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, 2007
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
Georgia
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58-1550675
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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Title of each class
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Name of Each Exchange on 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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Title of each class
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Name of Each Exchange on 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
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No
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Post Apartment Homes, L.P.
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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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Post Apartment Homes, L.P.
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[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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No
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Post Apartment Homes, L.P.
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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. [X]
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, 2007 was approximately
$2,237,043,221. As of February 15, 2008, there were
43,923,107 shares of common stock, $.01 par value,
outstanding.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or smaller reporting company . See definition of accelerated
filer, large accelerated filer and smaller reporting company in
Rule 12b-2
of the Exchange Act.
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Post Properties, Inc.
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Large Accelerated Filer
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[X]
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Accelerated Filer [ ]
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Non-Accelerated Filer
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(Do not check if a smaller reporting company) Smaller
Reporting Company [ ]
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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
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[X]
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(Do not check if a smaller reporting company) Smaller
Reporting Company [ ]
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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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No
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Post Apartment Homes, L.P.
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[X]
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DOCUMENTS
INCORPORATED BY REFERENCE
Portions of Part III of this report are incorporated by
reference from the Post Properties, Inc.s Proxy Statement
in connection with its Annual Meeting of Shareholders or will be
provided by an amendment to this report.
TABLE OF
CONTENTS
FINANCIAL INFORMATION
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Item
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Page
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No.
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No.
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Business
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1
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Risk Factors
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8
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Unresolved Staff Comments
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16
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Properties
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Legal Proceedings
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Submission of Matters to a Vote of Security
Holders
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Executive Officers of the Registrant
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Market for Registrants Common Stock,
Related Shareholder Matters and Issuer Purchases of Equity
Securities
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21
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Selected Financial Data
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23
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Managements Discussion and Analysis of
Financial Condition and Results of Operations
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25
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Quantitative and Qualitative Disclosures about
Market Risk
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50
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Financial Statements and Supplementary Data
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51
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Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
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51
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Controls and Procedures
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Other Information
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51
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Directors, Executive Officers and Corporate
Governance
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Executive Compensation
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52
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Security Ownership of Certain Beneficial Owners
and Management and Related Shareholder Matters
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52
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Certain Relationships and Related Transactions,
and Director Independence
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Principal Accountant Fees and Services
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Exhibits, Financial Statements and Schedules
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EX-10.8 AMENDED AND RESTATED EMPLOYEE STOCK PLAN |
EX-10.12 MULTI-FAMILY NOTE |
EX-10.14 FORM OF CHANGE IN CONTROL AGREEMENT |
EX-10.15 FORM OF CHANGE IN CONTROL AGREEMENT |
EX-10.16 FORM OF CHANGE IN CONTROL AGREEMENT |
EX-21.1 LIST OF SUBSIDIARIES |
EX-23.1 CONSENT OF DELOITTE & TOUCHE LLP-POST PROPERTIES, INC. |
EX-23.2 CONSENT OF DELOITTE & TOUCHE LLP - POST APARTMENT HOMES, L.P. AND POST PROPERTIES, INC. |
EX-23.3 CONSENT OF PRICEWATERHOUSECOOPERS LLP-POST PROPERTIES,INC. |
EX-23.4 CONSENT OF PREICEWATERHOUSECOOPERS LLP-POST APARTMENT HOMES, LLP AND POST PROPERTIES, INC. |
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO |
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO |
EX-32.1 SECTION 906, CERTIFICATION OF THE CEO |
EX-32.2 SECTION 906, CERTIFICATION OF THE CFO |
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, 2007, approximately 41.3%, 19.2%, 12.3% and
10.3% (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, 2007, the Company owned
22,578 apartment units in 63 apartment communities, including
1,747 apartment units in five communities held in unconsolidated
entities and 2,266 apartment units in seven communities (and the
expansion of one community) currently under construction
and/or in
lease-up.
The Company is also developing and selling 535 for-sale
condominium homes in four communities (including 137 units
in one community held in an unconsolidated entity) and is
converting apartment homes in two communities initially
consisting of 349 units 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
778 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, 2007, the Company, through wholly-owned
subsidiaries, controlled the Operating Partnership as the sole
general partner and as the holder of 98.9% 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.
Possible
Business Combination
On January 23, 2008 the Company announced that its Board of
Directors has authorized management to initiate a formal process
to pursue a possible business combination or other sale
transaction and to seek proposals from potentially interested
parties. The formal process was commenced by the Company
immediately following the announcement and is continuing. There
can be no assurance that the initiation of a formal process will
result in any transaction leading to a business combination or
other sale transaction.
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
less 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, 2007. The
Company entered the Raleigh, North Carolina market in 2007 with
its purchase of an approximately
124-acre
site and expects to commence construction on this site in 2008.
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 36 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
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Post Properties, Inc.
Post Apartment Homes, L.P.
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
provided employees and residents new opportunities for community
involvement, all intended to enhance what it believes is a
valuable asset.
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,
2007, 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.
3
Post Properties, Inc.
Post Apartment Homes, L.P.
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 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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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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Condominium conversion and other communities those
portions of existing apartment communities being converted into
condominiums and other communities converted to joint venture
ownership that are reflected in continuing operations under
Statement of Financial Accounting Standards (SFAS)
No. 144 (see note 1 to the consolidated financial
statements).
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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 2007, 2006 and 2005
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, 2003 through
December 31, 2007, the Company and its affiliates have
developed and completed 823 apartment units in four apartment
communities and sold 28 apartment communities containing an
aggregate of 12,518 apartment units. During the same period, the
Company acquired six apartment communities containing
1,837 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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|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
Units developed and completed
|
|
|
439
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
468
|
|
Units acquired
|
|
|
350
|
|
|
|
669
|
(3)
|
|
|
319
|
|
|
|
499
|
|
|
|
|
|
Units sold
|
|
|
(807
|
)(1)
|
|
|
(1,342
|
)(4)
|
|
|
(3,051
|
)(6)
|
|
|
(3,880
|
)
|
|
|
(2,236
|
)
|
Units sold as condominiums or currently being converted into
for-sale condominiums
|
|
|
|
|
|
|
|
|
|
|
(731
|
)(7)
|
|
|
|
|
|
|
|
|
Total units completed and owned by the Company and its
affiliates (including units held for sale) at year-end
|
|
|
20,546
|
(2)
|
|
|
20,564
|
(5)
|
|
|
21,237
|
(8)
|
|
|
24,700
|
|
|
|
28,081
|
|
Total revenues from continuing operations (in thousands)
|
|
$
|
307,542
|
|
|
$
|
291,545
|
|
|
$
|
272,271
|
|
|
$
|
258,534
|
|
|
$
|
243,729
|
|
|
|
|
(1)
|
|
Excludes 1,202 units in three
apartment communities that were converted to joint venture
ownership where the Company retained a 25% ownership interest.
|
(2)
|
|
Excludes 1,937 units currently
under development or in
lease-up at
December 31, 2007.
|
(3)
|
|
Excludes 150 units currently
in lease-up,
as the community was undergoing renovation upon purchase.
|
(4)
|
|
Includes a net reduction of two
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.
|
(5)
|
|
Excludes 1,181 apartment units
currently under development or in
lease-up at
December 31, 2006.
|
(6)
|
|
Includes reduction of four
apartment units that were combined with other units.
|
(7)
|
|
Represents all units within
communities that began conversion into condominiums in 2005. Of
these units, 219, 282 and 106 units were sold in 2005, 2006
and 2007 respectively.
|
(8)
|
|
Excludes 205 apartment units under
development at December 31, 2005.
|
4
Post Properties, Inc.
Post Apartment Homes, L.P.
Current
Development Activity
At December 31, 2007, the Company had six communities and
one community expansion under development containing 2,116
apartment units, and 305 for-sale condominium homes under
development in four communities (including 137 units in one
community held in an unconsolidated entity). These communities
are summarized in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Incurred
|
|
|
|
|
|
Number
|
|
|
|
|
|
Company
|
|
|
Estimated
|
|
|
Share of
|
|
|
as of
|
|
Community
|
|
Location
|
|
of Units
|
|
|
Retail Sq. Ft.
|
|
|
Ownership
|
|
|
Cost
|
|
|
Est. Cost
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Company Share)
|
|
|
Apartments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Alexandertm
|
|
Atlanta, GA
|
|
|
307
|
|
|
|
|
|
|
|
100
|
%
|
|
$
|
62.4
|
|
|
$
|
62.4
|
|
|
$
|
39.8
|
|
Post
Walk®
at Citrus Park Village
|
|
Tampa, FL
|
|
|
296
|
|
|
|
|
|
|
|
100
|
%
|
|
|
41.6
|
|
|
|
41.6
|
|
|
|
8.6
|
|
Post
Eastsidetm
|
|
Dallas, TX
|
|
|
435
|
|
|
|
37,900
|
|
|
|
100
|
%
|
|
|
56.7
|
|
|
|
56.7
|
|
|
|
21.8
|
|
Post Hyde
Park®
(expansion)
|
|
Tampa, FL
|
|
|
84
|
|
|
|
|
|
|
|
100
|
%
|
|
|
18.8
|
(4)
|
|
|
18.8
|
|
|
|
14.9
|
|
Post Frisco
Bridgestm
|
|
Dallas, TX
|
|
|
269
|
|
|
|
29,000
|
|
|
|
100
|
%
|
|
|
41.3
|
|
|
|
41.3
|
|
|
|
7.8
|
|
Post
Park®
|
|
Wash. DC
|
|
|
396
|
|
|
|
1,700
|
|
|
|
100
|
%
|
|
|
84.7
|
|
|
|
84.7
|
|
|
|
14.1
|
|
Post West
Austintm
|
|
Austin, TX
|
|
|
329
|
|
|
|
|
|
|
|
100
|
%
|
|
|
53.2
|
|
|
|
53.2
|
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Apartments
|
|
|
|
|
2,116
|
|
|
|
68,600
|
|
|
|
|
|
|
$
|
358.7
|
|
|
$
|
358.7
|
|
|
$
|
120.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Residences
at 3630
Peachtreetm(5)
|
|
Atlanta, GA
|
|
|
137
|
|
|
|
|
|
|
|
50
|
%
|
|
$
|
93.4
|
|
|
$
|
47.6
|
|
|
$
|
11.1
|
|
Four Seasons Residences
|
|
Austin, TX
|
|
|
168
|
|
|
|
8,000
|
|
|
|
100
|
%
|
|
|
133.5
|
|
|
|
133.5
|
|
|
|
18.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Condominiums
|
|
|
|
|
305
|
|
|
|
8,000
|
|
|
|
|
|
|
$
|
226.9
|
|
|
$
|
181.1
|
|
|
$
|
30.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Quarter of
|
|
|
Quarter of
|
|
|
|
|
|
Estimated
|
|
|
Units
|
|
|
|
|
|
|
of Const.
|
|
First Units
|
|
|
Stabilized
|
|
|
Units
|
|
|
Quarter
|
|
|
Under
|
|
|
Units
|
|
Community
|
|
Start
|
|
Available
|
|
|
Occupancy(1)
|
|
|
Leased(2)
|
|
|
Sell-out
|
|
|
Contract(3)
|
|
|
Closed(2)
|
|
|
Apartments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Alexandertm
|
|
2Q 2006
|
|
|
1Q 2008
|
|
|
|
2Q 2009
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post
Walk®
at Citrus Park Village
|
|
1Q 2008
|
|
|
1Q 2009
|
|
|
|
1Q 2010
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post
Eastsidetm
|
|
4Q 2006
|
|
|
2Q 2008
|
|
|
|
4Q 2009
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post Hyde
Park®
(expansion)
|
|
4Q 2006
|
|
|
4Q 2007
|
|
|
|
3Q 2008
|
|
|
|
21
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post Frisco
Bridgestm
|
|
3Q 2007
|
|
|
4Q 2008
|
|
|
|
2Q 2010
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post
Park®
|
|
4Q 2007
|
|
|
1Q 2009
|
|
|
|
2Q 2010
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post West
Austintm
|
|
4Q 2007
|
|
|
1Q 2009
|
|
|
|
3Q 2009
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Residences
at 3630
Peachtreetm(5)
|
|
3Q 2007
|
|
|
3Q 2009
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
4Q 2010
|
|
|
|
|
|
|
|
|
|
Four Seasons Residences
|
|
1Q 2008
|
|
|
4Q 2009
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
4Q 2010
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Condominiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 28, 2008.
|
(3)
|
As of January 28, 2008, 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.
|
(5)
|
The amounts reflected for this project represent the condominium
portion of a mixed-use development currently being developed in
an entity owned with other third-party developers. This
condominium portion of the project is co-owned with an
Atlanta-based condominium development partner.
|
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
5
Post Properties, Inc.
Post Apartment Homes, L.P.
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 with the Fair Housing Act (the
FHA), which requires that apartment communities
first occupied after March 13, 1991 be accessible to
persons with disabilities.
Noncompliance with the FHA 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 FHA could require removal of
structural barriers to handicapped access in a community,
including the interiors of multi-family housing units covered
under the FHA. In addition to the ADA and FHA, 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, FHA, 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.
Within the past few years, there has been heightened scrutiny of
multifamily housing communities for compliance with the
requirements of the FHA 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 FHA
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 FHA and ADA and prohibiting construction or sale
of noncompliant units or complexes.
At this stage in the proceeding, 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, FHA 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.
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
6
Post Properties, Inc.
Post Apartment Homes, L.P.
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 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 (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
7
Post Properties, Inc.
Post Apartment Homes, L.P.
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 l0-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.
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ITEM 1A.
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RISK
FACTORS
(Dollars In thousands, except per share amounts)
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The following risk factors apply to the Company and 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 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:
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the economic climate, which may be adversely impacted by a
reduction in jobs, industry slowdowns and other factors;
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local conditions, such as oversupply of, or reduced demand for,
apartment homes;
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declines in household formation;
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favorable residential mortgage rates;
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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
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competition from other available apartments and other housing
alternatives and changes in market rental rates.
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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:
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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;
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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;
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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;
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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;
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8
Post Properties, Inc.
Post Apartment Homes, L.P.
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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
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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.
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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 of 1986, as amended (the 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.
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, 2007, approximately 41.3%, 19.2%, 12.3% and
10.3% (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 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:
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the national and local economies;
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local real estate market conditions, such as an oversupply of
apartment homes or competing for-sale (condominium) housing;
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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;
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the Companys ability to provide adequate management,
maintenance and insurance for its apartment communities;
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rental expenses for its apartment communities, including real
estate taxes, insurance and utilities; and
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the level of mortgage interest rates and its impact on the
demand for prospective buyers of for-sale (condominium) housing.
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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 mortgagor. 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, 2007, the Company had outstanding
9
Post Properties, Inc.
Post Apartment Homes, L.P.
mortgage indebtedness of $266,791 (none of which matures in
2008), senior unsecured debt of $535,000 (none of which matures
in 2008) and unsecured line of credit borrowings of
$257,275.
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, 2007, 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,
adversely affect the Companys ability to make expected
distributions to its shareholders and the Operating
Partnerships ability to make expected distributions to its
limited partners and result 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 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. As a result of the Companys announcement
that its Board of Directors had authorized management, working
with financial and legal advisors, to initiate a formal process
to pursue a possible business combination or other sale
transaction and to seek proposals from potentially interested
parties, both Standard and Poors and Moodys rating
agencies placed the Companys credit rating outlook on
credit watch or developing, pending the
outcome of the process which could negatively impact the
Companys ability to refinance its existing indebtedness or
obtain new debt financing in the short term.
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:
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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;
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understanding the costs necessary to bring a newly developed or
converted for-sale (condominium) property up to standards
required for its intended market position;
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lack of demand by prospective buyers;
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oversupply of condominiums in a given market;
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the inability of buyers to qualify for financing;
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lower than anticipated sale prices;
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10
Post Properties, Inc.
Post Apartment Homes, L.P.
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the inability to close on sales of individual units under
contract;
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competition from other condominiums and other types of
residential housing; and
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liability claims from condominium associations or others
asserting that construction performed was defective, resulting
in litigation
and/or
settlement discussions.
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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.
Unfavorable
changes in for-sale (condominium) housing in the Companys
markets and general economic conditions could adversely affect
the profitability of the Companys condominium conversion
and newly developed for-sale housing business.
In total, the Company has converted five apartment communities
since 2005, initially consisting of 731 units (including
one held in a joint venture), into for-sale condominium homes.
As of the end of 2007, three of these condominium conversion
projects were sold out. The other two projects, consisting of a
206-unit
project in Tampa, FL and a
143-unit
project in Houston, TX, had, on average, closed the sales of
approximately 64% of their total units as of the end of 2007.
Beginning in the second quarter of 2007, the Company also began
closing condominium homes at two of its newly developed for-sale
condominium projects, containing 230 homes. As of
January 28, 2008, the Company had seven condominium homes
under contract and had closed 132 homes at these communities. In
late 2006 and continuing into 2007, there was a softening in the
condominium and single family housing markets due to increasing
mortgage financing rates, increasing supplies of such assets,
tighter credit standards and a significant slow down in the
residential housing market in the U.S. Further, in the
second half of 2007, the turbulence in weakening credit markets
accelerated, resulting in a further decline in for-sale housing
markets. As a result, the pace of condominium closings began to
slow in the second half of 2006 with a further slowing in the
second half of 2007. It is likely that closings will continue to
be slow at these communities into 2008. Additionally, a
significant portion of the condominium closings at the
Companys two newly developed for-sale condominium projects
resulted from contracts entered into prior to the third quarter
of 2007 when credit standards tightened and markets increased in
volatility resulting in a further slowing of the demand for
for-sale housing. There can be no assurance of the amount or
pace of future for-sale condominium sales and closings. To the
extent that condominium pricing pressure continues or worsens or
we are required to hold unsold units longer than anticipated
(requiring us to continue to pay debt service), the
profitability of these projects may be materially adversely
affected.
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:
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an acquired community may fail to achieve expected occupancy and
rental rates and may fail to perform as expected;
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the Company may not be able to successfully integrate acquired
properties and operations; and
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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.
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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.
11
Post Properties, Inc.
Post Apartment Homes, L.P.
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 2008, 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
2008 will not be sufficient to fund the dividend payments to
common and preferred shareholders by approximately $10,000 to
$15,000 (excluding any costs associated with a possible business
combination or other sale transaction). The Company intends to
use primarily the proceeds from 2008 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 may not 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 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:
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an inability to evaluate accurately local apartment or for-sale
(condominium) housing market conditions and local economies;
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an inability to obtain land for development or to identify
appropriate acquisition opportunities;
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an inability to hire and retain key personnel; and
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lack of familiarity with local governmental and permitting
procedures.
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12
Post Properties, Inc.
Post Apartment Homes, L.P.
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 Act , or the
FHA, which requires that multi-family housing communities first
occupied after March 13, 1991 be accessible to persons of
disabilities. Noncompliance with the FHA 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 FHA could require removal of
structural barriers to handicapped access in a community,
including the interiors of apartment units covered under the
FHA. In addition to the ADA and FHA, 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, FHA, 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.
Within the past few years, there has been heightened scrutiny of
multifamily housing communities for compliance with the
requirements of the FHA 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 FHA
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 FHA 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, FHA 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. In
addition, in connection with certain property dispositions or
formations of strategic joint ventures, the Company may be
required to provide indemnification against liabilities
associated with the litigation.
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.
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.
13
Post Properties, Inc.
Post Apartment Homes, L.P.
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 adverse 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. The Company has also chosen to sell partial
interests in certain apartment communities to co-venturers and
may continue this strategy in the future. 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 lease 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
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 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,
14
Post Properties, Inc.
Post Apartment Homes, L.P.
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 Internal Revenue Service
(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 years prior to 2005, 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, 2007, 2006 and
2005, 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.
The
formal process initiated by the Company to pursue a possible
business combination or other sale transaction may not result in
a transaction.
The Company has commenced a formal process to pursue a possible
business combination or other sale transaction and to seek
proposals from potentially interested parties. There can be no
assurance that the initiation of a formal process will result in
any transaction leading to a business combination or other sale
transaction.
Additionally, if a business combination or other sale
transaction does not occur, to the extent that the market price
reflects an assumption that such a combination would occur, the
Companys stock price may be adversely affected.
15
Post Properties, Inc.
Post Apartment Homes, L.P.
The
formal process to pursue a possible business combination or
other sale transaction may divert management attention and the
Company may not be able to retain key personnel.
The formal process initiated by the Company to pursue a possible
business combination or other sale transaction may require
management to divert some of its focus from the day to day
operations of the business. Additionally, the Company may not be
able to retain key personnel, who may choose to leave the
Company as a result of the uncertainty created by the formal
process. The diversion of management focus from the day to day
operations of the business or the loss of key personnel could
have an adverse impact on the Companys results of
operations.
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, 2007. 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,
respectively, 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.
16
Post Properties, Inc.
Post Apartment Homes, L.P.
At December 31, 2007, the Company owned 57
Post®
multifamily apartment communities, including five communities
held in unconsolidated entities and one community and a portion
of another community that were in
lease-up at
December 31, 2007. These communities are summarized below
by metropolitan area.
|
|
|
|
|
|
|
|
|
|
|
|
|
Metropolitan Area
|
|
Communities
|
|
|
# of Units
|
|
|
% of Total
|
|
|
Atlanta, GA
|
|
|
21
|
|
|
|
8,493
|
|
|
|
41.3
|
%
|
Dallas, TX
|
|
|
13
|
|
|
|
3,939
|
|
|
|
19.2
|
%
|
Greater Washington, D.C.
|
|
|
7
|
|
|
|
2,538
|
|
|
|
12.3
|
%
|
Tampa, FL
|
|
|
4
|
|
|
|
2,111
|
|
|
|
10.3
|
%
|
Charlotte, NC
|
|
|
4
|
|
|
|
1,388
|
|
|
|
6.8
|
%
|
Houston, TX
|
|
|
2
|
|
|
|
837
|
|
|
|
4.1
|
%
|
Orlando, FL
|
|
|
2
|
|
|
|
595
|
|
|
|
2.9
|
%
|
New York, NY
|
|
|
2
|
|
|
|
337
|
|
|
|
1.6
|
%
|
Austin, TX
|
|
|
2
|
|
|
|
308
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
|
|
|
20,546
|
|
|
|
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 9.8 years. The average economic occupancy
rate was 94.7% for the years ended December 31, 2007 and
2006 and the average monthly rental rate per apartment unit was
$1,245 and $1,187, respectively, for the 43 communities
stabilized for each of the years ended December 31, 2007
and 2006. See Selected Financial Information.
At December 31, 2007, the Company also had 2,032 apartment
units in six communities under construction.
At December 31, 2007, the Company is also developing and
selling four
ground-up
condominium projects, consisting of 535 homes (including
137 units in one community held in an unconsolidated
entity). The Company is also converting apartment homes in two
communities initially consisting of 349 units into for-sale
condominium homes through a taxable REIT subsidiary, at
December 31, 2007.
17
Post Properties, Inc.
Post Apartment Homes, L.P.
COMMUNITY
INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Year
|
|
No. of
|
|
|
Rental Rates
|
|
|
Economic
|
|
Communities
|
|
Location(1)
|
|
Completed
|
|
Units
|
|
|
Per Unit
|
|
|
Occupancy(2)
|
|
|
Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Biltmoretm(3)
|
|
Atlanta
|
|
2001
|
|
|
276
|
|
|
$
|
1,169
|
|
|
|
97.2
|
%
|
Post
Briarclifftm
|
|
Atlanta
|
|
1999
|
|
|
688
|
|
|
|
1,148
|
|
|
|
95.3
|
%
|
Post
Brookhaven®
|
|
Atlanta
|
|
1990-1992(4)
|
|
|
735
|
|
|
|
991
|
|
|
|
95.6
|
%
|
Post
Chastain®(7)
|
|
Atlanta
|
|
1990
|
|
|
558
|
|
|
|
1,115
|
|
|
|
78.7
|
%
|
Post Collier
Hills®(3)
|
|
Atlanta
|
|
1997
|
|
|
396
|
|
|
|
1,028
|
|
|
|
96.4
|
%
|
Post
Crest®(3)
|
|
Atlanta
|
|
1996
|
|
|
410
|
|
|
|
1,045
|
|
|
|
95.1
|
%
|
Post
Crossing®
|
|
Atlanta
|
|
1995
|
|
|
354
|
|
|
|
1,076
|
|
|
|
95.1
|
%
|
Post
Dunwoody®
|
|
Atlanta
|
|
1989-1996(4)
|
|
|
530
|
|
|
|
1,017
|
|
|
|
95.2
|
%
|
Post
Gardens®
|
|
Atlanta
|
|
1998
|
|
|
397
|
|
|
|
1,168
|
|
|
|
94.0
|
%
|
Post
Glen®
|
|
Atlanta
|
|
1997
|
|
|
314
|
|
|
|
1,160
|
|
|
|
94.5
|
%
|
Post Lenox
Park®
|
|
Atlanta
|
|
1995
|
|
|
206
|
|
|
|
1,076
|
|
|
|
93.7
|
%
|
Post
Lindbergh®(3)
|
|
Atlanta
|
|
1998
|
|
|
396
|
|
|
|
1,084
|
|
|
|
97.1
|
%
|
Post
Oglethorpe®
|
|
Atlanta
|
|
1994
|
|
|
250
|
|
|
|
1,291
|
|
|
|
93.9
|
%
|
Post
Parksidetm
|
|
Atlanta
|
|
2000
|
|
|
188
|
|
|
|
1,364
|
|
|
|
96.6
|
%
|
Post Peachtree
Hills®
|
|
Atlanta
|
|
1992-1994(4)
|
|
|
300
|
|
|
|
1,096
|
|
|
|
95.9
|
%
|
Post
Renaissance®(5)
|
|
Atlanta
|
|
1992-1994(4)
|
|
|
342
|
|
|
|
1,055
|
|
|
|
96.4
|
%
|
Post
Ridge®
|
|
Atlanta
|
|
1998
|
|
|
434
|
|
|
|
1,067
|
|
|
|
95.7
|
%
|
Post
Riverside®
|
|
Atlanta
|
|
1998
|
|
|
523
|
|
|
|
1,412
|
|
|
|
93.2
|
%
|
Post
Springtm
|
|
Atlanta
|
|
2000
|
|
|
452
|
|
|
|
1,017
|
|
|
|
96.6
|
%
|
Post
Stratfordtm(5)
|
|
Atlanta
|
|
2000
|
|
|
250
|
|
|
|
1,162
|
|
|
|
91.7
|
%
|
Post
Woods®
|
|
Atlanta
|
|
1977-1983(4)
|
|
|
494
|
|
|
|
927
|
|
|
|
96.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average Georgia
|
|
|
|
|
|
|
8,493
|
|
|
$
|
1,104
|
|
|
|
94.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Abbeytm
|
|
Dallas
|
|
1996
|
|
|
34
|
|
|
$
|
1,915
|
|
|
|
92.6
|
%
|
Post Addison
Circletm
|
|
Dallas
|
|
1998-2000(4)
|
|
|
1,334
|
|
|
|
1,007
|
|
|
|
94.6
|
%
|
Post Barton
Creektm
|
|
Austin
|
|
1998
|
|
|
160
|
|
|
|
1,431
|
|
|
|
98.2
|
%
|
Post
Coles
Cornertm
|
|
Dallas
|
|
1998
|
|
|
186
|
|
|
|
1,086
|
|
|
|
96.3
|
%
|
Post
Gallerytm
|
|
Dallas
|
|
1999
|
|
|
34
|
|
|
|
3,025
|
|
|
|
89.6
|
%
|
Post
Heightstm
|
|
Dallas
|
|
1998-1999(4)
|
|
|
368
|
|
|
|
1,143
|
|
|
|
94.5
|
%
|
Post Legacy
|
|
Dallas
|
|
2000
|
|
|
384
|
|
|
|
976
|
|
|
|
96.6
|
%
|
Post
Meridiantm
|
|
Dallas
|
|
1991
|
|
|
133
|
|
|
|
1,167
|
|
|
|
93.8
|
%
|
Post Midtown
Square®
|
|
Houston
|
|
1999-2000(4)
|
|
|
529
|
|
|
|
1,120
|
|
|
|
93.8
|
%
|
Post Park
Mesatm
|
|
Austin
|
|
1992
|
|
|
148
|
|
|
|
1,194
|
|
|
|
93.7
|
%
|
Post Rice
Loftstm(5)
|
|
Houston
|
|
1998
|
|
|
308
|
|
|
|
1,381
|
|
|
|
92.7
|
%
|
Post
Squaretm
|
|
Dallas
|
|
1996
|
|
|
218
|
|
|
|
1,206
|
|
|
|
95.9
|
%
|
Post Uptown
Villagetm
|
|
Dallas
|
|
1995-2000(4)
|
|
|
496
|
|
|
|
973
|
|
|
|
95.6
|
%
|
Post
Vineyardtm
|
|
Dallas
|
|
1996
|
|
|
116
|
|
|
|
1,071
|
|
|
|
96.3
|
%
|
Post
Vintagetm
|
|
Dallas
|
|
1993
|
|
|
161
|
|
|
|
1,043
|
|
|
|
94.6
|
%
|
Post Wilson
Buildingtm(5)
|
|
Dallas
|
|
1999
|
|
|
143
|
|
|
|
1,242
|
|
|
|
93.7
|
%
|
Post
Worthingtontm(7)
|
|
Dallas
|
|
1993
|
|
|
332
|
|
|
|
1,387
|
|
|
|
84.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average Texas
|
|
|
|
|
|
|
5,084
|
|
|
$
|
1,134
|
|
|
|
93.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
Post Properties, Inc.
Post Apartment Homes, L.P.
COMMUNITY INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 2007
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
Year
|
|
No. of
|
|
|
Rental Rates
|
|
|
Economic
|
|
Communities
|
|
Location(1)
|
|
Completed
|
|
Units
|
|
|
Per Unit
|
|
|
Occupancy(2)
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Bay at
Rocky
Pointtm(6)
|
|
Tampa
|
|
1997
|
|
|
150
|
|
|
$
|
1,475
|
|
|
|
N/A
|
|
Post Harbour
Placetm
|
|
Tampa
|
|
1999-2002(4)
|
|
|
578
|
|
|
|
1,418
|
|
|
|
93.6
|
%
|
Post Hyde
Park®(6)
|
|
Tampa
|
|
1996-2008
|
|
|
467
|
|
|
|
1,361
|
|
|
|
N/A
|
|
Post
Lake®
at Baldwin Park(6)
|
|
Orlando
|
|
2004-2007
|
|
|
350
|
|
|
|
1,526
|
|
|
|
N/A
|
|
Post
Parksidetm
|
|
Orlando
|
|
1999
|
|
|
245
|
|
|
|
1,449
|
|
|
|
93.6
|
%
|
Post Rocky
Point®
|
|
Tampa
|
|
1996-1998(4)
|
|
|
916
|
|
|
|
1,200
|
|
|
|
92.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average Florida
|
|
|
|
|
|
|
2,706
|
|
|
$
|
1,365
|
|
|
|
93.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Ballantyne
|
|
Charlotte
|
|
2004
|
|
|
323
|
|
|
$
|
1,112
|
|
|
|
92.9
|
%
|
Post Gateway
Placetm
|
|
Charlotte
|
|
2000
|
|
|
436
|
|
|
|
1,137
|
|
|
|
94.9
|
%
|
Post Park at Phillips
Place®
|
|
Charlotte
|
|
1998
|
|
|
402
|
|
|
|
1,335
|
|
|
|
93.4
|
%
|
Post Uptown
Placetm
|
|
Charlotte
|
|
2000
|
|
|
227
|
|
|
|
1,182
|
|
|
|
95.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average North Carolina
|
|
|
|
|
|
|
1,388
|
|
|
$
|
1,196
|
|
|
|
94.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Greater Washington, D.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Carlyle
Squaretm(6)
|
|
D.C.
|
|
2006
|
|
|
205
|
|
|
$
|
2,145
|
|
|
|
N/A
|
|
Post Corners at Trinity Centre
|
|
Fairfax Co., VA
|
|
1996
|
|
|
336
|
|
|
|
1,446
|
|
|
|
94.8
|
%
|
Post Fallsgrove
|
|
Rockville, MD
|
|
2003
|
|
|
361
|
|
|
|
1,595
|
|
|
|
94.3
|
%
|
Post
Forest®
|
|
Fairfax Co., VA
|
|
1990
|
|
|
364
|
|
|
|
1,395
|
|
|
|
95.0
|
%
|
Post
Massachusetts Avenue
tm(3)
|
|
D.C.
|
|
2002
|
|
|
269
|
|
|
|
2,597
|
|
|
|
92.8
|
%
|
Post Pentagon
Row
tm(5)
|
|
Arlington Co., VA
|
|
2001
|
|
|
504
|
|
|
|
2,218
|
|
|
|
94.5
|
%
|
Post Tysons
Corner
tm
|
|
Fairfax Co., VA
|
|
1990
|
|
|
499
|
|
|
|
1,626
|
|
|
|
94.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average Washington, D.C.
|
|
|
|
|
|
|
2,538
|
|
|
$
|
1,830
|
|
|
|
94.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Luminaria
tm
|
|
New York
|
|
2002
|
|
|
138
|
|
|
$
|
3,754
|
|
|
|
94.8
|
%
|
Post Toscana
tm
|
|
New York
|
|
2003
|
|
|
199
|
|
|
|
3,970
|
|
|
|
96.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal/Average New York
|
|
|
|
|
|
|
337
|
|
|
$
|
3,881
|
|
|
|
95.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
20,546
|
|
|
$
|
1,289
|
|
|
|
94.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
(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 2007, these communities, or
portions thereof, were in
lease-up
and, therefore, the average economic occupancy information for
these communities is not included above.
|
(7)
|
|
These communities are undergoing
rehabilitation.
|
19
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
In November 2006, the Equal Rights Center (ERC)
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 (FHA) and the Americans with
Disabilities Act (ADA) 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 FHA and the ADA and prohibiting construction or
sale of noncompliant units or complexes. On April 18, 2007,
ERC filed a motion for a preliminary injunction to prohibit the
Company and the Operating Partnership from selling any alleged
noncompliant apartment communities or condominium units while
the litigation is ongoing. On July 25, 2007 the court
entered an order denying ERCs motion for the preliminary
injunction. Discovery is being conducted by both parties. On
October 29, 2007, the court granted, in part, ERCs
motion to amend the scheduling order and expand the time
permitted for discovery and filing of dispositive motions. As a
result, the cutoff for fact discovery was extended to
February 29, 2008 with the end of all briefing on
dispositive motions set for August 11, 2008. On
January 29, 2008, the Operating Partnership and ERC agreed
to an extension of discovery dates to accommodate further
depositions and inspections. Under the agreement, which must be
approved by the court, fact discovery will be completed by
April 30, 2008, expert discovery will be completed by
August 29, 2008, and summary judgment briefing will be
completed by November 10, 2008. No trial date has been set.
At this stage in the proceeding, it is not possible to predict
or determine the outcome of the lawsuit, nor is it possible to
estimate the amount of loss 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.
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, 2008 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 45 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 58 years old.
20
Post Properties, Inc.
Post Apartment Homes, L.P.
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 48 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 42 years
old.
Sherry W. Cohen. Ms. Cohen has been with
the Company for twenty-three years. Since October 1997, she has
been an Executive Vice President of the Company 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 53 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 49 years old.
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
|
|
|
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
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
49.25
|
|
|
$
|
43.88
|
|
|
$
|
0.45
|
|
Second Quarter
|
|
|
55.90
|
|
|
|
44.24
|
|
|
|
0.45
|
|
Third Quarter
|
|
|
53.37
|
|
|
|
36.25
|
|
|
|
0.45
|
|
Fourth Quarter
|
|
|
43.97
|
|
|
|
33.67
|
|
|
|
0.45
|
|
On February 15, 2008, the Company had 1,521 common
shareholders of record and 43,923 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
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.
21
Post Properties, Inc.
Post Apartment Homes, L.P.
During 2007, the Company did not sell any unregistered
securities.
There is no established public trading market for the Common
Units. On February 15, 2008, the Operating Partnership had
48 holders of record of Common Units and 470 Common Units
outstanding, excluding the 43,923 of Common Units owned by the
Company.
For each quarter during 2007 and 2006, 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 2007, 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. During the first quarter 2007, the Company repurchased
83 shares of common stock totaling approximately $3,694 at
an average price of $44.61 under this program. The following
table summarizes the Companys purchases of its equity
securities in the three months ended December 31, 2007 (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, 2007 to October 31, 2007
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
196,300
|
|
November 1, 2007 to November 30, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,300
|
|
December 1, 2007 to December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
196,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
$
|
196,300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22
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,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
STATEMENT OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
290,975
|
|
|
$
|
274,731
|
|
|
$
|
257,141
|
|
|
$
|
243,965
|
|
|
$
|
230,677
|
|
Other
|
|
|
16,567
|
|
|
|
16,814
|
|
|
|
15,130
|
|
|
|
14,569
|
|
|
|
13,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
307,542
|
|
|
$
|
291,545
|
|
|
$
|
272,271
|
|
|
$
|
258,534
|
|
|
$
|
243,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations(1)
|
|
$
|
114,163
|
|
|
$
|
29,255
|
|
|
$
|
3,330
|
|
|
$
|
(31,578
|
)
|
|
$
|
(32,812
|
)
|
Income from discontinued operations(2)
|
|
|
64,536
|
|
|
|
72,214
|
|
|
|
138,618
|
|
|
|
119,797
|
|
|
|
46,968
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
178,699
|
|
|
|
101,469
|
|
|
|
141,948
|
|
|
|
88,219
|
|
|
|
14,156
|
|
Dividends to preferred shareholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(8,325
|
)
|
|
|
(11,449
|
)
|
Redemption costs on preferred stock and units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
171,062
|
|
|
$
|
93,832
|
|
|
$
|
134,311
|
|
|
$
|
76,368
|
|
|
$
|
2,707
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER COMMON SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
dividends and redemption costs) basic
|
|
$
|
2.45
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(1.17
|
)
|
Income from discontinued operations basic
|
|
|
1.48
|
|
|
|
1.69
|
|
|
|
3.45
|
|
|
|
3.01
|
|
|
|
1.25
|
|
Net income available to common shareholders basic
|
|
|
3.93
|
|
|
|
2.19
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
Income (loss) from continuing operations (net of preferred
dividends and redemption costs) diluted
|
|
$
|
2.41
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(1.17
|
)
|
Income from discontinued operations diluted
|
|
|
1.46
|
|
|
|
1.66
|
|
|
|
3.45
|
|
|
|
3.01
|
|
|
|
1.25
|
|
Net income available to common shareholders diluted
|
|
|
3.88
|
|
|
|
2.15
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
Dividends declared
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
Weighted average common shares outstanding basic
|
|
|
43,491
|
|
|
|
42,812
|
|
|
|
40,217
|
|
|
|
39,777
|
|
|
|
37,688
|
|
Weighted average common shares outstanding diluted
|
|
|
44,129
|
|
|
|
43,594
|
|
|
|
40,217
|
|
|
|
39,777
|
|
|
|
37,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before accumulated depreciation
|
|
$
|
2,677,869
|
|
|
$
|
2,580,092
|
|
|
$
|
2,416,335
|
|
|
$
|
2,502,418
|
|
|
$
|
2,596,376
|
|
Real estate, net of accumulated depreciation
|
|
|
2,111,612
|
|
|
|
2,028,580
|
|
|
|
1,899,381
|
|
|
|
1,977,719
|
|
|
|
2,085,517
|
|
Total assets
|
|
|
2,268,141
|
|
|
|
2,116,647
|
|
|
|
1,981,454
|
|
|
|
2,053,842
|
|
|
|
2,215,451
|
|
Total indebtedness
|
|
|
1,059,066
|
|
|
|
1,033,779
|
|
|
|
980,615
|
|
|
|
1,129,478
|
|
|
|
1,186,322
|
|
Shareholders equity
|
|
|
1,058,505
|
|
|
|
956,454
|
|
|
|
881,009
|
|
|
|
788,070
|
|
|
|
796,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
97,644
|
|
|
$
|
94,326
|
|
|
$
|
86,761
|
|
|
$
|
79,105
|
|
|
$
|
91,549
|
|
Investing activities
|
|
|
(27,876
|
)
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
131,873
|
|
|
|
234,195
|
|
Financing activities
|
|
|
(61,874
|
)
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
(212,189
|
)
|
|
|
(330,800
|
)
|
Total stabilized communities (at end of period)
|
|
|
54
|
|
|
|
55
|
|
|
|
57
|
|
|
|
65
|
|
|
|
70
|
|
Total stabilized apartment units (at end of period)
|
|
|
19,404
|
|
|
|
20,019
|
|
|
|
21,237
|
|
|
|
24,700
|
|
|
|
27,613
|
|
Average economic occupancy (fully stabilized communities)(3)
|
|
|
94.7
|
%
|
|
|
94.7
|
%
|
|
|
94.5
|
%
|
|
|
93.5
|
%
|
|
|
91.9
|
%
|
|
|
|
(1)
|
|
Income (loss) from continuing
operations in 2007 included gains on the sale of partial
interests of three communities totaling approximately $81,268.
Income (loss) from continuing operations in 2006 included 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 included
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. Income
(loss) from continuing operations in 2003 included the impact of
severance and proxy costs totaling $26,737.
|
(2)
|
|
See note 2 to the consolidated
financial statements for a discussion of 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 93.9%, 94.0%, 93.9%, 93.0% and 90.8% for the years ended
December 31, 2007, 2006, 2005, 2004 and 2003,
respectively). Net concessions were $1,150, $1,255, $947, $621
and $2,518 for the years ended December 31, 2007, 2006,
2005, 2004 and 2003, respectively. Employee discounts were $781,
$765, $398, $442 and $535 for the years ended December 31,
2007, 2006, 2005, 2004 and 2003, 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.
Post
Apartment Homes, L.P.
(In
thousands, except per unit and apartment unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
2003
|
|
|
STATEMENT OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
290,975
|
|
|
$
|
274,731
|
|
|
$
|
257,141
|
|
|
$
|
243,965
|
|
|
$
|
230,677
|
|
Other
|
|
|
16,567
|
|
|
|
16,814
|
|
|
|
15,130
|
|
|
|
14,569
|
|
|
|
13,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
307,542
|
|
|
$
|
291,545
|
|
|
$
|
272,271
|
|
|
$
|
258,534
|
|
|
$
|
243,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations(1)
|
|
$
|
115,654
|
|
|
$
|
29,673
|
|
|
$
|
3,104
|
|
|
$
|
(30,743
|
)
|
|
$
|
(32,278
|
)
|
Income from discontinued operations(2)
|
|
|
65,438
|
|
|
|
73,613
|
|
|
|
145,943
|
|
|
|
127,920
|
|
|
|
52,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
181,092
|
|
|
|
103,286
|
|
|
|
149,047
|
|
|
|
97,177
|
|
|
|
20,097
|
|
Distributions to preferred unitholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(12,105
|
)
|
|
|
(17,049
|
)
|
Redemption costs on preferred units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,526
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders
|
|
$
|
173,455
|
|
|
$
|
95,649
|
|
|
$
|
141,410
|
|
|
$
|
81,546
|
|
|
$
|
3,048
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER COMMON UNIT DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
distributions and redemption costs) basic
|
|
$
|
2.45
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(1.17
|
)
|
Income from discontinued operations basic
|
|
|
1.48
|
|
|
|
1.69
|
|
|
|
3.45
|
|
|
|
3.01
|
|
|
|
1.24
|
|
Net income available to common unitholders basic
|
|
|
3.93
|
|
|
|
2.19
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
Income (loss) from continuing operations (net of preferred
distributions and redemption costs) diluted
|
|
$
|
2.41
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
|
$
|
(1.09
|
)
|
|
$
|
(1.17
|
)
|
Income from discontinued operations diluted
|
|
|
1.46
|
|
|
|
1.66
|
|
|
|
3.45
|
|
|
|
3.01
|
|
|
|
1.24
|
|
Net income available to common unitholders diluted
|
|
|
3.88
|
|
|
|
2.15
|
|
|
|
3.34
|
|
|
|
1.92
|
|
|
|
0.07
|
|
Distributions declared
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
|
|
1.80
|
|
Weighted average common units outstanding basic
|
|
|
44,101
|
|
|
|
43,645
|
|
|
|
42,353
|
|
|
|
42,474
|
|
|
|
42,134
|
|
Weighted average common units outstanding diluted
|
|
|
44,738
|
|
|
|
44,427
|
|
|
|
42,353
|
|
|
|
42,474
|
|
|
|
42,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before accumulated depreciation
|
|
$
|
2,677,869
|
|
|
$
|
2,580,092
|
|
|
$
|
2,416,335
|
|
|
$
|
2,502,418
|
|
|
$
|
2,596,376
|
|
Real estate, net of accumulated depreciation
|
|
|
2,111,612
|
|
|
|
2,028,580
|
|
|
|
1,899,381
|
|
|
|
1,977,719
|
|
|
|
2,085,517
|
|
Total assets
|
|
|
2,268,141
|
|
|
|
2,116,647
|
|
|
|
1,981,454
|
|
|
|
2,053,842
|
|
|
|
2,215,451
|
|
Total indebtedness
|
|
|
1,059,066
|
|
|
|
1,033,779
|
|
|
|
980,615
|
|
|
|
1,129,478
|
|
|
|
1,186,322
|
|
Partners equity
|
|
|
1,068,859
|
|
|
|
970,511
|
|
|
|
907,773
|
|
|
|
831,411
|
|
|
|
928,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
97,644
|
|
|
$
|
94,326
|
|
|
$
|
86,761
|
|
|
$
|
79,105
|
|
|
$
|
91,549
|
|
Investing activities
|
|
|
(27,876
|
)
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
131,873
|
|
|
|
234,195
|
|
Financing activities
|
|
|
(61,874
|
)
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
(212,189
|
)
|
|
|
(330,800
|
)
|
Total stabilized communities (at end of period)
|
|
|
54
|
|
|
|
55
|
|
|
|
57
|
|
|
|
65
|
|
|
|
70
|
|
Total stabilized apartment units (at end of period)
|
|
|
19,404
|
|
|
|
20,019
|
|
|
|
21,237
|
|
|
|
24,700
|
|
|
|
27,613
|
|
Average economic occupancy (fully stabilized communities)(3)
|
|
|
94.7
|
%
|
|
|
94.7
|
%
|
|
|
94.5
|
%
|
|
|
93.5
|
%
|
|
|
91.9
|
%
|
|
|
|
(1)
|
|
Income (loss) from continuing
operations in 2007 included gains on the sale of partial
interests of three communities totaling approximately $81,268.
Income (loss) from continuing operations in 2006 included 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 included
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. Income
(loss) from continuing operations in 2003 included the impact of
severance and proxy costs totaling $26,737.
|
(2)
|
|
See note 2 to the consolidated
financial statements for a discussion of 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 93.9%, 94.0%, 93.9%, 93.0% and 90.8% for the years ended
December 31, 2007, 2006, 2005, 2004 and 2003,
respectively). Net concessions were $1,150, $1,255, $947, $621
and $2,518 for the years ended December 31, 2007, 2006,
2005, 2004 and 2003, respectively. Employee discounts were $781,
$765, $398, $442 and $535 for the years ended December 31,
2007, 2006, 2005, 2004 and 2003, 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.
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24
Post Properties, Inc.
Post Apartment Homes, L.P.
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ITEM 7.
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MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(In thousands, except apartment unit data)
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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, 2007, the Company owned 22,578 apartment units
in 63 apartment communities, including 1,747 apartment
units in five communities held in unconsolidated entities and
2,266 apartment units in seven communities (and the expansion of
one community) currently under construction
and/or in
lease-up.
The Company is also developing and selling 535 for-sale
condominium homes in four communities (including 137 units
in one community held in an unconsolidated entity) and is
converting apartment homes in two communities initially
consisting of 349 units into for-sale condominium homes
through a taxable REIT subsidiary. At December 31, 2007,
approximately 41.3%, 19.2%, 12.3% and 10.3% (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, 2007, the Company owned approximately 98.9%
of the common limited partnership interests (Common
Units) in the Operating Partnership. Common Units held by
persons other than the Company represented a 1.1% 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. In 2006 and 2007, the Companys operating results
continued to benefit from these improved fundamentals, although
the rate of growth has moderated in 2007. This is evidenced by
year over year increases in same store operating revenues and
property net operating income (NOI) of 4.7% and
4.7%, respectively, in 2007 compared to 5.5% and 6.2%,
respectively, in 2006 and 3.1% and 2.9%, respectively, in 2005.
Some concerns have emerged recently relating to a slowdown in
the overall U.S. housing market, attributable in part to
continued concerns relating to the impact of rising mortgage
delinquencies and tighter credit markets. The Company is
forecasting continued moderation in the rate of growth of same
store community revenues and NOI in 2008 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 3,047, 1,340 and 807
apartment units in 2005, 2006 and 2007, respectively, for
aggregate gross proceeds of approximately $232,000, $175,000 and
$91,800 in 2005, 2006 and 2007, respectively. In 2007, the
Company also transferred three communities, containing 1,202
apartment units, to a newly formed unconsolidated entity, in
which the Company retained a 25% interest. The 75% interest in
these communities effectively sold to the institutional partner
generated gross proceeds of approximately $136,200. During this
same period, the Company
25
Post Properties, Inc.
Post Apartment Homes, L.P.
acquired 319, 819 and 350 apartment units for aggregate gross
purchase prices of approximately $37,250, $152,000 and $74,000
in 2005, 2006 and 2007, respectively.
The Company also re-commenced development activities in late
2004 and the pace of new development began to accelerate in
2006. In 2006, the Company started for-rent apartment projects
and one expansion containing 826 units and started an
85 unit for-sale condominium project. In 2007 and early
2008, the Company started for-rent apartment projects containing
1,290 units and started an additional 305 for-sale units at
two condominium projects (one in an unconsolidated entity). The
Company also expects to begin additional development projects in
2008 and 2009.
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 total, the Company has converted five apartment communities
since 2005, initially consisting of 731 units (including
one held in a joint venture), into for-sale condominium homes.
As of the end of 2007, three of these condominium conversion
projects were sold out. The other two projects, consisting of a
206-unit
project in Tampa, FL and a
143-unit
project in Houston, TX, had, on average, closed the sales of
approximately 64% of their total units as of the end of 2007. In
late 2006 and continuing into 2007, there was a softening in the
condominium and single family housing markets due to increasing
mortgage financing rates, increasing supplies of such assets,
tighter credit standards and a significant slow down in the
residential housing market in the U.S. Further, in the
second half of 2007, the turbulence in weakening credit markets
accelerated, resulting in a further decline in for-sale housing
markets. As a result, the pace of condominium closings began to
slow in the second half of 2006 with a further slowing in the
second half of 2007. It is likely that closings will continue to
be slow at these communities into 2008. There can be no
assurance of the amount or pace of future for-sale condominium
sales and closings. As discussed in Note 1 to the
consolidated financial statement contained herein, the Company
uses the relative sales value method to allocate costs and
recognize profits from condominium projects. This method
requires the Company to estimate its total condominium projects
costs and profits each period. Should the Company adjust its
estimates regarding costs and profits expected to be realized
from its condominium projects in future periods, the Company may
recognize losses in subsequent periods to reduce estimated
profits previously recorded or may recognize impairment losses
if the carrying value of these assets is not deemed recoverable.
Beginning in the second quarter of 2007, the Company also began
closing condominium homes at two of its newly developed for-sale
condominium projects, containing 230 homes. The Company expects
closings at these communities to continue into 2008. As of
January 28, 2008, the Company had seven condominium homes
under contract and had closed 132 homes at these communities. As
discussed above, the pace of sales activities and closings is
expected to slow into 2008 at these communities. A significant
portion of the condominium closings at these two communities
resulted from contracts entered into prior to the third quarter
of 2007 when credit standards tightened and markets increased in
volatility resulting in a further slowing of the demand for
for-sale housing. 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, 2007, the Company had approximately $219,900
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 305 for-sale projects
currently under construction. In addition, the Company also had,
in the aggregate, approximately $154,617 of land held for future
development and net investments in unconsolidated land entities
as of December 31, 2007, 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 1.4%. 1.9% and 5.0% weighted average common
minority interest in the Operating Partnership in 2007, 2006 and
2005, respectively. See the summary financial information in the
section below titled, Results of Operations.
26
Post Properties, Inc.
Post Apartment Homes, L.P.
Possible
Business Combination
On January 23, 2008 the Company announced that its Board of
Directors has authorized management to initiate a formal process
to pursue a possible business combination or other sale
transaction and to seek proposals from potentially interested
parties. The formal process was commenced by the Company
immediately following the announcement and is continuing. There
can be no assurance that the initiation of a formal process will
result in any transaction leading to a business combination or
other sale transaction.
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 year ending December 31, 2008
(including the Companys assumptions for such performance
and expected levels of costs and expenses to be incurred in
2008), anticipated apartment community sales in 2008 (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 2008, 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:
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The success of the Companys business strategies described
on pages 2 to 3 in this Annual Report on
Form 10-K;
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|
Future local and national economic conditions, including changes
in job growth, interest rates, the availability of financing and
other factors;
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Demand for apartments in the Companys markets and the
effect on occupancy and rental rates;
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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;
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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;
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The uncertainties associated with the Companys real estate
development, including actual costs exceeding the Companys
budgets or development periods exceeding expectations;
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|
Uncertainties associated with the timing and amount of apartment
community sales and the resulting gains/losses associated with
such sales;
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Uncertainties associated with the Companys condominium
conversion and for-sale housing business, including the timing
and volume of condominium sales;
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Conditions affecting ownership of residential real estate and
general conditions in the multi-family residential real estate
market;
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Uncertainties associated with environmental and other regulatory
matters;
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The effects of compliance with the Americans with Disabilities
Act and the Fair Housing Act;
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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;
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The Companys ability to continue to qualify as a REIT
under the Internal Revenue Code;
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The progress and results of the Companys formal process to
pursue a potential sale or other business combination; and
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Other factors, including the risk factors discussed on pages 8
to 16 in this Annual Report on
Form 10-K.
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27
Post Properties, Inc.
Post Apartment Homes, L.P.
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 2007 and 2006 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, 2007,
2006 and 2005, the Company capitalized interest totaling
$11,801, $9,942 and $2,907, respectively. The increase in
capitalized interest primarily relates to a significantly
increased development pipeline over the last few years. The
weighted average interest rates used in the calculation of the
capitalized interest amounts ranged from 6.6% in 2007 to 6.5% in
2005 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 2007 levels. Aggregate
interest capitalization is expected to increase in 2008 even as
the average interest rate used in the calculation is expected to
be substantially the same or slightly decrease compared to 2007.
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. Over the past three years, the
Company increased its development personnel in three regional
geographic areas in anticipation of increased development
activity in 2007 and in future periods. In 2007, 2006 and 2005,
the Company expensed $7,063, $6,424 and $4,711, respectively, of
development personnel and associated costs. If future
development volume increases over 2007 levels, an additional
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, 2007 and 2006, 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.
In 2005, the Company entered into the for-sale condominium
business. At December 31, 2007, the Company is selling
condominiums at two condominium conversion communities and at
two newly developed communities completed in 2007. Under
Statement of Financial Accounting Standards No. 66
(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
28
Post Properties, Inc.
Post Apartment Homes, L.P.
and the conversion construction periods are typically very
short. In 2005 and 2006, all condominium sales were at
condominium conversion projects. In 2007, sales occurred at both
the condominium conversion and newly developed 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 evaluates the
factors specified in SFAS No. 66 and the guidance
provided by EITF Issue
No. 06-8
(EITF
No. 06-8)
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 and EITF
No. 06-8.
Under the Percentage of Completion Method, revenues 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.
In years prior to 2007, the Company determined that revenues,
project cost of sales and the resulting profits at its two newly
development condominium projects should be recorded under the
Completed Contract Method, similar to the accounting for
condominium conversion projects discussed above. This conclusion
was based upon the determination that the initial and continuing
cash investments received did not meet the requirements of
SFAS No. 66 and EITF
No. 06-8,
as well as other factors. Additionally, the Company commenced
the development of two new condominium projects in 2007 (one in
an unconsolidated entity), one of which began entering into
sales contracts (54 units, or 32% of the total, currently
under contract). For the same considerations as the
Companys other newly developed projects, the Company
determined that the revenues, costs and profits should be
recorded under the Completed Contract Method.
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. Additionally, FIN 48
requires additional disclosure regarding the nature and amount
of uncertain tax positions, if any. The Company implemented
FIN 48 on January 1, 2007 and the adoption did not
have a material impact on the Companys financial position
and results of operations (see note 8 to the consolidated
financial statements).
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).
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
29
Post Properties, Inc.
Post Apartment Homes, L.P.
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.
SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities including
an amendment of FASB Statement No. 115, was
issued in February 2007. SFAS No. 159 gives the
Company the irrevocable option to carry most financial assets
and liabilities at fair value, with changes in fair value
recognized in earnings. SFAS No. 159 is effective for
the Company on January 1, 2008. The Company does not expect
that the adoption of SFAS No. 159 will have a material
impact on the Companys financial position and results of
operations.
SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, was issued in December
2007. SFAS No. 160 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in
the consolidated financial statements. SFAS No. 160 is
effective for the Company on January 1, 2009. The Company
is currently evaluating the potential impact of
SFAS No. 160 on the Companys financial position
and results of operations.
SFAS No. 141R, Business Combinations, was
issued in December 2007. SFAS No. 141R will replace
SFAS No. 141 on the date it becomes effective.
SFAS No. 141R will require 1) acquirers to
recognize all of the assets acquired and liabilities assumed in
a business combination, 2) that the acquisition date be
used to determine fair value for all assets acquired and all
liabilities assumed, and 3) enhanced disclosures for the
acquirer surrounding the financial effects of the business
combination. The provisions of SFAS 141R will lead to the
expensing of acquisition related transaction costs and the
potential recognition of acquisition related contingencies.
SFAS No. 141R is effective for the Company on
January 1, 2009. The Company is currently evaluating the
potential impact of SFAS No. 141R on the
Companys financial position and results of operations.
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, 2007, the Companys
portfolio of operating apartment communities, excluding five
communities held in unconsolidated entities, consisted of the
following: (1) 43 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 2007 and 2006, and
(4) nine 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
deficits for the years ended December 31, 2007 and 2006 was
approximately $1,853 and $460, respectively. There was no
lease-up
deficit in 2005, 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
30
Post Properties, Inc.
Post Apartment Homes, L.P.
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.
Comparison
of Year Ended December 31, 2007 to Year Ended
December 31, 2006
The operating performance from continuing operations for all of
the Companys apartment communities summarized by segment
for the years ended December 31, 2007 and 2006 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
Rental and other property revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
$
|
244,537
|
|
|
$
|
233,637
|
|
|
|
4.7
|
%
|
Development, rehabilitation and
lease-up
communities
|
|
|
14,972
|
|
|
|
9,545
|
|
|
|
56.9
|
%
|
Condominium conversion and other communities(2)
|
|
|
9,810
|
|
|
|
17,281
|
|
|
|
(43.2
|
)%
|
Acquired communities(3)
|
|
|
13,760
|
|
|
|
7,027
|
|
|
|
95.8
|
%
|
Other property segments(4)
|
|
|
23,861
|
|
|
|
23,653
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306,940
|
|
|
|
291,143
|
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance expenses (excluding
depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
|
92,337
|
|
|
|
88,291
|
|
|
|
4.6
|
%
|
Development, rehabilitation and
lease-up
communities
|
|
|
8,064
|
|
|
|
5,291
|
|
|
|
52.4
|
%
|
Condominium conversion and other communities(2)
|
|
|
4,353
|
|
|
|
7,470
|
|
|
|
(41.7
|
)%
|
Acquired communities(3)
|
|
|
5,504
|
|
|
|
3,098
|
|
|
|
77.7
|
%
|
Other property segments, including corporate management
expenses(5)
|
|
|
30,884
|
|
|
|
29,340
|
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,142
|
|
|
|
133,490
|
|
|
|
5.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property net operating income(6)
|
|
$
|
165,798
|
|
|
$
|
157,653
|
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
3,334
|
|
|
$
|
3,718
|
|
|
|
(10.3
|
)%
|
Other
|
|
|
7,301
|
|
|
|
6,307
|
|
|
|
15.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,635
|
|
|
$
|
10,025
|
|
|
|
6.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring
|
|
$
|
8,422
|
|
|
$
|
5,698
|
|
|
|
47.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average apartment units in service
|
|
|
18,889
|
|
|
|
18,839
|
|
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Communities which reached
stabilization prior to January 1, 2006.
|
(2)
|
|
Portions of existing apartment
communities being converted into condominiums that are reflected
in continuing operations under SFAS No. 144 and
communities converted to joint venture ownership in 2007.
|
(3)
|
|
Operating communities acquired
subsequent to January 1, 2006.
|
(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 $602 and $402 for the years ended
December 31, 2007 and 2006, 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.
|
31
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
(6)
|
|
A reconciliation of property net
operating income to GAAP net income is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Total same store NOI
|
|
$
|
152,200
|
|
|
$
|
145,346
|
|
Property NOI from other operating segments
|
|
|
13,598
|
|
|
|
12,307
|
|
|
|
|
|
|
|
|
|
|
Consolidated property NOI
|
|
|
165,798
|
|
|
|
157,653
|
|
|
|
|
|
|
|
|
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
822
|
|
|
|
1,261
|
|
Other revenues
|
|
|
602
|
|
|
|
402
|
|
Minority interest in consolidated property partnerships
|
|
|
(1,857
|
)
|
|
|
(257
|
)
|
Depreciation
|
|
|
(66,371
|
)
|
|
|
(65,687
|
)
|
Interest expense
|
|
|
(52,116
|
)
|
|
|
(52,533
|
)
|
Amortization of deferred financing costs
|
|
|
(3,297
|
)
|
|
|
(3,526
|
)
|
General and administrative
|
|
|
(21,337
|
)
|
|
|
(18,502
|
)
|
Investment and development
|
|
|
(7,063
|
)
|
|
|
(6,424
|
)
|
Gains on sales of real estate assets, net
|
|
|
100,015
|
|
|
|
12,881
|
|
Equity in income of unconsolidated real estate entities
|
|
|
1,556
|
|
|
|
1,813
|
|
Other income (expense)
|
|
|
(1,098
|
)
|
|
|
2,592
|
|
Minority interest of common unitholders
|
|
|
(1,491
|
)
|
|
|
(418
|
)
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
114,163
|
|
|
|
29,255
|
|
Income from discontinued operations
|
|
|
64,536
|
|
|
|
72,214
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
178,699
|
|
|
$
|
101,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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,
|
|
|
|
2007
|
|
|
2006
|
|
|
Annually recurring capital expenditures
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
10,635
|
|
|
$
|
10,025
|
|
Discontinued operations
|
|
|
475
|
|
|
|
1,120
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital expenditures per statements of
cash flows
|
|
$
|
11,110
|
|
|
$
|
11,145
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital expenditures
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
8,422
|
|
|
$
|
5,698
|
|
Discontinued operations
|
|
|
29
|
|
|
|
266
|
|
|
|
|
|
|
|
|
|
|
Total periodically recurring capital expenditures per statements
of cash flows
|
|
$
|
8,451
|
|
|
$
|
5,964
|
|
|
|
|
|
|
|
|
|
|
The Operating Partnership reported net income available to
common unitholders of $173,455 and $95,649 for the years ended
December 31, 2007 and 2006, respectively, and the Company
reported net income available to common shareholders of $171,062
and $93,832 for the years ended December 31, 2007 and 2006,
respectively. The increase in net income in 2007, compared to
2006, primarily reflected increased gains on sales of real
estate assets in 2007 resulting from gains on land sales of
$5,186, gains on sale of three apartment communities of $62,407
and gains on the sale of a 75% interest in three apartment
communities of $81,268 in 2007 compared to gains on the sale of
three apartment communities of $68,324 and land sale gains of
$503 in 2006. The improved operating performance of the
Companys stabilized communities, offset somewhat by
reduced other income, also contributed to increased net income
between periods. These items are discussed in more detail in the
sections below.
Rental and other revenues from property operations increased
$15,797 or 5.4% from 2006 to 2007 primarily due to increased
revenues from the Companys fully stabilized communities of
$10,900 or 4.7%, increased revenues of $5,427 from development,
rehabilitation and
lease-up
communities and increased revenues from acquired communities of
$6,733, offset by reduced revenues from condominium conversion
and other communities of $7,471. The revenue increase from fully
stabilized communities is discussed more fully below. The
revenue increase from development, rehabilitation and
lease-up
communities primarily reflects the
lease-up of
two communities in 2007. The revenue increase from acquired
communities reflects the Companys acquisition of two
communities in March 2006, one community in July 2006 and one
community in July 2007. The revenue decrease from condominium
conversion and other communities reflects the reduction of
leased units as units were vacated for conversion and sale
throughout 2006 and 2007 and due primarily to the transfer and
sale of a 75% interest in three communities to an unconsolidated
entity in 2007. Property operating and maintenance expenses
(exclusive of depreciation and amortization) increased $7,652 or
5.7% primarily due
32
Post Properties, Inc.
Post Apartment Homes, L.P.
to increases from acquisition communities of $2,407, from fully
stabilized communities of $4,046 or 4.6% and from development,
rehabilitation and
lease-up
communities of $2,773 between periods, offset by reduced
expenses from condominium conversion and other communities of
$3,115. The expense increase from acquisition communities
reflects a full year of expenses in 2007 from communities
acquired in 2006 and five months of expenses from one community
acquired in the third quarter of 2007. The expense increase from
development, rehabilitation and
lease-up
communities primarily reflects expenses associated with the
lease-up of
two communities in 2007. The expense increase from stabilized
communities is discussed below. The expense decrease from
condominium conversion and other communities primarily reflects
the reduced expenses from the transfer and sale of a 75%
interest in three communities to an unconsolidated entity in
2007.
In 2007, gains on sales of real estate assets in continuing
operations included gains of $5,186 from the sale of three land
sites and gains of $81,268 from the transfer of a 75% interest
in three communities into a newly formed unconsolidated entity,
in which the Company retained a 25% interest. Gains on sales of
real estate assets in discontinued operations represented gains
of $62,407 from the sale of three apartment communities,
containing 807 apartment units. In 2006, gains on sales of real
estate assets in continuing operations included a gain of $503
from the sale of a land site. Gains on sales of real estate
assets in discontinued operations represented gains of $68,324
from the sale of three apartment communities, containing
1,340 units. The Company may continue to be a seller of
apartment communities in future periods depending on market
conditions and consistent with its investment strategy of
recycling investment capital to fund new development and
acquisition activities. The Company may also enter into
additional joint venture arrangements in future periods.
In 2007 and 2006, gains on sales of real estate assets also
included net gains from condominium sales activities of $13,945
and $12,603, respectively. Net condominium gains of $13,561 and
$12,378 for 2007 and 2006, respectively, were included in
continuing operations. The increase in aggregate condominium
gains between periods primarily reflects the volume, timing and
mix of condominium closings. In 2007 and 2006, the Company
closed 235 and 219 units, respectively, at wholly owned
development and conversion communities. The sales of
condominiums in 2006 at condominium conversion communities
generated higher profit margins than sales at newly developed
communities due to the accumulated depreciation recorded at such
communities prior to their conversion into condominiums.
Aggregate condominium sales (including those reported in
discontinued operations) generated gross proceeds of $78,018 in
2007 and $40,686 in 2006. Approximately 129 unit closings
in 2007 occurred at newly developed communities which began
closings in the second quarter of 2007. The majority of these
contracts were entered into in prior years. The Company expects
gains on sales of real estate assets at the Companys
condominium development and conversion communities to continue
at a slow pace in 2008 as the backlog of condominiums under
contract is lower than in previous quarters and due to the
further tightening of credit market conditions in an already
slow for-sale housing market.
Depreciation expense increased $684, or 1.0% from 2006 to 2007
primarily due to depreciation expense of $2,603 related to
development and
lease-up
communities as apartment units were placed in service in late
2006 and the first half of 2007, $1,742 related to properties
acquired in 2006 and 2007 and approximately $466 of accelerated
depreciation related to the retirement of six apartment units
and certain enclosed garages at a Florida community to
accommodate the expansion of the community in 2007. These
increases were offset by reduced depreciation between periods at
fully stabilized communities of $3,254 resulting from certain
furniture and fixtures (with a five year life) at certain
properties becoming fully depreciated in 2006 and due to reduced
depreciation of $957 from three communities contributed to an
unconsolidated joint venture in 2007.
General and administrative expenses increased $2,835, or 15.3%,
from 2006 to 2007 primarily due to higher compensation costs,
higher business and charitable contribution expenses, higher
legal expenses and higher corporate technology expenses. The
increase in compensation costs in 2007 of $1,790 reflected
annual compensation increases, increased personnel costs
associated with internalizing certain compliance activities and
increased incentive awards to management. Approximately $100 of
this increase reflects the one-time favorable adjustment in 2006
relating to the implementation of SFAS 123R (stock-based
compensation). Business and charitable contributions increased
by $354 in 2007 due to the timing and mix of the commitments
between years. Legal expenses increased by $255 due to
litigation costs associated with the ERC lawsuit which began in
the fourth quarter of 2006 and due to a legal expense recovery
of approximately $179 in 2006 related to prior year shareholder
litigation. The increase in technology expenses of $108
primarily reflects higher consulting and other costs associated
with the implementation of enhanced corporate systems and
technology support services as well as the timing of such
consulting and project expenditures between years. In addition,
the Company recorded additional severance charges of $283 in
2007 related to increased accruals of prior year severance
arrangements.
Investment and development expenses increased $639 or 9.9% from
2006 and 2007. In 2007, the Companys development personnel
and other costs increased $1,938 over 2006 (exclusive of the
specific expense components discussed herein), as
33
Post Properties, Inc.
Post Apartment Homes, L.P.
the Company continued to grow its development pipeline in three
regional markets, due to severance charges of approximately $426
relating to development personnel departures in 2007 as well as
$444 of write-offs of costs associated with certain abandoned
projects. These cost increases were offset by $2,169 of
increased capitalization of development personnel to increasing
development activity commencing in 2006 and continuing into 2007.
Interest expense included in continuing operations decreased
$417 or 1.0% from 2006 to 2007. The decreased expense amounts
between periods primarily reflected increased interest
capitalization on the Companys development projects of
$1,859 between periods offset somewhat by higher interest
expense on higher average debt levels due to increased
development activity between years, increased development land
acquisition activity in 2006 and 2007 and an apartment
acquisition in 2007. Interest expense included in discontinued
operations decreased from $4,189 in 2006 to $1,517 in 2007
primarily due to interest expense associated with three
communities sold in the second half of 2006 and three
communities sold in 2007.
Equity in income of unconsolidated real estate entities
decreased $257 or 14.2% from 2006 to 2007. The decrease was
primarily due to reduced net gains from condominium sales and
reduced net operating income in 2007 at the unconsolidated
entity that was converting its apartment community into
condominiums, as it completed the sell out of its remaining
units in 2007. See note 3 to the consolidated financial
statements for a summary of the operating results of the
Companys unconsolidated entities.
Other income (expense) in 2007 included expenses associated with
estimated state franchise and other income taxes. Franchise
taxes are associated with new margin-based taxes in Texas that
are effective in 2007. In 2006, other income (expense) primarily
included a gain on the sale of marketable securities of $573, an
additional gain on sale of the Companys prior year
investment in Rent.com of $325 resulting in the receipt of
previously escrowed proceeds under the prior year sale and net
mark-to-market derivative gains of $1,655.
Annually recurring and periodically recurring capital
expenditures from continuing operations increased $3,334 or
21.2% from 2006 to 2007. The increase in annually recurring
capital expenditures of $610 primarily reflects higher leasing
office and model upgrade expenditures in 2007. The increase in
periodically recurring capital expenditures of $2,724 primarily
reflects increased costs associated with access upgrades at
several communities and access upgrades and other non-revenue
generating capital expenditures (principally new roofs and HVAC
system upgrades) incurred in conjunction with the Companys
rehabilitation of two communities, offset by decreased tenant
improvements at the Companys office and retail properties
due to the timing of large tenant improvements in 2006.
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, adjusted by communities sold and classified as
held for sale, communities under rehabilitation and communities
converted to joint venture ownership in 2007. For the 2007 to
2006 comparison, fully stabilized communities are defined as
those communities which reached stabilization prior to
January 1, 2006. This portfolio consisted of
43 communities with 16,308 units, including
16 communities with 6,457 units (39.6%) located in
Atlanta, Georgia, 11 communities with 3,464 units
(21.2%) located in Dallas, Texas, 3 communities with
1,877 units (11.5%) located in Tampa, Florida, 4
communities with 1,703 units (10.4%) located in the greater
Washington D.C. metropolitan area,
34
Post Properties, Inc.
Post Apartment Homes, L.P.
4 communities with 1,388 units (8.5%) located in
Charlotte, North Carolina and 5 communities with
1,419 units (8.8%) located in other markets. The operating
performance of these communities is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
% Change
|
|
|
Rental and other revenues
|
|
$
|
244,537
|
|
|
$
|
233,637
|
|
|
|
4.7
|
%
|
Property operating and maintenance expenses (excluding
depreciation and amortization)
|
|
|
92,337
|
|
|
|
88,291
|
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store net operating income(1)
|
|
$
|
152,200
|
|
|
$
|
145,346
|
|
|
|
4.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
3,014
|
|
|
$
|
3,315
|
|
|
|
(9.1
|
)%
|
Other
|
|
|
5,259
|
|
|
|
5,239
|
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring
|
|
|
8,273
|
|
|
|
8,554
|
|
|
|
(3.3
|
)%
|
Periodically recurring
|
|
|
4,543
|
|
|
|
2,633
|
|
|
|
72.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures (A)
|
|
$
|
12,816
|
|
|
$
|
11,187
|
|
|
|
14.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures per unit (A
¸
16,308 units)
|
|
$
|
786
|
|
|
$
|
686
|
|
|
|
14.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average economic occupancy(3)
|
|
|
94.7
|
%
|
|
|
94.7
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly rental rate per unit(4)
|
|
$
|
1,245
|
|
|
$
|
1,187
|
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Net operating income of stabilized
communities is a supplemental non-GAAP financial measure. See
page 32 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,
|
|
|
|
2007
|
|
|
2006
|
|
|
Annually recurring capital expenditures by operating
segment
|
|
|
|
|
|
|
|
|
Same store
|
|
$
|
8,273
|
|
|
$
|
8,554
|
|
Development, rehabilitation and
lease-up
|
|
|
809
|
|
|
|
503
|
|
Condominium conversion and other
|
|
|
731
|
|
|
|
569
|
|
Acquired
|
|
|
519
|
|
|
|
213
|
|
Other segments
|
|
|
778
|
|
|
|
1,306
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital expenditures per statements of
cash flows
|
|
$
|
11,110
|
|
|
$
|
11,145
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital expenditures by operating
segment
|
|
|
|
|
|
|
|
|
Same store
|
|
$
|
4,543
|
|
|
$
|
2,633
|
|
Development, rehabilitation and
lease-up
|
|
|
2,660
|
|
|
|
702
|
|
Condominium conversion and other
|
|
|
758
|
|
|
|
147
|
|
Acquired
|
|
|
21
|
|
|
|
5
|
|
Other segments
|
|
|
469
|
|
|
|
2,477
|
|
|
|
|
|
|
|
|
|
|
Total periodically recurring capital expenditures per statements
of cash flows
|
|
$
|
8,451
|
|
|
$
|
5,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 93.9% and 93.8% for the years ended December 31, 2007
and 2006, respectively. For the years ended December 31,
2007 and 2006, net concessions were $1,149 and $1,337,
respectively, and employee discounts were $781 and $733,
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.
|
35
Post Properties, Inc.
Post Apartment Homes, L.P.
Rental and other property revenues increased $10,900 or 4.7%
from 2007 to 2006. This increase resulted primarily from a 4.9%
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
$11,417 between years. This increase in revenue related to
rental rates was offset somewhat by increased vacancy losses of
$1,385 primarily due to vacancy losses being measured at higher
rental rates in 2007. Additionally, other property revenues
increased $682 primarily as a result of higher up-front leasing
fees and net concessions decreased $186 due to generally reduced
concessions in a stronger rental market in 2007. Overall, the
improved performance of the operating portfolio reflected the
impact of the rental rate increases embedded into the portfolio
throughout much of 2006 as well as the continued modest increase
in job growth in most of the Companys markets with the
Companys operations in six of its markets reporting
increased revenues at or in excess of 4.0%. The Company believes
that the automated pricing software implemented in 2006
partially contributed to the increased revenues in 2007. Average
economic occupancy rates in the fourth quarter of 2007 were
approximately 1.4% higher than in the fourth quarter of 2006 due
to generally stable market conditions and a concerted effort to
maintain occupancy through the traditionally slower first
quarter leasing season. Average rental rate increases between
years were somewhat lower in the fourth quarter at 3.0% compared
to the full year of 4.9%. The Company expects this moderating
trend to continue into 2008 and anticipates establishing rental
rate structures that will enable average occupancy rates to
remain at mid-90% levels. See the Outlook section
below for an additional discussion of trends for 2008.
Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $4,046 or 4.6% from
2007 to 2006. This increase was primarily due to increased
property tax expenses of $1,494 or 5.2%, increased maintenance
expenses of $1,026 or 7.7%, increased other property expenses of
$414 or 12.3%, increased insurance expenses of $1,239 or 30.7%
offset by decreased utility expenses of $191 or 1.8%. Property
tax expenses increased due to increased property valuations in
2007 and the phase-out of property tax exemptions at the
Companys two New York City assets. Maintenance expenses
increased primarily due to higher costs associated with resident
turnover expenses, higher equipment repairs and higher exterior
painting costs between years. Other property expenses increased
primarily due to costs associated with the implementation of
automated revenue pricing software and third party call centers
in the second half of 2006 and into 2007. Insurance expenses
increased due to significantly higher insurance rates on the
renewal of the Companys insurance program in the fourth
quarter of 2006 and second quarter of 2007. The insurance rate
increases primarily related to market increases in catastrophic
coverage in coastal areas. The decrease in utility expense in
2007 primarily reflects the timing of expenses between years.
See the Outlook section below for an additional
discussion of trends in 2008.
36
Post Properties, Inc.
Post Apartment Homes, L.P.
Comparison
of Year Ended December 31, 2006 to Year Ended
December 31, 2005
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 2006 to 2005 comparison, the operating community
categories were based on the status of each community as of
December 31, 2006. As a result, these categories are
different from the operating community categories used in the
2007 to 2006 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, 2006 financial statements due to the
restatement impact of reclassifying the operating results of
assets designated as held for sale in 2007 to discontinued
operations under SFAS No. 144 (see the related
discussion under the caption, Discontinued
Operations). The operating performance from continuing
operations for all of the Companys apartment communities
combined 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)
|
|
$
|
244,434
|
|
|
$
|
231,774
|
|
|
|
5.5
|
%
|
Development, rehabilitation and
lease-up
communities
|
|
|
9,545
|
|
|
|
10,438
|
|
|
|
(8.6
|
)%
|
Condominium conversion and other communities(2)
|
|
|
2,626
|
|
|
|
5,890
|
|
|
|
(55.4
|
)%
|
Acquired communities(3)
|
|
|
10,886
|
|
|
|
2,298
|
|
|
|
373.7
|
%
|
Other property segments(4)
|
|
|
23,652
|
|
|
|
21,616
|
|
|
|
9.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
291,143
|
|
|
|
272,016
|
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance expenses (excluding
depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
|
92,251
|
|
|
|
88,438
|
|
|
|
4.3
|
%
|
Development, rehabilitation and
lease-up
communities
|
|
|
5,291
|
|
|
|
4,361
|
|
|
|
21.3
|
%
|
Condominium conversion and other communities(2)
|
|
|
1,901
|
|
|
|
2,013
|
|
|
|
(5.6
|
)%
|
Acquired communities(3)
|
|
|
4,706
|
|
|
|
856
|
|
|
|
449.8
|
%
|
Other property segments, including corporate management
expenses(5)
|
|
|
29,341
|
|
|
|
29,086
|
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
133,490
|
|
|
|
124,754
|
|
|
|
7.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property net operating income(6)
|
|
$
|
157,653
|
|
|
$
|
147,262
|
|
|
|
7.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
3,718
|
|
|
$
|
2,775
|
|
|
|
34.0
|
%
|
Other
|
|
|
6,307
|
|
|
|
5,475
|
|
|
|
15.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
10,025
|
|
|
$
|
8,250
|
|
|
|
21.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring
|
|
$
|
5,698
|
|
|
$
|
4,174
|
|
|
|
36.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average apartment units in service
|
|
|
18,839
|
|
|
|
18,563
|
|
|
|
1.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
37
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
|
|
$
|
152,183
|
|
|
$
|
143,336
|
|
Property NOI from other operating segments
|
|
|
5,470
|
|
|
|
3,926
|
|
|
|
|
|
|
|
|
|
|
Consolidated property NOI
|
|
|
157,653
|
|
|
|
147,262
|
|
|
|
|
|
|
|
|
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,261
|
|
|
|
661
|
|
Other revenues
|
|
|
402
|
|
|
|
255
|
|
Minority interest in consolidated property partnerships
|
|
|
(257
|
)
|
|
|
(110
|
)
|
Depreciation
|
|
|
(65,687
|
)
|
|
|
(68,795
|
)
|
Interest expense
|
|
|
(52,533
|
)
|
|
|
(54,197
|
)
|
Amortization of deferred financing costs
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
General and administrative
|
|
|
(18,502
|
)
|
|
|
(18,307
|
)
|
Investment and development
|
|
|
(6,424
|
)
|
|
|
(4,711
|
)
|
Severance charges
|
|
|
|
|
|
|
(796
|
)
|
Gains (losses) on sales of real estate assets, net
|
|
|
12,881
|
|
|
|
(531
|
)
|
Equity in income of unconsolidated real estate entities
|
|
|
1,813
|
|
|
|
1,767
|
|
Other income
|
|
|
2,592
|
|
|
|
5,267
|
|
Minority interest of common unitholders
|
|
|
(418
|
)
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
29,255
|
|
|
|
3,330
|
|
Income from discontinued operations
|
|
|
72,214
|
|
|
|
138,618
|
|
|
|
|
|
|
|
|
|
|
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
|
|
$
|
10,025
|
|
|
$
|
8,250
|
|
Discontinued operations
|
|
|
1,120
|
|
|
|
1,671
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital expenditures per statements of
cash flows
|
|
$
|
11,145
|
|
|
$
|
9,921
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital expenditures
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
5,698
|
|
|
$
|
4,174
|
|
Discontinued operations
|
|
|
266
|
|
|
|
334
|
|
|
|
|
|
|
|
|
|
|
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 $19,127 or 7.0%
from 2005 to 2006 primarily due to increased revenues from the
Companys fully stabilized communities of $12,660 or 5.5%
and acquired communities of $8,588. The revenue increase from
fully 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
$8,736 or 7.0% primarily due to increased expenses from fully
stabilized communities and acquisition communities. The expense
increase from fully 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 from condominium
sales at the Companys condominium conversion communities
and gains of $68,324 on the sale of three
38
Post Properties, Inc.
Post Apartment Homes, L.P.
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
from condominium sales at the Companys condominium
conversion communities and gains of $124,425 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.
Depreciation expense decreased $3,108, or 4.5% 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
$1,664 or 3.1% 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 $6,862 in 2005 to $4,189
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 fully 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 3 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 $3,299 or
26.6% from 2005 to 2006. The increase in annually recurring
capital expenditures of $1,775 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 $1,524 primarily reflects increased tenant
improvements at the Companys office and retail properties
as well as the timing of large structural expenditures between
periods.
39
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, adjusted by communities sold and held for sale
and two communities under rehabilitation. 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 45 communities with
17,187 units, including 19 communities with
7,659 units (44.6%) located in Atlanta, Georgia, 11
communities with 3,464 units (20.1%) located in Dallas,
Texas, 3 communities with 1,877 units (10.9%) located in
Tampa, Florida, 4 communities with 1,703 units (9.9%)
located in the greater Washington D.C. metropolitan area, 3
communities with 1,065 units (6.2%) located in Charlotte,
North Carolina and 5 communities with 1,419 units (8.3%)
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
|
|
$
|
244,434
|
|
|
$
|
231,774
|
|
|
|
5.5
|
%
|
Property operating and maintenance expenses (excluding
depreciation and amortization)
|
|
|
92,251
|
|
|
|
88,438
|
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Same store net operating income(1)
|
|
$
|
152,183
|
|
|
$
|
143,336
|
|
|
|
6.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
Annually recurring:
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$
|
3,532
|
|
|
$
|
2,489
|
|
|
|
41.9
|
%
|
Other
|
|
|
5,531
|
|
|
|
4,936
|
|
|
|
12.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring
|
|
|
9,063
|
|
|
|
7,425
|
|
|
|
22.1
|
%
|
Periodically recurring
|
|
|
2,760
|
|
|
|
3,021
|
|
|
|
(8.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures (A)
|
|
$
|
11,823
|
|
|
$
|
10,446
|
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures per unit (A
¸
17,187 units)
|
|
$
|
688
|
|
|
$
|
608
|
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average economic occupancy(3)
|
|
|
94.8
|
%
|
|
|
94.8
|
%
|
|
|
0.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average monthly rental rate per unit(4)
|
|
$
|
1,176
|
|
|
$
|
1,117
|
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Net operating income of stabilized
communities is a supplemental non-GAAP financial measure. See
page 38 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
|
|
$
|
9,063
|
|
|
$
|
7,425
|
|
Development, rehabilitation and
lease-up
|
|
|
503
|
|
|
|
433
|
|
Condominium conversion and other
|
|
|
2
|
|
|
|
133
|
|
Acquired
|
|
|
271
|
|
|
|
92
|
|
Other segments
|
|
|
1,306
|
|
|
|
1,838
|
|
|
|
|
|
|
|
|
|
|
Total annually recurring capital expenditures per statements of
cash flows
|
|
$
|
11,145
|
|
|
$
|
9,921
|
|
|
|
|
|
|
|
|
|
|
Periodically recurring capital expenditures by operating
segment
|
|
|
|
|
|
|
|
|
Same store
|
|
$
|
2,760
|
|
|
$
|
3,021
|
|
Development, rehabilitation and
lease-up
|
|
|
702
|
|
|
|
296
|
|
Condominium conversion and other
|
|
|
|
|
|
|
75
|
|
Acquired
|
|
|
25
|
|
|
|
5
|
|
Other segments
|
|
|
2,477
|
|
|
|
1,111
|
|
|
|
|
|
|
|
|
|
|
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.
|
40
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
(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 93.9% for the years ended December 31, 2006
and 2005, respectively. For the years ended December 31,
2006 and 2005, net concessions were $1,200 and $1,588,
respectively, and employee discounts were $754 and $561,
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 $12,660 or 5.5%
from 2005 to 2006. This increase resulted primarily from a 5.3%
increase in the average monthly rental rate per apartment unit
as the average economic occupancy of the portfolio was
consistent between years at 94.8%. This increase in average
rental rates resulted in a revenue increase of approximately
$12,038 between years. This increase in revenue related to
rental rates was offset somewhat by increased vacancy losses of
$1,005 primarily due to vacancy losses being measured at higher
rental rates in 2006. Additionally, other property revenues
increased $1,239 as a result of higher up-front leasing fees and
higher utility reimbursements from residents due to increased
utility expenses, and to lower net concessions of $388 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.
Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $3,813 or 4.3% from
2005 to 2006. This increase was primarily due to increased
property tax expenses of $1,760 or 6.3%, increased utility
expenses of $676 or 5.6%, increased personnel expenses of $647
or 3.0%, increased other property expenses of $851 or 32.2%,
increased insurance expenses of $477 or 12.9% offset by
decreased advertising and promotion expenses of $811 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.
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, 2007, income from
discontinued operations included the results of operations of
one apartment community classified as held for sale at
December 31, 2007, the operations of three communities sold
in 2007 through their sale dates and the results of operations
of one condominium conversion community through its sell-out
date in 2007. For the years ended December 31, 2006 and
2005, income from discontinued operations included the results
of operations of operations of the apartment community
classified as held for sale at December 31, 2007, the three
communities sold in 2007, two condominium conversion communities
through their respective sell-out dates in 2007 and 2005 and the
results of operations of nine apartment communities designated
as held for sale and sold in 2006 and 2005 through their
respective sale dates.
41
Post Properties, Inc.
Post Apartment Homes, L.P.
The revenues and expenses of these communities for the years
ended December 31, 2007, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
8,572
|
|
|
$
|
20,065
|
|
|
$
|
35,587
|
|
Other property revenues
|
|
|
676
|
|
|
|
1,914
|
|
|
|
3,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
9,248
|
|
|
|
21,979
|
|
|
|
38,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
3,890
|
|
|
|
8,951
|
|
|
|
16,496
|
|
Depreciation
|
|
|
1,069
|
|
|
|
3,280
|
|
|
|
7,452
|
|
Interest
|
|
|
1,517
|
|
|
|
4,189
|
|
|
|
6,862
|
|
Minority interest in consolidated property partnerships
|
|
|
|
|
|
|
|
|
|
|
(335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
6,476
|
|
|
|
16,420
|
|
|
|
30,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property operations before minority
interest
|
|
|
2,772
|
|
|
|
5,559
|
|
|
|
8,520
|
|
Minority interest
|
|
|
(39
|
)
|
|
|
(106
|
)
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property operations
|
|
$
|
2,733
|
|
|
$
|
5,453
|
|
|
$
|
8,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 apartment communities and for-sale condominiums
included in discontinued operations for each year fluctuate with
the timing and size of apartment communities and condominium
homes sold. 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.
Outlook
for 2008
The Companys outlook for 2008 is based on the expectation
that apartment market fundamentals will be moderate compared to
2007 as a result of moderating job growth expectations and a
slowing overall U.S. economy. Additionally, the Company
foresees an increased supply of rental competition from the
rental of excess for-sale condominiums and single family
inventories in some of its markets. However, the supply of new
apartment deliveries is projected to remain in balance with
rental demand and tighter credit markets may reduce turnover
driven by residents purchasing their own homes.
Rental and other revenues from fully stabilized communities are
expected to increase compared to 2007, driven by modest rental
rate increases and stable occupancies. Operating expenses of
fully stabilized communities are also expected to increase in
2008. Other than general inflationary increases, the Company
expects property taxes and insurance expenses to increase at
slightly higher rates. Insurance expenses are expected to
increase primarily as a result of the increased costs of
catastrophic insurance coverage in coastal regions through the
Companys May 2008 renewal date. Management expects fully
stabilized community net operating income to increase at a
modest pace in 2008 absent a recession in the U.S., which could
adversely impact the Companys results of operations.
Management expects interest expense in 2008 to be lower than in
2007 due generally to increased interest capitalization in 2008
resulting from increased project development volume, lower debt
levels as well as lower interest rates on variable rate,
unsecured debt. Management also expects modest increases in
general and administrative and property management expenses due
in large part to increased costs of personnel and related costs.
In addition, the Company expects that it will incur additional
costs associated with its commencement of a formal process to
pursue a possible combination or other sale transaction which is
continuing.
In 2008, management expects to sell two additional apartment
communities located in Atlanta, Georgia. These sales are
expected to generate gross proceeds of approximately $100,000.
The expected proceeds from these sales are intended to be used
for various corporate purposes, including funding of the
Companys development pipeline. Additionally, the
42
Post Properties, Inc.
Post Apartment Homes, L.P.
Company closed the sale of an apartment community located in
Dallas, Texas in January 2008 for a gross sales price of
$19,850. Finally, the Company, through a taxable REIT
subsidiary, expects to continue the sale of condominium homes in
its condominium conversion projects that commenced in 2006 and
at the two newly developed condominium communities that
commenced sales in 2007. The Company expects to realize net
accounting gains in 2008 from these apartment and condominium
sales.
The Company has six apartment projects, one expansion and two
condominium communities under construction with a total expected
cost to the Company of approximately $540,000 and expects to
begin additional development projects in 2008. Management
expects a decrease in expensed investment, development and other
expenses in 2008 primarily resulting from the increased
capitalization of development personnel to the increased volume
of construction activity in 2008.
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 flows from operating activities
increased from $94,326 in 2006 to $97,644 in 2007 primarily due
to the improved operating performance of the Companys
fully stabilized communities, offset by increased overhead
expenses as well as from favorable changes in the working
capital components (primarily increased accrued expenses and
prepaid rents between periods) included in operating activities.
The Companys net cash provided by operating activities
increased from $86,761 in 2005 to $94,326 in 2006 primarily due
to the improved operating performance of the Companys
fully stabilized communities and reduced interest expense
resulting from increased capitalization to development
communities in 2006. The Company expects cash flows from
operating activities to be consistent with or improve somewhat
in 2008 primarily driven by the expected modest improvement in
the operating performance of the Companys fully stabilized
properties offset somewhat by the continued dilutive cash flow
impact from asset sales and modest increases in overhead
expenses.
Net cash flows used in investing activities decreased from
$104,464 in 2006 to $27,876 in 2007 primarily due to increased
net proceeds from sales of real estate assets offset somewhat in
2007 by increased spending on development and rehabilitation
activities. Proceeds from sales of real estate assets increased
in 2007 primarily due to the sales of three apartment
communities, a 75% interest in three apartment communities and
land sites for aggregate net proceeds of approximately $167,572.
The Company began renovations of two of its apartment
communities in mid-2006 and construction and development
expenditures increased in 2007 as the Company initiated new
development starts in 2006 and 2007. 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
purchase prices 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. In 2008, the Company expects to increase development
activities (additional starts in 2008 and higher expenditures at
existing developments) in all of its regional geographic areas
primarily financed through debt borrowings or depending on the
outcome of its ongoing sales process, leveraged joint venture
arrangements. In 2008, the Company sold one community in January
and expects to sell two communities and additional condominium
homes and plans to principally reinvest the proceeds in its
development communities and to repay debt.
Net cash flows from financing activities changed from net cash
provided by financing activities of $7,391 in 2006 to net cash
used in financing activities of $61,874 in 2007, primarily due
to decreased proceeds from stock option exercises in 2007 and
slightly lower net borrowings between years. 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. In 2008,
the Company expects that its outstanding debt may increase
modestly, depending on the level of potential asset sales
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. 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.
43
Post Properties, Inc.
Post Apartment Homes, L.P.
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, 2007, 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 apartment community and
condominium 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 2008, 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 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 (excluding any costs associated with a
possible business combination or other sale transaction). The
Company intends to use primarily the proceeds from 2008
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 communities (discussed below) and the short-term
negative impact of apartment rehabilitation and
lease-up
activities. 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,
2007 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 communities, 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, including in 2007 the sale of a 75% interest in
three apartment communities to an unconsolidated entity in which
the Company retained a 25% interest, in 2007, 2006 and 2005 were
$312,674 (including approximately $67,000 of tax deferred
exchange proceeds held in escrow at December 31, 2007),
$216,419 (including $40,000 debt assumed) and $281,106
(including $81,560 of debt assumed), respectively.
In 2007, the Company sold three apartment communities,
containing 807 units, and converted three apartment
communities, containing 1,202 units, into joint venture
ownership as part of its asset sales program designed to
maintain the low average age and high quality of the portfolio
and to reduce the Companys market concentration in
Atlanta, Georgia. These sales generated significant capital
gains for tax purposes in 2007. The Company was able to use its
regular quarterly dividend of $0.45 per share to distribute
these capital gains to shareholders. In January 2008, the
Company sold its apartment community classified as held for sale
at December 31, 2007 for net proceeds of $19,433. The
Company also expects to generate additional sales proceeds from
the sale of two other communities that it currently plans to
market for sale in 2008 as well as from the sales of converted
and newly developed condominium homes. Management has continued
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 net
proceeds from sales to retire approximately $25,000 of maturing
unsecured notes and to repay and retire approximately $98,075 of
secured debt in 2007. In 2008, the Company has no scheduled
maturities of consolidated unsecured or secured indebtedness.
Aggregate maturities of secured indebtedness in unconsolidated
entities totals $17,000 in 2008.
44
Post Properties, Inc.
Post Apartment Homes, L.P.
In November 2007, the Company increased the borrowing capacity
under its line of facilities from $480,000 to $630,000. The
terms, conditions and restrictive covenants associated with the
lines of credit were slightly modified under the amended
facilities. At December 31, 2007, the Company had
approximately $257,275 borrowed under its $630,000 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, 2007, 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 2008 business plan and meet its short-term liquidity
requirements.
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, 2007, 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)
|
|
$
|
1,072,204
|
|
|
$
|
54,809
|
|
|
$
|
356,539
|
|
|
$
|
294,646
|
|
|
$
|
366,210
|
|
Lines of credit(1)(2)
|
|
|
290,411
|
|
|
|
14,485
|
|
|
|
275,926
|
|
|
|
|
|
|
|
|
|
Operating leases(3)
|
|
|
159,689
|
|
|
|
1,863
|
|
|
|
3,484
|
|
|
|
3,605
|
|
|
|
150,737
|
|
Other long-term obligations(4)
|
|
|
18,581
|
|
|
|
4,968
|
|
|
|
6,393
|
|
|
|
4,549
|
|
|
|
2,671
|
|
Development and construction obligations(5)
|
|
|
389,015
|
|
|
|
208,241
|
|
|
|
180,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,929,900
|
|
|
$
|
284,366
|
|
|
$
|
823,116
|
|
|
$
|
302,801
|
|
|
$
|
519,617
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amounts include principal and
interest payments.
|
(2)
|
|
At December 31, 2007, the
Company had issued letters of credit to third parties totaling
$1,350 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 severance agreements.
|
(5)
|
|
Represents estimated remaining
amounts necessary to complete projects under development at
December 31, 2007, 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
$19,561, $17,109 and $14,429 for the years ended
December 31, 2007, 2006 and 2005, respectively. Based on
the size of the Companys operating property portfolio at
December 31, 2007, the Company expects that its capital
expenditures in 2008 will be modestly higher than the amount
incurred in 2007 as the Company seeks to maintain the operating
performance of its assets.
At December 31, 2007, the Company had an outstanding
interest rate swap derivative financial instrument with a
notional value of approximately $93,890 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
At December 31, 2007, the Company holds investments in five
unconsolidated entities. Three of these entities own apartment
communities with ownership interests ranging from 25% to 35%. A
fourth unconsolidated entity, with a 35% ownership interest,
completed the sell-out of a condominium conversion community
during 2007. The fifth unconsolidated entity commenced
construction during 2007 of a mixed-use development with the
Company holding a 50% interest in the condominium portion of the
project. These unconsolidated entities have third party mortgage
and construction indebtedness, and the aggregate indebtedness
totaled $214,549 at December 31, 2007. The Companys
share of this indebtedness totaled $60,959 at December 31,
2007.
Under the terms of the construction loan facility, the Company
and its 50% equity partner have jointly and severally guaranteed
approximately $25,313 of the construction loan attributable to
the condominium portion of the project. Additionally, the
Company and its 50% equity partner have jointly and severally
guaranteed certain debt service payments of the condominium
portion of the loan not to exceed approximately $6,153 and all
of the equity owners of the project, including the Company, have
guaranteed the completion of the first building at the project.
45
Post Properties, Inc.
Post Apartment Homes, L.P.
Long-term
Debt Issuances and Retirements
A summary of the Companys outstanding debt and debt
maturities at December 31, 2007 is included in note 4
to the consolidated financial statements. A summary of changes
in secured and unsecured debt in 2006 is discussed below.
In June 2007, the Company repaid $25,000 of 6.11% senior
unsecured notes from available borrowings under its unsecured
line of credit. In July 2007, the Company repaid $83,132 of
secured mortgage notes, with interest rates ranging from 6.29%
to 7.69%, from borrowings under its unsecured line of credit.
These mortgage notes were scheduled to mature in October 2007.
In December 2007, the Company retired a $9,895 variable rate
tax-exempt bond prior to its scheduled maturity date in 2025 in
conjunction with the sale of the underlying apartment community.
In January 2008, the Company closed a $120,000 secured, fixed
rate mortgage note payable. The note bears interest at 4.88%,
requires interest only payments and matures in 2015. The note
contains an automatic one year extension under which the
interest rate converts to a variable rate, as defined.
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. During
2007, the Company repurchased 83 shares of common stock
totaling approximately $3,694 under this program.
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.
46
Post Properties, Inc.
Post Apartment Homes, L.P.
Acquisition of assets and community development and other
capitalized expenditures for the years ended December 31,
2007, 2006 and 2005 are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
New community development and acquisition activity(1)
|
|
$
|
284,239
|
|
|
$
|
295,979
|
|
|
$
|
116,710
|
|
Periodically recurring capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Community rehabilitation and other revenue generating
improvements(2)
|
|
|
13,074
|
|
|
|
10,641
|
|
|
|
|
|
Other community additions and improvements(3)
|
|
|
8,451
|
|
|
|
5,964
|
|
|
|
4,508
|
|
Annually recurring capital expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet replacements and other community additions and
improvements(4)
|
|
|
11,110
|
|
|
|
11,145
|
|
|
|
9,921
|
|
Corporate additions and improvements
|
|
|
2,903
|
|
|
|
3,480
|
|
|
|
1,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
319,777
|
|
|
$
|
327,209
|
|
|
$
|
132,910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized interest
|
|
$
|
11,801
|
|
|
$
|
9,942
|
|
|
$
|
2,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capitalized development and associated costs(5)
|
|
$
|
4,053
|
|
|
$
|
1,884
|
|
|
$
|
1,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
|
Current
Development Activity
At December 31, 2007, the Company had six communities (and
the expansion of one community) containing 2,116 apartment units
and 305 for-sale condominiums under development in two
communities (including 137 units in one community held in
an unconsolidated entity). These communities are summarized in
the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company
|
|
|
Incurred
|
|
|
|
|
|
Number
|
|
|
Retail
|
|
|
Company
|
|
|
Estimated
|
|
|
Share of
|
|
|
as of
|
|
Community
|
|
Location
|
|
of Units
|
|
|
Sq. Ft.
|
|
|
Ownership
|
|
|
Cost
|
|
|
Est. Cost
|
|
|
12/31/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Company Share)
|
|
|
Apartments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Alexandertm
|
|
Atlanta, GA
|
|
|
307
|
|
|
|
|
|
|
|
100
|
%
|
|
$
|
62.4
|
|
|
$
|
62.4
|
|
|
$
|
39.8
|
|
Post
Walk®
at Citrus Park Village
|
|
Tampa, FL
|
|
|
296
|
|
|
|
|
|
|
|
100
|
%
|
|
|
41.6
|
|
|
|
41.6
|
|
|
|
8.6
|
|
Post
Eastsidetm
|
|
Dallas, TX
|
|
|
435
|
|
|
|
37,900
|
|
|
|
100
|
%
|
|
|
56.7
|
|
|
|
56.7
|
|
|
|
21.8
|
|
Post Hyde
Park®
(expansion)
|
|
Tampa, FL
|
|
|
84
|
|
|
|
|
|
|
|
100
|
%
|
|
|
18.8
|
(4)
|
|
|
18.8
|
|
|
|
14.9
|
|
Post Frisco
Bridgestm
|
|
Dallas, TX
|
|
|
269
|
|
|
|
29,000
|
|
|
|
100
|
%
|
|
|
41.3
|
|
|
|
41.3
|
|
|
|
7.8
|
|
Post
Park®
|
|
Wash. DC
|
|
|
396
|
|
|
|
1,700
|
|
|
|
100
|
%
|
|
|
84.7
|
|
|
|
84.7
|
|
|
|
14.1
|
|
Post West
Austintm
|
|
Austin, TX
|
|
|
329
|
|
|
|
|
|
|
|
100
|
%
|
|
|
53.2
|
|
|
|
53.2
|
|
|
|
13.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Apartments
|
|
|
|
|
2,116
|
|
|
|
68,600
|
|
|
|
|
|
|
$
|
358.7
|
|
|
$
|
358.7
|
|
|
$
|
120.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Residences
at 3630
Peachtreetm(5)
|
|
Atlanta, GA
|
|
|
137
|
|
|
|
|
|
|
|
50
|
%
|
|
$
|
93.4
|
|
|
$
|
47.6
|
|
|
$
|
11.1
|
|
Four Seasons Residences
|
|
Austin, TX
|
|
|
168
|
|
|
|
8,000
|
|
|
|
100
|
%
|
|
|
133.5
|
|
|
|
133.5
|
|
|
|
18.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Condominiums
|
|
|
|
|
305
|
|
|
|
8,000
|
|
|
|
|
|
|
$
|
226.9
|
|
|
$
|
181.1
|
|
|
$
|
30.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
Quarter of
|
|
|
Quarter of
|
|
|
|
|
|
Estimated
|
|
|
Units
|
|
|
|
|
|
|
of Const.
|
|
First Units
|
|
|
Stabilized
|
|
|
Units
|
|
|
Quarter
|
|
|
Under
|
|
|
Units
|
|
Community
|
|
Start
|
|
Available
|
|
|
Occupancy(1)
|
|
|
Leased(2)
|
|
|
Sell-out
|
|
|
Contract(3)
|
|
|
Closed(2)
|
|
|
Apartments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Alexandertm
|
|
2Q 2006
|
|
|
1Q 2008
|
|
|
|
2Q 2009
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post
Walk®
at Citrus Park Village
|
|
1Q 2008
|
|
|
1Q 2009
|
|
|
|
1Q 2010
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post
Eastsidetm
|
|
4Q 2006
|
|
|
2Q 2008
|
|
|
|
4Q 2009
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post Hyde
Park®
(expansion)
|
|
4Q 2006
|
|
|
4Q 2007
|
|
|
|
3Q 2008
|
|
|
|
21
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post Frisco
Bridgestm
|
|
3Q 2007
|
|
|
4Q 2008
|
|
|
|
2Q 2010
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post
Park®
|
|
4Q 2007
|
|
|
1Q 2009
|
|
|
|
2Q 2010
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Post West
Austintm
|
|
4Q 2007
|
|
|
1Q 2009
|
|
|
|
3Q 2009
|
|
|
|
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condominiums:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Residences
at 3630
Peachtreetm(5)
|
|
3Q 2007
|
|
|
3Q 2009
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
4Q 2010
|
|
|
|
|
|
|
|
|
|
Four Seasons Residences
|
|
1Q 2008
|
|
|
4Q 2009
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
4Q 2010
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Condominiums
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 28, 2008.
|
(3)
|
|
As of January 28, 2008,
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.
|
(5)
|
|
The amounts reflected for this
project represent the condominium portion of a mixed-use
development currently being developed in an entity owned with
other third-party developers. This condominium portion of the
project is co-owned with an Atlanta-based condominium
development partner.
|
Inflation
For each of the last three years and as of December 31,
2007, 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
48
Post Properties, Inc.
Post Apartment Homes, L.P.
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
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,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Net income available to common shareholders
|
|
$
|
171,062
|
|
|
$
|
93,832
|
|
|
$
|
134,311
|
|
Minority interest of common unitholders continuing
operations
|
|
|
1,491
|
|
|
|
418
|
|
|
|
(226
|
)
|
Minority interest in discontinued operations(1)
|
|
|
903
|
|
|
|
1,399
|
|
|
|
7,325
|
|
Depreciation on consolidated real estate assets
|
|
|
65,560
|
|
|
|
66,574
|
|
|
|
73,189
|
|
Depreciation on real estate assets held in unconsolidated
entities
|
|
|
1,143
|
|
|
|
906
|
|
|
|
969
|
|
Gains on sales of real estate assets
|
|
|
(157,620
|
)
|
|
|
(80,927
|
)
|
|
|
(140,112
|
)
|
Incremental gains on condominium sales(2)
|
|
|
6,922
|
|
|
|
1,406
|
|
|
|
8,280
|
|
Gains on sales of real estate assets unconsolidated
entities
|
|
|
(186
|
)
|
|
|
(482
|
)
|
|
|
(612
|
)
|
Incremental gains on condominium sales unconsolidated
entities(2)
|
|
|
107
|
|
|
|
96
|
|
|
|
359
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common shareholders and
unitholders(3)
|
|
$
|
89,382
|
|
|
$
|
83,222
|
|
|
$
|
83,483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding basic
|
|
|
43,491
|
|
|
|
42,812
|
|
|
|
40,217
|
|
Weighted average shares and units outstanding basic
|
|
|
44,101
|
|
|
|
43,645
|
|
|
|
42,353
|
|
Weighted average shares outstanding diluted(4)
|
|
|
44,129
|
|
|
|
43,594
|
|
|
|
40,616
|
|
Weighted average shares and units outstanding
diluted(4)
|
|
|
44,738
|
|
|
|
44,427
|
|
|
|
42,752
|
|
|
|
|
|
(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, 2007, included gains on
the sale of land parcels of $5,186. 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.
|
|
(4)
|
Diluted weighted average shares and units for the years ended
December 31, 2005 include 400 of common stock equivalent
shares and units that were antidilutive to all income (loss) per
share computations under generally accepted accounting
principles.
|
49
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
(In thousands)
|
Interest
Rate Sensitivity
The Companys primary market risk exposure is interest rate
risk. At December 31, 2007, the Company had $351,275 of
variable rate debt tied to LIBOR. 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
|
|
|
|
2008
|
|
|
2009
|
|
|
2010
|
|
|
2011
|
|
|
2012
|
|
|
after
|
|
|
Total
|
|
|
Value
|
|
|
|
(In thousands)
|
|
|
Debt obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$
|
3,495
|
|
|
$
|
74,753
|
|
|
$
|
186,618
|
|
|
$
|
139,266
|
|
|
$
|
100,956
|
|
|
$
|
202,703
|
|
|
$
|
707,791
|
|
|
$
|
726,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average interest rate
|
|
|
5.82
|
%
|
|
|
5.47
|
%
|
|
|
7.68
|
%
|
|
|
5.40
|
%
|
|
|
5.45
|
%
|
|
|
6.09
|
%
|
|
|
6.22
|
%
|
|
|
|
|
Floating rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash management line(1)(2)
|
|
|
|
|
|
|
|
|
|
|
12,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,275
|
|
|
|
12,275
|
|
Syndicated line of credit(1)(2)
|
|
|
|
|
|
|
|
|
|
|
245,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
245,000
|
|
|
|
245,000
|
|
FNMA(3)
|
|
|
1,735
|
|
|
|
1,865
|
|
|
|
2,010
|
|
|
|
2,165
|
|
|
|
2,340
|
|
|
|
83,885
|
|
|
|
94,000
|
|
|
|
94,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total floating rate debt
|
|
|
1,735
|
|
|
|
1,865
|
|
|
|
259,285
|
|
|
|
2,165
|
|
|
|
2,340
|
|
|
|
83,885
|
|
|
|
351,275
|
|
|
|
351,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
5,230
|
|
|
$
|
76,618
|
|
|
$
|
445,903
|
|
|
$
|
141,431
|
|
|
$
|
103,296
|
|
|
$
|
286,588
|
|
|
$
|
1,059,066
|
|
|
$
|
1,077,889
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Interest on these debt instruments
is based on LIBOR plus 0.575% at December 31, 2007. At
December 31, 2007, the one-month LIBOR rate was 4.6%.
|
(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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
Expected
|
|
|
Fair Value
|
|
|
|
|
|
Pay Rate/
|
|
|
Average
|
|
Settlement
|
|
|
Asset
|
|
Interest Rate Derivatives
|
|
Notional Amount
|
|
Cap Rate
|
|
|
Receive Rate
|
|
Date
|
|
|
(Liab.)
|
|
|
Interest Rate Swaps Variable to fixed
|
|
$97,010 amortizing to $90,270
|
|
|
5.21
|
%
|
|
1 month LIBOR
|
|
|
7/31/09
|
|
|
$
|
(2,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate caps
|
|
$28,495
|
|
|
5.00
|
%
|
|
|
|
|
2/01/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(2,224
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 borrowings, in excess
of the $94,000 FNMA borrowings
50
Post Properties, Inc.
Post Apartment Homes, L.P.
effectively converted to fixed rates discussed above, fluctuated
by 1.0%, interest costs to the Company, based on outstanding
borrowings at December 31, 2007, would increase or decrease
by approximately $2,573 on an annualized basis.
In December 2007, the Company repaid $9,895 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 $9,895 was not terminated and as a result became
ineffective for accounting purposes. The loss recognized as a
result of such ineffectiveness was not material to the
consolidated financial statements. In 2006, the remaining
portion of this interest rate cap arrangement with a notional
amount of $18,600 was deemed ineffective for accounting
purposes. In 2007, the change in value of the interest rate cap
arrangement was not material to the Companys results of
operations or financial position. The interest rate cap
arrangement expired on February 1, 2008 with no change in
value from December 31, 2007.
|
|
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.
Pursuant to
Rules 13a-15(b)
and
15d-15(b)
under the Securities Exchange Act of 1934, as amended (the
Exchange Act), 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 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 2007 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.
51
Post Properties, Inc.
Post Apartment Homes, L.P.
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
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.
Additional information regarding this item will either appear in
our proxy statement, in which case it is hereby incorporated by
reference in this Annual Report on
Form 10-K,
or in an amendment to this
Form 10-K.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Information regarding this item will either appear in our proxy
statement, in which case it is hereby incorporated by reference
in this Annual Report on
Form 10-K,
or in an amendment to this
Form 10-K.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS
|
Information regarding this item will either appear in our proxy
statement, in which case it is hereby incorporated by reference
in this Annual Report on
Form 10-K,
or in an amendment to this
Form 10-K.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Information regarding this item will either appear in our proxy
statement, in which case it is hereby incorporated by reference
in this Annual Report on
Form 10-K,
or in an amendment to this
Form 10-K.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTANT FEES AND SERVICES
|
Information regarding this item will either appear in our proxy
statement, in which case it is hereby incorporated by reference
in this Annual Report on
Form 10-K,
or in an amendment to this
Form 10-K.
52
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55
|
|
|
|
|
56
|
|
|
|
|
58
|
|
|
|
|
59
|
|
|
|
|
60
|
|
|
|
|
62
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90
|
|
|
|
|
91
|
|
|
|
|
93
|
|
|
|
|
94
|
|
|
|
|
95
|
|
|
|
|
96
|
|
|
|
|
97
|
|
|
|
|
|
|
FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
|
|
122
|
|
All other financial statement schedules are omitted because they
are either not applicable or not required.
|
|
|
|
|
|
|
|
125
|
|
(c) Financial Statements of Fifty Percent or Less Owned
Persons
|
|
|
|
|
The audited consolidated financial statements of PCH Atlanta
Venture, LLC as of December 31, 2007 will be filed as an
amendment to this annual report on
Form 10-K
on or before March 31, 2008.
53
Post Properties, Inc.
Post Apartment Homes, L.P.
Consolidated Financial
Statements
December 31, 2007 and
2006
54
Post Properties, Inc.
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 Securities
Exchange Act of 1934 (the 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, 2007 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, 2007.
The effectiveness of the Companys internal control over
financial reporting as of December 31, 2007 has been
audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report
which is included herein.
55
Post Properties, Inc.
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 sheets of
Post Properties, Inc. and subsidiaries (the Company)
as of December 31, 2007 and 2006, and the related
consolidated statements of operations, shareholders
equity, and cash flows for each of the two years in the period
ended December 31, 2007. Our audits also included the
financial statement schedule listed in the Index at
Item 15. We also have audited the Companys internal
control over financial reporting as of December 31, 2007,
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
financial statement schedule, for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Control over Financial Reporting. Our responsibility is
to express an opinion on these financial statements and
financial statement schedule and an opinion on 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 audits of the 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, assessing the risk that a
material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the
assessed risk. Our audits also included 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, 2007 and 2006, and the results of their
operations and their cash flows for each of the two years in the
period ended December 31, 2007, 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, the Company maintained, in all material respects,
effective internal control over financial reporting as of
December 31, 2007, 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.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
February 28, 2008
56
Post Properties, Inc.
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Post Properties,
Inc.:
In our opinion, the consolidated statements of operations,
shareholders equity and accumulated earnings and cash
flows for the year ended December 31, 2005 present fairly,
in all material respects, the results of operations and cash
flows of Post Properties, Inc. and its subsidiaries for the year
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 real
estate investments and accumulated depreciation included in the
financial statement schedule for the year 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 the summary of activity for real
estate investments and accumulated depreciation included in the
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 audit. We conducted our audit 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 audit provides a reasonable basis for our
opinion.
/s/ 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 and
as it relates to the effects of changes in segment reporting
categories discussed in Note 15, as to which the date is
February 28, 2008
57
Post Properties, Inc.
POST
PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Real estate assets
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
276,680
|
|
|
$
|
278,448
|
|
Building and improvements
|
|
|
1,840,563
|
|
|
|
1,821,123
|
|
Furniture, fixtures and equipment
|
|
|
204,433
|
|
|
|
204,318
|
|
Construction in progress
|
|
|
134,125
|
|
|
|
135,428
|
|
Land held for future development
|
|
|
154,617
|
|
|
|
92,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,610,418
|
|
|
|
2,532,117
|
|
Less: accumulated depreciation
|
|
|
(562,226
|
)
|
|
|
(547,477
|
)
|
For-sale condominiums
|
|
|
38,844
|
|
|
|
28,295
|
|
Assets held for sale, net of accumulated depreciation of $4,031
and
|
|
|
|
|
|
|
|
|
$4,035 at December 31, 2007 and 2006, respectively
|
|
|
24,576
|
|
|
|
15,645
|
|
|
|
|
|
|
|
|
|
|
Total real estate assets
|
|
|
2,111,612
|
|
|
|
2,028,580
|
|
Investments in and advances to unconsolidated real estate
entities
|
|
|
23,036
|
|
|
|
32,794
|
|
Cash and cash equivalents
|
|
|
11,557
|
|
|
|
3,663
|
|
Restricted cash
|
|
|
5,642
|
|
|
|
5,203
|
|
Deferred charges, net
|
|
|
10,538
|
|
|
|
12,400
|
|
Other assets
|
|
|
105,756
|
|
|
|
34,007
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,268,141
|
|
|
$
|
2,116,647
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders equity
|
|
|
|
|
|
|
|
|
Indebtedness
|
|
$
|
1,059,066
|
|
|
$
|
1,033,779
|
|
Accounts payable and accrued expenses
|
|
|
100,215
|
|
|
|
75,403
|
|
Dividend and distribution payable
|
|
|
19,933
|
|
|
|
19,886
|
|
Accrued interest payable
|
|
|
4,388
|
|
|
|
4,885
|
|
Security deposits and prepaid rents
|
|
|
11,708
|
|
|
|
9,915
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,195,310
|
|
|
|
1,143,868
|
|
|
|
|
|
|
|
|
|
|
Minority interest of common unitholders in Operating Partnership
|
|
|
10,354
|
|
|
|
14,057
|
|
Minority interests in consolidated real estate entities
|
|
|
3,972
|
|
|
|
2,268
|
|
|
|
|
|
|
|
|
|
|
Total minority interests
|
|
|
14,326
|
|
|
|
16,325
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, 20,000 authorized:
|
|
|
|
|
|
|
|
|
81/2%
Series A Cumulative Redeemable Shares, liquidation
preference $50 per share, 900 shares issued and outstanding
|
|
|
9
|
|
|
|
9
|
|
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:
|
|
|
|
|
|
|
|
|
43,825 and 43,603 shares issued, 43,825 and
43,486 shares outstanding at December 31, 2007 and
2006, respectively
|
|
|
438
|
|
|
|
436
|
|
Additional
paid-in-capital
|
|
|
874,928
|
|
|
|
869,587
|
|
Accumulated earnings
|
|
|
189,985
|
|
|
|
97,567
|
|
Accumulated other comprehensive income (loss)
|
|
|
(3,962
|
)
|
|
|
(3,490
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,061,418
|
|
|
|
964,129
|
|
Less common stock in treasury, at cost, 72 and 175 shares
|
|
|
|
|
|
|
|
|
at December 31, 2007 and 2006, respectively
|
|
|
(2,913
|
)
|
|
|
(7,675
|
)
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
1,058,505
|
|
|
|
956,454
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
2,268,141
|
|
|
$
|
2,116,647
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
58
Post Properties, Inc.
POST
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
290,975
|
|
|
$
|
274,731
|
|
|
$
|
257,141
|
|
Other property revenues
|
|
|
15,965
|
|
|
|
16,412
|
|
|
|
14,875
|
|
Other
|
|
|
602
|
|
|
|
402
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
307,542
|
|
|
|
291,545
|
|
|
|
272,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
141,142
|
|
|
|
133,490
|
|
|
|
124,754
|
|
Depreciation
|
|
|
66,371
|
|
|
|
65,687
|
|
|
|
68,795
|
|
General and administrative
|
|
|
21,337
|
|
|
|
18,502
|
|
|
|
18,307
|
|
Investment, development and other
|
|
|
7,063
|
|
|
|
6,424
|
|
|
|
4,711
|
|
Severance charges
|
|
|
|
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
235,913
|
|
|
|
224,103
|
|
|
|
217,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
71,629
|
|
|
|
67,442
|
|
|
|
54,908
|
|
Interest income
|
|
|
822
|
|
|
|
1,261
|
|
|
|
661
|
|
Interest expense
|
|
|
(52,116
|
)
|
|
|
(52,533
|
)
|
|
|
(54,197
|
)
|
Amortization of deferred financing costs
|
|
|
(3,297
|
)
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
Gains (losses) on sales of real estate assets, net
|
|
|
100,015
|
|
|
|
12,881
|
|
|
|
(531
|
)
|
Equity in income of unconsolidated real estate entities
|
|
|
1,556
|
|
|
|
1,813
|
|
|
|
1,767
|
|
Other income (expense)
|
|
|
(1,098
|
)
|
|
|
2,592
|
|
|
|
5,267
|
|
Minority interest in consolidated property partnerships
|
|
|
(1,857
|
)
|
|
|
(257
|
)
|
|
|
(110
|
)
|
Minority interest of common unitholders
|
|
|
(1,491
|
)
|
|
|
(418
|
)
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
114,163
|
|
|
|
29,255
|
|
|
|
3,330
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property operations, net of minority
interest
|
|
|
2,733
|
|
|
|
5,453
|
|
|
|
8,664
|
|
Gains on sales of real estate assets, net of minority interest
|
|
|
61,925
|
|
|
|
67,247
|
|
|
|
132,997
|
|
Loss on early extinguishment of indebtedness, net of minority
interest
|
|
|
(122
|
)
|
|
|
(486
|
)
|
|
|
(3,043
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
64,536
|
|
|
|
72,214
|
|
|
|
138,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
178,699
|
|
|
|
101,469
|
|
|
|
141,948
|
|
Dividends to preferred shareholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
171,062
|
|
|
$
|
93,832
|
|
|
$
|
134,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
dividends)
|
|
$
|
2.45
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
Income from discontinued operations
|
|
|
1.48
|
|
|
|
1.69
|
|
|
|
3.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
3.93
|
|
|
$
|
2.19
|
|
|
$
|
3.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic
|
|
|
43,491
|
|
|
|
42,812
|
|
|
|
40,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share data Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
dividends)
|
|
$
|
2.41
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
Income from discontinued operations
|
|
|
1.46
|
|
|
|
1.66
|
|
|
|
3.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
3.88
|
|
|
$
|
2.15
|
|
|
$
|
3.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding diluted
|
|
|
44,129
|
|
|
|
43,594
|
|
|
|
40,217
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
POST
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
ACCUMULATED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(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, 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
|
|
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60
Post Properties, Inc.
POST
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
ACCUMULATED EARNINGS (contd)
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(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, 2006
|
|
|
2,900
|
|
|
|
43,486
|
|
|
$
|
29
|
|
|
$
|
436
|
|
|
$
|
869,587
|
|
|
$
|
97,567
|
|
|
$
|
(3,490
|
)
|
|
$
|
|
|
|
$
|
(7,675
|
)
|
|
$
|
956,454
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,699
|
|
Net change in derivatives, net of minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(458
|
)
|
|
|
|
|
|
|
|
|
|
|
(458
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
178,241
|
|
Proceeds from employee stock purchase, stock option and other
plans
|
|
|
|
|
|
|
187
|
|
|
|
|
|
|
|
1
|
|
|
|
(302
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,929
|
|
|
|
4,628
|
|
Adjustment for minority interest of unitholders in Operating
Partnership upon conversion of units into common shares and at
dates of capital transactions
|
|
|
|
|
|
|
235
|
|
|
|
|
|
|
|
1
|
|
|
|
1,581
|
|
|
|
|
|
|
|
(14
|
)
|
|
|
|
|
|
|
3,527
|
|
|
|
5,095
|
|
Stock-based compensation, net of minority interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,062
|
|
Treasury stock acquisitions
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,694
|
)
|
|
|
(3,694
|
)
|
Dividends to preferred shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
Dividends to common shareholders ($1.80 per share)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(78,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity and Accumulated Earnings,
December 31, 2007
|
|
|
2,900
|
|
|
|
43,825
|
|
|
$
|
29
|
|
|
$
|
438
|
|
|
$
|
874,928
|
|
|
$
|
189,985
|
|
|
$
|
(3,962
|
)
|
|
$
|
|
|
|
$
|
(2,913
|
)
|
|
$
|
1,058,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
61
Post Properties, Inc.
POST
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
178,699
|
|
|
$
|
101,469
|
|
|
$
|
141,948
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
67,440
|
|
|
|
68,967
|
|
|
|
76,248
|
|
Amortization of deferred financing costs
|
|
|
3,297
|
|
|
|
3,526
|
|
|
|
4,661
|
|
Minority interest of common unitholders in Operating Partnership
|
|
|
1,491
|
|
|
|
418
|
|
|
|
(226
|
)
|
Minority interest in discontinued operations
|
|
|
902
|
|
|
|
1,399
|
|
|
|
7,325
|
|
Minority interest in consolidated entities
|
|
|
1,857
|
|
|
|
257
|
|
|
|
(239
|
)
|
Gains on sales of real estate assets
|
|
|
(162,806
|
)
|
|
|
(81,430
|
)
|
|
|
(140,643
|
)
|
Other expense (income)
|
|
|
1,123
|
|
|
|
(1,433
|
)
|
|
|
(5,267
|
)
|
Equity in income of unconsolidated entities
|
|
|
(1,556
|
)
|
|
|
(1,813
|
)
|
|
|
(1,634
|
)
|
Distributions of earnings of unconsolidated entities
|
|
|
2,554
|
|
|
|
2,713
|
|
|
|
2,033
|
|
Deferred compensation
|
|
|
502
|
|
|
|
471
|
|
|
|
194
|
|
Stock-based compensation
|
|
|
4,118
|
|
|
|
2,910
|
|
|
|
2,293
|
|
Loss on early extinguishment of debt
|
|
|
124
|
|
|
|
495
|
|
|
|
2,264
|
|
Changes in assets, (increase) decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
(3,535
|
)
|
|
|
(3,009
|
)
|
|
|
(4,012
|
)
|
Deferred charges
|
|
|
(177
|
)
|
|
|
(129
|
)
|
|
|
(1,082
|
)
|
Changes in liabilities, increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
(497
|
)
|
|
|
(594
|
)
|
|
|
(2,199
|
)
|
Accounts payable and accrued expenses
|
|
|
2,754
|
|
|
|
655
|
|
|
|
2,476
|
|
Security deposits and prepaid rents
|
|
|
1,354
|
|
|
|
(546
|
)
|
|
|
2,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
97,644
|
|
|
|
94,326
|
|
|
|
86,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and acquisition of real estate assets, net of
payables
|
|
|
(262,958
|
)
|
|
|
(239,428
|
)
|
|
|
(112,527
|
)
|
Net proceeds from sales of real estate assets
|
|
|
245,522
|
|
|
|
176,419
|
|
|
|
199,546
|
|
Proceeds from sale of other investments
|
|
|
|
|
|
|
898
|
|
|
|
5,267
|
|
Capitalized interest
|
|
|
(11,801
|
)
|
|
|
(9,942
|
)
|
|
|
(2,907
|
)
|
Annually recurring capital expenditures
|
|
|
(11,110
|
)
|
|
|
(11,145
|
)
|
|
|
(9,921
|
)
|
Periodically recurring capital expenditures
|
|
|
(8,451
|
)
|
|
|
(5,964
|
)
|
|
|
(4,508
|
)
|
Community rehabilitation and other revenue generating capital
expenditures
|
|
|
(13,074
|
)
|
|
|
(10,641
|
)
|
|
|
|
|
Corporate additions and improvements
|
|
|
(2,903
|
)
|
|
|
(3,480
|
)
|
|
|
(1,771
|
)
|
Distributions from (investments in and advances to)
unconsolidated entities
|
|
|
36,033
|
|
|
|
(2,125
|
)
|
|
|
(5,846
|
)
|
Note receivable collections and other investments
|
|
|
866
|
|
|
|
944
|
|
|
|
2,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(27,876
|
)
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lines of credit proceeds, net
|
|
|
148,362
|
|
|
|
7,534
|
|
|
|
50,631
|
|
Proceeds from indebtedness
|
|
|
|
|
|
|
190,000
|
|
|
|
100,000
|
|
Payments on indebtedness
|
|
|
(123,145
|
)
|
|
|
(145,763
|
)
|
|
|
(217,934
|
)
|
Payments of financing costs
|
|
|
(894
|
)
|
|
|
(3,971
|
)
|
|
|
(1,211
|
)
|
Treasury stock acquisitions
|
|
|
(3,694
|
)
|
|
|
(5,000
|
)
|
|
|
(34,400
|
)
|
Proceeds from employee stock purchase and stock options plans
|
|
|
4,126
|
|
|
|
52,008
|
|
|
|
36,084
|
|
Capital contributions (distributions) of minority interests
|
|
|
656
|
|
|
|
(1,183
|
)
|
|
|
283
|
|
Distributions to common unitholders
|
|
|
(1,156
|
)
|
|
|
(1,685
|
)
|
|
|
(4,060
|
)
|
Dividends paid to preferred shareholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
Dividends paid to common shareholders
|
|
|
(78,492
|
)
|
|
|
(76,912
|
)
|
|
|
(72,523
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(61,874
|
)
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
7,894
|
|
|
|
(2,747
|
)
|
|
|
6,287
|
|
Cash and cash equivalents, beginning of period
|
|
|
3,663
|
|
|
|
6,410
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
11,557
|
|
|
$
|
3,663
|
|
|
$
|
6,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
62
Post Properties, Inc.
POST
PROPERTIES, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(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, 2007, the Company owned 22,578 apartment units
in 63 apartment communities, including 1,747 apartment units in
five communities held in unconsolidated entities and 2,266
apartment units in seven communities (and the expansion of one
community) currently under construction
and/or in
lease-up.
The Company is also developing and selling 535 for-sale
condominium homes (including 137 units in one community
held in an unconsolidated entity) and is converting apartment
homes in two communities, initially consisting of
349 units, into for-sale condominium homes through a
taxable REIT subsidiary. At December 31, 2007,
approximately 41.3%, 19.2%, 12.3% and 10.3% (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, 2007, the Company had outstanding
43,825 shares of common stock and owned the same number of
units of common limited partnership interests (Common
Units) in the Operating Partnership, representing a 98.9%
ownership interest in the Operating Partnership. Common Units
held by persons other than the Company totaled 470 at
December 31, 2007 and represented a 1.1% 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 98.6%, 98.1% and 95.0% for the years
ended December 31, 2007, 2006 and 2005, respectively.
Possible
business combination
On January 23, 2008, the Company announced that its Board
of Directors had authorized management, working with financial
and legal advisors, to initiate a formal process to pursue a
possible business combination or other sale transaction and to
seek proposals from potentially interested parties. The process
commenced immediately after the announcement and is continuing.
There can be no assurance that the process will result in any
transaction leading into a business combination or other sale
transaction.
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
(under the provisions of EITF
No. 04-5).
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.
63
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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
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, 2007, 2006 and 2005 were
approximately 6.6%, 6.6% and 6.5%, 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
64
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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 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,
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 and
the guidance provided by
EITF 06-8.
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 and the guidance provided by
EITF 06-8.
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 project costs for each condominium
unit
65
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
under a binding real estate contract. As of December 31,
2007, all newly developed condominium projects are accounted for
under the Completed Contract Method.
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.
Apartment
community acquisitions
In accordance with the provisions of 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 and
in-place leases 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 No. 123R, Share-Based Payment.
SFAS No. 123R requires companies to expense the fair
value of employee stock options and other forms of stock-based
compensation.
In 2005, the Company accounted for stock-based compensation
under the fair value method prescribed by
SFAS No. 123, Accounting for Stock-Based
Compensation, which was applied on a prospective basis.
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 in 2005 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 No. 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, required
maintenance reserves for certain communities located in Georgia
and earnest money and escrow deposits associated with the
Companys for-sale condominium business.
66
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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. At December 31, 2007, the aggregate
redemption value of the then outstanding common units of the
Operating Partnership was not materially different than their
net book value.
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.
New
accounting pronouncements
In 2007 and 2006, several new accounting pronouncements were
issued and the pronouncements with a potential impact on the
Company in 2007 and in future periods and which are not
discussed elsewhere in note 1 are discussed below.
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 were required to be adjusted
on the implementation date. Additionally, FIN 48 requires
additional disclosure regarding the nature and amount of
uncertain tax positions, if any. The Company implemented
FIN 48 on January 1, 2007 and the adoption did not
have a material impact on the Companys financial position
and results of operations (see note 8).
The Securities and Exchange Commission issued Staff Accounting
Bulletin 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
67
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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).
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.
SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities including
an amendment of FASB Statement No. 115, was issued in
February 2007. SFAS No. 159 gives the Company the
irrevocable option to carry most financial assets and
liabilities at fair value, with changes in fair value recognized
in earnings. SFAS No. 159 is effective for the Company
on January 1, 2008. The Company does not expect that the
adoption of SFAS No. 159 will have a material impact
on the Companys financial position and results of
operations.
SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, was issued in December
2007. SFAS No. 160 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in
the consolidated financial statements. SFAS No. 160 is
effective for the Operating Partnership on January 1, 2009.
The Operating Partnership is currently evaluating the potential
impact of SFAS No. 160 on the Operating
Partnerships financial position and results of operations.
SFAS No. 141R, Business Combinations, was
issued in December 2007. SFAS No. 141R will replace
SFAS No. 141 on the date it becomes effective.
SFAS No. 141R will require 1) acquirers to
recognize all of the assets acquired and liabilities assumed in
a business combination, 2) that the acquisition date be
used to determine fair value for all assets acquired and all
liabilities assumed, and 3) enhanced disclosures for the
acquirer surrounding the financial effects of the business
combination. The provisions of SFAS 141R will lead to the
expensing of acquisition related transaction costs and the
potential recognition of acquisition related contingencies.
SFAS No. 141R is effective for the Company on
January 1, 2009. The Company is currently evaluating the
potential impact of SFAS No. 141R on the
Companys financial position and results of operations.
|
|
2.
|
REAL
ESTATE ACQUISITIONS AND DISPOSITIONS
|
Acquisitions
In July 2007, the Company acquired a
350-unit
apartment community located in Orlando, Florida for
approximately $75,200, including closing costs. Additionally,
the Company plans to spend up to approximately $1,250 to improve
the community (of which approximately $73 was incurred as of
December 31, 2007). Aggregate acquisition costs were
allocated to land ($17,500), building, improvements and
equipment ($56,702) and identified lease related intangible
assets ($998).
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
incurred approximately $1,300 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 incurred approximately $2,255
to complete the renovation of the community.
68
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Lease-up of
renovated units began in the fourth quarter of 2006. At
December 31, 2007, the community was 80% occupied. 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 in 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, 2007, the Company had one community,
containing 143 units, and certain parcels of land
classified as held for sale. These real estate assets are
reflected in the accompanying consolidated balance sheet at
$24,576, which represents the lower of their depreciated cost or
fair value less costs to sell. At December 31, 2007, the
Company also had portions of two communities that are being
converted to condominiums, originally containing 349 units,
and certain completed condominium units at newly developed
condominium communities totaling $38,844 that are classified as
for-sale condominiums on the accompanying consolidated balance
sheet.
In 2007, the Company transferred three operating apartment
communities to a newly formed unconsolidated entity in which the
Company retained a 25% non-controlling interest, for aggregate
proceeds of approximately $134,922. This transaction resulted in
a gain on sale of real estate in continuing operations totaling
approximately $81,268 for the year ended December 31, 2007.
Additionally, the unconsolidated entity obtained mortgage
financing secured by the apartment communities totaling
approximately $126,724, of which approximately $31,681 was
distributed to the Company. For the year ended December 31,
2007, gains on sales of real estate assets in continuing
operations also included gains of $5,186 on the sale of land
sites. For the year ended December 31, 2006, gains on sales
of real estate assets in continuing operations included a gain
of $503 on the sale of a land site.
In 2007, 2006 and 2005, income from continuing operations also
included net gains from condominium sales activity at newly
developed condominium projects and condominium conversion
projects representing portions of existing communities. In
addition to the condominium gains included in continuing
operations, the Company expensed certain sales and marketing
costs associated with pre-sale condominium communities and
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, 2007, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
77,458
|
|
|
$
|
33,364
|
|
|
$
|
|
|
Condominium costs and expenses
|
|
|
(63,897
|
)
|
|
|
(20,986
|
)
|
|
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on sales of condominiums, net
|
|
$
|
13,561
|
|
|
$
|
12,378
|
|
|
$
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2007, the Company retrospectively adjusted its consolidated
financial statements for the years ended December 31, 2006
and 2005, to reflect three apartment communities classified as
held for sale (two of which were sold in 2007) in 2007
under SFAS No. 144. The effect of the retrospective
adjustment represented a $1,679 and $2,026 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,
2006 and 2005, respectively.
Under SFAS No. 144, 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,
2007, income from discontinued operations included the results
of operations of one apartment community classified as held for
sale at December 31, 2007, three communities sold in 2007
through their sale dates and one condominium conversion
69
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
community through its sell out date in 2007. For the years ended
December 31, 2006 and 2005, income from discontinued
operations included the results of operations of the apartment
community classified as held for sale at December 31, 2007,
three apartment communities sold in 2007, two condominium
conversion communities through their respective sell-out dates
in 2007 and 2005 and the results of operations of nine apartment
communities sold in 2006 and 2005 through their respective sale
dates.
The revenues and expenses of these communities for the years
ended December 31, 2007, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
8,572
|
|
|
$
|
20,065
|
|
|
$
|
35,587
|
|
Other property revenues
|
|
|
676
|
|
|
|
1,914
|
|
|
|
3,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
9,248
|
|
|
|
21,979
|
|
|
|
38,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
3,890
|
|
|
|
8,951
|
|
|
|
16,496
|
|
Depreciation
|
|
|
1,069
|
|
|
|
3,280
|
|
|
|
7,452
|
|
Interest
|
|
|
1,517
|
|
|
|
4,189
|
|
|
|
6,862
|
|
Minority interest in consolidated property partnerships
|
|
|
|
|
|
|
|
|
|
|
(335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
6,476
|
|
|
|
16,420
|
|
|
|
30,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property operations before minority
interest
|
|
|
2,772
|
|
|
|
5,559
|
|
|
|
8,520
|
|
Minority interest
|
|
|
(39
|
)
|
|
|
(106
|
)
|
|
|
144
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property operations
|
|
$
|
2,733
|
|
|
$
|
5,453
|
|
|
$
|
8,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2007, the Company recognized net gains in discontinued
operations of $62,406 ($61,546, net of minority interest) from
the sale of three communities containing 807 units. These
sales generated net proceeds of approximately $90,893, of which
a portion ($66,938) was held by an exchange intermediary at
December 31, 2007 (and classified as other assets on the
consolidated balance sheet), pending the completion of a tax
deferred exchange. 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.
Gains on sales of real estate assets included in discontinued
operations also includes net gains from condominium sales at two
condominium conversion communities for the years ended
December 31, 2007, 2006 and 2005. 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,
2007, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
560
|
|
|
$
|
7,322
|
|
|
$
|
56,012
|
|
Condominium costs and expenses
|
|
|
(176
|
)
|
|
|
(7,097
|
)
|
|
|
(39,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, before minority interest and income
taxes
|
|
|
384
|
|
|
|
225
|
|
|
|
16,812
|
|
Minority interest
|
|
|
(5
|
)
|
|
|
(4
|
)
|
|
|
(814
|
)
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, net of minority interest
|
|
$
|
379
|
|
|
$
|
221
|
|
|
$
|
15,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
In January 2008, the Company closed the sale of an apartment
community, containing 143 units, for a gross sales price of
$19,850. The sale completed the tax-deferred exchange
transaction discussed above.
|
|
3.
|
INVESTMENTS
IN UNCONSOLIDATED REAL ESTATE ENTITIES
|
At December 31, 2007, the Company holds investments in
five individual limited liability companies (the Property
LLCs) with institutional investors and other entities.
Three of the Property LLCs own apartment communities. A fourth
Property LLC completed the sell out of a condominium conversion
community in 2007 and the fifth Property LLC commenced
construction in 2007 of a mixed-use development, consisting of
for-sale condominiums and class A office space. The Company
holds a 35% equity interest in two Property LLCs, each owning
one apartment community, and the Property LLC that completed the
condominium conversion and sale process. The Company holds a 25%
interest in one Property LLC owning three apartment communities,
and a 50% interest in the condominium portion of the Property
LLC developing the mixed-use project.
In 2007, the Companys investment in the 25% owned Property
LLC resulted from the transfer of three previously owned
apartment communities to the Property LLC co-owned with an
institutional investor. The assets, liabilities and
members equity of this Property LLC were recorded at fair
value based on
agreed-upon
amounts contributed to the Property LLC. At December 31,
2007, the Companys investment in the 25% owned Property
LLC reflects a credit investment of $13,688 resulting primarily
from distributions of financing proceeds in excess of the
Companys historical cost investment. The credit investment
is reflected in consolidated liabilities on the Companys
consolidate balance sheet.
The Company accounts for its investments in these Property LLCs
using the equity method of accounting. At December 31,
2007, the Companys investment in these Property LLCs
totaled $23,036, excluding the credit investment discussed
above. The excess of the Companys investment over its
equity in the underlying net assets of certain Property LLCs was
approximately $5,812 at December 31, 2007. 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 related to the Property LLC constructing
condominiums will be recognized as additional costs as the
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 was as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Balance Sheet Data
|
|
2007
|
|
|
2006
|
|
|
Real estate assets, net of accumulated depreciation of $15,204
and $11,039, respectively
|
|
$
|
325,705
|
|
|
$
|
93,614
|
|
Assets held for sale, net
|
|
|
|
|
|
|
3,027
|
|
Cash and other
|
|
|
7,254
|
|
|
|
4,067
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
332,959
|
|
|
$
|
100,708
|
|
|
|
|
|
|
|
|
|
|
Mortgage/construction notes payable
|
|
$
|
214,549
|
|
|
$
|
66,998
|
|
Other liabilities
|
|
|
5,541
|
|
|
|
1,107
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
220,090
|
|
|
|
68,105
|
|
Members equity
|
|
|
112,869
|
|
|
|
32,603
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members equity
|
|
$
|
332,959
|
|
|
$
|
100,708
|
|
|
|
|
|
|
|
|
|
|
Companys equity investment in Property LLCs(1)
|
|
$
|
9,348
|
|
|
$
|
16,883
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
At December 31, 2007, the Companys equity investment
is shown net of a credit investment of $13,688 discussed above.
|
71
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
Income Statement Data
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
17,998
|
|
|
$
|
11,447
|
|
|
$
|
10,789
|
|
Other property revenues
|
|
|
1,169
|
|
|
|
752
|
|
|
|
807
|
|
Other
|
|
|
121
|
|
|
|
47
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
19,288
|
|
|
|
12,246
|
|
|
|
11,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
|
|
|
7,125
|
|
|
|
3,948
|
|
|
|
3,689
|
|
Depreciation and amortization
|
|
|
6,881
|
|
|
|
2,650
|
|
|
|
2,621
|
|
Interest
|
|
|
5,940
|
|
|
|
2,752
|
|
|
|
2,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
19,946
|
|
|
|
9,350
|
|
|
|
9,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(658
|
)
|
|
|
2,896
|
|
|
|
2,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
39
|
|
|
|
(343
|
)
|
|
|
(176
|
)
|
Gains on sales of real estate assets, net
|
|
|
861
|
|
|
|
2,947
|
|
|
|
2,834
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
900
|
|
|
|
2,604
|
|
|
|
2,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
242
|
|
|
$
|
5,500
|
|
|
$
|
4,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys share of net income
|
|
$
|
1,556
|
|
|
$
|
1,813
|
|
|
$
|
1,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 completed the sell out of the
community in 2007. A summary of revenues and costs and expenses
of condominium activities for the years ended December 31,
2007, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
4,592
|
|
|
$
|
21,857
|
|
|
$
|
15,098
|
|
Condominium costs and expenses
|
|
|
(3,731
|
)
|
|
|
(18,910
|
)
|
|
|
(12,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, net
|
|
$
|
861
|
|
|
$
|
2,947
|
|
|
$
|
2,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, mortgage/construction notes payable
include a $49,997 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. Another mortgage note payable totaling
$17,000 bears interest at a fixed rate of 4.04%, requires
interest only payments and matures in 2008. Three additional
mortgage notes were entered into in conjunction with the
formation of the 25% owned Property LLC in 2007. Two notes total
$85,724, bear interest at 5.63%, require interest only payments
and mature in 2017. The third mortgage note totals $41,000,
bears interest at 5.71%, requires interest only payments, and
matures in 2017.
In July 2007, the Property LLC constructing the mixed-use
development entered into a construction loan facility with an
aggregate capacity of $187,128. At December 31, 2007, the
construction loan had an outstanding balance of $20,829, bears
interest at LIBOR plus 1.35% and matures in 2011. Under the
terms of the construction loan facility, the Company and its 50%
equity partner have jointly and severally guaranteed
approximately $25,313 of the construction loan attributable to
the condominium portion of the project. Additionally, the
Company and its 50% equity partner have jointly and severally
guaranteed certain debt service payments of the condominium
portion of the loan not to exceed approximately $6,153 and all
of the equity owners of the project, including the Company, have
guaranteed the completion of the first building at the project.
72
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
In 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 2005. In 2006, the mortgage
note payable to the Company was retired from the proceeds of
condominium sales. The mortgage note payable to the Company had
a fixed rate component bearing interest at 4.28% and a variable
rate component bearing interest at LIBOR at 1.90%.
At December 31, 2007 and 2006, the Companys
indebtedness consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity
|
|
December 31,
|
|
Description
|
|
Payment Terms
|
|
Interest Rate
|
|
|
Date
|
|
2007
|
|
|
2006
|
|
|
Senior Unsecured Notes
|
|
Int.
|
|
|
5.13%-7.70%
|
|
|
2010-2013
|
|
$
|
535,000
|
|
|
$
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated Line of Credit
|
|
N/A
|
|
|
LIBOR + 0.575%
|
(1)
|
|
2010
|
|
|
245,000
|
|
|
|
95,000
|
|
Cash Management Line
|
|
N/A
|
|
|
LIBOR + 0.575%
|
|
|
2010
|
|
|
12,275
|
|
|
|
13,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257,275
|
|
|
|
108,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Secured Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
Prin. and Int.
|
|
|
6.15%
|
(2)
|
|
2029
|
|
|
94,000
|
|
|
|
95,600
|
|
Other
|
|
Prin. and Int.
|
|
|
4.27% - 6.50%
|
|
|
2009-2013
|
|
|
172,791
|
|
|
|
259,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,791
|
|
|
|
354,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-Exempt Floating Rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,059,066
|
|
|
$
|
1,033,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Represents stated rate. At December 31, 2007, the weighted
average interest rate was 5.63%.
|
(2)
|
Interest rate is fixed at 6.15%, inclusive of credit enhancement
and other fees, to 2009 through an interest rate swap
arrangement.
|
Debt
maturities
The aggregate maturities of the Companys indebtedness are
as follows:
|
|
|
|
|
2008
|
|
$
|
5,230
|
|
2009
|
|
|
76,618
|
|
2010
|
|
|
445,903
|
(1)
|
2011
|
|
|
141,431
|
|
2012
|
|
|
103,296
|
|
Thereafter
|
|
|
286,588
|
|
|
|
|
|
|
|
|
$
|
1,059,066
|
|
|
|
|
|
|
|
|
(1) |
Includes outstanding balance on lines of credit totaling
$257,275.
|
Debt
issuances, retirements and modifications
2007
Upon their maturity in June 2007, the Company repaid $25,000 of
6.11% senior unsecured notes from available borrowings
under its unsecured line of credit. In July 2007, the Company
repaid $83,132 of secured mortgage notes with interest rates
from 6.29% to 7.69% from borrowing under its unsecured line of
credit. These mortgage notes were scheduled to mature in October
2007.
73
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
In January 2008, the Company closed a $120,000 secured, fixed
rate mortgage note payable. The note bears interest at 4.88%,
requires interest only payments and matures in 2015. The note
contains an automatic one year extension under which the
interest rate converts to a variable rate, as defined.
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 ($122 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 2 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.
Unsecured
lines of credit
At December 31, 2007, the Company utilizes a $600,000,
increased from $450,000 in November 2007, 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
17 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. In addition to customary
restrictions, representations, covenants and events of default,
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, 2007, the Company had issued letters of credit
to third parties totaling $1,350 under this facility.
Additionally, at December 31, 2007, 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.
74
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Interest
paid
Interest paid (including capitalized amounts of $11,801, $9,942
and $2,907 for the years ended December 31, 2007, 2006 and
2005, respectively), aggregated $65,931, $67,257 and $66,234 for
the years ended December 31, 2007, 2006 and 2005,
respectively.
Pledged
assets and other
The aggregate net book value at December 31, 2007 of
property pledged as collateral for indebtedness amounted to
approximately $333,128. The Companys senior unsecured
notes, Syndicated Line and certain of its secured mortgage
arrangements contain customary restrictions, representations,
covenants, and events of default, including fixed charge
coverage and maximum leverage ratios.
Deferred charges consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Deferred financing costs
|
|
$
|
17,041
|
|
|
$
|
18,073
|
|
Other
|
|
|
5,677
|
|
|
|
5,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,718
|
|
|
|
23,574
|
|
Less: accumulated amortization
|
|
|
(12,180
|
)
|
|
|
(11,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,538
|
|
|
$
|
12,400
|
|
|
|
|
|
|
|
|
|
|
Preferred
Stock
At December 31, 2007, 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
|
|
|
|
(2
|
)
|
|
$
|
25.00
|
|
|
|
7.625
|
%
|
|
$
|
1.91
|
|
|
|
|
(1)
|
|
The preferred stock is redeemable,
at the Companys option, for cash.
|
(2)
|
|
The Series B preferred stock
became redeemable at the Companys option on
October 28, 2007.
|
Common
Stock Purchases
In 2007, the Company repurchased 83 shares of its common
stock totaling approximately $3,694 pursuant to a stock purchase
plan meeting the requirements of
Rule 10b5-1
under the Exchange Act. These shares were purchased under a
board of directors approved plan which allows the Company to
repurchase up to $200,000 of common or preferred stock at market
prices from time to time until December 31, 2008.
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, pursuant to
stock purchase plans meeting the requirements of
Rule 10b5-1
under the Exchange Act. These shares were purchased under a
previous board of directors approved plan.
75
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
Computation
of Earnings Per Common Share
In 2007, 2006 and 2005, 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, 2007
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
114,163
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
shareholders
|
|
|
106,526
|
|
|
|
43,491
|
|
|
$
|
2.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
638
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
shareholders
|
|
$
|
106,526
|
|
|
|
44,129
|
|
|
$
|
2.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
29,255
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
shareholders
|
|
|
21,618
|
|
|
|
42,812
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common
shareholders
|
|
$
|
21,618
|
|
|
|
43,594
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2005
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
3,330
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
|
(4,307
|
)
|
|
|
40,217
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
$
|
(4,307
|
)
|
|
|
40,217
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
For the year ended December 31, 2005, the potential
dilution from the Companys outstanding stock options and
awards of 400 shares was antidilutive to the loss from
continuing operations per share calculation. As such, this
amount was excluded from weighted average shares.
|
In 2007, 2006 and 2005, stock options to purchase 200, 0 and
3,534 shares of common stock, respectively, were excluded
from the computation of diluted earnings per share as these
options were antidilutive.
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 2007 and 2005, the Company recorded
additional expenses of $283 and $796, respectively, 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.
The following table summarizes the activity relating to the
accrued severance charges for the years ended December 31,
2007, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Accrued severance charges, beginning of year
|
|
$
|
12,832
|
|
|
$
|
14,325
|
|
|
$
|
15,317
|
|
Severance charges
|
|
|
283
|
|
|
|
|
|
|
|
796
|
|
Payments for period
|
|
|
(2,640
|
)
|
|
|
(2,341
|
)
|
|
|
(2,694
|
)
|
Interest accretion
|
|
|
740
|
|
|
|
848
|
|
|
|
906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued severance charges, end of year
|
|
$
|
11,215
|
|
|
$
|
12,832
|
|
|
$
|
14,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all of these remaining amounts will be paid over
the remaining terms of the former executives employment
and settlement agreements (six to nine years).
The Company has elected to be taxed as a REIT under 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. Should
the Company fail to qualify as a REIT in any tax year, it may be
subject to federal income taxes at regular corporate rates
(including any applicable alternative
77
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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 2007, other expenses on the consolidated statement of
operations included income tax expense of approximately $560
relating to estimated alternative minimum tax. The alternative
minimum tax results from the expected utilization of net
operating loss carryforwards generated by the Company in prior
years.
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.
The Company adopted the provisions of FIN 48 on
January 1, 2007. As of January 1, 2007 and
December 31, 2007, the Companys taxable REIT
subsidiaries (TRSs) had unrecognized tax benefits of
approximately $797 which primarily related to uncertainty
regarding the sustainability of certain deductions taken on
prior year income tax returns of the TRS with respect to the
amortization of certain intangible assets. The Company does not
expect any significant change in this unrecognized tax benefit
in 2008. To the extent these unrecognized tax benefits are
ultimately recognized, they may affect the effective tax rate in
a future period. The Companys policy is to recognize
interest and penalties, if any, related to unrecognized tax
benefits as income tax expense. Accrued interest and penalties
for the year ended December 31, 2007 and at
December 31, 2007 were not material to the Companys
results of operations, cash flows or financial position.
The Company and its subsidiaries (including the TRSs)
income tax returns are subject to examination by federal and
state tax jurisdictions for years 2004 through 2006. Net income
tax loss carryforwards and other tax attributes generated in
years prior to 2004 are also subject to challenge in any
examination of the 2004 to 2006 tax years.
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, 2007, 2006
and 2005 is detailed below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(Estimate)
|
|
|
(Actual)
|
|
|
(Actual)
|
|
|
Net income
|
|
$
|
178,699
|
|
|
$
|
101,469
|
|
|
$
|
141,948
|
|
Add (subtract) net loss (income) of taxable REIT subsidiaries
|
|
|
709
|
|
|
|
2,537
|
|
|
|
(6,882
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
|
179,408
|
|
|
|
104,006
|
|
|
|
135,066
|
|
Book/tax depreciation difference
|
|
|
(7,051
|
)
|
|
|
(4,325
|
)
|
|
|
(1,354
|
)
|
Book/tax difference on gains from real estate sales
|
|
|
(65,134
|
)
|
|
|
(41,909
|
)
|
|
|
(15,747
|
)
|
Book/tax difference on stock-based compensation
|
|
|
198
|
|
|
|
(13,304
|
)
|
|
|
(5,454
|
)
|
Other book/tax differences, net
|
|
|
(1,570
|
)
|
|
|
(7,563
|
)
|
|
|
1,990
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income before allocation of taxable capital gains
|
|
|
105,852
|
|
|
|
36,905
|
|
|
|
114,501
|
|
Income taxable as capital gains
|
|
|
(87,907
|
)
|
|
|
(34,756
|
)
|
|
|
(116,760
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable ordinary income (loss)
|
|
$
|
17,945
|
|
|
$
|
2,149
|
|
|
$
|
(2,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated taxable ordinary income for 2007 is expected to be
offset by a net operating loss carryforward, effectively
eliminating the amount of 2007 dividend treated as ordinary
income to the shareholders.
78
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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, 2007, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
|
Capital gains
|
|
$
|
1.38
|
|
|
|
76.6
|
%
|
|
$
|
0.87
|
|
|
|
48.5
|
%
|
|
$
|
0.99
|
|
|
|
55.1
|
%
|
Unrecaptured Section 1250 gains
|
|
|
0.42
|
|
|
|
23.4
|
%
|
|
|
0.86
|
|
|
|
48.1
|
%
|
|
|
0.81
|
|
|
|
44.9
|
%
|
Ordinary income
|
|
|
|
|
|
|
|
|
|
|
0.06
|
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
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, 2007, 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 $192,919.
Taxable
REIT subsidiaries
The Company utilizes TRSs principally to perform such non-REIT
activities as asset and property management, for-sale housing
(condominiums) conversions and sales and other services. 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.
Income tax expense of the TRSs for the years ended
December 31, 2007, 2006 and 2005 is comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Current tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
900
|
|
|
$
|
|
|
|
$
|
251
|
|
State
|
|
|
110
|
|
|
|
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,010
|
|
|
|
|
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(900
|
)
|
|
|
|
|
|
|
|
|
State
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,010
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
|
|
|
|
|
|
|
|
594
|
|
Income tax expense discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense continuing operations
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2007, the Company recognized a deferred tax benefit of $1,010
to offset estimated current income tax expense based on a
determination that such deferred tax assets are realizable
through the ability of such deferred assets to generate
carryback claims to prior years or to offset future income taxes
payable. 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. Net valuation allowances increased
approximately $214 and $1,309 in 2007 and 2006, respectively.
Aggregate valuation allowances at December 31, 2007 and
2006 are reflected in the table below.
79
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
The components of the TRSs deferred income tax assets and
liabilities at December 31, 2007 and 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Deferred interest
|
|
$
|
2,649
|
|
|
$
|
1,761
|
|
Accrued liabilities
|
|
|
1,154
|
|
|
|
512
|
|
Cost capitalization/recognition
|
|
|
864
|
|
|
|
260
|
|
Real estate asset basis differences
|
|
|
|
|
|
|
1,106
|
|
Other
|
|
|
297
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,964
|
|
|
|
3,740
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets, before valuation allowances
|
|
|
4,167
|
|
|
|
2,943
|
|
Valuation allowances
|
|
|
(3,157
|
)
|
|
|
(2,943
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
1,010
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, management had established valuation
allowances against the above listed net deferred tax assets due
primarily to historical losses at the TRSs in years prior
to 2007 and the variability of the income of these subsidiaries.
The tax benefits associated with such unused 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 prior to 2006, 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 years
prior to 2006, 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 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
80
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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, 2007, stock
options outstanding under the 2003 Stock Plan and the
Companys previous stock plan totaled 2,455.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Dividend yield
|
|
|
3.8
|
%
|
|
|
4.4
|
%
|
|
|
5.5
|
%
|
Expected volatility
|
|
|
18.1
|
%
|
|
|
17.5
|
%
|
|
|
17.1
|
%
|
Risk-free interest rate
|
|
|
4.8
|
%
|
|
|
4.3
|
%
|
|
|
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 2007, 2006 and 2005, the Company granted stock options to
purchase 199, 311 and 277 shares, respectively, of Company
common stock to Company officers and directors, of which 28, 50
and 50 shares, respectively, were granted to the
Companys non-executive chairman of the board. In 2007,
2006 and 2005, the Company recorded compensation expense related
to stock options of $1,523 ($1,502 net of minority
interest), $1,100 ($1,079 net of minority interest) and
$761 ($723 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 2007, 2006
and 2005, is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
|
2,375
|
|
|
$
|
33
|
|
|
|
3,534
|
|
|
$
|
34
|
|
|
|
4,491
|
|
|
$
|
33
|
|
Granted
|
|
|
199
|
|
|
|
48
|
|
|
|
311
|
|
|
|
41
|
|
|
|
277
|
|
|
|
33
|
|
Exercised
|
|
|
(108
|
)
|
|
|
36
|
|
|
|
(1,462
|
)
|
|
|
36
|
|
|
|
(1,105
|
)
|
|
|
33
|
|
Forfeited
|
|
|
(11
|
)
|
|
|
41
|
|
|
|
(8
|
)
|
|
|
35
|
|
|
|
(129
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
2,455
|
|
|
|
34
|
|
|
|
2,375
|
|
|
|
33
|
|
|
|
3,534
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
1,797
|
|
|
|
33
|
|
|
|
1,447
|
|
|
|
33
|
|
|
|
2,437
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of options granted during the year
|
|
$
|
7.22
|
|
|
|
|
|
|
$
|
4.91
|
|
|
|
|
|
|
$
|
2.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, there was $1,627 of unrecognized
compensation cost related to unvested stock options. This cost
is expected to be recognized over a weighted-average period of
1.1 years. The total intrinsic value of stock options
exercised in 2007, 2006 and 2005 was $1,397, $13,775 and $6,111,
respectively. The aggregate intrinsic values of stock options
outstanding, exercisable and expected to vest at
December 31, 2007 were $8,453, $6,728 and $8,295,
respectively. The weighted average remaining contractual lives
of stock options outstanding, exercisable and excepted to vest
at December 31, 2007, were 5.3 years, 4.4 years
and 5.3 years, respectively. Stock options expected to vest
at December 31, 2007 totaled 2,416 at a weighted average
exercise price of approximately $34.01.
At December 31, 2007, the Company had separated its
outstanding options into two ranges based on exercise prices.
There were 1,387 options outstanding with exercise prices
ranging from $23.90 to $36.13. These options have a weighted
average exercise price of $29.17 and a weighted average
remaining contractual life of 5.2 years. Of these
outstanding
81
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
options, 1,132 were exercisable at December 31, 2007 at a
weighted average exercise price of $29.36. In addition, there
were 1,068 options outstanding with exercise prices ranging from
$36.47 to $48.00. These options had a weighted average exercise
price of $40.32 and a weighted average remaining contractual
life of 5.4 years. Of these outstanding options, 665 were
exercisable at December 31, 2007 at a weighted average
exercise price of $38.04.
In 2007, 2006 and 2005, the Company granted 61, 42 and
35 shares of restricted stock, respectively, to Company
officers and directors, of which 4, 5 and 6 shares in 2007,
2006 and 2005, 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 2007, 2006 and 2005 was $45.61, $40.61 and $33.74 per
share, respectively. The total value of the restricted share
grants in 2007, 2006 and 2005 were $2,791, $1,701 and $1,173,
respectively. The compensation cost is amortized ratably into
compensation expense over the applicable vesting periods. Total
compensation expense relating to the restricted stock was $2,434
($2,402 net of minority interest), $1,651 ($1,620 net
of minority interest) and $1,367 ($1,298 net of minority
interest) in 2007, 2006 and 2005, 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 2007 and 2006 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested shares, beginning or period
|
|
|
125
|
|
|
$
|
31
|
|
|
|
140
|
|
|
$
|
28
|
|
Granted
|
|
|
61
|
|
|
|
46
|
|
|
|
42
|
|
|
|
41
|
|
Vested
|
|
|
(66
|
)
|
|
|
36
|
|
|
|
(57
|
)
|
|
|
32
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested shares, end of period
|
|
|
119
|
|
|
|
35
|
|
|
|
125
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, there was $3,597 of unrecognized
compensation cost related to restricted stock. This cost is
expected to be recognized over a weighted average period of
2.6 years. The total intrinsic value of restricted shares
vested in 2007, 2006 and 2005 was $2,680, $2,606 and $1,845,
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
ESPP) under a plan approved by Company shareholders
in 2005. The maximum number of shares issuable under the ESPP is
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
$160, $159 and $171 in 2007, 2006 and 2005, respectively.
|
|
10.
|
EMPLOYEE
BENEFIT PLAN
|
The Company maintains a defined contribution plan pursuant to
Section 401 of the 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 2007 and 2006 (5% in 2005).
Company contributions of $896, $911 and $691 were made to the
401K Plan in 2007, 2006 and 2005, 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
82
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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, 2007, are as follows:
|
|
|
|
|
2008
|
|
$
|
1,863
|
|
2009
|
|
|
1,729
|
|
2010
|
|
|
1,755
|
|
2011
|
|
|
1,785
|
|
2012
|
|
|
1,820
|
|
2013 and thereafter
|
|
$
|
150,737
|
|
The Company incurred $6,948, $6,421 and $6,309 of rent expense,
including rent expense under short-term rental and lease
arrangements, in 2007, 2006 and 2005, respectively.
Legal
proceedings
In November 2006, the Equal Rights Center (ERC)
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 (FHA) and the Americans with
Disabilities Act (ADA) 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 FHA and the ADA and prohibiting construction or
sale of noncompliant units or complexes. On April 18, 2007,
ERC filed a motion for a preliminary injunction to prohibit the
Company and the Operating Partnership from selling any alleged
noncompliant apartment communities or condominium units while
the litigation is ongoing. On July 25, 2007 the court
entered an order denying ERCs motion for the preliminary
injunction. Discovery is being conducted by both parties. On
October 29, 2007, the court granted, in part, ERCs
motion to amend the scheduling order and expand the time
permitted for discovery and filing of dispositive motions. As a
result, the cutoff for fact discovery was extended to
February 29, 2008 with the end of all briefing on
dispositive motions set for August 11, 2008. On
January 29, 2008, the Operating Partnership and ERC agreed
to an extension of discovery dates to accommodate further
depositions and inspections. Under the agreement, which must be
approved by the court, fact discovery will be completed by
April 30, 2008, expert discovery will be completed by
August 29, 2008, and summary judgment briefing will be
completed by November 10, 2008. No trial date has been set.
At this stage in the proceeding, it is not possible to predict
or determine the outcome of the lawsuit, nor is it possible to
estimate the amount of loss 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.
|
|
12.
|
RELATED
PARTY TRANSACTIONS
|
In 2007, 2006 and 2005, the Company held investments in Property
LLCs accounted for under the equity method of accounting
(see note 3). In 2007, 2006 and 2005, the Company recorded,
before elimination of the Companys equity interests,
project management fees, property management fees and expense
reimbursements (primarily personnel costs) of approximately
$2,591, $1,537 and $1,781, respectively, from these related
companies. Additionally in 2007, 2006 and 2005, the Company
earned interest under loans to unconsolidated entities totaling
$449, $860 and $437, respectively. The Company portion of all
significant intercompany transactions was eliminated in the
accompanying consolidated financial statements.
At December 31, 2007 and 2006, the Company had outstanding
loan balances to certain current and former company executives
totaling $1,120 and $1,268, 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.
Additionally, at December 31, 2007 and 2006, the Company
had outstanding an additional loan to a company
83
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
executive totaling $400 and $500, respectively. This loan bears
interest at 6.32% per annum. If the executive continues to be
employed by the Company, the loan will be forgiven annually over
a ten year period, as defined in the agreement. The annual loan
forgiveness under this loan and other similar loans outstanding
in prior years of $100, $100 and $140 was recorded as
compensation expense in 2007, 2006 and 2005, respectively.
|
|
13.
|
DERIVATIVE
FINANCIAL INSTRUMENTS
|
At December 31, 2007, the Company had an outstanding
interest rate swap agreement with a notional value of
approximately $93,890 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 Federal National Mortgage Association variable
rate debt. This swap was entered into in 2006 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. At December 31,
2007 and 2006, the fair value of the interest rate swap
agreement represented a liability of $2,224 and $564,
respectively, and the liabilities were included in consolidated
liabilities in the accompanying consolidated balance sheets. The
changes in the fair value of this cash flow hedge was recorded
as a change in accumulated other comprehensive income (loss), a
shareholders equity account, in the accompanying
consolidated balance sheet.
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 $1,123 and $1,116 for the years ended December 31, 2007
and 2006. The swap arrangement was terminated in 2006 through a
$2,448 termination payment to the swap counterparty.
At December 31, 2007 and 2006, 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 provided
a fixed interest ceiling at 5% for the Companys variable
rate, tax-exempt borrowings aggregating $28,495. As a result of
the repayment of tax-exempt indebtedness in December 2006 and
December 2007, portions of this interest rate cap arrangement
with notional amounts of $18,600 and $9,895, respectively,
associated with this indebtedness became ineffective for
accounting purposes. In 2006, the Company recognized a loss of
approximately $142 ($139 net of minority interest) due to
such ineffectiveness. In 2007, no loss was recognized due to
such ineffectiveness as the cost of the interest rate cap
arrangement was fully amortized though December 31, 2007.
The interest rate cap arrangement expired in February 2008 with
no change in its $0 fair value from December 31, 2007.
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.
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, 2007, the Company estimates that $2,345 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 of financial instruments
were determined by management using available market information
and appropriate valuation methodologies available to management
at December 31, 2007. 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.
84
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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, 2007, the fair value of fixed rate debt was
approximately $726,614 (carrying value of $707,791) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements. 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.
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, 2007, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling
$2,224 and the interest rate cap arrangement had no value. At
December 31, 2006, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling $564
and the interest rate cap arrangement had no value.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of
December 31, 2007. 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.
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 property
segments 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, 2006. The segment information for the years
ended December 31, 2006 and 2005 have been adjusted due to
the restatement impact of reclassifying the operating results of
the assets designated as held for sale in 2007 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 that are
under development, rehabilitation and
lease-up but
were not stabilized by the beginning of the current year,
including communities that stabilized during the current year.
|
|
|
Condominium conversion and other communities those
portions of existing apartment communities being converted into
condominiums and other communities converted to joint venture
ownership 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
85
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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.
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 2007, 2006 and 2005. 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,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
244,537
|
|
|
$
|
233,637
|
|
|
$
|
219,973
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
14,972
|
|
|
|
9,545
|
|
|
|
10,438
|
|
Condominium conversion and other communities
|
|
|
9,810
|
|
|
|
17,281
|
|
|
|
19,989
|
|
Acquired communities
|
|
|
13,760
|
|
|
|
7,027
|
|
|
|
|
|
Other property segments
|
|
|
23,861
|
|
|
|
23,653
|
|
|
|
21,616
|
|
Other
|
|
|
602
|
|
|
|
402
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenues
|
|
$
|
307,542
|
|
|
$
|
291,545
|
|
|
$
|
272,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to Property Net Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
152,200
|
|
|
$
|
145,346
|
|
|
$
|
135,511
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
6,908
|
|
|
|
4,254
|
|
|
|
6,077
|
|
Condominium conversion and other communities
|
|
|
5,457
|
|
|
|
9,811
|
|
|
|
13,144
|
|
Acquired communities
|
|
|
8,256
|
|
|
|
3,929
|
|
|
|
|
|
Other property segments, including corporate management expenses
|
|
|
(7,023
|
)
|
|
|
(5,687
|
)
|
|
|
(7,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated property net operating income
|
|
|
165,798
|
|
|
|
157,653
|
|
|
|
147,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
822
|
|
|
|
1,261
|
|
|
|
661
|
|
Other revenues
|
|
|
602
|
|
|
|
402
|
|
|
|
255
|
|
Minority interest in consolidated property partnerships
|
|
|
(1,857
|
)
|
|
|
(257
|
)
|
|
|
(110
|
)
|
Depreciation
|
|
|
(66,371
|
)
|
|
|
(65,687
|
)
|
|
|
(68,795
|
)
|
Interest expense
|
|
|
(52,116
|
)
|
|
|
(52,533
|
)
|
|
|
(54,197
|
)
|
Amortization of deferred financing costs
|
|
|
(3,297
|
)
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
General and administrative
|
|
|
(21,337
|
)
|
|
|
(18,502
|
)
|
|
|
(18,307
|
)
|
Investment and development
|
|
|
(7,063
|
)
|
|
|
(6,424
|
)
|
|
|
(4,711
|
)
|
Severance charges
|
|
|
|
|
|
|
|
|
|
|
(796
|
)
|
Gains (losses) on sales of real estate assets, net
|
|
|
100,015
|
|
|
|
12,881
|
|
|
|
(531
|
)
|
Equity in income of unconsolidated real estate entities
|
|
|
1,556
|
|
|
|
1,813
|
|
|
|
1,767
|
|
Other income (expense)
|
|
|
(1,098
|
)
|
|
|
2,592
|
|
|
|
5,267
|
|
Minority interest of common unitholders
|
|
|
(1,491
|
)
|
|
|
(418
|
)
|
|
|
226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
114,163
|
|
|
|
29,255
|
|
|
|
3,330
|
|
Income from discontinued operations
|
|
|
64,536
|
|
|
|
72,214
|
|
|
|
138,618
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
178,699
|
|
|
$
|
101,469
|
|
|
$
|
141,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
|
|
16.
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
Non-cash investing and financing activities for the years ended
December 31, 2007, 2006 and 2005 were as follows:
In 2007, the Company sold two apartment communities and the net
proceeds totaling $66,938 were held by an exchange intermediary
at December 31, 2007, pending the completion of a tax
deferred exchange. 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. Additionally in 2006,
the Company acquired an apartment community for cash and the
assumption of secured mortgage indebtedness totaling $41,394.
These transactions were excluded from the cash flow statement as
non-cash transactions.
In 2007, the Company amortized approximately $1,123
($1,108 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). Other than the amortization discussed herein, in
2007, 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 $1,637,
net of minority interest. 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 2007, 2006 and 2005 Common Units in the Operating Partnership
totaling 235, 697 and 1,097, 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
$5,095, $13,062 and $20,444 for the years ended
December 31, 2007, 2006 and 2005, respectively.
The Operating Partnership committed to distribute $19,933,
$19,886 and $19,257 for the quarters ended December 31,
2007, 2006 and 2005, respectively. As a result, the Company
declared dividends of $19,721, $19,569 and $18,626 for the
quarters ended December 31, 2007, 2006 and 2005,
respectively. The remaining distributions from the Operating
Partnership in the amount of $212, $317 and $631 for the
quarters ended December 31, 2007, 2006 and 2005,
respectively, are distributed to minority interest unitholders
in the Operating Partnership.
In 2007, 2006 and 2005, the Company issued common shares for
director compensation, totaling $502, $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, 2006
and 2007 were non-cash transactions.
In 2007, 2006 and 2005, the Company and the Companys
taxable REIT subsidiaries made income tax payments to federal
and state taxing authorities totaling $1,411, $339 and $760,
respectively.
|
|
17.
|
OTHER
INCOME (EXPENSE)
|
In 2007, other expense primarily included estimated state
franchise and other taxes. Franchise taxes of approximately $694
are associated with new margin-based taxes in Texas that were
effective in 2007. Income tax expense recorded by the Company of
approximately $560 in 2007 is discussed in note 8. In 2006,
other income primarily included 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) and
additional income totaling $1,655
87
Post Properties, Inc.
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
(In thousands, except per share data)
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.
|
|
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 2007 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 2007. Quarterly financial information for the years
ended December 31, 2007 and 2006, as revised to reflect the
change discussed above, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
75,360
|
|
|
$
|
76,065
|
|
|
$
|
78,011
|
|
|
$
|
78,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
6,890
|
|
|
|
63,397
|
|
|
|
9,947
|
|
|
|
33,929
|
|
Income from discontinued operations
|
|
|
17,581
|
|
|
|
540
|
|
|
|
1,102
|
|
|
|
45,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
24,471
|
|
|
|
63,937
|
|
|
|
11,049
|
|
|
|
79,242
|
|
Dividends to preferred shareholders
|
|
|
(1,909
|
)
|
|
|
(1,910
|
)
|
|
|
(1,909
|
)
|
|
|
(1,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$
|
22,562
|
|
|
$
|
62,027
|
|
|
$
|
9,140
|
|
|
$
|
77,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders basic
|
|
$
|
0.52
|
|
|
$
|
1.43
|
|
|
$
|
0.21
|
|
|
$
|
1.77
|
|
Net income available to common shareholders diluted
|
|
$
|
0.51
|
|
|
$
|
1.40
|
|
|
$
|
0.21
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
70,146
|
|
|
$
|
72,160
|
|
|
$
|
74,709
|
|
|
$
|
74,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,417
|
|
|
|
12,106
|
|
|
|
7,019
|
|
|
|
6,713
|
|
Income from discontinued operations
|
|
|
1,384
|
|
|
|
1,878
|
|
|
|
28,782
|
|
|
|
40,170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
In the first, second and fourth quarters of 2007, net income
increased primarily due to gains on sales of apartment
communities and gains on the sales of 75% interests in certain
apartment communities to an unconsolidated entity (see
note 2) during those periods. In the third and fourth
quarters of 2006, net income increased primarily due to gains on
sales of apartment communities during those periods.
88
Post Properties, Inc.
Consolidated Financial
Statements
December 31, 2007 and
2006
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 Securities
Exchange Act of 1934 (the 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, 2007 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,
2007. The effectiveness of the Partnerships internal
control over financial reporting as of December 31, 2007
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 sheets of
Post Apartment Homes, L.P. and subsidiaries (the Operating
Partnership) as of December 31, 2007 and 2006, and
the related consolidated statements of operations,
partners equity, and cash flows for each of the two years
in the period ended December 31, 2007. Our audits also
included the financial statement schedule listed in the Index at
Item 15. We also have audited the Operating
Partnerships internal control over financial reporting as
of December 31, 2007, 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 financial
statement schedule, for maintaining effective internal control
over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting,
included in the accompanying Managements Report on
Internal Control over Financial Reporting. Our responsibility is
to express an opinion on these financial statements and
financial statement schedule and an opinion on 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 audits of the 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, assessing the risk that a
material weakness exists, testing and evaluating the design and
operating effectiveness of internal control based on the
assessed risk. Our audits also included 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, 2007 and 2006, and the results of their
operations and their cash flows for each of the two years in the
period ended December 31, 2007, 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, the Operating Partnership maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2007, 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.
/s/ DELOITTE & TOUCHE LLP
Atlanta, Georgia
February 28, 2008
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 statements of operations,
partners equity and cash flows for the year ended
December 31, 2005 present fairly, in all material respects,
the results of operations and cash flows of Post Apartment
Homes, L.P. and its subsidiaries for the year 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 real estate
investments and accumulated depreciation included in the
financial statement schedule for the year 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 the summary of activity for real
estate investments and accumulated depreciation included in the
financial statement schedule are the responsibility of the
Partnerships management. Our responsibility is to express
an opinion on these financial statements and financial statement
schedule based on our audit. We conducted our audit 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 audit provides a reasonable basis for our
opinion.
/s/ 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 and
as it relates to the effects of changes in segment reporting
categories discussed in Note 15, as to which the date is
February 28, 2008
Post Apartment Homes, L.P.
92
POST
APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per unit data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Real estate assets
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
276,680
|
|
|
$
|
278,448
|
|
Building and improvements
|
|
|
1,840,563
|
|
|
|
1,821,123
|
|
Furniture, fixtures and equipment
|
|
|
204,433
|
|
|
|
204,318
|
|
Construction in progress
|
|
|
134,125
|
|
|
|
135,428
|
|
Land held for future development
|
|
|
154,617
|
|
|
|
92,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,610,418
|
|
|
|
2,532,117
|
|
Less: accumulated depreciation
|
|
|
(562,226
|
)
|
|
|
(547,477
|
)
|
For-sale condominiums
|
|
|
38,844
|
|
|
|
28,295
|
|
Assets held for sale, net of accumulated depreciation of $4,031
and $4,035 at December 31, 2007 and 2006, respectively
|
|
|
24,576
|
|
|
|
15,645
|
|
|
|
|
|
|
|
|
|
|
Total real estate assets
|
|
|
2,111,612
|
|
|
|
2,028,580
|
|
Investments in and advances to unconsolidated real estate
entities
|
|
|
23,036
|
|
|
|
32,794
|
|
Cash and cash equivalents
|
|
|
11,557
|
|
|
|
3,663
|
|
Restricted cash
|
|
|
5,642
|
|
|
|
5,203
|
|
Deferred charges, net
|
|
|
10,538
|
|
|
|
12,400
|
|
Other assets
|
|
|
105,756
|
|
|
|
34,007
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,268,141
|
|
|
$
|
2,116,647
|
|
|
|
|
|
|
|
|
|
|
Liabilities and partners equity
|
|
|
|
|
|
|
|
|
Indebtedness
|
|
$
|
1,059,066
|
|
|
$
|
1,033,779
|
|
Accounts payable and accrued expenses
|
|
|
100,215
|
|
|
|
75,403
|
|
Distribution payable
|
|
|
19,933
|
|
|
|
19,886
|
|
Accrued interest payable
|
|
|
4,388
|
|
|
|
4,885
|
|
Security deposits and prepaid rents
|
|
|
11,708
|
|
|
|
9,915
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
1,195,310
|
|
|
|
1,143,868
|
|
|
|
|
|
|
|
|
|
|
Minority interests in consolidated real estate entities
|
|
|
3,972
|
|
|
|
2,268
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Partners equity
Preferred units
|
|
|
95,000
|
|
|
|
95,000
|
|
Common units
General partner
|
|
|
11,329
|
|
|
|
10,341
|
|
Limited partner
|
|
|
966,535
|
|
|
|
868,711
|
|
Accumulated other comprehensive income (loss)
|
|
|
(4,005
|
)
|
|
|
(3,541
|
)
|
|
|
|
|
|
|
|
|
|
Total partners equity
|
|
|
1,068,859
|
|
|
|
970,511
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and partners equity
|
|
$
|
2,268,141
|
|
|
$
|
2,116,647
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
93
POST
APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
290,975
|
|
|
$
|
274,731
|
|
|
$
|
257,141
|
|
Other property revenues
|
|
|
15,965
|
|
|
|
16,412
|
|
|
|
14,875
|
|
Other
|
|
|
602
|
|
|
|
402
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
307,542
|
|
|
|
291,545
|
|
|
|
272,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
141,142
|
|
|
|
133,490
|
|
|
|
124,754
|
|
Depreciation
|
|
|
66,371
|
|
|
|
65,687
|
|
|
|
68,795
|
|
General and administrative
|
|
|
21,337
|
|
|
|
18,502
|
|
|
|
18,307
|
|
Investment, development and other
|
|
|
7,063
|
|
|
|
6,424
|
|
|
|
4,711
|
|
Severance charges
|
|
|
|
|
|
|
|
|
|
|
796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
235,913
|
|
|
|
224,103
|
|
|
|
217,363
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
71,629
|
|
|
|
67,442
|
|
|
|
54,908
|
|
Interest income
|
|
|
822
|
|
|
|
1,261
|
|
|
|
661
|
|
Interest expense
|
|
|
(52,116
|
)
|
|
|
(52,533
|
)
|
|
|
(54,197
|
)
|
Amortization of deferred financing costs
|
|
|
(3,297
|
)
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
Gains (losses) on sales of real estate assets, net
|
|
|
100,015
|
|
|
|
12,881
|
|
|
|
(531
|
)
|
Equity in income of unconsolidated real estate entities
|
|
|
1,556
|
|
|
|
1,813
|
|
|
|
1,767
|
|
Other income (expense)
|
|
|
(1,098
|
)
|
|
|
2,592
|
|
|
|
5,267
|
|
Minority interest in consolidated property partnerships
|
|
|
(1,857
|
)
|
|
|
(257
|
)
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
115,654
|
|
|
|
29,673
|
|
|
|
3,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property operations
|
|
|
2,772
|
|
|
|
5,559
|
|
|
|
8,520
|
|
Gains on sales of real estate assets
|
|
|
62,790
|
|
|
|
68,549
|
|
|
|
140,643
|
|
Loss on early extinguishment of indebtedness
|
|
|
(124
|
)
|
|
|
(495
|
)
|
|
|
(3,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
65,438
|
|
|
|
73,613
|
|
|
|
145,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
181,092
|
|
|
|
103,286
|
|
|
|
149,047
|
|
Distributions to preferred unitholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders
|
|
$
|
173,455
|
|
|
$
|
95,649
|
|
|
$
|
141,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common unit data Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
distributions)
|
|
$
|
2.45
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
Income from discontinued operations
|
|
|
1.48
|
|
|
|
1.69
|
|
|
|
3.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders
|
|
$
|
3.93
|
|
|
$
|
2.19
|
|
|
$
|
3.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding basic
|
|
|
44,101
|
|
|
|
43,645
|
|
|
|
42,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common unit data Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
distributions)
|
|
$
|
2.41
|
|
|
$
|
0.50
|
|
|
$
|
(0.11
|
)
|
Income from discontinued operations
|
|
|
1.46
|
|
|
|
1.66
|
|
|
|
3.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders
|
|
$
|
3.88
|
|
|
$
|
2.15
|
|
|
$
|
3.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding diluted
|
|
|
44,738
|
|
|
|
44,427
|
|
|
|
42,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
94
POST
APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2007, 2006 AND 2005
(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, 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
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
7,637
|
|
|
|
1,735
|
|
|
|
171,720
|
|
|
|
|
|
|
|
181,092
|
|
Net change in derivative value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(464
|
)
|
|
|
(464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
180,628
|
|
Contributions from the Company related to employee stock
purchase, stock option and other plans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
4,582
|
|
|
|
|
|
|
|
4,628
|
|
Equity-based compensation
|
|
|
|
|
|
|
187
|
|
|
|
|
|
|
|
41
|
|
|
|
4,077
|
|
|
|
|
|
|
|
4,118
|
|
Purchase of common units
|
|
|
|
|
|
|
(83
|
)
|
|
|
|
|
|
|
(37
|
)
|
|
|
(3,657
|
)
|
|
|
|
|
|
|
(3,694
|
)
|
Distributions to preferred unitholders
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,637
|
)
|
Distributions to common unitholders ($1.80 per unit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(797
|
)
|
|
|
(78,898
|
)
|
|
|
|
|
|
|
(79,695
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners Equity, December 31, 2007
|
|
|
2,900
|
|
|
|
44,295
|
|
|
$
|
95,000
|
|
|
$
|
11,329
|
|
|
$
|
966,535
|
|
|
$
|
(4,005
|
)
|
|
$
|
1,068,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
95
POST
APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
181,092
|
|
|
$
|
103,286
|
|
|
$
|
149,047
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
67,440
|
|
|
|
68,967
|
|
|
|
76,248
|
|
Amortization of deferred financing costs
|
|
|
3,297
|
|
|
|
3,526
|
|
|
|
4,661
|
|
Minority interest in consolidated entities
|
|
|
1,857
|
|
|
|
257
|
|
|
|
(239
|
)
|
Gains on sales of real estate assets
|
|
|
(162,806
|
)
|
|
|
(81,430
|
)
|
|
|
(140,643
|
)
|
Other expense (income)
|
|
|
1,123
|
|
|
|
(1,433
|
)
|
|
|
(5,267
|
)
|
Equity in income of unconsolidated entities
|
|
|
(1,556
|
)
|
|
|
(1,813
|
)
|
|
|
(1,634
|
)
|
Distributions of earnings of unconsolidated entities
|
|
|
2,554
|
|
|
|
2,713
|
|
|
|
2,033
|
|
Deferred compensation
|
|
|
502
|
|
|
|
471
|
|
|
|
194
|
|
Equity-based compensation
|
|
|
4,118
|
|
|
|
2,910
|
|
|
|
2,293
|
|
Loss on early extinguishment of debt
|
|
|
124
|
|
|
|
495
|
|
|
|
2,264
|
|
Changes in assets, (increase) decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Other assets
|
|
|
(3,535
|
)
|
|
|
(3,009
|
)
|
|
|
(4,012
|
)
|
Deferred charges
|
|
|
(177
|
)
|
|
|
(129
|
)
|
|
|
(1,082
|
)
|
Changes in liabilities, increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest payable
|
|
|
(497
|
)
|
|
|
(594
|
)
|
|
|
(2,199
|
)
|
Accounts payable and accrued expenses
|
|
|
2,754
|
|
|
|
655
|
|
|
|
2,476
|
|
Security deposits and prepaid rents
|
|
|
1,354
|
|
|
|
(546
|
)
|
|
|
2,621
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities
|
|
|
97,644
|
|
|
|
94,326
|
|
|
|
86,761
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction and acquisition of real estate assets, net of
payables
|
|
|
(262,958
|
)
|
|
|
(239,428
|
)
|
|
|
(112,527
|
)
|
Net proceeds from sales of real estate assets
|
|
|
245,522
|
|
|
|
176,419
|
|
|
|
199,546
|
|
Proceeds from sale of other investments
|
|
|
|
|
|
|
898
|
|
|
|
5,267
|
|
Capitalized interest
|
|
|
(11,801
|
)
|
|
|
(9,942
|
)
|
|
|
(2,907
|
)
|
Annually recurring capital expenditures
|
|
|
(11,110
|
)
|
|
|
(11,145
|
)
|
|
|
(9,921
|
)
|
Periodically recurring capital expenditures
|
|
|
(8,451
|
)
|
|
|
(5,964
|
)
|
|
|
(4,508
|
)
|
Community rehabilitation and other revenue generating capital
expenditures
|
|
|
(13,074
|
)
|
|
|
(10,641
|
)
|
|
|
|
|
Corporate additions and improvements
|
|
|
(2,903
|
)
|
|
|
(3,480
|
)
|
|
|
(1,771
|
)
|
Distributions from (investments in and advances to)
unconsolidated entities
|
|
|
36,033
|
|
|
|
(2,125
|
)
|
|
|
(5,846
|
)
|
Note receivable collections and other investments
|
|
|
866
|
|
|
|
944
|
|
|
|
2,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
(27,876
|
)
|
|
|
(104,464
|
)
|
|
|
70,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Lines of credit proceeds, net
|
|
|
148,362
|
|
|
|
7,534
|
|
|
|
50,631
|
|
Proceeds from indebtedness
|
|
|
|
|
|
|
190,000
|
|
|
|
100,000
|
|
Payments on indebtedness
|
|
|
(123,145
|
)
|
|
|
(145,763
|
)
|
|
|
(217,934
|
)
|
Payments of financing costs
|
|
|
(894
|
)
|
|
|
(3,971
|
)
|
|
|
(1,211
|
)
|
Redemption of common units
|
|
|
(3,694
|
)
|
|
|
(5,000
|
)
|
|
|
(34,400
|
)
|
Contributions from the Company related to employee stock
purchase and stock option plans
|
|
|
4,126
|
|
|
|
52,008
|
|
|
|
36,084
|
|
Capital contributions (distributions) of minority interests
|
|
|
656
|
|
|
|
(1,183
|
)
|
|
|
283
|
|
Distributions to common unitholders
|
|
|
(79,648
|
)
|
|
|
(78,597
|
)
|
|
|
(76,583
|
)
|
Distributions to preferred unitholders
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
(61,874
|
)
|
|
|
7,391
|
|
|
|
(150,767
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
7,894
|
|
|
|
(2,747
|
)
|
|
|
6,287
|
|
Cash and cash equivalents, beginning of period
|
|
|
3,663
|
|
|
|
6,410
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
11,557
|
|
|
$
|
3,663
|
|
|
$
|
6,410
|
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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)
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|
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, 2007, the Company owned 98.9% 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 98.6%, 98.1% and 95.0% for the years
ended December 31, 2007, 2006 and 2005 respectively. Common
Units held by persons other than the Company represented a 1.1%
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, 2007, the Company owned 22,578 apartment
units in 63 apartment communities, including 1,747 apartment
units in five communities held in unconsolidated entities and
2,266 apartment units in seven communities (and the expansion of
one community) currently under construction
and/or
lease-up.
The Company is also developing and selling 535 for-sale
condominium homes in four communities (including 137 units
in one community held in an unconsolidated entity) and is
converting apartment homes in two communities, initially
consisting of 349 units, into for-sale condominium homes
through a taxable REIT subsidiary. At December 31, 2007,
approximately 41.3%, 19.2%, 12.3%and 10.3% (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.
Possible
business combination
On January 23, 2008, the Company announced that its Board
of Directors had authorized management, working with financial
and legal advisors, to initiate a formal process to pursue a
possible business combination or other sale transaction and to
seek proposals from potentially interested parties. The process
commenced immediately after the announcement and is continuing.
There can be no assurance that the process will result in any
transaction leading into a business combination or other sale
transaction.
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
Post Apartment Homes, L.P.
97
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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
(under the provisions of EITF
No. 04-5).
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.
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, 2007, 2006 and 2005 were
approximately 6.6%, 6.6% and 6.5%, 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).
Post Apartment Homes, L.P.
98
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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 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 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
Post Apartment Homes, L.P.
99
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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 and the guidance provided by
EITF 06-8.
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 and the guidance provided by
EITF 06-8.
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 project costs for each condominium
unit under a binding real estate contract. As of
December 31, 2007, all newly developed condominium projects
are accounted for under the Completed Contract Method.
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.
Apartment
community acquisitions
In accordance with the provisions of 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 and
in-place leases 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 No. 123R, Share-Based
Payment. SFAS No. 123R requires companies to
expense the fair value of employee stock options and other forms
of stock-based compensation.
In 2005, the Operating Partnership accounted for equity-based
compensation under the fair value method prescribed by
SFAS No. 123, Accounting for Stock-Based
Compensation, which was applied on a prospective basis.
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 in 2005 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 No. 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.
Post Apartment Homes, L.P.
100
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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, 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 units 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.
New
accounting pronouncements
In 2007 and 2006, several new accounting pronouncements were
issued and the pronouncements with a potential impact on the
Operating Partnership in 2007 and in future periods and which
are not discussed elsewhere in note 1 are discussed below.
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 were required to
be adjusted on the implementation date. Additionally,
FIN 48 requires additional disclosure regarding the nature
and amount of uncertain tax positions, if any. The Operating
Partnership implemented FIN 48 on January 1, 2007 and
the adoption did not have a material impact on the Operating
Partnerships financial position and results of operations
(see note 8).
The Securities and Exchange Commission issued Staff Accounting
Bulletin 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.
Post Apartment Homes, L.P.
101
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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.
SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities including
an amendment of FASB Statement No. 115, was issued in
February 2007. SFAS No. 159 gives the Company the
irrevocable option to carry most financial assets and
liabilities at fair value, with changes in fair value recognized
in earnings. SFAS No. 159 is effective for the Company
on January 1, 2008. The Company does not expect that the
adoption of SFAS No. 159 will have a notional impact
on the Companys financial position and results of
operations.
SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, was issued in December
2007. SFAS No. 160 requires all entities to report
noncontrolling (minority) interests in subsidiaries as equity in
the consolidated financial statements. SFAS No. 160 is
effective for the Operating Partnership on January 1, 2009.
The Operating Partnership is currently evaluating the potential
impact of SFAS No. 160 on the Operating
Partnerships financial position and results of operations.
SFAS No. 141R, Business Combinations, was
issued in December 2007. SFAS No. 141R will replace
SFAS No. 141 on the date it becomes effective.
SFAS No. 141R will require 1) acquirers to
recognize all of the assets acquired and liabilities assumed in
a business combination, 2) that the acquisition date be
used to determine fair value for all assets acquired and all
liabilities assumed, and 3) enhanced disclosures for the
acquirer surrounding the financial effects of the business
combination. The provisions of SFAS 141R will lead to the
expensing of acquisition related transaction costs and the
potential recognition of acquisition related contingencies.
SFAS No. 141R is effective for the Operating
Partnership on January 1, 2009. The Operating Partnership
is currently evaluating the potential impact of
SFAS No. 141R on the Operating Partnerships
financial position and results of operations.
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2.
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REAL
ESTATE ACQUISITIONS AND DISPOSITIONS
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Acquisitions
In July 2007, the Operating Partnership acquired a
350-unit
apartment community located in Orlando, Florida for
approximately $75,200, including closing costs. Additionally,
the Operating Partnership plans to spend up to approximately
$1,250 to improve the community (of which approximately $73 was
incurred as of December 31, 2007). Aggregate acquisition
costs were allocated to land ($17,500), building, improvements
and equipment ($56,702) and identified lease related intangible
assets ($998).
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 incurred approximately $1,300 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 incurred
approximately $2,255 to complete the renovation of the
community.
Lease-up of
renovated units began in the fourth quarter of 2006. At
December 31, 2007, the community was 80% occupied. The
purchase price of this community was allocated to the assets
acquired based on their estimated fair values.
Post Apartment Homes, L.P.
102
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
In 2006, aggregate acquisition costs were allocated to land
($18,201), building improvements and equipment ($111,523),
construction in 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 its board of directors and after
the Operating Partnership has commenced an active program to
sell the assets. At December 31, 2007, the Operating
Partnership had one community, containing 143 units, and
certain parcels of land classified as held for sale. These real
estate assets are reflected in the accompanying consolidated
balance sheet at $24,576, which represents the lower of their
depreciated cost or fair value less costs to sell. At
December 31, 2007, the Operating Partnership also had
portions of two communities that are being converted to
condominiums, originally containing 349 units, and certain
completed condominium units at newly developed condominium
communities totaling $38,844 that are classified as for-sale
condominiums on the accompanying consolidated balance sheet.
In 2007, the Operating Partnership transferred three operating
apartment communities to a newly formed unconsolidated entity in
which the Operating Partnership retained a 25% non-controlling
interest, for aggregate proceeds of approximately $134,922. This
transaction resulted in a gain on sale of real estate in
continuing operations totaling approximately $81,268 for the
year ended December 31, 2007. Additionally, the
unconsolidated entity obtained mortgage financing secured by the
apartment communities totaling approximately $126,724, of which
approximately $31,681 was distributed to the Operating
Partnership. For the year ended December 31, 2007, gains on
sales of real estate assets in continuing operations also
included gains of $5,186 on the sale of land sites. For the year
ended December 31, 2006, gains on sales of real estate
assets in continuing operations included a gain of $503 on the
sale of a land site.
In 2007, 2006 and 2005, income from continuing operations also
included net gains from condominium sales activity at newly
developed condominium projects and condominium conversion
projects representing portions of existing communities. In
addition to the condominium gains included in continuing
operations, the Operating Partnership expensed certain sales and
marketing costs associated with pre-sale condominium communities
and condominium communities under development and such costs are
included in condominium expenses in the table below. A summary
of revenues and costs and expenses of condominium activities
included in continuing operations for the years ended
December 31, 2007, 2006 and 2005 was as follows:
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Year Ended December 31,
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2007
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2006
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2005
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Condominium revenues
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$
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77,458
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$
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33,364
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$
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Condominium costs and expenses
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(63,897
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)
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(20,986
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)
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(531
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains (losses) on sales of condominiums, net
|
|
$
|
13,561
|
|
|
$
|
12,378
|
|
|
$
|
(531
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2007, the Operating Partnership retrospectively adjusted its
consolidated financial statements for the years ended
December 31, 2006 and 2005, to reflect three apartment
communities classified as held for sale (two of which were sold
in 2007) in 2007 under SFAS No. 144. The effect
of the retrospective adjustment represented a $1,712 and $2,132
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, 2006 and 2005, respectively.
Under SFAS No. 144, 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,
2007, income from discontinued operations included the results
of operations of one apartment community classified as held for
sale at December 31, 2007, three communities sold in 2007
through their sale dates and one condominium conversion
community through its sell out date in 2007. For the years ended
December 31, 2006 and 2005, income from discontinued
operations included the results of operations of the apartment
community classified as held for sale at December 31, 2007,
Post Apartment Homes, L.P.
103
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
three apartment communities sold in 2007, two condominium
conversion communities through their respective sell-out dates
in 2007 and 2005 and the results of operations of nine apartment
communities sold in 2006 and 2005 through their respective sale
dates.
The revenues and expenses of these communities for the years
ended December 31, 2007, 2006 and 2005 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
8,572
|
|
|
$
|
20,065
|
|
|
$
|
35,587
|
|
Other property revenues
|
|
|
676
|
|
|
|
1,914
|
|
|
|
3,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
9,248
|
|
|
|
21,979
|
|
|
|
38,995
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
3,890
|
|
|
|
8,951
|
|
|
|
16,496
|
|
Depreciation
|
|
|
1,069
|
|
|
|
3,280
|
|
|
|
7,452
|
|
Interest
|
|
|
1,517
|
|
|
|
4,189
|
|
|
|
6,862
|
|
Minority interest in consolidated property partnerships
|
|
|
|
|
|
|
|
|
|
|
(335
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
6,476
|
|
|
|
16,420
|
|
|
|
30,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued property operations
|
|
$
|
2,772
|
|
|
$
|
5,559
|
|
|
$
|
8,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2007, the Operating Partnership recognized net gains in
discontinued operations of $62,406 from the sale of three
communities containing 807 units. These sales generated net
proceeds of approximately $90,893, of which a portion ($66,938)
was held by an exchange intermediary at December 31, 2007
(and classified as other assets on the consolidated balance
sheet), pending the completion of a tax deferred exchange. 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.
Gains on sales of real estate assets included in discontinued
operations also includes net gains from condominium sales at two
condominium conversion communities for the years ended
December 31, 2007, 2006 and 2005. 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, 2007, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
560
|
|
|
$
|
7,322
|
|
|
$
|
56,012
|
|
Condominium costs and expenses
|
|
|
(176
|
)
|
|
|
(7,097
|
)
|
|
|
(39,200
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, before income taxes
|
|
|
384
|
|
|
|
225
|
|
|
|
16,812
|
|
Provision for income taxes
|
|
|
|
|
|
|
|
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales
|
|
$
|
384
|
|
|
$
|
225
|
|
|
$
|
16,218
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In January 2008, the Operating Partnership closed the sale of an
apartment community, containing 143 units, for a gross
sales price of $19,850. The sale completed the tax-deferred
exchange transaction discussed above.
|
|
3.
|
INVESTMENTS
IN UNCONSOLIDATED REAL ESTATE ENTITIES
|
At December 31, 2007, the Operating Partnership holds
investments in five individual limited liability companies (the
Property LLCs) with institutional investors and
other entities. Three of the Property LLCs own apartment
communities. A fourth Property LLC completed the sell out of a
condominium conversion community in 2007 and the fifth Property
Post Apartment Homes, L.P.
104
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
LLC commenced construction in 2007 of a mixed-use development,
consisting of for-sale condominiums and class A office
space. The Operating Partnership holds a 35% equity interest in
two Property LLCs, each owning one apartment community, and the
Property LLC that completed the condominium conversion and sale
process. The Operating Partnership holds a 25% interest in one
Property LLC owning three apartment communities, and a 50%
interest in the condominium portion of the Property LLC
developing the mixed-use project.
In 2007, the Operating Partnerships investment in the 25%
owned Property LLC resulted from the transfer of three
previously owned apartment communities to the Property LLC
co-owned with an institutional investor. The assets, liabilities
and members equity of this Property LLC were recorded at
fair value based on
agreed-upon
amounts contributed to the Property LLC. At December 31,
2007, the Operating Partnerships investment in the 25%
owned Property LLC reflects a credit investment of $13,688
resulting primarily from distributions of financing proceeds in
excess of the Operating Partnerships historical cost
investment. The credit investment is reflected in consolidated
liabilities on the Operating Partnerships consolidate
balance sheet.
The Operating Partnership accounts for its investments in these
Property LLCs using the equity method of accounting. At
December 31, 2007, the Operating Partnerships
investment in these Property LLCs totaled $23,036, excluding the
credit investment discussed above. The excess of the Operating
Partnerships investment over its equity in the underlying
net assets of certain Property LLCs was approximately $5,812 at
December 31, 2007. 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 related to
the Property LLC constructing condominiums will be recognized as
additional costs as the 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 was as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Balance Sheet Data
|
|
2007
|
|
|
2006
|
|
|
Real estate assets, net of accumulated depreciation of $15,204
and $11,039, respectively
|
|
$
|
325,705
|
|
|
$
|
93,614
|
|
Assets held for sale, net
|
|
|
|
|
|
|
3,027
|
|
Cash and other
|
|
|
7,254
|
|
|
|
4,067
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
332,959
|
|
|
$
|
100,708
|
|
|
|
|
|
|
|
|
|
|
Mortgage/construction notes payable
|
|
$
|
214,549
|
|
|
$
|
66,998
|
|
Other liabilities
|
|
|
5,541
|
|
|
|
1,107
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
220,090
|
|
|
|
68,105
|
|
Members equity
|
|
|
112,869
|
|
|
|
32,603
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and members equity
|
|
$
|
332,959
|
|
|
$
|
100,708
|
|
|
|
|
|
|
|
|
|
|
Operating Partnerships equity investment in Property
LLCs(1)
|
|
$
|
9,348
|
|
|
$
|
16,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
At December 31, 2007, the
Operating Partnerships equity investment is shown net of a
credit investment of $13,688 discussed above.
|
Post Apartment Homes, L.P.
105
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Income Statement Data
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
|
|
$
|
17,998
|
|
|
$
|
11,447
|
|
|
$
|
10,789
|
|
Other property revenues
|
|
|
1,169
|
|
|
|
752
|
|
|
|
807
|
|
Other
|
|
|
121
|
|
|
|
47
|
|
|
|
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
19,288
|
|
|
|
12,246
|
|
|
|
11,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance
|
|
|
7,125
|
|
|
|
3,948
|
|
|
|
3,689
|
|
Depreciation and amortization
|
|
|
6,881
|
|
|
|
2,650
|
|
|
|
2,621
|
|
Interest
|
|
|
5,940
|
|
|
|
2,752
|
|
|
|
2,752
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
19,946
|
|
|
|
9,350
|
|
|
|
9,062
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
(658
|
)
|
|
|
2,896
|
|
|
|
2,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
39
|
|
|
|
(343
|
)
|
|
|
(176
|
)
|
Gains on sales of real estate assets, net
|
|
|
861
|
|
|
|
2,947
|
|
|
|
2,834
|
|
Loss on early extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(273
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
900
|
|
|
|
2,604
|
|
|
|
2,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
242
|
|
|
$
|
5,500
|
|
|
$
|
4,952
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Partnerships share of net income
|
|
$
|
1,556
|
|
|
$
|
1,813
|
|
|
$
|
1,767
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 completed the sell out of the
community in 2007. A summary of revenues and costs and expenses
of condominium activities for the years ended December 31,
2007, 2006 and 2005 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Condominium revenues
|
|
$
|
4,592
|
|
|
$
|
21,857
|
|
|
$
|
15,098
|
|
Condominium costs and expenses
|
|
|
(3,731
|
)
|
|
|
(18,910
|
)
|
|
|
(12,264
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on condominium sales, net
|
|
$
|
861
|
|
|
$
|
2,947
|
|
|
$
|
2,834
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, mortgage/construction notes payable
include a $49,997 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. Another mortgage note payable totaling
$17,000 bears interest at a fixed rate of 4.04%, requires
interest only payments and matures in 2008. Three additional
mortgage notes were entered into in conjunction with the
formation of the 25% owned Property LLC in 2007. Two notes total
$85,724, bear interest at 5.63%, require interest only payments
and mature in 2017. The third mortgage note totals $41,000,
bears interest at 5.71%, requires interest only payments, and
matures in 2017.
In July 2007, the Property LLC constructing the mixed-use
development entered into a construction loan facility with an
aggregate capacity of $187,128. At December 31, 2007, the
construction loan had an outstanding balance of $20,829, bears
interest at LIBOR plus 1.35% and matures in 2011. Under the
terms of the construction loan facility, the Company and its 50%
equity partner have jointly and severally guaranteed
approximately $25,313 of the construction loan attributable to
the condominium portion of the project. Additionally, the
Company and its 50% equity partner have jointly and severally
guaranteed certain debt service payments of the condominium
portion of the loan not to exceed approximately $6,153 and all
of the equity owners of the project, including the Company, have
guaranteed the completion of the first building at the project.
In 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
Post Apartment Homes, L.P.
106
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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 2005. In
2006, the mortgage note payable to the Operating Partnership was
retired from the proceeds of condominium sales. The mortgage
note payable to the Operating Partnership had a fixed rate
component bearing interest at 4.28% and a variable rate
component bearing interest at LIBOR at 1.90%.
At December 31, 2007 and 2006, the Operating
Partnerships indebtedness consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment
|
|
|
|
|
Maturity
|
|
December 31,
|
|
|
December 31,
|
|
Description
|
|
Terms
|
|
Interest Rate
|
|
|
Date
|
|
2007
|
|
|
2006
|
|
|
Senior Unsecured Notes
|
|
Int.
|
|
|
5.13% - 7.70%
|
|
|
2010-2013
|
|
$
|
535,000
|
|
|
$
|
560,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated Line of Credit
|
|
N/A
|
|
|
LIBOR + 0.575%
|
(1)
|
|
2010
|
|
|
245,000
|
|
|
|
95,000
|
|
Cash Management Line
|
|
N/A
|
|
|
LIBOR + 0.575%
|
|
|
2010
|
|
|
12,275
|
|
|
|
13,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
257,275
|
|
|
|
108,913
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed Rate Secured Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
Prin. and Int.
|
|
|
6.15%
|
(2)
|
|
2029
|
|
|
94,000
|
|
|
|
95,600
|
|
Other
|
|
Prin. and Int.
|
|
|
4.27% - 6.50%
|
|
|
2009-2013
|
|
|
172,791
|
|
|
|
259,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
266,791
|
|
|
|
354,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-Exempt Floating Rate Secured Bonds
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,895
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$
|
1,059,066
|
|
|
$
|
1,033,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Represents stated rate. At
December 31, 2007, the weighted average interest rate was
5.63%.
|
(2)
|
|
Interest rate is fixed at 6.15%,
inclusive of credit enhancement and other fees, to 2009 through
an interest rate swap arrangement.
|
Debt
maturities
The aggregate maturities of the Operating Partnerships
indebtedness are as follows:
|
|
|
|
|
2008
|
|
$
|
5,230
|
|
2009
|
|
|
76,618
|
|
2010
|
|
|
445,903
|
(1)
|
2011
|
|
|
141,431
|
|
2012
|
|
|
103,296
|
|
Thereafter
|
|
|
286,588
|
|
|
|
|
|
|
|
|
$
|
1,059,066
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes outstanding balance on
lines of credit totaling $257,275.
|
Debt
issuances, retirements and modifications
2007
Upon their maturity in June 2007, the Operating Partnership
repaid $25,000 of 6.11% senior unsecured notes from
available borrowings under its unsecured line of credit. In July
2007, the Operating Partnership repaid $83,132 of secured
mortgage notes with interest rates from 6.29% to 7.69% from
borrowing under its unsecured line of credit. These mortgage
notes were scheduled to mature in October 2007.
In January 2008, the Company closed a $120,000 secured, fixed
rate mortgage note payable. The note bears interest at 4.88%,
requires interest only payments and matures in 2015. The note
contains an automatic one year extension under which the
interest rate converts to a variable rate, as defined.
Post Apartment Homes, L.P.
107
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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 2 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.
Unsecured
lines of credit
At December 31, 2007, the Operating Partnership utilizes a
$600,000, increased from $450,000 in November 2007, 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 17 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. In addition to
customary restrictions, representations, covenants and events of
default, 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, 2007, the
Operating Partnership had issued letters of credit to third
parties totaling $1,350 under this facility.
Additionally, at December 31, 2007, 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 $11,801, $9,942
and $2,907 for the years ended December 31, 2007, 2006 and
2005, respectively), aggregated $65,931, $67,257 and $66,234 for
the years ended December 31, 2007, 2006 and 2005,
respectively.
Pledged
assets and other
The aggregate net book value at December 31, 2007 of
property pledged as collateral for indebtedness amounted to
approximately $333,128. The Companys senior unsecured
notes, Syndicated Line and certain of its secured mortgage
Post Apartment Homes, L.P.
108
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
arrangements contain customary restrictions, representations,
covenants and events of default, including fixed charge coverage
and maximum leverage ratios.
Deferred charges consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Deferred financing costs
|
|
$
|
17,041
|
|
|
$
|
18,073
|
|
Other
|
|
|
5,677
|
|
|
|
5,501
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,718
|
|
|
|
23,574
|
|
Less: accumulated amortization
|
|
|
(12,180
|
)
|
|
|
(11,174
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
10,538
|
|
|
$
|
12,400
|
|
|
|
|
|
|
|
|
|
|
Common
and Preferred Units
At December 31, 2007 and 2006, the Operating Partnership
had outstanding Common Units totaling 44,295 and 44,191,
respectively. At December 31, 2007, 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 currently redeemable at the option of
the Operating Partnership, 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.
Common
Unit Purchases
In 2007, the Company repurchased 83 shares of its common
stock totaling approximately $3,694 pursuant to a 10b5-1 stock
purchase plan meeting the requirements of
Rule 10b5-1
under the Exchange Act. These shares were purchased under a
board of directors approved plan which allows the Company to
repurchase up to $200,000 of common or preferred stock at market
prices from time to time until December 31, 2008. 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, pursuant to
stock purchase plans meeting the requirements of
Rule 10b5-1
under the Exchange Act. These shares were purchased under a
previous board of directors approved plan. Correspondingly, the
Operating Partnership repurchased the same number and amount of
common 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)
Computation
of Earnings per Common Unit
In 2007, 2006 and 2005, 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, 2007
|
|
|
|
Income
|
|
|
Units
|
|
|
Per-Unit
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
115,654
|
|
|
|
|
|
|
|
|
|
Less: Preferred unit distributions
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common unitholders
|
|
|
108,017
|
|
|
|
44,104
|
|
|
$
|
2.45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common unitholders
|
|
$
|
108,017
|
|
|
$
|
44,738
|
|
|
$
|
2.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2006
|
|
|
|
Income
|
|
|
Units
|
|
|
Per-Unit
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
29,673
|
|
|
|
|
|
|
|
|
|
Less: Preferred unit distributions
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common unitholders
|
|
|
22,036
|
|
|
|
43,645
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
782
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations available to common unitholders
|
|
$
|
22,036
|
|
|
|
44,427
|
|
|
$
|
0.50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, R2005
|
|
|
|
Income
|
|
|
Units
|
|
|
Per-Unit
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
|
Income from continuing operations
|
|
$
|
3,104
|
|
|
|
|
|
|
|
|
|
Less: Preferred unit distributions
|
|
|
(7,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
|
(4,533
|
)
|
|
|
42,353
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
|
|
|
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
$
|
(4,533
|
)
|
|
|
42,353
|
|
|
$
|
(0.11
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2005, the potential dilution from the
Companys outstanding stock options and awards of 400 was
antidilutive to the loss from continuing operations per unit
calculation. As such, this amount was excluded from weighted
average units in these years.
|
In 2007, 2006 and 2005, stock options to purchase 200, 0 and
3,534 shares of common stock, respectively, were excluded
from the computation of diluted earnings per share as these
options were antidilutive.
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
Post Apartment Homes, L.P.
110
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
certain payments and provide specified benefits through 2013 and
2016. In 2007 and 2005, the Operating Partnership recorded
additional expenses of $283 and $796, respectively, 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.
The following table summarizes the activity relating to the
accrued severance charges for the years ended December 31,
2007, 2006 and 2005:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Accrued severance charges, beginning of year
|
|
$
|
12,832
|
|
|
$
|
14,325
|
|
|
$
|
15,317
|
|
Severance charges
|
|
|
283
|
|
|
|
|
|
|
|
796
|
|
Payments for period
|
|
|
(2,640
|
)
|
|
|
(2,341
|
)
|
|
|
(2,694
|
)
|
Interest accretion
|
|
|
740
|
|
|
|
848
|
|
|
|
906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued severance charges, end of year
|
|
$
|
11,215
|
|
|
$
|
12,832
|
|
|
$
|
14,325
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Substantially all of these remaining amounts will be paid over
the remaining terms of the former executives employment
and settlement agreements (six to nine 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 2007, other expenses on the consolidated statement of
operations included income tax expense of approximately $560
relating to estimated alternative minimum tax of the Company.
The alternative minimum tax results from the expected
utilization of net operating loss carryforwards generated by the
Company in prior years. The Operating Partnership reimburses the
Company for the actual tax expense.
In the preparation of income tax returns in federal and state
jurisdictions, the Operating Partnership 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, 2007, 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 $192,919.
The Operating Partnership adopted the provisions of FIN 48
on January 1, 2007. As of January 1, 2007 and
December 31, 2007, the Operating Partnerships taxable
REIT subsidiaries (TRSs) had unrecognized tax
benefits of approximately $797 which primarily related to
uncertainty regarding the sustainability of certain deductions
taken on prior year income tax returns of the TRS with respect
to the amortization of certain intangible assets. The Operating
Partnership does not expect any significant change in this
unrecognized tax benefit in 2008. To the extent these
unrecognized tax benefits are ultimately recognized, they may
affect the effective tax rate in a future period. The Operating
Partnerships policy is to recognize interest and
penalties, if any, related to unrecognized tax benefits as
income tax expense. Accrued interest and penalties for the year
ended December 31, 2007 and at December 31, 2007 were
not material to the Operating Partnerships results of
operations, cash flows or financial position.
Post Apartment Homes, L.P.
111
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
The Operating Partnership and its subsidiaries (including
the TRSs) income tax returns are subject to examination by
federal and state tax jurisdictions for years 2004 through 2006.
Net income tax loss carryforwards and other tax attributes
generated in years prior to 2004 are also subject to challenge
in any examination of the 2004 to 2006 tax years.
Taxable
REIT subsidiaries
The Operating Partnership utilizes TRSs principally to perform
such non-REIT activities as asset and property management,
for-sale housing (condominiums) conversions and sales and other
services. 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.
Income tax expense of the TRSs for the years ended
December 31, 2007, 2006 and 2005 is comprised of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Current tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
900
|
|
|
$
|
|
|
|
$
|
251
|
|
State
|
|
|
110
|
|
|
|
|
|
|
|
343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,010
|
|
|
|
|
|
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(900
|
)
|
|
|
|
|
|
|
|
|
State
|
|
|
(110
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,010
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
|
|
|
|
|
|
|
|
|
594
|
|
Income tax expense discontinued operations
|
|
|
|
|
|
|
|
|
|
|
(594
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense continuing operations
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2007, the Operating Partnership recognized a deferred tax
benefit of $1,010 to offset estimated current income tax expense
based on a determination that such deferred tax assets are
realizable through the ability of such deferred assets to
generate carryback claims to prior years or to offset future
income taxes payable. 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. Net valuation allowances increased
approximately $214 and $1,309 in 2007 and 2006, respectively.
Aggregate valuation allowances at December 31, 2007 and
2006 are reflected in the table below.
The components of the TRSs deferred income tax assets and
liabilities at December 31, 2007 and 2006 were as follows:
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Deferred interest
|
|
$
|
2,649
|
|
|
$
|
1,761
|
|
Accrued liabilities
|
|
|
1,154
|
|
|
|
512
|
|
Cost capitalization/recognition
|
|
|
864
|
|
|
|
260
|
|
Real estate asset basis differences
|
|
|
|
|
|
|
1,106
|
|
Other
|
|
|
297
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,964
|
|
|
|
3,740
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(797
|
)
|
|
|
(797
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets, before valuation allowances
|
|
|
4,167
|
|
|
|
2,943
|
|
Valuation allowances
|
|
|
(3,157
|
)
|
|
|
(2,943
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$
|
1,010
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, management had established valuation
allowances against the above listed net deferred tax assets due
primarily to historical losses at the TRSs in years prior
to 2007 and the variability of the income of these subsidiaries.
The tax benefits associated with such unused valuation
allowances may be recognized in future periods, if the taxable
Post Apartment Homes, L.P.
112
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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.
|
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 equity-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 Company accounts for stock-based
compensation using the fair value method prescribed in
SFAS No. 123R (see note 1). For stock-based
compensation granted prior to 2006, 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 years
prior to 2006, 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 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, 2007, stock
options outstanding under the 2003 Stock Plan and the
Companys previous stock plan totaled 2,455.
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Dividend yield
|
|
|
3.8%
|
|
|
|
4.4%
|
|
|
|
5.5%
|
|
Expected volatility
|
|
|
18.1%
|
|
|
|
17.5%
|
|
|
|
17.1%
|
|
Risk-free interest rate
|
|
|
4.8%
|
|
|
|
4.3%
|
|
|
|
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
Post Apartment Homes, L.P.
113
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
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 2007, 2006 and 2005, the Company granted stock options to
purchase 199, 311 and 277 shares, respectively, of Company
common stock to Company officers and directors, of which 28, 50
and 50 shares, respectively, were granted to the
Companys non-executive chairman of the board. In 2007,
2006 and 2005, the Company recorded compensation expense related
to stock options of $1,523, $1,100 and $761, 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 2007, 2006
and 2005, is presented below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Shares
|
|
|
Exercise Price
|
|
|
Outstanding at beginning of year
|
|
|
2,375
|
|
|
$
|
33
|
|
|
|
3,534
|
|
|
$
|
34
|
|
|
|
4,491
|
|
|
$
|
33
|
|
Granted
|
|
|
199
|
|
|
|
48
|
|
|
|
311
|
|
|
|
41
|
|
|
|
277
|
|
|
|
33
|
|
Exercised
|
|
|
(108
|
)
|
|
|
36
|
|
|
|
(1,462
|
)
|
|
|
36
|
|
|
|
(1,105
|
)
|
|
|
33
|
|
Forfeited
|
|
|
(11
|
)
|
|
|
41
|
|
|
|
(8
|
)
|
|
|
35
|
|
|
|
(129
|
)
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
2,455
|
|
|
|
34
|
|
|
|
2,375
|
|
|
|
33
|
|
|
|
3,534
|
|
|
|
34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
1,797
|
|
|
|
33
|
|
|
|
1,447
|
|
|
|
33
|
|
|
|
2,437
|
|
|
|
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of options granted during the year
|
|
$
|
7.22
|
|
|
|
|
|
|
$
|
4.91
|
|
|
|
|
|
|
$
|
2.73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, there was $1,627 of unrecognized
compensation cost related to unvested stock options. This cost
is expected to be recognized over a weighted-average period of
1.1 years. The total intrinsic value of stock options
exercised in 2007, 2006 and 2005 was $1,397, $13,775 and $6,111,
respectively. The aggregate intrinsic values of stock options
outstanding, exercisable and expected to vest at
December 31, 2007 were $8,453, $6,728 and $8,295,
respectively. The weighted average remaining contractual lives
of stock options outstanding, exercisable and excepted to vest
at December 31, 2007, were 5.3 years, 4.4 years
and 5.3 years, respectively. Stock options expected to vest
at December 31, 2007 totaled 2,416 at a weighted average
exercise price of approximately $34.01.
At December 31, 2007, the Company had separated its
outstanding options into two ranges based on exercise prices.
There were 1,387 options outstanding with exercise prices
ranging from $23.90 to $36.13. These options have a weighted
average exercise price of $29.17 and a weighted average
remaining contractual life of 5.2 years. Of these
outstanding options, 1,132 were exercisable at December 31,
2007 at a weighted average exercise price of $29.36. In
addition, there were 1,068 options outstanding with exercise
prices ranging from $36.47 to $48.00. These options had a
weighted average exercise price of $40.32 and a weighted average
remaining contractual life of 5.4 years. Of these
outstanding options, 665 were exercisable at December 31,
2007 at a weighted average exercise price of $38.04.
In 2007, 2006 and 2005, the Company granted 61, 42 and
35 shares of restricted stock, respectively, to Company
officers and directors, of which 4, 5 and 6 shares in 2007,
2006 and 2005, 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 2007, 2006 and 2005 was $45.61, $40.61 and $33.74 per
share, respectively. The total value of the restricted share
grants in 2007, 2006 and 2005 were $2,791, $1,701 and $1,173,
respectively. The compensation cost is amortized ratably into
compensation expense over the applicable vesting periods. Total
compensation expense relating to the restricted stock was
$2,434, $1,651 and $1,367 in 2007, 2006 and 2005, respectively.
In 2006, such expense was net of the cumulative impact of the
adoption of SFAS No. 123R of $112, as discussed above.
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 the activity related to the Companys
restricted stock in 2007 and 2006 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant-Date
|
|
|
|
|
|
Grant-Date
|
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Shares
|
|
|
Fair Value
|
|
|
Unvested shares, beginning or period
|
|
|
125
|
|
|
$
|
31
|
|
|
|
140
|
|
|
$
|
28
|
|
Granted
|
|
|
61
|
|
|
|
46
|
|
|
|
42
|
|
|
|
41
|
|
Vested
|
|
|
(66
|
)
|
|
|
36
|
|
|
|
(57
|
)
|
|
|
32
|
|
Forfeited
|
|
|
(1
|
)
|
|
|
42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested shares, end of period
|
|
|
119
|
|
|
|
35
|
|
|
|
125
|
|
|
$
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, there was $3,597 of unrecognized
compensation cost related to restricted stock. This cost is
expected to be recognized over a weighted average period of
2.6 years. The total intrinsic value of restricted shares
vested in 2007, 2006 and 2005 was $2,680, $2,606 and $1,845,
respectively.
Employee
Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (the
ESPP) under a plan approved by Company shareholders
in 2005. The maximum number of shares issuable under the ESPP is
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
$160, $159 and $171 in 2007, 2006 and 2005, 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 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 2007 and 2006
(5% in 2005). Company contributions of $896, $911 and $691 were
made to the 401K Plan in 2007, 2006 and 2005, 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, 2007, are as follows:
|
|
|
|
|
2008
|
|
$
|
1,863
|
|
2009
|
|
|
1,729
|
|
2010
|
|
|
1,755
|
|
2011
|
|
|
1,785
|
|
2012
|
|
|
1,820
|
|
2013 and thereafter
|
|
$
|
150,737
|
|
The Operating Partnership incurred $6,948, $6,421 and $6,309 of
rent expense, including rent expense under short-term rental and
lease arrangements, in 2007, 2006 and 2005, respectively.
Post Apartment Homes, L.P.
115
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
Legal
proceedings
In November 2006, the Equal Rights Center (ERC)
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 (FHA) and the Americans with
Disabilities Act (ADA) 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 FHA and the ADA and prohibiting construction or
sale of noncompliant units or complexes. On April 18, 2007,
ERC filed a motion for a preliminary injunction to prohibit the
Company and the Operating Partnership from selling any alleged
noncompliant apartment communities or condominium units while
the litigation is ongoing. On July 25, 2007 the court
entered an order denying ERCs motion for the preliminary
injunction. Discovery is being conducted by both parties. On
October 29, 2007, the court granted, in part, ERCs
motion to amend the scheduling order and expand the time
permitted for discovery and filing of dispositive motions. As a
result, the cutoff for fact discovery was extended to
February 29, 2008 with the end of all briefing on
dispositive motions set for August 11, 2008. On
January 29, 2008, the Operating Partnership and ERC agreed
to an extension of discovery dates to accommodate further
depositions and inspections. Under the agreement, which must be
approved by the court, fact discovery will be completed by
April 30, 2008, expert discovery will be completed by
August 29, 2008, and summary judgment briefing will be
completed by November 10, 2008. No trial date has been set.
At this stage in the proceeding, it is not possible to predict
or determine the outcome of the lawsuit, nor is it possible to
estimate the amount of loss that would be associated with an
adverse decision.
The Company and 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 Operating
Partnership believes that any resolution of pending proceedings
or liability to the Company and 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 2007, 2006 and 2005, the Operating Partnership held
investments in Property LLCs accounted for under the
equity method of accounting (see note 3). In 2007, 2006 and
2005, 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
$2,591, $1,537 and $1,781, respectively, from these related
companies. Additionally in 2007, 2006 and 2005, the Operating
Partnership earned interest under loans to unconsolidated
entities totaling $449, $860 and $437, respectively. The
Operating Partnership portion of all significant intercompany
transactions was eliminated in the accompanying consolidated
financial statements.
At December 31, 2007 and 2006, the Operating Partnership
had outstanding loan balances to certain current and former
Operating Partnership executives totaling $1,120 and $1,268,
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. Additionally, at December 31,
2007 and 2006, the Operating Partnership had outstanding an
additional loan to an Operating Partnership executive totaling
$400 and $500, respectively. This loan bears interest at 6.32%
per annum. If the executive continues to be employed by the
Operating Partnership, the loan will be forgiven annually over a
ten year period, as defined in the agreement. The annual loan
forgiveness under this loan and other similar loans outstanding
in prior years of $100, $100 and $140 was recorded as
compensation expense in 2007, 2006 and 2005, respectively.
|
|
13.
|
DERIVATIVE
FINANCIAL INSTRUMENTS
|
At December 31, 2007, the Operating Partnership had an
outstanding interest rate swap agreement with a notional value
of approximately $93,890 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 Federal National Mortgage
Association variable rate debt. This swap was entered into in
2006 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. At
December 31, 2007 and 2006, the fair value of the interest
rate swap agreement represented a liability of $2,224
Post Apartment Homes, L.P.
116
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
and $564, respectively, and the liabilities were included in
consolidated liabilities in the accompanying consolidated
balance sheets. The changes in the fair value of this cash flow
hedge was recorded as a change in accumulated other
comprehensive income (loss), a partners equity account, in
the accompanying consolidated balance sheet.
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
partners equity, over the remaining life of the swap
through 2009. Total amortization expense related to this swap
was $1,123 and $1,116 for the years ended December 31, 2007
and 2006. The swap arrangement was terminated in 2006 through a
$2,448 termination payment to the swap counterparty.
At December 31, 2007 and 2006, 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 provided a fixed interest ceiling at 5% for the
Operating Partnerships variable rate, tax-exempt
borrowings aggregating $28,495. As a result of the repayment of
tax-exempt indebtedness in December 2006 and December 2007,
portions of this interest rate cap arrangement with notional
amounts of $18,600 and $9,895, respectively, associated with
this indebtedness became ineffective for accounting purposes. In
2006, the Operating Partnership recognized a loss of
approximately $142 due to such ineffectiveness. In 2007, no loss
was recognized due to such ineffectiveness as the cost of the
interest rate cap arrangement was fully amortized though
December 31, 2007. The interest rate cap arrangement
expired in February 2008 with no change in its $0 fair value
from December 31, 2007.
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.
The impact of the change in the value of the derivatives on
comprehensive income (loss) is included in the statement of
partners 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, 2007, the Operating
Partnership estimates that $2,345 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 of financial instruments
were determined by management using available market information
and appropriate valuation methodologies available to management
at December 31, 2007. 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, 2007, the fair value of fixed rate debt was
approximately $726,614 (carrying value of $707,791) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements. 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.
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, 2007, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling
$2,224 and the interest rate cap arrangement had no value. At
December 31, 2006, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling $564
and the interest rate cap arrangement had no value.
Post Apartment Homes, L.P.
117
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, 2007. 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 property
segments 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, 2006. The segment information for the years
ended December 31, 2006 and 2005 have been adjusted due to
the restatement impact of reclassifying the operating results of
the assets designated as held for sale in 2007 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 that are
under development, rehabilitation and
lease-up but
were not stabilized by the beginning of the current year,
including communities that stabilized during the current year.
|
|
|
Condominium conversion and other communities those
portions of existing apartment communities being converted into
condominiums and other communities converted to joint venture
ownership 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.
118
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 property NOI to consolidated net income
in 2007, 2006 and 2005. 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 at the segment level is not reported
internally.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
244,537
|
|
|
$
|
233,637
|
|
|
$
|
219,973
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
14,972
|
|
|
|
9,545
|
|
|
|
10,438
|
|
Condominium conversion and other communities
|
|
|
9,810
|
|
|
|
17,281
|
|
|
|
19,989
|
|
Acquired communities
|
|
|
13,760
|
|
|
|
7,027
|
|
|
|
|
|
Other property segments
|
|
|
23,861
|
|
|
|
23,653
|
|
|
|
21,616
|
|
Other
|
|
|
602
|
|
|
|
402
|
|
|
|
255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated revenues
|
|
$
|
307,542
|
|
|
$
|
291,545
|
|
|
$
|
272,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution to Property Net Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$
|
152,200
|
|
|
$
|
145,346
|
|
|
$
|
135,511
|
|
Development, rehabilitation and
lease-up
communities
|
|
|
6,908
|
|
|
|
4,254
|
|
|
|
6,077
|
|
Condominium conversion and other communities
|
|
|
5,457
|
|
|
|
9,811
|
|
|
|
13,144
|
|
Acquired communities
|
|
|
8,256
|
|
|
|
3,929
|
|
|
|
|
|
Other property segments, including corporate management expenses
|
|
|
(7,023
|
)
|
|
|
(5,687
|
)
|
|
|
(7,470
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated property net operating income
|
|
|
165,798
|
|
|
|
157,653
|
|
|
|
147,262
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
822
|
|
|
|
1,261
|
|
|
|
661
|
|
Other revenues
|
|
|
602
|
|
|
|
402
|
|
|
|
255
|
|
Minority interest in consolidated property partnerships
|
|
|
(1,857
|
)
|
|
|
(257
|
)
|
|
|
(110
|
)
|
Depreciation
|
|
|
(66,371
|
)
|
|
|
(65,687
|
)
|
|
|
(68,795
|
)
|
Interest expense
|
|
|
(52,116
|
)
|
|
|
(52,533
|
)
|
|
|
(54,197
|
)
|
Amortization of deferred financing costs
|
|
|
(3,297
|
)
|
|
|
(3,526
|
)
|
|
|
(4,661
|
)
|
General and administrative
|
|
|
(21,337
|
)
|
|
|
(18,502
|
)
|
|
|
(18,307
|
)
|
Investment and development
|
|
|
(7,063
|
)
|
|
|
(6,424
|
)
|
|
|
(4,711
|
)
|
Severance charges
|
|
|
|
|
|
|
|
|
|
|
(796
|
)
|
Gains (losses) on sales of real estate assets, net
|
|
|
100,015
|
|
|
|
12,881
|
|
|
|
(531
|
)
|
Equity in income of unconsolidated real estate entities
|
|
|
1,556
|
|
|
|
1,813
|
|
|
|
1,767
|
|
Other income (expense)
|
|
|
(1,098
|
)
|
|
|
2,592
|
|
|
|
5,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
115,654
|
|
|
|
29,673
|
|
|
|
3,104
|
|
Income from discontinued operations
|
|
|
65,438
|
|
|
|
73,613
|
|
|
|
145,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
181,092
|
|
|
$
|
103,286
|
|
|
$
|
149,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.
|
SUPPLEMENTAL
CASH FLOW INFORMATION
|
Non-cash investing and financing activities for the years ended
December 31, 2007, 2006 and 2005 were as follows:
In 2007, the Operating Partnership sold two apartment
communities of the net proceeds totaling $66,938 were held by an
exchange intermediary at December 31, 2007, pending the
completion of a tax deferred exchange. 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. Additionally in 2006, the Operating
Partnership acquired an apartment community for cash and the
assumption of secured mortgage indebtedness totaling $41,394.
These transactions were excluded from the cash flow statement as
non-cash transactions.
Post Apartment Homes, L.P.
119
POST
APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
(Dollars in thousands, except per unit data)
In 2007, the Operating Partnership amortized approximately
$1,123 of accumulated other comprehensive non-cash losses into
earnings related to an interest rate swap derivative financial
instrument (see note 13). Other than the amortization
discussed herein, in 2007, 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
partners equity of $1,660. 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 partners
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.
The Operating Partnership committed to distribute $19,933,
$19,886 and $19,257 for the quarters ended December 31,
2007, 2006 and 2005, respectively.
In 2007, 2006 and 2005, the Company issued common shares for
director compensation, totaling $502, $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, 2006
and 2007 were non-cash transactions.
In 2007, 2006 and 2005, the Operating Partnership and the
Operating Partnerships taxable REIT subsidiaries made
income tax payments to federal and state taxing authorities
totaling $1,411, $339 and $760, respectively.
|
|
17.
|
OTHER
INCOME (EXPENSE)
|
In 2007, other expense primarily included estimated state
franchise and other taxes. Franchise taxes of approximately $694
are associated with new margin-based taxes in Texas that were
effective in 2007. Income tax expense recorded by the Operating
Partnership of approximately $560 in 2007 is discussed in
note 8. In 2006, other income primarily included 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) 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.
120
|
|
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 2007 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 2007. Quarterly financial information for the years
ended December 31, 2007 and 2006, as revised to reflect the
change discussed above, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2007
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
75,360
|
|
|
$
|
76,065
|
|
|
$
|
78,011
|
|
|
$
|
78,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
6,968
|
|
|
|
64,300
|
|
|
|
10,038
|
|
|
|
34,348
|
|
Income from discontinued operations
|
|
|
17,854
|
|
|
|
548
|
|
|
|
1,118
|
|
|
|
45,918
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
24,822
|
|
|
|
64,848
|
|
|
|
11,156
|
|
|
|
80,266
|
|
Distributions to preferred unitholders
|
|
|
(1,909
|
)
|
|
|
(1,910
|
)
|
|
|
(1,909
|
)
|
|
|
(1,909
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders
|
|
$
|
22,913
|
|
|
$
|
62,938
|
|
|
$
|
9,247
|
|
|
$
|
78,357
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders basic
|
|
$
|
0.52
|
|
|
$
|
1.43
|
|
|
$
|
0.21
|
|
|
$
|
1.77
|
|
Net income available to common unitholders diluted
|
|
$
|
0.51
|
|
|
$
|
1.40
|
|
|
$
|
0.21
|
|
|
$
|
1.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2006
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Revenues
|
|
$
|
70,146
|
|
|
$
|
72,160
|
|
|
$
|
74,709
|
|
|
$
|
74,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
3,454
|
|
|
|
12,333
|
|
|
|
7,099
|
|
|
|
6,787
|
|
Income from discontinued operations
|
|
|
1,419
|
|
|
|
1,917
|
|
|
|
29,366
|
|
|
|
40,911
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
In the first, second and fourth quarters of 2007, net income
increased primarily due to gains on sales of apartment
communities and gains on the sales of 75% interests in certain
apartment communities to an unconsolidated entity (see
note 2) during those periods. In the third and fourth
quarters of 2006, net income increased primarily due to gains on
sales of apartment communities during those periods.
121
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule III
|
POST PROPERTIES, INC.
|
POST APARTMENT HOMES, L.P.
|
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
|
December 31, 2007
|
(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
Briarclifftm
|
|
Apartments
|
|
|
|
|
|
|
13,344
|
|
|
|
|
|
|
|
48,161
|
|
|
|
13,344
|
|
|
|
48,161
|
|
|
|
61,505
|
|
|
|
16,302
|
|
|
12/96
|
|
09/96
|
|
|
5-40 Years
|
Post
Brookhaven®
|
|
Apartments
|
|
|
|
|
|
|
7,921
|
|
|
|
|
|
|
|
34,417
|
|
|
|
7,921
|
|
|
|
34,417
|
|
|
|
42,338
|
|
|
|
19,066
|
|
|
07/89 12/92
|
|
03/89
|
|
|
5-40 Years
|
Post
Chastain®
|
|
Apartments
|
|
|
27,694
|
(2)
|
|
|
6,352
|
|
|
|
|
|
|
|
57,076
|
|
|
|
6,779
|
|
|
|
56,649
|
|
|
|
63,428
|
|
|
|
23,059
|
|
|
06/88 10/90
|
|
06/88
|
|
|
5-40 Years
|
Post
Crossing®
|
|
Apartments
|
|
|
21,580
|
|
|
|
3,951
|
|
|
|
|
|
|
|
20,899
|
|
|
|
3,951
|
|
|
|
20,899
|
|
|
|
24,850
|
|
|
|
8,067
|
|
|
04/94 08/95
|
|
11/93
|
|
|
5-40 Years
|
Post
Dunwoody®
|
|
Apartments
|
|
|
|
|
|
|
4,917
|
|
|
|
|
|
|
|
30,680
|
|
|
|
4,961
|
|
|
|
30,636
|
|
|
|
35,597
|
|
|
|
13,409
|
|
|
11/88
|
|
12/84 & 8/94
|
|
|
5-40 Years
|
Post
Gardens®
|
|
Apartments
|
|
|
|
|
|
|
5,859
|
|
|
|
|
|
|
|
35,455
|
|
|
|
5,931
|
|
|
|
35,383
|
|
|
|
41,314
|
|
|
|
12,177
|
|
|
07/96
|
|
05/96
|
|
|
5-40 Years
|
Post
Glen®
|
|
Apartments
|
|
|
19,137
|
|
|
|
5,591
|
|
|
|
|
|
|
|
22,972
|
|
|
|
5,784
|
|
|
|
22,779
|
|
|
|
28,563
|
|
|
|
8,280
|
|
|
07/96
|
|
05/96
|
|
|
5-40 Years
|
Post Lenox
Park®
|
|
Apartments
|
|
|
10,224
|
(2)
|
|
|
3,132
|
|
|
|
|
|
|
|
11,918
|
|
|
|
3,132
|
|
|
|
11,918
|
|
|
|
15,050
|
|
|
|
4,621
|
|
|
03/94 05/95
|
|
03/94
|
|
|
5-40 Years
|
Post
Oglethorpe®
|
|
Apartments
|
|
|
|
|
|
|
3,662
|
|
|
|
|
|
|
|
18,140
|
|
|
|
3,662
|
|
|
|
18,140
|
|
|
|
21,802
|
|
|
|
7,309
|
|
|
03/93 10/94
|
|
03/93
|
|
|
5-40 Years
|
Post
Parksidetm
|
|
Mixed Use
|
|
|
|
|
|
|
3,402
|
|
|
|
|
|
|
|
20,708
|
|
|
|
3,465
|
|
|
|
20,645
|
|
|
|
24,110
|
|
|
|
6,259
|
|
|
02/99
|
|
12/97
|
|
|
5-40 Years
|
Post Peachtree
Hills®
|
|
Apartments
|
|
|
|
|
|
|
4,215
|
|
|
|
|
|
|
|
15,324
|
|
|
|
4,857
|
|
|
|
14,682
|
|
|
|
19,539
|
|
|
|
6,575
|
|
|
02/92 09/94
|
|
02/92 & 9/92
|
|
|
5-40 Years
|
Post
Renaissance®(3)
|
|
Apartments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,726
|
|
|
|
|
|
|
|
21,726
|
|
|
|
21,726
|
|
|
|
9,831
|
|
|
07/91 12/94
|
|
06/91 & 01/94
|
|
|
5-40 Years
|
Post
Ridge®
|
|
Apartments
|
|
|
|
|
|
|
5,150
|
|
|
|
|
|
|
|
32,647
|
|
|
|
5,150
|
|
|
|
32,647
|
|
|
|
37,797
|
|
|
|
10,723
|
|
|
10/96
|
|
07/96
|
|
|
5-40 Years
|
Post
Riverside®
|
|
Mixed Use
|
|
|
|
|
|
|
11,130
|
|
|
|
|
|
|
|
112,706
|
|
|
|
12,457
|
|
|
|
111,379
|
|
|
|
123,836
|
|
|
|
38,356
|
|
|
07/96
|
|
01/96
|
|
|
5-40 Years
|
Post
Springtm
|
|
Apartments
|
|
|
|
|
|
|
2,105
|
|
|
|
|
|
|
|
38,736
|
|
|
|
2,105
|
|
|
|
38,736
|
|
|
|
40,841
|
|
|
|
11,190
|
|
|
09/99
|
|
09/99
|
|
|
5-40 Years
|
Post
Stratfordtm(3)
|
|
Apartments
|
|
|
|
|
|
|
328
|
|
|
|
|
|
|
|
26,127
|
|
|
|
620
|
|
|
|
25,835
|
|
|
|
26,455
|
|
|
|
7,951
|
|
|
04/99
|
|
01/99
|
|
|
5-40 Years
|
Post
Woods®
|
|
Apartments
|
|
|
24,517
|
(2)
|
|
|
1,378
|
|
|
|
|
|
|
|
29,905
|
|
|
|
3,070
|
|
|
|
28,213
|
|
|
|
31,283
|
|
|
|
16,797
|
|
|
03/76 09/83
|
|
06/76
|
|
|
5-40 Years
|
122
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, 2007
|
(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
|
|
|
$
|
1,863
|
|
|
$
|
575
|
|
|
$
|
8,139
|
|
|
$
|
8,714
|
|
|
$
|
2,183
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post Addison
Circletm
|
|
Mixed Use
|
|
|
|
|
|
|
2,885
|
|
|
|
41,482
|
|
|
|
124,618
|
|
|
|
8,382
|
|
|
|
160,603
|
|
|
|
168,985
|
|
|
|
49,900
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post Barton
Creektm
|
|
Apartments
|
|
|
|
|
|
|
1,920
|
|
|
|
24,482
|
|
|
|
941
|
|
|
|
1,920
|
|
|
|
25,423
|
|
|
|
27,343
|
|
|
|
1,367
|
|
|
N/A
|
|
03/06
|
|
|
5-40 Years
|
Post
Coles
Cornertm
|
|
Mixed Use
|
|
|
|
|
|
|
1,886
|
|
|
|
18,006
|
|
|
|
2,529
|
|
|
|
2,086
|
|
|
|
20,335
|
|
|
|
22,421
|
|
|
|
6,943
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post
Heightstm/Gallery
|
|
Mixed Use
|
|
|
|
|
|
|
5,455
|
|
|
|
15,559
|
|
|
|
31,367
|
|
|
|
5,812
|
|
|
|
46,569
|
|
|
|
52,381
|
|
|
|
14,840
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post Legacy
|
|
Mixed Use
|
|
|
|
|
|
|
684
|
|
|
|
|
|
|
|
33,868
|
|
|
|
811
|
|
|
|
33,741
|
|
|
|
34,552
|
|
|
|
8,969
|
|
|
03/99
|
|
03/99
|
|
|
5-40 Years
|
Post
Meridiantm
|
|
Apartments
|
|
|
|
|
|
|
1,535
|
|
|
|
11,605
|
|
|
|
1,493
|
|
|
|
1,535
|
|
|
|
13,098
|
|
|
|
14,633
|
|
|
|
4,231
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post Midtown
Square®
|
|
Mixed Use
|
|
|
|
|
|
|
4,408
|
|
|
|
1,412
|
|
|
|
48,941
|
|
|
|
3,437
|
|
|
|
51,324
|
|
|
|
54,761
|
|
|
|
13,942
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post Park
Mesatm
|
|
Apartments
|
|
|
|
|
|
|
1,480
|
|
|
|
17,861
|
|
|
|
881
|
|
|
|
1,480
|
|
|
|
18,742
|
|
|
|
20,222
|
|
|
|
983
|
|
|
N/A
|
|
03/06
|
|
|
5-40 Years
|
Post Rice
Loftstm(3)
|
|
Mixed Use
|
|
|
|
|
|
|
449
|
|
|
|
13,393
|
|
|
|
27,514
|
|
|
|
449
|
|
|
|
40,907
|
|
|
|
41,356
|
|
|
|
9,763
|
|
|
10/97
|
|
10/97
|
|
|
5-40 Years
|
Post
Squaretm
|
|
Mixed Use
|
|
|
|
|
|
|
4,565
|
|
|
|
24,595
|
|
|
|
1,983
|
|
|
|
4,565
|
|
|
|
26,578
|
|
|
|
31,143
|
|
|
|
7,219
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post Uptown
Villagetm
|
|
Apartments
|
|
|
14,889
|
(2)
|
|
|
3,955
|
|
|
|
22,120
|
|
|
|
19,856
|
|
|
|
6,682
|
|
|
|
39,249
|
|
|
|
45,931
|
|
|
|
10,665
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post
Vineyardtm
|
|
Apartments
|
|
|
|
|
|
|
1,133
|
|
|
|
8,560
|
|
|
|
657
|
|
|
|
1,133
|
|
|
|
9,217
|
|
|
|
10,350
|
|
|
|
2,476
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post
Vintagetm
|
|
Apartments
|
|
|
|
|
|
|
2,614
|
|
|
|
12,188
|
|
|
|
953
|
|
|
|
2,614
|
|
|
|
13,141
|
|
|
|
15,755
|
|
|
|
3,943
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
Post
Worthingtontm
|
|
Mixed Use
|
|
|
|
|
|
|
3,744
|
|
|
|
34,700
|
|
|
|
15,971
|
|
|
|
3,744
|
|
|
|
50,671
|
|
|
|
54,415
|
|
|
|
11,868
|
|
|
N/A
|
|
10/97
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Bay at
Rocky
Pointtm(5)
|
|
Apartments
|
|
|
|
|
|
|
528
|
|
|
|
5,081
|
|
|
|
20,437
|
|
|
|
2,400
|
|
|
|
23,646
|
|
|
|
26,046
|
|
|
|
675
|
|
|
N/A
|
|
10/06
|
|
|
5-40 Years
|
Post Harbour
Placetm
|
|
Mixed Use
|
|
|
|
|
|
|
3,854
|
|
|
|
|
|
|
|
66,137
|
|
|
|
8,312
|
|
|
|
61,679
|
|
|
|
69,991
|
|
|
|
17,842
|
|
|
03/97
|
|
01/97
|
|
|
5-40 Years
|
Post Hyde
Park®
|
|
Apartments
|
|
|
|
|
|
|
3,498
|
|
|
|
|
|
|
|
41,667
|
|
|
|
9,011
|
|
|
|
36,154
|
|
|
|
45,165
|
|
|
|
9,165
|
|
|
09/94
|
|
07/94
|
|
|
5-40 Years
|
Post Lake at Baldwin
Park®
|
|
Apartments
|
|
|
|
|
|
|
17,500
|
|
|
|
56,707
|
|
|
|
106
|
|
|
|
17,500
|
|
|
|
56,813
|
|
|
|
74,313
|
|
|
|
757
|
|
|
N/A
|
|
07/07
|
|
|
5-40 Years
|
Post
Parksidetm
|
|
Mixed Use
|
|
|
|
|
|
|
2,493
|
|
|
|
|
|
|
|
32,240
|
|
|
|
2,493
|
|
|
|
32,240
|
|
|
|
34,733
|
|
|
|
8,618
|
|
|
03/99
|
|
03/99
|
|
|
5-40 Years
|
Post Rocky
Point®
|
|
Apartments
|
|
|
57,000
|
|
|
|
10,510
|
|
|
|
|
|
|
|
64,126
|
|
|
|
10,567
|
|
|
|
64,069
|
|
|
|
74,636
|
|
|
|
21,519
|
|
|
04/94 11/96
|
|
02/94 & 09/96
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Virginia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Carlyle
Squaretm(5)
|
|
Mixed Use
|
|
|
|
|
|
|
1,043
|
|
|
|
|
|
|
|
55,608
|
|
|
|
3,316
|
|
|
|
53,335
|
|
|
|
56,651
|
|
|
|
1,424
|
|
|
12/04
|
|
N/A
|
|
|
5-40 Years
|
Post
Corners®
|
|
Apartments
|
|
|
16,676
|
(2)
|
|
|
4,404
|
|
|
|
|
|
|
|
25,192
|
|
|
|
4,493
|
|
|
|
25,103
|
|
|
|
29,596
|
|
|
|
8,835
|
|
|
06/94
|
|
06/94
|
|
|
5-40 Years
|
Post Fallsgrove
|
|
Apartments
|
|
|
40,513
|
|
|
|
14,801
|
|
|
|
69,179
|
|
|
|
692
|
|
|
|
14,801
|
|
|
|
69,871
|
|
|
|
84,672
|
|
|
|
3,046
|
|
|
N/A
|
|
7/06
|
|
|
5-40 Years
|
Post
Forest®
|
|
Apartments
|
|
|
|
|
|
|
8,590
|
|
|
|
|
|
|
|
27,837
|
|
|
|
9,106
|
|
|
|
27,321
|
|
|
|
36,427
|
|
|
|
16,716
|
|
|
01/89 12/90
|
|
03/88
|
|
|
5-40 Years
|
Post Pentagon
Rowtm(3)
|
|
Mixed Use
|
|
|
|
|
|
|
2,359
|
|
|
|
7,659
|
|
|
|
85,916
|
|
|
|
3,470
|
|
|
|
92,464
|
|
|
|
95,934
|
|
|
|
16,572
|
|
|
06/99
|
|
02/99
|
|
|
5-40 Years
|
Post Tysons
Cornertm
|
|
Apartments
|
|
|
|
|
|
|
20,000
|
|
|
|
65,478
|
|
|
|
1,869
|
|
|
|
20,000
|
|
|
|
67,347
|
|
|
|
87,347
|
|
|
|
7,909
|
|
|
N/A
|
|
06/04
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Luminariatm
|
|
Mixed Use
|
|
|
34,561
|
|
|
|
4,938
|
|
|
|
|
|
|
|
46,302
|
|
|
|
4,938
|
|
|
|
46,302
|
|
|
|
51,240
|
|
|
|
11,231
|
|
|
03/01
|
|
03/01
|
|
|
5-40 Years
|
Post
Toscanatm
|
|
Mixed Use
|
|
|
|
|
|
|
15,976
|
|
|
|
|
|
|
|
76,881
|
|
|
|
17,156
|
|
|
|
75,701
|
|
|
|
92,857
|
|
|
|
9,414
|
|
|
01/02
|
|
01/02
|
|
|
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, 2007
|
(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
|
|
|
$
|
2,470
|
|
|
$
|
6,400
|
|
|
$
|
33,320
|
|
|
$
|
39,720
|
|
|
$
|
3,270
|
|
|
11/04
|
|
05/05
|
|
|
5-40 Years
|
Post Gateway
Placetm
|
|
Mixed Use
|
|
$
|
|
|
|
|
2,424
|
|
|
|
|
|
|
|
61,338
|
|
|
|
3,481
|
|
|
|
60,281
|
|
|
|
63,762
|
|
|
|
14,154
|
|
|
11/00
|
|
08/99
|
|
|
5-40 Years
|
Post Park at Phillips
Place®
|
|
Mixed Use
|
|
|
|
|
|
|
4,305
|
|
|
|
|
|
|
|
38,317
|
|
|
|
4,307
|
|
|
|
38,315
|
|
|
|
42,622
|
|
|
|
13,608
|
|
|
01/96
|
|
11/95
|
|
|
5-40 Years
|
Post Uptown
Placetm
|
|
Mixed Use
|
|
|
|
|
|
|
2,336
|
|
|
|
|
|
|
|
29,019
|
|
|
|
2,363
|
|
|
|
28,992
|
|
|
|
31,355
|
|
|
|
7,484
|
|
|
09/98
|
|
09/98
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous Investments(6)
|
|
|
|
|
|
|
|
|
13,212
|
|
|
|
5,496
|
|
|
|
291,647
|
|
|
|
154,769
|
|
|
|
155,586
|
|
|
|
310,355
|
|
|
|
20,723
|
|
|
|
|
|
|
|
5-40 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
266,791
|
|
|
$
|
258,896
|
|
|
$
|
492,689
|
|
|
$
|
1,858,833
|
|
|
$
|
431,297
|
|
|
$
|
2,179,121
|
(4)
|
|
$
|
2,610,418
|
(4)
|
|
$
|
562,226
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The aggregate cost for Federal
Income Tax purposes to the Company was approximately $2,226,130
at December 31, 2007, 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 $38,844 and $24,576,
respectively, at December 31, 2007. Assets held for sale
include one apartment community with gross assets and gross
accumulated depreciation of $21,034 and $4,031, respectively, at
December 31, 2007.
|
|
(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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
Real estate investments
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
2,532,117
|
|
|
$
|
2,373,406
|
|
|
$
|
2,407,425
|
|
Improvements
|
|
|
241,215
|
|
|
|
316,296
|
|
|
|
129,101
|
|
Disposition of property(a)
|
|
|
(162,914
|
)
|
|
|
(157,585
|
)
|
|
|
(163,120
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
2,610,418
|
|
|
$
|
2,532,117
|
|
|
$
|
2,373,406
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of year
|
|
$
|
547,477
|
|
|
$
|
516,954
|
|
|
$
|
498,367
|
|
Depreciation(b)
|
|
|
65,646
|
|
|
|
67,311
|
|
|
|
75,185
|
|
Accumulated depreciation on disposed property(a)
|
|
|
(50,897
|
)
|
|
|
(36,788
|
)
|
|
|
(56,598
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of year(c)
|
|
$
|
562,226
|
|
|
$
|
547,477
|
|
|
$
|
516,954
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Represents reductions for assets
classified as held for sale and converted into for-sale
condominiums as well as assets contributes to an unconsolidated
entity in 2007.
|
(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 $4,031, $4,035 and $0 at
December 31, 2007, 2006 and 2005, respectively.
|
124
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 Bylaws of the
Company
|
|
3
|
.8(s)
|
|
|
|
Amendment No. 2 to the Amended and Restated Bylaws of the
Company
|
|
3
|
.9(q)
|
|
|
|
Amendment No. 3 to the Amended and Restated Bylaws 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*
|
|
|
|
Amended and Restated Employee Stock Plan
|
|
10
|
.9(j)*
|
|
|
|
2003 Incentive Stock Plan
|
|
10
|
.10(b)
|
|
|
|
Form of Indemnification Agreement for officers and directors
|
|
10
|
.11(k)*
|
|
|
|
Dividend Reinvestment Stock Purchase Plan
|
|
10
|
.12*
|
|
|
|
Multi-Family Note, dated as of January 25, 2008 by and
between Post Addison Circle, as the borrower, and Deutsche Bank
Berkshire Mortgage, Inc., d/b/a DB Berkshire Mortgage, Inc., a
Delaware corporation, as the lender.
|
|
10
|
.13(m)*
|
|
|
|
Deferred Compensation Plan for Directors and Eligible Employees
(as amended and restated effective as of January 1, 2005)
|
|
10
|
.14*
|
|
|
|
Form of Change in Control Agreement (2.0X)
|
|
10
|
.15*
|
|
|
|
Form of Change in Control Agreement (1.5X)
|
|
10
|
.16*
|
|
|
|
Form of Change in Control Agreement (1.0X)
|
|
10
|
.17(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with David P. Stockert
|
|
10
|
.18(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Christopher J. Papa
|
|
10
|
.19(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Thomas D. Senkbeil
|
|
10
|
.20(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Thomas L. Wilkes
|
|
10
|
.21(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Sherry W. Cohen
|
|
10
|
.22(n)*
|
|
|
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Key Employees
|
|
10
|
.23(n)*
|
|
|
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Directors and
Chairman
|
|
10
|
.24(l)*
|
|
|
|
Form of 2003 Incentive Stock Plan Restricted Stock Grant
Certificate for Key Employees
|
|
10
|
.25(l)*
|
|
|
|
Form of 2003 Incentive Stock Plan Restricted Stock Grant
Certificate for Directors and Chairman
|
|
10
|
.26(o)
|
|
|
|
Amended and Restated Credit Agreement dated as of April 28,
2006 by and among 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
|
.27(r)
|
|
|
|
First Amendment, dated as of November 2, 2007, to Amended
and Restated Credit Agreement by and among Post Apartment Homes,
L.P., each of the Lenders party thereto and Wachovia Bank,
National Association.
|
|
11
|
.1(p)
|
|
|
|
Statement Regarding Computation of Per Share Earnings
|
125
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
|
|
Description
|
|
|
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. |
(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 Current Report on
Form 8-K
of the Registrants filed February 15, 2008. |
(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, 2006
and incorporated herein by reference. |
(m) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed August 15, 2005 and incorporated
herein by reference. |
(n) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed January 24, 2006 and incorporated
herein by reference. |
(o) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed May 2, 2006 and incorporated
herein by reference. |
(p) |
|
The information required by this exhibit is included in
note 6 to the consolidated financial statement and
incorporated herein by reference. |
(q) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed on December 20, 2007 and
incorporated herein by reference. |
(r) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed on November 2, 2007 and
incorporated herein by reference. |
(s) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed on February 20, 2007 and
incorporated herein by reference. |
126
Post Properties, Inc.
Post Apartment Homes, L.P.
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)
February 28, 2008
|
|
|
|
By:
|
/s/ David
P. Stockert
|
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:
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Robert
C. Goddard, III
/s/
Robert C. Goddard, III
|
|
Chairman of the Board and Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ David
P. Stockert
/s/
David P. Stockert
|
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Christopher
J. Papa
/s/
Christopher J. Papa
|
|
Executive Vice President and Chief Financial Officer (Principal
Financial Officer)
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Arthur
J. Quirk
/s/
Arthur J. Quirk
|
|
Senior Vice President and Chief Accounting Officer (Principal
Financial Officer)
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Herschel
M. Bloom
/s/
Herschel M. Bloom
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Douglas
Crocker II
/s/
Douglas Crocker II
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Walter
M. Deriso, Jr.
/s/
Walter M. Deriso, Jr.
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Russell
R. French
/s/
Russell R. French
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Charles
E. Rice
/s/
Charles E. Rice
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Stella
F. Thayer
/s/
Stella F. Thayer
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Ronald
de Waal
/s/
Ronald de Waal
|
|
Director
|
|
February 28, 2008
|
127
Post Properties, Inc.
Post Apartment Homes, L.P.
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.
Post G.P. Holdings, Inc., as General Partner
February 28, 2008
|
|
|
|
By:
|
/s/ David
P. Stockert
|
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:
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
/s/ Robert
C. Goddard, III
/s/
Robert C. Goddard, III
|
|
Chairman of the Board and Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ David
P. Stockert
/s/
David P. Stockert
|
|
President, Chief Executive Officer and Director
(Principal Executive Officer)
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Christopher
J. Papa
/s/
Christopher J. Papa
|
|
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Arthur
J. Quirk
/s/
Arthur J. Quirk
|
|
Senior Vice President and Chief Accounting Officer
(Principal Accounting Officer)
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Herschel
M. Bloom
/s/
Herschel M. Bloom
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Douglas
Crocker II
/s/
Douglas Crocker II
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Walter
M. Deriso, Jr.
/s/
Walter M. Deriso, Jr.
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Russell
R. French
/s/
Russell R. French
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Charles
E. Rice
/s/
Charles E. Rice
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Stella
F. Thayer
/s/
Stella F. Thayer
|
|
Director
|
|
February 28, 2008
|
|
|
|
|
|
/s/ Ronald
de Waal
/s/
Ronald de Waal
|
|
Director
|
|
February 28, 2008
|
128
Post Properties, Inc.
Post Apartment Homes, L.P.
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 Bylaws of the Company
|
|
3
|
.8(s)
|
|
|
|
Amendment No. 2 to the Amended and Restated Bylaws of the Company
|
|
3
|
.9(q)
|
|
|
|
Amendment No. 3 to the Amended and Restated Bylaws 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*
|
|
|
|
Amended and Restated Employee Stock Plan
|
|
10
|
.9(j)*
|
|
|
|
2003 Incentive Stock Plan
|
|
10
|
.10(b)
|
|
|
|
Form of Indemnification Agreement for officers and directors
|
|
10
|
.11(k)*
|
|
|
|
Dividend Reinvestment Stock Purchase Plan
|
|
10
|
.12*
|
|
|
|
Multi-Family Note, dated as of January 25, 2008 by and between
Post Addison Circle, as the borrower, and Deutsche Bank
Berkshire Mortgage, Inc., d/b/a DB Berkshire Mortgage, Inc., a
Delaware corporation, as the lender.
|
|
10
|
.13(m)*
|
|
|
|
Deferred Compensation Plan for Directors and Eligible Employees
(as amended and restated effective as of January 1, 2005)
|
|
10
|
.14*
|
|
|
|
Form of Change in Control Agreement (2.0X)
|
|
10
|
.15*
|
|
|
|
Form of Change in Control Agreement (1.5X)
|
|
10
|
.16*
|
|
|
|
Form of Change in Control Agreement (1.0X)
|
|
10
|
.17(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with David P. Stockert
|
|
10
|
.18(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Christopher J. Papa
|
|
10
|
.19(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Thomas D. Senkbeil
|
|
10
|
.20(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Thomas L. Wilkes
|
|
10
|
.21(i)*
|
|
|
|
Amended and Restated Employment and Change in Control Agreement
with Sherry W. Cohen
|
|
10
|
.22(n)*
|
|
|
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Key Employees
|
|
10
|
.23(n)*
|
|
|
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Directors and
Chairman
|
|
10
|
.24(l)*
|
|
|
|
Form of 2003 Incentive Stock Plan Restricted Stock Grant
Certificate for Key Employees
|
|
10
|
.25(l)*
|
|
|
|
Form of 2003 Incentive Stock Plan Restricted Stock Grant
Certificate for Directors and Chairman
|
|
10
|
.26(o)
|
|
|
|
Amended and Restated Credit Agreement dated as of April 28, 2006
by and among 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
|
.27(r)
|
|
|
|
First Amendment, dated as of November 2, 2007, to Amended and
Restated Credit Agreement by and among Post Apartment Homes,
L.P., each of the Lenders party thereto and Wachovia Bank,
National Association.
|
|
11
|
.1(p)
|
|
|
|
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.
|
129
Post Properties, Inc.
Post Apartment Homes, L.P.
|
|
|
|
|
|
|
Exhibit
|
|
|
|
|
No.
|
|
|
|
Description
|
|
|
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. |
(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 Current Report on
Form 8-K
of the Registrants filed February 15, 2008. |
(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, 2006
and incorporated herein by reference. |
(m) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed August 15, 2005 and incorporated
herein by reference. |
(n) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed January 24, 2006 and incorporated
herein by reference. |
(o) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed May 2, 2006 and incorporated
herein by reference. |
(p) |
|
The information required by this exhibit is included in
note 6 to the consolidated financial statement and
incorporated herein by reference. |
(q) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed on December 20, 2007 and
incorporated herein by reference. |
(r) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed on November 2, 2007 and
incorporated herein by reference. |
(s) |
|
Filed as an exhibit to the Current Report on
Form 8-K
of the Registrants filed on February 20, 2007 and
incorporated herein by reference. |
130
Post Properties, Inc.
Post Apartment Homes, L.P.