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, 2005
OR
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission file number 1-12080
Commission file number 0-28226
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
(Exact name of registrants as specified in their charters)
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Georgia
Georgia
(State or other jurisdiction of
incorporation or organization) |
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58-1550675
58-2053632
(I.R.S. Employer
Identification No.) |
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:
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Name of Each Exchange on |
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Which Registered |
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Common Stock, $.01 par value
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New York Stock Exchange |
81/2%
Series A Cumulative
Redeemable Preferred Shares, $.01 par value |
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New York Stock Exchange |
75/8%
Series B Cumulative
Redeemable Preferred Shares, $.01 par value |
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New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None
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Name of Each Exchange on |
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Which Registered |
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None
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None |
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act.
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Post Properties, Inc.
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Yes [X] |
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No [ ] |
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Post Apartment Homes, L.P.
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Yes [X] |
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No [ ] |
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act.
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Post Properties, Inc.
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Yes [ ] |
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No [X] |
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Post Apartment Homes, L.P.
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Yes [ ] |
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No [X] |
Indicate by check mark whether the Registrants (1) have
filed all reports required to be filed by section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and
(2) have been subject to such filing requirements for the
past 90 days.
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Post Properties, Inc.
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Yes [X] |
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No [ ] |
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Post Apartment Homes, L.P.
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Yes [X] |
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No [ ] |
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 June 30, 2005 was approximately
$1,324,737,851. As of February 28, 2006 there were
42,029,956 shares of common stock, $.01 par value,
outstanding.
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, or a non-accelerated
filer. See definition of accelerated filer and large accelerated
filer in
Rule 12b-2 of the
Exchange Act.
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Post Properties, Inc. |
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Large Accelerated Filer [X] |
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Accelerated Filer [ ] |
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Non-Accelerated Filer [ ] |
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Post Apartment Homes, L.P. |
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Large Accelerated Filer [X] |
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Accelerated Filer [ ] |
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Non-Accelerated Filer [ ] |
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Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2 of the
Exchange Act).
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Post Properties, Inc.
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Yes [ ] |
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No [X] |
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Post Apartment Homes, L.P.
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Yes [ ] |
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No [X] |
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Post Properties, Inc.’s Proxy Statement in
connection with its Annual Meeting of Shareholders to be held
May 18, 2006 are incorporated by reference in Part III.
________________________________________________________________________________
TABLE OF CONTENTS
FINANCIAL INFORMATION
PART I
The Company
Post Properties, Inc. and its subsidiaries develop, own and
manage upscale multifamily apartment communities in selected
markets in the United States. As used in this report, the term
“Company” includes Post Properties, Inc. and its
subsidiaries, including Post Apartment Homes, L.P. (the
“Operating Partnership”), unless the context indicates
otherwise. The Company, through its wholly-owned subsidiaries,
is the general partner and owns a majority interest in the
Operating Partnership which, through its subsidiaries, conducts
substantially all of the on-going operations of the Company. At
December 31, 2005, approximately 46.8%, 18.5%, 9.3% and
8.9% (on a unit basis) of the Company’s communities were
located in the Atlanta, Georgia, Dallas, Texas, the greater
Washington, D.C. and Tampa, Florida metropolitan areas,
respectively. At December 31, 2005, the Company owned
21,442 apartment units in 58 apartment communities, including
545 apartment units in two communities held in unconsolidated
entities and 205 apartment units currently under development in
one community. Subsequent to December 31, 2005, the Company
acquired two apartment communities, containing 308 units,
in Austin, Texas. The Company is also developing 145 for-sale
condominium homes and is converting 597 apartment units
(including 121 units in one community held in an
unconsolidated entity) into for-sale condominium homes through a
taxable REIT subsidiary. The Company is a fully integrated
organization with multifamily development, operations and asset
management expertise. The Company has approximately 783
employees, 15 of whom are parties to a collective bargaining
agreement.
The Company is a self-administrated and self-managed equity real
estate investment trust (a “REIT”). A REIT is a legal
entity which holds real estate interests and, is generally not
subject to federal income tax on the income it distributes to
its shareholders.
The Company’s and the Operating Partnership’s
executive offices are located at 4401 Northside Parkway,
Suite 800, Atlanta, Georgia 30327 and their telephone
number is (404) 846-5000. Post Properties, Inc., a Georgia
corporation, was incorporated on January 25, 1984, and is
the successor by merger to the original Post Properties, Inc., a
Georgia corporation, which was formed in 1971. The Operating
Partnership is a Georgia limited partnership that was formed in
July 1993 for the purpose of consolidating the operating and
development businesses of the Company and the
Post®
apartment portfolio described herein.
The Operating Partnership
The Operating Partnership, through the operating divisions and
subsidiaries described below, is the entity through which all of
the Company’s operations are conducted. At
December 31, 2005, the Company, through wholly-owned
subsidiaries, controlled the Operating Partnership as the sole
general partner and as the holder of 96.7% of the common units
in the Operating Partnership (the “Common Units”) and
100% of the preferred units (the “Perpetual Preferred
Units”). The other limited partners of the Operating
Partnership who hold Common Units are those persons who, at the
time of the Company’s initial public offering, elected to
hold all or a portion of their interests in the form of Common
Units rather than receiving shares of common stock. Holders of
Common Units may cause the Operating Partnership to redeem any
of their Common Units for, at the option of the Operating
Partnership, either one share of Common Stock or cash equal to
the fair market value thereof at the time of such redemption.
The Operating Partnership presently anticipates that it will
cause shares of common stock to be issued in connection with
each such redemption (as has been done in all redemptions to
date) rather than paying cash. With each redemption of
outstanding Common Units for common stock, the Company’s
percentage ownership interest in the Operating Partnership will
increase. In addition, whenever the Company issues shares of
common and preferred stock, the Company will contribute any net
proceeds to the Operating Partnership, and the Operating
Partnership will issue an equivalent number of Common Units or
Perpetual Preferred Units, as appropriate, to the Company.
As the sole shareholder of the Operating Partnership’s sole
general partner, the Company has the exclusive power under the
limited partnership agreement of the Operating Partnership to
manage and conduct the business of the Operating Partnership,
subject to the consent of a majority of the outstanding Common
Units in connection with the sale of all or substantially all of
the assets of the Operating Partnership or in connection with a
dissolution of the Operating Partnership. The board of directors
of the Company manages the affairs of the Operating Partnership
by directing the affairs of the Company. In general, the
Operating Partnership cannot be terminated, except in connection
with a sale of all or substantially all of the assets of the
Company, until January 2044 without the approval of each limited
partner who received Common Units of the Operating Partnership
in connection with the
Post Properties, Inc.
1
Post Apartment Homes, L.P.
Company’s initial public offering. 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 losses of, the Operating Partnership in
proportion to the Company’s percentage interest in the
Operating Partnership and indirectly entitle the Company to vote
on all matters requiring a vote of the Operating Partnership.
As part of the formation of the Operating Partnership, a holding
company, Post Services, Inc. (“Post Services”) was
organized as a separate corporate subsidiary of the Operating
Partnership. Through Post Services and its subsidiaries, the
Operating Partnership will develop and sell for-sale condominium
units and provide other services to third parties. Post Services
is a “taxable REIT subsidiary” as defined in the
Internal Revenue Code. Effective in 2004, the Operating
Partnership owns 100% of the voting and nonvoting common stock
of Post Services, Inc. In prior years, the Operating Partnership
owned 1% of the voting common stock and 100% of the nonvoting
common stock, representing a 99% equity and economic interest in
Post Services, Inc.
Business Strategy
The Company’s business strategy is to deliver superior
satisfaction and value to its residents, associates and
investors, with a vision to be the first choice in quality
multifamily living. Key elements of the Company’s business
strategy are as follows:
Investment, Disposition and Acquisition Strategy
The Company’s investment, disposition and acquisition
strategy is to shape and rebalance its real estate portfolio to
achieve uniformly high quality, low average age properties and
cash flow diversification. The Company plans to achieve its
objectives by reducing its asset concentration in Atlanta,
Georgia and Dallas, Texas, while at the same time, building
critical mass in other core markets where it may currently lack
the portfolio size to achieve operating efficiencies and the
full value of the
Post®
brand. The Company defines critical mass for this purpose as at
least 2,000 apartment units or $200 million of investment
in a particular market. The Company’s goal ultimately is to
reduce its concentration in Atlanta, Georgia, measured by
dollars invested, to not more than 30% of the portfolio.
The Company plans to achieve its objectives by selling older and
least competitively located properties, and it may also consider
selling joint venture interests in some of its core properties
or selectively converting some of these properties to for-sale
(condominium) housing. The Company expects that this
strategy will provide capital to reinvest in new communities in
dynamic neighborhoods and may also allow for leveraged returns
through joint venture structures that preserve
Post®
branded property and asset management.
The Company is focusing on a limited number of major cities and
has re-established its regional value creation capabilities. The
Company has added skilled personnel to pursue acquisitions,
development, dispositions of apartment communities and select
multifamily for-sale (condominium) opportunities that are
consistent with its market strategy. The Company’s value
creation capabilities include the regional value creation teams
in Atlanta, Georgia (focusing on the Southeast), Washington, DC
(focusing on the mid-Atlantic market up to New York, New York)
and Dallas, Texas (focusing on the Southwest). The Company has
reduced the number of markets where it operates from thirteen to
ten as of March 10, 2006, and may exit one or more
additional markets in the future if it does not believe it can
achieve critical mass within a reasonable period of time.
Key elements of the Company’s investment and acquisition
strategy include instilling a disciplined team approach to
development and acquisition decisions and selecting sites and
properties in infill suburban and urban locations in strong
primary markets that serve the higher-end multifamily consumer.
The Company will focus development on the product types that are
affordable to the deepest segment of the upper end market in
each city. The Company will, therefore, look to develop more
infill garden style communities in its sunbelt markets and urban
and mixed-use communities in those markets and submarkets with
existing density and barriers to entry to warrant such
communities. The Company plans to develop, construct and
continually maintain and improve its apartment communities
consistent with quality standards management believes are
synonymous with the
Post®
brand. New acquisitions will be limited to properties that meet
or that are expected to be repositioned and improved to meet its
quality and location requirements. The Company will generally
pursue acquisitions either to rebalance its property portfolio,
using the proceeds of asset sales to redeploy capital in markets
where critical mass is desired, or to pursue opportunistic
purchases on a selective basis where market conditions warrant.
Post®
Brand Name Strategy
The
Post®
brand name has been cultivated for more than 30 years, and
its promotion has been integral to the Company’s success.
Company management believes that the
Post®
brand name is synonymous with quality upscale apartment
communities that are situated in desirable locations and that
provide a high level of resident service. The
Post Properties, Inc.
2
Post Apartment Homes, L.P.
Company believes that it provides its residents with a high
level of service, including attractive landscaping and numerous
amenities, including controlled access, high-speed connectivity,
on-site business
centers, on-site
courtesy officers, urban vegetable gardens and fitness centers
at a number of its communities.
Key elements in implementing the Company’s brand name
strategy include extensively utilizing the trademarked brand
name and coordinating its advertising programs to increase brand
name recognition. During 2004 and continuing into 2005, the
Company implemented a new marketing campaign, started new
customer service programs designed to raise resident
satisfaction and provided employees and residents new
opportunities for community involvement, all intended to enhance
what it believes is a valuable asset.
In early 2005, the Company announced the launch of a new
for-sale housing brand, Post Preferred
Homestm,
which will serve as the unified marketing umbrella for the
Company’s for-sale ventures, including developing new
communities and converting existing assets into upscale for-sale
condominium housing in several key markets. The Company’s
for-sale ventures will be marketed under the Post Preferred
Homestm
brand to differentiate for-sale product from the Company’s
rental portfolio while capitalizing on the Company’s unique
brand heritage.
Service and Associate Development Strategy
The Company’s service orientation strategy includes
utilizing independent third parties to regularly measure
resident satisfaction and providing performance incentives to
its associates linked to delivering a high level of service and
enhancing resident satisfaction. The Company also plans to
achieve its objective by investing in the development and
implementation of training programs focused on associate
development, improving the quality of its operations and the
delivery of resident service.
Operating Strategy
The Company’s operating strategy includes striving to be an
innovator and a leader in anticipating customer needs while
achieving operating consistency across its properties. The
Company also will continue to explore opportunities to improve
processes and technology that drive efficiency in its business.
In 2005, the Company implemented new property operating and
centralized procurement software for this purpose.
Financing Strategy
The Company’s financing strategy is to maintain a strong
balance sheet and to maintain its investment grade credit
rating. The Company plans to achieve its objectives by generally
maintaining total effective leverage (debt and preferred equity)
as a percentage of undepreciated real estate assets in a range
of 50% to 55%, by generally limiting variable rate indebtedness
as a percentage of total indebtedness to not more than 20% to
25% of aggregate indebtedness, and by maintaining adequate
liquidity through its unsecured lines of credit. At
December 31, 2005, the Company’s total effective
leverage (debt and preferred equity) as a percentage of
undepreciated real estate assets and its total variable rate
indebtedness as a percentage of total indebtedness were below
these ranges.
Operating Divisions
The major operating divisions of the Company include Post
Apartment Management, Post Investment Group and Post Corporate
Services. Each of these operating divisions is discussed below.
Post Apartment Management
Post Apartment Management is responsible for the
day-to-day operations
of all
Post®
communities including community leasing, property management,
personnel recruiting, training and development, maintenance and
security. Post Apartment Management also conducts short-term
corporate apartment leasing activities and is the largest
division in the Company (based on the number of employees).
Post Investment Group
Post Investment Group is responsible for all development,
acquisition, disposition, for-sale (condominium) and asset
management activities of the Company. For development, this
includes site selection, zoning and regulatory approvals,
project design and construction management. This division is
also responsible for apartment community acquisitions as well as
property dispositions and strategic joint ventures that the
Company undertakes as part of its investment strategy. The
division recommends and executes major value added renovations
and redevelopments of existing communities as well as direction
for investment levels within each city and any new geographic
market areas and new product types that the Company may consider.
Post Properties, Inc.
3
Post Apartment Homes, L.P.
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 compliance, information systems, human
resources, legal, risk management and insurance services
required by the Company and all of its affiliates are
centralized in Post Corporate Services.
Operating Segments
The Post Apartment Management division of the Company manages
the owned apartment communities based on the operating segments
associated with the various stages in the apartment ownership
lifecycle. The Company’s primary operating segments are
described below. In addition to these segments, all commercial
properties and other ancillary service and support operations
are reviewed and managed separately and in the aggregate by
Company management.
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Fully stabilized communities — those apartment
communities which have been stabilized (the earlier of the point
at which a property reaches 95% occupancy or one year after
completion of construction) for both the current and prior year. |
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Communities stabilized during prior year — communities
which reached stabilized occupancy in the prior year. |
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Condominium conversion communities — those portions of
existing apartment communities being converted into condominiums
that are reflected in continuing operations under
SFAS No. 144 (see note 1 to the consolidated
financial statements). |
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Development 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. |
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Acquired communities — those communities acquired in
the current or prior year. |
A summary of segment operating results for 2005, 2004 and 2003
is included in note 15 to the Company’s consolidated
financial statements. Additionally, segment operating
performance for such years is discussed in Item 7,
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” in this annual report
on Form 10-K.
Summary of Investment and Disposition Activity
During the five-year period from January 1, 2001 through
December 31, 2005, the Company and its affiliates have
developed and completed 5,259 apartment units in 16 apartment
communities, and sold 33 apartment communities containing an
aggregate of 14,631 apartment units. During the same period, the
Company acquired two apartment communities containing
818 units. As of December 31, 2005, the Company is
also converting 597 apartment units in four communities into
for-sale condominiums. The Company and its affiliates have sold
apartment communities after holding them for investment periods
that generally range up to twenty years after acquisition or
development. The following table shows a summary of the
Company’s development and sales activity during these
periods.
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2005 | |
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2004 | |
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2003 | |
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2002 | |
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2001 | |
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Units developed and completed
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— |
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— |
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468 |
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2,140 |
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2,651 |
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Units acquired
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319 |
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499 |
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— |
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— |
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Units sold
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(3,051 |
)(1) |
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(3,880 |
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(2,236 |
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(2,665 |
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(2,799 |
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Units sold as condominiums or currently being converted into
for-sale condominiums
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(731 |
)(2) |
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— |
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— |
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— |
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Total units completed and owned by the Company and its
affiliates (including units held for sale) at year-end
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21,237 |
(3) |
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24,700 |
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28,081 |
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29,849 |
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30,374 |
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Total revenues from continuing operations (in thousands)
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$ |
296,803 |
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$ |
282,784 |
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$ |
268,159 |
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$ |
262,882 |
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$ |
293,986 |
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(1) Includes reduction of 4 apartment units that were
combined with other units.
(2) Includes 134 units converted into condominiums and
sold in 2005.
(3) Excludes 205 apartment units currently under
development.
Post Properties, Inc.
4
Post Apartment Homes, L.P.
Current Development Activity
At December 31, 2005, the Company had one community under
development, containing 350 apartment and for-sale condominium
units. This community is summarized in the table below.
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Costs | |
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Estimated | |
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Estimated | |
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Incurred | |
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Quarter of | |
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Quarter of | |
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Quarter of | |
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Number of | |
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Construction | |
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as of | |
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Construction | |
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First Units | |
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Stabilized | |
| Metropolitan Area |
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Units | |
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Cost | |
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12/31/2005 | |
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Start | |
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Available | |
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Occupancy(1) | |
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($ in millions) | |
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Construction/ Lease-up Communities
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Washington D.C.
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Post
Carlyletm —
Apartments and Condominiums(2)
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350 |
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$ |
99 |
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$ |
47 |
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4Q ’04 |
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3Q ’06 |
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3Q ’07 |
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Construction/ Lease-up Communities
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350 |
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$ |
99 |
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$ |
47 |
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| (1) |
The Company defines stabilized occupancy for apartment
communities as the earlier to occur of (i) the attainment
of 95% physical occupancy on the first day of any month or
(ii) one year after completion of construction. |
| (2) |
The condominium component of the project, consisting of
145 units, is being developed through a taxable REIT
subsidiary in a majority owned joint venture with a Washington
D.C. based developer. |
Competition
All of the Company’s apartment and for-sale
(condominium) communities are located in developed markets
that include other upscale apartments and for-sale
(condominium) projects owned by numerous public and private
companies. Some of these companies may have substantially
greater resources and greater access to capital than the
Company, allowing them to grow at rates greater than the
Company. The number of competitive upscale apartment and
for-sale (condominium) properties and companies in a
particular market could have a material effect on the
Company’s ability to lease apartment units at its apartment
communities, including any newly developed or acquired
communities, and on the rents charged, and could have a material
effect on the Company’s ability to sell for-sale
(condominium) units and on the selling prices of such
units. In addition, other forms of residential properties,
including single family housing and town homes, provide housing
alternatives to potential residents of upscale apartment
communities or potential purchasers of our for-sale
(condominium) units.
The Company competes for residents in its apartment communities
based on its high level of resident service, the quality of its
apartment communities (including its landscaping and amenity
offerings) and the desirability of its locations. Resident
leases at its apartment communities are priced competitively
based on market conditions, supply and demand characteristics,
and the quality and resident service offerings of its
communities. The Company does not seek to compete on the basis
of providing the low-cost solution for all residents.
Americans with Disabilities Act and Fair Housing Act
The Company’s apartment 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 apartment 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
must also comply with the Fair Housing Amendment Act of 1988, or
the FHAA, which requires that apartment communities first
occupied after March 13, 1991 be accessible to the
handicapped. Recently there has been heightened scrutiny of
multi-family housing communities for compliance with the
requirements of the FHAA and ADA and an increasing number of
substantial enforcement actions and private lawsuits have been
brought against apartment communities to ensure compliance with
these requirements. Noncompliance with the FHAA and ADA could
result in the imposition of fines, awards of damages to private
litigants, payment of attorneys’ fees and other costs to
plaintiffs, substantial litigation costs and substantial costs
of remediation. Compliance with the FHAA could require removal
of structural barriers to handicapped access in a community,
including the interiors of apartment units covered under the
FHAA. Compliance with the ADA requirements could require removal
of structural barriers to handicapped access in certain public
areas of the Company’s apartment communities. In addition
to the ADA and FHAA, state and local laws exist that impact the
Company’s apartment communities with respect to access
thereto by disabled persons. Further, legislation or regulations
adopted in the future may impose additional burdens or
restrictions on the Company with respect to improved access by
disabled persons. The ADA, FHAA, or other
Post Properties, Inc.
5
Post Apartment Homes, L.P.
existing or new legislation may require the Company to modify
its existing properties. These laws may also restrict
renovations by requiring improved access to such buildings or
may require the Company to add other structural features that
increase its construction costs. The Company cannot ascertain
the ultimate cost of compliance with the ADA, FHAA or other
similar state and local legislation and such costs are not
likely covered by insurance policies. The cost of compliance
could be substantial and could adversely effect the
Company’s business, results of operations and financial
condition.
Environmental Regulations
The Company is subject to federal, state and local environmental
laws, ordinances, and regulations that apply to the development
of real property, including construction activities, the
ownership of real property, and the operation of multifamily
apartment and for-sale (condominium) communities.
The Company has instituted a policy that requires an
environmental investigation of each property that it considers
for purchase or that it owns and plans to develop. The
environmental investigation is conducted by a qualified
third-party environmental consultant in accordance with
recognized industry standards. The environmental investigation
report is reviewed by the Company and counsel prior to purchase
and/or development of any property. If the environmental
investigation identifies evidence of potentially significant
environmental contamination that merits additional
investigation, sampling of the property is performed by the
environmental consultant.
If necessary, remediation or mitigation of contamination,
including removal of contaminated soil and/or underground
storage tanks, is undertaken either prior to development or at
another appropriate time. When performing remediation
activities, the Company is subject to a variety of environmental
requirements. In some cases, the Company obtains state approval
of the selected remediation measures by entering into voluntary
environmental cleanup programs administered by state agencies.
In developing properties and constructing apartment and for-sale
(condominium) communities, the Company utilizes independent
environmental consultants to determine whether there are any
flood plains, wetlands or other environmentally sensitive areas
that are part of the property to be developed. If flood plains
are identified, development and construction work is planned so
that flood plain areas are preserved or alternative flood plain
capacity is created in conformance with federal and local flood
plain management requirements. If wetlands or other
environmentally sensitive areas are identified, the Company
plans and conducts its development and construction activities
and obtains the necessary permits and authorizations in
compliance with applicable legal standards. In some cases,
however, the presence of wetlands and/or other environmentally
sensitive areas could preclude, severely limit, or otherwise
alter the proposed site development and construction activities.
Storm water discharge from a construction site is subject to the
storm water permit requirements mandated under the Clean Water
Act. In most jurisdictions, the state administers the permit
programs. The Company currently anticipates that it will be able
to obtain and materially comply with any storm water permits
required for new development. The Company has obtained and is in
material compliance with the construction site storm water
permits required for its existing development activities.
The Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. sec. 9601 et seq.
(“CERCLA”), and comparable state laws subject the
owner or operator of real property or a facility and persons who
arranged for off-site disposal activities to claims or liability
for the costs of removal or remediation of hazardous substances
that are released at, in, on, under, or from real property or a
facility. In addition to claims for cleanup costs, the presence
of hazardous substances on or the release of hazardous
substances from a property or a facility could result in a claim
by a private party for personal injury or property damage or
could result in a claim from a governmental agency for other
damages, including natural resource damages. Liability under
CERCLA and comparable state laws can be imposed on the owner or
the operator of real property or a facility without regard to
fault or even knowledge of the release of hazardous substances
and other regulated materials on, at, in, under, or from the
property or facility. Environmental liabilities associated with
hazardous substances also could be imposed on the Company under
other applicable environmental laws, such as the Resource
Conservation and Recovery Act (and comparable state laws), or
common-law principles. The presence of hazardous substances in
amounts requiring response action or the failure to undertake
necessary remediation may adversely affect the owner’s
ability to use or sell real estate or borrow money using such
real estate as collateral.
Various environmental laws govern certain aspects of the
Company’s ongoing operation of its communities. Such
environmental laws include those regulating the existence of
asbestos-containing materials in buildings, management of
surfaces with lead-based paint (and notices to residents about
the lead-based paint), use of active underground petroleum
storage tanks, and waste-management activities. The failure to
comply with such
Post Properties, Inc.
6
Post Apartment Homes, L.P.
requirements could subject the Company to a government
enforcement action and/or claims for damages by a private party.
The Company has not been notified by any governmental authority
of any material noncompliance, claim, or liability in connection
with environmental conditions associated with any of its
apartment and for-sale (condominium) communities. The
Company has not been notified of a material claim for personal
injury or property damage by a private party relating to any of
its apartment and for-sale (condominium) communities in
connection with environmental conditions. The Company is not
aware of any environmental condition with respect to any of its
apartment and for-sale (condominium) communities that could
be considered to be material.
It is possible, however, that the environmental investigations
of the Company’s properties might not have revealed all
potential environmental liabilities associated with the
Company’s real property and its apartment and for-sale
(condominium) communities or the Company might have
underestimated any potential environmental issues identified in
the investigations. It is also possible that future
environmental laws, ordinances, or regulations or new
interpretations of existing environmental laws, ordinances, or
regulations will impose material environmental liabilities on
the Company; the current environmental conditions of properties
that the Company owns or operates will be affected adversely by
hazardous substances associated with other nearby properties or
the actions of third parties unrelated to the Company; or our
residents and/or commercial tenants may engage in activities
prohibited by their leases or otherwise expose the Company to
liability under applicable environmental laws, ordinances, or
regulations. The costs of defending any future environmental
claims, performing any future environmental remediation,
satisfying any such environmental liabilities, or responding to
any changed environmental conditions could materially adversely
affect the Company’s financial conditions and results of
operations.
Where You Can Find More Information
The Company makes its annual report on Form
l0-K, quarterly reports
on Form 10-Q,
current reports on
Form 8-K, and all
amendments to such reports filed pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934, as amended,
available (free of charge) on or through its Internet website,
located at http://www.postproperties.com, as soon as reasonably
practicable after they are filed with or furnished to the SEC.
(Dollars In thousands, except per share amounts)
The following risk factors apply to Post Properties, Inc. (the
“Company”) and Post Apartment Homes, L.P. (the
“Operating Partnership”). All indebtedness described
in the risk factors has been incurred by the Operating
Partnership.
Unfavorable changes in apartment markets and economic
conditions could adversely affect occupancy levels and rental
rates.
Market and economic conditions in the various metropolitan areas
of the United States where the Company operates, particularly
Atlanta, Georgia, Dallas, Texas, Tampa, Florida and the greater
Washington, D.C. area where a substantial majority of the
Company’s apartment communities are located, may
significantly affect occupancy levels and rental rates and
therefore profitability. Factors that may adversely affect these
conditions include the following:
|
|
| • |
the economic climate, which may be adversely impacted by a
reduction in jobs, industry slowdowns and other factors; |
| |
| • |
local conditions, such as oversupply of, or reduced demand for,
apartment homes; |
| |
| • |
declines in household formation; |
| |
| • |
favorable residential mortgage rates; |
| |
| • |
rent control or stabilization laws, or other laws regulating
rental housing, which could prevent the Company from raising
rents to offset increases in operating costs; and |
| |
| • |
competition from other available apartments and other housing
alternatives and changes in market rental rates. |
Any of these factors could adversely affect the Company’s
ability to achieve desired operating results from its
communities.
Post Properties, Inc.
7
Post Apartment Homes, L.P.
Development and construction risks could impact the
company’s profitability.
The Company intends to continue to develop and construct
apartment communities and may convert existing apartment
communities into condominiums or develop for-sale
(condominium) housing. Development activities may be
conducted through wholly-owned affiliated companies or through
joint ventures with unaffiliated parties. The 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 or unforeseen environmental conditions, which could
make completion of the property uneconomical, and the Company
may not be able to increase rents or for-sale
(condominium) unit sales prices to compensate for the
increase in construction costs; |
| |
| • |
the Company may abandon development opportunities that it has
already begun to explore, and it may fail to recover expenses
already incurred in connection with exploring those
opportunities; |
| |
| • |
the Company has at times been and may continue to be unable to
complete construction and
lease-up of a community
on schedule and meet financial goals for development projects; |
| |
| • |
because occupancy rates and rents at a newly developed community
may fluctuate depending on a number of factors, including market
and economic conditions, the Company may be unable to meet its
profitability goals for that community; and |
| |
| • |
land costs and construction costs have been increasing in the
Company’s markets, and may continue to increase in the
future and, in some cases, the costs of upgrading acquired
communities have, and may continue to, exceed original estimates
and the Company may be unable to charge rents, or sales prices
with respect to for-sale (condominium) product, that would
compensate for these increases in costs. |
Possible difficulty of selling apartment communities could
limit the Company’s operational and financial
flexibility.
Purchasers may not be willing to pay acceptable prices for
apartment communities that the Company wishes to sell. A weak
market may limit the 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 and acquisitions
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.
Concentration of investments in certain markets.
At December 31, 2005, approximately 46.8%, 18.5%, 9.3% and
8.9% (on a unit basis) of the Company’s communities were
located in the Atlanta, Georgia, Dallas, Texas, greater
Washington, D.C. and Tampa, Florida metropolitan areas,
respectively. The Company is therefore subject to increased
exposure — positive or negative — to
economic and other competitive factors specific to its markets
within these geographic areas.
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. Further, while the Company’s stated
goal is to limit variable rate debt to not more than 20% to 25%
of total indebtedness, management may adjust these levels over
time. 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.
Post Properties, Inc.
8
Post Apartment Homes, L.P.
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
generated by its apartment communities or through the sale of
for-sale (condominium) housing to make future principal
payments, it cannot assure investors that sufficient cash flow
will be available to make all required principal payments and
still meet the distribution requirements that the Company must
satisfy in order to maintain its status as a real estate
investment trust or “REIT” for federal income tax
purposes. The following factors, among others, may affect the
cash flows generated by the Company’s apartment communities
and through the sale of for-sale (condominium) housing:
|
|
| • |
the national and local economies; |
| |
| • |
local real estate market conditions, such as an oversupply of
apartment homes or competing for-sale (condominium) housing; |
|
|
| • |
the perceptions by prospective residents or buyers of the
safety, convenience and attractiveness of the Company’s
communities and the neighborhoods in which they are located; |
|
|
| • |
the Company’s ability to provide adequate management,
maintenance and insurance for its apartment communities; |
| |
| • |
rental expenses for its apartment communities, including real
estate taxes and utilities; and |
| |
| • |
the level of mortgage interest rates and its impact on the
demand for prospective buyers of for-sale
(condominium) housing. |
Expenses associated with the Company’s investment in
apartment communities, such as debt service, real estate taxes,
insurance and maintenance costs, are generally not reduced when
circumstances cause a reduction in cash flows from operations
from that community. If a community is mortgaged to secure
payment of debt and the Company is unable to make the mortgage
payments, the Company could sustain a loss as a result of
foreclosure on the community or the exercise of other remedies
by the mortgagee. The Company is likely to need to refinance at
least a portion of its outstanding debt as it matures. There is
a risk that the Company may not be able to refinance existing
debt or that the terms of any refinancing will not be as
favorable as the terms of the existing debt. As of
December 31, 2005, the Company had outstanding mortgage
indebtedness of $394,236, senior unsecured debt of $485,000 (of
which $75,000 matures in 2006) and unsecured line of credit
borrowings of $101,379.
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 stated goal is to generally maintain total
effective leverage (debt and preferred equity) as a percentage
of undepreciated real estate assets in a range of 50% to 55%, to
generally limit variable rate indebtedness as a percentage of
total indebtedness to not more than 20% to 25% of aggregate
indebtedness, and to maintain adequate liquidity through the
Company’s unsecured lines of credit.
At December 31, 2005, the Company’s total effective
leverage (debt and preferred equity) as a percentage of
undepreciated real estate assets and the Company’s total
variable rate indebtedness as a percentage of total indebtedness
were below these ranges. If management adjusts the
Company’s stated goal in the future, the Company could
become more highly leveraged, resulting in an increase in debt
service that could adversely affect funds from operations, the
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 and in
the Company’s outstanding senior unsecured notes. The
Company manages its debt to be in compliance with its stated
policy and with these debt covenants, but subject to compliance
with these covenants, the Company may increase the amount of
outstanding debt at any time without a concurrent improvement in
the 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.
Post Properties, Inc.
9
Post Apartment Homes, L.P.
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.
Expansion of the Company’s operations into condominium
conversion and for-sale (condominium) housing involves new
business risks and challenges for management.
Expansion into condominium conversions and for-sale
(condominium) housing is a new area of the Company’s
operations. The Company’s ability to successfully complete
a condominium conversion or other for-sale housing project, sell
the units and achieve management’s economic goals in
connection with the transaction is subject to various risks and
challenges, which if they materialize, may have an adverse
effect on the Company’s business, results of operations and
financial condition including:
|
|
| • |
the inability to obtain approvals to rezone the property and
releases from financing obligations and increases in costs
resulting from delays in obtaining such approvals and releases; |
|
|
| • |
understanding the costs necessary to bring a newly developed or
converted for-sale (condominium) property up to standards
required for its intended market position; |
|
|
| • |
lack of demand by prospective buyers; |
| |
| • |
over supply of condominiums in a given market; |
| |
| • |
the inability of buyers to qualify for financing; |
| |
| • |
lower than anticipated sale prices; |
| |
| • |
the inability to close on sales of individual units under
contract; |
| |
| • |
competition from other condominiums and other types of
residential housing; and |
| |
| • |
liability claims from condominium associations or others
asserting that construction performed was defective, resulting
in litigation and/or settlement discussions. |
In general, profits realized to date from the Company’s
sale of condominium homes have been more volatile than the
Company’s core apartment rental operations. In addition,
the Company believes that the demand of prospective buyers, the
supply and competition from other condominiums and other types
of residential housing, and the level of mortgage interest rates
and the affordability of housing, among other factors, could
have a significant impact on its ability to sell for-sale units
and on the sales prices achieved. If the Company is unable to
sell for-sale condominium homes, the Company could decide to
rent unsold units or could cause a condominium community to
revert to a rental apartment community. If these risks were to
materialize, it could cause the Company to realize impairment
losses in future periods and it could cause economic returns
that are materially lower than anticipated. In addition, if the
Company is unable to sell for-sale units, the expenses and
carrying costs associated with the ownership of such units would
continue.
Acquired apartment communities may not achieve anticipated
results.
The Company may selectively acquire apartment communities that
meet its investment criteria. The 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. |
Post Properties, Inc.
10
Post Apartment Homes, L.P.
Increased competition and increased affordability of
residential homes could limit the Company’s ability to
retain its residents, 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 and the increasing affordability of
owner occupied single and multi-family homes caused by declining
mortgage interest rates and government programs to promote home
ownership could adversely affect the Company’s ability to
retain its residents, 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 pursue, and competitors may have greater resources
than the Company. As a result, the Company may not be able to
make attractive investments on favorable terms, which could
adversely affect its growth.
The Company may not be able to maintain its current dividend
level.
For the full year of 2006, management of the Company currently
expects to maintain its current quarterly dividend payment rate
to common shareholders of $0.45 per share. At this dividend
rate, the Company currently expects that net cash flows from
operations reduced by annual operating capital expenditures for
2006 will not be sufficient to fund the dividend payments to
common and preferred shareholders by approximately $10,000 to
$15,000. The Company intends to use primarily the proceeds from
2006 asset (including condominium) sales to fund the additional
cash flow necessary to fully fund the dividend payments to
common shareholders. In prior periods, the additional funding,
in excess of cash flows from operating activities less operating
capital expenditures, required to pay the quarterly dividends
was funded through a combination of line of credit borrowings
and proceeds from asset sales. The Company’s board of
directors reviews the dividend quarterly, and there can be no
assurance that the current dividend level will be maintained.
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 at times
involved and may in the future involve material charges. These
charges are typically related to the extent and timing of
fluctuations in interest rates. Despite the 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.
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 or for-sale
(condominium) housing market conditions and local economies; |
| |
| • |
an inability to obtain land for development or to identify
appropriate acquisition opportunities; |
| |
| • |
an inability to hire and retain key personnel; and |
| |
| • |
lack of familiarity with local governmental and permitting
procedures. |
Post Properties, Inc.
11
Post Apartment Homes, L.P.
Any weaknesses identified in the Company’s system of
internal controls by the Company and its independent registered
public accounting firm pursuant to Section 404 of the
Sarbanes-Oxley Act of 2002 could have an adverse effect on the
Company’s business.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that
companies evaluate and report on their systems of internal
control over financial reporting. In addition, the
Company’s independent registered public accounting firm
must report on management’s evaluation of those controls.
In future periods, the Company may identify deficiencies in its
system of internal controls over financial reporting that may
require remediation. There can be no assurances that any such
future deficiencies identified may not be significant
deficiencies or material weaknesses that would be required to be
reported in future periods.
Losses from natural catastrophes may exceed insurance
coverage.
The Company carries comprehensive liability, fire, flood,
extended coverage and rental loss insurance on its properties,
which are believed to be of the type and amount customarily
obtained on real property assets. The Company intends to obtain
similar coverage for properties acquired in the future. However,
some losses, generally of a catastrophic nature, such as losses
from floods or wind storms, may be subject to limitations. The
Company exercises discretion in determining amounts, coverage
limits and deductibility provisions of insurance, with a view to
maintaining appropriate insurance on its investments at a
reasonable cost and on suitable terms; however, the Company may
not be able to maintain its insurance at a reasonable cost or in
sufficient amounts to protect it against potential losses.
Further, the Company’s insurance costs could increase in
future periods. If the Company suffers a substantial loss, its
insurance coverage may not be sufficient to pay the full current
market value or current replacement value of the lost
investment. Inflation, changes in building codes and ordinances,
environmental considerations and other factors also might make
it infeasible to use insurance proceeds to replace a property
after it has been damaged or destroyed.
Potential liability for environmental contamination could
result in substantial costs.
The Company is in the business of owning, operating, developing,
acquiring and, from time to time, selling real estate. Under
various federal, state and local environmental laws, as a
current or former owner or operator, the Company could be
required to investigate and remediate the effects of
contamination of currently or formerly owned real estate by
hazardous or toxic substances, often regardless of its knowledge
of or responsibility for the contamination and solely by virtue
of its current or former ownership or operation of the real
estate. In addition, the Company could be held liable to a
governmental authority or to third parties for property and
other damages and for investigation and
clean-up costs incurred
in connection with the contamination. These costs could be
substantial, and in many cases environmental laws create liens
in favor of governmental authorities to secure their payment.
The presence of such substances or a failure to properly
remediate any resulting contamination could materially and
adversely affect the 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 Company’s apartment communities and any newly acquired
apartment communities must comply with Title III of the
Americans with Disabilities Act, or the ADA, to the extent that
such properties are “public accommodations” and/or
“commercial facilities” as defined by the ADA.
Compliance with the ADA requirements could require removal of
structural barriers to handicapped access in certain public
areas of the Company’s apartment 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 must also comply with the Fair Housing Amendment Act
of 1988, or the FHAA, which requires that apartment communities
first occupied after March 13, 1991 be accessible to the
handicapped. Recently there has been heightened scrutiny of
multi family housing communities for compliance with the
requirements of the FHAA and ADA and an increasing number of
substantial enforcement actions and private lawsuits have been
brought against apartment communities to ensure compliance with
these requirements. Noncompliance with the FHAA and ADA could
result in the imposition of fines, awards of damages to private
litigants, payment of attorneys’ fees and other costs to
plaintiffs, substantial litigation costs and substantial costs
of remediation. Compliance with the FHAA could require removal
of structural barriers to handicapped access in a community,
including the interiors of apartment units covered under the
FHAA. Compliance with the ADA requirements could require removal
of structural barriers to handicapped access in certain public
areas of the Company’s apartment communities. In
Post Properties, Inc.
12
Post Apartment Homes, L.P.
addition to the ADA and FHAA, state and local laws exist that
impact the Company’s apartment communities with respect to
access thereto by disabled persons. Further, legislation or
regulations adopted in the future may impose additional burdens
or restrictions on the company with respect to improved access
by disabled persons. The ADA, FHAA, or other existing or new
legislation may require the Company to modify its existing
properties. These laws may also restrict renovations by
requiring improved access to such buildings or may require the
Company to add other structural features that increase its
construction costs. The Company cannot ascertain the ultimate
cost of compliance with the ADA, FHAA or other similar state and
local legislation and such costs may not be covered by insurance
policies. The cost of compliance could be substantial and could
adversely affect the Company’s business, results of
operations and financial condition.
Costs associated with moisture infiltration and resulting
mold remediation may be costly.
As a general matter, concern about indoor exposure to mold has
been increasing as such exposure has been alleged to have a
variety of adverse effects on health. As a result, there has
been a number of lawsuits in our industry against owners and
managers of apartment communities relating to moisture
infiltration and resulting mold. The Company has implemented
guidelines and procedures to address moisture infiltration and
resulting mold issues if and when they arise. The Company
believes that these measures will minimize the potential for any
adverse effect on its residents. The terms of our property and
general liability policies generally exclude certain
mold-related claims. Should an uninsured loss arise against the
Company, the Company would be required to use its funds to
resolve the issue, including litigation costs. The Company makes
no assurance that liabilities resulting from moisture
infiltration and the presence of or exposure to mold will not
have a future impact on its business, results of operations and
financial condition.
The Company’s joint ventures and joint ownership of
properties and partial interests in corporations and limited
partnerships could limit the Company’s ability to control
such properties and partial interests.
Instead of purchasing certain apartment communities directly,
the Company has invested and may continue to invest as a
co-venturer. Joint venturers often have shared control over the
operations of the joint venture assets. Therefore, it is
possible that the co-venturer in an investment might become
bankrupt, or have economic or business interests or goals that
are inconsistent with the Company’s business interests or
goals, or be in a position to take action contrary to the
Company’s instructions, requests, policies or objectives.
Consequently, a co-venturer’s actions might subject
property owned by the joint venture to additional risk. Although
the Company seeks to maintain sufficient influence of any joint
venture to achieve its objectives, the Company may be unable to
take action without the Company’s joint venture
partners’ approval, or joint venture partners could take
actions binding on the joint venture without the Company’s
consent. Additionally, should a joint venture partner become
bankrupt, the Company could become liable for such
partner’s share of joint venture liabilities.
The Company may be unable to renew leases or relet units as
leases expire.
When the Company’s residents decide not to renew their
leases upon expiration, the Company may not be able to relet
their units. Even if the residents do renew or the Company can
relet the units, the terms of renewal or reletting may be less
favorable than current leases terms. Because virtually all of
the Company’s leases are for apartments, they are generally
for no more than one year. If the Company is unable to promptly
renew the leases or relet the units, or if the rental rates upon
renewal or reletting are significantly lower than expected
rates, then the Company’s results of operations and
financial condition will be adversely affected. Consequently,
the Company’s cash flow and ability to service debt and
make distributions to security holders would be reduced.
The Company may fail to qualify as a REIT for federal income
tax purposes.
The 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 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
Post Properties, Inc.
13
Post Apartment Homes, L.P.
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 real estate assets may be subject to
impairment charges.
The Company continually evaluates the recoverability of the
carrying value of its real estate assets for impairment
indicators. Factors considered in evaluating impairment of the
Company’s existing real estate assets held for investment
include significant declines in property operating profits,
recurring property operating losses and other significant
adverse changes in general market conditions that are considered
permanent in nature. Generally, a real estate asset held for
investment is not considered impaired if the undiscounted,
estimated future cash flows of the asset over its estimated
holding period are in excess of the asset’s net book value
at the balance sheet date. Assumptions used to estimate annual
and residual cash flow and the estimated holding period of such
assets require the judgment of management.
In 2004 and in prior years, the Company recorded impairment
charges on assets held for investment and assets designated as
held for sale. There can be no assurance that the Company will
not take additional charges in the future related to the
impairment of its assets. For the years ended December 31,
2005, 2004 and 2003, management believes it has applied
reasonable estimates and judgments in determining the proper
classification of its real estate assets. However, should
external or internal circumstances change requiring the need to
shorten the holding periods or adjust the estimated future cash
flows of certain of the Company’s assets, the Company could
be required to record additional impairment charges. If any real
estate asset held for investment is considered impaired, a loss
is provided to reduce the carrying value of the asset to its
fair value, less selling costs. Any future impairment could have
a material adverse affect on the Company’s results of
operations and funds from operations in the period in which the
charge is taken.
The Company’s shareholders may not be able to effect a
change in control.
The articles of incorporation and bylaws of the Company and the
partnership agreement of the Operating Partnership contain a
number of provisions that could delay, defer or prevent a
transaction or a change in control that might involve a premium
price for the Company’s shareholders or otherwise be in
their best interests, including the following:
Preferred shares. The Company’s articles of
incorporation provide that the Company has the authority to
issue up to 20,000,000 shares of preferred stock, of which
2,900,000 were outstanding as of December 31, 2005. The
board of directors has the authority, without the approval of
the shareholders, to issue additional shares of preferred stock
and to establish the preferences and rights of such shares. The
issuance of preferred stock could have the effect of delaying or
preventing a change of control of the Company, even if a change
of control were in the shareholders’ interest.
Post Properties, Inc.
14
Post Apartment Homes, L.P.
Consent Rights of the Unitholders. Under the partnership
agreement of the Operating Partnership, the Company may not
merge or consolidate with another entity unless the merger
includes the merger of the Operating Partnership, which requires
the approval of the holders of a majority of the outstanding
units of the Operating Partnership. If the Company were to ever
hold less than a majority of the units, this voting requirement
might limit the possibility for an acquisition or a change of
control.
Ownership Limit. One of the requirements for maintenance
of the 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. 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 certain exceptions,
including an exception for shares of common stock held by
Mr. John A. Williams and Mr. John T. Glover, the
Company’s former chairman and former vice chairman and
certain investors for which the Company has waived the ownership
limit. Together, these limitations are referred to as the
“ownership limit.” Further, the 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. While the
Company has committed that it will not utilize the ownership
limit in its articles of incorporation as an anti-takeover
device, these provisions could still deter, delay or defer
someone from taking control of the Company.
Terrorist attacks and the possibility of wider armed conflict
may have an adverse effect on the Company’s business and
operating results and could decrease the value of the
Company’s assets.
Terrorist attacks and other acts of violence or war could have a
material adverse effect on the Company’s business and
operating results. Attacks or armed conflicts that directly
impact one or more of the Company’s apartment communities
could significantly affect the Company’s ability to operate
those communities and thereby impair its ability to achieve the
Company’s 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 the Company’s business and results of operations.
Finally, if the United States enters into and remains engaged in
a wider armed conflict, the Company’s business and
operating results could be adversely effected.
|
|
| ITEM 1B. |
UNRESOLVED STAFF COMMENTS |
None.
At December 31, 2005, the Company owned 57
Post®
multifamily apartment communities, including two communities
held in unconsolidated entities that were operating during all
of 2005. These communities are summarized below by metropolitan
area.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Metropolitan Area |
|
Communities | |
|
# of Units | |
|
% of Total | |
| |
|
| |
|
| |
|
| |
|
Atlanta, GA
|
|
|
26 |
|
|
|
9,944 |
|
|
|
46.8 |
% |
|
Dallas, TX
|
|
|
13 |
|
|
|
3,939 |
|
|
|
18.5 |
% |
|
Greater Washington, D.C.
|
|
|
5 |
|
|
|
1,972 |
|
|
|
9.3 |
% |
|
Tampa, FL
|
|
|
3 |
|
|
|
1,883 |
|
|
|
8.9 |
% |
|
Charlotte, NC
|
|
|
4 |
|
|
|
1,384 |
|
|
|
6.5 |
% |
|
Houston, TX
|
|
|
2 |
|
|
|
837 |
|
|
|
3.9 |
% |
|
Denver, CO
|
|
|
1 |
|
|
|
696 |
|
|
|
3.3 |
% |
|
New York, NY
|
|
|
2 |
|
|
|
337 |
|
|
|
1.6 |
% |
|
Orlando, FL
|
|
|
1 |
|
|
|
245 |
|
|
|
1.2 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
57 |
|
|
|
21,237 |
|
|
|
100.0 |
% |
| |
|
|
|
|
|
|
|
|
|
Thirty-five of the communities have in excess of 300 apartment
units, with the largest community having a total of 1,334
apartment units. The average age of the communities is
approximately nine years. The average economic occupancy rate
was 94.5% and 93.6%, respectively, and the average monthly
rental rate per apartment unit was $1,048 and $1,029,
respectively, for the 52 communities stabilized for each of the
years ended December 31, 2005 and 2004. See “Selected
Financial Information.”
Post Properties, Inc.
15
Post Apartment Homes, L.P.
At December 31, 2005, the Company also had one community,
containing 205 apartment units and 145 for-sale condominium
units, located in the Washington D.C. metropolitan area under
development. At December 31, 2005, the Company is also
converting 597 apartment units in four communities (including
121 units in one community held in an unconsolidated
entity) into for-sale condominiums through a taxable REIT
subsidiary.
Subsequent to December 31, 2005, the Company acquired two
apartment communities, containing 308 units, in Austin,
Texas.
COMMUNITY INFORMATION
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
December 2005 | |
|
2005 | |
| |
|
|
|
|
|
|
|
Average | |
|
Average | |
| |
|
|
|
Year | |
|
No. of | |
|
Rental Rates | |
|
Economic | |
| Communities |
|
Location(1) | |
|
Completed | |
|
Units | |
|
Per Unit | |
|
Occupancy(2) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Ashford®
|
|
|
Atlanta |
|
|
|
1987 |
|
|
|
222 |
|
|
$ |
778 |
|
|
|
94.2 |
% |
|
Post
Biltmore™(3)
|
|
|
Atlanta |
|
|
|
2001 |
|
|
|
276 |
|
|
|
1,066 |
|
|
|
95.5 |
% |
|
Post
Briarcliff™
|
|
|
Atlanta |
|
|
|
1999 |
|
|
|
688 |
|
|
|
1,020 |
|
|
|
92.4 |
% |
|
Post
Brookhaven®
|
|
|
Atlanta |
|
|
|
1990-1992(4) |
|
|
|
735 |
|
|
|
912 |
|
|
|
91.6 |
% |
|
Post
Chastain®
|
|
|
Atlanta |
|
|
|
1990 |
|
|
|
558 |
|
|
|
909 |
|
|
|
92.9 |
% |
|
Post Collier
Hills®
|
|
|
Atlanta |
|
|
|
1997 |
|
|
|
396 |
|
|
|
937 |
|
|
|
91.8 |
% |
|
Post
Crest®
|
|
|
Atlanta |
|
|
|
1996 |
|
|
|
410 |
|
|
|
980 |
|
|
|
93.4 |
% |
|
Post
Crossing®
|
|
|
Atlanta |
|
|
|
1995 |
|
|
|
354 |
|
|
|
1,026 |
|
|
|
94.3 |
% |
|
Post
Dunwoody®
|
|
|
Atlanta |
|
|
|
1989-1996(4) |
|
|
|
530 |
|
|
|
934 |
|
|
|
95.8 |
% |
|
Post
Gardens®
|
|
|
Atlanta |
|
|
|
1998 |
|
|
|
397 |
|
|
|
1,068 |
|
|
|
89.8 |
% |
|
Post
Glen®
|
|
|
Atlanta |
|
|
|
1997 |
|
|
|
314 |
|
|
|
1,124 |
|
|
|
94.3 |
% |
|
Post Lenox
Park®
|
|
|
Atlanta |
|
|
|
1995 |
|
|
|
206 |
|
|
|
1,007 |
|
|
|
94.2 |
% |
|
Post
Lindbergh®
|
|
|
Atlanta |
|
|
|
1998 |
|
|
|
396 |
|
|
|
985 |
|
|
|
94.0 |
% |
|
Post
Oak™
|
|
|
Atlanta |
|
|
|
1993 |
|
|
|
182 |
|
|
|
959 |
|
|
|
91.9 |
% |
|
Post
Oglethorpe®
|
|
|
Atlanta |
|
|
|
1994 |
|
|
|
250 |
|
|
|
1,228 |
|
|
|
93.8 |
% |
|
Post
Parkside™
|
|
|
Atlanta |
|
|
|
2000 |
|
|
|
188 |
|
|
|
1,225 |
|
|
|
95.4 |
% |
|
Post Peachtree
Hills®
|
|
|
Atlanta |
|
|
|
1992-1994(4) |
|
|
|
300 |
|
|
|
982 |
|
|
|
93.4 |
% |
|
Post
Renaissance®(5)
|
|
|
Atlanta |
|
|
|
1992-1994(4) |
|
|
|
342 |
|
|
|
972 |
|
|
|
95.3 |
% |
|
Post
Ridge®
|
|
|
Atlanta |
|
|
|
1998 |
|
|
|
434 |
|
|
|
991 |
|
|
|
95.5 |
% |
|
Post
Riverside®
|
|
|
Atlanta |
|
|
|
1998 |
|
|
|
523 |
|
|
|
1,368 |
|
|
|
93.9 |
% |
|
Post
Spring™
|
|
|
Atlanta |
|
|
|
2000 |
|
|
|
452 |
|
|
|
944 |
|
|
|
94.6 |
% |
|
Post
Stratford™(5)
|
|
|
Atlanta |
|
|
|
2000 |
|
|
|
250 |
|
|
|
1,136 |
|
|
|
93.9 |
% |
|
Post
Summit®
|
|
|
Atlanta |
|
|
|
1990 |
|
|
|
148 |
|
|
|
860 |
|
|
|
93.0 |
% |
|
Post
Valley®
|
|
|
Atlanta |
|
|
|
1988 |
|
|
|
496 |
|
|
|
658 |
|
|
|
93.2 |
% |
|
Post
Vinings®
|
|
|
Atlanta |
|
|
|
1989-1991(4) |
|
|
|
403 |
|
|
|
786 |
|
|
|
95.0 |
% |
|
Post
Woods®
|
|
|
Atlanta |
|
|
|
1977-1983(4) |
|
|
|
494 |
|
|
|
851 |
|
|
|
93.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Subtotal/ Average — Georgia
|
|
|
|
|
|
|
|
|
|
|
9,944 |
|
|
|
979 |
|
|
|
93.6 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Properties, Inc.
16
Post Apartment Homes, L.P.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
December 2005 | |
|
2005 | |
| |
|
|
|
|
|
|
|
Average | |
|
Average | |
| |
|
|
|
Year | |
|
No. of | |
|
Rental Rates | |
|
Economic | |
| Communities |
|
Location(1) | |
|
Completed | |
|
Units | |
|
Per Unit | |
|
Occupancy(2) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Abbey™
|
|
|
Dallas |
|
|
|
1996 |
|
|
|
34 |
|
|
|
1,718 |
|
|
|
97.7 |
% |
|
Post Addison
Circle™
|
|
|
Dallas |
|
|
|
1998-2000(4) |
|
|
|
1,334 |
|
|
|
940 |
|
|
|
92.5 |
% |
|
Post Cole’s
Corner™
|
|
|
Dallas |
|
|
|
1998 |
|
|
|
186 |
|
|
|
988 |
|
|
|
94.7 |
% |
|
Post
Square™
|
|
|
Dallas |
|
|
|
1996 |
|
|
|
218 |
|
|
|
1,102 |
|
|
|
94.9 |
% |
|
Post
Gallery™
|
|
|
Dallas |
|
|
|
1999 |
|
|
|
34 |
|
|
|
2,894 |
|
|
|
93.3 |
% |
|
Post
Heights™
|
|
|
Dallas |
|
|
|
1998-1999(4) |
|
|
|
368 |
|
|
|
1,023 |
|
|
|
95.9 |
% |
|
Post Legacy
|
|
|
Dallas |
|
|
|
2000 |
|
|
|
384 |
|
|
|
888 |
|
|
|
95.2 |
% |
|
Post
Meridian™
|
|
|
Dallas |
|
|
|
1991 |
|
|
|
133 |
|
|
|
1,066 |
|
|
|
94.0 |
% |
|
Post Midtown
Square®
|
|
|
Houston |
|
|
|
1999-2000(4) |
|
|
|
529 |
|
|
|
912 |
|
|
|
92.9 |
% |
|
Post Rice
Lofts™(5)
|
|
|
Houston |
|
|
|
1998 |
|
|
|
308 |
|
|
|
1,218 |
|
|
|
89.4 |
% |
|
Post Uptown
Village™
|
|
|
Dallas |
|
|
|
1995-2000(4) |
|
|
|
496 |
|
|
|
869 |
|
|
|
93.9 |
% |
|
Post
Vineyard™
|
|
|
Dallas |
|
|
|
1996 |
|
|
|
116 |
|
|
|
955 |
|
|
|
94.6 |
% |
|
Post
Vintage™
|
|
|
Dallas |
|
|
|
1993 |
|
|
|
161 |
|
|
|
919 |
|
|
|
93.0 |
% |
|
Post Wilson
Building™(5)
|
|
|
Dallas |
|
|
|
1999 |
|
|
|
143 |
|
|
|
1,140 |
|
|
|
89.6 |
% |
|
Post
Worthington™
|
|
|
Dallas |
|
|
|
1993 |
|
|
|
332 |
|
|
|
1,104 |
|
|
|
94.5 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Subtotal/ Average — Texas
|
|
|
|
|
|
|
|
|
|
|
4,776 |
|
|
|
999 |
|
|
|
93.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Harbour
Place™
|
|
|
Tampa |
|
|
|
1999-2002(4) |
|
|
|
578 |
|
|
|
1,223 |
|
|
|
96.6 |
% |
|
Post Hyde
Park®
|
|
|
Tampa |
|
|
|
1996 |
|
|
|
389 |
|
|
|
1,170 |
|
|
|
98.2 |
% |
|
Post
Parkside™
|
|
|
Orlando |
|
|
|
1999 |
|
|
|
245 |
|
|
|
1,247 |
|
|
|
98.1 |
% |
|
Post Rocky
Point®
|
|
|
Tampa |
|
|
|
1996-1998(4) |
|
|
|
916 |
|
|
|
1,058 |
|
|
|
97.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal/ Average — Florida
|
|
|
|
|
|
|
|
|
|
|
2,128 |
|
|
|
1,145 |
|
|
|
98.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North Carolina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Ballantyne
|
|
|
Charlotte |
|
|
|
2004 |
|
|
|
319 |
|
|
|
1,056 |
|
|
|
90.1 |
% |
|
Post Gateway
Place™
|
|
|
Charlotte |
|
|
|
2000 |
|
|
|
436 |
|
|
|
982 |
|
|
|
96.1 |
% |
|
Post Park at Phillips
Place®
|
|
|
Charlotte |
|
|
|
1998 |
|
|
|
402 |
|
|
|
1,180 |
|
|
|
94.8 |
% |
|
Post Uptown
Place™
|
|
|
Charlotte |
|
|
|
2000 |
|
|
|
227 |
|
|
|
1,023 |
|
|
|
97.4 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Subtotal/ Average — North Carolina
|
|
|
|
|
|
|
|
|
|
|
1,384 |
|
|
|
1,064 |
|
|
|
94.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Colorado
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Uptown
Square™
|
|
|
Denver |
|
|
|
1999-2001(4) |
|
|
|
696 |
|
|
|
922 |
|
|
|
92.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Properties, Inc.
17
Post Apartment Homes, L.P.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
December 2005 | |
|
2005 | |
| |
|
|
|
|
|
|
|
Average | |
|
Average | |
| |
|
|
|
Year | |
|
No. of | |
|
Rental Rates | |
|
Economic | |
| Communities |
|
Location(1) | |
|
Completed | |
|
Units | |
|
Per Unit | |
|
Occupancy(2) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Greater Washington, D.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Corners at Trinity Centre
|
|
|
Fairfax Co., VA |
|
|
|
1996 |
|
|
|
336 |
|
|
|
1,327 |
|
|
|
97.0 |
% |
|
Post
Forest®
|
|
|
Fairfax Co., VA |
|
|
|
1990 |
|
|
|
364 |
|
|
|
1,240 |
|
|
|
98.7 |
% |
|
Post Tysons
Corner™
|
|
|
Fairfax Co., VA |
|
|
|
1990 |
|
|
|
499 |
|
|
|
1,466 |
|
|
|
95.7 |
% |
|
Post Pentagon
Row™(5)
|
|
|
Arlington Co., VA |
|
|
|
2001 |
|
|
|
504 |
|
|
|
1,988 |
|
|
|
97.9 |
% |
|
Post Massachusetts
Avenue™(3)
|
|
|
D.C. |
|
|
|
2002 |
|
|
|
269 |
|
|
|
2,387 |
|
|
|
93.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Subtotal/ Average —
Washington, D.C.
|
|
|
|
|
|
|
|
|
|
|
1,972 |
|
|
|
1,660 |
|
|
|
97.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Luminaria™
|
|
|
New York |
|
|
|
2002 |
|
|
|
138 |
|
|
|
3,356 |
|
|
|
96.7 |
% |
|
Post
Toscana™
|
|
|
New York |
|
|
|
2003 |
|
|
|
199 |
|
|
|
3,451 |
|
|
|
95.4 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Subtotal/ Average — New York
|
|
|
|
|
|
|
|
|
|
|
337 |
|
|
|
3,412 |
|
|
|
96.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total |
|
|
|
|
|
|
|
|
|
|
21,237 |
|
|
$ |
1,106 |
|
|
|
94.4 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Refers to greater metropolitan areas of cities
indicated.
|
|
| (2) |
Average economic occupancy is defined as gross potential rent
less vacancy losses, model expenses and bad debt divided by
gross potential rent for the period, expressed as a percentage. |
(3) These communities are owned in unconsolidated entities
(Company equity ownership is 35%).
(4) These dates represent the respective completion dates
for multiple phases of a community.
(5) The Company has a leasehold interest in the land
underlying these communities.
Post Properties, Inc.
18
Post Apartment Homes, L.P.
|
|
| ITEM 3. |
LEGAL PROCEEDINGS |
On May 13, 2004, an alleged Company shareholder filed a
purported pro se derivative and direct action in the Superior
Court of Fulton County, Georgia, against the Company, certain
members of the Company’s board of directors, and certain of
its executive officers. The case was removed to the United
States District Court for the Northern District of Georgia on
May 21, 2004. The complaint alleged, among other things,
breaches of fiduciary duties, fraud, corporate waste,
withholding certain documents from shareholder inspection and
certain securities laws claims. The complaint requested various
types of relief, such as injunctive relief and damages and
demanded production of certain Company records. Because the
Company believed the allegations were wholly without merit, the
Company moved to dismiss the litigation. On April 20, 2005,
the court entered an order dismissing all claims without
prejudice, save a claim seeking production of certain Company
records, upon which the Court declined to rule, concluding it
lacked jurisdiction to do so, and ordered the claim remanded to
the Superior Court of Fulton County. Since that time, the
Company has moved for its attorney fees in the United States
District Court, arguing that the plaintiff frivolously pursued
the litigation, and the plaintiff has moved for entry of
judgment in Superior Court, which the Company has vigorously
contested. In February 2006, the United States District Court
granted the Company’s motion for attorneys’ fees in an
amount to be determined by the agreement of the parties, or,
alternatively, by the Court.
On May 5, 2003, the Company received notice that a
shareholder derivative and purported class action lawsuit was
filed against members of the board of directors of the Company
and the Company as a nominal defendant. This complaint was filed
in the Superior Court of Fulton County, Atlanta, Georgia on
May 2, 2003 and alleged various breaches of fiduciary
duties by the board of directors of the Company and sought,
among other relief, the disclosure of certain information by the
defendants. This complaint also sought to compel the defendants
to undertake various actions to facilitate a sale of the
Company. On May 7, 2003, the plaintiff made a request for
voluntary expedited discovery. On May 13, 2003, the Company
received notice that a similar shareholder derivative and
purported class action lawsuit was filed against certain members
of the board of directors of the Company and against the Company
as a nominal defendant. The complaint was filed in the Superior
Court of Fulton County, Atlanta, Georgia on May 12, 2003
and alleged breaches of fiduciary duties, abuse of control and
corporate waste by the defendants. The plaintiff sought monetary
damages and, as appropriate, injunctive relief. These lawsuits
were settled, and in October 2004, the Superior Court of Fulton
County entered an order approving the settlement and related
orders dismissing the litigation. The estimated legal and
settlement costs, not covered by insurance, associated with the
expected resolution of the lawsuits were recorded in 2003 as a
component of a proxy contest and related costs charge. An
alleged Company shareholder, who had filed a separate purported
derivative and direct action against the Company and certain of
its officers and directors (which is described in the paragraph
above), has appealed from the Superior Court’s orders
approving the settlement, overruling the shareholder’s
objection to the settlement denying the shareholder’s
motion to intervene, and dismissing the litigation with
prejudice. In November 2005, the Georgia Court of Appeals
affirmed the orders. In December 2005, the alleged Company
shareholder asked the Georgia Supreme Court to review the case,
and his petition remains pending.
The Company is involved in various other legal proceedings
incidental to its business from time to time, most of which are
expected to be covered by liability or other insurance.
Management of the Company believes that any resolution of
pending proceedings or liability to the Company which may arise
as a result of these proceedings will not have a material
adverse effect on the Company’s results of operations or
financial position.
|
|
| ITEM 4. |
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
None.
|
|
| ITEM X. |
EXECUTIVE OFFICERS OF THE REGISTRANT |
The persons who are executive officers of the Company and its
affiliates and their positions as of February 28, 2006 are
as follows:
| |
|
|
| NAME |
|
POSITIONS AND OFFICES HELD |
| |
|
|
|
David P. Stockert
|
|
President and Chief Executive Officer |
|
Thomas D. Senkbeil
|
|
Executive Vice President and Chief Investment Officer |
|
Thomas L. Wilkes
|
|
Executive Vice President and President, Post Apartment
Management |
|
Christopher J. Papa
|
|
Executive Vice President and Chief Financial Officer |
|
Sherry W. Cohen
|
|
Executive Vice President and Corporate Secretary |
|
Arthur J. Quirk
|
|
Senior Vice President and Chief Accounting Officer |
Post Properties, Inc.
19
Post Apartment Homes, L.P.
The following is a biographical summary of the experience of the
executive officers of the Company:
David P. Stockert. Mr. Stockert is the President and
Chief Executive Officer of the Company. Mr. Stockert has
been the Chief Executive Officer since July 2002. From January
2001 to June 2002, Mr. Stockert was President and Chief
Operating Officer. From July 1999 to October 2000,
Mr. Stockert was Executive Vice President of Duke Realty
Corporation, a publicly traded real estate company. From June
1995 to July 1999, Mr. Stockert was Senior Vice President
and Chief Financial Officer of Weeks Corporation, also a
publicly traded real estate company that was a predecessor by
merger to Duke Realty Corporation. From August 1990 to May 1995,
Mr. Stockert was an investment banker in the Real Estate
Group at Dean Witter Reynolds Inc. (now Morgan Stanley).
Mr. Stockert is 43 years old.
Thomas D. Senkbeil. Mr. Senkbeil has been an
Executive Vice President and Chief Investment Officer of the
Company since June 2003. From July 2000 to December 2002,
Mr. Senkbeil was President and Chief Operating Officer of
Carter & Associates, a leading regional full-service
real estate firm, overseeing the daily operation of
Carter’s four business units: Brokerage, Corporate Real
Estate Services, Development, and Property Management and
Leasing. Prior to joining Carter & Associates,
Mr. Senkbeil was Chief Investment Officer and a member of
the board of directors at Duke Realty Corporation and its
predecessor, Weeks Corporation, from June 1992 to July 2000.
Mr. Senkbeil is 56 years old.
Thomas L. Wilkes. Mr. Wilkes has been an Executive
Vice President and President of Post Apartment Management since
January 2001. From October 1997 through December 2000, he was an
Executive Vice President and Director of Operations for Post
Apartment Management responsible for the operations of Post
communities in the Western United States. Mr. Wilkes was a
Senior Vice President of Columbus Realty Trust from December
1993 through October 1997. Mr. Wilkes served as President
of CRH Management Company, a member of the Columbus Group, from
its formation in October 1990 to December 1993. Mr. Wilkes
is a Certified Property Manager. Mr. Wilkes is
46 years old.
Christopher J. Papa. Mr. Papa has been an Executive
Vice President and Chief Financial Officer of the Company since
December 2003. Prior to joining the Company, he was an audit
partner at BDO Seidman, LLP from June 2003 to November 2003, the
Chief Financial Officer at Plast-O-Matic Valves, Inc., a
privately-held company, from June 2002 to June 2003, and until
June 2002, an audit partner at Arthur Andersen LLP where he was
employed for over 10 years. Mr. Papa is a Certified
Public Accountant. Mr. Papa is 40 years old.
Sherry W. Cohen. Ms. Cohen has been with the Company
for twenty one years. Since October 1997, she has been an
Executive Vice President of Post Corporate Services responsible
for supervising and coordinating legal affairs and insurance.
Since April 1990, Ms. Cohen has also been Corporate
Secretary. She was a Senior Vice President with Post Corporate
Services from July 1993 to October 1997. Prior thereto,
Ms. Cohen was a Vice President of Post Properties, Inc.
since April 1990. Ms. Cohen is 51 years old.
Arthur J. Quirk. Mr. Quirk has been a Senior Vice
President and Chief Accounting Officer of the Company since
January 2003. Mr. Quirk served as the Company’s Vice
President and Chief Accounting Officer from March 2001 to
December 2002. From July 1999 to March 2001, Mr. Quirk was
Vice President and Controller of Duke Realty Corporation, a
publicly traded real estate company. From December 1994 to July
1999, Mr. Quirk was the Vice President and Controller of
Weeks Corporation, also a publicly traded real estate company
that was a predecessor by merger to Duke Realty Corporation.
Mr. Quirk is a Certified Public Accountant. Mr. Quirk
is 48 years old.
Post Properties, Inc.
20
Post Apartment Homes, L.P.
PART II
|
|
| ITEM 5. |
MARKET PRICE OF THE REGISTRANT’S COMMON STOCK, RELATED
SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
(In thousands, except per share amounts)
The Company’s common stock is traded on the New York Stock
Exchange (“NYSE”) under the symbol “PPS.”
The following table sets forth the quarterly high and low prices
per share reported on the NYSE, as well as the quarterly
dividends declared per share:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Dividends | |
| Quarter |
|
High | |
|
Low | |
|
Declared | |
| |
|
| |
|
| |
|
| |
|
2004
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
29.78 |
|
|
$ |
26.95 |
|
|
$ |
0.45 |
|
|
Second Quarter
|
|
|
30.14 |
|
|
|
25.95 |
|
|
|
0.45 |
|
|
Third Quarter
|
|
|
30.99 |
|
|
|
27.50 |
|
|
|
0.45 |
|
|
Fourth Quarter
|
|
|
35.70 |
|
|
|
29.75 |
|
|
|
0.45 |
|
| |
|
2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$ |
35.25 |
|
|
$ |
30.13 |
|
|
$ |
0.45 |
|
|
Second Quarter
|
|
|
37.74 |
|
|
|
30.47 |
|
|
|
0.45 |
|
|
Third Quarter
|
|
|
40.52 |
|
|
|
35.86 |
|
|
|
0.45 |
|
|
Fourth Quarter
|
|
|
42.00 |
|
|
|
33.83 |
|
|
|
0.45 |
|
On February 28, 2006, the Company had 1,624 common
shareholders of record and 42,030 shares of common stock
outstanding.
The Company pays regular quarterly dividends to holders of
shares of its common stock. Future dividend payments by the
Company will be paid at the discretion of the board of directors
and will depend on the actual funds from operations of the
Company, the 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 other factors that the board of
directors deems relevant. For a discussion of the Company’s
credit agreements and their restrictions on dividend payments,
see note 3 to the consolidated financial statements.
During 2005, the Company did not sell any unregistered
securities.
There is no established public trading market for the Common
Units. On February 28, 2006, the Operating Partnership had
56 holders of record of Common Units and 1,072 Common Units
outstanding, excluding the 42,030 of Common Units owned by the
Company.
For each quarter during 2005 and 2004, the Operating Partnership
paid a cash distribution to holders of Common Units equal in
amount to the dividends paid on the Company’s common stock
for such quarter.
During 2005, the Operating Partnership did not sell any
unregistered securities.
In the fourth quarter of 2004, the Company’s board of
directors adopted a new stock repurchase program under which the
Company may repurchase up to $200,000 of common or preferred
stock at market prices from time to time until December 31,
2006. In 2005, the Company repurchased approximately
1,031 shares of its common stock totaling approximately
$34,400 at an average price of $33.38 under 10b5-1 stock
purchase plans, the latest of which will expire May 31,
2006. Under its previous stock repurchase program which expired
on December 31, 2004, the Company repurchased $2,268 of
common stock and $120,000 of preferred stock and units during
2004. The following table summarizes the Company’s
purchases of its equity securities in the three months ended
December 31, 2005 (in thousands, except per share amounts).
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
Total Number of | |
|
Approximate Dollar | |
| |
|
|
|
|
|
Shares Purchased as | |
|
Value of Shares that | |
| |
|
|
|
|
|
Part of Publicly | |
|
May Yet Be | |
| |
|
Total Number of | |
|
Average Price | |
|
Announced | |
|
Purchased Under the | |
| Period |
|
Shares Purchased | |
|
Paid Per Share | |
|
Plans or Programs | |
|
Plans or Programs | |
| |
|
| |
|
| |
|
| |
|
| |
|
October 1, 2005 to October 31, 2005
|
|
|
282 |
|
|
$ |
35.23 |
|
|
|
282 |
|
|
$ |
165,600 |
|
|
November 1, 2005 to November 30, 2005
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
165,600 |
|
|
December 1, 2005 to December 31, 2005
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
165,600 |
|
|
Total
|
|
|
282 |
|
|
$ |
35.23 |
|
|
|
282 |
|
|
$ |
165,600 |
|
Post Properties, Inc.
21
Post Apartment Homes, L.P.
|
|
| ITEM 6. |
SELECTED FINANCIAL DATA |
Post Properties, Inc.
(In thousands, except per share and apartment unit data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
STATEMENT OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
279,508 |
|
|
$ |
266,191 |
|
|
$ |
253,345 |
|
|
$ |
248,682 |
|
|
$ |
265,035 |
|
| |
Other
|
|
|
17,295 |
|
|
|
16,593 |
|
|
|
14,814 |
|
|
|
14,200 |
|
|
|
14,863 |
|
| |
Third-party services(1)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,088 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
$ |
296,803 |
|
|
$ |
282,784 |
|
|
$ |
268,159 |
|
|
$ |
262,882 |
|
|
$ |
293,986 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations(2)
|
|
$ |
6,628 |
|
|
$ |
(26,282 |
) |
|
$ |
(26,885 |
) |
|
$ |
23,784 |
|
|
$ |
58,792 |
|
|
Income from discontinued operations(3)
|
|
|
135,320 |
|
|
|
114,501 |
|
|
|
41,041 |
|
|
|
36,962 |
|
|
|
28,748 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of accounting change
|
|
$ |
141,948 |
|
|
$ |
88,219 |
|
|
$ |
14,156 |
|
|
$ |
60,746 |
|
|
$ |
87,540 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(4)
|
|
$ |
141,948 |
|
|
$ |
88,219 |
|
|
$ |
14,156 |
|
|
$ |
60,746 |
|
|
$ |
86,927 |
|
| |
Dividends to preferred shareholders
|
|
|
(7,637 |
) |
|
|
(8,325 |
) |
|
|
(11,449 |
) |
|
|
(11,449 |
) |
|
|
(11,768 |
) |
| |
Redemption costs on preferred stock and units
|
|
|
— |
|
|
|
(3,526 |
) |
|
|
— |
|
|
|
— |
|
|
|
(239 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$ |
134,311 |
|
|
$ |
76,368 |
|
|
$ |
2,707 |
|
|
$ |
49,297 |
|
|
$ |
74,920 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER COMMON SHARE DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
dividends and redemption costs) — basic
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
|
$ |
0.33 |
|
|
$ |
1.23 |
|
|
Income from discontinued operations — basic
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
|
|
1.00 |
|
|
|
0.76 |
|
|
Income before cumulative effect of accounting change (net of
preferred dividends and redemption costs) — basic
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.98 |
|
|
Net income available to common shareholders — basic
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.97 |
|
|
Income (loss) from continuing operations (net of preferred
dividends and redemption costs) — diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
|
$ |
0.33 |
|
|
$ |
1.22 |
|
|
Income from discontinued operations — diluted
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
|
|
1.00 |
|
|
|
0.75 |
|
|
Income before cumulative effect of accounting change (net of
preferred dividends and redemption costs) — diluted
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.97 |
|
|
Net income available to common shareholders — diluted
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.96 |
|
|
Dividends declared
|
|
|
1.80 |
|
|
|
1.80 |
|
|
|
1.80 |
|
|
|
3.12 |
|
|
|
3.12 |
|
|
Weighted average common shares outstanding — basic
|
|
|
40,217 |
|
|
|
39,777 |
|
|
|
37,688 |
|
|
|
36,939 |
|
|
|
38,053 |
|
|
Weighted average common shares outstanding — diluted
|
|
|
40,217 |
|
|
|
39,777 |
|
|
|
37,688 |
|
|
|
36,954 |
|
|
|
38,268 |
|
| |
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before accumulated depreciation
|
|
$ |
2,416,335 |
|
|
$ |
2,502,418 |
|
|
$ |
2,596,376 |
|
|
$ |
2,705,215 |
|
|
$ |
2,777,980 |
|
|
Real estate, net of accumulated depreciation
|
|
|
1,899,381 |
|
|
|
1,977,719 |
|
|
|
2,085,517 |
|
|
|
2,258,037 |
|
|
|
2,371,256 |
|
|
Total assets
|
|
|
1,981,454 |
|
|
|
2,053,842 |
|
|
|
2,215,451 |
|
|
|
2,508,151 |
|
|
|
2,538,351 |
|
|
Total debt
|
|
|
980,615 |
|
|
|
1,129,478 |
|
|
|
1,186,322 |
|
|
|
1,414,555 |
|
|
|
1,336,520 |
|
|
Shareholders’ equity
|
|
|
881,009 |
|
|
|
788,070 |
|
|
|
796,526 |
|
|
|
833,699 |
|
|
|
901,517 |
|
| |
|
OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating activities
|
|
$ |
86,761 |
|
|
$ |
79,105 |
|
|
$ |
91,549 |
|
|
$ |
119,763 |
|
|
$ |
161,564 |
|
| |
Investing activities
|
|
|
70,293 |
|
|
|
131,873 |
|
|
|
234,195 |
|
|
|
(48,821 |
) |
|
|
(51,213 |
) |
| |
Financing activities
|
|
|
(150,767 |
) |
|
|
(212,189 |
) |
|
|
(330,800 |
) |
|
|
(69,355 |
) |
|
|
(113,007 |
) |
|
Total stabilized communities (at end of period)
|
|
|
52 |
|
|
|
65 |
|
|
|
70 |
|
|
|
75 |
|
|
|
78 |
|
|
Total stabilized apartment units (at end of period)
|
|
|
19,675 |
|
|
|
24,700 |
|
|
|
27,613 |
|
|
|
29,199 |
|
|
|
27,710 |
|
|
Average economic occupancy (fully stabilized communities)(5)
|
|
|
94.5 |
% |
|
|
93.5 |
% |
|
|
91.9 |
% |
|
|
90.9 |
% |
|
|
94.9 |
% |
|
|
| (1) |
Consists of revenues from property management and landscape
services provided to properties owned by third parties. These
businesses were sold in the fourth quarter of 2001. |
| (2) |
Income (loss) from continuing operations in 2005 includes a
$5,267 gain on sale of technology investment and severance
charges of $796. Income (loss) from continuing operations in
2004 included the impact of costs associated with the
termination of a debt remarketing agreement (interest expense)
and an early debt extinguishment loss totaling $14,626. See
note 3 to the consolidated financial statements for a
discussion of these costs. Income (loss) from continuing
operations in 2003 included the impact of severance and proxy
costs totaling $26,737. See note 7 to the consolidated
financial statements for a discussion of these costs. Income
from continuing operations in 2001 included the impact of
project abandonment, employee severance and other charges
totaling $17,450. |
| (3) |
Upon the implementation of SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets,” on January 1, 2002, the operating results of
real estate held for sale and sold are reported as discontinued
operations for all years presented. Additionally, all gains and
losses on the sale of assets classified as held for sale
subsequent to January 1, 2002 are included in discontinued
operations. As the operating results and gains or losses from
the sale of real estate assets prior to January 1, 2002 are
included in continuing operations, the presentation of results
is not comparable between years. |
| (4) |
Includes the impact of $613, net of minority interest, resulting
from the cumulative effect of accounting change from the
Company’s adoption of SFAS No. 133 in 2001. |
| (5) |
Calculated based on fully stabilized communities as defined for
each year (unadjusted for the impact of assets designated as
held for sale in subsequent years). Average economic occupancy
is defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. The calculation of average
economic occupancy does not include a deduction for net
concessions and employee discounts (average economic occupancy,
taking account of these amounts, would have been 93.9%, 93.0%,
90.8%, 89.1% and 93.8% for the years ended December 31,
2005, 2004, 2003, 2002 and 2001, respectively). Net concessions
were $1,019, $621, $2,518, $4,215 and $1,860 for the years ended
December 31, 2005, 2004, 2003, 2002 and 2001, respectively.
Employee discounts were $420, $442, $535, $660 and $895 for the
years ended December 31, 2005, 2004, 2003, 2002 and 2001,
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.
22
Post Apartment Homes, L.P.
Post Apartment Homes, L.P.
(In thousands, except per unit and apartment unit data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
|
2002 | |
|
2001 | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
STATEMENT OF OPERATIONS DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
279,508 |
|
|
$ |
266,191 |
|
|
$ |
253,345 |
|
|
$ |
248,682 |
|
|
$ |
265,035 |
|
| |
Other
|
|
|
17,295 |
|
|
|
16,593 |
|
|
|
14,814 |
|
|
|
14,200 |
|
|
|
14,863 |
|
| |
Third-party services(1)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,088 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
$ |
296,803 |
|
|
$ |
282,784 |
|
|
$ |
268,159 |
|
|
$ |
262,882 |
|
|
$ |
293,986 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations(2)
|
|
$ |
6,575 |
|
|
$ |
(25,088 |
) |
|
$ |
(25,652 |
) |
|
$ |
31,073 |
|
|
$ |
70,686 |
|
|
Income from discontinued operations(3)
|
|
|
142,472 |
|
|
|
122,265 |
|
|
|
45,749 |
|
|
|
42,045 |
|
|
|
32,646 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before cumulative effect of accounting change
|
|
$ |
149,047 |
|
|
$ |
97,177 |
|
|
$ |
20,097 |
|
|
$ |
73,118 |
|
|
$ |
103,332 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income(4)
|
|
$ |
149,047 |
|
|
$ |
97,177 |
|
|
$ |
20,097 |
|
|
$ |
73,118 |
|
|
$ |
102,637 |
|
| |
Distributions to preferred unitholders
|
|
|
(7,637 |
) |
|
|
(12,105 |
) |
|
|
(17,049 |
) |
|
|
(17,049 |
) |
|
|
(17,368 |
) |
| |
Redemption costs on preferred units
|
|
|
— |
|
|
|
(3,526 |
) |
|
|
— |
|
|
|
— |
|
|
|
(239 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders
|
|
$ |
141,410 |
|
|
$ |
81,546 |
|
|
$ |
3,048 |
|
|
$ |
56,069 |
|
|
$ |
85,030 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PER COMMON UNIT DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations (net of preferred
distributions and redemption costs) — basic
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
|
$ |
0.33 |
|
|
$ |
1.23 |
|
|
Income from discontinued operations — basic
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
|
|
1.00 |
|
|
|
0.76 |
|
|
Income before cumulative effect of accounting change (net of
preferred distributions and redemption costs) — basic
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.98 |
|
|
Net income available to common unitholders — basic
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.97 |
|
|
Income (loss) from continuing operations (net of preferred
distributions and redemption costs) — diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
|
$ |
0.33 |
|
|
$ |
1.22 |
|
|
Income from discontinued operations — diluted
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
|
|
1.00 |
|
|
|
0.75 |
|
|
Income before cumulative effect of accounting change (net of
preferred distributions and redemption costs) — diluted
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.97 |
|
|
Net income available to common unitholders — diluted
|
|
|
3.34 |
|
|
|
1.92 |
|
|
|
0.07 |
|
|
|
1.33 |
|
|
|
1.96 |
|
|
Distributions declared
|
|
|
1.80 |
|
|
|
1.80 |
|
|
|
1.80 |
|
|
|
3.12 |
|
|
|
3.12 |
|
|
Weighted average common units outstanding — basic
|
|
|
42,353 |
|
|
|
42,474 |
|
|
|
42,134 |
|
|
|
42,021 |
|
|
|
43,212 |
|
|
Weighted average common units outstanding — diluted
|
|
|
42,353 |
|
|
|
42,474 |
|
|
|
42,134 |
|
|
|
42,036 |
|
|
|
43,427 |
|
|
BALANCE SHEET DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate, before accumulated depreciation
|
|
$ |
2,416,335 |
|
|
$ |
2,502,418 |
|
|
$ |
2,596,376 |
|
|
$ |
2,705,215 |
|
|
$ |
2,777,980 |
|
|
Real estate, net of accumulated depreciation
|
|
|
1,899,381 |
|
|
|
1,977,719 |
|
|
|
2,085,517 |
|
|
|
2,258,037 |
|
|
|
2,371,256 |
|
|
Total assets
|
|
|
1,981,454 |
|
|
|
2,053,842 |
|
|
|
2,215,451 |
|
|
|
2,508,151 |
|
|
|
2,538,351 |
|
|
Total debt
|
|
|
980,615 |
|
|
|
1,129,478 |
|
|
|
1,186,322 |
|
|
|
1,414,555 |
|
|
|
1,336,520 |
|
|
Partners’ equity
|
|
|
907,773 |
|
|
|
831,411 |
|
|
|
928,935 |
|
|
|
993,976 |
|
|
|
1,077,670 |
|
|
OTHER DATA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Operating activities
|
|
$ |
86,761 |
|
|
$ |
79,105 |
|
|
$ |
91,549 |
|
|
$ |
119,763 |
|
|
$ |
161,564 |
|
| |
Investing activities
|
|
|
70,293 |
|
|
|
131,873 |
|
|
|
234,195 |
|
|
|
(48,821 |
) |
|
|
(51,213 |
) |
| |
Financing activities
|
|
|
(150,767 |
) |
|
|
(212,189 |
) |
|
|
(330,800 |
) |
|
|
(69,355 |
) |
|
|
(113,007 |
) |
|
Total stabilized communities (at end of period)
|
|
|
52 |
|
|
|
65 |
|
|
|
70 |
|
|
|
75 |
|
|
|
78 |
|
|
Total stabilized apartment units (at end of period)
|
|
|
19,675 |
|
|
|
24,700 |
|
|
|
27,613 |
|
|
|
29,199 |
|
|
|
27,710 |
|
|
Average economic occupancy (fully stabilized communities)(5)
|
|
|
94.5 |
% |
|
|
93.5 |
% |
|
|
91.9 |
% |
|
|
90.9 |
% |
|
|
94.9 |
% |
|
|
| (1) |
Consists of revenues from property management and landscape
services provided to properties owned by third parties. These
businesses were sold in the fourth quarter of 2001. |
| (2) |
Income (loss) from continuing operations in 2005 includes a
$5,267 gain on sale of technology investment and severance
charges of $796. Income (loss) from continuing operations in
2004 included the impact of costs associated with the
termination of a debt remarketing agreement (interest expense)
and an early debt extinguishment loss totaling $14,626. See
note 3 to the consolidated financial statements for a
discussion of these costs. Income (loss) from continuing
operations in 2003 included the impact of severance and proxy
costs totaling $26,737. See note 7 to the consolidated
financial statements for a discussion of these costs. Income
from continuing operations in 2001 included the impact of
project abandonment, employee severance and other charges
totaling $17,450. |
| (3) |
Upon the implementation of SFAS No. 144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets,” on January 1, 2002, the operating results of
real estate held for sale and sold are reported as discontinued
operations for all years presented. Additionally, all gains and
losses on the sale of assets classified as held for sale
subsequent to January 1, 2002 are included in discontinued
operations. As the operating results and gains or losses from
the sale of real estate assets prior to January 1, 2002 are
included in continuing operations, the presentation of results
are not comparable between years. |
| (4) |
Includes the impact of $695 resulting from the cumulative effect
of accounting change from the Company’s adoption of
SFAS No. 133 in 2001. |
| (5) |
Calculated based on fully stabilized communities as defined for
each year (unadjusted for the impact of assets designated as
held for sale in subsequent years). Average economic occupancy
is defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. The calculation of average
economic occupancy does not include a deduction for net
concessions and employee discounts (average economic occupancy,
taking account of these amounts, would have been 93.9%, 93.0%,
90.8%, 89.1% and 93.8% for the years ended December 31,
2005, 2004, 2003, 2002 and 2001, respectively). Net concessions
were $1,019, $621, $2,518, $4,215 and $1,860 for the years ended
December 31, 2005, 2004, 2003, 2002 and 2001, respectively.
Employee discounts were $420, $442, $535, $660 and $895 for the
years ended December 31, 2005, 2004, 2003, 2002 and 2001,
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.
23
Post Apartment Homes, L.P.
|
|
| ITEM 7. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS |
(In thousands, except apartment unit data)
Company Overview
Post Properties, Inc. and its subsidiaries develop, own and
manage upscale multifamily communities in selected markets in
the United States. As used in this report, the term
“Company” includes Post Properties, Inc. and its
subsidiaries, including Post Apartment Homes, L.P. (the
“Operating Partnership”), unless the context indicates
otherwise. The Company, through its wholly-owned subsidiaries is
the general partner and owns a majority interest in the
Operating Partnership which, through its subsidiaries, conducts
substantially all of the on-going operations of the Company. At
December 31, 2005, the Company owned 21,442 apartment units
in 58 apartment communities, including 545 apartment units in
two communities held in unconsolidated entities and 205
apartment units currently under development in one community.
The Company is also developing 145 for-sale condominium homes
and is converting 597 apartment units (including 121 units
in one community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary. At
December 31, 2005, approximately 46.8%, 18.5%, 9.3% and
8.9% (on a unit basis) of the Company’s operating
communities were located in the Atlanta, Dallas, the greater
Washington D.C. and Tampa metropolitan areas, respectively.
The Company has elected to qualify and operate as a
self-administrated and self-managed real estate investment trust
(“REIT”) for federal income tax purposes. A REIT is a
legal entity which holds real estate interests and, is generally
not subject to federal income tax on the income it distributes
to its shareholders.
At December 31, 2005, the Company owned approximately 96.7%
of the common limited partnership interests (“Common
Units”) in the Operating Partnership. Common Units held by
persons other than the Company represented a 3.3% common
minority interest in the Operating Partnership.
In prior years, beginning in 2001 and leading into 2004, the
multifamily apartment sector was adversely impacted by the
supply of multifamily apartments outpacing demand, due primarily
to the availability of capital and the low interest rate
environment, demand for multifamily apartments that was
adversely impacted by weakness in the overall U.S. economy
and the job market, as well as increased rates of homeownership
due primarily to historically low mortgage interest rates. In
particular, the Sunbelt markets in which a substantial portion
of the Company’s apartment communities are located were
adversely impacted.
In 2005, the Company’s operating results benefited from
improved fundamentals in the multifamily apartment market. The
Company believes that fundamentals improved due primarily to
improved job growth and overall growth in the U.S. economy,
increasing mortgage interest rates and single-family housing
prices which have decreased the affordability of housing, and
moderation in the supply of new market-rate apartments in the
primary markets and submarkets where the Company operates. The
Company expects that these factors will continue to favorably
impact apartment market fundamentals in 2006.
The Company has also been active over the past several years
repositioning its real estate portfolio and building its
development and value creation capabilities centered upon its
Southeast, Southwest and Mid-Atlantic regions. During this time,
the Company has been a net seller of apartment assets in an
effort to exploit opportunities to harvest value and recycle
capital through the sale of non-core assets that no longer met
the Company’s growth objectives. The Company’s asset
sales program has been consistent with its strategy of reducing
its concentration in Atlanta, Georgia and Dallas, Texas,
building critical mass in fewer markets and leveraging the
Post®
brand in order to improve operating efficiencies. The Company
has redeployed capital raised from its asset sales to strengthen
its balance sheet, by reducing high-coupon preferred equity and
debt, and reinvesting in assets that the Company believes
demonstrate better growth potential.
In this regard, the Company acquired a
499-unit apartment
community located in the greater Washington, D.C. area in
2004, a 319-unit
apartment community located in Charlotte, North Carolina in
2005, and two apartment communities located in Austin, Texas in
early 2006, consisting of 160 units and 148 units,
respectively. The Company also re-commenced development
activities with its start of a new
350-unit mixed-use,
for-rent apartment and for-sale condominium project located in
Alexandria, Virginia at the end of 2004. The Company expects to
begin delivering apartment homes at this project in the third
quarter of 2006, and condominium homes late in the fourth
quarter of 2006 or in the first quarter of 2007. The Company
also expects to begin additional development projects in 2006.
In early 2005, the Company entered the for-sale condominium
housing market to exploit the strategic opportunity for Post to
serve those consumers who are choosing to own, rather than rent,
their home. As a result, the Company
Post Properties, Inc.
24
Post Apartment Homes, L.P.
launched a new for-sale brand, Post Preferred
Homestm,
which serves as the unified marketing umbrella for the
Company’s for-sale ventures, including developing new
communities and converting existing assets into upscale for-sale
housing in several key markets.
During 2005, the Company, through a taxable REIT subsidiary,
commenced the conversion of three existing apartment communities
consisting of a total of 382 units into for-sale
condominium homes, including one in an unconsolidated entity,
located in Atlanta, Georgia, Dallas, Texas and Tampa, Florida.
One of these communities, containing 134 units, located in
Tampa, Florida, was completely sold out in 2005. The other two
communities are expected to be substantially sold out in 2006.
During 2006, the Company, through a taxable REIT subsidiary,
also commenced the conversion of a portion of two additional
existing apartment communities consisting of a total of
349 units into for-sale condominium homes, located in
Houston, Texas and Tampa, Florida. These two communities are
expected to begin sales of condominium homes in the second
quarter of 2006. There can be no assurances, however, that the
sale of for-sale condominium homes will close.
The Company’s expansion into for-sale condominium housing
exposes the Company to new risks and challenges, which if they
materialize, could have an adverse impact on the Company’s
business, results of operations and financial condition. See
Risk Factors elsewhere in this
Form 10-K where
discussed further.
The following discussion should be read in conjunction with the
selected financial data and with all of the accompanying
consolidated financial statements appearing elsewhere in this
report. This discussion is combined for the Company and the
Operating Partnership as their results of operations and
financial condition are substantially the same except for the
effect of the 5.0% weighted average common minority interest in
the Operating Partnership. See the summary financial information
in the section below titled, “Results of Operations”.
Disclosure Regarding Forward-Looking Statements
Certain statements made in this report, and other written or
oral statements made by or on behalf of the Company, may
constitute “forward-looking statements” within the
meaning of the federal securities laws. In addition, the
Company, or the executive officers on the Company’s behalf,
may from time to time make forward-looking statements in reports
and other documents the Company files with the SEC or in
connection with oral statements made to the press, potential
investors or others. Statements regarding future events and
developments and the 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. Forward-looking
statements include statements preceded by, followed by or that
include the words “believes,” “expects,”
“anticipates,” “plans,”
“estimates,” or similar expressions. Examples of such
statements in this report include the Company’s anticipated
performance for the three months ended March 31, 2006 and
the year ended December 31, 2006 (including the
Company’s assumptions for such performance and expected
levels of costs and expenses to be incurred in 2006),
anticipated apartment community sales in 2006 (including the
estimated proceeds, estimated gains on sales and the use of
proceeds from such sales), anticipated conversion of apartment
communities into condominium units, development of new for-sale
condominium housing and the related sales of the for-sale
condominium units, anticipated future acquisition and
development activities, accounting recognition and measurement
of guarantees, anticipated refinancing and other new financing
needs, the anticipated dividend level in 2006, the
Company’s ability to meet new construction, development and
other long-term liquidity requirements, and its ability to
execute future asset sales. Forward-looking statements are only
predictions and are not guarantees of performance. These
statements are based on beliefs and assumptions of the
Company’s management, which in turn are based on currently
available information. Important assumptions relating to the
forward-looking statements include, among others, assumptions
regarding the market for the Company’s apartment
communities, demand for apartments in the markets in which it
operates, competitive conditions and general economic
conditions. These assumptions could prove inaccurate. The
forward-looking statements also involve risks and uncertainties,
which could cause actual results to differ materially from those
contained in any forward-looking statement. Many of these
factors are beyond the Company’s ability to control or
predict. Such factors include, but are not limited to, the
following:
|
|
| • |
The success of the Company’s business strategies described
on pages 2-3 in this Annual Report on
Form 10-K;
|
| • |
Future local and national economic conditions, including changes
in job growth, interest rates, the availability of financing and
other factors; |
| • |
Demand for apartments in the Company’s markets and the
effect on occupancy and rental rates; |
| • |
The impact of competition on the Company’s business,
including competition for residents in the Company’s
apartment communities and buyers of the Company’s for-sale
condominium units and development locations; |
| • |
The Company’s ability to obtain financing or self-fund the
development or acquisition of additional apartment communities
and for-sale condominium housing; |
Post Properties, Inc.
25
Post Apartment Homes, L.P.
|
|
| • |
The uncertainties associated with the Company’s real estate
development, including actual costs exceeding the Company’s
budgets or development periods exceeding expectations; |
| • |
Uncertainties associated with the timing and amount of apartment
community sales and the resulting gains/losses associated with
such sales; |
| • |
Uncertainties associated with the Company’s condominium
conversion and for-sale housing business, including the timing
and volume of condominium sales; |
| • |
Conditions affecting ownership of residential real estate and
general conditions in the multi-family residential real estate
market; |
| • |
Uncertainties associated with environmental and other regulatory
matters, including the Americans with Disabilities Act and the
Fair Housing Act; |
| • |
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; |
| • |
The Company’s ability to continue to qualify as a REIT
under the Internal Revenue Code; and |
| • |
Other factors, including the risk factors discussed on
pages 7 through 15 in this Annual Report on
Form 10-K.
|
Management believes these forward-looking statements are
reasonable; however, undue reliance should not be placed on any
forward-looking statements, which are based on current
expectations. Further, forward-looking statements speak only as
of the date they are made, and management undertakes no
obligation to update publicly any of them in light of new
information or future events.
Critical Accounting Policies and New Accounting
Pronouncements
In the preparation of financial statements and in the
determination of Company operating performance, the Company
utilizes certain significant accounting polices and these
accounting policies are discussed in note 1 to the
Company’s consolidated financial statements. Also discussed
in note 1 to the consolidated financial statements, there
are new accounting pronouncements issued in 2005 and 2004 that
may have an impact on future reported results. The potential
impact of certain new pronouncements on the Company is discussed
below and in the consolidated financial statements. As the
Company is in the business of developing, owning and managing
apartment communities and developing, converting and selling
for-sale condominiums, its critical accounting policies, ones
that are subject to significant management estimates and
adjustments, relate to cost capitalization, asset impairment
evaluation and revenue and profit recognition of for-sale
condominium activities.
For communities under development, the Company capitalizes
interest, real estate taxes, and certain internal personnel and
associated costs directly related to apartment communities under
development and construction. Interest capitalized to projects
under development can fluctuate significantly from year to year
based on the level of projects under development and to a lesser
extent, changes in the weighted average interest rate used in
the calculation. For the years ended December 31, 2005,
2004 and 2003, the Company capitalized interest totaling $2,907,
$1,078 and $3,555, respectively. The increase in 2005 primarily
relates to increased development activity as the Company is
initiating new projects. The decline from 2003 to 2004 was
principally due to an intentional reduction in the size of the
Company’s development pipeline. The weighted average
interest rates used in the calculation of the capitalized
interest amounts ranged from 6.5% in 2005 to 7.0% in 2003 and,
as a result, were not the primary driver of the changes in
interest capitalization discussed above. In future periods, the
Company anticipates an increase in development activity which
will result in increased interest capitalization over 2005
levels. Aggregate interest capitalization increases are expected
even as the average interest rate used in the calculation is
expected to be substantially the same as in 2005. Due to the
predominately fixed rate nature of the Company’s debt,
future increases or decreases in short-term interest rates are
not expected to have a significant impact on the weighted
average interest rate used for interest capitalization purposes.
Future increases in long-term interest rates over time would
cause an increase in the weighted average rate used for
capitalization and cause interest amounts capitalized to
increase.
Internal personnel and associated costs are capitalized to the
projects under development based upon the effort identifiable
with such projects. As the Company intentionally slowed its
development efforts due to a weaker economic environment in 2003
and 2004, the Company capitalized less to development projects.
The Company elected to retain certain development personnel and
capabilities during this period in order to position the Company
for increased development activities in future years. In 2004
and 2003, the Company expensed $1,651 and $1,423, respectively,
of development personnel and associated costs. In 2005, the
Company increased its development personnel in three regional
geographic areas in anticipation of increased development
activity in 2005 and in future periods. In 2005, the Company
expensed $3,165 of development personnel and associated costs.
If future development volume increases over 2005 levels, the
majority of such costs may be capitalized to development
projects.
Post Properties, Inc.
26
Post Apartment Homes, L.P.
The Company continually evaluates the recoverability of the
carrying value of its real estate assets using the methodology
summarized in its accounting policies (see note 1 to the
consolidated financial statements). Under current accounting
literature, the evaluation of the recoverability of the
Company’s real estate assets requires the judgment of
Company management in the determination of the value of the
future cash flows expected from the assets and the estimated
holding period for the assets. The Company uses market
capitalization rates to determine the estimated residual value
of its real estate assets (capitalization rates generally ranged
from 4.5% to 6.0% at December 31, 2005) and, generally,
takes a long-term view of the holding period of its assets
unless specific facts and circumstances warrant shorter holding
periods (expected sales, departures from certain geographic
markets, etc.). At December 31, 2005 and 2004, management
believed it had applied reasonable estimates and judgments in
determining the proper classification of its real estate assets.
Should external or internal circumstances change requiring the
need to shorten the holding periods or adjust the estimated
future cash flows of certain of the Company’s assets, the
Company could be required to record future impairment charges.
As discussed in note 5 to the consolidated financial
statements, the Company recorded impairment losses in 2004 and
2003 on assets held for sale or for investment under the
application of its policies.
In 2005, the Company entered into the for-sale condominium
business through the conversion of three apartment communities
(including one held in an unconsolidated entity) into
condominiums. Under SFAS No. 66, the Company
recognizes revenue and the resulting profit from condominium
sales based on the relevant facts and circumstances associated
with each condominium project. For condominium conversion
projects, revenues are recognized upon the closing of each sale
transaction (the “Completed Contract Method”), as all
conditions for full profit recognition are generally met at the
time and the conversion construction periods are typically very
short. In 2005, all condominium sales were at condominium
conversion projects.
Under SFAS No. 66, the Company uses the relative sales
value method to allocate costs and recognize profits from
condominium conversion sales. Under the relative sales value
method, estimates of aggregate project revenues and aggregate
project costs are used to determine the allocation of project
cost of sales and the resulting profit in each accounting
period. In subsequent periods, project cost of sale allocations
and profits are adjusted to reflect changes in the actual and
estimated costs and estimated revenues of each project.
Unexpected increases or decreases in estimated project revenues
and project costs could cause future cost of sale and profit
margin amounts recognized in the financial statements to be
different than the amounts recognized in prior periods. Due to
the sell out and substantial sell out of two of the three
conversion communities in 2005, the Company does not expect the
impact of these estimates to have a material impact on the
profit margins recognized in 2005. As the Company continues to
be active in the condominium business in future periods, the
changes in such estimates would have a more significant impact
on reported results.
For newly developed condominiums, the Company will evaluate the
factors specified in SFAS No. 66 to determine the
appropriate method of accounting for each project (either the
“Percentage of Completion Method” or the Completed
Contract Method). The factors used to determine the appropriate
method are a determination of whether: the purchaser is legally
committed to closing in the real estate contract; the
construction of the project is beyond a preliminary phase;
sufficient units have been contracted to ensure the project will
not revert to a rental project; the aggregate project sale
proceeds and costs can be reasonably estimated; and the buyer
has made an adequate initial and continuing cash investment
under the contract in accordance with SFAS No. 66.
Under the Percentage of Completion Method, revenues and the
associated profit would be recognized over the project
construction period based on the ratio of total project costs
incurred to estimated total project costs. The determination of
the profit margins to be reported also requires an estimate of
the estimated aggregate revenues to be generated from
condominium sales. Increases in estimated revenues and decreases
in estimated costs over time would lead to increased profit
recognition in future periods. Likewise, decreases in estimated
revenues and increases in estimated costs over time would lead
to reductions in profit margins in future periods. Additionally,
contracts terminated prior to closing under the Percentage of
Completion Method would result in the reversal of previously
recognized profits and such amounts could be material under
market conditions that would lead to a general market value
decline for condominiums.
At December 31, 2005, the Company has one new condominium
project under development with approximately 50% of the
condominium units under contract. As the initial and continuing
cash investments received do not meet the requirements of
SFAS No. 66, as well as other factors, the Company has
concluded that this project will be accounted for under the
Completed Contract Method, similar to the accounting for
condominium conversion projects discussed above.
SFAS No. 123R, “Share-Based Payment”, was
issued in December 2004. SFAS No. 123R revised
SFAS No. 123, “Accounting for Stock-Based
Compensation” and requires companies to expense the fair
value of employee stock
Post Properties, Inc.
27
Post Apartment Homes, L.P.
options and other forms of stock-based compensation.
SFAS No. 123R also superseded the provisions of APB
No. 25. The provisions of SFAS No. 123R were
effective on January 1, 2006. The Company adopted the
provisions of SFAS No. 123R on January 1, 2006
using the modified prospective method of adoption. Since the
Company elected to apply the provisions of
SFAS No. 123 on January 1, 2003, the adoption of
SFAS No. 123R will not have a significant impact on
the Company’s financial position or results of operations.
FASB Interpretation No. 47 (“FIN 47”),
“Accounting for Conditional Asset Retirement
Obligations” was issued in March 2005. FIN 47 is an
interpretation of SFAS No. 143, “Accounting for
Asset Retirement Obligations,” and addressed liability
recognition issues under SFAS No. 143 related to the
timing and/or method of settlement of retirement obligations
that are conditional on future events. FIN 47 was effective
as of December 31, 2005. The Company has assessed the
impact of FIN 47 and has determined that the provisions of
FIN 47 did not have a material impact on the Company’s
financial position or results of operations at December 31,
2005. The application of FIN 47 requires significant
management estimates and judgments regarding the impact of
future events. Management believes it has applied reasonable
judgments and estimates in reaching its determination. As a
multifamily company, the Company’s operations do not
generally give rise to the types of retirement obligations
requiring accounting recognition. In future periods, the Company
could acquire land or older operating assets that may contain
conditions requiring the recognition of liabilities under
FIN 47.
The Emerging Issues Task Force issued EITF No. 04-05
(“EITF No. 04-05”), “Determining Whether a
General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners
Have Certain Rights”. EITF No. 04-05 provides a
framework for evaluating whether a general partner or group of
general partners or managing members controls a limited
partnership or limited liability company and therefore should
consolidate the entity. The presumption that the general partner
or group of general partners or managing members controls a
limited liability partnership or limited liability company may
be overcome if the limited partners or members have (1) the
substantive ability to dissolve the partnership without cause,
or (2) substantive participating rights. EITF No. 04-05
became effective on June 30, 2005 for new or modified
limited partnerships or limited liability companies and
January 1, 2006 for all existing arrangements. The Company
does not believe that the adoption of EITF No. 04-05 will
have a material impact on the Company’s financial position
or results of operations.
Results of Operations
The following discussion of results of operations should be read
in conjunction with the consolidated statements of operations,
the accompanying selected financial data and the community
operations/segment performance information included below.
The Company’s revenues and earnings from continuing
operations are generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative
operating performance, the Company categorizes its operating
apartment communities based on the period each community reaches
stabilized occupancy. The Company generally considers a
community to have achieved stabilized occupancy on the earlier
to occur of (1) attainment of 95% physical occupancy on the
first day of any month or (2) one year after completion of
construction.
For the year ended December 31, 2005, the Company’s
portfolio of operating apartment communities, excluding two
communities held in unconsolidated entities, consisted of the
following: (1) 52 communities that were completed and
stabilized for all of the current and prior year, (2) one
community that achieved full stabilization during 2004,
(3) portions of two communities that are being converted
into condominiums that are reflected in continuing operations
under SFAS No. 144 (see note 1 to the
consolidated financial statements), and (4) two communities
that were acquired in 2005 and 2004. These operating segments
exclude the operations of apartment communities classified as
discontinued operations, condominium conversion communities
classified as discontinued operations and apartment communities
held in unconsolidated entities for the years presented.
Post Properties, Inc.
28
Post Apartment Homes, L.P.
The Company has adopted an accounting policy related to
communities in the
lease-up stage whereby
substantially all operating expenses (including pre-opening
marketing and management and leasing personnel expenses) are
expensed as incurred. During the
lease-up phase, the sum
of interest expense on completed units and other operating
expenses (including pre-opening marketing and management and
leasing personnel expenses) will initially exceed rental
revenues, resulting in a
“lease-up
deficit,” which continues until such time as rental
revenues exceed such expenses. Lease up deficits for the years
ended December 31, 2005, 2004 and 2003 were $0, $0 and
$3,574, respectively.
In order to evaluate the operating performance of its
communities for the comparative years listed below, the Company
has presented financial information which summarizes the rental
and other revenues, property operating and maintenance expenses
(excluding depreciation and amortization) and net operating
income on a comparative basis for all of its operating
communities and for its stabilized operating communities. Net
operating income is a supplemental non-GAAP financial measure.
The Company believes that the line on the Company’s
consolidated statement of operations entitled “net
income” is the most directly comparable GAAP measure to net
operating income. Net operating income is reconciled to GAAP net
income in the financial information accompanying the tables. The
Company believes that net operating income is an important
supplemental measure of operating performance for a REIT’s
operating real estate because it provides a measure of the core
operations, rather than factoring in depreciation and
amortization, financing costs and general and administrative
expenses. This measure is particularly useful, in the opinion of
the Company, in evaluating the performance of geographic
operations, operating segment groupings and individual
properties. Additionally, the Company believes that net
operating income, as defined, is a widely accepted measure of
comparative operating performance in the real estate investment
community.
Comparison of Year Ended December 31, 2005 to Year Ended
December 31, 2004
The operating performance from continuing operations for all of
the Company’s apartment communities summarized by segment
for the years ended December 31, 2005 and 2004 is
summarized as follows:
| |
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|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
|
|
| |
|
| |
|
|
| |
|
2005 | |
|
2004 | |
|
% Change | |
| |
|
| |
|
| |
|
| |
|
Rental and other property revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
$ |
250,583 |
|
|
$ |
243,430 |
|
|
|
2.9 |
% |
|
Communities stabilized in 2004
|
|
|
7,184 |
|
|
|
7,007 |
|
|
|
2.5 |
% |
|
Condominium conversion communities(2)
|
|
|
5,485 |
|
|
|
5,716 |
|
|
|
(4.0 |
)% |
|
Acquired communities(3)
|
|
|
10,808 |
|
|
|
4,477 |
|
|
|
141.4 |
% |
|
Other property segments(4)
|
|
|
22,488 |
|
|
|
21,154 |
|
|
|
6.3 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
296,548 |
|
|
|
281,784 |
|
|
|
5.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance expenses (exclusive of
depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
|
97,160 |
|
|
|
94,284 |
|
|
|
3.1 |
% |
|
Communities stabilized in 2004
|
|
|
2,227 |
|
|
|
2,122 |
|
|
|
4.9 |
% |
|
Condominium conversion communities(2)
|
|
|
1,872 |
|
|
|
2,041 |
|
|
|
(8.3 |
)% |
|
Acquired communities(3)
|
|
|
3,578 |
|
|
|
1,313 |
|
|
|
172.5 |
% |
|
Other property segments and other expenses(5)
|
|
|
29,173 |
|
|
|
27,593 |
|
|
|
5.7 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
134,010 |
|
|
|
127,353 |
|
|
|
5.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Property net operating income(6)
|
|
$ |
162,538 |
|
|
$ |
154,431 |
|
|
|
5.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring capital expenditures:(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$ |
3,044 |
|
|
$ |
2,572 |
|
|
|
18.4 |
% |
|
Other
|
|
|
6,140 |
|
|
|
5,282 |
|
|
|
16.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
9,184 |
|
|
$ |
7,854 |
|
|
|
16.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Non-recurring capital expenditures
|
|
$ |
4,463 |
|
|
$ |
3,712 |
|
|
|
20.2 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Average apartment units in service
|
|
|
20,853 |
|
|
|
20,726 |
|
|
|
0.6 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Communities which reached stabilization prior to January 1,
2004. |
| (2) |
Portions of existing apartment communities being converted into
condominiums that are reflected in continuing operations under
SFAS No. 144. |
Post Properties, Inc.
29
Post Apartment Homes, L.P.
|
|
| (3) |
Communities acquired subsequent to January 1, 2004. |
| (4) |
Other property segment revenues include revenues from commercial
properties, revenues from furnished apartment rentals above the
unfurnished rental rates and any property revenue not directly
related to property operations. Other property segment revenues
exclude other corporate revenues of $255 and $1,000 for the
years ended December 31, 2005 and 2004, respectively. |
| (5) |
Other expenses include certain indirect central office operating
expenses related to management, grounds maintenance, and costs
associated with commercial properties and furnished apartment
rentals. |
| (6) |
A reconciliation of property net operating income to GAAP net
income is detailed below. |
| |
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Total same store NOI
|
|
$ |
153,423 |
|
|
$ |
149,146 |
|
|
Property NOI from other operating segments
|
|
|
9,115 |
|
|
|
5,285 |
|
| |
|
|
|
|
|
|
|
Consolidated property NOI
|
|
|
162,538 |
|
|
|
154,431 |
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
| |
Other revenues
|
|
|
255 |
|
|
|
1,000 |
|
| |
Interest income
|
|
|
661 |
|
|
|
817 |
|
| |
Minority interest in consolidated property partnerships
|
|
|
239 |
|
|
|
671 |
|
| |
Depreciation
|
|
|
(76,248 |
) |
|
|
(79,473 |
) |
| |
Interest expense
|
|
|
(58,898 |
) |
|
|
(63,552 |
) |
| |
Amortization of deferred financing costs
|
|
|
(4,661 |
) |
|
|
(4,304 |
) |
| |
General and administrative
|
|
|
(18,307 |
) |
|
|
(18,205 |
) |
| |
Investment, development and other expenses
|
|
|
(5,242 |
) |
|
|
(2,930 |
) |
| |
Severance charges
|
|
|
(796 |
) |
|
|
— |
|
| |
Equity in income of unconsolidated entities
|
|
|
1,767 |
|
|
|
1,083 |
|
| |
Gain on sale of technology investment
|
|
|
5,267 |
|
|
|
— |
|
| |
Termination of debt remarketing agreement (interest expense)
|
|
|
— |
|
|
|
(10,615 |
) |
| |
Loss on early extinguishment of indebtedness
|
|
|
— |
|
|
|
(4,011 |
) |
| |
Minority interest of preferred unitholders
|
|
|
— |
|
|
|
(3,780 |
) |
| |
Minority interest of common unitholders
|
|
|
53 |
|
|
|
2,586 |
|
| |
|
|
|
|
|
|
| |
Income (loss) from continuing operations
|
|
|
6,628 |
|
|
|
(26,282 |
) |
| |
Income from discontinued operations
|
|
|
135,320 |
|
|
|
114,501 |
|
| |
|
|
|
|
|
|
|
Net income
|
|
$ |
141,948 |
|
|
$ |
88,219 |
|
| |
|
|
|
|
|
|
|
|
| (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. Recurring capital expenditures are
those that are generally expected to be incurred on an annual
basis. Non-recurring capital expenditures are those that
generally occur less frequently than on an annual basis. |
| (8) |
A reconciliation of property capital expenditures from
continuing operations to total recurring and non-recurring
capital expenditures as presented in the consolidated statements
of cash flows under GAAP is detailed below. |
| |
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Recurring capital expenditures
|
|
|
|
|
|
|
|
|
| |
Continuing operations
|
|
$ |
9,184 |
|
|
$ |
7,854 |
|
| |
Discontinued operations
|
|
|
737 |
|
|
|
2,030 |
|
| |
|
|
|
|
|
|
| |
Total recurring capital expenditures per statements of cash flows
|
|
$ |
9,921 |
|
|
$ |
9,884 |
|
| |
|
|
|
|
|
|
|
Non-recurring capital expenditures
|
|
|
|
|
|
|
|
|
| |
Continuing operations
|
|
$ |
4,463 |
|
|
$ |
3,712 |
|
| |
Discontinued operations
|
|
|
45 |
|
|
|
893 |
|
| |
|
|
|
|
|
|
| |
Total non-recurring capital expenditures per statements of cash
flows
|
|
$ |
4,508 |
|
|
$ |
4,605 |
|
| |
|
|
|
|
|
|
The Operating Partnership reported net income available to
common unitholders of $141,410 and $81,546 for the years ended
December 31, 2005 and 2004, respectively, and the Company
reported net income available to common shareholders of $134,311
and $76,368 for the years ended December 31, 2005 and 2004,
respectively. The improvement in net income in 2005 compared to
2004 primarily reflected increased gains on sales of real estate
assets of $27,498 ($26,958 net of minority interest and
income taxes) and a gain of $5,267 ($5,003 net of minority
interest) on the sale of technology investment between years.
The change between years was also impacted by accounting charges
in 2004 of $20,987 ($19,637 net of minority interest)
relating to losses on early debt extinguishments, costs of
terminating a debt remarketing agreement (interest expense) and
asset impairment charges compared to debt extinguishment losses
of $3,220 ($3,043 net of minority interest) in 2005.
Additionally, net income was higher in 2005 due to the improved
operating performance of the Company’s stabilized
communities and reduced interest expense. These items are
discussed in more detail in the sections below.
Rental and other revenues increased $14,764 or 5.2% from 2004 to
2005 primarily due to increased revenues from the Company’s
stabilized communities of $7,153 or 2.9% and from the
Company’s newly stabilized and acquired
Post Properties, Inc.
30
Post Apartment Homes, L.P.
communities of $6,508 or 56.7%. The revenue increase from
stabilized communities is discussed below. The revenue increase
from newly stabilized communities in 2005 reflects a full year
of operating performance in 2005 for the one community compared
to a partial lease-up
year in 2004. The revenue increase from acquired communities
reflects the acquisition of one community in May 2005 and one
community in June 2004. Property operating and maintenance
expenses (exclusive of depreciation and amortization) increased
$6,657 or 5.2% primarily due to increased expenses from
stabilized communities and acquisition communities. The expense
increase from stabilized communities is discussed below. The
expense increase from acquisition communities reflects the full
year of expenses from one community acquired in June 2004 and a
partial year of expenses for the community acquired in May 2005.
In 2005, gains on sales of real estate assets from discontinued
operations represent the net gains of $16,218 ($15,404 net
of minority interest and provision for income taxes) from
condominium sales at the Company’s condominium conversion
communities and gains of $124,425 ($117,593 net of minority
interest) on the sale of six communities containing
3,047 units. The sales of the six communities generated net
proceeds of approximately $229,249, including $81,560 of
tax-exempt secured indebtedness assumed by the purchasers. In
2004, the Company recognized net gains from discontinued
operations of $113,739 ($106,039 net of minority interest)
from the sale of eight communities containing 3,880 units,
and certain land parcels. These sales generated net proceeds of
approximately $242,962, including $104,325 of
tax-exempt debt assumed
by the purchasers. The Company plans to continue to be a seller
of communities based on an assessment of market conditions and
consistent with its investment strategy of recycling investment
capital to fund new development and acquisition activities in
its core markets.
Depreciation expense decreased $3,225, or 4.1% from 2004 to 2005
primarily due to reduced depreciation resulting from certain
furniture and fixtures (with a five year life) at certain
properties becoming fully depreciated in 2004 and early 2005
offset by increased depreciation from communities acquired in
2005 and 2004.
Interest expense (excluding $10,615 in 2004 of costs associated
with the termination of a debt remarketing agreement —
discussed below) decreased $4,654 or 7.3% from 2004 to 2005 due
to reduced interest costs resulting from the refinancing of
approximately $112,000 of debt at lower fixed interest rates,
net debt repayments of fixed rate unsecured indebtedness of
approximately $100,000 during 2005 and due to $1,829 of
increased capitalized interest to development properties between
years.
In 2004, the Company terminated a remarketing agreement related
to its $100,000, 6.85% Mandatory Par Put Remarketed Securities
(“MOPPRS”) due March 2015. In connection with the
termination of the remarketing agreement, the Company paid
$10,615, including transaction expenses. Under the terms of the
remarketing agreement, the remarketing agent had the right to
remarket the $100,000 unsecured notes in March 2005 for a
ten-year term at an
interest rate calculated as 5.715% plus the Company’s then
current credit spread to the ten-year treasury rate. As a result
of the termination of the remarketing agreement, the underlying
debt matured and was repaid in March 2005.
The loss on early extinguishment of indebtedness included in
continuing operations in 2004 of $4,011 represented the debt
repurchase premiums, transactions expenses and the
write-off of
unamortized deferred financing costs associated with the early
retirement of debt. In October 2004, the Company purchased and
retired $87,957 of the Company’s 8.125% medium term,
unsecured notes through a tender offer. The debt was originally
scheduled to mature in 2005. The Company retired a portion of
this debt prior to maturity to take advantage of favorable lower
interest rates in late 2004 and to reduce its debt refinancing
risk in 2005.
General and administrative expenses increased $102 or 0.6% from
2004 to 2005 primarily due to increased compensation, incentive
compensation and board compensation costs offset by reduced
legal, consulting and corporate governance expenses in 2005. The
increase in annual compensation reflects annual compensation
increases and increased bonuses paid to corporate employees in
2005 due to improved Company performance. The increase in
incentive compensation reflects the increased amortization of
incentive stock awards as option award expense recognition has
increased due to the full phase-in of SFAS No. 123
over an approximately three year vesting period that began in
2003. Additionally, incentive compensation increased due to
increased restricted stock and shareholder value plan award
amortization (phased in over an approximately three year vesting
period as restricted stock and shareholder value plan awards
began to be granted annually beginning in 2003). Increased board
compensation costs resulted from increases in a director
variable deferred compensation plan which resulted from
increases in the Company’s stock price. This director plan
was amended in the third quarter of 2005. As a result, future
changes in the Company’s stock price are not expected to
have an impact on board compensation costs. These increases were
offset by reduced legal expenses of $834 between years primarily
due to reduced expenses associated with shareholder proxy
proposals, the settlement with the Company’s former
chairman and
Post Properties, Inc.
31
Post Apartment Homes, L.P.
CEO in 2004 and with shareholder litigation between periods. The
decrease in consulting expenses of approximately $620 between
periods related to portfolio valuation and software selection
services incurred in 2004. Corporate governance expenses
decreased approximately $307 due to a reduction in the costs of
Sarbanes/ Oxley compliance in the second full year of those
regulations.
In 2005, the Company reclassified certain expenses previously
reported as general and administrative expenses to property
operating and maintenance expenses and investment, development
and other expenses on the accompanying statements of operations.
Prior period amounts have been reclassified to conform to the
2005 presentation. The reclassified expenses primarily included
certain investment group executive and administrative functions
and long-term, stock-based compensation and benefits expenses
associated with property management and investment and
development group activities.
Investment, development and other costs increased $2,312 or
78.9% from 2004 to 2005. Investment, development and other costs
of $5,242 in 2005 include $1,546 of executive and administrative
functions, $3,165 of development personnel and associated costs
and land carry costs not allocable to development projects and
$531 of sales and marketing costs associated with for-sale
condominium developments which are not capitalized. Investment,
development and other costs of $2,930 in 2004 consisted of
$1,279 of executive and administrative functions and $1,651 of
development personnel and associated costs and land carry
expenses not allocable to development projects. The majority of
the increase in development personnel and associated costs of
$1,514, which was primarily due to the addition of new
development personnel and to establishing development
capabilities in three regional geographic areas in mid to late
2004 and into 2005.
Equity in income of unconsolidated real estate entities
increased from $1,083 in 2004 to $1,767 in 2005. This increase
was primarily due to improving apartment market fundamentals
resulting in improved operating performance of the two
communities held by the entities and increased profits resulting
from condominium sales at one of the unconsolidated entities
that began the conversion of its apartments into for-sale
condominiums in 2005. The first closings of condominium units
began in the second quarter of 2005. In 2005, the unconsolidated
entity closed 45 condominium units generating net gains to the
Company of approximately $612.
Recurring and nonrecurring capital expenditures from continuing
operations increased $2,081 or 18.0% from 2004 to 2005. The
increase in capital expenditures included one capital project
related to corrective improvements associated with compliance
with ADA regulations and the impact of several properties
beginning to capitalize the replacement of carpet, vinyl and
blinds under the Company’s accounting policies (during the
first five years of a community, the Company expenses the
replacements of these items).
Post Properties, Inc.
32
Post Apartment Homes, L.P.
Fully Stabilized (Same Store) Communities
The Company defines fully stabilized communities as those which
have reached stabilization prior to the beginning of the
previous year. For the 2005 to 2004 comparison, fully stabilized
communities are defined as those communities which reached
stabilization prior to January 1, 2004. This portfolio
consisted of 52 communities with 19,675 units, including 25
communities with 9,668 units (49.1%) located in Atlanta,
Georgia, 13 communities with 3,939 units (20.0%) located in
Dallas, Texas, three communities with 1,883 units (9.6%)
located in Tampa, Florida, three communities with
1,204 units (6.1%) located in Washington D.C. and eight
communities with 2,981 units (15.2%) located in other
markets. The operating performance of these communities is
summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
|
|
| |
|
| |
|
|
| |
|
2005 | |
|
2004 | |
|
% Change | |
| |
|
| |
|
| |
|
| |
|
Rental and other revenues
|
|
$ |
250,583 |
|
|
$ |
243,430 |
|
|
|
2.9 |
% |
|
Property operating and maintenance expenses (excluding
depreciation and amortization)
|
|
|
97,160 |
|
|
|
94,284 |
|
|
|
3.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Same store net operating income(1)
|
|
$ |
153,423 |
|
|
$ |
149,146 |
|
|
|
2.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Capital expenditures(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Carpet
|
|
$ |
2,673 |
|
|
$ |
2,422 |
|
|
|
10.4 |
% |
| |
Other
|
|
|
5,705 |
|
|
|
5,130 |
|
|
|
11.2 |
%(5) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total recurring
|
|
|
8,378 |
|
|
|
7,552 |
|
|
|
10.9 |
%(5) |
| |
Non-recurring
|
|
|
3,385 |
|
|
|
2,968 |
|
|
|
14.0 |
%(5) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total capital expenditures(A)
|
|
$ |
11,763 |
|
|
$ |
10,520 |
|
|
|
11.8 |
%(5) |
| |
|
|
|
|
|
|
|
|
|
| |
Total capital expenditures per
unit(A÷19,675 units)
|
|
$ |
598 |
|
|
$ |
535 |
|
|
|
11.8 |
%(5) |
| |
|
|
|
|
|
|
|
|
|
|
Average monthly rental per apartment unit(3)
|
|
$ |
1,048 |
|
|
$ |
1,029 |
|
|
|
1.8 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Average economic occupancy(4)
|
|
|
94.5 |
% |
|
|
93.6 |
% |
|
|
0.9 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Net operating income of stabilized communities is a supplemental
non-GAAP financial measure. See page 30 for a
reconciliation of net operating income for stabilized
communities to GAAP net income. |
| (2) |
A reconciliation of these segment components of property capital
expenditures to total recurring and non-recurring capital
expenditures as presented in the consolidated statements of cash
flows prepared under GAAP is detailed below. |
| |
|
|
|
|
|
|
|
|
| |
|
Year Ended | |
| |
|
December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Recurring capital expenditures by operating segment
|
|
|
|
|
|
|
|
|
|
Fully stabilized
|
|
$ |
8,378 |
|
|
$ |
7,552 |
(5) |
|
Stabilized in prior year
|
|
|
13 |
|
|
|
25 |
|
|
Condominium conversion communities
|
|
|
132 |
|
|
|
84 |
(5) |
|
Acquired
|
|
|
488 |
|
|
|
166 |
|
|
Other property segments, including discontinued operations
|
|
|
910 |
|
|
|
2,057 |
|
| |
|
|
|
|
|
|
|
Total recurring capital expenditures per statements of cash flows
|
|
$ |
9,921 |
|
|
$ |
9,884 |
|
| |
|
|
|
|
|
|
|
Non-recurring capital expenditures by operating segment
|
|
|
|
|
|
|
|
|
|
Fully stabilized
|
|
$ |
3,385 |
|
|
$ |
2,968 |
(5) |
|
Stabilized in prior year
|
|
|
— |
|
|
|
— |
|
|
Condominium conversion communities
|
|
|
75 |
|
|
|
263 |
(5) |
|
Acquired
|
|
|
69 |
|
|
|
5 |
|
|
Other property segments, including discontinued operations
|
|
|
979 |
|
|
|
1,369 |
|
| |
|
|
|
|
|
|
|
Total non-recurring capital expenditures, per statements of cash
flows
|
|
$ |
4,508 |
|
|
$ |
4,605 |
|
| |
|
|
|
|
|
|
|
|
|
The Company uses same store
recurring and non-recurring capital expenditures as cash flow
measures. Same store recurring and non- recurring capital
expenditures are supplemental non-GAAP financial measures. The
Company believes that same store recurring and non-recurring
capital expenditures are important indicators of the costs
incurred by the Company in maintaining same store communities.
The corresponding GAAP measures include information with respect
to the Company’s other operating segments consisting of
communities stabilized in the prior year, condominium conversion
communities, lease-up
communities, and sold communities in addition to same store
information. Therefore, the Company believes that it’s
presentation of same store recurring and non-recurring capital
expenditures is necessary to demonstrate same store replacement
costs over time. The Company believes that the most directly
comparable GAAP measure to same store recurring and
non-recurring capital expenditures are the lines on the
Company’s consolidated statements of cash flows entitled
“recurring capital expenditures” and
“non-recurring capital expenditures.”
|
|
|
| (3) |
Average monthly rental rate is defined as the average of the
gross actual rental rates for leased units and the average of
the anticipated rental rates for unoccupied units, divided by
total units. In the fourth quarter of 2005, the Company adjusted
its stated market rents at the majority of its communities to be
more reflective of current market conditions. The impact of this
change is estimated to have reduced the average monthly rental
rate per unit by less than 1% for the year ended
December 31, 2005. |
Post Properties, Inc.
33
Post Apartment Homes, L.P.
|
|
| (4) |
Average economic occupancy is defined as gross potential rent
less vacancy losses, model expenses and bad debt expenses
divided by gross potential rent for the period, expressed as a
percentage. In the fourth quarter of 2005, the Company adjusted
its stated market rents at the majority of its communities to be
more reflective of current market conditions. The impact of this
change is estimated to have increased the computed average
economic occupancy amounts by less than 1% for the year ended
December 31, 2005. Gross potential rent is defined as the
sum of the gross actual rental rates for leased units and the
anticipated rental rates for unoccupied units. The calculation
of average economic occupancy does not include a deduction for
net concessions and employee discounts. Average economic
occupancy including these amounts would have been 93.9% and
93.1% for the years ended December 31, 2005 and 2004,
respectively. For the years ended December 31, 2005 and
2004, net concessions were $1,019 and $746, respectively, and
employee discounts were $420 and $456, respectively. |
| (5) |
These amounts were adjusted from previously reported amounts to
properly reflect capital expenditures for partial condominium
conversion communities and for stabilized communities. |
Rental and other revenues increased $7,153 or 2.9% from 2004 to
2005. This increase resulted primarily from a 1.8% increase in
the average monthly rental rate per apartment unit and an
increase in average economic occupancy of the portfolio from
93.6% to 94.5%. This increase in average rental rates resulted
in a revenue increase of approximately $4,356 between years. The
occupancy increase resulted in lower vacancy losses of $1,707.
Additionally, other property revenues increased $1,368 as a
result of higher up-front leasing fees and higher utility
reimbursements from residents due to increased utility expenses,
but were offset somewhat by higher net concessions of $278 due
to the impact of straight-lining net rentals and concessions
under generally accepted accounting principles. Overall, the
improving performance of the operating portfolio reflects
gradually improving market conditions with the Company’s
operations in all of its markets reporting increased revenues
over the prior year. With modestly increasing occupancy rates in
2005, the Company’s strategy continues to be focused on
increasing average rental rates in 2006 as the Company’s
markets continue to show general economic improvement. See the
“Outlook” section below for a discussion of trends for
2006.
Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $2,876 or 3.1% from
2004 to 2005. This increase was primarily due to increased
utility expenses of $1,356 or 11.1%, increased maintenance and
repairs expenses of $1,446 or 14.2% and increased ground rent
expenses of $1,286 or 94.1%, offset by decreased property tax
expenses of $1,010 or 3.2% and decreased insurance expenses of
$671 or 14.1%. Utility expenses increased primarily due to
higher electricity rates at certain properties in the
Company’s Texas markets and generally higher rates for all
utilities in the second half of 2005. Repairs and maintenance
expenses increased primarily due to increased exterior painting
costs of $1,165 between periods. The increase in ground rent
expense of $1,286 reflects the impact of straight-lining
long-term ground lease payments associated with leases with
stated rent escalations (the straight-lining of ground rents
resulted in $1,251 of the increase) in 2005. The decrease in
property tax expenses in 2005 reflected reduced tax expense from
favorable tax valuations from taxing authorities in 2005 and
from prior year tax settlements recorded in 2005. Insurance
expenses declined in 2005 due primarily to favorable loss
experience on the Company’s property insurance program. See
the “Outlook” section below for a discussion of trends
for 2006.
Post Properties, Inc.
34
Post Apartment Homes, L.P.
Comparison of Year Ended December 31, 2004 to Year Ended
December 31, 2003
For the purposes of comparative operating performance, the
Company categorizes its operating communities based on the
period each community reaches stabilized occupancy, as defined
above. For the 2004 to 2003 comparison, the operating community
categories were based on the status of each community as of
December 31, 2004. As a result, these categories are
different from the operating community categories used in the
2005 to 2004 comparison discussed earlier in this section.
Further, the amounts reported in the table below have been
adjusted from the amounts reported in the Company’s
December 31, 2004 financial statements due to the
restatement impact of reclassifying the operating results of
assets designated as held for sale in 2005 to discontinued
operations under SFAS No. 144 (see the related
discussion under the caption, “Discontinued
Operations”). The operating performance from continuing
operations for all of the Company’s apartment communities
combined for the years ended December 31, 2004 and 2003 is
summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
|
|
| |
|
| |
|
|
| |
|
2004 | |
|
2003 | |
|
% Change | |
| |
|
| |
|
| |
|
| |
|
Rental and other property revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
$ |
233,309 |
|
|
$ |
231,437 |
|
|
|
0.8 |
% |
|
Communities stabilized in 2003
|
|
|
15,784 |
|
|
|
14,695 |
|
|
|
7.4 |
% |
|
Development and lease-up communities(2)
|
|
|
7,001 |
|
|
|
2,006 |
|
|
|
249.0 |
% |
|
Acquired communities(3)
|
|
|
4,472 |
|
|
|
— |
|
|
|
— |
|
|
Other property segments(4)
|
|
|
21,218 |
|
|
|
19,564 |
|
|
|
8.5 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
281,784 |
|
|
|
267,702 |
|
|
|
5.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Property operating and maintenance expenses (exclusive of
depreciation and amortization)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities(1)
|
|
|
90,349 |
|
|
|
86,751 |
|
|
|
4.1 |
% |
|
Communities stabilized in 2003
|
|
|
5,933 |
|
|
|
5,854 |
|
|
|
1.3 |
% |
|
Development and lease-up communities(2)
|
|
|
2,122 |
|
|
|
1,893 |
|
|
|
12.1 |
% |
|
Acquired communities(3)
|
|
|
1,309 |
|
|
|
— |
|
|
|
— |
|
|
Other property segments and other expenses(5)
|
|
|
27,640 |
|
|
|
23,273 |
|
|
|
18.8 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
127,353 |
|
|
|
117,771 |
|
|
|
8.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Property net operating income(6)
|
|
$ |
154,431 |
|
|
$ |
149,931 |
|
|
|
3.0 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recurring capital expenditures:(7)(8)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carpet
|
|
$ |
2,618 |
|
|
$ |
1,760 |
|
|
|
48.8 |
% |
|
Other
|
|
|
5,237 |
|
|
|
4,143 |
|
|
|
26.4 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
7,855 |
|
|
$ |
5,903 |
|
|
|
33.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Non-recurring capital expenditures
|
|
$ |
3,712 |
|
|
$ |
4,267 |
|
|
|
(13.0 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
Average apartment units in service
|
|
|
20,726 |
|
|
|
20,607 |
|
|
|
0.6 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Communities which reached stabilization prior to January 1,
2003. |
| (2) |
Communities in the “construction”,
“development” or “lease-up” stage during
2003 and, therefore, not considered fully stabilized for all of
the periods presented. |
| (3) |
Communities acquired subsequent to January 1, 2003. |
| (4) |
Other property segment revenues include revenues from commercial
properties, revenues from furnished apartment rentals above the
unfurnished rental rates and any property revenue not directly
related to property operations. Other property segment revenues
exclude other corporate revenues of $1,000 and $457 for the
years ended December 31, 2004 and 2003, respectively. |
| (5) |
Other property segments and other expenses include expenses
associated with commercial properties and furnished apartment
rentals as well as certain indirect central office operating
expenses related to management and grounds maintenance. |
Post Properties, Inc.
35
Post Apartment Homes, L.P.
|
|
| (6) |
A reconciliation of property net operating income to GAAP net
income is detailed below. |
| |
|
|
|
|
|
|
|
|
|
| |
|
Year Ended | |
| |
|
December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Total same store NOI
|
|
$ |
142,960 |
|
|
$ |
144,686 |
|
|
Property NOI from other operating segments
|
|
|
11,471 |
|
|
|
5,245 |
|
| |
|
|
|
|
|
|
|
Consolidated property NOI
|
|
|
154,431 |
|
|
|
149,931 |
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
| |
Other revenues
|
|
|
1,000 |
|
|
|
457 |
|
| |
Interest income
|
|
|
817 |
|
|
|
894 |
|
| |
Minority interest in consolidated property partnerships
|
|
|
671 |
|
|
|
1,605 |
|
| |
Depreciation
|
|
|
(79,473 |
) |
|
|
(77,595 |
) |
| |
Interest expense
|
|
|
(63,552 |
) |
|
|
(61,640 |
) |
| |
Amortization of deferred financing costs
|
|
|
(4,304 |
) |
|
|
(3,801 |
) |
| |
General and administrative
|
|
|
(18,205 |
) |
|
|
(13,841 |
) |
| |
Investment, development and other costs
|
|
|
(2,930 |
) |
|
|
(2,715 |
) |
| |
Termination of debt remarketing agreement (interest expense)
|
|
|
(10,615 |
) |
|
|
— |
|
| |
Loss on early extinguishment of indebtedness
|
|
|
(4,011 |
) |
|
|
— |
|
| |
Proxy contest and related costs
|
|
|
— |
|
|
|
(5,231 |
) |
| |
Severance charges
|
|
|
— |
|
|
|
(21,506 |
) |
| |
Equity in income of unconsolidated entities
|
|
|
1,083 |
|
|
|
7,790 |
|
| |
Minority interest of preferred unitholders
|
|
|
(3,780 |
) |
|
|
(5,600 |
) |
| |
Minority interest of common unitholders
|
|
|
2,586 |
|
|
|
4,367 |
|
| |
|
|
|
|
|
|
| |
Loss from continuing operations
|
|
|
(26,282 |
) |
|
|
(26,885 |
) |
| |
Income from discontinued operations
|
|
|
114,501 |
|
|
|
41,041 |
|
| |
|
|
|
|
|
|
|
Net income
|
|
$ |
88,219 |
|
|
$ |
14,156 |
|
| |
|
|
|
|
|
|
|
|
| (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. Recurring capital expenditures are
those that are generally expected to be incurred on an annual
basis. Non-recurring capital expenditures are those that
generally occur less frequently than on an annual basis. |
| (8) |
A reconciliation of property capital expenditures from
continuing operations to total recurring and non-recurring
capital expenditures as presented in the consolidated statements
of cash flows under GAAP is detailed below. |
| |
|
|
|
|
|
|
|
|
|
| |
|
Year Ended | |
| |
|
December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Recurring capital expenditures
|
|
|
|
|
|
|
|
|
| |
Continuing operations
|
|
$ |
7,854 |
|
|
$ |
5,903 |
|
| |
Discontinued operations
|
|
|
2,030 |
|
|
|
3,570 |
|
| |
|
|
|
|
|
|
| |
Total recurring capital expenditures per statements of cash flows
|
|
$ |
9,884 |
|
|
$ |
9,473 |
|
| |
|
|
|
|
|
|
|
Non-recurring capital expenditures
|
|
|
|
|
|
|
|
|
| |
Continuing operations
|
|
$ |
3,712 |
|
|
$ |
4,267 |
|
| |
Discontinued operations
|
|
|
893 |
|
|
|
885 |
|
| |
|
|
|
|
|
|
| |
Total non-recurring capital expenditures per statements of cash
flows
|
|
$ |
4,605 |
|
|
$ |
5,152 |
|
| |
|
|
|
|
|
|
The Operating Partnership reported net income available to
common unitholders of $81,546 and $3,048 for the years ended
December 31, 2004 and 2003, respectively, and the Company
reported net income available to common shareholders of $76,368
and $2,707 for the years ended December 31, 2004 and 2003,
respectively. The improvement in net income in 2004 compared to
2003 primarily reflected increased gains on property sales of
$72,947 ($69,542 net of minority interest) between years.
The change between years was also impacted by larger accounting
charges in 2003 of $44,199 ($39,232 net of minority
interest) relating to severance, proxy contest and asset
impairment charges compared to expense items in 2004 of $20,987
($19,637 net of minority interest) relating to losses on
early debt extinguishments, costs of terminating a debt
remarketing agreement (interest expense) and asset impairment
charges. These items are discussed in more detail in the
sections below along with a discussion of the changes in the
operating performance of the Company’s assets.
Rental and other revenues increased $14,082 or 5.3% from 2003 to
2004 primarily due to increased revenues from the Company’s
lease-up and acquired
communities of $9,467 or 471.9%. In addition, revenues from
stabilized communities and newly stabilized communities
increased from 2003 to 2004 due to improving market conditions
between years. The revenue increase from
lease-up communities in
2004 reflects almost a full year of operating performance in
2004 for the one community compared to an initial
lease-up period in
2003. The revenue increase from acquired communities reflects
the acquisition of one community in June 2004. Property
operating and
Post Properties, Inc.
36
Post Apartment Homes, L.P.
maintenance expenses (exclusive of depreciation and
amortization) increased $9,582 or 8.1% primarily due to
increased expenses from stabilized communities and increased
management division expenses. The expense increase from
stabilized communities is discussed below. The management
division expense increase primarily reflects the impact of
casualty losses to repair hurricane damage of $1,321 to the
Company’s Florida communities, severance costs of $569
relating to the elimination of certain positions resulting from
asset sales and other expense increases due to the increased
volume of corporate apartment business in 2004.
In 2004, the Company recognized net gains from discontinued
operations of $113,739 ($106,039 net of minority interest)
from the sale of eight communities containing 3,880 units,
and certain land parcels. These sales generated net proceeds of
approximately $242,962, including $104,325 of tax-exempt debt
assumed by the purchasers. In 2003, the Company recognized net
gains from discontinued operations of $40,792 ($36,497 net
of minority interest) on the sale of four communities containing
1,844 units and certain land parcels. These sales generated
net proceeds of approximately $163,560.
Depreciation expense increased $1,878, or 2.4% from 2003 to 2004
primarily due to depreciation on a community acquired in June
2004 and due to increased depreciation on a
lease-up community that
was placed in service in 2003.
Interest expense (excluding $10,615 of costs associated with the
termination of a debt remarketing agreement —
discussed below) increased $1,912 or 3.1% from 2003 to 2004
primarily due to a $2,477 reduction in capitalized interest to
development properties between years as the Company’s prior
year development pipeline transitioned to operating properties
through early 2003. Excluding the reduction in capitalized
interest between periods, the combined interest expense in
continuing and discontinued operations decreased by $4,253 or
5.7% between years. This decrease results from lower overall
debt levels between years and lower interest rates on unsecured
public debt refinanced in 2004. Lower debt levels in 2004 were a
result of the partial use of 2003 and 2004 asset sales proceeds
to reduce debt.
In December 2004, the Company terminated a remarketing agreement
related to its $100,000, 6.85% Mandatory Par Put Remarketed
Securities (“MOPPRS”) due March 2015. In connection
with the termination of the remarketing agreement, the Company
paid $10,615, including transaction expenses. Under the terms of
the remarketing agreement, the remarketing agent had the right
to remarket the $100,000 unsecured notes in March 2005 for a
ten-year term at an interest rate calculated as 5.715% plus the
Company’s then current credit spread to the ten-year
treasury rate. As a result of the termination of the remarketing
agreement, the underlying debt matured and was repaid in March
2005.
The loss on early extinguishment of indebtedness in 2004 of
$4,011 represented the debt repurchase premiums, transaction
expenses and the write-off of unamortized deferred financing
costs associated with the early retirement of debt. In October
2004, the Company purchased and retired $87,957 of the
Company’s 8.125% medium term, unsecured notes through a
tender offer. The debt was originally scheduled to mature in
2005. The Company retired a portion of this debt prior to
maturity to take advantage of favorable lower interest rates in
October 2004 and to reduce its debt refinancing risk in 2005.
General and administrative expenses increased $4,364, or 31.5%,
from 2003 to 2004 primarily due to higher expenses related to
the amortization of incentive stock compensation awards,
directors and officers insurance, legal, audit, corporate
governance and other consulting expenses. The increase in legal
expenses includes approximately $1,584 of additional costs
associated with the settlement with the Company’s former
chairman and CEO (see note 7 to the consolidated financial
statements), shareholder litigation and other matters. The
increase in audit and corporate governance expense includes
approximately $1,164 of additional costs associated with the
Company’s compliance with the Sarbanes/ Oxley regulations.
The increase in consulting expenses of approximately $620
between years reflects costs associated with a review and
valuation of each asset in the Company’s real estate
portfolio to assist with future capital investment decisions and
strategic planning and professional services to assist with the
selection of new property management software.
Investment, development and other costs increased $215 or 7.9%
from 2003 to 2004. Investment, development and other costs of
$2,930 in 2004 consisted of investment group executive
management and administrative costs of $1,279 and development
personnel and associated costs and land carry expenses not
allocable to development projects of $1,651. Investment,
development and other costs of $2,715 in 2003 included
investment group executive management and administrative costs
of $391, development personnel and associated costs and land
carry expenses not allocable to development projects of $1,423,
the write-off of the Company’s remaining investment in a
property management software company of $276, legal expenses of
$373 relating to board of directors governance and
Post Properties, Inc.
37
Post Apartment Homes, L.P.
transition matters, the settlement cost of $100 relating to the
bankruptcy of a former technology investment and losses of $152
on the disposal of the Company’s partial ownership interest
in a corporate aircraft.
The Company recorded severance and proxy contest charges of
$21,506 and $5,231, respectively, in 2003. These charges are
discussed in more detail below. Comparable charges were not
incurred in 2004.
Equity in income of unconsolidated real estate entities
decreased from $7,790 in 2003 to $1,083 in 2004. This decrease
was primarily due to the recognition of the Company’s share
of a gain of $8,395 resulting from the sale of an apartment
community by one of the limited liability companies in 2003.
Excluding the impact of this gain, the net income of the
unconsolidated entities improved in 2004 primarily due to the
completion of the
lease-up of one
community held by the entities and the generally improving
apartment market fundamentals resulting in improved operating
performance of the communities held by the entities.
Recurring and nonrecurring capital expenditures from continuing
operations increased $1,397 or 13.7% from 2003 to 2004. The
increase in recurring capital expenditures of $1,952 or 33.1%
reflects the impact of several communities beginning to
capitalize carpet, vinyl and blinds in 2004 (the communities
expensed these expenditures under the Company’s accounting
policies for the initial five years), more leasing office
upgrades in 2004, more parking lot resurfacings in 2004 as well
as the timing of capital spending between years. The decrease in
nonrecurring capital expenditures of $555 or 13.0% in 2004
reflects primarily lower expenditures on projects to prevent
water infiltration on two communities in Florida.
Fully Stabilized (Same Store) Communities
The Company defines fully stabilized communities as those which
have reached stabilization prior to the beginning of the
previous year. For the 2004 to 2003 comparison, fully stabilized
communities are defined as those communities which reached
stabilization prior to January 1, 2003. This portfolio
consisted of 50 communities with 19,106 units, including 25
communities with 9,672 units (50.6%) located in Atlanta,
Georgia, 13 communities with 3,939 units (20.6%) located in
Dallas, Texas, two communities with 1,305 units (6.8%)
located in Tampa, Florida, three communities with
1,204 units (6.3%) located in Washington D.C. and seven
communities with 2,986 units (15.7%) located in other
markets. The operating performance of these communities is
summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
|
|
| |
|
| |
|
|
| |
|
2004 | |
|
2003 | |
|
% Change | |
| |
|
| |
|
| |
|
| |
|
Rental and other revenues
|
|
$ |
233,309 |
|
|
$ |
231,437 |
|
|
|
0.8 |
% |
|
Property operating and maintenance expenses (excluding
depreciation and amortization)
|
|
|
90,349 |
|
|
|
86,751 |
|
|
|
4.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Same store net operating income(1)
|
|
$ |
142,960 |
|
|
$ |
144,686 |
|
|
|
(1.2 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
Capital expenditures(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Recurring
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Carpet
|
|
$ |
2,422 |
|
|
$ |
1,745 |
|
|
|
38.8 |
% |
| |
|
Other
|
|
|
4,940 |
|
|
|
3,951 |
|
|
|
25.0 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
Total recurring |
|
|
7,362 |
|
|
|
5,696 |
|
|
|
29.2 |
% |
| |
Non-recurring
|
|
|
3,000 |
|
|
|
3,302 |
|
|
|
(9.1 |
)% |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total capital expenditures (A)
|
|
$ |
10,362 |
|
|
$ |
8,998 |
|
|
|
15.2 |
% |
| |
|
|
|
|
|
|
|
|
|
| |
Total capital expenditures per unit
(A÷19,106 units)
|
|
$ |
542 |
|
|
$ |
471 |
|
|
|
15.1 |
% |
| |
|
|
|
|
|
|
|
|
|
|
Average monthly rental per apartment unit(3)
|
|
$ |
1,015 |
|
|
$ |
1,040 |
|
|
|
(2.4 |
)% |
| |
|
|
|
|
|
|
|
|
|
|
Average economic occupancy(4)
|
|
|
93.4 |
% |
|
|
91.8 |
% |
|
|
1.6 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Net operating income of stabilized communities is a supplemental
non-GAAP financial measure. See page 36 for a
reconciliation of net operating income for stabilized
communities to GAAP net income. |
Post Properties, Inc.
38
Post Apartment Homes, L.P.
|
|
| (2) |
A reconciliation of these segment components of property capital
expenditures to total recurring and non-recurring capital
expenditures as presented in the consolidated statements of cash
flows prepared under GAAP is detailed below. |
| |
|
|
|
|
|
|
|
|
| |
|
Year Ended | |
| |
|
December 31, | |
| |
|
| |
| |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
Recurring capital expenditures by operating segment
|
|
|
|
|
|
|
|
|
|
Fully stabilized
|
|
$ |
7,362 |
|
|
$ |
5,696 |
|
|
Communities stabilized in prior year
|
|
|
275 |
|
|
|
74 |
|
|
Construction and lease-up
|
|
|
25 |
|
|
|
— |
|
|
Acquired communities
|
|
|
166 |
|
|
|
— |
|
|
Other property segments, including discontinued operations
|
|
|
2,056 |
|
|
|
3,703 |
|
| |
|
|
|
|
|
|
|
Total recurring capital expenditures per statements of cash flows
|
|
$ |
9,884 |
|
|
$ |
9,473 |
|
| |
|
|
|
|
|
|
|
Non-recurring capital expenditures by operating segment
|
|
|
|
|
|
|
|
|
|
Fully stabilized
|
|
$ |
3,000 |
|
|
$ |
3,302 |
|
|
Communities stabilized in prior year
|
|
|
231 |
|
|
|
335 |
|
|
Construction and lease-up
|
|
|
— |
|
|
|
— |
|
|
Acquired communities
|
|
|
5 |
|
|
|
— |
|
|
Other property segments, including discontinued operations
|
|
|
1,369 |
|
|
|
1,515 |
|
| |
|
|
|
|
|
|
|
Total non-recurring capital expenditures, per statements of cash
flows
|
|
$ |
4,605 |
|
|
$ |
5,152 |
|
| |
|
|
|
|
|
|
|
|
| |
The Company uses same store recurring and non-recurring capital
expenditures as cash flow measures. Same store recurring and
non-recurring capital expenditures are supplemental non-GAAP
financial measures. The Company believes that same store
recurring and non-recurring capital expenditures are important
indicators of the costs incurred by the Company in maintaining
same store communities. The corresponding GAAP measures include
information with respect to the Company’s other operating
segments consisting of communities stabilized in the prior year,
lease-up communities,
acquired communities and sold communities in addition to same
store information. Therefore, the Company believes that the
Company’s presentation of same store recurring and
non-recurring capital expenditures is necessary to demonstrate
same store replacement costs over time. The Company believes
that the most directly comparable GAAP measure to same store
recurring and non-recurring capital expenditures are the lines
on the Company’s consolidated statements of cash flows
entitled “recurring capital expenditures” and
“non-recurring capital expenditures.” |
|
|
| (3) |
Average monthly rental rate is defined as the average of the
gross actual rental rates for leased units and the average of
the anticipated rental rates for unoccupied units, divided by
total units. |
| (4) |
Average economic occupancy is defined as gross potential rent
less vacancy losses, model expenses and bad debt expenses
divided by gross potential rent for the period, expressed as a
percentage. Gross potential rent is defined as the sum of the
gross actual rental rates for leased units and the anticipated
rental rates for unoccupied units. The calculation of average
economic occupancy does not include a deduction for net
concessions and employee discounts. Average economic occupancy
including these amounts would have been 93.0% and 90.5% for the
years ended December 31, 2004 and 2003, respectively. For
the years ended December 31, 2004 and 2003, net concessions
were $594 and $2,451, respectively, and employee discounts were
$422 and $491, respectively. |
Rental and other revenues increased $1,872 or 0.8% from 2003 to
2004. This increase resulted from increased average economic
occupancy levels in 2004 offset somewhat by a 2.4% decline in
the average monthly rental rate per apartment unit. The increase
in the average economic occupancy of the portfolio from 91.8% in
2003 to 93.4% in 2004 resulted in lower net rental concessions
of $1,857 and lower vacancy losses of $4,669 in 2004. Other
property revenues also increased $1,012. The decline in average
rental rates resulted in a revenue decrease of approximately
$5,666 between years. Overall, the improving performance of the
operating portfolio reflected gradually improving market
conditions throughout 2004 in most of the Company’s markets
resulting generally from improved economic conditions.
Beginning in mid 2003 and through 2004, the Company focused its
leasing strategy on retaining higher average occupancy levels as
detailed above. The overall revenue impact of the increase in
occupancy levels, offset by declining year over year percentage
decreases in average monthly rental rates, has resulted in
increased year over year total rental and other revenues between
years (0.8% increase between periods). In periods prior to mid
2003, the Company’s leasing strategy focused more on
maintaining average monthly rental rates than on retaining
occupancy. The Company believed this strategy change was
necessary to maximize its operating results under the market
conditions existing in 2003 and 2004, to operate the
Company’s communities more efficiently at higher occupancy
levels and to be in a better position to increase rental rates
as market conditions improved in 2004 and in future years.
Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $3,598 or 4.1% from
2003 to 2004. Increased personnel expenses of $1,604 or 8.1%,
increased property tax expenses of $1,239 or 4.2%, and increased
utility expenses of $956 or 8.9% were offset by decreased
insurance expenses of $319 or 6.7%. Personnel expenses increased
due to annual salary increases, increased bonus expenses and
increased health and benefit expenses in 2004. Property tax
expense increased due primarily to rising property valuations in
the Dallas, Texas market. Utility expenses increased primarily
due to higher water and sewer rates in Atlanta, Georgia.
Insurance expenses decreased due to lower insurance rates for
the 2004 insurance renewal period.
Post Properties, Inc.
39
Post Apartment Homes, L.P.
Discontinued Operations
In accordance with SFAS No. 144, the operating results
and gains and losses on sales of real estate assets designated
as held for sale are included in discontinued operations in the
consolidated statements of operations. Under
SFAS No. 144, the operating results of assets
designated as held for sale are included in discontinued
operations in the consolidated statements of operations for all
periods presented. Additionally, all gains and losses on the
sale of these assets are included in discontinued operations.
For the year ended December 31, 2005, income from
discontinued operations included the results of operations of
one condominium conversion community classified as held for sale
at December 31, 2005 as well as the operations of six
communities sold in 2005 through their sale dates and one
condominium conversion community through its sell-out date. For
the years ended December 31, 2004 and 2003, income from
discontinued operations included the results of operations of
the one condominium conversion community classified as held for
sale at December 31, 2005, communities sold in 2005, one
condominium conversion community through its sell out date and
the results of operations of 12 communities designated as
held for sale and sold in 2004 and 2003 through their sale dates.
The revenues and expenses of these communities for the years
ended December 31, 2005, 2004 and 2003 were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
13,222 |
|
|
$ |
41,881 |
|
|
$ |
68,330 |
|
| |
Other
|
|
|
1,243 |
|
|
|
3,615 |
|
|
|
5,310 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
|
14,465 |
|
|
|
45,496 |
|
|
|
73,640 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
7,241 |
|
|
|
19,478 |
|
|
|
30,039 |
|
| |
Depreciation
|
|
|
— |
|
|
|
5,837 |
|
|
|
12,381 |
|
| |
Interest
|
|
|
2,161 |
|
|
|
5,532 |
|
|
|
9,220 |
|
| |
Asset impairment charges
|
|
|
— |
|
|
|
2,233 |
|
|
|
17,462 |
|
| |
Minority interest in consolidated property partnerships
|
|
|
14 |
|
|
|
(238 |
) |
|
|
(419 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total expenses
|
|
|
9,416 |
|
|
|
32,842 |
|
|
|
68,683 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations (before minority interest)
|
|
|
5,049 |
|
|
|
12,654 |
|
|
|
4,957 |
|
|
Minority interest
|
|
|
317 |
|
|
|
(343 |
) |
|
|
(413 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$ |
5,366 |
|
|
$ |
12,311 |
|
|
$ |
4,544 |
|
| |
|
|
|
|
|
|
|
|
|
The decrease in revenues and expenses between years results from
the Company’s continuing asset sales program and the impact
of the continued reclassification of the operating results
relating to the aggregate number of communities held for sale
and sold during the periods presented. Likewise, the gains on
sales of properties included in discontinued operations for each
year fluctuate with the timing and amounts of such sales. A
discussion of the gains on property sales for the years
presented is included under the caption “Results of
Operations”.
As discussed under “Liquidity and Capital Resources”,
the Company expects to continue to sell real estate assets in
future periods as part of its overall investment and disposition
strategy. As such, the Company may continue to have additional
assets classified as held for sale, however, the timing and
amount of such asset sales and their impact on the aggregate
revenues and expenses included in discontinued operations will
vary from year to year.
In 2004, the Company recorded asset impairment charges totaling
$2,233 to write-down the cost of two apartment communities,
located in Dallas, Texas, to their estimated fair value when the
assets were classified as held for sale or sold. In 2003, the
Company recorded asset impairment charges totaling $17,462 to
write-down apartment communities in Dallas, Texas and Phoenix,
Arizona to their estimated fair value. Additionally, should the
Company change its expectations regarding the holding period for
certain assets or decide to classify certain assets as held for
sale, this could cause the Company to recognize impairment
losses in future periods if the carrying value of these assets
is not deemed recoverable.
Post Properties, Inc.
40
Post Apartment Homes, L.P.
2003 Management Transition and Severance and Proxy Contest
Charges
In 2002, the Company began a planned management succession
process. A new chief executive officer was named and the roles
of the chairman of the board of directors and the chief
executive officer were separated into individual positions. In
the first quarter of 2003, the Company’s former chairman
and vice chairman of the board of directors changed their status
from executive officers to non-executive board members and an
independent board member was elected as chairman of the board.
The Company’s new chairman of the board and the chief
executive officer embarked on additional management changes,
which included the departures of the Company’s executive
vice president and chief financial officer and executive vice
president of asset management, in the second quarter of 2003.
These changes and executive departures in 2003 lead to the
severance charges discussed in the following paragraphs.
Following a proxy contest initiated by the Company’s former
chairman of the board, as discussed more fully below, the
Company completed the transition to a new management team. A new
chief investment officer was added in the second quarter of 2003
to lead the Company’s development, acquisition and asset
disposition efforts and a new chief financial officer was added
in the fourth quarter of 2003 to lead the financial disciplines
of the Company.
In 2003, the Company recorded charges of $21,506 relating to the
change in roles from executive to non-executive status of the
Company’s former chairman and vice chairman of the board of
directors and relating to the departures of its executive vice
president and chief financial officer and its executive vice
president of asset management. These charges consisted of the
discounted present value of the estimated payments to be made to
the former chairman and vice chairman under their existing
employment arrangements, amounts representing the discounted
present value of estimated net costs that may be incurred by the
Company relating to its split-dollar life insurance obligations
to the individuals under their employment contracts and amounts
representing the aggregate amount of the estimated payments and
benefits to be made to the other departing executive officers.
In 2004, the Company entered into a final settlement agreement
with its former chairman of the board of directors. Under the
terms of the agreement, the former chairman’s employment
and non-competition agreements were terminated and the Company
agreed to continue to provide the former chairman certain
payments and benefits through May 2013, the approximate
expiration date of the original employment agreement. Because
the present value of the estimated payments under the settlement
agreement approximated the Company’s remaining accrued
charge under the former employment agreement, no additional
charges were recorded as a result of the settlement.
In 2005, the Company recorded an additional expense charge of
$796 relating to changes in the estimated future costs of
certain benefits granted to former executive officers under
prior employment or settlement agreements. The estimated future
cost increases primarily related to increased fuel and other
operating costs and expenses associated with certain fractional
aircraft benefits provided to such executives.
A summary of the changes in the accrued severance balance for
years ended December 31, 2005, 2004 and 2003 is included in
note 7 to the consolidated financial statements.
Substantially all of these remaining severance amounts will be
paid over the remaining terms of the former executives’
employment and settlement agreements (8 to 11 years).
Proxy and related costs of $5,231 represent the legal, advisory
and other expenses associated with the solicitation of proxies
from shareholders resulting from the proxy contest initiated in
2003 by the Company’s former chairman of the board of
directors. Additionally, the $5,231 amount includes the
estimated legal and resolution costs associated with the
settlement of two derivative and purported class action lawsuits
filed against the Company during the proxy contest. These
lawsuits were settled in 2004. Substantially all of the proxy
and related costs were paid in 2003.
Outlook for 2006
The Company’s outlook for 2006 is based on the expectation
that apartment market fundamentals will continue to improve
throughout the year as a result of increased demand stemming
from ongoing job growth and continued strength in the overall
U.S. economy, increased mortgage interest rates and
single-family housing prices which have decreased the
affordability of housing, and the expectation of a relatively
moderate level of supply of new market-rate apartments in the
primary markets and submarkets where the Company operates.
Rental and other revenues from fully stabilized communities are
expected to increase compared to 2005, primarily driven by
expected rental rate increases in excess of 4.0%. However,
operating expenses of fully stabilized communities are also
expected to increase in excess of 4.0% in 2006. The Company
expects the primary drivers of this expense increase will be
personnel expenses, property taxes, utility expenses and the
cost of new technology initiatives, including implementing new
customer contact centers and rolling out yield management (pric-
Post Properties, Inc.
41
Post Apartment Homes, L.P.
ing) software in 2006. Based on these assumptions for 2006,
management expects stabilized community net operating income to
increase in excess of 4.0% in 2006.
In 2006, management currently expects to sell one apartment
community located in Denver, CO (a single asset market). This
sale is expected to close in the second half of 2006 and is
expected to generate accounting gains in 2006. The expected net
proceeds from this sale is intended to be used for various
corporate purposes, including the acquisition of operating
apartment communities in other markets in which the Company
operates, funding of the Company’s development pipeline,
repayments of debt maturing in 2006 and possible common stock
repurchases. Additionally, the Company, through a taxable REIT
subsidiary, expects to substantially complete the sale of
remaining homes in its two condominium conversion projects that
commenced sales in 2005 and to begin sales of condominium homes
at portions of two existing communities in 2006. The Company
also expects to begin closings of condominium homes at a newly
developed project in late 2006 or early 2007. The Company
expects to realize net accounting gains in 2005 from these
condominium sales. Net condominium profits are expected to be
somewhat lower in 2006 as the majority of 2006 condominium
profits will be subject to federal and state income taxes. In
2005, the Company was not generally subject to federal income
taxes on profits from condominium sales to the extent the
Company benefited from tax net operating loss carryforwards.
Management expects interest expense in 2006 to be lower than in
2005 due generally to increased interest capitalization in 2006
resulting from increased project development volume as well as
lower fixed interest rates on unsecured debt that was refinanced
at a lower rate in 2005. Management also expects modest
increases in general and administrative expenses due primarily
to increased costs of personnel and incentive compensation plans
as well as increased technology expenses supporting the
Company’s new technology platforms and initiatives.
The Company has one project under construction with a total
expected cost of approximately $99,000 and expects to begin
additional development projects in 2006. As a result of expected
additional development starts in 2006, the Company expects to
have increased capitalization of incremental development
personnel and associated costs and, as a result, somewhat lower
expensed investment and development expenses.
For the first quarter of 2006, management expects to report
lower net income compared to the fourth quarter of 2005. The
reduction in net income in the first quarter is expected to be
driven by reduced net operating income on same store
communities, reduced net operating income from the conversion of
additional apartment units into condominiums and lower
condominium profits due to the timing of unit sales and the
availability of new conversion units later in 2006. Management
expects same store property net operating income to be lower
when compared to the fourth quarter of 2005, primarily driven by
higher projected operating expenses, due partly to resetting
annual accruals for property taxes and other expenses. Same
store operating revenues are expected to be flat to up slightly
compared to the fourth quarter of 2005. Expensed development
costs are expected to increase in the first quarter due to
increased development personnel as these increased costs will
not be absorbed by new development activities until later in
2006. General and administrative costs are expected to be
relatively flat compared to the fourth quarter of 2005.
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 flow from operating activities
increased from $79,105 in 2004 to $86,761 in 2005 primarily due
to higher net income (before depreciation and gains on sales)
resulting primarily from the lack of large expenses in 2005
related to early debt extinguishment costs and terminations of a
debt remarketing agreement (an aggregate reduction from 2004 of
$13,496) and to a lesser extent the improved operating
performance of the Company (as discussed above). The
Company’s net cash provided by operating activities
decreased from $91,549 in 2003 to $79,105 in 2004 primarily due
to lower net income (before depreciation and gains on property
sales) resulting from early debt extinguishment costs, costs
(additional interest) associated with the termination of a debt
remarketing agreement, increased general and administrative
expenses (as discussed above) and reduced earnings from the
dilutive impact of the Company’s asset sale and capital
recycling program. The Company expects cash flows from operating
activities to improve somewhat in 2006 primarily driven by the
expected improved operating performance of the Company’s
fully stabilized properties offset somewhat by the continued
dilutive cash flow impact from asset and condominium conversion
sales.
Net cash flow provided by investing activities decreased from
$131,873 in 2004 to $70,293 in 2005 primarily due to the
repayment in 2004 of construction loan advances from
unconsolidated entities. In 2005, the Company acquired
additional land for future development, acquired one apartment
community and continued the construction of one
Post Properties, Inc.
42
Post Apartment Homes, L.P.
community in Washington, D.C., however, the increased use
of proceeds was generally offset by increased proceeds from
community and condominium conversion sales. Net cash provided by
investing activities decreased from $234,195 in 2003 to $131,873
in 2004 primarily due to the net repayment of construction loan
advances and cash distributions from unconsolidated entities in
2003 offset somewhat by the timing and amount of assets sales
and acquisitions between years. In 2006, the Company expects to
increase its development activities in all three of its regional
geographic areas financed principally through debt financing
(see discussion below). The Company also expects to sell one
community and additional condominium units and to principally
reinvest the proceeds in acquisitions of other operating
communities.
Net cash flow used in financing activities decreased from
$212,189 in 2004 to $150,767 in 2005 primarily due to having
less proceeds from investing activities to retire debt in 2005.
Net cash used in financing activities decreased from $330,800 in
2003 to $212,189 in 2004 primarily due to having less net
proceeds from investing activities to retire outstanding debt
and preferred equity in 2004. In 2006, the Company expects to
see a net increase in outstanding debt, principally to fund the
expected increase in development and acquisition activity
discussed above.
Since 1993, the Company has elected to be taxed as a real estate
investment trust (“REIT”) under the Internal Revenue
Code of 1986, as amended (the “Code”). Management
currently intends to continue operating the Company as a REIT in
2006. As a REIT, the Company is subject to a number of
organizational and operating requirements, including a
requirement to distribute 90% of its adjusted taxable income to
its shareholders. As a REIT, the Company generally will not be
subject to federal income taxes on its taxable income it
distributes to its shareholders.
Generally, the Company’s objective is to meet its
short-term liquidity requirement of funding the payment of its
current level of quarterly preferred and common stock dividends
to shareholders through its net cash flows provided by operating
activities, less its annual recurring and nonrecurring property
and corporate capital expenditures. These operating capital
expenditures are the capital expenditures necessary to maintain
the earnings capacity of the Company’s operating assets
over time.
For the year ended December 31, 2005, the Company’s
net cash flow from operations, reduced by annual operating
capital expenditures, was not sufficient to fully fund the
Company’s current level of dividend payments to common and
preferred shareholders by approximately $14,000. The Company
used a combination of proceeds from asset sales and line of
credit borrowings to fund the additional cash flow necessary to
fully fund the Company’s annual dividend to common
shareholders of $1.80 per share. The Company’s net
cash flow from operations continues to be sufficient to meet the
dividend requirements necessary to maintain its REIT status
under the Code.
For 2006, management of the Company expects to maintain its
current quarterly dividend payment rate to common shareholders
of $0.45 per share. At this dividend rate, the Company
expects that net cash flows from operations reduced by annual
operating capital expenditures will not be sufficient to fund
the dividend payments to common and preferred shareholders by
approximately $10,000 to $15,000. The downward trend in the cash
flow shortfall is primarily due to the anticipated improvement
in the operating performance of the Company’s stabilized
operating communities in 2006. The Company intends to use
primarily the proceeds from 2006 apartment community and
condominium sales to fund the additional cash flow necessary to
fully fund the dividend payments to common shareholders. The
primary factor leading to the shortfall is the negative cash
flow impact of sales of operating properties (discussed below)
and condominium conversion properties prior to the reinvestment
of such proceeds. The Company’s board of directors,
however, will continue to review the dividend quarterly.
The Company generally expects to utilize net cash flow from
operations, available cash and cash equivalents and available
capacity under its revolving lines of credit to fund its
short-term liquidity requirements, including capital
expenditures, development and construction expenditures, land
and apartment community acquisitions, dividends and
distributions on its common and preferred equity and its debt
service requirements. Available borrowing capacity under the
Company’s revolving lines of credit as of December 31,
2005 was created primarily through the Company’s asset
sales program. The Company generally expects to fund its
long-term liquidity requirements, including maturities of
long-term debt and acquisition and development activities,
through long-term unsecured and secured borrowings, through
additional sales of selected operating and condominium
conversion properties, and possibly through equity or leveraged
joint venture arrangements. The Company may also continue to use
joint venture arrangements in future periods to reduce its
market concentrations in certain markets, build critical mass in
other markets and to reduce its exposure to certain risks of its
future development activities.
As previously discussed, the Company intends to use the proceeds
from the sale of operating and condominium conversion
properties, availability under its unsecured revolving lines of
credit and future construction loan financing as the primary
source of capital to fund its current and future development and
acquisition expenditures. The
Post Properties, Inc.
43
Post Apartment Homes, L.P.
Company had instituted an active asset sale and capital
recycling program as the primary means to fund its on-going
community development and acquisition program. Total net sales
proceeds in 2005, 2004 and 2003 were $229,249 (including $81,560
of debt assumed), $242,962 (including $104,325 of debt assumed)
and $163,560, respectively. Additionally in 2003, the Company
received net proceeds of approximately $75,000 (including the
repayment of the construction loan from the venture) from the
sale of one apartment community held in an unconsolidated
entity. A more detailed discussion of the assets sales is
included in note 5 to the consolidated financial statements.
In 2005, the Company sold six apartment communities, containing
3,047 units, as part of its asset sales program designed to
maintain the low average age and high quality of the portfolio
and reduce the Company’s market concentrations in Atlanta,
Georgia and Dallas, Texas. These sales generated significant
capital gains for tax purposes in 2005. The Company was able to
use its regular quarterly dividend of $0.45 per share
(including a portion of its 2006 dividends) to distribute these
capital gains to shareholders. The Company plans to sell one
apartment community in 2006 and the sale is expected to generate
net proceeds in excess of $100,000. The Company also expects to
generate additional sales proceeds from the sale of converted
condominium units. It is the current intent of management to
continue to recycle capital through selling assets and
reinvesting the proceeds as a strategy to diversify the cash
flows of the Company across its markets and focus on building
critical mass in fewer markets, although the pace of such sales
is expected to slow in 2006.
In 2005, the Company used a portion of the proceeds from its
asset sales program and the proceeds of a new $100,000 unsecured
note issuance to retire approximately $212,000 of maturing
unsecured notes. In 2006, the Company has approximately $121,000
of unsecured and secured debt that matures or becomes
prepayable. The Company anticipates refinancing some or all of
this debt through new debt issuances, depending on the amount
and timing of the Company’s capital needs and general
credit market conditions. The Company expects modest interest
rate increases in 2006 compared to interest rates experienced in
2005.
At December 31, 2005, the Company had available credit
facility borrowing capacity of approximately $265,000 under its
line of credit facilities. The Company’s credit facilities
with total capacity of $370,000 mature in January 2007. The
terms, conditions and restrictive covenants associated with the
Company’s lines of credit facilities are summarized in
note 3 to the consolidated financial statements. Management
believes it will have adequate capacity under its facilities to
execute its 2006 business plan and meet its short-term liquidity
requirements without a significant level of additional asset
sales (other than those asset sales discussed above).
Contractual Obligations
A summary of the Company’s future contractual obligations
related to long-term debt, non-cancelable operating leases and
other obligations at December 31, 2005, were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Obligation Due Date | |
| |
|
| |
| |
|
|
|
1 Year or | |
|
2-3 | |
|
4-5 | |
|
After | |
| Contractual Obligations |
|
Total | |
|
Less | |
|
Years | |
|
Years | |
|
5 Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Long-term debt(1)
|
|
$ |
879,236 |
|
|
$ |
81,269 |
|
|
$ |
162,750 |
|
|
$ |
264,168 |
|
|
$ |
371,049 |
|
|
Lines of credit(2)
|
|
|
101,379 |
|
|
|
— |
|
|
|
101,379 |
|
|
|
— |
|
|
|
— |
|
|
Operating leases(3)
|
|
|
176,047 |
|
|
|
1,665 |
|
|
|
3,263 |
|
|
|
3,262 |
|
|
|
167,857 |
|
|
Other long-term obligations(4)
|
|
|
22,053 |
|
|
|
4,695 |
|
|
|
6,542 |
|
|
|
5,324 |
|
|
|
5,492 |
|
|
Development and construction obligations(5)
|
|
|
52,227 |
|
|
|
47,004 |
|
|
|
5,223 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
1,230,942 |
|
|
$ |
134,633 |
|
|
$ |
279,157 |
|
|
$ |
272,754 |
|
|
$ |
544,398 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Amounts include principal payments only. The Company made
interest payments of $66,234, $66,992 and $78,822 for the years
ended December 31, 2005, 2004 and 2003, respectively. The
Company will pay interest in future periods on outstanding
indebtedness based on the rates and terms summarized in
note 3 to the consolidated financial statements. |
| (2) |
At December 31, 2005, the Company had issued letters of
credit to third parties totaling $3,136 under its credit
facility arrangements. |
| (3) |
Primarily includes ground leases underlying apartment
communities owned by the Company. |
| (4) |
Represents amounts committed to current and former executive
officers under the terms of employment and settlement agreements. |
| (5) |
Represents estimated remaining amounts necessary to complete one
project currently under development, including amounts due under
general construction contracts. |
In addition to these contractual obligations, the Company incurs
annual capital expenditures to maintain and enhance its existing
portfolio of operating properties. Aggregate capital
expenditures for the Company’s operating properties totaled
$14,429, $14,515 and $15,865 for the years ended
December 31, 2005, 2004 and 2003, respectively. Based on
the size of the Company’s operating property portfolio at
December 31, 2005, the Company expects that its capital
expenditures in 2006 will be modestly higher than the amount
incurred in 2005 as the Company seeks to maintain the operating
performance of its assets.
Post Properties, Inc.
44
Post Apartment Homes, L.P.
At December 31, 2005, the Company had an outstanding
interest rate swap derivative financial instrument with a
notional value of approximately $97,100 with a maturity date in
2009. The contractual payment terms of this arrangement is
summarized in Item 7A, “Quantitative and Qualitative
Disclosures About Market Risk” in this
Form 10-K.
Additional information regarding the accounting and disclosure
of this arrangement is included in note 13 to the
Company’s consolidated financial statements.
Off-Balance Sheet Arrangements
The Company holds investments in three unconsolidated entities,
in which it has a 35% ownership interest. Two of these
unconsolidated entities have third-party mortgage indebtedness
and the aggregate indebtedness totaled $66,999 at
December 31, 2005.
Long-term Debt Issuances and Retirements
A summary of the Company’s outstanding debt and debt
maturities at December 31, 2005 is included in note 3
to the consolidated financial statements. A summary of changes
in secured and unsecured debt in 2005 is discussed below.
Upon their maturity in 2005, the Company repaid its $25,000
(7.28%) medium term, unsecured notes, repaid its $100,000
(6.85%) Mandatory Par Put Remarketed Securities
(“MOPPRS”) debt arrangement, repaid its $62,043
(8.125%) medium term, unsecured notes and repaid its $25,000
(6.78%) medium term, unsecured notes from available borrowings
under its unsecured lines of credit.
In 2005, the Company issued $100,000 of senior unsecured notes.
The notes bear interest at 5.45% and mature in 2012. The net
proceeds from the unsecured notes were used to reduce amounts
outstanding under the Company’s unsecured lines of credit.
In 2005, the Company sold three apartment communities subject to
the assumption of $81,560 of tax-exempt mortgage indebtedness
(see note 4). As a result of these debt assumptions, the
Company recorded losses on the early extinguishment of debt of
$3,220 ($3,043 net of minority interest) related to the
write-off of deferred loan costs of $2,265 ($2,141 net of
minority interest) relating to such assumed indebtedness and the
realization of a $955 ($902 net of minority interest) loss
in connection with the termination of related interest rate cap
agreements that were used as cash flow hedges of the assumed
debt.
Stock Repurchase Program
In 2004, the Company’s board of directors adopted a new
stock repurchase program under which the Company may repurchase
up to $200,000 of common or preferred stock at market prices
from time to time until December 31, 2006.
In 2005, the Company repurchased approximately 1,031 shares
of its common stock totaling approximately $34,400 under 10b5-1
stock purchase plans, at an average price of $33.38 per
share. Under its previous stock program which expired on
December 31, 2004, the Company repurchased $2,268 of common
stock and $120,000 or preferred stock and units during 2004.
Capitalization of Fixed Assets and Community Improvements
The Company has a policy of capitalizing those expenditures
relating to the acquisition of new assets and the development
and construction of new apartment communities. In addition, the
Company capitalizes expenditures that enhance the value of
existing assets and expenditures that substantially extend the
life of existing assets. All other expenditures necessary to
maintain a community in ordinary operating condition are
expensed as incurred. Additionally, for new development
communities, carpet, vinyl and blind replacements are expensed
as incurred during the first five years (which corresponds to
the estimated depreciable life of these assets) after
construction completion. Thereafter, these replacements are
capitalized. Further, the Company expenses as incurred interior
and exterior painting of operating communities.
The Company capitalizes interest, real estate taxes, and certain
internal personnel and associated costs 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 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 included in construction in progress. The
Company ceases the capitalization of such costs as the
residential units in
Post Properties, Inc.
45
Post Apartment Homes, L.P.
a community become substantially complete and available for
occupancy. This practice results in a proration of these costs
between amounts that are capitalized and expensed as the
residential units in a development community become available
for occupancy. In addition, prior to the completion of units,
the Company expenses, as incurred, substantially all operating
expenses (including pre-opening marketing expenses) of such
communities.
Acquisition of assets and community improvement and other
capitalized expenditures for the years ended December 31,
2005, 2004 and 2003 are summarized as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Land and community development and acquisition activity(1)
|
|
$ |
116,710 |
|
|
$ |
43,708 |
|
|
$ |
24,914 |
|
|
Revenue generating additions and improvements(2)
|
|
|
— |
|
|
|
26 |
|
|
|
1,240 |
|
|
Nonrecurring capital expenditures(3)
|
|
|
4,508 |
|
|
|
4,605 |
|
|
|
5,152 |
|
|
Recurring capital expenditures(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Carpet replacements, other community additions and improvements
|
|
|
9,921 |
|
|
|
9,884 |
|
|
|
9,473 |
|
| |
Corporate additions and improvements
|
|
|
1,771 |
|
|
|
681 |
|
|
|
799 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
$ |
132,910 |
|
|
$ |
58,904 |
|
|
$ |
41,578 |
|
| |
|
|
|
|
|
|
|
|
|
|
Other Data
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Capitalized interest
|
|
$ |
2,907 |
|
|
$ |
1,078 |
|
|
$ |
3,555 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Capitalized development personnel and associated costs and
fees(5)
|
|
$ |
1,219 |
|
|
$ |
998 |
|
|
$ |
1,566 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Reflects aggregate land and community development and
acquisition costs, exclusive of the change in construction
payables between years. |
| (2) |
Represents expenditures for major renovations of communities,
water sub-metering equipment and other upgrade costs that
enhance the rental value of such units. |
| (3) |
Represents property improvement expenditures that generally
occur less frequently than on an annual basis. |
| (4) |
Represents property improvement expenditures of a type that are
expected to be incurred on an annual basis. |
| (5) |
Reflects development personnel and associated costs capitalized
to construction and development activities. |
Current Development Activity
At December 31, 2005, the Company had one community under
development containing 350 apartment and for-sale condominium
units. This community is summarized in the table below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Estimated | |
| |
|
|
|
Estimated | |
|
Costs Incurred | |
|
Quarter of | |
|
Quarter of | |
|
Quarter of | |
| |
|
Number of | |
|
Construction | |
|
as of | |
|
Construction | |
|
First Units | |
|
Stabilized | |
| Metropolitan Area |
|
Units | |
|
Cost | |
|
12/31/2005 | |
|
Start | |
|
Available | |
|
Occupancy(1) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
|
|
($ in millions) | |
|
($ in millions) | |
|
|
|
|
|
|
|
Construction/Lease-up Communities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Washington D.C.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Carlyletm —
Apartments and Condominiums(2)
|
|
|
350 |
|
|
$ |
99 |
|
|
$ |
47 |
|
|
|
4Q’04 |
|
|
|
3Q’06 |
|
|
|
3Q’07 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction/Lease-up Communities
|
|
|
350 |
|
|
$ |
99 |
|
|
$ |
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
The Company defines stabilized occupancy as the earlier to occur
of (i) the attainment of 95% physical occupancy on the
first day of any month or (ii) one year after completion of
construction. |
| (2) |
The condominium component of the project, consisting of
145 units, is being developed through a taxable REIT
subsidiary in a majority owned joint venture with a Washington
D.C. based developer. As of February 28, 2006, the Company
has 81 units under contract for sale upon completion and
delivery of the units. The first condominium units at this
project are expected to be delivered in late 2006 or early 2007.
There can be no assurance that condominium units under contract
will close. |
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
generally provide that the term will be extended unless either
the Company or the lessee gives at least sixty (60) days
written notice of termination. In addition, the Company’s
policy generally permits the earlier termination of a lease by a
lessee upon thirty (30) days written notice to the Company
and the payment of an amount equal to two month’s 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.
Post Properties, Inc.
46
Post Apartment Homes, L.P.
Funds from Operations
The Company uses the National Association of Real Estate
Investment Trusts (“NAREIT”) definition of funds from
operations (“FFO”). FFO is defined by NAREIT as net
income available to common shareholders determined in accordance
with GAAP, excluding gains (or losses) from extraordinary items
and sales of depreciable property, plus depreciation of real
estate assets, and after adjustment for unconsolidated
partnerships and joint ventures all determined on a consistent
basis in accordance with GAAP. FFO is a supplemental non-GAAP
financial measure. FFO presented herein is not necessarily
comparable to FFO presented by other real estate companies
because not all real estate companies use the same definition.
The Company’s FFO is comparable to the FFO of real estate
companies that use the current NAREIT definition.
The Company also uses FFO as an operating measure. Accounting
for real estate assets using historical cost accounting under
GAAP assumes that the value of real estate assets diminishes
predictably over time. NAREIT stated in its April 2002 White
Paper on Funds from Operations “since real estate asset
values have historically risen or fallen with market conditions,
many industry investors have considered presentations of
operating results for real estate companies that use historical
cost accounting to be insufficient by themselves.” As a
result, the concept of FFO was created by NAREIT for the REIT
industry to provide an alternate measure. Since the Company
agrees with the concept of FFO and appreciates the reasons
surrounding its creation, management believes that FFO is an
important supplemental measure of operating performance. In
addition, since most equity REITs provide FFO information to the
investment community, the Company believes FFO is a useful
supplemental measure for comparing the Company’s results to
those of other equity REITs. The Company believes that the line
on the Company’s consolidated statement of operations
entitled “net income available to common shareholders”
is the most directly comparable GAAP measure to FFO.
FFO should not be considered as an alternative to net income
available to common shareholders (determined in accordance with
GAAP) as an indicator of the Company’s financial
performance. While management believes that FFO is an important
supplemental non-GAAP financial measure, management believes it
is also important to stress that FFO should not be considered as
an alternative to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the
Company’s liquidity. Further, FFO is not necessarily
indicative of sufficient cash flow to fund all of the
Company’s needs or ability to service indebtedness or make
distributions.
A reconciliation of net income available to common shareholders
to FFO available to common shareholders and unitholders is
provided below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Net income available to common shareholders
|
|
$ |
134,311 |
|
|
$ |
76,368 |
|
|
$ |
2,707 |
|
|
Minority interest of common unitholders — continuing
operations
|
|
|
(53 |
) |
|
|
(2,586 |
) |
|
|
(4,367 |
) |
|
Minority interest in discontinued operations(1)
|
|
|
7,152 |
|
|
|
7,764 |
|
|
|
4,708 |
|
|
Depreciation on wholly-owned real estate assets, net(2)
|
|
|
73,189 |
|
|
|
81,433 |
|
|
|
84,530 |
|
|
Depreciation on real estate assets held in unconsolidated
entities
|
|
|
969 |
|
|
|
1,328 |
|
|
|
1,567 |
|
|
Gains on sales of real estate assets, net of provision for
income taxes — discontinued operations
|
|
|
(140,643 |
) |
|
|
(113,739 |
) |
|
|
(40,792 |
) |
|
Incremental gains on condominium sales, net of provision for
income taxes(3)
|
|
|
8,811 |
|
|
|
— |
|
|
|
— |
|
|
Gains on sales of real estate assets — unconsolidated
entities
|
|
|
(612 |
) |
|
|
— |
|
|
|
(8,395 |
) |
|
Incremental gains on condominium sales —
unconsolidated entities(3)
|
|
|
359 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Funds from operations available to common shareholders and
unitholders(4)
|
|
$ |
83,483 |
|
|
$ |
50,568 |
|
|
$ |
39,958 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$ |
86,761 |
|
|
$ |
79,105 |
|
|
$ |
91,549 |
|
|
Investing activities
|
|
$ |
70,293 |
|
|
$ |
131,873 |
|
|
$ |
234,195 |
|
|
Financing activities
|
|
$ |
(150,767 |
) |
|
$ |
(212,189 |
) |
|
$ |
(330,800 |
) |
|
Weighted average shares outstanding — basic
|
|
|
40,217 |
|
|
|
39,777 |
|
|
|
37,688 |
|
|
Weighted average shares and units outstanding — basic
|
|
|
42,353 |
|
|
|
42,474 |
|
|
|
42,134 |
|
|
Weighted average shares outstanding — diluted(5)
|
|
|
40,616 |
|
|
|
39,892 |
|
|
|
37,699 |
|
|
Weighted average shares and units outstanding —
diluted(5)
|
|
|
42,752 |
|
|
|
42,589 |
|
|
|
42,145 |
|
|
|
| (1) |
Represents the minority interest in earnings and gains (losses)
on properties held for sale and sold reported as discontinued
operations for the periods presented. |
Post Properties, Inc.
47
Post Apartment Homes, L.P.
|
|
| (2) |
Depreciation on wholly-owned real estate assets is net of the
minority interest portion of depreciation in consolidated
entities. |
| (3) |
The Company recognizes incremental gains on condominium sales in
FFO, net of provision for income taxes, to the extent that net
sales proceeds from the sale of condominium units exceeds the
greater of their fair value or net book value as of the date the
property is acquired by its taxable REIT subsidiary. |
| (4) |
Funds from operations for the year ended December 31, 2005
included a loss of $3,220 from the early extinguishment of debt
associated with asset sales, a severance charge of $796 and a
gain of $5,267 on the sale of a technology investment. Funds
from operations for the year ended December 31, 2004
included impairment charges of $2,333, losses on debt
extinguishments of $8,139 and a loss on the termination of a
debt remarketing agreement of $10,615. Additionally, FFO for the
year ended December 31, 2004 includes a reduction for
preferred stock and unit redemption costs of $3,526. FFO for the
year ended December 31, 2003, included severance changes of
$21,506, proxy and related costs of $5,231 and asset impairment
charges of $17,462. |
| (5) |
Diluted weighted average shares and units for the years ended
December 31, 2005, 2004 and 2003 include 400, 115 and 11 of
common stock equivalent shares and units, respectively, that
were antidilutive to all income (loss) per share computations
under generally accepted accounting principles. |
Post Properties, Inc.
48
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, 2005, the Company had $198,479 of
variable rate debt tied to LIBOR. In addition, the Company had
$28,495 in variable tax-exempt debt with interest based on the
FNMA “AAA” tax exempt rate. In addition, the Company
has interest rate risk associated with fixed rate debt at
maturity. The discussion in this Interest Rate Sensitivity
section is the same for the Company and the Operating
Partnership, except that all indebtedness described herein has
been incurred by the Operating Partnership.
Management has and will continue to manage interest rate risk as
follows:
|
|
| • |
maintain a conservative ratio of fixed rate, long-term debt to
total debt such that variable rate exposure is kept at an
acceptable level; |
| |
| • |
fix certain long-term variable rate debt through the use of
interest rate swaps or interest rate caps with appropriate
matching maturities; |
| |
| • |
use treasury locks where appropriate to fix rates on anticipated
debt transactions; and |
| |
| • |
take advantage of favorable market conditions for long-term debt
and/or equity. |
Management uses various financial models and advisors to achieve
these objectives.
The tables below provide information about the Company’s
fixed and floating rate debt and derivative financial
instruments that are sensitive to changes in interest rates. For
debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity
dates. For interest rate swap and cap arrangements, the table
presents notional amounts and weighted average interest rates by
(expected) contractual maturity dates. Notional amounts are
used to calculate the contractual payments to be exchanged under
the contract. Weighted average variable rates are based upon
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 | |
| |
|
| |
| |
|
|
|
There- | |
|
|
|
Fair | |
| |
|
2006 | |
|
2007 | |
|
2008 | |
|
2009 | |
|
2010 | |
|
after | |
|
Total | |
|
Value | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(in thousands) | |
|
Debt obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed rate
|
|
$ |
79,779 |
|
|
$ |
156,583 |
|
|
$ |
2,822 |
|
|
$ |
74,036 |
|
|
$ |
185,857 |
|
|
$ |
254,564 |
|
|
$ |
753,641 |
|
|
$ |
767,271 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Average interest rate
|
|
|
6.93 |
% |
|
|
6.43 |
% |
|
|
5.75 |
% |
|
|
5.47 |
% |
|
|
7.69 |
% |
|
|
5.33 |
% |
|
|
6.33 |
% |
|
|
|
|
|
Floating rate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
LIBOR-based and other:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Cash management line(1)(2)
|
|
|
— |
|
|
|
11,379 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
11,379 |
|
|
|
11,379 |
|
| |
|
Revolver(1)(2)
|
|
|
— |
|
|
|
90,000 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
90,000 |
|
|
|
90,000 |
|
| |
|
FNMA(3)
|
|
|
1,490 |
|
|
|
1,610 |
|
|
|
1,735 |
|
|
|
1,865 |
|
|
|
2,010 |
|
|
|
88,390 |
|
|
|
97,100 |
|
|
|
97,100 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Total LIBOR-based and other
|
|
|
1,490 |
|
|
|
102,989 |
|
|
|
1,735 |
|
|
|
1,865 |
|
|
|
2,010 |
|
|
|
88,390 |
|
|
|
198,479 |
|
|
|
198,479 |
|
| |
|
Tax-exempt(4)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
400 |
|
|
|
28,095 |
|
|
|
28,495 |
|
|
|
28,495 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total floating rate debt
|
|
$ |
1,490 |
|
|
$ |
102,989 |
|
|
$ |
1,735 |
|
|
$ |
1,865 |
|
|
|
2,410 |
|
|
|
116,485 |
|
|
|
226,974 |
|
|
|
226,974 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
$ |
81,269 |
|
|
$ |
259,572 |
|
|
$ |
4,557 |
|
|
$ |
75,901 |
|
|
$ |
188,267 |
|
|
$ |
371,049 |
|
|
$ |
980,615 |
|
|
$ |
994,245 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Interest on these debt instruments is based on LIBOR plus 0.75%
at December 31, 2005. At December 31, 2005, the
one-month LIBOR rate was 4.4%. |
| (2) |
Assumes the Company’s Revolver and Cash Management lines of
credit are repaid at their maturity dates. |
| (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, 2005, the FNMA “AAA” tax exempt
rate was 3.54%. 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.
49
Post Apartment Homes, L.P.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Expected | |
|
|
| |
|
|
|
Average | |
|
Average | |
|
Settlement | |
|
Fair Value | |
| Interest Rate Derivatives |
|
Notional Amount |
|
Pay Rate/Cap Rate | |
|
Receive Rate | |
|
Date | |
|
Asset (Liab.) | |
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
Interest Rate Swaps
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Variable to fixed
|
|
$104,000 amortizing to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$90,270 |
|
|
6.04% |
|
|
|
1 month LIBOR |
|
|
|
7/31/09 |
|
|
$ |
(4,021 |
) |
|
Interest rate cap
|
|
$28,495 |
|
|
5.00% |
|
|
|
— |
|
|
|
2/01/08 |
|
|
|
5 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(4,016 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As more fully described in note 1 to the consolidated
financial statements, the interest rate swap and cap
arrangements are carried on the consolidated balance sheet at
the fair value shown above in accordance with
SFAS No. 133, as amended. If interest rates under the
Company’s floating rate LIBOR-based and tax-exempt
borrowings, in excess of the $97,100 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, 2005, would increase or decrease by
approximately $1,299 on an annualized basis.
|
|
| ITEM 8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
The financial statements are listed under Item 15(a) and
are filed as part of this report on the pages indicated. The
supplementary data are included in note 17 of the Notes to
Consolidated Financial Statements.
|
|
| ITEM 9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE |
None.
ITEM 9A. CONTROLS
AND PROCEDURES
As required by Securities and Exchange Commission rules, the
Company has evaluated the effectiveness of the design and
operation of its disclosure controls and procedures as of the
end of the period covered by this Annual Report on
Form 10-K. This
evaluation was carried out under the supervision and with the
participation of the Company’s management, including its
principal executive officer and principal financial officer.
Based on this evaluation, these officers have concluded that the
design and operation of the Company’s disclosure controls
and procedures were effective as of the end of the period
covered by this annual report on
Form 10-K.
Disclosure controls and procedures (as defined in
Rule 13a-15(e) and
15d-15(e) under the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) are the Company’s controls and other procedures
that are designed to ensure that information required to be
disclosed by the Company in the reports that it files or submits
under the Exchange Act, is recorded, processed, summarized and
reported, within the time periods specified in the Securities
and Exchange Commission’s rules and forms.
There were no changes to the Company’s internal control
over financial reporting (as defined in
Rule 13a-15(f) and
15d-15(f) under the
Exchange Act) during the registrants’ fourth quarter of
2005 that materially affected, or are reasonably likely to
materially affect, the Company’s internal control over
financial reporting.
Management’s report on internal control over financial
reporting and the report of the Company’s independent
registered public accounting firm are included in Part IV,
Item 15 of this annual report on
Form 10-K and are
incorporated herein by reference.
|
|
| ITEM 9B. |
OTHER INFORMATION |
None.
Post Properties, Inc.
50
Post Apartment Homes, L.P.
PART III
|
|
| ITEM 10. |
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT |
The sections under the heading “Corporate Governance”
and the section under the headings
“Proposal 1 — Election of Directors”
entitled “Nominees for Election,” of the Proxy
Statement for Annual Meeting of Shareholders to be held
May 18, 2006 (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.
Code of Ethics
The Company has adopted a Code of Ethics for Senior Executive
and Financial Officers (the “Code of Ethics”) that
applies to our chief executive officer, chief financial officer
and chief accounting officer and persons performing similar
functions. The Code of Ethics is available on the Company’s
website at www.postproperties.com under the “Corporate
Governance” caption. Any amendments to, or waivers of, the
Code of Ethics will be disclosed on our website promptly
following the date of such amendment or waiver.
|
|
| ITEM 11. |
EXECUTIVE COMPENSATION |
The sections under the heading “Corporate Governance”
entitled “Director Compensation” 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,” “Long Term
Incentive Plan Table,” “Employee 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 AND RELATED SHAREHOLDER MATTERS |
The sections under the heading “Common Stock Ownership by
Management and Principal Shareholders” and “Equity
Compensation Plan Information” of the Proxy Statement are
incorporated herein by reference.
|
|
| ITEM 13. |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS |
The section under the heading “Certain Relationships and
Related Party Transactions” of the Proxy Statement is
incorporated herein by reference.
|
|
| ITEM 14. |
PRINCIPAL ACCOUNTANT FEES AND SERVICES |
The sections under the heading titled “Independent
Registered Public Accountant Fees and Services” of the
Proxy Statement are incorporated herein by reference.
PART IV
|
|
| ITEM 15. |
EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES |
(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.
Post Properties, Inc.
51
Post Apartment Homes, L.P.
INDEX TO FINANCIAL STATEMENTS
| |
|
|
|
|
|
| |
|
Page | |
| |
|
| |
|
POST PROPERTIES, INC.
|
|
|
|
|
|
Consolidated Financial Statements:
|
|
|
|
|
| |
Management’s Report on Internal Control over Financial
Reporting
|
|
|
54 |
|
| |
Report of Independent Registered Public Accounting Firm
|
|
|
55 |
|
| |
Consolidated Balance Sheets as of December 31, 2005 and 2004
|
|
|
56 |
|
| |
Consolidated Statements of Operations for the Years Ended
December 31, 2005, 2004 and 2003
|
|
|
57 |
|
| |
Consolidated Statements of Shareholders’ Equity and
Accumulated Earnings for the Years Ended December 31, 2005,
2004 and 2003
|
|
|
58 |
|
| |
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2005, 2004 and 2003
|
|
|
60 |
|
| |
Notes to the Consolidated Financial Statements
|
|
|
61 |
|
|
POST APARTMENT HOMES, L.P.
|
|
|
|
|
|
Consolidated Financial Statements:
|
|
|
|
|
| |
Management’s Report on Internal Control over Financial
Reporting
|
|
|
88 |
|
| |
Report of Independent Registered Public Accounting Firm
|
|
|
89 |
|
| |
Consolidated Balance Sheets as of December 31, 2005 and 2004
|
|
|
90 |
|
| |
Consolidated Statements of Operations for the Years Ended
December 31, 2005, 2004 and 2003
|
|
|
91 |
|
| |
Consolidated Statements of Partners’ Equity for the Years
Ended December 31, 2005, 2004 and 2003
|
|
|
92 |
|
| |
Consolidated Statements of Cash Flows for the Years Ended
December 31, 2005, 2004 and 2003
|
|
|
93 |
|
| |
Notes to the Consolidated Financial Statements
|
|
|
94 |
|
|
Schedule III:
|
|
|
|
|
| |
Real Estate and Accumulated Depreciation
|
|
|
120 |
|
|
All other schedules are omitted because they are either not
applicable or not required
|
|
|
|
|
|
POST PROPERTIES, INC. — 2005 NON-QUALIFIED EMPLOYEE
STOCK PURCHASE PLAN
|
|
|
|
|
|
Financial Statements:
|
|
|
|
|
| |
Report of Independent Registered Public Accounting Firm
|
|
|
124 |
|
| |
Statement of Net Assets Available for Plan Benefits as of
December 31, 2005
|
|
|
125 |
|
| |
Statement of Changes in Net Assets Available for Plan Benefits
for the Year ended December 31, 2005
|
|
|
126 |
|
| |
Notes to Financial Statements
|
|
|
127 |
|
Post Properties, Inc.
52
Post Properties, Inc.
Consolidated Financial Statements
December 31, 2005 and 2004
Post Properties, Inc.
53
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
The management of Post Properties, Inc. is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f).
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Under the supervision and with the
participation of the management of Post Properties, Inc.,
including the Company’s principal executive officer and
principal financial officer, Company management conducted an
evaluation of the effectiveness of its internal control over
financial reporting as of December 31, 2005 based on the
framework in Internal Control — Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its
evaluation under the framework in Internal
Control — Integrated Framework, the management of
Post Properties, Inc. concluded that its internal control over
financial reporting was effective as of December 31, 2005.
Management’s assessment of the effectiveness of the
Company’s internal control over financial reporting as of
December 31, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which is included
herein.
Post Properties, Inc.
54
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of Post Properties,
Inc.:
We have completed integrated audits of Post Properties, Inc.
2005 and 2004 consolidated financial statements and of its
internal control over financial reporting as of
December 31, 2005, and an audit of its 2003 consolidated
financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our
opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement
schedule
In our opinion, the consolidated financial statements listed in
the Post Properties index appearing under Item 15(a)
present fairly, in all material respects, the financial position
of Post Properties, Inc. and subsidiaries at December 31,
2005 and 2004, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2005 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a) presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. These financial statements and the financial
statement schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based
on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit of financial statements 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.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in
Management’s Report on Internal Control Over Financial
Reporting appearing under Item 15(a), that the Company
maintained effective internal control over financial reporting
as of December 31, 2005 based on criteria established in
Internal Control — Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO), is fairly stated, in all material respects,
based on those criteria. Furthermore, in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2005,
based on criteria established in Internal Control —
Integrated Framework issued by the COSO. The Company’s
management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
responsibility is to express opinions on management’s
assessment and on the effectiveness of the Company’s
internal control over financial reporting based on our audit. We
conducted our audit of internal control over financial reporting
in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over
financial reporting was maintained in all material respects. An
audit of internal control over financial reporting includes
obtaining an understanding of internal control over financial
reporting, evaluating management’s assessment, testing and
evaluating the design and operating effectiveness of internal
control, and performing such other procedures as we consider
necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinions.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 15, 2006
Post Properties, Inc.
55
POST PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Assets
|
|
|
|
|
|
|
|
|
| |
Real estate assets
|
|
|
|
|
|
|
|
|
| |
|
Land
|
|
$ |
266,914 |
|
|
$ |
266,520 |
|
| |
|
Building and improvements
|
|
|
1,789,479 |
|
|
|
1,887,514 |
|
| |
|
Furniture, fixtures and equipment
|
|
|
207,497 |
|
|
|
214,954 |
|
| |
|
Construction in progress
|
|
|
47,005 |
|
|
|
19,527 |
|
| |
|
Land held for future development
|
|
|
62,511 |
|
|
|
18,910 |
|
| |
|
|
|
|
|
|
| |
|
|
2,373,406 |
|
|
|
2,407,425 |
|
| |
|
Less: accumulated depreciation
|
|
|
(516,954 |
) |
|
|
(498,367 |
) |
| |
|
For-sale condominiums
|
|
|
38,338 |
|
|
|
— |
|
| |
|
Assets held for sale, net of accumulated depreciation of $0 and
$26,332 at December 31, 2005 and 2004, respectively
|
|
|
4,591 |
|
|
|
68,661 |
|
| |
|
|
|
|
|
|
| |
|
|
Total real estate assets |
|
|
1,899,381 |
|
|
|
1,977,719 |
|
| |
Investments in and advances to unconsolidated real estate
entities
|
|
|
26,614 |
|
|
|
21,320 |
|
| |
Cash and cash equivalents
|
|
|
6,410 |
|
|
|
123 |
|
| |
Restricted cash
|
|
|
4,599 |
|
|
|
1,844 |
|
| |
Deferred charges, net
|
|
|
11,624 |
|
|
|
15,574 |
|
| |
Other assets
|
|
|
32,826 |
|
|
|
37,262 |
|
| |
|
|
|
|
|
|
| |
|
|
Total assets |
|
$ |
1,981,454 |
|
|
$ |
2,053,842 |
|
| |
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
| |
Notes payable, including $0 and $34,060 of debt secured by
assets held for sale at December 31, 2005 and 2004,
respectively
|
|
$ |
980,615 |
|
|
$ |
1,129,478 |
|
| |
Accounts payable and accrued expenses
|
|
|
58,474 |
|
|
|
58,837 |
|
| |
Dividend and distribution payable
|
|
|
19,257 |
|
|
|
19,203 |
|
| |
Accrued interest payable
|
|
|
5,478 |
|
|
|
7,677 |
|
| |
Deposits and prepaid rents
|
|
|
9,857 |
|
|
|
7,236 |
|
| |
|
|
|
|
|
|
| |
|
|
Total liabilities |
|
|
1,073,681 |
|
|
|
1,222,431 |
|
| |
|
|
|
|
|
|
| |
Minority interest of common unitholders in Operating Partnership
|
|
|
26,764 |
|
|
|
43,341 |
|
| |
|
|
|
|
|
|
| |
Commitments and contingencies
|
|
|
|
|
|
|
|
|
| |
Shareholders’ equity
|
|
|
|
|
|
|
|
|
| |
|
Preferred stock, $.01 par value, 20,000 authorized:
|
|
|
|
|
|
|
|
|
| |
|
|
81/2%
Series A Cumulative Redeemable Shares, liquidation
preference $50 per share, 900 shares issued and
outstanding |
|
|
9 |
|
|
|
9 |
|
| |
|
|
75/8%
Series B Cumulative Redeemable Shares, liquidation
preference $25 per share, 2,000 shares issued and
outstanding |
|
|
20 |
|
|
|
20 |
|
| |
Common stock, $.01 par value, 100,000 authorized:
|
|
|
|
|
|
|
|
|
| |
|
41,394 and 40,164 shares issued, 41,394 and
40,164 shares outstanding at December 31, 2005 and
2004, respectively
|
|
|
414 |
|
|
|
401 |
|
| |
|
Additional paid-in capital
|
|
|
803,765 |
|
|
|
775,221 |
|
| |
|
Accumulated earnings
|
|
|
86,315 |
|
|
|
25,075 |
|
| |
|
Accumulated other comprehensive income (loss)
|
|
|
(4,208 |
) |
|
|
(8,668 |
) |
| |
|
Deferred compensation
|
|
|
(3,625 |
) |
|
|
(3,988 |
) |
| |
|
|
|
|
|
|
| |
|
|
882,690 |
|
|
|
788,070 |
|
| |
Less common stock in treasury, at cost, 44 and 0 shares at
December 31, 2005 and 2004, respectively
|
|
|
(1,681 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
| |
|
|
Total shareholders’ equity |
|
|
881,009 |
|
|
|
788,070 |
|
| |
|
|
|
|
|
|
| |
|
|
Total liabilities and shareholders’ equity |
|
$ |
1,981,454 |
|
|
$ |
2,053,842 |
|
| |
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc.
56
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
279,508 |
|
|
$ |
266,191 |
|
|
$ |
253,345 |
|
| |
Other property revenues
|
|
|
17,040 |
|
|
|
15,593 |
|
|
|
14,357 |
|
| |
Other
|
|
|
255 |
|
|
|
1,000 |
|
|
|
457 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
|
296,803 |
|
|
|
282,784 |
|
|
|
268,159 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
134,010 |
|
|
|
127,353 |
|
|
|
117,771 |
|
| |
Depreciation
|
|
|
76,248 |
|
|
|
79,473 |
|
|
|
77,595 |
|
| |
General and administrative
|
|
|
18,307 |
|
|
|
18,205 |
|
|
|
13,841 |
|
| |
Investment, development and other
|
|
|
5,242 |
|
|
|
2,930 |
|
|
|
2,715 |
|
| |
Proxy contest and related costs
|
|
|
— |
|
|
|
— |
|
|
|
5,231 |
|
| |
Severance charges
|
|
|
796 |
|
|
|
— |
|
|
|
21,506 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total expenses
|
|
|
234,603 |
|
|
|
227,961 |
|
|
|
238,659 |
|
| |
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
62,200 |
|
|
|
54,823 |
|
|
|
29,500 |
|
| |
Interest income
|
|
|
661 |
|
|
|
817 |
|
|
|
894 |
|
| |
Interest expense
|
|
|
(58,898 |
) |
|
|
(63,552 |
) |
|
|
(61,640 |
) |
| |
Amortization of deferred financing costs
|
|
|
(4,661 |
) |
|
|
(4,304 |
) |
|
|
(3,801 |
) |
| |
Equity in income of unconsolidated real estate entities
|
|
|
1,767 |
|
|
|
1,083 |
|
|
|
7,790 |
|
| |
Gains on sale of technology investment
|
|
|
5,267 |
|
|
|
— |
|
|
|
— |
|
| |
Termination of debt remarketing agreement (interest expense)
|
|
|
— |
|
|
|
(10,615 |
) |
|
|
— |
|
| |
Loss on early extinguishment of indebtedness
|
|
|
— |
|
|
|
(4,011 |
) |
|
|
— |
|
| |
Minority interest in consolidated property partnerships
|
|
|
239 |
|
|
|
671 |
|
|
|
1,605 |
|
| |
Minority interest of preferred unitholders
|
|
|
— |
|
|
|
(3,780 |
) |
|
|
(5,600 |
) |
| |
Minority interest of common unitholders
|
|
|
53 |
|
|
|
2,586 |
|
|
|
4,367 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Income (loss) from continuing operations
|
|
|
6,628 |
|
|
|
(26,282 |
) |
|
|
(26,885 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from discontinued operations, net of minority interest
|
|
|
5,366 |
|
|
|
12,311 |
|
|
|
4,544 |
|
| |
Gains on sales of real estate assets, net of minority interest
and provision for income taxes
|
|
|
132,997 |
|
|
|
106,039 |
|
|
|
36,497 |
|
| |
Loss on early extinguishment of indebtedness associated with
property sales, net of minority interest
|
|
|
(3,043 |
) |
|
|
(3,849 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Income from discontinued operations
|
|
|
135,320 |
|
|
|
114,501 |
|
|
|
41,041 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
141,948 |
|
|
|
88,219 |
|
|
|
14,156 |
|
| |
Dividends to preferred shareholders
|
|
|
(7,637 |
) |
|
|
(8,325 |
) |
|
|
(11,449 |
) |
| |
Redemption costs on preferred stock and units
|
|
|
— |
|
|
|
(3,526 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$ |
134,311 |
|
|
$ |
76,368 |
|
|
$ |
2,707 |
|
| |
|
|
|
|
|
|
|
|
|
|
Per common share data — Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loss from continuing operations (net of preferred dividends and
redemption costs)
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
| |
Income from discontinued operations
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Net income available to common shareholders
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Weighted average common shares outstanding — basic
|
|
|
40,217 |
|
|
|
39,777 |
|
|
|
37,688 |
|
| |
|
|
|
|
|
|
|
|
|
|
Per common share data — Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loss from continuing operations (net of preferred dividends and
redemption costs)
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
| |
Income from discontinued operations
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Net income available to common shareholders
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Weighted average common shares outstanding — diluted
|
|
|
40,217 |
|
|
|
39,777 |
|
|
|
37,688 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Common dividends declared
|
|
$ |
1.80 |
|
|
$ |
1.80 |
|
|
$ |
1.80 |
|
| |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc.
57
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
ACCUMULATED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands, except per share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Additional | |
|
|
|
Other | |
|
|
|
|
|
|
| |
|
Preferred | |
|
Common | |
|
Preferred | |
|
Common | |
|
Paid-in | |
|
Accumulated | |
|
Comprehensive | |
|
Deferred | |
|
Treasury | |
|
|
| |
|
Shares | |
|
Shares | |
|
Stock | |
|
Stock | |
|
Capital | |
|
Earnings | |
|
Income (Loss) | |
|
Compensation | |
|
Stock | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Shareholders’ Equity and Accumulated Earnings,
December 31, 2002
|
|
|
4,900 |
|
|
|
37,202 |
|
|
$ |
49 |
|
|
$ |
396 |
|
|
$ |
940,122 |
|
|
$ |
— |
|
|
$ |
(14,822 |
) |
|
$ |
(639 |
) |
|
$ |
(91,407 |
) |
|
$ |
833,699 |
|
| |
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,156 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
14,156 |
|
| |
|
Net change in derivative value, net of minority interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,460 |
|
|
|
— |
|
|
|
— |
|
|
|
2,460 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Total comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16,616 |
|
| |
Proceeds from employee stock purchase and stock option plans
|
|
|
— |
|
|
|
148 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,341 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,480 |
|
|
|
4,139 |
|
| |
Adjustment for minority interest of unitholders in Operating
Partnership upon conversion of units into common shares and at
dates of capital transactions
|
|
|
— |
|
|
|
1,162 |
|
|
|
— |
|
|
|
— |
|
|
|
(22,096 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
42,898 |
|
|
|
20,802 |
|
| |
Stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
218 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
218 |
|
| |
Restricted stock issuances, net of forfeitures
|
|
|
— |
|
|
|
174 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,737 |
) |
|
|
— |
|
|
|
— |
|
|
|
(4,527 |
) |
|
|
6,264 |
|
|
|
— |
|
| |
Amortization of deferred compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
742 |
|
|
|
— |
|
|
|
742 |
|
| |
Dividends to preferred shareholders
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,449 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,449 |
) |
| |
Dividends to common shareholders ($1.80 per share)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(65,534 |
) |
|
|
(2,707 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(68,241 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity and Accumulated Earnings,
December 31, 2003
|
|
|
4,900 |
|
|
|
38,686 |
|
|
|
49 |
|
|
|
396 |
|
|
|
849,632 |
|
|
|
— |
|
|
|
(12,362 |
) |
|
|
(4,424 |
) |
|
|
(36,765 |
) |
|
|
796,526 |
|
| |
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
88,219 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
88,219 |
|
| |
|
Net change in derivative value, net of minority interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,694 |
|
|
|
— |
|
|
|
— |
|
|
|
3,694 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Total comprehensive income
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
91,913 |
|
| |
Proceeds from employee stock purchase and stock option plans
|
|
|
— |
|
|
|
367 |
|
|
|
— |
|
|
|
5 |
|
|
|
6,115 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,345 |
|
|
|
10,465 |
|
| |
Adjustment for minority interest of unitholders in Operating
Partnership upon conversion of units into common shares and at
dates of capital transactions
|
|
|
— |
|
|
|
1,168 |
|
|
|
— |
|
|
|
— |
|
|
|
(14,042 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33,890 |
|
|
|
19,848 |
|
| |
Redemption of preferred stock
|
|
|
(2,000 |
) |
|
|
— |
|
|
|
(20 |
) |
|
|
— |
|
|
|
(49,980 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(50,000 |
) |
| |
Stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
633 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
633 |
|
| |
Restricted stock issuances, net of forfeitures
|
|
|
— |
|
|
|
25 |
|
|
|
— |
|
|
|
— |
|
|
|
(125 |
) |
|
|
— |
|
|
|
— |
|
|
|
(673 |
) |
|
|
798 |
|
|
|
— |
|
| |
Amortization of deferred compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,109 |
|
|
|
— |
|
|
|
1,109 |
|
| |
Treasury stock acquisitions
|
|
|
— |
|
|
|
(82 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,268 |
) |
|
|
(2,268 |
) |
| |
Dividends to preferred shareholders
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,325 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,325 |
) |
| |
Dividends to common shareholders ($1.80 per share)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,012 |
) |
|
|
(54,819 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(71,831 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity and Accumulated Earnings,
December 31, 2004
|
|
|
2,900 |
|
|
|
40,164 |
|
|
$ |
29 |
|
|
$ |
401 |
|
|
$ |
775,221 |
|
|
$ |
25,075 |
|
|
$ |
(8,668 |
) |
|
$ |
(3,988 |
) |
|
$ |
— |
|
|
$ |
788,070 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Properties, Inc.
58
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND
ACCUMULATED EARNINGS (cont’d)
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands, except per share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated | |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Additional | |
|
|
|
Other | |
|
|
|
|
|
|
| |
|
Preferred | |
|
Common | |
|
Preferred | |
|
Common | |
|
Paid-in | |
|
Accumulated | |
|
Comprehensive | |
|
Deferred | |
|
Treasury | |
|
|
| |
|
Shares | |
|
Shares | |
|
Stock | |
|
Stock | |
|
Capital | |
|
Earnings | |
|
Income (Loss) | |
|
Compensation | |
|
Stock | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Shareholders’ Equity and Accumulated Earnings,
December 31, 2004
|
|
|
2,900 |
|
|
|
40,164 |
|
|
$ |
29 |
|
|
$ |
401 |
|
|
$ |
775,221 |
|
|
$ |
25,075 |
|
|
$ |
(8,668 |
) |
|
$ |
(3,988 |
) |
|
$ |
— |
|
|
$ |
788,070 |
|
| |
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
141,948 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
141,948 |
|
| |
|
Net change in derivative value, net of minority interest |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,559 |
|
|
|
— |
|
|
|
— |
|
|
|
5,559 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
147,507 |
|
| |
Proceeds from employee stock purchase and stock option plans
|
|
|
— |
|
|
|
1,138 |
|
|
|
— |
|
|
|
8 |
|
|
|
16,181 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21,652 |
|
|
|
37,841 |
|
| |
Adjustment for minority interest of unitholders in Operating
Partnership upon conversion of units into common shares and at
dates of capital transactions
|
|
|
— |
|
|
|
1,097 |
|
|
|
— |
|
|
|
5 |
|
|
|
10,065 |
|
|
|
— |
|
|
|
(1,099 |
) |
|
|
— |
|
|
|
11,473 |
|
|
|
20,444 |
|
| |
Stock-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
888 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
888 |
|
| |
Restricted stock issuances, net of forfeitures
|
|
|
— |
|
|
|
26 |
|
|
|
— |
|
|
|
— |
|
|
|
1,410 |
|
|
|
— |
|
|
|
— |
|
|
|
(1,004 |
) |
|
|
(406 |
) |
|
|
— |
|
| |
Amortization of deferred compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1,367 |
|
|
|
— |
|
|
|
1,367 |
|
| |
Treasury stock acquisitions
|
|
|
— |
|
|
|
(1,031 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(34,400 |
) |
|
|
(34,400 |
) |
| |
Dividends to preferred shareholders
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,637 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,637 |
) |
| |
Dividends to common shareholders ($1.80 per share)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(73,071 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(73,071 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ Equity and Accumulated Earnings,
December 31, 2005
|
|
|
2,900 |
|
|
|
41,394 |
|
|
$ |
29 |
|
|
$ |
414 |
|
|
$ |
803,765 |
|
|
$ |
86,315 |
|
|
$ |
(4,208 |
) |
|
$ |
(3,625 |
) |
|
$ |
(1,681 |
) |
|
$ |
881,009 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc.
59
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
141,948 |
|
|
$ |
88,219 |
|
|
$ |
14,156 |
|
| |
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Depreciation
|
|
|
76,248 |
|
|
|
85,310 |
|
|
|
89,975 |
|
| |
|
Amortization of deferred financing costs
|
|
|
4,661 |
|
|
|
4,304 |
|
|
|
3,801 |
|
| |
|
Minority interest of preferred unitholders in Operating
Partnership
|
|
|
— |
|
|
|
3,780 |
|
|
|
5,600 |
|
| |
|
Minority interest of common unitholders in Operating Partnership
|
|
|
(53 |
) |
|
|
(2,586 |
) |
|
|
(4,367 |
) |
| |
|
Minority interest in discontinued operations
|
|
|
7,152 |
|
|
|
7,764 |
|
|
|
4,708 |
|
| |
|
Gains on sales of real estate assets — discontinued
operations
|
|
|
(140,643 |
) |
|
|
(113,739 |
) |
|
|
(40,792 |
) |
| |
|
Gain on sale of technology investment
|
|
|
(5,267 |
) |
|
|
— |
|
|
|
— |
|
| |
|
Asset impairment charges
|
|
|
— |
|
|
|
2,233 |
|
|
|
17,462 |
|
| |
|
Equity in income of unconsolidated real estate entities
|
|
|
(1,634 |
) |
|
|
(941 |
) |
|
|
(7,790 |
) |
| |
|
Distributions of earnings of unconsolidated entities
|
|
|
2,033 |
|
|
|
1,928 |
|
|
|
— |
|
| |
|
Stock-based compensation
|
|
|
2,293 |
|
|
|
1,785 |
|
|
|
1,071 |
|
| |
|
Deferred compensation
|
|
|
194 |
|
|
|
— |
|
|
|
— |
|
| |
|
Loss on early extinguishment of indebtedness
|
|
|
2,264 |
|
|
|
4,302 |
|
|
|
— |
|
| |
Changes in assets, (increase) decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Restricted cash
|
|
|
(2,755 |
) |
|
|
221 |
|
|
|
(696 |
) |
| |
|
Other assets
|
|
|
(1,257 |
) |
|
|
(2,858 |
) |
|
|
4,676 |
|
| |
|
Deferred charges
|
|
|
(1,082 |
) |
|
|
(361 |
) |
|
|
(2,210 |
) |
| |
Changes in liabilities, increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Accrued interest payable
|
|
|
(2,199 |
) |
|
|
754 |
|
|
|
(2,071 |
) |
| |
|
Accounts payable and accrued expenses
|
|
|
2,237 |
|
|
|
(356 |
) |
|
|
8,386 |
|
| |
|
Deposits and prepaid rents
|
|
|
2,621 |
|
|
|
(654 |
) |
|
|
(360 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Net cash provided by operating activities
|
|
|
86,761 |
|
|
|
79,105 |
|
|
|
91,549 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Construction and acquisition of real estate assets, net of
payables
|
|
|
(112,527 |
) |
|
|
(42,777 |
) |
|
|
(24,179 |
) |
| |
Net proceeds from sales of real estate assets
|
|
|
199,546 |
|
|
|
138,637 |
|
|
|
163,560 |
|
| |
Proceeds from sale of technology investment
|
|
|
5,267 |
|
|
|
— |
|
|
|
— |
|
| |
Capitalized interest
|
|
|
(2,907 |
) |
|
|
(1,078 |
) |
|
|
(3,555 |
) |
| |
Recurring capital expenditures
|
|
|
(9,921 |
) |
|
|
(9,884 |
) |
|
|
(9,473 |
) |
| |
Non-recurring capital expenditures
|
|
|
(4,508 |
) |
|
|
(4,605 |
) |
|
|
(5,152 |
) |
| |
Revenue generating capital expenditures
|
|
|
— |
|
|
|
(26 |
) |
|
|
(1,240 |
) |
| |
Corporate additions and improvements
|
|
|
(1,771 |
) |
|
|
(681 |
) |
|
|
(799 |
) |
| |
Distributions from (investments in and advances to)
unconsolidated entities
|
|
|
(5,846 |
) |
|
|
52,287 |
|
|
|
115,033 |
|
| |
Notes receivable collections
|
|
|
2,960 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
| |
Net cash provided by investing activities
|
|
|
70,293 |
|
|
|
131,873 |
|
|
|
234,195 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from indebtedness
|
|
|
100,000 |
|
|
|
135,000 |
|
|
|
— |
|
| |
Payments on indebtedness
|
|
|
(217,934 |
) |
|
|
(115,753 |
) |
|
|
(103,875 |
) |
| |
Payments of financing costs
|
|
|
(1,211 |
) |
|
|
(5,631 |
) |
|
|
— |
|
| |
Lines of credit proceeds (repayments), net
|
|
|
50,631 |
|
|
|
(21,262 |
) |
|
|
(124,358 |
) |
| |
Redemption of preferred stock
|
|
|
— |
|
|
|
(50,000 |
) |
|
|
— |
|
| |
Redemption of preferred units
|
|
|
— |
|
|
|
(70,000 |
) |
|
|
— |
|
| |
Treasury stock acquisitions
|
|
|
(34,400 |
) |
|
|
(2,268 |
) |
|
|
— |
|
| |
Proceeds from employee stock purchase and stock option plans
|
|
|
36,084 |
|
|
|
10,465 |
|
|
|
4,139 |
|
| |
Capital contributions (distributions) of minority interest
|
|
|
283 |
|
|
|
(3,806 |
) |
|
|
— |
|
| |
Distributions to preferred unitholders
|
|
|
— |
|
|
|
(4,246 |
) |
|
|
(5,600 |
) |
| |
Distributions to common unitholders
|
|
|
(4,060 |
) |
|
|
(5,219 |
) |
|
|
(9,789 |
) |
| |
Dividends paid to preferred shareholders
|
|
|
(7,637 |
) |
|
|
(8,325 |
) |
|
|
(11,449 |
) |
| |
Dividends paid to common shareholders
|
|
|
(72,523 |
) |
|
|
(71,144 |
) |
|
|
(79,868 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Net cash used in financing activities
|
|
|
(150,767 |
) |
|
|
(212,189 |
) |
|
|
(330,800 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
6,287 |
|
|
|
(1,211 |
) |
|
|
(5,056 |
) |
|
Cash and cash equivalents, beginning of period
|
|
|
123 |
|
|
|
1,334 |
|
|
|
6,390 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$ |
6,410 |
|
|
$ |
123 |
|
|
$ |
1,334 |
|
| |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Properties, Inc.
60
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data)
|
|
| 1. |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES |
Organization
Post Properties, Inc. and its subsidiaries develop, own and
manage upscale multifamily apartment communities in selected
markets in the United States. As used herein, the term
“Company” includes Post Properties, Inc. and its
subsidiaries, including Post Apartment Homes, L.P. (the
“Operating Partnership”), unless the context indicates
otherwise. The Company, through its wholly-owned subsidiaries is
the general partner and owns a majority interest in the
Operating Partnership which, through its subsidiaries, conducts
substantially all of the on-going operations of the Company. At
December 31, 2005, the Company owned 21,442 apartment units
in 58 apartment communities, including 545 apartment units in
two communities held in unconsolidated entities and 205
apartment units in one community currently under development.
The Company is also developing 145 for-sale condominium homes
and is converting 597 apartment units (including 121 units
in one community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary. At
December 31, 2005, approximately 46.8%, 18.5%, 9.3% and
8.9% (on a unit basis) of the Company’s operating
communities were located in the Atlanta, Dallas, the greater
Washington D.C. and Tampa metropolitan areas, respectively.
The Company has elected to qualify and operate as a
self-administrated and self-managed real estate investment trust
(“REIT”) for federal income tax purposes. A REIT is a
legal entity which holds real estate interests and, is generally
not subject to federal income tax on the income it distributes
to its shareholders.
At December 31, 2005, the Company had outstanding
41,394 shares of common stock and owned the same number of
units of common limited partnership interests (“Common
Units”) in the Operating Partnership, representing a 96.7%
ownership interest in the Operating Partnership. Common Units
held by persons other than the Company totaled 1,402 at
December 31, 2005 and represented a 3.3% common minority
interest in the Operating Partnership. Each Common Unit may be
redeemed by the holder thereof for either one share of Company
common stock or cash equal to the fair market value thereof at
the time of redemption, at the option of the Company. The
Company’s weighted average common ownership interest in the
Operating Partnership was 95.0%, 93.7% and 89.5% for the years
ended December 31, 2005, 2004 and 2003, respectively.
Basis of presentation
The accompanying consolidated financial statements include the
consolidated accounts of the Company, the Operating Partnership
and their wholly owned subsidiaries. The Company also
consolidates other entities in which it has a controlling
financial interest or entities where it is determined to be the
primary beneficiary under Financial Accounting Standards Board
Interpretation No. 46R (“FIN 46R”),
“Consolidation of Variable Interest Entities.” Under
FIN 46R, variable interest entities (“VIEs”) are
generally entities that lack sufficient equity to finance their
activities without additional financial support from other
parties or whose equity holders lack adequate decision making
ability. The primary beneficiary is required to consolidate the
VIE for financial reporting purposes. The application of
FIN 46R requires management to make significant estimates
and judgments about the Company’s and its other
partners’ rights, obligations and economic interests in
such entities. For entities in which the Company has less than a
controlling financial interest or entities where it is not the
primary beneficiary under FIN 46R, the entities 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
intercompany accounts and transactions have been eliminated in
consolidation. The minority interest of unitholders in the
operations of the Operating Partnership is calculated based on
the weighted average unit ownership during the period.
In 2005, the Company reclassified certain expenses previously
reported as general and administrative expenses to property
operating and maintenance expenses and investment, development
and other expenses on the accompanying statements of operations.
Prior period amounts have been reclassified to conform to the
2005 presentation. The reclassified expenses primarily included
certain investment group executive and administrative functions
and long-term, stock-based compensation and benefits expenses
associated with property management and investment and
development group activities.
Certain other items in the 2004 and 2003 consolidated financial
statements were reclassified for comparative purposes with the
2005 consolidated financial statements.
Post Properties, Inc.
61
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Cost capitalization
The Company capitalizes those expenditures relating to the
acquisition of new assets, the development and construction of
new apartment and condominium communities, the enhancement of
the value of existing assets and those expenditures that
substantially extend the life of existing assets. Recurring
capital expenditures are expenditures of a type that are
expected to be incurred on an annual basis during the life of an
apartment community, such as carpet, appliances and flooring.
Non-recurring capital expenditures are expenditures that
generally occur less frequently than on an annual basis, such as
major exterior projects relating to landscaping and structural
improvements. Revenue generating capital expenditures are
expenditures for the major renovation of communities, the new
installation of water sub-metering equipment and other property
upgrade costs that enhance the rental value of such communities.
All other expenditures necessary to maintain a community in
ordinary operating condition are expensed as incurred.
Additionally, for new development communities, carpet, vinyl,
and blind replacements are expensed as incurred during the first
five years (which corresponds to their estimated depreciable
life). Thereafter, these replacements are capitalized and
depreciated. The Company expenses as incurred interior and
exterior painting of its operating communities.
For communities under development, the Company capitalizes
interest, real estate taxes, and certain internal personnel and
associated costs directly related to apartment and condominium
communities under development and construction. Interest is
capitalized to projects under development based upon the
weighted average cumulative project costs for each month
multiplied by the Company’s weighted average borrowing
costs, expressed as a percentage. Weighted average borrowing
costs include the costs of the Company’s fixed rate secured
and unsecured borrowings and the variable rate unsecured
borrowings under its line of credit facilities. The weighted
average borrowing costs, expressed as a percentage, for the
years ended December 31, 2005, 2004 and 2003 were
approximately 6.5%, 7.3% and 7.0%, respectively. Internal
personnel and associated costs are capitalized to projects under
development based upon the effort 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 completion of rental and
condominium units, interest and other construction costs are
capitalized and reflected on the balance sheet as construction
in progress. The Company ceases the capitalization of such costs
as the residential units in a community become substantially
complete and available for occupancy or sale. This results in a
proration of costs between amounts that are capitalized and
expensed as the residential units in an apartment development
community become available for occupancy. In addition, prior to
the completion of rental units, the Company expenses as incurred
substantially all operating expenses (including pre-opening
marketing as well as property management and leasing personnel
expenses) of such rental communities. Prior to the completion
and closing of condominium units, the Company expenses all sales
and marketing costs related to such units.
For cash flow statement purposes, the Company classifies capital
expenditures for newly developed condominium communities and for
condominium conversion communities in investing activities in
the caption titled, “Construction and acquisition of real
estate assets.” Likewise, the proceeds from the sales of
such condominiums are included in investing activities in the
caption titled, “Net proceeds from sales of real estate
assets.”
Real estate assets, depreciation and impairment
Real estate assets are stated at the lower of depreciated cost
or fair value, if deemed impaired. Major replacements and
betterments are capitalized and depreciated over their estimated
useful lives. Depreciation is computed on a straight-line basis
over the useful lives of the properties (buildings and
components and related land improvements —
20-40 years; furniture, fixtures and equipment —
5-10 years).
The Company continually evaluates the recoverability of the
carrying value of its real estate assets using the methodology
prescribed in Statement of Financial Accounting Standards
(“SFAS”) No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets.” Factors
considered by management in evaluating impairment of its
existing real estate assets held for investment include
significant declines in property operating profits, recurring
property operating losses and other significant adverse changes
in general market conditions that are considered permanent in
nature. Under SFAS No. 144, a real estate asset held
for investment is not considered impaired if the undiscounted,
estimated future cash flows of an asset (both the annual
estimated cash flow from future operations and the estimated
cash flow from the theoretical sale of the asset) over its
estimated holding period are in excess of
Post Properties, Inc.
62
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
the asset’s net book value at the balance sheet date. If
any real estate asset held for investment is considered
impaired, a loss is provided to reduce the carrying value of the
asset to its estimated fair value.
The Company periodically classifies real estate assets as held
for sale. An asset is classified as held for sale after the
approval of the Company’s investment committee and after an
actual program to sell the asset has commenced. Upon the
classification of a real estate asset as held for sale, the
carrying value of the asset is reduced to the lower of its net
book value or its estimated fair value, less costs to sell the
asset. Subsequent to the classification of assets as held for
sale, no further depreciation expense is recorded. Real estate
assets held for sale are stated separately on the accompanying
consolidated balance sheets. The operating results of real
estate assets held for sale and sold are reported as
discontinued operations in the accompanying statements of
operations. Income from discontinued operations includes the
revenues and expenses, including depreciation and allocated
interest expense, associated with the assets. Interest expense
is allocated to assets held for sale based on actual interest
costs for assets with secured mortgage debt. Interest expense is
allocated to unencumbered assets based on the ratio of unsecured
debt to unencumbered assets multiplied by the weighted average
interest rate on the Company’s unsecured debt for the
period and further multiplied by the book value of the assets
held for sale and sold. This classification of operating results
as discontinued operations applies retroactively for all periods
presented. Additionally, gains and losses on assets designated
as held for sale are classified as part of discontinued
operations.
For condominium conversion projects, a complete community
conversion is treated as discontinued operations in the same
manner as discussed above for apartment community sales. For
partial conversions of communities, the operating results,
condominium revenues and associated gains are reflected in
continuing operations (see discussion under “revenue
recognition” below) and the net book value of the assets
being converted into condominiums are reflected separately from
discontinued assets on the consolidated balance sheet in the
caption titled, “For-sale condominiums.”
Revenue recognition
Residential properties are leased under operating leases with
terms of generally one year or less. Rental revenues from
residential leases are recognized on the straight-line method
over the approximate life of the leases, which is generally one
year. The recognition of rental revenues from residential leases
when earned has historically not been materially different from
rental revenues recognized on a straight-line basis.
Under the terms of residential leases, the residents of the
Company’s residential communities are obligated to
reimburse the Company for certain utility usage, water and
electricity (at selected properties), where the Company is the
primary obligor to the public utility entity. These utility
reimbursements from residents are reflected as other property
revenues in the consolidated statements of operations.
Sales and the associated gains or losses of real estate assets
and for-sale condominiums are recognized in accordance with the
provisions of SFAS No. 66, “Accounting for Sales
of Real Estate.” For condominium conversion projects,
revenues from individual condominium unit sales are recognized
upon the closing of the sale transactions (the “Completed
Contract Method”), as all conditions for full profit
recognition have been met at that time and the conversion
construction periods are typically very short. Under
SFAS No. 66, the Company uses the relative sales value
method to allocate costs and recognize profits from condominium
conversion sales. In accordance with SFAS No. 144,
“Accounting for the Impairment and Disposal of Long-Lived
Assets,” gains on sales of condominium units at complete
community condominium conversion projects are included in
discontinued operations. For condominium conversion projects
relating to a portion of an existing apartment community, the
Company will also recognize revenues and the associated gains
under the Completed Contract Method, as discussed herein. Since
a portion of an operating community does not meet the
requirements of a component of an entity under
SFAS No. 144, the revenues and gains on sales of
condominium units sold at partial condominium communities will
be included in continuing operations.
For newly developed condominiums, the Company accounts for each
project under either the Completed Contract Method or the
“Percentage of Completion Method,” based on a specific
evaluation of the factors specified in SFAS No. 66.
The factors used to determine the appropriate accounting method
are the legal commitment of the purchaser in the real estate
contract, whether the construction of the project is beyond a
preliminary phase, sufficient units have been contracted to
ensure the project will not revert to a rental project, the
aggregate project
Post Properties, Inc.
63
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
sale proceeds and costs can be reasonably estimated and the
buyer has made an adequate initial and continuing cash
investment under the contract in accordance with
SFAS No. 66. Under the Percentage of Completion
Method, revenues and the associated gains are recognized over
the project construction period generally based on the
percentage of total project costs incurred to estimated total
projects costs for each condominium unit under a binding real
estate contract.
Long-term ground leases
The Company is party to six long-term ground leases associated
with land underlying certain of the Company’s operating
communities. The ground leases generally provide for future
increases in minimum lease payments tied to an inflation index
or contain stated rent increases that generally compensate for
the impact of inflation. Beginning in 2005, the Company
recognizes ground lease expense on the straight-line method over
the life of the ground lease for all ground leases with stated
rent increases. The recognition of ground lease expense as
incurred has historically not been materially different than
recognizing ground lease expense on a straight-line basis.
Apartment community acquisitions
In accordance with the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 141,
“Business Combinations”, the aggregate purchase price
of apartment community acquisitions is allocated to the tangible
assets, intangible assets and liabilities (including mortgage
indebtedness) acquired in each transaction, based on their
estimated fair values at the acquisition date. The acquired
tangible assets, principally land, building and improvements and
furniture, fixtures and equipment, are reflected in real estate
assets and such assets, excluding land, are depreciated over
their estimated useful lives. The acquired intangible assets,
principally above/below market leases, in-place leases and
resident relationships, are reflected in other assets and
amortized over the average remaining lease terms of the acquired
leases and resident relationships (generally 6 months to
18 months).
Stock-based compensation
On January 1, 2003, the Company elected to voluntarily
change its method of accounting for stock-based compensation to
the fair value method prescribed by Statement of Financial
Accounting Standards (“SFAS”) No. 123,
“Accounting for Stock-Based Compensation,” using the
prospective method prescribed in SFAS No. 148,
“Accounting for Stock-Based Compensation —
Transition and Disclosure.” For stock-based compensation
granted prior to January 1, 2003, the Company accounted for
stock-based compensation under the intrinsic value method
prescribed by Accounting Principles Board (“APB”)
Opinion 25, “Accounting for Stock Issued to
Employees.”
Under the prospective method of adoption prescribed by
SFAS No. 123 and SFAS No. 148, the Company
reflects as an expense each period the vested portion of the
estimated cost of stock-based compensation, calculated under the
Black-Scholes option pricing model for stock options, for all
stock-based compensation granted after January 1, 2003. For
stock-based compensation granted prior to December 31,
2002, compensation expense was not recognized for stock options
granted at the Company’s current stock price on the grant
date. As a result, the Company’s general and administrative
expenses may not be comparable between periods.
Post Properties, Inc.
64
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
The following table reflects the effect on the Company’s
net income and net income per common share had the fair value
method of accounting under SFAS No. 123 been applied
for all stock-based compensation for each year.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Net income available to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
As reported
|
|
$ |
134,311 |
|
|
$ |
76,368 |
|
|
$ |
2,707 |
|
| |
Stock-based compensation included in net income as reported, net
of minority interest
|
|
|
2,184 |
|
|
|
1,672 |
|
|
|
958 |
|
| |
Stock-based compensation determined under the fair value method,
net of minority interest
|
|
|
(2,210 |
) |
|
|
(1,735 |
) |
|
|
(1,088 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Pro forma
|
|
$ |
134,285 |
|
|
$ |
76,305 |
|
|
$ |
2,577 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income per common share — basic
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
As reported
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
Pro forma
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
|
Net income per common share — diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
As reported
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
Pro forma
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
Derivative financial instruments
The Company accounts for derivative financial instruments at
fair value under the provisions of SFAS No. 133,
“Accounting for Derivative Instruments and Hedging
Activities”, as amended. The Company uses derivative
financial instruments, interest rate swap and interest rate cap
arrangements, to manage or hedge its exposure to interest rate
changes. The Company designates each derivative instrument as a
hedge of specific interest expense cash flow exposure. Under
SFAS 133, as amended, derivative instruments qualifying as
hedges of specific cash flows are recorded on the balance sheet
at fair value with an offsetting increase or decrease to
accumulated other comprehensive income, a shareholders’
equity account, until the hedged transactions are recognized in
earnings. Periodically, the Company evaluates the effectiveness
of its cash flow hedges. Any ineffective portion of cash flow
hedges are recognized immediately in earnings.
Cash and cash equivalents
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 is generally comprised of resident security
deposits for apartment communities located in Florida and
Tennessee, required maintenance reserves for certain communities
located in Georgia and earnest money and escrow deposits
associated with the Company’s for-sale condominium business.
Deferred financing costs
Deferred financing costs are amortized using the straight-line
method, which approximates the interest method, over the terms
of the related debt.
Per share data
The Company reports both basic and diluted earnings per share
amounts. Basic earnings per common share is computed by dividing
net income available to common shareholders by the weighted
average number of common shares outstanding during the year.
Diluted earnings per common share is computed by dividing net
income available to common shareholders by the weighted average
number of common shares and common share equivalents outstanding
during the year, which are computed using the treasury stock
method for outstanding stock options and non-vested awards.
Common share equivalents are excluded from the computations in
years in which they have an anti-dilutive effect.
Post Properties, Inc.
65
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Conversion of common units in the Operating Partnership
In accordance with the conclusions summarized in Emerging Issue
Task Force, Issue No. 95-7, “Implementation Issues
Related to the Treatment of Minority Interests in Certain Real
Estate Investment Trusts”, the Company accounts for the
conversion of original sponsors’ common units in the
Operating Partnership into shares of company common stock at the
net book value of the minority interest acquired. These
transactions result in a reduction in the minority interest of
common unit holders in the Operating Partnership and a
corresponding increase in shareholders’ equity in the
accompanying consolidated balance sheet at the date of
conversion.
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
New accounting pronouncements
In 2005 and 2004, several new accounting pronouncements were
issued and the pronouncements with a potential impact on the
Company in 2005 and in future periods are discussed below.
SFAS No. 123R, “Share-Based Payment”, was
issued in December 2004. SFAS No. 123R revised
SFAS No. 123, “Accounting for Stock-Based
Compensation” and requires companies to expense the fair
value of employee stock options and other forms of stock-based
compensation. SFAS No. 123R also superseded the
provisions of APB No. 25. The provisions of
SFAS No. 123R were effective on January 1, 2006.
The Company adopted SFAS No. 123R on January 1,
2006 using the modified prospective method of adoption. Since
the Company elected to apply the provisions of
SFAS No. 123 on January 1, 2003, the adoption of
SFAS No. 123R will not have a significant impact on
the Company’s financial position or results of operations.
FASB Interpretation No. 47 (“FIN 47”),
“Accounting for Conditional Asset Retirement
Obligations” was issued in March 2005. FIN 47 is an
interpretation of SFAS No. 143, “Accounting for
Asset Retirement Obligations,” and addressed liability
recognition issues under SFAS No. 143 related to the
timing and/or method of settlement of retirement obligations
that are conditional on future events. FIN 47 was effective
as of December 31, 2005. The Company has assessed the
impact of FIN 47 and has determined that the provisions of
FIN 47 did not have a material impact on the Company’s
financial position or results of operations at December 31,
2005. The application of FIN 47 requires significant
management estimates and judgments regarding the impact of
future events. Management believes it has applied reasonable
judgments and estimates in reaching its determination.
The Emerging Issues Task Force issued EITF No. 04-05
(“EITF No. 04-05”), “Determining Whether a
General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners
Have Certain Rights”. EITF No. 04-05 provides a
framework for evaluating whether a general partner or group of
general partners or managing members controls a limited
partnership or limited liability company and therefore should
consolidate the entity. The presumption that the general partner
or group of general partners or managing members controls a
limited liability partnership or limited liability company may
be overcome if the limited partners or members have (1) the
substantive ability to dissolve the partnership without cause,
or (2) substantive participating rights. EITF
No. 04-05 became effective on June 30, 2005 for new or
modified limited partnerships or limited liability companies and
January 1, 2006 for all existing arrangements. The Company
does not believe that the adoption of EITF No. 04-05 will
have a material impact on the Company’s financial position
or results of operations.
Post Properties, Inc.
66
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Deferred charges consist of the following:
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Deferred financing costs
|
|
$ |
26,050 |
|
|
$ |
33,542 |
|
|
Other
|
|
|
5,399 |
|
|
|
4,350 |
|
| |
|
|
|
|
|
|
| |
|
|
31,449 |
|
|
|
37,892 |
|
|
Less: accumulated amortization
|
|
|
(19,825 |
) |
|
|
(22,318 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
11,624 |
|
|
$ |
15,574 |
|
| |
|
|
|
|
|
|
At December 31, 2005 and 2004, the Company’s
indebtedness consisted of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
December 31, |
| |
|
|
|
|
|
Maturity | |
|
|
| Description |
|
Payment Terms |
|
Interest Rate | |
|
Date | |
|
2005 |
|
2004 |
| |
|
|
|
| |
|
| |
|
|
|
|
|
Unsecured Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes
|
|
Int. |
|
|
5.125% - 7.70% |
|
|
|
2006-2012 |
|
|
$485,000 |
|
$385,000 |
|
Medium Term Notes
|
|
Int. |
|
|
— |
|
|
|
— |
|
|
— |
|
212,043 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
485,000 |
|
597,043 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated Line of Credit
|
|
N/A |
|
|
LIBOR + 0.75% |
(1) |
|
|
2007 |
|
|
90,000 |
|
40,000 |
|
Cash Management Line
|
|
N/A |
|
|
LIBOR + 0.75% |
|
|
|
2007 |
|
|
11,379 |
|
10,748 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
101,379 |
|
50,748 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Conventional Fixed Rate (Secured)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
Prin. and Int. |
|
|
6.975% |
(2) |
|
|
2029 |
|
|
97,100 |
|
98,500 |
|
Other
|
|
Prin. and Int. |
|
|
4.27% - 7.69% |
|
|
|
2007-2013 |
|
|
268,641 |
|
273,132 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
365,741 |
|
371,632 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax Exempt Floating Rate Bonds (Secured)
|
|
Int. |
|
|
3.54% |
(3) |
|
|
2025 |
|
|
28,495 |
|
110,055 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
$980,615 |
|
$1,129,478 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Represents stated rate. At December 31, 2005, the weighted
average interest rate was 4.75%. |
| (2) |
Interest rate is fixed at 6.975%, inclusive of credit
enhancement and other fees, to 2009 through an interest rate
swap arrangement. |
| (3) |
FNMA credit enhanced bond indebtedness. Interest based on FNMA
“AAA” tax-exempt rate plus credit enhancement and
other fees of 0.639%. Interest rate represents the rate at
December 31, 2005 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%. At December 31, 2005 and 2004, approximately $0 and
$34,060, respectively, of this debt was secured by assets held
for sale. In June 2005, the Company executed an amendment to its
master reimbursement agreement with FNMA, which agreement, among
other things, sets forth the Company’s payment obligations
under its variable-rate, tax-exempt bond indebtedness. The
amendment deferred the commencement of principal repayments
under the bonds by five years from the originally scheduled
commencement date. The original maturity date for the bonds
remains unchanged and the amortization schedule of the bonds was
changed commensurate with the five-year deferral of the start of
principal amortization. |
Post Properties, Inc.
67
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Debt maturities
The aggregate maturities of the Company’s indebtedness are
as follows:
| |
|
|
|
|
|
2006
|
|
$ |
81,269 |
|
|
2007
|
|
|
259,572 |
(1) |
|
2008
|
|
|
4,557 |
|
|
2009
|
|
|
75,901 |
|
|
2010
|
|
|
188,267 |
|
|
Thereafter
|
|
|
371,049 |
|
| |
|
|
|
| |
|
$ |
980,615 |
|
| |
|
|
|
|
|
| (1) |
Includes outstanding balance on lines of credit totaling
$101,379. |
Debt issuances, retirements and modifications
2005
Upon their maturity in 2005, the Company repaid its $25,000
(7.28%) medium term, unsecured notes, repaid its $100,000
(6.85%) Mandatory Par Put Remarketed Securities
(“MOPPRS”) debt arrangement, repaid its $62,043
(8.125%) medium term, unsecured notes and repaid its $25,000
(6.78%) medium term, unsecured notes, from available borrowings
under its unsecured lines of credit.
In 2005, the Company issued $100,000 of senior unsecured notes.
The notes bear interest at 5.45% and mature in 2012. The net
proceeds from the unsecured notes were used to reduce amounts
outstanding under the Company’s unsecured lines of credit.
The Company sold three apartment communities subject to the
assumption of $81,560 of tax-exempt mortgage indebtedness (see
note 5). As a result of these debt assumptions, the Company
recorded losses on the early extinguishment of debt of $3,220
($3,043 net of minority interest) related to the write-off
of deferred loan costs of $2,264 ($2,141 net of minority
interest) relating to such assumed indebtedness and the
realization of a $955 ($902 net of minority interest) loss
in connection with the termination of related interest rate cap
agreements that were used as cash flow hedges of the assumed
debt.
2004
In the fourth quarter of 2004, the Company issued $100,000 of
senior unsecured notes. The notes bear interest at 5.125% and
mature in 2011. The net proceeds from the unsecured notes were
used to reduce amounts outstanding under the Company’s
unsecured lines of credit. In 2004, the Company also closed a
$35,000 secured, fixed rate mortgage note payable in a
consolidated real estate entity. The note bears interest at
4.27%, requires monthly interest only payments through March
2007 and monthly principal and interest payments based on a
30-year amortization
schedule from April 2007 through the note maturity date in March
2009.
In the fourth quarter of 2004, the Company purchased and retired
$87,957 of the Company’s 8.125% medium term, unsecured
notes through a tender offer using available borrowings under
its unsecured lines of credit. Subsequent to the debt
retirement, $62,043 of the 8.125% medium term notes remained
outstanding until their maturity in 2005. As part of this
transaction, the Company recorded a loss on the early
extinguishment of this indebtedness of $4,011 representing the
debt repurchase premiums, the expenses of the tender offer and
the write-off of the unamortized deferred financing costs
associated with the retired indebtedness.
In the fourth quarter of 2004, the Company terminated a
remarketing agreement related to its $100,000, 6.85% Mandatory
Par Put Remarketed Securities (“MOPPRS”). In
connection with the termination of the remarketing agreement,
the Company paid $10,615 (interest expense), including
transaction expenses. Under the provisions of the remarketing
agreement, the remarketing agent had the right to remarket the
$100,000 unsecured notes in 2005 for a ten-year term at an
interest rate calculated as 5.715% plus the Company’s then
current credit spread to the ten-year treasury rate. As a result
of the termination of the remarketing agreement, the underlying
debt matured and was repaid in 2005.
Post Properties, Inc.
68
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Upon their maturity in 2004, the Company repaid its $13,000
(7.30%) medium term, unsecured notes and repaid its $10,000
(6.69%) medium term, unsecured notes, from available borrowings
under its unsecured lines of credit.
The Company sold certain apartment communities subject to the
assumption of $104,325 of tax-exempt mortgage indebtedness (see
note 5). As a result of this debt assumption, the Company
recorded a loss on early extinguishment of indebtedness of
$4,128 ($3,849 net of minority interest) related to the
write-off of unamortized deferred financing costs of $3,187
($2,972 net of minority interest) relating to such assumed
indebtedness and the realization of a $941 ($877 net of
minority interest) loss in connection with the termination of
related interest rate cap agreements that were used as cash flow
hedges of the assumed debt.
In conjunction with an apartment community acquisition (see
note 5) in 2004, the Company assumed a secured, fixed rate
mortgage note payable. The mortgage note was valued at $49,496
yielding an effective rate of 4.7%. The mortgage note bears
interest at a coupon rate of 6.8%, requires monthly principal
and interest payments and matures in 2007.
Unsecured lines of credit
The Company utilizes a $350,000 syndicated unsecured revolving
line of credit (the “Revolver”) that matures in
January 2007 for its short-term financing needs. The Revolver
has a current stated interest rate of LIBOR plus 0.75% or the
prime rate and was provided by a syndicate of nine banks led by
Wachovia Bank, N.A. Additionally, the Revolver requires the
payment of annual facility fees currently equal to 0.15% of the
aggregate loan commitment. The Revolver provides for the
interest rate and facility fee rate to be adjusted up or down
based on changes in the credit ratings on the Company’s
senior unsecured debt. The rates under the Revolver are based on
the higher of the Company’s unsecured debt ratings in
instances where the Company has split unsecured debt ratings.
The Revolver also includes a money market competitive bid option
for short-term funds up to $175,000 at rates generally below the
stated line rate. The credit agreement for the Revolver contains
customary representations, covenants and events of default,
including fixed charge coverage and maximum leverage ratios as
well as 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 $15,000 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 these ratios and covenants will
adversely affect the ability of the Operating Partnership to
borrow money or make distributions, or the Company to declare
dividends, at the Company’s current dividend level. At
December 31, 2005, the Company had issued letters of credit
to third parties totaling $3,136 under this facility.
Additionally, the Company has a $20,000 unsecured line of credit
with Wachovia Bank, N.A. (the “Cash Management Line”).
The Cash Management line matures in January 2007 and carries
pricing and terms, including debt covenants, substantially
consistent with those of the Revolver.
Interest paid
Interest paid (including capitalized amounts of $2,907, $1,078
and $3,555 for the years ended December 31, 2005, 2004 and
2003, respectively), aggregated $66,234, $66,992 and $78,822 for
the years ended December 31, 2005, 2004 and 2003,
respectively.
Pledged assets
The aggregate net book value at December 31, 2005 of
property pledged as collateral for indebtedness amounted to
approximately $465,420.
|
|
| 4. |
INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES |
At December 31, 2005, the Company holds investments in
three individual limited liability companies (the “Property
LLCs”) with an institutional investor. Two of the Property
LLCs own single apartment communities.
Post Properties, Inc.
69
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
The third Property LLC is converting its apartment community,
containing 121 units, into for-sale condominiums. The
Company holds a 35% equity interest in the Property LLCs.
The Company accounts for its investments in these Property LLCs
using the equity method of accounting. Under FIN 46R, the
Company concluded the Property LLCs were not VIEs and therefore,
did not require consolidation. The excess of the Company’s
investment over its equity in the underlying net assets of the
Property LLCs was approximately $6,099 at December 31,
2005. The excess investment related to Property LLCs holding
apartment communities is being amortized as a reduction to
earnings on a straight-line basis over the lives of the related
assets. The excess investment of approximately $611 at
December 31, 2005 related to the Property LLC holding the
condominium conversion community will be recognized as
additional costs as the underlying condominiums are sold. The
Company provides real estate services (development, construction
and property management) to the Property LLCs for which it earns
fees.
In June 2003, the underlying apartment community held by a
fourth Property LLC was sold. The financial information below
for the year ended December 31, 2003 reflects the gain on
property sale of $26,179 and the operating results of this
Property LLC as discontinued operations through the sale date.
The Company’s share of this gain of $8,395 is included in
the Company’s share of net income (loss) shown in the table
below.
The operating results of the Company include its allocable share
of net income from the investments in the Property LLCs. A
summary of financial information for the Property LLCs in the
aggregate is as follows:
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
| |
|
| |
| Balance Sheet Data |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Real estate assets, net of accumulated depreciation of $8,349
and $9,712, respectively
|
|
$ |
96,000 |
|
|
$ |
124,072 |
|
|
Assets held for sale, net
|
|
|
17,715 |
|
|
|
— |
|
|
Cash and other
|
|
|
1,770 |
|
|
|
2,797 |
|
| |
|
|
|
|
|
|
| |
Total assets
|
|
$ |
115,485 |
|
|
$ |
126,869 |
|
| |
|
|
|
|
|
|
|
Mortgage notes payable
|
|
$ |
66,999 |
|
|
$ |
83,468 |
|
|
Mortgage notes payable to Company
|
|
|
5,967 |
|
|
|
— |
|
|
Other liabilities
|
|
|
996 |
|
|
|
1,296 |
|
| |
|
|
|
|
|
|
| |
Total liabilities
|
|
|
73,962 |
|
|
|
84,764 |
|
|
Members’ equity
|
|
|
41,523 |
|
|
|
42,105 |
|
| |
|
|
|
|
|
|
| |
Total liabilities and members’ equity
|
|
$ |
115,485 |
|
|
$ |
126,869 |
|
| |
|
|
|
|
|
|
|
Company’s equity investment
|
|
$ |
20,647 |
|
|
$ |
21,320 |
|
| |
|
|
|
|
|
|
Post Properties, Inc.
70
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| Income Statement Data |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
10,789 |
|
|
$ |
10,451 |
|
|
$ |
6,757 |
|
| |
Other
|
|
|
840 |
|
|
|
776 |
|
|
|
392 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total revenues
|
|
|
11,629 |
|
|
|
11,227 |
|
|
|
7,149 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property operating and maintenance
|
|
|
3,689 |
|
|
|
3,555 |
|
|
|
3,416 |
|
| |
Depreciation and amortization
|
|
|
2,621 |
|
|
|
2,579 |
|
|
|
2,481 |
|
| |
Interest
|
|
|
2,752 |
|
|
|
2,658 |
|
|
|
2,338 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total expenses
|
|
|
9,062 |
|
|
|
8,792 |
|
|
|
8,235 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
2,567 |
|
|
|
2,435 |
|
|
|
(1,086 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loss from discontinued operations
|
|
|
(176 |
) |
|
|
(355 |
) |
|
|
(683 |
) |
| |
Gain on sales of real estate assets
|
|
|
2,834 |
|
|
|
— |
|
|
|
26,179 |
|
| |
Loss on early extinguishment of debt
|
|
|
(273 |
) |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
2,385 |
|
|
|
(355 |
) |
|
|
25,496 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
4,952 |
|
|
$ |
2,080 |
|
|
$ |
24,410 |
|
| |
|
|
|
|
|
|
|
|
|
|
Company’s share of net income
|
|
$ |
1,767 |
|
|
$ |
1,083 |
|
|
$ |
7,790 |
|
| |
|
|
|
|
|
|
|
|
|
At December 31, 2005, mortgage notes payable include a
$49,999 mortgage note that bears interest at 4.13%, requires
monthly interest payments and annual principal payments of $1
through 2009. Thereafter, the note requires monthly principal
and interest payments based on a
25-year amortization
schedule and matures in 2034. The note is callable by the lender
in 2009 and on each successive fifth year anniversary of the
note thereafter. The note is prepayable without penalty in 2008.
The additional mortgage note payable totaling $17,000 bears
interest at a fixed rate of 4.04%, requires interest only
payments and matures in 2008.
In early 2005, one of the Property LLCs elected to convert its
apartment community into for-sale condominiums. As a result of
its decision to sell the community through the condominium
conversion process, the Property LLC prepaid its third party
mortgage note payable of $16,392 through secured borrowings from
the Company. The Property LLC incurred debt prepayment costs and
expenses associated with the write-off of unamortized deferred
financing costs totaling $273 in March 2005. The mortgage note
payable to the Company has a fixed rate component ($16,392)
bearing interest at 4.28% and a variable rate component bearing
interest at LIBOR at 1.90%. This note is repayable from the
proceeds of condominium sales and matures in February 2008.
|
|
| 5. |
REAL ESTATE ACQUISITIONS AND DISPOSITIONS |
Acquisitions
In June 2005, the Company acquired a
319-unit apartment
community located in suburban Charlotte, NC for approximately
$38,240, including closing costs and the reimbursement of a fee
to terminate a loan commitment paid for by the seller.
Additionally, through December 31, 2005, the Company had
incurred additional costs of approximately $1,000, of an
estimated cost of approximately $1,100 to improve the community.
The purchase price of this community was allocated to the assets
acquired based on their estimated fair values.
In June 2004, the Company acquired a
499-unit apartment
community located in suburban Washington, D.C. for
approximately $85,814, including the assumption of mortgage
indebtedness and closing costs. Additionally, the Company
incurred additional costs of approximately $2,000, to improve
the community. The assumed mortgage note payable was valued at
$49,496 yielding an effective interest rate of 4.7%. The
mortgage note bears interest at a coupon rate of 6.8%, requires
monthly principal and interest payments and matures in 2007. The
purchase of this community was allocated to the assets acquired
and the liabilities assumed based on their estimated fair values.
Subsequent to December 31, 2005, the Company acquired two
apartment communities, containing 308 units, in Austin,
Texas for approximately $46,500, including closing costs.
Post Properties, Inc.
71
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Dispositions
The Company classifies real estate assets as held for sale after
the approval of its investment committee and after the Company
has commenced an active program to sell the assets. At
December 31, 2005, the Company had one community,
originally containing 127 units, that is being converted
into condominiums classified as held for sale. This real estate
asset is classified separately in the accompanying consolidated
balance sheet at $4,591, which represented its remaining net
book value. The Company expects to complete the sale of all
condominiums at this community in the next twelve months.
In the fourth quarter of 2005, the Company began the conversion
of portions of two apartment communities into for-sale
condominiums. Under SFAS No. 144, the operating
results and future sales activities of these condominium units
will be reflected in continuing operations. In addition, the net
book value of the assets being converted into condominiums were
reflected separately on the consolidated balance sheet under the
caption titled “For-sale condominiums.”
Under SFAS No. 144, the operating results of assets
designated as held for sale are included in discontinued
operations in the consolidated statement of operations for all
periods presented. Additionally, all gains and losses on the
sale of these assets are included in discontinued operations.
For the year ended December 31, 2005, income from
discontinued operations included the results of operations of
one condominium conversion community classified as held for sale
at December 31, 2005 as well as the operations of six
communities sold in 2005 through their sale dates and one
condominium conversion community through its sell-out date. For
the years ended December 31, 2004 and 2003, income from
discontinued operations included the results of operations of
the one condominium conversion community classified as held for
sale at December 31, 2005, communities sold in 2005, one
condominium conversion community through its sell out date and
the results of operations of 12 communities sold in 2004 and
2003 through their sale dates.
The revenues and expenses of these communities for the years
ended December 31, 2005, 2004 and 2003 were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
13,222 |
|
|
$ |
41,881 |
|
|
$ |
68,330 |
|
| |
Other
|
|
|
1,243 |
|
|
|
3,615 |
|
|
|
5,310 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
|
14,465 |
|
|
|
45,496 |
|
|
|
73,640 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
7,241 |
|
|
|
19,478 |
|
|
|
30,039 |
|
| |
Depreciation
|
|
|
— |
|
|
|
5,837 |
|
|
|
12,381 |
|
| |
Interest
|
|
|
2,161 |
|
|
|
5,532 |
|
|
|
9,220 |
|
| |
Asset impairment charges
|
|
|
— |
|
|
|
2,233 |
|
|
|
17,462 |
|
| |
Minority interest in consolidated property partnerships
|
|
|
14 |
|
|
|
(238 |
) |
|
|
(419 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total expenses
|
|
|
9,416 |
|
|
|
32,842 |
|
|
|
68,683 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations before minority
interest
|
|
|
5,049 |
|
|
|
12,654 |
|
|
|
4,957 |
|
| |
Minority interest
|
|
|
317 |
|
|
|
(343 |
) |
|
|
(413 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$ |
5,366 |
|
|
$ |
12,311 |
|
|
$ |
4,544 |
|
| |
|
|
|
|
|
|
|
|
|
In 2004, the Company recorded asset impairment charges totaling
$2,233 to write-down the cost of two apartment communities,
located in Dallas, Texas, to their estimated fair value when the
assets were classified as held for sale or sold. In 2003, the
Company recorded asset impairment charges totaling $17,462 to
write-down apartment communities in Dallas, Texas and Phoenix,
Arizona to their estimated fair value.
For the year ended December 31, 2005, the Company
recognized net gains in discontinued operations of $124,425
($117,593 net of minority interest) from the sale of six
communities, containing 3,047 units. The sales generated
net proceeds of approximately $229,249, including $81,560 of
tax-exempt secured indebtedness assumed by the purchasers.
Post Properties, Inc.
72
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
In addition, for the year ended December 31, 2005, gains on
sales of real estate assets included net gains of $16,812
($15,404 net of minority interest and provision for income
taxes) from condominium sales at the Company’s condominium
conversion communities reported in discontinued operations. A
summary of revenues and costs and expenses of these condominium
activities for the year ended December 31, 2005 was as
follows:
| |
|
|
|
|
| |
|
2005 | |
| |
|
| |
|
Condominium revenues, net
|
|
$ |
51,857 |
|
|
Condominium costs and expenses
|
|
|
(35,045 |
) |
| |
|
|
|
|
Gains on condominium sales, before minority interest and income
taxes
|
|
|
16,812 |
|
|
Minority interest
|
|
|
(814 |
) |
|
Provision for income taxes
|
|
|
(594 |
) |
| |
|
|
|
|
Gains on condominium sales, net of minority interest and
provision for income taxes
|
|
$ |
15,404 |
|
| |
|
|
|
For the year ended December 31, 2004, the Company
recognized net gains from discontinued operations of $113,739
($106,039 net of minority interest) from the sale of eight
communities, containing 3,880 units, and certain land
parcels. These sales generated net proceeds of approximately
$242,962, including $104,325 of tax-exempt debt assumed by the
purchasers. For the year ended December 31, 2003, the
Company recognized net gains from discontinued operations of
$40,792 ($36,497 net of minority interest) on the sale of
four communities, containing 1,844 units, and certain land
parcels. These sales generated net proceeds of approximately
$163,560.
In January 2006, the Company designated one apartment community,
containing 696 units, as held for sale. The aggregate net
book value of this asset totaled approximately $88,000, which
represented the lower of depreciated cost or estimated fair
value of the assets. This asset is expected to be reported as
discontinued operations in 2006.
|
|
| 6. |
SHAREHOLDERS’ EQUITY/ MINORITY INTEREST |
Preferred Stock
At December 31, 2005, the Company had two outstanding
series of cumulative redeemable preferred stock with the
following characteristics:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Liquidation | |
|
Optional | |
|
Redemption | |
|
Stated | |
|
Dividend | |
| |
|
Outstanding | |
|
Preference | |
|
Redemption | |
|
Price (1) | |
|
Dividend | |
|
Rate | |
| Description |
|
Shares | |
|
(per share) | |
|
Date (1) | |
|
(per share) | |
|
Yield | |
|
(per share) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Series A
|
|
|
900 |
|
|
$ |
50.00 |
|
|
|
10/01/26 |
|
|
$ |
50.00 |
|
|
|
8.5% |
|
|
$ |
4.25 |
|
|
Series B
|
|
|
2,000 |
|
|
$ |
25.00 |
|
|
|
10/28/07 |
|
|
$ |
25.00 |
|
|
|
7.625% |
|
|
$ |
1.91 |
|
|
|
| (1) |
The preferred stock is redeemable, at the Company’s option,
for cash. |
In 2004, the Company redeemed its 7.625% series C
cumulative redeemable preferred stock (“Series C
Preferred Stock”) for $25.00 per share (an aggregate
of $50,000), plus accrued and unpaid dividends through the
redemption date. In connection with the issuance of the
Series C Preferred Stock in 1998, the Company incurred
$1,716 in issuance costs and recorded such costs as a reduction
of shareholders’ equity. The redemption price of the
Series C Preferred Stock exceeded the related carrying
value by the $1,716 of issuance costs. In connection with the
redemption, in accordance with generally accepted accounting
principles, the Company reflected the $1,716 of issuance costs
as a reduction of earnings in arriving at net income available
to common shareholders in 2004.
Preferred Units
In 2004, the Operating Partnership redeemed its 8.0%
Series D cumulative redeemable preferred units
(“Series D Preferred Units”) for $25.00 per
unit (an aggregate of $70,000), plus accrued and unpaid
distributions through the redemption date. In connection with
the issuance of the Series D Preferred Units in 1998, the
Operating Partnership incurred $1,810 in issuance costs and
recorded such costs as a reduction of partners’ equity. The
redemption price of the Series D Preferred Units exceeded
the related carrying value by the $1,810 of issuance costs. In
connection with the redemption, in accordance with generally
accepted accounting principles, the Company reflected the $1,810
of issuance costs as a reduction of earnings in arriving at net
income available to common shareholders in 2004.
Post Properties, Inc.
73
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Common Stock Purchases
In 2005, the Company repurchased approximately 1,031 shares
of its common stock at an aggregate cost of $34,400 under 10b5-1
stock repurchase plans. These shares were purchased under a
board of directors approved plan which provides for aggregate
common or preferred stock repurchases of up to $200,000 through
December 31, 2006. In 2004, under a previous stock
repurchase program, the Company repurchased $2,268 of common
stock and $120,000 of preferred stock and units.
Computation of Earnings Per Common Share
For the years ended December 31, 2005, 2004 and 2003, basic
and diluted earnings per common share for income (loss) from
continuing operations available to common shareholders has been
computed as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2005 | |
| |
|
| |
| |
|
Income | |
|
Shares | |
|
Per-Share | |
| |
|
(Numerator) | |
|
(Denominator) | |
|
Amount | |
| |
|
| |
|
| |
|
| |
|
Income from continuing operations
|
|
$ |
6,628 |
|
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(7,637 |
) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
|
(1,009 |
) |
|
|
40,217 |
|
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
— |
|
|
|
— |
(1) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
$ |
(1,009 |
) |
|
|
40,217 |
|
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2004 | |
| |
|
| |
| |
|
Income | |
|
Shares | |
|
Per-Share | |
| |
|
(Numerator) | |
|
(Denominator) | |
|
Amount | |
| |
|
| |
|
| |
|
| |
|
Loss from continuing operations
|
|
$ |
(26,282 |
) |
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(8,325 |
) |
|
|
|
|
|
|
|
|
|
Less: Preferred stock and unit redemption costs
|
|
|
(3,526 |
) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
|
(38,133 |
) |
|
|
39,777 |
|
|
$ |
(0.96 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
— |
|
|
|
— |
(1) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
$ |
(38,133 |
) |
|
|
39,777 |
|
|
$ |
(0.96 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2003 | |
| |
|
| |
| |
|
Income | |
|
Shares | |
|
Per-Share | |
| |
|
(Numerator) | |
|
(Denominator) | |
|
Amount | |
| |
|
| |
|
| |
|
| |
|
Loss from continuing operations
|
|
$ |
(26,885 |
) |
|
|
|
|
|
|
|
|
|
Less: Preferred stock dividends
|
|
|
(11,449 |
) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
|
(38,334 |
) |
|
|
37,688 |
|
|
$ |
(1.02 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options and awards
|
|
|
— |
|
|
|
— |
(1) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common shareholders
|
|
$ |
(38,334 |
) |
|
|
37,688 |
|
|
$ |
(1.02 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
For the years ended December 31, 2005, 2004 and 2003, the
potential dilution from the Company’s outstanding stock
options and awards of 400, 115 and 11 shares, respectively,
was antidilutive to the loss from continuing operations per
share calculation. As such, these amounts were excluded from
weighted average shares. |
Post Properties, Inc.
74
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
In 2005, 2004 and 2003, stock options to purchase 3,534, 4,491
and 4,735 shares of common stock, respectively, were
excluded from the computation of diluted earnings per share as
these options were antidilutive.
|
|
| 7. |
SEVERANCE AND PROXY CONTEST CHARGES |
In 2005, the Company recorded an additional expense charge of
$796 relating to changes in the estimated future costs of
certain benefits granted to former executive officers under
prior employment or settlement agreements (see discussion
below). The estimated future cost increases primarily related to
increased fuel and other operating costs and expenses associated
with certain fractional aircraft benefits provided to such
executives.
In 2003, the Company recorded charges totaling $21,506 relating
to the change in roles from executive to non-executive status of
the Company’s former chairman and vice-chairman of the
board of directors and relating to the departures of its
executive vice president and chief financial officer and its
executive vice president of asset management. These charges
consisted of amounts representing the discounted present value
of the estimated payments to be made to the former chairman and
vice-chairman under their existing employment arrangements,
amounts representing the discounted present value of estimated
net costs to be incurred by the Company relating to its
split-dollar life insurance obligations to the individuals under
their employment contracts and amounts representing the
aggregate amount of the estimated payments and benefits to be
made to the other departing executive officers. In 2004, the
Company entered into a final settlement agreement with its
former chairman of the board of directors. Under the terms of
the agreement, the former chairman’s employment and
non-competition agreements were terminated and the Company
agreed to continue to provide the former chairman certain
payments and benefits through 2013, the approximate expiration
date of the original employment agreement. Because the present
value of the estimated payments under the settlement agreement
approximated the Company’s remaining accrued charge under
the former employment agreement, no additional charges were
recorded in 2004 as a result of the settlement.
The following table summarizes the activity relating to the
accrued severance charges for the years ended December 31,
2005, 2004 and 2003:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Accrued severance charges, beginning of year
|
|
$ |
15,317 |
|
|
$ |
19,171 |
|
|
$ |
— |
|
|
Severance charges
|
|
|
796 |
|
|
|
— |
|
|
|
21,506 |
|
|
Payments for period
|
|
|
(2,694 |
) |
|
|
(4,858 |
) |
|
|
(3,237 |
) |
|
Interest accretion
|
|
|
906 |
|
|
|
1,004 |
|
|
|
902 |
|
| |
|
|
|
|
|
|
|
|
|
|
Accrued severance charges, end of year
|
|
$ |
14,325 |
|
|
$ |
15,317 |
|
|
$ |
19,171 |
|
| |
|
|
|
|
|
|
|
|
|
Substantially all of these remaining amounts will be paid over
the remaining terms of the former executives’ employment
and settlement agreements (8 to 11 years).
In 2003, proxy and related costs of $5,231 represented the
legal, advisory and other expenses associated with the
solicitation of proxies from shareholders resulting from the
proxy contest initiated in April 2003 by the Company’s
former chairman of the board of directors. Additionally, the
$5,231 amount included the estimated legal and resolution costs
associated with the settlement of two derivative and purported
class action lawsuits filed against the Company during the proxy
contest. These lawsuits were settled in October 2004 (see
note 11).
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.
Post Properties, Inc.
75
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
In the preparation of income tax returns in federal and state
jurisdictions, the Company and its taxable REIT subsidiaries
assert certain tax positions based on their understanding and
interpretation of the income tax law. The taxing authorities may
challenge such positions and the resolution of such matters
could result in the payment and recognition of additional income
tax expense. Management believes it has used reasonable
judgments and conclusions in the preparation of its income tax
returns.
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, 2005, 2004
and 2003 is detailed below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
(Estimate) | |
|
(Actual) | |
|
(Actual) | |
| |
|
| |
|
| |
|
| |
|
Net income
|
|
$ |
141,948 |
|
|
$ |
88,219 |
|
|
$ |
14,156 |
|
|
Add net loss (income) of taxable REIT subsidiaries
|
|
|
(6,881 |
) |
|
|
402 |
|
|
|
691 |
|
| |
|
|
|
|
|
|
|
|
|
|
Adjusted net income
|
|
|
135,067 |
|
|
|
88,621 |
|
|
|
14,847 |
|
| |
Book/tax depreciation difference
|
|
|
(1,320 |
) |
|
|
(1,719 |
) |
|
|
(4,309 |
) |
| |
Book/tax difference on gains from real estate sales
|
|
|
(9,409 |
) |
|
|
(9,806 |
) |
|
|
3,010 |
|
| |
Other book/tax differences, net
|
|
|
(9,223 |
) |
|
|
(9,489 |
) |
|
|
20,005 |
|
| |
|
|
|
|
|
|
|
|
|
|
Taxable income before allocation of taxable capital gains
|
|
|
115,115 |
|
|
|
67,607 |
|
|
|
33,553 |
|
|
Income taxable as capital gains
|
|
|
(116,739 |
) |
|
|
(89,393 |
) |
|
|
(35,620 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Taxable ordinary income (loss)
|
|
$ |
(1,624 |
) |
|
$ |
(21,786 |
) |
|
$ |
(2,067 |
) |
| |
|
|
|
|
|
|
|
|
|
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 is as follows for the years ended
December 31, 2005, 2004 and 2003:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
| |
|
Amount | |
|
% | |
|
Amount | |
|
% | |
|
Amount | |
|
% | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Ordinary income
|
|
$ |
— |
|
|
|
— |
|
|
$ |
— |
|
|
|
— |
|
|
$ |
0.16 |
|
|
|
7.4 |
% |
|
Capital gains
|
|
|
0.99 |
|
|
|
55.1 |
% |
|
|
0.74 |
|
|
|
40.9 |
% |
|
|
0.36 |
|
|
|
16.8 |
% |
|
Unrecaptured Section 1250 gains
|
|
|
0.81 |
|
|
|
44.9 |
% |
|
|
1.06 |
|
|
|
59.1 |
% |
|
|
0.31 |
|
|
|
14.5 |
% |
|
Return of capital
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1.30 |
|
|
|
61.3 |
% |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
$ |
1.80 |
|
|
|
100.0 |
% |
|
$ |
1.80 |
|
|
|
100.0 |
% |
|
$ |
2.13 |
|
|
|
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, 2005, 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 $50,803.
Post Properties, Inc.
76
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Taxable REIT subsidiaries
The Company utilizes taxable REIT subsidiaries
(“TRSs”) to perform such non-REIT activities as asset
and property management, for-sale housing
(condominiums) conversions and sales and other services for
third parties. These TRSs are subject to federal and state
income taxes. The components of income tax expense, significant
deferred tax assets and liabilities and a reconciliation of the
TRS income tax expense to the statutory federal rate are
reflected in the tables below.
For the years ended December 31, 2004 and 2003, the impact
of TRSs’ income taxes and their related tax attributes were
not material to the accompanying consolidated financial
statements.
Income tax expense of the TRSs for the year ended
December 31, 2005 is comprised of the following:
| |
|
|
|
|
|
| |
|
2005 | |
| |
|
| |
|
Current tax expense
|
|
|
|
|
| |
Federal
|
|
$ |
251 |
|
| |
State
|
|
|
343 |
|
| |
|
|
|
| |
|
|
594 |
|
| |
|
|
|
|
Deferred tax expense
|
|
|
|
|
| |
Federal
|
|
|
— |
|
| |
State
|
|
|
— |
|
| |
|
|
|
| |
|
|
— |
|
| |
|
|
|
|
Total income tax expense
|
|
|
594 |
|
|
Income tax expense — discontinued operations
|
|
|
(594 |
) |
| |
|
|
|
|
Income tax expense — continuing operations
|
|
$ |
— |
|
| |
|
|
|
In 2005, income tax expense was allocated to discontinued
operations as the taxable income of the TRSs resulted from
condominium sales activities which are reported in discontinued
operations. Deferred tax expense was offset by the reversal of
valuation allowances, primarily related to income tax net
operating loss carryforwards, that were established in prior
years. Net valuation allowances utilized in 2005 totaled
approximately $2,700 and total valuation allowances at
December 31, 2005 totaled approximately $1,600.
The components of the TRSs’ deferred income tax assets and
liabilities at December 31, 2005 and 2004 were as follows:
| |
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
| |
Real estate asset basis differences
|
|
$ |
1,106 |
|
|
$ |
1,106 |
|
| |
Tax NOLs
|
|
|
415 |
|
|
|
3,300 |
|
| |
Accrued liabilities
|
|
|
641 |
|
|
|
— |
|
| |
Other
|
|
|
269 |
|
|
|
769 |
|
| |
|
|
|
|
|
|
| |
|
|
2,431 |
|
|
|
5,175 |
|
| |
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
| |
Amortization
|
|
|
(797 |
) |
|
|
(824 |
) |
| |
|
|
|
|
|
|
| |
|
|
(797 |
) |
|
|
(824 |
) |
| |
|
|
|
|
|
|
|
Net deferred tax assets, before valuation allowances
|
|
|
1,634 |
|
|
|
4,351 |
|
|
Valuation allowances
|
|
|
(1,634 |
) |
|
|
(4,351 |
) |
| |
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
At December 31, 2005, the Company’s taxable REIT
subsidiaries had consolidated federal income tax net operating
loss carryforwards totaling approximately $1,200. These tax loss
carryforwards begin to expire in 2021. At
Post Properties, Inc.
77
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
December 31, 2005 and 2004, management had established
valuation allowances against the deferred tax asset associated
with these net operating loss carryforwards and other net
deferred tax assets due primarily to the historical losses and
variability of the income of these subsidiaries. The tax
benefits associated with such valuation allowances may be
recognized in future periods, if the taxable REIT subsidiaries
generate sufficient taxable income to utilize such amounts or if
the Company determines that it is more likely than not that the
related deferred tax assets are realizable.
A reconciliation of income tax expense of the TRSs to the
federal statutory rate is detailed below. As shown above, 2005
income tax expense was allocated to discontinued operations.
| |
|
|
|
|
| |
|
2005 | |
| |
|
| |
|
Federal tax rate
|
|
|
35 |
% |
|
State income tax, net of federal benefit
|
|
|
4 |
% |
|
Federal alternative minimum taxes
|
|
|
3 |
% |
|
Change in valuation allowance of deferred tax assets
|
|
|
(35 |
)% |
| |
|
|
|
| |
|
|
7 |
% |
| |
|
|
|
|
|
| 9. |
STOCK-BASED COMPENSATION PLANS |
Stock Compensation Plans
Effective January 1, 2003, the Company elected to
voluntarily change its method of accounting for stock-based
compensation to the fair value method prescribed in
SFAS No. 123 (see note 1). The Company elected
the prospective method of adoption prescribed by
SFAS No. 148. For stock-based compensation granted
prior to January 1, 2003, the Company accounted for
stock-based compensation under the intrinsic value method
prescribed by APB No. 25. A table in note 1 summarizes
the Company’s net income and earnings per common share had
the fair value method of accounting under SFAS No. 123
been applied for all stock-based compensation for the years
ended December 31, 2005, 2004 and 2003.
Incentive Stock Plans
The Company’s 2003 Incentive Stock Plan (the “2003
Stock Plan”) was approved by the Company’s
shareholders in May 2003. Under the 2003 Stock Plan, an
aggregate of 4,000 shares of common stock were reserved for
issuance. Of this amount, not more than 500 shares of
common stock are available for grants of restricted stock. The
exercise price of each option granted under the 2003 Stock Plan
may not be less than the market price of the Company’s
common stock on the date of the option grant and all options may
have a maximum life of ten years. Participants receiving
restricted stock grants are generally eligible to vote such
shares and receive dividends on such shares. Substantially all
stock option and restricted stock grants are subject to annual
vesting provisions (generally three to five years) as determined
by the administrative committee overseeing the 2003 Stock Plan.
At December 31, 2005, stock options outstanding under the
2003 Stock Plan totaled 1,150. The Company’s former stock
plan (the “1993 Stock Plan”) expired in July 2003. At
December 31, 2005, stock options outstanding under the 1993
Stock Plan totaled 2,384.
In 2005, 2004 and 2003, the Company granted stock options to
purchase 277, 283 and 1,252 shares of Company common
stock to Company officers and directors, of which 50, 50 and
100 shares in 2005, 2004 and 2003, respectively, were
granted to the Company’s non-executive chairman of the
board. For the years ended December 31, 2005, 2004 and
2003, the Company recorded compensation expense related to stock
options of $761 ($723 net of minority interest), $590
($553, net of minority interest) and $244 ($218, net of minority
interest), respectively, recognized under the fair value method.
Post Properties, Inc.
78
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
The following table summarizes the weighted average assumptions
used in the calculation of the fair value of stock options
granted using the Black-Scholes option-pricing model.
| |
|
|
|
|
|
|
| |
|
2005 |
|
2004 |
|
2003 |
| |
|
|
|
|
|
|
|
Dividend yield
|
|
5.5% |
|
6.3% |
|
6.5% |
|
Expected volatility
|
|
17.1% |
|
16.9% |
|
17.1% |
|
Risk-free interest rate
|
|
3.1% |
|
3.1% |
|
2.9% |
|
Expected option life
|
|
5 years |
|
5 years |
|
5 years |
A summary of stock option activity under all plans for the years
ended December 31, 2005, 2004 and 2003, is presented below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
| |
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
|
Weighted | |
| |
|
|
|
Average | |
|
|
|
Average | |
|
|
|
Average | |
| |
|
Shares | |
|
Exercise Price | |
|
Shares | |
|
Exercise Price | |
|
Shares | |
|
Exercise Price | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Outstanding at beginning of year
|
|
|
4,491 |
|
|
$ |
33 |
|
|
|
4,735 |
|
|
$ |
34 |
|
|
|
4,089 |
|
|
$ |
35 |
|
|
Granted
|
|
|
277 |
|
|
|
33 |
|
|
|
283 |
|
|
|
28 |
|
|
|
1,252 |
|
|
|
26 |
|
|
Exercised
|
|
|
(1,105 |
) |
|
|
33 |
|
|
|
(277 |
) |
|
|
29 |
|
|
|
(217 |
) |
|
|
28 |
|
|
Forfeited
|
|
|
(129 |
) |
|
|
30 |
|
|
|
(250 |
) |
|
|
36 |
|
|
|
(389 |
) |
|
|
32 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
3,534 |
|
|
|
34 |
|
|
|
4,491 |
|
|
|
33 |
|
|
|
4,735 |
|
|
|
34 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
2,437 |
|
|
|
|
|
|
|
3,131 |
|
|
|
|
|
|
|
3,233 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of options granted during the year
|
|
$ |
2.73 |
|
|
|
|
|
|
$ |
1.86 |
|
|
|
|
|
|
$ |
1.59 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2005, the Company has separated its
outstanding options into two ranges based on exercise prices.
There were 1,481 options outstanding with exercise prices
ranging from $23.90 to $35.51. These options have a weighted
average exercise price of $27.75 and a weighted average
remaining contractual life of 8 years. Of these outstanding
options, 457 were exercisable at December 31, 2005 at a
weighted average exercise price of $26.66. In addition, there
were 2,053 options outstanding with exercise prices ranging from
$36.13 to $44.13. These options have a weighted average exercise
price of $38.16 and a weighted average remaining contractual
life of 3 years. Of these outstanding options, 1,980 were
exercisable at December 31, 2005 at a weighted average
exercise price of $37.56.
In 2005, 2004 and 2003, the Company granted 35, 27 and
175 shares of restricted stock, respectively, to Company
officers and directors, of which 6, 7 and 8 shares in
2005, 2004 and 2003, respectively, were granted to the
Company’s non-executive chairman of the board. The
restricted shares granted in 2005 and 2004 vest ratably over
three to five year periods. The restricted shares granted in
2003 vest ratably over three to eight year periods. For each
year, the total value of the restricted share grants of $1,173,
$777 and $4,555, respectively, was initially reflected in
shareholders’ equity as additional paid-in capital and as
deferred compensation, a contra-shareholders’ equity
account. Such deferred compensation is amortized ratably into
compensation expense over the applicable vesting period. Total
compensation expense relating to the restricted stock was
$1,367, $1,109 and $742 in 2005, 2004 and 2003, respectively.
Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (the
“2005 ESPP”) under a plan approved by Company
shareholders in 2005. The provisions of the 2005 ESPP are
substantially similar to the Company’s former ESPP,
terminated in December 2004, with certain exceptions including
that the maximum number of shares issuable under the 2005 ESPP
will be 300. To participate in the ESPP, (i) directors 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; provided, an individual who is a director and
who is an employee shall be a participant exclusively with
respect to his or her status as an employee. 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.
Post Properties, Inc.
79
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Effective January 1, 2003, under SFAS No. 123,
the Company records the aggregate cost of the ESPP (generally
the 15% discount on the share purchases) as a period expense.
Total compensation expense relating to the ESPP was $171, $86
and $85 in 2005, 2004 and 2003, respectively.
|
|
| 10. |
EMPLOYEE BENEFIT PLAN |
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 was 5% in 2005 (4% in 2004 and 2003) of salary.
Company contributions of $691, $541 and $513 were made to this
plan in 2005, 2004 and 2003, respectively.
|
|
| 11. |
COMMITMENTS AND CONTINGENCIES |
Land, office and equipment leases
The Company is party to two ground leases with terms expiring in
years 2040 and 2043 relating to a single operating community and
four ground leases expiring in 2012, 2038, 2066 and 2074 for
four separate operating communities and to other facility,
office, equipment and other operating leases with terms expiring
through 2057. The ground leases generally provide for future
increases in minimum lease payments tied to an inflation index
or contain stated rent increases that generally compensate for
the impact of inflation. Future minimum lease payments for
non-cancelable land, office, equipment and other leases at
December 31, 2005, are as follows:
| |
|
|
|
|
|
2006
|
|
$ |
1,665 |
|
|
2007
|
|
|
1,625 |
|
|
2008
|
|
|
1,638 |
|
|
2009
|
|
|
1,628 |
|
|
2010
|
|
|
1,634 |
|
|
2011 and thereafter
|
|
|
167,857 |
|
The Company incurred $5,058, $4,981 and $4,382 of rent expense,
including rent expense under short-term rental and lease
arrangements, for the years ended December 31, 2005, 2004
and 2003, respectively.
Legal proceedings
On May 13, 2004, an alleged Company shareholder filed a
purported pro se derivative and direct action in the Superior
Court of Fulton County, Georgia, against the Company, certain
members of the Company’s board of directors, and certain of
its executive officers. The case was removed to the United
States District Court for the Northern District of Georgia on
May 21, 2004. The complaint alleged, among other things,
breaches of fiduciary duties, fraud, corporate waste,
withholding certain documents from shareholder inspection and
certain securities laws claims. The complaint requested various
types of relief, such as injunctive relief and damages and
demanded production of certain Company records. Because the
Company believed the allegations were wholly without merit, the
Company moved to dismiss the litigation. On April 20, 2005,
the court entered an order dismissing all claims without
prejudice, save a claim seeking production of certain Company
records, upon which the Court declined to rule, concluding it
lacked jurisdiction to do so, and ordered the claim remanded to
the Superior Court of Fulton County. Since that time, the
Company has moved for its attorney fees in the United States
District Court, arguing that the plaintiff frivolously pursued
the litigation, and the plaintiff has moved for entry of
judgment in Superior Court, which the Company has vigorously
contested. In February 2006, the United States District Court
granted the Company’s motion for attorneys’ fees in an
amount to be determined by the agreement of the parties, or,
alternatively, by the Court.
On May 5, 2003, the Company received notice that a
shareholder derivative and purported class action lawsuit was
filed against members of the board of directors of the Company
and the Company as a nominal defendant. This complaint was filed
in the Superior Court of Fulton County, Atlanta, Georgia on
May 2, 2003 and alleged various breaches of fiduciary
duties by the board of directors of the Company and sought,
among other relief, the disclosure of certain information by the
defendants. This complaint also sought to compel the defendants
to undertake various
Post Properties, Inc.
80
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
actions to facilitate a sale of the Company. On May 7,
2003, the plaintiff made a request for voluntary expedited
discovery. On May 13, 2003, the Company received notice
that a similar shareholder derivative and purported class action
lawsuit was filed against certain members of the board of
directors of the Company and against the Company as a nominal
defendant. The complaint was filed in the Superior Court of
Fulton County, Atlanta, Georgia on May 12, 2003 and alleged
breaches of fiduciary duties, abuse of control and corporate
waste by the defendants. The plaintiff sought monetary damages
and, as appropriate, injunctive relief. These lawsuits were
settled, and in October 2004, the Superior Court of Fulton
County entered an order approving the settlement and related
orders dismissing the litigation. The estimated legal and
settlement costs, not covered by insurance, associated with the
expected resolution of the lawsuits were recorded in the second
quarter of 2003 as a component of a proxy contest and related
costs charge. An alleged Company shareholder, who had filed a
separate purported derivative and direct action against the
Company and certain of its officers and directors (which is
described in the paragraph above), has appealed from the
Superior Court’s orders approving the settlement,
overruling the shareholder’s objection to the settlement
denying the shareholder’s motion to intervene, and
dismissing the litigation with prejudice. In November 2005, the
Georgia Court of Appeals affirmed the orders. In December 2005,
the alleged Company shareholder asked the Georgia Supreme Court
to review the case, and his petition remains pending.
The Company is involved in various other legal proceedings
incidental to its business from time to time, most of which are
expected to be covered by liability or other insurance.
Management believes that any resolution of pending proceedings
or liability to the Company which may arise as a result of these
proceedings will not have a material adverse effect on the
Company’s results of operations or financial position.
|
|
| 12. |
RELATED PARTY TRANSACTIONS |
In 2005, 2004 and 2003, the Company held investments in Property
LLC’s accounted for under the equity method of accounting
(see note 4). In 2005, 2004 and 2003, the Company recorded,
before elimination of the Company’s equity interests,
development fees, general construction contract billings,
management fees and expense reimbursements (primarily personnel
costs) of approximately $1,781, $1,756 and $2,913, respectively,
from these related companies. Additionally in 2005, 2004 and
2003, the Company earned interest under mortgage and
construction loans to the Project LLCs totaling $437, $308 and
$3,186, respectively. The Company portion of all significant
intercompany transactions was eliminated in the accompanying
consolidated financial statements.
In prior years, the Company provided landscaping services for
executive officers, employees, directors and other related
parties. For the year ended December 31, 2003, the Company
received landscaping revenue of $742 for such services. Such
revenue includes reimbursement of direct and indirect expenses.
At December 31, 2005 and 2004, the Company had outstanding
loan balances to certain current and former company executives
totaling $2,485 and $5,095, respectively. These loans mature ten
years from their issue date and bear interest at a rate of
6.32% per annum. Proceeds from these loans were used by
these executives to acquire the Company’s common shares on
the open market. Additionally, at December 31, 2005 and
2004, the Company had outstanding additional loans to certain
company executives totaling $640 and $780, respectively. The
loans bear interest at 6.32% per annum. If the executives
continue to be employed by the Company, the loans will be
forgiven annually over five to ten year periods, as defined in
the agreements. The annual loan forgiveness of $140, $140 and
$160 was recorded as compensation expense in 2005, 2004 and
2003, respectively.
|
|
| 13. |
DERIVATIVE FINANCIAL INSTRUMENTS |
At December 31, 2005, the Company had outstanding one
interest rate swap agreement with a notional value of
approximately $97,100 with a maturity date in 2009. At
December 31, 2004, the Company had interest rate swaps with
notional values of $123,000. At December 31, 2005 and 2004,
the fair value of the interest rate swap agreements represented
liabilities of $4,021 and $8,927, respectively, and the
liabilities were included in consolidated liabilities in the
accompanying consolidated balance sheets. The Company recorded
the changes in the fair value of these cash flow hedges as
changes in accumulated other comprehensive income (loss), a
shareholders’ equity account, in the accompanying
consolidated balance sheet.
At December 31, 2005, the Company had outstanding one
interest rate cap agreement with a financial institution with a
notional value of $28,495. This interest rate cap agreement is
cash flow hedge that provides a fixed interest
Post Properties, Inc.
81
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
ceiling at 5% for the Company’s variable rate, tax-exempt
borrowings aggregating $28,495 at December 31, 2005. The
Company is required to maintain the interest rate exposure
protection under the terms of the financing arrangements. The
interest rate cap arrangements are included on the accompanying
balance sheet at fair value. At December 31, 2005, the
difference between the amortized costs of the interest rate cap
arrangement and their fair value of $5 is included in
accumulated other comprehensive income (loss), a
shareholders’ equity account. The original cost of $362 of
the arrangements is being amortized to expense over their
five-year term.
In 2005, in connection with the sale of three communities
discussed in note 5 above, the Company sold its interest in
interest rate cap agreements with notional values of $81,560 for
aggregate proceeds of $17 and realized losses of $955
($902 net of minority interest) that were included in the
loss on early extinguishment of indebtedness associated with
asset sales on the accompanying statement of operations. In
2004, in connection with the sale of five communities discussed
in note 5 above, the Company sold its interest in interest
rate cap agreements with notional values of $104,325 for
aggregate proceeds of $379 and realized losses of $941
($877 net of minority interest) that was included in the
loss on early extinguishment of indebtedness associated with
asset sales on the accompanying statement of operations. The
unrealized losses on these interest rate cap agreements were
previously reflected in accumulated other comprehensive income
(loss), a shareholder’s equity account. These interest rate
cap agreements were sold and the underlying hedged indebtedness
was assumed by the purchasers in connection with the sale of the
related assets.
The impact of the change in the value of the derivatives on
comprehensive income (loss) is included in the statement of
shareholders’ equity. Amounts reported in accumulated other
comprehensive income related to these derivatives will be
reclassified to interest expense as schedule interest payments
are made on the Company’s hedge indebtedness. At
December 31, 2005, the Company estimates that $1,470 will
be reclassified from accumulated other comprehensive income as
an increase in interest expense during the next twelve months.
|
|
| 14. |
FAIR VALUE OF FINANCIAL INSTRUMENTS |
The 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 and other liabilities are carried at
amounts which reasonably approximate their fair values because
of the short-term nature of these instruments. At
December 31, 2005, the fair value of fixed rate debt was
approximately $767,271 (carrying value of $753,641) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements. At
December 31, 2004, the fair value of fixed rate debt was
approximately $891,579 (carrying value of $845,175) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements.
In order to manage the impact of interest rate changes on
earnings and cash flow, the Company entered into and has
outstanding interest rate swap and interest rate cap
arrangements. As more fully described in note 1, these
interest rate cap and interest rate swap agreements are carried
on the consolidated balance sheet at fair market value in
accordance with SFAS No. 133, as amended. At
December 31, 2005, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling
$4,021 and the carrying value of the interest rate cap
arrangement represented a net asset of $5. At December 31,
2004, the carrying amounts of the interest rate swap
arrangements represented net liabilities totaling $8,927 and the
carrying value of the interest rate cap arrangements represented
net assets of $110.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of
December 31, 2005. 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.
Post Properties, Inc.
82
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Segment Description
In accordance with SFAS No. 131, “Disclosure
About the Segments of an Enterprise and Related
Information,” the Company presents segment information
based on the way that management organizes the segments within
the enterprise for making operating decisions and assessing
performance. The segment information is prepared on the same
basis as the internally reported information used by the
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. Apartment community rental operations are broken
down into four segments based on the various stages in the
apartment community ownership lifecycle. These segments are
described below. All commercial and other ancillary service and
support operations are combined in the line item “other
property segments” in the accompanying segment information.
The segment information presented below reflects the segment
categories based on the lifecycle status of each community as of
December 31, 2005. The segment information for the years
ended December 31, 2004 and 2003 have been adjusted due to
the restatement impact of reclassifying the operating results of
the assets designated as held for sale in 2005 to discontinued
operations under SFAS No. 144 (see note 5).
|
|
|
| |
• |
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 prior year — communities
which reached stabilized occupancy in the prior year. |
| |
| |
• |
Condominium conversion communities — those portions of
existing apartment communities being converted into condominiums
that are reflected in continuing operations under
SFAS No. 144 (see note 1). |
| |
| |
• |
Acquired communities — those communities acquired in
the current or prior year. |
Segment Performance Measure
Management uses contribution to consolidated property net
operating income (“NOI”) as the performance measure
for its operating segments. Net operating income is defined as
rental and other revenue from real estate operations less total
property and maintenance expenses from real estate operations
(excluding depreciation and amortization).
Post Properties, Inc.
83
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
Segment Information
The following table reflects each segment’s contribution to
consolidated revenues and NOI together with a reconciliation of
segment contribution to NOI to consolidated net income for the
years ended December 31, 2005, 2004 and 2003. 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 is not reported internally at the
segment level.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$ |
250,583 |
|
|
$ |
243,430 |
|
|
$ |
240,613 |
|
|
Communities stabilized during prior year
|
|
|
7,184 |
|
|
|
7,007 |
|
|
|
2,008 |
|
|
Condominium conversion communities
|
|
|
5,485 |
|
|
|
5,716 |
|
|
|
5,523 |
|
|
Acquired communities
|
|
|
10,808 |
|
|
|
4,477 |
|
|
|
— |
|
|
Other property segments
|
|
|
22,488 |
|
|
|
21,154 |
|
|
|
19,558 |
|
|
Other
|
|
|
255 |
|
|
|
1,000 |
|
|
|
457 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Consolidated revenues
|
|
$ |
296,803 |
|
|
$ |
282,784 |
|
|
$ |
268,159 |
|
| |
|
|
|
|
|
|
|
|
|
|
Contribution to Property Net Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$ |
153,423 |
|
|
$ |
149,146 |
|
|
$ |
149,963 |
|
|
Communities stabilized during prior year
|
|
|
4,957 |
|
|
|
4,885 |
|
|
|
115 |
|
|
Condominium conversion communities
|
|
|
3,613 |
|
|
|
3,675 |
|
|
|
3,569 |
|
|
Acquired communities
|
|
|
7,230 |
|
|
|
3,163 |
|
|
|
— |
|
|
Other property segments, including corporate management expenses
|
|
|
(6,685 |
) |
|
|
(6,438 |
) |
|
|
(3,716 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Consolidated property net operating income
|
|
|
162,538 |
|
|
|
154,431 |
|
|
|
149,931 |
|
| |
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
661 |
|
|
|
817 |
|
|
|
894 |
|
|
Other revenues
|
|
|
255 |
|
|
|
1,000 |
|
|
|
457 |
|
|
Minority interest in consolidated property partnerships
|
|
|
239 |
|
|
|
671 |
|
|
|
1,605 |
|
|
Depreciation
|
|
|
(76,248 |
) |
|
|
(79,473 |
) |
|
|
(77,595 |
) |
|
Interest
|
|
|
(58,898 |
) |
|
|
(63,552 |
) |
|
|
(61,640 |
) |
|
Amortization of deferred financing costs
|
|
|
(4,661 |
) |
|
|
(4,304 |
) |
|
|
(3,801 |
) |
|
General and administrative
|
|
|
(18,307 |
) |
|
|
(18,205 |
) |
|
|
(13,841 |
) |
|
Investment, development and other
|
|
|
(5,242 |
) |
|
|
(2,930 |
) |
|
|
(2,715 |
) |
|
Termination of debt remarketing agreement (interest expense)
|
|
|
— |
|
|
|
(10,615 |
) |
|
|
— |
|
|
Loss on early extinguishment of indebtedness
|
|
|
— |
|
|
|
(4,011 |
) |
|
|
— |
|
|
Severance charges
|
|
|
(796 |
) |
|
|
— |
|
|
|
(21,506 |
) |
|
Proxy contest and related costs
|
|
|
— |
|
|
|
— |
|
|
|
(5,231 |
) |
|
Equity in income of unconsolidated real estate entities
|
|
|
1,767 |
|
|
|
1,083 |
|
|
|
7,790 |
|
|
Gain on sale of technology investment
|
|
|
5,267 |
|
|
|
— |
|
|
|
— |
|
|
Minority interest of preferred unitholders
|
|
|
— |
|
|
|
(3,780 |
) |
|
|
(5,600 |
) |
|
Minority interest of common unitholders
|
|
|
53 |
|
|
|
2,586 |
|
|
|
4,367 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
6,628 |
|
|
|
(26,282 |
) |
|
|
(26,885 |
) |
|
Income from discontinued operations
|
|
|
135,320 |
|
|
|
114,501 |
|
|
|
41,041 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
141,948 |
|
|
$ |
88,219 |
|
|
$ |
14,156 |
|
| |
|
|
|
|
|
|
|
|
|
Post Properties, Inc.
84
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
|
|
| 16. |
SUPPLEMENTAL CASH FLOW INFORMATION |
Non-cash investing and financing activities for the years ended
December 31, 2005, 2004 and 2003 were as follows:
In 2005, the Company sold three apartment communities subject to
$81,560 of tax-exempt mortgage indebtedness assumed by the
purchasers. In 2004, the Company sold certain apartment
communities subject to $104,325 of tax-exempt mortgage
indebtedness assumed by the purchasers. Additionally in 2004,
the Company acquired an apartment community, including the
assumption of mortgage indebtedness with an estimated fair value
of $49,496. These transactions were excluded from the cash flow
statement as a non-cash transactions.
In 2005, the Company’s derivative financial instruments
increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in
shareholders’ equity of $5,559, net of minority interest.
In 2004, the Company’s derivative financial instruments
increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in
shareholders’ equity of $3,694, net of minority interest.
In 2003, the Company’s derivative financial instruments
increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in
shareholders’ equity of $2,460, net of minority interest.
In 2005, 2004 and 2003, Common Units in the Operating
Partnership totaling 1,097, 1,168 and 1,162, respectively, were
converted into Company common shares on a one-for-one basis. The
net effect of the conversion of Common Units of the Operating
Partnership to common shares of the Company and the adjustments
to minority interest for the impact of the Company’s
employee stock purchase and stock options plans, decreased
minority interest and increased shareholders’ equity in the
amounts of $20,444, $19,848 and $20,802 for the years ended
December 31, 2005, 2004 and 2003, respectively.
The Operating Partnership committed to distribute $19,257,
$19,203 and $19,043 for the quarters ended December 31,
2005, 2004 and 2003, respectively. As a result, the Company
declared dividends of $18,626, $18,078 and $17,391 for the
quarters ended December 31, 2005, 2004 and 2003,
respectively. The remaining distributions from the Operating
Partnership in the amount of $631, $1,125 and $1,652 for the
quarters ended December 31, 2005, 2004 and 2003,
respectively, are distributed to minority interest unitholders
in the Operating Partnership.
In 2005, under an amended and restated deferred compensation
plan for directors and officers, Company common shares were
issued to the plan in settlement of the Company’s variable
obligation relating to changes in the value of its common shares
due the directors under the prior deferred compensation plan.
This common share issuance totaling $1,568 was a non-cash
transaction. In addition, common shares issued quarterly for
director compensation, totaling $194 in 2005, were also non-cash
transactions.
In 2005, the Company’s taxable REIT subsidiaries made
income tax payments to federal and state taxing authorities
totaling $760. Such income tax payments were not material in
2004 and 2003 due to the existence of tax loss carryforwards at
the taxable REIT subsidiaries (see note 8).
|
|
| 17. |
SALE OF TECHNOLOGY INVESTMENT |
In 2005, the Company sold its investment in Rent.com, a
privately-held internet leasing company, and recognized a gain
of $5,267.
Post Properties, Inc.
85
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
(In thousands, except per share data)
|
|
| 18. |
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) |
Under SFAS No. 144, as further discussed in
note 5, the operating results of apartment communities
classified as held for sale were included in discontinued
operations in the accompanying statements of operations for all
periods presented. To conform with this presentation, the
quarterly financial information presented below reflects the
reclassification of the operating results of these assets to
discontinued operations, which in 2004 differ from the
presentation of discontinued operations included in the
Company’s previously issued financial statements included
in its quarterly reports on
Form 10-Q filed in
2004. Due to the timing of discontinued operations, the
quarterly financial information presented below is consistent
with the Company’s quarterly financial information reported
in its 2005
Form 10-Qs.
Quarterly financial information for the years ended
December 31, 2005 and 2004, as revised to reflect the
change discussed above was as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2005 | |
| |
|
| |
| |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
$ |
71,580 |
|
|
$ |
73,119 |
|
|
$ |
76,071 |
|
|
$ |
76,033 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
1,230 |
|
|
|
(709 |
) |
|
|
1,983 |
|
|
|
4,124 |
|
|
Income from discontinued operations
|
|
|
3,446 |
|
|
|
59,154 |
|
|
|
71,258 |
|
|
|
1,462 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,676 |
|
|
|
58,445 |
|
|
|
73,241 |
|
|
|
5,586 |
|
|
Dividends to preferred shareholders
|
|
|
(1,909 |
) |
|
|
(1,910 |
) |
|
|
(1,909 |
) |
|
|
(1,909 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders
|
|
$ |
2,767 |
|
|
$ |
56,535 |
|
|
$ |
71,332 |
|
|
$ |
3,677 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders — basic
|
|
$ |
0.07 |
|
|
$ |
1.42 |
|
|
$ |
1.77 |
|
|
$ |
0.09 |
|
|
Net income available to common shareholders — diluted
|
|
$ |
0.07 |
|
|
$ |
1.42 |
|
|
$ |
1.75 |
|
|
$ |
0.09 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2004 | |
| |
|
| |
| |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
$ |
68,686 |
|
|
$ |
69,860 |
|
|
$ |
72,912 |
|
|
$ |
71,326 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(3,343 |
) |
|
|
(3,708 |
) |
|
|
(3,994 |
) |
|
|
(15,237 |
) |
|
Income from discontinued operations
|
|
|
6,754 |
|
|
|
104,816 |
|
|
|
2,201 |
|
|
|
730 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
3,411 |
|
|
|
101,108 |
|
|
|
(1,793 |
) |
|
|
(14,507 |
) |
|
Dividends to preferred shareholders
|
|
|
(2,597 |
) |
|
|
(1,910 |
) |
|
|
(1,909 |
) |
|
|
(1,909 |
) |
|
Redemption costs on preferred stock and units
|
|
|
(1,716 |
) |
|
|
— |
|
|
|
(1,810 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders
|
|
$ |
(902 |
) |
|
$ |
99,198 |
|
|
$ |
(5,512 |
) |
|
$ |
(16,416 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common shareholders —
basic
|
|
$ |
(0.02 |
) |
|
$ |
2.49 |
|
|
$ |
(0.14 |
) |
|
$ |
(0.41 |
) |
|
Net income (loss) available to common shareholders —
diluted
|
|
$ |
(0.02 |
) |
|
$ |
2.49 |
|
|
$ |
(0.14 |
) |
|
$ |
(0.41 |
) |
Post Properties, Inc.
86
Post Apartment Homes, L.P.
Consolidated Financial Statements
December 31, 2005 and 2004
Post Apartment Homes, L.P.
87
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING
The management of Post Apartment Homes, L.P. is responsible for
establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f).
Internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles. Under the supervision and with the
participation of the management of Post Apartment Homes, L.P.,
including the Partnership’s principal executive officer and
principal financial officer, Partnership management conducted an
evaluation of the effectiveness of its internal control over
financial reporting as of December 31, 2005 based on the
framework in Internal Control — Integrated
Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on its
evaluation under the framework in Internal
Control — Integrated Framework, the management of
Post Apartment Homes, L.P. concluded that its internal control
over financial reporting was effective as of December 31,
2005. Management’s assessment of the effectiveness of the
Partnership’s internal control over financial reporting as
of December 31, 2005 has been audited by
PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which is included
herein.
Post Apartment Homes, L.P.
88
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Partners of Post Apartment Homes, L.P.:
We have completed integrated audits of Post Apartment Homes,
L.P. 2005 and 2004 consolidated financial statements and of its
internal control over financial reporting as of
December 31, 2005, and an audit of its 2003 consolidated
financial statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Our
opinions, based on our audits, are presented below.
Consolidated financial statements and financial statement
schedule
In our opinion, the consolidated financial statements listed in
the Post Apartment Homes, L.P. index appearing under
Item 15(a) present fairly, in all material respects, the
financial position of Post Apartment Homes, L.P. and
subsidiaries at December 31, 2005 and 2004, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 2005 in conformity
with accounting principles generally accepted in the United
States of America. In addition, in our opinion, the financial
statement schedule listed in the index appearing under
Item 15(a) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements. These financial
statements and the financial statement schedule are the
responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our
audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit of financial statements 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.
Internal control over financial reporting
Also, in our opinion, management’s assessment, included in
Management’s Report on Internal Control Over Financial
Reporting appearing under Item 15(a), that the Company
maintained effective internal control over financial reporting
as of December 31, 2005 based on criteria established in
Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO), is fairly stated, in all material respects, based on
those criteria. Furthermore, in our opinion, the Company
maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2005, based on
criteria established in Internal Control — Integrated
Framework issued by the COSO. The Company’s management is
responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting. Our responsibility
is to express opinions on management’s assessment and on
the effectiveness of the Company’s internal control over
financial reporting based on our audit. We conducted our audit
of internal control over financial reporting in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was
maintained in all material respects. An audit of internal
control over financial reporting includes obtaining an
understanding of internal control over financial reporting,
evaluating management’s assessment, testing and evaluating
the design and operating effectiveness of internal control, and
performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 15, 2006
Post Apartment Homes, L.P.
89
POST APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Assets
|
|
|
|
|
|
|
|
|
| |
Real estate assets
|
|
|
|
|
|
|
|
|
| |
|
Land
|
|
$ |
266,914 |
|
|
$ |
266,520 |
|
| |
|
Building and improvements
|
|
|
1,789,479 |
|
|
|
1,887,514 |
|
| |
|
Furniture, fixtures and equipment
|
|
|
207,497 |
|
|
|
214,954 |
|
| |
|
Construction in progress
|
|
|
47,005 |
|
|
|
19,527 |
|
| |
|
Land held for future development
|
|
|
62,511 |
|
|
|
18,910 |
|
| |
|
|
|
|
|
|
| |
|
|
2,373,406 |
|
|
|
2,407,425 |
|
| |
|
Less: accumulated depreciation
|
|
|
(516,954 |
) |
|
|
(498,367 |
) |
| |
|
For-sale condominiums
|
|
|
38,338 |
|
|
|
— |
|
| |
|
Assets held for sale, net of accumulated depreciation of $0 and
$26,332 at December 31, 2005 and 2004, respectively
|
|
|
4,591 |
|
|
|
68,661 |
|
| |
|
|
|
|
|
|
| |
|
Total real estate assets
|
|
|
1,899,381 |
|
|
|
1,977,719 |
|
| |
Investments in and advances to unconsolidated real estate
entities
|
|
|
26,614 |
|
|
|
21,320 |
|
| |
Cash and cash equivalents
|
|
|
6,410 |
|
|
|
123 |
|
| |
Restricted cash
|
|
|
4,599 |
|
|
|
1,844 |
|
| |
Deferred charges, net
|
|
|
11,624 |
|
|
|
15,574 |
|
| |
Other assets
|
|
|
32,826 |
|
|
|
37,262 |
|
| |
|
|
|
|
|
|
| |
|
Total assets
|
|
$ |
1,981,454 |
|
|
$ |
2,053,842 |
|
| |
|
|
|
|
|
|
| |
|
Liabilities and Partners’ Equity
|
|
|
|
|
|
|
|
|
| |
Indebtedness, including $0 and $34,060 of debt secured by assets
held for sale at December 31, 2005 and 2004, respectively
|
|
$ |
980,615 |
|
|
$ |
1,129,478 |
|
| |
Accounts payable and accrued expenses
|
|
|
58,474 |
|
|
|
58,837 |
|
| |
Dividend and distribution payable
|
|
|
19,257 |
|
|
|
19,203 |
|
| |
Accrued interest payable
|
|
|
5,478 |
|
|
|
7,677 |
|
| |
Deposits and prepaid rents
|
|
|
9,857 |
|
|
|
7,236 |
|
| |
|
|
|
|
|
|
| |
|
Total liabilities
|
|
|
1,073,681 |
|
|
|
1,222,431 |
|
| |
|
|
|
|
|
|
| |
Commitments and contingencies
|
|
|
|
|
|
|
|
|
| |
Partners’ equity
|
|
|
|
|
|
|
|
|
| |
|
Preferred units
|
|
|
95,000 |
|
|
|
95,000 |
|
| |
|
Common units
|
|
|
|
|
|
|
|
|
| |
|
|
General partner
|
|
|
9,722 |
|
|
|
8,673 |
|
| |
|
|
Limited partner
|
|
|
807,403 |
|
|
|
737,940 |
|
| |
|
Accumulated other comprehensive income (loss)
|
|
|
(4,352 |
) |
|
|
(10,202 |
) |
| |
|
|
|
|
|
|
| |
|
Total partners’ equity
|
|
|
907,773 |
|
|
|
831,411 |
|
| |
|
|
|
|
|
|
| |
|
Total liabilities and partners’ equity
|
|
$ |
1,981,454 |
|
|
$ |
2,053,842 |
|
| |
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
90
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per unit data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
279,508 |
|
|
$ |
266,191 |
|
|
$ |
253,345 |
|
| |
Other property revenues
|
|
|
17,040 |
|
|
|
15,593 |
|
|
|
14,357 |
|
| |
Other
|
|
|
255 |
|
|
|
1,000 |
|
|
|
457 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
|
296,803 |
|
|
|
282,784 |
|
|
|
268,159 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
134,010 |
|
|
|
127,353 |
|
|
|
117,771 |
|
| |
Depreciation
|
|
|
76,248 |
|
|
|
79,473 |
|
|
|
77,595 |
|
| |
General and administrative
|
|
|
18,307 |
|
|
|
18,205 |
|
|
|
13,841 |
|
| |
Investment, development and other
|
|
|
5,242 |
|
|
|
2,930 |
|
|
|
2,715 |
|
| |
Proxy contest and related costs
|
|
|
— |
|
|
|
— |
|
|
|
5,231 |
|
| |
Severance charges
|
|
|
796 |
|
|
|
— |
|
|
|
21,506 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total expenses
|
|
|
234,603 |
|
|
|
227,961 |
|
|
|
238,659 |
|
| |
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
62,200 |
|
|
|
54,823 |
|
|
|
29,500 |
|
| |
Interest income
|
|
|
661 |
|
|
|
817 |
|
|
|
894 |
|
| |
Interest expense
|
|
|
(58,898 |
) |
|
|
(63,552 |
) |
|
|
(61,640 |
) |
| |
Amortization of deferred financing costs
|
|
|
(4,661 |
) |
|
|
(4,304 |
) |
|
|
(3,801 |
) |
| |
Equity in income of unconsolidated real estate entities
|
|
|
1,767 |
|
|
|
1,083 |
|
|
|
7,790 |
|
| |
Gains on sale of technology investment
|
|
|
5,267 |
|
|
|
— |
|
|
|
— |
|
| |
Termination of debt remarketing agreement (interest expense)
|
|
|
— |
|
|
|
(10,615 |
) |
|
|
— |
|
| |
Loss on early extinguishment of indebtedness
|
|
|
— |
|
|
|
(4,011 |
) |
|
|
— |
|
| |
Minority interest in consolidated property partnerships
|
|
|
239 |
|
|
|
671 |
|
|
|
1,605 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Income (loss) from continuing operations
|
|
|
6,575 |
|
|
|
(25,088 |
) |
|
|
(25,652 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Discontinued operations
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Income from discontinued operations
|
|
|
5,049 |
|
|
|
12,654 |
|
|
|
4,957 |
|
| |
Gains on sales of real estate assets, net of provision for
income tax
|
|
|
140,643 |
|
|
|
113,739 |
|
|
|
40,792 |
|
| |
Loss on early extinguishment of indebtedness associated with
property sales
|
|
|
(3,220 |
) |
|
|
(4,128 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Income from discontinued operations
|
|
|
142,472 |
|
|
|
122,265 |
|
|
|
45,749 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
149,047 |
|
|
|
97,177 |
|
|
|
20,097 |
|
| |
Distributions to preferred unitholders
|
|
|
(7,637 |
) |
|
|
(12,105 |
) |
|
|
(17,049 |
) |
| |
Redemption costs on preferred units
|
|
|
— |
|
|
|
(3,526 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders
|
|
$ |
141,410 |
|
|
$ |
81,546 |
|
|
$ |
3,048 |
|
| |
|
|
|
|
|
|
|
|
|
|
Per common unit data — Basic
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loss from continuing operations (net of preferred distributions
and redemption costs)
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
| |
Income from discontinued operations
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Net income available to common unitholders
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Weighted average common units outstanding
|
|
|
42,353 |
|
|
|
42,474 |
|
|
|
42,134 |
|
| |
|
|
|
|
|
|
|
|
|
|
Per common unit data — Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loss from continuing operations (net of preferred distributions
and redemption costs)
|
|
$ |
(0.03 |
) |
|
$ |
(0.96 |
) |
|
$ |
(1.02 |
) |
| |
Income from discontinued operations
|
|
|
3.36 |
|
|
|
2.88 |
|
|
|
1.09 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Net income available to common unitholders
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Weighted average common units outstanding
|
|
|
42,353 |
|
|
|
42,474 |
|
|
|
42,134 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Common distributions declared
|
|
$ |
1.80 |
|
|
$ |
1.80 |
|
|
$ |
1.80 |
|
| |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
91
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
(In thousands, except per unit data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
Accumulated Other | |
|
|
| |
|
Preferred | |
|
Common | |
|
Preferred | |
|
General | |
|
Limited | |
|
Comprehensive | |
|
|
| |
|
Units | |
|
Units | |
|
Units | |
|
Partner | |
|
Partner | |
|
Income (Loss) | |
|
Total | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
| |
|
(No. of Units) | |
|
(No. of Units) | |
|
|
|
|
|
|
|
|
|
|
|
Partners’ Equity, December 31, 2002
|
|
|
7,700 |
|
|
|
42,032 |
|
|
$ |
215,000 |
|
|
$ |
9,143 |
|
|
$ |
786,682 |
|
|
$ |
(16,849 |
) |
|
$ |
993,976 |
|
| |
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net income
|
|
|
— |
|
|
|
— |
|
|
|
17,049 |
|
|
|
30 |
|
|
|
3,018 |
|
|
|
— |
|
|
|
20,097 |
|
| |
|
Net change in derivative value
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,702 |
|
|
|
2,702 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total comprehensive income
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,799 |
|
| |
Contributions from the Company related to employee stock
purchase and stock option plans
|
|
|
— |
|
|
|
148 |
|
|
|
— |
|
|
|
41 |
|
|
|
4,098 |
|
|
|
— |
|
|
|
4,139 |
|
| |
Contributions from the Company related to shares issued for
restricted stock, net of deferred compensation
|
|
|
— |
|
|
|
174 |
|
|
|
— |
|
|
|
7 |
|
|
|
735 |
|
|
|
— |
|
|
|
742 |
|
| |
Equity-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2 |
|
|
|
242 |
|
|
|
— |
|
|
|
244 |
|
| |
Distributions to preferred Unitholders
|
|
|
— |
|
|
|
— |
|
|
|
(17,049 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(17,049 |
) |
| |
Distributions to common Unitholders ($1.80 per unit)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(759 |
) |
|
|
(75,157 |
) |
|
|
— |
|
|
|
(75,916 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Equity, December 31, 2003
|
|
|
7,700 |
|
|
|
42,354 |
|
|
|
215,000 |
|
|
|
8,464 |
|
|
|
719,618 |
|
|
|
(14,147 |
) |
|
|
928,935 |
|
| |
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net income
|
|
|
— |
|
|
|
— |
|
|
|
12,105 |
|
|
|
851 |
|
|
|
84,221 |
|
|
|
— |
|
|
|
97,177 |
|
| |
|
Net change in derivative value, net of minority interest
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
3,945 |
|
|
|
3,945 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total comprehensive income
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,122 |
|
| |
Contributions from the Company related to employee stock
purchase and stock option plans
|
|
|
— |
|
|
|
366 |
|
|
|
— |
|
|
|
105 |
|
|
|
10,360 |
|
|
|
— |
|
|
|
10,465 |
|
| |
Contributions from the Company related to shares issued for
restricted stock, net of deferred compensation
|
|
|
— |
|
|
|
25 |
|
|
|
— |
|
|
|
11 |
|
|
|
1,098 |
|
|
|
— |
|
|
|
1,109 |
|
| |
Redemption of preferred units
|
|
|
(4,800 |
) |
|
|
— |
|
|
|
(120,000 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(120,000 |
) |
| |
Equity-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
|
|
669 |
|
|
|
— |
|
|
|
676 |
|
| |
Purchase of common units
|
|
|
— |
|
|
|
(82 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,268 |
) |
|
|
— |
|
|
|
(2,268 |
) |
| |
Distributions to preferred Unitholders
|
|
|
— |
|
|
|
— |
|
|
|
(12,105 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(12,105 |
) |
| |
Distributions to common Unitholders ($1.80 per unit)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(765 |
) |
|
|
(75,758 |
) |
|
|
— |
|
|
|
(76,523 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Equity, December 31, 2004
|
|
|
2,900 |
|
|
|
42,663 |
|
|
|
95,000 |
|
|
|
8,673 |
|
|
|
737,940 |
|
|
|
(10,202 |
) |
|
|
831,411 |
|
| |
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Net income
|
|
|
— |
|
|
|
— |
|
|
|
7,637 |
|
|
|
1,414 |
|
|
|
139,996 |
|
|
|
— |
|
|
|
149,047 |
|
| |
|
Net change in derivative value
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5,850 |
|
|
|
5,850 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Total comprehensive income
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,897 |
|
| |
Contributions from the Company related to employee stock
purchase and stock option plans
|
|
|
— |
|
|
|
1,138 |
|
|
|
— |
|
|
|
378 |
|
|
|
37,463 |
|
|
|
— |
|
|
|
37,841 |
|
| |
Contributions from the Company related to shares issued for
restricted stock, net of deferred compensation
|
|
|
— |
|
|
|
26 |
|
|
|
— |
|
|
|
14 |
|
|
|
1,353 |
|
|
|
— |
|
|
|
1,367 |
|
| |
Equity-based compensation
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
9 |
|
|
|
917 |
|
|
|
— |
|
|
|
926 |
|
| |
Purchase of common units
|
|
|
— |
|
|
|
(1,031 |
) |
|
|
— |
|
|
|
— |
|
|
|
(34,400 |
) |
|
|
— |
|
|
|
(34,400 |
) |
| |
Distributions to preferred Unitholders
|
|
|
— |
|
|
|
— |
|
|
|
(7,637 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(7,637 |
) |
| |
Distributions to common Unitholders ($1.80 per unit)
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(766 |
) |
|
|
(75,866 |
) |
|
|
— |
|
|
|
(76,632 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Partners’ Equity, December 31, 2005
|
|
|
2,900 |
|
|
|
42,796 |
|
|
$ |
95,000 |
|
|
$ |
9,722 |
|
|
$ |
807,403 |
|
|
$ |
(4,352 |
) |
|
$ |
907,773 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
92
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per unit data)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Cash Flows From Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Net income
|
|
$ |
149,047 |
|
|
$ |
97,177 |
|
|
$ |
20,097 |
|
| |
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Depreciation
|
|
|
76,248 |
|
|
|
85,310 |
|
|
|
89,975 |
|
| |
|
Amortization of deferred loan costs
|
|
|
4,661 |
|
|
|
4,304 |
|
|
|
3,801 |
|
| |
|
Gains on sales of real estate assets — discontinued
operations
|
|
|
(140,643 |
) |
|
|
(113,739 |
) |
|
|
(40,792 |
) |
| |
|
Gains on sale of technology investment
|
|
|
(5,267 |
) |
|
|
— |
|
|
|
— |
|
| |
|
Asset impairment charges
|
|
|
|
|
|
|
2,233 |
|
|
|
17,462 |
|
| |
|
Equity in income of unconsolidated real estate entities
|
|
|
(1,634 |
) |
|
|
(941 |
) |
|
|
(7,790 |
) |
| |
|
Distribution of earnings of unconsolidated entities
|
|
|
2,033 |
|
|
|
1,928 |
|
|
|
— |
|
| |
|
Equity-based compensation
|
|
|
2,293 |
|
|
|
1,785 |
|
|
|
1,071 |
|
| |
|
Deferred compensation
|
|
|
194 |
|
|
|
— |
|
|
|
— |
|
| |
|
Loss on early extinguishment of indebtedness
|
|
|
2,264 |
|
|
|
4,302 |
|
|
|
— |
|
| |
Changes in assets, (increase) decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Restricted cash
|
|
|
(2,755 |
) |
|
|
221 |
|
|
|
(696 |
) |
| |
|
Other assets
|
|
|
(1,257 |
) |
|
|
(2,858 |
) |
|
|
4,676 |
|
| |
|
Deferred charges
|
|
|
(1,082 |
) |
|
|
(361 |
) |
|
|
(2,210 |
) |
| |
Changes in liabilities, increase (decrease) in:
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Accrued interest payable
|
|
|
(2,199 |
) |
|
|
754 |
|
|
|
(2,071 |
) |
| |
|
Accounts payable and accrued expenses
|
|
|
2,237 |
|
|
|
(356 |
) |
|
|
8,386 |
|
| |
|
Deposits and prepaid rents
|
|
|
2,621 |
|
|
|
(654 |
) |
|
|
(360 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Net cash provided by operating activities
|
|
|
86,761 |
|
|
|
79,105 |
|
|
|
91,549 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Construction and acquisition of real estate assets, net of
payables
|
|
|
(112,527 |
) |
|
|
(42,777 |
) |
|
|
(24,179 |
) |
| |
Net proceeds from property sales
|
|
|
199,546 |
|
|
|
138,637 |
|
|
|
163,560 |
|
| |
Proceeds from sale of technology investment
|
|
|
5,267 |
|
|
|
— |
|
|
|
— |
|
| |
Capitalized interest
|
|
|
(2,907 |
) |
|
|
(1,078 |
) |
|
|
(3,555 |
) |
| |
Recurring capital expenditures
|
|
|
(9,921 |
) |
|
|
(9,884 |
) |
|
|
(9,473 |
) |
| |
Non-recurring capital expenditures
|
|
|
(4,508 |
) |
|
|
(4,605 |
) |
|
|
(5,152 |
) |
| |
Revenue generating capital expenditures
|
|
|
— |
|
|
|
(26 |
) |
|
|
(1,240 |
) |
| |
Corporate additions and improvements
|
|
|
(1,771 |
) |
|
|
(681 |
) |
|
|
(799 |
) |
| |
Distributions from (investments in and advances to)
unconsolidated entities
|
|
|
(5,846 |
) |
|
|
52,287 |
|
|
|
115,033 |
|
| |
Note receivable collections
|
|
|
2,960 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
| |
Net cash provided by investing activities
|
|
|
70,293 |
|
|
|
131,873 |
|
|
|
234,195 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Proceeds from indebtedness
|
|
|
100,000 |
|
|
|
135,000 |
|
|
|
— |
|
| |
Payments on indebtedness
|
|
|
(217,934 |
) |
|
|
(115,753 |
) |
|
|
(103,875 |
) |
| |
Payment of financing costs
|
|
|
(1,211 |
) |
|
|
(5,631 |
) |
|
|
— |
|
| |
Lines of credit proceeds (repayments), net
|
|
|
50,631 |
|
|
|
(21,262 |
) |
|
|
(124,358 |
) |
| |
Redemption of preferred units
|
|
|
— |
|
|
|
(120,000 |
) |
|
|
— |
|
| |
Redemption of common units
|
|
|
(34,400 |
) |
|
|
(2,268 |
) |
|
|
— |
|
| |
Contributions from company related to employee stock purchase
and stock option plans
|
|
|
36,084 |
|
|
|
10,465 |
|
|
|
4,139 |
|
| |
Capital contributions (distributions) of minority interests
|
|
|
283 |
|
|
|
(3,806 |
) |
|
|
— |
|
| |
Distributions to preferred unitholders
|
|
|
(7,637 |
) |
|
|
(12,571 |
) |
|
|
(17,049 |
) |
| |
Distributions to common unitholders
|
|
|
(76,583 |
) |
|
|
(76,363 |
) |
|
|
(89,657 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Net cash used in financing activities
|
|
|
(150,767 |
) |
|
|
(212,189 |
) |
|
|
(330,800 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
6,287 |
|
|
|
(1,211 |
) |
|
|
(5,056 |
) |
|
Cash and cash equivalents, beginning of period
|
|
|
123 |
|
|
|
1,334 |
|
|
|
6,390 |
|
| |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$ |
6,410 |
|
|
$ |
123 |
|
|
$ |
1,334 |
|
| |
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
Post Apartment Homes, L.P.
93
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
|
|
| 1. |
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICES |
Organization
Post Apartment Homes, L.P. (the “Operating
Partnership”), a Georgia limited partnership, and its
subsidiaries develop, own and manage upscale multi-family
apartment communities in selected markets in the United States.
Post Properties, Inc. (the “Company”) through its
wholly-owned subsidiaries is the sole general partner, a limited
partner and owns a majority interest in the Operating
Partnership. The Operating Partnership, through its operating
divisions and subsidiaries conducts substantially all of the
on-going operations of Post Properties, Inc., a publicly traded
company which operates as a self-administered and self-managed
real estate investment trust.
At December 31, 2005, the Company owned 96.7% of the common
limited partnership interests (“Common Units”) in the
Operating Partnership and 100% of the preferred limited
partnership interests (“Preferred Units”). The
Company’s weighted average common ownership interest in the
Operating Partnership was 95.0%, 93.7% and 89.5% for the years
ended December 31, 2005, 2004 and 2003 respectively. Common
Units held by persons other than the Company represented a 3.3%
ownership interest in the Operating Partnership. Each Common
Unit may be redeemed by the holder thereof for either one share
of Company common stock or cash equal to the fair market value
thereof at the time of such redemptions, at the option of the
Operating Partnership. The Operating Partnership presently
anticipates that it will cause shares of common stock to be
issued in connection with each such redemption rather than
paying cash (as has been done in all redemptions to date). With
each redemption of outstanding Common Units for Company common
stock, the 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.
At December 31, 2005, the Company owned 21,442 apartment
units in 58 apartment communities, including 545 apartment units
in two communities held in unconsolidated entities and 205
apartment units in one community currently under development.
The Company is also developing 145 for-sale condominium homes
and is converting 597 apartment units (including 121 units
in one community held in an unconsolidated entity) into for-sale
condominium homes through a taxable REIT subsidiary. At
December 31, 2005, approximately 46.8%, 18.5%, 9.3% and
8.9% (on a unit basis) of the Operating Partnership’s
operating communities were located in the Atlanta, Dallas, the
greater Washington D.C. and Tampa metropolitan areas,
respectively.
Under the provisions of the limited partnership agreement, as
amended, Operating Partnership net profits, net losses and cash
flow (after allocations to preferred ownership interests) are
allocated to the partners in proportion to their common
ownership interests. Cash distributions from the Operating
Partnership shall be, at a minimum, sufficient to enable the
Company to satisfy its annual dividend requirements to maintain
its REIT status under the Code.
Basis of presentation
The accompanying consolidated financial statements include the
consolidated accounts of the Operating Partnership and its
wholly owned subsidiaries. The Operating Partnership also
consolidates other entities in which it has a controlling
financial interest or entities where it is determined to be the
primary beneficiary under Financial Accounting Standards Board
Interpretation No. 46R (“FIN 46R”),
“Consolidation of Variable Interest Entities.” Under
FIN 46R, variable interest entities (“VIEs”) are
generally entities that lack sufficient equity to finance their
activities without additional financial support from other
parties or whose equity holders lack adequate decision making
ability. The primary beneficiary is required to consolidate the
VIE for financial reporting purposes. The application of
FIN 46R requires management to make significant estimates
and judgments about the Operating Partnership’s and its
other partners’ rights, obligations and economic interests
in such entities. For entities in which the Operating
Partnership has less than a controlling financial interest or
entities where it is not the primary beneficiary under
FIN 46R, the entities 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
intercompany accounts and transactions have been eliminated in
consolidation. The minority interest of unitholders in the
operations of the Operating Partnership is calculated based on
the weighted average unit ownership during the period.
Post Apartment Homes, L.P.
94
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
In 2005, the Operating Partnership reclassified certain expenses
previously reported as general and administrative expenses to
property operating and maintenance expenses and investment,
development and other expenses on the accompanying statements of
operations. Prior period amounts have been reclassified to
conform to the 2005 presentation. The reclassified expenses
primarily included certain investment group executive and
administrative functions and long-term, stock-based compensation
and benefits expenses associated with property management and
investment and development group activities.
Certain other items in the 2004 and 2003 consolidated financial
statements were reclassified for comparative purposes with the
2005 consolidated financial statements.
Cost capitalization
The Operating Partnership capitalizes those expenditures
relating to the acquisition of new assets, the development and
construction of new apartment and condominium communities, the
enhancement of the value of existing assets and those
expenditures that substantially extend the life of existing
assets. Recurring capital expenditures are expenditures of a
type that are expected to be incurred on an annual basis during
the life of an apartment community, such as carpet, appliances
and flooring. Non-recurring capital expenditures are
expenditures that generally occur less frequently than on an
annual basis, such as major exterior projects relating to
landscaping and structural improvements. Revenue generating
capital expenditures are expenditures for the major renovation
of communities, the new installation of water sub-metering
equipment and other property upgrade costs that enhance the
rental value of such communities. All other expenditures
necessary to maintain a community in ordinary operating
condition are expensed as incurred. Additionally, for new
development communities, carpet, vinyl, and blind replacements
are expensed as incurred during the first five years (which
corresponds to their estimated depreciable life). Thereafter,
these replacements are capitalized and depreciated. The
Operating Partnership expenses as incurred interior and exterior
painting of its operating communities.
For communities under development, the Operating Partnership
capitalizes interest, real estate taxes, and certain internal
personnel and associated costs directly related to apartment and
condominium communities under development and construction.
Interest is capitalized to projects under development based upon
the weighted average cumulative project costs for each month
multiplied by the Operating Partnership’s weighted average
borrowing costs, expressed as a percentage. Weighted average
borrowing costs include the costs of the Operating
Partnership’s fixed rate secured and unsecured borrowings
and the variable rate unsecured borrowings under its line of
credit facilities. The weighted average borrowing costs,
expressed as a percentage, for the years ended December 31,
2005, 2004 and 2003 were approximately 6.5%, 7.3% and 7.0%,
respectively. Internal personnel and associated costs are
capitalized to projects under development based upon the effort
identifiable with such projects. The Operating Partnership
treats each unit in an apartment community separately for cost
accumulation, capitalization and expense recognition purposes.
Prior to the completion of rental and condominium units,
interest and other construction costs are capitalized and
reflected on the balance sheet as construction in progress. The
Operating Partnership ceases the capitalization of such costs as
the residential units in a community become substantially
complete and available for occupancy or sale. This results in a
proration of costs between amounts that are capitalized and
expensed as the residential units in an apartment development
community become available for occupancy. In addition, prior to
the completion of rental units, the Operating Partnership
expenses as incurred substantially all operating expenses
(including pre-opening marketing as well as property management
and leasing personnel expenses) of such rental communities.
Prior to the completion and closing of condominium units, the
Operating Partnership expenses all sales and marketing costs
related to such units.
For cash flow statement purposes, the Company classifies capital
expenditures for newly developed condominium communities and for
condominium conversion communities in investing activities in
the caption titled, “Construction and acquisition of real
estate assets.” Likewise, the proceeds from the sales of
such condominiums are included in investing activities in the
caption titled, “Net proceeds from sales of real estate
assets.”
Real estate assets, depreciation and impairment
Real estate assets are stated at the lower of depreciated cost
or fair value, if deemed impaired. Major replacements and
betterments are capitalized and depreciated over their estimated
useful lives. Depreciation is computed on a
Post Apartment Homes, L.P.
95
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
straight-line basis over the useful lives of the properties
(buildings and components and related land
improvements — 20-40 years; furniture, fixtures
and equipment — 5-10 years).
The Operating Partnership continually evaluates the
recoverability of the carrying value of its real estate assets
using the methodology prescribed in Statement of Financial
Accounting Standards (“SFAS”) No. 144,
“Accounting for the Impairment or Disposal of Long-Lived
Assets.” Factors considered by management in evaluating
impairment of its existing real estate assets held for
investment include significant declines in property operating
profits, recurring property operating losses and other
significant adverse changes in general market conditions that
are considered permanent in nature. Under
SFAS No. 144, a real estate asset held for investment
is not considered impaired if the undiscounted, estimated future
cash flows of an asset (both the annual estimated cash flow from
future operations and the estimated cash flow from the
theoretical sale of the asset) over its estimated holding period
are in excess of the asset’s net book value at the balance
sheet date. If any real estate asset held for investment is
considered impaired, a loss is provided to reduce the carrying
value of the asset to its estimated fair value.
The Operating Partnership periodically classifies real estate
assets as held for sale. An asset is classified as held for sale
after the approval of the Operating Partnership’s
investment committee and after an actual program to sell the
asset has commenced. Upon the classification of a real estate
asset as held for sale, the carrying value of the asset is
reduced to the lower of its net book value or its estimated fair
value, less costs to sell the asset. Subsequent to the
classification of assets as held for sale, no further
depreciation expense is recorded. Real estate assets held for
sale are stated separately on the accompanying consolidated
balance sheets. The operating results of real estate assets held
for sale and sold are reported as discontinued operations in the
accompanying statements of operations. Income from discontinued
operations includes the revenues and expenses, including
depreciation and allocated interest expense, associated with the
assets. Interest expense is allocated to assets held for sale
based on actual interest costs for assets with secured mortgage
debt. Interest expense is allocated to unencumbered assets based
on the ratio of unsecured debt to unencumbered assets multiplied
by the weighted average interest rate on the Operating
Partnership’s unsecured debt for the period and further
multiplied by the book value of the assets held for sale and
sold. This classification of operating results as discontinued
operations applies retroactively for all periods presented.
Additionally, gains and losses on assets designated as held for
sale are classified as part of discontinued operations.
For condominium conversion projects, a complete community
conversion is treated as discontinued operations in the same
manner as discussed above for apartment community sales. For
partial conversions of communities, the operating results,
condominium revenues and associated gains are reflected in
continuing operations (see discussion under “revenue
recognition” below) and the net book value of the assets
being converted into condominiums are reflected separately from
discontinued assets on the consolidated balance sheet in the
caption titled, “For-sale condominiums.”
Revenue recognition
Residential properties are leased under operating leases with
terms of generally one year or less. Rental revenues from
residential leases are recognized on the straight-line method
over the approximate life of the leases, which is generally one
year. The recognition of rental revenues from residential leases
when earned has historically not been materially different from
rental revenues recognized on a straight-line basis.
Under the terms of residential leases, the residents of the
Operating Partnership’s residential communities are
obligated to reimburse the Operating Partnership for certain
utility usage, water and electricity (at selected properties),
where the Operating Partnership is the primary obligor to the
public utility entity. These utility reimbursements from
residents are reflected as other property revenues in the
consolidated statements of operations.
Sales and the associated gains or losses of real estate assets
and for-sale condominiums are recognized in accordance with the
provisions of SFAS No. 66, “Accounting for Sales
of Real Estate.” For condominium conversion projects,
revenues from individual condominium unit sales are recognized
upon the closing of the sale transactions (the “Completed
Contract Method”), as all conditions for full profit
recognition have been met at that time and the conversion
construction periods are typically very short. Under
SFAS No. 66, the Company uses the relative sales value
method to allocate costs and recognize profits from condominium
conversion sales. In accordance with SFAS No. 144,
“Accounting for the Impairment and Disposal of Long-Lived
Assets,” gains on sales of condominium units at complete
community condominium conversion projects are included in
discontinued
Post Apartment Homes, L.P.
96
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
operations. For condominium conversion projects relating to a
portion of an existing apartment community, the Operating
Partnership will also recognize revenues and the associated
gains under the Completed Contract Method, as discussed herein.
Since a portion of an operating community does not meet the
requirements of a component of an entity under
SFAS No. 144, the revenues and gains on sales of
condominium units sold at partial condominium communities will
be included in continuing operations.
For newly developed condominiums, the Operating Partnership
accounts for each project under either the Completed Contract
Method or the “Percentage of Completion Method,” based
on a specific evaluation of the factors specified in
SFAS No. 66. The factors used to determine the
appropriate accounting method are the legal commitment of the
purchaser in the real estate contract, whether the construction
of the project is beyond a preliminary phase, sufficient units
have been contracted to ensure the project will not revert to a
rental project, the aggregate project sale proceeds and costs
can be reasonably estimated and the buyer has made an adequate
initial and continuing cash investment under the contract in
accordance with SFAS No. 66. Under the Percentage of
Completion Method, revenues and the associated gains are
recognized over the project construction period generally based
on the percentage of total project costs incurred to estimated
total projects costs for each condominium unit under a binding
real estate contract.
Long-term ground leases
The Operating Partnership is party to six long-term ground
leases associated with land underlying certain of the Operating
Partnership’s operating communities. The ground leases
generally provide for future increases in minimum lease payments
tied to an inflation index or contain stated rent increases that
generally compensate for the impact of inflation. Beginning in
2005, the Operating Partnership recognizes ground lease expense
on the straight-line method over the life of the ground lease
for all ground leases with stated rent increases. The
recognition of ground lease expense as incurred has historically
not been materially different than recognizing ground lease
expense on a straight-line basis.
Apartment community acquisitions
In accordance with the provisions of Statement of Financial
Accounting Standards (“SFAS”) No. 141,
“Business Combinations”, the aggregate purchase price
of apartment community acquisitions is allocated to the tangible
assets, intangible assets and liabilities (including mortgage
indebtedness) acquired in each transaction, based on their
estimated fair values at the acquisition date. The acquired
tangible assets, principally land, building and improvements and
furniture, fixtures and equipment, are reflected in real estate
assets and such assets, excluding land, are depreciated over
their estimated useful lives. The acquired intangible assets,
principally above/below market leases, in-place leases and
resident relationships, are reflected in other assets and
amortized over the average remaining lease terms of the acquired
leases and resident relationships (generally 6 months to
18 months).
Equity-based compensation
On January 1, 2003, the Operating Partnership elected to
voluntarily change its method of accounting for stock-based
compensation to the fair value method prescribed by Statement of
Financial Accounting Standards (“SFAS”) No. 123,
“Accounting for Stock-Based Compensation,” using the
prospective method prescribed in SFAS No. 148,
“Accounting for Stock-Based Compensation —
Transition and Disclosure.” For stock-based compensation
granted prior to January 1, 2003, the Operating Partnership
accounted for stock-based compensation under the intrinsic value
method prescribed by Accounting Principles Board
(“APB”) Opinion 25, “Accounting for Stock
Issued to Employees.”
Under the prospective method of adoption prescribed by
SFAS No. 123 and SFAS No. 148, the Operating
Partnership reflects as an expense each period the vested
portion of the estimated cost of stock-based compensation,
calculated under the Black-Scholes option pricing model for
stock options, for all stock-based compensation granted after
January 1, 2003. For stock-based compensation granted prior
to December 31, 2002, compensation expense was not
recognized for stock options granted at the Company’s
current stock price on the grant date. As a result, the
Operating Partnership’s general and administrative expenses
may not be comparable between periods.
Post Apartment Homes, L.P.
97
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
The following table reflects the effect on the Operating
Partnership’s net income and net income per common unit had
the fair value method of accounting under SFAS No. 123
been applied for each year.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Net income available to common unitholders As reported
|
|
$ |
141,410 |
|
|
$ |
81,546 |
|
|
$ |
3,048 |
|
| |
Equity-based compensation included in net income, as reported
|
|
|
2,299 |
|
|
|
1,785 |
|
|
|
1,071 |
|
| |
Equity-based compensation determined under the fair value method
|
|
|
(2,327 |
) |
|
|
(1,853 |
) |
|
|
(1,216 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
Pro forma
|
|
$ |
141,382 |
|
|
$ |
81,478 |
|
|
$ |
2,903 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income per common unit- basic As reported
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
Pro forma
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
|
Net income per common unit- diluted As reported
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
| |
Pro forma
|
|
$ |
3.34 |
|
|
$ |
1.92 |
|
|
$ |
0.07 |
|
Derivative financial instruments
The Operating Partnership accounts for derivative financial
instruments at fair value under the provisions of
SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities”, as amended. The
Operating Partnership uses derivative financial instruments,
interest rate swap and interest rate cap arrangements, to manage
or hedge its exposure to interest rate changes. The Operating
Partnership designates each derivative instrument as a hedge of
specific interest expense cash flow exposure. Under
SFAS 133, as amended, derivative instruments qualifying as
hedges of specific cash flows are recorded on the balance sheet
at fair value with an offsetting increase or decrease to
accumulated other comprehensive income, a partners’ equity
account, until the hedged transactions are recognized in
earnings. Periodically, the Operating Partnership evaluates the
effectiveness of its cash flow hedges. Any ineffective portion
of cash flow hedges are recognized immediately in earnings.
Cash and cash equivalents
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 is generally comprised of resident security
deposits for apartment communities located in Florida and
Tennessee, required maintenance reserves for certain communities
located in Georgia and earnest money and escrow deposits
associated with the Operating Partnership’s for-sale
condominium business.
Deferred financing costs
Deferred financing costs are amortized using the straight-line
method, which approximates the interest method, over the terms
of the related debt.
Per unit data
The Operating Partnership reports both basic and diluted
earnings per unit amounts. Basic earnings per common unit is
computed by dividing net income available to common unitholders
by the weighted average number of common units outstanding
during the year. Diluted earnings per common unit is computed by
dividing net income available to common unitholders by the
weighted average number of common units and common unit
equivalents outstanding during the year, which are computed
using the treasury stock method for outstanding stock options.
Common unit equivalents are excluded from the computations in
years in which they have an anti-dilutive effect.
Post Apartment Homes, L.P.
98
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
Use of estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
New accounting pronouncements
In 2005 and 2004, several new accounting pronouncements were
issued and the pronouncements with a potential impact on the
Operating Partnership in 2005 and in future periods are
discussed below.
SFAS No. 123R, “Share-Based Payment”, was
issued in December 2004. SFAS No. 123R revised
SFAS No. 123, “Accounting for Stock-Based
Compensation” and requires companies to expense the fair
value of employee stock options and other forms of stock-based
compensation. SFAS No. 123R also superseded the
provisions of APB No. 25. The provisions of
SFAS No. 123R were effective on January 1, 2006.
The Operating Partnership adopted SFAS No. 123R on
January 1, 2006 using the modified prospective method of
adoption. Since the Operating Partnership elected to apply the
provisions of SFAS No. 123 on January 1, 2003,
the adoption of SFAS No. 123R will not have a
significant impact on the Operating Partnership’s financial
position or results of operations.
FASB Interpretation No. 47 (“FIN 47”),
“Accounting for Conditional Asset Retirement
Obligations” was issued in March 2005. FIN 47 is an
interpretation of SFAS No. 143, “Accounting for
Asset Retirement Obligations,” and addressed liability
recognition issues under SFAS No. 143 related to the
timing and/or method of settlement of retirement obligations
that are conditional on future events. FIN 47 was effective
as of December 31, 2005. The Operating Partnership has
assessed the impact of FIN 47 and has determined that the
provisions of FIN 47 did not have a material impact on the
Operating Partnership’s financial position or results of
operations at December 31, 2005. The application of
FIN 47 requires significant management estimates and
judgments regarding the impact of future events. Management
believes it has applied reasonable judgments and estimates in
reaching its determination.
The Emerging Issues Task Force issued EITF No. 04-05
(“EITF No. 04-05”), “Determining Whether a
General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners
Have Certain Rights”. EITF No. 04-05 provides a
framework for evaluating whether a general partner or group of
general partners or managing members controls a limited
partnership or limited liability company and therefore should
consolidate the entity. The presumption that the general partner
or group of general partners or managing members controls a
limited liability partnership or limited liability company may
be overcome if the limited partners or members have (1) the
substantive ability to dissolve the partnership without cause,
or (2) substantive participating rights. EITF
No. 04-05 became effective on June 30, 2005 for new or
modified limited partnerships or limited liability companies and
January 1, 2006 for all existing arrangements. The
Operating Partnership does not believe that the adoption of EITF
No. 04-05 will have a material impact on the Operating
Partnership’s financial position or results of operations.
Deferred charges consist of the following:
| |
|
|
|
|
|
|
|
|
| |
|
December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Deferred financing costs
|
|
$ |
26,050 |
|
|
$ |
33,542 |
|
|
Other
|
|
|
5,399 |
|
|
|
4,350 |
|
| |
|
|
|
|
|
|
| |
|
|
31,449 |
|
|
|
37,892 |
|
|
Less: accumulated amortization
|
|
|
(19,825 |
) |
|
|
(22,318 |
) |
| |
|
|
|
|
|
|
| |
|
$ |
11,624 |
|
|
$ |
15,574 |
|
| |
|
|
|
|
|
|
Post Apartment Homes, L.P.
99
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
At December 31, 2005 and 2004, the Operating
Partnership’s indebtedness consisted of the following:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
December 31, |
| |
|
|
|
|
|
Maturity |
|
|
| Description |
|
Payment Terms |
|
Interest Rate | |
|
Date |
|
2005 |
|
2004 |
| |
|
|
|
| |
|
|
|
|
|
|
|
Unsecured Notes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Notes
|
|
Int. |
|
|
5.125% - 7.70 |
% |
|
2006-2012 |
|
$485,000 |
|
$385,000 |
|
Medium Term Notes
|
|
Int. |
|
|
— |
|
|
— |
|
— |
|
212,043 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
485,000 |
|
597,043 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Unsecured Lines of Credit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Syndicated Line of Credit
|
|
N/A |
|
|
LIBOR + 0.75 |
%(1) |
|
2007 |
|
90,000 |
|
40,000 |
|
Cash Management Line
|
|
N/A |
|
|
LIBOR + 0.75 |
% |
|
2007 |
|
11,379 |
|
10,748 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
101,379 |
|
50,748 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Conventional Fixed Rate (Secured)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FNMA
|
|
Prin. and Int. |
|
|
6.975 |
%(2) |
|
2029 |
|
97,100 |
|
98,500 |
|
Other
|
|
Prin. and Int. |
|
|
4.27% - 7.69 |
% |
|
2007-2013 |
|
268,641 |
|
273,132 |
| |
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
365,741 |
|
371,632 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Tax Exempt Floating Rate Bonds (Secured)
|
|
Int. |
|
|
3.54 |
%(3) |
|
2025 |
|
28,495 |
|
110,055 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
$980,615 |
|
$1,129,478 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
Represents stated rate. At December 31, 2005, the weighted
average interest rate was 4.75%. |
| (2) |
Interest rate is fixed at 6.975%, inclusive of credit
enhancement and other fees, to 2009 through an interest rate
swap arrangement. |
| (3) |
FNMA credit enhanced bond indebtedness. Interest based on FNMA
“AAA” tax-exempt rate plus credit enhancement and
other fees of 0.639%. Interest rate represents the rate at
December 31, 2005 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%. At December 31, 2005 and
2004, approximately $0 and $34,060, respectively, of this debt
was secured by assets held for sale. In June 2005, the Operating
Partnership executed an amendment to its master reimbursement
agreement with FNMA, which agreement, among other things, sets
forth the Operating Partnership’s payment obligations under
its variable-rate, tax-exempt bond indebtedness. The amendment
deferred the commencement of principal repayments under the
bonds by five years from the originally scheduled commencement
date. The original maturity date for the bonds remains unchanged
and the amortization schedule of the bonds was changed
commensurate with the five-year deferral of the start of
principal amortization. |
Debt maturities
The aggregate maturities of the Operating Partnership’s
indebtedness are as follows:
| |
|
|
|
|
|
2006
|
|
$ |
81,269 |
|
|
2007
|
|
|
259,572 |
(1) |
|
2008
|
|
|
4,557 |
|
|
2009
|
|
|
75,901 |
|
|
2010
|
|
|
188,267 |
|
|
Thereafter
|
|
|
371,049 |
|
| |
|
|
|
| |
|
$ |
980,615 |
|
| |
|
|
|
|
|
| (1) |
Includes outstanding balance on lines of credit totaling
$101,379. |
Debt issuances, retirements and modifications
2005
Upon their maturity in 2005, the Operating Partnership repaid
its $25,000 (7.28%) medium term, unsecured notes, repaid its
$100,000 (6.85%) Mandatory Par Put Remarketed Securities
(“MOPPRS”) debt arrangement, repaid its $62,043
(8.125%) medium term, unsecured notes and repaid its $25,000
(6.78%) medium term, unsecured notes, from available borrowings
under its unsecured lines of credit.
Post Apartment Homes, L.P.
100
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
In 2005, the Operating Partnership issued $100,000 of senior
unsecured notes. The notes bear interest at 5.45% and mature in
2012. The net proceeds from the unsecured notes were used to
reduce amounts outstanding under the Operating
Partnership’s unsecured lines of credit.
The Operating Partnership sold three apartment communities
subject to the assumption of $81,560 of tax-exempt mortgage
indebtedness (see note 5). As a result of these debt
assumptions, the Operating Partnership recorded losses on the
early extinguishment of debt of $3,220 related to the write-off
of deferred loan costs of $2,264 relating to such assumed
indebtedness and the realization of a $955 loss in connection
with the termination of related interest rate cap agreements
that were used as cash flow hedges of the assumed debt.
2004
In the fourth quarter of 2004, the Operating Partnership issued
$100,000 of senior unsecured notes. The notes bear interest at
5.125% and mature in 2011. The net proceeds from the unsecured
notes were used to reduce amounts outstanding under the
Operating Partnership’s unsecured lines of credit. In 2004,
the Operating Partnership also closed a $35,000 secured, fixed
rate mortgage note payable in a consolidated real estate entity.
The note bears interest at 4.27%, requires monthly interest only
payments through March 2007 and monthly principal and interest
payments based on a
30-year amortization
schedule from April 2007 through the note maturity date in March
2009.
In the fourth quarter of 2004, the Operating Partnership
purchased and retired $87,957 of the Operating
Partnership’s 8.125% medium term, unsecured notes through a
tender offer using available borrowings under its unsecured
lines of credit. Subsequent to the debt retirement, $62,043 of
the 8.125% medium term notes remained outstanding until their
maturity in 2005. As part of this transaction, the Operating
Partnership recorded a loss on the early extinguishment of this
indebtedness of $4,011 representing the debt repurchase
premiums, the expenses of the tender offer and the write-off of
the unamortized deferred financing costs associated with the
retired indebtedness.
In the fourth quarter of 2004, the Operating Partnership
terminated a remarketing agreement related to its $100,000,
6.85% Mandatory Par Put Remarketed Securities
(“MOPPRS”). In connection with the termination of the
remarketing agreement, the Operating Partnership paid $10,615
(interest expense), including transaction expenses. Under the
provisions of the remarketing agreement, the remarketing agent
had the right to remarket the $100,000 unsecured notes in 2005
for a ten-year term at an interest rate calculated as 5.715%
plus the Operating Partnership’s then current credit spread
to the ten-year treasury rate. As a result of the termination of
the remarketing agreement, the underlying debt matured and was
repaid in 2005.
Upon their maturity in 2004, the Operating Partnership repaid
its $13,000 (7.30%) medium term, unsecured notes and repaid its
$10,000 (6.69%) medium term, unsecured notes, from available
borrowings under its unsecured lines of credit.
The Operating Partnership sold certain apartment communities
subject to the assumption of $104,325 of tax-exempt mortgage
indebtedness (see note 5). As a result of this debt
assumption, the Operating Partnership recorded a loss on early
extinguishment of indebtedness of $4,128 related to the
write-off of unamortized deferred financing costs of $3,187
relating to such assumed indebtedness and the realization of a
$941 loss in connection with the termination of related interest
rate cap agreements that were used as cash flow hedges of the
assumed debt.
In conjunction with an apartment community acquisition (see
note 5) in 2004, the Operating Partnership assumed a
secured, fixed rate mortgage note payable. The mortgage note was
valued at $49,496 yielding an effective rate of 4.7%. The
mortgage note bears interest at a coupon rate of 6.8%, requires
monthly principal and interest payments and matures in 2007.
Unsecured lines of credit
The Operating Partnership utilizes a $350,000 syndicated
unsecured revolving line of credit (the “Revolver”)
that matures in January 2007 for its short-term financing needs.
The Revolver has a current stated interest rate of LIBOR plus
0.75% or the prime rate and was provided by a syndicate of nine
banks led by Wachovia Bank, N.A. Additionally, the Revolver
requires the payment of annual facility fees currently equal to
0.15% of the aggregate loan commitment. The Revolver provides
for the interest rate and facility fee rate to be adjusted up or
down based on changes in the credit ratings on the Operating
Partnership’s senior unsecured debt. The rates under the
Revolver
Post Apartment Homes, L.P.
101
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
are based on the higher of the Operating Partnership’s
unsecured debt ratings in instances where the Operating
Partnership has split unsecured debt ratings. The Revolver also
includes a money market competitive bid option for short-term
funds up to $175,000 at rates generally below the stated line
rate. The credit agreement for the Revolver contains customary
representations, covenants and events of default, including
fixed charge coverage and maximum leverage ratios as well as
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 $15,000 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
Operating Partnership does not anticipate that these ratios and
covenants will adversely affect the ability of the Operating
Partnership to borrow money or make distributions, or the
Company to declare dividends, at the Company’s current
dividend level. At December 31, 2005, the Operating
Partnership had issued letters of credit to third parties
totaling $3,136 under this facility.
Additionally, the Operating Partnership has a $20,000 unsecured
line of credit with Wachovia Bank, N.A. (the “Cash
Management Line”). The Cash Management line matures in
January 2007 and carries pricing and terms, including debt
covenants, substantially consistent with those of the Revolver.
Interest paid
Interest paid (including capitalized amounts of $2,907, $1,078
and $3,555 for the years ended December 31, 2005, 2004 and
2003, respectively), aggregated $66,234, $66,992 and $78,822 for
the years ended December 31, 2005, 2004 and 2003,
respectively.
Pledged assets
The aggregate net book value at December 31, 2005 of
property pledged as collateral for indebtedness amounted to
approximately $465,420.
|
|
| 4. |
INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES |
At December 31, 2005, the Operating Partnership holds
investments in three individual limited liability companies (the
“Property LLCs”) with an institutional investor. Two
of the Property LLCs own single apartment communities. The third
Property LLC is converting its apartment community, containing
121 units, into for-sale condominiums. The Operating
Partnership holds a 35% equity interest in the Property LLCs.
The Operating Partnership accounts for its investments in these
Property LLCs using the equity method of accounting. Under
FIN 46R, the Operating Partnership concluded the Property
LLCs were not VIEs and therefore, did not require consolidation.
The excess of the Operating Partnership’s investment over
its equity in the underlying net assets of the Property LLCs was
approximately $6,099 at December 31, 2005. The excess
investment related to Property LLCs holding apartment
communities is being amortized as a reduction to earnings on a
straight-line basis over the lives of the related assets. The
excess investment of approximately $611 at December 31,
2005 related to the Property LLC holding the condominium
conversion community will be recognized as additional costs as
the underlying condominiums are sold. The Operating Partnership
provides real estate services (development, construction and
property management) to the Property LLCs for which it earns
fees.
In June 2003, the underlying apartment community held by a
fourth Property LLC was sold. The financial information below
for the year ended December 31, 2003 reflects the gain on
property sale of $26,179 and the operating results of this
Property LLC as discontinued operations through the sale date.
The Operating Partnership’s share of this gain of $8,395 is
included in the Operating Partnership’s share of net income
(loss) shown in the table below.
Post Apartment Homes, L.P.
102
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
The operating results of the Operating Partnership include its
allocable share of net income from the investments in the
Property LLCs. A summary of financial information for the
Property LLCs in the aggregate is as follows:
| |
|
|
|
|
|
|
|
|
|
| |
|
December 31, | |
| |
|
| |
| Balance Sheet Data |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Real estate assets, net of accumulated depreciation of $8,349
and $9,712, respectively
|
|
$ |
96,000 |
|
|
$ |
124,072 |
|
|
Assets held for sale, net
|
|
|
17,715 |
|
|
|
— |
|
|
Cash and other
|
|
|
1,770 |
|
|
|
2,797 |
|
| |
|
|
|
|
|
|
| |
Total assets
|
|
$ |
115,485 |
|
|
$ |
126,869 |
|
| |
|
|
|
|
|
|
|
Mortgage notes payable
|
|
$ |
66,999 |
|
|
$ |
83,468 |
|
|
Mortgage notes payable to Operating Partnership
|
|
|
5,967 |
|
|
|
— |
|
|
Other liabilities
|
|
|
996 |
|
|
|
1,296 |
|
| |
|
|
|
|
|
|
| |
Total liabilities
|
|
|
73,962 |
|
|
|
84,764 |
|
|
Members’ equity
|
|
|
41,523 |
|
|
|
42,105 |
|
| |
|
|
|
|
|
|
| |
Total liabilities and members’ equity
|
|
$ |
115,485 |
|
|
$ |
126,869 |
|
| |
|
|
|
|
|
|
|
Operating Partnership’s equity investment
|
|
$ |
20,647 |
|
|
$ |
21,320 |
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| Income Statement Data |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
10,789 |
|
|
$ |
10,451 |
|
|
$ |
6,757 |
|
| |
Other
|
|
|
840 |
|
|
|
776 |
|
|
|
392 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total revenues
|
|
|
11,629 |
|
|
|
11,227 |
|
|
|
7,149 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property operating and maintenance
|
|
|
3,689 |
|
|
|
3,555 |
|
|
|
3,416 |
|
| |
Depreciation and amortization
|
|
|
2,621 |
|
|
|
2,579 |
|
|
|
2,481 |
|
| |
Interest
|
|
|
2,752 |
|
|
|
2,658 |
|
|
|
2,338 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Total expenses
|
|
|
9,062 |
|
|
|
8,792 |
|
|
|
8,235 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
2,567 |
|
|
|
2,435 |
|
|
|
(1,086 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Discontinued Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Loss from discontinued operations
|
|
|
(176 |
) |
|
|
(355 |
) |
|
|
(683 |
) |
| |
Gain on sales of real estate assets
|
|
|
2,834 |
|
|
|
— |
|
|
|
26,179 |
|
| |
Loss on early extinguishment of debt
|
|
|
(273 |
) |
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Income (loss) from discontinued operations
|
|
|
2,385 |
|
|
|
(355 |
) |
|
|
25,496 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
4,952 |
|
|
$ |
2,080 |
|
|
$ |
24,410 |
|
| |
|
|
|
|
|
|
|
|
|
|
Operating Partnership’s share of net income
|
|
$ |
1,767 |
|
|
$ |
1,083 |
|
|
$ |
7,790 |
|
| |
|
|
|
|
|
|
|
|
|
At December 31, 2005, mortgage notes payable include a
$49,999 mortgage note that bears interest at 4.13%, requires
monthly interest payments and annual principal payments of $1
through 2009. Thereafter, the note requires monthly principal
and interest payments based on a
25-year amortization
schedule and matures in 2034. The note is callable by the lender
in 2009 and on each successive fifth year anniversary of the
note thereafter. The note is prepayable without penalty in 2008.
The additional mortgage note payable totaling $17,000 bears
interest at a fixed rate of 4.04%, requires interest only
payments and matures in 2008.
In early 2005, one of the Property LLCs elected to convert its
apartment community into for-sale condominiums. As a result of
its decision to sell the community through the condominium
conversion process, the Property LLC
Post Apartment Homes, L.P.
103
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
prepaid its third party mortgage note payable of $16,392 through
secured borrowings from the Operating Partnership. The Property
LLC incurred debt prepayment costs and expenses associated with
the write-off of unamortized deferred financing costs totaling
$273 in March 2005. The mortgage note payable to the Operating
Partnership has a fixed rate component ($16,392) bearing
interest at 4.28% and a variable rate component bearing interest
at LIBOR at 1.90%. This note is repayable from the proceeds of
condominium sales and matures in February 2008.
|
|
| 5. |
REAL ESTATE ACQUISITIONS AND DISPOSITIONS |
Acquisitions
In June 2005, the Operating Partnership acquired a
319-unit apartment
community located in suburban Charlotte, NC for approximately
$38,240, including closing costs and the reimbursement of a fee
to terminate a loan commitment paid for by the seller.
Additionally, through December 31, 2005, the Operating
Partnership had incurred additional costs of approximately
$1,000, of an estimated cost of approximately $1,100 to improve
the community. The purchase price of this community was
allocated to the assets acquired based on their estimated fair
values.
In June 2004, the Operating Partnership acquired a
499-unit apartment
community located in suburban Washington, D.C. for
approximately $85,814, including the assumption of mortgage
indebtedness and closing costs. Additionally, the Operating
Partnership incurred additional costs of approximately $2,000,
to improve the community. The assumed mortgage note payable was
valued at $49,496 yielding an effective interest rate of 4.7%.
The mortgage note bears interest at a coupon rate of 6.8%,
requires monthly principal and interest payments and matures in
2007. The purchase of this community was allocated to the assets
acquired and the liabilities assumed based on their estimated
fair values.
Subsequent to December 31, 2005, the Operating Partnership
acquired two apartment communities, containing 308 units,
in Austin, Texas for approximately $46,500, including closing
costs.
Dispositions
The Operating Partnership classifies real estate assets as held
for sale after the approval of its investment committee and
after the Operating Partnership has commenced an active program
to sell the assets. At December 31, 2005, the Operating
Partnership had one community, originally containing
127 units, that is being converted into condominiums
classified as held for sale. This real estate asset is
classified separately in the accompanying consolidated balance
sheet at $4,591, which represented its remaining net book value.
The Operating Partnership expects to complete the sale of all
condominiums at this community in the next twelve months.
In the fourth quarter of 2005, the Operating Partnership began
the conversion of portions of two apartment communities into
for-sale condominiums. Under SFAS No. 144, the
operating results and future sales activities of these
condominium units will be reflected in continuing operations. In
addition, the net book value of the assets being converted into
condominiums were reflected separately on the consolidated
balance sheet under the caption titled “For-sale
condominiums.”
Under SFAS No. 144, the operating results of assets
designated as held for sale are included in discontinued
operations in the consolidated statement of operations for all
periods presented. Additionally, all gains and losses on the
sale of these assets are included in discontinued operations.
For the year ended December 31, 2005, income from
discontinued operations included the results of operations of
one condominium conversion community classified as held for sale
at December 31, 2005 as well as the operations of six
communities sold in 2005 through their sale dates and one
condominium conversion community through its sell-out date. For
the years ended December 31, 2004 and 2003, income from
discontinued operations included the results of operations of
the one condominium conversion community classified as held for
sale at December 31, 2005, communities sold in 2005, one
condominium conversion community through its sell out date and
the results of operations of 12 communities sold in 2004 and
2003 through their sale dates.
Post Apartment Homes, L.P.
104
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
The revenues and expenses of these communities for the years
ended December 31, 2005, 2004 and 2003 were as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Rental
|
|
$ |
13,222 |
|
|
$ |
41,881 |
|
|
$ |
68,330 |
|
| |
Other
|
|
|
1,243 |
|
|
|
3,615 |
|
|
|
5,310 |
|
| |
|
|
|
|
|
|
|
|
|
| |
|
Total revenues
|
|
|
14,465 |
|
|
|
45,496 |
|
|
|
73,640 |
|
| |
|
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Property operating and maintenance (exclusive of items shown
separately below)
|
|
|
7,241 |
|
|
|
19,478 |
|
|
|
30,039 |
|
| |
Depreciation
|
|
|
— |
|
|
|
5,837 |
|
|
|
12,381 |
|
| |
Interest
|
|
|
2,161 |
|
|
|
5,532 |
|
|
|
9,220 |
|
| |
Asset impairment charges
|
|
|
— |
|
|
|
2,233 |
|
|
|
17,462 |
|
| |
Minority interest in consolidated property partnerships
|
|
|
14 |
|
|
|
(238 |
) |
|
|
(419 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
Total expenses
|
|
|
9,416 |
|
|
|
32,842 |
|
|
|
68,683 |
|
| |
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
$ |
5,049 |
|
|
$ |
12,654 |
|
|
$ |
4,957 |
|
| |
|
|
|
|
|
|
|
|
|
In 2004, the Operating Partnership recorded asset impairment
charges totaling $2,233 to write-down the cost of two apartment
communities, located in Dallas, Texas, to their estimated fair
value when the assets were classified as held for sale or sold.
In 2003, the Operating Partnership recorded asset impairment
charges totaling $17,462 to write-down apartment communities in
Dallas, Texas and Phoenix, Arizona to their estimated fair value.
For the year ended December 31, 2005, the Operating
Partnership recognized net gains in discontinued operations of
$124,425 from the sale of six communities, containing
3,047 units. The sales generated net proceeds of
approximately $229,249, including $81,560 of tax-exempt secured
indebtedness assumed by the purchasers.
In addition, for the year ended December 31, 2005, gains on
sales of real estate assets included net gains of $16,812 from
condominium sales at the Operating Partnership’s
condominium conversion communities reported in discontinued
operations. A summary of revenues and costs and expenses of
these condominium activities for the year ended
December 31, 2005 was as follows:
| |
|
|
|
|
| |
|
2005 | |
| |
|
| |
|
Condominium revenues, net
|
|
$ |
51,857 |
|
|
Condominium costs and expenses
|
|
|
(35,045 |
) |
| |
|
|
|
|
Gains on condominium sales, before minority interest and income
taxes
|
|
|
16,812 |
|
|
Provision for income taxes
|
|
|
(594 |
) |
| |
|
|
|
|
Gains on condominium sales, net of minority interest and
provision for income taxes
|
|
$ |
16,218 |
|
| |
|
|
|
For the year ended December 31, 2004, the Operating
Partnership recognized net gains from discontinued operations of
$113,739 from the sale of eight communities, containing
3,880 units, and certain land parcels. These sales
generated net proceeds of approximately $242,962, including
$104,325 of tax-exempt debt assumed by the purchasers. For the
year ended December 31, 2003, the Operating Partnership
recognized net gains from discontinued operations of $40,792 on
the sale of four communities, containing 1,844 units, and
certain land parcels. These sales generated net proceeds of
approximately $163,560.
In January 2006, the Operating Partnership designated one
apartment community, containing 696 units, as held for
sale. The aggregate net book value of this asset totaled
approximately $88,000, which represented the lower of
depreciated cost or estimated fair value of the assets. The
asset is expected to be reported as discontinued operations in
2006.
Post Apartment Homes, L.P.
105
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
Common and Preferred Units
At December 31, 2005 and 2004, the Operating Partnership
had outstanding Common Units totaling 42,796 and 42,663,
respectively. At December 31, 2005, the Operating
Partnership had outstanding two separate series of cumulative
redeemable preferred partnership units as more fully described
below. The preferred partnership units are reflected in the
accompanying financial statements at their liquidation value.
The Operating Partnership has outstanding 900,000, 8.5%
Series A cumulative redeemable preferred partnership units
(the “Series A Preferred Units”). The
Series A Preferred Units have a liquidation preference of
$50.00 per unit and are redeemable at the option of the
Operating Partnership on or after October 1, 2026, at a
redemption price of $50.00 per unit. The Series A
Preferred Units are owned by the Company.
The Operating Partnership also has outstanding 2,000,000, 7.625%
Series B cumulative redeemable preferred partnership units
(the “Series B Preferred Units”). The
Series B Preferred Units have a liquidation preference of
$25.00 per unit and are redeemable at the option of the
Operating Partnership on or after October 28, 2007, at a
redemption price of $25.00 per unit. The Series B
Preferred Units are owned by the Company.
In 2004, the Company redeemed its 7.625% Series C
cumulative redeemable preferred stock. Correspondingly, the
Operating Partnership redeemed its Series C Preferred Units
on the same date and under the same terms. The redemption price
was $25.00 per unit, plus accrued and unpaid distributions
through the redemption date. In connection with the issuance of
the Series C Preferred Units in 1998, the Operating
Partnership incurred $1,716 in issuance costs and recorded such
costs as a reduction of partners’ equity. The redemption
price of the Series C Preferred Units exceeds the related
carrying value by the $1,716 of issuance costs. In connection
with the redemption, in accordance with generally accepted
accounting principles, the Operating Partnership reflected the
$1,716 of issuance costs as a reduction of earnings in arriving
at net income available to common unitholders in 2004.
In 2004, the Operating Partnership also redeemed its 8.0%
Series D cumulative redeemable preferred units
(“Series D Preferred Units”) for $25.00 per
unit (an aggregate of $70,000), plus accrued and unpaid
distributions through the redemption date. In connection with
the issuance of the Series D Preferred Units in 1998, the
Operating Partnership incurred $1,810 in issuance costs and
recorded such costs as a reduction of partners’ equity. The
redemption price of the Series D Preferred Units exceeded
the related carrying value by the $1,810 of issuance costs. In
connection with the redemption, in accordance with generally
accepted accounting principles, the Operating Partnership
reflected the $1,810 of issuance costs as a reduction of
earnings in arriving at net income available to common
unitholders in 2004.
Common Unit Purchases
In 2005, the Company repurchased approximately 1,031 shares
of its common stock at an aggregate cost of $34,400 under 10b5-1
stock purchase plans. These shares were purchased under a board
of directors approved plan which provides for aggregate common
or preferred stock repurchases of up to $200,000 through
December 31, 2006. In 2004, under a previous stock
repurchase program, the Company repurchased $2,268 of common
stock and $120,000 of preferred stock and units.
Correspondingly, the Operating Partnership repurchased the same
number and amount of common and preferred units from the Company.
Post Apartment Homes, L.P.
106
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
Computation of Earnings per Common Unit
For the years ended December 31, 2005, 2004 and 2003, basic
and diluted earnings per Common Unit for income (loss) from
continuing operations available to common unitholders, before
cumulative effect of accounting change, has been computed as
follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2005 | |
| |
|
| |
| |
|
Income | |
|
Units | |
|
Per-Unit | |
| |
|
(Numerator) | |
|
(Denominator) | |
|
Amount | |
| |
|
| |
|
| |
|
| |
|
Income from continuing operations
|
|
$ |
6,575 |
|
|
|
|
|
|
|
|
|
|
Less: Preferred Unit distributions
|
|
|
(7,637 |
) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
|
(1,062 |
) |
|
|
42,353 |
|
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
— |
|
|
|
— |
(1) |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
$ |
(1,062 |
) |
|
|
42,353 |
|
|
$ |
(0.03 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2004 | |
| |
|
| |
| |
|
Income | |
|
Units | |
|
Per-Unit | |
| |
|
(Numerator) | |
|
(Denominator) | |
|
Amount | |
| |
|
| |
|
| |
|
| |
|
Loss from continuing operations
|
|
$ |
(25,088 |
) |
|
|
|
|
|
|
|
|
|
Less: Preferred Unit distributions
|
|
|
(12,105 |
) |
|
|
|
|
|
|
|
|
|
Less: Redemption costs on preferred units
|
|
|
(3,526 |
) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
|
(40,719 |
) |
|
|
42,474 |
|
|
$ |
(0.96 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
$ |
(40,719 |
) |
|
|
42,474 |
|
|
$ |
(0.96 |
) |
| |
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2003 | |
| |
|
| |
| |
|
Income | |
|
Units | |
|
Per-Unit | |
| |
|
(Numerator) | |
|
(Denominator) | |
|
Amount | |
| |
|
| |
|
| |
|
| |
|
Loss from continuing operations
|
|
$ |
(25,652 |
) |
|
|
|
|
|
|
|
|
|
Less: Preferred unit distributions
|
|
|
(17,049 |
) |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Basic EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
|
(42,701 |
) |
|
|
42,134 |
|
|
$ |
(1.02 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
— |
|
|
|
— |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
Diluted EPU
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations available to common unitholders
|
|
$ |
(42,701 |
) |
|
|
42,134 |
|
|
$ |
(1.02 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
For the years ended December 31, 2005, 2004 and 2003, the
potential dilution from the Company’s outstanding stock
options of 400, 115 and 11, respectively, was antidilutive
to the loss from continuing operations per unit calculation. As
such, these amounts were excluded from weighted average units in
these years. |
Post Apartment Homes, L.P.
107
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
In 2005, 2004 and 2003, stock options to purchase 3,534,
4,491 and 4,735 shares of common stock, respectively, were
excluded from the computation of diluted earnings per unit as
these options were antidilutive.
|
|
| 7. |
SEVERANCE AND PROXY CONTEST CHARGES |
In 2005, the Operating Partnership recorded an additional
expense charge of $796 relating to changes in the estimated
future costs of certain benefits granted to former executive
officers under prior employment or settlement agreements (see
discussion below). The estimated future cost increases primarily
related to increased fuel and other operating costs and expenses
associated with certain fractional aircraft benefits provided to
such executives.
In 2003, the Operating Partnership recorded charges totaling
$21,506 relating to the change in roles from executive to
non-executive status of the Company’s former chairman and
vice-chairman of the board of directors and relating to the
departures of its executive vice president and chief financial
officer and its executive vice president of asset management.
These charges consisted of amounts representing the discounted
present value of the estimated payments to be made to the former
chairman and vice-chairman under their existing employment
arrangements, amounts representing the discounted present value
of estimated net costs to be incurred by the Operating
Partnership relating to its split-dollar life insurance
obligations to the individuals under their employment contracts
and amounts representing the aggregate amount of the estimated
payments and benefits to be made to the other departing
executive officers. In 2004, the Operating Partnership entered
into a final settlement agreement with its former chairman of
the board of directors. Under the terms of the agreement, the
former chairman’s employment and non-competition agreements
were terminated and the Operating Partnership agreed to continue
to provide the former chairman certain payments and benefits
through 2013, the approximate expiration date of the original
employment agreement. Because the present value of the estimated
payments under the settlement agreement approximated the
Operating Partnership’s remaining accrued charge under the
former employment agreement, no additional charges were recorded
in 2004 as a result of the settlement.
The following table summarizes the activity relating to the
accrued severance charges for the years ended December 31,
2005, 2004 and 2003:
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Accrued severance charges, beginning of year
|
|
$ |
15,317 |
|
|
$ |
19,171 |
|
|
$ |
— |
|
|
Severance charges
|
|
|
796 |
|
|
|
— |
|
|
|
21,506 |
|
|
Payments for period
|
|
|
(2,694 |
) |
|
|
(4,858 |
) |
|
|
(3,237 |
) |
|
Interest accretion
|
|
|
906 |
|
|
|
1,004 |
|
|
|
902 |
|
| |
|
|
|
|
|
|
|
|
|
|
Accrued severance charges, end of year
|
|
$ |
14,325 |
|
|
$ |
15,317 |
|
|
$ |
19,171 |
|
| |
|
|
|
|
|
|
|
|
|
Substantially all of these remaining amounts will be paid over
the remaining terms of the former executives’ employment
and settlement agreements (8 to 11 years).
In 2003, proxy and related costs of $5,231 represented the
legal, advisory and other expenses associated with the
solicitation of proxies from partners resulting from the proxy
contest initiated in April 2003 by the Company’s former
chairman of the board of directors. Additionally, the $5,231
amount included the estimated legal and resolution costs
associated with the settlement of two derivative and purported
class action lawsuits filed against the Operating Partnership
during the proxy contest. These lawsuits were settled in October
2004 (see note 11).
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 requirements.
Post Apartment Homes, L.P.
108
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
In the preparation of income tax returns in federal and state
jurisdictions, the Company and its taxable REIT subsidiaries
assert certain tax positions based on their understanding and
interpretation of the income tax law. The taxing authorities may
challenge such positions and the resolution of such matters
could result in the payment and recognition of additional income
tax expense. Management believes it has used reasonable
judgments and conclusions in the preparation of its income tax
returns.
As of December 31, 2005, the net basis for federal income
tax purposes, taking into account the special allocation of gain
to the partners contributing property to the Operating
Partnership and including minority interest in the Operating
Partnership, was lower than the net assets as reported in the
Operating Partnership’s consolidated financial statements
by $50,803.
Taxable REIT subsidiaries
The Operating Partnership utilizes taxable REIT subsidiaries
(“TRSs”) to perform such non-REIT activities as asset
and property management, for-sale housing
(condominiums) conversions and sales and other services for
third parties. These TRSs are subject to federal and state
income taxes. The components of income tax expense, significant
deferred tax assets and liabilities and a reconciliation of the
TRS income tax expense to the statutory federal rate are
reflected in the tables below. For the years ended
December 31, 2004 and 2003, the impact of TRSs’ income
taxes and their related tax attributes were not material to the
accompanying consolidated financial statements.
Income tax expense of the TRSs for the year ended
December 31, 2005 is comprised of the following:
| |
|
|
|
|
|
| |
|
2005 | |
| |
|
| |
|
Current tax expense
|
|
|
|
|
| |
Federal
|
|
$ |
251 |
|
| |
State
|
|
|
343 |
|
| |
|
|
|
| |
|
|
594 |
|
| |
|
|
|
|
Deferred tax expense
|
|
|
|
|
| |
Federal
|
|
|
— |
|
| |
State
|
|
|
— |
|
| |
|
|
|
| |
|
|
— |
|
| |
|
|
|
|
Total income tax expense
|
|
|
594 |
|
|
Income tax expense — discontinued operations
|
|
|
(594 |
) |
| |
|
|
|
|
Income tax expense — continuing operations
|
|
$ |
— |
|
| |
|
|
|
In 2005, income tax expense was allocated to discontinued
operations as the taxable income of the TRSs resulted from
condominium sales activities which are reported in discontinued
operations. Deferred tax expense was offset by the reversal of
valuation allowances, primarily related to income tax net
operating loss carryforwards, that were established in prior
years. Net valuation allowances utilized in 2005 totaled
approximately $2,700 and total valuation allowances at
December 31, 2005 totaled approximately $1,600.
Post Apartment Homes, L.P.
109
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
The components of the TRSs’ deferred income tax assets and
liabilities at December 31, 2005 and 2004 were as follows:
| |
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
| |
|
| |
|
| |
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
| |
Real estate asset basis differences
|
|
$ |
1,106 |
|
|
$ |
1,106 |
|
| |
Tax NOLs
|
|
|
415 |
|
|
|
3,300 |
|
| |
Accrued liabilities
|
|
|
641 |
|
|
|
— |
|
| |
Other
|
|
|
269 |
|
|
|
769 |
|
| |
|
|
|
|
|
|
| |
|
|
2,431 |
|
|
|
5,175 |
|
| |
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
| |
Amortization
|
|
|
(797 |
) |
|
|
(824 |
) |
| |
|
|
|
|
|
|
| |
|
|
(797 |
) |
|
|
(824 |
) |
| |
|
|
|
|
|
|
|
Net deferred tax assets, before valuation allowances
|
|
|
1,634 |
|
|
|
4,351 |
|
|
Valuation allowances
|
|
|
(1,634 |
) |
|
|
(4,351 |
) |
| |
|
|
|
|
|
|
|
Net deferred tax assets (liabilities)
|
|
$ |
— |
|
|
$ |
— |
|
| |
|
|
|
|
|
|
At December 31, 2005, the Operating Partnership’s
taxable REIT subsidiaries had consolidated federal income tax
net operating loss carryforwards totaling approximately $1,200.
These tax loss carryforwards begin to expire in 2021. At
December 31, 2005 and 2004, management had established
valuation allowances against the deferred tax asset associated
with these net operating loss carryforwards and other net
deferred tax assets due primarily to the historical losses and
variability of the income of these subsidiaries. The tax
benefits associated with such valuation allowances may be
recognized in future periods, if the taxable REIT subsidiaries
generate sufficient taxable income to utilize such amounts or if
the Operating Partnership determines that it is more likely than
not that the related deferred tax assets are realizable.
A reconciliation of income tax expense of the TRSs to the
federal statutory rate is detailed below. As shown above, 2005
income tax expense was allocated to discontinued operations.
| |
|
|
|
|
| |
|
2005 | |
| |
|
| |
|
Federal tax rate
|
|
|
35 |
% |
|
State income tax, net of federal benefit
|
|
|
4 |
% |
|
Federal alternative minimum taxes
|
|
|
3 |
% |
|
Change in valuation allowance of deferred tax assets
|
|
|
(35 |
)% |
| |
|
|
|
| |
|
|
7 |
% |
| |
|
|
|
|
|
| 9. |
EQUITY-BASED COMPENSATION PLANS |
Equity Compensation Plans
As the primary operating subsidiary of the Company, the
Operating Partnership participates in and bears the compensation
expenses associated with the Company’s stock-based
compensation plans. The information discussed below relating to
the Company’s stock-based compensation plans is also
applicable for the Operating Partnership. Effective
January 1, 2003, the Operating Partnership elected to
voluntarily change its method of accounting for equity-based
compensation to the fair value method prescribed in
SFAS No. 123 (see note 1). The Operating
Partnership elected the prospective method of adoption
prescribed by SFAS No. 148. For equity-based
compensation granted prior to January 1, 2003, the
Operating Partnership accounted for equity-based compensation
under the intrinsic value method prescribed by APB No. 25.
A table in note 1 summarizes the Operating
Partnership’s net income and earnings per common unit had
the fair value method of accounting under SFAS No. 123
been applied for the years ended December 31, 2005, 2004
and 2003.
Post Apartment Homes, L.P.
110
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
Incentive Stock Plans
The Company’s 2003 Incentive Stock Plan (the “2003
Stock Plan”) was approved by the Company’s
shareholders in May 2003. Under the 2003 Stock Plan, an
aggregate of 4,000 shares of common stock were reserved for
issuance. Of this amount, not more than 500 shares of
common stock are available for grants of restricted stock. The
exercise price of each option granted under the 2003 Stock Plan
may not be less than the market price of the Company’s
common stock on the date of the option grant and all options may
have a maximum life of ten years. Participants receiving
restricted stock grants are generally eligible to vote such
shares and receive dividends on such shares. Substantially all
stock option and restricted stock grants are subject to annual
vesting provisions (generally three to five years) as determined
by the administrative committee overseeing the 2003 Stock Plan.
At December 31, 2005, stock options outstanding under the
2003 Stock Plan totaled 1,150. The Company’s former stock
plan (the “1993 Stock Plan”) expired in July 2003. At
December 31, 2005, stock options outstanding under the 1993
Stock Plan totaled 2,384.
In 2005, 2004 and 2003, the Company granted stock options to
purchase 277, 283 and 1,252 shares of Company common
stock to Company officers and directors, of which 50, 50 and
100 shares in 2005, 2004 and 2003, respectively, were
granted to the Company’s non-executive chairman of the
board. For the years ended December 31, 2005, 2004 and
2003, the Company recorded compensation expense related to stock
options of $761, $590 and $244, respectively, recognized under
the fair value method.
The following table summarizes the weighted average assumptions
used in the calculation of the fair value of stock options
granted using the Black-Scholes option-pricing model.
| |
|
|
|
|
|
|
| |
|
2005 |
|
2004 |
|
2003 |
| |
|
|
|
|
|
|
|
Dividend yield
|
|
5.5% |
|
6.3% |
|
6.5% |
|
Expected volatility
|
|
17.1% |
|
16.9% |
|
17.1% |
|
Risk-free interest rate
|
|
3.1% |
|
3.1% |
|
2.9% |
|
Expected option life
|
|
5 years |
|
5 years |
|
5 years |
A summary of stock option activity under all plans for the years
ended December 31, 2005, 2004 and 2003, is presented below.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
| |
|
|
|
Weighted | |
|
|
|
Weighted | |
|
|
|
Weighted | |
| |
|
|
|
Average | |
|
|
|
Average | |
|
|
|
Average | |
| |
|
Shares | |
|
Exercise Price | |
|
Shares | |
|
Exercise Price | |
|
Shares | |
|
Exercise Price | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Outstanding at beginning of year
|
|
|
4,491 |
|
|
$ |
33 |
|
|
|
4,735 |
|
|
$ |
34 |
|
|
|
4,089 |
|
|
$ |
35 |
|
|
Granted
|
|
|
277 |
|
|
|
33 |
|
|
|
283 |
|
|
|
28 |
|
|
|
1,252 |
|
|
|
26 |
|
|
Exercised
|
|
|
(1,105 |
) |
|
|
33 |
|
|
|
(277 |
) |
|
|
29 |
|
|
|
(217 |
) |
|
|
28 |
|
|
Forfeited
|
|
|
(129 |
) |
|
|
30 |
|
|
|
(250 |
) |
|
|
36 |
|
|
|
(389 |
) |
|
|
32 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year
|
|
|
3,534 |
|
|
|
34 |
|
|
|
4,491 |
|
|
|
33 |
|
|
|
4,735 |
|
|
|
34 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at year-end
|
|
|
2,437 |
|
|
|
|
|
|
|
3,131 |
|
|
|
|
|
|
|
3,233 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average fair value of options granted during the year
|
|
$ |
2.73 |
|
|
|
|
|
|
$ |
1.86 |
|
|
|
|
|
|
$ |
1.59 |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2005, the Company has separated its
outstanding options into two ranges based on exercise prices.
There were 1,481 options outstanding with exercise prices
ranging from $23.90 to $35.51. These options have a weighted
average exercise price of $27.75 and a weighted average
remaining contractual life of 8 years. Of these outstanding
options, 457 were exercisable at December 31, 2005 at a
weighted average exercise price of $26.66. In addition, there
were 2,053 options outstanding with exercise prices ranging from
$36.13 to $44.13. These options have a weighted average exercise
price of $38.16 and a weighted average remaining contractual
life of 3 years. Of these outstanding options, 1,980 were
exercisable at December 31, 2005 at a weighted average
exercise price of $37.56.
In 2005, 2004 and 2003, the Company granted 35, 27 and
175 shares of restricted stock, respectively, to Company
officers and directors, of which 6, 7 and 8 shares in
2005, 2004 and 2003, respectively, were granted to the
Post Apartment Homes, L.P.
111
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
Company’s non-executive chairman of the board. The
restricted shares granted in 2005 and 2004 vest ratably over
three to five year periods. The restricted shares granted in
2003 vest ratably over three to eight year periods. For each
year, the total value of the restricted share grants of $1,173,
$777 and $4,555, respectively, was initially reflected in
partners’ equity as additional paid-in capital and as
deferred compensation, a contra-partners’ equity account.
Such deferred compensation is amortized ratably into
compensation expense over the applicable vesting period. Total
compensation expense relating to the restricted stock was
$1,367, $1,109 and $742 in 2005, 2004 and 2003, respectively.
Employee Stock Purchase Plan
The Company maintains an Employee Stock Purchase Plan (the
“2005 ESPP”) under a plan approved by Company
shareholders in 2005. The provisions of the 2005 ESPP are
substantially similar to the Company’s former ESPP,
terminated in December 2004, with certain exceptions including
that the maximum number of shares issuable under the 2005 ESPP
will be 300. To participate in the ESPP, (i) directors 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; provided, an individual who is a director and
who is an employee shall be a participant exclusively with
respect to his or her status as an employee. 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.
Effective January 1, 2003, under SFAS No. 123,
the Operating Partnership records the aggregate cost of the ESPP
(generally the 15% discount on the share purchases) as a period
expense. Total compensation expense relating to the ESPP was
$171, $86 and $85 in 2005, 2004 and 2003, respectively.
|
|
| 10. |
EMPLOYEE BENEFIT PLAN |
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 5% (4% in
2004 and 2003) of salary. Operating Partnership contributions of
$691, $541 and $513 were made to this plan in 2005, 2003 and
2003, respectively.
|
|
| 11. |
COMMITMENTS AND CONTINGENCIES |
Land, office and equipment leases
The Operating Partnership is party to two ground leases with
terms expiring in years 2040 and 2043 relating to a single
operating community and four ground leases expiring in 2012,
2038, 2066 and 2074 for four separate operating communities and
to other facility, office, equipment and other operating leases
with terms expiring through 2057. The ground leases generally
provide for future increases in minimum lease payments tied to
an inflation index or contain stated rent increases that
generally compensate for the impact of inflation. Future minimum
lease payments for non-cancelable land, office, equipment and
other leases at December 31, 2005, are as follows:
| |
|
|
|
|
|
2006
|
|
$ |
1,665 |
|
|
2007
|
|
|
1,625 |
|
|
2008
|
|
|
1,638 |
|
|
2009
|
|
|
1,628 |
|
|
2010
|
|
|
1,634 |
|
|
2011 and thereafter
|
|
|
167,857 |
|
The Operating Partnership incurred $5,058, $4,981 and $4,382 of
rent expense, including rent expense under short-term rental and
lease arrangements, for the years ended December 31, 2005,
2004 and 2003, respectively.
Post Apartment Homes, L.P.
112
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
Legal proceedings
On May 13, 2004, an alleged Company shareholder filed a
purported pro se derivative and direct action in the Superior
Court of Fulton County, Georgia, against the Company, certain
members of the Company’s board of directors, and certain of
its executive officers. The case was removed to the United
States District Court for the Northern District of Georgia on
May 21, 2004. The complaint alleged, among other things,
breaches of fiduciary duties, fraud, corporate waste,
withholding certain documents from shareholder inspection and
certain securities laws claims. The complaint requested various
types of relief, such as injunctive relief and damages and
demanded production of certain Company records. Because the
Company believed the allegations were wholly without merit, the
Company moved to dismiss the litigation. On April 20, 2005,
the court entered an order dismissing all claims without
prejudice, save a claim seeking production of certain Company
records, upon which the Court declined to rule, concluding it
lacked jurisdiction to do so, and ordered the claim remanded to
the Superior Court of Fulton County. Since that time, the
Company has moved for its attorney fees in the United States
District Court, arguing that the plaintiff frivolously pursued
the litigation, and the plaintiff has moved for entry of
judgment in Superior Court, which the Company has vigorously
contested. In February 2006, the United States District Court
granted the Company’s motion for attorneys’ fees in an
amount to be determined by the agreement of the parties, or,
alternatively, by the Court.
On May 5, 2003, the Company received notice that a
shareholder derivative and purported class action lawsuit was
filed against members of the board of directors of the Company
and the Company as a nominal defendant. This complaint was filed
in the Superior Court of Fulton County, Atlanta, Georgia on
May 2, 2003 and alleged various breaches of fiduciary
duties by the board of directors of the Company and sought,
among other relief, the disclosure of certain information by the
defendants. This complaint also sought to compel the defendants
to undertake various actions to facilitate a sale of the
Company. On May 7, 2003, the plaintiff made a request for
voluntary expedited discovery. On May 13, 2003, the Company
received notice that a similar shareholder derivative and
purported class action lawsuit was filed against certain members
of the board of directors of the Company and against the Company
as a nominal defendant. The complaint was filed in the Superior
Court of Fulton County, Atlanta, Georgia on May 12, 2003
and alleged breaches of fiduciary duties, abuse of control and
corporate waste by the defendants. The plaintiff sought monetary
damages and, as appropriate, injunctive relief. These lawsuits
were settled, and in October 2004, the Superior Court of Fulton
County entered an order approving the settlement and related
orders dismissing the litigation. The estimated legal and
settlement costs, not covered by insurance, associated with the
expected resolution of the lawsuits were recorded in the second
quarter of 2003 as a component of a proxy contest and related
costs charge. An alleged Company shareholder, who had filed a
separate purported derivative and direct action against the
Company and certain of its officers and directors (which is
described in the paragraph above), has appealed from the
Superior Court’s orders approving the settlement,
overruling the shareholder’s objection to the settlement
denying the shareholder’s motion to intervene, and
dismissing the litigation with prejudice. In November 2005, the
Georgia Court of Appeals affirmed the orders. In December 2005,
the alleged Company shareholder asked the Georgia Supreme Court
to review the case, and his petition remains pending.
The Company is involved in various other legal proceedings
incidental to its business from time to time, most of which are
expected to be covered by liability or other insurance.
Management of the Company believes that any resolution of
pending proceedings or liability to the Company which may arise
as a result of these proceedings will not have a material
adverse effect on the Company’s results of operations or
financial position.
|
|
| 12. |
RELATED PARTY TRANSACTIONS |
In 2005, 2004 and 2003, the Operating Partnership held
investments in Property LLC’s accounted for under the
equity method of accounting (see note 4). In 2005, 2004 and
2003, the Operating Partnership recorded, before elimination of
the Operating Partnership’s equity interests, development
fees, general construction contract billings, management fees
and expense reimbursements (primarily personnel costs) of
approximately $1,781, $1,756 and $2,913, respectively, from
these related companies. Additionally in 2005, 2004 and 2003,
the Operating Partnership earned interest under mortgage and
construction loans to the Project LLCs totaling $437, $308 and
$3,186, respectively. The Operating Partnership portion of all
significant intercompany transactions was eliminated in the
accompanying consolidated financial statements.
Post Apartment Homes, L.P.
113
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
In prior years, the Operating Partnership provided landscaping
services for executive officers, employees, directors and other
related parties. For the year ended December 31, 2003, the
Operating Partnership received landscaping revenue of $742 for
such services. Such revenue includes reimbursement of direct and
indirect expenses.
At December 31, 2005 and 2004, the Operating Partnership
had outstanding loan balances to certain current and former
Operating Partnership executives totaling $2,485 and $5,095,
respectively. These loans mature ten years from their issue date
and bear interest at a rate of 6.32% per annum. Proceeds
from these loans were used by these executives to acquire the
Company’s common shares on the open market. Additionally,
at December 31, 2005 and 2004, the Operating Partnership
had outstanding additional loans to certain Operating
Partnership executives totaling $640 and $780, respectively. The
loans bear interest at 6.32% per annum. If the executives
continue to be employed by the Operating Partnership, the loans
will be forgiven annually over five to ten year periods, as
defined in the agreements. The annual loan forgiveness of $140,
$140 and $160 was recorded as compensation expense in 2005, 2004
and 2003, respectively.
|
|
| 13. |
DERIVATIVE FINANCIAL INSTRUMENTS |
At December 31, 2005, the Operating Partnership had
outstanding one interest rate swap agreement with a notional
value of approximately $97,100 with a maturity date in 2009. At
December 31, 2004, the Operating Partnership had interest
rate swaps with notional values of $123,000. At
December 31, 2005 and 2004, the fair value of the interest
rate swap agreements represented liabilities of $4,021 and
$8,927, respectively, and the liabilities were included in
consolidated liabilities in the accompanying consolidated
balance sheets. The Operating Partnership recorded the changes
in the fair value of these cash flow hedges as changes in
accumulated other comprehensive income (loss), a partners’
equity account, in the accompanying consolidated balance sheet.
At December 31, 2005, the Operating Partnership had
outstanding one interest rate cap agreement with a financial
institution with a notional value of $28,495. This interest rate
cap agreement is cash flow hedge that provides a fixed interest
ceiling at 5% for the Operating Partnership’s variable
rate, tax-exempt borrowings aggregating $28,495 at
December 31, 2005. The Operating Partnership is required to
maintain the interest rate exposure protection under the terms
of the financing arrangements. The interest rate cap
arrangements are included on the accompanying balance sheet at
fair value. At December 31, 2005, the difference between
the amortized costs of the interest rate cap arrangement and
their fair value of $5 is included in accumulated other
comprehensive income (loss), a partners’ equity account.
The original cost of $362 of the arrangements is being amortized
to expense over their five-year term.
In 2005, in connection with the sale of three communities
discussed in note 5 above, the Operating Partnership sold
its interest in interest rate cap agreements with notional
values of $81,560 for aggregate proceeds of $17 and realized
losses of $955 that were included in the loss on early
extinguishment of indebtedness associated with asset sales on
the accompanying statement of operations. In 2004, in connection
with the sale of five communities discussed in note 5
above, the Operating Partnership sold its interest in interest
rate cap agreements with notional values of $104,325 for
aggregate proceeds of $379 and realized losses of $941 that was
included in the loss on early extinguishment of indebtedness
associated with asset sales on the accompanying statement of
operations. The unrealized losses on these interest rate cap
agreements were previously reflected in accumulated other
comprehensive income (loss), a partner’s equity account.
These interest rate cap agreements were sold and the underlying
hedged indebtedness was assumed by the purchasers in connection
with the sale of the related assets.
The impact of the change in the value of the derivatives on
comprehensive income (loss) is included in the statement of
partners’ equity. Amounts reported in accumulated other
comprehensive income related to these derivatives will be
reclassified to interest expense as schedule interest payments
are made on the Company’s hedge indebtedness. At
December 31, 2005, the Operating Partnership estimates that
$1,470 will be reclassified from accumulated other comprehensive
income as an increase in interest expense during the next twelve
months.
|
|
| 14. |
FAIR VALUE OF FINANCIAL INSTRUMENTS |
The 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
Post Apartment Homes, L.P.
114
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
amounts the Operating Partnership could realize on disposition
of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.
Cash equivalents, rents and accounts receivables, accounts
payable, accrued expenses and other liabilities are carried at
amounts which reasonably approximate their fair values because
of the short-term nature of these instruments. At
December 31, 2005, the fair value of fixed rate debt was
approximately $767,271 (carrying value of $753,641) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements. At
December 31, 2004, the fair value of fixed rate debt was
approximately $891,579 (carrying value of $845,175) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements.
In order to manage the impact of interest rate changes on
earnings and cash flow, the Operating Partnership entered into
and has outstanding interest rate swap and interest rate cap
arrangements. As more fully described in note 1, these
interest rate cap and interest rate swap agreements are carried
on the consolidated balance sheet at fair market value in
accordance with SFAS No. 133, as amended. At
December 31, 2005, the carrying amounts of the interest
rate swap arrangement represented a net liability totaling
$4,021 and the carrying value of the interest rate cap
arrangement represented a net asset of $5. At December 31,
2004, the carrying amounts of the interest rate swap
arrangements represented net liabilities totaling $8,927 and the
carrying value of the interest rate cap arrangements represented
net assets of $110.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of
December 31, 2005. Although management is not aware of any
factors that would significantly affect the reasonable fair
value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that
date and current estimates of fair value may differ
significantly from the amounts presented herein.
Segment Description
In accordance with SFAS No. 131, “Disclosure
About the Segments of an Enterprise and Related
Information,” the Operating Partnership presents segment
information based on the way that management organizes the
segments within the enterprise for making operating decisions
and assessing performance. The segment information is prepared
on the same basis as the internally reported information used by
the Operating 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. Apartment community
rental operations are broken down into four segments based on
the various stages in the apartment community ownership
lifecycle. These segments are described below. All commercial
and other ancillary service and support operations are combined
in the line item “other property segments” in the
accompanying segment information. The segment information
presented below reflects the segment categories based on the
lifecycle status of each community as of December 31, 2005.
The segment information for the years ended December 31,
2004 and 2003 have been adjusted due to the restatement impact
of reclassifying the operating results of the assets designated
as held for sale in 2005 to discontinued operations under
SFAS No. 144 (see note 5).
|
|
| • |
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 prior year — communities
which reached stabilized occupancy in the prior year. |
| |
| • |
Condominium conversion communities — those portions of
existing apartment communities being converted into condominiums
that are reflected in continuing operations under
SFAS No. 144 (see note 1). |
| |
| • |
Acquired communities — those communities acquired in
the current or prior year. |
Post Apartment Homes, L.P.
115
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
Segment Performance Measure
Management uses contribution to consolidated property net
operating income (“NOI”) as the performance measure
for its operating segments. Net operating income is defined as
rental and other revenue from real estate operations less total
property and maintenance expenses from real estate operations
(excluding depreciation and amortization).
Post Apartment Homes, L.P.
116
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 NOI together with a reconciliation of
segment contribution to NOI to consolidated net income for the
years ended December 31, 2005, 2004 and 2003. 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 is not reported
internally at the segment level.
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, | |
| |
|
| |
| |
|
2005 | |
|
2004 | |
|
2003 | |
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$ |
250,583 |
|
|
$ |
243,430 |
|
|
$ |
240,613 |
|
|
Communities stabilized during prior year
|
|
|
7,184 |
|
|
|
7,007 |
|
|
|
2,008 |
|
|
Condominium conversion communities
|
|
|
5,485 |
|
|
|
5,716 |
|
|
|
5,523 |
|
|
Acquired communities
|
|
|
10,808 |
|
|
|
4,477 |
|
|
|
— |
|
|
Other property segments
|
|
|
22,488 |
|
|
|
21,154 |
|
|
|
19,558 |
|
|
Other
|
|
|
255 |
|
|
|
1,000 |
|
|
|
457 |
|
| |
|
|
|
|
|
|
|
|
|
| |
Consolidated revenues
|
|
$ |
296,803 |
|
|
$ |
282,784 |
|
|
$ |
268,159 |
|
| |
|
|
|
|
|
|
|
|
|
|
Contribution to Property Net Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fully stabilized communities
|
|
$ |
153,423 |
|
|
$ |
149,146 |
|
|
$ |
149,963 |
|
|
Communities stabilized during prior year
|
|
|
4,957 |
|
|
|
4,885 |
|
|
|
115 |
|
|
Condominium conversion communities
|
|
|
3,613 |
|
|
|
3,675 |
|
|
|
3,569 |
|
|
Acquired communities
|
|
|
7,230 |
|
|
|
3,163 |
|
|
|
— |
|
|
Other property segments, including corporate management expenses
|
|
|
(6,685 |
) |
|
|
(6,438 |
) |
|
|
(3,716 |
) |
| |
|
|
|
|
|
|
|
|
|
|
Consolidated property net operating income
|
|
|
162,538 |
|
|
|
154,431 |
|
|
|
149,931 |
|
| |
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
661 |
|
|
|
817 |
|
|
|
894 |
|
|
Other revenues
|
|
|
255 |
|
|
|
1,000 |
|
|
|
457 |
|
|
Minority interest in consolidated property partnerships
|
|
|
239 |
|
|
|
671 |
|
|
|
1,605 |
|
|
Depreciation
|
|
|
(76,248 |
) |
|
|
(79,473 |
) |
|
|
(77,595 |
) |
|
Interest
|
|
|
(58,898 |
) |
|
|
(63,552 |
) |
|
|
(61,640 |
) |
|
Amortization of deferred loan costs
|
|
|
(4,661 |
) |
|
|
(4,304 |
) |
|
|
(3,801 |
) |
|
General and administrative
|
|
|
(18,307 |
) |
|
|
(18,205 |
) |
|
|
(13,841 |
) |
|
Investment, development and other
|
|
|
(5,242 |
) |
|
|
(2,930 |
) |
|
|
(2,715 |
) |
|
Termination of debt remarketing agreement (interest expense)
|
|
|
— |
|
|
|
(10,615 |
) |
|
|
— |
|
|
Loss on early extinguishment of indebtedness
|
|
|
— |
|
|
|
(4,011 |
) |
|
|
— |
|
|
Severance charges
|
|
|
(796 |
) |
|
|
— |
|
|
|
(21,506 |
) |
|
Proxy contest and related costs
|
|
|
— |
|
|
|
— |
|
|
|
(5,231 |
) |
|
Equity in income (losses) of unconsolidated real estate entities
|
|
|
1,767 |
|
|
|
1,083 |
|
|
|
7,790 |
|
|
Gain on sale of technology investment
|
|
|
5,267 |
|
|
|
— |
|
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
6,575 |
|
|
|
(25,088 |
) |
|
|
(25,652 |
) |
|
Income from discontinued operations
|
|
|
142,472 |
|
|
|
122,265 |
|
|
|
45,749 |
|
| |
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$ |
149,047 |
|
|
$ |
97,177 |
|
|
$ |
20,097 |
|
| |
|
|
|
|
|
|
|
|
|
Post Apartment Homes, L.P.
117
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
|
|
| 16. |
SUPPLEMENTAL CASH FLOW INFORMATION |
Non-cash investing and financing activities for the years ended
December 31, 2005, 2004 and 2003 are as follows:
In 2005, the Operating Partnership sold three communities
subject to $81,560 of tax-exempt mortgage indebtedness assumed
by the purchasers. In 2004, the Operating Partnership sold
certain apartment communities subject to $104,325 of tax-exempt
mortgage indebtedness assumed by the purchasers. Additionally in
2004, the Operating Partnership acquired an apartment community,
including the assumption of mortgage indebtedness with an
estimated fair value of $49,496. These transactions were
excluded from the cash flow statement as non-cash transactions.
In 2005, the Operating Partnership’s derivative financial
instruments increased in value causing a decrease in accounts
payable and accrued expenses and a corresponding increase in
partners’ equity of $5,850. In 2004, the Operating
Partnership’s derivative financial instruments increased in
value causing a decrease in accounts payable and accrued
expenses and a corresponding increase in partners’ equity
of $3,945. In 2003, the Operating Partnership’s derivative
financial instruments increased in value causing a decrease in
accounts payable and accrued expenses and a corresponding
increase in partners’ equity of $2,702.
The Operating Partnership committed to distribute $19,257,
$19,203 and $19,043 for the quarters ended December 31,
2005, 2004 and 2003, respectively.
In 2005, under an amended and restated deferred compensation
plan for directors and officers, Company common shares were
issued to the plan in settlement of the Company’s variable
obligation relating to changes in the value of its common shares
due the directors under the prior deferred compensation plan.
This common share issuance totaling $1,568 was a non-cash
transaction. In addition, common shares issued quarterly for
director compensation, totaling $194 in 2005, were also non-cash
transactions. The Operating Partnership bears the compensation
costs associated with the Company’s compensation plans. As
such, the Operating Partnership issued common units to the
Company in amounts equal to the above.
In 2005, the Operating Partnership’s taxable REIT
subsidiaries made income tax payments to federal and state
taxing authorities totaling $760. Such income tax payments were
not material in 2004 and 2003 due to the existence of tax loss
carryforwards at the taxable REIT subsidiaries (see note 8).
|
|
| 17. |
SALE OF TECHNOLOGY INVESTMENT |
In 2005, the Operating Partnership sold its investment in
Rent.com, a privately-held internet leasing company, and
recognized a gain of $5,267.
Post Apartment Homes, L.P.
118
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per unit data)
|
|
| 18. |
QUARTERLY FINANCIAL INFORMATION (UNAUDITED) |
Under SFAS No. 144, as further discussed in
note 5, the operating results of apartment communities
classified as held for sale were included in discontinued
operations in the accompanying statements of operations for all
periods presented. To conform with this presentation, the
quarterly financial information presented below reflects the
reclassification of the operating results of these assets to
discontinued operations, which in 2004 differ from the
presentation of discontinued operations included in the
Operating Partnership’s previously issued financial
statements included in its quarterly reports on
Form 10-Q filed in
2004. Due to the timing of discontinued operations, the
quarterly financial information presented below is consistent
with the Operating Partnership’s quarterly financial
information reported in its 2005
Form 10-Qs.
Quarterly financial information for the years ended
December 31, 2005 and 2004, as revised to reflect the
change discussed above was as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2005 | |
| |
|
| |
| |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
$ |
71,580 |
|
|
$ |
73,119 |
|
|
$ |
76,071 |
|
|
$ |
76,033 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
1,188 |
|
|
|
(867 |
) |
|
|
1,995 |
|
|
|
4,259 |
|
|
Income from discontinued operations
|
|
|
3,656 |
|
|
|
62,728 |
|
|
|
75,250 |
|
|
|
838 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
4,844 |
|
|
|
61,861 |
|
|
|
77,245 |
|
|
|
5,097 |
|
|
Distributions to preferred unitholders
|
|
|
(1,909 |
) |
|
|
(1,910 |
) |
|
|
(1,909 |
) |
|
|
(1,909 |
) |
|
Net income available to common unitholders
|
|
$ |
2,935 |
|
|
$ |
59,951 |
|
|
$ |
75,336 |
|
|
$ |
3,188 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Common Unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common unitholders — basic
|
|
$ |
0.07 |
|
|
$ |
1.42 |
|
|
$ |
1.77 |
|
|
$ |
0.08 |
|
|
Net income available to common unitholders — diluted
|
|
$ |
0.07 |
|
|
$ |
1.42 |
|
|
$ |
1.75 |
|
|
$ |
0.08 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Year Ended December 31, 2004 | |
| |
|
| |
| |
|
First | |
|
Second | |
|
Third | |
|
Fourth | |
| |
|
| |
|
| |
|
| |
|
| |
|
Revenues
|
|
$ |
68,686 |
|
|
$ |
69,860 |
|
|
$ |
72,912 |
|
|
$ |
71,326 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
(2,542 |
) |
|
|
(2,674 |
) |
|
|
(3,513 |
) |
|
|
(16,359 |
) |
|
Income from discontinued operations
|
|
|
7,282 |
|
|
|
112,391 |
|
|
|
2,021 |
|
|
|
571 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
4,740 |
|
|
|
109,717 |
|
|
|
(1,492 |
) |
|
|
(15,788 |
) |
|
Distributions to preferred unitholders
|
|
|
(3,997 |
) |
|
|
(3,310 |
) |
|
|
(2,889 |
) |
|
|
(1,909 |
) |
|
Redemption costs on preferred stock and units
|
|
|
(1,716 |
) |
|
|
— |
|
|
|
(1,810 |
) |
|
|
— |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common unitholders
|
|
$ |
(973 |
) |
|
$ |
106,407 |
|
|
$ |
(6,191 |
) |
|
$ |
(17,697 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per Common Unit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) available to common unitholders —
basic
|
|
$ |
(0.02 |
) |
|
$ |
2.49 |
|
|
$ |
(0.14 |
) |
|
$ |
(0.42 |
) |
|
Net income (loss) available to common unitholders —
diluted
|
|
$ |
(0.02 |
) |
|
$ |
2.49 |
|
|
$ |
(0.14 |
) |
|
$ |
(0.42 |
) |
Post Apartment Homes, L.P.
119
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2005
(Dollars in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Gross amount at which | |
| |
|
|
|
|
|
Initial costs |
|
Costs | |
|
Carried at close of period | |
| |
|
|
|
|
|
|
|
Capitalized | |
|
| |
| |
|
|
|
Related | |
|
|
|
Building and |
|
Subsequent | |
|
|
|
Building and | |
|
|
| |
|
Description | |
|
Encumbrances | |
|
Land | |
|
Improvements |
|
to Acquisition | |
|
Land | |
|
Improvements | |
|
Total(1) | |
| |
|
| |
|
| |
|
| |
|
|
|
| |
|
| |
|
| |
|
| |
|
Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Ashford®
|
|
|
Apartments |
|
|
$ |
9,895 |
(2) |
|
$ |
1,906 |
|
|
$ |
— |
|
|
$ |
9,183 |
|
|
$ |
1,906 |
|
|
$ |
9,183 |
|
|
$ |
11,089 |
|
|
Post
Briarclifftm
|
|
|
Apartments |
|
|
|
— |
|
|
|
13,344 |
|
|
|
— |
|
|
|
47,589 |
|
|
|
13,344 |
|
|
|
47,589 |
|
|
|
60,933 |
|
|
Post
Brookhaven®
|
|
|
Apartments |
|
|
|
— |
|
|
|
7,921 |
|
|
|
— |
|
|
|
33,575 |
|
|
|
7,921 |
|
|
|
33,575 |
|
|
|
41,496 |
|
|
Post
Chastain®
|
|
|
Apartments |
|
|
|
28,607 |
|
|
|
6,352 |
|
|
|
— |
|
|
|
41,829 |
|
|
|
6,779 |
|
|
|
41,402 |
|
|
|
48,181 |
|
|
Post Collier
Hills®
|
|
|
Apartments |
|
|
|
— |
|
|
|
6,487 |
|
|
|
— |
|
|
|
25,955 |
|
|
|
7,203 |
|
|
|
25,239 |
|
|
|
32,442 |
|
|
Post
Crest®
|
|
|
Apartments |
|
|
|
24,546 |
|
|
|
4,733 |
|
|
|
— |
|
|
|
25,499 |
|
|
|
4,763 |
|
|
|
25,469 |
|
|
|
30,232 |
|
|
Post
Crossing®
|
|
|
Apartments |
|
|
|
— |
|
|
|
3,951 |
|
|
|
— |
|
|
|
20,372 |
|
|
|
3,951 |
|
|
|
20,372 |
|
|
|
24,323 |
|
|
Post
Dunwoody®
|
|
|
Apartments |
|
|
|
— |
|
|
|
4,917 |
|
|
|
— |
|
|
|
29,936 |
|
|
|
4,961 |
|
|
|
29,892 |
|
|
|
34,853 |
|
|
Post
Gardens®
|
|
|
Apartments |
|
|
|
— |
|
|
|
5,859 |
|
|
|
— |
|
|
|
34,768 |
|
|
|
5,931 |
|
|
|
34,696 |
|
|
|
40,627 |
|
|
Post
Glen®
|
|
|
Apartments |
|
|
|
18,799 |
|
|
|
5,591 |
|
|
|
— |
|
|
|
22,186 |
|
|
|
5,784 |
|
|
|
21,993 |
|
|
|
27,777 |
|
|
Post Lenox
Park®
|
|
|
Apartments |
|
|
|
10,561 |
|
|
|
3,132 |
|
|
|
— |
|
|
|
11,336 |
|
|
|
3,132 |
|
|
|
11,336 |
|
|
|
14,468 |
|
|
Post
Lindbergh®
|
|
|
Apartments |
|
|
|
— |
|
|
|
6,268 |
|
|
|
— |
|
|
|
27,614 |
|
|
|
6,652 |
|
|
|
27,230 |
|
|
|
33,882 |
|
|
Post
Oaktm
|
|
|
Apartments |
|
|
|
— |
|
|
|
2,027 |
|
|
|
— |
|
|
|
8,844 |
|
|
|
2,027 |
|
|
|
8,844 |
|
|
|
10,871 |
|
|
Post
Oglethorpe®
|
|
|
Apartments |
|
|
|
— |
|
|
|
3,662 |
|
|
|
— |
|
|
|
17,817 |
|
|
|
3,662 |
|
|
|
17,817 |
|
|
|
21,479 |
|
|
Post
Parksidetm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
3,402 |
|
|
|
— |
|
|
|
20,349 |
|
|
|
3,465 |
|
|
|
20,286 |
|
|
|
23,751 |
|
|
Post Peachtree
Hills®
|
|
|
Apartments |
|
|
|
— |
|
|
|
4,215 |
|
|
|
— |
|
|
|
14,944 |
|
|
|
4,857 |
|
|
|
14,302 |
|
|
|
19,159 |
|
|
Post
Renaissance®(3)
|
|
|
Apartments |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21,046 |
|
|
|
— |
|
|
|
21,046 |
|
|
|
21,046 |
|
|
Post
Ridge®
|
|
|
Apartments |
|
|
|
— |
|
|
|
5,150 |
|
|
|
— |
|
|
|
32,162 |
|
|
|
5,150 |
|
|
|
32,162 |
|
|
|
37,312 |
|
|
Post
Springtm
|
|
|
Apartments |
|
|
|
— |
|
|
|
2,105 |
|
|
|
— |
|
|
|
38,416 |
|
|
|
2,105 |
|
|
|
38,416 |
|
|
|
40,521 |
|
|
Post
Summit®
|
|
|
Apartments |
|
|
|
— |
|
|
|
1,575 |
|
|
|
— |
|
|
|
6,733 |
|
|
|
1,575 |
|
|
|
6,733 |
|
|
|
8,308 |
|
|
Post
Valley®
|
|
|
Apartments |
|
|
|
18,600 |
(2) |
|
|
1,117 |
|
|
|
— |
|
|
|
20,351 |
|
|
|
1,117 |
|
|
|
20,351 |
|
|
|
21,468 |
|
|
Post
Vinings®
|
|
|
Apartments |
|
|
|
— |
|
|
|
4,322 |
|
|
|
— |
|
|
|
22,945 |
|
|
|
5,668 |
|
|
|
21,599 |
|
|
|
27,267 |
|
|
Post
Woods®
|
|
|
Apartments |
|
|
|
25,326 |
|
|
|
1,378 |
|
|
|
— |
|
|
|
29,126 |
|
|
|
3,070 |
|
|
|
27,434 |
|
|
|
30,504 |
|
|
Post
Stratfordtm
(3)
|
|
|
Apartments |
|
|
|
— |
|
|
|
328 |
|
|
|
— |
|
|
|
24,487 |
|
|
|
620 |
|
|
|
24,195 |
|
|
|
24,815 |
|
|
Post
Riverside®
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
11,130 |
|
|
|
— |
|
|
|
110,567 |
|
|
|
12,457 |
|
|
|
109,240 |
|
|
|
121,697 |
|
[Additional columns below]
[Continued from above table, first column(s) repeated]
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Accumulated | |
|
Date of | |
|
|
|
Depreciable | |
| |
|
Depreciation | |
|
Construction | |
|
Date Acquired | |
|
Lives Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
Georgia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Ashford®
|
|
$ |
4,751 |
|
|
|
04/86 – 06/87 |
|
|
|
04/86 |
|
|
|
5-40 Years |
|
|
Post
Briarclifftm
|
|
|
13,661 |
|
|
|
12/96 |
|
|
|
09/96 |
|
|
|
5-40 Years |
|
|
Post
Brookhaven®
|
|
|
16,762 |
|
|
|
07/89 – 12/92 |
|
|
|
03/89 |
|
|
|
5-40 Years |
|
|
Post
Chastain®
|
|
|
20,173 |
|
|
|
06/88 – 10/90 |
|
|
|
06/88 |
|
|
|
5-40 Years |
|
|
Post Collier
Hills®
|
|
|
8,163 |
|
|
|
10/95 |
|
|
|
06/95 |
|
|
|
5-40 Years |
|
|
Post
Crest®
|
|
|
8,624 |
|
|
|
09/95 |
|
|
|
10/94 |
|
|
|
5-40 Years |
|
|
Post
Crossing®
|
|
|
6,682 |
|
|
|
04/94 – 08/95 |
|
|
|
11/93 |
|
|
|
5-40 Years |
|
|
Post
Dunwoody®
|
|
|
11,389 |
|
|
|
11/88 |
|
|
|
12/84 & 8/94 |
|
|
|
5-40 Years |
|
|
Post
Gardens®
|
|
|
9,845 |
|
|
|
07/96 |
|
|
|
05/96 |
|
|
|
5-40 Years |
|
|
Post
Glen®
|
|
|
6,976 |
|
|
|
07/96 |
|
|
|
05/96 |
|
|
|
5-40 Years |
|
|
Post Lenox
Park®
|
|
|
3,839 |
|
|
|
03/94 – 05/95 |
|
|
|
03/94 |
|
|
|
5-40 Years |
|
|
Post
Lindbergh®
|
|
|
7,682 |
|
|
|
11/96 |
|
|
|
08/96 |
|
|
|
5-40 Years |
|
|
Post
Oaktm
|
|
|
3,807 |
|
|
|
09/92 – 12/93 |
|
|
|
09/92 |
|
|
|
5-40 Years |
|
|
Post
Oglethorpe®
|
|
|
6,119 |
|
|
|
03/93 – 10/94 |
|
|
|
03/93 |
|
|
|
5-40 Years |
|
|
Post
Parksidetm
|
|
|
5,266 |
|
|
|
02/99 |
|
|
|
12/97 |
|
|
|
5-40 Years |
|
|
Post Peachtree
Hills®
|
|
|
5,562 |
|
|
|
02/92 – 09/94 |
|
|
|
02/92 & 09/92 |
|
|
|
5-40 Years |
|
|
Post
Renaissance®(3)
|
|
|
8,422 |
|
|
|
07/91 – 12/94 |
|
|
|
06/91 & 01/94 |
|
|
|
5-40 Years |
|
|
Post
Ridge®
|
|
|
8,809 |
|
|
|
10/96 |
|
|
|
07/96 |
|
|
|
5-40 Years |
|
|
Post
Springtm
|
|
|
8,154 |
|
|
|
09/99 |
|
|
|
09/99 |
|
|
|
5-40 Years |
|
|
Post
Summit®
|
|
|
3,551 |
|
|
|
01/90 – 12/90 |
|
|
|
01/90 |
|
|
|
5-40 Years |
|
|
Post
Valley®
|
|
|
10,378 |
|
|
|
03/86 – 04/88 |
|
|
|
12/85 |
|
|
|
5-40 Years |
|
|
Post
Vinings®
|
|
|
11,354 |
|
|
|
05/88 – 09/91 |
|
|
|
05/88 |
|
|
|
5-40 Years |
|
|
Post
Woods®
|
|
|
15,013 |
|
|
|
03/76 – 09/83 |
|
|
|
06/76 |
|
|
|
5-40 Years |
|
|
Post
Stratfordtm
(3)
|
|
|
6,282 |
|
|
|
04/99 |
|
|
|
01/99 |
|
|
|
5-40 Years |
|
|
Post
Riverside®
|
|
|
31,734 |
|
|
|
07/96 |
|
|
|
01/96 |
|
|
|
5-40 Years |
|
Post Properties, Inc.
120
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2005
(Dollars in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
Gross amount at which | |
| |
|
|
|
|
|
Initial costs | |
|
Costs | |
|
Carried at close of period | |
| |
|
|
|
|
|
| |
|
Capitalized | |
|
| |
| |
|
|
|
Related | |
|
|
|
Building and | |
|
Subsequent | |
|
|
|
Building and | |
|
|
| |
|
Description | |
|
Encumbrances | |
|
Land | |
|
Improvements | |
|
to Acquisition | |
|
Land | |
|
Improvements | |
|
Total(1) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Addison
Circletm
|
|
|
Mixed Use |
|
|
|
86,061 |
|
|
|
2,885 |
|
|
|
41,482 |
|
|
|
122,393 |
|
|
|
8,382 |
|
|
|
158,378 |
|
|
|
166,760 |
|
|
Post Cole’s Corner
tm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
1,886 |
|
|
|
18,006 |
|
|
|
2,115 |
|
|
|
2,086 |
|
|
|
19,921 |
|
|
|
22,007 |
|
|
Post
Squaretm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
4,565 |
|
|
|
24,595 |
|
|
|
1,377 |
|
|
|
4,565 |
|
|
|
25,972 |
|
|
|
30,537 |
|
|
Post
Heightstm
/ Gallery
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
5,455 |
|
|
|
15,559 |
|
|
|
30,211 |
|
|
|
5,812 |
|
|
|
45,413 |
|
|
|
51,225 |
|
|
Post Legacy
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
684 |
|
|
|
— |
|
|
|
33,389 |
|
|
|
811 |
|
|
|
33,262 |
|
|
|
34,073 |
|
|
Post Midtown
Square®
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
4,408 |
|
|
|
1,412 |
|
|
|
47,584 |
|
|
|
3,436 |
|
|
|
49,968 |
|
|
|
53,404 |
|
|
Post
Abbeytm
|
|
|
Apartments |
|
|
|
— |
|
|
|
575 |
|
|
|
6,276 |
|
|
|
1,748 |
|
|
|
575 |
|
|
|
8,024 |
|
|
|
8,599 |
|
|
Post
Meridiantm
|
|
|
Apartments |
|
|
|
— |
|
|
|
1,535 |
|
|
|
11,605 |
|
|
|
1,265 |
|
|
|
1,535 |
|
|
|
12,870 |
|
|
|
14,405 |
|
|
Post Rice
Loftstm
(3)
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
449 |
|
|
|
13,393 |
|
|
|
27,085 |
|
|
|
449 |
|
|
|
40,478 |
|
|
|
40,927 |
|
|
Post
Vineyardtm
|
|
|
Apartments |
|
|
|
— |
|
|
|
1,133 |
|
|
|
8,560 |
|
|
|
491 |
|
|
|
1,133 |
|
|
|
9,051 |
|
|
|
10,184 |
|
|
Post
Vintagetm
|
|
|
Apartments |
|
|
|
— |
|
|
|
2,614 |
|
|
|
12,188 |
|
|
|
771 |
|
|
|
2,614 |
|
|
|
12,959 |
|
|
|
15,573 |
|
|
Post Worthington
tm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
3,744 |
|
|
|
34,700 |
|
|
|
2,964 |
|
|
|
3,744 |
|
|
|
37,664 |
|
|
|
41,408 |
|
|
Post Uptown
Villagetm
|
|
|
Apartments |
|
|
|
15,380 |
|
|
|
3,955 |
|
|
|
22,120 |
|
|
|
19,215 |
|
|
|
6,682 |
|
|
|
38,608 |
|
|
|
45,290 |
|
|
Post Wilson
Buildingtm(3)
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
— |
|
|
|
689 |
|
|
|
20,835 |
|
|
|
— |
|
|
|
21,524 |
|
|
|
21,524 |
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Harbour Place
tm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
3,854 |
|
|
|
— |
|
|
|
64,921 |
|
|
|
8,312 |
|
|
|
60,463 |
|
|
|
68,775 |
|
|
Post Hyde
Park®
|
|
|
Apartments |
|
|
|
— |
|
|
|
3,498 |
|
|
|
— |
|
|
|
26,900 |
|
|
|
5,108 |
|
|
|
25,290 |
|
|
|
30,398 |
|
|
Post
Parksidetm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
2,493 |
|
|
|
— |
|
|
|
31,260 |
|
|
|
2,493 |
|
|
|
31,260 |
|
|
|
33,753 |
|
|
Post Rocky
Point®
|
|
|
Apartments |
|
|
|
57,000 |
|
|
|
10,510 |
|
|
|
— |
|
|
|
62,752 |
|
|
|
10,567 |
|
|
|
62,695 |
|
|
|
73,262 |
|
|
Virginia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Corners®
|
|
|
Apartments |
|
|
|
17,226 |
|
|
|
4,404 |
|
|
|
— |
|
|
|
24,517 |
|
|
|
4,493 |
|
|
|
24,428 |
|
|
|
28,921 |
|
|
Post
Forest®
|
|
|
Apartments |
|
|
|
— |
|
|
|
8,590 |
|
|
|
— |
|
|
|
27,030 |
|
|
|
9,106 |
|
|
|
26,514 |
|
|
|
35,620 |
|
|
Post Pentagon Row
tm(3)
|
|
|
Apartments |
|
|
|
— |
|
|
|
2,359 |
|
|
|
7,659 |
|
|
|
82,404 |
|
|
|
3,470 |
|
|
|
88,952 |
|
|
|
92,422 |
|
|
Post Carlyle
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
46,934 |
|
|
|
— |
|
|
|
46,934 |
|
|
|
46,934 |
|
|
Post Tysons Corner
tm
|
|
|
Apartments |
|
|
|
47,235 |
|
|
|
20,000 |
|
|
|
65,478 |
|
|
|
1,205 |
|
|
|
20,000 |
|
|
|
66,683 |
|
|
|
86,683 |
|
[Additional columns below]
[Continued from above table, first column(s) repeated]
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Accumulated | |
|
Date of | |
|
|
|
Depreciable | |
| |
|
Depreciation | |
|
Construction | |
|
Date Acquired | |
|
Lives Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
Texas
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Addison
Circletm
|
|
|
40,839 |
|
|
|
10/97 |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post Cole’s Corner
tm
|
|
|
5,763 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post
Squaretm
|
|
|
5,694 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post
Heightstm
/ Gallery
|
|
|
11,006 |
|
|
|
10/97 |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post Legacy
|
|
|
6,520 |
|
|
|
03/99 |
|
|
|
03/99 |
|
|
|
5-40 Years |
|
|
Post Midtown
Square®
|
|
|
11,045 |
|
|
|
10/97 |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post
Abbeytm
|
|
|
1,736 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post
Meridiantm
|
|
|
3,339 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post Rice
Loftstm
(3)
|
|
|
7,471 |
|
|
|
10/97 |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post
Vineyardtm
|
|
|
1,939 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post
Vintagetm
|
|
|
3,118 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post Worthington
tm
|
|
|
9,116 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post Uptown
Villagetm
|
|
|
8,300 |
|
|
|
N/A |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Post Wilson
Buildingtm(3)
|
|
|
3,025 |
|
|
|
10/97 |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Florida
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Harbour Place
tm
|
|
|
12,559 |
|
|
|
03/97 |
|
|
|
01/97 |
|
|
|
5-40 Years |
|
|
Post Hyde
Park®
|
|
|
7,585 |
|
|
|
09/94 |
|
|
|
07/94 |
|
|
|
5-40 Years |
|
|
Post
Parksidetm
|
|
|
6,780 |
|
|
|
03/99 |
|
|
|
03/99 |
|
|
|
5-40 Years |
|
|
Post Rocky
Point®
|
|
|
17,552 |
|
|
|
04/94 – 11/96 |
|
|
|
02/94&09/96 |
|
|
|
5-40 Years |
|
|
Virginia
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Corners®
|
|
|
7,206 |
|
|
|
06/94 |
|
|
|
06/94 |
|
|
|
5-40 Years |
|
|
Post
Forest®
|
|
|
14,747 |
|
|
|
01/89 – 12/90 |
|
|
|
03/88 |
|
|
|
5-40 Years |
|
|
Post Pentagon Row
tm(3)
|
|
|
10,223 |
|
|
|
06/99 |
|
|
|
2/99 |
|
|
|
5-40 Years |
|
|
Post Carlyle
|
|
|
— |
|
|
|
12/04 |
|
|
|
N/A |
|
|
|
5-40 Years |
|
|
Post Tysons Corner
tm
|
|
|
3,316 |
|
|
|
N/A |
|
|
|
06/04 |
|
|
|
5-40 Years |
|
Post Properties, Inc.
121
Post Apartment Homes, L.P.
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
December 31, 2005
(Dollars in thousands)
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
Costs | |
|
Gross Amount at Which | |
| |
|
|
|
|
|
Initial Costs | |
|
Capitalized | |
|
Carried at Close of Period | |
| |
|
|
|
|
|
| |
|
Subsequent | |
|
| |
| |
|
|
|
Related | |
|
|
|
Building and | |
|
to | |
|
|
|
Building and | |
|
|
| |
|
Description | |
|
Encumbrances | |
|
Land | |
|
Improvements | |
|
Acquisition | |
|
Land | |
|
Improvements | |
|
Total(1) | |
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Toscanatm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
15,976 |
|
|
|
— |
|
|
|
76,515 |
|
|
|
17,156 |
|
|
|
75,335 |
|
|
|
92,491 |
|
|
Post
Luminariatm
|
|
|
Mixed Use |
|
|
|
35,000 |
|
|
|
4,938 |
|
|
|
— |
|
|
|
45,885 |
|
|
|
4,938 |
|
|
|
45,885 |
|
|
|
50,823 |
|
|
North Carolina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Ballantyne
|
|
|
Apartments |
|
|
|
— |
|
|
|
6,400 |
|
|
|
30,850 |
|
|
|
1,693 |
|
|
|
6,400 |
|
|
|
32,543 |
|
|
|
38,943 |
|
|
Post Uptown Place
tm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
2,336 |
|
|
|
— |
|
|
|
28,766 |
|
|
|
2,363 |
|
|
|
28,739 |
|
|
|
31,102 |
|
|
Post Gateway Place
tm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
2,424 |
|
|
|
— |
|
|
|
60,948 |
|
|
|
3,481 |
|
|
|
59,891 |
|
|
|
63,372 |
|
|
Post Park at Phillips
Place®
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
4,305 |
|
|
|
— |
|
|
|
37,675 |
|
|
|
4,307 |
|
|
|
37,673 |
|
|
|
41,980 |
|
|
Colorado
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Uptown Square
tm
|
|
|
Mixed Use |
|
|
|
— |
|
|
|
2,963 |
|
|
|
580 |
|
|
|
101,826 |
|
|
|
3,991 |
|
|
|
101,378 |
|
|
|
105,369 |
|
|
Miscellaneous Investments
|
|
|
|
|
|
|
— |
|
|
|
13,212 |
|
|
|
5,496 |
|
|
|
69,433 |
|
|
|
63,316 |
|
|
|
24,825 |
|
|
|
88,141 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
|
|
|
|
$ |
394,236 |
|
|
$ |
253,022 |
|
|
$ |
320,648 |
|
|
$ |
1,799,736 |
|
|
$ |
329,425 |
|
|
$ |
2,043,981 |
(4) |
|
$ |
2,373,406 |
(4) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Additional columns below]
[Continued from above table, first column(s) repeated]
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Accumulated | |
|
Date of | |
|
Date | |
|
Depreciable | |
| |
|
Depreciation | |
|
Construction | |
|
Acquired | |
|
Lives Years | |
| |
|
| |
|
| |
|
| |
|
| |
|
New York
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post
Toscanatm
|
|
|
5,237 |
|
|
|
01/02 |
|
|
|
01/02 |
|
|
|
5-40 Years |
|
|
Post
Luminariatm
|
|
|
7,336 |
|
|
|
03/01 |
|
|
|
03/01 |
|
|
|
5-40 Years |
|
|
North Carolina
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Ballantyne
|
|
|
748 |
|
|
|
N/A |
|
|
|
05/05 |
|
|
|
5-40 Years |
|
|
Post Uptown Place
tm
|
|
|
5,637 |
|
|
|
09/98 |
|
|
|
09/98 |
|
|
|
5-40 Years |
|
|
Post Gateway Place
tm
|
|
|
9,533 |
|
|
|
11/00 |
|
|
|
08/99 |
|
|
|
5-40 Years |
|
|
Post Park at Phillips
Place®
|
|
|
11,372 |
|
|
|
01/96 |
|
|
|
11/95 |
|
|
|
5-40 Years |
|
|
Colorado
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Post Uptown Square
tm
|
|
|
17,328 |
|
|
|
10/97 |
|
|
|
10/97 |
|
|
|
5-40 Years |
|
|
Miscellaneous Investments
|
|
|
17,886 |
|
|
|
|
|
|
|
|
|
|
|
5-40 Years |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
Total
|
|
$ |
516,954 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
The aggregate cost for Federal Income Tax purposes to the
Company was approximately $2,029,012 at December 31, 2005,
taking into account the special allocation of gain to the
partners contributing property to the Operating Partnership. |
| (2) |
These properties serve as collateral for the Federal National
Mortgage Association credit enhancement. |
| (3) |
The Company has a leasehold interest in the land underlying
these communities. |
| (4) |
This total excludes for-sale condominiums and assets held for
sale of $38,338 and $4,591, respectively, at December 31,
2005. |
A summary of activity for real estate investments and
accumulated depreciation is as follows:
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
2005 | |
|
2004 | |
|
2003 | |
|
|
| |
|
| |
|
| |
|
| |
|
|
|
Real estate investments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of year
|
|
$ |
2,407,425 |
|
|
$ |
2,376,524 |
|
|
$ |
2,614,325 |
|
|
|
| |
|
Improvements
|
|
|
129,101 |
|
|
|
106,621 |
|
|
|
50,957 |
|
|
|
| |
|
Disposition of property(a)
|
|
|
(163,120 |
) |
|
|
(75,720 |
) |
|
|
(288,758 |
) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at end of year
|
|
$ |
2,373,406 |
|
|
$ |
2,407,425 |
|
|
$ |
2,376,524 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at beginning of year
|
|
$ |
498,367 |
|
|
$ |
436,245 |
|
|
$ |
430,224 |
|
|
|
| |
|
Depreciation(b)
|
|
|
75,185 |
|
|
|
83,271 |
|
|
|
88,122 |
|
|
|
| |
|
Accumulated depreciation on disposed property(a)
|
|
|
(56,598 |
) |
|
|
(21,149 |
) |
|
|
(82,101 |
) |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
| |
Balance at end of year(c)
|
|
$ |
516,954 |
|
|
$ |
498,367 |
|
|
$ |
436,245 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
| (a) |
Represents reductions for assets classified as held for sale and
converted into for-sale condominiums. |
| (b) |
Represents depreciation expense of real estate assets. Amounts
exclude depreciation and amortization of lease intangible
assets, commercial leasing costs and excess joint venture
investments. |
| (c) |
Accumulated depreciation on the balance sheet excludes
accumulated depreciation on assets held for sale in the amounts
of $0, $26,332 and $74,614 at December 31, 2005, 2004 and
2003, respectively. |
Post Properties, Inc.
122
Post Apartment Homes, L.P.
Post Properties, Inc.
2005 Non-Qualified Employee Stock Purchase Plan
December 31, 2005
Post Properties, Inc.
123
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Participants and Administrator of
Post Properties, Inc. 2005 Non-Qualified Employee Stock Purchase
Plan
In our opinion, the accompanying statement of net assets
available for benefits and the related statement of changes in
net assets available for benefits present fairly, in all
material respects, the net assets available for benefits of the
Post Properties, Inc. 2005 Non-Qualified Employee Stock Purchase
Plan (the “Plan”) at December 31, 2005, and the
changes in net assets available for benefits for the year ended
December 31, 2005 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 audit. We conducted our audit
of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles
used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 15, 2006
Post Properties, Inc.
124
POST PROPERTIES, INC.
2005 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31, 2005
| |
|
|
|
|
|
|
ASSETS
|
|
|
|
|
| |
Receivable from Post Apartment Homes, L.P
|
|
$ |
457,306 |
|
| |
|
|
|
|
NET ASSETS AVAILABLE FOR PLAN BENEFITS
|
|
|
|
|
| |
Net assets available for plan benefits
|
|
$ |
457,306 |
|
| |
|
|
|
The accompanying notes are an integral part of this financial
statement.
Post Properties, Inc.
125
POST PROPERTIES, INC.
2005 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN
BENEFITS
FOR THE YEAR ENDED DECEMBER 31, 2005
| |
|
|
|
|
|
|
NET ASSETS AVAILABLE FOR PLAN BENEFITS, JANUARY 1,
2005
|
|
$ |
— |
|
|
DEDUCTIONS:
|
|
|
|
|
| |
Purchase of participants’ shares
|
|
|
(220,124 |
) |
|
ADDITIONS:
|
|
|
|
|
| |
Participant contributions, net of refunds
|
|
|
677,430 |
|
| |
|
|
|
|
NET ASSETS AVAILABLE FOR PLAN BENEFITS, DECEMBER 31,
2005
|
|
$ |
457,306 |
|
| |
|
|
|
The accompanying notes are an integral part of this financial
statement.
Post Properties, Inc.
126
POST PROPERTIES, INC.
2005 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
|
|
|
|
(A) |
|
Post Properties, Inc. (the “Company”) established the
2005 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, 2005, replacing
the Company’s 1995 Employee Stock Purchase Plan which was
terminated in December 2004. 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
Executive Compensation and Management Development Committee of
the Company’s Board of Directors) from the Company through
salary withholding or cash contributions. Aggregate shares
issuable under the Plan total 300,000. 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
specific dollar amount of their compensation to the Plan. 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.
At the end of each purchase period, the amounts accumulated for
each participating individual are automatically applied to the
purchase of Post common stock. The purchase price of the shares
of common stock is equal to 85% (or such higher percentage set
by the Executive Compensation and Management Development
Committee) of the lesser of the closing price per share of Post
common stock on the first trading day of the purchase period or
the closing price per share of Post common stock on the last
trading day of the purchase period.
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’s compensation. The fair market
value of the shares is determined as of the stock purchase date.
Post Properties, Inc.
127
Certain exhibits required by Item 601 of
Regulation S-K
have been filed with previous reports by the registrants and are
incorporated by reference herein.
The Registrants agree to furnish a copy of all agreements
relating to long-term debt upon request of the SEC.
| |
|
|
|
|
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
Description |
| |
|
|
|
|
| |
3 |
.1(a) |
|
|
|
— |
|
Articles of Incorporation of the Company |
| |
3 |
.2(b) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.3(b) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.4(b) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.5(c) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.6(d) |
|
|
|
— |
|
Bylaws of the Company (as Amended and Restated as of
November 5, 2003) |
| |
3 |
.7(e) |
|
|
|
— |
|
Amendment No. 1 to the Amended and Restated By-Laws of the
Company |
| |
4 |
.1(f) |
|
|
|
— |
|
Indenture between the Company and SunTrust Bank, as Trustee |
| |
4 |
.2(f) |
|
|
|
— |
|
Form of First Supplemental Indenture to the Indenture between
the Company and SunTrust Bank, as Trustee |
| |
10 |
.1(b) |
|
|
|
— |
|
Second Amended and Restated Agreement of Limited Partnership of
the Operating Partnership |
| |
10 |
.2(b) |
|
|
|
— |
|
First Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.3(b) |
|
|
|
— |
|
Second Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.4(g) |
|
|
|
— |
|
Third Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.5(g) |
|
|
|
— |
|
Fourth Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.6(c) |
|
|
|
— |
|
Fifth Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.7(h) |
|
|
|
— |
|
Sixth Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.8(i)* |
|
|
|
— |
|
Employee Stock Plan |
| |
10 |
.9(b)* |
|
|
|
— |
|
Amendment to Employee Stock Plan |
| |
10 |
.10(b)* |
|
|
|
— |
|
Amendment No. 2 to Employee Stock Plan |
| |
10 |
.11(b)* |
|
|
|
— |
|
Amendment No. 3 to Employee Stock Plan |
| |
10 |
.12(b)* |
|
|
|
— |
|
Amendment No. 4 to Employee Stock Plan |
| |
10 |
.13(j)* |
|
|
|
— |
|
2003 Incentive Stock Plan |
| |
10 |
.14(b) |
|
|
|
— |
|
Form of Indemnification Agreement for officers and directors |
| |
10 |
.15(a)* |
|
|
|
— |
|
Profit Sharing Plan of the Company |
| |
10 |
.16(b)* |
|
|
|
— |
|
Amendment Number One to Profit Sharing Plan |
| |
10 |
.17(b)* |
|
|
|
— |
|
Amendment Number Two to Profit Sharing Plan |
| |
10 |
.18(b)* |
|
|
|
— |
|
Amendment Number Three to Profit Sharing Plan |
| |
10 |
.19(b)* |
|
|
|
— |
|
Amendment Number Four to Profit Sharing Plan |
| |
10 |
.20(a) |
|
|
|
— |
|
Form of General Partner 1% Exchange Agreement |
| |
10 |
.21(k)* |
|
|
|
— |
|
Dividend Reinvestment Stock Purchase Plan |
| |
10 |
.22(l) |
|
|
|
— |
|
Credit Agreement dated as of January 16, 2004 among Post
Apartment Homes, L.P., Wachovia Bank, N.A., and certain other
lenders |
| |
10 |
.23(m) |
|
|
|
— |
|
First Amendment to Credit Agreement |
| |
10 |
.24(n) |
|
|
|
— |
|
Letter Agreement, dated as of December 22, 2004, by and
among Post Apartment Homes, L.P., certain lenders under the
Credit Agreement and Wachovia Bank, N.A., as the Administrative
Agent |
| |
10 |
.25(n) |
|
|
|
— |
|
Letter Agreement, dated as of December 23, 2004, by and
among Post Apartment Homes, L.P. and Fannie Mae |
| |
10 |
.26(o)* |
|
|
|
— |
|
Deferred Compensation Plan for Directors and Eligible Employees
(as amended and restated effective as of January 1, 2005) |
| |
10 |
.27(p)* |
|
|
|
— |
|
Form of Change in Control Agreement (3.0X) and schedule of
executive officers who have entered into such agreement |
| |
10 |
.28(p)* |
|
|
|
— |
|
Form of Change in Control Agreement (2.0X) and schedule of
executive officers who have entered into such agreement |
| |
10 |
.29(q)* |
|
|
|
— |
|
Form of Change in Control Agreement (1.5X) and schedule of
executive officers who have entered into such agreement |
| |
10 |
.30(q)* |
|
|
|
— |
|
Form of Change in Control Agreement (1.0X) and schedule of
executive officers who have entered into such agreement |
Post Properties, Inc.
128
Post Apartment Homes, L.P.
| |
|
|
|
|
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
Description |
| |
|
|
|
|
| |
10 |
.31(q)* |
|
|
|
— |
|
Form of Amendment No. 1 to Change in Control Agreement and
schedule of executive officers who have entered into such
amendment |
| |
10 |
.32(q)* |
|
|
|
— |
|
Version One Amendment No. 2 to Change in Control Agreement
and schedule of executive officers who have entered into such
amendment |
| |
10 |
.33(q)* |
|
|
|
— |
|
Version Two Amendment No. 2 to Change in Control Agreement
and schedule of executive officers who have entered into such
amendment |
| |
10 |
.34(q)* |
|
|
|
— |
|
Employment Agreement with David P. Stockert |
| |
10 |
.35(d)* |
|
|
|
— |
|
Amendment No. 1 to Employment Agreement with David P.
Stockert |
| |
10 |
.36(q)* |
|
|
|
— |
|
Employment Agreement with Thomas D. Senkbeil |
| |
10 |
.37(q)* |
|
|
|
— |
|
Amendment No. 1 to Employment Agreement with Thomas D.
Senkbeil |
| |
10 |
.38(d)* |
|
|
|
— |
|
Amendment No. 2 to Employment Agreement with Thomas D.
Senkbeil |
| |
10 |
.39(d)*+ |
|
|
|
— |
|
Restricted Stock Grant Certificate for Robert C.
Goddard, III, dated July 17, 2003 |
| |
10 |
.40(d)* |
|
|
|
— |
|
Non-Incentive Stock Option Certificate for Robert C.
Goddard, III, dated July 17, 2003 |
| |
10 |
.41(r)* |
|
|
|
— |
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Key Employees |
| |
10 |
.42(r)* |
|
|
|
— |
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Directors |
| |
10 |
.43(s)* |
|
|
|
— |
|
Employment and Change in Control Agreement, dated as of
October 17, 2005, by and among Thomas L. Wilkes, Post
Properties, Inc., Post Apartment Homes, L.P., and Post Services,
Inc. |
| |
10 |
.44(s)* |
|
|
|
— |
|
Employment and Change in Control Agreement, dated as of
October 17, 2005, by and among Sherry W. Cohen, Post
Properties, Inc., Post Apartment Homes, L.P., and Post Services,
Inc. |
| |
10 |
.45(s)* |
|
|
|
— |
|
Amended and Restated Employment and Change in Control Agreement,
dated as of October 17, 2005, by and among
Christopher J. Papa, Post Properties, Inc., Post Apartment
Homes, L.P., and Post Services, Inc. |
| |
10 |
.46* |
|
|
|
— |
|
Form of 2003 Incentive Stock Plan Restricted Stock Grant
Certificate for Key Employees |
| |
11 |
.1(t) |
|
|
|
— |
|
Statement Regarding Computation of Per Share Earnings |
| |
21 |
.1 |
|
|
|
— |
|
List of Subsidiaries |
| |
23 |
.1 |
|
|
|
— |
|
Consent of PricewaterhouseCoopers LLP for Registration
Statements on Form S-3 (No. 33-81772), Form S-3 (No.
333-47399), Form S-3 (No. 333-80427), Form S-3 (No.
333-44722), Form S-8 (No. 333-62243), Form S-8 (No.
33-00020), Form S-8 (No. 333-94121), Form S-8 (No.
333-38725), Form S-8 (No. 333-02374), Form S-8 (No.
333-107092), Form S-8 (No. 333-107093), Form S-8 (No.
333-125390) |
| |
23 |
.2 |
|
|
|
— |
|
Consent of PricewaterhouseCoopers LLP for Registration
Statements on Form S-3 (No. 333-36595), Form S-3 (No.
333-42884), Form S-3 (No. 333-55994), Form S-8 (No.
333-127580) |
| |
31 |
.1 |
|
|
|
— |
|
Certification of the Chief Executive Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended, and adopted under
Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
31 |
.2 |
|
|
|
— |
|
Certification of the Chief Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended, and adopted under
Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
32 |
.1 |
|
|
|
— |
|
Certification of the Chief Executive Officer pursuant to
18 U.S.C. 1350, as adopted under Section 906 of the
Sarbanes-Oxley Act of 2002 |
| |
32 |
.2 |
|
|
|
— |
|
Certification of the Chief Financial Officer pursuant to
18 U.S.C. 1350, as adopted under Section 906 of the
Sarbanes-Oxley Act of 2002 |
|
|
|
|
* |
|
Identifies each management contract or compensatory plan
required to be filed. |
|
+ |
|
Also serves as the of restricted stock grant certificate for
directors under the 2003 Incentive Stock Plan. |
|
(a) |
|
Filed as an exhibit to the Registration Statement on
Form S-11 (SEC
File
No. 33-61936), as
amended, of the Company and incorporated herein by reference. |
|
(b) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 2002 and
incorporated herein by reference. |
|
(c) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q of the
Registrants for the quarter ended September 30, 1999 and
incorporated herein by reference. |
Post Properties, Inc.
129
Post Apartment Homes, L.P.
|
|
|
|
(d) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q of the
Registrants for the quarter ended September 30, 2003 and
incorporated herein by reference. |
|
(e) |
|
Filed as Appendix A to the 2004 proxy statement and
incorporated herein by reference. |
|
(f) |
|
Filed as an exhibit to the Registration Statement on
Form S-3 (SEC File
No. 333-42884), as
amended, of the Company and incorporated herein by reference. |
|
(g) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 1998 and
incorporated herein by reference. |
|
(h) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 2000 and
incorporated herein by reference. |
|
(i) |
|
Filed as an exhibit to the Registration Statement on
Form S-11 (SEC
File
No. 33-71650), as
amended, of the Company and incorporated herein by reference. |
|
(j) |
|
Filed as Appendix A to the 2003 proxy statement and
incorporated herein by reference. |
|
(k) |
|
Filed as part of the Registration Statement on
Form S-3 (File
No. 333-39461) of
the Company and incorporated herein by reference. |
|
(l) |
|
Filed as an exhibit to the Annual Report on
Form 10-K for the
Registrants for the year ended December 31, 2003 and
incorporated herein by reference. |
|
(m) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed December 22, 2004 and incorporated herein
by reference. |
|
(n) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed December 28, 2004 and incorporated herein
by reference. |
|
(o) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed August 15, 2005 and incorporated herein
by reference. |
|
(p) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 2001 and
incorporated herein by reference. |
|
(q) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q of the
Registrants for the quarter ended June 30, 2003 and
incorporated herein by reference. |
|
(r) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed January 24, 2006 and incorporated herein
by reference. |
|
(s) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed October 18, 2005 and incorporated herein
by reference. |
|
(t) |
|
The information required by this exhibit is included in
note 6 to the consolidated financial statement and
incorporated herein by reference. |
Post Properties, Inc.
130
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) |
| |
|
March 15, 2006
|
|
By /s/ David P.
Stockert
David P. Stockert, President and
Chief
Executive Officer
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
| |
|
|
|
|
|
|
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
| |
/s/ Robert C.
Goddard, III
Robert C. Goddard, III |
|
Chairman of the Board and Director |
|
March 15, 2006 |
| |
/s/ David P. Stockert
David P. Stockert |
|
President, Chief Executive Officer and Director (Principal
Executive Officer) |
|
March 15, 2006 |
| |
/s/ Christopher J. Papa
Christopher J. Papa |
|
Executive Vice President and Chief Financial Officer (Principal
Financial Officer) |
|
March 15, 2006 |
| |
/s/ Arthur J. Quirk
Arthur J. Quirk |
|
Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer) |
|
March 15, 2006 |
| |
/s/ Herschel M. Bloom
Herschel M. Bloom |
|
Director |
|
March 15, 2006 |
| |
/s/ Douglas
Crocker II
Douglas Crocker II |
|
Director |
|
March 15, 2006 |
| |
/s/ Walter M.
Deriso, Jr.
Walter M. Deriso, Jr. |
|
Director |
|
March 15, 2006 |
| |
/s/ Russell R. French
Russell R. French |
|
Director |
|
March 15, 2006 |
| |
/s/ Nicholas B.
Paumgarten
Nicholas B. Paumgarten |
|
Director |
|
March 15, 2006 |
| |
/s/ Charles E. Rice
Charles E. Rice |
|
Director |
|
March 15, 2006 |
| |
/s/ Stella F. Thayer
Stella F. Thayer |
|
Director |
|
March 15, 2006 |
| |
/s/ Ronald de Waal
Ronald de Waal |
|
Director |
|
March 15, 2006 |
Post Properties, Inc.
131
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 |
| |
|
March 15, 2006
|
|
By /s/ David P.
Stockert
David P. Stockert, President and
Chief
Executive Officer
(Principal Executive Officer) |
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
| |
|
|
|
|
|
|
| Signature |
|
Title |
|
Date |
| |
|
|
|
|
| |
/s/ Robert C.
Goddard, III
Robert C. Goddard, III |
|
Chairman of the Board and Director |
|
March 15, 2006 |
| |
/s/ David P. Stockert
David P. Stockert |
|
President, Chief Executive Officer and Director (Principal
Executive Officer) |
|
March 15, 2006 |
| |
/s/ Christopher J. Papa
Christopher J. Papa |
|
Executive Vice President and Chief Financial Officer (Principal
Financial Officer) |
|
March 15, 2006 |
| |
/s/ Arthur J. Quirk
Arthur J. Quirk |
|
Senior Vice President and Chief Accounting Officer (Principal
Accounting Officer) |
|
March 15, 2006 |
| |
/s/ Herschel M. Bloom
Herschel M. Bloom |
|
Director |
|
March 15, 2006 |
| |
/s/ Douglas
Crocker II
Douglas Crocker II |
|
Director |
|
March 15, 2006 |
| |
/s/ Walter M.
Deriso, Jr.
Walter M. Deriso, Jr. |
|
Director |
|
March 15, 2006 |
| |
/s/ Russell R. French
Russell R. French |
|
Director |
|
March 15, 2006 |
| |
/s/ Nicholas B.
Paumgarten
Nicholas B. Paumgarten |
|
Director |
|
March 15, 2006 |
| |
/s/ Charles E. Rice
Charles E. Rice |
|
Director |
|
March 15, 2006 |
| |
/s/ Stella F. Thayer
Stella F. Thayer |
|
Director |
|
March 15, 2006 |
| |
/s/ Ronald de Waal
Ronald de Waal |
|
Director |
|
March 15, 2006 |
Post Properties, Inc.
132
Post Apartment Homes, L.P.
Exhibit Index
| |
|
|
|
|
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
Description |
| |
|
|
|
|
| |
3 |
.1(a) |
|
|
|
— |
|
Articles of Incorporation of the Company |
| |
3 |
.2(b) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.3(b) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.4(b) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.5(c) |
|
|
|
— |
|
Articles of Amendment to the Articles of Incorporation of the
Company |
| |
3 |
.6(d) |
|
|
|
— |
|
Bylaws of the Company (as Amended and Restated as of
November 5, 2003) |
| |
3 |
.7(e) |
|
|
|
— |
|
Amendment No. 1 to the Amended and Restated By-Laws of the
Company |
| |
4 |
.1(f) |
|
|
|
— |
|
Indenture between the Company and SunTrust Bank, as Trustee |
| |
4 |
.2(f) |
|
|
|
— |
|
Form of First Supplemental Indenture to the Indenture between
the Company and SunTrust Bank, as Trustee |
| |
10 |
.1(b) |
|
|
|
— |
|
Second Amended and Restated Agreement of Limited Partnership of
the Operating Partnership |
| |
10 |
.2(b) |
|
|
|
— |
|
First Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.3(b) |
|
|
|
— |
|
Second Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.4(g) |
|
|
|
— |
|
Third Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.5(g) |
|
|
|
— |
|
Fourth Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.6(c) |
|
|
|
— |
|
Fifth Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.7(h) |
|
|
|
— |
|
Sixth Amendment to Second Amended and Restated Partnership
Agreement |
| |
10 |
.8(i)* |
|
|
|
— |
|
Employee Stock Plan |
| |
10 |
.9(b)* |
|
|
|
— |
|
Amendment to Employee Stock Plan |
| |
10 |
.10(b)* |
|
|
|
— |
|
Amendment No. 2 to Employee Stock Plan |
| |
10 |
.11(b)* |
|
|
|
— |
|
Amendment No. 3 to Employee Stock Plan |
| |
10 |
.12(b)* |
|
|
|
— |
|
Amendment No. 4 to Employee Stock Plan |
| |
10 |
.13(j)* |
|
|
|
— |
|
2003 Incentive Stock Plan |
| |
10 |
.14(b) |
|
|
|
— |
|
Form of Indemnification Agreement for officers and directors |
| |
10 |
.15(a)* |
|
|
|
— |
|
Profit Sharing Plan of the Company |
| |
10 |
.16(b)* |
|
|
|
— |
|
Amendment Number One to Profit Sharing Plan |
| |
10 |
.17(b)* |
|
|
|
— |
|
Amendment Number Two to Profit Sharing Plan |
| |
10 |
.18(b)* |
|
|
|
— |
|
Amendment Number Three to Profit Sharing Plan |
| |
10 |
.19(b)* |
|
|
|
— |
|
Amendment Number Four to Profit Sharing Plan |
| |
10 |
.20(a) |
|
|
|
— |
|
Form of General Partner 1% Exchange Agreement |
| |
10 |
.21(k)* |
|
|
|
— |
|
Dividend Reinvestment Stock Purchase Plan |
| |
10 |
.22(l) |
|
|
|
— |
|
Credit Agreement dated as of January 16, 2004 among Post
Apartment Homes, L.P., Wachovia Bank, N.A., and certain other
lenders |
| |
10 |
.23(m) |
|
|
|
— |
|
First Amendment to Credit Agreement |
| |
10 |
.24(n) |
|
|
|
— |
|
Letter Agreement, dated as of December 22, 2004, by and
among Post Apartment Homes, L.P., certain lenders under the
Credit Agreement and Wachovia Bank, N.A., as the Administrative
Agent |
| |
10 |
.25(n) |
|
|
|
— |
|
Letter Agreement, dated as of December 23, 2004, by and
among Post Apartment Homes, L.P. and Fannie Mae |
| |
10 |
.26(o)* |
|
|
|
— |
|
Deferred Compensation Plan for Directors and Eligible Employees
(as amended and restated effective as of January 1, 2005) |
| |
10 |
.27(p)* |
|
|
|
— |
|
Form of Change in Control Agreement (3.0X) and schedule of
executive officers who have entered into such agreement |
| |
10 |
.28(p)* |
|
|
|
— |
|
Form of Change in Control Agreement (2.0X) and schedule of
executive officers who have entered into such agreement |
| |
10 |
.29(q)* |
|
|
|
— |
|
Form of Change in Control Agreement (1.5X) and schedule of
executive officers who have entered into such agreement |
| |
10 |
.30(q)* |
|
|
|
— |
|
Form of Change in Control Agreement (1.0X) and schedule of
executive officers who have entered into such agreement |
| |
10 |
.31(q)* |
|
|
|
— |
|
Form of Amendment No. 1 to Change in Control Agreement and
schedule of executive officers who have entered into such
amendment |
Post Properties, Inc.
133
Post Apartment Homes, L.P.
| |
|
|
|
|
|
|
|
|
| Exhibit |
|
|
|
|
| No. |
|
|
|
Description |
| |
|
|
|
|
| |
10 |
.32(q)* |
|
|
|
— |
|
Version One Amendment No. 2 to Change in Control Agreement
and schedule of executive officers who have entered into such
amendment |
| |
10 |
.33(q)* |
|
|
|
— |
|
Version Two Amendment No. 2 to Change in Control Agreement
and schedule of executive officers who have entered into such
amendment |
| |
10 |
.34(q)* |
|
|
|
— |
|
Employment Agreement with David P. Stockert |
| |
10 |
.35(d)* |
|
|
|
— |
|
Amendment No. 1 to Employment Agreement with David P.
Stockert |
| |
10 |
.36(q)* |
|
|
|
— |
|
Employment Agreement with Thomas D. Senkbeil |
| |
10 |
.37(q)* |
|
|
|
— |
|
Amendment No. 1 to Employment Agreement with Thomas D.
Senkbeil |
| |
10 |
.38(d)* |
|
|
|
— |
|
Amendment No. 2 to Employment Agreement with Thomas D.
Senkbeil |
| |
10 |
.39(d)*+ |
|
|
|
— |
|
Restricted Stock Grant Certificate for Robert C.
Goddard, III, dated July 17, 2003 |
| |
10 |
.40(d)* |
|
|
|
— |
|
Non-Incentive Stock Option Certificate for Robert C.
Goddard, III, dated July 17, 2003 |
| |
10 |
.41(r)* |
|
|
|
— |
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Key Employees |
| |
10 |
.42(r)* |
|
|
|
— |
|
Form of 2003 Incentive Stock Plan, Non-Incentive Stock Option
and Stock Appreciation Right Certificate for Directors |
| |
10 |
.43(s)* |
|
|
|
— |
|
Employment and Change in Control Agreement, dated as of
October 17, 2005, by and among Thomas L. Wilkes, Post
Properties, Inc., Post Apartment Homes, L.P., and Post Services,
Inc. |
| |
10 |
.44(s)* |
|
|
|
— |
|
Employment and Change in Control Agreement, dated as of
October 17, 2005, by and among Sherry W. Cohen, Post
Properties, Inc., Post Apartment Homes, L.P., and Post Services,
Inc. |
| |
10 |
.45(s)* |
|
|
|
— |
|
Amended and Restated Employment and Change in Control Agreement,
dated as of October 17, 2005, by and among
Christopher J. Papa, Post Properties, Inc., Post Apartment
Homes, L.P., and Post Services, Inc. |
| |
10 |
.46* |
|
|
|
— |
|
Form of 2003 Incentive Stock Plan Restricted Stock Grant
Certificate for Key Employees |
| |
11 |
.1(t) |
|
|
|
— |
|
Statement Regarding Computation of Per Share Earnings |
| |
21 |
.1 |
|
|
|
— |
|
List of Subsidiaries |
| |
23 |
.1 |
|
|
|
— |
|
Consent of PricewaterhouseCoopers LLP for Registration
Statements on Form S-3 (No. 33-81772), Form S-3 (No.
333-47399), Form S-3 (No. 333-80427), Form S-3 (No.
333-44722), Form S-8 (No. 333-62243), Form S-8 (No.
33-00020), Form S-8 (No. 333-94121), Form S-8 (No.
333-38725), Form S-8 (No. 333-02374), Form S-8 (No.
333-107092), Form S-8 (No. 333-107093), Form S-8 (No.
333-125390) |
| |
23 |
.2 |
|
|
|
— |
|
Consent of PricewaterhouseCoopers LLP for Registration
Statements on Form S-3 (No. 333-36595), Form S-3 (No.
333-42884), Form S-3 (No. 333-55994), Form S-8 (No.
333-127580) |
| |
31 |
.1 |
|
|
|
— |
|
Certification of the Chief Executive Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended, and adopted under
Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
31 |
.2 |
|
|
|
— |
|
Certification of the Chief Financial Officer pursuant to
Rule 13a-14(a) or Rule 15d-14(a) of the Securities
Exchange Act of 1934, as amended, and adopted under
Section 302 of the Sarbanes-Oxley Act of 2002 |
| |
32 |
.1 |
|
|
|
— |
|
Certification of the Chief Executive Officer pursuant to
18 U.S.C. 1350, as adopted under Section 906 of the
Sarbanes-Oxley Act of 2002 |
| |
32 |
.2 |
|
|
|
— |
|
Certification of the Chief Financial Officer pursuant to
18 U.S.C. 1350, as adopted under Section 906 of the
Sarbanes-Oxley Act of 2002 |
|
|
|
|
* |
|
Identifies each management contract or compensatory plan
required to be filed. |
|
+ |
|
Also serves as the of restricted stock grant certificate for
directors under the 2003 Incentive Stock Plan. |
|
(a) |
|
Filed as an exhibit to the Registration Statement on
Form S-11 (SEC
File
No. 33-61936), as
amended, of the Company and incorporated herein by reference. |
|
(b) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 2002 and
incorporated herein by reference. |
|
(c) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q of the
Registrants for the quarter ended September 30, 1999 and
incorporated herein by reference. |
|
(d) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q of the
Registrants for the quarter ended September 30, 2003 and
incorporated herein by reference. |
|
(e) |
|
Filed as Appendix A to the 2004 proxy statement and
incorporated herein by reference. |
Post Properties, Inc.
134
Post Apartment Homes, L.P.
|
|
|
|
(f) |
|
Filed as an exhibit to the Registration Statement on
Form S-3 (SEC File
No. 333-42884), as
amended, of the Company and incorporated herein by reference. |
|
(g) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 1998 and
incorporated herein by reference. |
|
(h) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 2000 and
incorporated herein by reference. |
|
(i) |
|
Filed as an exhibit to the Registration Statement on
Form S-11 (SEC
File
No. 33-71650), as
amended, of the Company and incorporated herein by reference. |
|
(j) |
|
Filed as Appendix A to the 2003 proxy statement and
incorporated herein by reference. |
|
(k) |
|
Filed as part of the Registration Statement on
Form S-3 (File
No. 333-39461) of
the Company and incorporated herein by reference. |
|
(l) |
|
Filed as an exhibit to the Annual Report on
Form 10-K for the
Registrants for the year ended December 31, 2003 and
incorporated herein by reference. |
|
(m) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed December 22, 2004 and incorporated herein
by reference. |
|
(n) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed December 28, 2004 and incorporated herein
by reference. |
|
(o) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed August 15, 2005 and incorporated herein
by reference. |
|
(p) |
|
Filed as an exhibit to the Annual Report on
Form 10-K of the
Registrants for the year ended December 31, 2001 and
incorporated herein by reference. |
|
(q) |
|
Filed as an exhibit to the Quarterly Report on
Form 10-Q of the
Registrants for the quarter ended June 30, 2003 and
incorporated herein by reference. |
|
(r) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed January 24, 2006 and incorporated herein
by reference. |
|
(s) |
|
Filed as an exhibit to the Current Report on
Form 8-K of the
Registrants filed October 18, 2005 and incorporated herein
by reference. |
|
(t) |
|
The information required by this exhibit is included in
note 6 to the consolidated financial statement and
incorporated herein by reference. |
Post Properties, Inc.
135
Post Apartment Homes, L.P.