UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file numbers 1-12080 and 0-28226

POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.

(Exact name of registrant as specified in its charter)

Georgia Georgia		58-1550675 58-2053632
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327
(Address of principal executive offices — zip code)

(404) 846-5000
(Registrant’s telephone number, including area code)

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 registrant was required to file
such reports), and (2) have been subject to such filing requirements for the past 90 days.

Post Properties, Inc.		Yes     þ     No     o
Post Apartment Homes, L.P.		Yes     þ     No     o

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers,
non-accelerated filers or smaller reporting company.
See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Post Properties, Inc.		Large Accelerated Filer		þ		Accelerated Filer o
		Non-Accelerated Filer		o		(Do not check if a smaller reporting company) Smaller Reporting Company o
Post Apartment Homes, L.P.		Large Accelerated Filer		o		Accelerated Filer o
		Non-Accelerated Filer		þ		(Do not check if a smaller reporting company) Smaller Reporting Company o

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act).

Post Properties, Inc.		Yes     o     No     þ
Post Apartment Homes, L.P.		Yes     o     No     þ

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

44,125,782 shares of common stock outstanding as of August 1, 2008.

 

 

POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.

INDEX

		Page
Part I            FINANCIAL INFORMATION
Item 1 Financial Statements
POST PROPERTIES, INC.
Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007		1
Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007		2
Consolidated Statement of Shareholders’ Equity and Accumulated Earnings for the six months ended June 30, 2008		3
Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007		4
Notes to Consolidated Financial Statements		5
POST APARTMENT HOMES, L.P.
Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007		21
Consolidated Statements of Operations for the three and six months ended June 30, 2008 and 2007		22
Consolidated Statement of Partners’ Equity for the six months ended June 30, 2008		23
Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007		24
Notes to Consolidated Financial Statements		25
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
Item 3 Quantitative and Qualitative Disclosures about Market Risk		60
Item 4 Controls and Procedures		60
Item 4T Controls and Procedures		60
Part II OTHER INFORMATION
Item 1 Legal Proceedings		61
Item 1A Risk Factors		61
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		62
Item 3 Defaults Upon Senior Securities		62
Item 4 Submission of Matters to a Vote of Security Holders		62
Item 5 Other Information		62
Item 6 Exhibits		63
Signatures		64
Exhibit Index		66
EX-31.1 SECTION 302, CERTIFICATION OF THE CEO
EX-31.2 SECTION 302, CERTIFICATION OF THE CFO
EX-32.1 SECTION 906, CERTIFICATION OF THE CEO
EX-32.2 SECTION 906, CERTIFICATION OF THE CFO

POST PROPERTIES, INC.

		June 30,				December 31,
		2008				2007
		(Unaudited)
Assets
Real estate assets
Land		$	232,160			$	276,680
Building and improvements			1,649,338				1,840,563
Furniture, fixtures and equipment			190,407				204,433
Construction in progress			135,232				134,125
Land held for future development			123,167				154,617
			2,330,304				2,610,418
Less: accumulated depreciation			(499,981	)			(562,226	)
For-sale condominiums			26,314				38,844
Assets held for sale, net of accumulated depreciation of $93,844 and $4,031 at June 30, 2008 and December 31, 2007, respectively			258,610				24,576
Total real estate assets			2,115,247				2,111,612
Investments in and advances to unconsolidated real estate entities			22,815				23,036
Cash and cash equivalents			17,988				11,557
Restricted cash			9,956				5,642
Deferred charges, net			10,159				10,538
Other assets			37,141				105,756
Total assets		$	2,213,306			$	2,268,141
Liabilities and shareholders’ equity
Indebtedness, including $34,261 and $0 secured by assets held for sale as of June 30, 2008 and December 31, 2007, respectively		$	1,064,405			$	1,059,066
Accounts payable and accrued expenses			99,003				100,215
Dividend and distribution payable			19,982				19,933
Accrued interest payable			4,790				4,388
Security deposits and prepaid rents			15,892				11,708
Total liabilities			1,204,072				1,195,310
Minority interest of common unitholders in Operating Partnership			6,034				10,354
Minority interests in consolidated real estate entities			2,921				3,972
Total minority interests			8,955				14,326
Commitments and contingencies
Shareholders’ equity
Preferred stock, $.01 par value, 20,000 authorized:
8 1/2% Series A Cumulative Redeemable Shares, liquidation preference $50 per share, 900 shares issued and outstanding			9				9
7 5/8% 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:
44,119 and 43,825 shares issued, 44,111 and 43,825 shares outstanding at June 30, 2008 and December 31, 2007, respectively			441				438
Additional paid-in-capital			882,438				874,928
Accumulated earnings			124,101				189,985
Accumulated other comprehensive income (loss)			(3,385	)			(3,962	)
			1,003,624				1,061,418
Less common stock in treasury, at cost, 83 and 72 shares at June 30, 2008 and December 31, 2007, respectively			(3,345	)			(2,913	)
Total shareholders’ equity			1,000,279				1,058,505
Total liabilities and shareholders’ equity		$	2,213,306			$	2,268,141

The accompanying notes are an integral part of these consolidated financial statements.

POST PROPERTIES, INC.

(In thousands, except per share data)
(Unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Revenues
Rental		$	62,286			$	60,873			$	124,474			$	121,538
Other property revenues			4,084				3,651				7,381				7,050
Other			235				128				474				245
Total revenues			66,605				64,652				132,329				128,833
Expenses
Property operating and maintenance (exclusive of items shown separately below)			33,555				32,265				66,012				63,616
Depreciation			14,386				14,375				28,649				28,726
General and administrative			4,956				5,959				10,804				11,407
Investment, development and other			1,356				1,955				2,814				3,505
Strategic review costs			2,091				—				8,161				—
Impairment and severance costs			29,300				—				29,300				—
Total expenses			85,644				54,554				145,740				107,254
Operating income (loss)			(19,039	)			10,098				(13,411	)			21,579
Interest income			61				213				271				463
Interest expense			(10,112	)			(10,863	)			(20,268	)			(21,908	)
Amortization of deferred financing costs			(859	)			(829	)			(1,710	)			(1,641	)
Gains (losses) on sales of real estate assets, net			(368	)			62,738				1,751				66,444
Equity in income of unconsolidated real estate entities			420				310				821				814
Other income (expense)			66				(261	)			(108	)			(522	)
Minority interest in consolidated property partnerships			427				(716	)			61				(693	)
Minority interest of common unitholders			238				(852	)			284				(882	)
Income (loss) from continuing operations			(29,166	)			59,838				(32,309	)			63,654
Discontinued operations
Income from discontinued property operations, net of minority interest			4,103				4,099				7,642				7,864
Gains on sales of real estate assets, net of minority interest			—				—				2,290				16,890
Income from discontinued operations			4,103				4,099				9,932				24,754
Net income (loss)			(25,063	)			63,937				(22,377	)			88,408
Dividends to preferred shareholders			(1,910	)			(1,910	)			(3,819	)			(3,819	)
Net income (loss) available to common shareholders		$	(26,973	)		$	62,027			$	(26,196	)		$	84,589
Per common share data — Basic
Income (loss) from continuing operations (net of preferred dividends)		$	(0.71	)		$	1.33			$	(0.82	)		$	1.38
Income from discontinued operations			0.09				0.09				0.23				0.57
Net income (loss) available to common shareholders		$	(0.61	)		$	1.43			$	(0.60	)		$	1.95
Weighted average common shares outstanding — basic			44,011				43,463				43,939				43,416
Per common share data — Diluted
Income (loss) from continuing operations (net of preferred dividends)		$	(0.71	)		$	1.31			$	(0.82	)		$	1.35
Income from discontinued operations			0.09			$	0.09				0.23				0.56
Net income (loss) available to common shareholders		$	(0.61	)		$	1.40			$	(0.60	)		$	1.91
Weighted average common shares outstanding — diluted			44,011				44,278				43,939				44,192

The accompanying notes are an integral part of these consolidated financial statements.

POST PROPERTIES, INC.

(In thousands, except per share data)
(Unaudited)

																		Accumulated
										Additional								Other
		Preferred				Common				Paid-in				Accumulated				Comprehensive				Treasury
		Stock				Stock				Capital				Earnings				Income (Loss)				Stock				Total
Shareholders’ Equity and Accumulated Earnings, December 31, 2007		$	29			$	438			$	874,928			$	189,985			$	(3,962	)		$	(2,913	)		$	1,058,505
Comprehensive income (loss)
Net income (loss)			—				—				—				(22,377	)			—				—				(22,377	)
Net change in derivatives, net of minority interest			—				—				—				—				593				—				593
Total comprehensive income (loss)																											(21,784	)
Proceeds from employee stock purchase, stock option and other plans			—				1				1,816				—				—				(914	)			903
Adjustment for minority interest of unitholders in Operating Partnership upon conversion of units into common shares and at dates of capital transactions			—				2				3,397				—				(16	)			482				3,865
Stock-based compensation, net of minority interest			—				—				2,297				—				—				—				2,297
Dividends to preferred shareholders			—				—				—				(3,819	)			—				—				(3,819	)
Dividends to common shareholders ($0.90 per share)			—				—				—				(39,688	)			—				—				(39,688	)
Shareholders’ Equity and Accumulated Earnings, June 30, 2008		$	29			$	441			$	882,438			$	124,101			$	(3,385	)		$	(3,345	)		$	1,000,279

The accompanying notes are an integral part of these consolidated financial statements.

POST PROPERTIES, INC.

(In thousands, except per share data)
(Unaudited)

		Six months ended
		June 30,
		2008				2007
Cash Flows From Operating Activities
Net income (loss)		$	(22,377	)		$	88,408
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			32,272				34,103
Amortization of deferred financing costs			1,710				1,641
Minority interest of common unitholders in Operating Partnership			(284	)			882
Minority interest in discontinued operations			78				380
Minority interest in consolidated entities			173				831
Gains on sales of real estate assets			(4,062	)			(83,597	)
Other expense			563				562
Asset impairment charges			28,947				—
Equity in income of unconsolidated entities			(821	)			(814	)
Distributions of earnings of unconsolidated entities			1,429				1,238
Deferred compensation			278				277
Stock-based compensation			2,315				1,985
Changes in assets, (increase) decrease in:
Other assets			(3,860	)			(3,597	)
Deferred charges			(178	)			(15	)
Changes in liabilities, increase (decrease) in:
Accrued interest payable			402				(57	)
Accounts payable and accrued expenses			(1,667	)			2,153
Security deposits and prepaid rents			(130	)			517
Net cash provided by operating activities			34,788				44,897
Cash Flows From Investing Activities
Construction and acquisition of real estate assets, net of payables			(69,689	)			(55,254	)
Net proceeds from sales of real estate assets			104,906				150,988
Capitalized interest			(6,671	)			(5,795	)
Annually recurring capital expenditures			(5,640	)			(6,080	)
Periodically recurring capital expenditures			(3,331	)			(3,867	)
Community rehabilitation and other revenue generating capital expenditures			(7,951	)			(7,206	)
Corporate additions and improvements			(421	)			(1,608	)
Distributions from (investments in and advances to) unconsolidated entities			(262	)			22,506
Note receivable collections and other investments			1,529				230
Net cash provided by investing activities			12,470				93,914
Cash Flows From Financing Activities
Lines of credit proceeds (repayments), net			(113,004	)			(27,969	)
Proceeds from indebtedness			120,000				—
Payments on indebtedness			(2,542	)			(67,632	)
Payments of financing costs			(952	)			(246	)
Treasury stock acquisitions			—				(3,694	)
Proceeds from employee stock purchase and stock options plans			624				3,806
Capital contributions (distributions) of minority interests			(1,224	)			430
Distributions to common unitholders			(351	)			(608	)
Dividends paid to preferred shareholders			(3,819	)			(1,909	)
Dividends paid to common shareholders			(39,559	)			(39,189	)
Net cash used in financing activities			(40,827	)			(137,011	)
Net increase in cash and cash equivalents			6,431				1,800
Cash and cash equivalents, beginning of period			11,557				3,663
Cash and cash equivalents, end of period		$	17,988			$	5,463

The accompanying notes are an integral part of these consolidated financial statements.

POST PROPERTIES. INC.

(Unaudited, in thousands, except per share or unit and apartment unit data)

1.		ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
		Organization
		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 June 30, 2008, the Company owned 22,140 apartment units in 61 apartment communities, including 1,747 apartment units in five communities held in unconsolidated entities and 1,736 apartment units in five communities currently under construction and/or in lease-up. The Company is also developing and selling 514 for-sale condominium homes in four communities (including 137 units in one community held in an unconsolidated entity) and is converting apartment homes in two communities initially consisting of 349 units into for-sale condominium homes through a taxable REIT subsidiary. At June 30, 2008, approximately 41.6%, 20.0%, 12.0% and 10.0% (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 June 30, 2008, the Company had outstanding 44,111 shares of common stock and owned the same number of units of common limited partnership interests (“Common Units”) in the Operating Partnership, representing a 99.3% common ownership interest in the Operating Partnership. Common Units held by persons other than the Company totaled 293 at June 30, 2008 and represented a 0.7% 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 99.3% and 98.6% for the three months ended and 99.2% and 98.5% for the six months ended June 30, 2008 and 2007, respectively.
		Conclusion of Strategic Process
		On January 23, 2008, the Company announced that its Board of Directors had authorized management, working with financial and legal advisors, to initiate a formal process to pursue a possible business combination or other sale transaction and to seek proposals from potentially interested parties. The Board ended the process on June 25, 2008 due to the increasingly difficult market environment and a lack of definitive proposals. For the three and six months ended June 30, 2008, the Company incurred approximately $2,091 and $8,161, respectively, of strategic review costs related to this process.
		Basis of Presentation
		The accompanying unaudited financial statements have been prepared by the Company’s management in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normally recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2008 are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K, as amended, for the year ended December 31, 2007 (the “Form 10-K”).
		The accompanying consolidated financial statements include the consolidated accounts of the Company, the Operating Partnership and their wholly owned subsidiaries. The Company also consolidates other entities in which it has a controlling financial interest or entities where it is determined to be the primary beneficiary under Financial Accounting Standards Board Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities.” Under FIN 46R, variable interest entities (“VIEs”) are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. The primary beneficiary is required to consolidate a VIE for financial reporting purposes. The application of FIN 46R requires management to make significant estimates and judgments about the 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 deemed to be the primary beneficiary under FIN

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

		46R, the entities are accounted for using the equity method of accounting (under the provisions of Emerging Issues Task Force (“EITF”) No. 04-5). Accordingly, the Company’s share of the net earnings or losses of these entities is included in consolidated net income. All significant inter-company accounts and transactions have been eliminated in consolidation. The minority interest of unitholders in the operations of the Operating Partnership is calculated based on the weighted average unit ownership during the period.
		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 Statement of Financial Accounting Standards (“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 Impairment or 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 also recognizes revenues and the associated gains under the Completed Contract Method, as discussed herein. Since a portion of an operating community does not meet the requirements of a component of an entity under SFAS No. 144, the revenues and gains on sales of condominium units at partial condominium communities are included in continuing operations.
		For newly developed condominiums, the Company accounts for each project under either the Completed Contract Method or the “Percentage of Completion Method,” based on a specific evaluation of the factors specified in SFAS No. 66 and the guidance provided by EITF 06-8. The factors used to determine the appropriate accounting method are the legal commitment of the purchaser in the real estate contract, whether the construction of the project is beyond a preliminary phase, sufficient units have been contracted to ensure the project will not revert to a rental project, the aggregate project sale proceeds and costs can be reasonably estimated and the buyer has made an adequate initial and continuing cash investment under the contract in accordance with SFAS No. 66 and the guidance provided by EITF 06-8. Under the Percentage of Completion Method, revenues and the associated gains are recognized over the project construction period generally based on the percentage of total project costs incurred to estimated total project costs for each condominium unit under a binding real estate contract. As of June 30, 2008, all newly developed condominium projects are accounted for under the Completed Contract Method.
		Recently Issued and Adopted Accounting Pronouncements
		SFAS No. 157, “Fair Value Measurements,” was issued in September 2006. The Company adopted SFAS No. 157 on January 1, 2008. SFAS No. 157 provides a definition of fair value and establishes a framework for measuring fair value. SFAS No. 157 clarified the definition of fair value and defines it as the price that would be received to sell an asset or paid to transfer a liability in a transaction between willing market participants. Additional disclosures focusing on the methods used to determine fair value are also required using the following hierarchy:

	•		Level 1 – Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
	•		Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
	•		Level 3 – Unobservable inputs for the assets or liability.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

The Company applies SFAS No. 157 in relation to the valuation of its derivative instrument at fair value (see note 6) and the Company’s impairment valuation analysis related to real estate assets (see note 8). The following table presents the Company’s real estate assets and derivative liabilities reported at fair market value and the related level in the fair value hierarchy as defined by SFAS No. 157 used to measure those assets and liabilities at June 30, 2008:

		Fair value measurements as of June 30, 2008
Assets (Liabilities)		Total				Level 1				Level 2				Level 3
Real estate assets, land held for development and sale		$	44,773			$	—			$	—			$	44,773
Interest rate swap agreement			(2,189	)			—				(2,189	)			—

		SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – including an amendment of FASB Statement No. 115,” was issued in February 2007. SFAS No. 159 gives the Company the irrevocable option to carry most financial assets and liabilities at fair value, with changes in fair value recognized in earnings. The Company adopted SFAS No. 159 on January 1, 2008, and the adoption did not have a material impact on the Company’s financial position and results of operations. The Company did not elect to record any of its financial assets and liabilities at fair value in 2008 that were not recorded as such under existing accounting pronouncements.
		SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” was issued in December 2007. SFAS No. 160 requires all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 160 on the Company’s financial position and results of operations.
		SFAS No. 141R, “Business Combinations,” was issued in December 2007. SFAS No. 141R will replace SFAS No. 141 on the date it becomes effective. SFAS No. 141R will require 1) acquirers to recognize all of the assets acquired and liabilities assumed in a business combination, 2) that the acquisition date be used to determine fair value for all assets acquired and all liabilities assumed, and 3) enhanced disclosures for the acquirer surrounding the financial effects of the business combination. The provisions of SFAS 141R will lead to the expensing of acquisition related transaction costs and the potential recognition of acquisition related contingencies. SFAS No. 141R is effective for the Company on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 141R on the Company’s financial position and results of operations.
2.		REAL ESTATE ACTIVITY
		Dispositions
		The Company classifies real estate assets as held for sale after the approval of its board of directors and after the Company has commenced an active program to sell the assets. At June 30, 2008, the Company had eight apartment communities, containing 2,615 units, and certain parcels of land classified as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheet at $258,610, which represents the lower of their depreciated cost or fair value less costs to sell. At June 30, 2008, the Company also had portions of two communities being converted to condominiums and certain completed condominium units at newly developed condominium communities totaling $26,314 classified as for-sale condominiums on the accompanying consolidated balance sheet.
		For the three and six months ended June 30, 2008 and 2007, income from continuing operations included net gains from condominium sales activities at newly developed and condominium conversion projects representing portions of existing communities. In addition to the condominium gains included in continuing operations, the Company expensed certain sales and marketing costs associated with pre-sale condominium communities and condominium communities under development and such costs are included in condominium expenses in the table below. A summary of revenues and costs and expenses of condominium activities included in continuing operations for the three and six months ended June 30, 2008 and 2007 was as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Condominium revenues		$	10,051			$	25,222			$	18,348			$	31,091
Condominium costs and expenses			(10,419	)			(19,524	)			(16,597	)			(23,885	)
Gains (losses) on sales of condominiums, net		$	(368	)		$	5,698			$	1,751			$	7,206

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

		For the three and six months ended June 30, 2007, gains on sales of real estate assets in continuing operations also included a gain of $55,300 related to the Company’s transfer of two operating apartment communities to a newly formed unconsolidated entity in which the Company retained a 25% non-controlling interest for aggregate proceeds of approximately $89,351. The gain was calculated as the difference between the proceeds received from the independent third party for its 75% interest in the unconsolidated entity and the Company’s 75% proportionate share of the net book value of operating communities transferred to the unconsolidated entity. The unconsolidated entity obtained mortgage financing secured by the apartment communities totaling approximately $85,723, of which approximately $21,431 was distributed to the Company. Additionally, for the three and six months ended June 30, 2007, gains on sales of real estate assets in continuing operations included gains of $1,740 and $3,938, respectively, on the sales of land sites in Atlanta, Georgia and Dallas, Texas.
		Under SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” the operating results of real estate assets designated as held for sale are included in discontinued operations in the consolidated statement of operations for all periods presented. Additionally, all gains and losses on the sale of these assets are included in discontinued operations. For the six months ended June 30, 2008, income from discontinued operations included the results of operations of eight apartment communities classified as held for sale during the first and second quarters of 2008 and one apartment community through its sale date in January 2008. For the six months ended June 30, 2007, income from discontinued operations included the results of operations of the eight apartment communities classified as held for sale at June 30, 2008, the apartment community sold in 2008, a condominium conversion community through its sell out date in February 2007 and three apartment communities sold in 2007 through their respective sale dates.
		The revenues and expenses of these communities for the three and six months ended June 30, 2008 and 2007 were as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Revenues
Rental		$	11,196			$	13,013			$	22,502			$	26,272
Other property revenues			471				645				875				1,241
Total revenues			11,667				13,658				23,377				27,513
Expenses
Property operating and maintenance (exclusive of items shown separately below)			3,763				4,384				7,900				9,126
Depreciation			1,698				2,685				3,623				5,377
Interest			1,944				2,336				3,921				4,891
Minority interest in consolidated property partnerships			134				95				234				138
Total expenses			7,539				9,500				15,678				19,532
Income from discontinued property operations before minority interest			4,128				4,158				7,699				7,981
Minority interest			(25	)			(59	)			(57	)			(117	)
Income from discontinued property operations		$	4,103			$	4,099			$	7,642			$	7,864

For the six months ended June 30, 2008, the Company recognized net gains in discontinued operations of $2,311 ($2,290 net of minority interest) from the sale of one community, containing 143 units. This sale generated net proceeds of approximately $19,433. For the six months ended June 30, 2007, the Company recognized net gains in discontinued operations of $16,974 ($16,714 net of minority interest) from the sale of one community, containing 182 units. The sale generated net proceeds of $23,741.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

For the six months ended June 30, 2007, gains on sales of real estate assets included in discontinued operations also included net gains from condominium sales at one condominium conversion community that sold out in February 2007. A summary of revenues and costs and expenses of condominium activities included in discontinued operations was as follows:

		Six months ended
		June 30, 2007
Condominium revenues		$	560
Condominium costs and expenses			(381	)
Gains on condominium sales, before minority interest			179
Minority interest			(3	)
Gains on condominium sales, net of minority interest		$	176

3.		INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
		At June 30, 2008, the Company holds investments in four individual limited liability companies (the “Property LLCs”) with institutional investors. Three of the Property LLCs own apartment communities. The fourth Property LLC commenced construction in 2007 of a mixed-use development, consisting of for-sale condominiums and Class A office space. The Company holds a 35% equity interest in two Property LLCs, each owning one apartment community. The Company holds a 25% interest in one Property LLC owning three apartment communities, and a 50% interest in the condominium portion of the Property LLC developing the mixed-use project. In 2007, another Property LLC completed the sell-out of a condominium conversion community, initially consisting of 121 units.
		In 2007, the Company’s investment in the 25% owned Property LLC resulted from the transfer of three previously owned apartment communities to the Property LLC co-owned with an institutional investor. The assets, liabilities and members’ equity of this Property LLC were recorded at fair value based on agreed-upon amounts contributed to the Property LLC. At June 30, 2008, the Company’s investment in the 25% owned Property LLC reflects a credit investment of $13,885 resulting primarily from distributions of financing proceeds in excess of the Company’s historical cost investment. The credit investment is reflected in consolidated liabilities on the Company’s consolidated balance sheet.
		The Company accounts for its investments in these Property LLCs using the equity method of accounting. At June 30, 2008, the Company’s investment in these Property LLCs totaled $22,815, excluding the credit investment discussed above. The excess of the Company’s investment over its equity in the underlying net assets of certain Property LLCs was approximately $5,986 at June 30, 2008. The excess investment related to Property LLCs holding apartment communities is being amortized as a reduction to earnings on a straight-line basis over the lives of the related assets. The excess investment related to the Property LLC constructing condominiums will be recognized as additional costs as the condominiums are sold. The Company provides real estate services (development, construction and property management) to the Property LLCs for which it earns fees.
		The operating results of the Company include its allocable share of net income from the investments in the Property LLCs. A summary of financial information for the Property LLCs in the aggregate was as follows:

		June 30,				December 31,
Balance Sheet Data		2008				2007
Real estate assets, net of accumulated depreciation of $18,361 and $15,204, respectively		$	362,036			$	325,705
Cash and other			7,246				7,254
Total assets		$	369,282			$	332,959
Mortgage/construction notes payable		$	250,270			$	214,549
Other liabilities			9,993				5,541
Total liabilities			260,263				220,090
Members’ equity			109,019				112,869
Total liabilities and members’ equity		$	369,282			$	332,959
Company’s equity investment in Property LLCs		$	8,930			$	9,348

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

		Three months ended								Six months ended
		June 30,								June 30,
Income Statement Data		2008				2007				2008				2007
Revenues
Rental		$	6,794			$	4,142			$	13,487			$	6,955
Other property revenues			482				307				883				479
Other			13				19				36				37
Total revenues			7,289				4,468				14,406				7,471
Expenses
Property operating and maintenance			2,882				1,520				5,635				2,532
Depreciation and amortization			2,104				1,281				4,236				1,942
Interest			2,500				1,331				4,999				2,019
Total expenses			7,486				4,132				14,870				6,493
Income (loss) from continuing operations			(197	)			336				(464	)			978
Discontinued operations
Income (loss) from discontinued operations			—				10				(2	)			31
Gains (losses) on sales of real estate assets, net			—				(83	)			—				775
Income from discontinued operations			—				(73	)			(2	)			806
Net income (loss)		$	(197	)		$	263			$	(466	)		$	1,784
Company’s share of net income		$	420			$	310			$	821			$	814

		For the three and six months ended June 30, 2007, gains (losses) on real estate assets represent net gains (losses) from condominium sales at the condominium conversion community held by a Property LLC that completed its sell out in 2007.
		At June 30, 2008, mortgage/construction notes payable include a $49,996 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 prepayable without penalty in May 2008. Another mortgage note payable totaling $17,000 bears interest at a fixed rate of 4.04% requires interest only payments and matures in 2008. Subsequent to June 30, 2008, this mortgage note was refinanced by the Property LLC. The new mortgage note payable totaling $29,272 bears interest at 5.83%, requires monthly interest only payments and matures in 2013. The note is prepayable without penalty in August 2011.
		Three additional mortgage notes were entered into in conjunction with the formation of the 25% owned Property LLC in 2007. Two notes total $85,723, bear interest at 5.63%, require interest only payments and mature in 2017. The third mortgage note totals $41,000, bears interest at 5.71%, requires interest only payments, and matures in 2017.
		In 2007, the Property LLC constructing the mixed-use development entered into a construction loan facility with an aggregate capacity of $187,128. At June 30, 2008, the construction loan had an outstanding balance of $56,550, bears interest at LIBOR plus 1.35% and matures in 2011. Under the terms of the construction loan facility, the Company and its 50% equity partner have jointly and severally guaranteed approximately $25,313 of the construction loan attributable to the condominium portion of the project. Additionally, the Company and its 50% equity partner have jointly and severally guaranteed certain debt service payments of the condominium portion of the loan not to exceed approximately $6,153, and all of the equity owners of the project, including the Company, have guaranteed the completion of the first building at the project.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

4.		INDEBTEDNESS
		At June 30, 2008 and December 31, 2007, the Company’s indebtedness consisted of the following:

		Payment				Maturity		June 30,				December 31,
Description		Terms		Interest Rate		Date		2008				2007
Senior Unsecured Notes		Int.		5.13% - 7.70%		2010-2013		$	535,000			$	535,000
Unsecured Lines of Credit
Syndicated Line of Credit		N/A		LIBOR + 0.575%(1)		2010			120,000				245,000
Cash Management Line		N/A		LIBOR + 0.575%		2010			24,271				12,275
									144,271				257,275
Fixed Rate Secured Notes
FNMA		Prin. and Int.		6.15%(2)		2029			94,000				94,000
Other		Prin. and Int.		4.27% - 6.50%		2009-2015			291,134				172,791
									385,134				266,791
Total								$	1,064,405			$	1,059,066

		Debt maturities
		The aggregate maturities of the Company’s indebtedness are as follows:

Remainder of 2008		$	3,572
2009			76,618
2010			332,899	(1)
2011			141,431
2012			103,296
Thereafter			406,589
		$	1,064,405

		Debt issuances
		In January 2008, the Company closed a $120,000 secured, fixed rate mortgage note payable. The note bears interest at 4.88%, requires interest only payments and matures in 2015. The note contains an automatic one year extension under which the interest rate converts to a variable rate, as defined.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

		Unsecured Lines of Credit
		At June 30, 2008, the Company utilizes a $600,000 syndicated unsecured revolving line of credit (the “Syndicated Line”) that matures in April 2010 for its short-term financing needs. The Syndicated Line currently has a stated interest rate of LIBOR plus 0.575% or the prime rate and was provided by a syndicate of 17 banks led by Wachovia Bank, N.A. and JP Morgan Securities, Inc. Additionally, the Syndicated Line requires the payment of annual facility fees currently equal to 0.15% of the aggregate loan commitment. The Syndicated Line provides for the interest rate and facility fee rate to be adjusted up or down based on changes in the credit ratings on the Company’s senior unsecured debt. The rates under the Syndicated Line are based on the higher of the Company’s unsecured debt ratings in instances where the Company has split unsecured debt ratings. The Syndicated Line also includes a competitive bid option for short-term funds up to 50% of the loan commitment at rates generally below the stated line rate. The credit agreement for the Syndicated Line contains customary restrictions, representations, covenants and events of default, including fixed charge coverage and maximum leverage ratios. The Syndicated Line also restricts the amount of capital the Company can invest in specific categories of assets, such as improved land, properties under construction, condominium properties, non-multifamily properties, debt or equity securities, notes receivable and unconsolidated affiliates. At June 30, 2008, the Company had issued letters of credit to third parties totaling $2,100 under this facility.
		Additionally, at June 30, 2008, the Company had a $30,000 unsecured line of credit with Wachovia Bank, N.A. (the “Cash Management Line”). The Cash Management Line matures in April 2010 and carries pricing and terms, including debt covenants, substantially consistent with the Syndicated Line.
5.		SHAREHOLDERS’ EQUITY
		Computation of Earnings (Loss) Per Common Share
		For the three and six months ended June 30, 2008 and 2007, a reconciliation of the numerator and denominator used in the computation of basic and diluted income (loss) from continuing operations per common share is as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Income (loss) from continuing operations available to common shareholders (numerator):
Income (loss) from continuing operations		$	(29,166	)		$	59,838			$	(32,309	)		$	63,654
Less: Preferred stock dividends			(1,910	)			(1,910	)			(3,819	)			(3,819	)
Income (loss) from continuing operations available to common shareholders		$	(31,076	)		$	57,928			$	(36,128	)		$	59,835
Common shares (denominator):
Weighted average shares outstanding — basic			44,011				43,463				43,939				43,416
Dilutive shares from stock options and awards (1)			—				815				—				776
Weighted average shares outstanding — diluted (1)			44,011				44,278				43,939				44,192

For the three and six months ended June 30, 2008 and 2007, stock options to purchase 2,414 and 213 shares of common stock, respectively, and 2,414 and 183, respectively, were excluded from the computation of diluted earnings (loss) per common share as these stock options and awards were antidilutive.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

6.		DERIVATIVE FINANCIAL INSTRUMENTS
		The Company adopted the provisions of SFAS No. 157 on January 1, 2008. To comply with the provisions of SFAS No. 157, the Company’s fair value measurement of its derivative instrument at June 30, 2008 uses Level 2 observable inputs that incorporate credit valuation adjustments to appropriately reflect both its risk of nonperformance and the counterparty’s risk of nonperformance.
		At June 30, 2008, the Company had an outstanding interest rate swap agreement with a notional value of approximately $93,890 with a maturity date in 2009. The swap arrangement is a variable to fixed rate swap at a fixed rate of 5.21% and the swap was designated as a cash flow hedge of the Company’s FNMA variable rate debt. The interest rate swap agreement is included on the accompanying consolidated balance sheet at fair value. At June 30, 2008, the fair value of the interest rate swap agreement represented a liability of $2,189, and the liability was included in consolidated liabilities in the accompanying consolidated balance sheet. The increase in the value of this cash flow hedge of $1,499 and $35 for the three and six months ended June 30, 2008, respectively, was recorded as a change in accumulated other comprehensive income (loss), a shareholders’ equity account, in the accompanying consolidated balance sheet.
		In prior years, a previous interest rate swap arrangement, accounted for as a cash flow hedge, became ineffective under generally accepted accounting principles (SFAS No. 133, as amended). Under SFAS No. 133, as amended, the Company is required to amortize into interest expense the cumulative unrecognized loss on the terminated interest rate swap arrangement of $4,021, included in shareholders’ equity, over the remaining life of the swap through 2009. Total amortization expense related to this swap was $281 for the three months ended and $562 for the six months ended June 30, 2008 and 2007.
		On February 1, 2008, a $28,495 interest rate cap arrangement expired on its maturity date with no change in value from December 31, 2007.
		A summary of comprehensive income (loss) for the three and six months ended June 30, 2008 and 2007 is as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Net income (loss)		$	(25,063	)		$	63,937			$	(22,377	)		$	88,408
Change in derivatives, net of minority interest (1)			1,765				1,044				593				1,111
Comprehensive income (loss)		$	(23,298	)		$	64,981			$	(21,784	)		$	89,519

7.		SEGMENT INFORMATION
		Segment Description
		In accordance with SFAS No. 131, “Disclosure About the Segments of an Enterprise and Related Information,” the Company presents segment information based on the way that management organizes the segments within the enterprise for making operating decisions and assessing performance. The segment information is prepared on 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 apartment community rental operations. Apartment community rental operations are generally broken down into four segments based on the various stages in the apartment community ownership lifecycle. These segments are described below. All commercial properties and other ancillary service and support operations are combined in the line item “other” in the accompanying segment information. The segment information presented below reflects the segment categories based on the lifecycle status of each community as of January 1, 2007. The segment information for the three and six months ended June 30, 2007 has been adjusted due to the restatement impact of reclassifying the operating results of the assets designated as held for sale or sold subsequent to June 30, 2007 to discontinued operations under SFAS No. 144 (see note 2).

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

	•		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 2007 – communities which reached stabilized occupancy in the prior year.
	•		Development, rehabilitation and lease-up communities – those apartment communities under development, rehabilitation and lease-up during the period.
	•		Condominium conversion and other communities – those portions of existing apartment communities being converted into condominiums and other communities converted to joint venture ownership that are reflected in continuing operations.
	•		Acquired communities – those communities acquired in the current or prior year.

		Segment Performance Measure
		Management uses contribution to consolidated property net operating income (“NOI”) as the performance measure for its operating segments. The Company uses net operating income, including net operating income of stabilized communities, as an operating measure. Net operating income is defined as rental and other property revenue from real estate operations less total property and maintenance expenses from real estate operations (excluding depreciation and amortization). The 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 generally incurred at the corporate level. This measure is particularly useful, in the opinion of the Company, in evaluating the performance of operating segment groupings and individual properties. Additionally, the Company believes that net operating income, as defined, is a widely accepted measure of comparative operating performance in the real estate investment community. The Company believes that the line on the Company’s consolidated statement of operations entitled “net income” is the most directly comparable GAAP measure to net operating income.
		Segment Information
		The following table reflects each segment’s contribution to consolidated revenues and NOI together with a reconciliation of segment contribution to property NOI to consolidated net income (loss) for the three and six months ended June 30, 2008 and 2007. Additionally, substantially all of the Company’s assets relate to the Company’s property rental operations. Asset cost, depreciation and amortization by segment are not presented because such information at the segment level is not reported internally.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

		Three months ended								Six months ended
		June 30,								June 30,
		2008				2007				2008				2007
Revenues
Fully stabilized communities		$	51,585			$	50,286			$	102,518			$	99,789
Communities stabilized during 2007			2,665				1,711				5,218				2,833
Development, rehabilitation and lease-up communities			4,543				3,974				8,838				7,799
Condominium conversion and other communities			188				2,760				389				6,784
Acquired communities			1,321				—				2,677				—
Other property segments			6,068				5,793				12,215				11,383
Other			235				128				474				245
Consolidated revenues		$	66,605			$	64,652			$	132,329			$	128,833
Contribution to Property Net Operating Income
Fully stabilized communities		$	30,190			$	30,223			$	60,914			$	60,257
Communities stabilized during 2007			1,621				618				3,051				795
Development, rehabilitation and lease-up communities			1,733				1,911				3,525				3,911
Condominium conversion and other communities			116				1,505				237				3,855
Acquired communities			720				—				1,385				—
Other property segments, including corporate management expenses			(1,565	)			(1,998	)			(3,269	)			(3,846	)
Consolidated property net operating income			32,815				32,259				65,843				64,972
Interest income			61				213				271				463
Other revenues			235				128				474				245
Minority interest in consolidated property partnerships			427				(716	)			61				(693	)
Depreciation			(14,386	)			(14,375	)			(28,649	)			(28,726	)
Interest expense			(10,112	)			(10,863	)			(20,268	)			(21,908	)
Amortization of deferred financing costs			(859	)			(829	)			(1,710	)			(1,641	)
General and administrative			(4,956	)			(5,959	)			(10,804	)			(11,407	)
Investment and development			(1,356	)			(1,955	)			(2,814	)			(3,505	)
Strategic review costs			(2,091	)			—				(8,161	)			—
Impairment and severance charges			(29,300	)			—				(29,300	)			—
Gains (losses) on sales of real estate assets, net			(368	)			62,738				1,751				66,444
Equity in income of unconsolidated real estate entities			420				310				821				814
Other income (expense)			66				(261	)			(108	)			(522	)
Minority interest of common unitholders			238				(852	)			284				(882	)
Income (loss) from continuing operations			(29,166	)			59,838				(32,309	)			63,654
Income from discontinued operations			4,103				4,099				9,932				24,754
Net income (loss)		$	(25,063	)		$	63,937			$	(22,377	)		$	88,408

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

8.		IMPAIRMENT AND SEVERANCE COSTS
		After an evaluation of its development pipeline in light of difficult current market conditions, the Company recorded impairment charges of approximately $28,947 in the second quarter of 2008. The impairment charges relate to the substantial cessation of current development activities associated with four land parcels in pre-development which were written down to their estimated fair market values, as well as the write-off of capitalized pursuit costs associated with certain abandoned projects. Fair market value for the assets recorded at fair value in the second quarter of 2008 was determined using Level 3 unobservable inputs, such as estimated cash flows, market capitalization rates and market internal rates of return.
		Additionally, in the second quarter of 2008, the Company recorded severance charges of approximately $353 related to a management and staff workforce reduction that was initiated in the second quarter. The impairment and severance charges reflected management’s decision to reduce the size of its workforce and lower overhead expenses in response in part to its decision to reduce the number of markets in which the Company operates, to sell additional operating assets and to focus its development strategy on fewer projects in the near term. The Company expects to record additional severance charges in the third quarter of 2008 of approximately $1,600 relating to additional headcount reductions in July 2008. The Company may also record additional severance charges in the second half of 2008 or in future periods, depending on market conditions and the Company’s business plans.
		In prior years, the Company recorded severance charges associated with the departure of certain executive officers of the Company. Under certain of these arrangements, the Company is required to make certain payments and provide specified benefits through 2013 and 2016. The following table summarizes the activity relating to aggregate net severance charges for the six months ended June 30, 2008 and 2007:

		Six months ended
		June 30,
		2008				2007
Accrued severance charges, beginning of period		$	11,215			$	12,832
Severance charges			353				283
Payments for period			(1,633	)			(1,518	)
Interest accretion			366				370
Accrued severance charges, end of period		$	10,301			$	11,967

9.		SUPPLEMENTAL CASH FLOW INFORMATION
		Interest paid (including capitalized amounts of $6,671 and $5,795 for the six months ended June 30, 2008 and 2007, respectively), aggregated $30,458 and $32,651 for the six months ended June 30, 2008 and 2007, respectively.
		For the six months ended June 30, 2008 and 2007, the Company and the Company’s taxable REIT subsidiaries made income tax payments to federal and state taxing authorities totaling $1,700 and $1,062, respectively.
		Non-cash investing and financing activities for the six months ended June 30, 2008 and 2007 were as follows:
		For the six months ended June 30, 2008 and 2007, the Company amortized approximately $562 ($558 net of minority interest) and $562 ($554 net of minority interest), respectively, of accumulated other comprehensive non-cash losses into earnings related to an interest rate swap derivative financial instrument (see note 6). Other than the amortization discussed herein, for the six months ended June 30, 2008, the Company’s derivative financial instruments, accounted for as cash flow hedges, increased in value causing a decrease in accounts payable and accrued expenses and a corresponding decrease in shareholder’s equity of $35, net of minority interest. For the six months ended June 30, 2007, the Company’s derivative financial instruments accounted for as cash flow hedges decreased in value causing an increase in accounts payable and accrued expenses and a corresponding decrease in shareholder’s equity of $558, net of minority interest.
		For the six months ended June 30, 2008 and 2007, Common Units in the Operating Partnership totaling 177 and 73, 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 $3,865 and $1,991 for the six months ended June 30, 2008 and 2007, respectively.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit and apartment unit data)

		The Operating Partnership committed to distribute $19,982 and $21,831 for the three months ended June 30, 2008 and 2007, respectively. As a result, the Company declared dividends of $19,850 and $19,647 for the three months ended June 30, 2008 and 2007, respectively. The remaining distributions from the Operating Partnership in the amount of $132 and $274 for the three months ended June 30, 2008 and 2007, respectively, are distributed to minority interest unitholders in the Operating Partnership.
		For the six months ended June 30, 2008 and 2007, the Company issued common shares for director compensation, totaling $278 and $277, respectively. These stock issuances were non-cash transactions.
10.		STOCK-BASED COMPENSATION PLANS
		Incentive Stock Plans
		Incentive stock awards are granted under the Company’s 2003 Incentive Stock Plan (the “2003 Stock Plan”). Under the 2003 Stock Plan, an aggregate of 4,000 shares of common stock were reserved for issuance. Of this amount, not more than 500 shares of common stock are available for grants of restricted stock. The exercise price of each option granted under the 2003 Stock Plan may not be less than the market price of the 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 compensation committee overseeing the 2003 Stock Plan. At June 30, 2008, stock options outstanding under the 2003 Stock Plan and the Company’s previous stock plan totaled 2,414.
		Compensation costs for stock options have been estimated on the grant date using the Black-Scholes option-pricing method. The Company did not grant any stock options for the six months ended June 30, 2008. For options granted during the six months ended June 30, 2007, the weighted average assumptions used in the Black-Scholes option-pricing model were dividend yield of 3.8%, expected volatility of 18.1%, risk-free interest rate of 4.8% and expected option term of 5.0 years.
		The Company’s assumptions were derived from the methodologies discussed herein. The expected dividend yield reflects the Company’s current historical yield, which is expected to approximate the future yield. Expected volatility was based on the historical volatility of the Company’s common stock. The risk-free interest rate for the expected life of the options was based on the implied yields on the U.S. Treasury yield curve. The weighted average expected option term was based on the Company’s historical data for prior period stock option exercise and forfeiture activity.
		For the six months ended June 30, 2008 and 2007, the Company granted stock options to purchase zero and 199 shares of Company common stock, respectively, to Company officers and directors, of which zero and 28 shares, respectively, were granted to the Company’s non-executive chairman of the board. The Company recorded compensation expense related to stock options of $309 ($307 net of minority interest) and $379 ($374 net of minority interest) for the three months ended and $666 ($661 net of minority interest) and $758 ($747 net of minority interest) for the six months ended June 30, 2008 and 2007, respectively, under the fair value method. Upon the exercise of stock options, the Company issues shares of common stock from treasury shares or, to the extent treasury shares are not available, from authorized common shares.
		A summary of stock option activity under all plans for the six months ended June 30, 2008 and 2007 is presented below:

		Six months ended
		June 30,
		2008								2007
						Weighted Average								Weighted Average
		Shares				Exercise Price				Shares				Exercise Price
Options outstanding, beginning of period			2,455			$	34				2,375			$	33
Granted			—				—				199				48
Exercised			(39	)			37				(94	)			36
Forfeited			(2	)			39				(7	)			41
Options outstanding, end of period			2,414				34				2,473				34
Options exercisable, end of period			2,037				33				1,648				33
Weighted-average fair value of options granted during the period		$	—							$	7.22

At June 30, 2008, there was $1,007 of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 0.7 years. The total intrinsic value of stock options exercised during the six months ended June 30, 2008 and 2007 was $194 and $1,148, respectively. The aggregate intrinsic values of stock options outstanding, exercisable and expected to vest at June 30, 2008 were $2,851, $2,376 and $2,805, respectively. The weighted