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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended December 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transmission period from ____ to ____
Commission file number 1-12080
Commission file number 0-28226
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POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
(Exact name of registrants as specified in their charters)
GEORGIA 58-1550675
GEORGIA 58-2053632
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
4401 NORTHSIDE PARKWAY, SUITE 800, ATLANTA, GEORGIA 30327
(Address of principal executive office - zip code)
(404) 846-5000
(Registrant's telephone number, including area code)
--------------------------
Securities registered pursuant to section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Common Stock, $.01 par value New York Stock Exchange
8 1/2% Series A Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
7 5/8% Series B Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
7 5/8% Series C Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ------------------------
Units of Limited Partnership None
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Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Post Properties, Inc. Yes [X] No [ ]
Post Apartment Homes, L.P. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the shares of common stock held by
non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on March 20, 2002 was approximately $1,268,750,173. As of March 20,
2002, there were 36,871,554 shares of common stock, $.01 par value, outstanding.
--------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement in connection with its
Annual Meeting of Shareholders to be held May 23, 2002 are incorporated by
reference in Part III.
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POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
TABLE OF CONTENTS
ITEM FINANCIAL INFORMATION PAGE
NO. NO.
- ---- ----
PART I
1. Business ................................................................................... 1
2. Properties ................................................................................. 12
3. Legal Proceedings .......................................................................... 15
4. Submission of Matters to a Vote of Security Holders ........................................ 15
X. Executive Officers of the Registrant ....................................................... 15
PART II
5. Market Price of the Registrant's Common Stock and Related Stockholder Matters .............. 17
6. Selected Financial Data .................................................................... 18
7. Management's Discussion and Analysis of Financial Condition and Results of Operations ...... 22
7A. Quantitative and Qualitative Disclosures about Market Risk ................................. 36
8. Financial Statements and Supplementary Data ................................................ 37
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ....... 37
PART III
10. Directors and Executive Officers of the Registrant ......................................... 38
11. Executive Compensation ..................................................................... 38
12. Security Ownership of Certain Beneficial Owners and Management ............................. 38
13. Certain Relationships and Related Transactions ............................................. 38
PART IV
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K .......................... 39
PART I
ITEM 1. BUSINESS
THE COMPANY
Post Properties, Inc. (the "Company") is one of the largest developers and
operators of upscale multifamily apartment communities in the United States. The
Company currently owns 87 stabilized communities (the "Communities") containing
30,062 apartment units located primarily in metropolitan Atlanta, Georgia;
Dallas, Texas and Tampa Florida. In addition, the Company currently has under
construction or in initial lease-up eight new communities and additions to two
existing communities in the Atlanta, Georgia; Tampa, Florida; Denver, Colorado;
Charlotte, North Carolina; New York City, New York; Pasadena, California and
Washington D.C. metropolitan areas that will contain an aggregate of 2,604
apartment units upon completion. For the year ended December 31, 2001, the
average economic occupancy rate (defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent) of the 76
Communities stabilized for the entire year was 94.5%. The average monthly rental
rate per apartment unit at these Communities for December 2001 was $991. The
Company is a fully integrated organization with multifamily development,
operation and asset management expertise. The Company has approximately 1,235
employees, none of whom is a party to a collective bargaining agreement.
Since its founding in 1971, the Company has pursued three distinctive core
business strategies that have remained substantially unchanged:
Investment Building
Investment building means taking a long-term view of the assets the Company
creates. The Company develops communities with the intention of operating them
for periods that are relatively long by the standards of the apartment industry.
Key elements of the Company's investment building strategy include instilling a
disciplined team approach to development decisions, selecting sites in urban
infill locations in strong primary markets, consistently constructing new
apartment communities with a uniformly high quality and conducting ongoing
property improvements.
Promotion of the Post(R) Brand Name
The Post(R) brand name strategy has been integral to the success of the Company
and, to the knowledge of the Company, has not been successfully duplicated
within the multifamily real estate industry in any major U.S. market. For such a
strategy to work, a company must develop and implement systems to achieve
uniformly high quality and value throughout its operations. As a result of the
Company's efforts in developing and maintaining its communities, the Company
believes that the Post(R) brand name is synonymous with quality upscale
apartment communities that are situated in desirable locations and provide
superior resident service. Key elements in implementing the Company's brand name
strategy include extensively utilizing the trademarked brand name, adhering to
quality in all aspects of the Company's operations, developing and implementing
leading edge training programs, and coordinating the Company's advertising
programs to increase brand name recognition.
Service Orientation
The Company's mission statement is: "To provide the superior apartment living
experience for our residents." By striving to provide a superior product and
superior service, the Company believes that it will be able to achieve its
long-term goals. The Company believes that it provides its residents with
superior product and superior service through its uniformly high quality
construction, selective urban infill locations, award winning landscaping and
landscape courtyards with water features and numerous amenities, including on
site business centers, on site courtesy officers, urban vegetable gardens and
state of the art fitness centers. The Company believes that with the
implementation of these strategies, multifamily properties in its primary
markets have the potential over long term to provide investment returns that
exceed national averages.
The Company is a self-administrated and self-managed equity real estate
investment trust (a "REIT"). In 1993, the Company completed an initial public
offering of its Common Stock (the "Initial Offering") and a business combination
involving entities under varying common ownership. Proceeds from the Initial
Offering were used by the Company, in part, to acquire a controlling interest in
Post Apartment Homes, L.P. (the "Operating Partnership"), the Company's
principal operating subsidiary,
Post Properties, Inc. 1
Post Apartment Homes, L.P.
which was formed to succeed to substantially all of the ownership interest in a
portfolio of 40 Post(R) multifamily apartment communities, all of which were
developed by the Company and owned by affiliates of the Company, and to the
development, leasing, landscaping and management business of the Company and
certain other affiliates.
The Company, through wholly owned subsidiaries, is the sole general partner of,
and controls a majority of the limited partnership interests in, the Operating
Partnership. The Company conducts all of its business through the Operating
Partnership and its subsidiaries.
The Company's and the Operating Partnership's executive officers are located at
4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327 and their telephone
number is (404) 846-5000. Post Properties, Inc., a Georgia corporation, was
incorporated on January 25, 1984, and is the successor by merger to the original
Post Properties, Inc., a Georgia corporation, which was formed in 1971. The
Operating Partnership is a Georgia limited partnership that was formed in July
1993 for the purpose of consolidating the operating and development business of
the Company and the Post(R) apartment portfolio described herein.
THE OPERATING PARTNERSHIP
The Operating Partnership, through the operating divisions and subsidiaries
described below, is the entity through which all of the Company's operations are
conducted. At December 31, 2001, the Company, through wholly owned subsidiaries,
controlled the Operating Partnership as the sole general partner and as the
holder of 87.8% of the common units in the Operating Partnership ("Common
Units") and 63.6% of the preferred Units (the "Perpetual Preferred Units"). The
other limited partners of the Operating Partnership, who hold Common Units, are
those persons (including certain officers and directors of the Company) who, at
the time of the Initial Offering, elected to hold all or a portion of their
interest in the form of Common Units rather than receiving shares of Common
Stock. Each Common Unit may be redeemed by the holder thereof for either one
share of Common Stock or cash equal to the fair market value thereof at the time
of such redemption, at the option of the Operating Partnership. The Operating
Partnership presently anticipates that it will cause shares of Common Stock to
be issued in connection with each such redemption (as had been done in all
redemptions to date) rather than paying cash. With each redemption of
outstanding Common Units for Common Stock, the Company's percentage ownership
interest in the Operating Partnership will increase. In addition, whenever the
Company issues shares of stock, the Company will contribute any net proceeds
therefrom to the Operating Partnership and the Operating Partnership will issue
an equivalent number of Units or Perpetual Preferred Units, as appropriate, to
the Company.
As the sole shareholder of the Operating Partnership's sole general partner, the
Company has the exclusive power under the agreement of limited partnership of
the Operating Partnership to manage and conduct the business of the Operating
Partnership, subject to the consent of the holders of the Common Units in
connection with the sale of all or substantially all of the assets of the
Operating Partnership or in connection with a dissolution of the Operating
Partnership. The board of directors of the Company manages the affairs of the
Operating Partnership by directing the affairs of the Company. The Operating
Partnership cannot be terminated, except in connection with a sale of all or
substantially all of the assets of the Company, for a period of 50 years without
a vote of limited partners of the Operating Partnership. The Company's indirect
limited and general partner interests in the Operating Partnership entitle it to
share in cash distributions from, and in the profits and loss of, the Operating
Partnership in proportion to the Company's percentage interest therein and
indirectly entitle the Company to vote on all matters requiring a vote of the
limited partnership.
As part of the formation of the Operating Partnership, a holding company, Post
Services, Inc. ("Post Services") was organized as a separate corporate
subsidiary of the Operating Partnership. Through Post Services and its
subsidiaries, the Operating Partnership provides leasing, landscaping and
property management services to third parties. Certain officers and directors of
the Company received 99%, collectively, of the voting common stock of Post
Services, and the Operating Partnership received 1% of the voting common stock
and 100% of the nonvoting common stock of Post Services. The voting and
nonvoting common stock of Post Services held by the Operating Partnership
represents 99% of the equity interests therein. The voting common stock held by
officers and directors in Post Services is subject to an agreement that is
designed to ensure that the stock will be held by one or more officers of Post
Services. The by-laws of Post Services provide that a majority of the board of
directors of Post Services must be persons who are not employees, members of
management or affiliates of the Company or its subsidiaries. This by-law
provision cannot be amended without the vote of 100% of the outstanding voting
common stock of Post Services. Post Services currently has the same board of
directors as the Company.
For taxable years ending on or before December 31, 2000, the Operating
Partnership could not own more than 10% of the voting stock of Post Services
without causing the Company to fail to qualify as a REIT for federal income tax
purposes. This restriction no longer applies to the voting stock of a "taxable
REIT subsidiary" as defined in the Internal Revenue Code. The
Post Properties, Inc. 2
Post Apartment Homes, L.P.
Company and Post Services have filed a joint election to have Post Services
treated as a taxable REIT subsidiary of the Company. This will enable the
Operating Partnership to acquire all of the voting stock of Post Services
without jeopardizing the company's status as a REIT. Management believes the
Operating Partnership will acquire the remaining interest of Post Services in
2002.
OPERATING DIVISIONS
The major operating divisions of the Operating Partnership include:
Post Apartment Management
Post Apartment Management is responsible for the day-to-day operations of all
the Post(R) communities including community leasing, property management and
personnel recruiting, training and development, maintenance and security. Post
Apartment Management also conducts short-term corporate apartment leasing
activities and is the largest division in the Company.
Post Apartment Development
Post Apartment Development conducts the development and construction activities
of the Company. These activities include site selection, zoning and regulatory
approvals, project design and the full range of construction management
services.
Post Corporate Services
Post Corporate Services provides executive direction and control to the
Company's other divisions and subsidiaries and has responsibility for the
creation and implementation of all Company financing and capital strategies. All
accounting, management reporting, information systems, human resources, legal
and insurance services required by the Company and all of its affiliates are
centralized in Post Corporate Services.
OPERATING SUBSIDIARIES
In periods prior to December 31, 2001, the Operating Partnership provided third
party asset management and leasing services for multifamily properties not
operating under the Post (R) name through RAM Partners, Inc. ("RAM").
Additionally in prior periods, the Operating Partnership provided landscape
installation and maintenance services to third parties through Post Landscape
Services, Inc. ("Post Landscape"). In the fourth quarter of 2001, the net assets
and operating businesses of RAM and Post Landscape were sold to their respective
management teams. The Company and the Operating Partnership will no longer
provide these services to unaffiliated third parties. Instead, the Operating
Partnership will focus its continuing efforts on its core business of owning,
developing and managing Post (R) brand multifamily real estate assets.
HISTORY OF POST PROPERTIES, INC.
During the five-year period from January 1, 1997 through December 31, 2001, the
Company and affiliates have developed and completed 11,545 apartment units in 26
apartment communities, acquired 6,296 units in 26 apartment communities (the
acquisitions were a result of the merger with Columbia Realty Trust (the
"Merger")) and sold 16 apartment communities containing an aggregate of 5,397
apartment units. Historically, the Company has primarily developed its apartment
communities to the Company's specifications as opposed to buying or refurbishing
existing properties built by others. The Company and its affiliates have sold
apartment communities after holding them for investment periods that typically
have been seven to twelve years after development. The following table shows the
result of the Company's developments during this period:
Post Properties, Inc. 3
Post Apartment Homes, L.P.
2001 2000 1999 1998 1997
--------- --------- --------- --------- ---------
Units Completed 2,651 2,786 1,955 2,025 2,128
Units acquired (1) -- -- -- -- 6,296
Units sold (2,799) (1,984) (198) -- (416)
Total units owned by the Company and its affiliates 30,374 30,522 29,720 27,963 25,938
Total apartment rental income (in thousands) $ 368,042 $ 365,895 $ 318,697 $ 275,755 $ 185,732
(1) As part of the Merger, the Company acquired 26 communities containing
6,296 units. Of the communities acquired in the Merger, 14 communities
containing 3,916 units were built by Columbus and 12 communities
containing 2,380 units were acquired by Columbus.
CURRENT DEVELOPMENT
The Company has under construction or in initial lease-up eight new communities
and additions to two existing communities that will contain an aggregate of
2,604 units upon completion. The Company's communities under development or in
initial lease-up are summarized in the following table:
ESTIMATED AMOUNT ESTIMATED ESTIMATED ESTIMATED
CONSTRUCTION SPENT QUARTER OF QUARTER OF QUARTER OF
# OF COST ($ IN AS OF CONSTRUCTION FIRST UNITS STABILIZED
METROPOLITAN AREA UNITS MILLION) 12/31/01 START AVAILABLE OCCUPANCY
----------------- ----- ------------ -------- ------------- ----------- ----------
WHOLLY OWNED CONSTRUCTION/LEASE-UP COMMUNITIES
CHARLOTTE, NC
Post Gateway Place II 204 $ 38 $ 30 3Q `00 4Q `01 1Q `03
-----
TAMPA, FL
Post Harbour Place III 259 35 15 2Q `01 2Q `02 2Q `03
-----
DENVER, CO
Post Uptown Square II 247 35 27 1Q `00 4Q `01 1Q `03
-----
WASHINGTON, DC
Post Pentagon Row 504 98 84 2Q `99 2Q `01 4Q `02
Post Massachusetts Avenue 269 76 32 2Q `01 1Q `03 4Q `03
----- ----- -----
773 174 116
----- ----- -----
Subtotal Wholly Owned Construction/Lease-up
Communities 1,483 $282 $188
===== ==== ====
CO-INVESTMENT CONSTRUCTION/LEASE-UP COMMUNITIES
ATLANTA, GA
Post Peachtree (a) 121 $ 31 $ 30 2Q `00 3Q `01 3Q `02
Post Biltmore (a) 276 37 29 3Q `00 4Q `01 1Q `03
----- ----- -----
397 68 59
NEW YORK CITY, NY
Post Luminaria (b) 138 52 21 3Q `01 3Q `02 2Q `03
Post Toscana (c) 199 97 21 1Q `02 2Q `03 2Q `04
----- ----- -----
337 149 42
PASADENA, CA
Post Paseo Colorado (a) (d) 387 76 60 2Q `00 2Q `02 2Q `03
----- ----- -----
Subtotal Co-Investment Construction/Lease-up
Communities 1,121 293 161
----- ----- -----
CONSTRUCTION TOTALS 2,604 575 349
=====
Less Partners' Portion (110) (84)
----- -----
POST PROPERTIES' FUNDING COMMITMENT $ 465 $ 265
===== =====
(a) These communities are being developed in joint ventures (Post equity
ownership is 35 percent).
(b) This development is structured as a joint venture, with Post and its
development partner contributing approximately 70% of the equity and a
landowner contributing the balance.
(c) This development is structured as a joint venture, with Post and its
development partner. Post will contribute substantially all of the
capital to the joint venture.
(d) Increase in cost related to upgrading the planned apartment unit
finishes.
Post Properties, Inc. 4
Post Apartment Homes, L.P.
COMPETITION
All of the Communities are located in developed areas that include other upscale
apartments. The number of competitive upscale apartment properties in a
particular area could have a material effect on the Company's ability to lease
apartment units at the Communities or at any newly developed or acquired
communities and on the rents charged. The Company may be competing with others
that have greater resources than the Company. In addition, other forms of
residential properties, including single family housing, provide housing
alternatives to potential residents of upscale apartment communities.
AMERICANS WITH DISABILITIES ACT
The Communities and any newly acquired apartment communities must comply with
Title III of the Americans with Disabilities Act (the "ADA") to the extent that
such properties are "public accommodations" and/or "commercial facilities" as
defined by the ADA. Compliance with the ADA requirements could require removal
of structural barriers to handicapped access in certain public areas of the
Company's Communities where such removal is readily achievable. The ADA does
not, however, consider residential properties, such as apartment communities, to
be public accommodations or commercial facilities, except to the extent portions
of such facilities, such as the leasing office, are open to the public. The
Company believes that its properties comply with all present requirements under
the ADA and applicable state laws. Noncompliance could result in imposition of
fines or an award of damages to private litigants. If required to make material
additional changes, the Company's results or operations could be adversely
affected.
ENVIRONMENTAL REGULATIONS
The Company is subject to Federal, state and local environmental regulations
that apply to the development of real property, including construction
activities, the ownership of real property, and the operation of multifamily
apartment communities.
In developing properties and constructing apartments, the Company utilizes
environmental consultants to determine whether there are any flood plains,
wetlands or environmentally sensitive areas that are part of the property to be
developed. If flood plains are identified, development and construction is
planned so that flood plain areas are preserved or alternative flood plain
capacity is created in conformance with Federal and local flood plain management
requirements.
Storm water discharge from a construction facility is evaluated in connection
with the requirements for storm water permits under the Clean Water Act. This is
an evolving program in most states. The Company currently anticipates it will be
able to obtain storm water permits for existing or new development.
The Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state superfund laws subject
the owner or real property to claims or liability for the costs or removal or
remediation of hazardous substances that are disposed of on real property in
amounts that require removal or remediation. Liability under CERCLA and
applicable state superfund laws can be imposed on the owner of real property or
the operator of a facility without regard to fault or even knowledge of the
disposal of hazardous substances on the property or at the facility. The
presence of hazardous substances in amounts requiring response action or the
failure to undertake remediation where it is necessary may adversely affect the
owner's ability to sell real estate or borrow money using such real estate as
collateral. In addition to claims for cleanup costs, the presence of hazardous
substances on a property could result in a claim by a private party for personal
injury or a claim by an adjacent property owner for property damage.
The Company has instituted a policy that requires an environmental investigation
of each property that it considers for purchase or that it owns and plans to
develop. The environmental investigation is conducted by a qualified
environmental consultant. If there is any indication of contamination, sampling
of the property is performed by the environmental consultant. The environmental
investigation report is reviewed by the Company and counsel prior to purchase of
any property. If necessary, remediation of contamination, including underground
storage tanks, is undertaken prior to development.
The Company has not been notified by any governmental authority of any
noncompliance, claim, or liability in connection with any of the Communities.
The Company has not been notified of a claim for personal injury or property
damage by a private party in connection with any of the Communities in
connection with environmental conditions. The Company is not aware of any
environmental condition with respect to any of the Communities that could be
considered to be material.
Post Properties, Inc. 5
Post Apartment Homes, L.P.
RISK FACTORS
The following risk factors apply to the Company and the Operating Partnership.
All indebtedness described in the risk factors has been incurred by the
Operating Partnership.
UNFAVORABLE CHANGES IN APARTMENT MARKETS AND ECONOMIC CONDITIONS COULD ADVERSELY
AFFECT OCCUPANCY LEVELS AND RENTAL RATES.
Market and economic conditions in the various metropolitan areas of the United
States where the Company operates may significantly affect occupancy levels and
rental rates and therefore profitability. Factors that may adversely affect
these conditions include the following:
- - the economic climate, which may be adversely impacted by a reduction in
jobs, industry slowdowns and other factors;
- - local conditions, such as oversupply of, or reduced demand for,
apartment homes;
- - a future economic downturn that simultaneously affects one or more of
the Company's geographic markets; o declines in household formation;
- - rent control or stabilization laws, or other laws regulating rental
housing, which could prevent the Company from raising rents to offset
increases in operating costs; and
- - competition from other available apartments and other housing
alternatives and changes in market rental rates.
Any of these factors could adversely affect the Company's ability to achieve
desired operating results from its communities.
DEVELOPMENT AND CONSTRUCTION RISKS COULD IMPACT THE COMPANY'S PROFITABILITY.
The Company intends to continue to develop and construct apartment communities.
Development activities may be conducted through wholly-owned affiliated
companies or through joint ventures with unaffiliated parties. The Company's
development and construction activities may be exposed to the following risks:
- - the Company may be unable to obtain, or face delays in obtaining,
necessary zoning, land-use, building, occupancy, and other required
governmental permits and authorizations, which could result in
increased development costs;
- - the Company may incur construction costs for a property that exceed
original estimates due to increased materials, labor or other costs,
which could make completion of the property uneconomical, and the
Company may not be able to increase rents to compensate for the
increase in construction costs;
- - the Company intends to concentrate its attention on fewer markets and
reduce annual development expenditures, and it may abandon development
opportunities that it has already begun to explore, and it may fail to
recover expenses already incurred in connection with exploring those
opportunities;
- - the Company has been and may continue to be unable to complete
construction and lease-up of a community on schedule and meet financial
goals for development projects;
Post Properties, Inc. 6
Post Apartment Homes, L.P.
- - because occupancy rates and rents at a newly developed community may
fluctuate depending on a number of factors, including market and
economic conditions, the Company may be unable to meet its
profitability goals for that community; and
- - construction costs have been increasing in the Company's existing
markets, and may continue to increase in the future and, in some cases,
the costs of upgrading acquired communities have, and may continue to,
exceed original estimates and the Company may be unable to charge rents
that would compensate for these increases in costs.
FAILURE TO SUCCEED IN NEW MARKETS MAY LIMIT THE COMPANY'S GROWTH.
The Company may from time to time commence development activity or make
acquisitions outside of its existing market areas if appropriate opportunities
arise. The Company's historical experience in its existing markets does not
ensure that it will be able to operate successfully in new markets. The Company
may be exposed to a variety of risks if it chooses to enter new markets. These
risks include, among others:
- - an inability to evaluate accurately local apartment market conditions
and local economies;
- - an inability to obtain land for development or to identify appropriate
acquisition opportunities;
- - an inability to hire and retain key personnel; and
- - lack of familiarity with local governmental and permitting procedures.
POSSIBLE DIFFICULTY OF SELLING APARTMENT COMMUNITIES COULD LIMIT THE COMPANY'S
OPERATIONAL AND FINANCIAL FLEXIBILITY.
Although the Company has experienced success in disposing of apartment
communities that no longer meet its strategic objectives, market conditions
could change and purchasers may not be willing to pay acceptable prices. A weak
market may limit the Company's ability to change its portfolio promptly in
response to changing economic conditions. Also, if the Company is unable to sell
apartment communities or if it can only sell apartment communities at prices
lower than are generally acceptable, then the Company may have to take on
additional leverage in order to provide adequate capital to execute its
development and construction strategy. Furthermore, a portion of the proceeds
from the Company's overall property sales in the future may be held in escrow
accounts in order for some sales to qualify as like-kind exchanges under Section
1031 of the Internal Revenue Code so that any related capital gain can be
deferred for federal income tax purposes. As a result, the Company may not have
immediate access to all of the cash flow generated from property sales.
CHANGING INTEREST RATES COULD INCREASE INTEREST COSTS AND COULD AFFECT THE
MARKET PRICE OF THE COMPANY'S SECURITIES.
The Company has incurred, and expects to continue to incur, debt-bearing
interest at rates that vary with market interest rates. Therefore, if interest
rates increase, the Company's interest costs will rise to the extent its
variable rate debt is not hedged effectively. In addition, an increase in market
interest rates may lead purchasers of the Company's securities to demand a
higher annual yield, which could adversely affect the market price of the
Company's common and preferred stock and debt securities.
FAILURE TO GENERATE SUFFICIENT CASH FLOWS COULD AFFECT THE COMPANY'S DEBT
FINANCING AND CREATE REFINANCING RISK.
The Company is subject to the risks normally associated with debt financing,
including the risk that its cash flow will be insufficient to make required
payments of principal and interest. Although the Company may be able to use cash
flow to make future principal payments, it cannot assure investors that
sufficient cash flow will be available to make all required principal payments
and still satisfy the distribution requirements that the Company must satisfy in
order to maintain its status as a real estate investment trust or "REIT" for
federal income tax purposes. The following factors, among others, may affect the
cash flows generated by the Company's apartment communities:
- - the national and local economies;
- - local real estate market conditions, such as an oversupply of apartment
homes;
- - the perceptions by prospective residents of the safety, convenience and
attractiveness of the Company's communities and the neighborhoods in
which they are located;
- - the Company's ability to provide adequate management, maintenance and
insurance; and
- - rental expenses, including real estate taxes and utilities.
Post Properties, Inc. 7
Post Apartment Homes, L.P.
Expenses associated with the Company's investment in a community, such as debt
service, real estate taxes, insurance and maintenance costs, are generally not
reduced when circumstances cause a reduction in cash flows from operations from
that community. If a community is mortgaged to secure payment of debt and the
Company is unable to make the mortgage payments, the Company could sustain a
loss as a result of foreclosure on the community or the exercise of other
remedies by the mortgagee. The Company is likely to need to refinance at least a
portion of its outstanding debt as it matures. There is a risk that the Company
may not be able to refinance existing debt or that the terms of any refinancing
will not be as favorable as the terms of the existing debt. As of December 31,
2001, the Company had outstanding mortgage indebtedness of approximately
$465,318, senior unsecured debt of approximately $703,000 and outstanding
indebtedness under its lines of credit and other unsecured debt aggregating
$168,202.
THE COMPANY COULD BECOME MORE HIGHLY LEVERAGED WHICH COULD RESULT IN AN
INCREASED RISK OF DEFAULT AND IN AN INCREASE IN ITS DEBT SERVICE REQUIREMENTS.
The Company's board of directors has adopted a policy of limiting indebtedness
to approximately 60% of the undepreciated book value of its assets, but the
Company's organizational documents do not contain any limitation on the amount
or percentage of indebtedness, funded or otherwise, that it might incur. If this
policy were changed, the Company could become more highly leveraged, resulting
in an increase in debt service that could adversely affect funds from operations
and the Company's ability to make expected distributions to its shareholders and
the Operating Partnership's ability to make expected distributions to its
limited partners and in an increased risk of default on the obligations of the
Company and the Operating Partnership. In addition, the Company's and the
Operating Partnership's ability to incur debt is limited by covenants in bank
and other credit agreements. The Company manages its debt to be in compliance
with its stated policy and with these debt covenants, but subject to compliance
with these covenants, the Company may increase the amount of outstanding debt at
any time without a concurrent improvement in the Company's ability to service
the additional debt. Accordingly, the Company could become more leveraged,
resulting in an increased risk of default on its obligations and in an increase
in debt service requirements, both of which could adversely affect the Company's
financial condition and ability to access debt and equity capital markets in the
future.
DEBT FINANCING MAY NOT BE AVAILABLE AND EQUITY ISSUANCES COULD BE DILUTIVE TO
THE COMPANY'S SHAREHOLDERS.
The Company's ability to execute its business strategy depends on its access to
an appropriate blend of debt financing, including unsecured lines of credit and
other forms of secured and unsecured debt, and equity financing, including
common and preferred equity. Debt financing may not be available in sufficient
amounts, or on favorable terms or at all. If the Company issues additional
equity securities to finance developments and acquisitions instead of incurring
debt, the interests of existing shareholders could be diluted.
ACQUIRED COMMUNITIES MAY NOT ACHIEVE ANTICIPATED RESULTS.
The Company intends to continue to selectively acquire apartment communities
that meet its investment criteria. The Company's acquisition activities and
their success may be exposed to the following risks:
- - an acquired community may fail to achieve expected occupancy and rental
rates and may fail to perform as expected;
- - the Company may not be able to successfully integrate acquired
properties and operations; and
- - the Company's estimates of the costs of repositioning or redeveloping
the acquired property may prove inaccurate, causing the Company to fail
to meet its profitability goals.
INCREASED COMPETITION COULD LIMIT THE COMPANY'S ABILITY TO LEASE APARTMENT HOMES
OR INCREASE OR MAINTAIN RENTS.
The Company's apartment communities compete with numerous housing alternatives
in attracting residents, including other apartment communities and single-family
rental homes, as well as owner occupied single- and multi-family homes.
Competitive housing in a particular area could adversely affect the Company's
ability to lease apartment homes and increase or maintain rents.
LIMITED INVESTMENT OPPORTUNITIES COULD ADVERSELY AFFECT THE COMPANY'S GROWTH.
The Company expects that other real estate investors will compete to acquire
existing properties and to develop new properties. These competitors include
insurance companies, pension and investment funds, developer partnerships,
investment companies and other apartment REITs. This competition could increase
prices for properties of the type that the Company would likely
Post Properties, Inc. 8
Post Apartment Homes, L.P.
pursue, and competitors may have greater resources than the Company. As a
result, the Company may not be able to make attractive investments on favorable
terms, which could adversely affect its growth.
INTEREST RATE HEDGING CONTRACTS MAY BE INEFFECTIVE AND MAY RESULT IN MATERIAL
CHARGES.
From time to time when the Company anticipates issuing debt securities, it may
seek to limit exposure to fluctuations in interest rates during the period prior
to the pricing of the securities by entering into interest rate hedging
contracts. The Company may do this to increase the predictability of its
financing costs. Also, from time to time, the Company may rely on interest rate
hedging contracts to limit its exposure under variable rate debt to unfavorable
changes in market interest rates. If the pricing of new debt securities is not
within the parameters of, or market interest rates produce a lower interest cost
than the Company incurs under, a particular interest rate hedging contract, the
contract is ineffective. Furthermore, the settlement of interest rate hedging
contracts has involved and may in the future involve material charges. These
charges are typically related to the extent and timing of fluctuations in
interest rates. Despite the Company's efforts to minimize its exposure to
interest rate fluctuations, the Company cannot guarantee that it will maintain
coverage for all of its outstanding indebtedness at any particular time. If the
Company does not effectively protect itself from this risk, it may be subject to
increased interest costs resulting from interest rate fluctuations.
TERRORIST ATTACKS AND THE POSSIBILITY OF WIDER ARMED CONFLICT MAY HAVE AN
ADVERSE EFFECT ON OUR BUSINESS AND OPERATING RESULTS AND COULD DECREASE THE
VALUE OF OUR ASSETS.
Terrorist attacks and other acts of violence or war, such as those that took
place on September 11, 2001, could have a material adverse effect on our
business and operating results. There can be no assurance that there will not be
further terrorist attacks against the United States or its businesses or
interests. Attacks or armed conflicts that directly impact one or more of our
apartment communities could significantly affect our ability to operate those
communities and thereby impair our ability to achieve our expected results.
Further, the Company's insurance coverage may not cover any losses caused by a
terrorist attack. In addition, the adverse effects that such violent acts and
threats of future attacks could have on the U.S. economy could similarly have a
material adverse effect on our business and results of operations. Finally,
further terrorist acts could cause the United States to enter into a wider armed
conflict which could further impact our business and operating results.
LOSSES FROM NATURAL CATASTROPHES MAY EXCEED INSURANCE COVERAGE.
The Company carries comprehensive liability, fire, flood, extended coverage and
rental loss insurance on its properties, which are believed to be of the type
and amount customarily obtained on real property assets. The Company intends to
obtain similar coverage for properties acquired in the future. However, some
losses, generally of a catastrophic nature, such as losses from floods or
earthquakes, may be subject to limitations. The Company exercises discretion in
determining amounts, coverage limits and deductibility provisions of insurance,
with a view to maintaining appropriate insurance on its investments at a
reasonable cost and on suitable terms. If the Company suffers a substantial
loss, its insurance coverage may not be sufficient to pay the full current
market value or current replacement value of the lost investment. Inflation,
changes in building codes and ordinances, environmental considerations and other
factors also might make it infeasible to use insurance proceeds to replace a
property after it has been damaged or destroyed.
POTENTIAL LIABILITY FOR ENVIRONMENTAL CONTAMINATION COULD RESULT IN SUBSTANTIAL
COSTS.
The Company is in the business of acquiring, developing, owning, operating and,
from time to time, selling real estate. Under various federal, state and local
environmental laws, as a current or former owner or operator, the Company could
be required to investigate and remediate the effects of contamination of
currently or formerly owned real estate by hazardous or toxic substances, often
regardless of its knowledge of or responsibility for the contamination and
solely by virtue of its current or former ownership or operation of the real
estate. In addition, the Company could be held liable to a governmental
authority or to third parties for property damage and for investigation and
clean-up costs incurred in connection with the contamination. These costs could
be substantial, and in many cases environmental laws create liens in favor of
governmental authorities to secure their payment. The presence of such
substances or a failure to properly remediate any resulting contamination could
materially and adversely affect the Company's ability to borrow against, sell or
rent an affected property.
COMPLIANCE OR FAILURE TO COMPLY WITH LAWS REQUIRING ACCESS TO THE COMPANY'S
PROPERTIES BY DISABLED PERSONS COULD RESULT IN SUBSTANTIAL COST.
The Americans with Disabilities Act, the Fair Housing Act of 1988 and other
federal, state and local laws generally require that public accommodations be
made accessible to disabled persons. Noncompliance could result in the
imposition of fines by the government or the award of damages to private
litigants. These laws may require the Company to modify its existing properties.
These laws may also restrict renovations by requiring improved access to such
buildings by disabled persons or may require the Company to add other structural
features that increase construction costs. Legislation or regulations adopted in
the future may impose further burdens or restrictions on the Company with
respect to improved access by disabled persons. The Company cannot ascertain the
costs of compliance with these laws, which may be substantial.
THE COMPANY MAY FAIL TO QUALIFY AS A REIT FOR FEDERAL INCOME TAX PURPOSES.
The Company's qualification as a REIT for federal income tax purposes depends
upon its ability to meet on a continuing basis, through actual annual operating
results, distribution levels and diversity of stock ownership, the various
qualification tests and
Post Properties, Inc. 9
Post Apartment Homes, L.P.
organizational requirements imposed upon REITs under the Internal Revenue Code.
The Company believes that it has qualified for taxation as a REIT for federal
income tax purposes commencing with its taxable year ended December 31, 1993,
and plans to continue to meet the requirements to qualify as a REIT in the
future. Many of these requirements, however, are highly technical and complex.
The Company cannot guarantee, therefore, that it has qualified or will continue
to qualify in the future as a REIT. The determination that the Company qualifies
as a REIT for federal income tax purposes requires an analysis of various
factual matters that may not be totally within the Company's control. Even a
technical or inadvertent mistake could jeopardize the Company's REIT status.
Furthermore, Congress and the IRS might make changes to the tax laws and
regulations, and the courts might issue new decisions that make it more
difficult, or impossible, for the Company to remain qualified as a REIT. The
Company does not believe, however, that any pending or proposed tax law changes
would jeopardize its REIT status.
If the Company were to fail to qualify for taxation as a REIT in any taxable
year, and certain relief provisions of the Internal Revenue Code did not apply,
the Company would be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, leaving less
money available for distributions to its shareholders. In addition,
distributions to shareholders in any year in which the Company failed to qualify
would not be deductible by the Company for federal income tax purposes nor would
they be required to be made. Unless entitled to relief under specific statutory
provisions, the Company also would be disqualified from taxation as a REIT for
the four taxable years following the year during which it ceased to qualify as a
REIT. It is not possible to predict whether in all circumstances the Company
would be entitled to such statutory relief. The Company's failure to qualify as
a REIT likely would have a significant adverse effect on the value of its
securities.
THE OPERATING PARTNERSHIP MAY FAIL TO BE TREATED AS A PARTNERSHIP FOR FEDERAL
INCOME TAX PURPOSES.
Management believes that the Operating Partnership qualifies, and has so
qualified since its formation, as a partnership for federal income tax purposes
and not as a publicly traded partnership taxable as a corporation. No assurance
can be provided, however, that the IRS will not challenge the treatment of the
Operating Partnership as a partnership for federal income tax purposes or that a
court would not sustain such a challenge. If the IRS were successful in treating
the Operating Partnership as a corporation for federal income tax purposes, then
the taxable income of the Operating Partnership would be taxable at regular
corporate income tax rates. In addition, the treatment of the Operating
Partnership as a corporation would cause the Company to fail to qualify as a
REIT. See "--The Company may fail to qualify as a REIT for federal income tax
purposes" above.
THE COMPANY'S SHAREHOLDERS MAY NOT BE ABLE TO EFFECT A CHANGE IN CONTROL.
The articles of incorporation and bylaws of the Company, the partnership
agreement of the Operating Partnership, and the Georgia Business Corporation
Code contain a number of provisions that could delay, defer or prevent a
transaction or a change in control that might involve a premium price for the
Company's shareholders or otherwise be in their best interests, including the
following:
Ownership Limit. One of the requirements for maintenance of the Company's
qualification as a REIT for federal income tax purposes is that no more than 50%
in value of its outstanding capital stock may be owned by five or fewer
individuals, including entities specified in the Internal Revenue Code, during
the last half of any taxable year. Primarily to facilitate maintenance of its
qualification as a REIT for federal income tax purposes, the ownership limit
under the Company's articles of incorporation prohibits ownership, directly or
by virtue of the attribution provisions of the Internal Revenue Code, by any
person or persons acting as a group of more than 6.0% of the issued and
outstanding shares of the Company's common stock, subject to an exception for
shares of common stock held by Mr. Williams and Mr. Glover, the Company's
Chairman and Vice Chairman. Together, these limitations are referred to as the
"ownership limit." Further, the Company's articles of incorporation include
provisions allowing it to stop transfers of and redeem its shares that are
intended to assist the Company in complying with these requirements. These
provisions may have the effect of delaying, deferring or preventing someone from
taking control, even though a change of control might involve a premium price
for the Company's shareholders or might otherwise be in the shareholders' best
interests.
Staggered Board. The Company's articles of incorporation provide that the board
of directors will consist of eight members and can be increased or decreased
after that according to its bylaws, provided that the total number of directors
is not less than three nor more than 15. Pursuant to the Company's bylaws, the
number of directors will be fixed by the board of directors within the limits in
its articles of incorporation. The board of directors is divided into three
classes of directors. Directors for each class are chosen for a three-year term.
The staggered terms for directors may affect the Company's shareholders' ability
to effect a change of control, even if a change of control would be in the
interest of the shareholders.
Post Properties, Inc. 10
Post Apartment Homes, L.P.
Preferred shares; classification or reclassification of unissued shares of
capital stock without shareholder approval. The Company's articles of
incorporation provide that the total number of shares of stock of all classes
which it has authority to issue is 120,000,000, consisting of 100,000,000 shares
of common stock and 20,000,000 shares of preferred stock, of which 4,900,000 are
outstanding as of December 31, 2001. The board of directors has the authority,
without a vote of shareholders, to classify or reclassify any unissued shares of
stock, including common stock into preferred stock or vice versa, and to
establish the preferences and rights of any preferred or other class or series
of shares to be issued. The issuance of preferred stock or other shares having
special preferences or rights could delay or prevent a change of control even if
a change of control would be in the interests of the shareholders. Because the
board of directors has the power to establish the preferences and rights of
additional classes or series of shares without a shareholder vote, the board of
directors may give the holders of any class or series preferences, powers and
rights, including voting rights, senior to the rights of holders of the
Company's common stock.
Consent rights of the Unitholders. Under the partnership agreement of the
Operating Partnership, the Company may not merge or consolidate with another
entity unless the merger includes the merger of the Operating Partnership, which
requires the approval of the holders of a majority of the outstanding units of
limited partnership. If the Company were to ever hold less than a majority of
the units, this voting requirement might limit the possibility for an
acquisition or a change of control.
Georgia Anti-Takeover Statutes. The Georgia Business Corporation Code generally
restricts a company from entering into certain business combinations with an
interested shareholder for a period of five years after the date on which the
shareholder becomes an interested shareholder unless (1) the transaction is
approved by the board of directors of the company prior to the date the person
becomes an interested shareholder, (2) the interested shareholder acquires 90%
of the company's voting stock in the same transaction in which it exceeds 10% or
(3) subsequent to becoming an interested shareholder, the shareholder acquires
90% of the company's voting stock and the business combination is approved by
the holders of a majority of the voting stock entitled to vote on the business
combination. An interested shareholder is defined as any person or entity that
is the beneficial owner of at least 10% of the company's voting stock. This
business combination statute will not apply unless the bylaws of the corporation
specifically provide that the statute is applicable to the corporation. The
Company has not elected to be covered by this statute, but it could so by action
of the board of directors at any time.
Georgia Fair Price Statute. The Georgia Fair Price Statute imposes fair price
and procedural requirements applicable to business combinations with any person
who owns 10% or more of the common stock. These statutory requirements restrict
business combinations with, and accumulations of shares of voting stock of,
certain Georgia corporations. This fair price statute will not apply unless the
bylaws of the corporation specifically provide that the statute is applicable to
the corporation. The Company has not elected to be covered by this statute, but
it could do so by action of the board of directors at any time.
Post Properties, Inc. 11
Post Apartment Homes, L.P.
ITEM 2. PROPERTIES
At February 3, 2002, the Communities consisted of 87 stabilized Post(R)
multifamily apartment communities located in the following metropolitan areas:
Metropolitan Area Communities # of Units % of Total
----------------- ----------- ---------- ----------
Atlanta, GA .................. 39 15,384 51.2%
Dallas, TX ................... 26 6,274 20.9%
Houston, TX .................. 2 981 3.3%
Austin, TX ................... 1 239 0.8%
Tampa, FL .................... 8 3,192 10.6%
Orlando, FL .................. 3 1,493 5.0%
Fairfax, VA .................. 2 700 2.3%
Nashville, TN ................ 1 86 0.3%
Phoenix, AZ .................. 1 403 1.3%
Charlotte, NC ................ 3 861 2.8%
Denver, CO ................... 1 449 1.5%
------- ------- -------
87 30,062 100.0%
======= ======= =======
The Company or its predecessors developed all but 12 of the Post(R) Communities
and currently manages all of the Communities. Fifty-two of the Communities have
in excess of 300 apartment units, with the largest Community having a total of
916 apartment units. Eighty-two of the eighty-seven Communities, comprising
approximately 95% of the Communities' apartment units, were completed after
January 1, 1986. The average age of the Communities is approximately eight
years. The average economic occupancy rate was 94.9% and 96.6%, respectively,
and the average monthly rental rate per apartment unit was $957 and $937,
respectively, for communities stabilized for each of the entire years ended
December 31, 2001 and 2000. See "Selected Financial Information."
COMMUNITY INFORMATION
DECEMBER 2001 2001
AVERAGE AVERAGE AVERAGE
YEAR UNIT SIZE NO. OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION (1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY (2)
----------- ------------ --------- ------------- ------ ------------- -------------
GEORGIA
Post Ashford(R).......................... Atlanta 1987 872 222 890 96.4%
Post Briarcliff(TM)...................... Atlanta 1999 1,034 688 1,146 95.3%
Post Bridge(R)........................... Atlanta 1986 847 354 749 94.6%
Post Brookhaven(R)....................... Atlanta 1990-92(4) 990 735 1,037 94.6%
Post Canyon(R)........................... Atlanta 1986 899 494 777 95.1%
Post Chase(R)............................ Atlanta 1987 938 410 761 94.3%
Post Chastain(R)......................... Atlanta 1990 965 558 1,042 93.9%
Post Collier Hills(R).................... Atlanta 1997 984 396 1,093 94.5%
Post Corners(R).......................... Atlanta 1986 860 460 750 92.0%
Post Court(R)............................ Atlanta 1988 838 446 728 94.3%
Post Crest(R)............................ Atlanta 1996 1,069 410 1,072 93.1%
Post Crossing(R)......................... Atlanta 1995 1,027 354 1,119 95.5%
Post Dunwoody(R)......................... Atlanta 1989-96(4) 1,010 530 1,022 95.4%
Post Gardens(R).......................... Atlanta 1998 1,068 397 1,262 94.2%
Post Glen(R)............................. Atlanta 1997 1,117 314 1,266 95.3%
Post Lane(R)............................. Atlanta 1988 840 166 815 96.2%
Post Lenox Park(R)....................... Atlanta 1995 1,030 206 1,141 94.3%
Post Lindbergh(R)........................ Atlanta 1998 956 396 1,106 96.0%
Post Mill(R)............................. Atlanta 1985 952 398 803 95.3%
Post Oak(TM)............................. Atlanta 1993 1,003 182 1,110 95.9%
Post Oglethorpe(R)....................... Atlanta 1994 1,218 250 1,342 93.5%
Post Park(R)............................. Atlanta 1988-90(4) 912 770 866 95.7%
Post Parkside(TM)........................ Atlanta 2000 903 188 1,399 96.8%
Post Peachtree Hills(R).................. Atlanta 1992-94(4) 971 300 1,107 95.0%
Post Renaissance(R)(5) .................. Atlanta 1992-94(4) 903 342 1,057 94.8%
Post Ridge(R)............................ Atlanta 1998 1,061 434 1,083 94.7%
Post Riverside(TM)....................... Atlanta 1998 1,049 527 1,464 94.2%
Post Spring(TM).......................... Atlanta 2000 977 452 1,050 N/A(3)
Post Stratford(TM)....................... Atlanta 2000 1,007 250 1,278 89.8%
Post Summit(R)........................... Atlanta 1990 957 148 979 94.7%
Post Valley(R)........................... Atlanta 1988 854 496 753 95.1%
Post Village(R).......................... Atlanta 803 95.7%
The Arbors ........................... 1983 1,063 301
The Fountains ........................ 1987 850 352
The Gardens .......................... 1986 891 494
The Hills ............................ 1984 953 241
The Meadows .......................... 1988 817 350
Post Vinings(R)......................... Atlanta 1989-91(4) 972 403 881 94.2%
Post Walk(R)............................ Atlanta 1984-87(4) 927 476 890 94.6%
Post Woods(R)........................... Atlanta 1977-83(4) 1,057 494 978 93.9%
------ ------ ----- -----
SUBTOTAL/AVERAGE - GEORGIA .......... 965 15,384 986 94.7%
------ ------ ----- -----
Post Properties, Inc. 12
Post Apartment Homes, L.P.
DECEMBER 2001 2001
AVERAGE AVERAGE AVERAGE
YEAR UNIT SIZE NO. OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATIONS COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY (2)
- ----------- --------- --------- ------------- ------ ------------- -------------
TEXAS
Post Abbey(TM) ......................... Dallas 1996 1,275 34 1,972 95.5%
Post Addison Circle(TM) - Phase I ...... Dallas 1998 895 460 991 91.7%
Post Addison Circle(TM) - Phase II ..... Dallas 2000 898 610 1,058 90.3%
Post Addison CircleTM - Phase III ...... Dallas 2000 806 264 922 N/A(3)
Post American Beauty Mill (TM).......... Dallas 1998 993 80 1,042 88.3%
Post Ascension(R)....................... Dallas 1985-95(4) 932 167 877 93.6%
Post Block 588(TM)...................... Dallas 2000 1,570 127 1,778 82.2%
Post Cole's Corners(TM)................. Dallas 1998 819 186 997 94.9%
Post Columbus Square(TM)................ Dallas 1996 863 218 1,153 95.3%
Post Commons(TM)........................ Dallas 1985 645 158 812 98.4%
Post Gallery(TM)........................ Dallas 1999 2,307 34 3,309 82.6%
Post Hackberry Creek(R)................. Dallas 1988-96(4) 865 432 856 95.1%
Post Heights(TM)........................ Dallas 1998-99(4) 1,267 368 1,057 93.0%
Post Legacy ............................ Dallas 2000 843 384 895 N/A(3)
Post Meridian(TM)....................... Dallas 1991 835 133 1,095 95.3%
Post Midtown Square(TM)(6).............. Houston 1999-2000(4) 937 672 1,249 N/A(3)
Post Parkwood(R)........................ Dallas 1962-70(4) 889 96 1,024 98.2%
Post Residences(TM)..................... Dallas 1986 776 196 1,063 95.8%
Post Rice Lofts(TM)..................... Houston 1998 964 309 1,494 93.6%
Post Town Lake(R)....................... Dallas 1986-87(4) 880 398 810 94.3%
Post Uptown Village(TM)................. Dallas 1995 767 300 946 96.3%
Post Uptown Village II ................. Dallas 2000 730 196 846 92.1%
Post Vineyard(TM)....................... Dallas 1996 733 116 970 95.9%
Post Vintage(TM)........................ Dallas 1993 783 161 962 96.2%
Post West Avenue Lofts(TM).............. Austin 2000 858 239 1,332 N/A(3)
Post White Rock(R)...................... Dallas 1988 660 207 804 96.3%
Post Wilson Building(TM)................ Dallas 1999 1,016 143 1,272 89.9%
Post Windhaven (7)...................... Dallas 1991 885 474 734 N/A(3)
Post Worthington(TM).................... Dallas 1993 846 332 1,165 94.3%
----- ----- ----- -----
SUBTOTAL/AVERAGE - TEXAS ............... 950 7,494 1,046 93.0%
----- ----- ----- -----
FLORIDA
Post Court(R)............................ Tampa 1991 1,018 228 825 95.5%
Post Fountains at Lee Vista(R)........... Orlando 1988 835 508 688 95.5%
Post Harbour Place(TM) (I&II) (6)........ Tampa 1999 942 525 1,173 N/A(3)
Post Hyde Park(R)........................ Tampa 1996 970 389 1,099 95.9%
Post Lake(R)............................. Orlando 1988 850 740 684 96.2%
Post Parkside(TM)........................ Orlando 1999 873 245 1,116 94.8%
Post Rocky Point(R)...................... Tampa 1996-98(4) 1,070 916 1,038 96.2%
Post Village(R).......................... Tampa 764 94.2%
The Arbors ........................... 1991 967 304
The Lakes ............................ 1989 895 360
The Oaks ............................. 1991 968 336
Post Walk at Old Hyde Park Village ...... Tampa 1997 889 134 1,298 97.2%
----- ----- ----- ----
SUBTOTAL/AVERAGE - FLORIDA .............. 934 4,685 907 95.6%
----- ----- ----- ----
Post Properties, Inc. 13
Post Apartment Homes, L.P.
DECEMBER 2001 2001
AVERAGE AVERAGE AVERAGE
YEAR UNIT SIZE NO. OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATIONS COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY (2)
- ----------- --------- --------- ------------- ------ ------------- -------------
ARIZONA
Post Roosevelt Square ................. Phoenix 2000 836 403 838 N/A(3)
----- ------ ----- ----
VIRGINIA
Post Corners at Trinity Centre ........ Fairfax 1996 1,027 336 1,258 97.3%
Post Forest(R)......................... Fairfax 1990 888 364 1,183 96.8%
----- ------ ----- ----
SUBTOTAL/AVERAGE - VIRGINIA ......... 958 700 1,219 97.1%
----- ------ ----- ----
NORTH CAROLINA
Post Gateway Place(TM) I............... Charlotte 2000 698 232 865 N/A(3)
Post Park at Phillips Place(R)......... Charlotte 1998 1,136 402 1,219 91.0%
Post Uptown Place ..................... Charlotte 2000 800 227 1,019 N/A(3)
----- ------ ----- ----
SUBTOTAL/AVERAGE - NORTH CAROLINA.... 878 861 1,071 91.0%
----- ------ ----- ----
COLORADO
Post Uptown Square(TM) I............... Denver 1999-2001(4) 847 449 1,871 N/A(3)
----- ------ ----- ----
TENNESSEE
Post Bennie Dillion(TM)................ Nashville 1999 714 86 974 97.4%
----- ------ ----- ----
TOTAL ............................... 885 30,062 1,008 94.5%
===== ====== ===== ====
(1) Refers to greater metropolitan areas of cities indicated.
(2) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage.
(3) During 2001, this community or a phase in this community was in lease-up
and, therefore, is not included
(4) These dates represent the respective completion dates for multiple phases
of a community.
(5) The Company has a leasehold interest in the land underlying Post
Renaissance pursuant to a ground lease that expires on January 1, 2040.
(6) These communities are comprised of two phases. Only the first phase of each
of these communities is stabilized as of February 3, 2002.
(7) Post Windhaven(TM) is currently under rehab.
Post Properties, Inc. 14
Post Apartment Homes, L.P.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The persons who are executive officers of the Company and its affiliates and
their positions as of March 1, 2002 are as follows:
NAME POSITIONS AND OFFICES HELD
- ---- --------------------------
John A. Williams ................ Chairman of the Board, Chief Executive Officer and Director
John T. Glover .................. Vice Chairman and Director
David P. Stockert ............... President and Chief Operating Officer
Thomas L. Wilkes ................ President - Post Management Services and Chief Management Officer
R. Gregory Fox .................. Executive Vice President - Post Corporate Services and Chief Financial Officer
Sherry W. Cohen ................. Executive Vice President and Secretary - Post Corporate Services
Douglas S. Gray ................. Senior Vice President - Post Corporate Services
The following is a biographical summary of the experience of the executive
officers of the Company:
John A. Williams. Mr. Williams is the Chairman of the Board and Chief Executive
Officer of the Company and is a Director. Mr. Williams founded the business of
the Company in 1971 and since that time has acted as Chairman and Chief
Executive Officer. Mr. Williams is currently serving on the board of directors
of Crawford & Co. and the Georgia Regional Transportation Authority.
Mr. Williams is 59 years old.
John T. Glover. Mr. Glover has been the Vice-Chairman of the Company since
February 29, 2000 and a Director since 1984. From 1984 through February 29,
2000, Mr. Glover was President, Chief Operating Officer, and Treasurer of the
Company. Mr. Glover is a director of Haverty's Furniture Companies, Inc., a
trustee of Emory University and a director of Emory Healthcare, Inc. Mr. Glover
is 55 years old.
David P. Stockert. Mr. Stockert joined the Company January 1, 2001 as President
and Chief Operating Officer. From July 1999 to October 2000, Mr. Stockert was
Executive Vice President of Duke-Weeks Realty Corporation, a publicly traded
real estate company. From June 1995 to July 1999, Mr. Stockert was Senior Vice
President and Chief Financial Officer of Weeks Corporation, also a publicly
traded real estate company that was a predecessor by merger to Duke-Weeks Realty
Corporation. From August 1990 to May 1995, Mr. Stockert was an investment banker
in the Real Estate Group at Dean Witter Reynolds Inc. (now Morgan Stanley Dean
Witter). Mr. Stockert is 39 years old.
Thomas L. Wilkes. Mr. Wilkes joined the Company in October 1997 and, since
January 2001, has been the President of Post Apartment Management and the
Company's Chief Management Officer. From December 1998 through December 2000, he
was an Executive Vice President and Director of Operations for Post Apartment
Management responsible for the operations of Post(R)communities in the Western
United States. From October 1997 to December 1998 he was an Executive Vice
President and Director of Operations of Post West. Mr. Wilkes was a Senior Vice
President of Columbus from October 1993 through October 1997. Mr. Wilkes served
as President of CRH Management Company, a multifamily property management firm
and a member of the Columbus Group, since its formation in October 1990 to
December 1993. Mr. Wilkes is a Certified Property Manager. Mr. Wilkes is 42
years old.
Post Properties, Inc. 15
Post Apartment Homes, L.P.
R. Gregory Fox. Mr. Fox has been with the Company since February 1996 and, since
October 2000 has served as the Company's Chief Financial Officer. From December
1998 through September 2000, he served as Executive Vice President of Post
Corporate Services and the Company's Chief Accounting Officer responsible for
financial reporting and planning, accounting, management information systems and
human resources. From February 1996 to December 1998, Mr. Fox was a Senior Vice
President. Prior to joining the Company, he was a senior manager in the audit
division of PriceWaterhouse LLP where he was employed for ten years. Mr. Fox is
a Certified Public Accountant and is currently on the board of directors of
Realeum, Inc. Mr. Fox is 42 years old.
Sherry W. Cohen. Ms. Cohen has been with the Company for seventeen years. Since
October 1997, she has been an Executive Vice President of Post Corporate
Services responsible for supervising and coordinating legal affairs and
insurance. Since April 1990, Ms. Cohen had also been Corporate Secretary. She
was a Senior Vice President with Post Corporate Services from July 1993 to
October 1997. Prior thereto, Ms. Cohen was a Vice President of Post Properties,
Inc. since April 1990. Ms. Cohen is 47 years old.
Douglas S. Gray. Mr. Gray joined the Company in December 1997 and, since January
1999, has been a Senior Vice President of Post Corporate Services responsible
for dispositions and asset management. He was a Vice President of Post Corporate
Services from December 1997 to December 1998. Prior to joining Post, Mr. Gray
was Vice President of Dutch Institutional Holding Co. from July 1994 to November
1997. Prior thereto, he was Director of Property Services for The Landmarks
Group from June 1988 to June 1994. Mr. Gray is a Certified Public Accountant and
holds the CCIM designation. Mr. Gray is 42 years old.
Post Properties, Inc. 16
Post Apartment Homes, L.P.
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Common Stock is traded on the New York Stock Exchange ("NYSE") under the
symbol "PPS." The following table sets forth the quarterly high and low prices
per share reported on the NYSE, as well as the quarterly dividends declared per
share:
Dividends
Quarter End High Low Declared
- ----------- -------- -------- ---------
2000
First Quarter .................... $40.3125 $36.5000 $0.760
Second Quarter ................... 46.0938 39.9375 0.760
Third Quarter .................... 46.7500 42.0312 0.760
Fourth Quarter ................... 38.2500 33.9375 0.760
2001
First Quarter .................... $39.2500 $35.0000 $0.780
Second Quarter ................... 39.1500 35.2000 0.780
Third Quarter .................... 38.9500 35.7600 0.780
Fourth Quarter ................... 37.0800 32.5000 0.780
On March 20, 2002, the Company had 1,734 common shareholders of record.
The Company pays regular quarterly dividends to holders of shares of Common
Stock. Future distributions by the Company will be at the discretion of the
board of directors and will depend on the actual funds from operations of the
Company, the Company's financial condition and capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended (the "Code") and such other factors as the board of
directors deems relevant. For a discussion of the Company's credit agreements
and their restrictions on dividend payments, see Liquidity and Capital Resources
at Management's Discussion and Analysis of Financial Condition and Results of
Operations.
During 2001, the Company did not sell any unregistered securities.
There is no established public trading market for the Units. As of March 20,
2002, the Operating Partnership had 103 holders of record of Units of the
Operating Partnership.
For each quarter during 2000 and 2001, the Operating Partnership paid a cash
distribution to holders of Units equal in amount to the dividend paid on the
Company's common stock for such quarter.
During 2001, the Operating Partnership did not sell any unregistered securities.
Post Properties, Inc. 17
Post Apartment Homes, L.P.
ITEM 6. SELECTED FINANCIAL DATA
POST PROPERTIES, INC.
(Dollars in thousands, except per share and apartment unit data)
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ------------ ------------ ------------ ------------
OPERATING DATA:
Revenue:
Rental ...................................... $ 368,042 $ 365,895 $ 318,697 $ 275,755 $ 185,732
Third-party services (1) .................... 14,088 15,249 12,486 10,416 7,569
Other ....................................... 16,184 18,688 14,744 12,734 6,815
----------- ------------ ------------ ------------ ------------
Total revenue ............................. 398,314 399,832 345,927 298,905 200,116
----------- ------------ ------------ ------------ ------------
Expense:
Property operating and maintenance expense
(exclusive of depreciation and amortization) 140,630 131,349 113,152 99,717 67,515
Depreciation ................................ 76,178 71,113 58,013 46,646 29,048
Third-party services (1) .................... 13,023 13,092 10,829 8,763 6,243
Interest expense ............................ 57,930 50,303 33,192 31,297 24,658
Amortization of deferred loan costs ......... 1,978 1,636 1,496 1,185 980
General and administration .................. 13,745 10,066 7,788 8,495 7,364
Minority interest in consolidated property
partnerships ............................... (2,098) (1,695) 511 397 --
----------- ------------ ------------ ------------ ------------
Total expense ............................. 301,386 275,864 224,981 196,500 135,808
----------- ------------ ------------ ------------ ------------
Income before net gain (loss) on sale of
assets, loss on unused treasury locks,
loss on relocation of corporate office,
other charges, minority interest of
unitholders, cumulative affect of
accounting change and extraordinary item ..... 96,928 123,968 120,946 102,405 64,308
Net gain (loss) on sale of assets .............. 23,942 3,208 (1,522) -- 3,270
Loss on unused treasury locks .................. -- -- -- (1,944) --
Loss on relocation of corporate office ......... -- -- -- -- (1,500)
Project abandonment, employee severance and
impairment charges (2) ....................... (17,450) (9,365) -- -- --
Minority interest of preferred unitholders in
Operating Partnership ........................ (5,600) (5,600) (1,851) -- --
Minority interest of common unitholders in
Operating Partnership ........................ (10,203) (11,691) (12,598) (11,511) (11,131)
----------- ------------ ------------ ------------ ------------
Income before cumulative effect of accounting
change and extraordinary item ................ 87,617 100,520 104,975 88,950 54,947
Cumulative effect of accounting change, net of
minority interest (3) ........................ (613) -- -- -- --
Extraordinary item, net of minority
interest (4) ................................. (77) -- (458) -- (75)
----------- ------------ ------------ ------------ ------------
Net income ..................................... 86,927 100,520 104,517 88,950 54,872
Dividends to preferred shareholders ............ (11,768) (11,875) (11,875) (11,473) (4,907)
----------- ------------ ------------ ------------ ------------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS .... $ 75,159 $ 88,645 $ 92,642 $ 77,477 $ 49,965
=========== ============ ============ ============ ============
PER COMMON SHARE DATA:
Income before cumulative effect of accounting
change and extraordinary item (net of
preferred dividends) - basic ................. $ 2.00 $ 2.25 $ 2.42 $ 2.21 $ 2.11
Net income available to common
shareholder - basic .......................... 1.98 2.25 2.41 2.21 2.11
Income before cumulative effect of accounting
changes and extraordinary item (net of
preferred dividends) - diluted ............... 1.98 2.22 2.39 2.18 2.09
Net income available to common
shareholder - diluted ........................ 1.96 2.22 2.38 2.18 2.09
Dividends declared ............................. 3.12 3.04 2.80 2.60 2.38
BALANCE SHEET DATA
Real estate, before accumulated depreciation ... $ 2,867,672 $ 2,827,094 $ 2,582,785 $ 2,255,074 $ 1,936,011
Real estate, net of accumulated depreciation ... 2,463,398 2,469,914 2,279,769 2,007,926 1,734,916
Total assets ................................... 2,538,351 2,551,237 2,350,173 2,066,713 1,780,563
Total debt ..................................... 1,336,520 1,213,309 989,583 800,008 821,209
Shareholder's equity ........................... 901,517 1,028,610 1,058,862 1,051,686 756,920
Post Properties, Inc. 18
Post Apartment Homes, L.P.
OTHER DATA:
Cash flow provided from (used in):
Operating activities ........................... $ 161,564 $ 185,073 $ 153,038 $ 148,618 $ 109,554
Investing activities ........................... $ (51,213) $ (255,986) $ (317,960) $ (328,216) $ (208,377)
Financing activities ........................... $ (113,007) $ 72,502 $ 149,638 $ 189,873 $ 109,469
Funds from operations (5) ...................... $ 133,133 $ 163,411 $ 162,581 $ 134,202 $ 85,892
Weighted average common shares
outstanding - basic ........................... 38,052,673 39,317,725 38,460,689 35,028,596 23,664,044
Weighted average common shares and units
outstanding - basic ........................... 43,211,834 44,503,290 43,663,373 40,244,351 28,880,928
Weighted average common shares
outstanding - diluted ......................... 38,267,939 39,852,514 38,916,987 35,473,587 23,887,906
Weighted average common shares and units
outstanding - diluted ......................... 43,427,100 45,038,079 44,119,671 40,689,342 29,104,790
Total stabilized communities (at end of period) 82 82 85 83 78
Total stabilized apartment units (at end
of period) ................................... 27,710 28,736 29,032 27,568 25,938
Average economic occupancy (fully stabilized
communities) (6) ............................. 94.9% 96.8% 96.4% 96.5% 94.8%
(1) Consists of revenue and expenses from property management and landscape
services provided to properties owned by third parties.
(2) Project abandonment, employee severance and impairment charges for 2001
consisted of the following: Severance cost - $3.6 million Impairment
reserve for technology investments - $1.5 million Impairment reserve for
pre-development costs - $8.1 million Impairment reserve for for-sale
housing - $1.0 million Loss on sale of and impairment reserve for other
assets, including corporate aircraft - $3.3 million.
(3) The cumulative effect of accounting change results from the Company's
adoption of SFAS No. 133, effective January 1, 2001.
(4) The extraordinary item resulted from costs associated with the early
extinguishment of indebtedness.
(5) The Company uses the National Association of Real Estate Investment Trusts
("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT amended its
definition of FFO to include in FFO all non-recurring transactions, except
those that are defined as extraordinary under generally accepted accounting
principles ("GAAP"). The Company adopted this new definition effective
January 1, 2000. FFO for any period means the Consolidated Net Income of
the Company and its subsidiaries for such period excluding gains or losses
from debt restructuring and sales of property plus depreciation of real
estate assets, and after adjustment for unconsolidated partnerships and
joint ventures, all determined on a consistent basis in accordance with
GAAP. FFO presented herein is not necessarily comparable to FFO presented
by other real estate companies because not all real estate companies use
the same definition. The Company's FFO is comparable to the FFO of real
estate companies that use the current NAREIT definition. FFO should not be
considered as an alternative to net income (determined in accordance with
GAAP) as an indicator of the Company's financial performance or to cash
flow from operating activities (determined in accordance with GAAP) as a
measure of the Company's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Company's needs or ability to
service indebtedness or make distributions. FFO for 1998 and 1997 has been
restated to reflect the requirements of the new NAREIT definition.
(6) Amount represents average economic occupancy for communities stabilized for
both the current and prior respective periods. Average economic occupancy
is defined as gross potential rent less vacancy losses, model expenses and
bad debt divided by gross potential rent for the period, expressed as a
percentage. The calculation of average economic occupancy does not include
a deduction for concessions and employee discounts (average economic
occupancy, taking account of these amounts, would have been 93.8% and 94.8%
for the year ended December 31, 2001 and 2000, respectively). Concessions
were $1,860 and $3,729 and employee discounts were $895 and $871 for the
years ended December 31, 2001 and 2000, respectively. A community is
considered by the Company to have achieved stabilized occupancy on the
earlier to occur of (i) attainment of 95% physical occupancy on the first
day of any month, or (ii) one year after completion of construction.
Post Properties, Inc. 19
Post Apartment Homes, L.P.
POST APARTMENT HOMES, L.P.
(Dollars in thousands, except per unit and apartment unit data)
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
2001 2000 1999 1998 1997
----------- ------------ ------------ ------------ ------------
OPERATING DATA:
Revenue:
Rental ...................................... $ 368,042 $ 365,895 $ 318,697 $ 275,755 $ 185,732
Third-party services ........................ 14,088 15,249 12,486 10,416 7,569
Other ....................................... 16,184 18,688 14,744 12,734 6,815
----------- ------------ ------------ ------------ ------------
Total revenue ............................. 398,314 399,832 345,927 298,905 200,116
----------- ------------ ------------ ------------ ------------
Expense:
Property operating and maintenance expense
(exclusive of depreciation and
amortization) .............................. 140,630 131,349 113,152 99,717 67,515
Depreciation (real estate and non-real
estate assets) ............................. 76,178 71,113 58,013 46,646 29,048
Third-party services ........................ 13,023 13,092 10,829 8,763 6,243
Interest expense ............................ 57,930 50,303 33,192 31,297 24,658
Amortization of deferred loan costs ......... 1,978 1,636 1,496 1,185 980
General and administration .................. 13,745 10,066 7,788 8,495 7,364
Minority interest in consolidated property
partnerships ............................... (2,098) (1,695) 511 397 --
----------- ------------ ------------ ------------ ------------
Total expenses ............................ 301,386 275,864 224,981 196,500 135,808
----------- ------------ ------------ ------------ ------------
Income before net gain (loss) on sale of
assets, loss on unused treasury locks,
loss on relocation of corporate office,
other charges, cumulative affect of
accounting change and extraordinary item ..... 96,928 123,968 120,946 102,405 64,308
Net gain (loss) on sale of assets .............. 23,942 3,208 (1,522) -- 3,270
Loss on unused treasury locks .................. -- -- -- (1,944) --
Loss on relocation of corporate office ......... -- -- -- -- (1,500)
Project abandonment, employee severance and
impairment charges (2) ....................... (17,450) (9,365) -- -- --
----------- ------------ ------------ ------------ ------------
Income before cumulative effect of
accounting change and extraordinary item ..... 103,420 117,811 119,424 100,461 66,078
Cumulative effect of accounting change (3)...... (695) -- -- -- --
Extraordinary item (4) ......................... (88) -- (521) -- (93)
----------- ------------ ------------ ------------ ------------
Net income ..................................... 102,637 117,811 118,903 100,461 65,985
Distributions to preferred unitholders ......... (17,368) (17,475) (13,726) (11,473) (4,907)
----------- ------------ ------------ ------------ ------------
NET INCOME AVAILABLE TO COMMON UNITHOLDERS ..... $ 85,269 $ 100,336 $ 105,177 $ 88,988 $ 61,078
=========== ============ ============ ============ ============
PER COMMON UNIT DATA:
Income before cumulative effect of accounting
change and extraordinary item (net of
preferred distributions) - basic ............. $ 2.00 $ 2.25 $ 2.42 $ 2.21 $ 2.11
Net income available to common
unitholder - basic ........................... 1.98 2.25 2.41 2.21 2.11
Income before cumulative effect of
accounting changes and extraordinary item
(net of preferred distributions) - diluted ... 1.98 2.22 2.39 2.18 2.09
Net income available to common
unitholder - diluted ......................... 1.96 2.22 2.38 2.18 2.09
Distributions declared ......................... 3.12 3.04 2.80 2.60 2.38
BALANCE SHEET DATA
Real estate, before accumulated depreciation ... $ 2,867,672 $ 2,827,094 $ 2,582,785 $ 2,255,074 $ 1,936,011
Real estate, net of accumulated depreciation ... 2,463,398 2,469,914 2,279,769 2,007,926 1,734,916
Total assets ................................... 2,538,351 2,551,237 2,350,173 2,066,713 1,780,563
Total debt ..................................... 1,336,520 1,213,309 989,583 800,008 821,209
Partner's equity ............................... 1,077,670 1,216,701 1,251,342 1,177,051 869,304
OTHER DATA:
Cash flow provided from (used in):
Operating activities ........................... $ 161,564 $ 185,073 $ 153,038 $ 148,618 $ 109,554
Investing activities ........................... $ (51,213) $ (255,986) $ (317,960) $ (328,216) $ (208,377)
Financing activities ........................... $ (113,007) $ 72,502 $ 149,638 $ 189,873 $ 109,469
Funds from operations (5) ...................... $ 133,133 $ 163,411 $ 162,581 $ 134,202 $ 85,892
Weighted average common units
outstanding - basic .......................... 43,211,834 44,503,290 43,663,373 40,244,351 28,880,928
Weighted average common units
outstanding - diluted ........................ 43,427,100 45,038,079 44,119,671 40,689,342 29,104,790
Total stabilized communities
(at end of period) ........................... 82 82 85 83 78
Total stabilized apartment units
(at end of period) ........................... 27,710 28,736 29,032 27,568 25,938
Average economic occupancy
(fully stabilized communities) (6) ........... 94.9% 96.8% 96.4% 96.5% 94.8%
Post Properties, Inc. 20
Post Apartment Homes, L.P.
(1) Consists of revenue and expenses from property management and landscape
services provided to properties owned by third parties.
(2) Project abandonment, employee severance and impairment charges for 2001
consisted of the following:
Severance cost - $3.6 million
Impairment reserve for technology investments - $1.5 million
Impairment reserve for pre-development costs - $8.1 million
Impairment reserve for for-sale housing - $1.0 million
Loss on sale of and impairment reserve for other assets, including
corporate aircraft - $3.3 million.
(3) The cumulative effect of accounting change results from the Company's
adoption of SFAS No. 133, effective January 1, 2001.
(4) The extraordinary item resulted from costs associated with the early
extinguishment of indebtedness. The extraordinary item has been reduced by
the portion related to the minority interest of the unitholders calculated
on the basis of weighted average Units outstanding for the year.
(5) The Company uses the National Association of Real Estate Investment Trusts
("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT amended its
definition of FFO to include in FFO all non-recurring transactions, except
those that are defined as extraordinary under generally accepted accounting
principles ("GAAP"). The Company adopted this new definition effective
January 1, 2000. FFO for any period means the Consolidated Net Income of
the Company and its subsidiaries for such period excluding gains or losses
from debt restructuring and sales of property plus depreciation of real
estate assets, and after adjustment for unconsolidated partnerships and
joint ventures, all determined on a consistent basis in accordance with
GAAP. FFO presented herein is not necessarily comparable to FFO presented
by other real estate companies because not all real estate companies use
the same definition. The Company's FFO is comparable to the FFO of real
estate companies that use the current NAREIT definition. FFO should not be
considered as an alternative to net income (determined in accordance with
GAAP) as an indicator of the Company's financial performance or to cash
flow from operating activities (determined in accordance with GAAP) as a
measure of the Company's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Company's needs or ability to
service indebtedness or make distributions. FFO for 1998 and 1997 has been
restated to reflect the requirements of the new NAREIT definition.
(6) Amount represents average economic occupancy for communities stabilized for
both the current and prior respective periods. Average economic occupancy
is defined as gross potential rent less vacancy losses, model expenses and
bad debt divided by gross potential rent for the period, expressed as a
percentage. The calculation of average economic occupancy does not include
a deduction for concessions and employee discounts (average economic
occupancy, taking account of these amounts, would have been 93.8% and 94.8%
for the year ended December 31, 2001 and 2000, respectively). Concessions
were $1,860 and $3,729 and employee discounts were $895 and $871 for the
years ended December 31, 2001 and 2000, respectively. A community is
considered by the Company to have achieved stabilized occupancy on the
earlier to occur of (i) attainment of 95% physical occupancy on the first
day of any month, or (ii) one year after completion of construction.
Post Properties, Inc. 21
Post Apartment Homes, L.P.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (Dollars in thousand, except apartment unit data)
OVERVIEW
The following discussion should be read in conjunction with all of the financial
statements appearing elsewhere in this report. The following discussion is based
primarily on the Consolidated Financial Statements of Post Properties, Inc. (the
"Company") and Post Apartment Homes, L.P. (the "Operating Partnership"). Except
for the effect of minority interest in the Operating Partnership, the following
discussion with respect to the Company is the same for the Operating
Partnership.
As of December 31, 2001, there were 41,975,447 Units outstanding, of which
36,856,559 or 87.8%, were owned by the Company and 5,118,888, or 12.2% were
owned by other limited partners (including certain officers and directors of the
Company). As of December 31, 2001, there were 7,700,000 preferred units
outstanding, of which 4,900,000 were owned by the Company.
CRITICAL ACCOUNTING POLICIES AND NEW ACCOUNTING PRONOUNCEMENTS
In the preparation of financial statements and in the determination of Company
operating performance, the Company utilizes certain significant accounting
polices and these accounting policies are discussed in Note 1 to the Company's
consolidated financial statements. Also discussed in Note 1 to the consolidated
financial statements are several new accounting pronouncements issued in 2001.
The impact of the new pronouncements is discussed below and in the consolidated
financial statements. As the Company is in the business of developing, owning
and managing apartment communities, its critical accounting policies relate to
cost capitalization and asset impairment evaluation.
The Company capitalizes those expenditures relating to the acquisition of new
assets, the development and construction of new apartment communities, the
enhancement of 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). Thereafter, these replacements
are capitalized. Further, the Company expenses as incurred all interior and
exterior painting of communities.
The Company capitalizes interest, real estate taxes, and certain internal
personnel and associated costs directly related to apartment communities under
development and construction. The incremental personnel and associated costs are
capitalized to the projects under development based upon the effort directly
identifiable with such projects. Should the Company reduce its development
activities below a range of $75 million to $150 million annually, the Company
would need to either reduce its incremental personnel and associated costs
related to development and construction activities or reflect such costs as
current period expenses. The Company treats each unit in an apartment community
separately for cost accumulation, capitalization and expense recognition
purposes. Prior to the commencement of leasing activities, interest and other
construction costs are capitalized and 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 expenses) of such communities.
The Company continually evaluates the recoverability of the carrying value of
its real estate assets using the methodology prescribed in Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." Factors
considered by management in evaluating impairment include significant declines
in property operating profits, recurring property operating losses and other
significant adverse changes in general market conditions that are considered
permanent in nature. If any real estate asset held for investment is considered
impaired, a loss is provided to reduce the carrying value of the asset to its
fair value. If a real estate asset is held for sale, any estimated loss is
provided to reduce the carrying value of the asset to its fair value less costs
to sell. Subsequent to the classification of assets as held for sale, no further
depreciation expense is recorded.
In 2001, the Financial Accounting Standards Board issued several new accounting
pronouncements, which are discussed in the following paragraphs.
Post Properties, Inc. 22
Post Apartment Homes, L.P.
SFAS No. 141, "Business Combinations", which requires all business combinations
initiated after June 30, 2001 to be accounted for under the purchase method, was
issued in July 2001. SFAS No. 141 supersedes APB Opinion No. 16, "Accounting for
Pre-acquisition Contingencies of Purchase Enterprises", and is effective for all
business combinations initiated after June 30, 2001. The adoption of SFAS No.
141 did not have a significant effect on the Company's results of operations or
its financial position.
SFAS No. 142, "Goodwill and Other Intangible Assets", was issued in July 2001.
Under SFAS No. 142, the amortization of goodwill or other intangible assets with
indefinite lives is no longer required, but will be subject to periodic testing
for impairment. SFAS No. 142 supersedes APB Opinion No. 17, "Intangible Assets".
The Company will implement SFAS No. 142 on January 1, 2002. The Company believes
the provisions of SFAS No. 142 will not have a significant effect on its results
of operations or its financial position.
SFAS No. 143, "Account for Obligations Associated with Retirement of Long-Lived
Assets", was issued in August 2001. SFAS No. 143 establishes accounting
standards for the recognition and measurement of an asset retirement obligation
and its associated asset retirement costs. It also provides accounting guidance
for legal obligations associated with the retirement of tangible long-lived
assets. SFAS No. 143 is effective in fiscal years beginning after June 15, 2002.
The Company believes the provisions of SFAS No. 143 will not have a significant
effect on its results of operations or its financial position.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
that replaces SFAS No. 121 was issued in October 2001. SFAS No. 144 requires
that long-lived assets be measured at the lower of their carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. The provisions of SFAS No. 144 are effective for
financial statements issued for fiscal years beginning after December 15, 2001
and the Company will implement the provisions of SFAS No. 144 on January 1,
2002.
Under both SFAS No. 121 and 144, real estate assets designated as held for sale
are stated at their fair value less costs to sell. The Company classifies real
estate as held for sale when its internal investment committee approves the sale
and the Company has commenced an active program to sell the assets. Subsequent
to this classification, no further depreciation is recorded on the assets. The
operating results of real estate assets held for sale were included in
continuing operations. Upon the implementation of SFAS No. 144 in 2002, the
operating results of real estate assets held for sale and real estate assets
sold will be included in discontinued operations in the consolidated statement
of operations. The Company believes the provisions of SFAS No. 144 will not have
a significant effect on the Company's net results of operations or its financial
position.
RESULTS OF OPERATIONS
The following discussion of results of operations should be read in conjunction
with the consolidated statements of operations and the accompanying selected
financial data.
COMPARISON OF YEAR ENDED DECEMBER 31, 2001 TO YEAR ENDED DECEMBER 31, 2000
The Operating Partnership reported net income available to common unitholders of
$85,269 and $100,336 for the years ended December 31, 2001 and 2000,
respectively, and the Company reported net income available to common
shareholders of $75,159 and $88,645 for the years ended December 31, 2001 and
2000, respectively. The decrease in Company net income available to common
shareholders of $13,486 from 2000 to 2001 was primarily related to project
abandonment, employee severance and impairment charges of $17,450 ($15,316 net
of minority interest). The Company's asset sales in 2001 generated gains which
increased by $20,734 ($18,276 net of minority interest) due to an increase in
sales volume as well as the mix of assets sold as compared to 2000. These
increased gains were offset by the weaker operating performance of fully
stabilized communities (see below), slower lease-up of new development
communities, the dilutive impact of the Company's fully implemented asset sale
and capital reinvestment program and increased general and administrative
expenses.
Rental revenue increased $2,147 or 0.6% from 2000 to 2001 primarily due to the
$2,496 or 1.0% growth in revenues from fully stabilized communities discussed
further below. The rental revenue increases from the Company's newly stabilized
and lease-up properties of $32,973 was offset by the revenue reduction of
$33,224, from assets held for sale and sold under the Company's asset sales and
capital recycling program. Property operating and maintenance expenses
(exclusive of depreciation and amortization) increased $9,281 or 7.1% primarily
due to the $8,216 or 9.0% increase at fully stabilized and newly stabilized
properties.
Post Properties, Inc. 23
Post Apartment Homes, L.P.
Revenues in excess of specified expenses from third party services, principally
landscape and property management, decreased $1,092 or 50.6% from 2000 to 2001
primarily due to a decrease in earnings from landscape services. This decrease
was due to a reduction in new installation volume resulting from a slow down in
commercial construction activity and due to the sale of the landscape operation
to its management team effective October 31, 2001.
In addition to the sale of third party landscape business, the Company also sold
its third party property management business to its respective management team
on December 31, 2001. These sales were part of the Company's strategy to focus
on its core business of owning, developing and managing multifamily communities.
As the sales were financed 100% by the Company, they were not recorded as sales
under generally accepted accounting principles. The Company financed these
transactions over five years with two one-year renewal options. The purchase
money notes bear interest at 9% per annum. As more fully discussed in Note 8 to
the consolidated financial statements, full sales recognition will not occur
until the Company receives an adequate down payment on the notes. The estimated
loss of $452 on the landscape business sale was included in the asset impairment
charge in 2001. A gain of $591 was deferred on the sale of the property
management business and will be recognized when the criteria for sale
recognition occurs (expected to be in 2002). These operations generated revenues
in excess of specified expenses of $1,065 that will not occur in 2002.
Depreciation expense increased $5,065 or 7.1% from 2000 to 2001 primarily as a
result of the increase in operating depreciable assets in 2001.
Interest expense increased $7,627 or 15.2% from 2000 to 2001 primarily due to
increased borrowings and a decrease in the amount of interest capitalized to a
reduced amount of communities under construction between years.
General and administrative expenses increased $3,679 or 36.5% from 2000 to 2001
primarily due to reduced capitalization of overhead on a reduced amount of
communities under construction, increased insurance costs and technology
connectivity costs.
The net gain on sale of assets in 2001 resulted from the sale of six
communities, one commercial property and five tracts of land, adjusted by the
impact of write-downs to fair value less costs to sell of assets currently held
for sale.
COMPARISON OF YEAR ENDED DECEMBER 31, 2000 TO YEAR ENDED DECEMBER 31, 1999
The Operating Partnership reported net income available to common unitholders of
$100,336 and $105,177 for the years ended December 31, 2000 and 1999,
respectively, and the Company reported net income available to common
shareholder of $88,645 and $92,642 for the years ended December 31, 2000 and
1999, respectively. The decrease in Company net income available to common
shareholders of $3,997 from 1999 to 2000 was primarily related to project
abandonment, employee severance and asset impairment changes of $9,365 ($8,277
net of minority interest) as discussed below.
Rental revenues increased $47,198 or 14.8% due to the $13,950 or 5.8% growth in
revenues from fully stabilized communities discussed further below and due to
the increase from newly stabilized and lease-up properties of $37,254. These
increases were only partially offset by the impact of assets held for sale or
sold under the Company's asset sales and capital recycling program which was
implemented in 2000. Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $18,197 or 16.1% largely due to the
increase of the operating property portfolio from the lease-up of newly
stabilized and lease-up properties.
Revenues in excess of specified expenses (exclusive of depreciation and
amortization) from third party services increased by $500 or 30.2% due to
increased profits from the property management business resulting from an
increase in the average number of units managed.
Depreciation expense increased $13,100 or 22.6% from 1999 to 2000 primarily as a
result of an increase in operating depreciable property from the completion of
development properties, additional leasehold improvements and technology
expenditures.
Interest expense increased $17,111 or 51.6% from 1999 to 2000 primarily due to
significantly increased borrowings used to fund the growth in both the operating
and development property portfolios.
General and administrative expenses increased $2,278 or 29.3% from 1999 to 2000
primarily due to increased personnel costs at a rate consistent with the overall
growth of the Company.
Post Properties, Inc. 24
Post Apartment Homes, L.P.
The net gain on sale of assets in 2000 resulted from the sale of eight
communities, adjusted by the impact of write downs to fair market value of
assets held for sale. The net loss on sale of assets in 1999 resulted from the
sale of one community and two tracts of land.
PROJECT ABANDONMENT, EMPLOYEE SEVERANCE AND IMPAIRMENT CHARGES
The Company recorded project impairment and abandonment, employee severance and
asset impairment charges for the years ended December 31, 2001 and 2000. The
charges are summarized as follows:
2001 2000
------- -------
Project impairment and abandonment ... $ 8,122 $ 4,389
Employee severance ................... 3,560 3,066
Asset impairment ..................... 5,768 1,910
------- -------
$17,450 $ 9,365
======= =======
In the fourth quarter of 2001, the Company recorded charges totaling $17,450.
These charges, precipitated by the sharp decline in economic and market
conditions, reflect management's decision to focus its business and new
development strategy on fewer markets, to focus on its core business of owning,
developing and managing multifamily real estate assets and to do so with a
smaller workforce and lower overhead expenses. The project impairment charge of
$8,122 represents reserves on certain predevelopment and transaction pursuit
costs in markets the Company will no longer pursue for development opportunities
and for certain projects that will no longer be pursued due to economic and
market conditions. The employee severance charge of $3,560 is primarily for
severance costs related to approximately a 100 person senior management and
staff workforce reduction plan initiated and completed in the fourth quarter of
2001. The asset impairment and disposition charge includes a loss of $2,831
related to the disposition of the Company's corporate aircraft, a loss of $452
on the sale of the Company's third party landscape business discussed more fully
below, impairment charges of $1,000 related to the Company's exit from the
for-sale housing business in all markets, and the write-down to estimated market
value of certain internet and technology investments of $1,485.
At December 31, 2001, approximately $3,632 of these charges, primarily employee
severance costs, remained as an accrued liability on the consolidated balance
sheet. These amounts are expected to be paid in 2002.
In the fourth quarter of 2001, the Company sold substantially all of the net
assets of Post Landscape Group, Inc., a subsidiary entity that provided
landscape maintenance, design and installation services to third parties, and
RAM Partners, Inc., a separate subsidiary entity that managed apartment
communities for third parties. These businesses were sold to members of the
respective former management teams of the subsidiaries. The Company financed
100% of the sales price of $5,767 (adjusted for working capital transfers at
closing) through purchase money notes with a fixed interest rate of 9%. The
notes require periodic interest, annual principal and final balloon principal
payments in 2006. The notes can be extended for two one-year periods. Under
generally accepted accounting principles, the transactions have not been
recorded as sales at December 31, 2001, and will not be recorded as sales until
the conditions for sale recognition, primarily the receipt of an adequate down
payment on the notes, are met. Until these transactions are recognized as sales,
the book value of the assets and liabilities of these business are included in
the Company's consolidated balance sheet. Any collections under the notes will
reduce the carrying value of the assets. The sale of the Post Landscape Group
resulted in a loss of $452. Under generally accepted accounting principles, this
loss was recognized in 2001 and included in the project abandonment, employee
severance and impairment charges discussed above. The sale of RAM Partners will
result in a gain of approximately $591, which will be recognized when the
conditions for full sale recognition are met (expected in 2002).
In the fourth quarter of 2000, the Company recorded charges of $9,365. These
charges reflect management's decision to restrict its development activities to
fewer markets, refine its development investment and for-sale housing strategies
and make changes in its executive management team. Project abandonment charges
totaling $4,389 related to the write off of predevelopment and pursuit costs in
markets in which the Company will no longer pursue development opportunities and
on certain proposed development deals not consistent with management's revised
development strategy. Employee severance charges related to the termination
costs of four executive positions and five staff personnel in the Company's
Dallas, Texas regional office. The asset impairment charge of $1,910 includes a
charge of $1,503 related to the write off of the Company's investment in a high
speed internet provider that filed for bankruptcy protection and a charge of
$407 related to the exit from the for-sale housing business in certain markets.
As of December 31, 2001, all of the 2000 charges had been paid.
Post Properties, Inc. 25
Post Apartment Homes, L.P.
COMMUNITY OPERATIONS/SEGMENT PERFORMANCE
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is generally
considered by the Company to have achieved stabilized occupancy on the earlier
to occur of (i) attainment of 95% physical occupancy on the first day of any
month or (ii) one year after completion of construction.
At December 31, 2001, the Company's portfolio of apartment communities consisted
of the following: (i) 65 communities that were completed and stabilized for all
of the current and prior year, (ii) ten communities that achieved full
stabilization during 2000, (iii) six communities and an addition to an existing
community which reached stabilization during 2001, (iv) 12 communities and
additions to three existing communities currently in the development or lease-up
stage and (v) two stabilized communities classified as held for sale.
The Company has adopted an accounting policy related to communities in the
lease-up stage whereby substantially all operating expenses (including
pre-opening marketing expenses) are expensed as incurred. During the lease-up
phase, the sum of interest expense on completed units and other operating
expenses (including pre-opening marketing expenses) will initially exceed rental
revenues, resulting in a "lease-up deficit," which continues until such time as
rental revenues exceed such expenses. Lease up deficits for the years ended
December 31, 2001, 2000 and 1999 were $3,173, $2,665 and $2,798, respectively.
In order to evaluate the operating performance of its communities, the Company
has presented financial information which summarizes the revenue in excess of
specified expense on a comparative basis for all of its operating communities
combined and for fully stabilized communities.
ALL OPERATING COMMUNITIES
The operating performance for all of the Company's apartment communities
combined for the years ended December 31, 2001, 2000 and 1999 is summarized as
follows:
2001 2000 % CHANGE 2000 1999 % CHANGE
-------- -------- -------- -------- -------- --------
Rental and other revenue:
Fully stabilized communities(1) .................... $257,007 $254,511 1.0% $254,511 $240,561 5.8%
Communities stabilized during 2000 ................. 46,237 39,556 16.9% 39,556 14,863 166.1%
Lease-up communities(2) ............................ 44,607 18,315 143.6% 18,315 5,754 218.3%
Communities held for sale(3) ....................... 6,278 6,132 2.4% 6,132 5,885 4.2%
Sold communities(4) ................................ 13,381 46,751 (71.4)% 46,751 53,181 (12.1)%
Other revenue(5) ................................... 14,945 17,396 (14.1)% 17,396 12,433 39.9%
-------- -------- ----- -------- -------- -----
382,455 382,661 (0.1)% 382,661 332,677 15.0%
-------- -------- ----- -------- -------- -----
Property operating and maintenance expense
(exclusive of depreciation and amortization):
Fully stabilized communities(1) .................... 83,117 78,101 6.4% 78,101 73,768 5.9%
Communities stabilized during 2000 ................. 16,108 12,908 24.8% 12,908 5,416 138.3%
Lease-up communities(2) ............................ 17,688 8,496 108.2% 8,496 2,598 227.0%
Communities held for sale(3) ....................... 2,207 2,113 4.4% 2,113 1,945 8.6%
Sold communities(4) ................................ 5,123 15,124 (66.1)% 15,124 16,117 (6.2)%
Other expense(6) ................................... 16,387 14,607 12.2% 14,607 13,308 9.8%
-------- -------- ----- -------- -------- -----
140,630 131,349 7.1% 131,349 113,152 16.1%
-------- -------- ----- -------- -------- -----
Revenue in excess of specified expense ............. $241,825 $251,312 (3.8)% $251,312 $219,525 14.5%
======== ======== ===== ======== ======== =====
Recurring capital expenditures:(7)
Carpet ............................................. $ 2,935 $ 2,890 1.6% $ 2,890 $ 2,864 0.9%
Other .............................................. 7,506 6,267 19.8% 6,267 5,777 8.5%
-------- -------- ----- -------- -------- -----
Total .............................................. $ 10,441 $ 9,157 14.0% $ 9,157 $ 8,641 6.0%
======== ======== ===== ======== ======== =====
Average apartment units in service ................. 31,485 31,722 (0.7)% 31,722 29,304 8.3%
======== ======== ===== ======== ======== =====
(1) Communities which reached stabilization prior to January 1, 2000.
(2) Communities in the "construction", "development" or "lease-up" stage during
2001 and, therefore, not considered fully stabilized for all of the periods
presented.
(3) Includes two communities in Florida and one commercial property in Texas.
Post Properties, Inc. 26
Post Apartment Homes, L.P.
(4) Includes results from six communities containing 2,799 units and one
commercial property sold in 2001 and results from eight communities
containing 1,984 units sold in 2000 for the applicable periods presented.
(5) Other revenue includes revenue on furnished apartment rentals above the
unfurnished rental rates and any revenue not directly related to property
operations.
(6) Other expenses includes certain indirect central office operating expenses
related to management, grounds maintenance, and costs associated with
furnished apartment rentals.
(7) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring and developing new assets, materially enhancing the value of an
existing asset, or substantially extending the useful life of an existing
asset, all of which are capitalized.
For the year ended December 31, 2001, rental and other revenue decreased $206 or
0.1% compared to 2000. The revenue increase from the completion and lease-up of
new development communities was offset by the revenue reduction from assets sold
in 2001 and 2000 under the Company's asset sales and capital recycling program.
The growth in revenue from fully stabilized communities slowed to 1.0% between
years as a result of declining average occupancy and declining rental rate
growth in the second half of 2001. Property operating and maintenance expenses
(exclusive of depreciation and amortization) increased $9,281 or 7.1% from 2000
to 2001 primarily due to an increase in expenses at fully stabilized communities
and communities stabilized in 2000 of $8,216 resulting from increased personnel
costs, real estate taxes and insurance. For the year ended December 31, 2001,
recurring capital expenditures increased $1,284, or 14.0% compared to the prior
year, primarily due to increased roof replacements, appliance purchases and
amenities enhancements.
For the year ended December 31, 2000, rental and other revenue increased $49,984
or 15.0% compared to 1999, primarily as a result of the completion and lease-up
of new communities and increased rental rates at fully stabilized communities.
Property maintenance and operating expenses (exclusive of depreciation and
amortization) increased from 1999 to 2000 by $18,197 or 16.1% primarily due to
the financial impact of placing an average of an additional 2,418 apartment
units in service between years. For the year ended December 31, 2000, recurring
capital expenditures increased $516, or 6.0%, compared to the prior year,
primarily due to additional units place in service and additional landscape
improvements at the communities.
FULLY STABILIZED COMMUNITIES
The Company defines fully stabilized communities as those which have reached
stabilization prior to the beginning of the previous calendar year. At December
31, 2001, the fully stabilized portfolio of 65 communities with 22,505 units
includes 34 communities with 13,279 units (59%) located in Atlanta, Georgia, 18
communities with 4,042 units (18%) in Dallas, Texas, eight communities with
3,687 units (16%) located in Tampa and Orlando, Florida and five communities
with 1,497 units (7%) located in other markets. The operating performance of
these communities is summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
---------------------------------- ---------------------------------
2001 2000 % CHANGE 2000 1999 % CHANGE
-------- -------- -------- -------- -------- --------
Rental and other revenue(1) .......................... $257,007 $254,511 1.0% $254,511 $240,561 5.8%
Property operating and maintenance expense
(exclusive of depreciation and amortization)
(2) ............................................... 83,117 78,101 6.4% 78,101 73,768 5.9%
-------- -------- -------- --------
Revenue in excess of specified expense ............... $173,890 $176,410 (1.4)% $176,410 $166,793 5.8%
======== ======== ======== ========
Average economic occupancy(3) ........................ 94.9% 96.6% (1.7)% 96.6% 95.4% 1.2%
======== ======== ======== ========
Average monthly rental rate per apartment unit
(4) ............................................... $ 957 $ 937 2.1% $ 937 $ 900 4.1%
======== ======== ======== ========
Apartment units in service ........................... 22,505 22,505 22,505 22,505
======== ======== ======== ========
(1) Communities which reached stabilization prior to January 1, 2000.
(2) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing asset,
or substantially extending the useful life of an existing asset, all of
which are capitalized. For the years ended December 31, 2001, 2000 and 1999,
recurring expenditures were $9,014, $7,328 and $7,048, or $401, $326 and
$313 on a per unit basis, respectively.
(3) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts. (Average economic occupancy, taking account of these amounts
would have been 93.8%, 94.8% and 94.1% for the years ended December 31,
2001, 2000 and 1999, respectively). Concessions were $1,860, $3,729 and
$3,217 and employee discounts were $895, $871 and $678 for the years ended
December 31, 2001, 2000 and 1999, respectively.
(4) Average monthly rental rate is defined as the average of the gross actual
rental rates for leased units and the average of the anticipated rental
rates for unoccupied units.
For the year ended December 31, 2001, rental and other revenue increased $2,496
or 1.0% compared to 2000. Gross revenue less concessions increased by
approximately $7,174 or 2.9% between years. This increase was partially offset
by an increased
Post Properties, Inc. 27
Post Apartment Homes, L.P.
vacancy loss of $4,684 primarily resulting from the decrease in weighted average
occupancy from 96.6% in 2000 to 94.9% in 2001. The Company's rental and other
revenue growth between years began to slow in the third quarter of 2001 and
showed a decline of $1,846 or 2.9% in the fourth quarter as average occupancies
declined and rental rate growth slowed. The decline in the second half of 2001
reflects the sharp decline in economic and market activity across most of the
Company's markets. This was especially true in the Company's primary market,
Atlanta, Georgia, where new job growth turned negative for the first time in
many years as many major employers began downsizing their workforces in response
to a national recession.
As the Company enters into the first quarter of 2002, average economic occupancy
for the stabilized portfolio has decreased from 93.3% in the fourth quarter of
2001 to approximately 91.0% in the first two months of 2000 further reflecting
the impact of declining economic and market conditions in the national economy
and most of our major markets, particularly Atlanta, Georgia. If market
conditions do not improve in 2002, stabilized property revenues and revenues in
excess of specified expense will decrease in the 2% to 5% range when compared to
2001.
Property operating maintenance expense (exclusive of depreciation and
amortization) increased $5,016 or 6.4% from 2000 to 2001 primarily due to
increased personnel costs of $1,471 or 6.9%, increased repairs and maintenance
expenses of $1,061 or 11.3% and increased property insurance premiums of $1,614
or 142.4%. Insurance costs increased due to across the board increases in
property and liability premiums primarily due to favorably low rate structure
the Company enjoyed in prior years and to a lesser extent unfavorable claims
experience. Personnel costs increased due to annual salary increases and
additional maintenance personnel based on an expectation of higher average
occupancies and increased rental rates as the Company entered into 2001.
Property repairs and maintenance reflects increased unit turnkey expenses as
unit vacancies increased between years and an increase in expensed exterior
painting between years.
For 2002, the Company will have additional insurance premium increases of
approximately 70% as a result of the effects on the insurance markets of the
terrorist attacks in September 2001. However, through certain staff realignments
and reductions and a more intense focus on expense control, the Company believes
the increase in property operating and maintenance expenses for 2002 will be in
the 2% to 4% range.
For the year ended December 31, 2000, rental and other revenue increased $13,950
or 5.8% compared to 1999 due to both rental rate growth and average occupancy
increases. Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $4,333 or 5.9% from 1999 to 2000
primarily due to increased personnel costs of $1,905 or 9.8% and increased real
estate tax expenses of $2,021 or 8.1%. Personnel costs increased due to normal
annual salary increases and additional staff necessary to service the portfolio
averaging over 96% occupancy in 2000 and due to an increase in employee
discounts between years. Real estate taxes increased due primarily to a 5%
increase in tax rates in Dallas, Texas, and to valuation increases of over 10%
at our Tampa, Florida properties.
LIQUIDITY AND CAPITAL RESOURCES
The discussion in this Liquidity and Capital Resources section is the same for
the Company and the Operating partnership, except that all indebtedness
described herein has been incurred by the Operating Partnership.
The Company's net cash provided by operating activities decreased from $185,073
in 2000 to $161,564 in 2001 primarily due to lower net income (before
depreciation and gain on sale of assets), resulting from the larger project
abandonment, employee severance and impairment charges, weaker operating
performance of the Company's fully stabilized properties and the dilutive impact
of the Company's asset sale and capital recycling program. Net cash provided by
operating activities increased from $153,038 in 1999 to $185,073 in 2000,
primarily due changes in working capital and an increase in net income before
depreciation.
Net cash used in investing activities decreased from $255,986 in 2000 to $51,213
in 2001 primarily due to greater proceeds from the sale of apartment communities
and other property and reduced spending on construction and acquisition of real
estate assets. Net cash used in investing activities decreased from $317,960 in
1999 to $255,986 in 2000 primarily due to increased proceeds from the sale of
apartment communities partially offset by increased spending on construction and
acquisition of real estate assets.
Net cash provided by (used in) financing activities decreased from $149,638 in
1999 to $72,502 in 2000 and to $(113,007) in 2001 primarily due to increased
treasury stock purchases and reduced net borrowings between years.
Post Properties, Inc. 28
Post Apartment Homes, L.P.
Since 1993, the Company has elected to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
It is management's current intent that the Company will continue to operate as a
REIT in 2002. As a REIT, the Company is subject to a number of organizational
and operating requirements, including a requirement to distribute 90% of its
taxable income to its shareholders. As a REIT, the Company generally will not be
subject to federal income taxes on its taxable income.
In prior years, the Company met its short-term liquidity requirement of funding
the payment of its current level of quarterly dividends to shareholders from its
net cash flow provided by operating activities, less its annual recurring and
nonrecurring property and corporate capital expenditures. Beginning in the
fourth quarter of 2001, the Company's net cash flow from operations reduced by
annual capital expenditures discussed above was not sufficient to fully fund the
Company's current level of dividend payments to common shareholders. The
Company's net cash flow from operations continues to be sufficient to meet the
dividend requirements to maintain its REIT status under the Code. The additional
funding required to pay the current dividends was obtained through a combination
of line of credit borrowings and proceeds from asset sales. The factors that
have lead to this condition are the decline in economic and market conditions in
the fourth quarter in the Company's major markets resulting in lower cash flow
from its operating property portfolio, the slower lease-up of its existing
development community portfolio and the short-term negative cash flow impact of
funding its current development portfolio through the sale of operating real
estate assets.
Management believes that these factors will remain present as the Company moves
into 2002, resulting in the need to fund a portion of its current level of
dividend payments primarily through proceeds from asset sales. Depending on
market conditions, the Company may need to fund dividends ranging from $8,000 to
$15,000 from these sources in 2002. Management has indicated that it intends to
maintain the quarterly dividend to common shareholders at its current level of
$0.78 per share, as the Company has adequate financing capability to fund the
dividends. Additionally, it is management's belief that as economic and market
conditions recover in future periods operating cash flow will increase and be
adequate to fund the current level of dividend payments.
Management expects the Company to meet its new construction and development and
certain of its other long-term liquidity requirements, including the contractual
obligations detailed below, and possible land and property acquisitions through
the sale of operating properties and through long-term secured and unsecured
borrowings. Management believes the Company has adequate borrowing capacity and
accessibility to real estate sales markets to fund these requirements.
Additionally, the Company began to utilize equity joint ventures as a means of
raising capital and reducing the size and exposure of its development property
pipeline. During 2001, the Company received equity capital through the joint
ventures totaling $18,082. The Company plans to continue to use joint venture
arrangements in 2002.
A summary of the Company's future contractual obligations related to long-term
debt, non-cancelable operating leases and other obligations listed and discussed
below at December 31, 2001, were as follows:
OBLIGATION DUE DATE
---------------------------------------------------------------------------
CONTRACTUAL OBLIGATIONS TOTAL 1 YEAR OR LESS 2-3 YEARS 4-5 YEARS AFTER 5 YEARS
- ----------------------- ---------- -------------- --------- --------- -------------
Long-term debt .................... $1,170,318 $23,367 $130,505 $283,682 $732,764
Lines of credit ................... 166,202 11,202 155,000 -- --
Operating leases(1) ............... 165,857 1,918 3,547 2,594 157,798
Debt and equity commitments to
unconsolidated entities(2) ..... 43,988 43,988 -- -- --
---------- ------- -------- -------- --------
$1,546,365 $80,475 $289,052 $286,276 $890,562
========== ======= ======== ======== ========
(1) Includes six ground leases relating to apartment communities owned by the
Company.
(2) At December 31, 2001, the Company is obligated to fund approximately $34,252
of construction financing and $9,736 of equity contributions to
unconsolidated entities. In addition, the Company has guaranteed the timely
construction completion and the final cost of certain construction cost
categories of the underlying real estate projects. The maximum exposure
under the cost guarantee provisions of these arrangements is approximately
$14,000. The Company estimates its current funding obligation under these
cost guarantee provisions to be approximately $900. Further, the Company
believes the projects will be completed on a timely basis, thus fully
mitigating its cost exposure under the completion guarantee.
In addition to these contractual obligations, the Company has development
projects in progress that will be completed over the next twelve to eighteen
months. At December 31, 2001, the Company's share of the estimated future cash
expenditures to complete these projects will approximate $200,000. As previously
discussed, the Company intends to use the proceeds from sale of operating
properties as the primary source of capital to fund these future development
expenditures. The Company began an active asset sale and capital recycling
program in 2000 as the primary means to fund its on-going development community
program. Total funds raised in 2001 and 2000 were $220,122 and $157,265,
respectively.
Post Properties, Inc. 29
Post Apartment Homes, L.P.
In 2001, the Company sold six apartment communities containing 2,799 units for
net proceeds of approximately $210,443. The communities sold were located in
Atlanta, Georgia, Dallas Texas and Nashville, Tennessee. Additionally, the
Company sold land parcels in Dallas, Texas, Denver, Colorado and Charlotte,
North Carolina and a commercial property in Dallas, Texas for aggregate net
proceeds of $9,679. These sales resulted in net gains of approximately $16,365.
For the year ended December 31, 2001, the aggregate net gain on the sale of
assets of $23,942 included the impact of the estimated net losses totaling
$11,490 on the write down to fair value of assets designated as held for sale at
December 31, 2001 and excluded realized losses totaling $19,067 related to
assets written down to their estimated fair value at December 31, 2000.
In 2000, the Company sold eight apartment communities containing 1,984 units for
net proceeds of approximately $157,265, resulting in net gains of approximately
$24,266. The communities sold were located in Atlanta, Georgia, Jackson,
Mississippi and Nashville, Tennessee. For the year ended December 31, 2000, the
aggregate net gain on the sale of assets of $3,208 included the estimated net
losses totaling $21,058 on the write down to fair value of assets designated as
held for sale at December 31, 2000.
At December 31, 2001, the Company had available credit facility borrowing
capacity of approximately $359,000 under its existing credit facilities. The
Company's primary credit facility with total capacity of $320,000 matures in
2004 while a second incremental credit facility of $185,000 renews annually.
Management currently anticipates the renewal of the incremental credit facility
although the total capacity will likely be reduced as a result of the decrease
in the Company's development pipeline. The Company has adequate capacity under
these facilities to execute its 2002 business plan without regard to a
significant level of asset sales or other secured and unsecured debt financings.
In the first quarter of 2002, the Company's unsecured public debt was downgraded
from Baa1 to Baa2 by Moody's Investor Services and from BBB+ to BBB by Standard
& Poors. This change in the investment credit rating of the Company's debt
increased the pricing of its syndicated lines of credit by 10 to 12.5 basis
points and may increase the pricing of new issuances of unsecured debt. In
addition, certain of the financial covenants under the Company's syndicated line
of credit are tied to maintaining an investment grade credit rating. After the
recent downgrade, the Company remains an investment grade rated company by both
Moody's Investors Services and Standard & Poors. Management does not anticipate
this downgrade to affect the Company's ability to obtain the anticipated level
of debt financing. Should the Company not maintain its investment credit rating
its total dividend payout, exclusive of the portion of the dividend attributable
to capital gains from asset sales up to $30,000, would be limited to 95% versus
100% of Consolidated Income Available for Distribution, as defined. Management
believes the Company's current business plan and financing strategy are
consistent with the fundamentals of maintaining its investment grade ratings.
UNSECURED LINES OF CREDIT
The Company utilizes a $320,000 three-year syndicated revolving line of credit
(the "Revolver"), for its short-term financing. At December 31, 2001, the stated
interest rate for the Revolver was LIBOR plus 0.75% or prime minus 0.25%.
Subsequent to year end, the stated rate increased to LIBOR plus 0.85% as a
result of credit rating agency downgrade on the Company's senior unsecured debt.
The Revolver provides for the rate to be adjusted up or down based on changes in
the credit ratings on the Company's senior unsecured debt. The Revolver also
includes a money market competitive bid option for short-term funds up to
$160,000 at rates below the stated line rate. The credit agreement for the
Revolver contains customary representations, covenants and events of default,
including covenants which restrict the ability of the Operating Partnership to
make distributions, in excess of stated amounts, which in turn restrict the
discretion of the Company to declare and pay dividends. In general, during any
fiscal year the Operating Partnership may only distribute up to 100% of the
Operating Partnership's consolidated income available for distribution (as
defined in the credit agreement) exclusive of distributions of up to $30,000 of
capital gains for such year. The credit agreement contains exceptions to these
limitations to allow the Operating Partnership to make distributions necessary
to allow the Company to maintain its status as a REIT. The Company does not
anticipate that this covenant will adversely affect the ability of the Operating
Partnership to make distributions, or the Company to declare dividends, under
the Company's current dividend level. The Revolver matures in April 2004.
The Company also has in place an additional $185,000 line of credit facility for
general corporate purposes. This line matures in April 2002 and carries terms
substantially equal to the Revolver. Management expects the Company to renew and
extend this credit facility, although the total capacity and terms may vary.
There were no outstanding borrowings under this facility at December 31, 2001.
Post Properties, Inc. 30
Post Apartment Homes, L.P.
Additionally, the Company has a $20,000 unsecured line of credit with Wachovia
Bank of Georgia, N.A. (the "Cash Management Line"). The Cash Management Line
bears interest at LIBOR plus 0.75% or prime minus .25% and matures in February,
2003. Management believes the Cash Management Line will be renewed at maturity
with similar terms.
SENIOR AND MEDIUM TERM NOTES
In 2001, the Company issued $50,000 of 6.71% senior unsecured notes due in 2006.
The net proceeds from the notes were used to repay outstanding indebtedness. In
2001, the Company repaid the outstanding balance of one medium term note
issuance totaling $37,000 and one senior note issuance totaling $30,000 at their
scheduled maturing dates. All of the unsecured notes are subject to certain
covenants, including those governing the Company's total leverage.
STOCK REPURCHASE PROGRAM
The Company's Board of Directors has approved the purchase of up to $200,000 of
the Company's common stock. In the fourth quarter of 2000, the Company began
repurchasing shares of its common stock in accordance with the announced stock
repurchase program using funds from operating cash flow and the sale of
properties. Purchases will be made from time to time in the open market and it
is expected that funding of the program will come primarily from the proceeds
from asset sales. For the year ended December 31, 2001, the Company repurchased
2,370,100 shares of common stock at a total cost of $87,506. Treasury stock
activity for the year ended December 31, 2001 was as follows (in thousands
dollars):
TREASURY STOCK
----------------------------
SHARES AMOUNT
--------- --------
Balance at December 31, 2000 ............... 808,596 $ 28,903
Acquisitions of common stock ............. 2,370,100 87,506
Other additions .......................... 1,902 70
Distribution under Employee Stock Plan ... (360,953) (12,906)
--------- --------
Balance at December 31, 2001 ............... 2,819,645 $103,573
========= ========
Additionally, during the fourth quarter of 2001, the Company repurchased 100,000
shares of its preferred stock for $5,100. The stock repurchase activity in 2001
and 2000 was consistent with the Company's stated objective to acquire stock
when the price per share is below the Company's internal estimate of the fair
market value of its net assets. Management has indicated it will be
opportunistic with respect to additional share repurchases and intends to
finance additional repurchases with asset sale proceeds rather than additional
borrowings.
Post Properties, Inc. 31
Post Apartment Homes, L.P.
SCHEDULE OF INDEBTEDNESS
The following table reflects the Company's indebtedness at December 31, 2001 and
2000:
INTEREST MATURITY
DESCRIPTION PAYMENT TERMS RATE DATE (1)
- ----------- -------------- ------------ ---------
SENIOR NOTES (UNSECURED)
Senior Notes .......................... Int. 6.71% - 7.70% 2003-2010
Medium Term Notes ..................... Int. 6.69% - 8.12%(2) 2004-2015
Northwestern Mutual Life .............. Int. 8.37% 2002
UNSECURED LINES OF CREDIT & OTHER
Revolver N/A LIBOR + 0.75%(3) 2004
Cash Management Line ................. N/A LIBOR + 0.75% 2003
Other ................................ N/A 5.00%(4) 2021
CONVENTIONAL FIXED RATE (SECURED)
FNMA ................................. Prin. and Int. 6.975%(5) 2029
Northwestern Mutual Life ............. Prin. and Int. 7.69% 2007
Northwestern Mutual Life ............. Prin. and Int. 6.50%(6) 2009
Northwestern Mutual Life ............. Prin. and Int. 7.69% 2007
Parkwood Townhomes(TM) ............... Prin. and Int. 7.375% 2014
TAX EXEMPT FLOATING RATE BONDS
(SECURED) ............................ Int. 1.65%(7) 2025
TOTAL ................................
DECEMBER 31,
----------------------------
DESCRIPTION 2001 2000
- ----------- ---------- ----------
SENIOR NOTES (UNSECURED)
Senior Notes .......................... $ 360,000 $ 310,000
Medium Term Notes ..................... 323,000 360,000
Northwestern Mutual Life .............. 20,000 50,000
---------- ----------
703,000 720,000
---------- ----------
UNSECURED LINES OF CREDIT & OTHER
Revolver 155,000 18,000
Cash Management Line ................. 11,202 4,925
Other ................................ 2,000 2,000
---------- ----------
168,202 24,925
---------- ----------
CONVENTIONAL FIXED RATE (SECURED)
FNMA ................................. 102,200 103,200
Northwestern Mutual Life ............. 50,527 51,238
Northwestern Mutual Life ............. 47,681 48,601
Northwestern Mutual Life ............. 28,268 28,666
Parkwood Townhomes(TM) ............... 762 799
---------- ----------
229,438 232,504
---------- ----------
TAX EXEMPT FLOATING RATE BONDS
(SECURED) ............................ 235,880 235,880
---------- ----------
TOTAL ................................ $1,336,520 $1,213,309
========== ==========
(1) All outstanding indebtedness can be prepaid at any time, subject to certain
prepayment penalties.
(2) Contains $100,000 of Mandatory Par Put Remarketed Securities. The annual
interest rate on these securities to 2005 (the "Remarketing Date") is 6.85%.
On the Remarketing Date, they are subject to mandatory tender for
remarketing.
(3) Represents stated rate. Stated rate increased to LIBOR plus 0.85% in 2002.
At December 31, 2001, the outstanding balance of the Revolver consisted of
"money market" loans with an average interest rate of 2.46%.
(4) This loan is interest free for the first three years, with interest at 5.00%
thereafter.
(5) In 2000, interest rate was fixed at 6.975%, inclusive of credit enhancement
and other fees, to 2009 through an interest rate swap arrangement.
(6) This note bears interest at 6.50% with an effective rate of 7.30%.
(7) FNMA credit enhanced bond indebtedness. Interest based on FNMA "AAA" tax
exempt rate plus credit enhancement and other fees of 0.639%. Interest rate
represents rate at December 31, 2001 before credit enhancements. The Company
has outstanding interest rate cap arrangements that limit the Company's
exposure to increases in the base interest rate to 5%.
CAPITALIZATION OF FIXED ASSETS AND COMMUNITY IMPROVEMENTS
The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. All expenditures
necessary to maintain a community in ordinary operating condition are expensed
as incurred. For new development communities carpet replacements are expensed as
incurred during the first five years (which corresponds to the estimated
depreciable life). Thereafter, carpet replacements are capitalized.
Post Properties, Inc. 32
Post Apartment Homes, L.P.
Acquisition of assets and community improvement expenditures for the years ended
December 31, 2001 and 2000 are summarized as follows:
2001 2000
-------- --------
New community development and acquisition activity ... $232,569 $387,649
Revenue generating additions and improvements:
Property renovations .............................. 4,019 6,638
Submetering of water service ...................... 207 32
Nonrecurring capital expenditures:
Vehicle access control gates ...................... 749 403
Other community additions and improvements ........ 1,786 5,173
Recurring capital expenditures:
Carpet replacements ............................... 2,935 2,890
Other community additions and improvements ........ 7,506 6,267
Corporate additions and improvements .............. 3,021 3,441
-------- --------
$252,792 $412,493
======== ========
INFLATION
Substantially all of the leases at the Communities allow, at the time of
renewal, for adjustments in the rent payable thereunder, and thus may enable the
Company to seek increases in rents. The substantial majority of these leases are
for one year or less and the remaining leases are for up to two years. At the
expiration of a lease term, the Company's lease agreements provide that the term
will be extended unless either the Company or the lessee gives at least sixty
(60) days written notice of termination; in addition, the Company's policy
permits the earlier termination of a lease by a lessee upon thirty (30) days
written notice to the Company and the payment of one month's additional rent as
compensation for early termination. The short-term nature of these leases
generally serves to reduce the risk to the Company of the adverse effect of
inflation.
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Historical Funds from Operations
The Company considers funds from operations ("FFO") a useful measure of
performance of an equity REIT. FFO is defined to mean net income available to
common shareholders determined in accordance with GAAP, excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation of real
estate assets, and after adjustment for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's financial
performance or to cash flow from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Company's needs. Cash
available for distribution ("CAD") is defined as FFO less capital expenditures
funded by operations and loan amortization payments. The Company believes that
in order to facilitate a clear understanding of the consolidated historical
operating results of the Company, FFO and CAD should be examined in conjunction
with net income as presented in the consolidated financial statements and data
included elsewhere in this report.
Post Properties, Inc. 33
Post Apartment Homes, L.P.
FFO and CAD for the years ended December 31, 2001, 2000 and 1999 presented on a
historical basis are summarized in the following table:
Calculation of Funds from Operations and Cash Available for Distribution
2001 2000 1999
------------ ------------ ------------
Net income available to common shareholders ........................ $ 75,159 $ 88,645 $ 92,642
Cumulative effect of accounting change, net of minority interest ... 613 -- --
Extraordinary item, net of minority interest ....................... 77 -- 458
Minority interest of common unitholders ............................ 10,203 11,691 12,598
Net (gain) loss on sale of assets .................................. (23,942) (3,208) 1,522
------------ ------------ ------------
Adjusted net income ................................................ 62,110 97,128 107,220
Depreciation of real estate assets ................................. 71,023 66,283 55,361
------------ ------------ ------------
Funds from Operations(1) ........................................... 133,133 163,411 162,581
Recurring capital expenditures(2) .................................. (10,441) (9,157) (8,641)
Non-recurring capital expenditures(3) .............................. (2,535) (5,576) (2,971)
Loan amortization payments ......................................... (3,126) (1,869) (81)
------------ ------------ ------------
Cash Available for Distribution .................................... $ 117,031 $ 146,809 $ 150,888
============ ============ ============
Revenue generating capital expenditures(4) ......................... $ 4,226 $ 6,670 $ 8,011
============ ============ ============
Cash Flow Provided By (Used In):
Operating activities ............................................. $ 161,564 $ 185,073 $ 153,038
Investing activities ............................................. $ (51,213) $ (255,986) $ (317,960)
Financing activities ............................................. $ (113,007) $ 72,502 $ 149,638
Weighted average common shares outstanding - basic ................. 38,052,673 39,317,725 38,460,689
============ ============ ============
Weighted average common shares outstanding - diluted ............... 38,267,939 39,852,514 38,916,987
============ ============ ============
Weighted average common shares and units outstanding - basic ....... 43,211,834 44,503,290 43,663,373
============ ============ ============
Weighted average common shares and units outstanding - diluted ..... 43,427,100 45,038,079 44,119,671
============ ============ ============
(1) The Company uses the National Association of Real Estate Investment Trusts
("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT amended its
definition of FFO to include in FFO all non-recurring transactions, except
those that are defined as extraordinary under generally accepted accounting
principles ("GAAP"). The Company adopted this new definition effective
January 1, 2000. FFO for any period means the Consolidated Net Income of the
Company and its subsidiaries for such period excluding gains or losses from
debt restructuring and sales of property plus depreciation of real estate
assets, and after adjustment for unconsolidated partnerships and joint
ventures, all determined on a consistent basis in accordance with GAAP. FFO
presented herein is not necessarily comparable to FFO presented by other
real estate companies because not all real estate companies use the same
definition. The Company's FFO is comparable to the FFO of real estate
companies that use the current NAREIT definition. FFO should not be
considered as an alternative to net income (determined in accordance with
GAAP) as an indicator of the Company's financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a measure
of the Company's liquidity, nor is it necessarily indicative of sufficient
cash flow to fund all of the Company's needs or ability to service
indebtedness or make distributions.
(2) Recurring capital expenditures consisted primarily of $2,935, $2,890 and
$2,864 of carpet replacement and $7,506, $6,267 and $5,777 of other
community additions and improvements to existing communities for the years
ended December 31, 2001, 2000 and 1999, respectively. Since the Company does
not add back the depreciation of non-real estate assets in its calculation
of FFO, capital expenditures of $3,021, $3,441 and $6,811 are excluded from
the calculation of CAD for the years ended December 31, 2001, 2000 and 1999,
respectively.
(3) Non-recurring capital expenditures consisted of the additions of vehicle
access control gates to communities of $749, $403 and $794 and other
community additions and improvements of $1,786, $5,173 and $2,177 for the
years ended December 31, 2001, 2000 and 1999, respectively.
(4) Revenue generating capital expenditures included major renovations of
communities in the amount of $4,019, $6,638 and $7,826 for the years ended
December 31, 2001, 2000 and 1999, respectively, and sub-metering of water
service to communities in the amounts of $207, $32 and $185 for the years
ended December 31, 2001, 2000 and 1999, respectively.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this report, and other written or oral statements
made by or on behalf of the Company, may constitute "forward-looking statements"
within the meaning of the federal securities laws. Statements regarding future
events and developments and the Company's future performance, as well as
management's expectations, beliefs, plans, estimates or projections relating to
the future, are forward-looking statements within the meaning of these laws.
Examples of such statements in this report include our expectations with regard
to net operating income and funds from operations for 2002, our expectations
with regard to occupancy levels and rent growth, our expectations with regard to
our dividend payments, our ability to meet new construction, development and
other long-term liquidity requirements, and our ability to execute asset sales
in connection with our asset sale and capital recycling program. 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. Additional information concerning the risk and uncertainties
listed above, and other factors that you may wish to consider, is contained
elsewhere in the Company's filings with the Securities and Exchange Commission.
Post Properties, Inc. 34
Post Apartment Homes, L.P.
The following are some of the factors that could cause the Company's actual
results to differ materially from the expected results described in the
Company's forward-looking statements:
- - future local and national economic conditions, including changes in job
growth, interest rates, the availability of financing and other
factors;
- - demand for apartments in the 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;
- - the Company's ability to obtain financing or self fund the development
of additional apartment communities;
- - the uncertainties associated with the Company's current real estate
development, including actual costs exceeding the Company's budgets or
development periods exceeding expectations;
- - conditions affecting ownership of residential real estate and general
conditions in the multi-family residential real estate market;
- - the effects of changes in accounting policies and other regulatory
matters detailed in the Company's filings with the Securities and
Exchange Commission and uncertainties of litigation; and
- - the Company's ability to continue to qualify as a real estate
investment trust under the Code.
Post Properties, Inc. 35
Post Apartment Homes, L.P.
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY
The Company's primary market risk exposure is interest rate risk. At December
31, 2001, the Company had $293,402 of variable rate debt tied to LIBOR. In
addition, the Company had $235,880 in variable tax-exempt debt with interest
based the FNMA "AAA" tax exempt rate.. In addition, the Company has interest
rate risk associated with fixed rate debt at maturity. The discussion in this
Interest Rate Sensitivity section is the same for the Company and the Operating
Partnership, except that all indebtedness described herein has been incurred by
the Operating Partnership.
Management has and will continue to manage interest rate risk as follows:
- - maintain a conservative ratio of fixed rate, long-term debt to total
debt such that variable rate exposure is kept at an acceptable level;
- - fix certain long-term variable rate debt through the use of interest
rate swaps or interest rate caps with appropriately matching
maturities;
- - use treasury locks where appropriate to fix rates on anticipated debt
transactions, and
- - take advantage of favorable market conditions for long-term debt and/or
equity.
Management uses various financial models and advisors to achieve these
objectives.
The table below provides information about the Company's derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates. For debt obligations, the table presents principal cash flows
and related weighted average interest rates by expected maturity dates. For
interest rate swap and cap arrangements, the table presents notional amounts and
weighted average interest rates by (expected) contractual maturity dates.
Notional amounts are used to calculate the contractual payments to be exchanged
under the contract. Weighted average variable rates are based upon implied
forward rates in the yield curve at the reporting date. The information is
presented in U.S. dollar equivalents, which is the Company's reporting currency.
EXPECTED MATURITY DATE
-----------------------------------------------------------------------------
2002 2003 2004 2005 2006 THERE-AFTER
------- -------- -------- -------- ------- --------
(in thousands)
-----------------------------------------------------------------------------
Long-term Debt:
Fixed Rate ..................... $22,217 $102,381 $ 25,554 $177,748 $77,949 $401,389
------- -------- -------- -------- ------- --------
Average interest rate .......... 7.42% 7.44% 7.46% 7.29% 7.35% 6.84%
Floating Rate(1)
LIBOR-based:
Cash Management Line (2) ... 11,202 -- -- -- -- --
MTN .......................... -- -- -- 25,000 -- --
Revolver(2) .................. -- -- 155,000 -- -- --
FNMA(3) ...................... 1,150 1,235 1,335 1,435 1,550 95,495
------- -------- -------- -------- ------- --------
Total LIBOR-based .......... 12,352 1,235 156,335 26,435 1,550 95,495
Tax-exempt(4) ................ -- -- -- -- -- 235,880
------- -------- -------- -------- ------- --------
Total floating rate Debt .......... 12,352 1,235 156,335 26,435 1,550 331,375
------- -------- -------- -------- ------- --------
Total debt ........................ $34,569 $103,616 $181,889 $204,183 $79,499 $732,764
======= ======== ======== ======== ======= ========
EXPECTED MATURITY DATE
--------------------------
TOTAL FAIR VALUE
---------- ----------
(in thousands)
--------------------------
Long-term Debt:
Fixed Rate ..................... $ 807,238 $ 847,563
---------- ----------
Average interest rate .......... 7.44%
Floating Rate(1)
LIBOR-based:
Cash Management Line (2) ... 11,202 11,202
MTN .......................... 25,000 25,000
Revolver(2) .................. 155,000 155,000
FNMA(3) ...................... 102,200 102,200
---------- ----------
Total LIBOR-based .......... 293,402 293,402
Tax-exempt(4) ................ 235,880 235,880
---------- ----------
Total floating rate Debt .......... 529,282 529,282
---------- ----------
Total debt ........................ $1,336,520 $1,376,845
========== ==========
(1) Interest on these debt instruments is based on LIBOR ranging from LIBOR plus
0.75% to 0.85% above LIBOR. At December 31, 2001, the LIBOR rate was 1.88%.
See Schedule of indebtedness in Management's Discussion and Analysis for
rates on individual debt instruments.
(2) Assumes the Company's Revolver and Cash Management Line are repaid at the
maturity date. Management believes these lines will be renewed at maturity
with similar terms.
(3) In December 2000, the Company entered into a swap transaction that fixed the
rate on the note at 6.975%, inclusive of credit enhancement and other fees,
from January 1, 2001 through July 31, 2009.
(4) At December 31, 2001, the FNMA "AAA" tax exempt rate was 1.65%. Interest on
these debt instruments is equal to the FNMA "AAA" tax exempt rate plus
credit enhancement and other fees of 0.639%. The Company has purchased an
interest rate cap that limits the Company's exposure to increases in the
base rate to 5.00%.
Post Properties, Inc. 36
Post Apartment Homes, L.P.
EXPECTED
AVERAGE AVERAGE SETTLEMENT
INTEREST RATE DERIVATIVES NOTIONAL AMOUNT PAY RATE/CAP RATE RECEIVE RATE DATE FAIR VALUE
------------------------- ------------------- ----------------- ------------- ---------- ----------
Asset (Liab.)
Interest Rate Swaps
$104,000 amortizing
Variable to fixed ............... to $90,270 6.04% 1 month LIBOR 7/31/09 $(4,799)
Variable to fixed ............... $ 25,000 6.53% 3 month LIBOR 2/01/05 (1,846)
Interest rate cap .................. $ 76,000 5.00% -- 2/01/03 5
Interest rate cap .................. $ 141,230 5.00% -- 2/01/03 9
Interest rate cap .................. $ 18,650 5.00% -- 2/01/03 1
-------
$(6,630)
=======
As more fully described in Note 1 to the consolidated financial statements, the
interest rate swap and cap arrangements are carried on the consolidated sheet at
the fair value shown above in accordance with SFAS No. 133, as amended. If
interest rates under the Company's floating rate LIBOR-based and tax-exempt
borrowings, in excess of the $102,200 FNMA borrowings effectively converted to
fixed rates discussed above, fluctuated by 1.0%, interest costs to the Company,
based on outstanding borrowings at December 31, 2001, would increase or decrease
by approximately $4,300 on an annualized basis.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are listed under Item 14(a) and are filed as part of
this report on the pages indicated. The supplementary data are included in Note
13 of the Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
Post Properties, Inc. 37
Post Apartment Homes, L.P.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections under the headings "Election of Directors" entitled "Nominees for
Election," "Incumbent Directors -- Term Expiring 2003," and "Incumbent Directors
- -- Term Expiring 2004" of the Proxy Statement for Annual Meeting of Shareholders
to be held May 23, 2002 (the "Proxy Statement") are incorporated herein by
reference for information on Directors of the Registrant. See Item X in Part I
hereof for information regarding executive officers of the Registrant. The
section under the heading "Other Matters" entitled "Section 16(a) Beneficial
Ownership Reporting Compliance" of the Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The section under the heading "Election of Directors" entitled "Compensation of
Directors" of the Proxy Statement and the sections under the heading titled
"Executive Compensation" entitled "Summary Compensation Table," "Option Grants
Table," "Fiscal Year-End Option Value Table," "Profit Sharing Plan,"
"Noncompetition Agreements, Employment Agreements and Change of Control
Agreements" and "Compensation Committee Interlocks and Insider Participation" of
the Proxy Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Common Stock Ownership by Management and
Principal Shareholders" of the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section under the heading "Certain Transactions" of the Proxy Statement is
incorporated herein by reference.
Post Properties, Inc. 38
Post Apartment Homes, L.P.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. AND 2. FINANCIAL STATEMENTS AND SCHEDULES
The financial statements and schedules listed below are filed as part of this
annual report on the pages indicated.
INDEX TO FINANCIAL STATEMENTS
PAGE
POST PROPERTIES, INC.
Consolidated Financial Statements:
Report of Independent Accountants...................................................................... 40
Consolidated Balance Sheets as of December 31, 2001 and 2000........................................... 41
Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999............. 42
Consolidated Statements of Shareholders' Equity and Accumulated Earnings for the Years Ended
December 31, 2001, 2000 and 1999..................................................................... 43
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999............. 44
Notes to the Consolidated Financial Statements......................................................... 45
POST APARTMENT HOMES, L.P.
Consolidated Financial Statements:
Report of Independent Accountants...................................................................... 63
Consolidated Balance Sheets as of December 31, 2001 and 2000........................................... 64
Consolidated Statements of Operations for the Years Ended December 31, 2001, 2000 and 1999............. 65
Consolidated Statements of Partners' Equity for the Years Ended December 31, 2001, 2000 and 1999....... 66
Consolidated Statements of Cash Flows for the Years Ended December 31, 2001, 2000 and 1999............. 67
Notes to the Consolidated Financial Statements......................................................... 68
Schedule III:
Real Estate and Accumulated Depreciation............................................................... 86
All other schedules are omitted because they are either not applicable or not
required.
POST PROPERTIES, INC. -- 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Financial Statements:
Report of Independent Accountants...................................................................... 89
Statement of Net Assets Available for Plan Benefits as of December 31, 2001 and 2000................... 90
Statement of Changes in Net Assets Available for Plan Benefits for the Years Ended
December 31, 2001 and 2000........................................................................... 91
Notes to Financial Statements.......................................................................... 92
Post Properties, Inc. 39
Post Apartment Homes, L.P
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Post Properties, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and accumulated
earnings, and of cash flows, present fairly, in all material respects, the
financial position of Post Properties, Inc. at December 31, 2001 and 2000, and
the results of their operations and their cash flows for each of the three years
then ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1, Post Properties, Inc. adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by Statement of Financial Accounting Standards No. 138,
on January 1, 2001.
PricewaterhouseCoopers LLP (signed)
Atlanta, Georgia
March 5, 2002
Post Properties, Inc. 40
Post Apartment Homes, L.P
POST PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
--------------------------------
2001 2000
------------ ------------
ASSETS
Real estate assets
Land ................................................................................ $ 277,146 $ 281,525
Building and improvements ........................................................... 1,794,658 1,681,798
Furniture, fixtures and equipment ................................................... 212,390 190,968
Construction in progress ............................................................ 419,449 509,702
Investments in and advances to unconsolidated real estate entities .................. 89,692 --
Land held for future development .................................................... 23,658 28,995
------------ ------------
2,816,993 2,692,988
Less: accumulated depreciation ...................................................... (393,014) (345,121)
Assets held for sale ................................................................ 39,419 122,047
------------ ------------
Real estate assets .................................................................. 2,463,398 2,469,914
Cash and cash equivalents ............................................................. 4,803 7,459
Restricted cash ....................................................................... 1,315 1,272
Deferred charges, net ................................................................. 18,203 21,700
Other assets .......................................................................... 50,632 50,892
------------ ------------
Total assets ........................................................................ $ 2,538,351 $ 2,551,237
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable ......................................................................... $ 1,336,520 $ 1,213,309
Accrued interest payable .............................................................. 9,660 10,751
Dividend and distribution payable ..................................................... 33,208 33,933
Accounts payable and accrued expenses ................................................. 72,277 67,136
Security deposits and prepaid rents ................................................... 9,016 9,407
------------ ------------
Total liabilities ................................................................... 1,460,681 1,334,536
------------ ------------
Minority interest of preferred unitholders in Operating Partnership ................... 70,000 70,000
------------ ------------
Minority interest of common unitholders in Operating Partnership ...................... 106,153 118,091
------------ ------------
Commitments and contingencies ......................................................... -- --
Shareholders' equity
Preferred stock, $.01 par value, 20,000,000 authorized:
8 1/2% Series A Cumulative Redeemable Shares, liquidation preference $50
per share, 900,000 and 1,000,000 shares issued and outstanding at
December 31, 2001 and
2000, respectively .............................................................. 9 10
7 5/8% Series B Cumulative Redeemable Shares, liquidation preference $25 per
share, 2,000,000 shares issued and outstanding .................................. 20 20
7 5/8% Series C Cumulative Redeemable Shares, liquidation preference $25 per
share, 2,000,000 shares issued and outstanding .................................. 20 20
Common stock, $.01 par value, 100,000,000 authorized:
39,676,204 and 39,662,192 shares issued, 36,856,559 and 38,853,596 shares
outstanding at December 31, 2001 and 2000, respectively ......................... 396 396
Additional paid-in capital ............................................................ 1,010,954 1,057,067
Accumulated earnings .................................................................. -- --
Accumulated other comprehensive income ................................................ (5,864) --
Deferred compensation ................................................................. (445) --
------------ ------------
1,005,090 1,057,513
Less common stock in treasury, at cost, 2,819,645 shares and 808,596 shares at
December 31, 2001 and 2000, respectively ............................................ (103,573) (28,903)
------------ ------------
Total shareholders' equity .......................................................... 901,517 1,028,610
------------ ------------
Total liabilities and shareholders' equity .......................................... $ 2,538,351 $ 2,551,237
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 41
Post Apartment Homes, L.P
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2001 2000 1999
------------- ------------- -------------
REVENUES
Rental ................................................................. $ 368,042 $ 365,895 $ 318,697
Third-party services ................................................... 14,088 15,249 12,486
Interest ............................................................... 1,771 1,922 764
Other .................................................................. 14,413 16,766 13,980
------------- ------------- -------------
Total revenues ....................................................... 398,314 399,832 345,927
------------- ------------- -------------
EXPENSES
Property operating and maintenance (exclusive of items shown
separately below) .................................................... 140,630 131,349 113,152
Depreciation ........................................................... 76,178 71,113 58,013
Third-party services ................................................... 13,023 13,092 10,829
Interest ............................................................... 57,930 50,303 33,192
Amortization of deferred loan costs .................................... 1,978 1,636 1,496
General and administrative ............................................. 13,745 10,066 7,788
Minority interest in consolidated property partnerships ................ (2,098) (1,695) 511
------------- ------------- -------------
Total expenses ....................................................... 301,386 275,864 224,981
------------- ------------- -------------
Income before net gain (loss) on sale of assets, other charges, minority
interest of unitholders in Operating Partnership,
cumulative effect of accounting change and extraordinary item ........ 96,928 123,968 120,946
Net gain (loss) on sale of assets ...................................... 23,942 3,208 (1,522)
Project abandonment, employee severance and impairment charges ......... (17,450) (9,365) --
Minority interest of preferred unitholders in Operating Partnership .... (5,600) (5,600) (1,851)
Minority interest of common unitholders in Operating Partnership ....... (10,203) (11,691) (12,598)
------------- ------------- -------------
Income before cumulative effect of accounting change and
extraordinary item ................................................... 87,617 100,520 104,975
Cumulative effect of accounting change, net of minority interest ....... (613) -- --
Extraordinary item, net of minority interest ........................... (77) -- (458)
------------- ------------- -------------
Net income ............................................................. 86,927 100,520 104,517
Dividends to preferred shareholders .................................... (11,768) (11,875) (11,875)
------------- ------------- -------------
Net income available to common shareholders ............................ $ 75,159 $ 88,645 $ 92,642
============= ============= =============
EARNINGS PER COMMON SHARE - BASIC
Income before cumulative effect of accounting change and
extraordinary item (net of preferred dividends) ...................... $ 2.00 $ 2.25 $ 2.42
Cumulative effect of accounting change, net of minority interest ....... (0.02) -- --
Extraordinary item, net of minority interest ........................... -- -- (0.01)
------------- ------------- -------------
Net income available to common shareholders ............................ $ 1.98 $ 2.25 $ 2.41
============= ============= =============
Weighted average common shares outstanding ............................. 38,052,673 39,317,725 38,460,689
============= ============= =============
EARNINGS PER COMMON SHARE - DILUTED
Income before cumulative effect of accounting change and
extraordinary item (net of preferred dividends) ...................... $ 1.98 $ 2.22 $ 2.39
Cumulative effect of accounting change, net of minority interest ....... (0.02) -- --
Extraordinary item, net of minority interest ........................... -- -- (0.01)
------------- ------------- -------------
Net income available to common shareholders ............................ $ 1.96 $ 2.22 $ 2.38
============= ============= =============
Weighted average common shares outstanding ............................. 38,267,939 39,852,514 38,916,987
============= ============= =============
Dividends declared ..................................................... $ 3.12 $ 3.04 $ 2.80
============= ============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 42
Post Apartment Homes, L.P
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(DOLLARS IN THOUSANDS)
ADDITIONAL
PREFERRED COMMON PAID-IN ACCUMULATED
STOCK STOCK CAPITAL EARNINGS
--------- ------- ------------ ----------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 1998......................... $ 50 $ 380 $ 1,051,256 $ --
Offering cost of redeemable
preferred units .................................. -- -- (1,810) --
Proceeds from Dividend
Reinvestment and Employee
Stock Purchase Plan .............................. -- 8 23,304 --
Adjustment for minority
interest of unitholders in
Operating Partnership at
dates of capital transactions .................... -- -- 857 --
Net income ......................................... -- -- -- 104,517
Dividends to preferred
shareholders ..................................... -- -- -- (11,875)
Dividends declared and paid to
common shareholders .............................. -- -- (15,183) (65,458)
Dividends declared to common
shareholders ..................................... -- -- -- (27,184)
-------- ----- ------------ ----------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 1999......................... $ 50 $ 388 $ 1,058,424 $ --
Proceeds from Dividend
Reinvestment and Employee
Stock Purchase Plan .............................. -- 8 29,029 --
Adjustment for minority
interest of unitholders in
Operating Partnership at
dates of capital transactions .................... -- -- 320 --
Net income ......................................... -- -- -- 100,520
Acquisition of treasury stock ...................... -- -- -- --
Dividends to preferred
shareholders ..................................... -- -- -- (11,875)
Dividends to common
shareholders ..................................... -- -- (30,706) (88,645)
-------- ----- ------------ ----------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 2000......................... $ 50 $ 396 $ 1,057,067 $ --
COMPREHENSIVE INCOME
Net income ....................................... -- -- -- 86,927
Cumulative effect of adoption
of SFAS 133, net of
minority interest .............................. -- -- -- --
Net change in derivative
value, net of minority
interest ....................................... -- -- -- --
TOTAL COMPREHENSIVE INCOME .......................
Proceeds from Dividend
Reinvestment and Employee
Stock Purchase Plans ............................. -- -- (3,541) --
Preferred Stock repurchase ....................... (1) -- (5,099) --
Adjustment for minority
interest of unitholders in
Operating Partnership at
dates of capital
transactions ................................... -- -- 5,194 --
Restricted stock issuances,
net of forfeitures ............................. -- -- 46 --
Amortization of deferred
compensation ................................... -- -- -- --
Treasury stock acquisitions ...................... -- -- -- --
Dividends to preferred
shareholders ................................... -- -- -- (11,768)
Dividends to common
shareholders ................................... -- -- (42,713) (75,159)
-------- ----- ------------ ----------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 2001......................... $ 49 $ 396 $ 1,010,954 $ --
======== ===== ============ ==========
ACCUMULATED
OTHER
COMPREHENSIVE DEFERRED TREASURY
INCOME COMPENSATION STOCK TOTAL
------------- ------------ ------------ ----------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 1998......................... $ -- $ -- $ -- $1,051,686
Offering cost of redeemable
preferred units .................................. -- -- -- (1,810)
Proceeds from Dividend
Reinvestment and Employee
Stock Purchase Plan .............................. -- -- -- 23,312
Adjustment for minority
interest of unitholders in
Operating Partnership at
dates of capital transactions .................... -- -- -- 857
Net income ......................................... -- -- -- 104,517
Dividends to preferred
shareholders ..................................... -- -- -- (11,875)
Dividends declared and paid to
common shareholders .............................. -- -- -- (80,641)
Dividends declared to common
shareholders ..................................... -- -- -- (27,184)
-------- ----- ------------ ----------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 1999,........................ $ -- $ -- $ -- $1,058,862
Proceeds from Dividend
Reinvestment and Employee
Stock Purchase Plan .............................. -- -- 152 29,189
Adjustment for minority
interest of unitholders in
Operating Partnership at
dates of capital transactions .................... -- -- -- 320
Net income ......................................... -- -- -- 100,520
Acquisition of treasury stock ...................... -- -- (29,055) (29,055)
Dividends to preferred
shareholders ..................................... -- -- -- (11,875)
Dividends to common
shareholders ..................................... -- -- -- (119,351)
-------- ----- ------------ ----------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 2000......................... $ -- $ -- $ (28,903) $1,028,610
COMPREHENSIVE INCOME
Net income ....................................... -- -- -- 86,927
Cumulative effect of adoption
of SFAS 133, net of
minority interest .............................. (1,299) -- -- (1,299)
Net change in derivative
value, net of minority
interest ....................................... (4,565) -- -- (4,565)
----------
TOTAL COMPREHENSIVE INCOME........................ 81,063
Proceeds from Dividend
Reinvestment and Employee
Stock Purchase Plans ............................. -- -- 12,307 8,766
Preferred Stock repurchase ....................... -- -- -- (5,100)
Adjustment for minority
interest of unitholders in
Operating Partnership at
dates of capital
transactions ................................... -- -- -- 5,194
Restricted stock issuances,
net of forfeitures ............................. -- (616) 570 --
Amortization of deferred
compensation ................................... -- 171 -- 171
Treasury stock acquisitions ...................... -- -- (87,547) (87,547)
Dividends to preferred
shareholders ................................... -- -- -- (11,768)
Dividends to common
shareholders ................................... -- -- -- (117,872)
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 2001........................ $ (5,864) $(445) $ (103,573) $ 901,517
======== ===== ============ ==========
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 43
Post Apartment Homes, L.P
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------------------------
2001 2000 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................. $ 86,927 $ 100,520 $ 104,517
Adjustments to reconcile net income to net cash provided by
operating activities:
Net (gain) loss on sale of assets .................................... (23,942) (3,208) 1,522
Minority interest of preferred unitholders in Operating
Partnership ........................................................ 5,600 5,600 1,851
Minority interest of common unitholders in Operating Partnership ..... 10,203 11,691 12,598
Equity in loss of unconsolidated entities ............................ 186 -- --
Cumulative effect of accounting change, net of minority interest ..... 613 -- --
Extraordinary item, net of minority interest ......................... 77 -- 458
Depreciation ......................................................... 76,178 71,113 58,013
Amortization of deferred loan costs .................................. 1,978 1,636 1,496
Changes in assets, (increase) decrease in:
Restricted cash ...................................................... (43) 108 (32)
Other assets ......................................................... (1,626) (8,904) (24,735)
Deferred charges ..................................................... (929) (1,591) (4,106)
Changes in liabilities, increase (decrease) in:
Accrued interest payable ............................................. (1,091) 1,591 1,551
Accounts payable and accrued expenses ................................ 7,824 6,133 (402)
Security deposits and prepaid rents .................................. (391) 384 307
---------- ---------- ----------
Net cash provided by operating activities .............................. 161,564 185,073 153,038
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets, net of payables .... (220,297) (362,981) (286,696)
Net proceeds from sale of assets ....................................... 220,122 157,265 16,587
Capitalized interest ................................................... (22,124) (25,426) (21,417)
Recurring capital expenditures ......................................... (10,441) (9,157) (8,641)
Corporate additions and improvements ................................... (3,021) (3,441) (6,811)
Non-recurring capital expenditures ..................................... (2,535) (5,576) (2,971)
Revenue generating capital expenditures ................................ (4,226) (6,670) (8,011)
Investment in and advances to unconsolidated entities .................. (8,691) -- --
---------- ---------- ----------
Net cash used in investing activities .................................. (51,213) (255,986) (317,960)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt proceeds .......................................................... 710,142 440,001 279,000
Payment of financing costs ............................................. (300) (3,128) (1,495)
Proceeds from Dividend Reinvestment and Employee Stock Purchase
Plans ................................................................ 8,766 26,754 23,312
Proceeds from preferred units, net of offering costs ................... -- -- 68,190
Debt payments .......................................................... (586,931) (216,275) (89,425)
Treasury stock acquisitions ............................................ (87,547) (24,912) --
Preferred stock repurchases ............................................ (5,100) -- --
Distributions to preferred unitholders ................................. (5,600) (5,600) (1,384)
Distributions to common unitholders .................................... (16,018) (15,458) (14,318)
Dividends paid to preferred shareholders ............................... (11,768) (11,875) (11,875)
Dividends paid to common shareholders .................................. (118,651) (117,005) (102,367)
---------- ---------- ----------
Net cash provided by (used in) financing activities .................... (113,007) 72,502 149,638
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents ................... (2,656) 1,589 (15,284)
Cash and cash equivalents, beginning of period ......................... 7,459 5,870 21,154
---------- ---------- ----------
Cash and cash equivalents, end of period ............................... $ 4,803 $ 7,459 $ 5,870
========== ========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 44
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
ORGANIZATION
Post Properties, Inc. (the "Company" or "PPI") through its majority owned
subsidiary, Post Apartment Homes, L.P. (the "Operating Partnership") currently
owns and manages or is in the process of developing apartment communities
located in the Atlanta, Dallas, Tampa, Orlando, Washington, D.C., Virginia,
Nashville, Houston, Austin, Phoenix, Denver, Pasadena, New York City and
Charlotte metropolitan areas. At December 31, 2001, approximately 50.7%, 20.7%
and 11.5% (on a unit basis) of the Company's communities are located in the
Atlanta, Dallas and Tampa metropolitan areas, respectively.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
accounts of the Company and the Operating Partnership. The Company's investments
in non-majority owned entities in which it does not exercise unilateral control,
but has the ability to exercise significant influence over operating and
financial policies, are accounted for on the equity method of accounting.
Accordingly, the Company's share of the net earnings or losses of these entities
is included in consolidated net income. All significant inter company accounts
and transactions have been eliminated in consolidation. Since units can be
redeemed for shares of the Company on a one-for-one basis at the Operating
Partnership's option, minority interest of unitholders in the operations of the
Operating Partnership is calculated based on the weighted average of shares and
units outstanding during the period.
Certain items in the 2000 and 1999 consolidated financial statements were
reclassified for comparative purposes with the 2001 consolidated financial
statements.
NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 2001, the Company adopted SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by SFAS No. 138, "Accounting for
Certain Derivative Instruments and Hedging Activities." This standard
established accounting and reporting standards for derivative and hedging
activities and required the Company to recognize all derivative financial
instruments on its balance sheet at fair value. Upon adoption of SFAS No. 133,
the Company recorded a derivative instrument liability of $1,299, net of
minority interest, and an adjustment of $1,299, net of minority interest, to
accumulated other comprehensive income, a shareholders' equity account,
representing the fair value of its outstanding interest rate swap agreements.
The Company also recorded a net transition adjustment loss in the statement of
operations of $613, net of minority interest, relating to the write down of the
book value of it's interest rate cap agreements to their fair value.
For all outstanding derivative financial instruments and for future use of
derivative financial instruments, the Company designates the specific
instruments as a hedge of identified cash flow exposure. The Company formally
documents all relationships between hedging instruments and hedged items, as
well as its risk-management objective and strategy for undertaking various
hedged transactions. In this documentation, the Company will specifically
identify the asset, liability, firm commitment, or forecasted transaction that
has been designated as a hedged item and will state how the hedged instrument is
expected to hedge the risks related to the hedged item. The Company will
formally measure effectiveness of its hedging relationships both at the hedge
inception and on an ongoing basis in accordance with its risk management policy.
The Company may discontinue hedge accounting prospectively when it is determined
that the derivative is no longer effective in offsetting changes in the fair
value or cash flows of a hedged item; when the derivative is expired or sold,
terminated or exercised; or when the derivative is re-designated to no longer be
a hedged instrument.
The Company currently utilizes only qualifying cash flow hedges that are
designated specifically to reduce exposure to interest rate risk by locking in
the expected future cash payments on certain designated liabilities. This is
typically accomplished using an interest rate swap or interest rate cap
arrangement. For financial reporting purposes, a cash flow hedge is recorded at
fair value in the balance sheet. The gain or loss on the effective portion of
these types of cash flow hedges are deferred and recorded as a component of
accumulated other comprehensive income until the hedged transactions are
recognized in earnings. The ineffective portion of these cash flow hedges are
recorded immediately in earnings.
Post Properties, Inc. 45
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
At December 31, 2001, the Company has outstanding interest rate swap agreements
with a notional value of $129,000 with maturity dates ranging from 2005 to 2009.
For the year ended December 31, 2001, the Company recorded the unrealized net
loss of $4,565, net minority interest, resulting from the change in fair value
of these cash flow hedges as a reduction in accumulated other comprehensive
income, a shareholders' equity account. In addition, the Company recorded the
change in fair value of the ineffective component of its outstanding interest
rate cap agreements in its statement of operations for the year ended
December 31, 2001. This charge against earnings and the fair value of the
interest rate cap agreements as of December 31, 2001 were not significant to the
Company's financial position or results of operations. In 2002, the Company
expects to reclassify out of accumulated other comprehensive income
approximately $1,231.
In 2001, the Financial Accounting Standards Board issued several new accounting
pronouncements, which are discussed in the following paragraphs.
SFAS No. 141, "Business Combinations", which requires all business combinations
initiated after June 30, 2001 to be accounted for under the purchase method, was
issued in July 2001. SFAS No. 141 supersedes APB Opinion No. 16, "Accounting for
Pre-acquisition Contingencies of Purchase Enterprises". The adoption of SFAS No.
141 did not have a significant effect on the Company's results of operations or
its financial position.
SFAS No. 142, "Goodwill and Other Intangible Assets", was issued in July 2001.
Under SFAS No. 142, the amortization of goodwill or other intangible assets with
indefinite lives is no longer required, but will be subject to periodic testing
for impairment. SFAS No. 142 supersedes APB Opinion No. 17, "Intangible Assets".
The Company will implement SFAS No. 142 on January 1, 2002. The Company believes
the provisions of SFAS No. 142 will not have a significant effect on its results
of operations or its financial position.
SFAS No. 143, "Account for Obligations Associated with Retirement of Long-Lived
Assets", was issued in August 2001. SFAS No. 143 establishes accounting
standards for the recognition and measurement of an asset retirement obligation
and its associated asset retirement costs. It also provides accounting guidance
for legal obligations associated with the retirement of tangible long-lived
assets. SFAS No. 143 is effective in fiscal years beginning after June 15, 2002.
The Company believes the provisions of SFAS No. 143 will not have a significant
effect on its results of operations or its financial position.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
that replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", was issued in October 2001. SFAS
No. 144 requires that long-lived assets be measured at the lower of their
carrying amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. The provisions of SFAS No. 144 are
effective for financial statements issued for fiscal years beginning after
December 15, 2001 and the Company will implement the provisions of SFAS No. 144
on January 1, 2002. The Company believes the provisions of SFAS No. 144 will not
have a significant effect on the Company's net results of operations or its
financial position.
COST CAPITALIZATION
The Company capitalizes those expenditures relating to the acquisition of new
assets, the development and construction of new apartment communities, the
enhancement of 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). Thereafter, these replacements
are capitalized. The Company expenses as incurred all interior and exterior
painting of communities.
The Company capitalizes interest, real estate taxes, and certain internal
personnel and associated costs directly related to apartment communities under
development and construction. The incremental personnel and associated costs are
capitalized to projects under development based upon the effort directly
identifiable with such projects. The Company treats each unit in an apartment
community separately for cost accumulation, capitalization and expense
recognition purposes. Prior to the commencement of leasing activities, interest
and other construction costs are capitalized and 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
Post Properties, Inc. 46
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
substantially complete and available for occupancy. In addition, prior to the
completion of units, the Company expenses as incurred substantially all
operating expenses (including pre-opening marketing expenses) of such
communities.
REAL ESTATE ASSETS, DEPRECIATION AND IMPAIRMENT
Real estate assets are stated at the lower of depreciated cost or fair value, if
deemed impaired. Major replacements and betterments are capitalized and
depreciated over their estimated useful lives. Depreciation is computed on a
straight-line basis over the useful lives of the properties (buildings and
components and related land improvements -- 20-40 years; furniture, fixtures and
equipment -- 5 - 10 years).
The Company continually evaluates the recoverability of the carrying value of
its real estate assets using the methodology prescribed in Statement of
Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of." Factors
considered by management in evaluating impairments include significant declines
in property operating profits, recurring property operating losses and other
significant adverse changes in general market conditions that are considered
permanent in nature. If any real estate asset held for investment is considered
impaired, a loss is recorded to reduce the carrying value of the asset to its
fair value. If a real estate asset is held for sale, any estimated loss is
recorded to reduce the carrying value of the asset to its fair value less costs
to sell. Subsequent to the classification of assets as held for sale, no further
depreciation expense is recorded.
As discussed above, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," that
replaces SFAS No. 121. SFAS No. 144 requires that long-lived assets be measured
at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations. The provisions
of SFAS No. 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001 and the Company will implement the provisions
of SFAS No. 144 beginning on January 1, 2002. The Company believes the
provisions of SFAS No. 144 will not have a significant effect on the Company's
net results of operations or its financial position.
REAL ESTATE ASSETS HELD FOR SALE
Under both SFAS No. 121 and 144, real estate assets held for sale are stated at
their fair value less cost to sell. The Company classifies real estate assets as
held for sale when its internal investment committee approves the sale and the
Company has commenced an active program to sell the assets. Subsequent to this
classification, no further depreciation is recorded on the assets. The operating
results of real estate assets held for sale are included in continuing
operations in the consolidated statement of operations. Upon the implementation
of SFAS No. 144 in 2002, the operating results of real estate assets held for
sale and real estate assets sold will be included in discontinued operations in
the consolidated statement of operations.
REVENUE RECOGNITION
Rental -- Residential properties are leased under operating leases with terms of
generally one year or less. Rental income is recognized when earned, which is
not materially different from revenue recognition on a straight-line basis.
Property management and landscaping services -- Income is recognized when earned
for property management and landscaping services provided to third parties.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, all investments purchased with an
original maturity of three months or less are considered to be cash equivalents.
RESTRICTED CASH
Restricted cash generally is comprised of resident security deposits for
communities located in Florida and Tennessee and required maintenance reserves
for communities located in DeKalb County, Georgia.
Post Properties, Inc. 47
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
DEFERRED FINANCING COSTS
Deferred financing costs are amortized using the interest method over the terms
of the related debt.
PER SHARE DATA
Basic earnings per common share with respect to the Company for the years ended
December 31, 2001, 2000 and 1999 is computed based upon the weighted average
number of shares outstanding during the period. Diluted earnings per common
share is based upon the weighted average number of shares outstanding during the
period and includes the effect of the potential issuance of additional shares if
stock options were exercised or converted into common stock.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. DEFERRED CHARGES
Deferred charges consist of the following:
DECEMBER 31,
----------------------------------
2001 2000
--------- ---------
Deferred financing costs ......................... $ 35,817 $ 36,068
Other ............................................ 4,527 5,240
--------- ---------
40,344 41,308
Less: accumulated amortization ................... (22,141) (19,608)
--------- ---------
$ 18,203 $ 21,700
========= =========
Post Properties, Inc. 48
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
3. NOTES PAYABLE
At December 31, 2001 and 2000, the Company's indebtedness consisted of the
following:
DECEMBER 31,
INTEREST MATURITY ------------------------------
DESCRIPTION PAYMENT TERMS RATE DATE(1) 2001 2000
----------- ------------- --------------- --------- ----------- ------------
SENIOR NOTES (UNSECURED)
Senior Notes Int. 6.71% - 7.70% 2003-2010 $ 360,000 $ 310,000
Medium Term Notes Int. 6.69% - 8.12%(2) 2004-2015 323,000 360,000
Northwestern Mutual Life Int. 8.37% 2002 20,000 50,000
----------- ------------
703,000 720,000
----------- ------------
UNSECURED LINES OF CREDIT &
OTHER
Revolver N/A LIBOR + 0.75% (3) 2004 155,000 18,000
Cash Management Line N/A LIBOR + 0.75% 2003 11,202 4,925
Other N/A 5.00% (4) 2021 2,000 2,000
----------- ------------
168,202 24,925
----------- ------------
CONVENTIONAL FIXED RATE (SECURED)
FNMA Prin. and Int. 6.975% (5) 2029 102,200 103,200
Northwestern Mutual Life Prin. and Int. 7.69% 2007 50,527 51,238
Northwestern Mutual Life Prin. and Int. 6.50% (6) 2009 47,681 48,601
Northwestern Mutual Life Prin. and Int. 7.69% 2007 28,268 28,666
Parkwood Townhomes(TM) Prin. and Int. 7.375% 2014 762 799
----------- ------------
229,438 232,504
----------- ------------
TAX EXEMPT FLOATING RATE BONDS
(SECURED) Int. 1.65% (7) 2025 235,880 235,880
----------- ------------
TOTAL $ 1,336,520 $ 1,213,309
=========== ============
(1) All outstanding indebtedness can be prepaid at any time, subject to
certain prepayment penalties.
(2) Contains $100,000 of Mandatory Par Put Remarketed Securities. The
annual interest rate on these securities to 2005 (the "Remarketing
Date") is 6.85%. On the Remarketing Date, they are subject to mandatory
tender for remarketing.
(3) Represents stated rate. Stated rate increased to LIBOR plus 0.85% in
2002. At December 31, 2001, the outstanding balance of the Revolver
consisted of "money market" loans with an average interest rate of
2.46%.
(4) This loan is interest free for the first three years, with interest at
5.00% thereafter.
(5) In 2000, interest rate was fixed at 6.975%, inclusive of credit
enhancement and other fees, to 2009 through an interest rate swap
arrangement.
(6) This note bears interest at 6.50% with an effective rate of 7.30%.
(7) FNMA credit enhanced bond indebtedness. Interest based on FNMA "AAA"
tax exempt rate plus credit enhancement and other fees of 0.639%.
Interest rate represents rate at December 31, 2001 before credit
enhancements. The Company has outstanding interest rate cap
arrangements that limit the Company's exposure to increases in the base
interest rate to 5%.
SENIOR AND MEDIUM TERM NOTES
In 2001, the Company issued $50,000 of 6.71% senior unsecured notes due in 2006.
The net proceeds from the notes were used to repay outstanding indebtedness. In
2001, the Company repaid the outstanding balance of one medium term note
issuance totaling $37,000 and one senior note issuance totaling $30,000 at their
scheduled maturing dates. All of the unsecured notes are subject to certain
covenants, including those governing the Company's interest and fixed charge
coverage and total leverage.
Post Properties, Inc. 49
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
DEBT MATURITIES
The aggregate maturities of the Company's indebtedness are as follows(1):
2002 ................................... $ 23,367
2003 ................................... 103,616
2004 ................................... 26,889
2005 ................................... 204,183
2006 ................................... 79,499
Thereafter ............................. 732,764
-----------
$ 1,170,318
===========
(1) Excludes outstanding balances on lines of credit discussed
below.
UNSECURED LINES OF CREDIT
The Company utilizes a $320,000 three-year syndicated revolving line of credit
(the "Revolver"), for its short-term financing requirements. At December 31,
2001, the stated interest rate for the Revolver was LIBOR plus 0.75% or prime
minus 0.25%. Subsequent to year end, the stated rate increased to LIBOR plus
0.85% as a result of a credit rating agency downgrade on the Company's senior
unsecured debt. The Revolver provides for the rate to be adjusted up or down
based on changes in the credit ratings on the Company's senior unsecured debt.
The Revolver also includes a money market competitive bid option for short-term
funds up to $160,000 at rates below the stated line rate. The credit agreement
for the Revolver contains customary representations, covenants and events of
default, including covenants which restrict the ability of the Operating
Partnership to make distributions, in excess of stated amounts, which in turn
restrict the discretion of the Company to declare and pay dividends. In general,
during any fiscal year the Operating Partnership may only distribute up to 100%
of the Operating Partnership's consolidated income available for distribution
(as defined in the credit agreement) exclusive of distributions of up to $30,000
of capital gains for such year. The credit agreement contains exceptions to
these limitations to allow the Operating Partnership to make distributions
necessary to allow the Company to maintain its status as a REIT. The Company
does not anticipate that this covenant will adversely affect the ability of the
Operating Partnership to make distributions, or the Company to declare
dividends, under the Company's current dividend level. The Revolver matures in
April 2004.
The Company also has in place an additional $185,000 line of credit facility for
general corporate purposes. This line, with an annual renewal, matures in April
2002 and carries terms substantially equal to the Revolver. The Company expects
to renew this credit facility, although the total capacity and terms may vary.
Additionally, the Company has a $20,000 unsecured line of credit with Wachovia
Bank of Georgia, N.A. (the "Cash Management Line"). The Cash Management Line
bears interest at LIBOR plus 0.75% or prime minus .25% and matures in February
2003. Management believes the Cash Management Line will be renewed at maturity
with similar terms.
INTEREST PAID
Interest paid (including capitalized amounts of $22,124, $25,426 and $21,417
for the years ended December 31, 2001, 2000 and 1999, respectively), aggregated
$82,383, $74,419 and $51,337 for the years ended December 31, 2001, 2000 and
1999, respectively.
PLEDGED ASSETS
The aggregate net book value at December 31, 2001 of property pledged as
collateral for indebtedness amounted to approximately $457,038.
Post Properties, Inc. 50
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
EXTRAORDINARY ITEM
The extraordinary losses for the years ended December 31, 2001 and 1999 of $88
($77 net of minority interest) and $521 ($458 net of minority interest),
respectively, resulted from costs associates with the early extinguishment of
indebtedness.
4. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
In 2001, the Company contributed two apartment communities under development in
Atlanta, Georgia and one apartment community in Pasadena, California to
individual limited liability companies (the "Property LLCs") with an
institutional investor. The Company holds a 35% equity interest in the Property
LLCs. The total estimated development cost of the apartment communities of
$144,000 is being funded through member equity contributions proportionate to
the members' ownership interests and through construction financing provided by
the Company. No gain or loss was recognized on the Company's contribution to the
Property LLCs. The Company provides real estate services (development,
construction and property management) to the Property LLCs. The Company accounts
for its investments in these Property LLCs using the equity method of
accounting. The excess of the Company's investment over its equity in the
underlying net assets of the Property LLCs was approximately $3,123 at December
31, 2001. This excess investment will primarily be amortized as a reduction to
earnings on a straight-line basis over the lives of the related assets.
The operating results of the Company include its proportionate share of net
income (loss) from the investments in the Property LLCs. A summary of financial
information for the Property LLCs in the aggregate is as follows:
DECEMBER 31, 2001
Real estate assets, net $ 115,664
Cash and other 533
----------
Total assets $ 116,197
==========
Construction notes payable to Company $ 77,019
Other liabilities 11,892
----------
Total liabilities 88,911
----------
Members' equity 27,286
----------
Total liabilities and members' equity $ 116,197
==========
Company's equity investment $ 12,673
==========
YEAR ENDED DECEMBER 31, 2001
Revenue $ 186
Expenses (718)
----------
Net loss $ (532)
==========
Company's share of net loss $ (186)
==========
At December 31, 2001, two of the apartment communities had commenced initial
rental operations. The third community was under construction with an
anticipated completion date in 2002. The Company's share of the net loss from
these investments is included in other revenue in the accompanying consolidated
financial statements.
The Company has committed construction financing to the Property LLCs
totaling $111,271 ($77,019 funded at December 31, 2001). These loans earn
interest at LIBOR plus 1.75% and are secured by the apartment communities. The
loans mature on dates ranging from February 2003 to February 2004 and are
expected to be repaid from the proceeds of permanent project financings. A
portion of the construction loan financing from the Company totaling
approximately $50,062 represents an obligation of the institutional investor
member of the Property LLCs.
Post Properties, Inc. 51
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
As part of the development and construction services agreements entered into
between the Company and the Property LLCs, the Company guaranteed the maximum
total amount for certain construction cost categories subject to aggregate
limits (approximately $14,000). At December 31, 2001, the Company's estimated
obligations under the agreements total approximately $900. If the Company is
unsuccessful in mitigating these estimated costs, the Company will be required
to fund the amounts to the Property LLCs. Any amounts funded will be accounted
for as part of the Company's investment in the Property LLCs. Additionally,
under these agreements, the Company is subject to project completion
requirements, as defined. At December 31, 2001, the Company believes that it
will meet the completion date requirements and not be subject to any additional
costs.
5. REAL ESTATE ASSETS HELD FOR SALE AND ASSET DISPOSITIONS
The Company classifies real estate assets as held for sale after the approval of
its internal investment committee and after the Company has commenced an active
program to sell the assets. At December 31 2001, the Company has classified two
apartment communities, six tracts of land and one commercial property as held
for sale. These real estate assets are reflected in the accompanying
consolidated balance sheet at $39,419 which represented the lower of cost or
fair value less costs to sell. The Company expects the sale of these assets to
occur in 2002.
For the years ended December 31, 2001, 2000 and 1999, the consolidated
statements of operations include net income of $4,071, $4,019 and $3,940,
respectively, from communities held for sale at December 31, 2001. For the year
ended December 31, 2001, depreciation expense of $844 was recognized on these
assets prior to the date of held for sale classification.
In 2001, the Company sold six apartment communities containing 2,799 units for
net proceeds of approximately $210,443. The communities sold were located in
Atlanta, Georgia, Dallas, Texas and Nashville, Tennessee. Additionally, the
Company sold land parcels in Dallas, Texas, Denver, Colorado and Charlotte,
North Carolina and a commercial property in Dallas, Texas for aggregate net
proceeds of $9,679. These sales resulted in net gains of approximately $16,365.
For the year ended December 31, 2001, the aggregate net gain on the sale of
assets of $23,942 included the impact of the estimated net losses totaling
$11,490 on the write down to fair value of assets designated as held for sale at
December 31, 2001 and excluded realized losses totaling $19,067 related to
assets written down to their estimated fair value at December 31, 2000.
In 2000, the Company sold eight apartment communities containing 1,984 units for
net proceeds of approximately $157,265, resulting in net gains of approximately
$24,266. The communities sold were located in Atlanta, Georgia, Jackson,
Mississippi and Nashville, Tennessee. For the year ended December 31, 2000, the
aggregate net gain on the sale of assets of $3,208 included the estimated net
losses totaling $21,058 on the write down to fair value of assets designated as
held for sale at December 31, 2000.
In 1999, the Company sold one apartment community containing 198 units and other
land parcels for net proceeds of approximately $16,587, resulting in a net loss
of $1,522.
6. SHAREHOLDERS' EQUITY/MINORITY INTEREST
PREFERRED STOCK
At December 31, 2001 and 2000, the Company had issued three series of preferred
stock with the following characteristics:
Liquidation Optional Redemption Stated
Preference Redemption Price(1) Dividend
Description (per share) Date(1) (per share) Rate
----------- ----------- ---------- ----------- --------
Series A $ 50.00 10/01/26 $ 50.00 8.5%
Series B $ 25.00 10/28/07 $ 25.00 7.625%
Series C $ 25.00 02/09/03 $ 25.00 7.625%
(1) The preferred stock is redeemable by the Company for cash.
Post Properties, Inc. 52
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
COMPUTATION OF EARNINGS PER COMMON SHARE
For the years ended December 31, 2001, 2000 and 1999, basic and diluted earnings
per common share for income before extraordinary item, net of preferred
dividends, and income available to common shareholders before cumulative effect
of accounting change and extraordinary item has been computed as follows:
YEAR ENDED 2001
-----------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Income before cumulative effect of accounting change and
extraordinary item ........................................... $ 87,617
Less: Preferred stock dividends ................................. (11,768)
---------
BASIC EPS
Income available to common shareholders before cumulative effect
of accounting change and extraordinary item .................. 75,849 38,052,673 $ 2.00
======
EFFECT OF DILUTIVE SECURITIES
Options ......................................................... -- 215,266
--------- ----------
DILUTED EPS
Income available to common shareholders + assumed conversions
before cumulative effect of accounting change and
extraordinary item ........................................... $ 75,849 38,267,939 $ 1.98
========= =========== ======
YEAR ENDED 2000
-----------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Income before extraordinary item ................................ $ 100,520
Less: Preferred stock dividends ................................. (11,875)
---------
BASIC EPS
Income available to common shareholders before extraordinary
item ......................................................... 88,645 39,317,725 $ 2.25
======
EFFECT OF DILUTIVE SECURITIES
Options ......................................................... -- 534,789
--------- ----------
DILUTED EPS
Income available to common shareholders + assumed conversions
before extraordinary item .................................... $ 88,645 39,852,514 $ 2.22
========= =========== ======
YEAR ENDED 1999
-----------------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Income before extraordinary item ................................ $ 104,975
Less: Preferred stock dividends ................................. (11,875)
---------
BASIC EPS
Income available to common shareholders before extraordinary
item ......................................................... 93,100 38,460,689 $ 2.42
======
EFFECT OF DILUTIVE SECURITIES
Options ......................................................... -- 456,298
--------- -----------
DILUTED EPS
Income available to common shareholders + assumed conversions
before extraordinary item .................................... $ 93,100 38,916,987 $ 2.39
========= =========== ======
Post Properties, Inc. 53
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
PREFERRED UNITS
The Operating Partnership has outstanding 2,800,000, 8% Series D cumulative
redeemable preferred units (the "Series D Preferred Units"). The Series D
Preferred Units have a liquidation preference of $25.00 per unit and are
redeemable by the Operating Partnership on or after September 3, 2004, at a
redemption price of $25.00 per unit. The Series D Preferred Units are
exchangeable into authorized, but unissued Series D preferred stock of the
Company, with identical terms and preferences, on or after September 2, 2009, at
the option of the holders. Under certain circumstances, as defined in the
agreement, the Series D preferred Units may become exchangeable on or after
September 3, 2002, at the option of the holders.
7. PROJECT ABANDONMENT, EMPLOYEE SEVERANCE AND IMPAIRMENT CHARGES
The Company recorded project impairment and abandonment, employee severance and
asset impairment charges for the years ended December 31, 2001 and 2000. The
charges are summarized as follows:
2001 2000
--------- ---------
Project impairment and abandonment ....... $ 8,122 $ 4,389
Employee severance ....................... 3,560 3,066
Asset impairment ......................... 5,768 1,910
--------- ---------
$ 17,450 $ 9,365
========= =========
In the fourth quarter of 2001, the Company recorded charges totaling $17,450.
These charges, precipitated by the sharp decline in economic and market
conditions, reflect management's decision to focus its business and new
development strategy on fewer markets, to focus on its core business of owning,
developing and managing multifamily real estate assets and to do so with a
smaller workforce and lower overhead expenses. The project impairment and
abandonment charge of $8,122 represents reserves on certain predevelopment and
transaction pursuit costs in markets the Company will no longer pursue for
development opportunities and for certain projects that will no longer be
pursued due to economic and market conditions. The employee severance charge of
$3,560 is primarily for severance costs related to approximately a 100 person
senior management and staff workforce reduction plan initiated and completed in
the fourth quarter of 2001. The asset impairment and disposition charge includes
a loss of $2,831 related to the disposition of the Company's corporate aircraft,
a loss of $452 on the sale of the Company's third party landscape business
discussed more fully below, impairment charges of $1,000 related to the
Company's exit from the for-sale housing business in all markets and the
write-down to estimated market value of certain internet and technology
investments of $1,485.
At December 31, 2001, approximately $3,632 of these charges, primarily employee
severance costs, remained as an accrued liability on the consolidated balance
sheet. These amounts are expected to be paid in 2002.
In the fourth quarter of 2001, the Company sold substantially all of the net
assets of Post Landscape Group, Inc., a subsidiary entity that provided
landscape maintenance, design and installation services to third parties, and
RAM Partners, Inc., a separate subsidiary entity that managed apartment
communities for third parties. These businesses were sold to members of the
respective former management teams of the subsidiaries. The Company financed
100% of the sales price of $5,767 (adjusted for working capital transfers at
closing) through purchase money notes with interest of 9%. The notes require
periodic interest, annual principal and balloon principal payments in 2006. The
notes can be extended for two one-year periods. Under generally accepted
accounting principles, the transactions have not been recorded as sales at
December 31, 2001, and will not be recorded as sales until the conditions for
sale recognition, primarily the receipt of an adequate down payment on the
notes, are met. Until these transactions are recognized as sales, the book value
of the assets and liabilities of these business are included in the Company's
consolidated balance sheet. Any collections under the notes will reduce the
carrying value of the assets. The sale of the Post Landscape Group resulted in a
loss of $452. Under generally accepted accounting principles, this loss was
recognized in 2001 and included in the project abandonment, employee severance
and impairment charges discussed above. The sale of RAM Partners will result in
a gain of approximately $591, which will be recognized when the conditions for
full sale recognition are met (expected in 2002).
Post Properties, Inc. 54
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
In the fourth quarter of 2000, the Company recorded charges of $9,365. These
charges reflect management's decision to restrict its development activities
to fewer markets, refine its development investment and for-sale housing
strategies and make changes in its executive management team. Project
abandonment charges totaling $4,389 related to the write off of predevelopment
and pursuit costs in markets in which the Company will no longer pursue
development opportunities and on certain proposed development deals not meeting
management's revised development strategy. Employee severance charges related to
the termination costs of four executive positions and five staff personnel in
the Company's Dallas, Texas regional office. The asset impairment charge of
$1,910 includes a charge of $1,503 related to the write off of the Company's
investment in a high speed internet provider that filed for bankruptcy
protection and a charge of $407 related to the exit from the for-sale housing
business in certain markets. As of December 31, 2001, all of the 2000 charges
had been paid.
8. INCOME TAXES
The Company has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"). To qualify as a REIT, the Company must distribute
annually at least 90% of its adjusted taxable income, as defined in the Code, to
its shareholders and satisfy certain other organizational and operating
requirements. It is management's current intention to adhere to these
requirements and maintain the Company's REIT status. As a REIT, the Company
generally will not be subject to Federal income tax at the corporate level on
the taxable income it distributes to its shareholders. If the Company fails to
qualify as a REIT in any taxable year, it will be subject to federal income
taxes at regular corporate rates (including any applicable alternative minimum
tax) and may not be able to qualify as a REIT for four subsequent taxable years.
The Company may be subject to certain state and local taxes on its income and
property, and to federal income taxes and excise taxes on its undistributed
taxable income.
The Company utilizes taxable REIT subsidiaries to perform such non-REIT
activities as asset management, leasing and landscaping services for third
parties. These taxable REIT subsidiaries are subject to federal, state and local
income taxes. For the three years in the period ended December 31, 2001, the
impact of these taxable REIT subsidiaries' income taxes and their related tax
attributes were not material to the accompanying consolidated financial
statements.
RECONCILIATION OF NET INCOME TO TAXABLE INCOME
As discussed in Note 1, the Company conducts substantially all of its operations
through its majority-owned subsidiary, the Operating Partnership. For income tax
reporting purposes, the Company receives an allocable share of the Operating
Partnership's ordinary income and capital gains based on its weighted average
ownership adjusted for certain specially allocated items. All adjustments to net
income in the table below are net of amounts attributable to minority interests
and taxable REIT subsidiaries. A reconciliation of net income to taxable income
for the years ended December 31, 2001, 2000 and 1999 is detailed below:
2001 2000 1999
(ESTIMATE) (ACTUAL) (ACTUAL)
---------- ---------- ----------
Net income ...................................................... $ 86,927 $ 100,520 $ 104,517
Add net loss of taxable REIT subsidiaries ....................... 9,375 1,279 906
---------- ---------- ----------
Adjusted net income ............................................. 96,302 101,799 105,423
Book/tax depreciation difference ............................. (22,987) (19,741) (24,064)
Book/tax difference on gains from real estate sales .......... 36,097 38,015 8,135
Other book/tax differences, net .............................. (5,524) (8,497) (5,984)
---------- ---------- ----------
Taxable income before allocation of taxable capital gains ....... 103,888 111,576 83,510
Income taxable as capital gains ................................. (50,400) (38,060) (9,542)
---------- ---------- ----------
Taxable ordinary income ......................................... $ 53,488 $ 73,516 $ 73,968
========== ========== ==========
Post Properties, Inc. 55
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
INCOME TAX CHARACTERIZATION OF DIVIDENDS
For income tax purposes, dividends to common shareholders are characterized as
ordinary income, capital gains or as a return of a shareholder's invested
capital. A summary of the income tax characterization of the Company's dividends
paid per common share were as follows for the years ended December 31, 2001,
2000 and 1999:
2001 2000 1999
----------------------- ----------------------- ---------------------
Amount % Amount % Amount %
-------- -------- -------- -------- -------- ------
Ordinary income ................... $ 1.58 51.1% $ 2.10 70.3% $ 2.29 83.2%
Capital gains ..................... 0.55 17.8% 0.59 20.0% 0.16 5.9%
Unrecaptured Section 1250 gains ... 0.64 20.5% 0.29 9.6% 0.06 2.1%
Return of capital ................. 0.33 10.6% 0.00 0.1% 0.24 8.8%
-------- -------- -------- -------- -------- ------
$ 3.10 100.0% $ 2.98 100.0% $ 2.75 100.0%
======== ======== ======== ======== ======== ======
The income tax characterization of dividends to common shareholders is based on
the calculation of Taxable Earnings and Profits, as defined in the Code. Taxable
Earnings and Profits differ from regular taxable income due primarily to
differences in the estimated useful lives and methods used to compute
depreciation and in the recognition of gains and losses on the sale of real
estate assets.
As of December 31, 2001, the net basis for federal income tax purposes taking
into account the special allocation of gain to the partners contributing
property to the Operating Partnership and including minority interest in the
Operating Partnership was lower than the net assets as reported in the Company's
consolidated financial statements by $6,640.
9. STOCK-BASED COMPENSATION PLANS
STOCK COMPENSATION PLANS
At December 31, 2001, the Company had two stock-based compensation plans, the
Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the
"ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as
described below. The Company applies APB Opinion 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its plans.
Accordingly, based upon the criteria of APB Opinion 25 no compensation cost is
required to be recognized for the Stock Plan and the ESPP. The compensation cost
which is required to be charged against income for the Grant Plan, was $112,
$138 and $205 for 2001, 2000 and 1999, respectively. Had compensation cost for
the Company's Stock Plan and ESPP been determined based on the fair value at the
grant dates for awards under the Plans consistent with the method of SFAS No.
123, "Accounting for Stock-Based Compensation," the Company's net income and
earnings per share would have been reduced to the pro forma amounts indicated
below:
2001 2000 1999
-------- -------- --------
Net income available to common
shareholders.................... As reported..... $ 75,159 $ 88,645 $ 92,642
Pro forma....... $ 73,872 $ 86,463 $ 90,459
-------- -------- --------
Net income per common share -
basic........................... As reported..... $ 1.98 $ 2.25 $ 2.41
Pro forma....... $ 1.94 $ 2.20 $ 2.35
Net income per common share -
diluted......................... As reported..... $ 1.96 $ 2.22 $ 2.38
Pro forma....... $ 1.93 $ 2.17 $ 2.32
Post Properties, Inc. 56
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
For purposes of the pro forma presentation, the fair value of each option
grant is estimated as of the date of grant using the Black-Scholes
option-pricing model. The weighted-average of all assumptions used in the
calculation for various grants under all of the Company's plans during 2001,
2000 and 1999 are as follows:
2001 2000 1999
----------- ----------- -----------
Dividend yield ........................................ 8.4% 8.0% 7.3%
Expected volatility ................................... 15.1% 24.8% 15.4%
Risk-free interest rate ............................... 3.7% to 5.3% 6.7% to 6.9% 4.5% to 6.6%
Expected option life .................................. 5 to 7 years 5 to 7 years 5 to 7 years
EMPLOYEE STOCK PLAN
Under the Stock Plan, the Company may grant to its employees and directors
options to purchase up to 6,000,000 shares of common stock. Of this amount,
550,000 shares are available for grants of restricted stock. Options granted to
any key employee or officer cannot exceed 100,000 shares a year (500,000 shares
if such key employee or officer is a member of the Company's Executive
Committee). The exercise price of each option may not be less than the market
price on the date of grant and all options have a maximum term of ten years from
the grant date.
A summary of the status of stock option activity under the Stock Plan as of
December 31, 2001, 2000 and 1999, is presented below:
2001 2000 1999
----------------------- ------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARE PRICE SHARES PRICE SHARE PRICE
---------- -------- ---------- --------- ---------- ---------
Outstanding at beginning or year 4,271,608 $ 35 4,054,876 $ 34 3,030,852 $ 31
Granted 415,529 37 740,538 38 1,288,232 36
Exercised (262,332) 30 (334,194) 32 (164,053) 30
Forfeited (196,587) 38 (189,612) 38 (100,155) 37
---------- ---------- ----------
Outstanding at end of year 4,228,218 36 4,271,608 35 4,054,876 35
========== ========== ==========
Options exercisable at year-end 2,962,245 2,413,595 2,290,143
========== ========== ==========
Weighted-average fair value of
options granted during the year $ 1.44 $ 4.76 $ 2.08
========== ========== ==========
At December 31, 2001, the range of exercise prices for options outstanding was
$27.625 - $44.125 and the weighted-average remaining contractual life was 6
years.
In 2001, under its existing Stock Plan, the Company granted 17,566 shares of
restricted stock to company officers. The restricted shares vest ratably over a
five-year period. The total value of the restricted share grants of $644 was
initially reflected in shareholders' equity as additional capital reduced by
non-amortized deferred compensation expense. Such deferred compensation is
amortized ratably into compensation expense over the vesting period.
10. EMPLOYEE BENEFIT PLANS
The employees of the Company are participants in a defined contribution plan
pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Company
contributions, if any, to this plan are based on the performance of the Company
and are allocated to each participant based on the relative contribution of the
participant to the total contributions of all participants. For purposes of
allocating the Company contribution, the maximum employee contribution included
in the calculation is 3% of salary. Company contributions of $638, $514 and $346
were made in 2001, 2000 and 1999, respectively.
Post Properties, Inc. 57
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
The Company maintains an Employee Stock Purchase Plan ("ESPP") to encourage
stock ownership by eligible directors and employees. To participate in the ESPP,
(i) directors must not be employed by the Company or the Operating Partnership
and must have been a member of the Board of Directors for at least one month and
(ii) an employee must have been employed full or part-time by the Company or the
Operating Partnership for at least one month. The purchase price of shares of
Common Stock under the ESPP is equal to 85% of the lesser of the closing price
per share of Common Stock on the first or last day of the trading period, as
defined.
11. COMMITMENTS AND CONTINGENCIES
LAND, OFFICE AND EQUIPMENT LEASES
The Company is party to two ground leases with terms expiring in years 2040 and
2043 relating to a single operating community, one ground lease expiring in 2038
for a second operating community, three ground leases expiring in 2066, 2069 and
2074 for three communities under development and to office, equipment and other
operating leases with terms expiring in years 2001 through 2004. Future minimum
lease payments for non-cancelable land, office, equipment and other leases at
December 31, 2001, are as follows:
2002......................... $ 1,918
2003......................... 1,827
2004......................... 1,721
2005......................... 1,288
2006......................... 1,306
2007 and thereafter.......... 157,798
The Company incurred $5,998, $5,935 and $5,109 of rent expense for the years
ended December 31, 2001, 2000 and 1999, respectively.
CONTINGENCIES
The Company is party to various legal actions which are incidental to its
business. Management believes that these actions will not have a material
adverse affect on the consolidated balance sheets and statements of operations.
12. RELATED PARTY TRANSACTIONS
In 2001, the Company invested in three Property LLCs that are accounted for
under the equity method of accounting (see Note 4). In 2001, the Company
recorded development fees, general construction contract billings, management
fees and expense reimbursements (primarily personnel costs) of approximately
$15,202 from these related companies. Additionally in 2001, the Company earned
interest under the construction loans to the Project LLCs totaling $1,024.
The Company provides landscaping services for executive officers, employees,
directors and other related parties. For the years ended December 31, 2001, 2000
and 1999, the Company received landscaping revenue of $ 705, $667 and $610 for
such services. Such revenue includes reimbursement of direct and indirect
expenses. Additionally, the Company provides accounting and administrative
services to entities controlled by certain executive officers of the Company.
Fees under this arrangement aggregated $25 for each year ended December 31,
2001, 2000 and 1999, respectively. Also, the Company was contracted to assist in
the development of apartment complexes constructed by a former executive and
current shareholder. Fees under this arrangement were $7, $29 and $100 for the
years ended December 31, 2001, 2000 and 1999, respectively.
In 2001, 2000 and 1999, the Company loaned $2,500, $1,500 and $7,750,
respectively, to certain executives. These loans are payable ten years from the
issue date and bear interest at a rate of 6.32% per annum. Proceeds from these
loans were used by these executives to acquire the Company's common shares on
the open market. At December 31, 2001, $2,500 of the loans have been repaid.
Additionally, in 2001, the Company loaned $1,300 to certain executives. The
loans bear interest at 6.32% per annum. If the executives continue to be
employed by the Company, the loans will be forgiven annually over five to ten
year periods, as defined in the agreements. The annual loan forgiveness of $160
is recorded as compensation expense.
Post Properties, Inc. 58
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
Considerable judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize on disposition
of the financial instruments. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair value
amounts.
Cash equivalents, rents and accounts receivables, accounts payable, accrued
expenses, agreements and other liabilities are carried at amounts which
reasonably approximate their fair values because of the short-term nature of
these investments. The fair value of fixed rate debt was approximately $847,563
(carrying value of $807,238) and the fair value of floating rate debt
approximated its carrying value due to the adjustable nature of the arrangements
at December 31, 2001.
In order to manage the impact of interest rate changes on earnings and cash
flow, the Company entered into and has outstanding interest rate swap and
interest rate cap arrangements. As more fully described in Note 1, the fair
values of these interest rate cap and interest rate swap agreements are carried
on the consolidated balance sheet at fair market value in accordance with SFAS
No. 133. At December 31, 2001, the carrying amounts related to these
arrangements represented net liabilities totaling approximately $6,630.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 2001. Although management
is not aware of any factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and current estimates of fair
value may differ significantly from the amounts presented herein.
14. SEGMENT INFORMATION
SEGMENT DESCRIPTION
In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise
and Related Information," the Company presents segment information based on the
way that management organizes the segments within the enterprise for making
operating decisions and assessing performance. The segment information is
prepared on substantially the same basis as the internally reported information
used by the Company's chief operating decision makers to manage the business.
The Company's chief operating decision makers focus on the Company's primary
sources of income from property rental operations. Property rental operations
are broken down into five segments based on the various stages in the property
ownership lifecycle. These segments are described below. All other ancillary
service and support operations, including the third party service businesses
(see Note 7), are aggregated in the accompanying segment information.
- Fully stabilized communities - those apartment communities
which have been stabilized (the earlier of the point at which
a property reaches 95% occupancy or one year after completion
of construction) for both the current and prior year.
- Communities stabilized during 2000 - communities which reached
stabilized occupancy in the prior year.
- Development and lease up communities - those communities that
are in lease-up but were not stabilized by the beginning of
the current year, including communities that stabilized during
the current year.
- Communities held for sale - those communities that are being
marketed for sale.
- Sold communities - communities which were sold in the current
or prior year.
Post Properties, Inc. 59
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the performance
measure for its segments. Effective January 1, 2000, FFO is defined by the
National Association of Real Estate Investment Trusts as net income available to
common shareholders determined in accordance with generally accepted accounting
principles ("GAAP"), excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation of real estate assets, and after adjustment
for unconsolidated partnerships and joint ventures. FFO should not be considered
as an alternative to net income (determined in accordance with GAAP) as an
indicator of the Company's financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of the Company's
liquidity, nor is it necessarily indicative of sufficient cash flow to fund all
of the Company's needs.
SEGMENT INFORMATION
The following table reflects each segment's contribution to consolidated
revenues and FFO together with a reconciliation of segment contribution to FFO,
total FFO and income before extraordinary item and preferred dividends.
Additionally, substantially all of the Company's assets relate to the Company's
property rental operations. Asset cost, depreciation and amortization by segment
are not presented because such information at the segment level is not reported
internally.
2001 2000 1999
---------- ---------- ----------
REVENUES
Fully stabilized communities .......................... $ 257,007 $ 254,511 $ 240,561
Communities stabilized during 2000 .................... 46,237 39,556 14,863
Development and lease-up communities .................. 44,607 18,315 5,754
Communities held for sale ............................. 6,278 6,132 5,885
Sold communities ...................................... 13,381 46,751 53,181
Other ................................................. 30,804 34,567 25,683
---------- ---------- ----------
Consolidated revenues ................................. $ 398,314 $ 399,832 $ 345,927
========== ========== ==========
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities .......................... $ 173,890 $ 176,410 $ 166,793
Communities stabilized during 2000 .................... 30,129 26,648 9,447
Development and lease-up communities .................. 26,919 9,819 3,156
Communities held for sale ............................. 4,071 4,019 3,940
Sold communities ...................................... 8,258 31,627 37,064
Other ................................................. 1,065 2,157 1,657
---------- ---------- ----------
Contribution to FFO ................................... 244,332 250,680 222,057
---------- ---------- ----------
Other operating income, net of expense ................ (8,048) (3,314) (2,652)
Depreciation on non-real estate assets ................ (2,378) (2,405) (1,962)
Minority interest in consolidated property Partnerships 2,098 1,695 (511)
Project abandonment, employee severance and impairment
Charges ............................................. (17,450) (9,365) --
Interest expense ...................................... (57,930) (50,303) (33,192)
Amortization of deferred loan costs ................... (1,978) (1,636) (1,496)
General and administrative ............................ (13,745) (10,066) (7,788)
Dividends to preferred shareholders ................... (11,768) (11,875) (11,875)
---------- ---------- ----------
Total FFO ............................................. 133,133 163,411 162,581
---------- ---------- ----------
Depreciation on real estate assets .................... (71,023) (66,283) (55,361)
Net gain (loss) on sale of assets ..................... 23,942 3,208 (1,522)
Minority interest of common unitholders in
Operating Partnership ............................... (10,203) (11,691) (12,598)
Dividends to preferred shareholders ................... 11,768 11,875 11,875
---------- ---------- ----------
Income before cumulative effect of accounting change,
extraordinary item and preferred dividends .......... $ 87,617 $ 100,520 $ 104,975
========== ========== ==========
Post Properties, Inc. 60
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
15. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December 31,
2001, 2000 and 1999 are as follows:
(a) In 2001, 2000 and 1999, holders of 62,523, 12,014 and 22,299 Units in
the Operating Partnership, respectively, exercised their option to
convert their Units to shares of the Company on a one-for-one basis.
The net effect of the capital allocated to the unitholders of the
Operating Partnership on the dates of the offerings, the subsequent
conversion of Units of the Operating Partnership to shares of the
Company, and the adjustments to minority interest for the dilutive
impact of the Dividend Reinvestment and Employee Stock Purchase Plans,
decreased minority interest and increased shareholders' equity in the
amounts of $5,194, $320 and $857 for the years ended December 31, 2001,
2000 and 1999, respectively.
(b) The Operating Partnership committed to distribute $32,741, $33,466 and
$30,818 for the quarters ended December 31, 2001, 2000 and 1999,
respectively. As a result, the Company declared dividends of $28,748,
$29,528 and $27,184 for the quarters ended December 31, 2001, 2000 and
1999, respectively. The remaining distributions from the Operating
Partnership in the amount of $3,993, $3,938 and $3,634 for the quarters
ended December 31, 2001, 2000 and 1999, respectively, are distributed
to minority interest unitholders in the Operating Partnership.
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended 2001 and 2000 are as
follows:
YEAR ENDED DECEMBER 31, 2001*
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- --------- ---------
Revenues ............................................................. $ 102,583 $ 102,162 $ 99,119 $ 94,450
---------- ---------- --------- ---------
Income before net gain (loss) on sale of assets, other charges,
minority interest of unitholders in Operating Partnership,
cumulative effect of accounting change and extraordinary item ..... 27,466 26,374 23,932 19,156
Net gain (loss) on sale of assets .................................... 111 15,660 8,179 (8)
Project abandonment, employee severance and impairment charges ....... -- -- -- (17,450)
Minority interest of preferred unitholders in Operating Partnership .. (1,400) (1,400) (1,400) (1,400)
Minority interest of common unitholders in Operating Partnership ..... (2,729) (4,443) (3,322) 292
Cumulative effect of accounting change ............................... (613) -- -- --
Extraordinary items .................................................. -- (77) -- --
---------- ---------- --------- ---------
Net income ........................................................... 22,835 36,114 27,389 590
Dividends to preferred shareholders .................................. (2,969) (2,969) (2,969) (2,862)
---------- ---------- --------- ---------
Net income (loss) available to common shareholders ................... $ 19,866 $ 33,145 $ 24,420 $ (2,272)
========== ========== ========= =========
Earnings per common share:
Net income (loss) available to common shareholders - basic ........... $ 0.51 $ 0.86 $ 0.64 $ (0.06)
Net income (loss) available to common shareholders - diluted ......... $ 0.51 $ 0.85 $ 0.64 $ (0.06)
Post Properties, Inc. 61
Post Apartment Homes, L.P
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31, 2000*
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- --------- ---------
Revenues ............................................................. $ 95,443 $ 99,482 $ 101,342 $ 103,565
---------- ---------- --------- ---------
Income before net gain (loss) on sale of assets, other charges and
minority interest of unitholders in Operating Partnership ......... 31,965 33,734 30,676 27,593
Net gain (loss) on sale of assets .................................... 687 (19) 959 1,581
Project abandonment, employee severance and impairment charges ....... -- -- -- (9,365)
Minority interest of preferred unitholders in Operating Partnership .. (1,400) (1,400) (1,400) (1,400)
Minority interest of common unitholders in .Operating Partnership .... (3,321) (3,421) (3,156) (1,793)
---------- ---------- --------- ---------
Net income ........................................................... 27,931 28,894 27,079 16,616
Dividends to preferred shareholders .................................. (2,968) (2,969) (2,969) (2,969)
---------- ---------- --------- ---------
Net income available to common shareholders .......................... $ 24,963 $ 25,925 $ 24,110 $ 13,647
========== ========== ========= =========
Earnings per common share:
Net income available to common shareholders - basic .................. $ 0.64 $ 0.66 $ 0.61 $ 0.35
Net income available to common shareholders - diluted ................ $ 0.63 $ 0.65 $ 0.60 $ 0.34
* The total of the four quarterly amounts for minority interest of
unitholders in Operating Partnership, extraordinary item, net income
and earnings per share may not equal the total for the year. These
differences result from the use of a weighted average to compute
minority interest in the Operating Partnership and average number of
shares outstanding.
Post Properties, Inc. 62
Post Apartment Homes, L.P
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Post Apartment Homes, L.P.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of partners' equity, and of cash flows,
present fairly, in all material respects, the financial position of Post
Apartment Homes, L.P. at December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years ended December 31,
2001 in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
As discussed in Note 1, Post Apartment Homes, L.P. adopted Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, as amended by Statement of Financial Accounting
Standards No. 138, on January 1, 2001.
PricewaterhouseCoopers LLP (signed)
Atlanta, Georgia
March 5, 2002
Post Properties, Inc. 63
Post Apartment Homes, L.P
POST APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
-------------------------------
2001 2000
----------- -----------
ASSETS
Real estate assets
Land ................................................................. $ 277,146 $ 281,525
Building and improvements ............................................ 1,794,658 1,681,798
Furniture, fixtures and equipment .................................... 212,390 190,968
Construction in progress ............................................. 419,449 509,702
Investments in and advances to unconsolidated real estate entities ... 89,692 --
Land held for future development ..................................... 23,658 28,995
----------- -----------
2,816,993 2,692,988
Less: accumulated depreciation ....................................... (393,014) (345,121)
Assets held for sale ................................................. 39,419 122,047
----------- -----------
Real estate assets ................................................... 2,463,398 2,469,914
Cash and cash equivalents .............................................. 4,803 7,459
Restricted cash ........................................................ 1,315 1,272
Deferred charges, net .................................................. 18,203 21,700
Other assets ........................................................... 50,632 50,892
----------- -----------
Total assets ......................................................... $ 2,538,351 $ 2,551,237
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Notes payable .......................................................... $ 1,336,520 $ 1,213,309
Accrued interest payable ............................................... 9,660 10,751
Dividend and distribution payable ...................................... 33,208 33,933
Accounts payable and accrued expenses .................................. 72,277 67,136
Security deposits and prepaid rents .................................... 9,016 9,407
----------- -----------
Total liabilities .................................................... 1,460,681 1,334,536
----------- -----------
Commitments and contingencies .......................................... -- --
Partners' equity
Preferred units ........................................................ $ 215,000 $ 220,000
Common units
General partner ...................................................... 9,877 10,274
Limited partners ..................................................... 859,438 986,427
Accumulated other comprehensive income ................................. (6,645) --
----------- -----------
Total partners' equity ............................................... 1,077,670 1,216,701
----------- -----------
Total liabilities and partners' equity ............................... $ 2,538,351 $ 2,551,237
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 64
Post Apartment Homes, L.P
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2001 2000 1999
------------ ------------ ------------
REVENUES
Rental ............................................................ $ 368,042 $ 365,895 $ 318,697
Third-party services .............................................. 14,088 15,249 12,486
Interest .......................................................... 1,771 1,922 764
Other ............................................................. 14,413 16,766 13,980
------------ ------------ ------------
Total revenue ................................................... 398,314 399,832 345,927
------------ ------------ ------------
EXPENSES
Property operating and maintenance (exclusive of items shown
separately below) ............................................... 140,630 131,349 113,152
Depreciation ...................................................... 76,178 71,113 58,013
Third-party services .............................................. 13,023 13,092 10,829
Interest .......................................................... 57,930 50,303 33,192
Amortization of deferred loan costs ............................... 1,978 1,636 1,496
General and administrative ........................................ 13,745 10,066 7,788
Minority interest in consolidated property partnerships ........... (2,098) (1,695) 511
------------ ------------ ------------
Total expenses .................................................. 301,386 275,864 224,981
------------ ------------ ------------
Income before net gain (loss) on sale of assets, other charges,
cumulative effect of accounting change and extraordinary item ... 96,928 123,968 120,946
Net gain (loss) on sale of assets ................................. 23,942 3,208 (1,522)
Project abandonment, employee severance and impairment charges .... (17,450) (9,365) --
------------ ------------ ------------
Income before cumulative effect of accounting change and .......... 103,420 117,811 119,424
extraordinary item
Cumulative effect of accounting change ............................ (695) -- --
Extraordinary item ................................................ (88) -- (521)
------------ ------------ ------------
Net income ........................................................ 102,637 117,811 118,903
Distributions to preferred unitholders ............................ (17,368) (17,475) (13,726)
------------ ------------ ------------
Net income available to common unitholders ........................ $ 85,269 $ 100,336 $ 105,177
============ ============ ============
EARNINGS PER COMMON UNIT - BASIC
Income before cumulative effect of accounting changes and
extraordinary item (net of preferred distribution) .............. $ 2.00 $ 2.25 $ 2.42
Cumulative effect of accounting change ............................ (0.02) -- --
Extraordinary item ................................................ -- -- (0.01)
------------ ------------ ------------
Net income available to common unitholders ........................ $ 1.98 $ 2.25 $ 2.41
============ ============ ============
Weighted average common units outstanding ......................... 43,211,834 44,503,290 43,663,373
============ ============ ============
EARNINGS PER COMMON UNIT - DILUTED
Income before cumulative effect of accounting change and ..........
extraordinary item (net of preferred distributions) ............. $ 1.98 $ 2.22 $ 2.39
Cumulative effect of accounting change ............................ (0.02) -- --
Extraordinary item ................................................ -- -- (0.01)
------------ ------------ ------------
Net income available to common unitholders ........................ $ 1.96 $ 2.22 $ 2.38
============ ============ ============
Weighted average common units outstanding ......................... 43,427,100 45,038,079 44,118,671
============ ============ ============
Distributions declared ............................................ $ 3.12 $ 3.04 $ 2.80
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 65
Post Apartment Homes, L.P
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(DOLLARS IN THOUSANDS)
COMMON UNITS ACCUMULATED
------------------------- OTHER
PREFERRED GENERAL LIMITED COMPREHENSIVE
UNITS PARTNER PARTNERS INCOME TOTAL
--------- --------- ------------ ------------- -----------
PARTNERS' EQUITY, DECEMBER 31, 1998 ........... $ 150,000 $ 10,271 $ 1,016,780 $ -- $ 1,177,051
Contributions from PPI related to
Dividend Reinvestment and Employee
Stock Purchase Plans ..................... -- 233 23,079 -- 23,312
Proceeds from issuance of preferred
units, net of offering costs ............. 70,000 -- (1,810) -- 68,190
Distributions to preferred Unitholders ..... (13,726) -- -- -- (13,726)
Distributions to common Unitholders ........ -- (916) (90,654) -- (91,570)
Distributions declared to common
Unitholders .............................. -- (308) (30,510) -- (30,818)
Net income ................................. 13,726 1,052 104,125 -- 118,903
--------- -------- ----------- ------- -----------
PARTNERS' EQUITY, DECEMBER 31, 1999 ........... $ 220,000 $ 10,332 $ 1,021,010 $ -- $ 1,251,342
Contributions from the Company related to
Dividend Reinvestment and Employee
Stock Purchase Plans ..................... -- 290 28,747 -- 29,037
Purchase of Common Units ................... -- -- (28,903) -- (28,903)
Distributions to preferred Unitholders ..... (17,475) -- -- -- (17,475)
Distributions to common Unitholders ........ -- (1,351) (133,760) -- (135,111)
Net income ................................. 17,475 1,003 99,333 -- 117,811
--------- -------- ----------- ------- -----------
PARTNERS' EQUITY, DECEMBER 31, 2000 ........... $ 220,000 $ 10,274 $ 986,427 $ -- $ 1,216,701
Comprehensive income:
Net income ................................. 17,368 853 84,416 -- 102,637
Cumulative effect of adoption of SFAS 133 .. -- -- -- (1,472) (1,472)
Net change in derivative value ............. -- -- -- (5,173) (5,173)
-----------
Total comprehensive income ............... 95,992
Contributions from the Company related to
Dividend Reinvestment and Employee
Stock Purchase Plans ..................... -- 88 8,678 -- 8,766
Preferred Unit repurchases ................. (5,000) (1) (99) -- (5,100)
Purchase of Common Units ................... -- -- (87,547) -- (87,547)
Distributions to preferred Unitholders ..... (17,368) -- -- -- (17,368)
Distributions to common Unitholders ........ -- (1,339) (132,606) -- (133,945)
Contributions from the Company related to
shares issued for restricted stock, net
deferred compensation .................... -- 2 169 -- 171
--------- -------- ----------- ------- -----------
PARTNERS' EQUITY, DECEMBER 31, 2001 ........... $ 215,000 $ 9,877 $ 859,438 $(6,645) $ 1,077,670
========= ======== =========== ======= ===========
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 66
Post Apartment Homes, L.P
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------------------
2001 2000 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................ $ 102,637 $ 117,811 $ 118,903
Adjustments to reconcile net income to net cash provided by
operating activities:
Net (gain) loss on sale of assets ................................... (23,942) (3,208) 1,522
Equity in loss of unconsolidated entities ........................... 186 -- --
Extraordinary item .................................................. 88 -- 521
Depreciation ........................................................ 76,178 71,113 58,013
Amortization of deferred loan costs ................................. 1,978 1,636 1,496
Cumulative effect of accounting change .............................. 695 -- --
Changes in assets, (increase) decrease in:
Restricted cash ..................................................... (43) 108 (32)
Other assets ........................................................ (1,626) (8,904) (24,735)
Deferred charges .................................................... (929) (1,591) (4,106)
Changes in liabilities, increase (decrease) in:
Accrued interest payable ............................................ (1,091) 1,591 1,551
Accounts payable and accrued expenses ............................... 7,824 6,133 (402)
Security deposits and prepaid rents ................................. (391) 384 307
--------- --------- ---------
Net cash provided by operating activities ............................. 161,564 185,073 153,038
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets, net of payables ... (220,297) (362,981) (286,696)
Net proceeds from sale of assets ...................................... 220,122 157,265 16,587
Capitalized interest .................................................. (22,124) (25,426) (21,417)
Recurring capital expenditures ........................................ (10,441) (9,157) (8,641)
Corporate additions and improvements .................................. (3,021) (3,441) (6,811)
Non-recurring capital expenditures .................................... (2,535) (5,576) (2,971)
Revenue generating capital expenditures ............................... (4,226) (6,670) (8,011)
Investment in and advances to unconsolidated entities ................. (8,691) -- --
--------- --------- ---------
Net cash used in investing activities ................................. (51,213) (255,986) (317,960)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt proceeds ......................................................... 710,142 440,001 279,000
Payment of financing costs ............................................ (300) (3,128) (1,495)
Preferred Unit repurchases ............................................ (5,100) -- --
Debt payments ......................................................... (586,931) (216,275) (89,425)
Proceeds from preferred units, net of offering costs .................. -- -- 68,190
Purchase of Units ..................................................... (87,547) (24,912) --
Proceeds from Dividend Reinvestment and Employee Stock Purchase
Plans ............................................................... 8,766 26,754 23,312
Distributions to preferred unitholders ................................ (17,368) (17,475) (13,259)
Distributions to common unitholders ................................... (134,669) (132,463) (116,685)
--------- --------- ---------
Net cash provided by (used in) financing activities ................... (113,007) 72,502 149,638
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents .................. (2,656) 1,589 (15,284)
Cash and cash equivalents, beginning of period ........................ 7,459 5,870 21,154
--------- --------- ---------
Cash and cash equivalents, end of period .............................. $ 4,803 $ 7,459 $ 5,870
========= ========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc. 67
Post Apartment Homes, L.P
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
ORGANIZATION
Post Apartment Homes, L.P. (the "Operating Partnership"), a Georgia limited
partnership, was formed on January 22, 1993, to conduct the business of
developing, leasing and managing upscale multi-family apartment communities for
its general partner, Post Properties, Inc. (the "Company" or "PPI"). The
Operating Partnership, through its operating divisions and subsidiaries, is the
entity through which all of the Company's operations are conducted. At December
31, 2001, the Company, through wholly owned subsidiaries, controlled the
Operating Partnership as the sole general partner and as the holder of 87.8% of
the common units in the Operating Partnership ("Common Units") and 63.6% of the
Perpetual Preferred Partnership Units ("Preferred Units"). As the sole general
partner, the Company holds approximately 1% of the common units in the Operating
Partnership. The other limited partners of the Operating Partnership, who hold
Common Units, are those persons (including certain officers and directors of the
Company) who, at the time of Initial Offering, elected to hold all or a portion
of the their interest in the form of Common Units rather than receiving shares
of Company common stock. Each Common Unit may be redeemed by the holder thereof
for either one share of Company common stock or cash equal to the fair market
value thereof at the time of such redemptions, at the option of the Operating
Partnership. The Operating Partnership presently anticipates that it will cause
shares of Common Stock to be issued in connections with each such redemption
rather than paying cash (as has been done in all redemptions to date). With
each redemption of outstanding Units for Common Stock, the Company's percentage
ownership interest in the Operating Partnership will increase. In addition,
whenever the Company issues shares of common stock, the Company will contribute
any net proceeds therefrom to the Operating Partnership and the Operating
Partnership will issue an equivalent number of Common Units to the Company.
The Company elected to be taxed as a real estate investment trust ("REIT") for
Federal income tax purposes beginning with the year ended December 31, 1993. A
REIT is a legal entity that holds real estate interest and, through payments of
dividends to shareholder, in practical effect is not subject to Federal income
taxes at the corporate level.
The Operating partnership currently owns and manages or in the process of
developing apartment communities located in the Atlanta, Dallas, Tampa, Orlando,
Washington, D.C., Virginia, Nashville, Houston, Austin, Phoenix, Denver,
Pasadena, New York City and Charlotte metropolitan areas. At December 31, 2001,
approximately 50.7%, 20.7% and 11.5% (on a unit basis) of the Company's
communities are located in the Atlanta, Dallas and Tampa metropolitan areas,
respectively.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
accounts of the Operating Partnership. All significant intercompany accounts and
transactions have been eliminated in consolidation. The Operating Partnership's
investments in non-majority owned entities in which it does not exercise
unilateral control, but has the ability to exercise significant influence over
the operating and financial policies, are accounted for on the equity method of
accounting. Accordingly, the Operating Partnership's share of the net earnings
or losses of these entities is included in consolidated net income. All
significant inter-company accounts and transactions have been eliminated in
consolidation.
Certain items in the 2000 and 1999 consolidated financial statements were
reclassified for comparative purposes with the 2001 consolidated financial
statements.
NEW ACCOUNTING PRONOUNCEMENTS
On January 1, 2001, the Operating Partnership adopted SFAS No. 133, "Accounting
for Derivative Instruments and Hedging Activities," as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Hedging Activities." This
standard established accounting and reporting standards for derivative and
hedging activities and required the Operating Partnership to recognize all
derivative financial instruments on its balance sheet at fair value. Upon
adoption of SFAS No. 133, the Operating Partnership recorded a derivative
instrument liability of $1,472 and an adjustment of $1,472 to accumulated
other comprehensive income, a partners' equity account, representing the fair
value of its outstanding interest rate swap agreements. The Operating
Partnership also recorded a net transition adjustment loss in the statement of
operations of $695, relating to the write down of the book value of its
interest rate cap agreements to their fair value.
Post Properties, Inc. 68
Post Apartment Homes, L.P
For all outstanding derivative financial instruments and for future use of
derivative financial instruments, the Operating Partnership designates the
specific instruments as a hedge of identified cash flow exposure. The Operating
Partnership formally documents all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedged transactions. In this documentation, the Operating
Partnership will specifically identify the asset, liability, firm commitment, or
forecasted transaction that has been designated as a hedged item and will state
how the hedged instrument is expected to hedge the risks related to the hedged
item. The Operating Partnership will formally measure effectiveness of its
hedging relationships both at the hedge inception and on an ongoing basis in
accordance with its risk management policy. The Operating Partnership may
discontinue hedge accounting prospectively when it is determined that the
derivative is no longer effective in offsetting changes in the fair value or
cash flows of a hedged item; when the derivative is expired or sold, terminated
or exercised; or when the derivative is re-designated to no longer be a hedged
instrument.
The Operating Partnership currently utilizes only qualifying cash flow hedges
that are designated specifically to reduce exposure to interest rate risk by
locking in the expected future cash payments on certain designated liabilities.
This is typically accomplished using an interest rate swap or interest rate cap
arrangement. For financial reporting purposes, a cash flow hedge is recorded at
fair value in the balance sheet. The gain or loss on the effective portion of
these types of cash flow hedges are deferred and recorded as a component of
accumulated other comprehensive income until the hedged transactions are
recognized in earnings. The ineffective portion of these cash flow hedges are
recorded immediately in earnings.
At December 31, 2001, the Operating Partnership has outstanding interest rate
swap agreements with a notional value of $129,000 with maturity dates ranging
from 2005 to 2009. For the year ended December 31, 2001, the Operating
Partnership recorded the unrealized net loss of $5,173, resulting from the
change in fair value of these cash flow hedges as a reduction in accumulated
other comprehensive income, a partners' equity account. In addition, the
Operating Partnership recorded the change in fair value of the ineffective
component of its outstanding interest rate cap agreements in its statement of
operations for the year ended December 31, 2001. This charge against earnings
and the fair value of the interest rate cap agreements as of December 31, 2001
were not significant to the Operating Partnership's financial position or
results of operations. In 2002, the Operating Partnership expects to reclassify
out of accumulated other comprehensive income approximately $1,231.
In 2001, the Financial Accounting Standards Board issued several new accounting
pronouncements, which are discussed in the following paragraphs.
SFAS No. 141, "Business Combinations", which requires all business combinations
initiated after June 30, 2001 to be accounted for under the purchase method, was
issued July 2001. SFAS No. 141 supersedes APB Opinion No. 16, "Accounting for
Pre-acquisition Contingencies of Purchase Enterprises," and is effective for all
business combinations initiated after June 30, 2001. The adoption of SFAS No.
141 did not have a significant effect on the Operating Partnership results of
operations or its financial position.
SFAS No. 142, "Goodwill and Other Intangible Assets," was issued July 2001.
Under SFAS No. 142, the amortization of goodwill or other intangible assets with
indefinite lives is no longer required, but will be subject to periodic testing
for impairment. SFAS No. 142 supersedes APB Opinion No. 17, "Intangible Assets".
The Operating Partnership will implement SFAS No. 142 on January 1, 2002. The
Operating Partnership believes the provisions of SFAS No. 142 will not have a
significant effect on its results of operations or its financial position.
SFAS No. 143, "Account for Obligations Associated with Retirement of Long-Lived
Assets," was issued in August 2001. SFAS No. 143 establishes accounting
standards for the recognition and measurement of an asset retirement obligation
and its associated asset retirement costs. It also provides accounting guidance
for legal obligations associated with the retirement of tangible long-lived
assets. SFAS No. 143 is effective in fiscal years beginning after June 15, 2002.
The Operating Partnership believes the provisions of SFAS No. 143 will not have
a significant effect on its results of operations or its financial position.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
that replaces SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of," was issued in October 2001. SFAS
No. 144 requires that long-lived assets be measured at the lower of their
carrying amount or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. The provisions of SFAS No. 144 are
effective for financial statements issued
Post Properties, Inc. 69
Post Apartment Homes, L.P
for fiscal years beginning after December 15, 2001 and the Operating Partnership
will implement the provisions of SFAS No 144 on January 1, 2002. The Operating
Partnership believes the provisions of SFAS No. 144 will not have a significant
effect on the Operating Partnership's net results of operations or its financial
position.
COST CAPITALIZATION
The Operating Partnership capitalizes those expenditures relating to the
acquisition of new assets, the development and construction of new apartment
communities, the enhancement of 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). Thereafter, these replacements
are capitalized. The Operating Partnership expenses as incurred all interior and
exterior painting of communities.
The Operating Partnership capitalizes interest, real estate taxes, and certain
internal personnel and associated costs directly related to apartment
communities under development and construction. The incremental personnel and
associated costs are capitalized to projects under development based upon the
effort directly identifiable with such projects. The Company treats each unit in
an apartment community separately for cost accumulation, capitalization and
expense recognition purposes. Prior to commencement of leasing activities,
interest and other construction costs are capitalized and reflected on the
balance sheet as construction in progress. The Operating Partnership ceases the
capitalization of such costs as the residential units in a community become
substantially complete and available for occupancy. In addition, prior to the
completion of units, the Operating Partnership expenses as incurred
substantially all operating expenses (including pre-opening marketing expenses)
of such communities.
REAL ESTATE ASSETS, DEPRECIATION AND IMPAIRMENT
Real estate assets are stated at the lower of depreciated cost or fair value, if
deemed impaired. Major replacements and betterments are capitalized and
depreciated over their estimated useful lives. Depreciation is computed on a
straight-line basis over the useful lives of the properties (buildings and
components and related land improvements -- 20-40 years; furniture, fixtures and
equipment -- 5 - 10 years).
The Operating Partnership continually evaluates the recoverability of the
carrying value of its real estate assets using the methodology prescribed in
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." Factors considered by management in
evaluating impairments include significant declines in property operating
profits, recurring property operating losses and other significant adverse
changes in general market conditions that are considered permanent in nature. If
any real estate asset held for investment is considered impaired, a loss is
provided to reduce the carrying value of the asset to its fair value. If a real
estate asset is held for sale, any estimated loss is provided to reduce the
carrying value of the asset to its fair value less costs to sell. Subsequent to
the classification of assets for sale, no further depreciation expense is
recorded.
As discussed above, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," that
replaces SFAS No. 121. SFAS No. 144 requires that long-lived assets be measured
at the lower of carrying amount or fair value less cost to sell, whether
reported in continuing operations or in discontinued operations. The provisions
of SFAS No. 144 are effective for financial statements issued for fiscal years
beginning after December 15, 2001 and the Operating Partnership will implement
the provisions of SFAS No. 144 beginning on January 1, 2002. The Operating
Partnership believes the provisions of SFAS No. 144 will not have a significant
effect on the Operating Partnership's results of operations or its financial
position.
REAL ESTATE ASSETS HELD FOR SALE
Under both SFAS No. 121 and 144, real estate assets held for sale are stated at
their fair value less cost to sell. The Operating Partnership classifies real
estate assets as held for sale when its internal investment committee approves
the sale and the Operating Partnership has commenced an active program to sell
the assets. Subsequent to this classification, no further depreciation is
recorded on the assets. The operating results of real estate assets held for
sale are included in continuing operations in the consolidated statement of
operations. Upon the implementation of SFAS No. 144 in 2002, the operating
results of real estate
Post Properties, Inc. 70
Post Apartment Homes, L.P
assets held for sale and real estate assets sold will be included in
discontinued operations in the consolidated statement of operations.
REVENUE RECOGNITION
Rental -- Residential properties are leased under operating leases with terms of
generally one year or less. Rental income is recognized when earned, which is
not materially different from revenue recognition on a straight line basis.
Property management and landscaping services -- Income is recognized when earned
for property management and landscaping services provided to third parties.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, all investments purchased with an
original maturity of three months or less are considered to be cash equivalents.
RESTRICTED CASH
Restricted cash generally is comprised of resident security deposits for
communities located in Florida and Tennessee and required maintenance reserves
for communities located in DeKalb County, Georgia.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized using the interest method over the terms
of the related debt.
PER UNIT DATA
Basic earnings per Common Unit with respect to the Operating Partnership for the
years ended December 31, 2001, 2000 and 1999 is computed based upon the weighted
average number of Common Units outstanding during the period. Diluted earnings
per Common Unit is based upon the weighted average number of Common Units
outstanding during the period and includes the effect of the potential issuance
of additional Units if stock options were exercised or converted into common
stock of the Company.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Post Properties, Inc. 71
Post Apartment Homes, L.P
2. DEFERRED CHARGES
Deferred charges consist of the following:
DECEMBER 31,
-----------------------
2001 2000
-------- --------
Deferred financing costs .......... $ 35,817 $ 36,068
Other ............................. 4,527 5,240
-------- --------
40,344 41,308
Less: accumulated amortization .... (22,141) (19,608)
-------- --------
$ 18,203 $ 21,700
======== ========
3. NOTES PAYABLE
At December 31, 2001 and 2000, the Operating Partnership's indebtedness
consisted of the following:
DECEMBER 31,
INTEREST MATURITY ------------------------------
DESCRIPTION PAYMENT TERMS RATE DATE (1) 2001 2000
----------- ------------- ----------------- ---------- ------------ ------------
SENIOR NOTES (UNSECURED)
Senior Notes Int. 6.71% - 7.70% 2003-2010 $ 360,000 $ 310,000
Medium Term Notes Int. 6.69% - 8.12% (2) 2004-2015 323,000 360,000
Northwestern Mutual Life Int. 8.37% 2002 20,000 50,000
----------- ------------
703,000 720,000
----------- ------------
UNSECURED LINES OF CREDIT &
OTHER
Revolver N/A LIBOR + 0.75% (3) 2004 155,000 18,000
Cash Management Line N/A LIBOR + 0.75% 2003 11,202 4,925
Other N/A 5.00% (4) 2021 2,000 2,000
----------- ------------
168,202 24,925
----------- ------------
CONVENTIONAL FIXED RATE (SECURED)
FNMA Prin. and Int. 6.975% (5) 2029 102,200 103,200
Northwestern Mutual Life Prin. and Int. 7.69% 2007 50,527 51,238
Northwestern Mutual Life Prin. and Int. 6.50% (6) 2009 47,681 48,601
Northwestern Mutual Life Prin. and Int. 7.69% 2007 28,268 28,666
Parkwood Townhomes(TM) Prin. and Int. 7.375% 2014 762 799
----------- ------------
229,438 232,504
----------- ------------
TAX EXEMPT FLOATING RATE BONDS
(SECURED) Int. 1.65% (7) 2025 235,880 235,880
----------- ------------
TOTAL $ 1,336,520 $ 1,213,309
=========== ============
(1) All outstanding indebtedness can be prepaid at any time, subject to
certain prepayment penalties.
(2) Contains $100,000 of Mandatory Par Put Remarketed Securities. The
annual interest rate on these securities to 2005 (the "Remarketing
Date") is 6.85%. On the Remarketing Date, they are subject to mandatory
tender for remarketing.
(3) Represents stated rate. Stated rate increased to LIBOR plus 0.85% in
2002. At December 31, 2001, the outstanding balance of the Revolver
consisted of "money market" loans with an average interest rate of
2.46%.
(4) This loan is interest free for the first three years, with interest at
5.00% thereafter.
(5) In 2000, interest rate was fixed at 6.975%, inclusive of credit
enhancement and other fees, to 2009 through an interest rate swap
arrangement.
(6) This note bears interest at 6.50% with an effective rate of 7.30%.
(7) FNMA credit enhanced bond indebtedness. Interest based on FNMA "AAA"
tax exempt rate plus credit enhancement and other fees of 0.639%.
Interest rate represents rate at December 31, 2001 before credit
enhancements. The Operating Partnership has outstanding interest rate
cap arrangements that limit the Operating Partnership's exposure to
increases in the base interest rate to 5%.
Post Properties, Inc. 72
Post Apartment Homes, L.P
SENIOR AND MEDIUM TERM NOTES
In 2001, the Operating Partnership issued $50,000 of 6.71% senior unsecured
notes due in 2006. The net proceeds from the notes were used to repay
outstanding indebtedness. In 2001, the Operating Partnership repaid the
outstanding balance of one medium term note issuance totaling $37,000 and one
senior note issuance totaling $30,000 at their scheduled maturing dates. All of
the unsecured notes are subject to certain covenants, including those governing
the Operating Partnership's interest and fixed charge coverage and total
leverage.
DEBT MATURITIES
The aggregate maturities of the Operating Partnership's indebtedness are as
follows (1):
2002.......................................... $ 23,367
2003.......................................... 103,616
2004.......................................... 26,889
2005.......................................... 204,183
2006.......................................... 79,499
Thereafter.................................... 732,764
----------
$1,170,318
==========
(1) Excludes outstanding balances on lines of credit, discussed below.
UNSECURED LINES OF CREDIT
The Operating Partnership utilizes a $320,000 three-year syndicated revolving
line of credit (the "Revolver"), for its short-term financing requirements. At
December 31, 2001, the stated interest rate for the Revolver was LIBOR plus
0.75% or prime minus 0.25%. Subsequent to year end, the stated rate increased to
LIBOR plus 0.85% as a result of a credit rating agency downgrade on the
Operating Partnership's senior unsecured debt. The Revolver provides for the
rate to be adjusted up or down based on changes in the credit ratings on the
Operating Partnership's senior unsecured debt. The Revolver also includes a
money market competitive bid option for short-term funds up to $160,000 at rates
below the stated line rate. The credit agreement for the Revolver contains
customary representations, covenants and events of default, including covenants
which restrict the ability of the Operating Partnership to make distributions,
in excess of stated amounts, which in turn restrict the discretion of the
Company to declare and pay dividends. In general, during any fiscal year the
Operating Partnership may only distribute up to 100% of the Operating
Partnership's consolidated income available for distribution (as defined in the
credit agreement) exclusive of distributions of up to $30,000 of capital gains
for such year. The credit agreement contains exceptions to these limitations to
allow the Operating Partnership to make distributions necessary to allow the
Operating Partnership to maintain its status as a REIT. The Company does not
anticipate that this covenant will adversely affect the ability of the Operating
Partnership to make distributions, or the Company to declare dividends, under
the Company's current dividend level. The Revolver matures in April 2004.
The Operating Partnership also has in place an additional $185,000 line of
credit facility for general corporate purposes. This line, with an annual
renewal, matures in April 2002 and carries terms substantially equal to the
Revolver. The Operating Partnership expects to renew this credit facility,
although the total capacity and terms may vary.
Additionally, the Operating Partnership has a $20,000 unsecured line of credit
with Wachovia Bank of Georgia, N.A. (the "Cash Management Line"). The Cash
Management Line bears interest at LIBOR plus 0.75% or prime minus .25% and
matures in February 2003. Management believes the Cash Management Line will be
renewed at maturity with similar terms.
Post Properties, Inc. 73
Post Apartment Homes, L.P
INTEREST PAID
Interest paid (including capitalized amounts of $22,124, $25,426 and $21,417 for
the years ended December 31, 2001, 2000 and 1999, respectively), aggregated
$82,383, $74,419 and $51,337 for the years ended December 31, 2001, 2000 and
1999, respectively.
PLEDGED ASSETS
The aggregate net book value at December 31, 2001 of property pledged as
collateral for indebtedness amounted to approximately $457,038.
EXTRAORDINARY ITEM
The extraordinary losses for the years ended December 31, 2001 and 1999 of $88
and $521, respectively, resulted from costs associates with the early
extinguishment of indebtedness.
4. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
In 2001, the Operating Partnership contributed two apartment communities under
development in Atlanta, Georgia and one apartment community in Pasadena,
California to individual limited liability companies (the "Property LLCs") with
an institutional investor. The Operating Partnership holds a 35% equity interest
in the Property LLCs. The total estimated development cost of the apartment
communities of $144,000 is being funded through member equity contributions
proportionate to the members' ownership interests and through construction
financing provided by the Operating Partnership. No gain or loss was recognized
on the Operating Partnership's contribution to the Property LLCs. The Operating
Partnership provides real estate services (development, construction and
property management) to the Property LLCs. The Operating Partnership accounts
for its investments in these Property LLCs using the equity method of
accounting. The excess of the Operating Partnership's investment over it's
equity in the underlying net assets of the Property LLC's was approximately
$3,123 at December 31, 2001. This excess investment will primarily be amortized
as a reduction to earnings on a straight-line basis over the lives of the
related assets.
The operating results of the Operating Partnership include its proportionate
share of net income (loss) from the investments in the Property LLCs. A summary
of financial information for the Property LLCs in the aggregate is as follows:
DECEMBER 31, 2001
Real estate assets, net ................................ $ 115,664
Cash and other ......................................... 533
---------
Total assets ........................................ $ 116,197
---------
Construction notes payable to Operating Partnership .... $ 77,019
Other liabilities ...................................... 11,892
---------
Total liabilities ................................... 88,911
---------
Member's equity ........................................ 27,286
---------
Total liabilities and members' equity ............... $ 116,197
---------
---------
Operating Partnership equity investment ................ $ 12,673
---------
YEAR ENDED DECEMBER 31, 2001
Revenue ................................................ $ 186
Expenses ............................................... (718)
---------
Net loss ............................................... $ (532)
---------
Operating Partnership share of net loss ................ $ (186)
---------
Post Properties, Inc. 74
Post Apartment Homes, L.P
At December 31, 2001, two of the apartment communities had commenced initial
rental operations. The third community was under construction with an
anticipated completion date in 2002. The Operating Partnership's share of the
net loss from these investments is included in other revenue in the accompanying
consolidated financial statements.
The Operating Partnership has committed construction financing to the Property
LLCs totaling $111,271 ($77,019 funded at December 31, 2001). These loans earn
interest at LIBOR plus 1.75% and are secured by the apartment communities. The
loans mature on dates ranging from February 2003 to February 2004 and are
expected to be repaid from the proceeds of permanent project financings. A
portion of the construction loan financing from the Operating Partnership
totaling approximately $50,062 represents an obligation of the institutional
investor member of the Property LLCs.
As part of the development and construction services agreements entered into
between the Operating Partnership and the Property LLCs, the Operating
Partnership guaranteed the maximum total amount for certain construction cost
categories subject to aggregate limits (approximately $14,000). At December 31,
2001, the Operating Partnership's estimated obligations under the agreements
total approximately $900. If the Operating Partnership is unsuccessful in
mitigating these estimated costs, the Operating Partnership will be required to
fund the amounts to the Property LLCs. Any amounts funded will be accounted for
as part of the Operating Partnership's investment in the Property LLCs.
Additionally, under these agreements, the Operating Partnership is subject to
project completion requirements, as defined. At December 31, 2001, the Operating
Partnership believes that it will meet the completion date requirements and not
be subject to any additional costs.
5. REAL ESTATE ASSETS HELD FOR SALE AND ASSET DISPOSITIONS
The Operating Partnership classifies real estate assets as held for sale after
the approval of its internal investment committee and after the Operating
Partnership has commenced an active program to sell the assets. At December 31
2001, the Operating Partnership has classified two apartment communities, six
tracts of land and one commercial property as held for sale. These real estate
assets are reflected in the accompanying consolidated balance sheet at $39,419
which represented the lower of cost or fair value less costs to sell. The
Operating Partnership expects the sale of these assets to occur in 2002.
For the years ended December 31, 2001, 2000 and 1999, the consolidated
statements of operations include net income of $4,071, $4,019 and $3,940,
respectively, from communities held for sale at December 31, 2001. For the year
ended December 31, 2001, depreciation expense of $844 was recognized on these
assets prior to the date of held for sale classification.
In 2001, the Operating Partnership sold six apartment communities containing
2,799 units for net proceeds of approximately $210,443. The communities sold
were located in Atlanta, Georgia, Dallas Texas and Nashville, Tennessee.
Additionally, the Operating Partnership sold land parcels in Dallas, Texas,
Denver, Colorado and Charlotte, North Carolina and a commercial property in
Dallas, Texas for aggregate net proceeds of $9,679. These sales resulted in net
gains of approximately $16,365. For the year ended December 31, 2001, the
aggregate net gain on the sale of assets of $23,942 included the impact of the
estimated net losses totaling $11,490 on the write down to fair value of assets
designated as held for sale at December 31, 2001 and excluded realized losses
totaling $19,067 related to assets written down to their estimated fair value at
December 31, 2000.
In 2000, the Operating Partnership sold eight apartment communities containing
1,984 units for net proceeds of approximately $157,265, resulting in net gains
of approximately $24,266. The communities sold were located in Atlanta, Georgia,
Jackson, Mississippi and Nashville, Tennessee. For the year ended December 31,
2000, the aggregate net gain on the sale of assets of $3,208 included the
estimated net losses totaling $21,058 on the write down to fair value of assets
designated as held for sale at December 31, 2000.
In 1999, the Operating Partnership sold one apartment community containing 198
units and other land parcels for net proceeds of approximately $16,587,
resulting in a net loss of $1,522.
Post Properties, Inc. 75
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6. PARTNERS' EQUITY
PREFERRED UNITS
At December 31, 2001, the Operating Partnership had outstanding four separate
series of cumulative redeemable preferred partnership units as more fully
described below. The preferred partnership units are reflected in the
accompanying financial statements at their liquidation value.
At December 31, 2001 and 2000, the Operating Partnership had outstanding
4,900,000 and 5,000,000, respectively, 8.5% Series A cumulative redeemable
preferred partnership units (the "Series A Preferred Units"). The Series A
Preferred Units have a liquidation preference of $50.00 per unit and are
redeemable at the option of the Operating Partnership on or after October 1,
2026, at a redemption price of $50.00 per unit. The Series A Preferred Units are
owned by the Company.
The Operating Partnership has outstanding 2,000,000, 7.625% Series B cumulative
redeemable preferred partnership units (the "Series B Preferred Units"). The
Series B Preferred Units have a liquidation preference of $25.00 per unit and
are redeemable at the option of the Operating Partnership on or after October
28, 2007, at a redemption price of $25.00 per unit. The Series B Preferred Units
are owned by the Company.
The Operating Partnership has outstanding 2,000,000, 7.625% Series C cumulative
redeemable preferred partnership units (the "Series C Preferred Units"). The
Series C Preferred Units have a liquidation preference of $25.00 per unit and
are redeemable at the option of the Operating Partnership on or after February
9, 2003, at a redemption price of $25.00 per unit. The Series C Preferred Units
are owned by the Company.
The Operating Partnership has outstanding 2,800,000, 8% Series D cumulative
redeemable preferred partnership units (the "Series D Preferred Units"). The
Series D Preferred Units have a liquidation preference of $25.00 per unit and
are redeemable by the Operating Partnership on or after September 3, 2004, at a
redemption price of $25.00 per unit. The Series D Preferred Units are
exchangeable into authorized, but unissued Series D Preferred Stock of the
Company, with identical terms and preferences, on or after September 2, 2009, at
the option of the holders. Under certain circumstances, as defined in the
agreement, the Series D Preferred Units may become exchangeable on or after
September 3, 2002, at the option of the holders.
Post Properties, Inc. 76
Post Apartment Homes, L.P
COMPUTATION OF EARNINGS PER COMMON UNIT
For the years ended December 31, 2001, 2000 and 1999, basic and diluted earnings
per Common Unit for income before extraordinary item, net of preferred
dividends, and net income available to common unitholders before cumulative
effect of accounting change and extraordinary item has been computed as follows:
YEAR ENDED 2001
--------------------------------------------
INCOME UNITS PER-UNIT
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------
Income before cumulative effect of accounting change and
extraordinary item ........................................... $ 103,420
Less: Distributions to preferred unitholders .................... (17,368)
---------
BASIC EPS
Income available to common unitholders before cumulative effect
of accounting change and extraordinary item .................. 86,052 43,211,834 $2.00
=====
EFFECT OF DILUTIVE SECURITIES
Options ......................................................... -- 215,266
--------- ----------
DILUTED EPS
Income available to common unitholders + assumed conversions
before cumulative effect of accounting change and
extraordinary item ........................................... $ 86,052 43,427,100 $1.98
========= ========== =====
YEAR ENDED 2000
--------------------------------------------
INCOME UNITS PER-UNIT
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------
Income before extraordinary item ................................ $ 117,811
Less: Preferred stock distributions ............................. (17,475)
---------
BASIC EPS
Income available to common unitholders before extraordinary item 100,336 44,503,290 $2.25
=====
EFFECT OF DILUTIVE SECURITIES
Options ......................................................... -- 534,789
--------- ----------
DILUTED EPS
Income available to common unitholders + assumed conversions
before extraordinary item .................................... $ 100,336 45,038,079 $2.22
========= ========== =====
YEAR ENDED 2001
--------------------------------------------
INCOME UNITS PER-UNIT
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------
Income before extraordinary item ................................ $ 119,424
Less: Preferred stock distributions ............................. (13,726)
---------
BASIC EPS
Income available to common unitholders before extraordinary item 105,698 43,663,373 $2.42
=====
EFFECT OF DILUTIVE SECURITIES
Options ......................................................... -- 456,298
--------- ----------
DILUTED EPS
Income available to common unitholders + assumed conversions
before extraordinary item .................................... $ 105,698 44,119,671 $2.39
========= ========== =====
Post Properties, Inc. 77
Post Apartment Homes, L.P
7. PROJECT ABANDONMENT, EMPLOYEE SEVERANCE AND IMPAIRMENT CHARGES
The Operating Partnership recorded project impairment and abandonment, employee
severance and asset impairment charges for the years ended December 31, 2001 and
2000. The charges are summarized as follows:
2001 2000
-------- --------
Project impairment and abandonment ..... $ 8,122 $ 4,389
Employee severance ..................... 3,560 3,066
Asset impairment ....................... 5,768 1,910
-------- --------
$ 17,450 $ 9,365
======== ========
In the fourth quarter of 2001, the Operating Partnership recorded charges
totaling $17,450. These charges, precipitated by the sharp decline in economic
and market conditions, reflect management's decision to focus its business and
new development strategy on fewer markets, to focus on its core business of
owning, developing and managing multifamily real estate assets and to do so with
a smaller workforce and lower overhead expenses. The project impairment charge
of $8,122 represents reserves on certain predevelopment and transaction pursuit
costs in markets the Operating Partnership will no longer pursue for development
opportunities and for certain projects that will no longer be pursued due to
economic and market conditions. The employee severance charge of $3,560 is
primarily for severance costs related to approximately a 100 person senior
management and staff workforce reduction plan initiated and completed in the
fourth quarter of 2001. The asset impairment and disposition charge includes a
loss of $2,831 related to the disposition of the Operating Partnership's
corporate aircraft, a loss of $452 on the sale of the Operating Partnership's
third party landscape business discussed more fully below, impairment charges of
$1,000 related to the Operating Partnership's exit from the for-sale housing
business in all markets and the write down to estimated market value of certain
internet and technology investments of $1,485.
At December 31, 2001, approximately $3,632 of these charges, primarily employee
severance costs, remained as an accrued liability on the consolidated balance
sheet. These amounts are expected to be paid in 2002.
In the fourth quarter of 2001, the Operating Partnership sold substantially all
of the net assets of Post Landscape Group, Inc., a subsidiary entity that
provided landscape maintenance, design and installation services to third
parties, and RAM Partners, Inc., a separate subsidiary entity that managed
apartment communities for third parties. These businesses were sold to members
of the respective former management teams of the subsidiaries. The Operating
Partnership financed 100% of the sales price of $5,767 (adjusted for working
capital transfers at closing) through purchase money notes with interest of 9%.
The notes require periodic interest, annual principal and balloon principal
payments in 2006. The notes can be extended for two one-year periods. Under
generally accepted accounting principles, the transactions have not been
recorded as sales at December 31, 2001, and will not be recorded as sales until
the conditions for sale recognition, primarily the receipt of an adequate down
payment on the notes, are met. Until these transactions are recognized as sales,
the book value of the assets and liabilities of these business are included in
the Operating Partnership's consolidated balance sheet. Any collections under
the notes will reduce the carrying value of the assets. The sale of the Post
Landscape Group resulted in a loss of $452. Under generally accepted accounting
principles, this loss was recognized in 2001 and included in the project
abandonment, employee severance and impairment charges discussed above. The sale
of RAM Partners will result in a gain of approximately $591, which will be
recognized when the conditions for full sale recognition are met (expected in
2002).
In the fourth quarter of 2000, the Operating Partnership recorded charges of
$9,365. These charges reflect management's decision to restrict its development
activities to fewer markets, refine its development investment and for-sale
housing strategies and make changes in its executive management team. Project
abandonment charges totaling $4,389 related to the write off of predevelopment
and pursuit costs in markets in which the Operating Partnership will no longer
pursue development opportunities and on certain proposed development deals not
meeting management's revised development strategy. Employee severance charges
related to the termination costs of four executive positions and five staff
personnel in the Operating Partnership's Dallas, Texas regional office. The
asset impairment charge of $1,910 includes a charge of $1,503 related to the
write off of the Operating
Post Properties, Inc. 78
Post Apartment Homes, L.P
Partnership's investment in a high speed internet provider that filed for
bankruptcy protection and a charge of $407 related to the exit from the for-sale
housing business in certain markets. As of December 31, 2001, all of the 2000
charges had been paid.
8. INCOME TAXES
Income or losses of the Operating Partnership are allocated to the partners of
the Operating Partnership for inclusion in their respective income tax returns.
Accordingly, no provisions or benefit for income taxes has been made in the
accompanying financial statements. The Company elected to be taxed as a REIT
under the Internal Revenue Code of 1986, as amended (the "Code") commencing with
the taxable year ended December 31, 1993. In order for the Company to qualify as
a REIT, it must distribute 90% of its REIT taxable incomes, as defined in the
Code, to its shareholders and satisfy certain other requirements. The Operating
Partnership intends to make sufficient cash distributions to the Company to
enable it to meet its annual REIT distribution.
The Operating Partners utilizes taxable subsidiaries to perform such activities
as asset management, leasing and landscape services for third parties. These
taxable subsidiaries are subject to federal, state and local income taxes. For
the three years in the period ended December 31, 2001, the impact of these
taxable subsidiaries' income taxes and their related tax attributes were not
material to the accompanying consolidated financial statements
As of December 31, 2001, the net basis for Federal income tax purposes, taking
into account the special allocation of gain to the partners contributing
property to the Operating Partnership was lower that the net assets as reported
in the Operating Partnership's consolidated financial statements by $6,640.
9. STOCK-BASED COMPENSATION PLANS
STOCK COMPENSATION PLANS
At December 31, 2001, the Company had two stock-based compensation plans, the
Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the
"ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as
described below. The Operating Partnership applies APB Opinion 25, "Accounting
for Stock Issued to Employees," and related Interpretations in accounting for
its plans. Accordingly, based upon the criteria of APB Opinion 25 no
compensation cost is required to be recognized for the Stock Plan and the ESPP.
The compensation cost which is required to be charged against income for the
Grant Plan, was $112, $138 and $205 for 2001, 2000 and 1999, respectively. Had
compensation cost for the Stock Plan and ESPP been determined based on the fair
value at the grant dates for awards under the Plans consistent with the method
of SFAS No. 123, "Accounting for Stock-Based Compensation," the Operating
Partnership's net income and earnings per share would have been reduced to the
pro forma amounts indicated below:
2001 2000 1999
-------- -------- --------
Net income available to Common Unitholders .........As reported ..... $85,269 $100,336 $105,177
Pro forma ....... $83,982 $ 98,154 $102,994
Net income per Common Unit - basic .................As reported ..... $ 1.98 $ 2.25 $ 2.41
Pro forma ....... $ 1.94 $ 2.21 $ 2.36
Net income per Common Unit - diluted ...............As reported ..... $ 1.96 $ 2.22 $ 2.39
Pro forma ....... $ 1.93 $ 2.18 $ 2.33
Post Properties, Inc. 79
Post Apartment Homes, L.P
For purposes of the pro forma presentation, the fair value of each option grant
is estimated as of the date of grant using the Black-Scholes option-pricing
model. The weighted-average of all assumptions used in the calculation for
various grants under all of the Company's plans during 2001, 2000 and 1999 are
as follows:
2001 2000 1999
------------ ------------ ------------
Dividend yield............................ 8.4% 8.0% 7.3%
Expected volatility....................... 15.1% 24.8% 15.4%
Risk-free interest rate................... 3.7% to 5.3% 6.7% to 6.9% 4.5% to 6.6%
Expected option life...................... 5 to 7 years 5 to 7 years 5 to 7 years
EMPLOYEE STOCK PLAN
Under the Stock Plan, the Company may grant to its employees and directors
options to purchase up to 6,000,000 shares of common stock. Of this amount,
550,000 shares are available for grants of restricted stock. Options granted to
any key employee or officer cannot exceed 100,000 shares a year (500,000 shares
if such key employee or officer is a member of the Company's Executive
Committee). The exercise price of each option may not be less than the market
price on the date of grant and all options have a maximum term of ten years from
the grant date.
A summary of the status of stock option activity under the Stock Plan as of
December 31, 2001, 2000 and 1999, is presented below:
2001 2000 1999
---------------------------- ----------------------------- -----------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARE EXERCISE PRICE SHARES EXERCISE PRICE SHARE EXERCISE PRICE
----------- -------------- ------------- -------------- ------------- --------------
Outstanding at beginning or year 4,271,608 $ 35 4,054,876 $ 34 3,030,852 $ 31
Granted 415,529 37 740,538 38 1,288,232 36
Exercised (262,332) 30 (334,194) 32 (164,053) 30
Forfeited (196,587) 38 (189,612) 38 (100,155) 37
---------- ---------- ----------
Outstanding at end of year 4,228,218 36 4,271,608 35 4,054,876 35
========== ========== ==========
Options exercisable at year-end 2,962,245 2,413,595 2,290,143
========== ========== ==========
Weighted-average fair value of
options granted during the year $ 1.44 $ 4.76 $ 2.08
========== ========== ==========
At December 31, 2001, the range of exercise prices for options outstanding was
$27.625 - $44.125 and the weighted-average remaining contractual life was 6
years.
In 2001, under its existing Stock Plan, the Company granted 17,566 shares of
restricted stock to company officers. The restricted shares vest ratably over a
five-year period. The total value of the restricted share grants of $644 was
initially reflected in partners' equity as additional capital reduced by
non-amortized deferred compensation expense. Such deferred compensation is
amortized ratably into compensation expense over the vesting period.
Post Properties, Inc. 80
Post Apartment Homes, L.P
10. EMPLOYEE BENEFIT PLANS
Through a plan adopted by the Company, the employees of the Operating
Partnership are participants in a defined contribution plan pursuant to Section
401 of the Internal Revenue Code. Beginning in 1996, Operating Partnership
contributions, if any, to this plan are based on the performance of the Company
and the Operating Partnership and are allocated to each participant based on the
relative contribution of the participant to the total contributions of all
participants. For purposes of allocating the Operating Partnership contribution,
the maximum employee contribution included in the calculation is 3% of salary.
Operating Partnership contributions of $638, $514 and $346 were made in 2001,
2000 and 1999, respectively.
The Company maintains an Employee Stock Purchase Plan ("ESPP") to encourage
stock ownership by eligible directors and employees. To participate in the ESPP,
(i) directors must not be employed by the Company or the Operating Partnership
and must have been a member of the Board of Directors for at least one month and
(ii) an employee must have been employed full or part-time by the Company or the
Operating Partnership for at least one month. The purchase price of shares of
Common Stock under the ESPP is equal to 85% of the lesser of the closing price
per share of Common Stock on the first or last day of the trading period, as
defined.
11. COMMITMENTS AND CONTINGENCIES
LAND, OFFICE AND EQUIPMENT LEASES
The Operating Partnership is party to two ground leases with terms expiring in
years 2040 and 2043 relating to a single operating community, one ground lease
expiring in 2038 for a second operating community, three ground leases expiring
in 2066, 2069 and 2074 for three communities under development and to office,
equipment and other operating leases with terms expiring in years 2001 through
2004. Future minimum lease payments for non-cancelable land, office, equipment
and other leases at December 31, 2001, are as follows:
2002......................... $ 1,918
2003......................... 1,827
2004......................... 1,721
2005......................... 1,288
2006......................... 1,306
2007 and thereafter.......... 157,798
The Operating Partnership incurred $5,998, $5,935 and $5,109 of rent expense for
the years ended December 31, 2001, 2000 and 1999, respectively.
CONTINGENCIES
The Operating Partnership is party to various legal actions which are incidental
to its business. Management believes that these actions will not have a material
adverse affect on the consolidated balance sheets and statements of operations.
12. RELATED PARTY TRANSACTIONS
In 2001, the Operating Partnership invested in three Property LLCs that are
accounted for under the equity method of accounting (see Note 4). In 2001, the
Operating Partnership recorded development fees, general construction contract
billings, management fees and expense reimbursements (primarily personnel costs)
of approximately $15,202 from these related companies. Additionally in 2001, the
Operating Partnership earned interest under the construction loans to the
Project LLCs totaling $1,024.
The Operating Partnership provides landscaping services for executive officers,
employees, directors and other related parties. For the years ended December 31,
2001, 2000 and 1999, the Operating Partnership received landscaping revenue of $
705, $667 and $610 for such services. Such revenue includes reimbursement of
direct and indirect expenses. Additionally, the Operating Partnership provides
accounting and administrative services to entities controlled by certain
executive officers of the Operating Partnership. Fees under this arrangement
aggregated $25 for each year ended December 31, 2001, 2000 and 1999,
respectively. Also, the Operating Partnership was contracted to assist in the
development of apartment complexes constructed by a former
Post Properties, Inc. 81
Post Apartment Homes, L.P
executive and current unitholder. Fees under this arrangement were $7, $29 and
$100 for the years ended December 31, 2001, 2000 and 1999, respectively.
In 2001, 2000 and 1999, the Operating Partnership loaned $2,500, $1,500 and
$7,750, respectively, to certain executives. These loans are payable ten years
from the issue date and bear interest at a rate of 6.32% per annum. Proceeds
from these loans were used by these executives to acquire the Company's common
shares on the open market. As of December 31, 2001, $2,500 of the loans have
been repaid. Additionally, in 2001, the Operating Partnership loaned $1,300 to
certain executives. The loans bear interest at 6.32% per annum. If the
executives continue to be employed by the Operating Partnership, the loans will
be forgiven annually over five to ten year periods, as defined in the
agreements. The annual loan forgiveness of $160 is recorded as compensation
expense.
13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
Considerable judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Operating Partnership could realize on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Cash equivalents, rents and accounts receivables, accounts payable, accrued
expenses, agreements and other liabilities are carried at amounts which
reasonably approximate their fair values because of the short-term nature of
these investments. The fair value of fixed rate debt was approximately $847,563
(carrying value of $807,238) and the fair value of floating rate debt
approximated its carrying value due to the adjustable nature of the arrangements
at December 31, 2001.
In order to manage the impact of interest rate changes on earnings and cash
flow, the Operating Partnership entered into and has outstanding interest rate
swap and interest rate cap arrangements. As more fully described in Note 1, the
fair values of these interest rate cap and interest rate swap agreements are
carried on the consolidated balance sheet at fair market value in accordance
with SFAS No. 133. At December 31, 2001, the carrying amounts related to these
arrangements represented net liabilities totaling approximately $6,630.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 2001. Although management
is not aware of any factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and current estimates of fair
value may differ significantly from the amounts presented herein.
14. SEGMENT INFORMATION
SEGMENT DESCRIPTION
In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise
and Related Information," the Operating Partnership presents segment information
based on the way that management organizes the segments within the enterprise
for making operating decisions and assessing performance. The segment
information is prepared on substantially the same basis as the internally
reported information used by the Operating Partnership's chief operating
decision makers to manage the business.
The Operating Partnership's chief operating decision makers focus on the
Operating Partnership's primary sources of income from property rental
operations. Property rental operations are broken down into five segments based
on the various stages in the property ownership lifecycle. These segments are
described below. All other ancillary service and support operations, including
the third party service businesses (see Note 7), are aggregated in the
accompanying segment information.
- Fully stabilized communities - those apartment communities which have
been stabilized (the earlier of the point at which a property reaches
95% occupancy or one year after completion of construction) for both
the current and prior year.
- Communities stabilized during 2000 - communities which reached
stabilized occupancy in the prior year.
Post Properties, Inc. 82
Post Apartment Homes, L.P
- Development and lease up communities - those communities that are in
lease-up but were not stabilized by the beginning of the current year,
including communities that stabilized during the current year.
- Communities held for sale - those communities that are being marketed
for sale.
- Sold communities - communities which were sold in the current or prior
year.
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the performance
measure for its segments. Effective January 1, 2000, FFO is defined by the
National Association of Real Estate Investment Trusts as net income available to
common unitholders determined in accordance with generally accepted accounting
principles ("GAAP"), excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation of real estate assets, and after adjustment
for unconsolidated partnerships and joint ventures. FFO should not be considered
as an alternative to net income (determined in accordance with GAAP) as an
indicator of the Operating Partnership's financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a measure of
the Operating Partnership's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Operating Partnership's needs.
Post Properties, Inc. 83
Post Apartment Homes, L.P
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
SEGMENT INFORMATION
The following table reflects each segment's contribution to consolidated
revenues and FFO together with a reconciliation of segment contribution to FFO,
total FFO and income before extraordinary item and preferred dividends.
Additionally, substantially all of the Operating Partnership's assets relate to
the Operating Partnership's property rental operations. Asset cost, depreciation
and amortization by segment are not presented because such information at the
segment level is not reported internally.
2001 2000 1999
--------- --------- ---------
REVENUES
Fully stabilized communities ............................... $ 257,007 $ 254,511 $ 240,561
Communities stabilized during 2000 ......................... 46,237 39,556 14,863
Development and lease-up communities ....................... 44,607 18,315 5,754
Communities held for sale .................................. 6,278 6,132 5,885
Sold communities ........................................... 13,381 46,751 53,181
Other ...................................................... 30,804 34,567 25,683
--------- --------- ---------
Consolidated revenues ...................................... $ 398,314 $ 399,832 $ 345,927
========= ========= =========
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities ............................... $ 173,890 $ 176,410 $ 166,793
Communities stabilized during 2000 ......................... 30,129 26,648 9,447
Development and lease-up communities ....................... 26,919 9,819 3,156
Communities held for sale .................................. 4,071 4,019 3,940
Sold communities ........................................... 8,258 31,627 37,064
Other ...................................................... 1,065 2,157 1,657
--------- --------- ---------
Contribution to FFO ........................................ 244,332 250,680 222,057
--------- --------- ---------
Other operating income, net of expense ..................... (2,448) 2,286 (801)
Depreciation on non-real estate assets ..................... (2,378) (2,405) (1,962)
Minority interest in consolidated property Partnerships .... 2,098 1,695 (511)
Project abandonment, employee severance and impairment
Charges ................................................... (17,450) (9,365) --
Interest expense ........................................... (57,930) (50,303) (33,192)
Amortization of deferred loan costs ........................ (1,978) (1,636) (1,496)
General and administrative ................................. (13,745) (10,066) (7,788)
Dividends to preferred unitholders ......................... (17,368) (17,475) (13,726)
--------- --------- ---------
Total FFO .................................................. 133,133 163,411 162,581
--------- --------- ---------
Depreciation on real estate assets ......................... (71,023) (66,283) (55,361)
Net gain (loss) on sale of assets .......................... 23,942 3,208 (1,522)
Dividends to preferred unitholders ......................... 17,368 17,475 13,726
--------- --------- ---------
Income before cumulative effect of accounting change and
extraordinary item and preferred dividends ................ $ 103,420 $ 117,811 $ 119,424
========= ========= =========
15. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December 31,
2001, 2000 and 1999 are as follows:
The Operating Partnership committed to distribute $32,741, $33,466 and $30,818
for the quarters ended December 31, 2001, 2000 and 1999, respectively.
Post Properties, Inc. 84
Post Apartment Homes, L.P.
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
16. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended 2001 and 2000 are as
follows:
YEAR ENDED DECEMBER 31, 2001*
--------------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
Revenues ...................................................... $102,583 $102,162 $ 99,119 $ 94,450
-------- -------- -------- --------
Income before net gain (loss) on sale of assets, other charges,
cumulative effect of accounting change and extraordinary item 27,466 26,374 23,932 19,156
Net gain (loss) on sale of assets ............................. 111 15,660 8,179 (8)
Project abandonment, employee severance and impairment
charges ..................................................... -- -- -- (17,450)
Cumulative effect of accounting change ........................ (695) -- -- --
Extraordinary item ............................................ -- (88) -- --
-------- -------- -------- --------
Net income .................................................... 26,882 41,946 32,111 1,698
Distributions to Preferred Unitholders ........................ (4,369) (4,369) (4,369) (4,262)
-------- -------- -------- --------
Net income (loss) available to Common Unitholders ............. $ 22,513 $ 37,577 $ 27,742 $ (2,564)
======== ======== ======== ========
Earnings per Common Unit:
Net income (loss) available to Common Unitholders - basic ..... $ 0.51 $ 0.86 $ 0.64 $ (0.06)
Net income (loss) available to Common Unitholders - diluted ... $ 0.51 $ 0.85 $ 0.64 $ (0.06)
YEAR ENDED DECEMBER 31, 2000*
--------------------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
Revenues ...................................................... $ 95,443 $ 99,482 $101,342 $103,565
-------- -------- -------- --------
Income before net gain (loss) on sale of assets and other charges 31,965 33,734 30,676 27,593
Net gain (loss) on sale of assets ............................. 687 (19) 959 1,581
Project abandonment, employee severance and impairment
charges ..................................................... -- -- -- (9,365)
-------- -------- -------- --------
Net income .................................................... 32,652 33,715 31,635 19,809
Distributions to Preferred Unitholders ........................ (4,368) (4,369) (4,369) (4,369)
-------- -------- -------- --------
Net income available to Common Unitholders .................... $ 28,284 $ 29,346 $ 27,266 $ 15,440
======== ======== ======== ========
Earnings per Common Unit:
Net income available to Common Unitholders - basic ............ $ 0.64 $ 0.66 $ 0.61 $ 0.35
Net income available to Common Unitholders - diluted .......... $ 0.63 $ 0.65 $ 0.60 $ 0.34
* The total of the four quarterly amounts for minority interest of unitholders
in Operating Partnership, extraordinary item, net income and earnings per unit
may not equal the total for the year. These differences result from the use of a
weighted average to compute minority interest in the Operating Partnership and
average number of units outstanding.
Post Properties, Inc. 85
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
GROSS AMOUNT AT
WHICH CARRIED AT
INITIAL COSTS COSTS CLOSE OF PERIOD
--------------------- CAPITALIZED ----------------------
RELATED BLDG. & SUBSEQUENT BLDG. &
DESC. ENCUMBRANCES LAND IMPROV. TO ACQUISITION LAND IMPROV.
----------- ------------ -------- --------- -------------- -------- ---------
GEORGIA
Post Ashford Apt. $ 9,895(2) $ 1,906 $ -- $ 8,517 $ 1,906 $ 8,517
Post Briarcliff Apt. -- 13,344 -- 46,442 13,344 46,442
Post Bridge Apt. 12,450(2) 868 -- 12,493 869 12,492
Post Brookhaven Apt. -- 7,921 -- 31,718 7,921 31,718
Post Canyon Apt. 16,845(2) 931 -- 18,488 931 18,488
Post Chase Apt. 15,000(2) 1,438 -- 16,324 1,438 16,324
Post Chastain Apt. 30,047 6,352 -- 40,548 6,779 40,121
Post Collier Hills Apt. -- 6,487 -- 25,293 7,183 24,597
Post Corners Apt. 14,760(2) 1,473 -- 15,614 1,473 15,614
Post Court Apt. 18,650(2) 1,769 -- 17,912 1,769 17,912
Post Crest Apt. 23,888 4,733 -- 24,817 4,763 24,787
Post Crossing Apt. -- 3,951 -- 19,649 3,951 19,649
Post Dunwoody Apt. -- 4,917 -- 28,822 4,961 28,778
Post Gardens Apt. -- 5,859 -- 33,908 5,931 33,836
Post Glen Apt. 23,793 5,591 -- 21,699 5,784 21,506
Post Lane Apt. -- 1,512 -- 8,302 2,067 7,837
Post Lenox Park Apt. 10,833 3,132 -- 10,893 3,132 10,893
Post Lindbergh Apt. -- 6,268 -- 27,058 6,652 26,674
Post Mill Apt. 12,880(2) 915 -- 13,184 922 13,177
Post Oak Apt. -- 2,027 -- 8,429 2,027 8,429
Post Oglethorpe Apt. -- 3,662 -- 17,205 3,662 17,205
Post Park Apt. -- 6,253 -- 40,536 8,830 37,959
Post Parkside Mixed Use -- 3,402 -- 20,046 3,465 19,983
Post Peachtree Hills Apt. -- 4,215 -- 14,064 4,857 13,422
Post Renaissance Apt. -- -- -- 20,041 20,041
Post Ridge Apt. -- 5,150 -- 31,644 5,150 31,644
Post Spring Apt. -- 2,105 -- 38,242 2,105 38,242
Post Summit Apt. -- 1,575 -- 6,474 1,575 6,474
Post Valley Apt. 18,600(2) 1,117 -- 19,243 1,117 19,243
Post Vinings Apt. -- 4,322 -- 22,053 5,668 20,707
Post Village Apt.
The Arbors Apt. -- 373 -- 17,194 373 17,194
The Fountains & The Meadows Apt. 26,200(2) 611 -- 38,401 878 38,134
The Gardens Apt. 14,500(2) 187 -- 28,097 637 27,647
The Hills Apt. 7,000(2) 91 -- 13,563 307 13,347
Post Walk Apt. 19,300 2,954 -- 17,997 2,954 17,997
Post Woods Apt. 16,659 1,378 -- 27,882 3,070 26,190
Post Stratford Apt. -- 328 -- 24,314 620 24,022
Post Riverside Mixed Use -- 11,130 -- 106,741 12,457 105,414
TEXAS
Post Addison Circle - Phase I Mixed Use 28,268 2,885 41,482 4,855 3,324 45,898
Post Addison Circle - Phase II Mixed Use 50,527 3,417 1,128 84,419 4,126 84,838
Post Addison Circle - Phase III Mixed Use -- 752 -- 21,174 931 20,995
Post American Beauty Mill Apt. -- 156 2,786 3,530 156 6,316
Post Block 588 Apt. -- 1,278 48 21,533 1,415 21,444
GROSS AMOUNT
AT WHICH
CARRIED
AT CLOSE
OF PERIOD
-------------- DEPRECIABLE
ACCUM. DATE OF DATE LIVES
DESC. TOTAL (1) DEP. CONST. ACQUIRED YEARS
--------- ------------- -------- ------------ -------------- -----------
GEORGIA
Post Ashford Apt. $ 10,423 $ 3,610 04/86 -06/87 06/87 5 - 40
Post Briarcliff Apt. 59,786 3,966 12/96 09/96 5 - 40
Post Bridge Apt. 13,361 5,591 09/84 - 12/86 09/84 5 - 40
Post Brookhaven Apt. 39,639 12,193 07/89 - 12/92 03/89 5 - 40
Post Canyon Apt. 19,419 8,264 04/84 - 04/86 10/81 5 - 40
Post Chase Apt. 17,762 6,859 06/85 - 04/87 06/85 5 - 40
Post Chastain Apt. 46,900 14,840 06/88 - 10/90 06/88 5 - 40
Post Collier Hills Apt. 31,780 4,850 10/95 06/95 5 - 40
Post Corners Apt. 17,087 6,976 08/84 - 04/86 08/84 5 - 40
Post Court Apt. 19,681 7,199 06/86 - 04/88 12/85 5 - 40
Post Crest Apt. 29,550 5,579 09/95 10/94 5 - 40
Post Crossing Apt. 23,600 4,152 04/94 - 08/95 11/93 5 - 40
Post Dunwoody Apt. 33,739 7,648 11/88 12/84&8/94(5) 5 - 40
Post Gardens Apt. 39,767 4,121 07/96 05/96 5 - 40
Post Glen Apt. 27,290 3,437 07/96 05/96 5 - 40
Post Lane Apt. 9,904 3,419 04/87 - 05/88 01/87 5 - 40
Post Lenox Park Apt. 14,025 2,424 03/94 - 05/95 03/94 5 - 40
Post Lindbergh Apt. 33,326 3,273 11/96 08/96 5 - 40
Post Mill Apt. 14,099 6,293 05/83 - 05/85 05/81 5 - 40
Post Oak Apt. 10,456 2,667 09/92 - 12/93 09/92 5 - 40
Post Oglethorpe Apt. 20,867 3,903 03/93 - 10/94 03/93 5 - 40
Post Park Apt. 46,789 15,261 06/87 - 09/90 06/87 5 - 40
Post Parkside Mixed Use 23,448 1,330 02/99 12/97 5 - 40
Post Peachtree Hills Apt. 18,279 3,675 02/92 - 09/94 02&11/92(5) 5 - 40
Post Renaissance Apt. 20,041 5,846 07/91 - 12/94 06/91&01/94(5) 5 - 40
Post Ridge Apt. 36,794 3,474 10/96 07/96 5 - 40
Post Spring Apt. 40,347 09/99 09/99 5 - 40
Post Summit Apt. 8,049 2,628 01/90 - 12/90 01/90 5 - 40
Post Valley Apt. 20,360 7,905 03/86 - 04/88 12/85 5 - 40
Post Vinings Apt. 26,375 8,317 05/88 - 09/91 05/88 5 - 40
Post Village Apt.
The Arbors Apt. 17,567 8,849 04/82 - 10/83 03/82 5 - 40
The Fountains & The Meadows Apt. 39,012 13,479 08/85 - 05/88 08/85 5 - 40
The Gardens Apt. 28,284 9,772 06/88 - 07/89 05/84 5 - 40
The Hills Apt. 13,654 4,718 05/84 - 04/86 04/83 5 - 40
Post Walk Apt. 20,951 8,020 03/86 - 08/87 06/85 5 - 40
Post Woods Apt. 29,260 11,549 03/76 - 09/83 06/76 5 - 40
Post Stratford Apt. 24,642 1,053 04/99 01/99 5 - 40
Post Riverside Mixed Use 117,871 7,570 07/96 01/96 5 - 40
TEXAS
Post Addison Circle - Phase I Mixed Use 49,222 7,495 10/97 10/97 5 - 40
Post Addison Circle - Phase II Mixed Use 88,964 7,820 10/97 10/97 5 - 40
Post Addison Circle - Phase III Mixed Use 21,926 648 07/99 10/97 5 - 40
Post American Beauty Mill Apt. 6,472 537 10/97 10/97 5 - 40
Post Block 588 Apt. 22,859 858 10/97 10/97 5 - 40
Post Properties, Inc. 86
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
GROSS AMOUNT AT
WHICH CARRIED AT
INITIAL COSTS COSTS CLOSE OF PERIOD
--------------------- CAPITALIZED ----------------------
RELATED BLDG. & SUBSEQUENT BLDG. &
DESC. ENCUMBRANCES LAND IMPROV. TO ACQUISITION LAND IMPROV.
----------- ------------ -------- --------- -------------- -------- ---------
Post Cole's Corner Apt. -- 1,886 18,006 1,531 2,086 19,337
Post Columbus Square Mixed Use -- 4,565 24,595 656 4,565 25,251
Post Heights Mixed Use -- 5,455 15,559 28,991 5,812 44,193
Post Legacy Apt. -- 684 32,814 811 32,687
Post Midtown - Phase I, II & III Apt. -- 4,408 1,412 69,023 4,737 70,106
Post Parkwood Apt. 762 306 2,592 4,667 864 6,701
Post Ascension Apt. -- 1,230 8,976 695 1,264 9,637
Post Hackberry Creek Apt. -- 7,269 23,579 (533) 7,269 23,046
Post Town Lake/Parks Apt. -- 2,985 19,464 1,815 2,985 21,279
Post White Rock Apt. -- 1,560 9,969 1,463 1,560 11,432
Post Windhaven Apt. -- 4,029 23,385 3,466 4,029 26,851
Post Abbey Apt. -- 575 6,276 1,643 575 7,919
Post Commons Apt. -- 1,406 7,938 646 1,406 8,584
Post Meridian Apt. -- 1,535 11,605 707 1,535 12,312
Post Residences Apt. -- 1,494 18,022 1,963 1,494 19,985
Post Rice Lofts Apt. -- 449 13,393 20,925 449 34,318
Post Vineyard Apt. -- 1,133 8,560 172 1,133 8,732
Post Vintage Apt. -- 2,614 12,188 347 2,614 12,535
Post West Avenue Lofts Apt. -- -- 16,490 6,523 23,013
Post Worthington Mixed Use -- 3,744 34,700 1,212 3,744 35,912
Post Uptown Village I & II Apt. 22,484 3,955 22,120 16,125 6,195 36,005
Post Wilson Building Apt. -- -- 689 16,317 17,006
Towne Crossing Retail -- 3,703 10,721 964 3,703 11,685
Post & Paddock(6) Retail -- 2,352 7,383 (723) 2,352 5,537
FLORIDA
Post Bay(6) Apt. -- 2,203 -- 15,716 2,573 15,346
Post Court(6) Apt. -- 2,083 -- 10,354 2,083 10,354
Post Fountains Apt. 21,500(2) 3,856 -- 24,640 3,856 24,640
Post Harbour Place I - IV Apt. -- 3,854 -- 72,428 16,281 60,001
Post Hyde Park Apt. -- 3,498 -- 25,979 5,108 24,369
Post Lake Apt. 28,500(2) 6,113 -- 33,215 6,724 32,604
Post Parkside (Orlando) Mixed Use 2,493 29,392 2,493 29,392
Post Rocky Point Apt. -- 10,510 -- 59,624 10,567 59,567
Post Village Apt.
The Arbors Apt. -- 2,063 -- 15,735 2,906 14,892
The Lakes Apt. -- 2,813 -- 17,265 3,488 16,590
The Oaks Apt. -- 3,229 -- 15,733 3,294 15,668
Post Walk at Hyde Park Apt. -- 1,943 -- 10,878 1,974 10,847
VIRGINIA
Post Corners at Trinity Centre Apt. 22,177 4,404 -- 23,648 4,493 23,559
Post Forest Apt. -- 8,590 -- 25,278 9,106 24,762(3)
WASHINGTON D.C
1499 Mass. Avenue Apt. -- 18,271 14,181 18,271 14,181
Post Pentagon Row Mixed Use -- 2,359 7,659 74,024 2,359 81,683
GROSS AMOUNT
AT WHICH
CARRIED
AT CLOSE
OF PERIOD
-------------- DEPRECIABLE
ACCUM. DATE OF DATE LIVES
DESC. TOTAL (1) DEP. CONST. ACQUIRED YEARS
--------- ------------- -------- ------------ -------------- -----------
Post Cole's Corner Apt. 21,423 3,259 n/a 10/97 5 - 40
Post Columbus Square Mixed Use 29,816 2,775 n/a 10/97 5 - 40
Post Heights Mixed Use 50,005 4,300 10/97 10/97 5 - 40
Post Legacy Apt. 33,498 03/99 03/99 5 - 40
Post Midtown - Phase I, II & III Apt. 74,843 2,293 10/97(4) 10/97 5 - 40
Post Parkwood Apt. 7,565 853 n/a 10/97 5 - 40
Post Ascension Apt. 10,901 1,307 n/a 10/97 5 - 40
Post Hackberry Creek Apt. 30,315 3,036 n/a 10/97 5 - 40
Post Town Lake/Parks Apt. 24,264 3,216 n/a 10/97 5 - 40
Post White Rock Apt. 12,992 1,620 n/a 10/97 5 - 40
Post Windhaven Apt. 30,880 3,051 n/a 10/97 5 - 40
Post Abbey Apt. 8,494 867 n/a 10/97 5 - 40
Post Commons Apt. 9,990 1,373 n/a 10/97 5 - 40
Post Meridian Apt. 13,847 1,559 n/a 10/97 5 - 40
Post Residences Apt. 21,479 3,097 n/a 10/97 5 - 40
Post Rice Lofts Apt. 34,767 2,467 10/97 10/97 5 - 40
Post Vineyard Apt. 9,865 940 n/a 10/97 5 - 40
Post Vintage Apt. 15,149 1,541 n/a 10/97 5 - 40
Post West Avenue Lofts Apt. 23,013 597 09/99 09/99 5 - 40
Post Worthington Mixed Use 39,656 4,422 n/a 10/97 5 - 40
Post Uptown Village I & II Apt. 42,200 3,170 n/a 10/97 5 - 40
Post Wilson Building Apt. 17,006 789 10/97 10/97 5 - 40
Towne Crossing Retail 15,388 1,286 n/a 10/97 5 - 40
Post & Paddock Retail 7,889 469 n/a 10/97 5 - 40
FLORIDA
Post Bay (6) Apt. 17,919 6,172 05/87 - 12/88 05/87 5 - 40
Post Court (6) Apt. 12,437 4,005 04/90 - 05/91 10/87 5 - 40
Post Fountains Apt. 28,496 9,220 12/85 - 03/88 12/85 5 - 40
Post Harbour Place I - IV Apt. 76,282 2,799 03/97(4) 01/97 5 - 40
Post Hyde Park Apt. 29,477 3,900 09/94 07/94 5 - 40
Post Lake Apt. 39,328 13,175 11/85 - 03/88 10/85 5 - 40
Post Parkside (Orlando) Mixed Use 31,885 1,664 03/99 03/99 5 - 40
Post Rocky Point Apt. 70,134 8,938 04/94 - 11/96 02/94&09/96(5) 5 - 40
Post Village Apt.
The Arbors Apt. 17,798 6,397 06/90 - 12/91 11/90 5 - 40
The Lakes Apt. 20,078 5,777 07/88 - 12/89 05/88 5 - 40
The Oaks Apt. 18,962 5,456 11/89 - 07/91 12/89 5 - 40
Post Walk at Hyde Park Apt. 12,821 2,533 10/95-09/97 09/95 5 - 40
VIRGINIA
Post Corners at Trinity Centre Apt. 28,052 4,387 06/94 06/94 5 - 40
Post Forest Apt. 33,868 10,839 01/89 - 12/90 03/88 5 - 40
WASHINGTON D.C
1499 Mass. Avenue Apt. 32,452 02/01(4) 02/01 5 - 40
Post Pentagon Row Mixed Use 84,042 06/99(4) 02/99 5 - 40
Post Properties, Inc. 87
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(DOLLARS IN THOUSANDS)
GROSS AMOUNT AT
WHICH CARRIED AT
INITIAL COSTS COSTS CLOSE OF PERIOD
--------------------- CAPITALIZED ----------------------
RELATED BLDG. & SUBSEQUENT BLDG. &
DESC. ENCUMBRANCES LAND IMPROV. TO ACQUISITION LAND IMPROV.
----------- ------------ -------- --------- -------------- -------- ---------
NEW,YORK
Post Toscana Apt. -- 15,976 4,765 16,019 4,722
Post Luminaria Apt. -- 366 20,382 366 20,382
NORTH CAROLINA
Post Uptown Place Apt. -- 2,336 -- 28,435 2,363 28,408
Post Gateway I & II Apt. -- 2,424 -- 52,458 3,269 51,613
Post Park at Phillips Place Mixed Use -- 4,305 -- 36,674 4,307 36,672
ARIZONA
Post Roosevelt Sq. I, II & III Apt. -- 1,920 49,354 3,480 47,794
TENNESSEE
Post Bennie Dillion Mixed Use -- -- -- 8,527 8,527
COLORADO
Post Uptown Square I, II & III Apt. -- 2,963 580 94,468 2,963 95,048
MISC. INVESTMENTS -- 18,757 4,930 35,457 8,023 51,121
-------- -------- ---------- ---------- ---------- ----------
TOTAL $465,318 $323,401 $ 376,235 $2,079,467 $ 349,028 $2,428,952
======== ======== ========== ========== ========== ==========
GROSS AMOUNT
AT WHICH
CARRIED
AT CLOSE
OF PERIOD
-------------- DEPRECIABLE
ACCUM. DATE OF DATE LIVES
DESC. TOTAL (1) DEP. CONST. ACQUIRED YEARS
--------- ------------- -------- ------------ -------------- -----------
NEW,YORK
Post Toscana Apt. 20,741 01/02(4) 01/02 5 - 40
Post Luminaria Apt. 20,748 03/01(4) 03/01 5 - 40
NORTH CAROLINA
Post Uptown Place Apt. 30,771 403 09/98 09/98 5 - 40
Post Gateway I & II Apt. 54,882 (4) 5 - 40
Post Park at Phillips Place Mixed Use 40,979 6,396 01/96 11/95 5 - 40
ARIZONA
Post Roosevelt Sq. I, II & III Apt. 51,274 3 02/99(4) 02/99 5 - 40
TENNESSEE
Post Bennie Dillion Mixed Use 8,527 452 07/98 07/98 5 - 40
COLORADO
Post Uptown Square I, II & III Apt. 98,011 4 10/97(4) 10/97 5 - 40
MISC. INVESTMENTS 59,144 11,394 N/A N/A 5 - 40
----------- --------
TOTAL $ 2,777,980 $404,274
=========== ========
(1) The aggregate cost for Federal Income Tax purposes to the Company was
approximately $2,383,405 at December 31, 2001, taking into account the
special allocation of gain to the partners contributing property to the
Operating Partnership.
(2) These properties serve as collateral for the Federal National Mortgage
Association credit enhancement.
(3) Balance includes an allowance for possible loss of $3,700 which was
taken in prior years.
(4) Construction still in process as of December 31, 2001.
(5) Additional land was acquired for construction of a second phase.
(6) These properties are currently held for sale. If required, the carrying
value of the assets has been adjusted based on management's best
estimate of the expected proceeds from sales.
A summary of activity for real estate investments and accumulated depreciation
is as follows:
2001 2000 1999
------------ ------------ ------------
Real estate investments:
Balance at beginning of year
Improvements $ 2,827,094 $ 2,582,785 $ 2,255,074
Disposition of property 211,881 380,856 345,994
Balance at end of year (260,995) (136,547) (18,283)
------------ ------------ ------------
Accumulated depreciation: 2,777,980(a) 2,827,094 2,582,785
============ ============ ============
Balance at beginning of year
Depreciation 357,180 303,016 247,148
Depreciation on disposed property 76,178 71,113 58,013
Balance at end of year (29,084) (16,949) (2,145)
------------ ------------ ------------
$ 404,274(b) $ 357,180(b) $ 303,016
============ ============ ============
(a) Excludes investments in and advances to unconsolidated
entities in the amount of $89,692.
(b) Accumulated depreciation on the balance sheet is net of
accumulated depreciation on assets held for sale in the
amounts of $11,260 and 12,059, for the years ended
December 31, 2001 and 2000, respectively.
Post Properties, Inc. 88
Post Apartment Homes, L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the
Post Properties, Inc. 1995 Non-Qualified Employee Stock Purchase Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and of changes in net assets available for plan benefits present
fairly, in all material respects, the net assets of the Post Properties, Inc.
1995 Non-Qualified Employee Stock Purchase Plan at December 31, 2001 and 2000
and the changes in net assets available for plan benefits for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 5, 2001
Post Properties, Inc. 89
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
Year Ended December 31,
-----------------------
2001 2000
--------- ---------
ASSETS
Receivable from Post Apartment Homes, L.P. ... $455,119 $473,017
NET ASSETS AVAILABLE FOR PLAN BENEFITS
Net assets available for plan benefits ....... $455,119 $473,017
Post Properties, Inc. 90
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
Year Ended December 31,
------------------------
2001 2000
--------- ---------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, JANUARY 1 ..... $ 473,017 $ 492,698
DEDUCTIONS:
Purchase of participants' shares .................... (937,218) (898,218)
Payment for payroll taxes on behalf
of participants ................................... (50,930) (69,322)
ADDITIONS:
Participant contributions ........................... 970,250 947,859
--------- ---------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, DECEMBER 31 ... $ 455,119 $ 473,017
========= =========
Post Properties, Inc. 91
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Post Properties, Inc. (the "Company") established the 1995 Non-Qualified
Employee Stock Purchase Plan (the "Plan") to encourage stock ownership by
eligible directors and employees.
(B) The financial statements have been prepared on the accrual basis of
accounting.
(C) All expenses incurred in the administration of the Plan are paid by the
Company and are excluded from these financial statements.
NOTE 2 - THE PLAN
The Plan became effective as of January 1, 1995. Under the Plan, eligible
participating employees and directors of the Company can purchase Common Stock
at a discount (up to 15% as set by the Compensation Committee of the Company's
Board of Directors) from the Company through salary withholding or cash
contributions. The Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, nor is it intended to qualify for
special tax treatment under Section 401(a) of the Internal Revenue Code.
Directors who have been a member of the Board of Directors for at least one full
calendar month and full-time employees who have been employed a full calendar
month are eligible to participate in the Plan. Eligible directors and employees
(the "Participants") may contribute in cash or as a specified dollar amount or
percentage of their compensation to the Plan. The minimum payroll deduction for
a Participant for each payroll period for purchases under the Plan is $10.00.
The maximum contribution which a Participant can make for purchases under the
Plan for any calendar year is $100,000. All contributions to the Plan are held
in the general assets of Post Apartment Homes, L.P., the Company's operating
partnership.
Shares of the Company's Common Stock are purchased by an investment firm
semi-annually after the end of each six-month period, as defined, and credited
to each Participant's individual account. The purchase price of the Common Stock
purchased pursuant to the Plan is currently equal to 85% of the closing price on
either the first or last trading day of each purchase period, whichever is
lower.
All Common Stock of the Company purchased by Participants pursuant to the Plan
may be voted by the Participants or as directed by the Participants.
The Plan does not discriminate, in scope, terms, or operation, in favor of
officers or directors of the Company and is available, subject to the
eligibility rules of the Plan, to all employees of the Company on the same
basis.
NOTE 3 - FEDERAL INCOME TAXES
The Plan is not subject to Federal income taxes. The difference between the fair
market value of the shares acquired under the Plan, and the amount contributed
by the Participants is treated as ordinary income to the Participants' for
Federal income tax purposes. Accordingly, the Company withholds all applicable
taxes from the employee contributions. The fair market value of the shares is
determined as of the stock purchase date.
Post Properties, Inc. 92
Post Apartment Homes, L.P.
3. Exhibits
Certain of the exhibits required by Item 601 of Regulation S-K have been filed
with previous reports by the registrant and are herein incorporated by reference
thereto.
The Registrants agree to furnish a copy of all agreements relating to long-term
debt upon request of the Commission.
Exhibit
No. Description
3.1(a) -- Articles of Incorporation of the Company
3.2(b) -- Articles of Amendment to the Articles of Incorporation of the Company.
3.3(c) -- Articles of Amendment to the Articles of Incorporation of the Company.
3.4(d) -- Articles of Amendment to the Articles of Incorporation of the Company.
3.5(e) -- Articles of Amendment to the Articles of Incorporation of the Company.
3.6(a) -- Bylaws of the Company
4.1(f) -- Indenture between the Company and SunTrust Bank, as Trustee
4.2(f) -- First Supplemental Indenture to the Indenture between the Company and SunTrust Bank, as Trustee
10.1(g) -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership
10.2(g) -- First Amendment to Second Amended and Restated Partnership Agreement
10.3(g) -- Second Amendment to Second Amended and Restated Partnership Agreement
10.4(k) -- Third Amendment to Second Amended and Restated Partnership Agreement
10.5(k) -- Fourth Amendment to Second Amended and Restated Partnership Agreement
10.6(e) -- Fifth Amendment to the Second Amended and Restated Partnership Agreement
10.7(m) -- Sixth Amendment to Amended and Restated Partnership Agreement
10.8(h) -- Employee Stock Plan
10.9(g) -- Amendment to Employee Stock Plan
10.10(g) -- Amendment No. 2 to Employee Stock Plan
10.11(g) -- Amendment No. 3 to Employee Stock Plan
10.12(g) -- Amendment No. 4 to Employee Stock Plan
10.13(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams
10.14(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John T. Glover
10.15(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams
dated as of June 1, 1998
10.16(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John T.
Glover dated as of June 1, 1998
10.17(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and
John A. Williams dated June 1, 1998
10.18(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and John
T. Glover dated as of June 1, 1998
10.19(e) -- Option and Transfer Agreement among the Operating Partnership, Post Services, John A. Williams and
John T. Glover
10.20(h) -- Promissory Note made by Post Services, Inc. in favor of RAM Partners, Inc.
10.21(g) -- Form of officers and directors Indemnification Agreement
10.22(a) -- Form of Option Agreement to be entered into between the Operating Partnership and the owners of four
parcels of undeveloped land
10.23(a) -- Profit Sharing Plan of the Company
10.24(g) -- Amendment Number One to Profit Sharing Plan
Post Properties, Inc. 93
Post Apartment Homes, L.P.
10.25(g) -- Amendment Number Two to Profit Sharing Plan
10.26(g) -- Amendment Number Three to Profit Sharing Plan
10.27(g) -- Amendment Number Four to Profit Sharing Plan
10.28(h) -- Form of General Partner 1% Exchange Agreement
10.29(i) -- Employee Stock Purchase Plan
10.30(g) -- Amendment to Employee Stock Purchase Plan
10.31(i) -- Amended and Restated Dividend Reinvestment and Stock Purchase Plan
10.32(m) -- Fifth Amended and Restated Credit Agreement dated as of January 1, 2001 among Post Apartment
Homes, L.P., Wachovia Bank of Georgia, N.A., and the banks listed on the signature pages thereto (the
"Fifth Credit Agreement")
10.33(l) -- Deferred Compensation Plan for Directors and Executive Committee Members
10.34 -- Form of Change in Control Agreement and scheduled of executive officers who have entered into such agreement
10.35 -- Form of Change in Control Agreement and schedule of executive officers who have entered into such agreement
10.36 -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and John A.
Williams dated as of March 25, 2002.
10.37 -- Master Employment agreement between the Company, the Operating Partnership, Post Services, Inc., and John
T. Glover dated as of March 22, 2002
21.1 -- List of Subsidiaries
23.1 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-62243)
23.2 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-70689)
23.3 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 33-81772)
23.4 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-36595)
23.5 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-47399)
23.6 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 33-00020)
23.7 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-94121)
23.8 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-80427)
23.9 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-44722)
23.10 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-42884)
23.11 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-55994)
23.12 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-38725)
23.13 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-02374)
- ------------------
(a) Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No.
33-61936), as amended, of the Company.
(b) Filed as an exhibit to the Current Report on Form 8-K, dated as of October
1, 1996, of the Company.
(c) Filed as an exhibit to the Current Report on Form 8-K, dated as of October
28, 1997, of the Company.
(d) Filed as an exhibit to the Current Report on Form 8-K, dated as of February
9, 1998, of the Company.
(e) Filed as an exhibit to the Quarterly Report on Form 10-Q, dated as of
November 15, 1999, of the Company.
(f) Filed as an exhibit to the Registration Statement on Form S-3 (SEC File No.
333-42884) of the Company.
(g) Filed as an exhibit to the Annual Report on Form 10-K of the Company for the
year ended December 31, 1997.
(h) Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No.
33-71650), as amended, of the Company.
(i) Filed as an exhibit to the Registration Statement on Form S-8 (SEC File No.
33-86674) of the Company.
(j) Filed as part of the Registration Statement on Form S-3 (SEC File No.
333-39461) of the Company.
(k) Filed as an exhibit to the Annual Report on Form 10-K of the Registrants for
the year ended December 31, 1998.
(l) Filed as an exhibit to the Annual Report on Form 10-K of the Registrants for
the year ended December 31, 1999.
(m) Filed as an exhibit to the Annual Report on Form 10-K of the Registrants for
the year ended December 31, 2000.
(b) Reports on Form 8-K
None
Post Properties, Inc. 94
Post Apartment Homes, L.P.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
POST PROPERTIES, INC.
(Registrant)
/s/ David P. Stockert
--------------------------------------------------------
March 28, 2002 David P. Stockert, President and Chief Operating Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Signature Title Date
/s/ John A. Williams
----------------------------- Chairman of the Board, Chief Executive Officer March 28, 2002
John A. Williams and Director (Principal Executive Officer)
/s/ John T. Glover
----------------------------- Vice Chairman and Director March 28, 2002
John T. Glover
/s/ R. Gregory Fox
----------------------------- Executive Vice President and Chief Financial Officer March 28, 2002
R. Gregory Fox (Principal Financial Officer)
/s/ Arthur J. Quirk
----------------------------- Chief Accounting Officer March 28, 2002
Arthur J. Quirk (Principal Accounting Officer)
/s/ Robert Anderson
----------------------------- Director March 28, 2002
Robert Anderson
/s/ Arthur M. Blank
----------------------------- Director March 28, 2002
Arthur M. Blank
/s/ Herschel M. Bloom
----------------------------- Director March 28, 2002
Herschel M. Bloom
/s/ Russell R. French
----------------------------- Director March 28, 2002
Russell R. French
/s/ Charles E. Rice
----------------------------- Director March 28, 2002
Charles E. Rice
/s/ Ronald de Waal
----------------------------- Director March 28, 2002
Ronald de Waal
Post Properties, Inc. 95
Post Apartment Homes, L.P.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
POST APARTMENT HOMES, L.P.
By: Post G.P. Holdings, Inc., as General Partner
/s/ David P. Stockert
--------------------------------------------------------
March 28, 2002 David P. Stockert, President and Chief Operating Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
Signature Title Date
/s/ John A. Williams
----------------------------- Chairman of the Board and Chief Executive Officer
John A. Williams
/s/ John T. Glover
----------------------------- Vice Chairman March 28, 2002
John T. Glover
/s/ R. Gregory Fox
----------------------------- Executive Vice President and Chief Financial Officer March 28, 2002
R. Gregory Fox (Principal Financial Officer)
/s/ Arthur J. Quirk
----------------------------- Chief Accounting Officer March 28, 2002
Arthur J. Quirk (Principal Accounting Officer)
/s/ Robert Anderson
----------------------------- Director March 28, 2002
Robert Anderson
/s/ Arthur M. Blank
----------------------------- Director March 28, 2002
Arthur M. Blank
/s/ Herschel M. Bloom
----------------------------- Director March 28, 2002
Herschel M. Bloom
/s/ Russell R. French
----------------------------- Director March 28, 2002
Russell R. French
/s/ Charles E. Rice
----------------------------- Director March 28, 2002
Charles E. Rice
/s/ Ronald de Waal
----------------------------- Director March 28, 2002
Ronald de Waal
Post Properties, Inc. 96
Post Apartment Homes, L.P.