-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Hq56czuDSlu0qkf7NoT31B1Vx/gzskH5cNKIN7Fh7bvKsBnRQTtlaHmstLKK6veg agcjPAo1EmBgaTmnJwAlsg== 0000950144-02-003120.txt : 20020415 0000950144-02-003120.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950144-02-003120 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POST PROPERTIES INC CENTRAL INDEX KEY: 0000903127 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 581550675 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12080 FILM NUMBER: 02594478 BUSINESS ADDRESS: STREET 1: 4401 NORTHSIDE PARKWAY STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 BUSINESS PHONE: 4048465000 MAIL ADDRESS: STREET 1: ONE RIVERSIDE STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POST APARTMENT HOMES LP CENTRAL INDEX KEY: 0001012271 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 582053632 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28226 FILM NUMBER: 02594479 BUSINESS ADDRESS: STREET 1: ONE RIVERSIDE 4401 NORTHSIDE PARKWAY STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 BUSINESS PHONE: 7708504400 MAIL ADDRESS: STREET 1: ONE RIVERSIDE 4401 NORTHSIDE PARKWAY STREET 2: SUITE 800 CITY: ATLANTA STATE: GA ZIP: 30327 10-K 1 g74920e10-k.txt POST PROPERTIES, INC./POST APARTMENT HOMES, L.P. =============================================================================== UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 -------------------------- FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For fiscal year ended December 31, 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 -------------------------- 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 -------------------------- 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. ================================================================================ 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 Post Apartment Homes, L.P 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. EX-10.34 3 g74920ex10-34.txt FORM OF CHANGE IN CONTROL AGREEMENT Exhibit 10.34 Change in Control Agreements The following is a list of executive officers who have entered into Change in Control Agreements with the Company in the form set below: G. Gregory Fox David P. Stockert Thomas L. Wilkes CHANGE IN CONTROL AGREEMENT This Change in Control Agreement , or "Agreement", is entered into by and between Post Properties, Inc., a Georgia corporation, and ______________, or "Executive". WHEREAS, Executive currently is employed by Post as Post's President and Chief Operating Officer; and WHEREAS, Executive provides services directly or indirectly to one, or more than one, Post Affiliate in addition to providing services to Post; and WHEREAS, Post desires to continue to retain Executive's services, trust, confidence and complete and undivided attention if there is any speculation regarding a Change in Control of Post; NOW, THEREFORE, in consideration of the mutual promises and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Post and Executive hereby agree as follows: Section 1. Definitions 1.1 Board. The term "Board" for purposes of this Agreement shall mean the Board of Directors of Post. 1.2 Cause. The term "Cause" for purposes of this Agreement shall (subject to Section 1.2(d)) mean: (a) Executive is convicted of, pleads guilty to, or confesses or otherwise admits any felony or any act of fraud, misappropriation or embezzlement or Executive otherwise engages in a fraudulent act or course of conduct; (b) There is any material act or omission by Executive involving malfeasance or negligence in the performance of Executive's duties to Post to the material detriment of Post; or (c) Executive breaches in any material respect any of the covenants set forth in Section 3, Section 4 or Section 5 of this Agreement; provided, however, (d) No such act or omission or event shall be treated as "Cause" under this Agreement unless (i) Executive has been provided a detailed, written statement of the basis for Post's belief such act or omission or event constitutes "Cause" and an opportunity to meet with the Compensation Committee (together with Executive's counsel if Executive chooses to have Executive's counsel present at such meeting) after Executive has had a reasonable period in which to review such statement and, if the allegation is under Section 1.2(b) or Section 1.2(c), has had at least a thirty (30) day period to take corrective action and (ii) the Compensation Committee after such meeting (if Executive meets with the Compensation Committee) and after the end of such thirty (30) day correction period (if applicable) determines reasonably and in good faith and by the affirmative vote of at least two thirds of the members of the Compensation Committee then in office at a meeting called and held for such purpose that "Cause" does exist under this Agreement. 1.3 Change in Control. The term "Change in Control" for purposes of this Agreement shall mean: (a) a "change in control" of Post of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A for a proxy statement filed under Section 14(a) of the Securities Exchange Act as in effect on the date of this Agreement; (b) a "person" (as that term is used in 14(d)(2) of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities representing 45% or more of the combined voting power for election of directors of the then outstanding securities of Post; (c) the individuals who at the beginning of any period of two consecutive years or less (starting on or after the date of this Agreement) constitute Post's Board cease for any reason during such period to constitute at least a majority of Post's Board, unless the election or nomination for election of each new member of the Board was approved by vote of at least two-thirds of the members of such Board then still in office who were members of such Board at the beginning of such period; (d) the shareholders of Post approve any reorganization, merger, consolidation or share exchange as a result of which the common stock of Post shall be changed, converted or exchanged into or for securities of another organization (other than a merger with a Post Affiliate or a wholly-owned subsidiary of Post) or any dissolution or liquidation of Post or any sale or the -2- disposition of 50% or more of the assets or business of Post; or (e) the shareholders of Post approve any reorganization, merger, consolidation or share exchange with another corporation unless (i) the persons who were the beneficial owners of the outstanding shares of the common stock of Post immediately before the consummation of such transaction beneficially own more than 60% of the outstanding shares of the common stock of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (ii) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in Section 1.3(e)(i) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of Post common stock immediately before the consummation of such transaction, provided (iii) the percentage described in Section 1.3(e)(i) of the beneficially owned shares of the successor or survivor corporation and the number described in Section 1.3(e)(ii) of the beneficially owned shares of the successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of Post by the persons described in Section 1.3(e)(i) immediately before the consummation of such transaction. 1.4 Code. The term "Code" for purposes of this Agreement shall mean the Internal Revenue Code of 1986, as amended. 1.5 Compensation Committee. The term "Compensation Committee" for purposes of this Agreement means the Compensation Committee of the Board. 1.6 Confidential or Proprietary Information. The term "Confidential or Proprietary Information" for purposes of this Agreement shall mean any secret, confidential, or proprietary information of Post or a Post Affiliate (not otherwise included in the definition of Trade Secret in Section 1.18 of this Agreement) that has not become generally available to the public by the act of one who has the right to disclose such information without violating any right of Post or a Post Affiliate. 1.7 Disability. The term "Disability" for purposes of this Agreement means that Executive is unable as a result of a mental or physical condition or illness to perform the essential functions of Executive's job at Post even with reasonable accommodation for any consecutive 180-day period, all as reasonably determined by the Compensation Committee. 1.8 Effective Date. The term "Effective Date" for purposes of this Agreement shall mean either the date which includes the "closing" of the transaction which makes a Change in Control effective if the Change in Control is made effective through a -3- transaction which has a "closing" or the date a Change in Control is reported in accordance with applicable law as effective to the Securities and Exchange Commission if the Change in Control is made effective other than through a transaction which has a "closing". 1.9 Exchange Act. The term "Exchange Act" for purposes of this Agreement shall mean the Securities Exchange Act of 1934, as amended. 1.10 Good Reason. The term "Good Reason" for purposes of this Agreement shall (subject to Section 1.10(e)) mean: (a) there is a reduction after a Change in Control but before the end of Executive's Protection Period in Executive's combined salary from Post and from each Post Affiliate or there is a reduction after a Change in Control but before the end of Executive's Protection Period in Executive's combined opportunity to receive any incentive compensation or bonuses from Post and from each Post Affiliate without Executive's express written consent; (b) there is a reduction after a Change in Control but before the end of Executive's Protection Period in the scope, importance or prestige of Executive's duties, responsibilities or authority at Post or at any Post Affiliate (other than as a result of a mere change in Executive's title if such change in title is consistent with the organizational structure of Post and any Post Affiliate following such Change in Control) without Executive's express written consent; (c) Post or any Post Affiliate at any time after a Change in Control but before the end of Executive's Protection Period (without Executive's express written consent) transfers Executive's primary work site from Executive's primary work site on the date of such Change in Control or, if Executive subsequently consents in writing to such a transfer under this Agreement, from the primary work site which was the subject of such consent, to a new primary work site which is more than 35 miles from Executive's then current primary work site unless such new primary work site is closer to Executive's primary residence than Executive's then current primary work site; or (d) Post or any Post Affiliate fails (without Executive's express written consent) after a Change in Control but before the end of Executive's Protection Period to continue to provide to Executive health and welfare benefits, deferred compensation benefits, executive perquisites (other than the use of a company airplane for personal purposes) and stock option and restricted stock grants that are in the aggregate comparable in value to those provided to Executive immediately prior to the Change in Control Date; provided, however, -4- (e) No such act or omission shall be treated as "Good Reason" under this Agreement unless (i) (A) Executive delivers to the Compensation Committee a detailed, written statement of the basis for Executive's belief that such act or omission constitutes Good Reason, (B) Executive delivers such statement before the later of (1) the end of the ninety (90) day period which starts on the date there is an act or omission which forms the basis for Executive's belief that Good Reason exists or (2) the end of the period mutually agreed upon for purposes of this Section 1.10(e)(i)(B) in writing by Executive and the Chairman of the Compensation Committee, (C) Executive gives the Compensation Committee a thirty (30) day period after the delivery of such statement to cure the basis for such belief and (D) Executive actually submits Executive's written resignation to the Compensation Committee during the sixty (60) day period which begins immediately after the end of such thirty (30) day period if Executive reasonably and in good faith determines that Good Reason continues to exist after the end of such thirty (30) day period, or (ii) Post states in writing to Executive that Executive has the right to treat any such act or omission as Good Reason under this Agreement and Executive resigns during the sixty (60) day period which starts on the date such statement is actually delivered to Executive; (f) If (A) Executive gives the Compensation Committee the statement described in Section 1.10(e)(i) before the end of the thirty (30) day period which immediately follows the end of the Protection Period and Executive thereafter resigns within the period described in Section 1.10(e)(i) or (B) Post provides the statement to Executive described in Section 1.10(e)(ii) before the end of the thirty (30) day period which immediately follows the end of the Protection Period and Executive thereafter resigns within the period described in Section 1.10(e)(ii), then (C) such resignation shall be treated under this Agreement as if made in Executive's Protection Period; and (g) If Executive consents in writing to any reduction described in Section 1.10(a) or Section 1.10(b), to any transfer described in Section 1.10(c) or to any failure described in Section 1.10(d) in lieu of exercising Executive's right to resign for Good Reason and delivers such consent to Post, the date such consent is delivered to Post thereafter shall be treated under this definition as the date of a Change in Control for purposes of determining whether Executive subsequently has Good Reason under this Agreement to resign under Section 2(a) or Section 2(c) as a result of any subsequent reduction described in Section 1.10(a) or Section 1.10(b), any subsequent transfer described in Section 1.10(c) or any subsequent failure described in Section 1.10(d). -5- 1.11 Gross Up Payment. The term "Gross Up Payment" for purposes of this Agreement shall mean a payment to or on behalf of Executive which shall be sufficient to pay (a) any excise tax described in Section 8 in full, (b) any federal, state and local income tax and social security and other employment tax on the payment made to pay such excise tax as well as any additional taxes on such payment and (c) any interest or penalties assessed by the Internal Revenue Service on Executive which are related to the payment of such excise tax unless such interest or penalties are attributable to Executive's willful misconduct or gross negligence. 1.12 Multifamily Property. The term "Multifamily Property" for purposes of this Agreement shall mean any real property on which an upscale multifamily residential-use development has been constructed or is under construction of the date of this Agreement. 1.13 Post. The term "Post" for purposes of this Agreement shall mean Post Properties, Inc. and any successor to Post. 1.14 Post Affiliate. The term "Post Affiliate" for purposes of this Agreement shall mean (a) Post Apartment Homes, L.P. and any successor to such organization, (b) Post Services, Inc. and any successor to such organization, (c) Post GP Holdings, Inc. and any successor to such organization and (d) any other organization if Post, Post Apartment Homes, L.P., Post Services, Inc. or Post GP Holdings, Inc. (i) beneficially own more than twenty percent (20%) of the outstanding voting capital stock of such organization (if such organization is a corporation) or more than twenty percent (20%) of the beneficial interests of such organization (if such organization is not a corporation) and (ii) possess the power to direct or cause the direction of the day to day operations and affairs of such organization, whether through ownership of voting securities, by contract, in the capacity of general partner, manager or managing member or otherwise. 1.15 Protection Period. The term "Protection Period" for purposes of this Agreement shall (subject to Section 1.10(f)) mean the three (3) year period which begins on the Effective Date for a Change in Control. 1.16 Restricted Period. The term "Restricted Period" for purposes of this Agreement shall mean the period which starts on the date Executive's employment by Post or a Post Affiliate terminates under circumstances which create an obligation for Post under Section 2 of this Agreement and which ends (a)(i) on the first anniversary of such termination date for purposes of Section 5 and (ii) on the second anniversary of such termination date for purposes of Section 3 and Section 4 or (b) on the first date following such a termination on which Post breaches any obligation to Executive under Section 2 of this Agreement, whichever period is shorter. 1.17 Salary and Bonus. The term "Salary and Bonus" for purposes of this Agreement shall mean the sum of -6- (a) Executive's combined annual salary (as determined without regard to any salary deferral election) from Post and each Post Affiliate in effect on the day before Executive's employment terminates under Section 2(a)(1) or, if greater, Executive's average annualized combined annual salary (as determined without regard to any salary deferral election) from Post and each Post Affiliate over the three (3) consecutive year period (or, if less, Executive's period of employment by Post) which ends on the date that Executive's employment so terminates, and (b) the average annual bonuses which have been paid by Post and any Post Affiliate (whether paid at the discretion of Post or any Post Affiliate or pursuant to the terms of any plan or program) or which would have been paid but for a bonus deferral election with respect to Executive's performance over the three (3) consecutive year period (or, if less, Executive's period of employment by Post) whether such bonuses are paid (or would have been paid but for a bonus deferral election) in cash, in property or in any combination of cash and property; provided, however, (c) neither the value of any stock option or restricted stock grants made by Post or any Post Affiliate to Executive in any calendar year nor any income which Executive realizes in any calendar year from the exercise of any such stock options or the lapse of any restrictions on such restricted stock grants shall be treated as part of Executive's salary under Section 1.17(a) or as part of Executive's bonuses under Section 1.17(b). 1.18 Trade Secret. The term "Trade Secret" for purposes of this Agreement shall mean information, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers that: (a) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (b) is the subject of reasonable efforts by Post or a Post Affiliate to maintain its secrecy. -7- Section 2. Compensation and Benefits (a) General Rule. (1) If there is a Change in Control and either (a) Post during Executive's Protection Period terminates Executive's employment without Cause, (b) Executive during Executive's Protection Period resigns for Good Reason or (c) Executive resigns for any reason whatsoever or for no reason whatsoever at any time during the 90 day period which starts on the first anniversary of the Effective Date, then (2) Post shall pay Executive three (3.0) times Executive's then Salary and Bonus in cash in a lump sum within thirty (30) days after the date Executive's employment so terminates; (3) (a) Each outstanding stock option granted to Executive by Post shall (notwithstanding the terms under which such option was granted) become fully vested and exercisable on the date Executive's employment so terminates and shall (notwithstanding the terms under which such option was granted) remain exercisable for the remaining term of each such option (as determined as if there had been no such termination of Executive's employment) or for the remainder of Executive's Protection Period, whichever is less, subject to the same terms and conditions as if Executive had remained employed by Post or a Post Affiliate for such term or such period (other than any term or condition which gives Post the right to cancel any such option) and (b) any restrictions on any outstanding restricted stock grants to Executive by Post immediately shall (notwithstanding the terms under which such grant was made) expire and Executive's right to such stock shall be non-forfeitable; (4) (a) Executive shall have no obligation or liability whatsoever for the repayment of any outstanding loan from Post or a Post Affiliate until the due date for repayment under the terms of such loan (as determined as if there had been no such termination of Executive's employment) or until the end of Executive's Protection Period, whichever comes first, (b) Executive shall be treated during the period over which no repayment is due pursuant to this Section 2(a)(4)(b) as if he or she had remained in the employ of Post or a Post Affiliate for all purposes, including any provision in such loan or in any agreement related to such loan which provides for the forgiveness of such loan while Executive remains employed by Post or a Post Affiliate and (c) Post shall pay Executive in cash within thirty (30) days after the date Executive's employment so terminates 140% of the -8- excess, if any, of the then principal and interest outstanding on such termination date on each loan which had been made by Post or a Post Affiliate to Executive to help Executive purchase shares of Post stock (whether made under Post's "senior management stock ownership program" or otherwise) over the "total market value" of such shares of stock on such termination date or, if such Post stock has been converted into shares of stock in a successor corporation, the "total market value" of such shares of stock in such successor corporation, where such "total market value" shall be determined by multiplying the number of such shares of stock by (1) the closing price for such shares on such termination date as reported in The Wall Street Journal or, if there is no closing price on such termination date, (2) the closing price for such shares of stock as reported in The Wall Street Journal for the first date which immediately precedes such termination date for which there is a closing price for such shares of stock or, if The Wall Street Journal no longer reports a closing price for such shares, (3) the fair market value of a share of such stock as determined in any manner which is acceptable to Executive; and (5) Post from the date of such termination of Executive's employment until the end of Executive's Protection Period shall continue to provide to Executive (a) the same coverage and benefits as Executive was provided under Post's employee benefit plans, policies and practices on the day before Executive's employment terminated or, at Executive's election, on any date in the one (1) year period which ends on the date of such termination of employment and (b) the same executive perquisites (other than the use of a company airplane for personal purposes) as Executive enjoyed on the day before Executive's employment terminated or, at Executive's election, on any date in the one (1) year period which ends on the date of such termination; provided, however, if Post cannot provide such coverage and benefits under Post's employee benefit plans, policies or programs, Post either shall provide such coverage and benefits to Executive outside such plans, policies and programs at no additional expense or tax liability to Executive or shall reimburse Executive for Executive's cost to purchase such coverage and benefits and for any tax liability for such reimbursements. (b) No Increase in Other Benefits. If Executive's employment terminates under the circumstances described in Section 2(a)(1) or Section 2(c), Executive expressly waives Executive's right, if any, to have any payment made under Section 2(a) taken into account to increase the benefits otherwise payable to, or on behalf of, Executive under any employee benefit plan, policy or program, whether qualified or nonqualified, maintained by Post or a Post Affiliate. -9- (c) Termination in Anticipation of a Change in Control. Executive shall be treated under Section 2(a) as if Executive's employment had been terminated without Cause or Executive had resigned for Good Reason during Executive's Protection Period if (1) Executive's employment is terminated by Post without Cause or Executive resigns for Good Reason, (2) such termination is effected or such resignation is effective at any time in the sixty (60) day period which ends on the date of a Change in Control, and (3) there is an Effective Date for such Change in Control. (d) Death or Disability. Executive agrees that Post will have no obligation to Executive under this Section 2 if Executive's employment terminates exclusively as a result of Executive's death or a Disability. Section 3. No Solicitation of Customers Executive will not, during the Restricted Period, for purposes of competing with Post or a Post Affiliate, solicit or seek to solicit on Executive's own behalf or on behalf of any other person, firm, or corporation which engages, directly or indirectly, in the development, operation, management, leasing, or landscaping of a Multifamily Property, any entity or person who was a customer of Post, and with whom Executive had a personal business interaction, at any time during the two (2) years immediately prior to the termination of Executive's employment by Post. Section 4. Antipirating of Employees Executive will not during the Restricted Period employ or seek to employ on Executive's own behalf or on behalf of any other person, firm or corporation that engages, directly or indirectly, in the development, operation, management, leasing or landscaping of a Multifamily Property, any person who was employed by Post or a Post Affiliate in an executive, managerial, or supervisory capacity during the term of Executive's employment by Post, with whom Executive had business dealings during the two (2) year period which ends on the date Executive's employment by Post terminates (whether or not such employee would commit a breach of contract), and who has not ceased to be employed by Post or a Post Affiliate for a period of at least one (1) year. -10- Section 5. Trade Secrets and Confidential or Proprietary Information Executive hereby agrees that Executive will hold in a fiduciary capacity for the benefit of Post and each Post Affiliate, and will not directly or indirectly use or disclose, any Trade Secret that Executive may have acquired during the term of Executive's employment by Post for so long as such information remains a Trade Secret even if such information remains a Trade Secret after the expiration of the Restricted Period. Executive in addition agrees that Executive during the Restricted Period will hold in a fiduciary capacity for the benefit of Post and each Post Affiliate, and will not directly or indirectly use or disclose, any Confidential or Proprietary Information that Executive may have acquired (whether or not developed or compiled by Executive and whether or not Executive was authorized to have access to such information) during the term of, in the course of, or as a result of Executive's employment by Post. Section 6. Reasonable and Necessary Restrictions Executive acknowledges that the restrictions, prohibitions and other provisions set forth in this Agreement, including without limitation the Restricted Period, are reasonable, fair and equitable in scope, terms and duration; are necessary to protect the legitimate business interests of Post; and are a material inducement to Post to enter into this Agreement. Executive covenants that Executive will not challenge the enforceability of this Agreement nor will Executive raise any equitable defense to its enforcement. Section 7. Specific Performance Executive acknowledges that the obligations undertaken by him pursuant to this Agreement are unique and that Post likely will have no adequate remedy at law if Executive shall fail to perform any of Executive's obligations under this Agreement, and Executive therefore confirms that Post' right to specific performance of the terms of this Agreement is essential to protect the rights and interests of Post. Accordingly, in addition to any other remedies that Post may have at law or in equity, Post will have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Executive, and Post will have the right to obtain preliminary and permanent injunctive relief to secure specific performance and to -11- prevent a breach or contemplated breach of this Agreement by Executive, and Executive submits to the jurisdiction of the courts of the State of Georgia for this purpose. Section 8. Tax Protection If Post or Post's independent accountants determine that any payments and benefits called for under this Agreement together with any other payments and benefits made available to Executive by Post or a Post Affiliate will result in Executive being subject to an excise tax under Section 4999 of the Code or if such an excise tax is assessed against Executive as a result of any such payments and other benefits, Post shall make a Gross Up Payment to or on behalf of Executive as and when any such determination or assessment is made, provided Executive takes such action (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 8) as Post reasonably requests under the circumstances to mitigate or challenge such tax; provided, however, if Post or Post's independent accountants make such a determination and, further, determine that Executive will not be subject to any such excise tax if Executive waives Executive's right to receive a part of such payments or benefits and such part does not exceed $25,000, Executive shall irrevocably waive Executive's right to receive such part if an independent accountant or lawyer retained by Executive and paid by Post agrees with the determination made by Post or Post's independent accountants with respect to the effect of such reduction in payments or benefits. Any determinations under this Section 8 shall be made in accordance with Section 280G of the Code and any applicable related regulations (whether proposed, temporary or final) and any related Internal Revenue Service rulings and any related case law and, if Post reasonably requests that Executive take action to mitigate or challenge, or to mitigate and challenge, any such tax or assessment (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 8) and Executive complies with such request, Post shall provide Executive with such information and such expert advice and assistance from Post's independent accountants, lawyers and other advisors as Executive may reasonably request and shall pay for all expenses incurred in effecting such compliance and any related fines, penalties, interest and other assessments. Section 9. Miscellaneous Provisions 9.1 Assignment. This Agreement is for the personal services of Executive, and the rights and obligations of Executive under this Agreement are not assignable in whole or in part by Executive without the prior written consent of Post. This Agreement -12- is assignable in whole or in part to any parent, subsidiaries, or affiliates of Post, but only if such person or entity is financially capable of fulfilling the obligations of Post under this Agreement, and Post as part of any Change in Control which is made effective through a transaction for which there is a "closing" shall assign Post's obligations under this Agreement to Post's successor and such successor shall expressly agree to such assignment or Post on or before the Effective Date for such Change in Control shall (without any further action on the part of Executive) take the action called for in Section 2 of this Agreement as if Executive had been terminated without Cause on the Effective Date for such Change in Control without regard to whether Executive's employment actually has terminated. 9.2 Governing Law. This Agreement will be governed by and construed under the laws of the State of Georgia (without reference to the choice of law principles under the laws of the State of Georgia). Executive consents to jurisdiction and venue in the state and federal courts in the State of Georgia for any action arising from a dispute under this Agreement, and for any such action brought in such a court, expressly waives any defense Executive might otherwise have based on lack of personal jurisdiction or improper venue, or that the action has been brought in an inconvenient forum. 9.3 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 9.4 Headings; References. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Any reference to a section (Section) shall be to a section (Section) of this Agreement unless there is an express reference to a section (Section) of the Code or the Exchange Act, in which event the reference shall be to the Code or to the Exchange Act, whichever is applicable. 9.5 Attorneys Fees. If any action at law or in equity is necessary for Executive to enforce or interpret the terms of this Agreement, Post shall pay Executive's reasonable attorneys' fees and other reasonable expenses incurred with respect to such action. If any other action is taken with respect to this Agreement, Post shall bear its own attorneys' fees and expenses and Executive shall bear Executive's own attorneys' fees and expenses. 9.6 Amendments and Waivers. Except as otherwise specified in this Agreement, this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of Post and Executive. -13- 9.7 Severability. Any provision of this Agreement held to be unenforceable under applicable law will be enforced to the maximum extent possible, and the balance of this Agreement will remain in full force and effect. 9.8 Entire Agreement. This Agreement constitutes the entire understanding and agreement of Post and Executive with respect to the transactions contemplated in this Agreement, and this Agreement supersedes all prior understandings and agreements between Post and Executive with respect to such transactions. 9.9 Notices. Any notice required under this Agreement to be given by either Post or Executive will be in writing and will be deemed effectively given upon personal delivery to the party to be notified or five (5) days after deposit with the United States Post office by registered or certified mail, postage prepaid, to the other party at the address set forth below or to such other address as either party may from time to time designate by ten (10) days advance written notice pursuant to this Section 9.9. Any such written notice shall be directed as follows: If to Post: Post Properties, Inc. One Riverside 4401 Northside Parkway Suite 800 Atlanta, Georgia 30027 Attention: Chief Executive Officer If to Executive: ___________________ ___________________ ___________________ 9.10 Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, Post and Executive and their respective heirs, personal representatives, legal representatives, successors and assigns, subject, however, to the provisions in Section 9.1 of this Agreement. 9.11 Not an Employment Contract. This Agreement is not an employment contract and shall not give Executive the right to continue in employment by Post or a Post Affiliate for any period of time or from time to time. Moreover, this Agreement shall not adversely affect the right of Post or a Post Affiliate to terminate Executive's employment with or without cause at any time. -14- 9.12. Term. (a) General Rule. Subject to Section 9.12(b), the initial term of this Agreement shall be a three (3) year term, which starts on the date of this Agreement, and this initial term automatically shall be extended for one additional year on the first anniversary of the date of this Agreement and for one additional year on each anniversary date thereafter unless Post at least 180 days before any such anniversary date advises Executive that there will be no such extension on such anniversary date. (b) Special Rule. If Executive has a right to any compensation or benefits under Section 2 before the term of this Agreement expires under Section 9.12(a), the term of this Agreement shall continue until Executive agrees that all of Post's obligations to Executive under this Agreement have been satisfied in full or a court of competent jurisdiction makes a final determination that Post has no further obligations to Executive under this Agreement, whichever comes first. IN WITNESS WHEREOF, Post and Executive have executed this Agreement effective as of this ___ day of September, 2001. POST PROPERTIES, INC. By:________________________ John A. Williams EXECUTIVE ___________________________ -15- EX-10.35 4 g74920ex10-35.txt FORM OF CHANGE IN CONTROL AGREEMENT Exhibit 10.35 Change in Control Agreements The following is a list of executive officers who have entered into Change in Control Agreements with the Company in the form set below: Sherry W. Cohen Douglas S. Gray CHANGE IN CONTROL AGREEMENT This Change in Control Agreement , or "Agreement", is entered into by and between Post Properties, Inc., a Georgia corporation, and _____________, or "Executive". WHEREAS, Executive currently is employed as a senior executive of Post or a Post Affiliate; and WHEREAS, Post desires to continue to retain Executive's services, trust, confidence and complete and undivided attention if there is any speculation regarding a Change in Control of Post; NOW, THEREFORE, in consideration of the mutual promises and agreements contained in this Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Post and Executive hereby agree as follows: Section 1. Definitions 1.1 Board. The term "Board" for purposes of this Agreement shall mean the Board of Directors of Post. 1.2 Cause. The term "Cause" for purposes of this Agreement shall (subject to Section 1.2(e)) mean: (a) Executive is convicted of, pleads guilty to, or confesses or otherwise admits any felony or any act of fraud, misappropriation or embezzlement or Executive otherwise engages in a fraudulent act or course of conduct; (b) There is any material act or omission by Executive involving malfeasance or negligence in the performance of Executive's duties to Post to the material detriment of Post; or (c) Executive breaches in any material respect any of the covenants set forth in Section 3, Section 4 or Section 5 of this Agreement; provided, however, (d) No such act or omission or event shall be treated as "Cause" under this Agreement unless (i) Executive has been provided a detailed, written statement of the basis for Post's belief such act or omission or event constitutes "Cause" and an opportunity to meet with the Compensation Committee (together with Executive's counsel if Executive chooses to have Executive's counsel present at such meeting) after Executive has had a reasonable period in which to review such statement and, if the allegation is under Section 1.2(b) or Section 1.2(c), has had at least a thirty (30) day period to take corrective action and (ii) the Compensation Committee after such meeting (if Executive meets with the Compensation Committee) and after the end of such thirty (30) day correction period (if applicable) determines reasonably and in good faith and by the affirmative vote of at least two thirds of the members of the Compensation Committee then in office at a meeting called and held for such purpose that "Cause" does exist under this Agreement. 1.3 Change in Control. The term "Change in Control" for purposes of this Agreement shall mean: (a) a "change in control" of Post of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A for a proxy statement filed under Section 14(a) of the Securities Exchange Act as in effect on the date of this Agreement; (b) a "person" (as that term is used in 14(d)(2) of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities representing 45% or more of the combined voting power for election of directors of the then outstanding securities of Post; (c) the individuals who at the beginning of any period of two consecutive years or less (starting on or after the date of this Agreement) constitute Post's Board cease for any reason during such period to constitute at least a majority of Post's Board, unless the election or nomination for election of each new member of the Board was approved by vote of at least two-thirds of the members of such Board then still in office who were members of such Board at the beginning of such period; (d) the shareholders of Post approve any reorganization, merger, consolidation or share exchange as a result of which the common stock of Post shall be changed, converted or exchanged into or for securities of another organization (other than a merger with a Post Affiliate or a wholly-owned subsidiary of Post) or any dissolution or liquidation of Post or any sale or the disposition of 50% or more of the assets or business of Post; or -2- (e) the shareholders of Post approve any reorganization, merger, consolidation or share exchange with another corporation unless (i) the persons who were the beneficial owners of the outstanding shares of the common stock of Post immediately before the consummation of such transaction beneficially own more than 60% of the outstanding shares of the common stock of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (ii) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in Section 1.3(e)(i) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of Post common stock immediately before the consummation of such transaction, provided (iii) the percentage described in Section 1.3(e)(i) of the beneficially owned shares of the successor or survivor corporation and the number described in Section 1.3(e)(ii) of the beneficially owned shares of the successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of Post by the persons described in Section 1.3(e)(i) immediately before the consummation of such transaction. 1.4 Code. The term "Code" for purposes of this Agreement shall mean the Internal Revenue Code of 1986, as amended. 1.5 Compensation Committee. The term "Compensation Committee" for purposes of this Agreement means the Compensation Committee of the Board. 1.6 Confidential or Proprietary Information. The term "Confidential or Proprietary Information" for purposes of this Agreement shall mean any secret, confidential, or proprietary information of Post or a Post Affiliate (not otherwise included in the definition of Trade Secret in Section 1.18 of this Agreement) that has not become generally available to the public by the act of one who has the right to disclose such information without violating any right of Post or a Post Affiliate. 1.7 Disability. The term "Disability" for purposes of this Agreement means that Executive is unable as a result of a mental or physical condition or illness to perform the essential functions of Executive's job at Post even with reasonable accommodation for any consecutive 180-day period, all as reasonably determined by the Compensation Committee. 1.8 Effective Date. The term "Effective Date" for purposes of this Agreement shall mean either the date which includes the "closing" of the transaction which makes a Change in Control effective if the Change in Control is made effective through a transaction which has a "closing" or the date a Change in Control is reported in accordance with applicable law as effective to the Securities and Exchange -3- Commission if the Change in Control is made effective other than through a transaction which has a "closing". 1.9 Exchange Act. The term "Exchange Act" for purposes of this Agreement shall mean the Securities Exchange Act of 1934, as amended. 1.10 Good Reason. The term "Good Reason" for purposes of this Agreement shall (subject to Section 1.10(e)) mean: (a) there is a reduction after a Change in Control but before the end of Executive's Protection Period in Executive's combined salary from Post and from each Post Affiliate or there is a reduction after a Change in Control but before the end of Executive's Protection Period in Executive's combined opportunity to receive any incentive compensation or bonuses from Post and from each Post Affiliate without Executive's express written consent; (b) there is a reduction after a Change in Control but before the end of Executive's Protection Period in the scope, importance or prestige of Executive's duties, responsibilities or authority at Post or at any Post Affiliate (other than as a result of a mere change in Executive's title if such change in title is consistent with the organizational structure of Post and any Post Affiliate following such Change in Control) without Executive's express written consent; (c) Post or any Post Affiliate at any time after a Change in Control but before the end of Executive's Protection Period (without Executive's express written consent) transfers Executive's primary work site from Executive's primary work site on the date of such Change in Control or, if Executive subsequently consents in writing to such a transfer under this Agreement, from the primary work site which was the subject of such consent, to a new primary work site which is more than 35 miles from Executive's then current primary work site unless such new primary work site is closer to Executive's primary residence than Executive's then current primary work site; or (d) Post or any Post Affiliate fails (without Executive's express written consent) after a Change in Control but before the end of Executive's Protection Period to continue to provide to Executive health and welfare benefits, deferred compensation benefits, executive perquisites (other than the use of a company airplane for personal purposes) and stock option and restricted stock grants that are in the aggregate comparable in value to those provided to Executive immediately prior to the Change in Control Date; provided, however, (e) No such act or omission shall be treated as "Good Reason" under this Agreement unless -4- (i) (A) Executive delivers to the Compensation Committee a detailed, written statement of the basis for Executive's belief that such act or omission constitutes Good Reason, (B) Executive delivers such statement before the later of (1) the end of the ninety (90) day period which starts on the date there is an act or omission which forms the basis for Executive's belief that Good Reason exists or (2) the end of the period mutually agreed upon for purposes of this Section 1.10(e)(i)(B) in writing by Executive and the Chairman of the Compensation Committee, (C) Executive gives the Compensation Committee a thirty (30) day period after the delivery of such statement to cure the basis for such belief and (D) Executive actually submits Executive's written resignation to the Compensation Committee during the sixty (60) day period which begins immediately after the end of such thirty (30) day period if Executive reasonably and in good faith determines that Good Reason continues to exist after the end of such thirty (30) day period, or (ii) Post states in writing to Executive that Executive has the right to treat any such act or omission as Good Reason under this Agreement and Executive resigns during the sixty (60) day period which starts on the date such statement is actually delivered to Executive; (f) If (A) Executive gives the Compensation Committee the statement described in Section 1.10(e)(i) before the end of the thirty (30) day period which immediately follows the end of the Protection Period and Executive thereafter resigns within the period described in Section 1.10(e)(i) or (B) Post provides the statement to Executive described in Section 1.10(e)(ii) before the end of the thirty (30) day period which immediately follows the end of the Protection Period and Executive thereafter resigns within the period described in Section 1.10(e)(ii), then (C) such resignation shall be treated under this Agreement as if made in Executive's Protection Period; and (g) If Executive consents in writing to any reduction described in Section 1.10(a) or Section 1.10(b), to any transfer described in Section 1.10(c) or to any failure described in Section 1.10(d) in lieu of exercising Executive's right to resign for Good Reason and delivers such consent to Post, the date such consent is delivered to Post thereafter shall be treated under this definition as the date of a Change in Control for purposes of determining whether Executive subsequently has Good Reason under this Agreement to resign under Section 2(a) or Section 2(c) as a result of any subsequent reduction described in Section 1.10(a) or Section 1.10(b), any subsequent transfer described in Section 1.10(c) or any subsequent failure described in Section 1.10(d). 1.11 Gross Up Payment. The term "Gross Up Payment" for purposes of this Agreement shall mean a payment to or on behalf of Executive which shall be sufficient to pay (a) any excise tax described in Section 8 in full, (b) any federal, state and local income -5- tax and social security and other employment tax on the payment made to pay such excise tax as well as any additional taxes on such payment and (c) any interest or penalties assessed by the Internal Revenue Service on Executive which are related to the payment of such excise tax unless such interest or penalties are attributable to Executive's willful misconduct or gross negligence. 1.12 Multifamily Property. The term "Multifamily Property" for purposes of this Agreement shall mean any real property on which an upscale multifamily residential-use development has been constructed or is under construction of the date of this Agreement. 1.13 Post. The term "Post" for purposes of this Agreement shall mean Post Properties, Inc. and any successor to Post. 1.14 Post Affiliate. The term "Post Affiliate" for purposes of this Agreement shall mean (a) Post Apartment Homes, L.P. and any successor to such organization, (b) Post Services, Inc. and any successor to such organization, (c) Post GP Holdings, Inc. and any successor to such organization and (d) any other organization if Post, Post Apartment Homes, L.P., Post Services, Inc. or Post GP Holdings, Inc. (i) beneficially own more than twenty percent (20%) of the outstanding voting capital stock of such organization (if such organization is a corporation) or more than twenty percent (20%) of the beneficial interests of such organization (if such organization is not a corporation) and (ii) possess the power to direct or cause the direction of the day to day operations and affairs of such organization, whether through ownership of voting securities, by contract, in the capacity of general partner, manager or managing member or otherwise. 1.15 Protection Period. The term "Protection Period" for purposes of this Agreement shall (subject to Section 1.10(f)) mean the two (2) year period which begins on the Effective Date for a Change in Control. 1.16 Restricted Period. The term "Restricted Period" for purposes of this Agreement shall mean the period which starts on the date Executive's employment by Post or a Post Affiliate terminates under circumstances which create an obligation for Post under Section 2 of this Agreement and which ends (a) on the first anniversary of such termination date or (b) on the first date following such a termination on which Post breaches any obligation to Executive under Section 2 of this Agreement, whichever period is shorter. 1.17 Salary and Bonus. The term "Salary and Bonus" for purposes of this Agreement shall mean the sum of (a) Executive's combined annual salary (as determined without regard to any salary deferral election) from Post and each Post Affiliate in effect on the day before Executive's employment terminates under Section 2(a)(1) or, if greater, -6- Executive's average annualized combined annual salary (as determined without regard to any salary deferral election) from Post and each Post Affiliate over the three (3) consecutive year period (or, if less, Executive's period of employment by Post) which ends on the date that Executive's employment so terminates, and (b) the average annual bonuses which have been paid by Post and any Post Affiliate (whether paid at the discretion of Post or any Post Affiliate or pursuant to the terms of any plan or program) or which would have been paid but for a bonus deferral election with respect to Executive's performance over the three (3) consecutive year period (or, if less, Executive's period of employment by Post) whether such bonuses are paid (or would have been paid but for a bonus deferral election) in cash, in property or in any combination of cash and property; provided, however, (c) neither the value of any stock option or restricted stock grants made by Post or any Post Affiliate to Executive in any calendar year nor any income which Executive realizes in any calendar year from the exercise of any such stock options or the lapse of any restrictions on such restricted stock grants shall be treated as part of Executive's salary under Section 1.17(a) or as part of Executive's bonuses under Section 1.17(b). 1.18 Trade Secret. The term "Trade Secret" for purposes of this Agreement shall mean information, including, but not limited to, technical or nontechnical data, a formula, a pattern, a compilation, a program, a device, a method, a technique, a drawing, a process, financial data, financial plans, product plans, or a list of actual or potential customers or suppliers that: (a) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and (b) is the subject of reasonable efforts by Post or a Post Affiliate to maintain its secrecy. Section 2. Compensation and Benefits (a) General Rule. (1) If there is a Change in Control and Post during Executive's Protection Period terminates Executive's employment without Cause or Executive during Executive's Protection Period resigns for Good Reason, then -7- (2) Post shall pay Executive two (2.0) times Executive's then Salary and Bonus in cash in a lump sum within thirty (30) days after the date Executive's employment so terminates; (3) (a) Each outstanding stock option granted to Executive by Post shall (notwithstanding the terms under which such option was granted) become fully vested and exercisable on the date Executive's employment so terminates and shall (notwithstanding the terms under which such option was granted) remain exercisable for the remaining term of each such option (as determined as if there had been no such termination of Executive's employment) or for the remainder of Executive's Protection Period, whichever is less, subject to the same terms and conditions as if Executive had remained employed by Post or a Post Affiliate for such term or such period (other than any term or condition which gives Post the right to cancel any such option) and (b) any restrictions on any outstanding restricted stock grants to Executive by Post immediately shall (notwithstanding the terms under which such grant was made) expire and Executive's right to such stock shall be non-forfeitable; (4) (a) Executive shall have no obligation or liability whatsoever for the repayment of any outstanding loan from Post or a Post Affiliate until the due date for repayment under the terms of such loan (as determined as if there had been no such termination of Executive's employment) or until the end of Executive's Protection Period, whichever comes first, (b) Executive shall be treated during the period over which no repayment is due pursuant to this Section 2(a)(4)(b) as if he or she had remained in the employ of Post or a Post Affiliate for all purposes, including any provision in such loan or in any agreement related to such loan which provides for the forgiveness of such loan while Executive remains employed by Post or a Post Affiliate and (c) Post shall pay Executive in cash within thirty (30) days after the date Executive's employment so terminates 1.40% of the excess, if any, of the then principal and interest outstanding on such termination date on each loan which had been made by Post or a Post Affiliate to Executive to help Executive purchase shares of Post stock (whether made under Post's "senior management stock ownership program" or otherwise) over the "total market value" of such shares of stock on such termination date or, if such Post stock has been converted into shares of stock in a successor corporation, the "total market value" of such shares of stock in such successor corporation, where such "total market value" shall be determined by multiplying the number of such shares of stock by (1) the closing price for such shares on such termination date as reported in The Wall Street Journal or, if there is no closing price on such termination date, (2) the closing price for such -8- shares of stock as reported in The Wall Street Journal for the first date which immediately precedes such termination date for which there is a closing price for such shares of stock or, if The Wall Street Journal no longer reports a closing price for such shares, (3) the fair market value of a share of such stock as determined in any manner which is acceptable to Executive; and (5) Post from the date of such termination of Executive's employment until the end of Executive's Protection Period shall continue to provide to Executive (a) the same coverage and benefits as Executive was provided under Post's employee benefit plans, policies and practices on the day before Executive's employment terminated or, at Executive's election, on any date in the one (1) year period which ends on the date of such termination of employment and (b) the same executive perquisites (other than the use of a company airplane for personal purposes) as Executive enjoyed on the day before Executive's employment terminated or, at Executive's election, on any date in the one (1) year period which ends on the date of such termination; provided, however, if Post cannot provide such coverage and benefits under Post's employee benefit plans, policies or programs, Post either shall provide such coverage and benefits to Executive outside such plans, policies and programs at no additional expense or tax liability to Executive or shall reimburse Executive for Executive's cost to purchase such coverage and benefits and for any tax liability for such reimbursements. (b) No Increase in Other Benefits. If Executive's employment terminates under the circumstances described in Section 2(a)(1) or Section 2(c), Executive expressly waives Executive's right, if any, to have any payment made under Section 2(a) taken into account to increase the benefits otherwise payable to, or on behalf of, Executive under any employee benefit plan, policy or program, whether qualified or nonqualified, maintained by Post or a Post Affiliate. (c) Termination in Anticipation of a Change in Control. Executive shall be treated under Section 2(a) as if Executive's employment had been terminated without Cause or Executive had resigned for Good Reason during Executive's Protection Period if (1) Executive's employment is terminated by Post without Cause or Executive resigns for Good Reason, (2) such termination is effected or such resignation is effective at any time in the sixty (60) day period which ends on the date of a Change in Control, and -9- (3) there is an Effective Date for such Change in Control. (d) Death or Disability. Executive agrees that Post will have no obligation to Executive under this Section 2 if Executive's employment terminates exclusively as a result of Executive's death or a Disability. Section 3. No Solicitation of Customers Executive will not, during the Restricted Period, for purposes of competing with Post or a Post Affiliate, solicit or seek to solicit on Executive's own behalf or on behalf of any other person, firm, or corporation which engages, directly or indirectly, in the development, operation, management, leasing, or landscaping of a Multifamily Property, any entity or person who was a customer of Post, and with whom Executive had a personal business interaction, at any time during the two (2) years immediately prior to the termination of Executive's employment by Post. Section 4. Antipirating of Employees Executive will not during the Restricted Period employ or seek to employ on Executive's own behalf or on behalf of any other person, firm or corporation that engages, directly or indirectly, in the development, operation, management, leasing or landscaping of a Multifamily Property, any person who was employed by Post or a Post Affiliate in an executive, managerial, or supervisory capacity during the term of Executive's employment by Post, with whom Executive had business dealings during the two (2) year period which ends on the date Executive's employment by Post terminates (whether or not such employee would commit a breach of contract), and who has not ceased to be employed by Post or a Post Affiliate for a period of at least one (1) year. Section 5. Trade Secrets and Confidential or Proprietary Information Executive hereby agrees that Executive will hold in a fiduciary capacity for the benefit of Post and each Post Affiliate, and will not directly or indirectly use or disclose, any Trade Secret that Executive may have acquired during the term of Executive's employment by Post for so long as such information remains a Trade Secret even if such information remains a Trade Secret after the expiration of the Restricted Period. -10- Executive in addition agrees that Executive during the Restricted Period will hold in a fiduciary capacity for the benefit of Post and each Post Affiliate, and will not directly or indirectly use or disclose, any Confidential or Proprietary Information that Executive may have acquired (whether or not developed or compiled by Executive and whether or not Executive was authorized to have access to such information) during the term of, in the course of, or as a result of Executive's employment by Post. Section 6. Reasonable and Necessary Restrictions Executive acknowledges that the restrictions, prohibitions and other provisions set forth in this Agreement, including without limitation the Restricted Period, are reasonable, fair and equitable in scope, terms and duration; are necessary to protect the legitimate business interests of Post; and are a material inducement to Post to enter into this Agreement. Executive covenants that Executive will not challenge the enforceability of this Agreement nor will Executive raise any equitable defense to its enforcement. Section 7. Specific Performance Executive acknowledges that the obligations undertaken by him pursuant to this Agreement are unique and that Post likely will have no adequate remedy at law if Executive shall fail to perform any of Executive's obligations under this Agreement, and Executive therefore confirms that Post' right to specific performance of the terms of this Agreement is essential to protect the rights and interests of Post. Accordingly, in addition to any other remedies that Post may have at law or in equity, Post will have the right to have all obligations, covenants, agreements and other provisions of this Agreement specifically performed by Executive, and Post will have the right to obtain preliminary and permanent injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Agreement by Executive, and Executive submits to the jurisdiction of the courts of the State of Georgia for this purpose. Section 8. Tax Protection If Post or Post's independent accountants determine that any payments and benefits called for under this Agreement together with any other payments and benefits made available to Executive by Post or a Post Affiliate will result in Executive being subject to an excise tax under Section 4999 of the Code or if such an excise tax is -11- assessed against Executive as a result of any such payments and other benefits, Post shall make a Gross Up Payment to or on behalf of Executive as and when any such determination or assessment is made, provided Executive takes such action (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 8) as Post reasonably requests under the circumstances to mitigate or challenge such tax; provided, however, if Post or Post's independent accountants make such a determination and, further, determine that Executive will not be subject to any such excise tax if Executive waives Executive's right to receive a part of such payments or benefits and such part does not exceed $10,000, Executive shall irrevocably waive Executive's right to receive such part if an independent accountant or lawyer retained by Executive and paid by Post agrees with the determination made by Post or Post's independent accountants with respect to the effect of such reduction in payments or benefits. Any determinations under this Section 8 shall be made in accordance with Section 280G of the Code and any applicable related regulations (whether proposed, temporary or final) and any related Internal Revenue Service rulings and any related case law and, if Post reasonably requests that Executive take action to mitigate or challenge, or to mitigate and challenge, any such tax or assessment (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 8) and Executive complies with such request, Post shall provide Executive with such information and such expert advice and assistance from Post's independent accountants, lawyers and other advisors as Executive may reasonably request and shall pay for all expenses incurred in effecting such compliance and any related fines, penalties, interest and other assessments. Section 9. Miscellaneous Provisions 9.1 Assignment. This Agreement is for the personal services of Executive, and the rights and obligations of Executive under this Agreement are not assignable in whole or in part by Executive without the prior written consent of Post. This Agreement is assignable in whole or in part to any parent, subsidiaries, or affiliates of Post, but only if such person or entity is financially capable of fulfilling the obligations of Post under this Agreement, and Post as part of any Change in Control which is made effective through a transaction for which there is a "closing" shall assign Post's obligations under this Agreement to Post's successor and such successor shall expressly agree to such assignment or Post on or before the Effective Date for such Change in Control shall (without any further action on the part of Executive) take the action called for in Section 2 of this Agreement as if Executive had been terminated without Cause on the Effective Date for such Change in Control without regard to whether Executive's employment actually has terminated. -12- 9.2 Governing Law. This Agreement will be governed by and construed under the laws of the State of Georgia (without reference to the choice of law principles under the laws of the State of Georgia). Executive consents to jurisdiction and venue in the state and federal courts in the State of Georgia for any action arising from a dispute under this Agreement, and for any such action brought in such a court, expressly waives any defense Executive might otherwise have based on lack of personal jurisdiction or improper venue, or that the action has been brought in an inconvenient forum. 9.3 Counterparts. This Agreement may be executed in counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. 9.4 Headings; References. The headings and captions used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. Any reference to a section (Section) shall be to a section (Section) of this Agreement unless there is an express reference to a section (Section) of the Code or the Exchange Act, in which event the reference shall be to the Code or to the Exchange Act, whichever is applicable. 9.5 Attorneys Fees. If any action at law or in equity is necessary for Executive to enforce or interpret the terms of this Agreement, Post shall pay Executive's reasonable attorneys' fees and other reasonable expenses incurred with respect to such action. If any other action is taken with respect to this Agreement, Post shall bear its own attorneys' fees and expenses and Executive shall bear Executive's own attorneys' fees and expenses. 9.6 Amendments and Waivers. Except as otherwise specified in this Agreement, this Agreement may be amended, and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of Post and Executive. 9.7 Severability. Any provision of this Agreement held to be unenforceable under applicable law will be enforced to the maximum extent possible, and the balance of this Agreement will remain in full force and effect. 9.8 Entire Agreement. This Agreement constitutes the entire understanding and agreement of Post and Executive with respect to the transactions contemplated in this Agreement, and this Agreement supersedes all prior understandings and agreements between Post and Executive with respect to such transactions. 9.9 Notices. Any notice required under this Agreement to be given by either Post or Executive will be in writing and will be deemed effectively given upon personal delivery to the party to be notified or five (5) days after deposit with the United States -13- Post office by registered or certified mail, postage prepaid, to the other party at the address set forth below or to such other address as either party may from time to time designate by ten (10) days advance written notice pursuant to this Section 9.9. Each such written notice shall be directed as follows: If to Post, to Post Properties, Inc., One Riverside, 4401 Northside Parkway, Suite 800, Atlanta, Georgia 30027, Attention: Chief Executive Officer. If to Executive, to Executive at his or her most recent home address as shown in Post's personnel files. 9.10 Binding Effect. This Agreement shall be for the benefit of, and shall be binding upon, Post and Executive and their respective heirs, personal representatives, legal representatives, successors and assigns, subject, however, to the provisions in Section 9.1 of this Agreement. 9.11 Not an Employment Contract. This Agreement is not an employment contract and shall not give Executive the right to continue in employment by Post or a Post Affiliate for any period of time or from time to time. Moreover, this Agreement shall not adversely affect the right of Post or a Post Affiliate to terminate Executive's employment with or without cause at any time. 9.12. Term. (a) General Rule. Subject to Section 9.12(b), the initial term of this Agreement shall be a three (3) year term, which starts on the date of this Agreement, and this initial term automatically shall be extended for one additional year on the first anniversary of the date of this Agreement and for one additional year on each anniversary date thereafter unless Post at least 180 days before any such anniversary date advises Executive that there will be no such extension on such anniversary date. (b) Special Rule. If Executive has a right to any compensation or benefits under Section 2 before the term of this Agreement expires under Section 9.12(a), the term of this Agreement shall continue until Executive agrees that all of Post's obligations to Executive under this Agreement have been satisfied in full or a court of competent jurisdiction makes a final determination that Post has no further obligations to Executive under this Agreement, whichever comes first. -14- IN WITNESS WHEREOF, Post and Executive have executed this Agreement effective as of this ___ day of September, 2001. POST PROPERTIES, INC. By:________________________ David P. Stockert EXECUTIVE ___________________________ -15- EX-10.36 5 g74920ex10-36.txt MASTER EMPLOYMENT AGREEMENT (JOHN WILLIAMS) EXHIBIT 10.36 MASTER EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into on this 25th day of March, 2002, by and between JOHN A. WILLIAMS, an individual resident of the State of Georgia ("Executive"), POST PROPERTIES, INC., a Georgia corporation ("Post"), POST GP Holdings, Inc., a Georgia corporation, as the general partner of POST APARTMENT HOMES, L.P., ("Holdings") and Post Services, Inc., a Georgia corporation ("Services"); W I T N E S S E T H: WHEREAS, Post, Holdings and Services desire to employ Executive, and Executive desires to be employed by Post, Holdings and Services on the terms and conditions contained in this Agreement; NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Post, Holdings, Services and Executive, intending to be legally bound, do hereby agree as follows: Section 1 Employment Subject to the terms of this Agreement, Post, Holdings and Services hereby employ Executive effective as of July 1, 2002, and Executive hereby accepts such employment with Post, Holdings and Services. Executive shall serve as Chairman of the Boards of Directors of Post, Holdings and Services and in such capacities shall have, and shall discharge, such duties and responsibilities as shall be assigned to him from time to time by the Boards of Directors of Post, Holdings, and Services, but all such duties and responsibilities shall be no more than part-time and consultative in nature and none of such duties and responsibilities shall require Executive to maintain a regular work schedule or shall involve day-to-day operating duties or responsibilities. Executive shall report to the Board of Directors of Post with respect to his duties and responsibilities as Chairman of the Board of Post, to the Board of Directors of Holdings with respect to his duties and responsibilities as Chairman of the Board of Holdings and to the Board of Directors of Services with respect to his duties and responsibilities as Chairman of the Board of Services. Subject to the other terms and conditions of this Agreement, Executive, Post, Holdings and Services agree that Executive's compensation, accountabilities, and requirements shall be determined by Post's Board of Directors or its Compensation Committee (the "Committee"), in their sole discretion but after discussion with Executive, Holdings and Services. Executive shall discharge his duties and responsibilities as set in accordance with this Section 1 in good faith and with such care as is customarily required by an individual undertaking similar duties for entities similar to Post, Holdings and Services. Finally, Executive shall have the discretion to decide at any time whether he is performing his duties or exercising his responsibilities for Post, for Holdings or for Services. Section 2 Compensation; Expenses 2.1. Base Salary. Executive shall be paid during the Term of this Agreement (as described in Section 3.1), a minimum base salary equal to $150,000 per annum (his "Base Salary"), which amount shall be subject to upward adjustment, if any, in accordance with this Section 2.1. The Committee shall review Executive's Base Salary on a regular basis and shall make such upward adjustment as the Committee deems appropriate to ensure that his Base Salary remains competitive. Executive's Base Salary, less all applicable withholding taxes, shall be paid to Executive in accordance with the payroll procedures in effect with respect to executive officers of Post but shall be apportioned between and actually be paid on Post's payroll, Holding's payroll (or, at its option, the payroll of Post Apartment Homes, LP ("Post LP")) and Services' payroll as agreed upon from time to time by Post, Holdings and Services. 2.2. Stock Options. Executive shall be eligible to receive such grants of options to purchase Post stock or grants of restricted Post stock as the Committee determines in its discretion to grant to Executive from time to time. 2.3. Expenses. Executive shall be reimbursed for all reasonable business-related expenses incurred by Executive at the request of or on behalf of Post, Holdings or Services, including, without limitation, first class travel and entertainment expenses incurred in connection with the performance of Executive's duties and responsibilities, moving expenses and his cellular and other expenses to maintain a complete, real time communications link with Post, Holdings and Services while he is away from his office. 2.4. Participation in Employee Benefit Plans. (a) General. Executive shall be entitled to participate in such medical, dental, disability, hospitalization, life insurance, profit sharing and other employee benefit plans as maintained from time to time for the benefit of executive officers of Post, Holdings and Services, on the terms and subject to the conditions set forth in such plans. However, if Post, Holdings and Services each maintain the same plan, the benefits available under such plan shall not exceed the benefit -2- which would have been available if Post, Holdings and Services were one and the same company. (b) Life Insurance. Post, Holdings and Services collectively will provide Executive with a split dollar life insurance program up to $31,000,000 on terms and conditions to be agreed upon by Post and Executive. (c) Annual Physical. Post, Holdings and Services will reimburse Executive for a comprehensive physical examination on an annual basis. Post, Holdings and Services require that Executive have such an examination at least every other year. 2.5. Miscellaneous Perquisites. (a) Luncheon/Athletic Club. Post, Holdings and Services collectively shall reimburse Executive for monthly dues for one luncheon or athletic club. (b) Luxury Car. Post, Holdings and Services collectively shall reimburse Executive for the rental and operation of a luxury automobile, including lease payments, insurance, maintenance, ad valorem and use taxes, and operating expenses. (c) Office. Post, Holdings and Services collectively shall provide Executive with an office at 4401 Northside Parkway, Suite 100, Atlanta, Georgia, and all related equipment and services, including secretarial, bookkeeping and other support services, and operate and maintain such office during such hours (including hours on weekends and holidays) as Executive shall request, commensurate in all respects with the office, equipment and services provided to Executive on the date of this Agreement and, further, shall continue to provide and maintain commensurate mobile and home office equipment to and for Executive, including computers, telephones, home security systems, and related ancillary equipment such as printers, modems, fax machines, and pagers to enable Executive to perform his duties and responsibilities remotely and otherwise from his primary residence and each other residence owned and used as a secondary residence by Executive. (d) Personal Financial Counseling. Post, Holdings and Services collectively shall reimburse Executive for all reasonable costs associated with retaining a personal financial counselor, up to an annual amount of $75,000, to provide such advice and services, including tax advice and tax return preparation services, to and on behalf of Executive as customarily provided by personal financial counselors. (e) Company Airplane. Post, Holdings and Services shall make available to Executive for his business and personal use a Falcon 2000 for 100 hours in each consecutive 12 month period starting on July 1, 2002 or shall make -3- such aircraft available for such other number of hours or shall make such other aircraft available for such other number of hours as agreed upon from time to time by Post and Executive. Any personal use of an aircraft pursuant to this Section 2.5(e) shall be subject to the applicable tax rules for personal use. (f) Household Help. Post, Holdings and Services shall continue to make available employees to perform household and other services at Executive's residence on the same basis as employees are made available on the date of this Agreement subject to Executive continuing to reimburse Post, Holdings and Services for such services in accordance with the reimbursement procedures in effect on the date of this Agreement. (g) Legal Fees. Post, Holdings and Services shall pay Executive's reasonable legal fees and expenses which he incurs in connection with the negotiation of this Agreement. (h) Rule 10b5-1 Plan. Post consistent with Post's insider trading policies shall take such action as necessary or appropriate to assist Executive if Executive seeks to implement a "plan" under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, to sell Post common stock or other securities issued by Post. (i) Health Benefits. Post shall make available to Executive after his termination of employment (for any reason) for his lifetime and, if he has a spouse at his death, to her for her lifetime, coverage under the group health plan in which Posts' senior executives continue to participate or, if such coverage can not reasonably be effected under the terms of such plan, shall reimburse Executive and such surviving spouse for their medical expenses to the same extent such expenses would have been reimbursed under the terms of such plan, all subject to the condition that (1) Executive pays Post for such coverage on the same basis as a former employee pays for such coverage and his surviving spouse, if any, pays for such coverage on the same basis that the surviving spouse of a former employees pays for such coverage and (2) Executive's employment not be terminated "For Cause" under Section 3.3(e). 2.6. Allocation. Post, Holdings and Services shall allocate the payments and benefits called for under this Agreement between themselves as Post, Holdings and Services deem reasonable and appropriate and, further, may (as between themselves) designate one company to make all such payments (except with respect to Base Salary under Section 2.1) and provide all such benefits to Executive. However, Executive may (except with respect to Base Salary under Section 2.1) look to either Post, Holdings or Services for 100% of the payments and benefits called for under this Agreement if at any time there is any failure by Post, Holdings or Services to make any payment or provide any benefit called for under this Agreement. -4- Section 3. Term of Employment 3.1. Term of Employment. Unless earlier terminated in accordance with Section 3.3 of this Agreement, the employment of Executive under this Agreement shall commence on July 1, 2002 and shall continue until the date of Post's regularly scheduled annual shareholder's meeting in 2013 (the "Term"). 3.2. Termination of Prior Employment Agreement. Executive's Employment Agreement with Post, Holdings and Services entered into on June 1,1998 and as thereafter amended will terminate on July 1, 2002, but Executive's Noncompetition Agreement with Post, Holdings and Services, entered into as of July 22, 1993, shall not be affected by this Agreement and shall continue in full force and effect. Such Noncompetition Agreement and any successor to such agreement shall be referred to in this Agreement as the "Noncompetition Agreement." 3.3. Termination. Executive's employment under this Agreement may be terminated as follows: (a) by Executive at any time if (i) Executive is relieved of his title as Chairman of the Board of Directors of Post, Holdings or Services without his consent, (ii) Executive is assigned duties or responsibilities which are outside the scope of the duties and responsibilities described in Section 1 without his consent, (iii) there is a material decrease in the value of Executive's compensation and benefits package without his consent, or (iv) Post, Holdings, Services or Post LP accelerates the date for repayment of any indebtedness owed by Executive to Post, Holdings, Services or Post LP without Executive's consent, in which event his benefits under this Agreement shall be determined under Section 4.1; (b) by Executive for any reason during the one (1) year period which starts on the Effective Date of a Change in Control, where (i) the term "Change in Control" shall mean (1) a "change in control" of Post of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A -5- for a proxy statement filed under Section 14(a) of the Securities Exchange Act of 1934, as amended, or "Exchange Act," as in effect on the date of this Agreement, (2) a "person" (as that term is used in 14(d)(2) of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities representing 45% or more of the combined voting power for election of directors of the then outstanding securities of Post, (3) the individuals who at the beginning of any period of two consecutive years or less (starting on or after the date of this Agreement) constitute Post's Board of Directors cease for any reason during such period to constitute at least a majority of Post's Board of Directors, unless the election or nomination for election of each new member of Post's Board of Directors was approved by vote of at least two-thirds of the members of such Board of Directors then still in office who were members of such Board of Directors at the beginning of such period, (4) the shareholders of Post approve any reorganization, merger, consolidation or share exchange as a result of which the common stock of Post shall be changed, converted or exchanged into or for securities of another organization (other than a merger with a Post affiliate or a wholly-owned subsidiary of Post) or any dissolution or liquidation of Post or any sale or the disposition of 50% or more of the assets or business of Post, or (5) the shareholders of Post approve any reorganization, merger, consolidation or share exchange with another corporation unless (A) the persons who were the beneficial owners of the outstanding shares of the common stock of Post immediately before the consummation of such transaction beneficially own more than 60% of the outstanding shares of the common stock of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (B) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in Section 3.3(b)(i)(5)(A) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of Post common stock immediately before the consummation of such transaction, provided (C) the percentage described in Section 3.3(b)(i)(5)(A) of the beneficially owned shares of the successor or survivor corporation and the number described in Section 3.3(b)(i)(5)(B) of the beneficially owned shares of the -6- successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of Post by the persons described in Section 3.3(b)(i)(5)(A) immediately before the consummation of such transaction, and (ii) the term "Effective Date" shall mean the date which includes the "closing" of the transaction which makes a Change in Control effective if the Change in Control is made effective through a transaction which has a "closing" or the date a Change in Control is reported in accordance with applicable law as effective to the Securities and Exchange Commission if the Change in Control is made effective other than through a transaction which has a "closing", in which event his benefits under this Agreement shall be determined under Section 4.1; (c) by Post (other than under Section 3.3(e)), in which event his benefits under this Agreement shall be determined under Section 4.1; (d) by Executive's death, in which event his benefits under this Agreement shall be determined under Section 4.2; or (e) by Post "For Cause" if (i) Executive is convicted of, pleads guilty to, or confesses to any felony or any act of fraud, misappropriation or embezzlement which has an immediate and materially adverse effect on Post, Holdings, Services, Post LP or any of their direct or indirect subsidiaries, as determined by Post's Board of Directors in good faith, (ii) Executive engages in a fraudulent act to the material damage or prejudice of Post, Holdings, Services, Post LP or any of their direct or indirect subsidiaries or in conduct or activities materially damaging to the property, business or reputation of Post, Holdings, Services, Post LP, or any of their direct or indirect subsidiaries, all as determined by Post's Board of Directors in good faith, (iii) there is any material act or omission by Executive involving malfeasance or negligence in the performance of Executive's duties to Post, Holdings or Services to the material detriment of Post, Holdings, Services or Post LP, as determined by Post's Board of Directors in good faith, which has not been corrected by Executive within thirty (30) days after written notice from Post of any such act or omission, -7- (iv) Executive fails to comply in any material respect with the terms of this Agreement or any other written agreement with Post, Holdings, Services, Post LP or any of their direct or indirect subsidiaries or any written policies or directives of Post's Board of Directors as determined by Post's Board of Directors in good faith, which has not been corrected by Executive within thirty (30) days after written notice from Post of such failure, or (v) Executive breaches any of the covenants set forth in the Noncompetition Agreement, in which event Executive's benefits under this Agreement shall be determined under Section 4.3. Section 4 Result of Termination 4.1. General Rule. If Executive's employment under this Agreement is terminated under Section 3.3(a), Section 3.3(b) or Section 3.3(c), then (a) Executive shall be entitled to continue to receive his then Base Salary until the end of the Term (as determined without regard to his termination of employment) or until he dies, whichever comes first; (b) Executive's unvested stock options, if any, shall fully vest and the restrictions on his restricted stock grants, if any, shall lapse on the effective date of such termination; (c) Executive shall be entitled to continue to receive all the perquisites, benefits, services and equipment described in Section 2.4 and Section 2.5 of this Agreement until the end of the Term (as determined without regard to his termination of employment) or until he dies, whichever comes first, or subject to Executive's consent, the cash equivalent of such perquisites, benefits, services and equipment, such cash equivalent to be agreed upon by Post and Executive as a condition to such consent; provided, if Executive dies after his employment terminates but before the end of the Term (as determined without regard to such termination of employment), suitable office space at 4401 Northside Parkway, Atlanta, Georgia and related equipment and services, including secretarial, bookkeeping and other support services, shall be made available at no expense for the benefit of his estate for no less than the six (6) month period which starts on the date of his death; (d) Executive shall receive all the perquisites and benefits to which he has a right to receive independent of this Agreement under the terms and -8- conditions of the plans and programs under which such perquisites and benefits were granted to Executive; and (e) the group health plan coverage described in Section 2.5(i) shall remain available in accordance with the terms of Section 2.5(i). 4.2. Termination as a Result of Death. If Executive's employment under this Agreement is terminated as a result of his death, then, (a) Executive (or at his death, his designated beneficiary, if any, or if none, his surviving spouse or, if none, his estate) shall be entitled to receive (i) any Base Salary which may be owed to Executive but which is unpaid as of the effective date of such termination and (ii) a severance payment equal to his Base Salary for such calendar year; (b) Executive's unvested stock options shall fully vest on the effective date of such termination; (c) all Executive's perquisites and benefits called for exclusively under the terms of this Agreement shall terminate as of the effective date of such termination except (i) the group health plan coverage described in Section 2.5(i), shall remain available in accordance with the terms of Section 2.5(i) and (ii) Post shall make available suitable office space at 4401 Northside Parkway, Atlanta, Georgia and related equipment and services, including secretarial, bookkeeping and other support services, at no expense for the benefit of Executive's estate for no less than the six (6) month period which starts on Executive's date of death; and (d) all of Executive's perquisites and benefits to which he has a right independent of this Agreement shall remain in effect, if at all, exclusively under the terms and conditions of the plans and programs under which such perquisites and benefits were granted to Executive. 4.3 For Cause. If Post terminates Executive's employment "For Cause" (as defined in Section 3.3(e)), Executive shall not thereafter be entitled to receive any Base Salary for periods following the effective date of such termination; provided, however, that Executive shall be entitled to receive any Base Salary which may be owed to Executive but is unpaid as of the effective date of such termination. All Executive's perquisites and benefits called for exclusively under the terms of this Agreement shall terminate as of the effective date of such termination. All Executive's perquisites and benefits, including stock options, to which Executive has a right independent of this Agreement shall remain in effect, if at all, exclusively under the terms and conditions of the plans and programs under which such perquisites and benefits were granted to Executive. 4.4 Employee Benefit Plans and Incentive Compensation and Other Compensatory Arrangements. In addition to the benefits described in Section 4.1, Section 4.2 and -9- Section 4.3, Executive shall upon Executive's termination of employment be eligible for such other benefits as may be payable to Executive under any employee benefit plan then in force. Section 5. Change In Control 5.1. General Rule. Subject to Section 3.3(b), Section 5.3 and Section 5.4, no Change in Control or any other change in the control, ownership, operations or assets of Post shall have any effect whatsoever on Post's obligations under this Agreement. 5.2 Definitions. (a) Code. The term "Code" for purposes of this Agreement shall mean the Internal Revenue Code of 1986, as amended. (b) Gross Up Payment. The term "Gross Up Payment" for purposes of this Section 5 shall mean a payment to or on behalf of Executive which shall be sufficient to pay (a) any excise tax described in Section 5.3 in full, (b) any federal, state and local income tax and social security and other employment tax on the payment made to pay such excise tax as well as any excise and other additional taxes on such payment, (c) any interest or penalties assessed by the Internal Revenue Service on Executive which are related to the payment of such excise tax unless such interest or penalties are attributable to Executive's willful misconduct or gross negligence and (d) any federal, state and local income tax and social security tax and other employment tax on the payment made to pay such interest or penalties as well as any excise and additional taxes on such payment. 5.3. Tax Protection. If Post or Post's independent accountants determine that any payments and benefits called for under this Agreement together with any other payments and benefits made available to Executive by Post or a Post affiliate will result in Executive being subject to an excise tax under Section 4999 of the Code (or any successor provision thereof) or if such an excise tax is assessed against Executive as a result of any such payments and other benefits, Post shall make a Gross Up Payment to or on behalf of Executive as and when any such determination or assessment is made, provided Executive takes such action (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 5.3) as Post reasonably requests under the circumstances to mitigate or challenge such tax; provided, however, if Post or Post's independent accountants make such a determination and, further, determine that Executive will not be subject to any such excise tax if Executive waives Executive's right to receive a part of such payments or benefits and such part does not exceed $25,000, Executive shall irrevocably waive Executive's right to receive such part if an independent accountant or lawyer retained by Executive and paid by Post agrees with -10- the determination made by Post or Post's independent accountants with respect to the effect of such reduction in payments or benefits. Any determinations under this Section 5.3 shall be made in accordance with Section 280G of the Code, including any successor provision thereof, and any applicable related regulations (whether proposed, temporary or final) and any related Internal Revenue Service rulings and any related case law and, if Post reasonably requests that Executive take action to mitigate or challenge, or to mitigate and challenge, any such tax or assessment (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 5.3) and Executive complies with such request, Post shall provide Executive with such information and such expert advice and assistance from Post's independent accountants, lawyers and other advisors as Executive may reasonably request and shall pay for all expenses incurred in effecting such compliance and any related fines, penalties, interest and other assessments. 5.4. Attorneys Fees. If any action at law or in equity is necessary for Executive to enforce or interpret the terms of this Section 5, Post shall pay Executive's reasonable attorneys' fees and other reasonable expenses incurred with respect to such action. Section 6. Miscellaneous 6.1. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon Executive and his executor, administrator, heirs, personal representative and assigns, and upon Post, Holdings and Services and their successors and assigns; provided, however, that Executive shall not be entitled to assign or delegate any of his rights or obligations hereunder without the prior written consent of Post, Holdings and Services. 6.2. Construction of Agreement. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or drafted such provision. 6.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 6.4. Survival of Agreements. All covenants and agreements made herein shall survive the execution and delivery of this Agreement and the termination of Executive's employment hereunder for any reason. 6.5. Headings and References. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references to sections (Section) shall be to sections (Section) of this Agreement unless otherwise expressly stated. -11- 6.6. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to be given when delivered personally or mailed first class, registered or certified mail, postage prepaid, in either case, addressed as follows: (a) to Executive: Mr. John A. Williams 4615 Northside Drive, N.W. Atlanta, Georgia 30327 With a copy to: Mr. Edward J. Hardin Rogers & Hardin 2700 International Tower 229 Peachtree Street Atlanta, Georgia 30303 (b) If to Post, Holdings or Services: Post Properties, Inc. One Riverside 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327 with a copy to: Mr. Herschel M. Bloom King & Spalding 191 Peachtree Street Atlanta, Georgia 30303-1763 6.7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 6.8. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and upon the Effective Date, will supersede and replace all prior agreements, written and oral, between the parties hereto or with respect to the subject matter hereof. This Agreement may be modified only by a written instrument signed by each party hereto. -12- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. POST PROPERTIES, INC. By: /s/ David P. Stockert -------------------------------------- Title: President ----------------------------------- POST GP HOLDINGS, INC. By: /s/ David P. Stockert -------------------------------------- Title: President ----------------------------------- POST SERVICES, INC. By: /s/ David P. Stockert -------------------------------------- Title: President ----------------------------------- EXECUTIVE /s/ John A. Williams ----------------------------------------- John A. Williams -13- EX-10.37 6 g74920ex10-37.txt MASTER EMPLOYMENT AGREEMENT (JOHN GLOVER) EXHIBIT 10.37 MASTER EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into on this 22nd day of March, 2002, by and between JOHN T. GLOVER, an individual resident of the State of Georgia ("Executive"), POST PROPERTIES, INC., a Georgia corporation ("Post"), POST GP Holdings, Inc., a Georgia corporation, as the general partner of POST APARTMENT HOMES, L.P., ("Holdings") and Post Services, Inc., a Georgia corporation ("Services"); W I T N E S S E T H: WHEREAS, Post, Holdings and Services desire to employ Executive, and Executive desires to be employed by Post, Holdings and Services on the terms and conditions contained in this Agreement; NOW, THEREFORE, in consideration of the mutual promises and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Post, Holdings, Services and Executive, intending to be legally bound, do hereby agree as follows: Section 1 Employment Subject to the terms of this Agreement, Post, Holdings and Services hereby employ Executive effective as of January 1, 2002, and Executive hereby accepts such employment with Post, Holdings and Services. Executive shall serve as the Vice Chairman of the Boards of Directors of Post, Holdings and Services and in such capacities shall have, and shall discharge, such duties and responsibilities as shall be assigned to him from time to time by the Boards of Directors of Post, Holdings, and Services, but all such duties and responsibilities shall be no more than part-time and consultative in nature and none of such duties and responsibilities shall require Executive to maintain a regular work schedule or shall involve day-to-day operating duties or responsibilities. Executive shall report to the Board of Directors of Post with respect to his duties and responsibilities as Vice Chairman of the Board of Post, to the Board of Directors of Holdings with respect to his duties and responsibilities as Vice Chairman of the Board of Holdings and to the Board of Directors of Services with respect to his duties and responsibilities as Vice Chairman of the Board of Services. Subject to the other terms and conditions of this Agreement, Executive, Post, Holdings and Services agree that Executive's compensation, accountabilities, and requirements shall be determined by Post's Board of Directors or its Compensation Committee (the "Committee"), in their sole discretion but after discussion with Executive, Holdings and Services. Executive shall discharge his duties and responsibilities as set in accordance with this Section 1 in good faith and with such care as is customarily required by an individual undertaking similar duties for entities similar to Post, Holdings and Services. Finally, Executive shall have the discretion to decide at any time whether he is performing his duties or exercising his responsibilities for Post, for Holdings or for Services. Section 2 Compensation; Expenses 2.1. Base Salary. Executive shall be paid during the Term of this Agreement (as described in Section 3.1), a minimum base salary equal to $100,000 per annum (his "Base Salary"), which amount shall be subject to upward adjustment, if any, in accordance with this Section 2.1. The Committee shall review Executive's Base Salary on a regular basis and shall make such upward adjustment as the Committee deems appropriate to ensure that his Base Salary remains competitive. Executive's Base Salary, less all applicable withholding taxes, shall be paid to Executive in accordance with the payroll procedures in effect with respect to executive officers of Post but shall be apportioned between and actually be paid on Post's payroll, Holding's payroll (or, at its option, the payroll of Post Apartment Homes, LP ("Post LP")) and Services' payroll as agreed upon from time to time by Post, Holdings and Services. 2.2. Stock Options. Executive shall be eligible to receive such grants of options to purchase Post stock or grants of restricted Post stock as the Committee determines in its discretion to grant to Executive from time to time. 2.3. Expenses. Executive shall be reimbursed for all reasonable business-related expenses incurred by Executive at the request of or on behalf of Post, Holdings or Services, including, without limitation, first class travel and entertainment expenses incurred in connection with the performance of Executive's duties and responsibilities, moving expenses and his cellular and other expenses to maintain a complete, real time communications link with Post, Holdings and Services while he is away from his office. 2.4. Participation in Employee Benefit Plans. (a) General. Executive shall be entitled to participate in such medical, dental, disability, hospitalization, life insurance, profit sharing and other employee benefit plans as maintained from time to time for the benefit of executive officers of Post, Holdings and Services, on the terms and subject to the conditions set forth in such plans. However, if Post, Holdings and Services each maintain the same plan, the benefits available under such plan shall not exceed the benefit -2- which would have been available if Post, Holdings and Services were one and the same company. (b) Life Insurance. Post, Holdings and Services collectively will provide Executive with a split dollar life insurance program up to $15,000,000 on terms and conditions to be agreed upon by Post and Executive. (c) Annual Physical. Post, Holdings and Services will reimburse Executive for a comprehensive physical examination on an annual basis. Post, Holdings and Services require that Executive have such an examination at least every other year. 2.5. Miscellaneous Perquisites. (a) Luncheon/Athletic Club. Post, Holdings and Services collectively shall reimburse Executive for monthly dues for one luncheon or athletic club. (b) Luxury Car. Post, Holdings and Services collectively shall reimburse Executive for the rental and operation of a luxury automobile, including lease payments, insurance, maintenance, ad valorem and use taxes, and operating expenses. (c) Office. Post, Holdings and Services collectively shall provide Executive with an office at 4401 Northside Parkway, Suite 110, Atlanta, Georgia, and all related equipment and services, including secretarial, bookkeeping and other support services, and operate and maintain such office during such hours (including hours on weekends and holidays) as Executive shall request, commensurate in all respects with the office, equipment and services provided to Executive on the date of this Agreement and, further, shall continue to provide and maintain commensurate mobile and home office equipment to and for Executive, including computers, telephones, home security systems, and related ancillary equipment such as printers, modems, fax machines, and pagers to enable Executive to perform his duties and responsibilities remotely and otherwise from his primary residence and each other residence owned and used as a secondary residence by Executive. (d) Personal Financial Counseling. Post, Holdings and Services collectively shall reimburse Executive for all reasonable costs associated with retaining a personal financial counselor, up to an annual amount of $50,000, to provide such advice and services, including tax advice and tax return preparation services, to and on behalf of Executive as customarily provided by personal financial counselors. (e) Company Airplane. Post, Holdings and Services shall make available to Executive each calendar year for his business and personal use a Citation VII for 50 hours, a Falcon 2000 for 25 hours and a King Air B200 for 25 -3- hours or shall make such aircraft available for such other number of hours or shall make such other types of aircraft available for such other number of hours as agreed upon from time to time by Post and Executive; provided, however, no hours used by Executive before February 1, 2002 shall count against Executive's use limits for 2002. Any personal use of an aircraft pursuant to this Section 2.5(e) shall be subject to the applicable tax rules for personal use. (f) Household Help. Post, Holdings and Services shall continue to make available employees to perform household and other services at Executive's residence on the same basis as employees are made available on the date of this Agreement subject to Executive continuing to reimburse Post, Holdings and Services for such services in accordance with the reimbursement procedures in effect on the date of this Agreement. (g) Legal Fees. Post, Holdings and Services shall pay Executive's reasonable legal fees and expenses which he incurs in connection with the negotiation of this Agreement. (h) Rule 10b5-1 Plan. Post consistent with Post's insider trading policies shall take such action as necessary or appropriate to assist Executive if Executive seeks to implement a "plan" under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, to sell Post common stock or other securities issued by Post. (i) Health Benefits. Post shall make available to Executive after his termination of employment (for any reason) for his lifetime and, if he has a spouse at his death, to her for her lifetime, coverage under the group health plan in which Posts' senior executives continue to participate or, if such coverage can not reasonably be effected under the terms of such plan, shall reimburse Executive and such surviving spouse for their medical expenses to the same extent such expenses would have been reimbursed under the terms of such plan, all subject to the condition that (1) Executive pays Post for such coverage on the same basis as a former employee pays for such coverage and his surviving spouse, if any, pays for such coverage on the same basis that the surviving spouse of a former employees pays for such coverage and (2) Executive's employment not be terminated "For Cause" under Section 3.3(e). (j) East Lake Golf Club. Executive shall be Post's designated member at the East Lake Golf Club. 2.6. Allocation. Post, Holdings and Services shall allocate the payments and benefits called for under this Agreement between themselves as Post, Holdings and Services deem reasonable and appropriate and, further, may (as between themselves) designate one company to make all such payments (except with respect to Base Salary under Section 2.1) and provide all such benefits to Executive. However, Executive may (except with respect to Base Salary under Section 2.1) look to either Post, -4- Holdings or Services for 100% of the payments and benefits called for under this Agreement if at any time there is any failure by Post, Holdings or Services to make any payment or provide any benefit called for under this Agreement. Section 3. Term of Employment 3.1. Term of Employment. Unless earlier terminated in accordance with Section 3.3 of this Agreement, the employment of Executive under this Agreement shall commence as of January 1, 2002 and shall continue until May 30, 2016 (the "Term"). 3.2. Termination of Prior Employment Agreement. Executive's Employment Agreement with Post, Holdings and Services entered into on June 1,1998 and as thereafter amended will terminate as of January 1, 2002, but Executive's Noncompetition Agreement with Post, Holdings and Services, entered into as of July 22, 1993, shall not be affected by this Agreement and shall continue in full force and effect. Such Noncompetition Agreement and any successor to such agreement shall be referred to in this Agreement as the "Noncompetition Agreement." 3.3. Termination. Executive's employment under this Agreement may be terminated as follows: (a) by Executive at any time if (i) Executive is relieved of his title as Vice Chairman of the Board of Directors of Post, Holdings or Services without his consent, (ii) Executive is assigned duties or responsibilities which are outside the scope of the duties and responsibilities described in Section 1 without his consent, (iii) there is a material decrease in the value of Executive's compensation and benefits package without his consent, or (iv) Post, Holdings, Services or Post LP accelerates the date for repayment of any indebtedness owed by Executive to Post, Holdings, Services or Post LP without Executive's consent, in which event his benefits under this Agreement shall be determined under Section 4.1; (b) by Executive for any reason during the one (1) year period which starts on the Effective Date of a Change in Control, where (i) the term "Change in Control" shall mean -5- (1) a "change in control" of Post of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A for a proxy statement filed under Section 14(a) of the Securities Exchange Act of 1934, as amended, or "Exchange Act," as in effect on the date of this Agreement, (2) a "person" (as that term is used in 14(d)(2) of the Exchange Act) becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities representing 45% or more of the combined voting power for election of directors of the then outstanding securities of Post, (3) the individuals who at the beginning of any period of two consecutive years or less (starting on or after the date of this Agreement) constitute Post's Board of Directors cease for any reason during such period to constitute at least a majority of Post's Board of Directors, unless the election or nomination for election of each new member of Post's Board of Directors was approved by vote of at least two-thirds of the members of such Board of Directors then still in office who were members of such Board of Directors at the beginning of such period, (4) the shareholders of Post approve any reorganization, merger, consolidation or share exchange as a result of which the common stock of Post shall be changed, converted or exchanged into or for securities of another organization (other than a merger with a Post affiliate or a wholly-owned subsidiary of Post) or any dissolution or liquidation of Post or any sale or the disposition of 50% or more of the assets or business of Post, or (5) the shareholders of Post approve any reorganization, merger, consolidation or share exchange with another corporation unless (A) the persons who were the beneficial owners of the outstanding shares of the common stock of Post immediately before the consummation of such transaction beneficially own more than 60% of the outstanding shares of the common stock of the successor or survivor corporation in such transaction immediately following the consummation of such transaction and (B) the number of shares of the common stock of such successor or survivor corporation beneficially owned by the persons described in Section 3.3(b)(i)(5)(A) immediately following the consummation of such transaction is beneficially owned by each such person in substantially the same proportion that each such person had beneficially owned shares of Post common stock immediately before the consummation of such transaction, provided (C) the -6- percentage described in Section 3.3(b)(i)(5)(A) of the beneficially owned shares of the successor or survivor corporation and the number described in Section 3.3(b)(i)(5)(B) of the beneficially owned shares of the successor or survivor corporation shall be determined exclusively by reference to the shares of the successor or survivor corporation which result from the beneficial ownership of shares of common stock of Post by the persons described in Section 3.3(b)(i)(5)(A) immediately before the consummation of such transaction, and (ii) the term "Effective Date" shall mean the date which includes the "closing" of the transaction which makes a Change in Control effective if the Change in Control is made effective through a transaction which has a "closing" or the date a Change in Control is reported in accordance with applicable law as effective to the Securities and Exchange Commission if the Change in Control is made effective other than through a transaction which has a "closing", in which event his benefits under this Agreement shall be determined under Section 4.1; (c) by Post (other than under Section 3.3(e)), in which event his benefits under this Agreement shall be determined under Section 4.1; (d) by Executive's death, in which event his benefits under this Agreement shall be determined under Section 4.2; or (e) by Post "For Cause" if (i) Executive is convicted of, pleads guilty to, or confesses to any felony or any act of fraud, misappropriation or embezzlement which has an immediate and materially adverse effect on Post, Holdings, Services, Post LP or any of their direct or indirect subsidiaries, as determined by Post's Board of Directors in good faith, (ii) Executive engages in a fraudulent act to the material damage or prejudice of Post, Holdings, Services, Post LP or any of their direct or indirect subsidiaries or in conduct or activities materially damaging to the property, business or reputation of Post, Holdings, Services, Post LP, or any of their direct or indirect subsidiaries, all as determined by Post's Board of Directors in good faith, (iii) there is any material act or omission by Executive involving malfeasance or negligence in the performance of Executive's duties to Post, Holdings or Services to the material detriment of Post, Holdings, Services or Post LP, as determined by Post's Board of Directors in good -7- faith, which has not been corrected by Executive within thirty (30) days after written notice from Post of any such act or omission, (iv) Executive fails to comply in any material respect with the terms of this Agreement or any other written agreement with Post, Holdings, Services, Post LP or any of their direct or indirect subsidiaries or any written policies or directives of Post's Board of Directors as determined by Post's Board of Directors in good faith, which has not been corrected by Executive within thirty (30) days after written notice from Post of such failure, or (v) Executive breaches any of the covenants set forth in the Noncompetition Agreement, in which event Executive's benefits under this Agreement shall be determined under Section 4.3. Section 4 Result of Termination 4.1. General Rule. If Executive's employment under this Agreement is terminated under Section 3.3(a), Section 3.3(b) or Section 3.3(c), then (a) Executive shall be entitled to continue to receive his then Base Salary until the end of the Term (as determined without regard to his termination of employment) or until he dies, whichever comes first; (b) Executive's unvested stock options, if any, shall fully vest and the restrictions on his restricted stock grants, if any, shall lapse on the effective date of such termination; (c) Executive shall be entitled to continue to receive all the perquisites, benefits, services and equipment described in Section 2.4 and Section 2.5 of this Agreement until the end of the Term (as determined without regard to his termination of employment) or until he dies, whichever comes first, or subject to Executive's consent, the cash equivalent of such perquisites, benefits, services and equipment, such cash equivalent to be agreed upon by Post and Executive as a condition to such consent; provided, if Executive dies after his employment terminates but before the end of the Term (as determined without regard to such termination of employment), suitable office space at 4401 Northside Parkway, Atlanta, Georgia and related equipment and services, including secretarial, bookkeeping and other support services, shall be made available at no expense for the benefit of his estate for no less than the six (6) month period which starts on the date of his death; -8- (d) Executive shall receive all the perquisites and benefits to which he has a right to receive independent of this Agreement under the terms and conditions of the plans and programs under which such perquisites and benefits were granted to Executive; and (e) the group health plan coverage described in Section 2.5(i) shall remain available in accordance with the terms of Section 2.5(i). 4.2. Termination as a Result of Death. If Executive's employment under this Agreement is terminated as a result of his death, then, (a) Executive (or at his death, his designated beneficiary, if any, or if none, his surviving spouse or, if none, his estate) shall be entitled to receive (i) any Base Salary which may be owed to Executive but which is unpaid as of the effective date of such termination and (ii) a severance payment equal to his Base Salary for such calendar year; (b) Executive's unvested stock options shall fully vest on the effective date of such termination; (c) all Executive's perquisites and benefits called for exclusively under the terms of this Agreement shall terminate as of the effective date of such termination except (i) the group health plan coverage described in Section 2.5(i), shall remain available in accordance with the terms of Section 2.5(i) and (ii) Post shall make available suitable office space at 4401 Northside Parkway, Atlanta, Georgia and related equipment and services, including secretarial, bookkeeping and other support services, at no expense for the benefit of Executive's estate for no less than the six (6) month period which starts on Executive's date of death; and (d) all of Executive's perquisites and benefits to which he has a right independent of this Agreement shall remain in effect, if at all, exclusively under the terms and conditions of the plans and programs under which such perquisites and benefits were granted to Executive. 4.3 For Cause. If Post terminates Executive's employment "For Cause" (as defined in Section 3.3(e)), Executive shall not thereafter be entitled to receive any Base Salary for periods following the effective date of such termination; provided, however, that Executive shall be entitled to receive any Base Salary which may be owed to Executive but is unpaid as of the effective date of such termination. All Executive's perquisites and benefits called for exclusively under the terms of this Agreement shall terminate as of the effective date of such termination. All Executive's perquisites and benefits, including stock options, to which Executive has a right independent of this Agreement shall remain in effect, if at all, exclusively under the terms and conditions of the plans and programs under which such perquisites and benefits were granted to Executive. -9- 4.4 Employee Benefit Plans and Incentive Compensation and Other Compensatory Arrangements. In addition to the benefits described in Section 4.1, Section 4.2 and Section 4.3, Executive shall upon Executive's termination of employment be eligible for such other benefits as may be payable to Executive under any employee benefit plan then in force. Section 5. Change In Control 5.1. General Rule. Subject to Section 3.3(b), Section 5.3 andSection 5.4, no Change in Control or any other change in the control, ownership, operations or assets of Post shall have any effect whatsoever on Post's obligations under this Agreement. 5.2 Definitions. (a) Code. The term "Code" for purposes of this Agreement shall mean the Internal Revenue Code of 1986, as amended. (b) Gross Up Payment. The term "Gross Up Payment" for purposes of this Section 5 shall mean a payment to or on behalf of Executive which shall be sufficient to pay (a) any excise tax described in Section 5.3 in full, (b) any federal, state and local income tax and social security and other employment tax on the payment made to pay such excise tax as well as any excise and other additional taxes on such payment, (c) any interest or penalties assessed by the Internal Revenue Service on Executive which are related to the payment of such excise tax unless such interest or penalties are attributable to Executive's willful misconduct or gross negligence and (d) any federal, state and local income tax and social security tax and other employment tax on the payment made to pay such interest or penalties as well as any excise and additional taxes on such payment. 5.3. Tax Protection. If Post or Post's independent accountants determine that any payments and benefits called for under this Agreement together with any other payments and benefits made available to Executive by Post or a Post affiliate will result in Executive being subject to an excise tax under Section 4999 of the Code (or any successor provision thereof) or if such an excise tax is assessed against Executive as a result of any such payments and other benefits, Post shall make a Gross Up Payment to or on behalf of Executive as and when any such determination or assessment is made, provided Executive takes such action (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 5.3) as Post reasonably requests under the circumstances to mitigate or challenge such tax; provided, however, if Post or Post's independent accountants make such a determination and, further, determine that Executive will not be subject to any such excise tax if Executive waives Executive's right to receive a part of such payments or benefits and such part does not exceed $25,000, Executive shall irrevocably waive Executive's right -10- to receive such part if an independent accountant or lawyer retained by Executive and paid by Post agrees with the determination made by Post or Post's independent accountants with respect to the effect of such reduction in payments or benefits. Any determinations under this Section 5.3 shall be made in accordance with Section 280G of the Code, including any successor provision thereof, and any applicable related regulations (whether proposed, temporary or final) and any related Internal Revenue Service rulings and any related case law and, if Post reasonably requests that Executive take action to mitigate or challenge, or to mitigate and challenge, any such tax or assessment (other than waiving Executive's right to any payments or benefits in excess of the payments or benefits which Executive has expressly agreed to waive under this Section 5.3) and Executive complies with such request, Post shall provide Executive with such information and such expert advice and assistance from Post's independent accountants, lawyers and other advisors as Executive may reasonably request and shall pay for all expenses incurred in effecting such compliance and any related fines, penalties, interest and other assessments. 5.4. Attorneys Fees. If any action at law or in equity is necessary for Executive to enforce or interpret the terms of this Section 5, Post shall pay Executive's reasonable attorneys' fees and other reasonable expenses incurred with respect to such action. Section 6. Miscellaneous 6.1. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon Executive and his executor, administrator, heirs, personal representative and assigns, and upon Post, Holdings and Services and their successors and assigns; provided, however, that Executive shall not be entitled to assign or delegate any of his rights or obligations hereunder without the prior written consent of Post, Holdings and Services. 6.2. Construction of Agreement. No provision of this Agreement or any related document shall be construed against or interpreted to the disadvantage of any party hereto by any court or other governmental or judicial authority by reason of such party having or being deemed to have structured or drafted such provision. 6.3. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Georgia. 6.4. Survival of Agreements. All covenants and agreements made herein shall survive the execution and delivery of this Agreement and the termination of Executive's employment hereunder for any reason. -11- 6.5. Headings and References. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. All references to sections (Section) shall be to sections (Section) of this Agreement unless otherwise expressly stated. 6.6. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be deemed to be given when delivered personally or mailed first class, registered or certified mail, postage prepaid, in either case, addressed as follows: (a) to Executive: Mr. John T. Glover 1888 Garraux Road, N.W. Atlanta, Georgia 30327 With a copy to: Mr. Edward J. Hardin Rogers & Hardin 2700 International Tower 229 Peachtree Street Atlanta, Georgia 30303 (b) If to Post, Holdings or Services: Post Properties, Inc. One Riverside 4401 Northside Parkway Suite 800 Atlanta, Georgia 30327 with a copy to: Mr. Herschel M. Bloom King & Spalding 191 Peachtree Street Atlanta, Georgia 30303-1763 6.7. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 6.8. Entire Agreement. This Agreement constitutes the entire agreement of the parties with respect to the subject matter hereof and upon the Effective Date, will supersede and replace all prior agreements, written and oral, -12- between the parties hereto or with respect to the subject matter hereof. This Agreement may be modified only by a written instrument signed by each party hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. POST PROPERTIES, INC. By: /s/ David P. Stockert ________________________ Title: President _____________________ POST GP HOLDINGS, INC. By: /s/ David P. Stockert ________________________ Title: President _____________________ POST SERVICES, INC. By: /s/ David P. Stockert ________________________ Title: President _____________________ EXECUTIVE /s/ John T. Glover ___________________________ John T. Glover -13- EX-21.1 7 g74920ex21-1.txt LIST OF SUBSIDIARIES EXHIBIT 21.1 Schedule 4.08 SUBSIDIARIES OF POST PROPERTIES, INC. (AS OF MARCH 29, 2002)
NAME STATE OF FORMATION 1. Addison Circle Access, Inc. Delaware 2. Addison Circle One, Ltd. Texas 3. Addison Circle Three, Ltd. Texas 4. Addison Circle Two, Ltd. Texas 5. Addison Townhomes One, Ltd. Texas 6. Akard-McKinney Investment Company, LLC Texas 7. Armada Condominiums, L.P. Georgia 8. Armada Denver Condominiums, LLC Texas 9. Armada Homes, Inc. Delaware 10. Armada Phoenix Townhomes, LLC Texas 11. Armada Residences, L.P. Georgia 12. Briarcliff Commercial Property, LLC Georgia 13. Cumberland Lake, Inc. Georgia 14. Gateway WW, LLC Georgia 15. Greenwood Residential, LLC Texas 16. P/C 89th Street LLC Delaware 17. P/C First Avenue LLC Delaware 18. P/C Times Square LLC Delaware 19. Post 89th Street, LLC Georgia 20. Post 1499 Massachusetts, LLC Georgia
NAME STATE OF FORMATION 21. Post Apartment Homes, L.P. Georgia 22. Post Asset Management, Inc. Georgia 23. Post Austin Triangle, L.P. Georgia 24. Post Aviation, LLC Georgia 25. Post Carlyle I, LLC Georgia 26. Post Construction Services, Inc. Georgia 27. Post Development Services Limited Partnership Georgia 28. Post GP Holdings, Inc. Georgia 29. Post Landscape Group, Inc. Georgia 30. Post LP Holdings, Inc. Georgia 31. Post Paseo Colorado, LLC Georgia 32. Post Rice Lofts, LLC Texas 33. Post Services, Inc. Georgia 34. Post Times Square, LLC Georgia 35. Post Travel, Inc. Georgia 36. Post Triangle, LLC Georgia 37. Post Uptown, LLC Texas 38. Post West Avenue, LLC Georgia 39. Post West Avenue Lofts, L.P. Georgia 40. Post-AmerUs American Beauty Mill, L.P. Georgia 41. Post-AmerUs Bennie Dillon, L.P. Georgia 42. Post-AmerUs Rice Lofts, L.P. Georgia 43. Post-AmerUs Wilson Building II, L.P. Georgia 44. Post-AmerUs Wilson Building, L.P. Georgia
NAME STATE OF FORMATION 45. STS Loan and Management, Inc. Georgia 46. Residential Ventures, Inc. Georgia 47. Rice Lofts, LP Texas 48. Riverside Villas, LLC Georgia 49. Rocky Point Management, Inc. Georgia 50. Rose Hill Associates, LLC* Delaware 51. STS Loan, L.P. Georgia 52. The Clarett Group, LLC New York 53. Uptown Denver, LLC Colorado 54. Villas at Parkway Village, LP Georgia 55. Villas GP, LLC Georgia
*Post Apartment Homes, L.P.'s indirect interest in this entity is anticipated to exceed 50% upon full funding during construction. EX-23.1 8 g74920ex23-1.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-62243) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.2 9 g74920ex23-2.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-70689) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.3 10 g74920ex23-3.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 33-81772) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.4 11 g74920ex23-4.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.4 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-36595) of our report dated March 5, 2002 appearing on page 37 and 59 of Post Properties, Inc.'s and Post Apartment Homes, L.P.'s Annual Report on Form 10-K for the year ended December 31, 2001, respectively. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.5 12 g74920ex23-5.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.5 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-47399) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.6 13 g74920ex23-6.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.6 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 33-00020) of our report dated March 5, 2002 appearing on page 37of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.7 14 g74920ex23-7.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.7 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-94121) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.8 15 g74920ex23-8.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.8 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-80427) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.9 16 g74920ex23-9.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.9 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-44722) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.10 17 g74920ex23-10.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.10 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-42884) of our reports dated March 5, 2002 appearing on pages 37 and 59 of Post Properties, Inc.'s and Post Apartment Homes, L.P.'s Annual Report on Form 10-K for the year ended December 31, 2001, respectively. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.11 18 g74920ex23-11.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.11 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 333-55994) of our reports dated March 5, 2002 appearing on pages 37 and 59 of Post Properties, Inc.'s and Post Apartment Homes, L.P.'s Annual Report on Form 10-K for the year ended December 31, 2001, respectively. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.12 19 g74920ex23-12.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.12 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-38725) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 EX-23.13 20 g74920ex23-13.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP EXHIBIT 23.13 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-02374) of our report dated March 5, 2002 appearing on page 37 of Post Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001. PricewaterhouseCoopers LLP Atlanta, Georgia March 26, 2002 -----END PRIVACY-ENHANCED MESSAGE-----