Exhibit 99.2
Second Quarter 2009
Supplemental Financial Data
Table of Contents
| Page | ||
Consolidated Statements of Operations | 3 | |
Calculation of Funds from Operations and Adjusted Funds From Operations | 6 | |
Same Store Results | 7 | |
Consolidated Balance Sheets | 10 | |
Debt Summary | 11 | |
| Summary of Apartment Communities Under Construction and in Lease-Up and Land Held for Future Investment and Sale | 14 | |
Summary of Apartment Communities Under Rehabilitation | 15 | |
Summary of Condominium Projects | 16 | |
Community Acquisition and Disposition Summary | 17 | |
Capitalized Costs Summary | 18 | |
Investments in Unconsolidated Real Estate Entities | 19 | |
Net Asset Value Supplemental Information | 20 | |
Non-GAAP Financial Measures and Other Defined Terms | 22 | |
The projections and estimates given in this document 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. All forward-looking statements are subject to certain risks and uncertainties that could cause actual events to differ materially from those projected. Management believes that these forward-looking statements are reasonable; however, you should not place undue reliance on such statements. These statements are based on current expectations and speak only as of the date of such statements. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of future events, new information or otherwise. The following are some of the factors that could cause the Company’s actual results and its expectations to differ materially from those described in the Company’s forward-looking statements: the success of the Company’s business strategies discussed in its Annual Report on Form 10-K dated December 31, 2008 and in subsequent filings with the SEC; future conditions in the global capital markets, including changes in the availability of credit and liquidity; future local and national economic conditions, including changes in levels of employment, interest rates, the availability of mortgage and other financing and related factors; a downgrade in the credit rating of the Company’s securities; demand for apartments in the Company’s markets and the effect on occupancy and rental rates; the impact of competition on the Company’s business, including competition for tenants and development locations for its apartment communities and competing for-sale housing in the markets where the Company is completing condominium conversions or developing new condominiums; the uncertainties associated with the Company’s current and planned future real estate development, including actual costs exceeding the Company’s budgets or development periods exceeding expectations; uncertainties associated with the timing and amount of asset sales, the market for asset sales and the resulting gains/losses associated with such asset sales; the Company’s ability to enter into new joint ventures and the availability of equity financing from traditional real estate investors to fund development activities; the Company’s ability to obtain construction loan financing to fund development activities; uncertainties associated with the Company’s condominium conversion and for-sale housing business, including the lack of demand for for-sale housing and the Company’s inability to sell for-sale products at attractive pricing levels; uncertainties associated with loss of personnel in connection with the Company’s reduction of corporate and property development and management overhead; conditions affecting ownership of residential real estate and general conditions in the multifamily residential real estate market; uncertainties associated with environmental and other regulatory matters; the impact of ongoing litigation with the Equal Rights Center regarding compliance with the Americans with Disabilities Act and the Fair Housing Act (including any award of compensatory or punitive damages or injunctive relief requiring the Company to retrofit apartments or public use areas or prohibiting the sale of apartment communities or condominium units) as well as the impact of other litigation; the effects of changes in accounting policies and other regulatory matters detailed in the Company’s filings with the Securities and Exchange Commission; the costs of remediating damages to the Company’s communities that have stucco or exterior insulation finishing systems for potential water penetration and other related issues; and the Company’s ability to continue to qualify as a real estate investment trust under the Internal Revenue Code. Other important risk factors regarding the Company are included under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K dated December 31, 2008 and may be discussed in subsequent filings with the SEC. The risk factors discussed in Form 10-K under the caption “Risk Factors” are specifically incorporated by reference into this document.
| 2 |
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTSOF OPERATIONS
(In thousands, except per share or unit data)
(Unaudited)
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
Revenues | ||||||||||||
Rental | $ | 64,808 | $ | 66,208 | $ | 130,192 | $ | 132,364 | ||||
Other property revenues | 4,033 | 4,108 | 7,601 | 7,425 | ||||||||
Other | 277 | 235 | 503 | 474 | ||||||||
Total revenues | 69,118 | 70,551 | 138,296 | 140,263 | ||||||||
Expenses | ||||||||||||
Total property operating and maintenance (exclusive of items shown separately below) | 32,658 | 35,195 | 65,356 | 69,591 | ||||||||
Depreciation | 18,009 | 15,213 | 35,601 | 30,310 | ||||||||
General and administrative (1) | 3,964 | 4,351 | 8,373 | 9,485 | ||||||||
Investment and development (2) | 793 | 1,274 | 1,790 | 2,664 | ||||||||
Other investment costs (2) | 646 | 244 | 1,299 | 499 | ||||||||
Strategic review costs (3) | - | 2,091 | - | 8,161 | ||||||||
Impairment, severance and other costs (4) (11) | 9,658 | 29,300 | 9,658 | 29,300 | ||||||||
Total expenses | 65,728 | 87,668 | 122,077 | 150,010 | ||||||||
Operating income (loss) | 3,390 | (17,117) | 16,219 | (9,747) | ||||||||
Interest income | 23 | 61 | 138 | 271 | ||||||||
Interest expense | (12,241) | (11,004) | (26,419) | (22,035) | ||||||||
Amortization of deferred financing costs | (682) | (859) | (1,616) | (1,710) | ||||||||
Net gains (losses) on condominium sales activities (5) | 232 | (368) | (28) | 1,751 | ||||||||
Equity in income (loss) of unconsolidated real estate entities (6)(11) | (74,656) | 420 | (74,546) | 821 | ||||||||
Other income (expense), net (7) | 50 | 66 | 1,109 | (108) | ||||||||
Net gain (loss) on early extinguishment of indebtedness (8) | (79) | - | 819 | - | ||||||||
Loss from continuing operations | (83,963) | (28,801) | (84,324) | (30,757) | ||||||||
Discontinued operations (9) | ||||||||||||
Income from discontinued property operations | 2,026 | 3,232 | 4,635 | 6,036 | ||||||||
Gains on sales of real estate assets | 24,742 | - | 24,742 | 2,311 | ||||||||
Income from discontinued operations | 26,768 | 3,232 | 29,377 | 8,347 | ||||||||
Net loss | (57,195) | (25,569) | (54,947) | (22,410) | ||||||||
Noncontrolling interests - consolidated real estate entities (11) | 8,150 | 293 | 8,226 | (173) | ||||||||
Noncontrolling interests - Operating Partnership | 250 | 213 | 248 | 206 | ||||||||
Net loss attributable to the Company | (48,795) | (25,063) | (46,473) | (22,377) | ||||||||
Dividends to preferred shareholders | (1,910) | (1,910) | (3,819) | �� | (3,819) | |||||||
Net loss attributable to common shareholders | $ | (50,705) | $ | (26,973) | $ | (50,292) | $ | (26,196) | ||||
Per common share data - Basic(10) | ||||||||||||
Loss from continuing operations (net of preferred dividends) | $ | (1.75) | $ | (0.68) | $ | (1.80) | $ | (0.78) | ||||
Income from discontinued operations | 0.60 | 0.07 | 0.66 | 0.19 | ||||||||
Net loss attributable to common shareholders | $ | (1.14) | $ | (0.61) | $ | (1.13) | $ | (0.59) | ||||
Weighted average common shares outstanding - basic | 44,118 | 44,011 | 44,116 | 43,939 | ||||||||
Per common share data - Diluted(10) | ||||||||||||
Loss from continuing operations (net of preferred dividends) | $ | (1.75) | $ | (0.68) | $ | (1.80) | $ | (0.78) | ||||
Income from discontinued operations | 0.60 | 0.07 | 0.66 | 0.19 | ||||||||
Net loss attributable to common shareholders | $ | (1.14) | $ | (0.61) | $ | (1.13) | $ | (0.59) | ||||
Weighted average common shares outstanding - diluted | 44,118 | 44,011 | 44,116 | 43,939 | ||||||||
| 3 |
POST PROPERTIES, INC.
NOTESTO CONSOLIDATED
STATEMENTSOF OPERATIONS
(In thousands, except per share or unit data)
| (1) | For the three and six months ended June 30, 2009, as compared to 2008, general and administrative costs decreased primarily as a result of reduced personnel and long-term incentive compensation costs and for the six months ended, $353 of additional severance charges in 2008 related to prior year severance arrangements. Beginning in the fourth quarter of 2008, the Company began allocating personnel and other costs, primarily related to accounting, information technology and human resources that support property management and investment operations, from general and administrative expenses to property management and investment and development expenses. Prior period results have been adjusted to reflect the current period presentation. |
| (2) | Investment and development expenses for the three and six months ended June 30, 2009 and 2008 included investment group expenses, development personnel and associated costs not allocable to current development projects. Beginning in the fourth quarter of 2008, the Company reclassified its land carry costs (primarily property taxes and assessments) to a separate line, “Other investment costs.” Previously, these costs were included in the line captioned investment and development expenses. Prior period results have been adjusted to reflect the current period presentation of land carry costs and other support costs discussed in (1) above. |
| (3) | Strategic review costs for the three and six months ended June 30, 2008 included financial, legal and other costs associated with the Company’s formal process to pursue a possible business combination or other sale transaction. In June 2008, the Company concluded the formal process without a business combination or other sale transaction. |
| (4) | Impairment, severance and other costs for the three and six months ended June 30, 2009 consisted of non-cash impairment charges to write off certain condominium land held for future investment. The gross non-cash impairment charge totaling $9,658 includes the amount allocable to the noncontrolling joint venture interest in the consolidated entity holding the land. See (11) below for a reconciliation of the net impairment charge applicable to the Company. Impairment, severance and other costs for the three and six months ended June 30, 2008 consisted of non-cash charges totaling $28,947 associated with the write down of certain land held for investment, predevelopment costs and pursuit costs related to the Company’s investment and development activities no longer expected to be commenced at that time and severance charges totaling $353. |
| (5) | For the three and six months ended June 30, 2009 and 2008, income from continuing operations included net gains from condominium sales activities at newly developed and condominium conversion projects representing portions of existing communities. In addition, condominium gains are net of certain expensed sales and marketing costs associated with condominium communities under development and in pre-sale totaling $107 and $160 for the three months ended and $231 and $407 for the six months ended June 30, 2009 and 2008, respectively. A summary of revenues and costs and expenses of condominium activities included in continuing operations for the three and six months ended June 30, 2009 and 2008 was as follows: |
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
Condominium revenues | $ | 6,176 | $ | 10,051 | $ | 8,222 | $ | 18,348 | ||||
Condominium costs and expenses | (5,944) | (10,419) | (8,250) | (16,597) | ||||||||
Gains (losses) on sales of condominiums | $ | 232 | $ | (368) | $ | (28) | $ | 1,751 | ||||
| (6) | For the three and six months ended June 30, 2009, the Company recognized its share of a non-cash impairment charge recognized at an unconsolidated entity constructing condominium homes. The gross non-cash impairment charge, totaling $74,733, includes the write off of the Company’s costs in excess of its invested capital and includes the amount allocable to the noncontrolling joint venture interest in the consolidated entity holding the equity investment. See (11) below for a reconciliation of the net impairment charge applicable to the Company. |
| (7) | For the three and six months ended June 30, 2009, other income (expense) included non-cash income of approximately $207 and $582, respectively, related to a reduction in estimated costs associated with the hurricane damage sustained in 2008, offset by inspection expenses related to the Company’s exterior remediation project. For the three and six months ended June 30, 2009 and 2008, other expenses also included estimated state franchise and other income taxes. For the |
| 4 |
six months ended June 30, 2009, other income (expense) included non-cash income of $874 related to the mark-to-market of an interest rate swap agreement that became ineffective under generally accepted accounting principles. |
| (8) | Net gain on early extinguishment of indebtedness for the six months ended June 30, 2009 includes a net gain of $3,445 from the early extinguishment of debt related to the Company’s tender offer for its 2010 and 2011 senior unsecured bonds offset by a net loss of $2,626 on the prepayment of the Company’s weekly-remarketed, variable rate taxable mortgage bonds and the associated interest rate swap agreement. |
| (9) | Under SFAS No. 144, the operating results of real estate assets designated as held for sale are included in discontinued operations for all periods presented. Additionally, all subsequent gains or additional losses on the sale of these assets are included in discontinued operations. |
For the three and six months ended June 30, 2009, income from discontinued operations included the operating results of two apartment communities, containing 798 units, held for sale at June 30, 2009 and one apartment community containing 530 units through its sale date in 2009. For the three and six months ended June 30, 2008, income from discontinued operations included the results of operations of the two apartment communities held for sale at June 30, 2009, the apartment community sold in 2009 and four apartment communities sold in 2008 through their sale dates.
The operating revenues and expenses of these communities for the three and six months ended June 30, 2009 and 2008 were as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
Revenues | ||||||||||||
Rental | $ | 3,228 | $ | 7,275 | $ | 7,463 | $ | 14,613 | ||||
Other property revenues | 196 | 447 | 454 | 831 | ||||||||
Total revenues | 3,424 | 7,722 | 7,917 | 15,444 | ||||||||
Expenses | ||||||||||||
Total property operating and maintenance (exclusive of items shown separately below) | 1,087 | 2,567 | 2,559 | 5,292 | ||||||||
Depreciation | - | 871 | - | 1,962 | ||||||||
Interest | 311 | 1,052 | 723 | 2,154 | ||||||||
Total expenses | 1,398 | 4,490 | 3,282 | 9,408 | ||||||||
Income from discontinued property operations | $ | 2,026 | $ | 3,232 | $ | 4,635 | $ | 6,036 | ||||
For the three and six months ended June 30, 2009, the Company recognized net gains in discontinued operations of $24,742 from the sale of one apartment community, containing 530 units. This sale generated aggregate net proceeds of approximately $43,643 for the three and six months ended June 30, 2009. For the six months ended June 30, 2008, the Company recognized net gains in discontinued operations of $2,311 from the sale of one apartment community, containing 143 units. This sale generated aggregate net proceeds of approximately $19,433 for the six months ended June 30, 2008.
| (10) | Post Properties, Inc. is structured as an UPREIT, or Umbrella Partnership Real Estate Investment Trust. Post GP Holdings, Inc., a wholly-owned subsidiary of the Company, is the sole general partner and, together with Post LP Holdings, Inc., also a wholly-owned subsidiary of the Company, owns the controlling interest in Post Apartment Homes, L.P., the Operating Partnership through which the Company conducts its operations. As of June 30, 2009, there were 44,572 units of the Operating Partnership outstanding, of which 44,353, or 99.5%, were owned by the Company. |
| (11) | A summary of non-cash impairment charges recognized for the three and six months ended June 30, 2009 related to the Company’s investment in its 3630 Peachtree condominium project and adjacent land is as follows: |
Condominium land held for future investment (see (4) above) | $ | 9,658 | |||
Equity in loss of unconsolidated real estate entity (see (6) above) | 74,733 | ||||
Noncontrolling joint venture interest share of charges | (8,074) | ||||
| $ | 76,317 | ||||
| 5 |
POST PROPERTIES, INC.
CALCULATIONOF FUNDSFROM OPERATIONSAND ADJUSTED FUNDS FROM OPERATIONS AVAILABLE
TO COMMON SHAREHOLDERSAND UNITHOLDERS
(In thousands, except per share or unit data)
(Unaudited)
A reconciliation of net income (loss) available to common shareholders to funds from operations available to common shareholders and unitholders and adjusted funds from operations available to common shareholders and unitholders is provided below.
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||
Net loss attributable to common shareholders | $ | (50,705) | $ | (26,973) | $ | (50,292) | $ | (26,196) | |||||||
Noncontrolling interests - Operating Partnership | (250) | (213) | (248) | (206) | |||||||||||
Depreciation on consolidated real estate assets, net (1) | 17,501 | 15,582 | 34,578 | 31,284 | |||||||||||
Depreciation on real estate assets held in unconsolidated entities | 350 | 345 | 700 | 693 | |||||||||||
Gains on sales of apartment communities | (24,742) | - | (24,742) | (2,311) | |||||||||||
Losses (gains) on sales of condominiums | (232) | 368 | 28 | (1,751) | |||||||||||
Incremental losses on condominium sales (2) | (959) | (1,748) | (2,072) | (244) | |||||||||||
Funds (deficit) from operations available to common shareholders and unitholders (A) | $ | (59,037) | $ | (12,639) | $ | (42,048) | $ | 1,269 | |||||||
Funds (deficit) from operations available to common shareholders and unitholders (A) | $ | (59,037) | $ | (12,639) | $ | (42,048) | $ | 1,269 | |||||||
Annually recurring capital expenditures (3) | (3,673) | (3,382) | (6,307) | (5,640) | |||||||||||
Periodically recurring capital expenditures (3) | (1,215) | (1,738) | (5,009) | (3,331) | |||||||||||
Non-cash impairment charges | 76,317 | 28,947 | 76,317 | 28,947 | |||||||||||
Non-cash income related to mark-to-market of interest rate swap agreement | - | - | (874) | - | |||||||||||
Non-cash straight-line adjustment for ground lease expenses | 285 | 294 | 574 | 589 | |||||||||||
Net loss (gain) on early extinguishment of indebtedness | 78 | - | (819) | - | |||||||||||
Strategic review costs | - | 2,091 | - | 8,161 | |||||||||||
Adjusted funds from operations available to common shareholders and unitholders (4) (B) | $ | 12,755 | $ | 13,573 | $ | 21,834 | $ | 29,995 | |||||||
Per Common Share Data - Basic | |||||||||||||||
Funds (deficit) from operations per share or unit, as defined (A÷C) | $ | (1.32 | ) | $ | (0.28 | ) | $ | (0.94 | ) | $ | 0.03 | ||||
Adjusted funds from operations per share or unit (4)(B÷C) | $ | 0.29 | $ | 0.31 | $ | 0.49 | $ | 0.68 | |||||||
Dividends declared | $ | 0.20 | $ | 0.45 | $ | 0.40 | $ | 0.90 | |||||||
Weighted average shares outstanding | 44,351 | 44,111 | 44,325 | 44,039 | |||||||||||
Weighted average shares and units outstanding(C) | 44,570 | 44,405 | 44,544 | 44,387 | |||||||||||
Per Common Share Data - Diluted | |||||||||||||||
Funds (deficit) from operations per share or unit, as defined (A÷D) | $ | (1.32 | ) | $ | (0.28 | ) | $ | (0.94 | ) | $ | 0.03 | ||||
Adjusted funds from operations per share or unit (4)(B÷D) | $ | 0.29 | $ | 0.31 | $ | 0.49 | $ | 0.67 | |||||||
Dividends declared | $ | 0.20 | $ | 0.45 | $ | 0.40 | $ | 0.90 | |||||||
Weighted average shares outstanding (5) | 44,351 | 44,111 | 44,325 | 44,361 | |||||||||||
Weighted average shares and units outstanding (5)(D) | 44,570 | 44,405 | 44,544 | 44,709 | |||||||||||
| (1) | Depreciation on consolidated real estate assets is net of the minority interest portion of depreciation in consolidated entities. |
| (2) | See the table entitled “Summary of Condominium Projects” and related footnotes on page 16, specifically footnote 5, for discussion of the Company’s policy for recognizing incremental gains on condominium sales in FFO. |
| (3) | For the three and six months ended June 30, 2009, excludes approximately $8,157 and $13,528, respectively, of periodically recurring capital expenditures related to the Company’s exterior remediation project. For the three months ended June 30, 2009 and 2008, includes approximately $140 and $8, respectively, of periodically recurring capital expenditures associated with the Company’s communities under rehabilitation. For the six months ended June 30, 2009 and 2008, includes approximately $2,058 and $29, respectively, of periodically recurring capital expenditures associated with the Company’s communities under rehabilitation. |
| (4) | Since the Company does not add back the depreciation of non-real estate assets in its calculation of funds from operations, non-real estate related capital expenditures of $67 and $190 for the three months and $126 and $421 for the six months ended June 30, 2009 and 2008, respectively, are excluded from the calculation of adjusted funds from operations available to common shareholders and unitholders. |
| (5) | Diluted weighted average shares and units include the impact of dilutive securities totaling 322 for the six months ended June 30, 2008. These dilutive securities were antidilutive to the computation of income (loss) per share, as the Company reported a loss from continuing operations for this period under generally accepted accounting principles. Additionally, basic and diluted weighted average shares and units included the impact of non-vested shares and units totaling 233 and 100 for the three months ended and 209 and 100 for the six months ended June 30, 2009 and 2008, respectively, for the computation of funds (deficit) from operations per share. Such non-vested shares and units are considered in the income (loss) per share computations under generally accepted accounting principles using the “two-class method.” |
| 6 |
POST PROPERTIES, INC.
SAME STORE RESULTS
(In thousands, except per share or unit data)
(Unaudited)
Same Store Results
The Company defines fully stabilized or same store communities as those which have reached stabilization prior to the beginning of the previous calendar year, adjusted by communities sold and classified as held for sale and communities under rehabilitation. Same store net operating income is a supplemental non-GAAP financial measure. See Table 1 on page 24 for a reconciliation of same store net operating income to GAAP net income. The operating performance and capital expenditures of the 41 communities containing 14,921 apartment units which were fully stabilized as of January 1, 2008, is summarized as follows:
| Three months ended June 30, | Six months ended June 30, | |||||||||||||||
| 2009 | 2008 | % Change | 2009 | 2008 | % Change | |||||||||||
Rental and other revenues | $ | 57,292 | $ | 59,297 | (3.4)% | $ | 114,985 | $ | 117,907 | (2.5)% | ||||||
Real estate taxes and insurance expenses | 8,962 | 9,372 | (4.4)% | 18,184 | 18,855 | (3.6)% | ||||||||||
Other property operating and maintenance expenses | 13,740 | 15,406 | (10.8)% | 27,587 | 29,913 | (7.8)% | ||||||||||
Total property operating and maintenance expenses | 22,702 | 24,778 | (8.4)% | 45,771 | 48,768 | (6.1)% | ||||||||||
Same store net operating income | $ | 34,590 | $ | 34,519 | 0.2% | $ | 69,214 | $ | 69,139 | 0.1% | ||||||
Capital expenditures (2) | ||||||||||||||||
Annually recurring: | ||||||||||||||||
Carpet | $ | 679 | $ | 682 | (0.4)% | $ | 1,251 | $ | 1,242 | 0.7% | ||||||
Other | 2,500 | 1,861 | 34.3% | 4,125 | 2,948 | 39.9% | ||||||||||
Total annually recurring (3) | 3,179 | 2,543 | 25.0% | 5,376 | 4,190 | 28.3% | ||||||||||
Periodically recurring (3) | 8,759 | 1,579 | 454.7% | 15,176 | 2,869 | 429.0% | ||||||||||
Total capital expenditures(A) | $ | 11,938 | $ | 4,122 | 189.6% | $ | 20,552 | $ | 7,059 | 191.1% | ||||||
Total capital expenditures per unit | $ | 800 | $ | 276 | 189.9% | $ | 1,377 | $ | 473 | 191.1% | ||||||
Average monthly rental rate per unit (4) | $ | 1,287 | $ | 1,328 | (3.1)% | $ | 1,298 | $ | 1,326 | (2.1)% | ||||||
| (1) | Beginning in the fourth quarter of 2008, other property operating and maintenance expenses include certain expenses reclassified from corporate property management expenses for all periods presented. The reclassified operating expenses relate primarily to relief and preventative maintenance engineers, collections personnel, certain property related advertising and property level performance based awards. |
| (2) | See Table 3 on page 27 for a reconciliation of these segment components of property capital expenditures to total annually recurring capital expenditures and total periodically recurring capital expenditures as presented on the consolidated cash flow statements prepared under GAAP. |
| (3) | Periodically recurring expenditures included $8,157 and $13,528 for the three and six months ended June 30, 2009, respectively, related to the Company’s exterior remediation project. Periodically recurring expenditures included $254 and $493 for the three months and $579 and $964 for the six months ended June 30, 2009 and 2008, respectively, related to the Company’s “resident design center” program. |
| (4) | Average monthly rental rate is defined as the average of the gross actual rates for occupied units and the anticipated rental rates for unoccupied units divided by total units. See Table 2 on page 25 for further information. |
| 7 |
Same Store Operating Results by Market –
Comparison of Second Quarter of 2009 to Second Quarter of 2008
(Increase (decrease) from same period in prior year)
| Three months ended June 30, 2009 | Six months ended June 30, 2009 | |||||||||||||||||||||
Market | Revenues | (1) | Expenses | (1) | NOI | (1) | Average Economic Occupancy | Revenues | (1) | Expenses | (1) | NOI | (1) | Average Economic Occupancy | ||||||||
Atlanta | (3.7)% | (4.7)% | (2.9)% | (1.0)% | (2.7)% | (1.5)% | (3.6)% | (1.3)% | ||||||||||||||
Dallas | (5.5)% | (15.4)% | 3.3% | (0.9)% | (3.2)% | (14.0)% | 6.4% | (0.6)% | ||||||||||||||
Washington, DC | (1.3)% | (1.9)% | (1.0)% | (0.1)% | (0.9)% | (2.1)% | (0.3)% | 0.2% | ||||||||||||||
Tampa | (1.9)% | (11.9)% | 6.5% | 2.5% | (2.0)% | (9.5)% | 3.9% | 2.4% | ||||||||||||||
Charlotte | (9.5)% | (14.7)% | (6.4)% | (3.1)% | (7.0)% | (9.0)% | (5.8)% | (2.4)% | ||||||||||||||
New York | (2.4)% | 1.6% | (4.3)% | (0.8)% | (2.5)% | 1.3% | (4.5)% | (2.2)% | ||||||||||||||
Houston | 0.1% | (18.7)% | 19.1% | (0.7)% | 0.6% | (6.8)% | 7.2% | (1.0)% | ||||||||||||||
Austin | (2.8)% | (6.2)% | 0.2% | (2.5)% | (2.5)% | (6.9)% | 1.6% | (2.8)% | ||||||||||||||
Orlando | 2.2% | 9.9% | (3.8)% | 6.2% | (0.3)% | (0.7)% | 0.0% | 5.9% | ||||||||||||||
Total | (3.4)% | (8.4)% | 0.2% | (0.3)% | (2.5)% | (6.1)% | 0.1% | (0.3)% | ||||||||||||||
| (1) | See Table 2 on page 25 for a reconciliation of these components of same store net operating income and Table 1 on page 24 for a reconciliation of same store net operating income to GAAP net income. |
Same Store Occupancy by Market
Market | Apartment Units | % of NOI Three months ended June 30, 2009 | Average Economic Occupancy (1) | Average Economic Occupancy (1) | Physical Occupancy at June 30, 2009 (2) | Average Rental Rate Per Unit Three Months Ended June 30, 2009 (3) | |||||||||||
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||
| 2009 | 2008 | 2009 | 2008 | ||||||||||||||
Atlanta | 4,242 | 24.5% | 93.4% | 94.4% | 93.4% | 94.7% | 92.9% | $ | 1,114 | ||||||||
Dallas | 3,429 | 18.3% | 93.0% | 93.9% | 93.7% | 94.3% | 93.5% | 1,078 | |||||||||
Washington, DC | 1,905 | 19.3% | 94.5% | 94.6% | 94.4% | 94.2% | 94.7% | 1,787 | |||||||||
Tampa | 1,877 | 11.9% | 94.4% | 91.9% | 95.1% | 92.7% | 96.8% | 1,214 | |||||||||
Charlotte | 1,388 | 8.3% | 91.2% | 94.3% | 91.1% | 93.5% | 94.4% | 1,108 | |||||||||
New York | 337 | 7.0% | 93.4% | 94.2% | 92.8% | 95.0% | 95.3% | 3,843 | |||||||||
Houston | 837 | 5.2% | 91.9% | 92.6% | 92.0% | 93.0% | 91.8% | 1,263 | |||||||||
Austin | 308 | 1.9% | 91.5% | 94.0% | 92.1% | 94.9% | 90.3% | 1,325 | |||||||||
Orlando | 598 | 3.6% | 95.2% | 89.0% | 94.9% | 89.0% | 95.5% | 1,339 | |||||||||
Total | 14,921 | 100.0% | 93.4% | 93.7% | 93.6% | 93.9% | 93.9% | $ | 1,287 | ||||||||
| (1) | 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 92.3% and 92.4% for the three months and 92.2% and 92.6% for the six months ended June 30, 2009 and 2008, respectively. For the three months ended June 30, 2009 and 2008, net concessions were $456 and $558, respectively, and employee discounts were $197 and $207, respectively. For the six months ended June 30, 2009 and 2008, net concessions were $1,166 and $1,081, respectively, and employee discounts were $393 and $413, respectively. |
| (2) | Physical occupancy is defined as the number of units occupied divided by total apartment units, expressed as a percentage. |
| (3) | Average monthly rental rate is defined as the average of the gross actual rates for occupied units and the anticipated rental rates for unoccupied units divided by total units. See Table 2 on page 25 for further information. |
| 8 |
Same Store Sequential Comparison
| Three months ended | ||||||||||
| June 30, 2009 | March 31, 2009 | % Change | ||||||||
Rental and other revenues |
$ |
57,292 | $ | 57,694 | (0.7)% | |||||
Real estate taxes and insurance expenses | 8,962 | 9,222 | (2.8)% | |||||||
Other property operating and maintenance expenses | 13,740 | 13,848 | (0.8)% | |||||||
Total property operating and maintenance expenses | 22,702 | 23,070 | (1.6)% | |||||||
Same store net operating income (1) | $ | 34,590 | $ | 34,624 | (0.1)% | |||||
Average economic occupancy | 93.4% | 93.7% | (0.3)% | |||||||
Average monthly rental rate per unit | $ | 1,287 | $ | 1,308 | (1.6)% | |||||
(1) See Table 2 on page 25 for a reconciliation of these components of same store net operating income and Table 1 on page 24 for a reconciliation of same store net operating income to GAAP net income. | ||||||||||
Sequential Same Store Operating Results by Market –
Comparison of Second Quarter of 2009 to First Quarter 2009
(Increase (decrease) between periods)
Market | Revenues | (1) | Expenses | (1) | NOI | (1) | Average Economic Occupancy | ||||||
Atlanta | (0.7)% | (1.8)% | 0.1% | 0.0% | |||||||||
Dallas | (1.9)% | 2.1% | (4.6)% | (1.4)% | |||||||||
Washington, DC | 0.9% | (1.7)% | 2.4% | 0.2% | |||||||||
Tampa | (0.9)% | 1.2% | (2.4)% | (1.3)% | |||||||||
Charlotte | (2.9)% | 0.8% | (4.9)% | 0.2% | |||||||||
New York | (1.1)% | (15.1)% | 7.7% | 1.1% | |||||||||
Houston | 0.3% | (13.5)% | 12.8% | (0.2)% | |||||||||
Austin | (1.5)% | (3.7)% | 0.5% | (1.2)% | |||||||||
Orlando | 2.4% | 8.6% | (2.5)% | 0.5% | |||||||||
Total | (0.7)% | (1.6)% | (0.1)% | (0.3)% | |||||||||
(1) See Table 2 on page 25 for a reconciliation of these components of same store net operating income and Table 1 on page 24 for a reconciliation of same store net operating income to GAAP net income. | |||||||||||||
| 9 |
POST PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share or unit data)
| June 30, 2009 | December 31, 2008 | |||||
| (Unaudited) | ||||||
Assets | ||||||
Real estate assets | ||||||
Land | $ | 268,541 | $ | 258,593 | ||
Building and improvements | 1,874,469 | 1,802,496 | ||||
Furniture, fixtures and equipment | 217,297 | 205,221 | ||||
Construction in progress | 123,072 | 138,496 | ||||
Land held for future investment | 82,039 | 81,555 | ||||
| 2,565,418 | 2,486,361 | |||||
Less: accumulated depreciation | (587,116) | (553,814) | ||||
Condominiums, for-sale and under construction | 90,911 | 65,507 | ||||
Assets held for sale, net of accumulated depreciation of $28,441 and | 63,364 | 85,097 | ||||
Total real estate assets | 2,132,577 | 2,083,151 | ||||
Investments in and advances to unconsolidated real estate entities | 8,706 | 39,300 | ||||
Cash and cash equivalents | 3,694 | 75,472 | ||||
Restricted cash | 10,614 | 10,164 | ||||
Deferred charges, net | 9,582 | 10,278 | ||||
Other assets | 32,328 | 34,290 | ||||
Total assets | $ | 2,197,501 | $ | 2,252,655 | ||
Liabilities and shareholders’ equity | ||||||
Indebtedness | $ | 1,086,790 | $ | 1,112,913 | ||
Accounts payable and accrued expenses | 97,949 | 93,175 | ||||
Investments in unconsolidated real estate entities | 54,334 | 15,985 | ||||
Dividend and distribution payable | 8,914 | 8,888 | ||||
Accrued interest payable | 5,137 | 5,493 | ||||
Security deposits and prepaid rents | 15,779 | 15,941 | ||||
Total liabilities | 1,268,903 | 1,252,395 | ||||
Redeemable common units | 4,094 | 4,410 | ||||
Commitments and contingencies | ||||||
Equity | ||||||
Company shareholders’ equity Preferred stock, $.01 par value, 20,000 authorized: 8 1/2% Series A Cumulative Redeemable Shares, liquidation preference | 9 | 9 | ||||
7 5/8% Series B Cumulative Redeemable Shares, liquidation preference | 20 | 20 | ||||
Common stock, $.01 par value, 100,000 authorized: | ||||||
44,353 and 44,222 shares issued and 44,353 and 44,222 shares | 443 | 442 | ||||
Additional paid-in-capital | 888,639 | 886,643 | ||||
Accumulated earnings | 37,269 | 105,300 | ||||
Accumulated other comprehensive income (loss) | - | (1,819) | ||||
| 926,380 | 990,595 | |||||
Less common stock in treasury, at cost, 85 and 80 shares | (3,010) | (2,965) | ||||
Total Company shareholders’ equity | 923,370 | 987,630 | ||||
Noncontrolling interests - consolidated real estate entities | 1,134 | 8,220 | ||||
Total equity | 924,504 | 995,850 | ||||
Total liabilities and equity | $ | 2,197,501 | $ | 2,252,655 | ||
| 10 |
POST PROPERTIES, INC.
DEBT SUMMARY
(Dollars in thousands, except per share or unit data)
(Unaudited)
Summary of Outstanding Debt at June 30, 2009 - Consolidated
Type of Indebtedness | Balance | Percentage of Total | Weighted Average Rate (1) June 30, | ||||||
| 2009 | 2008 | ||||||||
Unsecured fixed rate senior notes | $ | 360,142 | 33.1% | 6.4% | 6.4% | ||||
Secured fixed rate notes | 688,582 | 63.3% | 5.8% | 5.3% | |||||
Secured variable rate notes | - | 0.0% | 0.0% | 6.1% | |||||
Unsecured lines of credit | 29,913 | 2.8% | 1.1% | 3.1% | |||||
Secured variable rate construction notes | 8,153 | 0.8% | 1.8% | 0.0% | |||||
| $ | 1,086,790 | 100.0% | 5.8% | 5.6% | |||||
| Balance | Percentage of Total Debt | Weighted Average Maturity of Total Debt (2) (3) | |||||||
Total fixed rate debt | $ | 1,048,724 | 96.5% | 5.0 | |||||
Total variable rate debt | 38,066 | 3.5% | 1.1 | ||||||
Total debt | $ | 1,086,790 | 100.0% | 4.9 | |||||
Debt Maturities – Consolidated and Unconsolidated
| Consolidated | Unconsolidated Entities | ||||||||||||||
Aggregate debt maturities by year | Amount | Weighted Average Rate on Debt Maturities (1) | Amount | Company Share | Weighted Average Rate on Debt Maturities (1) | ||||||||||
Remainder of 2009 | $ | 770 | 5.8% | $ | - | $ | - | 0.0% | |||||||
2010 | 132,032 | (3) | 6.2% | - | - | 0.0% | |||||||||
2011 | 59,637 | 5.3% | 33,679 | (4) | 33,679 | 1.8% | |||||||||
2012 | 104,381 | 5.5% | - | - | 0.0% | ||||||||||
2013 | 206,515 | 6.1% | 79,772 | 27,920 | 5.8% | ||||||||||
Thereafter | 583,455 | 5.8% | 126,724 | 31,681 | 5.7% | ||||||||||
| $ | 1,086,790 | 5.8% | $ | 240,175 | $ | 93,280 | 4.7% | ||||||||
Debt Statistics
| Six months ended June 30, | ||||
| 2009 | 2008 | |||
Interest coverage ratio (5)(6) | 2.4x | 2.4x | ||
Fixed charge coverage ratio (5)(7) | 2.1x | 2.0x | ||
Total debt as a % of undepreciated real estate assets (adjusted for joint venture partner's share of debt) (8) | 41.6% | 40.2% | ||
Total debt and preferred equity as a % of undepreciated real estate assets (adjusted for joint venture partner's share of debt) (8) | 45.0% | 43.6% | ||
| (1) | Weighted average rate includes credit enhancements and other fees, where applicable. The weighted average rates at June 30, 2008 are based on the debt outstanding at that date. |
| (2) | Weighted average maturity of total debt represents number of years to maturity based on the debt maturities schedule above. |
| (3) | Includes outstanding balances on lines of credit of $29,913 maturing in 2010. |
| (4) | Amount represents the outstanding balance of the condominium portion of the total construction loan outstanding on the Company’s mixed-use development. See page 19 for further discussion. |
| (5) | Calculated for the six months ended June 30, 2009 and 2008. |
| (6) | Interest coverage ratio is defined as net income available for debt service divided by interest expense. For purposes of this calculation, net income available for debt service represents income from continuing operations, before preferred or common noncontrolling interest, gains on sales of real estate and investment sales, impairment charges, interest expense, depreciation, amortization and income taxes. Net income available for debt service was also adjusted for the Company’s share of depreciation and interest expense from unconsolidated entities, and interest expense used in the calculation was adjusted to include the Company’s share of interest expense from unconsolidated entities. The calculation of the interest coverage ratio is a non-GAAP financial measure. A reconciliation of net income available for debt service to income from continuing operations and interest expense to consolidated interest expense is included in Table 4 on page 27. |
| (7) | Fixed charge coverage ratio is defined as net income available for debt service divided by interest expense plus dividends to preferred shareholders and distributions to preferred unitholders. For purposes of this calculation, net income available for debt service represents earnings from continuing operations, before preferred or common noncontrolling interest, gains on sales of real estate and investment sales, impairment charges, interest expense, depreciation, amortization and income taxes. Net income available for debt service was also adjusted for the Company’s share of depreciation and interest expense from unconsolidated entities, and interest expense used in the calculation was adjusted to include the Company’s share of interest expense from unconsolidated entities. The calculation of the fixed charge coverage ratio is a non-GAAP financial measure. A reconciliation of net income available for debt service to income from continuing operations and fixed charges to consolidated interest expense plus preferred dividends to shareholders and preferred distributions to unitholders is included in Table 4 on page 27. |
| (8) | A computation of the debt ratios is included in Table 5 on page 28. |
| 11 |
POST PROPERTIES, INC.
DEBT SUMMARY (CONT.)
(Dollars in thousands, except per share or unit data)
(Unaudited)
Financial Debt Covenants - Senior Unsecured Public Notes
Covenant requirement(1) | As of June 30, 2009 | |
Consolidated Debt to Total Assets cannot exceed 60% | 39% | |
Secured Debt to Total Assets cannot exceed 40% | 25% | |
Total Unencumbered Assets to Unsecured Debt must be at least 1.5/1 | 4.8x | |
Consolidated Income Available for Debt Service Charge must be at least 1.5/1 | 2.5x | |
(1) A summary of the public debt covenant calculations and reconciliations of the financial components used in the public debt covenant calculations to the most comparable GAAP financial measures are detailed below. | ||
Ratio of Consolidated Debt to Total Assets
| As of June 30, 2009 | |||
Consolidated debt, per balance sheet (A) | $ | 1,086,790 | |
Total assets, as defined(B) (Table A) | $ | 2,803,476 | |
Computed ratio(A÷B) | 39% | ||
Required ratio (cannot exceed) | 60% | ||
Ratio of Secured Debt to Total Assets
Total secured debt (C) | $ | 696,735 | |
Computed ratio(C÷B) | 25% | ||
Required ratio (cannot exceed) | 40% | ||
Ratio of Total Unencumbered Assets to Unsecured Debt
Consolidated debt, per balance sheet (A) | $ | 1,086,790 | |
Total secured debt (C) | (696,735) | ||
Total unsecured debt(D) | $ | 390,055 | |
Total unencumbered assets, as defined(E) (Table A) | $ | 1,869,473 | |
Computed ratio(E÷D) | 4.8x | ||
Required minimum ratio | 1.5x | ||
Ratio of Consolidated Income Available for Debt Service to Annual
Debt Service Charge (Annualized) (2)
Consolidated Income Available for Debt Service, as defined(F) (Table B) | $ | 145,730 | |
Annual Debt Service Charge, as defined(G) (Table B) | $ | 57,720 | |
Computed ratio(F÷G) | 2.5x | ||
Required minimum ratio | 1.5x | ||
(2) The actual calculation of these ratios requires the use of annual trailing financial data. These computations reflect annualized 2009 results for comparison and presentation purposes. The computations using annual financial data also reflect compliance with the debt covenants. | |||
| 12 |
POST PROPERTIES, INC.
DEBT SUMMARY (CONT.)
(Dollars in thousands, except per share or unit data)
(Unaudited)
Table A
Calculation of Total Assets and Total Unencumbered Assets for
Public Debt Covenant Computations
| As of June 30, 2009 | |||
Total real estate assets | $ | 2,132,577 | |
Add: | |||
Investments in and advances to unconsolidated real estate entities | 8,706 | ||
Accumulated depreciation | 587,116 | ||
Accumulated depreciation on assets held for sale | 28,441 | ||
Other tangible assets | 46,636 | ||
Total assets for public debt covenant computations | 2,803,476 | ||
Less: | |||
Encumbered real estate assets | (934,003) | ||
Total unencumbered assets for public debt covenant computations | $ | 1,869,473 | |
Table B
Calculation of Consolidated Income Available for Debt Service and
Annual Debt Service Charge (Annualized) (1)
Consolidated income available for debt service | Six months ended June 30, 2009 | ||
Net income | $ | (54,947) | |
Add: | |||
Non-cash impairment charge - unconsolidated entity | 74,733 | ||
Non-cash impairment charge - consolidated entities | 9,658 | ||
Depreciation | 35,601 | ||
Depreciation (company share) of assets held in unconsolidated entities | 700 | ||
Amortization of deferred financing costs | 1,616 | ||
Interest expense | 26,419 | ||
Interest expense (company share) of assets held in unconsolidated entities | 1,718 | ||
Interest expense of discontinued operations | 723 | ||
Income tax expense | 464 | ||
Losses on sales of real estate assets, net | 28 | ||
Other non-cash expenses | 2,587 | ||
Less: | |||
Net gain on early extinguishment of indebtedness | (819) | ||
Gains on sales of real estate assets - discontinued operations | (24,742) | ||
Other non-cash income | (874) | ||
Consolidated income available for debt service | $ | 72,865 | |
Consolidated income available for debt service (annualized) | $ | 145,730 | |
Annual debt service charge | |||
Consolidated interest expense | $ | 26,419 | |
Interest expense (company share) of assets held in unconsolidated entities | 1,718 | ||
Interest expense of discontinued operations | 723 | ||
Debt service charge | $ | 28,860 | |
Debt service charge (annualized) | $ | 57,720 | |
(1) The actual calculation of these ratios requires the use of annual trailing financial data. These computations reflect annualized 2009 results for comparison and presentation purposes. The computations using annual financial data also reflect compliance with the debt covenants. | |||
| 13 |
POST PROPERTIES, INC.
SUMMARYOF APARTMENT COMMUNITIES UNDER CONSTRUCTIONANDINLEASE-UP
AND LAND HELDFOR FUTUREINVESTMENTAND SALE
($ in millions)
Apartment Communities Under Construction and in Lease-up
Community | Location | Number of Units | Retail Sq. Ft. | Estimated Cost | Costs Incurred as of 06/30/09 | Quarter of Const. Start | Quarter of First Units Available | Estimated Quarter of Stabilized Occupancy (1) | Units Leased (2) | |||||||||||
Post Eastside™ | Dallas, TX | 435 | 37,900 | $ | 57.9 | $ | 55.5 | 4Q 2006 | 2Q 2008 | 2Q 2010 | 304 | |||||||||
Post Sierra at Frisco Bridges™ | Dallas, TX | 269 | 29,000 | 42.1 | 37.1 | 3Q 2007 | 2Q 2009 | 3Q 2010 | 59 | |||||||||||
Post Park® | Wash. DC | 396 | 1,700 | 84.7 | 71.0 | 4Q 2007 | 2Q 2009 | 4Q 2010 | 65 | |||||||||||
Post West Austin™ | Austin, TX | 329 | - | 53.2 | 48.9 | 4Q 2007 | 2Q 2009 | 3Q 2010 | 59 | |||||||||||
Total | 1,429 | 68,600 | $ | 237.9 | $ | 212.5 | 487 | |||||||||||||
| (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 July 28, 2009. |
Land Held for Future Investment and Sale
The following are land positions (including pre-development costs incurred to date) that the Company currently holds. There can be no assurance that projects held for future investment will be developed in the future or at all or that land held for sale will be sold.
Land Held for Future Investment:
Project | Metro Area | Carrying Value At June 30, 2009 (in thousands) | Estimated Usable Acreage | |||||
Alexander | Atlanta, GA | $ 6,652 | 2.5 | |||||
Allen Plaza | Atlanta, GA | 19,016 | 5.6 | |||||
South Lamar | Austin, TX | 4,942 | 4.0 | |||||
Frisco Bridges II | Dallas, TX | 5,480 | 5.4 | |||||
Midtown Square III | Houston, TX | 3,502 | 1.6 | |||||
Richmond | Houston, TX | 4,420 | 2.1 | |||||
Baldwin Park | Orlando, FL | 9,841 | 13.5 | |||||
Wade | Raleigh, NC | 10,949 | 31.4 | |||||
Soho Square | Tampa, FL | 5,168 | 4.1 | |||||
Carlyle Square II | Washington, D.C. | 12,069 | 2.4 | |||||
Total Land Held for Future Investment(1) | $ 82,039 | 72.6 | ||||||
Land Held for Sale: | ||||||||
Project | Metro Area | Carrying Value At June 30, 2009 (in thousands) | Estimated Usable Acreage | |||||
Millennium | Atlanta, GA | $ 2,774 | 1.0 | |||||
Spring Hill | Atlanta, GA | 2,023 | 9.1 | |||||
Wade | Raleigh, NC | 8,626 | 49.1 | |||||
Citrus Park | Tampa, FL | 3,450 | 17.7 | |||||
Total Land Held for Sale(2) | $ 16,873 | 76.9 | ||||||
(1) The carrying value of land held for future investment at June 30, 2009 has been written-down to reflect previously recorded impairments totaling $72,171 in 2008. | ||||||||
(2) The carrying value of land held for sale at June 30, 2009 has been written-down to reflect previously recorded impairments of $15,660 in 2008. | ||||||||
14 |
POST PROPERTIES, INC.
SUMMARY OF APARTMENT COMMUNITIES UNDER REHABILITATION
(Dollars in thousands, except per square foot)
| Property NOI For the Fiscal | Property NOI For the | Undepreciated | Number of Units As of June 30, 2009 | |||||||||||||||||||
Project | Location | Year Completed | Total Units | Average Sq. Ft. Per Unit (1) | Year Preceding The Start of Rehabilitation | Three Months Ended June 30, 2009 | Book Value Prior to Rehabilitation | Completed | Out of Service | Units Leased | % Units Leased | |||||||||||
Post Heights™ | Dallas, TX | 1998-1999 | 368 | 845 | $ 2,598 | $ 275 | $ 42,195 | 368 | - | 286 | 78% | |||||||||||
Post Peachtree Hills® | Atlanta, GA | 1992-1994 | 300 | 978 | 2,436 | 128 | 19,539 | 300 | - | 257 | 86% | |||||||||||
| 668 | $ 61,734 | 668 | - | 543 | ||||||||||||||||||
| Rehabilitation Cost Incurred in The Three Months Ended June 30, 2009 | Rehabilitation Capital Cost Incurred As of June 30, 2009 | Projected | ||||||||||||||||||||||
Project | Revenue- Generating Capital Cost | Non-Revenue- Generating Capital Cost | Total Capital Cost | Revenue- Generating Capital Cost | Non-Revenue- Generating Capital Cost | Total Capital Cost | Quarter of Rehabilitation Start | Quarter of Rehabilitation Completion | Quarter of Re-Stabilized Occupancy | |||||||||||||||
Post Heights™ | $ | 655 | $ | - | $ | 655 | $ | 7,975 | $ | 1,135 | $ | 9,110 | 1Q 2008 | 2Q 2009 | 4Q 2009 | |||||||||
Post Peachtree Hills® | 1,270 | 140 | 1,410 | 8,952 | 1,033 | 9,985 | 1Q 2008 | 2Q 2009 | 4Q 2009 | |||||||||||||||
| $ | 1,925 | $ | 140 | $ | 2,065 | $ | 16,927 | $ | 2,168 | $ | 19,095 | |||||||||||||
| (1) | Average square footage information is based on approximate amounts and individual unit sizes may vary. |
| 15 |
POST PROPERTIES, INC.
SUMMARY OF CONDOMINIUM PROJECTS
(Dollars in thousands)
| Units (2) | ||||||||||||||||||||||||
| Project | Location | Year Completed | Sale Start Date | Quarter of First Available Units | Average Sq. Ft. (1) | Book Value as of 6/30/09 | Remaining Construction Costs as of 6/30/09 | Total | Closed | Under Contract | Available for Sale | |||||||||||||
Completed Condominium Conversion Projects | ||||||||||||||||||||||||
Harbour Place City Homes™ | Tampa, FL | 1999 | Q2 2006 | N/A | 1,036 | $ | 885 | N/A | 206 | 193 | 1 | 12 | ||||||||||||
RISETM | Houston, TX | 2000 | Q2 2006 | N/A | 1,407 | 4,163 | N/A | 143 | 114 | 9 | 20 | |||||||||||||
Completed Condominium Development Projects | ||||||||||||||||||||||||
Mercer Square™ | Dallas, TX | 2007 | 3Q2007 | N/A | 1,094 | 3,748 | N/A | 85 | 60 | 6 | 19 | |||||||||||||
Condominium Development Projects Under Construction | ||||||||||||||||||||||||
The Ritz-Carlton Residences, Atlanta, Buckhead (3) | Atlanta, GA | N/A | N/A | 1Q 2010 | 1,903 | 6,569 | (7) | 35,094 | 129 | - | - | 129 | ||||||||||||
Four Seasons Residences | Austin, TX | N/A | N/A | 1Q 2010 | 1,969 | 82,115 | 51,385 | 148 | - | 67 | 81 | |||||||||||||
| $ | 97,480 | $ 86,479 | 711 | 367 | 83 | 261 | ||||||||||||||||||
Financial Summary – Aggregate Condominium Activity
| Three months ended June 30, 2009 | Three months ended June 30, 2008 | Six months ended June 30, 2009 | Six months ended June 30, 2008 | |||||||||||||||||||||||||||||
Project | Units Closed | Gross Revenues | Gain on Sale (5)(6) | Units Closed | Gross Revenues | Gain on Sale (5)(6) | Units Closed | Gross Revenues | Gain on Sale (5)(6) | Units Closed | Gross Revenues | Gain on Sale (5)(6) | ||||||||||||||||||||
Completed Condominium Conversion Projects | ||||||||||||||||||||||||||||||||
Harbour Place City Homes™ | 11 | $ | 2,115 | $ | 772 | 8 | $ | 1,857 | $ | 148 | 21 | $ | 3,959 | $ | 1,340 | 11 | $ | 2,505 | $ | 267 | ||||||||||||
RISETM | 10 | 2,863 | (24) | 8 | 2,372 | (276) | 10 | 2,863 | (190) | 14 | 4,328 | (176) | ||||||||||||||||||||
Completed Condominium Development Projects | ||||||||||||||||||||||||||||||||
The Condominiums at Carlyle Square™ (4) | - | - | - | 6 | 2,849 | 5 | - | - | - | 22 | 7,918 | 1,566 | ||||||||||||||||||||
Mercer Square™ | 5 | 1,198 | (409) | 11 | 2,973 | 286 | 6 | 1,391 | (955) | 13 | 3,597 | 484 | ||||||||||||||||||||
| 26 | 6,176 | 339 | 33 | 10,051 | 163 | 37 | 8,213 | 195 | 60 | 18,348 | 2,141 | |||||||||||||||||||||
Other | - | - | (107) | - | - | (161) | - | 9 | (223) | - | - | (407) | ||||||||||||||||||||
Total | 26 | $ | 6,176 | $ | 232 | 33 | $ | 10,051 | $ | 2 | 37 | $ | 8,222 | $ | (28) | 60 | $ | 18,348 | $ | 1,734 | ||||||||||||
| (1) | Average square footage information is based on approximate amounts and individual unit sizes may vary. |
| (2) | Unit status is as of July 28, 2009. There can be no assurance that condominium units under contract will close. |
| (3) | 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. The condominium portion of the project is owned through a joint venture with an Atlanta-based condominium development partner and is branded as The Ritz-Carlton Residences, Atlanta, Buckhead. See footnote 2 on page 19 for further information concerning this venture. |
| (4) | Final condominium closings occurred in 2008 at this community. |
| (5) | For conversion projects, the Company recognizes accounting gains under GAAP to the extent that net sales proceeds from the sale of condominium units exceed the Company’s net GAAP basis and related expenses. For FFO purposes, the Company recognizes incremental gains on condominium sales in FFO, net of provision for income taxes, to the extent that net sales proceeds, less costs of sales, from the sale of condominium units exceed the “transfer price”. The transfer price for purposes of computing incremental gains on condominium sales included in FFO at conversion projects reflects the greater of (1) the estimated fair value on the date the project was acquired by the Company’s taxable REIT subsidiary (as supported by independently-prepared, third-party appraisals) or (2) its net book value at that time. For development projects, gains on condominium sales in FFO are equivalent to gains reported under GAAP. |
| (6) | For co-investment projects, amounts exclude noncontrolling interests of $(370) and $17 for the three and six months ended June 30, 2008, respectively. There was no income tax provision for the three and six months ended June 30, 2009 and 2008 attributable to gains (losses) on condominium sales. |
| (7) | The carrying value of The Ritz-Carlton Residences, Atlanta, Buckhead located at 3630 Peachtree in Atlanta, Georgia has been written down to reflect an impairment charge (including non-controlling joint venture interests) of $74,733 in the second quarter of 2009. |
| 16 |
POST PROPERTIES, INC.
COMMUNITY ACQUISITIONAND DISPOSITION SUMMARY
Property Name/Period | Location | Units | Year Built | Gross Amount Per Unit | Gross Amount | ||||||||
Acquisitions | |||||||||||||
2008 | |||||||||||||
None | |||||||||||||
2009 | |||||||||||||
None | |||||||||||||
Dispositions | |||||||||||||
Q1 2008 | |||||||||||||
Post Wilson™ | Dallas, TX | 143 | 1999 | $ | 138,811 | $ | 19,850,000 | ||||||
Q3 2008 | |||||||||||||
Post Oglethorpe® | Atlanta, GA | 250 | 1994 | $ | 154,000 | 38,500,000 | |||||||
Q4 2008 | |||||||||||||
Post Woods® | Atlanta, GA | 494 | 1977-1983 | $ | 106,781 | 52,750,000 | |||||||
Post Lenox Park® | Atlanta, GA | 206 | 1995 | $ | 110,194 | 22,700,000 | |||||||
2008 YTD Total | $ | 133,800,000 | |||||||||||
Average Cap Rate – Dispositions – 2008 | 6.1% | (1) | |||||||||||
Q2 2009 Post Dunwoody® | Atlanta, GA | 530 | 1989-1996 | $ | 89,434 | $ | 47,400,000 | ||||||
Q3 2009 | |||||||||||||
Post Forest® | Washington, D.C. | 364 | 1990 | $ | 157,967 | 57,500,000 | |||||||
Post Ridge® | Atlanta, GA | 434 | 1998 | $ | 103,226 | 44,800,000 | |||||||
2009 YTD Total | $ | 149,700,000 | |||||||||||
Average Cap Rate – Dispositions – 2009 | 7.6% | (1) | |||||||||||
| (1) | Based on trailing twelve-month net operating income after adjustments for management fee (3.0%) and capital reserves ($300/unit). |
| 17 |
POST PROPERTIES, INC.
CAPITALIZED COSTS SUMMARY
(Dollars in thousands, except per share or unit data)
(Unaudited)
The Company has a policy of capitalizing those expenditures relating to the acquisition of new assets and the development, construction and rehabilitation of apartment and condominium 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 the interior and exterior painting of operating communities, unless those communities are under major rehabilitation.
The Company capitalizes interest, real estate taxes, and certain internal personnel and associated costs related to apartment and condominium communities under development, construction, and major rehabilitation. The internal personnel and associated costs are capitalized to the projects under development based upon the effort identifiable with such projects. The Company treats each unit in an apartment and condominium community separately for cost accumulation, capitalization and expense recognition purposes. Prior to the commencement of leasing and sales activities, interest and other construction costs are capitalized and are 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. This 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 and property management and leasing personnel expenses) of such communities.
A summary of community acquisition and development improvements and other capitalized expenditures for the three and six months ended June 30, 2009 and 2008 is detailed below.
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
Development and acquisition expenditures (1) | $ | 37,265 | $ | 41,255 | $ | 86,507 | $ | 80,613 | ||||
Periodically recurring capital expenditures | ||||||||||||
Community rehabilitation and other revenue generating improvements (2) | 1,925 | 4,443 | 3,503 | 7,951 | ||||||||
Other community additions and improvements (3) (6) | 9,372 | 1,738 | 18,537 | 3,331 | ||||||||
Annually recurring capital expenditures | ||||||||||||
Carpet replacements and other community additions and improvements (4) | 3,673 | 3,382 | 6,307 | 5,640 | ||||||||
Corporate additions and improvements | 67 | 190 | 126 | 421 | ||||||||
| $ | 52,302 | $ | 51,008 | $ | 114,980 | $ | 97,956 | |||||
Other Data | ||||||||||||
Capitalized interest | $ | 3,490 | $ | 3,288 | $ | 6,597 | $ | 6,671 | ||||
Capitalized development and associated costs (5) | $ | 1,194 | $ | 1,568 | $ | 2,499 | $ | 3,328 | ||||
| (1) | Reflects aggregate community acquisition and development costs, exclusive of the change in construction payables and assumed debt, if any, between years. |
| (2) | Represents expenditures for community rehabilitations and other unit upgrade costs that enhance the rental value of such units (see page 15). |
| (3) | Represents community improvement expenditures (e.g. property upgrades) that generally occur less frequently than on an annual basis. |
| (4) | Represents community improvement expenditures (e.g. carpets, appliances) of a type that are expected to be incurred on an annual basis. |
| (5) | Reflects internal personnel and associated costs capitalized to construction and development activities. |
| (6) | Periodically recurring expenditures includes $8,157 and $13,528 for the three and six months ended June 30, 2009, respectively, related to the Company’s exterior remediation project. |
| 18 |
POST PROPERTIES, INC.
INVESTMENTSIN UNCONSOLIDATED REAL ESTATE ENTITIES
(Dollars in thousands, except per share or unit data)
(Unaudited)
Apartments and Condominium Development Communities
The Company holds investments in limited liability companies (the “Property LLCs”) with institutional investors and accounts for its investments in these Property LLCs using the equity method of accounting. A summary of non-financial and financial information for the Property LLCs is as follows:
Non-Financial Data | ||||||||||||||||||||||||||||||||||
Joint Venture Property | Location | Property Type | # of Units | Ownership Interest | ||||||||||||||||||||||||||||||
Post Collier Hills® (1) | Atlanta, GA | Apartments | 396 | 25% | ||||||||||||||||||||||||||||||
Post Crest® (1) | Atlanta, GA | Apartments | 410 | 25% | ||||||||||||||||||||||||||||||
Post Lindbergh® (1) | Atlanta, GA | Apartments | 396 | 25% | ||||||||||||||||||||||||||||||
Post Biltmore™ | Atlanta, GA | Apartments | 276 | 35% | ||||||||||||||||||||||||||||||
Post Massachusetts Avenue™ | Washington, D.C. | Apartments | 269 | 35% | ||||||||||||||||||||||||||||||
3630 Peachtree South Tower (2) | Atlanta, GA | Mixed-Use | 129 | 49% | ||||||||||||||||||||||||||||||
Financial Data | ||||||||||||||||||||||||||||||||||
| As of June 30, 2009 | Three months ended June 30, 2009 | Six months ended June 30, 2009 | ||||||||||||||||||||||||||||||||
Joint Venture Property | Gross Investment in Real Estate (9) | Mortgage/ Construction Notes Payable | Entity Equity | Company’s Equity Investment | Entity NOI | Company’s Equity in Earnings | Mgmt. Fees & Other | Entity NOI | Company’s Equity in Earnings | Mgmt. Fees & Other | ||||||||||||||||||||||||
Post Collier Hills® (1) | $ | 54,635 | $ | 39,565 | (4) | $ | 13,090 | $ | (4,106) | (1) | $ | 729 | $ | 9 | $ | 1,453 | $ | 18 | ||||||||||||||||
Post Crest® (1) | 63,887 | 46,159 | (4) | 15,046 | (6,508) | (1) | 687 | (28) | 1,385 | (52) | ||||||||||||||||||||||||
Post Lindbergh® (1) | 60,285 | 41,000 | (5) | 17,960 | (3,900) | (1) | 713 | (9) | 1,499 | 2 | ||||||||||||||||||||||||
Post Biltmore™ | 36,334 | 29,272 | (6) | 1,326 | 2,292 | 633 | 3 | 1,231 | (5) | |||||||||||||||||||||||||
Post Massachusetts Avenue™ | 69,464 | 50,500 | (7) | 9,276 | 6,414 | 1,633 | 237 | 3,245 | 470 | |||||||||||||||||||||||||
3630 Peachtree South Tower (2) | 91,541 | 95,289 | (8) | (22,086) | (39,820) | (3) | (233) | (74,868) | (376) | (74,979) | ||||||||||||||||||||||||
Total | $ | 376,146 | $ | 301,785 | $ | 34,612 | $ | (45,628) | $ | 4,162 | $ | (74,656) | $ | 211 | (10) | $ | 8,437 | $ | (74,546) | $ | 422 | (10) | ||||||||||||
| (1) | In 2007, the Company’s 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 the Property LLC were recorded at fair value based on agreed-upon amounts contributed to the venture. The credit investments in the Company’s 25% owned Property LLC resulted from financing proceeds distributed in excess of the Company’s historical cost-basis investment. These credit investments are reflected in consolidated liabilities on the Company’s consolidated balance sheet. |
| (2) | The mixed-use project (the “Master JV”) consists of 129 luxury for-sale condominiums to be marketed as The Ritz-Carlton Residences, Atlanta, Buckhead (sponsored through a joint venture between the Company and a private condominium developer; the “Condo JV”) and approximately 425,000 square feet of Class A office space (sponsored through a joint venture between an office REIT and a private office developer). The Condo JV owns an approximate 49% pro-rata interest in the Master JV accounted for on the equity method, representing the condominium portion of the project. Due to its majority ownership of the Condo JV, the Company consolidates that entity on its consolidated balance sheet. The Company’s share of gross real estate assets and construction notes payable at June 30, 2009 was $6,659 and $33,679, respectively. See page 17 for further information regarding the for-sale condominium portion of the project. |
| (3) | The Company’s credit investment results from a non-cash impairment charge of $68,219, net of the allocable loss to the noncontrolling joint venture interest in the entity of $6,514, for the three months ended June 30, 2009 to write down its investment to fair value. The credit investment is reflected in consolidated liabilities on the Company’s balance sheet. |
| (4) | These notes bear interest at a fixed rate of 5.63% and mature in 2017. |
| (5) | This note bears interest at a fixed rate of 5.71% and matures in 2017. |
| (6) | This note bears interest at a fixed rate of 5.83% and requires monthly interest only payments through 2013. The note is prepayable without penalty in September 2011. |
| (7) | This note bears interest at a fixed rate of 5.82% and requires monthly interest only payments through 2013. The note is prepayable without penalty in September 2011. |
| (8) | At June 30, 2009, $95,289 was outstanding under a $178,840 construction loan facility bearing interest at a variable rate of LIBOR plus 1.35% and which matures in 2011. |
| (9) | Represents GAAP basis net book value plus accumulated depreciation. |
| (10) | Amounts include net property and asset management fees to the Company included in “Other Revenues” in the Company’s consolidated statements of operations. |
| 19 |
POST PROPERTIES, INC.
NET ASSET VALUE SUPPLEMENTAL INFORMATION
(Dollars in thousands, except per share or unit data)
(Unaudited)
This supplemental financial and other data provides adjustments to certain GAAP financial measures and Net Operating Income (“NOI”), which is a supplemental non-GAAP financial measure that the Company uses internally to calculate Net Asset Value (“NAV”). These measures, as adjusted, are also non-GAAP financial measures. With the exception of NOI, the most comparable GAAP measure for each of the non-GAAP measures presented below in the “As Adjusted” column is the corresponding number presented in the first column listed below.
The Company presents below NOI for the quarter ended June 30, 2009 for properties stabilized by April 1, 2009 so that a capitalization rate may be applied and an approximate value for the assets determined. Properties not stabilized by April 1, 2009 are presented at full undepreciated cost. Other tangible assets, total liabilities and the liquidation value of preferred shares are also presented.
Financial Data
(In thousands)
| Income Statement Data | Three months ended June 30, 2009 | Adjustments | As Adjusted | |||||||
Rental revenues | $ | 64,808 | $ | (539) | (1) | $ | 64,269 | |||
Other property revenues | 4,033 | (75) | (1) | 3,958 | ||||||
Total rental and other revenues(A) | 68,841 | (614) | 68,227 | |||||||
Property operating & maintenance expenses | ||||||||||
(excluding depreciation and amortization)(B) | 32,658 | (6,199) | (1) | 26,459 | ||||||
Property net operating income (Table 1)(A-B) | $ | 36,183 | $ | 5,585 | $ | 41,768 | ||||
Assumed property management fee | ||||||||||
(calculated at 3% of revenues)(A x 3%) | (2,047) | |||||||||
Assumed property capital expenditure reserve | ||||||||||
($300 per unit per year based on 17,002 units) | (1,275) | |||||||||
Adjusted property net operating income | $ | 38,446 | ||||||||
Annualized property net operating income(C) | $ | 153,784 | ||||||||
Apartment units represented(D) | 20,662 | (3,660) | (1) | 17,002 | ||||||
Other Asset Data | As of June 30, 2009 | Adjustments | As Adjusted | |||||||
Cash & equivalents | $ | 3,694 | $ | - | $ | 3,694 | ||||
Real estate assets under construction, lease-up, conversion or rehabilitation, at cost (2) | 123,072 | 232,965 | (2) | 356,037 | ||||||
Land held for future investment | 82,039 | - | 82,039 | |||||||
Condominiums, for-sale and under construction | 90,911 | - | 90,911 | |||||||
Assets held for sale (3) | 63,364 | (46,491) | (3) | 16,873 | ||||||
Investments in and advances to unconsolidated real estate entities (4) | 8,706 | (8,706) | (4) | - | ||||||
Restricted cash and other assets | 42,942 | - | 42,942 | |||||||
Cash & other assets of unconsolidated real estate entities (5) | 6,672 | (4,738) | (5) | 1,934 | ||||||
Total(E) | $ | 421,400 | $ | 173,030 | $ | 594,430 | ||||
Other Liability Data | ||||||||||
Indebtedness | $ | 1,086,790 | $ | - | $ | 1,086,790 | ||||
Investments in unconsolidated real estate entities (4) | 54,334 | (14,514) | (4) | 39,820 | ||||||
Other liabilities (including noncontrolling interests) (6) | 128,913 | (14,290) | (6) | 114,623 | ||||||
Total liabilities of unconsolidated real estate entities (7) | 209,851 | (149,286) | (7) | 60,565 | ||||||
Total(F) | $ | 1,479,888 | $ | (178,090) | $ | 1,301,798 | ||||
| 20 |
Other Data
| As of June 30, 2009 | ||||||||||
| # Shares/Units | Stock Price | Implied Value | ||||||||
Liquidation value of preferred shares(G) | $ | 95,000 | ||||||||
Common shares outstanding | 44,353 | |||||||||
Common units outstanding | 219 | |||||||||
Total(H) | 44,572 | $ | 13.44 | $ | 599,048 | |||||
Implied market value of Company gross real estate assets(I) = (F+G+H-E) | $ | 1,401,416 | ||||||||
Implied Portfolio Capitalization Rate(C÷I) | 11.0% | |||||||||
Implied market value of Company gross real estate assets per unit(I÷D) | $ | 82.4 | ||||||||
| (1) | The following table summarizes the adjustments made to the components of property net operating income for the three months ended June 30, 2009 to adjust property net operating income to the Company’s share for fully stabilized communities: |
| Rental Revenue | Other Revenue | Expenses | Units | ||||||||||
Under construction, lease-up, conversion, or rehabilitation | $ | (3,343) | $ | (280) | $ | (2,883) | (2,404) | ||||||
Corporate property management expenses | - | - | (2,709) | - | |||||||||
Company share of unconsolidated entities | 1,974 | 144 | 707 | (1,256) | |||||||||
Held for sale operating properties | 2,772 | 154 | 931 | - | |||||||||
Corporate apartments and other | (1,942) | (93) | (2,245) | - | |||||||||
| $ | (539) | $ | (75) | $ | (6,199) | (3,660) | |||||||
| (2) | The “As Adjusted” amount represents CIP balance per the Company’s balance sheet plus the costs of properties under construction and lease-up that have been transferred to operating real estate assets as apartment units are completed, plus the gross book value for communities under rehabilitation during the second quarter of 2009. |
| (3) | The adjustment reflects a reduction for the depreciated book value of two apartment communities held for sale and included in discontinued operations at June 30, 2009, as the net property operating income of these communities has been included in adjusted property net operating income reflected above (see note 1). |
| (4) | The adjustment reflects a reduction for the investments in unconsolidated entities for entities with operating real estate assets, as the Company’s net operating income of such investments is included in the adjusted net operating income reflected above. The “As Adjusted” liability amount represents the consolidated credit investment in 3630 Peachtree South Tower (i.e., The Ritz-Carlton Residences, Atlanta, Buckhead). |
| (5) | The “As of June 30, 2009” amount represents cash and other assets of unconsolidated apartment entities. The adjustment includes a reduction for the venture partners’ respective share of cash and other assets. The “As Adjusted” amount represents the Company’s respective share of the cash and other assets of unconsolidated apartment entities. |
| (6) | The “As of June 30, 2009” amount consists of the sum of accrued interest payable, dividends and distributions payable, accounts payable and accrued expenses, security deposits and prepaid rents, and noncontrolling interests in consolidated real estate entities as reflected on the Company’s balance sheet. The adjustment represents a reduction for the non-cash liability associated with straight-line, long-term ground lease expense. |
| (7) | The “As of June 30, 2009” amount represents total liabilities of unconsolidated apartment entities. The adjustment represents a reduction for the venture partner’s respective share of liabilities. The “As Adjusted” amount represents the Company’s respective share of liabilities of unconsolidated apartment entities. |
| 21 |
POST PROPERTIES, INC.
NON-GAAP FINANCIAL MEASURESAND OTHER DEFINED TERMS
(Dollars in thousands, except per share or unit data)
(Unaudited)
Definitions of Supplemental Non-GAAP Financial Measures and Other Defined Terms
The Company uses certain non-GAAP financial measures and other defined terms in this accompanying Supplemental Financial Data. These non-GAAP financial measures include FFO, AFFO, net operating income, same store capital expenditures and certain debt statistics and ratios. The definitions of these non-GAAP financial measures are summarized below. The Company believes that these measures are helpful to investors in measuring financial performance and/or liquidity and comparing such performance and/or liquidity to other REITs.
Funds from Operations- The Company uses FFO as an operating measure. The Company uses the NAREIT definition of FFO. FFO is defined by NAREIT to mean net income (loss) available to common shareholders determined in accordance with GAAP, excluding gains (losses) from extraordinary items and sales of depreciable operating property, plus depreciation and amortization of real estate assets, and after adjustment for unconsolidated partnerships and joint ventures all determined on a consistent basis in accordance with GAAP. FFO presented in the Company’s press release and Supplemental Financial Data is not necessarily comparable to FFO presented by other real estate companies because not all real estate companies use the same definition. The Company’s FFO is comparable to the FFO of real estate companies that use the current NAREIT definition.
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 that “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, the Company believes that FFO is an important supplemental measure of operating performance. In addition, since most equity REITs provide FFO information to the investment community, the Company believes that FFO is a useful supplemental measure for comparing the Company’s results to those of other equity REITs. The Company believes that the line on its consolidated statement of operations entitled “net income (loss) available to common shareholders” is the most directly comparable GAAP measure to FFO.
Adjusted Funds From Operations- The Company also uses adjusted funds from operations (“AFFO”) as an operating measure. AFFO is defined as FFO less operating capital expenditures after adjusting for the impact of non-cash straight-line long-term ground lease expense, non-cash impairment charges, non-cash income (loss) related to mark-to-market of interest rate swap agreements, non-cash debt extinguishment costs and strategic review costs. The Company believes that AFFO is an important supplemental measure of operating performance for an equity REIT because it provides investors with an indication of the REIT’s ability to fund operating capital expenditures through earnings. In addition, since most equity REITs provide AFFO information to the investment community, the Company believes that AFFO is a useful supplemental measure for comparing the Company to other equity REITs. The Company believes that the line on its consolidated statement of operations entitled “net income (loss) available to common shareholders” is the most directly comparable GAAP measure to AFFO.
Property Net Operating Income- The Company uses property NOI, including same store NOI and same store NOI by market, as an operating measure. NOI is defined as rental and other revenues from real estate operations less total property and maintenance expenses from real estate operations (exclusive of depreciation and amortization). The Company believes that NOI is an important supplemental measure of operating performance for a REIT’s 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 geographic operations, same store groupings and individual properties. Additionally, the Company believes that NOI, as defined, is a widely accepted measure of comparative operating performance in the real estate investment community. The Company believes that the line on its consolidated statement of operations entitled “net income” is the most directly comparable GAAP measure to NOI.
| 22 |
Same Store Capital Expenditures- 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 its same store communities on an ongoing basis. The corresponding GAAP measures include information with respect to the Company’s other operating segments consisting of communities stabilized in the prior year, lease-up communities, rehabilitation communities, sold properties and commercial properties in addition to same store information. Therefore, the Company believes that the Company’s 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 Company’s consolidated statements of cash flows entitled “annually recurring capital expenditures” and “periodically recurring capital expenditures.”
Debt Statistics and Debt Ratios- The Company uses a number of debt statistics and ratios as supplemental measures of liquidity. The numerator and/or the denominator of certain of these statistics and/or ratios include non-GAAP financial measures that have been reconciled to the most directly comparable GAAP financial measure. These debt statistics and ratios include: (1) an interest coverage ratio; (2) a fixed charge coverage ratio; (3) total debt as a percentage of undepreciated real estate (adjusted for joint venture partner’s share of debt); (4) total debt plus preferred equity as a percentage of undepreciated real estate (adjusted for joint venture partner’s share of debt); (5) a ratio of consolidated debt to total assets; (6) a ratio of secured debt to total assets; (7) a ratio of total unencumbered assets to unsecured debt; and (8) a ratio of consolidated income available to debt service to annual debt service charge. A number of these debt statistics and ratios are derived from covenants found in the Company’s debt agreements, including, among others, the Company’s senior unsecured notes. In addition, the Company presents these measures because the degree of leverage could affect the Company’s ability to obtain additional financing for working capital, capital expenditures, acquisitions, development or other general corporate purposes. The Company uses these measures internally as an indicator of liquidity and the Company believes that these measures are also utilized by the investment and analyst communities to better understand the Company’s liquidity.
Average Economic Occupancy- The Company uses average economic occupancy as a statistical measure of operating performance. The Company defines average economic occupancy 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.
| 23 |
Reconciliations of Supplemental Non-GAAP Financial Measures
Table 1
Reconciliation of Same Store Net Operating Income (NOI) to GAAP Net Income
(Dollars in thousands)
(Unaudited)
| Three months ended | Six months ended | ||||||||||||||
| June 30, 2009 | June 30, 2008 | March 31, 2009 | June 30, 2009 | June 30, 2008 | |||||||||||
Total same store NOI | $ | 34,590 | $ | 34,519 | $ | 34,624 | $ | 69,214 | $ | 69,139 | |||||
Property NOI from other operating segments | 1,593 | 602 | 1,630 | 3,223 | 1,059 | ||||||||||
Consolidated property NOI | 36,183 | 35,121 | 36,254 | 72,437 | 70,198 | ||||||||||
Add (subtract): | |||||||||||||||
Interest income | 23 | 61 | 115 | 138 | 271 | ||||||||||
Other revenues | 277 | 235 | 226 | 503 | 474 | ||||||||||
Depreciation | (18,009) | (15,213) | (17,592) | (35,601) | (30,310) | ||||||||||
Interest expense | (12,241) | (11,004) | (14,178) | (26,419) | (22,035) | ||||||||||
Amortization of deferred financing costs | (682) | (859) | (934) | (1,616) | (1,710) | ||||||||||
General and administrative | (3,964) | (4,351) | (4,409) | (8,373) | (9,485) | ||||||||||
Investment and development | (793) | (1,274) | (997) | (1,790) | (2,664) | ||||||||||
Other investment costs | (646) | (244) | (653) | (1,299) | (499) | ||||||||||
Strategic review costs | - | (2,091) | - | - | (8,161) | ||||||||||
Impairment, severance and other charges | (9,658) | (29,300) | - | (9,658) | (29,300) | ||||||||||
Gains (losses) on sales of real estate assets, net | 232 | (368) | (260) | (28) | 1,751 | ||||||||||
Equity in income (loss) of unconsolidated real estate entities | (74,656) | 420 | 110 | (74,546) | 821 | ||||||||||
Other income (expense), net | 50 | 66 | 1,059 | 1,109 | (108) | ||||||||||
Net gain (loss) on early extinguishment of indebtedness | (79) | - | 898 | 819 | - | ||||||||||
Loss from continuing operations | (83,963) | (28,801) | (361) | (84,324) | (30,757) | ||||||||||
Income from discontinued operations | 26,768 | 3,232 | 2,609 | 29,377 | 8,347 | ||||||||||
Net income (loss) | $ | (57,195) | $ | (25,569) | $ | 2,248 | $ | (54,947) | $ | (22,410) | |||||
| 24 |
Table 2
Same Store Net Operating Income (NOI) and Average Rental Rate per Unit by Market
(Dollars in thousands)
| Three months ended | Q2 ‘09 vs. Q2 ‘08 % Change | Q2 ‘09 vs. Q1 ‘09 % Change | Q2 ‘09 % Same Store NOI | ||||||||||||
| June 30, 2009 | June 30, 2008 | March 31, 2009 | |||||||||||||
Rental and other revenues | |||||||||||||||
Atlanta | $ | 14,422 | $ | 14,969 | $ | 14,519 | (3.7)% | (0.7)% | |||||||
Dallas | 10,982 | 11,627 | 11,189 | (5.5)% | (1.9)% | ||||||||||
Washington, D.C. | 10,215 | 10,350 | 10,121 | (1.3)% | 0.9% | ||||||||||
Tampa | 6,966 | 7,101 | 7,030 | (1.9)% | (0.9)% | ||||||||||
Charlotte | 4,443 | 4,912 | 4,577 | (9.5)% | (2.9)% | ||||||||||
New York | 3,634 | 3,725 | 3,675 | (2.4)% | (1.1)% | ||||||||||
Houston | 3,072 | 3,070 | 3,063 | 0.1% | 0.3% | ||||||||||
Austin | 1,196 | 1,231 | 1,214 | (2.8)% | (1.5)% | ||||||||||
Orlando | 2,362 | 2,312 | 2,306 | 2.2% | 2.4% | ||||||||||
Total rental and other revenues | 57,292 | 59,297 | 57,694 | (3.4)% | (0.7)% | ||||||||||
Property operating and maintenance expenses (exclusive of depreciation and amortization) | |||||||||||||||
Atlanta | 5,958 | 6,249 | 6,065 | (4.7)% | (1.8)% | ||||||||||
Dallas | 4,650 | 5,499 | 4,554 | (15.4)% | 2.1% | ||||||||||
Washington, D.C. | 3,524 | 3,594 | 3,584 | (1.9)% | (1.7)% | ||||||||||
Tampa | 2,866 | 3,252 | 2,831 | (11.9)% | 1.2% | ||||||||||
Charlotte | 1,588 | 1,862 | 1,576 | (14.7)% | 0.8% | ||||||||||
New York | 1,206 | 1,187 | 1,420 | 1.6% | (15.1)% | ||||||||||
Houston | 1,259 | 1,548 | 1,456 | (18.7)% | (13.5)% | ||||||||||
Austin | 541 | 577 | 562 | (6.2)% | (3.7)% | ||||||||||
Orlando | 1,110 | 1,010 | 1,022 | 9.9% | 8.6% | ||||||||||
Total | 22,702 | 24,778 | 23,070 | (8.4)% | (1.6)% | ||||||||||
Net operating income | |||||||||||||||
Atlanta | 8,464 | 8,720 | 8,454 | (2.9)% | 0.1% | 24.5% | |||||||||
Dallas | 6,332 | 6,128 | 6,635 | 3.3% | (4.6)% | 18.3% | |||||||||
Washington, D.C. | 6,691 | 6,756 | 6,537 | (1.0)% | 2.4% | 19.3% | |||||||||
Tampa | 4,100 | 3,849 | 4,199 | 6.5% | (2.4)% | 11.9% | |||||||||
Charlotte | 2,855 | 3,050 | 3,001 | (6.4)% | (4.9)% | 8.3% | |||||||||
New York | 2,428 | 2,538 | 2,255 | (4.3)% | 7.7% | 7.0% | |||||||||
Houston | 1,813 | 1,522 | 1,607 | 19.1% | 12.8% | 5.2% | |||||||||
Austin | 655 | 654 | 652 | 0.2% | 0.5% | 1.9% | |||||||||
Orlando | 1,252 | 1,302 | 1,284 | (3.8)% | (2.5)% | 3.6% | |||||||||
Total same store NOI | $ | 34,590 | $ | 34,519 | $ | 34,624 | 0.2% | (0.1)% | 100.0% | ||||||
Average rental rate per unit | |||||||||||||||
Atlanta | $ | 1,114 | $ | 1,152 | $ | 1,134 | (3.3)% | (1.7)% | |||||||
Dallas | 1,078 | 1,103 | 1,093 | (2.3)% | (1.4)% | ||||||||||
Washington, D.C. | 1,787 | 1,813 | 1,799 | (1.4)% | (0.7)% | ||||||||||
Tampa | 1,214 | 1,286 | 1,231 | (5.6)% | (1.3)% | ||||||||||
Charlotte | 1,108 | 1,187 | 1,151 | (6.7)% | (3.8)% | ||||||||||
New York | 3,843 | 3,893 | 3,939 | (1.3)% | (2.4)% | ||||||||||
Houston | 1,263 | 1,250 | 1,269 | 1.0% | (0.5)% | ||||||||||
Austin | 1,325 | 1,331 | 1,346 | (0.5)% | (1.5)% | ||||||||||
Orlando | 1,339 | 1,452 | 1,373 | (7.8)% | (2.5)% | ||||||||||
Total average rental rate per unit | 1,287 | 1,328 | 1,308 | (3.1)% | (1.6)% | ||||||||||
| 25 |
Table 2 (con’t)
Same Store Net Operating Income (NOI) and Average Rental Rate per Unit by Market
(Dollars in thousands)
| Six months ended | % Change | |||||||
| June 30, 2009 | June 30, 2008 | |||||||
Rental and other revenues | ||||||||
Atlanta | $ | 28,941 | $ | 29,756 | (2.7)% | |||
Dallas | 22,171 | 22,893 | (3.2)% | |||||
Washington, D.C. | 20,337 | 20,531 | (0.9)% | |||||
Tampa | 13,996 | 14,283 | (2.0)% | |||||
Charlotte | 9,020 | 9,696 | (7.0)% | |||||
New York | 7,308 | 7,493 | (2.5)% | |||||
Houston | 6,135 | 6,101 | 0.6% | |||||
Austin | 2,410 | 2,471 | (2.5)% | |||||
Orlando | 4,667 | 4,683 | (0.3)% | |||||
Total rental and other revenues | 114,985 | 117,907 | (2.5)% | |||||
Property operating and maintenance expenses (exclusive of depreciation and amortization) | ||||||||
Atlanta | 12,023 | 12,200 | (1.5)% | |||||
Dallas | 9,205 | 10,703 | (14.0)% | |||||
Washington, D.C. | 7,108 | 7,258 | (2.1)% | |||||
Tampa | 5,697 | 6,294 | (9.5)% | |||||
Charlotte | 3,164 | 3,478 | (9.0)% | |||||
New York | 2,625 | 2,591 | 1.3% | |||||
Houston | 2,715 | 2,912 | (6.8)% | |||||
Austin | 1,102 | 1,184 | (6.9)% | |||||
Orlando | 2,132 | 2,148 | (0.7)% | |||||
Total | 45,771 | 48,768 | (6.1)% | |||||
Net operating income | ||||||||
Atlanta | 16,918 | 17,556 | (3.6)% | |||||
Dallas | 12,966 | 12,190 | 6.4% | |||||
Washington, D.C. | 13,229 | 13,273 | (0.3)% | |||||
Tampa | 8,299 | 7,989 | 3.9% | |||||
Charlotte | 5,856 | 6,218 | (5.8)% | |||||
New York | 4,683 | 4,902 | (4.5)% | |||||
Houston | 3,420 | 3,189 | 7.2% | |||||
Austin | 1,308 | 1,287 | 1.6% | |||||
Orlando | 2,535 | 2,535 | 0.0% | |||||
Total same store NOI | $ | 69,214 | $ | 69,139 | 0.1% | |||
Average rental rate per unit | ||||||||
Atlanta | $ | 1,124 | $ | 1,148 | (2.1)% | |||
Dallas | 1,086 | 1,099 | (1.2)% | |||||
Washington, D.C. | 1,793 | 1,809 | (0.9)% | |||||
Tampa | 1,222 | 1,291 | (5.3)% | |||||
Charlotte | 1,130 | 1,186 | (4.7)% | |||||
New York | 3,891 | 3,886 | 0.1% | |||||
Houston | 1,266 | 1,239 | 2.2% | |||||
Austin | 1,335 | 1,326 | 0.7% | |||||
Orlando | 1,356 | 1,457 | (6.9)% | |||||
Total average rental rate per unit | 1,298 | 1,326 | (2.1)% | |||||
| 26 |
Table 3
Reconciliation of Segment Cash Flow Data to Statements of Cash Flows
(Dollars in thousands)
| Three months ended June 30, | Six months ended June 30, | |||||||||||
| 2009 | 2008 | 2009 | 2008 | |||||||||
Annually recurring capital expenditures by operating segment | ||||||||||||
Fully stabilized | $ | 3,179 | $ | 2,543 | $ | 5,376 | $ | 4,190 | ||||
Communities stabilized during 2008 | 221 | 309 | 401 | 444 | ||||||||
Development, rehabilitation and lease-up | 135 | 108 | 205 | 212 | ||||||||
Other segments | 138 | 422 | 325 | 794 | ||||||||
Total annually recurring capital expenditures per statements of cash flows (1) | $ | 3,673 | $ | 3,382 �� | $ | 6,307 | $ | 5,640 | ||||
Periodically recurring capital expenditures by operating segment | ||||||||||||
Fully stabilized | $ | 8,759 | $ | 1,579 | $ | 15,176 | $ | 2,869 | ||||
Communities stabilized during 2008 | 5 | 3 | 6 | 48 | ||||||||
Development, rehabilitation and lease-up | 145 | 22 | 2,132 | 45 | ||||||||
Other segments | 463 | 134 | 1,223 | 369 | ||||||||
Total periodically recurring capital expenditures per statements of cash flows (1) | $ | 9,372 | $ | 1,738 | $ | 18,537 | $ | 3,331 | ||||
(1) For the three and six months ended June 30, 2009, includes approximately $8,157 and $13,528, respectively, of periodically recurring capital expenditures related to the Company’s exterior remediation project. | ||||||||||||
Table 4
Computation of Interest and Fixed Charge Coverage Ratios
(Dollars in thousands)
| Six months ended June 30, | ||||||
| 2009 | 2008 | |||||
Loss from continuing operations | $ | (84,324) | $ | (30,757) | ||
Other non-cash expenses, net | 1,713 | 2,488 | ||||
Income tax expense | 464 | 341 | ||||
Losses (gains) on sales of real estate assets, net | 28 | (1,751) | ||||
Net gain on early extinguishment of indebtedness | (819) | - | ||||
Non-cash impairment charge - unconsolidated entity | 74,733 | - | ||||
Non-cash impairment charge - consolidated entities | 9,658 | 28,947 | ||||
Depreciation expense | 35,601 | 30,310 | ||||
Depreciation (company share) of assets held in unconsolidated entities | 700 | 693 | ||||
Interest expense | 26,419 | 22,035 | ||||
Interest expense (company share) of assets held in unconsolidated entities | 1,718 | 1,387 | ||||
Amortization of deferred financing costs | 1,616 | 1,710 | ||||
Income available for debt service(A) | $ | 67,507 | $ | 55,403 | ||
Interest expense | $ | 26,419 | $ | 22,035 | ||
Interest expense (company share) of assets held in unconsolidated entities | 1,718 | 1,387 | ||||
Interest expense for purposes of computation(B) | 28,137 | 23,422 | ||||
Dividends and distributions to preferred shareholders and unitholders | 3,819 | 3,819 | ||||
Fixed charges for purposes of computation(C) | $ | 31,956 | $ | 27,241 | ||
Interest coverage ratio(A÷B) | 2.4x | 2.4x | ||||
Fixed charge coverage ratio(A÷C) | 2.1x | 2.0x | ||||
| 27 |
Table 5
Computation of Debt Ratios
(Dollars in thousands)
| As of June 30, | ||||||
| 2009 | 2008 | |||||
Total real estate assets per balance sheet | $ | 2,132,577 | $ | 2,115,247 | ||
Plus: | ||||||
Company share of real estate assets held in unconsolidated entities | 80,436 | 94,510 | ||||
Company share of accumulated depreciation - assets held in unconsolidated entities | 7,864 | 6,049 | ||||
Accumulated depreciation per balance sheet | 587,116 | 499,981 | ||||
Accumulated depreciation on assets held for sale | 28,441 | 93,844 | ||||
Total undepreciated real estate assets(A) | $ | 2,836,434 | $ | 2,809,631 | ||
Total debt per balance sheet | $ | 1,086,790 | $ | 1,064,405 | ||
Plus: | ||||||
Company share of third party debt held in unconsolidated entities | 93,280 | 65,128 | ||||
Total debt (adjusted for joint venture partners’ share of debt)(B) | $ | 1,180,070 | $ | 1,129,533 | ||
Total debt as a % of undepreciated real estate assets (adjusted for joint venture partners’ share of debt(B÷A) | 41.6% | 40.2% | ||||
Total debt per balance sheet | $ | 1,086,790 | $ | 1,064,405 | ||
Plus: | ||||||
Company share of third party debt held in unconsolidated entities | 93,280 | 65,128 | ||||
Preferred shares at liquidation value | 95,000 | 95,000 | ||||
Total debt and preferred equity (adjusted for joint venture partners’ share of debt)(C) | $ | 1,275,070 | $ | 1,224,533 | ||
Total debt and preferred equity as a % of undepreciated real estate assets (adjusted for joint venture partners’ share of debt)(C÷A) | 45.0% | 43.6% | ||||
Table 6
Calculation of Company Undepreciated Book Value Per Share
(Dollars in thousands)
| June 30, 2009 | |||
Total Company shareholders’ equity, per balance sheet | $ | 923,370 | |
Plus: | |||
Accumulated depreciation, per balance sheet | 587,116 | ||
Accumulated depreciation held for sale assets, per balance sheet | 28,441 | ||
Noncontrolling interest of common unitholders in Operating Partnership, per balance sheet | 4,094 | ||
Less: | |||
Deferred charges, net, per balance sheet | (9,582) | ||
Preferred shares at liquidation value | (95,000) | ||
Total undepreciated book value(A) | $ | 1,438,439 | |
Total common shares and units(B) | 44,571 | ||
Company undepreciated book value per share(A÷B) | $ | 32.27 | |
| 28 |