Funds
from Operations
The Company uses the National Association of Real Estate
Investment Trusts (NAREIT) definition of funds from
operations (FFO). FFO is defined by NAREIT as net
income available to common shareholders determined in accordance
with GAAP, excluding gains (or losses) from extraordinary items
and sales of depreciable property, plus depreciation of real
estate assets, and after adjustment for unconsolidated
partnerships and joint ventures all determined on a consistent
basis in accordance with GAAP. FFO is a supplemental non-GAAP
financial measure. FFO presented herein is not necessarily
comparable to FFO presented by other real estate companies
because not all real estate companies use the same definition.
The Companys FFO is comparable to the FFO of real estate
companies that use the current NAREIT definition.
The Company also uses FFO as an operating measure. Accounting
for real estate assets using historical cost accounting under
GAAP assumes that the value of real estate assets diminishes
predictably over time. NAREIT stated in its April 2002 White
Paper on Funds from Operations since real estate asset
values have historically risen or fallen with market conditions,
many industry investors have considered presentations of
operating results for real estate companies that use historical
cost accounting to be insufficient by themselves. As a
result, the concept of FFO was created by NAREIT for the REIT
industry to provide an alternate measure. Since the Company
agrees with the concept of FFO and appreciates the reasons
surrounding its creation, management believes that FFO is an
important supplemental measure of operating performance. In
addition, since most equity REITs provide FFO information to the
investment community, the Company believes FFO is a useful
supplemental measure for comparing the Companys results to
those of other equity REITs. The
46
Post Properties, Inc.
Post Apartment Homes, L.P.
Company believes that the line on the Companys
consolidated statement of operations entitled net income
available to common shareholders is the most directly
comparable GAAP measure to FFO.
FFO should not be considered as an alternative to net income
available to common shareholders (determined in accordance with
GAAP) as an indicator of the Companys financial
performance. While management believes that FFO is an important
supplemental non-GAAP financial measure, management believes it
is also important to stress that FFO should not be considered as
an alternative to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the
Companys liquidity. Further, FFO is not necessarily
indicative of sufficient cash flow to fund all of the
Companys needs or ability to service indebtedness or make
distributions.
A reconciliation of net income available to common shareholders
to FFO available to common shareholders and unitholders is
provided below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Net income available to common
shareholders
|
|
$
|
93,832
|
|
|
$
|
134,311
|
|
|
$
|
76,368
|
|
Minority interest of common
unitholders continuing operations
|
|
|
451
|
|
|
|
(120
|
)
|
|
|
(2,615
|
)
|
Minority interest in discontinued
operations(1)
|
|
|
1,366
|
|
|
|
7,219
|
|
|
|
7,793
|
|
Depreciation on consolidated real
estate assets
|
|
|
66,574
|
|
|
|
73,189
|
|
|
|
81,433
|
|
Depreciation on real estate assets
held in unconsolidated entities
|
|
|
906
|
|
|
|
969
|
|
|
|
1,328
|
|
Gains on sales of real estate
assets, net of provision for income taxes
|
|
|
(80,927
|
)
|
|
|
(140,112
|
)
|
|
|
(113,739
|
)
|
Incremental gains on condominium
sales, net of provision for income taxes(2)
|
|
|
1,406
|
|
|
|
8,280
|
|
|
|
|
|
Gains on sales of real estate
assets unconsolidated entities
|
|
|
(482
|
)
|
|
|
(612
|
)
|
|
|
|
|
Incremental gains on condominium
sales unconsolidated entities(2)
|
|
|
96
|
|
|
|
359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available
to common shareholders and unitholders(3)
|
|
$
|
83,222
|
|
|
$
|
83,483
|
|
|
$
|
50,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding basic
|
|
|
42,812
|
|
|
|
40,217
|
|
|
|
39,777
|
|
Weighted average shares and units
outstanding basic
|
|
|
43,645
|
|
|
|
42,353
|
|
|
|
42,474
|
|
Weighted average shares
outstanding diluted(4)
|
|
|
43,594
|
|
|
|
40,616
|
|
|
|
39,892
|
|
Weighted average shares and units
outstanding diluted(4)
|
|
|
44,427
|
|
|
|
42,752
|
|
|
|
42,589
|
|
|
|
|
|
(1)
|
Represents the minority interest in earnings and gains (losses)
on properties held for sale and sold reported as discontinued
operations for the periods presented.
|
|
(2)
|
The Company recognizes incremental gains on condominium sales in
FFO, net of provision for income taxes, to the extent that net
sales proceeds from the sale of condominium homes exceeds the
greater of their fair value or net book value as of the date the
property is acquired by its taxable REIT subsidiary.
|
|
(3)
|
FFO for the year ended December 31, 2006, included a gain
related to the final proceeds of $325 related to the sale of a
technology investment, non-cash income of $1,655 relating to the
mark-to-market
of an interest rate swap arrangement, a gain on the sale of
marketable securities of $573 and a gain on the sale of a land
parcel of $503. FFO for the year ended December 31, 2005
included a loss of $3,220 from the early extinguishment of debt
associated with asset sales, a severance charge of $796 and a
gain of $5,267 on the sale of a technology investment. FFO for
the year ended December 31, 2004 included impairment
charges of $2,333, losses on debt extinguishments of $8,139 and
a loss on the termination of a debt remarketing agreement of
$10,615. Additionally, FFO for the year ended December 31,
2004 includes a reduction for preferred stock and unit
redemption costs of $3,526.
|
|
(4)
|
Diluted weighted average shares and units for the years ended
December 31, 2005 and 2004 include 400 and 115 of common
stock equivalent shares and units, respectively, that were
antidilutive to all income (loss) per share computations under
generally accepted accounting principles.
|
47
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
Interest
Rate Sensitivity
The Companys primary market risk exposure is interest rate
risk. At December 31, 2006, the Company had $204,513 of
variable rate debt tied to LIBOR. In addition, the Company had
$9,895 in variable tax-exempt debt with interest based on the
FNMA AAA tax exempt rate. In addition, the Company
has interest rate risk associated with fixed rate debt at
maturity. The discussion in this Interest Rate Sensitivity
section is the same for the Company and the Operating
Partnership, except that all indebtedness described herein has
been incurred by the Operating Partnership.
Management has and will continue to manage interest rate risk as
follows:
|
|
|
maintain a conservative ratio of fixed rate, long-term debt to
total debt such that variable rate exposure is kept at an
acceptable level;
|
|
|
fix certain long-term variable rate debt through the use of
interest rate swaps or interest rate caps with appropriate
matching maturities;
|
|
|
use treasury locks where appropriate to fix rates on anticipated
debt transactions; and
|
|
|
take advantage of favorable market conditions for long-term debt
and/or
equity.
|
Management uses various financial models and advisors to achieve
these objectives.
The tables below provide information about the Companys
fixed and floating rate debt and derivative financial
instruments that are sensitive to changes in interest rates. For
debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity
dates. For interest rate swap and cap arrangements, the table
presents notional amounts and weighted average interest rates by
(expected) contractual maturity dates. Notional amounts are used
to calculate the contractual payments to be exchanged under the
contract. Weighted average variable rates are based upon actual
rates at the reporting date. The information is presented in
U.S. dollar equivalents, which is the Companys
reporting currency.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected Maturity Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There-
|
|
|
|
|
|
Fair
|
|
|
|
2007
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
after
|
|
|
Total
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
Debt obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
111,580
|
|
|
$
|
3,495
|
|
|
$
|
74,753
|
|
|
$
|
186,618
|
|
|
$
|
139,266
|
|
|
$
|
303,659
|
|
|
$
|
819,371
|
|
|
$
|
828,983
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate
|
|
|
7.14
|
%
|
|
|
5.82
|
%
|
|
|
5.47
|
%
|
|
|
7.68
|
%
|
|
|
5.40
|
%
|
|
|
5.46
|
%
|
|
|
6.34
|
%
|
|
|
|
|
Floating rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIBOR-based and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash management line(1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,913
|
|
|
|
|
|
|
|
|
|
|
|
13,913
|
|
|
|
13,913
|
|
Syndicated line of credit(1) (2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,000
|
|
|
|
|
|
|
|
|
|
|
|
95,000
|
|
|
|
95,000
|
|
FNMA(3)
|
|
|
1,610
|
|
|
|
1,735
|
|
|
|
1,865
|
|
|
|
2,010
|
|
|
|
2,165
|
|
|
|
86,215
|
|
|
|
95,600
|
|
|
|
95,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total LIBOR-based and other
|
|
|
1,610
|
|
|
|
1,735
|
|
|
|
1,865
|
|
|
|
110,923
|
|
|
|
2,165
|
|
|
|
86,215
|
|
|
|
204,513
|
|
|
|
204,513
|
|
Tax-exempt(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
400
|
|
|
|
9,395
|
|
|
|
9,895
|
|
|
|
9,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total floating rate debt
|
|
|
1,610
|
|
|
|
1,735
|
|
|
|
1,865
|
|
|
|
111,023
|
|
|
|
2,565
|
|
|
|
95,610
|
|
|
|
214,408
|
|
|
|
214,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
113,190
|
|
|
$
|
5,230
|
|
|
$
|
76,618
|
|
|
$
|
297,641
|
|
|
$
|
141,831
|
|
|
$
|
399,269
|
|
|
$
|
1,033,779
|
|
|
$
|
1,043,391
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Interest on these debt instruments
is based on LIBOR plus 0.575% at December 31, 2006. At
December 31, 2006, the one-month LIBOR rate was 5.32%.
|
(2)
|
|
Assumes the Companys
Syndicated and Cash management lines of credit are repaid at
their maturity dates.
|
(3)
|
|
In April 2006, the Company entered
into a swap transaction that fixed the rate on the note at
6.145%, inclusive of credit enhancement and other fees through
July 31, 2009.
|
(4)
|
|
At December 31, 2006, the FNMA
AAA tax exempt rate was 3.66%. Interest on these
debt instruments is equal to the FNMA AAA tax exempt
rate plus credit enhancement and other fees of 0.639%. The
Company has purchased an interest rate cap that limits the
Companys exposure to increases in the base rate to 5.00%.
|
48
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
Settlement
|
|
|
Fair Value
|
|
Interest Rate Derivatives
|
|
Notional Amount
|
|
Pay Rate/Cap Rate
|
|
|
Receive Rate
|
|
Date
|
|
|
Asset (Liab.)
|
|
|
Interest Rate Swaps Variable to
fixed
|
|
$97,100 amortizing to $90,270
|
|
|
5.21
|
%
|
|
1 month LIBOR
|
|
|
7/31/09
|
|
|
$
|
(564
|
)
|
Interest rate caps
|
|
$28,495
|
|
|
5.00
|
%
|
|
|
|
|
2/01/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(564
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As more fully described in note 1 to the consolidated
financial statements, the interest rate swap and cap
arrangements are carried on the consolidated balance sheet at
the fair value shown above in accordance with
SFAS No. 133, as amended. If interest rates under the
Companys floating rate LIBOR-based and tax-exempt
borrowings, in excess of the $95,600 FNMA borrowings effectively
converted to fixed rates discussed above, fluctuated by 1.0%,
interest costs to the Company, based on outstanding borrowings
at December 31, 2006, would increase or decrease by
approximately $1,188 on an annualized basis.
In April 2006, the Company terminated an existing interest rate
swap arrangement through a $2,448 termination payment to the
swap counterparty. Subsequent to the termination of the swap
arrangement, the Company entered into the new, market rate swap
arrangement reflected in the table above. Similar to the
terminated swap, the new swap has been designated as a cash flow
hedge of the Companys FNMA variable rate debt.
In December 2006, the Company repaid $18,600 of tax-exempt
indebtedness associated with the sale of an apartment community.
The portion of the interest rate cap arrangement with a notional
amount of $18,600 was not terminated and as a result became
ineffective for accounting purposes. At that time, the Company
recognized a loss of approximately $142 due to such
ineffectiveness. Due to the short-term period until the maturity
of this arrangement, the Company does not expect future changes
in the fair value of this arrangement to be material to its
consolidated financial statements.
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
The financial statements are listed under Item 15(a) and
are filed as part of this report on the pages indicated. The
supplementary data are included in note 18 of the Notes to
Consolidated Financial Statements.
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
As required by Securities and Exchange Commission rules, the
Company has evaluated the effectiveness of the design and
operation of its disclosure controls and procedures as of the
end of the period covered by this Annual Report on
Form 10-K.
This evaluation was carried out under the supervision and with
the participation of the Companys management, including
its principal executive officer and principal financial officer.
Based on this evaluation, these officers have concluded that the
design and operation of the Companys disclosure controls
and procedures were effective as of the end of the period
covered by this annual report on
Form 10-K.
Disclosure controls and procedures (as defined in
Rule 13a-15(e)
and
15d-15(e)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act)) are the Companys controls and
other procedures that are designed to ensure that information
required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in
the Securities and Exchange Commissions rules and forms.
There were no changes to the Companys internal control
over financial reporting (as defined in
Rule 13a-15(f)
and
15d-15(f)
under the Exchange Act) during the registrants fourth
quarter of 2006 that materially affected, or are reasonably
likely to materially affect, the Companys internal control
over financial reporting.
Managements report on internal control over financial
reporting and the report of the Companys independent
registered public accounting firm are included in Part IV,
Item 15 of this annual report on
Form 10-K
and are incorporated herein by reference.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
49
Post Properties, Inc.
Post Apartment Homes, L.P.
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The section under the heading Proposal 1
Election of Directors entitled Nominees for
Election, of the Proxy Statement for Annual Meeting of
Shareholders to be held May 24, 2007 (the Proxy
Statement) is incorporated herein by reference for
information on Directors of the Registrant. See Item X in
Part I hereof for information regarding executive officers
of the Registrant. The section under the heading Other
Matters entitled Section 16(a) Beneficial
Ownership Reporting Compliance of the Proxy Statement is
incorporated herein by reference. The section under the heading
Corporate Governance entitled Committees of
the Board of Directors Audit Committee of the
proxy statement is incorporated herein by reference.
There have been no material changes to the procedures by which
shareholders may recommend nominees to the Companys board
of directors since the Company last disclosed such procedures in
the Proxy Statement for its 2006 Annual Meeting of Shareholders.
Code of
Ethics
The Company has adopted a Code of Ethics for Senior Executive
and Financial Officers (the Code of Ethics) that
applies to our chief executive officer, chief financial officer
and chief accounting officer and persons performing similar
functions. The Code of Ethics is available on the Companys
website at www.postproperties.com under the Investor
Relations section and Corporate Governance
caption. Any amendments to, or waivers of, the Code of Ethics
will be disclosed on our website promptly following the date of
such amendment or waiver.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
The section under the heading Corporate Governance
entitled Director Compensation of the Proxy
Statement, the sections under the heading titled Executive
Compensation and Management Committee Report and the
sections under the heading titled Executive
Compensation of the Proxy Statement are incorporated
herein by reference.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
|
The sections under the headings Common Stock Ownership by
Management and Principal Shareholders and Equity
Compensation Plan Information of the Proxy Statement are
incorporated herein by reference.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
The section under the headings Certain Relationships and
Related Person Transactions of the Proxy Statement and the
section under the heading Corporate Governance
entitled Director Independence of the Proxy
Statement are incorporated herein by reference.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
The sections under the heading titled Independent
Registered Public Accountant Fees and Services of the
Proxy Statement are incorporated herein by reference.
50
Post Properties, Inc.
Post Apartment Homes, L.P.
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENTS AND SCHEDULES
|
(a) 1. and 2. Financial Statements and Schedules
The financial statements and schedule listed below are filed as
part of this annual report on the pages indicated.
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
|
|
POST PROPERTIES, INC
|
|
|
|
|
|
|
|
|
|
|
|
|
53
|
|
|
|
|
54
|
|
|
|
|
56
|
|
|
|
|
57
|
|
|
|
|
58
|
|
|
|
|
60
|
|
|
|
|
61
|
|
|
|
|
|
|
POST APARTMENT HOMES,
L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
|
|
91
|
|
|
|
|
93
|
|
|
|
|
94
|
|
|
|
|
95
|
|
|
|
|
96
|
|
|
|
|
97
|
|
|
|
|
|
|
FINANCIAL STATEMENT
SCHEDULE
|
|
|
|
|
|
|
|
123
|
|
All other financial statement schedules are omitted because they
are either not applicable or not required.
51
Post Properties, Inc.
Post Apartment Homes, L.P.
Post Properties, Inc.
December 31, 2006 and
2005
Post Properties, Inc.
52
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Post Properties, Inc. is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f).
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Under the supervision and with the
participation of the management of Post Properties, Inc.,
including the Companys principal executive officer and
principal financial officer, Company management conducted an
evaluation of the effectiveness of its internal control over
financial reporting as of December 31, 2006 based on the
framework in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its
evaluation under the framework in Internal
Control Integrated Framework, the management of
Post Properties, Inc. concluded that its internal control over
financial reporting was effective as of December 31, 2006.
Managements assessment of the effectiveness of the
Companys internal control over financial reporting as of
December 31, 2006 has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as
stated in their report which is included herein.
Post Properties, Inc.
53
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Post Properties,
Inc.:
We have audited the accompanying consolidated balance sheet of
Post Properties, Inc. and subsidiaries (the Company)
as of December 31, 2006, and the related consolidated
statements of operations, shareholders equity and
accumulated earnings, and cash flows for the year ended
December 31, 2006. Our audit also included the financial
statement schedule as of and for the year ended
December 31, 2006, listed in the Index at Item 15. We
also have audited managements assessment, included in the
accompanying Managements Report on Internal Control Over
Financial Reporting, that the Company maintained effective
internal control over financial reporting as of
December 31, 2006, based on criteria established in
Internal Control Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway
Commission. The Companys management is responsible for
these financial statements and the financial statement schedule,
for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of
internal control over financial reporting. Our responsibility is
to express an opinion on these financial statements and
financial statement schedule, an opinion on managements
assessment, and an opinion on the effectiveness of the
Companys internal control over financial reporting based
on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audit of financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our
audit of internal control over financial reporting included
obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and
evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Post Properties, Inc. and subsidiaries as of
December 31, 2006, and the results of their operations and
their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein. Also, in
our opinion, managements assessment that the Company
maintained effective internal control over financial reporting
as of December 31, 2006, is fairly stated, in all material
respects, based on the criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2006, based on the criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission.
As described in Note 1 to the consolidated financial
statements, the Company adopted SEC Staff Accounting
Bulletin No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current
Year Financial Statements, effective December 31, 2006.
Deloitte & Touche LLP
Atlanta, Georgia
February 28, 2007
Post Properties, Inc.
54
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Post Properties,
Inc.:
In our opinion, the consolidated balance sheet as of
December 31, 2005 and the related consolidated statements
of operations, shareholders equity and accumulated
earnings and cash flows for each of the two years in the period
ended December 31, 2005 present fairly, in all material
respects, the financial position of Post Properties, Inc. and
its subsidiaries at December 31, 2005, and the results of
their operations and their cash flows for each of the two years
in the period ended December 31, 2005, in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the summary of activity
for the real estate investments and accumulated depreciation
included in the financial statement schedule for each of the two
years in the period ended December 31, 2005 presents
fairly, in all material respects, the information set forth
therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial
statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 15, 2006, except with respect to our opinion on the
consolidated financial statements insofar as it relates to the
effects of discontinued operations discussed in Note 2, as
to which date is December 8, 2006, and insofar as it
relates to the effects in segment reporting categories discussed
in Note 15, as to which date is February 28, 2007
Post Properties, Inc.
55
POST
PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Real estate assets
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
278,448
|
|
|
$
|
266,914
|
|
Building and improvements
|
|
|
1,821,123
|
|
|
|
1,789,479
|
|
Furniture, fixtures and equipment
|
|
|
204,318
|
|
|
|
207,497
|
|
Construction in progress
|
|
|
135,428
|
|
|
|
47,005
|
|
Land held for future development
|
|
|
92,800
|
|
|
|
62,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,532,117
|
|
|
|
2,373,406
|
|
Less: accumulated depreciation
|
|
|
(547,477
|
)
|
|
|
(516,954
|
)
|
For-sale condominiums
|
|
|
28,295
|
|
|
|
38,338
|
|
Assets held for sale, net of
accumulated depreciation of $4,035 and
$0 at December 31, 2006 and 2005, respectively
|
|
|
15,645
|
|
|
|
4,591
|
|
|
|
|
|
|
|
|
|
|
Total real estate assets
|
|
|
2,028,580
|
|
|
|
1,899,381
|
|
Investments in and advances to
unconsolidated real estate entities
|
|
|
32,794
|
|
|
|
26,614
|
|
Cash and cash equivalents
|
|
|
3,663
|
|
|
|
6,410
|
|
Restricted cash
|
|
|
5,203
|
|
|
|
4,599
|
|
Deferred charges, net
|
|
|
12,400
|
|
|
|
11,624
|
|
Other assets
|
|
|
34,007
|
|
|
|
32,826
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,116,647
|
|
|
$
|
1,981,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders Equity
|
|
|
|
|
|
|
|
|
Indebtedness
|
|
$
|
1,033,779
|
|
|
$
|
980,615
|
|
Accounts payable and accrued
expenses
|
|
|
75,403
|
|
|
|
53,429
|
|
Dividend and distribution payable
|
|
|
19,886
|
|
|
|
19,257
|
|
Accrued interest payable
|
|
|
4,885
|
|
|
|
5,478
|
|
Security deposits and prepaid rents
|
|
|
9,915
|
|
|
|
9,857
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,143,868
|
|
|
|
1,068,636
|
|
|
|
|
|
|
|
|
|
|
Minority interest of common
unitholders in Operating Partnership
|
|
|
14,057
|
|
|
|
26,764
|
|
Minority interests in consolidated
real estate entities
|
|
|
2,268
|
|
|
|
5,045
|
|
|
|
|
|
|
|
|
|
|
Total minority interests
|
|
|
16,325
|
|
|
|
31,809
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par
value, 20,000 authorized:
|
|
|
|
|
|
|
|
|
81/2%
Series A Cumulative Redeemable Shares, liquidation
preference
|
|
|
9
|
|
|
|
9
|
|
$50 per share, 900 shares
issued and outstanding
|
|
|
|
|
|
|
|
|
75/8%
Series B Cumulative Redeemable Shares, liquidation
preference
|
|
|
|
|
|
|
|
|
$25 per share,
2,000 shares issued and outstanding
|
|
|
20
|
|
|
|
20
|
|
Common stock, $.01 par value,
100,000 authorized:
|
|
|
|
|
|
|
|
|
43,603 and 41,394 shares
issued, 43,486 and 41,394 shares outstanding
at December 31, 2006 and 2005, respectively
|
|
|
436
|
|
|
|
414
|
|
Additional
paid-in-capital
|
|
|
869,587
|
|
|
|
803,765
|
|
Accumulated earnings
|
|
|
97,567
|
|
|
|
86,315
|
|
Accumulated other comprehensive
income (loss)
|
|
|
(3,490
|
)
|
|
|
(4,208
|
)
|
Deferred compensation
|
|
|
|
|
|
|
(3,625
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
964,129
|
|
|
|
882,690
|
|
Less common stock in treasury, at
cost, 175 and 44 shares
at December 31, 2006 and 2005, respectively
|
|
|
(7,675
|
)
|
|
|
(1,681
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
956,454
|
|
|
|
881,009
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
shareholders equity
|
|
$
|
2,116,647
|
|
|
$
|
1,981,454
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc.
56
POST
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
282,650
|
|
|
$
|
264,763
|
|
|
$
|
251,661
|
|
Other property revenues
|
|
|
17,044
|
|
|
|
15,478
|
|
|
|
14,131
|
|
Other
|
|
|
402
|
|
|
|
255
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
300,096
|
|
|
|
280,496
|
|
|
|
266,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
(exclusive of items shown separately below)
|
|
|
137,172
|
|
|
|
128,115
|
|
|
|
121,420
|
|
Depreciation
|
|
|
67,328
|
|
|
|
70,435
|
|
|
|
73,665
|
|
General and administrative
|
|
|
18,502
|
|
|
|
18,307
|
|
|
|
18,205
|
|
Investment, development and other
|
|
|
6,424
|
|
|
|
4,711
|
|
|
|
2,930
|
|
Severance charges
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
229,426
|
|
|
|
222,364
|
|
|
|
216,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
70,670
|
|
|
|
58,132
|
|
|
|
50,572
|
|
Interest income
|
|
|
1,261
|
|
|
|
661
|
|
|
|
817
|
|
Interest expense
|
|
|
(54,049
|
)
|
|
|
(55,638
|
)
|
|
|
(59,763
|
)
|
Amortization of deferred financing
costs
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
|
|
(4,304
|
)
|
Gains (losses) on sales of
condominiums, net
|
|
|
12,378
|
|
|
|
(531
|
)
|
|
|
|
|
Equity in income of unconsolidated
real estate entities
|
|
|
1,813
|
|
|
|
1,767
|
|
|
|
1,083
|
|
Other income
|
|
|
3,095
|
|
|
|
5,267
|
|
|
|
|
|
Termination of debt remarketing
agreement (interest expense)
|
|
|
|
|
|
|
|
|
|
|
(10,615
|
)
|
Loss on early extinguishment of
indebtedness
|
|
|
|
|
|
|
|
|
|
|
(4,011
|
)
|
Minority interest in consolidated
property partnerships
|
|
|
(257
|
)
|
|
|
239
|
|
|
|
671
|
|
Minority interest of preferred
unitholders
|
|
|
|
|
|
|
|
|
|
|
(3,780
|
)
|
Minority interest of common
unitholders
|
|
|
(451
|
)
|
|
|
120
|
|
|
|
2,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
30,934
|
|
|
|
5,356
|
|
|
|
(26,715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property
operations, net of minority interest
|
|
|
3,774
|
|
|
|
6,638
|
|
|
|
12,744
|
|
Gains on sales of real estate
assets, net of minority interest
and provision for income taxes
|
|
|
67,247
|
|
|
|
132,997
|
|
|
|
106,039
|
|
Loss on early extinguishment of
indebtedness, net of minority interest
|
|
|
(486
|
)
|
|
|
(3,043
|
)
|
|
|
(3,849
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations
|
|
|
70,535
|
|
|
|
136,592
|
|
|
|
114,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
101,469
|
|
|
|
141,948
|
|
|
|
88,219
|
|
Dividends to preferred shareholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(8,325
|
)
|
Redemption costs on preferred
stock and units
|
|
|
|
|
|
|
|
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders
|
|
$
|
93,832
|
|
|
$
|
134,311
|
|
|
$
|
76,368
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share
data Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations (net of preferred dividends and redemption costs)
|
|
$
|
0.54
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
Income from discontinued operations
|
|
|
1.65
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders
|
|
$
|
2.19
|
|
|
$
|
3.34
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding basic
|
|
|
42,812
|
|
|
|
40,217
|
|
|
|
39,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share
data Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations (net of preferred dividends and redemption costs)
|
|
$
|
0.53
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
Income from discontinued operations
|
|
|
1.62
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders
|
|
$
|
2.15
|
|
|
$
|
3.34
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding diluted
|
|
|
43,594
|
|
|
|
40,217
|
|
|
|
39,777
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc.
57
POST
PROPERTIES, INC.
ACCUMULATED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Preferred
|
|
|
Common
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Deferred
|
|
|
Treasury
|
|
|
|
|
|
|
Shares
|
|
|
Shares
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Compensation
|
|
|
Stock
|
|
|
Total
|
|
|
Shareholders Equity and
Accumulated Earnings,
December 31, 2003
|
|
|
4,900
|
|
|
|
38,686
|
|
|
$
|
49
|
|
|
$
|
396
|
|
|
$
|
849,632
|
|
|
$
|
|
|
|
$
|
(12,362
|
)
|
|
$
|
(4,424
|
)
|
|
$
|
(36,765
|
)
|
|
$
|
796,526
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88,219
|
|
Net change in derivatives, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,694
|
|
|
|
|
|
|
|
|
|
|
|
3,694
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,913
|
|
Proceeds from employee stock
purchase, stock option and other plans
|
|
|
|
|
|
|
367
|
|
|
|
|
|
|
|
5
|
|
|
|
6,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,345
|
|
|
|
10,465
|
|
Adjustment for minority interest of
unitholders in Operating Partnership upon conversion of units
into common shares and at dates of capital transactions
|
|
|
|
|
|
|
1,168
|
|
|
|
|
|
|
|
|
|
|
|
(14,042
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,890
|
|
|
|
19,848
|
|
Stock-based compensation, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
633
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
633
|
|
Restricted stock issuances, net of
forfeitures
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
(125
|
)
|
|
|
|
|
|
|
|
|
|
|
(673
|
)
|
|
|
798
|
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,109
|
|
|
|
|
|
|
|
1,109
|
|
Redemption of preferred stock
|
|
|
(2,000
|
)
|
|
|
|
|
|
|
(20
|
)
|
|
|
|
|
|
|
(49,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(50,000
|
)
|
Treasury stock acquisitions
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,268
|
)
|
|
|
(2,268
|
)
|
Dividends to preferred shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,325
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,325
|
)
|
Dividends to common shareholders
($1.80 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,012
|
)
|
|
|
(54,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71,831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity and
Accumulated Earnings,
December 31, 2004
|
|
|
2,900
|
|
|
|
40,164
|
|
|
|
29
|
|
|
|
401
|
|
|
|
775,221
|
|
|
|
25,075
|
|
|
|
(8,668
|
)
|
|
|
(3,988
|
)
|
|
|
|
|
|
|
788,070
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,948
|
|
Net change in derivatives, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,559
|
|
|
|
|
|
|
|
|
|
|
|
5,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,507
|
|
Proceeds from employee stock
purchase, stock option and other plans
|
|
|
|
|
|
|
1,138
|
|
|
|
|
|
|
|
8
|
|
|
|
16,181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,652
|
|
|
|
37,841
|
|
Adjustment for minority interest of
unitholders in Operating Partnership upon conversion of units
into common shares and at dates of capital transactions
|
|
|
|
|
|
|
1,097
|
|
|
|
|
|
|
|
5
|
|
|
|
10,065
|
|
|
|
|
|
|
|
(1,099
|
)
|
|
|
|
|
|
|
11,473
|
|
|
|
20,444
|
|
Stock-based compensation, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
888
|
|
Restricted stock issuances, net of
forfeitures
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
1,410
|
|
|
|
|
|
|
|
|
|
|
|
(1,004
|
)
|
|
|
(406
|
)
|
|
|
|
|
Amortization of deferred
compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,367
|
|
|
|
|
|
|
|
1,367
|
|
Treasury stock acquisitions
|
|
|
|
|
|
|
(1,031
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,400
|
)
|
|
|
(34,400
|
)
|
Dividends to preferred shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
Dividends to common shareholders
($1.80 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73,071
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(73,071
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity and
Accumulated Earnings,
December 31, 2005
|
|
|
2,900
|
|
|
|
41,394
|
|
|
$
|
29
|
|
|
$
|
414
|
|
|
$
|
803,765
|
|
|
$
|
86,315
|
|
|
$
|
(4,208
|
)
|
|
$
|
(3,625
|
)
|
|
$
|
(1,681
|
)
|
|
$
|
881,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
POST PROPERTIES, INC.
|
|
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
|
|
ACCUMULATED EARNINGS (contd)
|
|
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
|
|
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Preferred
|
|
|
Common
|
|
|
Paid-in
|
|
|
Accumulated
|
|
|
Comprehensive
|
|
|
Deferred
|
|
|
Treasury
|
|
|
|
|
|
|
Shares
|
|
|
Shares
|
|
|
Stock
|
|
|
Stock
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Compensation
|
|
|
Stock
|
|
|
Total
|
|
|
Shareholders Equity and
Accumulated Earnings,
December 31, 2005
|
|
|
2,900
|
|
|
|
41,394
|
|
|
$
|
29
|
|
|
$
|
414
|
|
|
$
|
803,765
|
|
|
$
|
86,315
|
|
|
$
|
(4,208
|
)
|
|
$
|
(3,625
|
)
|
|
$
|
(1,681
|
)
|
|
$
|
881,009
|
|
Cumulative effect of application of
SAB 108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,725
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity and
Accumulated Earnings,
January 1, 2006
|
|
|
2,900
|
|
|
|
41,394
|
|
|
|
29
|
|
|
|
414
|
|
|
|
803,765
|
|
|
|
81,590
|
|
|
|
(4,208
|
)
|
|
|
(3,625
|
)
|
|
|
(1,681
|
)
|
|
|
876,284
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,469
|
|
Net change in derivatives, net of
minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,265
|
|
Transition effect of adoption of
SFAS 123R
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,625
|
)
|
|
|
|
|
|
|
|
|
|
|
3,625
|
|
|
|
|
|
|
|
|
|
Proceeds from employee stock
purchase, stock option and other plans
|
|
|
|
|
|
|
1,462
|
|
|
|
|
|
|
|
15
|
|
|
|
53,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(994
|
)
|
|
|
52,479
|
|
Adjustment for minority interest of
unitholders in Operating Partnership upon conversion of units
into common shares and at dates of capital transactions
|
|
|
|
|
|
|
697
|
|
|
|
|
|
|
|
7
|
|
|
|
13,133
|
|
|
|
|
|
|
|
(78
|
)
|
|
|
|
|
|
|
|
|
|
|
13,062
|
|
Stock-based compensation, net of
minority interest
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
2,856
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,856
|
|
Treasury stock acquisitions
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,000
|
)
|
|
|
(5,000
|
)
|
Dividends to preferred shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
Dividends to common shareholders
($1.80 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,855
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(77,855
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity and
Accumulated Earnings,
December 31, 2006
|
|
|
2,900
|
|
|
|
43,486
|
|
|
$
|
29
|
|
|
$
|
436
|
|
|
$
|
869,587
|
|
|
$
|
97,567
|
|
|
$
|
(3,490
|
)
|
|
$
|
|
|
|
$
|
(7,675
|
)
|
|
$
|
956,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
POST
PROPERTIES, INC.
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Cash Flows From Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
101,469
|
|
|
$
|
141,948
|
|
|
$
|
88,219
|
|
Adjustments to reconcile net income
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
68,967
|
|
|
|
76,248
|
|
|
|
85,310
|
|
Amortization of deferred financing
costs
|
|
|
3,526
|
|
|
|
4,661
|
|
|
|
4,304
|
|
Minority interest of common
unitholders in Operating Partnership
|
|
|
451
|
|
|
|
(120
|
)
|
|
|
(2,615
|
)
|
Minority interest in discontinued
operations
|
|
|
1,366
|
|
|
|
7,219
|
|
|
|
7,793
|
|
Minority interest of preferred
unitholders in Operating Partnership
|
|
|
|
|
|
|
|
|
|
|
3,780
|
|
Minority interest in consolidated
entities
|
|
|
257
|
|
|
|
(239
|
)
|
|
|
(671
|
)
|
Gains on sales of real estate assets
|
|
|
(81,430
|
)
|
|
|
(140,643
|
)
|
|
|
(113,739
|
)
|
Other income
|
|
|
(1,433
|
)
|
|
|
(5,267
|
)
|
|
|
|
|
Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
2,233
|
|
Equity in income of unconsolidated
entities
|
|
|
(1,813
|
)
|
|
|
(1,634
|
)
|
|
|
(941
|
)
|
Distributions of earnings of
unconsolidated entities
|
|
|
2,713
|
|
|
|
2,033
|
|
|
|
1,928
|
|
Deferred compensation
|
|
|
471
|
|
|
|
194
|
|
|
|
|
|
Stock-based compensation
|
|
|
2,910
|
|
|
|
2,293
|
|
|
|
1,785
|
|
Loss on early extinguishment of debt
|
|
|
495
|
|
|
|
2,264
|
|
|
|
4,302
|
|
Changes in assets, (increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
(3,009
|
)
|
|
|
(4,012
|
)
|
|
|
(2,637
|
)
|
Deferred charges
|
|
|
(129
|
)
|
|
|
(1,082
|
)
|
|
|
(361
|
)
|
Changes in liabilities, increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
(594
|
)
|
|
|
(2,199
|
)
|
|
|
754
|
|
Accounts payable and accrued
expenses
|
|
|
655
|
|
|
|
2,476
|
|
|
|
315
|
|
Security deposits and prepaid rents
|
|
|
(546
|
)
|
|
|
2,621
|
|
|
|
(654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
94,326
|
|
|
|
86,761
|
|
|
|
79,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and acquisition of
real estate assets, net of payables
|
|
|
(239,428
|
)
|
|
|
(112,527
|
)
|
|
|
(42,777
|
)
|
Net proceeds from sales of real
estate assets
|
|
|
176,419
|
|
|
|
199,546
|
|
|
|
138,637
|
|
Proceeds from sale of other
investments
|
|
|
898
|
|
|
|
5,267
|
|
|
|
|
|
Capitalized interest
|
|
|
(9,942
|
)
|
|
|
(2,907
|
)
|
|
|
(1,078
|
)
|
Annually recurring capital
expenditures
|
|
|
(11,145
|
)
|
|
|
(9,921
|
)
|
|
|
(9,884
|
)
|
Periodically recurring capital
expenditures
|
|
|
(5,964
|
)
|
|
|
(4,508
|
)
|
|
|
(4,605
|
)
|
Community rehabilitation and other
revenue generating capital expenditures
|
|
|
(10,641
|
)
|
|
|
|
|
|
|
(26
|
)
|
Corporate additions and improvements
|
|
|
(3,480
|
)
|
|
|
(1,771
|
)
|
|
|
(681
|
)
|
Distributions from (investments in
and advances to) unconsolidated entities
|
|
|
(2,125
|
)
|
|
|
(5,846
|
)
|
|
|
52,287
|
|
Note receivable collections and
other investments
|
|
|
944
|
|
|
|
2,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
131,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on indebtedness
|
|
|
(145,763
|
)
|
|
|
(217,934
|
)
|
|
|
(115,753
|
)
|
Proceeds from indebtedness
|
|
|
190,000
|
|
|
|
100,000
|
|
|
|
135,000
|
|
Lines of credit proceeds
(repayments), net
|
|
|
7,534
|
|
|
|
50,631
|
|
|
|
(21,262
|
)
|
Payments of financing costs
|
|
|
(3,971
|
)
|
|
|
(1,211
|
)
|
|
|
(5,631
|
)
|
Redemption of preferred stock and
preferred units
|
|
|
|
|
|
|
|
|
|
|
(120,000
|
)
|
Treasury stock acquisitions
|
|
|
(5,000
|
)
|
|
|
(34,400
|
)
|
|
|
(2,268
|
)
|
Proceeds from employee stock
purchase and stock options plans
|
|
|
52,008
|
|
|
|
36,084
|
|
|
|
10,465
|
|
Capital contributions
(distributions) of minority interests
|
|
|
(1,183
|
)
|
|
|
283
|
|
|
|
(3,806
|
)
|
Distributions to preferred
unitholders
|
|
|
|
|
|
|
|
|
|
|
(4,246
|
)
|
Distributions to common unitholders
|
|
|
(1,685
|
)
|
|
|
(4,060
|
)
|
|
|
(5,219
|
)
|
Dividends paid to preferred
shareholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(8,325
|
)
|
Dividends paid to common
shareholders
|
|
|
(76,912
|
)
|
|
|
(72,523
|
)
|
|
|
(71,144
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
(212,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
(2,747
|
)
|
|
|
6,287
|
|
|
|
(1,211
|
)
|
Cash and cash equivalents,
beginning of period
|
|
|
6,410
|
|
|
|
123
|
|
|
|
1,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period
|
|
$
|
3,663
|
|
|
$
|
6,410
|
|
|
$
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc.
60
POST
PROPERTIES, INC.
(In thousands, except per share data)
|
|
1.
|
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
|
Organization
Post Properties, Inc. and its subsidiaries develop, own and
manage upscale multifamily apartment communities in selected
markets in the United States. As used herein, the term
Company includes Post Properties, Inc. and its
subsidiaries, including Post Apartment Homes, L.P. (the
Operating Partnership), unless the context indicates
otherwise. The Company, through its wholly-owned subsidiaries is
the general partner and owns a majority interest in the
Operating Partnership which, through its subsidiaries, conducts
substantially all of the on-going operations of the Company. At
December 31, 2006, the Company owned 21,745 apartment units
in 61 apartment communities, including 545 apartment units in
two communities held in unconsolidated entities and 1,181
apartment units in four communities (and the expansion of one
community) currently under construction
and/or in
lease-up.
The Company is also developing 230 for-sale condominium homes
and is converting apartment homes in four communities initially
consisting of 597 units (including 121 units in one
community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary. At
December 31, 2006, approximately 44.5%, 18.8%, 12.1% and
9.7% (on a unit basis) of the Companys operating
communities were located in the Atlanta, Dallas, the greater
Washington D.C. and Tampa metropolitan areas, respectively.
The Company has elected to qualify and operate as a
self-administrated and self-managed real estate investment trust
(REIT) for federal income tax purposes. A REIT is a
legal entity which holds real estate interests and is generally
not subject to federal income tax on the income it distributes
to its shareholders.
At December 31, 2006, the Company had outstanding
43,486 shares of common stock and owned the same number of
units of common limited partnership interests (Common
Units) in the Operating Partnership, representing a 98.4%
ownership interest in the Operating Partnership. Common Units
held by persons other than the Company totaled 705 at
December 31, 2006 and represented a 1.6% common minority
interest in the Operating Partnership. Each Common Unit may be
redeemed by the holder thereof for either one share of Company
common stock or cash equal to the fair market value thereof at
the time of redemption, at the option of the Company. The
Companys weighted average common ownership interest in the
Operating Partnership was 98.1%, 95.0% and 93.7% for the years
ended December 31, 2006, 2005 and 2004, respectively.
Basis of
presentation
The accompanying consolidated financial statements include the
consolidated accounts of the Company, the Operating Partnership
and their wholly owned subsidiaries. The Company also
consolidates other entities in which it has a controlling
financial interest or entities where it is determined to be the
primary beneficiary under Financial Accounting Standards Board
Interpretation No. 46R (FIN 46R),
Consolidation of Variable Interest Entities. Under
FIN 46R, variable interest entities (VIEs) are
generally entities that lack sufficient equity to finance their
activities without additional financial support from other
parties or whose equity holders lack adequate decision making
ability. The primary beneficiary is required to consolidate a
VIE for financial reporting purposes. The application of
FIN 46R requires management to make significant estimates
and judgments about the Companys and its other
partners rights, obligations and economic interests in
such entities. For entities in which the Company has less than a
controlling financial interest or entities where it is not
deemed to be the primary beneficiary under FIN 46R, the
entities are accounted for using the equity method of accounting
(see discussion of EITF
No. 04-5
below). Accordingly, the Companys share of the net
earnings or losses of these entities is included in consolidated
net income. All significant inter-company accounts and
transactions have been eliminated in consolidation. The minority
interest of unitholders in the operations of the Operating
Partnership is calculated based on the weighted average unit
ownership during the period.
Certain items related to condominium activities and minority
interests in the 2005 and 2004 consolidated financial statements
were reclassified for comparative purposes with the 2006
consolidated financial statements.
Cost
capitalization
The Company capitalizes those expenditures relating to the
acquisition of new assets, the development and construction of
new apartment and condominium communities, the enhancement of
the value of existing assets and those expenditures that
substantially extend the life of existing assets. Annually
recurring capital expenditures are expenditures of a type that
are expected to be incurred on an annual basis during the life
of an apartment community, such as carpet, appliances and
Post Properties, Inc.
61
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
flooring. Periodically recurring capital expenditures are
expenditures that generally occur less frequently than on an
annual basis, such as major exterior projects relating to
landscaping and structural improvements. Revenue generating
capital expenditures are expenditures for the renovation of
communities, the new installation of water
sub-metering
equipment and other property upgrade costs that enhance the
rental value of such communities. All other expenditures
necessary to maintain a community in ordinary operating
condition are expensed as incurred. Additionally, for new
development communities, carpet, vinyl, and blind replacements
are expensed as incurred during the first five years (which
corresponds to their estimated depreciable life). Thereafter,
these replacements are capitalized and depreciated. The Company
expenses as incurred interior and exterior painting of its
operating communities, unless those communities are under
rehabilitation.
For communities under development or rehabilitation, the Company
capitalizes interest, real estate taxes, and certain internal
personnel and associated costs associated with apartment and
condominium communities under development and construction.
Interest is capitalized to projects under development or
construction based upon the weighted average cumulative project
costs for each month multiplied by the Companys weighted
average borrowing costs, expressed as a percentage. Weighted
average borrowing costs include the costs of the Companys
fixed rate secured and unsecured borrowings and the variable
rate unsecured borrowings under its line of credit facilities.
The weighted average borrowing costs, expressed as a percentage,
for the years ended December 31, 2006, 2005 and 2004 were
approximately 6.6%, 6.5% and 7.3%, respectively. Internal
personnel and associated costs are capitalized to projects under
development or construction based upon the effort associated
with such projects. The Company treats each unit in an apartment
community separately for cost accumulation, capitalization and
expense recognition purposes. Prior to the completion of rental
and condominium units, interest and other construction costs are
capitalized and reflected on the balance sheet as construction
in progress. The Company ceases the capitalization of such costs
as the residential units in a community become substantially
complete and available for occupancy or sale. This results in a
proration of costs between amounts that are capitalized and
expensed as the residential units in apartment and condominium
development communities become available for occupancy or sale.
In addition, prior to the completion of rental units, the
Company expenses as incurred substantially all operating
expenses (including pre-opening marketing as well as property
management and leasing personnel expenses) of such rental
communities. Prior to the completion and closing of condominium
units, the Company expenses all sales and marketing costs
related to such units.
For cash flow statement purposes, the Company classifies capital
expenditures for newly developed condominium communities and for
condominium conversion communities in investing activities in
the caption titled, Construction and acquisition of real
estate assets. Likewise, the proceeds from the sales of
such condominiums are included in investing activities in the
caption titled, Net proceeds from sales of real estate
assets.
Real
estate assets, depreciation and impairment
Real estate assets are stated at the lower of depreciated cost
or fair value, if deemed impaired. Major replacements and
betterments are capitalized and depreciated over their estimated
useful lives. Depreciation is computed on a straight-line basis
over the useful lives of the properties (buildings and
components and related land improvements
20-40 years;
furniture, fixtures and equipment 5-10 years).
The Company continually evaluates the recoverability of the
carrying value of its real estate assets using the methodology
prescribed in Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Factors
considered by management in evaluating impairment of its
existing real estate assets held for investment include
significant declines in property operating profits, annually
recurring property operating losses and other significant
adverse changes in general market conditions that are considered
permanent in nature. Under SFAS No. 144, a real estate
asset held for investment is not considered impaired if the
undiscounted, estimated future cash flows of an asset (both the
annual estimated cash flow from future operations and the
estimated cash flow from the theoretical sale of the asset) over
its estimated holding period are in excess of the assets
net book value at the balance sheet date. If any real estate
asset held for investment is considered impaired, a loss is
provided to reduce the carrying value of the asset to its
estimated fair value.
The Company periodically classifies real estate assets as held
for sale. An asset is classified as held for sale after the
approval of the Companys board of directors and after an
active program to sell the asset has commenced. Upon the
classification of a real estate asset as held for sale, the
carrying value of the asset is reduced to the lower of its net
book value or its estimated fair value, less costs to sell the
asset. Subsequent to the classification of assets as held for
sale, no
Post Properties, Inc.
62
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
further depreciation expense is recorded. Real estate assets
held for sale are stated separately on the accompanying
consolidated balance sheets. The operating results of real
estate assets held for sale and sold are reported as
discontinued operations in the accompanying statements of
operations. Income from discontinued operations includes the
revenues and expenses, including depreciation and allocated
interest expense, associated with the assets. Interest expense
is allocated to assets held for sale based on actual interest
costs for assets with secured mortgage debt. Interest expense is
allocated to unencumbered assets based on the ratio of unsecured
debt to unencumbered assets multiplied by the weighted average
interest rate on the Companys unsecured debt for the
period and further multiplied by the book value of the assets
held for sale
and/or sold.
This classification of operating results as discontinued
operations applies retroactively for all periods presented.
Additionally, gains and losses on assets designated as held for
sale are classified as part of discontinued operations.
For condominium conversion projects, a complete community
conversion is treated as discontinued operations in the same
manner as discussed above for apartment community sales. For
partial conversions of communities, the operating results,
condominium revenues and associated gains are reflected in
continuing operations (see discussion under revenue
recognition below) and the net book value of the assets
being converted into condominiums are reflected separately from
held for sale assets on the consolidated balance sheet in the
caption titled, For-sale condominiums. In either
case, subsequent to the classification of the assets as held for
sale, no further depreciation expense is recorded.
Revenue
recognition
Residential properties are leased under operating leases with
terms of generally one year or less. Rental revenues from
residential leases are recognized on the straight-line method
over the approximate life of the leases, which is generally one
year. The recognition of rental revenues from residential leases
when earned has historically not been materially different from
rental revenues recognized on a straight-line basis.
Under the terms of residential leases, the residents of the
Companys residential communities are obligated to
reimburse the Company for certain utility usage, water and
electricity (at selected properties), where the Company is the
primary obligor to the public utility entity. These utility
reimbursements from residents are reflected as other property
revenues in the consolidated statements of operations.
Sales and the associated gains or losses of real estate assets
and for-sale condominiums are recognized in accordance with the
provisions of SFAS No. 66, Accounting for Sales
of Real Estate. For condominium conversion projects,
revenues from individual condominium unit sales are recognized
upon the closing of the sale transactions (the Completed
Contract Method), as all conditions for full profit
recognition have been met at that time and the conversion
construction periods are typically very short. Under
SFAS No. 66, the Company uses the relative sales value
method to allocate costs and recognize profits from condominium
conversion sales. In accordance with SFAS No. 144,
Accounting for the Impairment and Disposal of Long-Lived
Assets, gains on sales of condominium units at complete
community condominium conversion projects are included in
discontinued operations. For condominium conversion projects
relating to a portion of an existing apartment community, the
Company also recognizes revenues and the associated gains under
the Completed Contract Method, as discussed herein. Since a
portion of an operating community does not meet the requirements
of a component of an entity under SFAS No. 144, the
revenues and gains on sales of condominium units at partial
condominium communities are included in continuing operations.
For newly developed condominiums, the Company accounts for each
project under either the Completed Contract Method or the
Percentage of Completion Method, based on a specific
evaluation of the factors specified in SFAS No. 66.
The factors used to determine the appropriate accounting method
are the legal commitment of the purchaser in the real estate
contract, whether the construction of the project is beyond a
preliminary phase, sufficient units have been contracted to
ensure the project will not revert to a rental project, the
aggregate project sale proceeds and costs can be reasonably
estimated and the buyer has made an adequate initial and
continuing cash investment under the contract in accordance with
SFAS No. 66. Under the Percentage of Completion
Method, revenues and the associated gains are recognized over
the project construction period generally based on the
percentage of total project costs incurred to estimated total
projects costs for each condominium unit under a binding real
estate contract. As of December 31, 2006, no condominium
projects are accounted for under the Percentage of Completion
Method.
In November 2006 the Financial Accounting Standards Board
(FASB) ratified EITF Issue
No. 06-8
(EITF
No. 06-8),
Applicability of the Assessment of a Buyers
Continuing Investment under FASB Statement No. 66 for Sales
of
Post Properties, Inc.
63
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Condominiums. EITF
No. 06-8
provides additional guidance on whether the seller of a
condominium unit is required to evaluate the buyers
continuing investment under SFAS No. 66 in order to
recognize profit from the sale under the percentage of
completion method. The EITF concluded that both the buyers
initial and continuing investment must meet the criteria in
SFAS No. 66 in order for condominium sale profits to
be recognized under the percentage of completion method. Sales
of condominiums not meeting the continuing investment test must
be accounted for under the deposit method (a method consistent
with the Companys above stated Completed Contract Method).
EITF
No. 06-8
is effective January 1, 2008. As discussed above, the
Company accounts for condominium sales using similar criteria to
those stated in EITF
No. 06-8.
As a result, the Company does not expect that the adoption of
EITF
No. 06-8
will have a material impact on the Companys financial
position or results of operations.
Long-term
ground leases
The Company is party to six long-term ground leases associated
with land underlying certain of the Companys operating
communities. The ground leases generally provide for future
increases in minimum lease payments tied to an inflation index
or contain stated rent increases that generally compensate for
the impact of inflation. Beginning in 2005, the Company
recognized ground lease expense on the straight-line method over
the life of the ground lease for all ground leases with stated
rent increases. The recognition of ground lease expense as
incurred had historically not been materially different than the
recognition of ground lease expense on a straight-line basis.
The Securities and Exchange Commission issued
SAB No. 108 (SAB 108), Considering
the Effects of Prior Year Misstatements When Quantifying
Misstatements in Current Year Financial Statements, in
September 2006. SAB 108 requires that companies analyze the
effect of financial statement misstatements on both their
balance sheet and their income statement and contains guidance
on correcting errors under this approach. The Company applied
the guidance in SAB 108 on December 31, 2006 and, in
accordance with the initial application provisions of
SAB 108, adjusted retained earnings as of January 1,
2006. The adjustment was considered to be immaterial
individually and in the aggregate in prior years based on the
Companys historical method of determining materiality. The
application of SAB 108 resulted in a cumulative effect
adjustment to record the prior period impact of accounting for
two ground leases with scheduled rent increases on a
straight-line basis during periods prior to January 1,
2005, and resulted in an increase in consolidated real estate
assets of approximately $3,900, an increase in consolidated
liabilities of approximately $8,800 and a decrease in
consolidated equity of approximately $4,900 ($4,700 net of
minority interest).
Apartment
community acquisitions
In accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations, the aggregate purchase price
of apartment community acquisitions is allocated to the tangible
assets and liabilities (including mortgage indebtedness) as well
as the intangible assets acquired in each transaction based on
their estimated fair values at the acquisition date. The
acquired tangible assets, principally land, building and
improvements and furniture, fixtures and equipment are reflected
in real estate assets, and such assets, excluding land, are
depreciated over their estimated useful lives. The acquired
intangible assets, principally above/below market leases,
in-place leases and resident relationships are reflected in
other assets and amortized over the average remaining lease
terms of the acquired leases and resident relationships
(generally 5 months to 18 months).
Stock-based
compensation
Effective January 1, 2006, the Company accounts for
stock-based compensation under the fair value method prescribed
by SFAS 123R, Share-Based Payment.
SFAS No. 123R was issued in December 2004.
SFAS No. 123R revised SFAS No. 123,
Accounting for Stock-Based Compensation, and
required companies to expense the fair value of employee stock
options and other forms of stock-based compensation.
SFAS No. 123R also superseded the provisions of APB
No. 25. The Company adopted the provisions of
SFAS No. 123R using the modified prospective method of
adoption. Since the Company elected to apply the provisions of
SFAS No. 123 on January 1, 2003, the adoption of
SFAS No. 123R did not have a significant impact on the
Companys financial position or results of operations.
In periods from January 1, 2003 through December 31,
2005, the Company accounted for stock-based compensation under
the fair value method prescribed by SFAS No. 123. In
adopting SFAS No. 123, the Company used the
prospective method prescribed in SFAS No. 148,
Accounting for Stock-Based Compensation
Transition and Disclosure, for all options issued after
January 1, 2003.
Post Properties, Inc.
64
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
In 2005 and 2004, the effect on the Companys net income
and net income per share had the fair value method of accounting
been applied to all stock-based compensation was not significant
to the Companys financial position or results of
operations.
Derivative
financial instruments
The Company accounts for derivative financial instruments at
fair value under the provisions of SFAS No. 133,
Accounting for Derivative Instruments and Hedging
Activities, as amended. The Company uses derivative
financial instruments, interest rate swap and interest rate cap
arrangements to manage or hedge its exposure to interest rate
changes. The Company generally designates each derivative
instrument as a hedge of specific interest expense cash flow
exposure. Under SFAS 133, as amended, derivative
instruments qualifying as hedges of specific cash flows are
recorded on the balance sheet at fair value with an offsetting
increase or decrease to accumulated other comprehensive income,
a shareholders equity account, until the hedged
transactions are recognized in earnings. Quarterly, the Company
evaluates the effectiveness of its cash flow hedges. Any
ineffective portion of cash flow hedges are recognized
immediately in earnings.
Cash and
cash equivalents
All investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
Restricted
cash
Restricted cash is generally comprised of resident security
deposits for apartment communities located in Florida and
Tennessee, required maintenance reserves for certain communities
located in Georgia and earnest money and escrow deposits
associated with the Companys for-sale condominium business.
Deferred
financing costs
Deferred financing costs are amortized using the straight-line
method, which approximates the interest method, over the terms
of the related indebtedness.
Per share
data
The Company reports both basic and diluted earnings per share.
Basic earnings per common share is computed by dividing net
income available to common shareholders by the weighted average
number of common shares outstanding during the year. Diluted
earnings per common share is computed by dividing net income
available to common shareholders by the weighted average number
of common shares and common share equivalents outstanding during
the year, which are computed using the treasury stock method for
outstanding stock options and non-vested awards. Common share
equivalents are excluded from the computations in years in which
they have an anti-dilutive effect.
Conversion
of common units in the Operating Partnership
In accordance with the conclusions summarized in Emerging Issue
Task Force, Issue
No. 95-7,
Implementation Issues Related to the Treatment of Minority
Interests in Certain Real Estate Investment Trusts, the
Company accounts for the conversion of original sponsors
common units in the Operating Partnership into shares of company
common stock at the net book value of the minority interest
acquired. These transactions result in a reduction in the
minority interest of common unit holders in the Operating
Partnership and a corresponding increase in shareholders
equity in the accompanying consolidated balance sheet at the
date of conversion.
Use of
estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Post Properties, Inc.
65
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
New
accounting pronouncements
In 2006 and 2005, several new accounting pronouncements were
issued and the pronouncements with a potential impact on the
Company in 2006 and in future periods and which are not
discussed elsewhere in note 1 are discussed below.
The Emerging Issues Task Force issued EITF
No. 04-5
(EITF
No. 04-5),
Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights. EITF
No. 04-5
provides a framework for evaluating whether a general partner or
group of general partners or managing members controls a limited
partnership or limited liability company and therefore should
consolidate the entity. The presumption that the general partner
or group of general partners or managing members controls a
limited partnership or limited liability company may be overcome
if the limited partners or members have (1) the substantive
ability to dissolve the partnership without cause or
(2) substantive participating rights. EITF
No. 04-5
became effective on September 30, 2005 for new or modified
limited partnerships or limited liability companies and
January 1, 2006 for all existing arrangements. The Company
adopted EITF
No. 04-5
on January 1, 2006 for all existing partnerships and
limited liability companies and the adoption did not have a
material impact on the Companys financial position or
results of operations.
FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement 109, was issued in
July 2006. FIN 48 clarifies guidance on the recognition and
measurement of uncertain tax positions and establishes a more
likely than not standard for the evaluation of whether such tax
positions can be recognized in the Companys financial
statements. Previously recognized tax positions that do not meet
the more likely than not criteria will be required to be
adjusted on the implementation date. FIN 48 is effective
for the Company on January 1, 2007. Additionally,
FIN 48 requires additional disclosure regarding the nature
and amount of uncertain tax positions, if any. The Company has
performed an analysis and does not expect that the adoption of
FIN 48 will have a material impact on the Companys
financial position and results of operations.
Statement of Financial Accounting Standards No. 157
(SFAS No. 157), Fair Value
Measurements, was issued in September 2006.
SFAS No. 157 provides a definition of fair value and
establishes a framework for measuring fair value.
SFAS No. 157 clarified the definition of fair value in
an effort to eliminate inconsistencies in the application of
fair value under generally accepted accounting principles.
Additional disclosure focusing on the methods used to determine
fair value are also required. SFAS No. 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007 and should be applied
prospectively. The Company does not expect that the adoption of
SFAS No. 157 will have a material impact on the
Companys financial position and results of operations.
|
|
2.
|
REAL
ESTATE ACQUISITIONS AND DISPOSITIONS
|
Acquisitions
In March 2006, the Company acquired two apartment communities,
containing 308 units, in Austin, Texas for approximately
$46,400, including closing costs. Additionally, the Company
plans to spend up to approximately $1,200 (of which
approximately $946 was incurred as of December 31,
2006) to improve the communities. The purchase price of
these communities was allocated to the assets acquired based on
their estimated fair values.
In July 2006, the Company acquired a
361-unit
apartment community in suburban Washington D.C. for
approximately $84,600, including the assumption of approximately
$41,394 mortgage indebtedness and closing costs. The assumed
mortgage note payable bears interest at a coupon rate of 6.1%
(which approximated fair value), requires monthly principal and
interest payments and matures in 2011. The Company may be
required to pay additional purchase consideration of up to
approximately $6,563 based on a share of the appreciation in the
value of the property, if any, over approximately the next four
years. The purchase price of this community was allocated to the
assets and liabilities acquired based on their estimated fair
values.
In October 2006, the Company acquired a
150-unit
apartment community in Tampa, Florida for approximately $23,700,
including closing costs. At the time of acquisition, the
community was undergoing an extensive renovation program and was
predominantly vacant. The Company plans to spend up to
approximately $2,000 (of which approximately $870 was incurred
as of December 31, 2006) to complete the renovation of
the community.
Lease-up of
renovated units began in the fourth quarter of 2006. The
purchase price of this community was allocated to the assets
acquired based on their estimated fair values.
Post Properties, Inc.
66
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
In 2006, aggregate acquisition costs were allocated to land
($18,201), building, improvements and equipment ($111,523),
construction progress ($23,723) and identified lease related
intangible assets ($1,296). Aggregate liabilities assumed
related to mortgage indebtedness, other payables and deposits
totaled approximately $41,419.
In June 2005, the Company acquired a
319-unit
apartment community located in suburban Charlotte, NC for
approximately $38,240, including closing costs and the
reimbursement of a fee to terminate a loan commitment paid for
by the seller. Additionally, the Company incurred additional
costs of approximately $1,100 to improve the community. The
purchase price of this community was allocated to the assets
acquired based on their estimated fair values.
Dispositions
The Company classifies real estate assets as held for sale after
the approval of its board of directors and after the Company has
commenced an active program to sell the assets. At
December 31, 2006, the Company had one community,
originally containing 127 units, that is being converted
into condominiums, one apartment community, containing
182 units, classified as held for sale and certain parcels
of land classified as held for sale. These real estate assets
are reflected in the accompanying consolidated balance sheet at
$15,645, which represents the lower of their depreciated cost or
fair value less costs to sell. At December 31, 2006, the
Company also had portions of two communities that are being
converted to condominiums, originally containing 349 units,
that are classified as for-sale condominiums on the accompanying
consolidated balance sheet at $28,295.
In the fourth quarter of 2005, the Company began the conversion
of portions of two apartment communities into for-sale
condominiums. As discussed in note 1, gains on sales of
these condominium units are reflected in continuing operations.
In addition to the condominium gains included in continuing
operations, the Company expensed certain sales and marketing
costs associated with new condominium communities under
development and such costs are included in condominium expenses
in the table below. A summary of revenues and costs and expenses
of condominium activities included in continuing operations for
the years ended December 31, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
33,364
|
|
|
$
|
|
|
Condominium costs and expenses
|
|
|
(20,986
|
)
|
|
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
Gains (losses) on sales of
condominiums, net
|
|
$
|
12,378
|
|
|
$
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
In 2006, the Company retrospectively adjusted its consolidated
financial statements for the years ended December 31, 2005
and 2004, to reflect four apartment communities classified as
held for sale (three of which were sold in 2006) in 2006
under SFAS No. 144. The effect of the retrospective
adjustment represented a $1,272 and $433 decrease in the
Companys previously reported income (loss) from continuing
operations and a corresponding increase in income from
discontinued operations for the years ended December 31,
2005 and 2004, respectively.
Under SFAS No. 144 Accounting for the Impairment
or Disposal of Long-Lived Assets, the operating results of
real estate assets designated as held for sale are included in
discontinued operations in the consolidated statement of
operations for all periods presented. Additionally, all gains
and losses on the sale of these assets are included in
discontinued operations. For the year ended December 31,
2006, income from discontinued operations included the results
of operations of one condominium conversion community and one
apartment community classified as held for sale at
December 31, 2006 as well as the operations of three
communities sold in 2006 through their sale dates. For the years
ended December 31, 2005 and 2004, income from discontinued
operations included the results of operations of the condominium
conversion community and apartment community classified as held
for sale at December 31, 2006, communities sold in 2006,
one condominium conversion community through its sell-out date
and the results of operations of 14 communities sold in 2005 and
2004.
Post Properties, Inc.
67
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
The revenues and expenses of these communities for the years
ended December 31, 2006, 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
12,146
|
|
|
$
|
27,967
|
|
|
$
|
56,411
|
|
Other property revenues
|
|
|
1,282
|
|
|
|
2,805
|
|
|
|
5,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
13,428
|
|
|
|
30,772
|
|
|
|
61,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
(exclusive of items shown separately below)
|
|
|
5,269
|
|
|
|
13,136
|
|
|
|
25,411
|
|
Depreciation
|
|
|
1,639
|
|
|
|
5,813
|
|
|
|
11,645
|
|
Interest
|
|
|
2,673
|
|
|
|
5,421
|
|
|
|
9,321
|
|
Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
2,233
|
|
Minority interest in consolidated
property partnerships
|
|
|
|
|
|
|
14
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
9,581
|
|
|
|
24,384
|
|
|
|
48,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
property operations before minority interest
|
|
|
3,847
|
|
|
|
6,388
|
|
|
|
13,116
|
|
Minority interest
|
|
|
(73
|
)
|
|
|
250
|
|
|
|
(372
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
property operations
|
|
$
|
3,774
|
|
|
$
|
6,638
|
|
|
$
|
12,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2004, the Company recorded asset impairment charges totaling
$2,233 to write-down the cost of two apartment communities,
located in Dallas, Texas, to their estimated fair value when the
assets were classified as held for sale or sold.
In 2006, the Company recognized net gains in discontinued
operations of $68,324 ($67,026 net of minority interest)
from the sale of three communities containing 1,340 units.
These sales generated net proceeds of approximately $173,007,
including $40,000 of secured indebtedness assumed by the
purchasers. In 2005, the Company recognized net gains in
discontinued operations of $124,425 ($117,593 net of
minority interest) from the sale of six communities containing
3,047 units. These sales generated net proceeds of
approximately $229,249, including $81,560 of tax-exempt secured
indebtedness assumed by the purchasers. In 2004, the Company
recognized net gains from discontinued operations of $113,739
($106,039 net of minority interest) from the sale of eight
communities, containing 3,880 units, and certain land
parcels. These sales generated net proceeds of approximately
$242,962, including $104,325 of tax-exempt debt assumed by the
purchasers.
In 2006 and 2005, gains on sales of real estate assets included
in discontinued operations also includes net gains from
condominium sales at two condominium conversion communities. The
Company commenced condominium conversion activities in 2005. A
summary of revenues and costs and expenses of condominium
activities included in discontinued operations for the years
ended December 31, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
7,322
|
|
|
$
|
56,012
|
|
Condominium costs and expenses
|
|
|
(7,097
|
)
|
|
|
(39,200
|
)
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, before
minority interest and income taxes
|
|
|
225
|
|
|
|
16,812
|
|
Minority interest
|
|
|
(4
|
)
|
|
|
(814
|
)
|
Provision for income taxes
|
|
|
|
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, net of
minority interest and income taxes
|
|
$
|
221
|
|
|
$
|
15,404
|
|
|
|
|
|
|
|
|
|
|
Post Properties, Inc.
68
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
3.
|
INVESTMENTS
IN UNCONSOLIDATED REAL ESTATE ENTITIES
|
Apartment
and Condominium Conversion Communities
At December 31, 2006, the Company holds investments in
three individual limited liability companies (the Property
LLCs) with an institutional investor. Two of the Property
LLCs own single apartment communities. The third Property LLC is
converting its apartment community, initially consisting of
121 units, into for-sale condominiums. The Company holds a
35% equity interest in the Property LLCs.
The Company accounts for its investments in these Property LLCs
using the equity method of accounting. The excess of the
Companys investment over its equity in the underlying net
assets of the Property LLCs was approximately $5,446 at
December 31, 2006. The excess investment related to
Property LLCs holding apartment communities is being amortized
as a reduction to earnings on a straight-line basis over the
lives of the related assets. The excess investment of
approximately $104 at December 31, 2006 related to the
Property LLC holding the condominium conversion community will
be recognized as additional costs as the underlying condominiums
are sold. The Company provides real estate services
(development, construction and property management) to the
Property LLCs for which it earns fees.
The operating results of the Company include its allocable share
of net income from the investments in the Property LLCs. A
summary of financial information for the Property LLCs in the
aggregate is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Balance Sheet Data
|
|
2006
|
|
|
2005
|
|
|
Real estate assets, net of
accumulated depreciation of $11,039 and $8,349, respectively
|
|
$
|
93,614
|
|
|
$
|
96,000
|
|
Assets held for sale, net
|
|
|
3,027
|
|
|
|
17,715
|
|
Cash and other
|
|
|
4,067
|
|
|
|
1,770
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
100,708
|
|
|
$
|
115,485
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable
|
|
$
|
66,998
|
|
|
$
|
66,999
|
|
Mortgage note payable to Company
|
|
|
|
|
|
|
5,967
|
|
Other liabilities
|
|
|
1,107
|
|
|
|
996
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
68,105
|
|
|
|
73,962
|
|
Members equity
|
|
|
32,603
|
|
|
|
41,523
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
members equity
|
|
$
|
100,708
|
|
|
$
|
115,485
|
|
|
|
|
|
|
|
|
|
|
Companys equity investment
in Property LLCs
|
|
$
|
16,883
|
|
|
$
|
20,647
|
|
|
|
|
|
|
|
|
|
|
Post Properties, Inc.
69
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Income Statement Data
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
11,447
|
|
|
$
|
10,789
|
|
|
$
|
10,451
|
|
Other property revenues
|
|
|
799
|
|
|
|
840
|
|
|
|
776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
12,246
|
|
|
|
11,629
|
|
|
|
11,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
|
|
|
3,948
|
|
|
|
3,689
|
|
|
|
3,555
|
|
Depreciation and amortization
|
|
|
2,650
|
|
|
|
2,621
|
|
|
|
2,579
|
|
Interest
|
|
|
2,752
|
|
|
|
2,752
|
|
|
|
2,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
9,350
|
|
|
|
9,062
|
|
|
|
8,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
2,896
|
|
|
|
2,567
|
|
|
|
2,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
(343
|
)
|
|
|
(176
|
)
|
|
|
(355
|
)
|
Gains on sales of real estate
assets, net
|
|
|
2,947
|
|
|
|
2,834
|
|
|
|
|
|
Loss on early extinguishment of
debt
|
|
|
|
|
|
|
(273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations
|
|
|
2,604
|
|
|
|
2,385
|
|
|
|
(355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,500
|
|
|
$
|
4,952
|
|
|
$
|
2,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys share of net income
|
|
$
|
1,813
|
|
|
$
|
1,767
|
|
|
$
|
1,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on real estate assets represent net gains from condominium
sales at the condominium conversion community held by one of the
Property LLCs. This Property LLC began its condominium
conversion activity in 2005. A summary of revenues and costs and
expenses of condominium activities for the years ended
December 31, 2006 and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenue
|
|
$
|
21,857
|
|
|
$
|
15,098
|
|
Condominium costs and expenses
|
|
|
(18,910
|
)
|
|
|
(12,264
|
)
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, net
|
|
$
|
2,947
|
|
|
$
|
2,834
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006, mortgage notes payable include a
$49,998 mortgage note that bears interest at 4.13%, requires
monthly interest payments and annual principal payments of $1
through 2009. Thereafter, the note requires monthly principal
and interest payments based on a
25-year
amortization schedule and matures in 2034. The note is callable
by the lender in 2009 and on each successive fifth year
anniversary of the note thereafter. The note is prepayable
without penalty in 2008. The additional mortgage note payable
totaling $17,000 bears interest at a fixed rate of 4.04%,
requires interest only payments and matures in 2008.
In early 2005, one of the Property LLCs elected to convert its
apartment community into for-sale condominiums. As a result of
its decision to sell the community through the condominium
conversion process, the Property LLC prepaid its third party
mortgage note payable of $16,392 through secured borrowings from
the Company. The Property LLC incurred debt prepayment costs and
expenses associated with the write-off of unamortized deferred
financing costs totaling $273 in March 2005. The mortgage note
payable to the Company had a fixed rate component ($16,392)
bearing interest at 4.28% and a variable rate component bearing
interest at LIBOR at 1.90%. In June 2006, the mortgage note
payable to the Company was retired from the proceeds of
condominium sales.
Post Properties, Inc.
70
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Land
Entities
At December 31, 2006, the Company holds a 50% equity
interest in a limited liability company whose sole investment
consists of a partnership interest in an entity (the Land
Partnership) which holds land for future development. At
December 31, 2006, the Land Partnership had total assets of
$26,157, principally land held for future development, total
liabilities of $12,582 (including a secured note payable of
$12,000 to the Company) and total equity of $13,575 (including
the Companys equity investment of $3,911).
At December 31, 2006 and 2005, the Companys
indebtedness consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
December 31,
|
|
|
December 31,
|
|
Description
|
|
Payment Terms
|
|
Interest Rate
|
|
|
Date
|
|
2006
|
|
|
2005
|
|
|
Senior Unsecured
Notes
|
|
Int.
|
|
|
5.13%-7.70%
|
|
|
2007-2013
|
|
$
|
560,000
|
|
|
$
|
485,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of
Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated Line of Credit
|
|
N/A
|
|
|
LIBOR + 0.575%
|
(1)
|
|
2010
|
|
|
95,000
|
|
|
|
90,000
|
|
Cash Management Line
|
|
N/A
|
|
|
LIBOR + 0.575%
|
|
|
2010
|
|
|
13,913
|
|
|
|
11,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,913
|
|
|
|
101,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Secured
Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
Prin. and Int.
|
|
|
6.15%
|
(2)
|
|
2029
|
|
|
95,600
|
|
|
|
97,100
|
|
Other
|
|
Prin. and Int.
|
|
|
4.27%-7.69%
|
|
|
2007-2013
|
|
|
259,371
|
|
|
|
268,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
354,971
|
|
|
|
365,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-Exempt Floating Rate
Secured Bonds
|
|
Int.
|
|
|
3.54%
|
(3)
|
|
2025
|
|
|
9,895
|
|
|
|
28,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,033,779
|
|
|
$
|
980,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents stated rate. At December 31, 2006, the weighted
average interest rate was 5.58%.
|
(2)
|
Interest rate is fixed at 6.15%, inclusive of credit enhancement
and other fees, to 2009 through an interest rate swap
arrangement.
|
(3)
|
FNMA credit enhanced bond indebtedness. Interest based on FNMA
AAA tax-exempt rate plus credit enhancement and
other fees of 0.639%. Interest rate represents the rate at
December 31, 2006 before credit enhancements. The Company
has outstanding interest rate cap arrangements that limit the
Companys exposure to increases in the base interest rate
to 5%.
|
Debt
maturities
The aggregate maturities of the Companys indebtedness are
as follows:
|
|
|
|
|
2007
|
|
$
|
113,190
|
|
2008
|
|
|
5,230
|
|
2009
|
|
|
76,618
|
|
2010
|
|
|
297,641
|
(1)
|
2011
|
|
|
141,831
|
|
Thereafter
|
|
|
399,269
|
|
|
|
|
|
|
|
|
$
|
1,033,779
|
|
|
|
|
|
|
|
|
(1) |
Includes outstanding balance on lines of credit totaling
$108,913.
|
Post Properties, Inc.
71
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Debt
issuances, retirements and modifications
2006
Upon their maturity in March 2006, the Company repaid $50,000 of
6.71% senior unsecured notes. In October 2006, the Company
repaid $25,000 of 7.5% senior unsecured notes. Both notes
were repaid from available borrowings under its unsecured lines
of credit.
In April 2006, the Company closed a $40,000 mortgage note
payable secured by an apartment community located in Denver,
Colorado. The mortgage note accrued interest at LIBOR plus 1.0%,
was scheduled to mature in April 2008 and was pre- payable
without penalty. In August 2006, this mortgage note was assumed
by the purchaser of this community. As a result of this debt
assumption, the Company recorded a loss on early extinguishment
of indebtedness of $123 ($121 net of minority interest)
related to the write-off of unamortized deferred financing costs.
In June 2006, the Company issued $150,000 of senior unsecured
notes. The notes bear interest at 6.30% and mature in September
2013. The net proceeds from the unsecured notes were used to
reduce amounts outstanding under the Companys unsecured
lines of credit.
In July 2006, in conjunction with an apartment community
acquisition (see note 4 to the consolidated financial
statements), the Company assumed a secured, fixed rate mortgage
note payable with an outstanding balance of $41,394. The
mortgage note bears interest at a coupon rate of approximately
6.1% (which approximated fair value), requires monthly principal
and interest payments and matures in November 2011.
In December 2006, the Company repaid a $45,718, 6.8% secured
mortgage note prior to its schedule maturity date in 2007. Also
in December 2006, the Company repaid $18,600 of tax-exempt
indebtedness associated with the sale of an apartment community.
As a result of this debt retirement, the Company recorded a loss
on the early extinguishment of debt of $372 ($365 net of
minority interest) related to the write-off of deferred loan
costs of $230 ($226 net of minority interest) relating to
such retired indebtedness and a loss of $142 ($139 net of
minority interest) due to the ineffectiveness of a related
interest rate cap agreement.
2005
Upon their maturity in 2005, the Company repaid its $25,000
(7.28%) medium term, unsecured notes, repaid its $100,000
(6.85%) Mandatory Par Put Remarketed Securities
(MOPPRS) debt arrangement, repaid its $62,043
(8.125%) medium term, unsecured notes and repaid its $25,000
(6.78%) medium term, unsecured notes, from available borrowings
under its unsecured lines of credit.
In 2005, the Company issued $100,000 of senior unsecured notes.
The notes bear interest at 5.45% and mature in 2012. The net
proceeds from the unsecured notes were used to reduce amounts
outstanding under the Companys unsecured lines of credit.
The Company sold three apartment communities subject to the
assumption of $81,560 of tax-exempt mortgage indebtedness (see
note 5). As a result of these debt assumptions, the Company
recorded losses on the early extinguishment of debt of $3,220
($3,043 net of minority interest) related to the write-off
of deferred loan costs of $2,264 ($2,141 net of minority
interest) relating to such assumed indebtedness and the
realization of a $955 ($902 net of minority interest) loss
in connection with the termination of related interest rate cap
agreements that were used as cash flow hedges of the assumed
debt.
2004
In 2004, the Company purchased and retired $87,957 of 8.125%
medium term, unsecured notes through a tender offer. As part of
this transaction, the Company recorded a loss on the early
extinguishment of this indebtedness of $4,011 representing the
debt repurchase premiums, the expenses of the tender offer and
the write-off of the unamortized deferred financing costs
associated with the retired indebtedness. Also in 2004, the
Company terminated a remarketing agreement related to its
$100,000 MOPPRS debt. In connection with the termination of the
remarketing agreement, the Company paid $10,615 (interest
expense), including transaction expenses. As a result of the
termination of the remarketing agreement, the underlying debt
matured and was repaid in 2005.
Post Properties, Inc.
72
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Unsecured
lines of credit
At December 31, 2006, the Company utilizes a $450,000
syndicated unsecured revolving line of credit (the
Syndicated Line) that matures in April 2010 for its
short-term financing needs. The Syndicated Line currently has a
stated interest rate of LIBOR plus 0.575% or the prime rate and
was provided by a syndicate of 11 banks led by Wachovia Bank,
N.A. and JP Morgan Securities, Inc. Additionally, the Syndicated
Line requires the payment of annual facility fees currently
equal to 0.15% of the aggregate loan commitment. The Syndicated
Line provides for the interest rate and facility fee rate to be
adjusted up or down based on changes in the credit ratings on
the Companys senior unsecured debt. The rates under the
Syndicated Line are based on the higher of the Companys
unsecured debt ratings in instances where the Company has split
unsecured debt ratings. The Syndicated Line also includes a
competitive bid option for short-term funds up to 50% of the
loan commitment at rates generally below the stated line rate.
The credit agreement for the Syndicated Line contains customary
restrictions, representations, covenants and events of default,
including fixed charge coverage and maximum leverage ratios. The
Syndicated Line also restricts the amount of capital the Company
can invest in specific categories of assets, such as improved
land, properties under construction, condominium properties,
non-multifamily properties, debt or equity securities, notes
receivable and unconsolidated affiliates. At December 31,
2006, the Company had issued letters of credit to third parties
totaling $2,805 under this facility.
Additionally, at December 31, 2006, the Company had a
$30,000 unsecured line of credit with Wachovia Bank, N.A. (the
Cash Management Line). The Cash Management Line
matures in April 2010 and carries pricing and terms, including
debt covenants, substantially consistent with the Syndicated
Line.
Interest
paid
Interest paid (including capitalized amounts of $9,942, $2,907
and $1,078 for the years ended December 31, 2006, 2005 and
2004, respectively), aggregated $67,257, $66,234 and $66,992 for
the years ended December 31, 2006, 2005 and 2004,
respectively.
Pledged
assets
The aggregate net book value at December 31, 2006 of
property pledged as collateral for indebtedness amounted to
approximately $619,000.
Deferred charges consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Deferred financing costs
|
|
$
|
18,073
|
|
|
$
|
26,050
|
|
Other
|
|
|
5,501
|
|
|
|
5,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,574
|
|
|
|
31,449
|
|
Less: accumulated amortization
|
|
|
(11,174
|
)
|
|
|
(19,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,400
|
|
|
$
|
11,624
|
|
|
|
|
|
|
|
|
|
|
Post Properties, Inc.
73
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
6.
|
SHAREHOLDERS
EQUITY/MINORITY INTEREST
|
Preferred
Stock
At December 31, 2006, the Company had two outstanding
series of cumulative redeemable preferred stock with the
following characteristics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Approximate
|
|
|
|
|
|
|
Liquidation
|
|
|
Optional
|
|
|
Redemption
|
|
|
Stated
|
|
|
Dividend
|
|
|
|
Outstanding
|
|
|
Preference
|
|
|
Redemption
|
|
|
Price(1)
|
|
|
Dividend
|
|
|
Rate
|
|
Description
|
|
Shares
|
|
|
(per share)
|
|
|
Date(1)
|
|
|
(per share)
|
|
|
Yield
|
|
|
(per share)
|
|
|
Series A
|
|
|
900
|
|
|
$
|
50.00
|
|
|
|
10/01/26
|
|
|
$
|
50.00
|
|
|
|
8.5
|
%
|
|
$
|
4.25
|
|
Series B
|
|
|
2,000
|
|
|
$
|
25.00
|
|
|
|
10/28/07
|
|
|
$
|
25.00
|
|
|
|
7.625
|
%
|
|
$
|
1.91
|
|
|
|
|
(1)
|
|
The preferred stock is redeemable,
at the Companys option, for cash.
|
In 2004, the Company redeemed its 7.625% series C
cumulative redeemable preferred stock (Series C
Preferred Stock) for $25.00 per share (an aggregate
of $50,000), plus accrued and unpaid dividends through the
redemption date. In connection with the issuance of the
Series C Preferred Stock in 1998, the Company incurred
$1,716 in issuance costs and recorded such costs as a reduction
of shareholders equity. The redemption price of the
Series C Preferred Stock exceeded the related carrying
value by the $1,716 of issuance costs. In connection with the
redemption, in accordance with generally accepted accounting
principles, the Company reflected the $1,716 of issuance costs
as a reduction of earnings in arriving at net income available
to common shareholders in 2004.
Preferred
Units
In 2004, the Operating Partnership redeemed its 8.0%
Series D cumulative redeemable preferred units
(Series D Preferred Units) for $25.00 per
unit (an aggregate of $70,000), plus accrued and unpaid
distributions through the redemption date. In connection with
the issuance of the Series D Preferred Units in 1998, the
Operating Partnership incurred $1,810 in issuance costs and
recorded such costs as a reduction of partners equity. The
redemption price of the Series D Preferred Units exceeded
the related carrying value by the $1,810 of issuance costs. In
connection with the redemption, in accordance with generally
accepted accounting principles, the Company reflected the $1,810
of issuance costs as a reduction of earnings in arriving at net
income available to common shareholders in 2004.
Common
Stock Purchases
In 2006 and 2005, the Company repurchased approximately 109 and
1,031 shares, respectively, of its common stock at an
aggregate cost of $5,000 and $34,400, respectively, under 10b5-1
stock repurchase plans. These shares were purchased under a
board of directors approved plan which provided for aggregate
common or preferred stock repurchases of up to $200,000 through
December 31, 2006. In 2004, under a previous stock
repurchase program, the Company repurchased $2,268 of common
stock and $120,000 of preferred stock and units.
In the fourth quarter of 2006, the Companys board of
directors adopted a new stock repurchase program under which the
Company may repurchase up to $200,000 of common or preferred
stock at market prices from time to time until December 31,
2008. Subsequent to the year ended December 31, 2006, the
Company repurchased 83 shares of its common stock totaling
approximately $3,694 under its 10b5-1 stock purchase plan.
Post Properties, Inc.
74
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Computation
of Earnings Per Common Share
In 2006, 2005 and 2004, basic and diluted earnings per common
share for income (loss) from continuing operations available to
common shareholders has been computed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
30,934
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common shareholders
|
|
|
23,297
|
|
|
|
42,812
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common shareholders
|
|
$
|
23,297
|
|
|
|
43,594
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
5,356
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common shareholders
|
|
|
(2,281
|
)
|
|
|
40,217
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common shareholders
|
|
$
|
(2,281
|
)
|
|
|
40,217
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Loss from continuing operations
|
|
$
|
(26,715
|
)
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(8,325
|
)
|
|
|
|
|
|
|
|
|
Less: Preferred stock and unit
redemption costs
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common shareholders
|
|
|
(38,566
|
)
|
|
|
39,777
|
|
|
$
|
(0.97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common shareholders
|
|
$
|
(38,566
|
)
|
|
|
39,777
|
|
|
$
|
(0.97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
For the years ended December 31, 2005 and 2004, the
potential dilution from the Companys outstanding stock
options and awards of 400 and 115 shares, respectively, was
antidilutive to the loss from continuing operations per share
calculation. As such, these amounts were excluded from weighted
average shares.
|
Post Properties, Inc.
75
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
In 2005 and 2004, stock options to purchase 3,534 and
4,491 shares of common stock, respectively, were excluded
from the computation of diluted earnings per share as these
options were antidilutive. There were no antidilutive shares in
2006.
In prior years, the Company recorded severance charges
associated with the departure of certain executive officers of
the Company. Under certain of these arrangements, the Company is
required to make certain payments and provide specified benefits
through 2013 and 2016. In 2005, the Company recorded an
additional expense charge of $796 relating to changes in the
estimated future costs of certain benefits granted to former
executive officers under such agreements. These estimated future
cost increases primarily related to increased fuel and other
operating costs and expenses associated with certain fractional
aircraft benefits provided to such executives. In 2004, the
Company entered into a final settlement agreement with its
former chairman of the board of directors. Under the terms of
the agreement, the former chairmans employment and
non-competition agreements were terminated and the Company
agreed to continue to provide the former chairman certain
payments and benefits through 2013, the approximate expiration
date of the original employment agreement. Because the present
value of the estimated payments under the settlement agreement
approximated the Companys remaining accrued charge under
the former employment agreement, no additional charges were
recorded in 2004 as a result of the settlement.
The following table summarizes the activity relating to the
accrued severance charges for the years ended December 31,
2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Accrued severance charges,
beginning of year
|
|
$
|
14,325
|
|
|
$
|
15,317
|
|
|
$
|
19,171
|
|
Severance charges
|
|
|
|
|
|
|
796
|
|
|
|
|
|
Payments for period
|
|
|
(2,341
|
)
|
|
|
(2,694
|
)
|
|
|
(4,858
|
)
|
Interest accretion
|
|
|
848
|
|
|
|
906
|
|
|
|
1,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued severance charges, end of
year
|
|
$
|
12,832
|
|
|
$
|
14,325
|
|
|
$
|
15,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all of these remaining amounts will be paid over
the remaining terms of the former executives employment
and settlement agreements (7 to 10 years).
The Company has elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended (the Code). To
qualify as a REIT, the Company must distribute annually at least
90% of its adjusted taxable income, as defined in the Code, to
its shareholders and satisfy certain other organizational and
operating requirements. It is managements current
intention to adhere to these requirements and maintain the
Companys REIT status. As a REIT, the Company generally
will not be subject to federal income tax at the corporate level
on the taxable income it distributes to its shareholders. If the
Company fails to qualify as a REIT in any taxable year, it will
be subject to federal income taxes at regular corporate rates
(including any applicable alternative minimum tax) and may not
be able to qualify as a REIT for four subsequent taxable years.
The Company may be subject to certain state and local taxes on
its income and property, and to federal income taxes and excise
taxes on its undistributed taxable income.
In the preparation of income tax returns in federal and state
jurisdictions, the Company and its taxable REIT subsidiaries
assert certain tax positions based on their understanding and
interpretation of the income tax law. The taxing authorities may
challenge such positions and the resolution of such matters
could result in the payment and recognition of additional income
tax expense. Management believes it has used reasonable
judgments and conclusions in the preparation of its income tax
returns.
Post Properties, Inc.
76
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Reconciliation
of net income to taxable income
As discussed in note 1, the Company conducts substantially
all of its operations through its majority-owned subsidiary, the
Operating Partnership. For income tax reporting purposes, the
Company receives an allocable share of the Operating
Partnerships ordinary income and capital gains based on
its weighted average ownership, adjusted for certain specially
allocated items. All adjustments to net income in the table
below are net of amounts attributable to minority interests and
taxable REIT subsidiaries. A reconciliation of net income to
taxable income for the years ended December 31, 2006, 2005
and 2004 is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
(Estimate)
|
|
|
(Actual)
|
|
|
(Actual)
|
|
|
Net income
|
|
$
|
101,469
|
|
|
$
|
141,948
|
|
|
$
|
88,219
|
|
Add (subtract) net loss (income)
of taxable REIT subsidiaries
|
|
|
2,537
|
|
|
|
(6,882
|
)
|
|
|
402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
|
104,006
|
|
|
|
135,066
|
|
|
|
88,621
|
|
Book/tax depreciation difference
|
|
|
(4,926
|
)
|
|
|
(1,354
|
)
|
|
|
(1,719
|
)
|
Book/tax difference on gains from
real estate sales
|
|
|
(40,435
|
)
|
|
|
(15,747
|
)
|
|
|
(9,806
|
)
|
Book/tax difference on stock-based
compensation
|
|
|
(13,369
|
)
|
|
|
(5,454
|
)
|
|
|
(604
|
)
|
Other book/tax differences, net
|
|
|
(7,674
|
)
|
|
|
1,990
|
|
|
|
(8,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income before allocation
of taxable capital gains
|
|
|
37,602
|
|
|
|
114,501
|
|
|
|
67,607
|
|
Income taxable as capital gains
|
|
|
(36,231
|
)
|
|
|
(116,760
|
)
|
|
|
(89,393
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable ordinary income (loss)
|
|
$
|
1,371
|
|
|
$
|
(2,259
|
)
|
|
$
|
(21,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax characterization of dividends
For income tax purposes, dividends to common shareholders are
characterized as ordinary income, capital gains or as a return
of a shareholders invested capital. A summary of the
income tax characterization of the Companys dividends paid
per common share is as follows for the years ended
December 31, 2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Ordinary income
|
|
$
|
0.06
|
|
|
|
3.2
|
%
|
|
$
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
|
Capital gains
|
|
|
0.87
|
|
|
|
48.5
|
%
|
|
|
0.99
|
|
|
|
55.1
|
%
|
|
|
0.74
|
|
|
|
40.9
|
%
|
Unrecaptured Section 1250
gains
|
|
|
0.86
|
|
|
|
48.1
|
%
|
|
|
0.81
|
|
|
|
44.9
|
%
|
|
|
1.06
|
|
|
|
59.1
|
%
|
Return of capital
|
|
|
0.01
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.80
|
|
|
|
100.0
|
%
|
|
$
|
1.80
|
|
|
|
100.0
|
%
|
|
$
|
1.80
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The income tax characterization of dividends to common
shareholders is based on the calculation of Taxable Earnings and
Profits, as defined in the Code. Taxable Earnings and Profits
differ from regular taxable income due primarily to differences
in the estimated useful lives and methods used to compute
depreciation and in the recognition of gains and losses on the
sale of real estate assets.
As of December 31, 2006, the net basis for federal income
tax purposes, taking into account the special allocation of gain
to the partners contributing property to the Operating
Partnership and including minority interest in the Operating
Partnership, was lower than the net assets as reported in the
Companys consolidated financial statements by $119,000.
Post Properties, Inc.
77
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Taxable
REIT subsidiaries
The Company utilizes taxable REIT subsidiaries
(TRSs) to perform such non-REIT activities as asset
and property management, for-sale housing (condominiums)
conversions and sales and other services for third parties.
These TRSs are subject to federal and state income taxes. The
components of income tax expense, significant deferred tax
assets and liabilities and a reconciliation of the TRS income
tax expense to the statutory federal rate are reflected in the
tables below.
In 2006 and 2004, the TRSs recorded no income tax expense due to
the existence of income tax operating loss carryforwards and the
existence of deferred tax asset valuation allowances. Income tax
expense of the TRSs in 2005 is comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
|
|
|
Current tax expense
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
251
|
|
|
|
|
|
State
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense
|
|
|
|
|
|
|
|
|
Federal
|
|
|
|
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
594
|
|
|
|
|
|
Income tax expense
discontinued operations
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
continuing operations
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2005, income tax expense was allocated to discontinued
operations as the taxable income of the TRSs resulted from
condominium sales activities which are reported in discontinued
operations. Deferred tax expense was offset by a decrease in the
Companys deferred tax valuation allowances, primarily
related to the utilization of income tax net
Post Properties, Inc.
78
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
operating loss carryforwards, that were established in prior
years. Net valuation allowances decreased approximately $2,700
in 2005. Aggregate valuation allowances at December 31,
2006 and 2005 are reflected in the table below.
The components of the TRSs deferred income tax assets and
liabilities at December 31, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Real estate asset basis differences
|
|
$
|
1,106
|
|
|
$
|
1,106
|
|
Deferred interest
|
|
|
1,761
|
|
|
|
|
|
Accrued liabilities
|
|
|
512
|
|
|
|
641
|
|
Cost capitalization
|
|
|
260
|
|
|
|
211
|
|
Other
|
|
|
101
|
|
|
|
58
|
|
Tax NOLs
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,740
|
|
|
|
2,431
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets, before
valuation allowances
|
|
|
2,943
|
|
|
|
1,634
|
|
Valuation allowances
|
|
|
(2,943
|
)
|
|
|
(1,634
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
(liabilities)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006 and 2005, management had established
valuation allowances against the above listed net deferred tax
assets due primarily to the historical losses and variability of
the income of these subsidiaries. The tax benefits associated
with such valuation allowances may be recognized in future
periods, if the taxable REIT subsidiaries generate sufficient
taxable income to utilize such amounts or if the Company
determines that it is more likely than not that the related
deferred tax assets are realizable.
A reconciliation of income tax expense for 2005 of the TRSs to
the federal statutory rate is detailed below. As reflected
above, 2005 income tax expense was allocated to discontinued
operations.
|
|
|
|
|
|
|
2005
|
|
|
Federal tax rate
|
|
|
35
|
%
|
State income tax, net of federal
benefit
|
|
|
4
|
|
Federal alternative minimum taxes
|
|
|
3
|
|
Change in valuation allowance of
deferred tax assets
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
7
|
%
|
|
|
|
|
|
|
|
9.
|
STOCK-BASED
COMPENSATION PLANS
|
Stock
Compensation Plans
Effective January 1, 2006, the Company accounts for
stock-based compensation using the fair value method prescribed
in SFAS No. 123R (see note 1). For stock-based
compensation granted from January 1, 2003 to
December 31, 2005, the Company accounted for stock-based
compensation under the fair value method prescribed by
SFAS No. 123. Other than the required modification
under SFAS No. 123R to use an estimated forfeiture
rate for award terminations and forfeitures, the adoption of
SFAS 123R did not have a material impact on the
Companys accounting for stock-based compensation. In prior
years, the Company used a policy of recognizing the effect of
award forfeitures as they occurred. Under
SFAS No. 123R, such award forfeitures are recognized
based on an estimate of the number of awards expected to be
forfeited during the estimated service period. The cumulative
impact of this modification on awards granted prior to
January 1, 2006 was $172 and the amount was reflected as a
reduction of compensation expense for the year ended
December 31, 2006.
Post Properties, Inc.
79
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Incentive
Stock Plans
Incentive stock awards are granted under the Companys 2003
Incentive Stock Plan (the 2003 Stock Plan). Under
the 2003 Stock Plan, an aggregate of 4,000 shares of common
stock were reserved for issuance. Of this amount, not more than
500 shares of common stock are available for grants of
restricted stock. The exercise price of each option granted
under the 2003 Stock Plan may not be less than the market price
of the Companys common stock on the date of the option
grant and all options may have a maximum life of ten years.
Participants receiving restricted stock grants are generally
eligible to vote such shares and receive dividends on such
shares. Substantially all stock option and restricted stock
grants are subject to annual vesting provisions (generally three
to five years) as determined by the compensation committee
overseeing the 2003 Stock Plan. At December 31, 2006, stock
options outstanding under the 2003 Stock Plan and the
Companys previous stock plan totaled 2,375.
Compensation costs for stock options have been estimated on the
grant date using the Black-Scholes option-pricing method. The
weighted average assumptions used in the Black-Scholes
option-pricing model were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Dividend yield
|
|
|
4.4%
|
|
|
|
5.5%
|
|
|
|
6.3%
|
|
Expected volatility
|
|
|
17.5%
|
|
|
|
17.1%
|
|
|
|
16.9%
|
|
Risk-free interest rate
|
|
|
4.3%
|
|
|
|
3.1%
|
|
|
|
3.1%
|
|
Expected option life
|
|
|
5 years
|
|
|
|
5 years
|
|
|
|
5 years
|
|
The Companys assumptions were derived from the
methodologies discussed herein. The expected dividend yield
reflects the Companys current historical yield, which is
expected to approximate the future yield. Expected volatility
was based on the historical volatility of the Companys
common stock. The risk-free interest rate for the expected life
of the options was based on the implied yields on the
U.S. Treasury yield curve. The weighted average expected
option term was based on the Companys historical data for
prior period stock option exercise and forfeiture activity.
In 2006, 2005 and 2004, the Company granted stock options to
purchase 311, 277 and 283 shares of Company common stock to
Company officers and directors, of which 50 shares were
granted each year to the Companys non-executive chairman
of the board. In 2006, 2005 and 2004, the Company recorded
compensation expense related to stock options of $1,100
($1,079 net of minority interest), $761 ($723 net of
minority interest) and $590 ($553 net of minority
interest), respectively, recognized under the fair value method.
In 2006, such expense was net of the cumulative impact of the
adoption of SFAS No. 123R of $60, as discussed above.
Upon the exercise of stock options, the Company issues shares of
common stock from treasury shares or, to the extent treasury
shares are not available, from authorized common shares.
A summary of stock option activity under all plans in 2006, 2005
and 2004, is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
|
3,534
|
|
|
$
|
34
|
|
|
|
4,491
|
|
|
$
|
33
|
|
|
|
4,735
|
|
|
$
|
34
|
|
Granted
|
|
|
311
|
|
|
|
41
|
|
|
|
277
|
|
|
|
33
|
|
|
|
283
|
|
|
|
28
|
|
Exercised
|
|
|
(1,462
|
)
|
|
|
36
|
|
|
|
(1,105
|
)
|
|
|
33
|
|
|
|
(277
|
)
|
|
|
29
|
|
Forfeited
|
|
|
(8
|
)
|
|
|
35
|
|
|
|
(129
|
)
|
|
|
30
|
|
|
|
(250
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
2,375
|
|
|
|
33
|
|
|
|
3,534
|
|
|
|
34
|
|
|
|
4,491
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
1,447
|
|
|
|
33
|
|
|
|
2,437
|
|
|
|
36
|
|
|
|
3,131
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of
options granted during the year
|
|
$
|
4.91
|
|
|
|
|
|
|
$
|
2.73
|
|
|
|
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006, there was $1,722 of unrecognized
compensation cost related to unvested stock options. This cost
is expected to be recognized over a weighted-average period of
1.5 years. The total intrinsic value of stock options
Post Properties, Inc.
80
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
exercised in 2006, 2005 and 2004 was $13,775, $6,111 and $1,179,
respectively. The aggregate intrinsic values of stock options
outstanding, exercisable and expected to vest at
December 31, 2006 were $30,267, $18,109 and $29,416,
respectively. The weighted average remaining contractual lives
of stock options outstanding, exercisable and expected to vest
at December 31, 2006, were 5.8 years, 4.6 years
and 5.8 years, respectively. Stock options expected to vest
at December 31, 2006, totaled 2,318 at a weighted average
exercise price of approximately $33.00.
At December 31, 2006, the Company had separated its
outstanding options into two ranges based on exercise prices.
There were 1,188 options outstanding with exercise prices
ranging from $23.90 to $34.76. These options have a weighted
average exercise price of $27.86 and a weighted average
remaining contractual life of 6.9 years. Of these
outstanding options, 590 were exercisable at December 31,
2006 at a weighted average exercise price of $27.41. In
addition, there were 1,187 options outstanding with exercise
prices ranging from $34.90 to $45.70. These options had a
weighted average exercise price of $38.06 and a weighted average
remaining contractual life of 4.8 years. Of these
outstanding options, 857 were exercisable at December 31,
2006 at a weighted average exercise price of $37.16.
In 2006, 2005 and 2004, the Company granted 42, 35 and
27 shares of restricted stock, respectively, to Company
officers and directors, of which 5, 6 and 7 shares in
2006, 2005 and 2004, respectively, were granted to the
Companys non-executive chairman of the board. The
restricted share grants generally vest ratably over three to
five year periods. The weighted average grant date fair value
for the restricted shares granted in 2006, 2005 and 2004 was
$40.61, $33.74 and $28.79 per share, respectively. The
total value of the restricted share grants in 2006, 2005 and
2004 were $1,701, $1,173 and $777, respectively. The
compensation cost is amortized ratably into compensation expense
over the applicable vesting periods. Total compensation expense
relating to the restricted stock was $1,651 ($1,620 net of
minority interest), $1,367 ($1,298 net of minority
interest) and $1,109 ($1,039 net of minority interest) in
2006, 2005 and 2004, respectively. In 2006, such expense was net
of the cumulative impact of the adoption of
SFAS No. 123R of $112, as discussed above.
A summary of the activity related to the Companys
restricted stock in 2006 is presented below:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested shares, beginning or
period
|
|
|
140
|
|
|
$
|
28
|
|
Granted
|
|
|
42
|
|
|
|
41
|
|
Vested
|
|
|
(57
|
)
|
|
|
32
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested shares, end of period
|
|
|
125
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006, there was $3,268 of unrecognized
compensation cost related to restricted stock. This cost is
expected to be recognized over a weighted average period of
3.2 years. The total intrinsic value of restricted shares
vested in 2006, 2005 and 2004 was $2,606, $1,845 and $1,420,
respectively. In years prior to 2006, the annual value of the
restricted share grants was initially reflected in
shareholders equity as additional paid-in capital and as
deferred compensation, a contra-shareholders equity
account. In conjunction with the adoption of
SFAS No. 123R, the unamortized deferred compensation
balance of $3,625 was reclassified to additional
paid-in-capital.
Employee
Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (the
2005 ESPP) under a plan approved by Company
shareholders in 2005. The provisions of the 2005 ESPP are
substantially similar to the Companys former ESPP,
terminated in December 2004, with certain exceptions including
that the maximum number of shares issuable under the 2005 ESPP
will be 300. The purchase price of shares of common stock under
the ESPP is equal to 85% of the lesser of the closing price per
share of common stock on the first or last day of the trading
period, as defined. The Company records the aggregate cost of
the ESPP (generally the 15% discount on the share purchases) as
a period expense. Total compensation expense relating to the
ESPP was $159, $171 and $86 in 2006, 2005 and 2004, respectively.
Post Properties, Inc.
81
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
10.
|
EMPLOYEE
BENEFIT PLAN
|
The Company maintains a defined contribution plan pursuant to
Section 401 of the Internal Revenue Code (the 401K
Plan) that allows eligible employees to contribute a
percentage of their compensation to the 401K Plan. The Company
matches 50% of the employees pre-tax contribution up to a
maximum employee contribution of 6% of salary in 2006 (5% in
2005 and 4% in 2004). Company contributions of $911, $691 and
$541 were made to the 401K Plan in 2006, 2005 and 2004,
respectively.
|
|
11.
|
COMMITMENTS
AND CONTINGENCIES
|
Land,
office and equipment leases
The Company is party to two ground leases with terms expiring in
years 2040 and 2043 relating to a single operating community,
four ground leases expiring in 2012, 2038, 2066 and 2074 for
four separate operating communities and to other facility,
office, equipment and other operating leases with terms expiring
through 2057. The ground leases generally provide for future
increases in minimum lease payments tied to an inflation index
or contain stated rent increases that generally compensate for
the impact of inflation. Future minimum lease payments for
non-cancelable land, office, equipment and other leases at
December 31, 2006, are as follows:
|
|
|
|
|
2007
|
|
$
|
1,983
|
|
2008
|
|
|
1,784
|
|
2009
|
|
|
1,703
|
|
2010
|
|
|
1,736
|
|
2011
|
|
|
1,770
|
|
2012 and thereafter
|
|
$
|
152,102
|
|
The Company incurred $6,421, $6,309 and $4,981 of rent expense,
including rent expense under short-term rental and lease
arrangements, in 2006, 2005 and 2004, respectively.
Legal
proceedings
The Company has previously disclosed litigation brought by an
alleged Company shareholder against the Company, certain members
of the Companys board of directors, and certain of its
executive officers, seeking, among other things, inspection of
certain corporate records. On December 22, 2006, the
parties to the litigation agreed to settle any and all claims
that the parties had or may have had with respect to the
previously-disclosed actions styled Amy Vasquez v. Robert
L. Anderson, et al., Civil Action
No. 2003-CV-69140,
Clem Fowler v. Robert C. Goddard, III, et al.,
Civil Action
No. 2003-CV-69608,
Superior Court of Fulton County, Georgia, Ronald S.
Leventhal v. Robert C. Goddard, III, et al., Superior
Court of Fulton County, Georgia, Civil Action
No. 2004-CV-85875,
Ronald S. Leventhal v. Robert C. Goddard, III,
et al., United States District Court for the Northern
District of Georgia, Civil Action Number 1:04-CV-1445, Post
Properties, Inc. v. John Does 1-5, Civil Action
No. 2005-CV-105244,
Superior Court of Fulton County, Georgia, and certain other
related matters. In reaching this settlement, the Company and
the individual defendants did not pay any money to the
shareholder and denied any and all liability. All litigation
embraced by the settlement has been dismissed with prejudice.
In November 2006, the Equal Rights Center filed a lawsuit
against the Company and the Operating Partnership in the United
States District Court for the District of Columbia. This suit
alleges various violations of the Fair Housing Act and the
Americans with Disabilities Act at properties designed,
constructed or operated by the Company and the Operating
Partnership in the District of Columbia, Virginia, Colorado,
Florida, Georgia, New York, North Carolina and Texas. The
plaintiff seeks compensatory and punitive damages in unspecified
amounts, an award of attorneys fees and costs of suit, as
well as preliminary and permanent injunctive relief that
includes retrofitting apartments and public use areas to comply
with the Fair Housing Act and the Americans with Disabilities
Act and prohibiting construction or sale of noncompliant units
or complexes. Due to the preliminary nature of the litigation,
it is not possible to predict or determine the outcome of the
legal proceeding, nor is it possible to estimate the amount of
loss, if any, that would be associated with an adverse decision.
The Company is involved in various other legal proceedings
incidental to its business from time to time, most of which are
expected to be covered by liability or other insurance.
Management of the Company believes that any resolution of
Post Properties, Inc.
82
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
pending proceedings or liability to the Company which may arise
as a result of these various other legal proceedings will not
have a material adverse effect on the Companys results of
operations or financial position.
|
|
12.
|
RELATED
PARTY TRANSACTIONS
|
In 2006, 2005 and 2004, the Company held investments in Property
LLCs accounted for under the equity method of accounting
(see note 3). In 2006, 2005 and 2004, the Company recorded,
before elimination of the Companys equity interests,
project management fees, property management fees and expense
reimbursements (primarily personnel costs) of approximately
$1,537, $1,781 and $1,756, respectively, from these related
companies. Additionally in 2006, 2005 and 2004, the Company
earned interest under loans to unconsolidated entities totaling
$860, $437 and $308, respectively. The Company portion of all
significant intercompany transactions was eliminated in the
accompanying consolidated financial statements.
At December 31, 2006 and 2005, the Company had outstanding
loan balances to certain current and former company executives
totaling $1,268 and $2,485, respectively. These loans mature ten
years from their issue date and bear interest at a rate of
6.32% per annum. Proceeds from these loans were used by
these executives to acquire the Companys common shares on
the open market. Additionally, at December 31, 2006 and
2005, the Company had outstanding additional loans to certain
company executives totaling $500 and $640, respectively. The
loans bear interest at 6.32% per annum. If the executives
continue to be employed by the Company, the loans will be
forgiven annually over five to ten year periods, as defined in
the agreements. The annual loan forgiveness of $100, $140 and
$140 was recorded as compensation expense in 2006, 2005 and
2004, respectively.
|
|
13.
|
DERIVATIVE
FINANCIAL INSTRUMENTS
|
At December 31, 2006, the Company had an outstanding
interest rate swap agreement with a notional value of
approximately $95,510 with a maturity date in 2009. The swap
arrangement is a variable to fixed rate swap at a fixed rate of
5.21% and the swap was designated as a cash flow hedge of the
Companys FNMA variable rate debt. This swap was entered
into following the termination of a prior swap arrangement
discussed below. The interest rate swap agreement is included on
the accompanying consolidated balance sheet at fair value.
In the early 2006, a previous interest rate swap arrangement,
accounted for as a cash flow hedge, became ineffective under
generally accepted accounting principles
(SFAS No. 133, as amended). As a result, the gross
increase in the market value of the interest rate swap
arrangement of $1,655 through its termination date in 2006 was
recognized in other income in the consolidated statement of
operations. In addition, under SFAS No. 133, as
amended, the Company is required to amortize into interest
expense the cumulative unrecognized loss on the terminated
interest rate swap arrangement of $4,021, included in
shareholders equity, over the remaining life of the swap
through 2009. Total amortization expense related to this swap
was $1,116 in 2006. The swap arrangement was terminated through
a $2,448 termination payment to the swap counterparty. At
December 31, 2005, this terminated swap arrangement had a
notional value of approximately $97,100.
At December 31, 2006 and 2005, the fair value of the
interest rate swap agreements represented liabilities of $564
and $4,021, respectively, and the liabilities were included in
consolidated liabilities in the accompanying consolidated
balance sheets. Other than discussed above, the changes in the
fair value of these cash flow hedges were recorded as changes in
accumulated other comprehensive income (loss), a
shareholders equity account, in the accompanying
consolidated balance sheet.
At December 31, 2006 and 2005, the Company had outstanding
an interest rate cap agreement with a financial institution with
a notional value of $28,495. Through mid-December 2006, this
interest rate cap agreement was a cash flow hedge that provides
a fixed interest ceiling at 5% for the Companys variable
rate, tax-exempt borrowings aggregating $28,495. In December
2006, the Company repaid $18,600 of tax-exempt indebtedness
associated with the sale of an apartment community. The portion
of this interest rate cap arrangement with a notional amount of
$18,600 associated with this indebtedness was not terminated and
as a result became ineffective for accounting purposes. At that
time, the Company recognized a loss of approximately $142
($139 net of minority interest) due to such
ineffectiveness. The Company is required to maintain the
interest rate exposure protection under the terms of the
financing arrangements. The interest rate cap arrangement is
included on the accompanying balance sheet at fair value. At
December 31, 2006, the difference between the amortized
costs of the interest rate cap arrangement and their $0 fair
value is included in accumulated other
Post Properties, Inc.
83
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
comprehensive income (loss), a shareholders equity
account. The original cost of $126 of the arrangements is being
amortized to expense over their five-year term.
In 2005, in connection with the sale of three communities
discussed in note 2 above, the Company sold its interest in
interest rate cap agreements with notional values of $81,560 for
aggregate proceeds of $17 and realized losses of $955
($901 net of minority interest) that were included in the
loss on early extinguishment of indebtedness associated with
asset sales on the accompanying statement of operations. In
2004, in connection with the sale of five communities discussed
in note 5 above, the Company sold its interest in interest
rate cap agreements with notional values of $104,325 for
aggregate proceeds of $379 and realized losses of $941
($877 net of minority interest) that was included in the
loss on early extinguishment of indebtedness associated with
asset sales on the accompanying statement of operations. The
unrealized losses on these interest rate cap agreements were
previously reflected in accumulated other comprehensive income
(loss), a shareholders equity account. These interest rate
cap agreements were sold and the underlying hedged indebtedness
was assumed by the purchasers in connection with the sale of the
related assets.
The impact of the change in the value of the derivatives on
comprehensive income (loss) is included in the statement of
shareholders equity. Amounts reported in accumulated other
comprehensive income related to these derivatives will be
reclassified to interest expense as schedule interest payments
are made on the Companys hedged indebtedness. At
December 31, 2006, the Company estimates that $1,226 will
be reclassified from accumulated other comprehensive income as
an increase in interest expense during the next twelve months.
|
|
14.
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
The disclosures of estimated fair value were determined by
management using available market information and appropriate
valuation methodologies available to management at
December 31, 2006. Considerable judgment is necessary to
interpret market data and develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Company could realize on
disposition of the financial instruments. The use of different
market assumptions
and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.
Cash equivalents, rents and accounts receivables, accounts
payable, accrued expenses and other liabilities are carried at
amounts which reasonably approximate their fair values because
of the short-term nature of these instruments. At
December 31, 2006, the fair value of fixed rate debt was
approximately $828,983 (carrying value of $819,371) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements. At
December 31, 2005, the fair value of fixed rate debt was
approximately $767,271 (carrying value of $753,641) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements.
In order to manage the impact of interest rate changes on
earnings and cash flow, the Company entered into and has
outstanding interest rate swap and interest rate cap
arrangements. As more fully described in note 1, these
interest rate cap and interest rate swap agreements are carried
on the consolidated balance sheet at fair market value in
accordance with SFAS No. 133, as amended. At
December 31, 2006, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling $564
and the carrying value of the interest rate cap arrangement had
no value. At December 31, 2005, the carrying amounts of the
interest rate swap arrangement represented a net liability
totaling $4,021 and the carrying value of the interest rate cap
arrangement represented a net asset of $5.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of
December 31, 2006. Although management is not aware of any
factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that
date and current estimates of fair value may differ
significantly from the amounts presented herein.
Segment
Description
In accordance with SFAS No. 131, Disclosure
About the Segments of an Enterprise and Related
Information, the Company presents segment information
based on the way that management organizes the segments within
the enterprise for making operating decisions and assessing
performance. The segment information is prepared on the same
basis as the internally reported information used by the
Companys chief operating decision makers to manage the
business.
Post Properties, Inc.
84
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
The Companys chief operating decision makers focus on the
Companys primary sources of income from apartment
community rental operations. Apartment community rental
operations are generally broken down into four segments based on
the various stages in the apartment community ownership
lifecycle. These segments are described below. All commercial
properties and other ancillary service and support operations
are combined in the line item other in the
accompanying segment information. The segment information
presented below reflects the segment categories based on the
lifecycle status of each community as of January 1, 2005.
The segment information for the years ended December 31,
2005 and 2004 have been adjusted due to the restatement impact
of reclassifying the operating results of the assets designated
as held for sale in 2006 to discontinued operations under
SFAS No. 144 (see note 2).
|
|
|
Fully stabilized communities those apartment
communities which have been stabilized (the earlier of the point
at which a property reaches 95% occupancy or one year after
completion of construction) for both the current and prior year.
|
|
|
Development, rehabilitation and
lease-up
communities those apartment communities under
development, rehabilitation and
lease-up
during the period.
|
|
|
Condominium conversion communities those portions of
existing apartment communities being converted into condominiums
that are reflected in continuing operations under
SFAS No. 144 (see note 1).
|
|
|
Acquired communities those communities acquired in
the current or prior year.
|
Segment
Performance Measure
Management uses contribution to consolidated property net
operating income (NOI) as the performance measure
for its operating segments. The Company uses net operating
income, including net operating income of stabilized
communities, as an operating measure. Net operating income is
defined as rental and other property revenue from real estate
operations less total property and maintenance expenses from
real estate operations (excluding depreciation and
amortization). The Company believes that net operating income is
an important supplemental measure of operating performance for a
REITs operating real estate because it provides a measure
of the core operations, rather than factoring in depreciation
and amortization, financing costs and general and administrative
expenses generally incurred at the corporate level. This measure
is particularly useful, in the opinion of the Company, in
evaluating the performance of operating segment groupings and
individual properties. Additionally, the Company believes that
net operating income, as defined, is a widely accepted measure
of comparative operating performance in the real estate
investment community. The Company believes that the line on the
Companys consolidated statement of operations entitled
net income is the most directly comparable GAAP
measure to net operating income.
Post Properties, Inc.
85
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Segment
Information
The following table reflects each segments contribution to
consolidated revenues and NOI together with a reconciliation of
segment contribution to property NOI to consolidated net income
in 2006, 2005 and 2004. Additionally, substantially all of the
Companys assets relate to the Companys property
rental operations. Asset cost, depreciation and amortization by
segment are not presented because such information at the
segment level is not reported internally.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
252,761
|
|
|
$
|
239,817
|
|
|
$
|
229,169
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
9,545
|
|
|
|
10,438
|
|
|
|
10,139
|
|
Condominium conversion communities
|
|
|
2,626
|
|
|
|
5,890
|
|
|
|
5,716
|
|
Acquired communities
|
|
|
10,886
|
|
|
|
2,298
|
|
|
|
|
|
Other property segments
|
|
|
23,876
|
|
|
|
21,798
|
|
|
|
20,768
|
|
Other
|
|
|
402
|
|
|
|
255
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenues
|
|
$
|
300,096
|
|
|
$
|
280,496
|
|
|
$
|
266,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to Property Net
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
156,890
|
|
|
$
|
148,075
|
|
|
$
|
141,709
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
4,254
|
|
|
|
6,077
|
|
|
|
5,690
|
|
Condominium conversion communities
|
|
|
725
|
|
|
|
3,877
|
|
|
|
3,675
|
|
Acquired communities
|
|
|
6,180
|
|
|
|
1,442
|
|
|
|
|
|
Other property segments, including
corporate management expenses
|
|
|
(5,527
|
)
|
|
|
(7,345
|
)
|
|
|
(6,702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated property net
operating income
|
|
|
162,522
|
|
|
|
152,126
|
|
|
|
144,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,261
|
|
|
|
661
|
|
|
|
817
|
|
Other revenues
|
|
|
402
|
|
|
|
255
|
|
|
|
1,000
|
|
Minority interest in consolidated
property partnerships
|
|
|
(257
|
)
|
|
|
239
|
|
|
|
671
|
|
Depreciation
|
|
|
(67,328
|
)
|
|
|
(70,435
|
)
|
|
|
(73,665
|
)
|
Interest expense
|
|
|
(54,049
|
)
|
|
|
(55,638
|
)
|
|
|
(59,763
|
)
|
Amortization of deferred financing
costs
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
|
|
(4,304
|
)
|
General and administrative
|
|
|
(18,502
|
)
|
|
|
(18,307
|
)
|
|
|
(18,205
|
)
|
Investment, development and other
expenses
|
|
|
(6,424
|
)
|
|
|
(4,711
|
)
|
|
|
(2,930
|
)
|
Termination of debt remarketing
agreement (interest expense)
|
|
|
|
|
|
|
|
|
|
|
(10,615
|
)
|
Loss on early extinguishment of
indebtedness
|
|
|
|
|
|
|
|
|
|
|
(4,011
|
)
|
Severance charges
|
|
|
|
|
|
|
(796
|
)
|
|
|
|
|
Gains (losses) on sales of
condominiums, net
|
|
|
12,378
|
|
|
|
(531
|
)
|
|
|
|
|
Equity in income of unconsolidated
real estate entities
|
|
|
1,813
|
|
|
|
1,767
|
|
|
|
1,083
|
|
Other income
|
|
|
3,095
|
|
|
|
5,267
|
|
|
|
|
|
Minority interest of preferred
unitholders
|
|
|
|
|
|
|
|
|
|
|
(3,780
|
)
|
Minority interest of common
unitholders
|
|
|
(451
|
)
|
|
|
120
|
|
|
|
2,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
30,934
|
|
|
|
5,356
|
|
|
|
(26,715
|
)
|
Income from discontinued operations
|
|
|
70,535
|
|
|
|
136,592
|
|
|
|
114,934
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
101,469
|
|
|
$
|
141,948
|
|
|
$
|
88,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
Non-cash investing and financing activities for the years ended
December 31, 2006, 2005 and 2004 were as follows:
In 2006, the Company sold an apartment community subject to
$40,000 of secured mortgage indebtedness assumed by the
purchaser. In 2005, the Company sold three apartment communities
subject to $81,560 of tax-exempt mortgage indebtedness assumed
by the purchasers. In 2004, the Company sold certain apartment
communities subject to $104,325 of tax-exempt mortgage
indebtedness assumed by the purchasers. Additionally in 2006,
the Company acquired an apartment community for cash and the
assumption of secured mortgage indebtedness totaling $41,394. In
2004, the
Post Properties, Inc.
86
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Company acquired an apartment community, including the
assumption of secured mortgage indebtedness with an estimated
fair value of $49,496. These transactions were excluded from the
cash flow statement as a non-cash transactions.
In 2006, the Company amortized approximately $1,116
($1,095 net of minority interest) of accumulated other
comprehensive non-cash losses into earnings related to an
interest rate swap derivative financial instrument (see
note 13). In addition in 2006, the Company recognized a
non-cash loss of $142 ($139 net of minority interest)
through a reduction of accumulated other comprehensive losses as
a result of the ineffectiveness of an interest rate cap
arrangement (see note 13). Other than the amortization and
loss discussed herein, in 2006, the Companys derivative
financial instruments, accounted for as cash flow hedges,
decreased in value causing an increase in accounts payable and
accrued expenses and a corresponding decrease in
shareholders equity of $299, net of minority interest. In
2005, the Companys derivative financial instruments
increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in
shareholders equity of $5,559, net of minority interest.
In 2004, the Companys derivative financial instruments
increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in
shareholders equity of $3,694, net of minority interest.
In 2006, 2005 and 2004 Common Units in the Operating Partnership
totaling 697, 1,097 and 1,168, respectively, were converted into
Company common shares on a
one-for-one
basis. The net effect of the conversion of Common Units of the
Operating Partnership to common shares of the Company and the
adjustments to minority interest for the impact of the
Companys employee stock purchase and stock options plans,
decreased minority interest and increased shareholders
equity in the amounts of $12,958, $20,444 and $19,848 for the
years ended December 31, 2006, 2005 and 2004, respectively.
The Operating Partnership committed to distribute $19,886,
$19,257 and $19,203 for the quarters ended December 31,
2006, 2005 and 2004, respectively. As a result, the Company
declared dividends of $19,569, $18,626 and $18,078 for the
quarters ended December 31, 2006, 2005 and 2004,
respectively. The remaining distributions from the Operating
Partnership in the amount of $317, $631 and $1,125 for the
quarters ended December 31, 2006, 2005 and 2004,
respectively, are distributed to minority interest unitholders
in the Operating Partnership.
In 2006 and 2005, the Company issued common shares for director
compensation, totaling $471 and $194, respectively. In 2005,
under an amended and restated deferred compensation plan for
directors and officers, Company common shares were issued to the
plan in settlement of the Companys variable obligation
relating to changes in the value of its common shares due the
directors under the prior deferred compensation plan. This 2005
common share issuance totaling $1,568 and the additional stock
issuances in 2005 and 2006 were non-cash transactions.
In 2006 and 2005, the Company and the Companys taxable
REIT subsidiaries made income tax payments to federal and state
taxing authorities totaling $339 and $760, respectively. Such
income tax payments were not material in 2004 due to the
existence of tax loss carryforwards at the taxable REIT
subsidiaries (see note 8).
In 2006, other income includes a gain on the sale of marketable
securities of $573, an additional gain on sale of a technology
investment of $325 resulting from the receipt of previously
escrowed proceeds under the prior year sale (see below), a $503
gain on the sale of a land parcel and additional income totaling
$1,655 resulting from the net increase in the market value of an
ineffective cash flow hedge prior to its termination. In 2005,
the Company sold its investment in a technology company, and
recognized a gain of $5,267.
Post Properties, Inc.
87
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
18.
|
QUARTERLY
FINANCIAL INFORMATION (UNAUDITED)
|
Under SFAS No. 144, as further discussed in
note 2, the operating results of apartment communities
classified as held for sale were included in discontinued
operations in the accompanying statements of operations for all
periods presented. To conform with this presentation, the
quarterly financial information presented below reflects the
reclassification of the operating results of these assets to
discontinued operations, which in the first and second quarters
of 2006 differ from the presentation of discontinued operations
included in the Companys previously issued financial
statements included in its quarterly reports on
Form 10-Q
filed in 2006. Quarterly financial information for the years
ended December 31, 2006 and 2005, as revised to reflect the
change discussed above, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
72,204
|
|
|
$
|
74,267
|
|
|
$
|
76,874
|
|
|
$
|
76,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,805
|
|
|
|
12,503
|
|
|
|
7,431
|
|
|
|
7,195
|
|
Income from discontinued operations
|
|
|
996
|
|
|
|
1,481
|
|
|
|
28,370
|
|
|
|
39,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,801
|
|
|
|
13,984
|
|
|
|
35,801
|
|
|
|
46,883
|
|
Dividends to preferred shareholders
|
|
|
(1,909
|
)
|
|
|
(1,910
|
)
|
|
|
(1,909
|
)
|
|
|
(1,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders
|
|
$
|
2,892
|
|
|
$
|
12,074
|
|
|
$
|
33,892
|
|
|
$
|
44,974
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders basic
|
|
$
|
0.07
|
|
|
$
|
0.28
|
|
|
$
|
0.79
|
|
|
$
|
1.04
|
|
Net income available to common
shareholders diluted
|
|
$
|
0.07
|
|
|
$
|
0.28
|
|
|
$
|
0.77
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
67,646
|
|
|
$
|
69,130
|
|
|
$
|
71,900
|
|
|
$
|
71,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
1,151
|
|
|
|
(898
|
)
|
|
|
1,594
|
|
|
|
3,509
|
|
Income from discontinued operations
|
|
|
3,525
|
|
|
|
59,343
|
|
|
|
71,647
|
|
|
|
2,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,676
|
|
|
|
58,445
|
|
|
|
73,241
|
|
|
|
5,586
|
|
Dividends to preferred shareholders
|
|
|
(1,909
|
)
|
|
|
(1,910
|
)
|
|
|
(1,909
|
)
|
|
|
(1,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders
|
|
$
|
2,767
|
|
|
$
|
56,535
|
|
|
$
|
71,332
|
|
|
$
|
3,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
shareholders basic
|
|
$
|
0.07
|
|
|
$
|
1.42
|
|
|
$
|
1.77
|
|
|
$
|
0.09
|
|
Net income available to common
shareholders diluted
|
|
$
|
0.07
|
|
|
$
|
1.42
|
|
|
$
|
1.77
|
|
|
$
|
0.09
|
|
In the third and fourth quarters of 2006 and the second and
third quarters of 2005, net income increased primarily due to
gains on sales of apartment communities during those periods.
Post Properties, Inc.
88
Post Apartment Homes,
L.P.
December 31, 2006 and
2005
Post Apartment Homes, L.P.
89
MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Post Apartment Homes, L.P. is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f).
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Under the supervision and with the
participation of the management of Post Apartment Homes, L.P.,
including the Partnerships principal executive officer and
principal financial officer, Partnership management conducted an
evaluation of the effectiveness of its internal control over
financial reporting as of December 31, 2006 based on the
framework in Internal Control Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its
evaluation under the framework in Internal
Control Integrated Framework, the management of
Post Apartment Homes, L.P. concluded that its internal control
over financial reporting was effective as of December 31,
2006. Managements assessment of the effectiveness of the
Partnerships internal control over financial reporting as
of December 31, 2006 has been audited by
Deloitte & Touche LLP, an independent registered public
accounting firm, as stated in their report which is included
herein.
Post Apartment Homes, L.P.
90
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Unitholders of Post Apartment Homes, L.P.:
We have audited the accompanying consolidated balance sheet of
Post Apartment Homes, L.P. and subsidiaries (the Operating
Partnership) as of December 31, 2006, and the related
consolidated statements of operations, partners equity,
and cash flows for the year ended December 31, 2006. Our
audit also included the financial statement schedule as of and
for the year ended December 31, 2006, listed in the Index
at Item 15. We also have audited managements
assessment, included in the accompanying Managements
Report on Internal Control Over Financial Reporting, that the
Company maintained effective internal control over financial
reporting as of December 31, 2006, based on criteria
established in Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations of the
Treadway Commission. The Operating Partnerships management
is responsible for these financial statements and the financial
statement schedule, for maintaining effective internal control
over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule, an opinion on
managements assessment, and an opinion on the
effectiveness of the Operating Partnerships internal
control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement and whether effective internal
control over financial reporting was maintained in all material
respects. Our audit of financial statements included examining,
on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. Our
audit of internal control over financial reporting included
obtaining an understanding of internal control over financial
reporting, evaluating managements assessment, testing and
evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed by, or under the supervision of, the
companys principal executive and principal financial
officers, or persons performing similar functions, and effected
by the companys board of directors, management, and other
personnel to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles and that receipts and expenditures of the company are
being made only in accordance with authorizations of management
and directors of the company; and (3) provide reasonable
assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of the inherent limitations of internal control over
financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements
due to error or fraud may not be prevented or detected on a
timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting
to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may
deteriorate.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of Post Apartment Homes, L.P. and subsidiaries as of
December 31, 2006, and the results of their operations and
their cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein. Also, in
our opinion, managements assessment that the Operating
Partnership maintained effective internal control over financial
reporting as of December 31, 2006, is fairly stated, in all
material respects, based on the criteria established in Internal
Control Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission.
Furthermore, in our opinion, the Operating Partnership
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2006, based on
the criteria established in Internal Control
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
As described in Note 1 to the consolidated financial
statements, the Operating Partnership adopted SEC Staff
Accounting Bulletin No. 108, Considering the
Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements,
effective December 31, 2006.
Deloitte & Touche LP
Atlanta, Georgia
February 28, 2007
Post Apartment Homes, L.P.
91
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Unitholders of Post Apartment Homes, L.P.:
In our opinion, the consolidated balance sheet as of
December 31, 2005 and the related consolidated statements
of operations, partners equity and cash flows for each of
the two years in the period ended December 31, 2005 present
fairly, in all material respects, the financial position of Post
Apartment Homes, L.P. and its subsidiaries at December 31,
2005, and the results of their operations and their cash flows
for each of the two years in the period ended December 31,
2005, in conformity with accounting principles generally
accepted in the United States of America. In addition, in our
opinion, the summary of activity for the real estate investments
and accumulated depreciation included in the financial statement
schedule for each of the two years in the period ended
December 31, 2005 presents fairly, in all material
respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
These financial statements and financial statement schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and financial statement schedule based on our audits.
We conducted our audits of these statements in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 15, 2006, except with respect to our opinion on the
consolidated financial statements insofar as it relates to the
effects of discontinued operations discussed in Note 2, as
to which date is December 8, 2006, and insofar as it
relates to the effects in segment reporting categories discussed
in Note 15, as to which date is February 28, 2007
Post Apartment Homes, L.P.
92
POST
APARTMENT HOMES, L.P.
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Real estate assets
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
278,448
|
|
|
$
|
266,914
|
|
Building and improvements
|
|
|
1,821,123
|
|
|
|
1,789,479
|
|
Furniture, fixtures and equipment
|
|
|
204,318
|
|
|
|
207,497
|
|
Construction in progress
|
|
|
135,428
|
|
|
|
47,005
|
|
Land held for future development
|
|
|
92,800
|
|
|
|
62,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,532,117
|
|
|
|
2,373,406
|
|
Less: accumulated depreciation
|
|
|
(547,477
|
)
|
|
|
(516,954
|
)
|
For-sale condominiums
|
|
|
28,295
|
|
|
|
38,338
|
|
Assets held for sale, net of
accumulated depreciation of $4,035 and $0 at December 31,
2006 and 2005, respectively
|
|
|
15,645
|
|
|
|
4,591
|
|
|
|
|
|
|
|
|
|
|
Total real estate assets
|
|
|
2,028,580
|
|
|
|
1,899,381
|
|
Investments in and advances to
unconsolidated real estate entities
|
|
|
32,794
|
|
|
|
26,614
|
|
Cash and cash equivalents
|
|
|
3,663
|
|
|
|
6,410
|
|
Restricted cash
|
|
|
5,203
|
|
|
|
4,599
|
|
Deferred charges, net
|
|
|
12,400
|
|
|
|
11,624
|
|
Other assets
|
|
|
34,007
|
|
|
|
32,826
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,116,647
|
|
|
$
|
1,981,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Partners
Equity
|
|
|
|
|
|
|
|
|
Indebtedness
|
|
$
|
1,033,779
|
|
|
$
|
980,615
|
|
Accounts payable and accrued
expenses
|
|
|
75,403
|
|
|
|
53,429
|
|
Distribution payable
|
|
|
19,886
|
|
|
|
19,257
|
|
Accrued interest payable
|
|
|
4,885
|
|
|
|
5,478
|
|
Security deposits and prepaid rents
|
|
|
9,915
|
|
|
|
9,857
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,143,868
|
|
|
|
1,068,636
|
|
|
|
|
|
|
|
|
|
|
Minority interests in consolidated
real estate entities
|
|
|
2,268
|
|
|
|
5,045
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Partners equity
|
|
|
|
|
|
|
|
|
Preferred units
|
|
|
95,000
|
|
|
|
95,000
|
|
Common units
|
|
|
|
|
|
|
|
|
General partner
|
|
|
10,341
|
|
|
|
9,722
|
|
Limited partner
|
|
|
868,711
|
|
|
|
807,403
|
|
Accumulated other comprehensive
income (loss)
|
|
|
(3,541
|
)
|
|
|
(4,352
|
)
|
|
|
|
|
|
|
|
|
|
Total partners equity
|
|
|
970,511
|
|
|
|
907,773
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
partners equity
|
|
$
|
2,116,647
|
|
|
$
|
1,981,454
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
93
POST
APARTMENT HOMES, L.P.
(In thousands, except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
282,650
|
|
|
$
|
264,763
|
|
|
$
|
251,661
|
|
Other property revenues
|
|
|
17,044
|
|
|
|
15,478
|
|
|
|
14,131
|
|
Other
|
|
|
402
|
|
|
|
255
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
300,096
|
|
|
|
280,496
|
|
|
|
266,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
(exclusive of items shown separately below)
|
|
|
137,172
|
|
|
|
128,115
|
|
|
|
121,420
|
|
Depreciation
|
|
|
67,328
|
|
|
|
70,435
|
|
|
|
73,665
|
|
General and administrative
|
|
|
18,502
|
|
|
|
18,307
|
|
|
|
18,205
|
|
Investment, development and other
|
|
|
6,424
|
|
|
|
4,711
|
|
|
|
2,930
|
|
Severance charges
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
229,426
|
|
|
|
222,364
|
|
|
|
216,220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
70,670
|
|
|
|
58,132
|
|
|
|
50,572
|
|
Interest income
|
|
|
1,261
|
|
|
|
661
|
|
|
|
817
|
|
Interest expense
|
|
|
(54,049
|
)
|
|
|
(55,638
|
)
|
|
|
(59,763
|
)
|
Amortization of deferred financing
costs
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
|
|
(4,304
|
)
|
Gains (losses) on sales of
condominiums, net
|
|
|
12,378
|
|
|
|
(531
|
)
|
|
|
|
|
Equity in income of unconsolidated
real estate entities
|
|
|
1,813
|
|
|
|
1,767
|
|
|
|
1,083
|
|
Other income
|
|
|
3,095
|
|
|
|
5,267
|
|
|
|
|
|
Termination of debt remarketing
agreement (interest expense)
|
|
|
|
|
|
|
|
|
|
|
(10,615
|
)
|
Loss on early extinguishment of
indebtedness
|
|
|
|
|
|
|
|
|
|
|
(4,011
|
)
|
Minority interest in consolidated
property partnerships
|
|
|
(257
|
)
|
|
|
239
|
|
|
|
671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
31,385
|
|
|
|
5,236
|
|
|
|
(25,550
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property
operations
|
|
|
3,847
|
|
|
|
6,388
|
|
|
|
13,116
|
|
Gains (losses) on sales of real
estate assets, net of provision for income taxes
|
|
|
68,549
|
|
|
|
140,643
|
|
|
|
113,739
|
|
Loss on early extinguishment of
indebtedness
|
|
|
(495
|
)
|
|
|
(3,220
|
)
|
|
|
(4,128
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
operations
|
|
|
71,901
|
|
|
|
143,811
|
|
|
|
122,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
103,286
|
|
|
|
149,047
|
|
|
|
97,177
|
|
Distributions to preferred
unitholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(12,105
|
)
|
Redemption costs on preferred units
|
|
|
|
|
|
|
|
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders
|
|
$
|
95,649
|
|
|
$
|
141,410
|
|
|
$
|
81,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common unit
data Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations (net of preferred distributions and redemption costs)
|
|
$
|
0.54
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
Income from discontinued operations
|
|
|
1.65
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders
|
|
$
|
2.19
|
|
|
$
|
3.34
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units
outstanding basic
|
|
|
43,645
|
|
|
|
42,353
|
|
|
|
42,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common unit
data
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations (net of preferred distributions and redemption costs)
|
|
$
|
0.53
|
|
|
$
|
(0.06
|
)
|
|
$
|
(0.97
|
)
|
Income from discontinued operations
|
|
|
1.62
|
|
|
|
3.40
|
|
|
|
2.89
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders
|
|
$
|
2.15
|
|
|
$
|
3.34
|
|
|
$
|
1.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units
outstanding diluted
|
|
|
44,427
|
|
|
|
42,353
|
|
|
|
42,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
94
(In thousands, except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Units
|
|
|
Other
|
|
|
|
|
|
|
Preferred
|
|
|
Common
|
|
|
Preferred
|
|
|
General
|
|
|
Limited
|
|
|
Comprehensive
|
|
|
|
|
|
|
Units
|
|
|
Units
|
|
|
Units
|
|
|
Partner
|
|
|
Partners
|
|
|
Income (Loss)
|
|
|
Total
|
|
|
|
(No. of Units)
|
|
|
(No. of Units)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Equity,
December 31, 2003
|
|
|
7,700
|
|
|
|
42,354
|
|
|
$
|
215,000
|
|
|
$
|
8,464
|
|
|
$
|
719,618
|
|
|
$
|
(14,147
|
)
|
|
$
|
928,935
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
12,105
|
|
|
|
851
|
|
|
|
84,221
|
|
|
|
|
|
|
|
97,177
|
|
Net change in derivative value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,945
|
|
|
|
3,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,122
|
|
Contributions from the Company
related to employee stock purchase, stock option and other plans
|
|
|
|
|
|
|
366
|
|
|
|
|
|
|
|
105
|
|
|
|
10,360
|
|
|
|
|
|
|
|
10,465
|
|
Contributions from the Company
related to shares issued for restricted stock, net of deferred
compensation
|
|
|
|
|
|
|
25
|
|
|
|
|
|
|
|
11
|
|
|
|
1,098
|
|
|
|
|
|
|
|
1,109
|
|
Equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
669
|
|
|
|
|
|
|
|
676
|
|
Redemption of preferred units
|
|
|
(4,800
|
)
|
|
|
|
|
|
|
(120,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(120,000
|
)
|
Purchase of common units
|
|
|
|
|
|
|
(82
|
)
|
|
|
|
|
|
|
|
|
|
|
(2,268
|
)
|
|
|
|
|
|
|
(2,268
|
)
|
Distributions to preferred
unitholders
|
|
|
|
|
|
|
|
|
|
|
(12,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,105
|
)
|
Distributions to common unitholders
($1.80 per unit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(765
|
)
|
|
|
(75,758
|
)
|
|
|
|
|
|
|
(76,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Equity,
December 31, 2004
|
|
|
2,900
|
|
|
|
42,663
|
|
|
|
95,000
|
|
|
|
8,673
|
|
|
|
737,940
|
|
|
|
(10,202
|
)
|
|
|
831,411
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
7,637
|
|
|
|
1,414
|
|
|
|
139,996
|
|
|
|
|
|
|
|
149,047
|
|
Net change in derivative value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,850
|
|
|
|
5,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,897
|
|
Contributions from the Company
related to employee stock purchase, stock option and other plans
|
|
|
|
|
|
|
1,138
|
|
|
|
|
|
|
|
378
|
|
|
|
37,463
|
|
|
|
|
|
|
|
37,841
|
|
Contributions from the Company
related to shares issued for restricted stock, net of deferred
compensation
|
|
|
|
|
|
|
26
|
|
|
|
|
|
|
|
14
|
|
|
|
1,353
|
|
|
|
|
|
|
|
1,367
|
|
Equity-based compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
|
|
917
|
|
|
|
|
|
|
|
926
|
|
Purchase of common units
|
|
|
|
|
|
|
(1,031
|
)
|
|
|
|
|
|
|
|
|
|
|
(34,400
|
)
|
|
|
|
|
|
|
(34,400
|
)
|
Distributions to preferred
unitholders
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
Distributions to common unitholders
($1.80 per unit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(766
|
)
|
|
|
(75,866
|
)
|
|
|
|
|
|
|
(76,632
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Equity,
December 31, 2005
|
|
|
2,900
|
|
|
|
42,796
|
|
|
|
95,000
|
|
|
|
9,722
|
|
|
|
807,403
|
|
|
|
(4,352
|
)
|
|
|
907,773
|
|
Cumulative effect of application of
SAB 108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(49
|
)
|
|
|
(4,836
|
)
|
|
|
|
|
|
|
(4,885
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Equity,
January 1, 2006
|
|
|
2,900
|
|
|
|
42,796
|
|
|
|
95,000
|
|
|
|
9,673
|
|
|
|
802,567
|
|
|
|
(4,352
|
)
|
|
|
902,888
|
|
Comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
7,637
|
|
|
|
956
|
|
|
|
94,693
|
|
|
|
|
|
|
|
103,286
|
|
Net change in derivative value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
811
|
|
|
|
811
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
104,097
|
|
Contributions from the Company
related to employee stock purchase, stock option and other plans
|
|
|
|
|
|
|
1,462
|
|
|
|
|
|
|
|
525
|
|
|
|
51,954
|
|
|
|
|
|
|
|
52,479
|
|
Equity-based compensation
|
|
|
|
|
|
|
42
|
|
|
|
|
|
|
|
29
|
|
|
|
2,881
|
|
|
|
|
|
|
|
2,910
|
|
Purchase of common units
|
|
|
|
|
|
|
(109
|
)
|
|
|
|
|
|
|
(50
|
)
|
|
|
(4,950
|
)
|
|
|
|
|
|
|
(5,000
|
)
|
Distributions to preferred
unitholders
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
Distributions to common unitholders
($1.80 per unit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(792
|
)
|
|
|
(78,434
|
)
|
|
|
|
|
|
|
(79,226
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Equity,
December 31, 2006
|
|
|
2,900
|
|
|
|
44,191
|
|
|
$
|
95,000
|
|
|
$
|
10,341
|
|
|
$
|
868,711
|
|
|
$
|
(3,541
|
)
|
|
$
|
970,511
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
95
POST
APARTMENT HOMES, L.P.
(In thousands, except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Cash Flows From Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
103,286
|
|
|
$
|
149,047
|
|
|
$
|
97,177
|
|
Adjustments to reconcile net income
to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
68,967
|
|
|
|
76,248
|
|
|
|
85,310
|
|
Amortization of deferred financing
costs
|
|
|
3,526
|
|
|
|
4,661
|
|
|
|
4,304
|
|
Minority interest in consolidated
entities
|
|
|
257
|
|
|
|
(239
|
)
|
|
|
(671
|
)
|
Gains on sales of real estate assets
|
|
|
(81,430
|
)
|
|
|
(140,643
|
)
|
|
|
(113,739
|
)
|
Other income
|
|
|
(1,433
|
)
|
|
|
(5,267
|
)
|
|
|
|
|
Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
2,233
|
|
Equity in income of unconsolidated
entities
|
|
|
(1,813
|
)
|
|
|
(1,634
|
)
|
|
|
(941
|
)
|
Distributions of earnings of
unconsolidated entities
|
|
|
2,713
|
|
|
|
2,033
|
|
|
|
1,928
|
|
Deferred compensation
|
|
|
471
|
|
|
|
194
|
|
|
|
|
|
Equity-based compensation
|
|
|
2,910
|
|
|
|
2,293
|
|
|
|
1,785
|
|
Loss on early extinguishment of debt
|
|
|
495
|
|
|
|
2,264
|
|
|
|
4,302
|
|
Changes in assets, (increase)
decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
(3,009
|
)
|
|
|
(4,012
|
)
|
|
|
(2,637
|
)
|
Deferred charges
|
|
|
(129
|
)
|
|
|
(1,082
|
)
|
|
|
(361
|
)
|
Changes in liabilities, increase
(decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
(594
|
)
|
|
|
(2,199
|
)
|
|
|
754
|
|
Accounts payable and accrued
expenses
|
|
|
655
|
|
|
|
2,476
|
|
|
|
315
|
|
Security deposits and prepaid rents
|
|
|
(546
|
)
|
|
|
2,621
|
|
|
|
(654
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities
|
|
|
94,326
|
|
|
|
86,761
|
|
|
|
79,105
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and acquisition of
real estate assets, net of payables
|
|
|
(239,428
|
)
|
|
|
(112,527
|
)
|
|
|
(42,777
|
)
|
Net proceeds from sales of real
estate assets
|
|
|
176,419
|
|
|
|
199,546
|
|
|
|
138,637
|
|
Proceeds from sale of other
investments
|
|
|
898
|
|
|
|
5,267
|
|
|
|
|
|
Capitalized interest
|
|
|
(9,942
|
)
|
|
|
(2,907
|
)
|
|
|
(1,078
|
)
|
Annually recurring capital
expenditures
|
|
|
(11,145
|
)
|
|
|
(9,921
|
)
|
|
|
(9,884
|
)
|
Periodically recurring capital
expenditures
|
|
|
(5,964
|
)
|
|
|
(4,508
|
)
|
|
|
(4,605
|
)
|
Community rehabilitation and other
revenue generating capital expenditures
|
|
|
(10,641
|
)
|
|
|
|
|
|
|
(26
|
)
|
Corporate additions and improvements
|
|
|
(3,480
|
)
|
|
|
(1,771
|
)
|
|
|
(681
|
)
|
Distributions from (investments in
and advances to) unconsolidated entities
|
|
|
(2,125
|
)
|
|
|
(5,846
|
)
|
|
|
52,287
|
|
Note receivable collections and
other investments
|
|
|
944
|
|
|
|
2,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
131,873
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on indebtedness
|
|
|
(145,763
|
)
|
|
|
(217,934
|
)
|
|
|
(115,753
|
)
|
Proceeds from indebtedness
|
|
|
190,000
|
|
|
|
100,000
|
|
|
|
135,000
|
|
Lines of credit proceeds
(repayments), net
|
|
|
7,534
|
|
|
|
50,631
|
|
|
|
(21,262
|
)
|
Payments of financing costs
|
|
|
(3,971
|
)
|
|
|
(1,211
|
)
|
|
|
(5,631
|
)
|
Redemption of preferred units
|
|
|
|
|
|
|
|
|
|
|
(120,000
|
)
|
Redemption of common units
|
|
|
(5,000
|
)
|
|
|
(34,400
|
)
|
|
|
(2,268
|
)
|
Contributions from the Company
related to employee stock purchase and stock option plans
|
|
|
52,008
|
|
|
|
36,084
|
|
|
|
10,465
|
|
Capital contributions
(distributions) of minority interests
|
|
|
(1,183
|
)
|
|
|
283
|
|
|
|
(3,806
|
)
|
Distributions to common unitholders
|
|
|
(78,597
|
)
|
|
|
(76,583
|
)
|
|
|
(76,363
|
)
|
Distributions to preferred
unitholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(12,571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
(212,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and
cash equivalents
|
|
|
(2,747
|
)
|
|
|
6,287
|
|
|
|
(1,211
|
)
|
Cash and cash equivalents,
beginning of period
|
|
|
6,410
|
|
|
|
123
|
|
|
|
1,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of
period
|
|
$
|
3,663
|
|
|
$
|
6,410
|
|
|
$
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
96
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
|
|
1.
|
ORGANIZATION
AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
|
Organization
Post Apartment Homes, L.P. (the Operating
Partnership), a Georgia limited partnership, and its
subsidiaries develop, own and manage upscale multi-family
apartment communities in selected markets in the United States.
Post Properties, Inc. (the Company) through its
wholly-owned subsidiaries is the sole general partner, a limited
partner and owns a majority interest in the Operating
Partnership. The Operating Partnership, through its operating
divisions and subsidiaries conducts substantially all of the
on-going operations of Post Properties, Inc., a publicly traded
company which operates as a self-administered and self-managed
real estate investment trust.
At December 31, 2006, the Company owned 98.4% of the common
limited partnership interests (Common Units) in the
Operating Partnership and 100% of the preferred limited
partnership interests (Preferred Units). The
Companys weighted average common ownership interest in the
Operating Partnership was 98.1%, 95.0% and 93.7% for the years
ended December 31, 2006, 2005 and 2004 respectively. Common
Units held by persons other than the Company represented a 1.6%
ownership interest in the Operating Partnership. Each Common
Unit may be redeemed by the holder thereof for either one share
of Company common stock or cash equal to the fair market value
thereof at the time of such redemptions, at the option of the
Operating Partnership. The Operating Partnership presently
anticipates that it will cause shares of common stock to be
issued in connection with each such redemption rather than
paying cash (as has been done in all redemptions to date). With
each redemption of outstanding Common Units for Company common
stock, the Companys percentage ownership interest in the
Operating Partnership will increase. In addition, whenever the
Company issues shares of common stock, the Company will
contribute any net proceeds therefrom to the Operating
Partnership and the Operating Partnership will issue an
equivalent number of Common Units to the Company.
At December 31, 2006, the Company owned 21,745 apartment
units in 61 apartment communities, including 545 apartment units
in two communities held in unconsolidated entities and 1,181
apartment units in four communities (and the expansion of one
community) currently under construction
and/or
lease-up.
The Company is also developing 230 for-sale condominium homes
and is converting apartment homes in four communities initially
consisting of 597 units (including 121 units in one
community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary. At
December 31, 2006, approximately 44.5%, 18.8%, 12.1% and
9.7% (on a unit basis) of the Operating Partnerships
operating communities were located in the Atlanta, Dallas, the
greater Washington D.C. and Tampa metropolitan areas,
respectively.
Under the provisions of the limited partnership agreement, as
amended, Operating Partnership net profits, net losses and cash
flow (after allocations to preferred ownership interests) are
allocated to the partners in proportion to their common
ownership interests. Cash distributions from the Operating
Partnership shall be, at a minimum, sufficient to enable the
Company to satisfy its annual dividend requirements to maintain
its REIT status under the Code.
Basis of
presentation
The accompanying consolidated financial statements include the
consolidated accounts of the Operating Partnership and its
wholly owned subsidiaries. The Operating Partnership also
consolidates other entities in which it has a controlling
financial interest or entities where it is determined to be the
primary beneficiary under Financial Accounting Standards Board
Interpretation No. 46R (FIN 46R),
Consolidation of Variable Interest Entities. Under
FIN 46R, variable interest entities (VIEs) are
generally entities that lack sufficient equity to finance their
activities without additional financial support from other
parties or whose equity holders lack adequate decision making
ability. The primary beneficiary is required to consolidate a
VIE for financial reporting purposes. The application of
FIN 46R requires management to make significant estimates
and judgments about the Operating Partnerships and its
other partners rights, obligations and economic interests
in such entities. For entities in which the Operating
Partnership has less than a controlling financial interest or
entities where it is not deemed to be the primary beneficiary
under FIN 46R, the entities are accounted for using the
equity method of accounting (see discussion of EITF
No. 04-5
below). Accordingly, the Operating Partnerships share of
the net earnings or losses of these entities is included in
consolidated net income. All significant inter-company accounts
and transactions have been eliminated in consolidation. The
minority interest of unitholders in the operations of the
Operating Partnership is calculated based on the weighted
average unit ownership during the period.
Post Apartment Homes, L.P.
97
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Certain items related to condominium activities and minority
interests in the 2005 and 2004 consolidated financial statements
were reclassified for comparative purposes with the 2006
consolidated financial statements.
Cost
capitalization
The Operating Partnership capitalizes those expenditures
relating to the acquisition of new assets, the development and
construction of new apartment and condominium communities, the
enhancement of the value of existing assets and those
expenditures that substantially extend the life of existing
assets. Annually recurring capital expenditures are expenditures
of a type that are expected to be incurred on an annual basis
during the life of an apartment community, such as carpet,
appliances and flooring. Periodically recurring capital
expenditures are expenditures that generally occur less
frequently than on an annual basis, such as major exterior
projects relating to landscaping and structural improvements.
Revenue generating capital expenditures are expenditures for the
renovation of communities, the new installation of water
sub-metering
equipment and other property upgrade costs that enhance the
rental value of such communities. All other expenditures
necessary to maintain a community in ordinary operating
condition are expensed as incurred. Additionally, for new
development communities, carpet, vinyl, and blind replacements
are expensed as incurred during the first five years (which
corresponds to their estimated depreciable life). Thereafter,
these replacements are capitalized and depreciated. The
Operating Partnership expenses as incurred interior and exterior
painting of its operating communities, unless those communities
are under rehabilitation.
For communities under development or rehabilitation, the
Operating Partnership capitalizes interest, real estate taxes,
and certain internal personnel and associated costs associated
with apartment and condominium communities under development and
construction. Interest is capitalized to projects under
development or construction based upon the weighted average
cumulative project costs for each month multiplied by the
Operating Partnerships weighted average borrowing costs,
expressed as a percentage. Weighted average borrowing costs
include the costs of the Operating Partnerships fixed rate
secured and unsecured borrowings and the variable rate unsecured
borrowings under its line of credit facilities. The weighted
average borrowing costs, expressed as a percentage, for the
years ended December 31, 2006, 2005 and 2004 were
approximately 6.6%, 6.5% and 7.3%, respectively. Internal
personnel and associated costs are capitalized to projects under
development or construction based upon the effort associated
with such projects. The Operating Partnership treats each unit
in an apartment community separately for cost accumulation,
capitalization and expense recognition purposes. Prior to the
completion of rental and condominium units, interest and other
construction costs are capitalized and reflected on the balance
sheet as construction in progress. The Operating Partnership
ceases the capitalization of such costs as the residential units
in a community become substantially complete and available for
occupancy or sale. This results in a proration of costs between
amounts that are capitalized and expensed as the residential
units in apartment and condominium development communities
become available for occupancy or sale. In addition, prior to
the completion of rental units, the Operating Partnership
expenses as incurred substantially all operating expenses
(including pre-opening marketing as well as property management
and leasing personnel expenses) of such rental communities.
Prior to the completion and closing of condominium units, the
Operating Partnership expenses all sales and marketing costs
related to such units.
For cash flow statement purposes, the Operating Partnership
classifies capital expenditures for newly developed condominium
communities and for condominium conversion communities in
investing activities in the caption titled, Construction
and acquisition of real estate assets. Likewise, the
proceeds from the sales of such condominiums are included in
investing activities in the caption titled, Net proceeds
from sales of real estate assets.
Real
estate assets, depreciation and impairment
Real estate assets are stated at the lower of depreciated cost
or fair value, if deemed impaired. Major replacements and
betterments are capitalized and depreciated over their estimated
useful lives. Depreciation is computed on a straight-line basis
over the useful lives of the properties (buildings and
components and related land improvements
20-40 years;
furniture, fixtures and equipment 5-10 years).
The Operating Partnership continually evaluates the
recoverability of the carrying value of its real estate assets
using the methodology prescribed in Statement of Financial
Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. Factors considered by management in evaluating
impairment of its existing real estate assets held for
investment include significant declines in property operating
profits, annually recurring property operating losses and other
significant adverse changes in general market conditions that
are considered
Post Apartment Homes, L.P.
98
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
permanent in nature. Under SFAS No. 144, a real estate
asset held for investment is not considered impaired if the
undiscounted, estimated future cash flows of an asset (both the
annual estimated cash flow from future operations and the
estimated cash flow from the theoretical sale of the asset) over
its estimated holding period are in excess of the assets
net book value at the balance sheet date. If any real estate
asset held for investment is considered impaired, a loss is
provided to reduce the carrying value of the asset to its
estimated fair value.
The Operating Partnership periodically classifies real estate
assets as held for sale. An asset is classified as held for sale
after the approval of the Companys board of directors and
after an active program to sell the asset has commenced. Upon
the classification of a real estate asset as held for sale, the
carrying value of the asset is reduced to the lower of its net
book value or its estimated fair value, less costs to sell the
asset. Subsequent to the classification of assets as held for
sale, no further depreciation expense is recorded. Real estate
assets held for sale are stated separately on the accompanying
consolidated balance sheets. The operating results of real
estate assets held for sale and sold are reported as
discontinued operations in the accompanying statements of
operations. Income from discontinued operations includes the
revenues and expenses, including depreciation and allocated
interest expense, associated with the assets. Interest expense
is allocated to assets held for sale based on actual interest
costs for assets with secured mortgage debt. Interest expense is
allocated to unencumbered assets based on the ratio of unsecured
debt to unencumbered assets multiplied by the weighted average
interest rate on the Operating Partnerships unsecured debt
for the period and further multiplied by the book value of the
assets held for sale
and/or sold.
This classification of operating results as discontinued
operations applies retroactively for all periods presented.
Additionally, gains and losses on assets designated as held for
sale are classified as part of discontinued operations.
For condominium conversion projects, a complete community
conversion is treated as discontinued operations in the same
manner as discussed above for apartment community sales. For
partial conversions of communities, the operating results,
condominium revenues and associated gains are reflected in
continuing operations (see discussion under revenue
recognition below) and the net book value of the assets
being converted into condominiums are reflected separately from
held for sale assets on the consolidated balance sheet in the
caption titled, For-sale condominiums. In either
case, subsequent to the classification of the assets as held for
sale, no further depreciation expense is recorded.
Revenue
recognition
Residential properties are leased under operating leases with
terms of generally one year or less. Rental revenues from
residential leases are recognized on the straight-line method
over the approximate life of the leases, which is generally one
year. The recognition of rental revenues from residential leases
when earned has historically not been materially different from
rental revenues recognized on a straight-line basis.
Under the terms of residential leases, the residents of the
Operating Partnerships residential communities are
obligated to reimburse the Operating Partnership for certain
utility usage, water and electricity (at selected properties),
where the Operating Partnership is the primary obligor to the
public utility entity. These utility reimbursements from
residents are reflected as other property revenues in the
consolidated statements of operations.
Sales and the associated gains or losses of real estate assets
and for-sale condominiums are recognized in accordance with the
provisions of SFAS No. 66, Accounting for Sales
of Real Estate. For condominium conversion projects,
revenues from individual condominium unit sales are recognized
upon the closing of the sale transactions (the Completed
Contract Method), as all conditions for full profit
recognition have been met at that time and the conversion
construction periods are typically very short. Under
SFAS No. 66, the Operating Partnership uses the
relative sales value method to allocate costs and recognize
profits from condominium conversion sales. In accordance with
SFAS No. 144, Accounting for the Impairment and
Disposal of Long-Lived Assets, gains on sales of
condominium units at complete community condominium conversion
projects are included in discontinued operations. For
condominium conversion projects relating to a portion of an
existing apartment community, the Operating Partnership also
recognizes revenues and the associated gains under the Completed
Contract Method, as discussed herein. Since a portion of an
operating community does not meet the requirements of a
component of an entity under SFAS No. 144, the
revenues and gains on sales of condominium units at partial
condominium communities are included in continuing operations.
For newly developed condominiums, the Operating Partnership
accounts for each project under either the Completed Contract
Method or the Percentage of Completion Method, based
on a specific evaluation of the factors specified in
SFAS No. 66. The factors used to determine the
appropriate accounting method are the legal commitment of the
purchaser in the real estate contract, whether the construction
of the project is beyond a preliminary phase, sufficient units
have been
Post Apartment Homes, L.P.
99
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
contracted to ensure the project will not revert to a rental
project, the aggregate project sale proceeds and costs can be
reasonably estimated and the buyer has made an adequate initial
and continuing cash investment under the contract in accordance
with SFAS No. 66. Under the Percentage of Completion
Method, revenues and the associated gains are recognized over
the project construction period generally based on the
percentage of total project costs incurred to estimated total
projects costs for each condominium unit under a binding real
estate contract. As of December 31, 2006, no condominium
projects are accounted for under the Percentage of Completion
Method.
In November 2006 the Financial Accounting Standards Board
(FASB) ratified EITF Issue
No. 06-8
(EITF
No. 06-8),
Applicability of the Assessment of a Buyers
Continuing Investment under FASB Statement No. 66 for Sales
of Condominiums. EITF
No. 06-8
provides additional guidance on whether the seller of a
condominium unit is required to evaluate the buyers
continuing investment under SFAS No. 66 in order to
recognize profit from the sale under the percentage of
completion method. The EITF concluded that both the buyers
initial and continuing investment must meet the criteria in
SFAS No. 66 in order for condominium sale profits to
be recognized under the percentage of completion method. Sales
of condominiums not meeting the continuing investment test must
be accounted for under the deposit method (a method consistent
with the Operating Partnerships above stated Completed
Contract Method). EITF
No. 06-8
is effective January 1, 2008. As discussed above, the
Operating Partnership accounts for condominium sales using
similar criteria to those stated in EITF
No. 06-8.
As a result, the Operating Partnership does not expect that the
adoption of EITF
No. 06-8
will have a material impact on the Operating Partnerships
financial position or results of operations.
Long-term
ground leases
The Operating Partnership is party to six long-term ground
leases associated with land underlying certain of the Operating
Partnerships operating communities. The ground leases
generally provide for future increases in minimum lease payments
tied to an inflation index or contain stated rent increases that
generally compensate for the impact of inflation. Beginning in
2005, the Operating Partnership recognized ground lease expense
on the straight-line method over the life of the ground lease
for all ground leases with stated rent increases. The
recognition of ground lease expense as incurred had historically
not been materially different than the recognition of ground
lease expense on a straight-line basis.
The Securities and Exchange Commission issued
SAB No. 108 (SAB 108),
Considering the Effects of Prior Year Misstatements When
Quantifying Misstatements in Current Year Financial
Statements, in September 2006. SAB 108 requires that
companies analyze the effect of financial statement
misstatements on both their balance sheet and their income
statement and contains guidance on correcting errors under this
approach. The Operating Partnership applied the guidance in
SAB 108 on December 31, 2006 and, in accordance with
the initial application provisions of SAB 108, adjusted
retained earnings as of January 1, 2006. The adjustment was
considered to be immaterial individually and in the aggregate in
prior years based on the Operating Partnerships historical
method of determining materiality. The application of
SAB 108 resulted in a cumulative effect adjustment to
record the prior period impact of accounting for two ground
leases with scheduled rent increases on a straight-line basis
during periods prior to January 1, 2005, and resulted in an
increase in consolidated real estate assets of approximately
$3,900, an increase in consolidated liabilities of approximately
$8,800 and a decrease in consolidated equity of approximately
$4,900.
Apartment
community acquisitions
In accordance with the provisions of Statement of Financial
Accounting Standards (SFAS) No. 141,
Business Combinations, the aggregate purchase price
of apartment community acquisitions is allocated to the tangible
assets and liabilities (including mortgage indebtedness) as well
as the intangible assets acquired in each transaction based on
their estimated fair values at the acquisition date. The
acquired tangible assets, principally land, building and
improvements and furniture, fixtures and equipment are reflected
in real estate assets, and such assets, excluding land, are
depreciated over their estimated useful lives. The acquired
intangible assets, principally above/below market leases,
in-place leases and resident relationships are reflected in
other assets and amortized over the average remaining lease
terms of the acquired leases and resident relationships
(generally 5 months to 18 months).
Equity-based
compensation
Effective January 1, 2006, the Operating Partnership
accounts for equity-based compensation under the fair value
method prescribed by SFAS 123R, Share-Based
Payment. SFAS No. 123R was issued in December
2004. SFAS No. 123R revised SFAS No. 123,
Accounting for Stock-Based Compensation, and
required companies to expense the fair value of
Post Apartment Homes, L.P.
100
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
employee stock options and other forms of stock-based
compensation. SFAS No. 123R also superseded the
provisions of APB No. 25. The Operating Partnership adopted
the provisions of SFAS No. 123R using the modified
prospective method of adoption. Since the Operating Partnership
elected to apply the provisions of SFAS No. 123 on
January 1, 2003, the adoption of SFAS No. 123R
did not have a significant impact on the Operating
Partnerships financial position or results of operations.
In periods from January 1, 2003 through December 31,
2005, the Operating Partnership accounted for equity-based
compensation under the fair value method prescribed by
SFAS No. 123. In adopting SFAS No. 123, the
Operating Partnership used the prospective method prescribed in
SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure, for
all options issued after January 1, 2003.
In 2005 and 2004, the effect on the Operating Partnerships
net income and net income per unit had the fair value method of
accounting been applied to all equity-based compensation was not
significant to the Operating Partnerships financial
position or results of operations.
Derivative
financial instruments
The Operating Partnership accounts for derivative financial
instruments at fair value under the provisions of
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. The
Operating Partnership uses derivative financial instruments,
interest rate swap and interest rate cap arrangements to manage
or hedge its exposure to interest rate changes. The Operating
Partnership generally designates each derivative instrument as a
hedge of specific interest expense cash flow exposure. Under
SFAS 133, as amended, derivative instruments qualifying as
hedges of specific cash flows are recorded on the balance sheet
at fair value with an offsetting increase or decrease to
accumulated other comprehensive income, a partners equity
account, until the hedged transactions are recognized in
earnings. Quarterly, the Operating Partnership evaluates the
effectiveness of its cash flow hedges. Any ineffective portion
of cash flow hedges are recognized immediately in earnings.
Cash and
cash equivalents
All investments purchased with an original maturity of three
months or less are considered to be cash equivalents.
Restricted
cash
Restricted cash is generally comprised of resident security
deposits for apartment communities located in Florida and
Tennessee, required maintenance reserves for certain communities
located in Georgia and earnest money and escrow deposits
associated with the Operating Partnerships for-sale
condominium business.
Deferred
financing costs
Deferred financing costs are amortized using the straight-line
method, which approximates the interest method, over the terms
of the related indebtedness.
Per unit
data
The Operating Partnership reports both basic and diluted
earnings per unit. Basic earnings per common unit is computed by
dividing net income available to common unitholders by the
weighted average number of common units outstanding during the
year. Diluted earnings per common unit is computed by dividing
net income available to common unitholders by the weighted
average number of common unit and common unit equivalents
outstanding during the year, which are computed using the
treasury stock method for outstanding stock options and
non-vested awards. Common unit equivalents are excluded from the
computations in years in which they have an anti-dilutive effect.
Use of
estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Post Apartment Homes, L.P.
101
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
New
accounting pronouncements
In 2006 and 2005, several new accounting pronouncements were
issued and the pronouncements with a potential impact on the
Operating Partnership in 2006 and in future periods and which
are not discussed elsewhere in note 1 are discussed below.
The Emerging Issues Task Force issued EITF
No. 04-5
(EITF
No. 04-5),
Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar
Entity When the Limited Partners Have Certain Rights. EITF
No. 04-5
provides a framework for evaluating whether a general partner or
group of general partners or managing members controls a limited
partnership or limited liability company and therefore should
consolidate the entity. The presumption that the general partner
or group of general partners or managing members controls a
limited partnership or limited liability company may be overcome
if the limited partners or members have (1) the substantive
ability to dissolve the partnership without cause or
(2) substantive participating rights. EITF
No. 04-5
became effective on September 30, 2005 for new or modified
limited partnerships or limited liability companies and
January 1, 2006 for all existing arrangements. The
Operating Partnership adopted EITF
No. 04-5
on January 1, 2006 for all existing partnerships and
limited liability companies and the adoption did not have a
material impact on the Operating Partnerships financial
position or results of operations.
FASB Interpretation No. 48 (FIN 48),
Accounting for Uncertainty in Income Taxes an
interpretation of FASB Statement 109, was issued in
July 2006. FIN 48 clarifies guidance on the recognition and
measurement of uncertain tax positions and establishes a more
likely than not standard for the evaluation of whether such tax
positions can be recognized in the Operating Partnerships
financial statements. Previously recognized tax positions that
do not meet the more likely than not criteria will be required
to be adjusted on the implementation date. FIN 48 is
effective for the Operating Partnership on January 1, 2007.
Additionally, FIN 48 requires additional disclosure
regarding the nature and amount of uncertain tax positions, if
any. The Operating Partnership has performed an analysis and
does not expect that the adoption of FIN 48 will have a
material impact on the Operating Partnerships financial
position and results of operations.
Statement of Financial Accounting Standards No. 157
(SFAS No. 157), Fair Value
Measurements, was issued in September 2006.
SFAS No. 157 provides a definition of fair value and
establishes a framework for measuring fair value.
SFAS No. 157 clarified the definition of fair value in
an effort to eliminate inconsistencies in the application of
fair value under generally accepted accounting principles.
Additional disclosure focusing on the methods used to determine
fair value are also required. SFAS No. 157 is
effective for financial statements issued for fiscal years
beginning after November 15, 2007 and should be applied
prospectively. The Operating Partnership does not expect that
the adoption of SFAS No. 157 will have a material
impact on the Operating Partnerships financial position
and results of operations.
|
|
2.
|
REAL
ESTATE ACQUISITIONS AND DISPOSITIONS
|
Acquisitions
In March 2006, the Operating Partnership acquired two apartment
communities, containing 308 units, in Austin, Texas for
approximately $46,400, including closing costs. Additionally,
the Operating Partnership plans to spend up to approximately
$1,200 (of which approximately $946 was incurred as of
December 31, 2006) to improve the communities. The
purchase price of these communities was allocated to the assets
acquired based on their estimated fair values.
In July 2006, the Operating Partnership acquired a
361-unit
apartment community in suburban Washington D.C. for
approximately $84,600, including the assumption of approximately
$41,394 mortgage indebtedness and closing costs. The assumed
mortgage note payable bears interest at a coupon rate of 6.1%
(which approximated fair value), requires monthly principal and
interest payments and matures in 2011. The Operating Partnership
may be required to pay additional purchase consideration of up
to approximately $6,563 based on a share of the appreciation in
the value of the property, if any, over approximately the next
four years. The purchase price of this community was allocated
to the assets and liabilities acquired based on their estimated
fair values.
In October 2006, the Operating Partnership acquired a
150-unit
apartment community in Tampa, Florida for approximately $23,700,
including closing costs. At the time of acquisition, the
community was undergoing an extensive renovation program and was
predominantly vacant. The Operating Partnership plans to spend
up to approximately $2,000 (of which approximately $870 was
incurred as of December 31, 2006) to complete the
renovation of the community.
Post Apartment Homes, L.P.
102
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Lease-up of
renovated units began in the fourth quarter of 2006. The
purchase price of this community was allocated to the assets
acquired based on their estimated fair values.
In 2006, aggregate acquisition costs were allocated to land
($18,201), building, improvements and equipment ($111,523),
construction progress ($23,723) and identified lease related
intangible assets ($1,296). Aggregate liabilities assumed
related to mortgage indebtedness, other payables and deposits
totaled approximately $41,419.
In June 2005, the Operating Partnership acquired a
319-unit
apartment community located in suburban Charlotte, NC for
approximately $38,240, including closing costs and the
reimbursement of a fee to terminate a loan commitment paid for
by the seller. Additionally, the Operating Partnership incurred
additional costs of approximately $1,100 to improve the
community. The purchase price of this community was allocated to
the assets acquired based on their estimated fair values.
Dispositions
The Operating Partnership classifies real estate assets as held
for sale after the approval of the Companys board of
directors and after the Operating Partnership has commenced an
active program to sell the assets. At December 31, 2006,
the Operating Partnership had one community, originally
containing 127 units, that is being converted into
condominiums, one apartment community, containing
182 units, classified as held for sale and certain parcels
of land classified as held for sale. These real estate assets
are reflected in the accompanying consolidated balance sheet at
$15,645, which represents the lower of their depreciated cost or
fair value less costs to sell. At December 31, 2006, the
Operating Partnership also had portions of two communities that
are being converted to condominiums, originally containing
349 units, that are classified as for-sale condominiums on
the accompanying consolidated balance sheet at $28,295.
In the fourth quarter of 2005, the Operating Partnership began
the conversion of portions of two apartment communities into
for-sale condominiums. As discussed in note 1, gains on
sales of these condominium units are reflected in continuing
operations. In addition to the condominium gains included in
continuing operations, the Operating Partnership expensed
certain sales and marketing costs associated with new
condominium communities under development and such costs are
included in condominium expenses in the table below. A summary
of revenues and costs and expenses of condominium activities
included in continuing operations for the years ended
December 31, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
33,364
|
|
|
$
|
|
|
Condominium costs and expenses
|
|
|
(20,986
|
)
|
|
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
Gains (losses) on sales of
condominiums, net
|
|
$
|
12,378
|
|
|
$
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
In 2006, the Operating Partnership retrospectively adjusted its
consolidated financial statements for the years ended
December 31, 2005 and 2004, to reflect four apartment
communities classified as held for sale (three of which were
sold in 2006) in 2006 under SFAS No. 144. The
effect of the retrospective adjustment represented a $1,339 and
$462 decrease in the Operating Partnerships previously
reported income (loss) from continuing operations and a
corresponding increase in income from discontinued operations
for the years ended December 31, 2005 and 2004,
respectively.
Under SFAS No. 144 Accounting for the Impairment
or Disposal of Long-Lived Assets, the operating results of
real estate assets designated as held for sale are included in
discontinued operations in the consolidated statement of
operations for all periods presented. Additionally, all gains
and losses on the sale of these assets are included in
discontinued operations. For the year ended December 31,
2006, income from discontinued operations included the results
of operations of one condominium conversion community and one
apartment community classified as held for sale at
December 31, 2006 as well as the operations of three
communities sold in 2006 through their sale dates. For the years
ended December 31, 2005 and 2004, income from discontinued
operations included the results of operations of the condominium
conversion community and apartment community classified as held
for sale at December 31, 2006, communities sold in 2006,
one condominium conversion community through its sell-out date
and the results of operations of 14 communities sold in 2005
and 2004.
Post Apartment Homes, L.P.
103
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
The revenues and expenses of these communities for the years
ended December 31, 2006, 2005 and 2004 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
12,146
|
|
|
$
|
27,967
|
|
|
$
|
56,411
|
|
Other property revenues
|
|
|
1,282
|
|
|
|
2,805
|
|
|
|
5,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
13,428
|
|
|
|
30,772
|
|
|
|
61,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
(exclusive of items shown separately below)
|
|
|
5,269
|
|
|
|
13,136
|
|
|
|
25,411
|
|
Depreciation
|
|
|
1,639
|
|
|
|
5,813
|
|
|
|
11,645
|
|
Interest
|
|
|
2,673
|
|
|
|
5,421
|
|
|
|
9,321
|
|
Asset impairment charges
|
|
|
|
|
|
|
|
|
|
|
2,233
|
|
Minority interest in consolidated
property partnerships
|
|
|
|
|
|
|
14
|
|
|
|
(238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
9,581
|
|
|
|
24,384
|
|
|
|
48,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued
property operations
|
|
$
|
3,847
|
|
|
$
|
6,388
|
|
|
$
|
13,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2004, the Operating Partnership recorded asset impairment
charges totaling $2,233 to write-down the cost of two apartment
communities, located in Dallas, Texas, to their estimated fair
value when the assets were classified as held for sale
or sold.
In 2006, the Operating Partnership recognized net gains in
discontinued operations of $68,324 from the sale of three
communities containing 1,340 units. These sales generated
net proceeds of approximately $173,007, including $40,000 of
secured indebtedness assumed by the purchasers. In 2005, the
Operating Partnership recognized net gains in discontinued
operations of $124,425 from the sale of six communities
containing 3,047 units. These sales generated net proceeds
of approximately $229,249, including $81,560 of tax-exempt
secured indebtedness assumed by the purchasers. In 2004, the
Operating Partnership recognized net gains from discontinued
operations of $113,739 from the sale of eight communities,
containing 3,880 units, and certain land parcels. These
sales generated net proceeds of approximately $242,962,
including $104,325 of tax-exempt debt assumed by the purchasers.
In 2006 and 2005, gains on sales of real estate assets included
in discontinued operations also include net gains from
condominium sales at two condominium conversion communities. The
Operating Partnership commenced condominium conversion
activities in 2005. A summary of revenues and costs and expenses
of condominium activities included in discontinued operations
for the years ended December 31, 2006 and 2005 was as
follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
7,322
|
|
|
$
|
56,012
|
|
Condominium costs and expenses
|
|
|
(7,097
|
)
|
|
|
(39,200
|
)
|
|
|
|
|
|
|
|
|
|
Gains (losses) on condominium
sales, before income taxes
|
|
|
225
|
|
|
|
16,812
|
|
Provision for income taxes
|
|
|
|
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
Gains (losses) on condominium
sales, net of income taxes
|
|
$
|
225
|
|
|
$
|
16,218
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
INVESTMENTS
IN UNCONSOLIDATED REAL ESTATE ENTITIES
|
Apartment
and Condominium Conversion Communities
At December 31, 2006, the Operating Partnership holds
investments in three individual limited liability companies (the
Property LLCs) with an institutional investor. Two
of the Property LLCs own single apartment communities. The third
Property LLC is converting its apartment community, initially
consisting of 121 units, into for-sale condominiums. The
Operating Partnership holds a 35% equity interest in the
Property LLCs.
Post Apartment Homes, L.P.
104
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
The Operating Partnership accounts for its investments in these
Property LLCs using the equity method of accounting. The excess
of the Operating Partnerships investment over its equity
in the underlying net assets of the Property LLCs was
approximately $5,446 at December 31, 2006. The excess
investment related to Property LLCs holding apartment
communities is being amortized as a reduction to earnings on a
straight-line basis over the lives of the related assets. The
excess investment of approximately $104 at December 31,
2006 related to the Property LLC holding the condominium
conversion community will be recognized as additional costs as
the underlying condominiums are sold. The Operating Partnership
provides real estate services (development, construction and
property management) to the Property LLCs for which it earns
fees.
The operating results of the Operating Partnership include its
allocable share of net income from the investments in the
Property LLCs. A summary of financial information for the
Property LLCs in the aggregate is as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Balance Sheet Data
|
|
2006
|
|
|
2005
|
|
|
Real estate assets, net of
accumulated depreciation of $11,039 and $8,349, respectively
|
|
$
|
93,614
|
|
|
$
|
96,000
|
|
Assets held for sale, net
|
|
|
3,027
|
|
|
|
17,715
|
|
Cash and other
|
|
|
4,067
|
|
|
|
1,770
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
100,708
|
|
|
$
|
115,485
|
|
|
|
|
|
|
|
|
|
|
Mortgage notes payable
|
|
$
|
66,998
|
|
|
$
|
66,999
|
|
Mortgage notes payable to
Operating Partnership
|
|
|
|
|
|
|
5,967
|
|
Other liabilities
|
|
|
1,107
|
|
|
|
996
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
68,105
|
|
|
|
73,962
|
|
Members equity
|
|
|
32,603
|
|
|
|
41,523
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
members equity
|
|
$
|
100,708
|
|
|
$
|
115,485
|
|
|
|
|
|
|
|
|
|
|
Operating Partnerships
equity investment in Property LLCs
|
|
$
|
16,883
|
|
|
$
|
20,647
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Income Statement Data
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
11,447
|
|
|
$
|
10,789
|
|
|
$
|
10,451
|
|
Other property revenues
|
|
|
799
|
|
|
|
840
|
|
|
|
776
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
12,246
|
|
|
|
11,629
|
|
|
|
11,227
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
|
|
|
3,948
|
|
|
|
3,689
|
|
|
|
3,555
|
|
Depreciation and amortization
|
|
|
2,650
|
|
|
|
2,621
|
|
|
|
2,579
|
|
Interest
|
|
|
2,752
|
|
|
|
2,752
|
|
|
|
2,658
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
9,350
|
|
|
|
9,062
|
|
|
|
8,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
2,896
|
|
|
|
2,567
|
|
|
|
2,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from discontinued operations
|
|
|
(343
|
)
|
|
|
(176
|
)
|
|
|
(355
|
)
|
Gains on sales of real estate
assets, net
|
|
|
2,947
|
|
|
|
2,834
|
|
|
|
|
|
Loss on early extinguishment of
debt
|
|
|
|
|
|
|
(273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued
operations
|
|
|
2,604
|
|
|
|
2,385
|
|
|
|
(355
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
5,500
|
|
|
$
|
4,952
|
|
|
$
|
2,080
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Partnerships share
of net income
|
|
$
|
1,813
|
|
|
$
|
1,767
|
|
|
$
|
1,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Apartment Homes, L.P.
105
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Gains on real estate assets represent net gains from condominium
sales at the condominium conversion community held by one of the
Property LLCs. This Property LLC began its condominium
conversion activity in 2005. A summary of revenues and costs and
expenses of condominium activities for the years ended
December 31, 2006 and 2005 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenue
|
|
$
|
21,857
|
|
|
$
|
15,098
|
|
Condominium costs and expenses
|
|
|
(18,910
|
)
|
|
|
(12,264
|
)
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, net
|
|
$
|
2,947
|
|
|
$
|
2,834
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006, mortgage notes payable include a
$49,998 mortgage note that bears interest at 4.13%, requires
monthly interest payments and annual principal payments of $1
through 2009. Thereafter, the note requires monthly principal
and interest payments based on a
25-year
amortization schedule and matures in 2034. The note is callable
by the lender in 2009 and on each successive fifth year
anniversary of the note thereafter. The note is prepayable
without penalty in 2008. The additional mortgage note payable
totaling $17,000 bears interest at a fixed rate of 4.04%,
requires interest only payments and matures in 2008.
In early 2005, one of the Property LLCs elected to convert its
apartment community into for-sale condominiums. As a result of
its decision to sell the community through the condominium
conversion process, the Property LLC prepaid its third party
mortgage note payable of $16,392 through secured borrowings from
the Operating Partnership. The Property LLC incurred debt
prepayment costs and expenses associated with the write-off of
unamortized deferred financing costs totaling $273 in March
2005. The mortgage note payable to the Operating Partnership had
a fixed rate component ($16,392) bearing interest at 4.28% and a
variable rate component bearing interest at LIBOR at 1.90%. In
June 2006, the mortgage note payable to the Operating
Partnership was retired from the proceeds of condominium sales.
Land
Entities
At December 31, 2006, the Operating Partnership holds a 50%
equity interest in a limited liability company whose sole
investment consists of a partnership interest in an entity (the
Land Partnership) which holds land for future
development. At December 31, 2006, the Land Partnership had
total assets of $26,157, principally land held for future
development, total liabilities of $12,582 (including a secured
note payable of $12,000 to the Operating Partnership) and total
equity of $13,575 (including the Operating Partnerships
equity investment of $3,911).
At December 31, 2006 and 2005, the Operating
Partnerships indebtedness consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
December 31,
|
|
Description
|
|
Payment Terms
|
|
Interest Rate
|
|
|
Date
|
|
2006
|
|
|
2005
|
|
|
Senior Unsecured
Notes
|
|
Int.
|
|
|
5.13% - 7.70%
|
|
|
2007-2013
|
|
$
|
560,000
|
|
|
$
|
485,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of
Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated Line of Credit
|
|
N/A
|
|
|
LIBOR + 0.575%
|
(1)
|
|
2010
|
|
|
95,000
|
|
|
|
90,000
|
|
Cash Management Line
|
|
N/A
|
|
|
LIBOR + 0.575%
|
|
|
2010
|
|
|
13,913
|
|
|
|
11,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,913
|
|
|
|
101,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Secured
Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
Prin. and Int.
|
|
|
6.15%
|
(2)
|
|
2029
|
|
|
95,600
|
|
|
|
97,100
|
|
Other
|
|
Prin. and Int.
|
|
|
4.27% - 7.69%
|
|
|
2007-2013
|
|
|
259,371
|
|
|
|
268,641
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
354,971
|
|
|
|
365,741
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-Exempt Floating Rate
Secured Bonds
|
|
Int.
|
|
|
3.54%
|
(3)
|
|
2025
|
|
|
9,895
|
|
|
|
28,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,033,779
|
|
|
$
|
980,615
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Apartment Homes, L.P.
106
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
|
|
|
(1)
|
|
Represents stated rate. At
December 31, 2006, the weighted average interest rate was
5.58%.
|
(2)
|
|
Interest rate is fixed at 6.15%,
inclusive of credit enhancement and other fees, to 2009 through
an interest rate swap arrangement.
|
(3)
|
|
FNMA credit enhanced bond
indebtedness. Interest based on FNMA AAA tax-exempt
rate plus credit enhancement and other fees of 0.639%. Interest
rate represents the rate at December 31, 2006 before credit
enhancements. The Operating Partnership has outstanding interest
rate cap arrangements that limit the Operating
Partnerships exposure to increases in the base interest
rate to 5%.
|
Debt
maturities
The aggregate maturities of the Operating Partnerships
indebtedness are as follows:
|
|
|
|
|
2007
|
|
$
|
113,190
|
|
2008
|
|
|
5,230
|
|
2009
|
|
|
76,618
|
|
2010
|
|
|
297,641
|
(1)
|
2011
|
|
|
141,831
|
|
Thereafter
|
|
|
399,269
|
|
|
|
|
|
|
|
|
$
|
1,033,779
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes outstanding balance on
lines of credit totaling $108,913.
|
Debt
issuances, retirements and modifications
2006
Upon their maturity in March 2006, the Operating Partnership
repaid $50,000 of 6.71% senior unsecured notes. In October
2006, the Operating Partnership repaid $25,000 of
7.5% senior unsecured notes. Both notes were repaid from
available borrowings under its unsecured lines of credit.
In April 2006, the Operating Partnership closed a $40,000
mortgage note payable secured by an apartment community located
in Denver, Colorado. The mortgage note accrued interest at LIBOR
plus 1.0%, was scheduled to mature in April 2008 and was
pre-payable without penalty. In August 2006, this mortgage note
was assumed by the purchaser of this community. As a result of
this debt assumption, the Operating Partnership recorded a loss
on early extinguishment of indebtedness of $123 related to the
write-off of unamortized deferred financing costs.
In June 2006, the Operating Partnership issued $150,000 of
senior unsecured notes. The notes bear interest at 6.30% and
mature in September 2013. The net proceeds from the unsecured
notes were used to reduce amounts outstanding under the
Operating Partnerships unsecured lines of credit.
In July 2006, in conjunction with an apartment community
acquisition (see note 4 to the consolidated financial
statements), the Operating Partnership assumed a secured, fixed
rate mortgage note payable with an outstanding balance of
$41,394. The mortgage note bears interest at a coupon rate of
approximately 6.1% (which approximated fair value), requires
monthly principal and interest payments and matures in November
2011.
In December 2006, the Operating Partnership repaid a $45,718,
6.8% secured mortgage note prior to its schedule maturity date
in 2007. Also in December 2006, the Operating Partnership repaid
$18,600 of tax-exempt indebtedness associated with the sale of
an apartment community. As a result of this debt retirement, the
Operating Partnership recorded a loss on the early
extinguishment of debt of $372 related to the write-off of
deferred loan costs of $230 relating to such retired
indebtedness and a loss of $142 due to the ineffectiveness of a
related interest rate cap agreement.
2005
Upon their maturity in 2005, the Operating Partnership repaid
its $25,000 (7.28%) medium term, unsecured notes, repaid its
$100,000 (6.85%) Mandatory Par Put Remarketed Securities
(MOPPRS) debt arrangement, repaid its $62,043
(8.125%) medium term, unsecured notes and repaid its $25,000
(6.78%) medium term, unsecured notes, from available borrowings
under its unsecured lines of credit.
In 2005, the Operating Partnership issued $100,000 of senior
unsecured notes. The notes bear interest at 5.45% and mature in
2012. The net proceeds from the unsecured notes were used to
reduce amounts outstanding under the Operating
Partnerships unsecured lines of credit.
Post Apartment Homes, L.P.
107
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
The Operating Partnership sold three apartment communities
subject to the assumption of $81,560 of tax-exempt mortgage
indebtedness (see note 5). As a result of these debt
assumptions, the Operating Partnership recorded losses on the
early extinguishment of debt of $3,220 related to the write-off
of deferred loan costs of $2,264 relating to such assumed
indebtedness and the realization of a $955 loss in connection
with the termination of related interest rate cap agreements
that were used as cash flow hedges of the assumed debt.
2004
In 2004, the Operating Partnership purchased and retired $87,957
of 8.125% medium term, unsecured notes through a tender offer.
As part of this transaction, the Operating Partnership recorded
a loss on the early extinguishment of this indebtedness of
$4,011 representing the debt repurchase premiums, the expenses
of the tender offer and the write-off of the unamortized
deferred financing costs associated with the retired
indebtedness. Also in 2004, the Operating Partnership terminated
a remarketing agreement related to its $100,000 MOPPRS debt. In
connection with the termination of the remarketing agreement,
the Operating Partnership paid $10,615 (interest expense),
including transaction expenses. As a result of the termination
of the remarketing agreement, the underlying debt matured and
was repaid in 2005.
Unsecured
lines of credit
At December 31, 2006, the Operating Partnership utilizes a
$450,000 syndicated unsecured revolving line of credit (the
Syndicated Line) that matures in April 2010 for its
short-term financing needs. The Syndicated Line currently has a
stated interest rate of LIBOR plus 0.575% or the prime rate and
was provided by a syndicate of 11 banks led by Wachovia Bank,
N.A. and JP Morgan Securities, Inc. Additionally, the Syndicated
Line requires the payment of annual facility fees currently
equal to 0.15% of the aggregate loan commitment. The Syndicated
Line provides for the interest rate and facility fee rate to be
adjusted up or down based on changes in the credit ratings on
the Operating Partnerships senior unsecured debt. The
rates under the Syndicated Line are based on the higher of the
Operating Partnerships unsecured debt ratings in instances
where the Operating Partnership has split unsecured debt
ratings. The Syndicated Line also includes a competitive bid
option for short-term funds up to 50% of the loan commitment at
rates generally below the stated line rate. The credit agreement
for the Syndicated Line contains customary restrictions,
representations, covenants and events of default, including
fixed charge coverage and maximum leverage ratios. The
Syndicated Line also restricts the amount of capital the
Operating Partnership can invest in specific categories of
assets, such as improved land, properties under construction,
condominium properties, non-multifamily properties, debt or
equity securities, notes receivable and unconsolidated
affiliates. At December 31, 2006, the Operating Partnership
had issued letters of credit to third parties totaling $2,805
under this facility.
Additionally, at December 31, 2006, the Operating
Partnership had a $30,000 unsecured line of credit with Wachovia
Bank, N.A. (the Cash Management Line). The Cash
Management Line matures in April 2010 and carries pricing and
terms, including debt covenants, substantially consistent with
the Syndicated Line.
Interest
paid
Interest paid (including capitalized amounts of $9,942, $2,907
and $1,078 for the years ended December 31, 2006, 2005 and
2004, respectively), aggregated $67,257, $66,234 and $66,992 for
the years ended December 31, 2006, 2005 and 2004,
respectively.
Pledged
assets
The aggregate net book value at December 31, 2006 of
property pledged as collateral for indebtedness amounted to
approximately $619,000.
Post Apartment Homes, L.P.
108
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Deferred charges consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
Deferred financing costs
|
|
$
|
18,073
|
|
|
$
|
26,050
|
|
Other
|
|
|
5,501
|
|
|
|
5,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,574
|
|
|
|
31,449
|
|
Less: accumulated amortization
|
|
|
(11,174
|
)
|
|
|
(19,825
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
12,400
|
|
|
$
|
11,624
|
|
|
|
|
|
|
|
|
|
|
Common
and Preferred Units
At December 31, 2006 and 2005, the Operating Partnership
had outstanding Common Units totaling 44,191 and 42,796,
respectively. At December 31, 2006, the Operating
Partnership had outstanding two separate series of cumulative
redeemable preferred partnership units as more fully described
below. The preferred partnership units are reflected in the
accompanying financial statements at their liquidation value.
The Operating Partnership has outstanding 900,000, 8.5%
Series A cumulative redeemable preferred partnership units
(the Series A Preferred Units). The
Series A Preferred Units have a liquidation preference of
$50.00 per unit and are redeemable at the option of the
Operating Partnership on or after October 1, 2026, at a
redemption price of $50.00 per unit. The Series A
Preferred Units are owned by the Company.
The Operating Partnership also has outstanding 2,000,000, 7.625%
Series B cumulative redeemable preferred partnership units
(the Series B Preferred Units). The
Series B Preferred Units have a liquidation preference of
$25.00 per unit and are redeemable at the option of the
Operating Partnership on or after October 28, 2007, at a
redemption price of $25.00 per unit. The Series B
Preferred Units are owned by the Company.
In 2004, the Company redeemed its 7.625% Series C
cumulative redeemable preferred stock. Correspondingly, the
Operating Partnership redeemed its Series C Preferred Units
on the same date and under the same terms. The redemption price
was $25.00 per unit, plus accrued and unpaid distributions
through the redemption date. In connection with the issuance of
the Series C Preferred Units in 1998, the Operating
Partnership incurred $1,716 in issuance costs and recorded such
costs as a reduction of partners equity. The redemption
price of the Series C Preferred Units exceeds the related
carrying value by the $1,716 of issuance costs. In connection
with the redemption, in accordance with generally accepted
accounting principles, the Operating Partnership reflected the
$1,716 of issuance costs as a reduction of earnings in arriving
at net income available to common unitholders in 2004.
In 2004, the Operating Partnership also redeemed its 8.0%
Series D cumulative redeemable preferred units
(Series D Preferred Units) for $25.00 per
unit (an aggregate of $70,000), plus accrued and unpaid
distributions through the redemption date. In connection with
the issuance of the Series D Preferred Units in 1998, the
Operating Partnership incurred $1,810 in issuance costs and
recorded such costs as a reduction of partners equity. The
redemption price of the Series D Preferred Units exceeded
the related carrying value by the $1,810 of issuance costs. In
connection with the redemption, in accordance with generally
accepted accounting principles, the Operating Partnership
reflected the $1,810 of issuance costs as a reduction of
earnings in arriving at net income available to common
unitholders in 2004.
Common
Unit Purchases
In 2006 and 2005, the Company repurchased approximately 109 and
1,031 shares, respectively, of its common stock at an
aggregate cost of $5,000 and $34,400, respectively, under
10b5-1 stock
repurchase plans. These shares were purchased under a board of
directors approved plan which provided for aggregate common or
preferred stock repurchases of up to $200,000 through
December 31, 2006. In 2004, under a previous stock
repurchase program, the Company repurchased $2,268 of common
stock and $120,000 of preferred stock and units.
Correspondingly, the Operating Partnership repurchased the same
number and amount of common and preferred units from the Company.
Post Apartment Homes, L.P.
109
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
In the fourth quarter of 2006, the Companys board of
directors adopted a new stock repurchase program under which the
Company may repurchase up to $200,000 of common or preferred
stock at market prices from time to time until December 31,
2008. Subsequent to the year ended December 31, 2006, the
Company repurchased 83 shares of its common stock totaling
approximately $3,694 under its
10b5-1 stock
purchase plan. Correspondingly, the Operating Partnership
repurchased the same number and amount of common units from the
Company.
Computation
of Earnings per Common Unit
In 2006, 2005 and 2004, basic and diluted earnings per common
unit for income (loss) from continuing operations available to
common unitholders has been computed as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
Income
|
|
|
Units
|
|
|
Per-Unit
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
31,385
|
|
|
|
|
|
|
|
|
|
Less: Preferred unit distributions
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common unitholders
|
|
|
23,748
|
|
|
|
43,645
|
|
|
$
|
0.54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
available to common unitholders
|
|
$
|
23,748
|
|
|
|
44,427
|
|
|
$
|
0.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
Income
|
|
|
Units
|
|
|
Per-Unit
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
5,236
|
|
|
|
|
|
|
|
|
|
Less: Preferred unit distributions
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common unitholders
|
|
|
(2,401
|
)
|
|
|
42,353
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common unitholders
|
|
$
|
(2,401
|
)
|
|
|
42,353
|
|
|
$
|
(0.06
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2004
|
|
|
|
Income
|
|
|
Units
|
|
|
Per-Unit
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Loss from continuing operations
|
|
$
|
(25,550
|
)
|
|
|
|
|
|
|
|
|
Less: Preferred unit distributions
|
|
|
(12,105
|
)
|
|
|
|
|
|
|
|
|
Less: Redemption costs on
preferred units
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common unitholders
|
|
|
(41,181
|
)
|
|
|
42,474
|
|
|
$
|
(0.97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive
securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
available to common unitholders
|
|
$
|
(41,181
|
)
|
|
|
42,474
|
|
|
$
|
(0.97
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Apartment Homes, L.P.
110
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
|
|
|
(1)
|
|
For the years ended
December 31, 2005 and 2004, the potential dilution from the
Companys outstanding stock options and awards of 400 and
115, respectively, was antidilutive to the loss from continuing
operations per unit calculation. As such, these amounts were
excluded from weighted average units in these years.
|
In 2005 and 2004, stock options to purchase 3,534 and
4,491 shares of common stock, respectively, were excluded
from the computation of diluted earnings per unit as these
options were antidilutive. There were no antidilutive shares in
2006.
In prior years, the Operating Partnership recorded severance
charges associated with the departure of certain executive
officers of the Operating Partnership. Under certain of these
arrangements, the Operating Partnership is required to make
certain payments and provide specified benefits through 2013 and
2016. In 2005, the Operating Partnership recorded an additional
expense charge of $796 relating to changes in the estimated
future costs of certain benefits granted to former executive
officers under such agreements. These estimated future cost
increases primarily related to increased fuel and other
operating costs and expenses associated with certain fractional
aircraft benefits provided to such executives. In 2004, the
Operating Partnership entered into a final settlement agreement
with its former chairman of the board of directors. Under the
terms of the agreement, the former chairmans employment
and non-competition agreements were terminated and the Operating
Partnership agreed to continue to provide the former chairman
certain payments and benefits through 2013, the approximate
expiration date of the original employment agreement. Because
the present value of the estimated payments under the settlement
agreement approximated the Operating Partnerships
remaining accrued charge under the former employment agreement,
no additional charges were recorded in 2004 as a result of the
settlement.
The following table summarizes the activity relating to the
accrued severance charges for the years ended December 31,
2006, 2005 and 2004:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Accrued severance charges,
beginning of year
|
|
$
|
14,325
|
|
|
$
|
15,317
|
|
|
$
|
19,171
|
|
Severance charges
|
|
|
|
|
|
|
796
|
|
|
|
|
|
Payments for period
|
|
|
(2,341
|
)
|
|
|
(2,694
|
)
|
|
|
(4,858
|
)
|
Interest accretion
|
|
|
848
|
|
|
|
906
|
|
|
|
1,004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued severance charges, end of
year
|
|
$
|
12,832
|
|
|
$
|
14,325
|
|
|
$
|
15,317
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all of these remaining amounts will be paid over
the remaining terms of the former executives employment
and settlement agreements (7 to 10 years).
Income or losses of the Operating Partnership are allocated to
the partners of the Operating Partnership for inclusion in their
respective income tax returns. Accordingly, no provisions or
benefit for income taxes has been made in the accompanying
financial statements. The Company elected to be taxed as a REIT
under the Internal Revenue Code of 1986, as amended (the
Code) commencing with the taxable year ended
December 31, 1993. In order for the Company to qualify as a
REIT, it must distribute 90% of its REIT taxable income, as
defined in the Code, to its unitholders and satisfy certain
other organizational and operating requirements. The Operating
Partnership intends to make sufficient cash distributions to the
Company to enable it to meet its annual REIT distribution
requirements.
In the preparation of income tax returns in federal and state
jurisdictions, the Company and its taxable REIT subsidiaries
assert certain tax positions based on their understanding and
interpretation of the income tax law. The taxing authorities may
challenge such positions and the resolution of such matters
could result in the payment and recognition of additional income
tax expense. Management believes it has used reasonable
judgments and conclusions in the preparation of its income tax
returns.
As of December 31, 2006, the net basis for federal income
tax purposes, taking into account the special allocation of gain
to the partners contributing property to the Operating
Partnership and including minority interest in the Operating
Partnership, was lower than the net assets as reported in the
Operating Partnerships consolidated financial statements
by $119,000.
Post Apartment Homes, L.P.
111
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Taxable
REIT subsidiaries
The Operating Partnership utilizes taxable REIT subsidiaries
(TRSs) to perform such non-REIT activities as asset
and property management, for-sale housing (condominiums)
conversions and sales and other services for third parties.
These TRSs are subject to federal and state income taxes. The
components of income tax expense, significant deferred tax
assets and liabilities and a reconciliation of the TRS income
tax expense to the statutory federal rate are reflected in the
tables below.
In 2006 and 2004, the TRSs recorded no income tax expense due to
the existence of income tax operating loss carryforwards and the
existence of deferred tax asset valuation allowances. Income tax
expense of the TRSs in 2005 is comprised of the following:
|
|
|
|
|
|
|
2005
|
|
|
Current tax expense
|
|
|
|
|
Federal
|
|
$
|
251
|
|
State
|
|
|
343
|
|
|
|
|
|
|
|
|
|
594
|
|
|
|
|
|
|
Deferred tax expense
|
|
|
|
|
Federal
|
|
|
|
|
State
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
594
|
|
Income tax expense
discontinued operations
|
|
|
(594
|
)
|
|
|
|
|
|
Income tax expense
continuing operations
|
|
$
|
|
|
|
|
|
|
|
Post Apartment Homes, L.P.
112
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
In 2005, income tax expense was allocated to discontinued
operations as the taxable income of the TRSs resulted from
condominium sales activities which are reported in discontinued
operations. Deferred tax expense was offset by a decrease in the
Operating Partnerships deferred tax valuation allowances,
primarily related to the utilization of income tax net operating
loss carryforwards, that were established in prior years. Net
valuation allowances decreased approximately $2,700 in 2005.
Aggregate valuation allowances at December 31, 2006 and
2005 are reflected in the table below.
The components of the TRSs deferred income tax assets and
liabilities at December 31, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Real estate asset basis differences
|
|
$
|
1,106
|
|
|
$
|
1,106
|
|
Deferred interest
|
|
|
1,761
|
|
|
|
|
|
Accrued liabilities
|
|
|
512
|
|
|
|
641
|
|
Cost capitalization
|
|
|
260
|
|
|
|
211
|
|
Other
|
|
|
101
|
|
|
|
58
|
|
Tax NOLs
|
|
|
|
|
|
|
415
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,740
|
|
|
|
2,431
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets, before
valuation allowances
|
|
|
2,943
|
|
|
|
1,634
|
|
Valuation allowances
|
|
|
(2,943
|
)
|
|
|
(1,634
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
(liabilities)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006 and 2005, management had established
valuation allowances against the above listed net deferred tax
assets due primarily to the historical losses and variability of
the income of these subsidiaries. The tax benefits associated
with such valuation allowances may be recognized in future
periods, if the taxable REIT subsidiaries generate sufficient
taxable income to utilize such amounts or if the Company
determines that it is more likely than not that the related
deferred tax assets are realizable.
A reconciliation of income tax expense for 2005 of the TRSs to
the federal statutory rate is detailed below. As reflected
above, 2005 income tax expense was allocated to discontinued
operations.
|
|
|
|
|
|
|
2005
|
|
|
Federal tax rate
|
|
|
35
|
%
|
State income tax, net of federal
benefit
|
|
|
4
|
|
Federal alternative minimum taxes
|
|
|
3
|
|
Change in valuation allowance of
deferred tax assets
|
|
|
(35
|
)
|
|
|
|
|
|
|
|
|
7
|
%
|
|
|
|
|
|
Post Apartment Homes, L.P.
113
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
|
|
9.
|
EQUITY-BASED
COMPENSATION PLANS
|
Equity
Compensation Plans
As the primary operating subsidiary of the Company, the
Operating Partnership participates in and bears the compensation
expenses associated with the Companys stock-based
compensation plans. The information discussed below relating to
the Companys stock-based compensation plans is also
applicable for the Operating Partnership. Effective
January 1, 2006, the Operating Partnership accounts for
stock-based compensation using the fair value method prescribed
in SFAS No. 123R (see note 1). For stock-based
compensation granted from January 1, 2003 to
December 31, 2005, the Operating Partnership accounted for
stock-based compensation under the fair value method prescribed
by SFAS No. 123. Other than the required modification
under SFAS No. 123R to use an estimated forfeiture
rate for award terminations and forfeitures, the adoption of
SFAS 123R did not have a material impact on the Operating
Partnerships accounting for stock-based compensation. In
prior years, the Operating Partnership used a policy of
recognizing the effect of award forfeitures as they occurred.
Under SFAS No. 123R, such award forfeitures are
recognized based on an estimate of the number of awards expected
to be forfeited during the estimated service period. The
cumulative impact of this modification on awards granted prior
to January 1, 2006 was $172 and the amount was reflected as
a reduction of compensation expense for the year ended
December 31, 2006.
Incentive
Stock Plans
Incentive stock awards are granted under the Companys 2003
Incentive Stock Plan (the 2003 Stock Plan). Under
the 2003 Stock Plan, an aggregate of 4,000 shares of common
stock were reserved for issuance. Of this amount, not more than
500 shares of common stock are available for grants of
restricted stock. The exercise price of each option granted
under the 2003 Stock Plan may not be less than the market price
of the Companys common stock on the date of the option
grant and all options may have a maximum life of ten years.
Participants receiving restricted stock grants are generally
eligible to vote such shares and receive dividends on such
shares. Substantially all stock option and restricted stock
grants are subject to annual vesting provisions (generally three
to five years) as determined by the compensation committee
overseeing the 2003 Stock Plan. At December 31, 2006, stock
options outstanding under the 2003 Stock Plan and the
Companys previous stock plan totaled 2,375.
Compensation costs for stock options have been estimated on the
grant date using the Black-Scholes option-pricing method. The
weighted average assumptions used in the Black-Scholes
option-pricing model were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Dividend yield
|
|
|
4.4
|
%
|
|
|
5.5
|
%
|
|
|
6.3
|
%
|
Expected volatility
|
|
|
17.5
|
%
|
|
|
17.1
|
%
|
|
|
16.9
|
%
|
Risk-free interest rate
|
|
|
4.3
|
%
|
|
|
3.1
|
%
|
|
|
3.1
|
%
|
Expected option life
|
|
|
5 years
|
|
|
|
5 years
|
|
|
|
5 years
|
|
The Companys assumptions were derived from the
methodologies discussed herein. The expected dividend yield
reflects the Companys current historical yield, which is
expected to approximate the future yield. Expected volatility
was based on the historical volatility of the Companys
common stock. The risk-free interest rate for the expected life
of the options was based on the implied yields on the
U.S. Treasury yield curve. The weighted average expected
option term was based on the Companys historical data for
prior period stock option exercise and forfeiture activity.
In 2006, 2005 and 2004, the Company granted stock options to
purchase 311, 277 and 283 shares of Company common stock to
Company officers and directors, of which 50 shares were
granted each year to the Companys non-executive chairman
of the board. In 2006, 2005 and 2004, the Company recorded
compensation expense related to stock options of $1,100, $761
and $590, respectively, recognized under the fair value method.
In 2006, such expense was net of the cumulative impact of the
adoption of SFAS No. 123R of $60, as discussed above.
Upon the exercise of stock options, the Company issues shares of
common stock from treasury shares or, to the extent treasury
shares are not available, from authorized common shares.
Post Apartment Homes, L.P.
114
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
A summary of stock option activity under all plans in 2006, 2005
and 2004, is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
|
|
Weighted Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
|
3,534
|
|
|
$
|
34
|
|
|
|
4,491
|
|
|
$
|
33
|
|
|
|
4,735
|
|
|
$
|
34
|
|
Granted
|
|
|
311
|
|
|
|
41
|
|
|
|
277
|
|
|
|
33
|
|
|
|
283
|
|
|
|
28
|
|
Exercised
|
|
|
(1,462
|
)
|
|
|
36
|
|
|
|
(1,105
|
)
|
|
|
33
|
|
|
|
(277
|
)
|
|
|
29
|
|
Forfeited
|
|
|
(8
|
)
|
|
|
35
|
|
|
|
(129
|
)
|
|
|
30
|
|
|
|
(250
|
)
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
2,375
|
|
|
|
33
|
|
|
|
3,534
|
|
|
|
34
|
|
|
|
4,491
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
1,447
|
|
|
|
33
|
|
|
|
2,437
|
|
|
|
36
|
|
|
|
3,131
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of
options granted during the year
|
|
$
|
4.91
|
|
|
|
|
|
|
$
|
2.73
|
|
|
|
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2006, there was $1,722 of unrecognized
compensation cost related to unvested stock options. This cost
is expected to be recognized over a weighted-average period of
1.5 years. The total intrinsic value of stock options
exercised in 2006, 2005 and 2004 was $13,775, $6,111 and $1,179,
respectively. The aggregate intrinsic values of stock options
outstanding exercisable and expected to vest at
December 31, 2006 were $30,267, $18,109 and $29,416,
respectively. The weighted average remaining contractual lives
of stock options outstanding, exercisable and expected to vest
at December 31, 2006, were 5.8 years, 4.6 years
and 5.8 years, respectively. Stock options expected to vest
at December 31, 2006, totaled 2,318 at a weighted average
price of approximately $33.00.
At December 31, 2006, the Company had separated its
outstanding options into two ranges based on exercise prices.
There were 1,188 options outstanding with exercise prices
ranging from $23.90 to $34.76. These options have a weighted
average exercise price of $27.86 and a weighted average
remaining contractual life of 6.9 years. Of these
outstanding options, 590 were exercisable at December 31,
2006 at a weighted average exercise price of $27.41. In
addition, there were 1,187 options outstanding with exercise
prices ranging from $34.90 to $45.70. These options had a
weighted average exercise price of $38.06 and a weighted average
remaining contractual life of 4.8 years. Of these
outstanding options, 857 were exercisable at December 31,
2006 at a weighted average exercise price of $37.16.
In 2006, 2005 and 2004, the Company granted 42, 35 and
27 shares of restricted stock, respectively, to Company
officers and directors, of which 5, 6 and 7 shares in
2006, 2005 and 2004, respectively, were granted to the
Companys non-executive chairman of the board. The
restricted share grants generally vest ratably over three to
five year periods. The weighted average grant date fair value
for the restricted shares granted in 2006, 2005 and 2004 was
$40.61, $33.74 and $28.79 per share, respectively. The
total value of the restricted share grants in 2006, 2005 and
2004 were $1,701, $1,173 and $777, respectively. The
compensation cost is amortized ratably into compensation expense
over the applicable vesting periods. Total compensation expense
relating to the restricted stock was $1,651, $1,367 and $1,109
in 2006, 2005 and 2004, respectively. In 2006, such expense was
net of the cumulative impact of the adoption of
SFAS No. 123R of $112, as discussed above.
A summary of the activity related to the Companys
restricted stock in 2006 is presented below:
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested shares, beginning of
period
|
|
|
140
|
|
|
$
|
28
|
|
Granted
|
|
|
42
|
|
|
|
41
|
|
Vested
|
|
|
(57
|
)
|
|
|
32
|
|
Forfeited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested shares, end of period
|
|
|
125
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
Post Apartment Homes, L.P.
115
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
At December 31, 2006, there was $3,268 of unrecognized
compensation cost related to restricted stock. This cost is
expected to be recognized over a weighted average period of
3.2 years. The total intrinsic value of restricted shares
vested in 2006, 2005 and 2004 was $2,606, $1,845 and $1,420,
respectively.
Employee
Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (the
2005 ESPP) under a plan approved by Company
shareholders in 2005. The provisions of the 2005 ESPP are
substantially similar to the Companys former ESPP,
terminated in December 2004, with certain exceptions including
that the maximum number of shares issuable under the 2005 ESPP
will be 300. The purchase price of shares of common stock under
the ESPP is equal to 85% of the lesser of the closing price per
share of common stock on the first or last day of the trading
period, as defined. The Company records the aggregate cost of
the ESPP (generally the 15% discount on the share purchases) as
a period expense. Total compensation expense relating to the
ESPP was $159, $171 and $86 in 2006, 2005 and 2004, respectively.
|
|
10.
|
EMPLOYEE
BENEFIT PLAN
|
The Company maintains a defined contribution plan pursuant to
Section 401 of the Internal Revenue Code (the 401K
Plan) that allows eligible employees of the Operating
Partnership to contribute a percentage of their compensation to
the 401K Plan. The Company matches 50% of the employees
pre-tax contribution up to a maximum employee contribution of 6%
of salary in 2006 (5% in 2005 and 4% in 2004). Operating
Partnership contributions of $911, $691 and $541 were made to
this plan in 2006, 2005 and 2004, respectively.
|
|
11.
|
COMMITMENTS
AND CONTINGENCIES
|
Land,
office and equipment leases
The Operating Partnership is party to two ground leases with
terms expiring in years 2040 and 2043 relating to a single
operating community, four ground leases expiring in 2012, 2038,
2066 and 2074 for four separate operating communities and to
other facility, office, equipment and other operating leases
with terms expiring through 2057. The ground leases generally
provide for future increases in minimum lease payments tied to
an inflation index or contain stated rent increases that
generally compensate for the impact of inflation. Future minimum
lease payments for non-cancelable land, office, equipment and
other leases at December 31, 2006, are as follows:
|
|
|
|
|
2007
|
|
$
|
1,983
|
|
2008
|
|
|
1,784
|
|
2009
|
|
|
1,703
|
|
2010
|
|
|
1,736
|
|
2011
|
|
|
1,770
|
|
2012 and thereafter
|
|
$
|
152,102
|
|
The Operating Partnership incurred $6,421, $6,309 and $4,981 of
rent expense, including rent expense under short-term rental and
lease arrangements, in 2006, 2005 and 2004, respectively.
Legal
proceedings
The Company has previously disclosed litigation brought by an
alleged Company shareholder against the Company, certain members
of the Companys board of directors, and certain of its
executive officers, seeking, among other things, inspection of
certain corporate records. On December 22, 2006, the
parties to the litigation agreed to settle any and all claims
that the parties had or may have had with respect to the
previously-disclosed actions styled Amy Vasquez v. Robert
L. Anderson, et al., Civil Action
No. 2003-CV-69140,
Clem Fowler v. Robert C. Goddard, III, et al.,
Civil Action
No. 2003-CV-69608,
Superior Court of Fulton County, Georgia, Ronald S.
Leventhal v. Robert C. Goddard, III, et al., Superior
Court of Fulton County, Georgia, Civil Action
No. 2004-CV-85875,
Ronald S. Leventhal v. Robert C. Goddard, III,
et al., United States District Court for the Northern
District of Georgia, Civil Action Number
1:04-CV-1445,
Post Properties, Inc. v. John Does 1-5, Civil Action
No. 2005-CV-105244,
Superior Court of Fulton County, Georgia, and certain other
related matters. In reaching this settlement, the Company and
the individual defendants did not pay any money to the
shareholder and denied any and all liability. All litigation
embraced by the settlement has been dismissed with prejudice.
Post Apartment Homes, L.P.
116
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
In November 2006, the Equal Rights Center filed a lawsuit
against the Company and the Operating Partnership in the United
States District Court for the District of Columbia. This suit
alleges various violations of the Fair Housing Act and the
Americans with Disabilities Act at properties designed,
constructed or operated by the Company and the Operating
Partnership in the District of Columbia, Virginia, Colorado,
Florida, Georgia, New York, North Carolina and Texas. The
plaintiff seeks compensatory and punitive damages in unspecified
amounts, an award of attorneys fees and costs of suit, as
well as preliminary and permanent injunctive relief that
includes retrofitting apartments and public use areas to comply
with the Fair Housing Act and the Americans with Disabilities
Act and prohibiting construction or sale of noncompliant units
or complexes. Due to the preliminary nature of the litigation,
it is not possible to predict or determine the outcome of the
legal proceeding, nor is it possible to estimate the amount of
loss, if any, that would be associated with an adverse decision.
The Company and the Operating Partnership are involved in
various other legal proceedings incidental to its business from
time to time, most of which are expected to be covered by
liability or other insurance. Management of the Company and the
Operating Partnership believe that any resolution of pending
proceedings or liability to the Company and the Operating
Partnership which may arise as a result of these various other
legal proceedings will not have a material adverse effect on the
Operating Partnerships results of operations or financial
position.
|
|
12.
|
RELATED
PARTY TRANSACTIONS
|
In 2006, 2005 and 2004, the Operating Partnership held
investments in Property LLCs accounted for under the
equity method of accounting (see note 3). In 2006, 2005 and
2004, the Operating Partnership recorded, before elimination of
the Operating Partnerships equity interests, project
management fees, property management fees and expense
reimbursements (primarily personnel costs) of approximately
$1,537, $1,781 and $1,756, respectively, from these related
companies. Additionally in 2006, 2005 and 2004, the Operating
Partnership earned interest under loans to unconsolidated
entities totaling $860, $437 and $308, respectively. The
Operating Partnership portion of all significant inter-company
transactions was eliminated in the accompanying consolidated
financial statements.
At December 31, 2006 and 2005, the Operating Partnership
had outstanding loan balances to certain current and former
Operating Partnership executives totaling $1,268 and $2,485,
respectively. These loans mature ten years from their issue date
and bear interest at a rate of 6.32% per annum. Proceeds
from these loans were used by these executives to acquire the
Companys common shares on the open market. Additionally,
at December 31, 2006 and 2005, the Operating Partnership
had outstanding additional loans to certain Operating
Partnership executives totaling $500 and $640, respectively. The
loans bear interest at 6.32% per annum. If the executives
continue to be employed by the Operating Partnership, the loans
will be forgiven annually over five to ten year periods, as
defined in the agreements. The annual loan forgiveness of $100,
$140 and $140 was recorded as compensation expense in 2006, 2005
and 2004, respectively.
|
|
13.
|
DERIVATIVE
FINANCIAL INSTRUMENTS
|
At December 31, 2006, the Operating Partnership had an
outstanding interest rate swap agreement with a notional value
of approximately $95,510 with a maturity date in 2009. The swap
arrangement is a variable to fixed rate swap at a fixed rate of
5.21% and the swap was designated as a cash flow hedge of the
Operating Partnerships FNMA variable rate debt. This swap
was entered into following the termination of a prior swap
arrangement discussed below. The interest rate swap agreement is
included on the accompanying consolidated balance sheet at fair
value.
In the early 2006, a previous interest rate swap arrangement,
accounted for as a cash flow hedge, became ineffective under
generally accepted accounting principles
(SFAS No. 133, as amended). As a result, the gross
increase in the market value of the interest rate swap
arrangement of $1,655 through its termination date in 2006 was
recognized in other income in the consolidated statement of
operations. In addition, under SFAS No. 133, as
amended, the Operating Partnership is required to amortize into
interest expense the cumulative unrecognized loss on the
terminated interest rate swap arrangement of $4,021, included in
shareholders equity, over the remaining life of the swap
through 2009. Total amortization expense related to this swap
was $1,116 in 2006. The swap arrangement was terminated through
a $2,448 termination payment to the swap counterparty. At
December 31, 2005, this terminated swap arrangement had a
notional value of approximately $97,100.
At December 31, 2006 and 2005, the fair value of the
interest rate swap agreements represented liabilities of $564
and $4,021, respectively, and the liabilities were included in
consolidated liabilities in the accompanying consolidated
balance sheets. Other than discussed above, the changes in the
fair value of these cash flow hedges were recorded as changes in
Post Apartment Homes, L.P.
117
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
accumulated other comprehensive income (loss), a partners
equity account, in the accompanying consolidated balance sheet.
At December 31, 2006 and 2005, the Operating Partnership
had outstanding an interest rate cap agreement with a financial
institution with a notional value of $28,495. Through
mid-December 2006, this interest rate cap agreement was a cash
flow hedge that provides a fixed interest ceiling at 5% for the
Operating Partnerships variable rate, tax-exempt
borrowings aggregating $28,495. In December 2006, the Operating
Partnership repaid $18,600 of tax-exempt indebtedness associated
with the sale of an apartment community. The portion of this
interest rate cap arrangement with a notional amount of $18,600
associated with this indebtedness was not terminated and as a
result became ineffective for accounting purposes. At that time,
the Operating Partnership recognized a loss of approximately
$142 due to such ineffectiveness. The Operating Partnership is
required to maintain the interest rate exposure protection under
the terms of the financing arrangements. The interest rate cap
arrangement is included on the accompanying balance sheet at
fair value. At December 31, 2006, the difference between
the amortized costs of the interest rate cap arrangement and
their $0 fair value is included in accumulated other
comprehensive income (loss), a partners equity account.
The original cost of $126 of the arrangements is being amortized
to expense over their five-year term.
In 2005, in connection with the sale of three communities
discussed in note 2 above, the Operating Partnership sold
its interest in interest rate cap agreements with notional
values of $81,560 for aggregate proceeds of $17 and realized
losses of $955 that were included in the loss on early
extinguishment of indebtedness associated with asset sales on
the accompanying statement of operations. In 2004, in connection
with the sale of five communities discussed in note 5
above, the Operating Partnership sold its interest in interest
rate cap agreements with notional values of $104,325 for
aggregate proceeds of $379 and realized losses of $941 that was
included in the loss on early extinguishment of indebtedness
associated with asset sales on the accompanying statement of
operations. The unrealized losses on these interest rate cap
agreements were previously reflected in accumulated other
comprehensive income (loss), a partners equity account.
These interest rate cap agreements were sold and the underlying
hedged indebtedness was assumed by the purchasers in connection
with the sale of the related assets.
The impact of the change in the value of the derivatives on
comprehensive income (loss) is included in the statement of
shareholders equity. Amounts reported in accumulated other
comprehensive income related to these derivatives will be
reclassified to interest expense as schedule interest payments
are made on the Operating Partnerships hedged
indebtedness. At December 31, 2006, the Operating
Partnership estimates that $1,226 will be reclassified from
accumulated other comprehensive income as an increase in
interest expense during the next twelve months.
|
|
14.
|
FAIR
VALUE OF FINANCIAL INSTRUMENTS
|
The disclosures of estimated fair value were determined by
management using available market information and appropriate
valuation methodologies available to management at
December 31, 2006. Considerable judgment is necessary to
interpret market data and develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts the Operating Partnership could
realize on disposition of the financial instruments. The use of
different market assumptions
and/or
estimation methodologies may have a material effect on the
estimated fair value amounts.
Cash equivalents, rents and accounts receivables, accounts
payable, accrued expenses and other liabilities are carried at
amounts which reasonably approximate their fair values because
of the short-term nature of these instruments. At
December 31, 2006, the fair value of fixed rate debt was
approximately $828,983 (carrying value of $819,371) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements. At
December 31, 2005, the fair value of fixed rate debt was
approximately $767,271 (carrying value of $753,641) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements.
In order to manage the impact of interest rate changes on
earnings and cash flow, the Operating Partnership entered into
and has outstanding interest rate swap and interest rate cap
arrangements. As more fully described in note 1, these
interest rate cap and interest rate swap agreements are carried
on the consolidated balance sheet at fair market value in
accordance with SFAS No. 133, as amended. At
December 31, 2006, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling $564
and the carrying value of the interest rate cap arrangement had
no value. At December 31, 2005, the carrying amounts of the
interest rate swap arrangement represented a net liability
totaling $4,021 and the carrying value of the interest rate cap
arrangement represented a net asset of $5.
Post Apartment Homes, L.P.
118
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of
December 31, 2006. Although management is not aware of any
factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that
date and current estimates of fair value may differ
significantly from the amounts presented herein.
Segment
Description
In accordance with SFAS No. 131, Disclosure
About the Segments of an Enterprise and Related
Information, the Operating Partnership presents segment
information based on the way that management organizes the
segments within the enterprise for making operating decisions
and assessing performance. The segment information is prepared
on the same basis as the internally reported information used by
the Operating Partnerships chief operating decision makers
to manage the business.
The Operating Partnerships chief operating decision makers
focus on the Operating Partnerships primary sources of
income from apartment community rental operations. Apartment
community rental operations are generally broken down into four
segments based on the various stages in the apartment community
ownership lifecycle. These segments are described below. All
commercial properties and other ancillary service and support
operations are combined in the line item other in
the accompanying segment information. The segment information
presented below reflects the segment categories based on the
lifecycle status of each community as of January 1, 2005.
The segment information for the years ended December 31,
2005 and 2004 have been adjusted due to the restatement impact
of reclassifying the operating results of the assets designated
as held for sale in 2006 to discontinued operations under
SFAS No. 144 (see note 2).
|
|
|
Fully stabilized communities those apartment
communities which have been stabilized (the earlier of the point
at which a property reaches 95% occupancy or one year after
completion of construction) for both the current and prior year.
|
|
|
Development, rehabilitation and
lease-up
communities those apartment communities under
development, rehabilitation and
lease-up
during the period.
|
|
|
Condominium conversion communities those portions of
existing apartment communities being converted into condominiums
that are reflected in continuing operations under
SFAS No. 144 (see note 1).
|
|
|
Acquired communities those communities acquired in
the current or prior year.
|
Segment
Performance Measure
Management uses contribution to consolidated property net
operating income (NOI) as the performance measure
for its operating segments. The Operating Partnership uses net
operating income, including net operating income of stabilized
communities, as an operating measure. Net operating income is
defined as rental and other property revenue from real estate
operations less total property and maintenance expenses from
real estate operations (excluding depreciation and
amortization). The Operating Partnership believes that net
operating income is an important supplemental measure of
operating performance for a REITs operating real estate
because it provides a measure of the core operations, rather
than factoring in depreciation and amortization, financing costs
and general and administrative expenses generally incurred at
the corporate level. This measure is particularly useful, in the
opinion of the Operating Partnership, in evaluating the
performance of operating segment groupings and individual
properties. Additionally, the Operating Partnership believes
that net operating income, as defined, is a widely accepted
measure of comparative operating performance in the real estate
investment community. The Operating Partnership believes that
the line on the Operating Partnerships consolidated
statement of operations entitled net income is the
most directly comparable GAAP measure to net operating income.
Post Apartment Homes, L.P.
119
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Segment
Information
The following table reflects each segments contribution to
consolidated revenues and NOI together with a reconciliation of
segment contribution to NOI to consolidated net income in 2006,
2005 and 2004. Additionally, substantially all of the Operating
Partnerships assets relate to the Operating
Partnerships property rental operations. Asset cost,
depreciation and amortization by segment are not presented
because such information is not reported internally at the
segment level.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
252,761
|
|
|
$
|
239,817
|
|
|
$
|
229,169
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
9,545
|
|
|
|
10,438
|
|
|
|
10,139
|
|
Condominium conversion communities
|
|
|
2,626
|
|
|
|
5,890
|
|
|
|
5,716
|
|
Acquired communities
|
|
|
10,886
|
|
|
|
2,298
|
|
|
|
|
|
Other property segments
|
|
|
23,876
|
|
|
|
21,798
|
|
|
|
20,768
|
|
Other
|
|
|
402
|
|
|
|
255
|
|
|
|
1,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenues
|
|
$
|
300,096
|
|
|
$
|
280,496
|
|
|
$
|
266,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to Property Net
Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
156,890
|
|
|
$
|
148,075
|
|
|
$
|
141,709
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
4,254
|
|
|
|
6,077
|
|
|
|
5,690
|
|
Condominium conversion communities
|
|
|
725
|
|
|
|
3,877
|
|
|
|
3,675
|
|
Acquired communities
|
|
|
6,180
|
|
|
|
1,442
|
|
|
|
|
|
Other property segments, including
corporate management expenses
|
|
|
(5,527
|
)
|
|
|
(7,345
|
)
|
|
|
(6,702
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated property net
operating income
|
|
|
162,522
|
|
|
|
152,126
|
|
|
|
144,372
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,261
|
|
|
|
661
|
|
|
|
817
|
|
Other revenues
|
|
|
402
|
|
|
|
255
|
|
|
|
1,000
|
|
Minority interest in consolidated
property partnerships
|
|
|
(257
|
)
|
|
|
239
|
|
|
|
671
|
|
Depreciation
|
|
|
(67,328
|
)
|
|
|
(70,435
|
)
|
|
|
(73,665
|
)
|
Interest expense
|
|
|
(54,049
|
)
|
|
|
(55,638
|
)
|
|
|
(59,763
|
)
|
Amortization of deferred financing
costs
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
|
|
(4,304
|
)
|
General and administrative
|
|
|
(18,502
|
)
|
|
|
(18,307
|
)
|
|
|
(18,205
|
)
|
Investment, development and other
expenses
|
|
|
(6,424
|
)
|
|
|
(4,711
|
)
|
|
|
(2,930
|
)
|
Termination of debt remarketing
agreement (interest expense)
|
|
|
|
|
|
|
|
|
|
|
(10,615
|
)
|
Loss on early extinguishment of
indebtedness
|
|
|
|
|
|
|
|
|
|
|
(4,011
|
)
|
Severance charges
|
|
|
|
|
|
|
(796
|
)
|
|
|
|
|
Gains (losses) on sales of
condominiums, net
|
|
|
12,378
|
|
|
|
(531
|
)
|
|
|
|
|
Equity in income of unconsolidated
real estate entities
|
|
|
1,813
|
|
|
|
1,767
|
|
|
|
1,083
|
|
Other income
|
|
|
3,095
|
|
|
|
5,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
31,385
|
|
|
|
5,236
|
|
|
|
(25,550
|
)
|
Income from discontinued operations
|
|
|
71,901
|
|
|
|
143,811
|
|
|
|
122,727
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
103,286
|
|
|
$
|
149,047
|
|
|
$
|
97,177
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
Non-cash investing and financing activities for the years ended
December 31, 2006, 2005 and 2004 were as follows:
In 2006, the Operating Partnership sold an apartment community
subject to $40,000 of secured mortgage indebtedness assumed by
the purchaser. In 2005, the Operating Partnership sold three
apartment communities subject to $81,560 of tax-exempt mortgage
indebtedness assumed by the purchasers. In 2004, the Operating
Partnership sold certain apartment communities subject to
$104,325 of tax-exempt mortgage indebtedness assumed by the
purchasers. Additionally in 2006, the Operating Partnership
acquired an apartment community for cash and the assumption of
secured mortgage indebtedness totaling $41,394. In 2004, the
Operating Partnership acquired an apartment community, including
the assumption
Post Apartment Homes, L.P.
120
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
of secured mortgage indebtedness with an estimated fair value of
$49,496. These transactions were excluded from the cash flow
statement as a non-cash transactions.
In 2006, the Operating Partnership amortized approximately
$1,116 of accumulated other comprehensive non-cash losses into
earnings related to an interest rate swap derivative financial
instrument (see note 13). In addition in 2006, the
Operating Partnership recognized a non-cash loss of $142 through
a reduction of accumulated other comprehensive losses as a
result of the ineffectiveness of an interest rate cap
arrangement (see note 13). Other than the amortization and
loss discussed herein, in 2006, the Operating Partnerships
derivative financial instruments, accounted for as cash flow
hedges, decreased in value causing an increase in accounts
payable and accrued expenses and a corresponding decrease in
shareholders equity of $305. In 2005, the Operating
Partnerships derivative financial instruments increased in
value causing a decrease in accounts payable and accrued
expenses and a corresponding increase in partners equity
of $5,850. In 2004, the Operating Partnerships derivative
financial instruments increased in value causing a decrease in
accounts payable and accrued expenses and a corresponding
increase in partners equity of $3,945.
The Operating Partnership committed to distribute $19,886,
$19,257 and $19,203 and for the quarters ended December 31,
2006, 2005 and 2004, respectively.
In 2006 and 2005, the Company issued common shares for director
compensation, totaling $471 and $194, respectively. In 2005,
under an amended and restated deferred compensation plan for
directors and officers, Company common shares were issued to the
plan in settlement of the Companys variable obligation
relating to changes in the value of its common shares due the
directors under the prior deferred compensation plan. This 2005
common share issuance totaling $1,568 and the additional stock
issuances in 2005 and 2006 were non-cash transactions. The
Operating Partnership bears the compensation costs associated
with the Companys compensation plans. As such, the
Operating Partnership issued common units to the Company in
amounts equal to the above.
In 2006 and 2005, the Operating Partnership and the Operating
Partnerships taxable REIT subsidiaries made income tax
payments to federal and state taxing authorities totaling $339
and $760, respectively. Such income tax payments were not
material in 2004 due to the existence of tax loss carryforwards
at the taxable REIT subsidiaries (see note 8).
In 2006, other income includes a gain on the sale of marketable
securities of $573, an additional gain on sale of a technology
investment of $325 resulting from the receipt of previously
escrowed proceeds under the prior year sale (see below), a $503
gain on the sale of a land parcel and additional income totaling
$1,655 resulting from the net increase in the market value of an
ineffective cash flow hedge prior to its termination. In 2005,
the Operating Partnership sold its investment in a technology
company, and recognized a gain of $5,267.
Post Apartment Homes, L.P.
121
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
|
|
18.
|
QUARTERLY
FINANCIAL INFORMATION (UNAUDITED)
|
Under SFAS No. 144, as further discussed in
note 2, the operating results of apartment communities
classified as held for sale were included in discontinued
operations in the accompanying statements of operations for all
periods presented. To conform with this presentation, the
quarterly financial information presented below reflects the
reclassification of the operating results of these assets to
discontinued operations, which in the first and second quarters
of 2006 differ from the presentation of discontinued operations
included in the Operating Partnerships previously issued
financial statements included in its quarterly reports on
Form 10-Q
filed in 2006. Quarterly financial information for the years
ended December 31, 2006 and 2005, as revised to reflect the
change discussed above, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
72,204
|
|
|
$
|
74,267
|
|
|
$
|
76,874
|
|
|
$
|
76,751
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,852
|
|
|
|
12,738
|
|
|
|
7,518
|
|
|
|
7,277
|
|
Income from discontinued operations
|
|
|
1,021
|
|
|
|
1,512
|
|
|
|
28,947
|
|
|
|
40,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,873
|
|
|
|
14,250
|
|
|
|
36,465
|
|
|
|
47,698
|
|
Distributions to preferred
unitholders
|
|
|
(1,909
|
)
|
|
|
(1,910
|
)
|
|
|
(1,909
|
)
|
|
|
(1,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders
|
|
$
|
2,964
|
|
|
$
|
12,340
|
|
|
$
|
34,556
|
|
|
$
|
45,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Common Unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders basic
|
|
$
|
0.07
|
|
|
$
|
0.28
|
|
|
$
|
0.79
|
|
|
$
|
1.04
|
|
Net income available to common
unitholders diluted
|
|
$
|
0.07
|
|
|
$
|
0.28
|
|
|
$
|
0.77
|
|
|
$
|
1.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2005
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
67,646
|
|
|
$
|
69,130
|
|
|
$
|
71,900
|
|
|
$
|
71,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations
|
|
|
1,104
|
|
|
|
(1,067
|
)
|
|
|
1,584
|
|
|
|
3,615
|
|
Income from discontinued operations
|
|
|
3,740
|
|
|
|
62,928
|
|
|
|
75,661
|
|
|
|
1,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,844
|
|
|
|
61,861
|
|
|
|
77,245
|
|
|
|
5,097
|
|
Distributions to preferred
unitholders
|
|
|
(1,909
|
)
|
|
|
(1,910
|
)
|
|
|
(1,909
|
)
|
|
|
(1,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders
|
|
$
|
2,935
|
|
|
$
|
59,951
|
|
|
$
|
75,336
|
|
|
$
|
3,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Common Unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common
unitholders basic
|
|
$
|
0.07
|
|
|
$
|
1.42
|
|
|
$
|
1.77
|
|
|
$
|
0.08
|
|
Net income available to common
unitholders diluted
|
|
$
|
0.07
|
|
|
$
|
1.42
|
|
|
$
|
1.77
|
|
|
$
|
0.08
|
|
In the third and fourth quarters of 2006 and the second and
third quarters of 2005, net income increased primarily due to
gains on sales of apartment communities during those periods.
Post Apartment Homes, L.P.
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule III
|
POST PROPERTIES, INC.
|
POST APARTMENT HOMES, L.P.
|
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
|
December 31, 2006
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
Gross Amount at Which
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Costs
|
|
|
Capitalized
|
|
|
Carried at Close of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
Building and
|
|
|
Subsequent
|
|
|
|
|
|
Building and
|
|
|
|
|
|
Accumulated
|
|
|
Date of
|
|
Date
|
|
Depreciable
|
|
|
Description
|
|
Encumbrances
|
|
|
Land
|
|
|
Improvements
|
|
|
To Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Total(1)
|
|
|
Depreciation
|
|
|
Construction
|
|
Acquired
|
|
Lives Years
|
|
Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Ashford®
|
|
Apartments
|
|
$
|
9,895
|
|
|
$
|
1,906
|
|
|
$
|
|
|
|
$
|
9,404
|
|
|
$
|
1,906
|
|
|
$
|
9,404
|
|
|
$
|
11,310
|
|
|
$
|
5,039
|
|
|
04/86
-06/87
|
|
04/86
|
|
|
5-40 Years
|
Post
Briarclifftm
|
|
Apartments
|
|
|
|
|
|
|
13,344
|
|
|
|
|
|
|
|
47,868
|
|
|
|
13,344
|
|
|
|
47,868
|
|
|
|
61,212
|
|
|
|
14,964
|
|
|
12/96
|
|
09/96
|
|
|
5-40 Years
|
Post
Brookhaven®
|
|
Apartments
|
|
|
|
|
|
|
7,921
|
|
|
|
|
|
|
|
34,029
|
|
|
|
7,921
|
|
|
|
34,029
|
|
|
|
41,950
|
|
|
|
17,910
|
|
|
07/89
12/92
|
|
03/89
|
|
|
5-40 Years
|
Post
Chastain®
|
|
Apartments
|
|
|
28,164
|
(2)
|
|
|
6,352
|
|
|
|
|
|
|
|
47,038
|
|
|
|
6,779
|
|
|
|
46,611
|
|
|
|
53,390
|
|
|
|
21,459
|
|
|
06/88
10/90
|
|
06/88
|
|
|
5-40 Years
|
Post Collier
Hills®
|
|
Apartments
|
|
|
|
|
|
|
6,487
|
|
|
|
|
|
|
|
26,210
|
|
|
|
7,203
|
|
|
|
25,494
|
|
|
|
32,697
|
|
|
|
8,903
|
|
|
10/95
|
|
06/95
|
|
|
5-40 Years
|
Post
Crest®
|
|
Apartments
|
|
|
22,299
|
|
|
|
4,733
|
|
|
|
|
|
|
|
25,668
|
|
|
|
4,763
|
|
|
|
25,638
|
|
|
|
30,401
|
|
|
|
9,405
|
|
|
09/95
|
|
10/94
|
|
|
5-40 Years
|
Post
Crossing®
|
|
Apartments
|
|
|
|
|
|
|
3,951
|
|
|
|
|
|
|
|
20,623
|
|
|
|
3,951
|
|
|
|
20,623
|
|
|
|
24,574
|
|
|
|
7,367
|
|
|
04/94
08/95
|
|
11/93
|
|
|
5-40 Years
|
Post
Dunwoody®
|
|
Apartments
|
|
|
|
|
|
|
4,917
|
|
|
|
|
|
|
|
30,277
|
|
|
|
4,961
|
|
|
|
30,233
|
|
|
|
35,194
|
|
|
|
12,379
|
|
|
11/88
|
|
12/84 &
8/94
|
|
|
5-40 Years
|
Post
Gardens®
|
|
Apartments
|
|
|
|
|
|
|
5,859
|
|
|
|
|
|
|
|
35,060
|
|
|
|
5,931
|
|
|
|
34,988
|
|
|
|
40,919
|
|
|
|
10,990
|
|
|
07/96
|
|
05/96
|
|
|
5-40 Years
|
Post
Glen®
|
|
Apartments
|
|
|
19,775
|
|
|
|
5,591
|
|
|
|
|
|
|
|
22,550
|
|
|
|
5,784
|
|
|
|
22,357
|
|
|
|
28,141
|
|
|
|
7,614
|
|
|
07/96
|
|
05/96
|
|
|
5-40 Years
|
Post Lenox
Park®
|
|
Apartments
|
|
|
10,398
|
(2)
|
|
|
3,132
|
|
|
|
|
|
|
|
11,805
|
|
|
|
3,132
|
|
|
|
11,805
|
|
|
|
14,937
|
|
|
|
4,221
|
|
|
03/94
05/95
|
|
03/94
|
|
|
5-40 Years
|
Post
Lindbergh®
|
|
Apartments
|
|
|
|
|
|
|
6,268
|
|
|
|
|
|
|
|
27,906
|
|
|
|
6,652
|
|
|
|
27,522
|
|
|
|
34,174
|
|
|
|
8,493
|
|
|
11/96
|
|
08/96
|
|
|
5-40 Years
|
Post
Oglethorpe®
|
|
Apartments
|
|
|
|
|
|
|
3,662
|
|
|
|
|
|
|
|
18,001
|
|
|
|
3,662
|
|
|
|
18,001
|
|
|
|
21,663
|
|
|
|
6,708
|
|
|
03/93
10/94
|
|
03/93
|
|
|
5-40 Years
|
Post
Parksidetm
|
|
Mixed Use
|
|
|
|
|
|
|
3,402
|
|
|
|
|
|
|
|
20,599
|
|
|
|
3,465
|
|
|
|
20,536
|
|
|
|
24,001
|
|
|
|
5,771
|
|
|
02/99
|
|
12/97
|
|
|
5-40 Years
|
Post Peachtree
Hills®
|
|
Apartments
|
|
|
|
|
|
|
4,215
|
|
|
|
|
|
|
|
15,197
|
|
|
|
4,857
|
|
|
|
14,555
|
|
|
|
19,412
|
|
|
|
6,065
|
|
|
02/92
09/94
|
|
02/92 &
9/92
|
|
|
5-40 Years
|
Post
Renaissance®(3)
|
|
Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,465
|
|
|
|
|
|
|
|
21,465
|
|
|
|
21,465
|
|
|
|
9,118
|
|
|
07/91
12/94
|
|
06/91 &
01/94
|
|
|
5-40 Years
|
Post
Ridge®
|
|
Apartments
|
|
|
|
|
|
|
5,150
|
|
|
|
|
|
|
|
32,326
|
|
|
|
5,150
|
|
|
|
32,326
|
|
|
|
37,476
|
|
|
|
9,749
|
|
|
10/96
|
|
07/96
|
|
|
5-40 Years
|
Post
Riverside®
|
|
Mixed Use
|
|
|
|
|
|
|
11,130
|
|
|
|
|
|
|
|
111,851
|
|
|
|
12,457
|
|
|
|
110,524
|
|
|
|
122,981
|
|
|
|
34,999
|
|
|
07/96
|
|
01/96
|
|
|
5-40 Years
|
Post
Springtm
|
|
Apartments
|
|
|
|
|
|
|
2,105
|
|
|
|
|
|
|
|
38,527
|
|
|
|
2,105
|
|
|
|
38,527
|
|
|
|
40,632
|
|
|
|
10,101
|
|
|
09/99
|
|
09/99
|
|
|
5-40 Years
|
Post
Stratfordtm(3)
|
|
Apartments
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
25,842
|
|
|
|
620
|
|
|
|
25,550
|
|
|
|
26,170
|
|
|
|
7,235
|
|
|
04/99
|
|
01/99
|
|
|
5-40 Years
|
Post
Vinings®
|
|
Apartments
|
|
|
|
|
|
|
4,322
|
|
|
|
|
|
|
|
23,256
|
|
|
|
5,668
|
|
|
|
21,910
|
|
|
|
27,578
|
|
|
|
12,136
|
|
|
05/88
09/91
|
|
05/88
|
|
|
5-40 Years
|
Post
Woods®
|
|
Apartments
|
|
|
24,935
|
(2)
|
|
|
1,378
|
|
|
|
|
|
|
|
29,521
|
|
|
|
3,070
|
|
|
|
27,829
|
|
|
|
30,899
|
|
|
|
15,898
|
|
|
03/76
09/83
|
|
06/76
|
|
|
5-40 Years
|
123
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule III continued
|
POST PROPERTIES, INC.
|
POST APARTMENT HOMES, L.P.
|
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
|
December 31, 2006
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
Gross Amount at Which
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Costs
|
|
|
Capitalized
|
|
|
Carried at Close of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
Building and
|
|
|
Subsequent
|
|
|
|
|
|
Building and
|
|
|
|
|
|
Accumulated
|
|
|
Date of
|
|
Date
|
|
Depreciable
|
|
|
Description
|
|
Encumbrances
|
|
|
Land
|
|
|
Improvements
|
|
|
To Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Total(1)
|
|
|
Depreciation
|
|
|
Construction
|
|
Acquired
|
|
Lives Years
|
|
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Abbeytm
|
|
Apartments
|
|
$
|
|
|
|
$
|
575
|
|
|
$
|
6,276
|
|
|
$
|
1,831
|
|
|
$
|
575
|
|
|
$
|
8,107
|
|
|
$
|
8,682
|
|
|
$
|
1,955
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post Addison
Circletm
|
|
Mixed Use
|
|
|
84,151
|
|
|
|
2,885
|
|
|
|
41,482
|
|
|
|
123,502
|
|
|
|
8,382
|
|
|
|
159,487
|
|
|
|
167,869
|
|
|
|
45,387
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post Barton
Creektm
|
|
Apartments
|
|
|
|
|
|
|
1,920
|
|
|
|
24,482
|
|
|
|
679
|
|
|
|
1,920
|
|
|
|
25,161
|
|
|
|
27,081
|
|
|
|
576
|
|
|
N/A
|
|
03/06
|
|
|
5-40 Years
|
Post Coles
Cornertm
|
|
Mixed Use
|
|
|
|
|
|
|
1,886
|
|
|
|
18,006
|
|
|
|
2,335
|
|
|
|
2,086
|
|
|
|
20,141
|
|
|
|
22,227
|
|
|
|
6,356
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post
Heightstm/Gallery
|
|
Mixed Use
|
|
|
|
|
|
|
5,455
|
|
|
|
15,559
|
|
|
|
30,201
|
|
|
|
5,812
|
|
|
|
45,403
|
|
|
|
51,215
|
|
|
|
12,806
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post Legacy
|
|
Mixed Use
|
|
|
|
|
|
|
684
|
|
|
|
|
|
|
|
33,518
|
|
|
|
811
|
|
|
|
33,391
|
|
|
|
34,202
|
|
|
|
8,095
|
|
|
03/99
|
|
03/99
|
|
|
5-40 Years
|
Post
Meridiantm
|
|
Apartments
|
|
|
|
|
|
|
1,535
|
|
|
|
11,605
|
|
|
|
1,417
|
|
|
|
1,535
|
|
|
|
13,022
|
|
|
|
14,557
|
|
|
|
3,780
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post Midtown
Square®
|
|
Mixed Use
|
|
|
|
|
|
|
4,408
|
|
|
|
1,412
|
|
|
|
47,122
|
|
|
|
3,409
|
|
|
|
49,533
|
|
|
|
52,942
|
|
|
|
12,391
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post Park
Mesatm
|
|
Apartments
|
|
|
|
|
|
|
1,480
|
|
|
|
17,861
|
|
|
|
467
|
|
|
|
1,480
|
|
|
|
18,328
|
|
|
|
19,808
|
|
|
|
415
|
|
|
N/A
|
|
03/06
|
|
|
5-40 Years
|
Post Rice
Loftstm(3)
|
|
Mixed Use
|
|
|
|
|
|
|
449
|
|
|
|
13,393
|
|
|
|
27,250
|
|
|
|
449
|
|
|
|
40,643
|
|
|
|
41,092
|
|
|
|
8,605
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post
Squaretm
|
|
Mixed Use
|
|
|
|
|
|
|
4,565
|
|
|
|
24,595
|
|
|
|
1,595
|
|
|
|
445
|
|
|
|
30,310
|
|
|
|
30,755
|
|
|
|
6,447
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post Uptown
Villagetm
|
|
Apartments
|
|
|
15,143
|
(2)
|
|
|
3,955
|
|
|
|
22,120
|
|
|
|
17,446
|
|
|
|
6,195
|
|
|
|
37,326
|
|
|
|
43,521
|
|
|
|
9,083
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post
Vineyardtm
|
|
Apartments
|
|
|
|
|
|
|
1,133
|
|
|
|
8,560
|
|
|
|
599
|
|
|
|
1,133
|
|
|
|
9,159
|
|
|
|
10,292
|
|
|
|
2,202
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post
Vintagetm
|
|
Apartments
|
|
|
|
|
|
|
2,614
|
|
|
|
12,188
|
|
|
|
846
|
|
|
|
2,614
|
|
|
|
13,034
|
|
|
|
15,648
|
|
|
|
3,528
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post Wilson
Buildingtm(3)
|
|
Mixed Use
|
|
|
|
|
|
|
|
|
|
|
689
|
|
|
|
20,262
|
|
|
|
|
|
|
|
20,951
|
|
|
|
20,951
|
|
|
|
3,596
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post
Worthingtontm
|
|
Mixed Use
|
|
|
|
|
|
|
3,744
|
|
|
|
34,700
|
|
|
|
9,534
|
|
|
|
3,744
|
|
|
|
44,234
|
|
|
|
47,978
|
|
|
|
10,353
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Bay at Rocky
Pointtm(5)
|
|
Apartments
|
|
|
|
|
|
|
528
|
|
|
|
5,081
|
|
|
|
|
|
|
|
528
|
|
|
|
5,081
|
|
|
|
5,609
|
|
|
|
14
|
|
|
N/A
|
|
10/06
|
|
|
5-40 Years
|
Post Harbour
Placetm
|
|
Mixed Use
|
|
|
|
|
|
|
3,854
|
|
|
|
|
|
|
|
65,717
|
|
|
|
8,312
|
|
|
|
61,259
|
|
|
|
69,571
|
|
|
|
15,406
|
|
|
03/97
|
|
01/97
|
|
|
5-40 Years
|
Post Hyde
Park®
|
|
Apartments
|
|
|
|
|
|
|
3,498
|
|
|
|
|
|
|
|
27,103
|
|
|
|
5,108
|
|
|
|
25,493
|
|
|
|
30,601
|
|
|
|
8,402
|
|
|
09/94
|
|
07/94
|
|
|
5-40 Years
|
Post
Parksidetm
|
|
Mixed Use
|
|
|
|
|
|
|
2,493
|
|
|
|
|
|
|
|
32,220
|
|
|
|
2,493
|
|
|
|
32,220
|
|
|
|
34,713
|
|
|
|
7,709
|
|
|
03/99
|
|
03/99
|
|
|
5-40 Years
|
Post Rocky
Point®
|
|
Apartments
|
|
|
57,000
|
|
|
|
10,510
|
|
|
|
|
|
|
|
63,395
|
|
|
|
10,567
|
|
|
|
63,338
|
|
|
|
73,905
|
|
|
|
19,491
|
|
|
04/94
11/96
|
|
02/94 &
09/96
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Carlyle
Squaretm(5)
|
|
Mixed Use
|
|
|
|
|
|
|
1,043
|
|
|
|
|
|
|
|
13,067
|
|
|
|
1,043
|
|
|
|
13,067
|
|
|
|
14,110
|
|
|
|
25
|
|
|
12/04
|
|
N/A
|
|
|
5-40 Years
|
Post
Corners®
|
|
Apartments
|
|
|
16,960
|
(2)
|
|
|
4,404
|
|
|
|
|
|
|
|
24,925
|
|
|
|
4,493
|
|
|
|
24,836
|
|
|
|
29,329
|
|
|
|
8,002
|
|
|
06/94
|
|
06/94
|
|
|
5-40 Years
|
Post Fallsgrove
|
|
Apartments
|
|
|
41,147
|
|
|
|
14,801
|
|
|
|
69,179
|
|
|
|
383
|
|
|
|
14,801
|
|
|
|
69,562
|
|
|
|
84,363
|
|
|
|
946
|
|
|
N/A
|
|
7/06
|
|
|
5-40 Years
|
Post
Forest®
|
|
Apartments
|
|
|
|
|
|
|
8,590
|
|
|
|
|
|
|
|
27,433
|
|
|
|
9,106
|
|
|
|
26,917
|
|
|
|
36,023
|
|
|
|
15,724
|
|
|
01/89
12/90
|
|
03/88
|
|
|
5-40 Years
|
Post Pentagon
Rowtm(3)
|
|
Mixed Use
|
|
|
|
|
|
|
2,359
|
|
|
|
7,659
|
|
|
|
85,674
|
|
|
|
3,470
|
|
|
|
92,222
|
|
|
|
95,692
|
|
|
|
13,610
|
|
|
06/99
|
|
02/99
|
|
|
5-40 Years
|
Post Tysons
Cornertm
|
|
Apartments
|
|
|
|
|
|
|
20,000
|
|
|
|
65,478
|
|
|
|
1,575
|
|
|
|
20,000
|
|
|
|
67,053
|
|
|
|
87,053
|
|
|
|
5,592
|
|
|
N/A
|
|
06/04
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Luminariatm
|
|
Mixed Use
|
|
|
35,000
|
|
|
|
4,938
|
|
|
|
|
|
|
|
46,131
|
|
|
|
4,938
|
|
|
|
46,131
|
|
|
|
51,069
|
|
|
|
9,491
|
|
|
03/01
|
|
03/01
|
|
|
5-40 Years
|
Post
Toscanatm
|
|
Mixed Use
|
|
|
|
|
|
|
15,976
|
|
|
|
|
|
|
|
76,870
|
|
|
|
17,156
|
|
|
|
75,690
|
|
|
|
92,846
|
|
|
|
7,332
|
|
|
01/02
|
|
01/02
|
|
|
5-40 Years
|
124
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule III continued
|
POST PROPERTIES, INC.
|
POST APARTMENT HOMES, L.P.
|
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
|
December 31, 2006
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
Gross Amount at Which
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Initial Costs
|
|
|
Capitalized
|
|
|
Carried at Close of Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related
|
|
|
|
|
|
Building and
|
|
|
Subsequent
|
|
|
|
|
|
Building and
|
|
|
|
|
|
Accumulated
|
|
|
Date of
|
|
Date
|
|
Depreciable
|
|
|
Description
|
|
Encumbrances
|
|
|
Land
|
|
|
Improvements
|
|
|
To Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Total(1)
|
|
|
Depreciation
|
|
|
Construction
|
|
Acquired
|
|
Lives Years
|
|
North Carolina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Ballantyne
|
|
Apartments
|
|
|
|
|
|
$
|
6,400
|
|
|
$
|
30,850
|
|
|
$
|
2,408
|
|
|
$
|
6,400
|
|
|
$
|
33,258
|
|
|
$
|
39,658
|
|
|
$
|
2,001
|
|
|
11/04
|
|
05/05
|
|
|
5-40 Years
|
Post Gateway
Placetm
|
|
Mixed Use
|
|
$
|
|
|
|
|
2,424
|
|
|
|
|
|
|
|
61,184
|
|
|
|
3,481
|
|
|
|
60,127
|
|
|
|
63,608
|
|
|
|
12,210
|
|
|
11/00
|
|
08/99
|
|
|
5-40 Years
|
Post Park at Phillips
Place®
|
|
Mixed Use
|
|
|
|
|
|
|
4,305
|
|
|
|
|
|
|
|
37,988
|
|
|
|
4,307
|
|
|
|
37,986
|
|
|
|
42,293
|
|
|
|
12,472
|
|
|
01/96
|
|
11/95
|
|
|
5-40 Years
|
Post Uptown
Placetm
|
|
Mixed Use
|
|
|
|
|
|
|
2,336
|
|
|
|
|
|
|
|
28,843
|
|
|
|
2,363
|
|
|
|
28,816
|
|
|
|
31,179
|
|
|
|
6,761
|
|
|
09/98
|
|
09/98
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
Investments(6)
|
|
|
|
|
|
|
|
|
13,212
|
|
|
|
5,496
|
|
|
|
241,791
|
|
|
|
98,711
|
|
|
|
161,788
|
|
|
|
260,499
|
|
|
|
20,190
|
|
|
|
|
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
364,866
|
|
|
$
|
265,112
|
|
|
$
|
436,671
|
|
|
$
|
1,830,334
|
|
|
$
|
371,248
|
|
|
$
|
2,160,869
|
(4)
|
|
$
|
2,532,117
|
(4)
|
|
$
|
547,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The aggregate cost for Federal
Income Tax purposes to the Company was approximately $2,173,000
at December 31, 2006, taking into account
the special allocation of gain to the partners contributing
property to the Operating Partnership.
|
(2)
|
|
These properties serve as
collateral for the Federal National Mortgage Association credit
enhancement.
|
(3)
|
|
The Company has a leasehold
interest in the land underlying these communities.
|
(4)
|
|
This total excludes for-sale
condominiums and assets held for sale of $28,295 and $15,645,
respectively, at December 31, 2006. Assets held for sale
include
the Post
Oaktm
community with gross assets and gross accumulated depreciation
of $10,967 and $4,035, respectively, at December 31, 2006.
|
(5)
|
|
For communities in
lease-up,
amounts represent cost associated with completed apartment units.
|
(6)
|
|
Miscellaneous investments include
construction in progress, land held for development and certain
other corporate assets.
|
A summary of activity for real estate investments and
accumulated depreciation is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Real estate investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
2,373,406
|
|
|
$
|
2,407,425
|
|
|
$
|
2,376,524
|
|
Improvements
|
|
|
316,296
|
|
|
|
129,101
|
|
|
|
106,621
|
|
Disposition of property(a)
|
|
|
(157,585
|
)
|
|
|
(163,120
|
)
|
|
|
(75,720
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
2,532,117
|
|
|
$
|
2,373,406
|
|
|
$
|
2,407,425
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
516,954
|
|
|
$
|
498,367
|
|
|
$
|
436,245
|
|
Depreciation(b)
|
|
|
67,311
|
|
|
|
75,185
|
|
|
|
83,271
|
|
Accumulated depreciation on
disposed property(a)
|
|
|
(36,788
|
)
|
|
|
(56,598
|
)
|
|
|
(21,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year(c)
|
|
$
|
547,477
|
|
|
$
|
516,954
|
|
|
$
|
498,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents reductions for assets
classified as held for sale and converted into for-sale
condominiums as well as assets sold in 2006.
|
(b)
|
|
Represents depreciation expense of
real estate assets. Amounts exclude depreciation and
amortization of lease intangible assets,
commercial leasing costs and excess joint venture investments.
|
(c)
|
|
Accumulated depreciation on the
balance sheet excludes accumulated depreciation on assets held
for sale in the amounts of $4,035, $0 and $26,332
at December 31, 2006, 2005 and 2004, respectively.
|
125
Post Properties, Inc.
Post Apartment Homes, L.P.
Certain exhibits required by Item 601 of
Regulation S-K
have been filed with previous reports by the registrants and are
incorporated by reference herein.
The Registrants agree to furnish a copy of all agreements
relating to long-term debt upon request of the SEC.
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
|
|
Description
|
|
|
3
|
.1(a)
|
|
|
|
Articles of Incorporation of the
Company
|
|
3
|
.2(b)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.3(b)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.4(b)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.5(c)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.6(d)
|
|
|
|
Bylaws of the Company (as Amended
and Restated as of November 5, 2003)
|
|
3
|
.7(e)
|
|
|
|
Amendment No. 1 to the
Amended and Restated By-Laws of the Company
|
|
4
|
.1(f)
|
|
|
|
Indenture between the Company and
SunTrust Bank, as Trustee
|
|
4
|
.2(f)
|
|
|
|
Form of First Supplemental
Indenture to the Indenture between the Company and SunTrust
Bank, as Trustee
|
|
10
|
.1(b)
|
|
|
|
Second Amended and Restated
Agreement of Limited Partnership of the Operating Partnership
|
|
10
|
.2(b)
|
|
|
|
First Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.3(b)
|
|
|
|
Second Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.4(g)
|
|
|
|
Third Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.5(g)
|
|
|
|
Fourth Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.6(c)
|
|
|
|
Fifth Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.7(h)
|
|
|
|
Sixth Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.8(i)*
|
|
|
|
Employee Stock Plan
|
|
10
|
.9(b)*
|
|
|
|
Amendment to Employee Stock Plan
|
|
10
|
.10(b)*
|
|
|
|
Amendment No. 2 to Employee
Stock Plan
|
|
10
|
.11(b)*
|
|
|
|
Amendment No. 3 to Employee
Stock Plan
|
|
10
|
.12(b)*
|
|
|
|
Amendment No. 4 to Employee
Stock Plan
|
|
10
|
.13(j)*
|
|
|
|
2003 Incentive Stock Plan
|
|
10
|
.14(b)
|
|
|
|
Form of Indemnification Agreement
for officers and directors
|
|
10
|
.15(a)*
|
|
|
|
Profit Sharing Plan of the Company
|
|
10
|
.16(b)*
|
|
|
|
Amendment Number One to Profit
Sharing Plan
|
|
10
|
.17(b)*
|
|
|
|
Amendment Number Two to Profit
Sharing Plan
|
|
10
|
.18(b)*
|
|
|
|
Amendment Number Three to Profit
Sharing Plan
|
|
10
|
.19(b)*
|
|
|
|
Amendment Number Four to Profit
Sharing Plan
|
|
10
|
.20(a)
|
|
|
|
Form of General Partner 1%
Exchange Agreement
|
|
10
|
.21(k)*
|
|
|
|
Dividend Reinvestment Stock
Purchase Plan
|
|
10
|
.22(l)
|
|
|
|
Credit Agreement dated as of
January 16, 2004 among Post Apartment Homes, L.P., Wachovia
Bank, N.A., and certain other lenders
|
|
10
|
.23(m)
|
|
|
|
First Amendment to Credit Agreement
|
|
10
|
.24(n)
|
|
|
|
Letter Agreement, dated as of
December 22, 2004, by and among Post Apartment Homes, L.P.,
certain lenders under the Credit Agreement and Wachovia Bank,
N.A., as the Administrative Agent
|
|
10
|
.25(n)
|
|
|
|
Letter Agreement, dated as of
December 23, 2004, by and among Post Apartment Homes, L.P.
and Fannie Mae
|
|
10
|
.26(o)*
|
|
|
|
Deferred Compensation Plan for
Directors and Eligible Employees (as amended and restated
effective as of January 1, 2005)
|
|
10
|
.27(p)*
|
|
|
|
Form of Change in Control
Agreement (3.0X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.28(p)*
|
|
|
|
Form of Change in Control
Agreement (2.0X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.29(q)*
|
|
|
|
Form of Change in Control
Agreement (1.5X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.30(q)*
|
|
|
|
Form of Change in Control
Agreement (1.0X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.31(q)*
|
|
|
|
Form of Amendment No. 1 to
Change in Control Agreement and schedule of executive officers
who have entered into such amendment
|
Post Properties, Inc.
Post Apartment Homes, L.P.
126
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
|
|
Description
|
|
|
10
|
.32(q)*
|
|
|
|
Version One Amendment No. 2
to Change in Control Agreement and schedule of executive
officers who have entered into such amendment
|
|
10
|
.33(q)*
|
|
|
|
Version Two Amendment No. 2
to Change in Control Agreement and schedule of executive
officers who have entered into such amendment
|
|
10
|
.34(q)*
|
|
|
|
Employment Agreement with David P.
Stockert
|
|
10
|
.35(d)*
|
|
|
|
Amendment No. 1 to Employment
Agreement with David P. Stockert
|
|
10
|
.36(q)*
|
|
|
|
Employment Agreement with Thomas
D. Senkbeil
|
|
10
|
.37(q)*
|
|
|
|
Amendment No. 1 to Employment
Agreement with Thomas D. Senkbeil
|
|
10
|
.38(d)*
|
|
|
|
Amendment No. 2 to Employment
Agreement with Thomas D. Senkbeil
|
|
10
|
.39(d)*+
|
|
|
|
Restricted Stock Grant Certificate
for Robert C. Goddard, III, dated July 17, 2003
|
|
10
|
.40(d)*
|
|
|
|
Non-Incentive Stock Option
Certificate for Robert C. Goddard, III, dated July 17,
2003
|
|
10
|
.41(r)*
|
|
|
|
Form of 2003 Incentive Stock Plan,
Non-Incentive Stock Option and Stock Appreciation Right
Certificate for Key Employees
|
|
10
|
.42(r)*
|
|
|
|
Form of 2003 Incentive Stock Plan,
Non-Incentive Stock Option and Stock Appreciation Right
Certificate for Directors
|
|
10
|
.43(s)*
|
|
|
|
Employment and Change in Control
Agreement, dated as of October 17, 2005, by and among
Thomas L. Wilkes, Post Properties, Inc., Post Apartment Homes,
L.P., and Post Services, Inc.
|
|
10
|
.44(s)*
|
|
|
|
Employment and Change in Control
Agreement, dated as of October 17, 2005, by and among
Sherry W. Cohen, Post Properties, Inc., Post Apartment Homes,
L.P., and Post Services, Inc.
|
|
10
|
.45(s)*
|
|
|
|
Amended and Restated Employment
and Change in Control Agreement, dated as of October 17,
2005, by and among Christopher J. Papa, Post Properties, Inc.,
Post Apartment Homes, L.P., and Post Services, Inc.
|
|
10
|
.46*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Key Employees for grants
in February 2007 and thereafter
|
|
10
|
.47(t)*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Key Employees for grants
prior to February 2007
|
|
10
|
.48*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Directors
|
|
10
|
.49(u)
|
|
|
|
Amended and Restated Credit
Agreement dated as of April 28, 2006 by and amongst Post
Apartment Homes, L.P., Wachovia Capital Markets, LLC and
J.P. Morgan Securities Inc., Wachovia Bank, National
Association, SunTrust Bank and Sumitomo Mitsui Banking
Corporation, and the financial institutions a party thereto and
their assignees
|
|
10
|
.50*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Robert C. Goddard
|
|
11
|
.1(v)
|
|
|
|
Statement Regarding Computation of
Per Share Earnings
|
|
21
|
.1
|
|
|
|
List of Subsidiaries
|
|
23
|
.1
|
|
|
|
Consent of Deloitte &
Touche LLP Post Properties, Inc.
|
|
23
|
.2
|
|
|
|
Consent of Deloitte &
Touche LLP Post Apartment Homes, L.P. and Post
Properties, Inc.
|
|
23
|
.3
|
|
|
|
Consent of PricewaterhouseCoopers
LLP Post Properties, Inc.
|
|
23
|
.4
|
|
|
|
Consent of PricewaterhouseCoopers
LLP Post Apartment Homes, L.P. and Post Properties,
Inc.
|
|
31
|
.1
|
|
|
|
Certification of the Chief
Executive Officer pursuant to
Rule 13a-14(a)
or
Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended, and adopted
under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31
|
.2
|
|
|
|
Certification of the Chief
Financial Officer pursuant to
Rule 13a-14(a)
or
Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended, and adopted
under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.1
|
|
|
|
Certification of the Chief
Executive Officer pursuant to 18 U.S.C. 1350, as adopted
under Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.2
|
|
|
|
Certification of the Chief
Financial Officer pursuant to 18 U.S.C. 1350, as adopted
under Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
* |
|
Identifies each management contract or compensatory plan
required to be filed. |
|
|
|
+ |
|
Also serves as the of restricted stock grant certificate
for directors under the 2003 Incentive Stock Plan. |
|
|
|
(a) |
|
Filed as an exhibit to the Registration Statement on
Form S-11
(SEC File
No. 33-61936),
as amended, of the Company and incorporated herein by reference. |
(b) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2002 and
incorporated herein by reference. |
Post Properties, Inc.
Post Apartment Homes, L.P.
127
|
|
|
(c) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q
of the Registrants for the quarter ended September 30, 1999
and incorporated herein by reference. |
(d) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q
of the Registrants for the quarter ended September 30, 2003
and incorporated herein by reference. |
(e) |
|
Filed as Appendix A to the 2004 proxy statement and
incorporated herein by reference. |
(f) |
|
Filed as an exhibit to the Registration Statement on
Form S-3
(SEC File
No. 333-42884),
as amended, of the Company and incorporated herein by reference. |
(g) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 1998 and
incorporated herein by reference. |
(h) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2000 and
incorporated herein by reference. |
(i) |
|
Filed as an exhibit to the Registration Statement on
Form S-11
(SEC File
No. 33-71650),
as amended, of the Company and incorporated herein by reference. |
(j) |
|
Filed as Appendix A to the 2003 proxy statement and
incorporated herein by reference. |
(k) |
|
Filed as part of the Registration Statement on
Form S-3
(File No.
333-39461)
of the Company and incorporated herein by reference. |
(l) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
for the Registrants for the year ended December 31, 2003
and incorporated herein by reference. |
(m) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed December 22, 2004 and incorporated
herein by reference. |
(n) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed December 28, 2004 and incorporated
herein by reference. |
(o) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed August 15, 2005 and incorporated
herein by reference. |
(p) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2001 and
incorporated herein by reference. |
(q) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q
of the Registrants for the quarter ended June 30, 2003 and
incorporated herein by reference. |
(r) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed January 24, 2006 and incorporated
herein by reference. |
(s) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed October 18, 2005 and incorporated
herein by reference. |
(t) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2005 and
incorporated herein by reference. |
(u) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed May 2, 2006 and incorporated
herein by reference. |
(v) |
|
The information required by this exhibit is included in
note 6 to the consolidated financial statement and
incorporated herein by reference. |
Post Properties, Inc.
Post Apartment Homes, L.P.
128
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
POST PROPERTIES, INC.
(Registrant)
March 1, 2007
David P. Stockert, President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
|
|
|
|
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Signature
|
|
Title
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Date
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/s/ Robert
C.
Goddard, III
Robert
C. Goddard, III
|
|
Chairman of the Board and Director
|
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March 1, 2007
|
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|
|
|
|
/s/ David
P. Stockert
David
P. Stockert
|
|
President, Chief Executive Officer
and Director (Principal Executive Officer)
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March 1, 2007
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|
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/s/ Christopher
J. Papa
Christopher
J. Papa
|
|
Executive Vice President and Chief
Financial Officer (Principal Financial Officer)
|
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March 1, 2007
|
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|
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/s/ Arthur
J. Quirk
Arthur
J. Quirk
|
|
Senior Vice President and Chief
Accounting Officer (Principal Accounting Officer)
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March 1, 2007
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/s/ Herschel
M. Bloom
Herschel
M. Bloom
|
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Director
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|
March 1, 2007
|
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/s/ Douglas
Crocker II
Douglas
Crocker II
|
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Director
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|
March 1, 2007
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|
|
|
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/s/ Walter
M.
Deriso, Jr.
Walter
M. Deriso, Jr.
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Director
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|
March 1, 2007
|
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/s/ Russell
R. French
Russell
R. French
|
|
Director
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|
March 1, 2007
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|
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|
|
/s/ Nicholas
B.
Paumgarten
Nicholas
B. Paumgarten
|
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Director
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March 1, 2007
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/s/ Charles
E. Rice
Charles
E. Rice
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Director
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|
March 1, 2007
|
|
|
|
|
|
/s/ Stella
F. Thayer
Stella
F. Thayer
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
Ronald
de Waal
|
|
Director
|
|
March 1, 2007
|
Post Properties, Inc.
Post Apartment Homes, L.P.
129
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
POST APARTMENT HOMES, L.P.
By: Post G.P. Holdings, Inc., as General Partner
March 1, 2007
David P. Stockert, President and Chief
Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
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Signature
|
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Title
|
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Date
|
|
/s/ Robert
C.
Goddard, III
Robert
C. Goddard, III
|
|
Chairman of the Board and Director
|
|
March 1, 2007
|
|
|
|
|
|
/s/ David
P. Stockert
David
P. Stockert
|
|
President, Chief Executive Officer
and Director (Principal Executive Officer)
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Christopher
J. Papa
Christopher
J. Papa
|
|
Executive Vice President and Chief
Financial Officer (Principal Financial Officer)
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Arthur
J. Quirk
Arthur
J. Quirk
|
|
Senior Vice President and Chief
Accounting Officer (Principal Accounting Officer)
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Herschel
M. Bloom
Herschel
M. Bloom
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Douglas
Crocker II
Douglas
Crocker II
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Walter
M.
Deriso, Jr.
Walter
M. Deriso, Jr.
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Russell
R. French
Russell
R. French
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Nicholas
B.
Paumgarten
Nicholas
B. Paumgarten
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Charles
E. Rice
Charles
E. Rice
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
/s/ Stella
F. Thayer
Stella
F. Thayer
|
|
Director
|
|
March 1, 2007
|
|
|
|
|
|
Ronald
de Waal
|
|
Director
|
|
March 1, 2007
|
Post Properties, Inc.
Post Apartment Homes, L.P.
130
Exhibit Index
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
|
|
Description
|
|
|
3
|
.1(a)
|
|
|
|
Articles of Incorporation of the
Company
|
|
3
|
.2(b)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.3(b)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.4(b)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.5(c)
|
|
|
|
Articles of Amendment to the
Articles of Incorporation of the Company
|
|
3
|
.6(d)
|
|
|
|
Bylaws of the Company (as Amended
and Restated as of November 5, 2003)
|
|
3
|
.7(e)
|
|
|
|
Amendment No. 1 to the
Amended and Restated By-Laws of the Company
|
|
4
|
.1(f)
|
|
|
|
Indenture between the Company and
SunTrust Bank, as Trustee
|
|
4
|
.2(f)
|
|
|
|
Form of First Supplemental
Indenture to the Indenture between the Company and SunTrust
Bank, as Trustee
|
|
10
|
.1(b)
|
|
|
|
Second Amended and Restated
Agreement of Limited Partnership of the Operating Partnership
|
|
10
|
.2(b)
|
|
|
|
First Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.3(b)
|
|
|
|
Second Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.4(g)
|
|
|
|
Third Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.5(g)
|
|
|
|
Fourth Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.6(c)
|
|
|
|
Fifth Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.7(h)
|
|
|
|
Sixth Amendment to Second Amended
and Restated Partnership Agreement
|
|
10
|
.8(i)*
|
|
|
|
Employee Stock Plan
|
|
10
|
.9(b)*
|
|
|
|
Amendment to Employee Stock Plan
|
|
10
|
.10(b)*
|
|
|
|
Amendment No. 2 to Employee
Stock Plan
|
|
10
|
.11(b)*
|
|
|
|
Amendment No. 3 to Employee
Stock Plan
|
|
10
|
.12(b)*
|
|
|
|
Amendment No. 4 to Employee
Stock Plan
|
|
10
|
.13(j)*
|
|
|
|
2003 Incentive Stock Plan
|
|
10
|
.14(b)
|
|
|
|
Form of Indemnification Agreement
for officers and directors
|
|
10
|
.15(a)*
|
|
|
|
Profit Sharing Plan of the Company
|
|
10
|
.16(b)*
|
|
|
|
Amendment Number One to Profit
Sharing Plan
|
|
10
|
.17(b)*
|
|
|
|
Amendment Number Two to Profit
Sharing Plan
|
|
10
|
.18(b)*
|
|
|
|
Amendment Number Three to Profit
Sharing Plan
|
|
10
|
.19(b)*
|
|
|
|
Amendment Number Four to Profit
Sharing Plan
|
|
10
|
.20(a)
|
|
|
|
Form of General Partner 1%
Exchange Agreement
|
|
10
|
.21(k)*
|
|
|
|
Dividend Reinvestment Stock
Purchase Plan
|
|
10
|
.22(l)
|
|
|
|
Credit Agreement dated as of
January 16, 2004 among Post Apartment Homes, L.P., Wachovia
Bank, N.A., and certain other lenders
|
|
10
|
.23(m)
|
|
|
|
First Amendment to Credit Agreement
|
|
10
|
.24(n)
|
|
|
|
Letter Agreement, dated as of
December 22, 2004, by and among Post Apartment Homes, L.P.,
certain lenders under the Credit Agreement and Wachovia Bank,
N.A., as the Administrative Agent
|
|
10
|
.25(n)
|
|
|
|
Letter Agreement, dated as of
December 23, 2004, by and among Post Apartment Homes, L.P.
and Fannie Mae
|
|
10
|
.26(o)*
|
|
|
|
Deferred Compensation Plan for
Directors and Eligible Employees (as amended and restated
effective as of January 1, 2005)
|
|
10
|
.27(p)*
|
|
|
|
Form of Change in Control
Agreement (3.0X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.28(p)*
|
|
|
|
Form of Change in Control
Agreement (2.0X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.29(q)*
|
|
|
|
Form of Change in Control
Agreement (1.5X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.30(q)*
|
|
|
|
Form of Change in Control
Agreement (1.0X) and schedule of executive officers who have
entered into such agreement
|
|
10
|
.31(q)*
|
|
|
|
Form of Amendment No. 1 to
Change in Control Agreement and schedule of executive officers
who have entered into such amendment
|
|
10
|
.32(q)*
|
|
|
|
Version One Amendment No. 2
to Change in Control Agreement and schedule of executive
officers who have entered into such amendment
|
|
10
|
.33(q)*
|
|
|
|
Version Two Amendment No. 2
to Change in Control Agreement and schedule of executive
officers who have entered into such amendment
|
|
10
|
.34(q)*
|
|
|
|
Employment Agreement with David P.
Stockert
|
|
10
|
.35(d)*
|
|
|
|
Amendment No. 1 to Employment
Agreement with David P. Stockert
|
|
10
|
.36(q)*
|
|
|
|
Employment Agreement with Thomas
D. Senkbeil
|
|
10
|
.37(q)*
|
|
|
|
Amendment No. 1 to Employment
Agreement with Thomas D. Senkbeil
|
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
|
|
Description
|
|
|
10
|
.38(d)*
|
|
|
|
Amendment No. 2 to Employment
Agreement with Thomas D. Senkbeil
|
|
10
|
.39(d)*+
|
|
|
|
Restricted Stock Grant Certificate
for Robert C. Goddard, III, dated July 17, 2003
|
|
10
|
.40(d)*
|
|
|
|
Non-Incentive Stock Option
Certificate for Robert C. Goddard, III, dated July 17,
2003
|
|
10
|
.41(r)*
|
|
|
|
Form of 2003 Incentive Stock Plan,
Non-Incentive Stock Option and Stock Appreciation Right
Certificate for Key Employees
|
|
10
|
.42(r)*
|
|
|
|
Form of 2003 Incentive Stock Plan,
Non-Incentive Stock Option and Stock Appreciation Right
Certificate for Directors
|
|
10
|
.43(s)*
|
|
|
|
Employment and Change in Control
Agreement, dated as of October 17, 2005, by and among
Thomas L. Wilkes, Post Properties, Inc., Post Apartment Homes,
L.P., and Post Services, Inc.
|
|
10
|
.44(s)*
|
|
|
|
Employment and Change in Control
Agreement, dated as of October 17, 2005, by and among
Sherry W. Cohen, Post Properties, Inc., Post Apartment Homes,
L.P., and Post Services, Inc.
|
|
10
|
.45(s)*
|
|
|
|
Amended and Restated Employment
and Change in Control Agreement, dated as of October 17,
2005, by and among Christopher J. Papa, Post Properties, Inc.,
Post Apartment Homes, L.P., and Post Services, Inc.
|
|
10
|
.46*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Key Employees for grants
in February 2007 and thereafter
|
|
10
|
.47(t)*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Key Employees for grants
prior to February 2007
|
|
10
|
.48*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Directors
|
|
10
|
.49(u)
|
|
|
|
Amended and Restated Credit
Agreement dated as of April 28, 2006 by and amongst Post
Apartment Homes, L.P., Wachovia Capital Markets, LLC and
J.P. Morgan Securities Inc., Wachovia Bank, National
Association, SunTrust Bank and Sumitomo Mitsui Banking
Corporation, and the financial institutions a party thereto and
their assignees
|
|
10
|
.50*
|
|
|
|
Form of 2003 Incentive Stock Plan
Restricted Stock Grant Certificate for Robert C. Goddard
|
|
11
|
.1(v)
|
|
|
|
Statement Regarding Computation of
Per Share Earnings
|
|
21
|
.1
|
|
|
|
List of Subsidiaries
|
|
23
|
.1
|
|
|
|
Consent of Deloitte &
Touche LLP Post Properties, Inc.
|
|
23
|
.2
|
|
|
|
Consent of Deloitte &
Touche LLP Post Apartment Homes, L.P. and Post
Properties, Inc.
|
|
23
|
.3
|
|
|
|
Consent of PricewaterhouseCoopers
LLP Post Properties, Inc.
|
|
23
|
.4
|
|
|
|
Consent of PricewaterhouseCoopers
LLP Post Apartment Homes, L.P. and Post Properties,
Inc.
|
|
31
|
.1
|
|
|
|
Certification of the Chief
Executive Officer pursuant to
Rule 13a-14(a)
or
Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended, and adopted
under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
31
|
.2
|
|
|
|
Certification of the Chief
Financial Officer pursuant to
Rule 13a-14(a)
or
Rule 15d-14(a)
of the Securities Exchange Act of 1934, as amended, and adopted
under Section 302 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.1
|
|
|
|
Certification of the Chief
Executive Officer pursuant to 18 U.S.C. 1350, as adopted
under Section 906 of the Sarbanes-Oxley Act of 2002
|
|
32
|
.2
|
|
|
|
Certification of the Chief
Financial Officer pursuant to 18 U.S.C. 1350, as adopted
under Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
|
* |
|
Identifies each management contract or compensatory plan
required to be filed. |
|
|
|
+ |
|
Also serves as the of restricted stock grant certificate
for directors under the 2003 Incentive Stock Plan. |
|
|
|
(a) |
|
Filed as an exhibit to the Registration Statement on
Form S-11
(SEC File
No. 33-61936),
as amended, of the Company and incorporated herein by reference. |
(b) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2002 and
incorporated herein by reference. |
(c) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q
of the Registrants for the quarter ended September 30, 1999
and incorporated herein by reference. |
(d) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q
of the Registrants for the quarter ended September 30, 2003
and incorporated herein by reference. |
(e) |
|
Filed as Appendix A to the 2004 proxy statement and
incorporated herein by reference. |
(f) |
|
Filed as an exhibit to the Registration Statement on
Form S-3
(SEC File
No. 333-42884),
as amended, of the Company and incorporated herein by reference. |
(g) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 1998 and
incorporated herein by reference. |
(h) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2000 and
incorporated herein by reference. |
(i) |
|
Filed as an exhibit to the Registration Statement on
Form S-11
(SEC File
No. 33-71650),
as amended, of the Company and incorporated herein by reference. |
(j) |
|
Filed as Appendix A to the 2003 proxy statement and
incorporated herein by reference. |
|
|
|
(k) |
|
Filed as part of the Registration Statement on
Form S-3
(File No.
333-39461)
of the Company and incorporated herein by reference. |
(l) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
for the Registrants for the year ended December 31, 2003
and incorporated herein by reference. |
(m) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed December 22, 2004 and incorporated
herein by reference. |
(n) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed December 28, 2004 and incorporated
herein by reference. |
(o) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed August 15, 2005 and incorporated
herein by reference. |
(p) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2001 and
incorporated herein by reference. |
(q) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q
of the Registrants for the quarter ended June 30, 2003 and
incorporated herein by reference. |
(r) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed January 24, 2006 and incorporated
herein by reference. |
(s) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed October 18, 2005 and incorporated
herein by reference. |
(t) |
|
Filed as an exhibit to the Annual Report on
Form 10-K
of the Registrants for the year ended December 31, 2005 and
incorporated herein by reference. |
(u) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed May 2, 2006 and incorporated
herein by reference. |
(v) |
|
The information required by this exhibit is included in
note 6 to the consolidated financial statement and
incorporated herein by reference. |