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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSMISSION PERIOD FROM TO
---------- ----------
COMMISSION FILE NUMBER 1-12080
COMMISSION FILE NUMBER 0-28226
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
(Exact name of registrants as specified in their charters)
GEORGIA 58-1550675
GEORGIA 58-2053632
(State or other jurisdiction (I.R.S. Employer
of incorporation or 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)
----------------------------
Securities registered pursuant to section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
---------------------------- ------------------------
Common Stock, $.01 par value New York Stock Exchange
8 1/2% Series A Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
7 5/8% Series B Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
7 5/8% Series C Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
---------------------------- ------------------------
Units of Limited Partnership None
----------------------------
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days.
Post Properties, Inc.: YES [x] NO [ ]
Post Apartment Homes, L.P.: YES [x] NO [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the shares of common stock held by
non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on March 13, 2001 was approximately $1,437,365,412. As of March 13,
2001, there were 38,763,900 shares of common stock, $.01 par value, outstanding.
----------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement in connection with its Annual
Meeting of Shareholders to be held May 22, 2001 are incorporated by reference in
Part III.
================================================================================
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
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TABLE OF CONTENTS
ITEM FINANCIAL INFORMATION PAGE
NO. NO.
- ---- ----
PART I
1. Business............................................................................. 1
2. Properties........................................................................... 7
3. Legal Proceedings.................................................................... 10
4. Submission of Matters to a Vote of Security Holders.................................. 10
X. Executive Officers of the Registrant................................................. 10
PART II
5. Market Price of the Registrant's Common Stock and Related Stockholder Matters........ 12
6. Selected Financial Data.............................................................. 13
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 17
7A. Quantitative and Qualitative Disclosures about Market Risk........................... 36
8. Financial Statements and Supplementary Data.......................................... 38
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................................... 38
PART III
10. Directors and Executive Officers of the Registrant................................... 39
11. Executive Compensation............................................................... 39
12. Security Ownership of Certain Beneficial Owners and Management....................... 39
13. Certain Relationships and Related Transactions....................................... 39
PART IV
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.................... 40
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PART I
ITEM 1. BUSINESS
THE COMPANY
Post Properties, Inc. (the "Company") is one of the largest developers and
operators of upscale multifamily apartment communities in the Southeastern and
Southwestern United States. The Company currently owns 87 stabilized communities
(the "Communities") containing 30,522 apartment units located primarily in
metropolitan Atlanta, Georgia; Dallas, Texas and Tampa and Orlando, Florida. In
addition, the Company currently has under construction or in initial lease-up 12
new communities and additions to three existing communities in the Atlanta,
Georgia; Dallas, Houston and Austin, Texas; Tampa, Florida; Denver, Colorado;
Charlotte, North Carolina; Phoenix, Arizona; Pasadena, California and Washington
D. C. metropolitan areas that will contain an aggregate of 4,661 apartment units
upon completion. For the year ended December 31, 2000, the average economic
occupancy rate (defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent) of the 75 Communities
stabilized for the entire year was 96.7%. The average monthly rental rate per
apartment unit at these Communities for December 2000 was $933. The Company also
manages through affiliates 15,651 additional apartment units owned by third
parties. The Company is a fully integrated organization with multifamily
development, acquisition, operation and asset management expertise. The Company
has approximately 2,036 employees, none of whom is a party to a collective
bargaining agreement.
Since its founding in 1971, the Company has pursued three distinctive core
business strategies that have remained substantially unchanged:
Investment Building
Investment building means taking a long-term view of the assets the Company
creates. The Company develops communities with the intention of operating them
for periods that are relatively long by the standards of the apartment industry.
Key elements of the Company's investment building strategy include instilling a
disciplined team approach to development decisions, selecting sites in urban
infill locations in strong primary markets, consistently constructing new
apartment communities with a uniformly high quality, and conducting ongoing
property improvements.
Promotion of the Post(R) Brand Name
The Post(R) brand name strategy has been integral to the success of the Company
and, to the knowledge of the Company, has not been successfully duplicated
within the multifamily real estate industry in any major U.S. market. For such a
strategy to work, a company must develop and implement systems to achieve
uniformly high quality and value throughout its operations. As a result of the
Company's efforts in developing and maintaining its communities, the Company
believes that the Post(R) brand name is synonymous with quality upscale
apartment communities that are situated in desirable locations and provide
superior resident service. Key elements in implementing the Company's brand name
strategy include extensively utilizing the trademarked brand name, adhering to
quality in all aspects of the Company's operations, developing and implementing
leading edge training programs, and coordinating the Company's advertising
programs to increase brand name recognition.
Service Orientation
The Company's mission statement is: "To provide the superior apartment living
experience for our residents." By striving to provide a superior product and
superior service, the Company believes that it will be able to achieve its
long-term goals. The Company believes that it provides its residents with
superior product and superior service through its uniformly high quality
construction, selective urban infill locations, award winning landscaping and
numerous amenities, including on site business centers, on site courtesy
officers, urban vegetable gardens and state of the art fitness centers.
The Company believes that with the implementation of these strategies,
multifamily properties in its primary markets have the potential over the long
term to provide investment returns that exceed national averages. According to
recent market surveys, employment growth, population growth and household
formation growth in the Company's primary markets have exceeded, and are
forecasted to continue to exceed, national averages.
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The Company is a self-administered and self-managed equity real estate
investment trust (a "REIT"). In 1993, the Company completed an initial public
offering of its Common Stock (the "Initial Offering") and a business combination
involving entities under varying common ownership. Proceeds from the Initial
Offering were used by the Company, in part, to acquire a controlling interest in
Post Apartment Homes, L.P. (the "Operating Partnership"), the Company's
principal operating subsidiary, which was formed to succeed to substantially all
of the ownership interest in a portfolio of 40 Post(R) multifamily apartment
communities, all of which were developed by the Company and owned by affiliates
of the Company, and to the development, leasing, landscaping and management
business of the Company and certain other affiliates.
The Company, through wholly owned subsidiaries, is the sole general partner of,
and controls a majority of the limited partnership interests in, the Operating
Partnership. The Company conducts all of its business through the Operating
Partnership and its subsidiaries.
The Company's and the Operating Partnership's executive 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(R) apartment portfolio described herein.
THE OPERATING PARTNERSHIP
The Operating Partnership, through the operating divisions and subsidiaries
described below, is the entity through which all of the Company's operations are
conducted. At December 31, 2000, the Company, through wholly owned subsidiaries,
controlled the Operating Partnership as the sole general partner and as the
holder of 88.2% of the common units in the Operating Partnership ("Units") and
64.1% of the preferred Units (the "Perpetual Preferred Units"). The other
limited partners of the Operating Partnership, who hold units, are those persons
(including certain officers and directors of the Company) who, at the time of
the Initial Offering, elected to hold all or a portion of their interest in the
form of Units rather than receiving shares of Common Stock. Each Unit may be
redeemed by the holder thereof for either one share of Common Stock or cash
equal to the fair market value thereof at the time of such redemption, at the
option of the Operating Partnership. The Operating Partnership presently
anticipates that it will cause shares of Common Stock to be issued in connection
with each such redemption rather than paying cash (as has been done in all
redemptions to date). With each redemption of outstanding Units for Common
Stock, the Company's percentage ownership interest in the Operating Partnership
will increase. In addition, whenever the Company issues shares of stock, the
Company will contribute any net proceeds therefrom to the Operating Partnership
and the Operating Partnership will issue an equivalent number of Units or
Perpetual Preferred Units, as appropriate, to the Company.
As the sole shareholder of the Operating Partnership's sole general partner, the
Company has the exclusive power under the agreement of limited partnership of
the Operating Partnership to manage and conduct the business of the Operating
Partnership, subject to the consent of the holders of the Units in connection
with the sale of all or substantially all of the assets of the Operating
Partnership or in connection with a dissolution of the Operating Partnership.
The board of directors of the Company manages the affairs of the Operating
Partnership by directing the affairs of the Company. The Operating Partnership
cannot be terminated, except in connection with a sale of all or substantially
all of the assets of the Company, for a period of 50 years without a vote of
limited partners of the Operating Partnership. The Company's indirect limited
and general partner interests in the Operating Partnership entitle it to share
in cash distributions from, and in the profits and losses of, the Operating
Partnership in proportion to the Company's percentage interest therein and
indirectly entitle the Company to vote on all matters requiring a vote of the
limited partners.
As part of the formation of the Operating Partnership, a new holding company,
Post Services, Inc. ("Post Services") was organized as a separate corporate
subsidiary of the Operating Partnership. Post Services, in turn, owns all the
outstanding stock of its principal two operating subsidiaries, RAM Partners,
Inc. ("RAM") and Post Landscape Services, Inc. ("Post Landscape"). Certain
officers and directors of the Company received 99%, collectively, of the voting
common stock of Post Services, and the Operating Partnership
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received 1% of the voting common stock and 100% of the nonvoting common stock of
Post Services. The voting and nonvoting common stock of Post Services held by
the Operating Partnership represents 99% of the equity interests therein. The
voting common stock held by officers and directors in Post Services is subject
to an agreement that is designed to ensure that the stock will be held by one or
more officers of Post Services. The by-laws of Post Services provide that a
majority of the board of directors of Post Services must be persons who are not
employees, members of management or affiliates of the Company or its
subsidiaries. This by-law provision cannot be amended without the vote of 100%
of the outstanding voting common stock of Post Services. Post Services currently
has the same board of directors as the Company.
For taxable years ending on or before December 31, 2000, the Operating
Partnership could not own more than 10% of the voting stock of Post Services
without causing the Company to fail to qualify as a REIT for federal income tax
purposes. This restriction no longer applies to the voting stock of a "taxable
REIT subsidiary" as defined in the Internal Revenue Code. The Company and Post
Services have filed a joint election to have Post Services treated as a taxable
REIT subsidiary of the Company. This will enable the Operating Partnership to
acquire all of the voting stock of Post Services without jeopardizing the
company's status as a REIT. Management believes the Operating Partnership will
acquire the remaining interest of Post Services in 2001.
OPERATING DIVISIONS
The major operating divisions of the Operating Partnership include:
Post Apartment Management
Post Apartment Management is responsible for the day-to-day operations of all
the Post(R) communities including community leasing, property management and
personnel recruiting, training and development, maintenance and security. Post
Apartment Management also conducts short-term corporate apartment leasing
activities and is the largest division in the Company.
Post Apartment Development
Post Apartment Development conducts the development and construction activities
of the Company. These activities include site selection, zoning and regulatory
approvals, project design, and the full range of construction management
services.
Post Corporate Services
Post Corporate Services provides executive direction and control to the
Company's other divisions and subsidiaries and has responsibility for the
creation and implementation of all Company financing and capital strategies. All
accounting, management reporting, information systems, human resources, legal
and insurance services required by the Company and all of its affiliates are
centralized in Post Corporate Services.
OPERATING SUBSIDIARIES
The operating subsidiaries of the Operating Partnership, each of which is wholly
owned by Post Services, include:
RAM
RAM provides third party asset management and leasing services for multifamily
properties that do not operate under the Post(R) name. RAM's clients include
pension funds, independent private investors, financial institutions and
insurance companies. RAM's asset management contracts generally are subject to
annual renewal or are terminable upon specified notice. As of December 31, 2000,
RAM managed 72 properties (located in Georgia, Florida, Tennessee, Kansas, South
Carolina, North Carolina, Texas, Maryland, Missouri, Alabama and Virginia) with
15,651 units under management.
Post Landscape Group
As a result of the reputation the Company developed in connection with the
landscaping of Post(R) communities, in 1990, the Company began providing third
party design landscape services for clients other than Post(R) communities.
Projects with third parties include the design, installation and maintenance of
the landscape for golf courses, office
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parks, commercial buildings and other commercial enterprises, and private
residences. Post Landscape Group provides such third party landscape services.
See Note 14 to the Company's Consolidated Financial Statements for information
regarding the industry segments into which the Company organizes its operations.
HISTORY OF POST PROPERTIES, INC.
During the five-year period from January 1, 1996 through December 31, 2000, the
Company and affiliates have developed and completed 11,152 apartment units in 27
apartment communities, acquired 7,186 units in 28 apartment communities (26
communities containing 6,296 apartment units were as a result of the merger with
Columbus Realty Trust (the "Merger")) and sold 11 apartment communities
containing an aggregate of 2,778 apartment units. Historically, the Company has
primarily developed its apartment communities to the Company's specifications as
opposed to buying or refurbishing existing properties built by others. The
Company and its affiliates have sold apartment communities after holding them
for investment periods that typically have been seven to twelve years after
development. The following table shows the results of the Company's developments
during this period:
2000 1999 1998 1997 1996
--------- ---------- -------- ---------- ---------
Units completed 2,786 1,955 2,025 2,128 2,258
Units acquired(1) -- -- -- 6,296 890
Units sold (1,984) (198) -- (416) (180)
Total units owned by Company
affiliates 30,522 29,720 27,963 25,938 17,930
Total apartment rental income (in
thousands) $ 365,895 $ 318,697 $275,755 $ 185,732 $ 158,618
(1) As part of the Merger, the Company acquired 26 communities containing
6,296 units. Of the communities acquired in the Merger, 14 communities
containing 3,916 units were built by Columbus and 12 communities
containing 2,380 units were acquired by Columbus.
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CURRENT DEVELOPMENT ACTIVITY
The Company currently has under construction or in initial lease-up 12 new
communities and additions to three existing communities that will contain an
aggregate of 4,661 units upon completion. The Company's communities under
development or in initial lease-up are summarized in the following table:
ESTIMATED ESTIMATED ESTIMATED
QUARTER OF QUARTER OF QUARTER OF
# OF CONSTRUCTION FIRST UNITS STABILIZED
METROPOLITAN AREA UNITS START AVAILABLE OCCUPANCY
- ----------------- ----- ------------ ----------- ---------
ATLANTA, GA
Post Spring(TM) 452 3Q'99 2Q'00 3Q'01
Post Peachtree(TM) 121 2Q'00 4Q'01 2Q'02
Post Biltmore(TM) 276 3Q'00 4Q'01 3Q'02
-----
849
-----
CHARLOTTE, NC
Post Uptown Place(TM) 226 3Q'98 1Q'00 2Q'01
Post Gateway Place(TM) 232 3Q'99 3Q'00 3Q'01
Post Gateway Place II(TM) 204 3Q'00 3Q'01 1Q'02
-----
662
-----
TAMPA, FL
Post Harbour Place(TM)Phase II 319 4Q'98 2Q'00 1Q'01
-----
DALLAS, TX
Post Legacy 384 3Q'99 3Q'00 4Q'01
Post Addison Circle(TM)III 264 3Q'99 3Q'00 2Q'01
-----
648
-----
HOUSTON, TX
Post Midtown Square(TM)Phase II 193 1Q'00 4Q'00 4Q'01
-----
DENVER, CO
Post Uptown Square(TM)I 449 1Q'98 3Q'99 3Q'01
Post Uptown Square(TM)Phase II 247 1Q'00 4Q'01 3Q'02
-----
696
-----
PHOENIX, AZ
Post Roosevelt Square(TM) 403 4Q'98 1Q'00 4Q'01
-----
GREATER WASHINGTON AREA
Post Pentagon Row(TM) 504 2Q'99 2Q'01 2Q'02
-----
PASADENA, CA
Post Paseo Colorado(TM) 387 2Q'00 2Q'02 2Q'03
-----
TOTAL 4,661
=====
The Company is also currently conducting feasibility and other pre-development
studies for possible new Post(R) communities in selected market areas.
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COMPETITION
All of the Communities are located in developed areas that include other upscale
apartments. The number of competitive upscale apartment properties in a
particular area could have a material effect on the Company's ability to lease
apartment units at the Communities or at any newly developed or acquired
communities and on the rents charged. The Company may be competing with others
that have greater resources than the Company. In addition, other forms of
residential properties, including single family housing, provide housing
alternatives to potential residents of upscale apartment communities.
AMERICANS WITH DISABILITIES ACT
The Communities and any newly acquired apartment communities must comply with
Title III of the Americans with Disabilities Act (the "ADA") to the extent that
such properties are "public accommodations" and/or "commercial facilities" as
defined by the ADA. Compliance with the ADA requirements could require removal
of structural barriers to handicapped access in certain public areas of the
Company's Communities where such removal is readily achievable. The ADA does
not, however, consider residential properties, such as apartment communities, to
be public accommodations or commercial facilities, except to the extent portions
of such facilities, such as the leasing office, are open to the public. The
Company believes that its properties comply with all present requirements under
the ADA and applicable state laws. Noncompliance could result in imposition of
fines or an award of damages to private litigants. If required to make material
additional changes, the Company's results of operations could be adversely
affected.
ENVIRONMENTAL REGULATIONS
The Company is subject to Federal, state and local environmental regulations
that apply to the development of real property, including construction
activities, the ownership of real property, and the operation of multifamily
apartment communities.
In developing properties and constructing apartments, the Company utilizes
environmental consultants to determine whether there are any flood plains,
wetlands or environmentally sensitive areas that are part of the property to be
developed. If flood plains are identified, development and construction is
planned so that flood plain areas are preserved or alternative flood plain
capacity is created in conformance with Federal and local flood plain management
requirements.
Storm water discharge from a construction facility is evaluated in connection
with the requirements for storm water permits under the Clean Water Act. This is
an evolving program in most states. The Company currently anticipates it will be
able to obtain storm water permits for existing or new development.
The Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state superfund laws subject
the owner of real property to claims or liability for the costs of removal or
remediation of hazardous substances that are disposed of on real property in
amounts that require removal or remediation. Liability under CERCLA and
applicable state superfund laws can be imposed on the owner of real property or
the operator of a facility without regard to fault or even knowledge of the
disposal of hazardous substances on the property or at the facility. The
presence of hazardous substances in amounts requiring response action or the
failure to undertake remediation where it is necessary may adversely affect the
owner's ability to sell real estate or borrow money using such real estate as
collateral. In addition to claims for cleanup costs, the presence of hazardous
substances on a property could result in a claim by a private party for personal
injury or a claim by an adjacent property owner for property damage.
The Company has instituted a policy that requires an environmental investigation
of each property that it considers for purchase or that it owns and plans to
develop. The environmental investigation is conducted by a qualified
environmental consultant. If there is any indication of contamination, sampling
of the property is performed by the environmental consultant. The environmental
investigation report is reviewed by the Company and counsel prior to purchase of
any property. If necessary, remediation of contamination, including underground
storage tanks, is undertaken prior to development.
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The Company has not been notified by any governmental authority of any
noncompliance, claim, or liability in connection with any of the Communities.
The Company has not been notified of a claim for personal injury or property
damage by a private party in connection with any of the Communities in
connection with environmental conditions. The Company is not aware of any other
environmental condition with respect to any of the Communities that could be
considered to be material.
ITEM 2. PROPERTIES
At February 3, 2001, the Communities consisted of 87 stabilized Post(R)
multifamily apartment communities located in the following metropolitan areas:
METROPOLITAN AREA COMMUNITIES # OF UNITS % OF TOTAL
----------------- ----------- ---------- ----------
Atlanta, GA .................... 40 16,102 52.8%
Dallas, TX ..................... 29 7,846 25.7%
Houston, TX .................... 1 309 1.0%
Tampa, FL ...................... 9 3,504 11.5%
Orlando, FL .................... 3 1,493 4.9%
Fairfax, VA .................... 2 700 2.3%
Nashville, TN .................. 2 166 0.5%
Charlotte, NC .................. 1 402 1.3%
------ ------ -----
87 30,522 100.0%
====== ====== =====
The Company or its predecessors developed all but 14 of the Post(R) Communities
and currently manages all of the Communities. Fifty-two of the Communities have
in excess of 300 apartment units, with the largest Community having a total of
916 apartment units. Eighty of the eighty-seven Communities, comprising
approximately 92% of the Communities' apartment units, were completed after
January 1, 1986. The average age of the Communities is approximately nine years.
The average economic occupancy rate was 96.8% and 96.4%, respectively, and the
average monthly rental rate per apartment unit was $897 and $862, respectively,
for communities stabilized for each of the entire years ended December 31, 2000
and 1999. See "Selected Financial Information."
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COMMUNITY INFORMATION
DECEMBER 2000 2000
AVERAGE NUMBER AVERAGE AVERAGE
YEAR UNIT SIZE OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2)
- ----------- ----------- --------- ------------- ------ ------------- ------------
GEORGIA
Post Ashford(R) ......................... Atlanta 1987 872 222 $ 873 97.3%
Post Briarcliff(TM) ..................... Atlanta 1999 1,062 688 1,137 N/A (3)
Post Bridge(R) .......................... Atlanta 1986 847 354 747 96.8%
Post Brookhaven(R) ...................... Atlanta 1990-92 (4) 991 735 1,037 96.6%
Post Canyon(R) .......................... Atlanta 1986 899 494 775 97.5%
Post Chase(R) ........................... Atlanta 1987 938 410 759 96.7%
Post Chastain(R) ........................ Atlanta 1990 965 558 1,066 96.2%
Post Collier Hills(R) ................... Atlanta 1997 967 396 1,085 97.4%
Post Corners(R) ......................... Atlanta 1986 860 460 765 96.8%
Post Court(R) ........................... Atlanta 1988 838 446 723 97.4%
Post Creek(R) ........................... Atlanta 1983 (5) 1,180 810 972 97.1%
Post Crest(R) ........................... Atlanta 1996 1,073 410 1,076 97.2%
Post Crossing(R) ........................ Atlanta 1995 1,067 354 1,121 96.5%
Post Dunwoody(R) ........................ Atlanta 1989-96 (4) 941 530 1,005 95.7%
Post Gardens(R) ......................... Atlanta 1998 1,066 397 1,290 95.7%
Post Glen(R) ............................ Atlanta 1997 1,113 314 1,262 96.8%
Post Lane(R) ............................ Atlanta 1988 840 166 792 97.6%
Post Lenox Park(R) ...................... Atlanta 1995 1,030 206 1,153 95.3%
Post Lindbergh(R) ....................... Atlanta 1998 960 396 1,107 95.2%
Post Mill(R) ............................ Atlanta 1985 952 398 800 97.9%
Post Oak(TM) ............................ Atlanta 1993 1,003 182 1,107 97.1%
Post Oglethorpe(R) ...................... Atlanta 1994 1,205 250 1,355 96.0%
Post Park(R) ............................ Atlanta 1988-90 (4) 904 770 848 96.7%
Post Parkside(TM) ....................... Atlanta 2000 903 188 1,355 N/A (3)
Post Peachtree Hills(R) ................. Atlanta 1992-94 (4) 982 300 1,108 96.2%
Post Pointe(R) .......................... Atlanta 1988 835 360 740 95.4%
Post Renaissance(R)(6) .................. Atlanta 1992-94 (4) 890 342 1,051 95.5%
Post Ridge(R) ........................... Atlanta 1998 1,045 434 1,092 96.2%
Post Stratford(TM) ...................... Atlanta 2000 1,013 250 1,365 N/A (3)
Post Summit(R) .......................... Atlanta 1990 957 148 960 96.8%
Post Valley(R) .......................... Atlanta 1988 854 496 756 96.8%
Post Village(R) ......................... Atlanta 798 98.0%
The Arbors ............................. 1983 1,063 301
The Fountains .......................... 1987 850 352
The Gardens ............................ 1986 891 494
The Hills .............................. 1984 953 241
The Meadows ............................ 1988 817 350
Post Vinings(R) ......................... Atlanta 1989-91 (4) 964 403 882 96.5%
Post Walk(R) ............................ Atlanta 1984-87 (4) 932 476 888 96.4%
Post Woods(R) ........................... Atlanta 1977-83 (4) 1,057 494 972 96.4%
Post Riverside(TM) ...................... Atlanta 1998 989 527 1,532 N/A (3)
----- ------ ------- -------
Subtotal/Average-- Georgia ............. 964 16,102 980 96.7%
----- ------ ------- -------
TEXAS
Addison Circle Apartment Homes
by Post(R)- Phase I ................... Dallas 1998 896 460 968 95.4%
Addison Circle Apartment Homes
by Post(R)- Phase II .................. Dallas 2000 898 610 1,058 N/A (3)
Post American Beauty Mill(TM) ........... Dallas 1998 980 80 1,016 96.1%
Post Block 588(TM) ...................... Dallas 2000 1,570 127 1,874 N/A
Post Cole's Corner(TM) .................. Dallas 1998 796 186 983 96.1%
Post Columbus Square by Post(TM) ........ Dallas 1996 861 218 1,129 97.3%
Post Gallery(TM) ........................ Dallas 1999 2,307 34 3,735 N/A (3)
Post Midtown Square(R)(7) ............... Dallas 2000 940 672 1,230 N/A (3)
Post Parkwood(R) ........................ Dallas 1962-70 (4) 1,042 96 983 97.7%
Post Ascension(R) ....................... Dallas 1985-95 (4) 929 167 847 96.5%
Post Hackberry Creek(R) ................. Dallas 1988-96 (4) 865 432 820 96.7%
Post Lakeside(TM) ....................... Dallas 1986 791 327 845 97.0%
Post Townlake(R)/Parks .................. Dallas 1986-87 (4) 869 398 775 96.6%
Post White Rock(R) ...................... Dallas 1988 659 207 770 97.2%
Post Winsted(R) ......................... Dallas 1996 728 314 802 96.3%
Post Shores(TM) ......................... Dallas 1988-97 (4) 874 908 943 96.7%
The Abbey of State-Thomas by Post(TM) ... Dallas 1996 1,276 34 1,951 97.2%
The Commons at Turtle Creek by Post(TM).. Dallas 1985 645 158 776 96.9%
The Heights of State-Thomas by Post(TM).. Dallas 1998 813 198 1,024 95.5%
8
11
DECEMBER 2000 2000
AVERAGE NUMBER AVERAGE AVERAGE
YEAR UNIT SIZE OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2)
- ----------- ----------- --------- ------------- ------ ------------- ------------
TEXAS CONTINUED
The Heights of State-Thomas II by ............. Dallas 1999 894 170 1,061 93.7%
Post(TM)
The Meridian of State-Thomas by Post(TM)....... Dallas 1991 798 132 1,073 96.1%
The Residences on McKinney by Post(TM) ........ Dallas 1986 749 196 1,026 95.0%
The Rice by Post .............................. Houston 1998 977 309 1,436 97.4%
The Vineyard by Post(TM) ...................... Dallas 1996 728 116 949 96.8%
The Vintage by Post(TM) ....................... Dallas 1993 781 161 934 96.9%
Post Wilson Building(TM) ...................... Dallas 1999 1,015 143 1,352 N/A (3)
Post Worthington(TM) .......................... Dallas 1993 818 332 1,147 96.0%
Post Uptown Village(TM) ....................... Dallas 1995 767 300 929 96.2%
Post Uptown Village II(TM) .................... Dallas 2000 730 196 834 N/A (3)
Post Windhaven(TM)(8) ......................... Dallas 1991 825 474 615 100.0%
----- ------ ------ -----
Subtotal/Average-- Texas ..................... 927 8,155 1,001 91.5%
----- ------ ------ -----
FLORIDA
Post Bay(R) ................................... Tampa 1988 782 312 727 97.5%
Post Court(R) ................................. Tampa 1991 1,018 228 822 96.2%
Post Fountains at Lee Vista(R) ................ Orlando 1988 835 508 680 96.4%
Post Harbour Place(TM)(7) ..................... Tampa 1999 1,037 525 1,166 N/A (3)
Post Hyde Park(R) ............................. Tampa 1996 1,009 389 1,064 97.2%
Post Lake(R) .................................. Orlando 1988 850 740 687 97.6%
Post Parkside(TM) ............................. Orlando 1999 891 245 1,103 N/A (3)
Post Rocky Point(R) ........................... Tampa 1996-98 (4) 1,018 916 1,019 96.2%
Post Village(R) ............................... Tampa 764 95.8%
The Arbors ................................... 1991 967 304
The Lakes .................................... 1989 895 360
The Oaks ..................................... 1991 968 336
Post Walk(TM) at
Old Hyde Park Village ........................ Tampa 1997 984 134 1,260 96.6%
----- ------ -------- -----
Subtotal/Average-- Florida ................... 938 4,997 887 96.5%
----- ------ -------- -----
VIRGINIA
Post Corners at Trinity Centre ................ Fairfax 1996 1,030 336 1,154 99.6%
Post Forest(R) ................................ Fairfax 1990 889 364 1,109 99.2%
----- ------ -------- -----
Subtotal/Average-- Virginia .................. 960 700 1,131 99.4%
----- ------ -------- -----
NORTH CAROLINA
Post Park at Phillips Place(R) ................ Charlotte 1998 912 402 1,272 95.0%
----- ------ -------- -----
TENNESSEE
Post Bennie Dillon(TM) ........................ Nashville 1999 719 86 944 96.6%
The Lee Apartments ............................ Nashville 1924 (9) 808 80 731 98.5%
----- ------ -------- -----
Subtotal/Average-- Tennessee ................. 764 166 842 97.3%
----- ------ -------- -----
TOTAL ...................................... 911 30,522 $ 977 96.7%
===== ====== ======== =====
(1) Refers to greater metropolitan areas of cities indicated.
(2) Average economic occupancy is defined as gross potential rent less
vacancy losses, model expenses and bad debt divided by gross potential
rent for the period, expressed as a percentage.
(3) During 2000, this community or a phase in this community was in
lease-up and, therefore, is not included.
(4) These dates represent the respective completion dates for multiple
phases of a community.
(5) This community was completed by the Company in 1983, sold during 1986,
managed by the Company through 1993 and reacquired by the Company in
1996.
(6) The Company has a leasehold interest in the land underlying Post
Renaissance pursuant to a ground lease that expires on January 1, 2040.
(7) These communities are comprised of two phases. Only the first phase of
each of these communities is stabilized as of February 3, 2001.
(8) Post Windhaven(TM) is subject to a master lease with Electronic Data
Systems.
(9) The Company acquired this community in 1996.
9
12
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The persons who are executive officers of the Company and its affiliates and
their positions are as follows:
NAME POSITIONS AND OFFICES HELD
---- --------------------------
John A. Williams........................ Chairman of the Board, Chief Executive Officer and Director
John T. Glover.......................... Vice Chairman and Director
David P. Stockert....................... President and Chief Operating Officer
W. Daniel Faulk, Jr..................... President-- Post Apartment Development and Chief Development
Officer
Thomas L. Wilkes........................ President-- Post Management Services and Chief Management Officer
R. Gregory Fox.......................... Executive Vice President-- Post Corporate Services and Chief
Financial Officer
Sherry W. Cohen......................... Executive Vice President and Secretary-- Post Corporate Services
Douglas S. Gray......................... Senior Vice President-- Post Corporate Services
The following is a biographical summary of the experience of the executive
officers of the Company:
John A. Williams. Mr. Williams is the Chairman of the Board and Chief Executive
Officer of the Company and is a Director. Mr. Williams founded the business of
the Company in 1971 and since that time has acted as Chairman and Chief
Executive Officer. Mr. Williams is currently serving on the board of directors
of Crawford & Co. and the Atlanta Regional Commission and was formerly Chairman
of the Metro Atlanta Chamber of Commerce. Mr. Williams is 58 years old.
John T. Glover. Mr. Glover has been the Vice Chairman of the Company since
February 29, 2000 and a Director since 1984. From 1984 through February 29,
2000, Mr. Glover was President, Chief Operating Officer, and Treasurer of the
Company. Mr. Glover is a Director of SunTrust Bank, Haverty's Furniture
Companies, Inc. and Emory Healthcare, Inc. Mr. Glover is 54 years old.
David P. Stockert. Mr. Stockert joined the Company January 1, 2001 as President
and Chief Operating Officer. From July 1999 to October 2000, Mr. Stockert was
Executive Vice President of Duke-Weeks Realty Corporation, a publicly traded
real estate company. From June 1995 to July 1999, Mr. Stockert was Senior Vice
President and Chief Financial Officer of Weeks Corporation, also a publicly
traded real estate company that was a predecessor by merger to Duke-Weeks Realty
Corporation. From August 1990 to May 1995, Mr. Stockert was an investment banker
in the Real Estate Group at Dean Witter Reynolds Inc. (now Morgan Stanley Dean
Witter). Mr. Stockert is 38 years old.
10
13
W. Daniel Faulk, Jr. Mr. Faulk has been with the Company for fourteen years and
is currently President of Post Apartment Development and Chief Development
Officer. From April 1993 to December 1999, he was President of Post Apartment
Development, which is responsible for the development and construction of all
Post(R)apartment communities. Prior thereto, Mr. Faulk was President of Post
Atlanta since February 1987. Mr. Faulk is currently on the board of directors of
Mountain National Bank. Mr. Faulk is 58 years old.
Thomas L. Wilkes. Mr. Wilkes joined the Company in October 1997 and, since
January 2001, has been the President of Post Apartment Management and the
Company's Chief Management Officer. From December 1998 through December 2000, he
was an Executive Vice President and Director of Operations for Post Apartment
Management responsible for the operations of Post(R)communities in the Western
United States. From October 1997 to December 1998 he was an Executive Vice
President and Director of Operations of Post West. Mr. Wilkes was a Senior Vice
President of Columbus from October 1993 through October 1997. Mr. Wilkes served
as President of CRH Management Company, a multifamily property management firm
and a member of the Columbus Group, since its formation in October 1990 to
December 1993. Mr. Wilkes is a Certified Property Manager. Mr. Wilkes is 41
years old.
R. Gregory Fox. Mr. Fox has been with the Company since February 1996 and, since
October 2000 has served as the Company's Chief Financial Officer. From December
1998 through September 2000, he served as Executive Vice President of Post
Corporate Services and the Company's Chief Accounting Officer responsible for
financial reporting and planning, accounting, management information systems and
human resources. From February 1996 to December 1998, Mr. Fox was a Senior Vice
President. Prior to joining the Company, he was a senior manager in the audit
division of Price Waterhouse LLP where he was employed for ten years. Mr. Fox is
a Certified Public Accountant and is currently on the board of directors of
Realeum, Inc. Mr. Fox is 41 years old.
Sherry W. Cohen. Ms. Cohen has been with the Company for sixteen years. Since
October 1997, she has been an Executive Vice President of Post Corporate
Services responsible for supervising and coordinating legal affairs and
insurance. Since April 1990, Ms. Cohen had also been Corporate Secretary. She
was a Senior Vice President with Post Corporate Services from July 1993 to
October 1997. Prior thereto, Ms. Cohen was a Vice President of Post Properties,
Inc. since April 1990. Ms. Cohen is 46 years old.
Douglas S. Gray. Mr. Gray joined the Company in December 1997 and, since January
1999, has been a Senior Vice President of Post Corporate Services responsible
for dispositions and asset management. He was a Vice President of Post Corporate
Services from December 1997 to December 1998. Prior to joining Post, Mr. Gray
was Vice President of Dutch Institutional Holding Co. from July 1994 to
November 1997. Prior thereto, he was Director of Property Services for The
Landmarks Group from June 1988 to June 1994. Mr. Gray is a Certified Public
Accountant and holds the CCIM designation. Mr. Gray is 41 years old.
11
14
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Common Stock is traded on the New York Stock Exchange ("NYSE") under the
symbol "PPS." The following table sets forth the quarterly high and low closing
sales prices per share reported on the NYSE, as well as the quarterly dividends
declared per share:
DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
------------- --------- --------- ---------
1999
First Quarter $ 38.8125 $ 35.2500 $ 0.700
Second Quarter 42.0625 35.3750 0.700
Third Quarter 41.0000 38.8750 0.700
Fourth Quarter 39.7500 36.7500 0.700
2000
First Quarter $ 40.3125 $ 36.5000 $ 0.760
Second Quarter 46.0938 39.9375 0.760
Third Quarter 46.7500 42.0312 0.760
Fourth Quarter 38.2500 33.9375 0.760
On February 12, 2001, the Company had 1,735 common shareholders of record.
The Company pays regular quarterly dividends to holders of shares of Common
Stock. Future distributions by the Company will be at the discretion of the
board of directors and will depend on the actual funds from operations of the
Company, the Company's financial condition and capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended (the "Code") and such other factors as the board of
directors deems relevant. For a discussion of the Company's credit agreements
and their restrictions on dividend payments, see Liquidity and Capital Resources
at Management's Discussion and Analysis of Financial Condition and Results of
Operations.
During 2000, the Company did not sell any unregistered securities.
There is no established public trading market for the Units. As of February 12,
2001, the Operating Partnership had 109 holders of record of Units of the
Operating Partnership.
For each quarter during 1999 and 2000, the Operating Partnership paid a cash
distribution to holders of Units equal in amount to the dividend paid on the
Company's common stock for such quarter.
During 2000, the Operating Partnership did not sell any unregistered securities.
12
15
ITEM 6. SELECTED FINANCIAL DATA
POST PROPERTIES, INC.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
OPERATING DATA:
Revenue:
Rental ......................................... $ 365,895 $ 318,697 $ 275,755 $ 185,732 $ 158,618
Property management - third-party (1) .......... 3,826 3,368 3,164 2,421 2,828
Landscape services - third-party (1) ........... 11,423 9,118 7,252 5,148 4,882
Other .......................................... 18,688 14,744 12,734 6,815 5,247
--------- --------- --------- --------- ---------
Total revenue .............................. 399,832 345,927 298,905 200,116 171,575
--------- --------- --------- --------- ---------
Property operating and maintenance
expense (exclusive of depreciation
and amortization) ............................ 131,349 113,152 99,717 67,515 58,202
Depreciation ................................... 71,113 58,013 46,646 29,048 23,603
Property management expenses - third-party (1) 3,099 2,925 2,499 1,959 2,055
Landscape services expenses - third-party (1) .. 9,993 7,904 6,264 4,284 3,917
Interest expense ............................... 50,303 33,192 31,297 24,658 22,131
Amortization of deferred loan costs ............ 1,636 1,496 1,185 980 1,352
General and administrative ..................... 10,066 7,788 8,495 7,364 7,716
Minority interest in consolidated property
partnerships ................................. (1,695) 511 397 -- --
--------- --------- --------- --------- ---------
Total expense ............................. 275,864 224,981 196,500 135,808 118,976
--------- --------- --------- --------- ---------
Income before net gain (loss) on sale of assets,
loss on unused treasury locks, loss on
relocation of corporate office, other charges,
minority interest of unitholders, and
extraordinary item ........................... 123,968 120,946 102,405 64,308 52,599
Net gain (loss) on sale of assets ................ 3,208 (1,522) -- 3,270 854
Loss on unused treasury locks .................... -- -- (1,944) -- --
Loss on relocation of corporate office ........... -- -- -- (1,500) --
Project abandonment, employee severance and
impairment charges (2) ........................... (9,365) -- -- -- --
Minority interest of preferred unitholders in
Operating Partnership ........................ (5,600) (1,851) -- -- --
Minority interest of common unitholders in
Operating Partnership ........................ (11,691) (12,598) (11,511) (11,131) (9,984)
--------- --------- --------- --------- ---------
Income before extraordinary item ................. 100,520 104,975 88,950 54,947 43,469
Extraordinary item, net of minority
interest (3) ................................. -- (458) -- (75) --
--------- --------- --------- --------- ---------
Net income ....................................... 100,520 104,517 88,950 54,872 43,469
Dividends to preferred shareholders .............. (11,875) (11,875) (11,473) (4,907) (1,063)
--------- --------- --------- --------- ---------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS ............................ $ 88,645 $ 92,642 $ 77,477 $ 49,965 $ 42,406
========= ========= ========= ========= =========
PER COMMON SHARE DATA:
Income before extraordinary item
(net of preferred dividends) - basic ........... $ 2.25 $ 2.42 $ 2.21 $ 2.11 $ 1.95
Net income available to common
shareholders - basic ........................... 2.25 2.41 2.21 2.11 1.95
Income before extraordinary item
(net of preferred dividends) - diluted ......... 2.22 2.39 2.18 2.09 1.94
Net income available to common
shareholders - diluted ......................... 2.22 2.38 2.18 2.09 1.94
Dividends declared ............................... 3.04 2.80 2.60 2.38 2.16
13
16
DECEMBER 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ----------- ---------- -------
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation................................... $2,827,094 $2,582,785 $2,255,074 $ 1,936,011 $ 1,109,342
Real estate, net of accumulated
depreciation................................... 2,469,914 2,279,769 2,007,926 1,734,916 931,670
Total assets..................................... 2,551,237 2,350,173 2,066,713 1,780,563 958,675
Total debt....................................... 1,213,309 989,583 800,008 821,209 434,319
Shareholders' equity............................. 1,028,610 1,058,862 1,051,686 756,920 398,993
DECEMBER 31,
------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------- ------------ ------------ ------------
OTHER DATA:
Cash flow provided from (used in):
Operating activities ............. $ 185,073 $ 153,038 $ 148,618 $ 109,554 $ 78,966
Investing activities ............. $ (255,986) $ (317,960) $ (328,216) $ (208,377) $ (166,762)
Financing activities ............. $ 72,502 $ 149,638 $ 189,873 $ 109,469 $ 79,021
Funds from operations (4) ........... $ 163,411 $ 162,581 $ 134,202 $ 85,892 $ 74,212
Weighted average common shares
outstanding - basic .............. 39,317,725 38,460,689 35,028,596 23,664,044 21,787,648
Weighted average common shares and
units outstanding - basic ........ 44,503,290 43,663,373 40,244,351 28,880,928 26,917,723
Weighted average common shares
outstanding - diluted ............ 39,852,514 38,916,987 35,473,587 23,887,906 21,879,248
Weighted average common shares and
units outstanding - diluted ...... 45,038,079 44,119,671 40,689,342 29,104,790 27,009,323
Total stabilized communities
(at end of period) ............... 82 85 83 78 49
Total stabilized apartment units
(at end of period) ............... 28,736 29,032 27,568 25,938 17,930
Average economic occupancy
(fully stabilized communities)(5). 96.8% 96.4% 96.5% 94.8% 95.3%
(1) Consists of revenues and expenses from property management and
landscape services provided to properties owned by third parties.
(2) Project abandonment, employee severance and impairment charges
consisted of the following: Write-off of pursuit costs on abandoned
development projects - $4,389 Severance cost related to management
changes - $3,066 Impairment reserves on for-sale housing - $407
Write-off of investment in Darwin Networks - $1,503.
(3) The extraordinary item resulted from costs associated with the early
extinguishment of indebtedness. The extraordinary item has been reduced
by the portion related to the minority interest of the unitholders
calculated on the basis of weighted average Units outstanding for the
year.
(4) The Company uses the National Association of Real Estate Investment
Trusts ("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT
amended its definition of FFO to include in FFO all non-recurring
transactions, except those that are defined as extraordinary under
generally accepted accounting principles. ("GAAP"). The Company adopted
this new definition effective January 1, 2000. FFO for any period means
the Consolidated Net Income of the Company and its subsidiaries for
such period excluding gains or losses from debt restructuring and sales
of property plus depreciation of real estate assets, and after
adjustment for unconsolidated partnerships and joint ventures, all
determined on a consistent basis in accordance with GAAP. FFO presented
herein is not necessarily comparable to FFO presented by other real
estate companies because not all real estate companies use the same
definition. The Company's FFO is comparable to the FFO of real estate
companies that use the current NAREIT definition. FFO should not be
considered as an alternative to net income (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company's needs or ability to service indebtedness or make
distributions. FFO for 1998 and 1997 has been restated to reflect the
requirements of the new NAREIT definition.
(5) Amount represents average economic occupancy for communities stabilized
for both the current and prior respective periods. Average economic
occupancy is defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent for the period,
expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts (average economic occupancy, taking account of these amounts,
would have been 94.9% for both years ended December 31, 2000 and 1999).
Concessions were $3,250 and $2,745 and employee discounts were $1,143
and $599 for the years ended December 31, 2000 and 1999, 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.
14
17
POST APARTMENT HOMES, L.P.
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
OPERATING DATA:
Revenue:
Rental ..................................................... $ 365,895 $ 318,697 $ 275,755 $ 185,732 $ 158,618
Property management - third-party (1) ...................... 3,826 3,368 3,164 2,421 2,828
Landscape services - third-party (1) ....................... 11,423 9,118 7,252 5,148 4,882
Other ...................................................... 18,688 14,744 12,734 6,815 5,247
--------- --------- --------- --------- ---------
Total revenue ............................................ 399,832 345,927 298,905 200,116 171,575
--------- --------- --------- --------- ---------
Property operating and maintenance
expense (exclusive of depreciation
and amortization) .......................................... 131,349 113,152 99,717 67,515 58,202
Depreciation (real estate and non-real estate assets)......... 71,113 58,013 46,646 29,048 23,603
Property management expenses - third-party (1) ............... 3,099 2,925 2,499 1,959 2,055
Landscape services expenses - third-party (1) ................ 9,993 7,904 6,264 4,284 3,917
Interest expense ............................................. 50,303 33,192 31,297 24,658 22,131
Amortization of deferred loan costs .......................... 1,636 1,496 1,185 980 1,352
General and administrative ................................... 10,066 7,788 8,495 7,364 7,716
Minority interest in consolidated ............................
property partnerships ...................................... (1,695) 511 397 -- --
--------- --------- --------- --------- ---------
Total expenses ........................................... 275,864 224,981 196,500 135,808 118,976
--------- --------- --------- --------- ---------
Income before net gain (loss) on sale of assets, loss on
unused treasury locks, loss on relocation of corporate
office, other charges and extraordinary item ............... 123,968 120,946 102,405 64,308 52,599
Net gain (loss) on sale of assets ............................ 3,208 (1,522) -- 3,270 854
Loss on unused treasury locks ................................ -- -- (1,944) -- --
Loss on relocation of corporate office ....................... -- -- -- (1,500) --
Project abandonment, employee severance and
impairment charges (2) ....................................... (9,365) -- -- -- --
--------- --------- --------- --------- ---------
Income before extraordinary item ............................. 117,811 119,424 100,461 66,078 53,453
Extraordinary item (3) ....................................... -- (521) -- (93) --
--------- --------- --------- --------- ---------
Net income ................................................... 117,811 118,903 100,461 65,985 53,453
Distributions to preferred unitholders ....................... (17,475) (13,726) (11,473) (4,907) (1,063)
--------- --------- --------- --------- ---------
NET INCOME AVAILABLE TO
COMMON UNITHOLDERS ......................................... $ 100,336 $ 105,177 $ 88,988 $ 61,078 $ 52,390
========= ========= ========= ========= =========
PER COMMON UNIT DATA:
Income before extraordinary item
(net of preferred distributions) - basic ................... $ 2.25 $ 2.42 $ 2.21 $ 2.11 $ 1.95
Net income available to common
unitholders - basic ........................................ 2.25 2.41 2.21 2.11 1.95
Income before extraordinary item
(net of preferred distributions) - diluted ................. 2.22 2.39 2.18 2.09 1.94
Net income available to common
unitholders - diluted ...................................... 2.22 2.38 2.18 2.09 1.94
Distributions declared ....................................... 3.04 2.80 2.60 2.38 2.16
15
18
DECEMBER 31,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- -----------
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation .................. $2,827,094 $2,582,785 $2,255,074 $1,936,011 $1,109,342
Real estate, net of accumulated
depreciation................... 2,469,914 2,279,769 2,007,926 1,734,916 931,670
Total assets ................... 2,551,237 2,350,173 2,066,713 1,780,563 958,675
Total debt ..................... 1,213,309 989,583 800,008 821,209 434,319
Partners' equity ............... 1,216,701 1,251,342 1,177,051 869,304 482,434
DECEMBER 31,
------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ----------- ------------ ------------
OTHER DATA:
Cash flow provided from (used in):
Operating activities .............. $ 185,073 $ 153,038 $ 148,618 $ 109,554 $ 78,966
Investing activities .............. $ (255,986) $ (317,960) $ (328,216) $ (208,377) $ (166,762)
Financing activities .............. $ 72,502 $ 149,638 $ 189,873 $ 109,469 $ 79,021
Funds from operations (4) ............. $ 163,411 $ 162,581 $ 134,202 $ 85,892 $ 74,212
Weighted average common Units
outstanding - basic ............... 44,503,290 43,663,373 40,244,351 28,880,928 26,917,723
Weighted average common Units
outstanding - diluted ............. 45,038,079 44,119,671 40,689,342 29,104,790 27,009,323
Total stabilized communities
(at end of period) ................ 82 85 83 78 49
Total stabilized apartment units
(at end of period) ................ 28,736 29,032 27,568 25,938 17,930
Average economic occupancy
(fully stabilized communities)(5).. 96.8% 96.4% 96.5% 94.8% 95.3%
(1) Consists of revenues and expenses from property management and
landscape services provided to properties owned by third parties.
(2) Project abandonment, employee severance and impairment charges
consisted of the following: Write-off of pursuit costs on abandoned
development projects - $4,389 Severance cost related to management
changes - $3,066 Impairment reserves on for-sale housing - $407
Write-off of investment in Darwin Networks - $1,503.
(3) The extraordinary item resulted from costs associated with the early
extinguishment of indebtedness. The extraordinary item has been reduced
by the portion related to the minority interest of the unitholders
calculated on the basis of weighted average Units outstanding for the
year.
(4) The Company uses the National Association of Real Estate Investment
Trusts ("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT
amended its definition of FFO to include in FFO all non-recurring
transactions, except those that are defined as extraordinary under
generally accepted accounting principles. ("GAAP"). The Company adopted
this new definition effective January 1, 2000. FFO for any period means
the Consolidated Net Income of the Company and its subsidiaries for
such period excluding gains or losses from debt restructuring and sales
of property plus depreciation of real estate assets, and after
adjustment for unconsolidated partnerships and joint ventures, all
determined on a consistent basis in accordance with GAAP. FFO presented
herein is not necessarily comparable to FFO presented by other real
estate companies because not all real estate companies use the same
definition. The Company's FFO is comparable to the FFO of real estate
companies that use the current NAREIT definition. FFO should not be
considered as an alternative to net income (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company's needs or ability to service indebtedness or make
distributions. FFO for 1998 and 1997 has been restated to reflect the
requirements of the new NAREIT definition.
(5) Amount represents average economic occupancy for communities stabilized
for both the current and prior respective periods. Average economic
occupancy is defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent for the period,
expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts (average economic occupancy, taking account of these amounts,
would have been 94.9% for each of the years ended December 31, 2000 and
1999). Concessions were $3,250 and $2,745 and employee discounts were
$1,143 and $599 for the years ended December 31, 2000 and 1999,
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.
16
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
OVERVIEW
The following discussion should be read in conjunction with all of the financial
statements appearing elsewhere in this report. The following discussion is based
primarily on the Consolidated Financial Statements of Post Properties, Inc. (the
"Company") and Post Apartment Homes, L.P. (the "Operating Partnership"). Except
for the effect of minority interest in the Operating Partnership, the following
discussion with respect to the Company is the same for the Operating
Partnership.
As of December 31, 2000, there were 44,035,007 Units outstanding, of which
38,853,596 or 88.2%, were owned by the Company and 5,181,411, or 11.8% were
owned by other limited partners (including certain officers and directors of the
Company). As of December 31, 2000, there were 7,800,000 preferred units
outstanding, of which 5,000,000 were owned by the Company.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
The Operating Partnership recorded net income available to common unitholders of
$100,336, $105,177, and $88,988 for the years ended December 31, 2000, 1999 and
1998, respectively. The Company recorded net income available to common
shareholders of $88,645, $92,642 and $77,477 for the years ended December 31,
2000, 1999 and 1998, respectively. The Company's decrease in net income
available to common shareholders of $3,997 from 1999 to 2000 was primarily
related to project abandonment, employee severance and impairment charges,
increased interest expense resulting from higher interest rates, and increased
general and administrative expenses, partially offset by a gain on the sale of
assets, increased rental rates for fully stabilized communities and an increase
in units placed in service. The Company's increase in net income available to
common shareholders of $15,165 from 1998 to 1999 is primarily related to
increased rental rates for fully stabilized communities and an increase in units
placed in service.
COMMUNITY OPERATIONS
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is generally
considered by the Company to have achieved stabilized occupancy on the earlier
to occur of (i) attainment of 95% physical occupancy on the first day of any
month or (ii) one year after completion of construction.
At December 31, 2000, the Company's portfolio of apartment communities consisted
of the following: (i) 63 communities that were completed and stabilized for all
of the current and prior year, (ii) eight communities that achieved full
stabilization during the prior year, (iii) nine communities which reached
stabilization during 2000, (iv) 16 communities and additions to three existing
communities currently in the development or lease-up stage, and (v) four
stabilized communities that are currently held for sale.
For communities with respect to which construction is completed and the
community has become fully operational, all property operating and maintenance
expenses are expensed as incurred and those recurring and non-recurring
expenditures relating to acquiring new assets, materially enhancing the value of
an existing asset, or substantially extending the useful life of an existing
asset are capitalized. (See "Capitalization of Fixed Assets and Community
Improvements").
The Company has adopted an accounting policy related to communities in the
development and lease-up stage whereby substantially all operating expenses
(including pre-opening marketing expenses) are expensed as incurred. The Company
treats each unit in an apartment community separately for cost accumulation,
capitalization and expense recognition purposes. Prior to the commencement of
leasing activities, interest and other construction costs are capitalized and
reflected on the balance sheet as construction in progress. Once a unit is
placed in service, all
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operating expenses allocated to that unit, including interest, are expensed as
incurred. During the lease-up phase, the sum of interest expense on completed
units and other operating expenses (including pre-opening marketing expenses)
will initially exceed rental revenues, resulting in a "lease-up deficit," which
continues until such time as rental revenues exceed such expenses. Lease up
deficits for the years ended December 31, 2000, 1999, and 1998 were $2,665,
$2,798 and $2,063, respectively.
In order to evaluate the operating performance of its communities, the Company
has presented financial information which summarizes the revenue in excess of
specified expense on a comparative basis for all of its operating communities
combined and for fully stabilized communities.
ALL OPERATING COMMUNITIES
The operating performance for all of the Company's apartment communities
combined for the years ended December 31, 2000, 1999 and 1998 is summarized as
follows:
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
----------------------------------- -----------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
-------- -------- ------- -------- -------- -------
Rental and other revenue:
Fully stabilized communities (1) ......... $232,435 $221,901 4.7% $221,901 $213,043 4.2%
Communities stabilized during 1999 ....... 42,710 38,097 12.1% 38,097 20,845 82.8%
Development and lease-up communities (2).. 54,486 17,408 213.0% 17,408 2,106 726.6%
Communities held for sale (3) ............ 19,706 18,552 6.2% 18,552 18,359 1.1%
Sold communities (4) ..................... 15,928 24,285 (34.4)% 24,285 24,004 1.2%
Other revenue (5) ........................ 17,396 12,434 39.9% 12,434 9,660 28.7%
-------- -------- -------- --------
382,661 332,677 15.0% 332,677 288,017 15.5%
-------- -------- -------- --------
Property operating and maintenance expense
(exclusive of depreciation and
amortization):
Fully stabilized communities (1) ......... 70,238 67,841 3.5% 67,841 66,612 1.8%
Communities stabilized during 1999 ....... 13,957 11,898 17.3% 11,898 8,176 45.5%
Development and lease-up communities (2).. 20,802 7,729 169.1% 7,729 2,290 237.5%
Communities held for sale (3) ............ 7,314 6,748 8.4% 6,748 6,463 4.4%
Sold communities (4) ..................... 4,471 6,118 (26.9)% 6,118 6,790 (9.9)%
Other expense (6) ........................ 14,568 12,818 13.7% 12,818 9,386 36.6%
-------- -------- -------- --------
131,350 113,152 16.1% 113,152 99,717 13.5%
-------- -------- -------- --------
Revenue in excess of specified expense ..... $251,311 $219,525 14.5% $219,525 $188,300 16.6%
======== ======== ======== ========
Recurring capital expenditures: (7)
Carpet ................................... $ 2,890 $ 2,864 0.9% $ 2,864 $ 2,550 12.3%
Other .................................... 6,267 5,777 8.5% 5,777 4,929 17.2%
-------- -------- -------- --------
Total ................................. $ 9,157 $ 8,641 6.0% $ 8,641 $ 7,479 15.5%
======== ======== ======== ========
Average apartment units in service ......... 31,722 29,304 8.3% 29,304 27,416 6.9%
======== ======== ======== ========
(1) Communities which reached stabilization prior to January 1, 1999.
Includes fully stabilized communities acquired as a result of the
Merger.
(2) Communities in the "construction", "development" or "lease-up" stage
during 2000 and, therefore, not considered fully stabilized for all of
the periods presented.
(3) Includes one community in Tennessee and three communities and two
commercial properties in Texas.
(4) Includes one community containing 213 units, which was sold on February
4, 2000, three communities containing 983 units which were sold
September 6, 2000, two communities containing 367 units which were sold
on November 9, 2000, one community containing 296 units which was sold
on December 21, 2000 and one community containing 125 units which was
sold on December 28, 2000.
(5) Other revenue includes revenue on furnished apartment rentals above the
unfurnished rental rates and any revenue not directly related to
property operations.
(6) Other expenses includes certain indirect central office operating
expenses related to management, grounds maintenance, and costs
associated with furnished apartment rentals.
(7) In addition to those expenses which relate to property operations, the
Company incurs recurring and non- recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing
asset, or substantially extending the useful life of an existing asset,
all of which are capitalized.
For the year ended December 31, 2000, rental and other revenue increased $49,984
or 15.0% compared to 1999, primarily as a result of the completion of new
communities and increased rental rates for existing communities.
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For the year ended December 31, 1999, rental and other revenue increased $44,660
or 15.5% compared to 1998, primarily as a result of the completion of new
communities and increased rental rates for existing communities.
Property operating and maintenance expenses (exclusive of depreciation and
amortization) increased from 1999 to 2000 and from 1998 to 1999 primarily due to
an increase in the number of units placed in service through the development of
communities.
For the years ended December 31, 2000 and 1999, recurring capital expenditures
increased $516 or 6.0% and $1,162 or 15.5%, respectively, compared to the prior
years, primarily due to additional units placed in service and the timing and
extent of scheduled capital improvements.
FULLY STABILIZED COMMUNITIES
The Company defines fully stabilized communities as those which have reached
stabilization prior to the beginning of the previous calendar year.
The operating performance of the 63 communities containing an aggregate of
21,591 units which were stabilized as of January 1, 1999, are summarized as
follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------ -----------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
-------- -------- ------- -------- -------- -------
Rental and other revenue (1) ............ $232,435 $221,901 4.7% $221,901 $213,043 4.2%
Property operating and maintenance
expense (exclusive of depreciation
and amortization) (2) ................. 70,238 67,841 3.5% 67,841 66,612 1.8%
-------- -------- -------- --------
Revenue in excess of specified expense .. $162,197 $154,060 5.3% $154,060 $146,431 5.2%
======== ======== ======== ========
Average economic occupancy (3) .......... 96.8% 96.4% 0.4% 96.4% 96.5% (0.1)%
Average monthly rental rate per apartment
unit (4) .............................. $ 897 $ 862 4.1% $ 862 $ 836 3.1%
======== ======== ======== ========
Apartment units in service .............. $ 21,591 21,591 21,591 21,591
======== ======== ======== ========
(1) Communities which reached stabilization prior to January 1, 1999.
(2) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing
asset, or substantially extending the useful life of an existing asset,
all of which are capitalized. For the years ended December 31, 2000 and
1999, recurring expenditures were $7,573 and $7,768, or $351 and $360
on a per unit basis, respectively.
(3) Average economic occupancy is defined as gross potential rent less
vacancy losses, model expenses and bad debt divided by gross potential
rent for the period, expressed as a percentage. The calculation of
average economic occupancy does not include a deduction for concessions
and employee discounts. (Average economic occupancy, taking account of
these amounts would have been 94.9% for both years ended December 31,
2000 and 1999.) Concessions were $3,250 and $2,745 and employee
discounts were $1,143 and $599 for the years ended December 31, 2000
and 1999, respectively.
(4) Average monthly rental rate is defined as the average of the gross
actual rental rates for leased units and the average of the anticipated
rental rates for unoccupied units.
Rental and other revenue increased from 1999 to 2000 primarily due to increased
rental rates. The increase in property and maintenance expense (exclusive of
depreciation and amortization) from 1999 to 2000 was primarily due to increased
personnel and property tax expenses.
Rental and other revenue increased from 1998 to 1999 due to increased rental
rates. The increase in property and maintenance expenses (exclusive of
depreciation and amortization) from 1998 to 1999 was primarily due to an
increase in personnel and property tax expenses, partially offset by a decline
in utilities expense as a result of water sub-metering and lower repairs and
maintenance expense.
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THIRD PARTY SERVICES
THIRD PARTY MANAGEMENT SERVICES
The Company provides asset management, leasing and other consulting services to
non-related owners of apartment communities through its subsidiary, RAM. The
operating performance of RAM for the years ended December 31, 2000, 1999 and
1998 is summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------- --------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
------- ------- ------- ------- ------- ------
Property management and
other revenue .................. $ 3,826 $ 3,368 13.6% $ 3,368 $ 3,164 6.4%
Property management expense ..... 3,099 2,925 5.9% 2,925 2,499 17.0%
Depreciation expense ............ 27 27 0.0% 27 34 (20.6)%
------- ------- ------- -------
Revenue in excess of specified
expense ........................ 700 $ 416 68.3% $ 416 $ 631 (34.1)%
======= ======= ======= =======
Average apartment units managed... 14,422 12,572 14.7% 12,572 11,046 13.8%
======= ======= ======= =======
The increase in revenue in excess of specified expense from 1999 to 2000 is
primarily attributable to an increase in the average number of units managed.
The change from 1998 to 1999 is primarily attributable to management of more
communities in lease-up phases as a result of turnover in management contracts.
THIRD PARTY LANDSCAPE SERVICES
The Company provides landscape maintenance, design and installation services to
non-related parties through a subsidiary, Post Landscape Group, Inc., formerly
Post Landscape Services, Inc. ("Post Landscape Group").
The operating performance of Post Landscape Group for the years ended December
31, 2000, 1999 and 1998 are summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- ------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
------- ------- ------- ------- ------- ------
Landscape services and
other revenue .............. $11,423 $9,118 25.3% $9,118 $7,252 25.7%
Landscape services expense ... 9,993 7,904 26.4% 7,904 6,264 26.2%
Depreciation expense ......... 374 293 27.6% 293 173 69.4%
------- ------ ------ ------
Revenue in excess of specified
expense .................... $ 1,056 $ 921 14.7% $ 921 $ 815 13.0%
======= ====== ====== ======
The change in landscape services revenue and landscape services expense from
1999 to 2000 and 1998 to 1999 is primarily due to an increase in landscape
contracts.
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OTHER INCOME AND EXPENSES
Depreciation expense increased from 1999 to 2000 and from 1998 to 1999 primarily
as a result of an increase in units in service, additional leasehold
improvements and technology expenditures.
Interest expense increased from 1999 to 2000 and from 1998 to 1999 primarily due
to an increase in debt used to fund the development of new communities and
increased interest rates (1999 to 2000 only).
Amortization of deferred loan costs increased from 1999 to 2000 due primarily to
three unsecured debt issues and two secured debt issues completed by the Company
in 2000. Amortization of deferred loan costs increased from 1998 to 1999 due
primarily to two secured debt issues completed by the Company in 1999. See
"Liquidity and Capital Resources" below.
General and administrative expenses increased from 1999 to 2000 primarily due to
increased personnel costs and a reduction in development support. General and
administrative expenses decreased from 1998 to 1999 as a result of a reduction
in personnel related expenditures and an increase in development support.
The net gain on sale of assets in 2000 resulted from the sale of eight
communities, reduced by management's best estimate of the effect of the
anticipated sale of communities currently held for sale. The net loss on sale of
assets in 1999 resulted from the net loss on the sale of one community and two
tracts of land.
In the fourth quarter of 2000, management decided to restrict its development
activities to fewer markets, refine its development investment strategy, exit
the for-sale housing business and make changes in its executive management team.
As a result of this decision, the Company wrote off $4,389 of costs it had
incurred in markets it will no longer pursue for development opportunities and
on individual development deals that are no longer consistent with management's
revised strategy.
At December 31, 2000, all employees included in the severance charge of $3,066
had been notified of their termination and severance agreement. As of February
15, 2001, these employees were no longer providing any service to the Company.
The employees included in the accrual at December 31, 2000, were primarily four
executives and five accounting department employees in the Dallas regional
office. At December 31, 2000, the accrual for unpaid severance charges was
$2,250.
In addition to these charges, the Company also recorded an impairment charge of
$407 to adjust the cost of for-sale housing in Atlanta and Dallas to its
estimated net sales proceeds. Additionally, the Company recorded a charge of
$1,503 to write off its investment in Darwin Networks, a high-speed Internet
provider that filed for Chapter 11 bankruptcy in January 2001.
The loss on unused treasury locks in 1998 resulted from the termination of
treasury locks intended for debt securities that were not issued by the
Operating Partnership.
The extraordinary item in 1999, net of the minority interest portion,
resulted from the costs associated with the early retirement of debt.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's net cash provided by operating activities increased from $148,618
in 1998 to $153,038 in 1999, primarily due to increased net income partially
offset by a net decrease in cash from changes in current assets. The change in
current assets is primarily attributable to $7,750 of employee loans, $9,500 in
tax increment financing receivables with public/private development projects and
additional expenditures for pre-development activities.
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Net cash provided by operating activities increased from $153,038 in 1999 to
$185,073 in 2000 primarily due to changes in working capital and an increase in
net income before depreciation.
Net cash used in investing activities decreased from $328,216 in 1998 to
$317,960 in 1999 primarily due to proceeds from the sale of one community in
March 1999 and reduced capital expenditures. Net cash used in investing
activities decreased from $317,960 in 1999 to $255,986 in 2000 primarily due to
proceeds from the sale of eight communities partially offset by increased
spending on construction and acquisition of real estate assets.
Net cash provided by financing activities decreased from $189,873 in 1998 to
$149,638 in 1999 primarily due to reduced proceeds from debt and equity
offerings partially offset by reduced debt payments. Net cash provided by
financing activities decreased from $149,638 in 1999 to $72,502 in 2000
primarily due to increased debt payments and treasury stock purchases partially
offset by increased debt proceeds.
The Company has elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856 through 860 of the Code commencing with its taxable year
ended December 31, 1993. REITs are subject to a number of organizational and
operational requirements, including a requirement that they currently distribute
95% of their ordinary taxable income (90% beginning in 2001). As a REIT, the
Company generally will not be subject to Federal income tax on net income.
The discussion in this Liquidity section is the same for the Company and the
Operating Partnership, except that all indebtedness described herein has been
incurred by the Operating Partnership. At December 31, 2000, the Company had
total indebtedness of $1,213,309 and cash and cash equivalents of $7,459. The
Company's indebtedness includes approximately $232,504 in conventional mortgages
payable and $235,880 in tax-exempt bond indebtedness secured by communities,
senior unsecured notes of $720,000, and other unsecured debt and borrowings
under unsecured lines of credit totaling approximately $24,925. A schedule of
indebtedness is included in Item 7.
The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under credit
arrangements and expects to meet certain of its long-term liquidity
requirements, such as scheduled debt maturities, repayment of financing of
construction and development activities and possible property acquisitions,
through long-term secured and unsecured borrowings, possible sale of properties
and the issuance of debt securities or additional equity securities of the
Company or Units of the Operating Partnership in connection with acquisitions of
land or improved properties. The Company believes that its net cash provided by
operations will continue to be adequate to meet both operating requirements and
payment of dividends by the Company in accordance with REIT requirements in both
the short and the long term. The budgeted expenditures for improvements and
renovations to certain of the communities are expected to be funded from
property operations.
Lines of Credit
On January 12, 2001, the Company closed a $320,000 three-year syndicated
revolving line of credit (the "Revolver") which matures in April 2004. This line
of credit bears interest of LIBOR plus .75% or prime minus .25% and replaces the
Company's previous line. The Revolver provides for the rate to be adjusted up or
down based on changes in the credit ratings on the Company's senior unsecured
debt. The Revolver also includes a money market competitive bid option for
short-term funds up to $160,000 at rates below the stated line rate. The credit
agreement for the Revolver contains customary representations, covenants and
events of default, including covenants which restrict the ability of the
Operating Partnership to make distributions, in excess of stated amounts, which
in turn restricts the discretion of the Company to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute up
to 100% of the Operating Partnership's consolidated income available for
distribution (as defined in the credit agreement) exclusive of distributions of
up to $30,000 of capital gains for such year. The credit agreement contains
exceptions to these limitations to allow the Operating Partnership to make
distributions necessary to allow the Company to maintain its status as a REIT.
The Company does not anticipate that this covenant will adversely affect the
ability of the Operating Partnership to make distributions, or the Company to
declare dividends, under the Company's current dividend policy.
Also in January 2001, the Company reached an agreement with a syndicated group
of banks for an incremental $185,000, 364 day facility at terms substantially
equal to the Revolver.
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On July 26, 1996, the Company closed a $20,000 unsecured line of credit with
Wachovia Bank of Georgia, N.A. (The "Cash Management Line"). The Cash Management
Line bears interest at LIBOR plus .675% or prime minus .25% and matures on March
31, 2002. The Revolver requires three days advance notice to repay borrowings
whereas the Cash Management Line provides the Company with an automatic daily
sweep which applies all available cash to reduce the outstanding balance. In
addition, the Company has a $3,000 facility to provide letters of credit for
general business purposes.
Other Unsecured Debt
On March 1, 1998, the Company entered into a Disposition and Development
Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the
City of Phoenix loaned the Company $2,000. This loan is interest-free for the
first three years, with a 5.00% interest rate thereafter. Repayment of the loan
commences on March 1, 2001 with equal semi-annual payments due on March 1 and
September 1 of each year through March 1, 2021.
Tax Exempt Bonds
On June 29, 1995, the Company replaced the bank letters of credit providing
credit enhancement for its outstanding tax-exempt bonds. Under an agreement with
the Federal National Mortgage Association ("FNMA"), FNMA now provides, directly
or indirectly through other bank letters of credit, credit enhancement with
respect to such bonds. Under the terms of such agreement, FNMA has provided
replacement credit enhancement through 2025 for the bond issues, aggregating
$235,880, which were reissued. The agreement with FNMA contains representations,
covenants, and events of default customary to such secured loans.
Secured Debt
On March 30, 1999, the Company issued $50,000 of secured notes to The
Northwestern Mutual Life Insurance Company. These notes bear interest at 6.5%
with an effective rate of 7.3% after consideration of a terminated swap
agreement, mature on March 1, 2009 and are secured by two apartment communities.
Net proceeds of $49,933 were used to repay outstanding indebtedness.
On July 23, 1999, the Company issued $104,000 of secured notes to FNMA. Net
proceeds of $101,988 were used to repay outstanding indebtedness. These notes
bear interest at 30-day LIBOR plus credit enhancement, liquidity and service
fees of .935%, mature on July 23, 2029 and are secured by five apartment
communities. The notes include a prepayment penalty that is an amount equal to a
percentage of the principal amount remaining under the notes at the time of
prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth
year. The Company has an option to call these notes after ten years from the
issuance date. In December 2000, the Company entered into a swap transaction
that fixed the rate of interest on this note at 6.975%, inclusive of credit
enhancement and other fees, from January 1, 2001 through July 31, 2009.
On October 3, 2000, the Company issued two secured notes totaling $80,000 to The
Northwestern Mutual Life Insurance Company. The notes bear interest at 7.69% and
mature on October 1, 2007. Each note is secured by an apartment community. Net
proceeds of $79,334 were used to repay outstanding indebtedness.
Senior Unsecured Debt Offerings
On June 7, 1995, the Company issued $50,000 of unsecured senior notes with The
Northwestern Mutual Life Insurance Company. The notes were in two tranches; the
first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over
the corresponding treasury rate on the date such rate was set) and matures on
June 7, 2001; and the second, totaling $20,000 carries an interest rate of 8.37%
per annum (1.35% over the corresponding treasury rate on the date such rate was
set) and matures on June 7, 2002. Proceeds from the notes were used to repay
outstanding indebtedness. The note agreements pursuant to which the notes were
purchased contain customary representations, covenants and events of default
similar to those contained in the note agreement for the Revolver.
On September 30, 1996, the Company completed a public offering of $125,000
senior unsecured debt comprised of two tranches. The first tranche, $100,000 of
7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to
yield 7.316%, or 71 basis points over the rate on U.S. Treasury securities with
a comparable maturity. The second tranche, $25,000 of 7.50% Notes due on October
1, 2006 (the "2006 Notes", and together with the 2003
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Notes, the "Notes"), was priced at 99.694% to yield 7.544%, or 83 basis points
over the rate on U.S. Treasury securities with a comparable maturity. Proceeds
from the Notes were used to repay outstanding indebtedness.
On December 20, 2000, the Company issued $185,000 of unsecured senior notes. The
notes bear interest at 7.70% and mature on December 20, 2010. Net proceeds of
approximately $183,798 were used to repay outstanding indebtedness.
Medium Term Notes and Mandatory Par Put Remarketed Securities
On January 29, 1997, the Company established a program for the sale of
Medium-Term Notes due three months or more from the date of issue (the "MTNs").
As of December 31, 2000, the Company had $360,000 aggregate principal amount of
notes outstanding under the MTN Program. Proceeds from the MTNs were used to (i)
prepay certain outstanding notes and (ii) repay outstanding indebtedness.
On March 12, 1998, the Company issued $100,000 of 6.85% Mandatory Par Put
Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds
of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding
indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co.
purchased an option to remarket the securities as of March 16, 2005 (the
"Remarketing Date") reducing the effective borrowing rate through the
Remarketing Date to 6.59%. In anticipation of the offering, the Company entered
into forward-treasury-lock agreements in the fall of 1997. As a result of the
termination of these agreements, the effective borrowing rate was increased to
approximately 6.85%, the coupon rate on the MOPPRS(SM).
On May 9, 2000, the Company sold $25,000 aggregate principal amount of notes
under the MTN Program. These notes bear interest at the London Interbank Offer
Rate ("LIBOR") plus .75% and mature on February 1, 2005. Net proceeds of $24,875
were used to repay outstanding indebtedness. In October 2000, the Company
entered into a swap transaction that fixed the rate on the notes at 7.28%,
inclusive of credit enhancement and other fees, through maturity.
On June 16, 2000, the Company sold $150,000 aggregate principal amount of notes
under the MTN Program. These notes bear interest at 8.12% and mature on June 15,
2005. Net proceeds of $148,865 were used to repay outstanding indebtedness.
Preferred Unit Offerings
On September 3, 1999, the Operating Partnership issued $70,000 of Series D
Cumulative Redeemable Preferred Units of limited partnership interest (the
"Series D Preferred Units") to an institutional investor in a private placement
meeting the requirements of Regulation D promulgated under the Securities Act of
1933, as amended. Net proceeds to the Operating Partnership of approximately
$68,000 were used to repay outstanding indebtedness.
Perpetual Preferred Stock Offerings
On February 9, 1998, the Company sold two million non-convertible 7 5/8% Series
C Cumulative Redeemable Shares (the "Series C Perpetual Preferred Shares") with
a liquidation preference of $25 per share. Net proceeds of $48,284 from the sale
of Series C Perpetual Shares were contributed to the Operating Partnership in
exchange for two million Perpetual Preferred Units and used by the Operating
Partnership to repay outstanding indebtedness.
Common Stock Offerings
On December 8, 1998, the Company issued 730,000 shares of common stock at a
price of $37 per share. The net proceeds of approximately $27,000 were
contributed to the Operating Partnership and used to repay outstanding
indebtedness.
On November 4, 1998, the Company issued 1.15 million shares of common stock at a
price of $38.6875 per share. The net proceeds of approximately $42,200 were
contributed to the Operating Partnership and used to repay outstanding
indebtedness.
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On May 28, 1998, the Company issued 373,250 shares of its common stock at a
price of $40.1875 per share. The shares were deposited into a registered unit
investment trust, the Paine Webber Equity Trust Reit Series 1. Net proceeds of
$13,662 were contributed to the Operating Partnership and were used to fund
development and other operating cash flow needs.
On April 29, 1998, the Company issued approximately 1.1 million shares of its
common stock at a price of $40.5625 per share. The shares were deposited into a
registered unit investment trust, the Equity Investor Fund Cohen & Steers Realty
Majors Portfolio. Net proceeds of $44,059 were used to repay outstanding
indebtedness.
On March 4, 1998, the Company issued 3.5 million shares of common stock at a
price of $39 per share. Net proceeds of $129,179 were used to repay outstanding
indebtedness.
Stock Repurchase Program
The Company's Board of Directors has approved the purchase of up to $100,000 of
the Company's common stock. In the fourth quarter of 2000, the Company began
repurchasing shares of its common stock in accordance with the announced stock
repurchase program using funds from operating cash flow and the sale of
properties. Purchases will be made from time to time in the open market and it
is expected that funding of the program will come from operating cash flow,
existing bank facilities, and proceeds from asset sales. Through December 31,
2000, the Company had repurchased 757,500 shares of its common stock at a total
cost of $26,620. From January 1, 2001 through February 10, 2001, the Company has
repurchased an additional 255,000 shares of its common stock at a total cost of
$9,451. Treasury stock activity for the year ended December 31, 2000 was as
follows:
TREASURY STOCK
SHARES AMOUNT
-------- --------
Balance at December 31, 1999 ............ -- $ --
Acquisitions of common stock ......... 757,500 26,620
Other additions ...................... 54,497 2,435
Distribution under Employee Stock Plan (3,401) (152)
-------- --------
Balance at December 31, 2000 ............ 808,596 $ 28,903
======== ========
Amounts in thousands, except share data
There were 100,000,000 shares of common stock authorized and 38,853,596
and 38,834,323 shares of common stock outstanding at December 31, 2000 and
1999, respectively.
Sale of Properties
In February 2000, the Company sold a 213-unit property located in Atlanta,
Georgia for $32,350. Net proceeds of approximately $31,500 were used to repay
outstanding indebtedness.
In September 2000, the Company sold three communities in Jackson, Mississippi
containing a total of 983 units, for $44,600. Net proceeds of approximately
$42,903 were used to repay outstanding indebtedness.
In November 2000, the Company sold two properties located in Nashville,
Tennessee, containing a total of 367 units, for $36,885. Net proceeds of
approximately $36,290 were used to repay outstanding indebtedness.
In December 2000, the Company sold two properties located in Atlanta, Georgia,
containing a total of 421 units, for $47,250. Net proceeds of approximately
$46,651 were used to repay outstanding indebtedness and to repurchase the
Company's common stock.
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Schedule of Indebtedness
The following table reflects the Company's indebtedness at December 31, 2000:
MATURITY PRINCIPAL
DESCRIPTION LOCATION INTEREST RATE DATE (1) BALANCE
----------- ---------- ------------- -------- ----------
CONVENTIONAL FIXED RATE (SECURED)
Parkwood Townhomes(TM) ................ Dallas, TX 7.375% 04/01/14 $ 799
Northwestern Mutual Life .............. N/A 6.50% (2) 03/01/09 48,601
Northwestern Mutual Life .............. Dallas, TX 7.69% 10/01/07 28,666
Northwestern Mutual Life .............. Dallas, TX 7.69% 10/01/07 51,238
FNMA .................................. Atlanta, GA 6.975% (3) 07/23/29 103,200
----------
232,504
----------
TAX EXEMPT FLOATING RATE (SECURED)
Post Ashford(R) Series 1995............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 9,895
Post Valley(R) Series 1995.............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 18,600
Post Brook(R) Series 1995............... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 4,300
Post Village(R) (Atlanta) Hills
Series 1995........................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 7,000
Post Mill(R) Series 1995................ Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 12,880
Post Canyon(R) Series 1996.............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 16,845
Post Corners(R) Series 1996............. Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 14,760
Post Bridge(R).......................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 12,450
Post Village(R) (Atlanta) Gardens....... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 14,500
Post Chase(R)........................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 15,000
Post Walk(R)............................ Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 15,000
Post Lake(R)............................ Orlando, FL "AAA" NON-AMT + .515% (4)(5) 06/01/25 28,500
Post Fountains at Lee Vista(R).......... Orlando, FL "AAA" NON-AMT + .515% (4)(5) 06/01/25 21,500
Post Village(R) (Atlanta) Fountains
and Meadows.......................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 26,000
Post Court(R)........................... Atlanta, GA "AAA" NON-AMT + .515% (4)(5) 06/01/25 18,650
----------
235,880
----------
SENIOR NOTES (UNSECURED)
Northwestern Mutual Life................ N/A 8.21% 06/07/01 30,000
Medium Term Notes....................... N/A 7.02% 04/02/01 37,000
Northwestern Mutual Life................ N/A 8.37% 06/07/02 20,000
Senior Notes............................ N/A 7.25% 10/01/03 100,000
Medium Term Notes....................... N/A 7.30% 04/01/04 13,000
Medium Term Notes....................... N/A 6.69% 09/22/04 10,000
Medium Term Notes....................... N/A 6.78% 09/22/05 25,000
Senior Notes............................ N/A 7.50% 10/01/06 25,000
Mandatory Par Put Remarketed
Securities............................. N/A 6.85% (6) 03/16/15 100,000
Medium Term Notes....................... N/A 7.28% (7) 02/01/05 25,000
Medium Term Notes....................... N/A 8.12% 06/15/05 150,000
Senior Notes............................ N/A 7.70% 12/20/10 185,000
----------
720,000
----------
LINES OF CREDIT & OTHER UNSECURED DEBT
City of Phoenix......................... N/A 5.00% (8) 03/01/21 2,000
Revolver ............................... N/A LIBOR + .825% or prime minus .25% (9) 04/30/03 18,000
Cash Management Line.................... N/A LIBOR + .675% or prime minus .25% 03/31/01 4,925
----------
24,925
----------
TOTAL................................... $1,213,309
==========
(1) All of the mortgages can be prepaid at any time, subject to certain
prepayment penalties.
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(2) This note bears interest at 6.50% with an effective rate of 7.30% after
consideration of a terminated swap agreement.
(3) In December 2000, the Company entered into a swap transaction that
fixed the rate of interest on this note at 6.975%, inclusive of credit
enhancement and other fees, from January 1, 2001 through July 31, 2009.
(4) Bond financed (interest rate on bonds + credit enhancement fees
effective October 1, 1998). The Company pays credit enhancement fees of
.515% of the amount of such bonds or the amount of the letters of
credit, as the case may be.
(5) These bonds are cross-collateralized. The Company has purchased an
interest rate cap that limits the Company's exposure to increases in
the base rate to 5%.
(6) The annual interest rate on these securities to March 16, 2005 (the
"Remarketing Date") is 6.85%. On the Remarketing Date, they are subject
to mandatory tender for remarketing.
(7) In October 2000, the Company entered into a swap transaction that fixed
the rate on the note at 7.28%, inclusive of credit enhancement and
other fees, through maturity.
(8) This loan is interest free for the first three years, with interest at
5.00% thereafter. Repayment is to commence on March 1, 2001 subject to
the conditions set forth in the Agreement.
(9) Represents stated rate. The Company may also make "money market" loans
of up to $175,000 at rates below the stated rate. At December 31, 2000,
the outstanding balance of the Revolver consisted of "money market"
loans with an average interest rate of 7.49%. Effective January 12,
2001, the interest rate is LIBOR plus .75% or prime minus .25% and the
debt matures April 30, 2004. Also effective January 12, 2001, the
Company may make "money market" loans of up to $160,000 at rates below
the stated rate.
Capitalization of Fixed Assets and Community Improvements
The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. All expenditures
necessary to maintain a community in ordinary operating condition are expensed
as incurred. During the first five years of a community (which corresponds to
the estimated depreciable life), carpet replacements are expensed as incurred.
Thereafter, carpet replacements are capitalized.
Acquisition of assets and community improvement expenditures for the years ended
December 31, 2000 and 1999 are summarized as follows:
YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999
--------- ---------
New community development and acquisition activity..... $387,649 $320,081
Revenue generating additions and improvements:
Property renovations ............................... 6,638 7,826
Submetering of water service ....................... 32 185
Nonrecurring capital expenditures:
Vehicle access control gates ....................... 403 794
Other community additions and improvements ......... 5,173 2,177
Recurring capital expenditures:
Carpet replacements ................................ 2,890 2,864
Other community additions and improvements ......... 6,267 5,777
Corporate additions and improvements ............... 3,441 6,811
-------- --------
$412,493 $346,515
======== ========
INFLATION
Substantially all of the leases at the Communities allow, at the time of
renewal, for adjustments in the rent payable thereunder, and thus may enable the
Company to seek increases in rents. The substantial majority of these leases are
for one year or less and the remaining leases are for up to two years. At the
expiration of a lease term, the Company's lease agreements provide that the term
will be extended unless either the Company or the lessee gives at least sixty
(60) days written notice of termination; in addition, the Company's policy
permits the earlier termination of a lease by a lessee upon thirty (30) days
written notice to the Company and the payment of one month's additional rent as
compensation for early termination. The short-term nature of these leases
generally serves to reduce the risk to the Company of the adverse effect of
inflation.
NEW ACCOUNTING PRONOUNCEMENTS
See Note 1 to Consolidated Financial Statements of the Company.
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Historical Funds from Operations
The Company considers funds from operations ("FFO") a useful measure of
performance of an equity REIT. FFO is defined to mean net income available to
common shareholders determined in accordance with GAAP, excluding
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gains (or losses) from debt restructuring and sales of property, plus
depreciation of real estate assets, and after adjustment for unconsolidated
partnerships and joint ventures. FFO should not be considered as an alternative
to net income (determined in accordance with GAAP) as an indicator of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's liquidity,
nor is it necessarily indicative of sufficient cash flow to fund all of the
Company's needs. Cash available for distribution ("CAD") is defined as FFO less
capital expenditures funded by operations and loan amortization payments. The
Company believes that in order to facilitate a clear understanding of the
consolidated historical operating results of the Company, FFO and CAD should be
examined in conjunction with net income as presented in the consolidated
financial statements and data included elsewhere in this report.
FFO and CAD for the years ended December 31, 2000, 1999 and 1998 presented on a
historical basis are summarized in the following table:
Calculations of Funds from Operations and Cash Available for Distribution
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2000 1999 1998
------------ ------------ ------------
Net income available to common shareholders ......................... $ 88,645 $ 92,642 $ 77,477
Extraordinary item, net of minority interest ........................ -- 458 --
Minority interest ................................................... 11,691 12,598 11,511
Net (gain) loss on sale of assets ................................... (3,208) 1,522 --
------------ ------------ ------------
Adjusted net income ................................................. 97,128 107,220 88,988
Depreciation of real estate assets .................................. 66,283 55,361 45,214
------------ ------------ ------------
Funds from Operations (1) ........................................... 163,411 162,581 134,202
Recurring capital expenditures (2) .................................. (9,157) (8,641) (7,479)
Non-recurring capital expenditures (3) .............................. (5,576) (2,971) (1,423)
Loan amortization payments .......................................... (1,869) (81) (75)
------------ ------------ ------------
Cash Available for Distribution ..................................... $ 146,809 $ 150,888 $ 125,225
============ ============ ============
Revenue generating capital expenditures (4) ......................... $ 6,670 $ 8,011 $ 13,614
============ ============ ============
Cash Flow Provided From (Used In):
Operating activities .............................................. $ 185,073 $ 153,038 $ 148,618
Investing activities .............................................. $ (255,986) $ (317,960) $ (328,216)
Financing activities .............................................. $ 72,502 $ 149,638 $ 189,873
Weighted average common shares outstanding - basic .................. 39,317,725 38,460,689 35,028,596
============ ============ ============
Weighted average common shares outstanding - diluted ................ 39,852,514 38,916,987 35,473,587
============ ============ ============
Weighted average common shares and units outstanding - basic ........ 44,503,290 43,663,373 40,244,351
============ ============ ============
Weighted average common shares and units outstanding - diluted ...... 45,038,079 44,119,671 40,689,342
============ ============ ============
(1) The Company uses the National Association of Real Estate Investment
Trusts ("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT
amended its definition of FFO to include in FFO all non-recurring
transactions, except those that are defined as extraordinary under
generally accepted accounting principles ("GAAP"). The Company adopted
this new definition effective January 1, 2000. FFO for any period means
the Consolidated Net Income of the Company and its subsidiaries for
such period excluding gains or losses from debt restructuring and sales
of property plus depreciation of real estate assets, and after
adjustment for unconsolidated partnerships and joint ventures, all
determined on a consistent basis in accordance with GAAP. FFO
presented herein is not necessarily comparable to FFO presented by
other real estate companies because not all real estate companies use
the same definition. The Company's FFO is comparable to the FFO of real
estate companies that use the current NAREIT definition. FFO should not
be considered as an alternative to net income (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is
it necessarily indicative of sufficient cash flow to fund all of the
Company's needs or ability to service indebtedness or make
distributions. FFO for 1998 has been restated to reflect the
requirements of the new NAREIT definition.
(2) Recurring capital expenditures consisted primarily of $2,890, $2,864
and $2,550 of carpet replacement and $6,267, $5,777 and $4,929 of other
community additions and improvements to existing communities for the
years ended December 31, 2000, 1999 and 1998, respectively. Since the
Company does not add back the depreciation of non-real estate assets in
its calculation of FFO, capital expenditures of $3,441, $6,811, and
$8,576 are excluded from the calculation of CAD for the years ended
December 31, 2000, 1999 and 1998, respectively.
(3) Non-recurring capital expenditures consisted of the additions of
vehicle access control gates to communities of $403, $794, and $377 and
other community additions and improvements of $5,173, $2,177 and $1,046
for the years ended December 31, 2000, 1999 and 1998, respectively.
(4) Revenue generating capital expenditures included major renovations of
communities in the amount of $6,638, $7,826, and $12,896 for the years
ended December 31, 2000, 1999 and 1998, respectively, and sub-metering
of water service to communities in the amounts of $32, $185, and $718
for the years ended December 31, 2000, 1999 and 1998, respectively.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements made in this report, and other written or oral statements
made by or on behalf of the Company, may constitute "forward-looking statements"
within the meaning of the federal securities laws. Statements regarding future
events and developments and the Company's future performance, as well as
management's expectations, beliefs, plans, estimates or projections relating to
the future, are forward-looking statements within the meaning of these laws.
Examples of such statements in this report include descriptions of our plans
with respect to the development of new apartment communities, our plans to enter
new markets and our expectations relating to our continuing growth. All
forward-looking statements are subject to certain risks and uncertainties that
could cause actual events to differ materially from those projected. Management
believes that these forward-looking statements are reasonable; however, you
should not place undue reliance on such statements. These statements are based
on current expectations and speak only as of the date of such statements. The
Company undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of future events, new information
or otherwise. Additional information concerning the risk and uncertainties
listed above, and other factors that you may wish to consider, is contained
elsewhere in the Company's filings with the Securities and Exchange Commission.
The following are some of the factors that could cause the Company's actual
results to differ materially from the expected results described in the
Company's forward-looking statements:
- - conditions affecting the acquisition, development and ownership of
residential real estate, including local zoning and land use issues,
environmental regulations, the Americans with Disabilities Act, the
Fair Housing Amendments Act of 1988 and general conditions in the
multi-family residential real estate market.
- - adverse or unanticipated weather conditions, which may affect the
Company's overall level of development.
- - the Company's ability to obtain financing for the development of
additional apartment communities.
- - the impact of competition, including competition for tenants and
locations and in other important aspects of the Company's business. The
Company's primary competitors include other regional or national
apartment communities. The multifamily apartment community business is
highly competitive.
- - general economic conditions which affected consumer confidence and
purchases of new homes, including interest rates, the overall level of
economic activity, the availability of consumer credit and mortgage
financing, unemployment rates, and other factors.
- - the Company's ability to continue to qualify as a real estate
investment trust under the Code.
- - changes in laws and regulations, including changes in accounting
standards, tax statutes or regulations, and environmental and land use
regulations, and uncertainties of litigation.
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RISK FACTORS
THE FOLLOWING RISK FACTORS APPLY TO THE COMPANY AND THE OPERATING PARTNERSHIP.
ALL INDEBTEDNESS DESCRIBED IN THE RISK FACTORS HAS BEEN INCURRED BY THE
OPERATING PARTNERSHIP.
UNFAVORABLE CHANGES IN APARTMENT MARKETS AND ECONOMIC CONDITIONS COULD ADVERSELY
AFFECT OCCUPANCY LEVELS AND RENTAL RATES.
Market and economic conditions in the various metropolitan areas of the
United States where the Company operates may significantly affect occupancy
levels and rental rates and therefore profitability. Factors that may adversely
affect these conditions include the following:
- the economic climate, which may be adversely impacted by a
reduction in jobs, industry slowdowns and other factors;
- local conditions, such as oversupply of, or reduced demand
for, apartment homes;
- a future economic downturn that simultaneously affects one or
more of the Company's geographic markets;
- declines in household formation;
- rent control or stabilization laws, or other laws regulating
rental housing, which could prevent the Company from raising
rents to offset increases in operating costs; and
- competition from other available apartments and changes in
market rental rates.
Any of these factors could adversely affect the Company's ability to achieve
desired operating results from its communities.
DEVELOPMENT AND CONSTRUCTION RISKS COULD IMPACT THE COMPANY'S PROFITABILITY.
The Company intends to continue to develop and construct apartment
communities. Development activities may be conducted through wholly-owned
affiliated companies or through joint ventures with unaffiliated parties. The
Company's development and construction activities may be exposed to the
following risks:
- the Company may be unable to obtain, or face delays in
obtaining, necessary zoning, land-use, building, occupancy,
and other required governmental permits and authorizations,
which could result in increased development costs;
- the Company may incur construction costs for a property that
exceed original estimates due to increased materials, labor or
other costs, which could make completion of the property
uneconomical, and the Company may not be able to increase
rents to compensate for the increase in construction costs;
- the Company intends to concentrate its attention on fewer
markets and reduce annual development expenditures, and it may
abandon development opportunities that it has already begun to
explore, and it may fail to recover expenses already incurred
in connection with exploring those opportunities;
- the Company has been and may continue to be unable to complete
construction and lease-up of a community on schedule and meet
financial goals for development projects;
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- because occupancy rates and rents at a newly developed
community may fluctuate depending on a number of factors,
including market and economic conditions, the Company may be
unable to meet its profitability goals for that community; and
- construction costs have been increasing in the Company's
existing markets, and may continue to increase in the future
and, in some cases, the costs of upgrading acquired
communities have, and may continue to, exceed original
estimates and the Company may be unable to charge rents that
would compensate for these increases in costs.
FAILURE TO SUCCEED IN NEW MARKETS MAY LIMIT THE COMPANY'S GROWTH.
The Company may from time to time commence development activity or make
acquisitions outside of its existing market areas if appropriate opportunities
arise. The Company's historical experience in its existing markets does not
ensure that it will be able to operate successfully in new markets. The Company
may be exposed to a variety of risks if it chooses to enter new markets. These
risks include, among others:
- an inability to evaluate accurately local apartment market
conditions and local economies;
- an inability to obtain land for development or to identify
appropriate acquisition opportunities;
- an inability to hire and retain key personnel; and
- lack of familiarity with local governmental and permitting
procedures.
POSSIBLE DIFFICULTY OF SELLING APARTMENT COMMUNITIES COULD LIMIT THE COMPANY'S
OPERATIONAL AND FINANCIAL FLEXIBILITY.
Although the Company has experienced success in disposing of apartment
communities that no longer meet its strategic objectives, market conditions
could change and purchasers may not be willing to pay acceptable prices. A weak
market may limit the Company's ability to change its portfolio promptly in
response to changing economic conditions. Also, if the Company is unable to sell
apartment communities or if it can only sell apartment communities at prices
lower than are generally acceptable, then the Company may not have adequate
capital to execute its development and construction strategy. Furthermore, a
significant portion of the proceeds from the Company's overall property sales
may be held in escrow accounts in order for some sales to qualify as like-kind
exchanges under Section 1031 of the Internal Revenue Code so that any related
capital gain can be deferred for federal income tax purposes. As a result, the
Company may not have immediate access to all of the cash flow generated from
property sales.
CHANGING INTEREST RATES COULD INCREASE INTEREST COSTS AND COULD AFFECT THE
MARKET PRICE OF THE COMPANY'S SECURITIES.
The Company has incurred, and expects to continue to incur, debt
bearing interest at rates that vary with market interest rates. Therefore, if
interest rates increase, the Company's interest costs will rise to the extent
its variable rate debt is not hedged effectively. In addition, an increase in
market interest rates may lead purchasers of the Company's securities to demand
a higher annual yield, which could adversely affect the market price of the
Company's common and preferred stock and debt securities.
FAILURE TO GENERATE SUFFICIENT CASH FLOWS COULD AFFECT THE COMPANY'S DEBT
FINANCING AND CREATE REFINANCING RISK.
The Company is subject to the risks normally associated with debt
financing, including the risk that its cash flow will be insufficient to make
required payments of principal and interest. Although the Company may be able to
use cash flow to make future principal payments, it cannot assure investors that
sufficient cash flow will be available to make all required principal payments
and still satisfy the distribution requirements that the Company must satisfy in
order to maintain its status as a real estate investment trust or "REIT" for
federal income tax purposes. The following factors, among others, may affect the
cash flows generated by the Company's apartment communities:
- the national and local economies;
- local real estate market conditions, such as an oversupply of
apartment homes;
- the perceptions by prospective residents of the safety,
convenience and attractiveness of the Company's communities
and the neighborhoods in which they are located;
- the Company's ability to provide adequate management,
maintenance and insurance; and
- rental expenses, including real estate taxes and utilities.
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Expenses associated with the Company's investment in a community, such
as debt service, real estate taxes, insurance and maintenance costs, are
generally not reduced when circumstances cause a reduction in cash flows from
operations from that community. If a community is mortgaged to secure payment of
debt and the Company is unable to make the mortgage payments, the Company could
sustain a loss as a result of foreclosure on the community or the exercise of
other remedies by the mortgagee. The Company is likely to need to refinance at
least a portion of its outstanding debt as it matures. There is a risk that the
Company may not be able to refinance existing debt or that the terms of any
refinancing will not be as favorable as the terms of the existing debt. As of
December 31, 2000, the Company had outstanding mortgage indebtedness of
approximately $468 million and senior unsecured debt of approximately $720
million and outstanding indebtedness under its lines of credit aggregating $25
million.
THE COMPANY COULD BECOME MORE HIGHLY LEVERAGED WHICH COULD RESULT IN AN
INCREASED RISK OF DEFAULT AND IN AN INCREASE IN ITS DEBT SERVICE REQUIREMENTS.
The Company's board of directors has adopted a policy of limiting
indebtedness to approximately 60% of the undepreciated book value of its assets,
but the Company's organizational documents do not contain any limitation on the
amount or percentage of indebtedness, funded or otherwise, that it might incur.
If this policy were changed, the Company could become more highly leveraged,
resulting in an increase in debt service that could adversely affect funds from
operations and the Company's ability to make expected distributions to its
shareholders and the Operating Partnership's ability to make expected
distributions to its limited partners and in an increased risk of default on the
obligations of the Company and the Operating Partnership. In addition, the
Company's and the Operating Partnership's ability to incur debt is limited by
covenants in bank and other credit agreements. The Company manages its debt to
be in compliance with its stated policy and with these debt covenants, but
subject to compliance with these covenants, the Company may increase the amount
of outstanding debt at any time without a concurrent improvement in the
Company's ability to service the additional debt. Accordingly, the Company could
become more leveraged, resulting in an increased risk of default on its
obligations and in an increase in debt service requirements, both of which could
adversely affect the Company's financial condition and ability to access debt
and equity capital markets in the future.
DEBT FINANCING MAY NOT BE AVAILABLE AND EQUITY ISSUANCES COULD BE DILUTIVE TO
THE COMPANY'S SHAREHOLDERS.
The Company's ability to execute its business strategy depends on its
access to an appropriate blend of debt financing, including unsecured lines of
credit and other forms of secured and unsecured debt, and equity financing,
including common and preferred equity. Debt financing may not be available in
sufficient amounts, or on favorable terms or at all. If the Company issues
additional equity securities to finance developments and acquisitions instead of
incurring debt, the interests of existing shareholders could be diluted.
ACQUIRED COMMUNITIES MAY NOT ACHIEVE ANTICIPATED RESULTS.
The Company intends to continue to selectively acquire apartment
communities that meet its investment criteria. The Company's acquisition
activities and their success may be exposed to the following risks:
- an acquired community may fail to achieve expected occupancy
and rental rates and may fail to perform as expected;
- the Company may not be able to successfully integrate acquired
properties and operations; and
- the Company's estimates of the costs of repositioning or
redeveloping the acquired property may prove inaccurate,
causing the Company to fail to meet its profitability goals.
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INCREASED COMPETITION COULD LIMIT THE COMPANY'S ABILITY TO LEASE APARTMENT HOMES
OR INCREASE OR MAINTAIN RENTS.
The Company's apartment communities compete with numerous housing
alternatives in attracting residents, including other apartment communities and
single-family rental homes, as well as owner occupied single- and multi-family
homes. Competitive housing in a particular area could adversely affect the
Company's ability to lease apartment homes and increase or maintain rents.
LIMITED INVESTMENT OPPORTUNITIES COULD ADVERSELY AFFECT THE COMPANY'S GROWTH.
The Company expects that other real estate investors will compete to
acquire existing properties and to develop new properties. These competitors
include insurance companies, pension and investment funds, developer
partnerships, investment companies and other apartment REITs. This competition
could increase prices for properties of the type that the Company would likely
pursue, and competitors may have greater resources than the Company. As a
result, the Company may not be able to make attractive investments on favorable
terms, which could adversely affect its growth.
INTEREST RATE HEDGING CONTRACTS MAY BE INEFFECTIVE AND MAY RESULT IN MATERIAL
CHARGES.
From time to time when the Company anticipates issuing debt securities,
it may seek to limit exposure to fluctuations in interest rates during the
period prior to the pricing of the securities by entering into interest rate
hedging contracts. The Company may do this to increase the predictability of its
financing costs. Also, from time to time the Company may rely on interest rate
hedging contracts to limit its exposure under variable rate debt to unfavorable
changes in market interest rates. If the pricing of new debt securities is not
within the parameters of, or market interest rates produce a lower interest cost
than the Company incurs under, a particular interest rate hedging contract, the
contract is ineffective. Furthermore, the settlement of interest rate hedging
contracts has involved and may in the future involve material charges. These
charges are typically related to the extent and timing of fluctuations in
interest rates. Despite the Company's efforts to minimize its exposure to
interest rate fluctuations, the Company cannot guarantee that it will maintain
coverage for all of its outstanding indebtedness at any particular time. If the
Company does not effectively protect itself from this risk, it may be subject to
increased interest costs resulting from interest rate fluctuations.
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LOSSES FROM NATURAL CATASTROPHES MAY EXCEED INSURANCE COVERAGE.
The Company carries comprehensive liability, fire, flood, extended
coverage and rental loss insurance on its properties, which are believed to be
of the type and amount customarily obtained on real property assets. The Company
intends to obtain similar coverage for properties acquired in the future.
However, some losses, generally of a catastrophic nature, such as losses from
floods or earthquakes, may be subject to limitations. The Company exercises
discretion in determining amounts, coverage limits and deductibility provisions
of insurance, with a view to maintaining appropriate insurance on its
investments at a reasonable cost and on suitable terms. If the Company suffers a
substantial loss, its insurance coverage may not be sufficient to pay the full
current market value or current replacement value of the lost investment.
Inflation, changes in building codes and ordinances, environmental
considerations and other factors also might make it infeasible to use insurance
proceeds to replace a property after it has been damaged or destroyed.
POTENTIAL LIABILITY FOR ENVIRONMENTAL CONTAMINATION COULD RESULT IN SUBSTANTIAL
COSTS.
The Company is in the business of acquiring, developing, owning,
operating and from time to time selling real estate. Under various federal,
state and local environmental laws, as a current or former owner or operator,
the Company could be required to investigate and remediate the effects of
contamination of currently or formerly owned real estate by hazardous or toxic
substances, often regardless of its knowledge of or responsibility for the
contamination and solely by virtue of its current or former ownership or
operation of the real estate. In addition, the Company could be held liable to a
governmental authority or to third parties for property damage and for
investigation and clean-up costs incurred in connection with the contamination.
These costs could be substantial, and in many cases environmental laws create
liens in favor of governmental authorities to secure their payment. The presence
of such substances or a failure to properly remediate any resulting
contamination could materially and adversely affect the Company's ability to
borrow against, sell or rent an affected property.
COMPLIANCE OR FAILURE TO COMPLY WITH LAWS REQUIRING ACCESS TO THE COMPANY'S
PROPERTIES BY DISABLED PERSONS COULD RESULT IN SUBSTANTIAL COST.
The Americans with Disabilities Act, the Fair Housing Act of 1988 and
other federal, state and local laws generally require that public accommodations
be made accessible to disabled persons. Noncompliance could result in the
imposition of fines by the government or the award of damages to private
litigants. These laws may require the Company to modify its existing properties.
These laws may also restrict renovations by requiring improved access to such
buildings by disabled persons or may require the Company to add other structural
features that increase construction costs. Legislation or regulations adopted in
the future may impose further burdens or restrictions on the Company with
respect to improved access by disabled persons. The Company cannot ascertain the
costs of compliance with these laws, which may be substantial.
THE COMPANY MAY FAIL TO QUALIFY AS A REIT FOR FEDERAL INCOME TAX PURPOSES.
The Company's qualification as a REIT for federal income tax purposes
depends upon its ability to meet on a continuing basis, through actual annual
operating results, distribution levels and diversity of stock ownership, the
various qualification tests and 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
34
37
might make changes to the tax laws and regulations, and the courts might issue
new decisions that make it more difficult, or impossible, for the Company to
remain qualified as a REIT. The Company does not believe, however, that any
pending or proposed tax law changes would jeopardize its REIT status.
If the Company were to fail to qualify for taxation as a REIT in any
taxable year, and certain relief provisions of the Internal Revenue Code did not
apply, the Company would be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, leaving less
money available for distributions to its shareholders. In addition,
distributions to shareholders in any year in which the Company failed to qualify
would not be deductible by the Company for federal income tax purposes nor would
they be required to be made. Unless entitled to relief under specific statutory
provisions, the Company also would be disqualified from taxation as a REIT for
the four taxable years following the year during which it ceased to qualify as a
REIT. It is not possible to predict whether in all circumstances the Company
would be entitled to such statutory relief. The Company's failure to qualify as
a REIT likely would have a significant adverse effect on the value of its
securities.
THE OPERATING PARTNERSHIP MAY FAIL TO BE TREATED AS A PARTNERSHIP FOR FEDERAL
INCOME TAX PURPOSES.
Management believes that the Operating Partnership qualifies, and has
so qualified since its formation, as a partnership for federal income tax
purposes and not as a publicly traded partnership taxable as a corporation. No
assurance can be provided, however, that the IRS will not challenge the
treatment of the Operating Partnership as a partnership for federal income tax
purposes or that a court would not sustain such a challenge. If the IRS were
successful in treating the Operating Partnership as a corporation for federal
income tax purposes, then the taxable income of the Operating Partnership would
be taxable at regular corporate income tax rates. In addition, the treatment of
the Operating Partnership as a corporation would cause the Company to fail to
qualify as a REIT. See "--The Company may fail to qualify as a REIT for federal
income tax purposes" above.
THE COMPANY'S SHAREHOLDERS MAY NOT BE ABLE TO EFFECT A CHANGE OF CONTROL.
The articles of incorporation and bylaws of the Company, the
partnership agreement of the Operating Partnership, and the Georgia Business
Corporation Code contain a number of provisions that could delay, defer or
prevent a transaction or a change of control that might involve a premium price
for the Company's shareholders or otherwise be in their best interests,
including the following:
Ownership limit. One of the requirements for maintenance of the
Company's qualification as a REIT for federal income tax purposes is that no
more than 50% in value of its outstanding capital stock may be owned by five or
fewer individuals, including entities specified in the Internal Revenue Code,
during the last half of any taxable year. Primarily to facilitate maintenance of
its qualification as a REIT for federal income tax purposes, the ownership limit
under the Company's articles of incorporation prohibits ownership, directly or
by virtue of the attribution provisions of the Internal Revenue Code, by any
person or persons acting as a group of more than 6.0% of the issued and
outstanding shares of the Company's common stock, subject to an exception for
shares of common stock held by Mr. Williams and Mr. Glover, the Company's
Chairman and Vice Chairman. Together, these limitations are referred to as the
"ownership limit." Further, the Company's articles of incorporation include
provisions allowing it to stop transfers of and redeem its shares that are
intended to assist the Company in complying with these requirements. These
provisions may have the effect of delaying, deferring or preventing someone from
taking control, even though a change of control might involve a premium price
for the Company's shareholders or might otherwise be in the shareholders' best
interests.
Staggered board. The Company's articles of incorporation provides that
the board of directors will consist of eight members and can be increased or
decreased after that according to its bylaws, provided that the
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total number of directors is not less than three nor more than 15. Pursuant to
the Company's bylaws, the number of directors will be fixed by the board of
directors within the limits in its articles of incorporation. The board of
directors is divided into three classes of directors. Directors for each class
are chosen for a three-year term. The staggered terms for directors may affect
the Company's shareholders' ability to effect a change of control, even if a
change of control would be in the interest of the shareholders.
Preferred shares; classification or reclassification of unissued shares
of capital stock without shareholder approval. The Company's articles of
incorporation provide that the total number of shares of stock of all classes
which it has authority to issue is 120,000,000, consisting of 100,000,000 shares
of common stock and 20,000,000 shares of preferred stock, of which 5,000,000 had
been issued as of December 31, 2000. The board of directors has the authority,
without a vote of shareholders, to classify or reclassify any unissued shares of
stock, including common stock into preferred stock or vice versa, and to
establish the preferences and rights of any preferred or other class or series
of shares to be issued. The issuance of preferred stock or other shares having
special preferences or rights could delay or prevent a change of control even if
a change of control would be in the interests of the shareholders. Because the
board of directors has the power to establish the preferences and rights of
additional classes or series of shares without a shareholder vote, the board of
directors may give the holders of any class or series preferences, powers and
rights, including voting rights, senior to the rights of holders of the
Company's common stock.
Consent rights of the Unitholders. Under the partnership agreement of
the Operating Partnership, the Company may not merge or consolidate with another
entity unless the merger includes the merger of the Operating Partnership, which
requires the approval of the holders of a majority of the outstanding units of
limited partnership. If the Company were to ever hold less than a majority of
the units, this voting requirement might limit the possibility for an
acquisition or a change of control.
Georgia Anti-Takeover Statutes. The Georgia Business Corporation Code
generally restricts a company from entering into certain business combinations
with an interested shareholder for a period of five years after the date on
which the shareholder becomes an interested shareholder unless (1) the
transaction is approved by the board of directors of the company prior to the
date the person becomes an interested shareholder, (2) the interested
shareholder acquires 90% of the company's voting stock in the same transaction
in which it exceeds 10% or (3) subsequent to becoming an interested shareholder,
the shareholder acquires 90% of the company's voting stock and the business
combination is approved by the holders of a majority of the voting stock
entitled to vote on the business combination. An interested shareholder is
defined as any person or entity that is the beneficial owner of at least 10% of
the company's voting stock. This business combination statute will not apply
unless the bylaws of the corporation specifically provides that the statute is
applicable to the corporation. The Company has not elected to be covered by this
statute, but it could so by action of the board of directors at any time.
Georgia Fair Price Statute. The Georgia Fair Price Statute imposes fair
price and procedural requirements applicable to business combinations with any
person who owns 10% or more of the common stock. These statutory requirements
restrict business combinations with, and accumulations of shares of voting stock
of, certain Georgia corporations. This fair price statute will not apply unless
the bylaws of the corporation specifically provides that the statute is
applicable to the corporation. The Company has not elected to be covered by this
statute, but it could do so by action of the board of directors at any time.
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, 2000, the Company had $151,125 of variable rate debt tied to LIBOR. In
addition, the Company had $235,880 in variable tax-exempt debt tied to "AAA"
NON-AMT. In addition, the Company has interest rate risk associated with fixed
rate debt at maturity. The discussion in this Interest Rate Sensitivity section
is the same for the Company and the Operating Partnership, except that all
indebtedness described herein has been incurred by the Operating Partnership.
Management has and will continue to manage interest rate risk as follows:
- - maintain a conservative ratio of fixed rate, long-term debt to total
debt such that variable rate exposure is kept at an acceptable level;
- - fix certain long-term variable rate debt through the use of interest
rate swaps or interest rate caps with appropriately matching
maturities;
- - use treasury locks where appropriate to fix rates on anticipated debt
transactions, and
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- - take advantage of favorable market conditions for long-term debt and/or
equity.
Management uses various financial models and advisors to achieve these
objectives.
The table below provides information about the Company's derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates. For debt obligations, the table presents principal cash flows
and related weighted average interest rates by expected maturity dates. For
interest rate swaps, 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
2001 2002 2003 2004 2005 AFTER TOTAL VALUE
--------- -------- --------- --------- --------- --------- ---------- ----------
(IN MILLIONS)
-----------------------------------------------------------------------------------------------------
Long-term Debt:
Fixed Rate ............... $ 69,066 $ 22,316 $ 102,480 $ 25,654 $ 177,848 $ 428,940 $ 826,304 $ 822,043
--------- -------- --------- --------- --------- --------- ---------- ----------
Average interest rate.... 7.49% 7.47% 7.50% 7.52% 7.36% 6.83% 7.49%
to 7.39%
Floating Rate (1)
LIBOR-based:
Cash Management
Line (2)................ 4,925 4,925 4,925
MTN...................... 25,000 25,000 25,000
Revolver (2)............. 18,000 18,000 18,000
FNMA (3)................. 103,200 103,200 103,200
--------- -------- --------- --------- --------- --------- ---------- ----------
Total LIBOR-based....... 4,925 -- 18,000 25,000 103,200 151,125 151,125
Tax-exempt (4).............. 235,880 235,880 235,880
--------- -------- --------- --------- --------- --------- ---------- ----------
Total floating rate
Debt................... -- 4,925 -- 18,000 25,000 339,080 387,005 387,005
--------- -------- --------- --------- --------- --------- ---------- ----------
Total debt.................. $ 69,066 $ 27,241 $ 102,480 $ 43,654 $ 202,848 $ 768,020 $1,213,309 $1,209,048
========= ======== ========= ========= ========= ========= ========== ==========
(1) Interest on these debt instruments is based on LIBOR ranging from LIBOR
plus .675% to .750% above LIBOR. At December 31, 2000, the LIBOR rate was
6.561%. See Schedule of Indebtedness in Management's Discussion and
Analysis for rates on individual debt instruments.
(2) Assumes the Company's Revolver and Cash Management Line are repaid at the
maturity date. Management believes these lines will be renewed at maturity
with similar terms. Maturity dates reflect new terms which are effective
January 12, 2001.
(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, 2000, the "AAA" NON-AMT rate was 5.00%. Interest on these
debt instruments is equal to the "AAA" NON-AMT rate plus .515%. The Company
has purchased an interest rate cap that limits the Company's exposure to
increases in the base rate to 5.00%.
AVERAGE EXPECTED
PAY RATE/ AVERAGE SETTLEMENT FAIR
INTEREST RATE DERIVATIVES NOTIONAL AMOUNT CAPRATE RECEIVE RATE DATE VALUE
- ------------------------------- ------------------- ---------- ------------- ---------- ---------
Interest Rate Swaps
$104,000 amortizing 1 month
Variable to fixed........... to $90,270 6.04% LIBOR 7/31/09 $ (793)
3 month
Variable to fixed........... 25,000 6.53% LIBOR 2/01/05 (679)
Interest rate cap.............. 76,000 5.00% -- 2/01/03 11
Interest rate cap.............. 141,230 5.00% -- 2/01/03 20
Interest rate cap.............. $ 18,650 5.00% -- 2/01/03 3
--------
$ (1,438)
========
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements are listed under Item 14(a) and are filed as part of
this report on the pages indicated. The supplementary data are included in Note
13 of the Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections under the headings "Election of Directors" entitled "Nominees for
Election," "Incumbent Directors -- Term Expiring 2002," and "Incumbent Directors
- -- Term Expiring 2003" of the Proxy Statement for Annual Meeting of Shareholders
to be held May 22, 2001 (the "Proxy Statement") are incorporated herein by
reference for information on Directors of the Registrant. See Item X in Part I
hereof for information regarding executive officers of the Registrant. The
section under the heading "Other Matters" entitled "Section 16(a) Beneficial
Ownership Reporting Compliance" of the Proxy Statement is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
The section under the heading "Election of Directors" entitled "Compensation of
Directors" of the Proxy Statement and the sections under the heading titled
"Executive Compensation" entitled "Summary Compensation Table," "Option Grants
Table," "Fiscal Year-End Option Value Table," "Profit Sharing Plan,"
"Noncompetition and Employment Contract," and "Compensation Committee Interlocks
and Insider Participation" of the Proxy Statement are incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section under the heading "Common Stock Ownership by Management and
Principal Shareholders" of the Proxy Statement is incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section under the heading "Certain Transactions" of the Proxy Statement is
incorporated herein by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. AND 2. FINANCIAL STATEMENTS AND SCHEDULES
The financial statements and schedules listed below are filed as part of this
annual report on the pages indicated.
INDEX TO FINANCIAL STATEMENTS
PAGE
POST PROPERTIES, INC.
Consolidated Financial Statements:
Report of Independent Accountants...................................................................... 41
Consolidated Balance Sheets as of December 31, 2000 and 1999........................................... 42
Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998............. 43
Consolidated Statements of Shareholders' Equity and Accumulated Earnings for the
Years Ended December 31, 2000, 1999 and 1998......................................................... 44
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998............. 45
Notes to Consolidated Financial Statements............................................................. 46
POST APARTMENT HOMES, L.P.
Consolidated Financial Statements:
Report of Independent Accountants...................................................................... 62
Consolidated Balance Sheets as of December 31, 2000 and 1999........................................... 63
Consolidated Statements of Operations for the Years Ended December 31, 2000, 1999 and 1998............. 64
Consolidated Statements of Partners' Equity for the Years Ended December 31, 2000, 1999 and 1998....... 65
Consolidated Statements of Cash Flows for the Years Ended December 31, 2000, 1999 and 1998............. 66
Notes to Consolidated Financial Statements............................................................. 67
Schedule III:
Real Estate and Accumulated Depreciation............................................................... 83
All other schedules are omitted because they are either not applicable or not required.
POST PROPERTIES, INC. -- 1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Financial Statements:
Report of Independent Accountants...................................................................... 86
Statement of Net Assets Available for Plan Benefits as of December 31, 2000 and 1999................... 87
Statement of Changes in Net Assets Available for Plan Benefits for the Years Ended
December 31, 2000 and 1999........................................................................... 88
Notes to Financial Statements.......................................................................... 89
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Post Properties, Inc.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and accumulated
earnings, and of cash flows, present fairly, in all material respects, the
financial position of Post Properties, Inc. at December 31, 2000 and December
31, 1999, and the results of their operations and their cash flows for the years
then ended in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP (signed)
Atlanta, Georgia
February 16, 2001
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POST PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
-----------------------------
2000 1999
----------- -----------
ASSETS
Real estate assets
Land ......................................................................... $ 281,525 $ 277,784
Building and improvements .................................................... 1,681,798 1,574,158
Furniture, fixtures and equipment ............................................ 190,968 137,602
Construction in progress ..................................................... 509,702 576,361
Land held for future development ............................................. 28,995 16,880
----------- -----------
2,692,988 2,582,785
Less: accumulated depreciation ............................................... (345,121) (303,016)
Assets held for sale ....................................................... 122,047 --
----------- -----------
Real estate assets ......................................................... 2,469,914 2,279,769
Cash and cash equivalents ...................................................... 7,459 5,870
Restricted cash ................................................................ 1,272 1,380
Deferred charges, net .......................................................... 21,700 20,820
Other assets ................................................................... 50,892 42,334
----------- -----------
Total assets ............................................................ $ 2,551,237 $ 2,350,173
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable .................................................................. $ 1,213,309 $ 989,583
Accrued interest payable ....................................................... 10,751 9,160
Dividend and distribution payable .............................................. 33,933 31,285
Accounts payable and accrued expenses .......................................... 67,136 59,780
Security deposits and prepaid rents ............................................ 9,407 9,023
----------- -----------
Total liabilities ....................................................... 1,334,536 1,098,831
----------- -----------
Minority interest of preferred unitholders in Operating Partnership ............ 70,000 70,000
----------- -----------
Minority interest of common unitholders in Operating Partnership ............... 118,091 122,480
----------- -----------
Commitments and contingencies .................................................. -- --
Shareholders' equity
Preferred stock, $.01 par value, 20,000,000 authorized:
8 1/2% Series A Cumulative Redeemable Shares, liquidation
preference $50 per share, 1,000,000 shares issued and outstanding ........... 10 10
7 5/8% Series B Cumulative Redeemable Shares, liquidation
preference $25 per share, 2,000,000 shares issued and
outstanding ................................................................. 20 20
7 5/8% Series C Cumulative Redeemable Shares, liquidation
preference $25 per share, 2,000,000 shares issued and
outstanding ................................................................. 20 20
Common stock, $.01 par value, 100,000,000
authorized, 39,662,192 and 38,834,323 shares issued, 38,853,596 and
38,834,323 shares outstanding at December 31, 2000 and 1999, respectively ... 396 388
Additional paid-in capital ................................................... 1,057,067 1,058,424
Accumulated earnings ......................................................... -- --
----------- -----------
1,057,513 1,058,862
Less common stock in treasury at cost, 808,596 shares ................... (28,903) --
----------- -----------
Total shareholders' equity .............................................. 1,028,610 1,058,862
----------- -----------
Total liabilities and shareholders' equity .............................. $ 2,551,237 $ 2,350,173
=========== ===========
The accompanying notes are an integral part of these
consolidated financial statements.
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POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
--------------------------------------------------
2000 1999 1998
------------ ------------ ------------
REVENUES
Rental .................................................................... $ 365,895 $ 318,697 $ 275,755
Property management - third party ......................................... 3,826 3,368 3,164
Landscape services - third party .......................................... 11,423 9,118 7,252
Interest .................................................................. 1,922 764 472
Other ..................................................................... 16,766 13,980 12,262
------------ ------------ ------------
Total revenue ......................................................... 399,832 345,927 298,905
------------ ------------ ------------
EXPENSES
Property operating and maintenance (exclusive of items
shown separately below) ................................................. 131,349 113,152 99,717
Depreciation .............................................................. 71,113 58,013 46,646
Property management - third party ......................................... 3,099 2,925 2,499
Landscape services - third party .......................................... 9,993 7,904 6,264
Interest .................................................................. 50,303 33,192 31,297
Amortization of deferred loan costs ....................................... 1,636 1,496 1,185
General and administrative ................................................ 10,066 7,788 8,495
Minority interest in consolidated property partnerships ................... (1,695) 511 397
------------ ------------ ------------
Total expenses ........................................................ 275,864 224,981 196,500
------------ ------------ ------------
Income before net gain (loss) on sale of assets, loss on unused treasury
locks, other charges, minority interest of unitholders in Operating
Partnership and extraordinary item ...................................... 123,968 120,946 102,405
Net gain (loss) on sale of assets ......................................... 3,208 (1,522) --
Loss on unused treasury locks ............................................. -- -- (1,944)
Project abandonment, employee severance and impairment charges ............ (9,365) -- --
Minority interest of preferred unitholders in Operating Partnership ....... (5,600) (1,851) --
Minority interest of common unitholders in Operating Partnership .......... (11,691) (12,598) (11,511)
------------ ------------ ------------
Income before extraordinary item .......................................... 100,520 104,975 88,950
Extraordinary item, net of minority interest of unitholders
in Operating Partnership ................................................ -- (458) --
------------ ------------ ------------
Net income ................................................................ 100,520 104,517 88,950
Dividends to preferred shareholders ....................................... (11,875) (11,875) (11,473)
------------ ------------ ------------
Net income available to common shareholders ............................... $ 88,645 $ 92,642 $ 77,477
============ ============ ============
EARNINGS PER COMMON SHARE - BASIC
Income before extraordinary item (net of preferred dividends) ............. $ 2.25 $ 2.42 $ 2.21
Extraordinary item ........................................................ -- (0.01) --
------------ ------------ ------------
Net income available to common shareholders ............................... $ 2.25 $ 2.41 $ 2.21
============ ============ ============
Weighted average common shares outstanding ................................ 39,317,725 38,460,689 35,028,596
============ ============ ============
Dividends declared ........................................................ $ 3.04 $ 2.80 $ 2.60
============ ============ ============
EARNINGS PER COMMON SHARE - DILUTED
Income before extraordinary item (net of preferred dividends) ............. $ 2.22 $ 2.39 $ 2.18
Extraordinary item ........................................................ -- (0.01) --
------------ ------------ ------------
Net income available to common shareholders ............................... $ 2.22 $ 2.38 $ 2.18
============ ============ ============
Weighted average common shares outstanding ................................ 39,852,514 38,916,987 35,473,587
============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
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POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(DOLLARS IN THOUSANDS)
ADDITIONAL
PREFERRED COMMON PAID-IN TREASURY ACCUMULATED
SHARES SHARES CAPITAL STOCK EARNINGS TOTAL
---------- ---------- ---------- ---------- ----------- ----------
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
DECEMBER 31, 1997 ............................. $ 30 $ 306 $ 756,584 $ -- $ -- $ 756,920
Proceeds from Preferred Shares, net of
underwriting discount and offering
costs of $1,716 .............................. 20 -- 48,264 -- -- 48,284
Proceeds from Common Shares, net of
Underwriting discount and offering
Costs of $13,592 ........................... -- 69 255,838 -- -- 255,907
Proceeds from Dividend Reinvestment and
Employee Stock Purchase Plans ............... -- 5 18,855 -- -- 18,860
Adjustment for minority interest of
unitholders in Operating Partnership
at dates of capital transactions ............ -- -- (15,031) -- -- (15,031)
Net income .................................... -- -- -- -- 88,950 88,950
Dividends to preferred shareholders ........... -- -- -- -- (11,473) (11,473)
Dividends declared and paid to common
Shareholders ................................ -- -- (13,254) -- (55,752) (69,006)
Dividends declared to common shareholders ..... -- -- -- -- (21,725) (21,725)
---------- ---------- ---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
DECEMBER 31, 1998 ............................. $ 50 $ 380 $1,051,256 $ -- $ -- $1,051,686
Offering cost of redeemable preferred units ... -- -- (1,810) -- -- (1,810)
Proceeds from Dividend Reinvestment and
Employee Stock Purchase Plans ............... -- 8 23,304 -- -- 23,312
Adjustment for minority interest of
unitholders in Operating Partnership
at dates of capital transactions ............ -- -- 857 -- -- 857
Net income .................................... -- -- -- -- 104,517 104,517
Dividends to preferred shareholders ........... -- -- -- -- (11,875) (11,875)
Dividends declared and paid to common
Shareholders ................................. -- -- (15,183) -- (65,458) (80,641)
Dividends declared to common shareholders ..... -- -- -- -- (27,184) (27,184)
---------- ---------- ---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
DECEMBER 31, 1999 ............................. $ 50 $ 388 $1,058,424 $ -- $ -- $1,058,862
Proceeds from Dividend Reinvestment and
Employee Stock Purchase Plans and Employee
Stock Plan .................................. -- 8 29,029 152 -- 29,189
Adjustment for minority interest of
unitholders in Operating Partnership
at dates of capital transactions ............ -- -- 320 -- -- 320
Net income .................................... -- -- -- -- 100,520 100,520
Acquisition of treasury stock ................. -- -- -- (29,055) -- (29,055)
Dividends to preferred shareholders ........... -- -- -- -- (11,875) (11,875)
Dividends to common shareholders .............. -- -- (30,706) -- (88,645) (119,351)
---------- ---------- ---------- ---------- ---------- ----------
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
DECEMBER 31, 2000 ............................. $ 50 $ 396 $1,057,067 $ (28,903) $ -- $1,028,610
========== ========== ========== ========== ========== ==========
The accompanying notes are an integral part of
these consolidated financial statements.
44
47
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
-----------------------------------------
2000 1999 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ............................................................. $ 100,520 $ 104,517 $ 88,950
Adjustments to reconcile net income to net cash provided
by operating activities:
Minority interest of preferred unitholders in Operating Partnership .... 5,600 1,851 --
Minority interest of common unitholders in Operating Partnership ....... 11,691 12,598 11,511
Net (gain) loss on sale of assets ...................................... (3,208) 1,522 --
Loss on unused treasury locks .......................................... -- -- 1,944
Extraordinary item, net of minority interest of unitholders in
Operating Partnership ................................................. -- 458 --
Depreciation ........................................................... 71,113 58,013 46,623
Amortization of deferred loan costs .................................... 1,636 1,496 1,209
Other .................................................................. -- -- 168
Changes in assets, (increase) decrease in:
Restricted cash ....................................................... 108 (32) 194
Deferred charges ...................................................... (1,591) (4,106) (7,115)
Other assets .......................................................... (8,904) (24,735) 2,998
Changes in liabilities, increase (decrease) in:
Accrued interest payable .............................................. 1,591 1,551 104
Accounts payable and accrued expenses ................................. 6,133 (402) 1,433
Security deposits and prepaid rents ................................... 384 307 599
--------- --------- ---------
Net cash provided by operating activities .............................. 185,073 153,038 148,618
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets,
net of payables ....................................................... (362,981) (286,696) (279,473)
Net proceeds from sale of assets ....................................... 157,265 16,587 --
Payment for unused treasury locks ...................................... -- -- (1,944)
Capitalized interest ................................................... (25,426) (21,417) (15,707)
Recurring capital expenditures ......................................... (9,157) (8,641) (7,479)
Corporate capital expenditures ......................................... (3,441) (6,811) (8,576)
Non-recurring capital expenditures ..................................... (5,576) (2,971) (1,423)
Revenue generating capital expenditures ................................ (6,670) (8,011) (13,614)
--------- --------- ---------
Net cash used in investing activities .................................. (255,986) (317,960) (328,216)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs ............................................. (3,128) (1,495) --
Debt proceeds .......................................................... 440,001 279,000 253,930
Debt payments .......................................................... (216,275) (89,425) (275,131)
Proceeds from preferred units, net of offering costs ................... -- 68,190 --
Offering proceeds, net of underwriters discount
and offering costs .................................................... -- -- 255,907
Proceeds from Preferred Shares ......................................... -- -- 48,284
Purchase of treasury stock ............................................. (24,912) -- --
Proceeds from Dividend Reinvestment Plan ............................... 26,754 23,312 18,860
Capital distributions to common unitholders ............................ (15,458) (14,318) (13,277)
Distributions paid to preferred unitholders ............................ (5,600) (1,384) --
Dividends paid to preferred shareholders ............................... (11,875) (11,875) (11,473)
Dividends paid to common shareholders .................................. (117,005) (102,367) (87,227)
--------- --------- ---------
Net cash provided by financing activities .............................. 72,502 149,638 189,873
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ................... 1,589 (15,284) 10,275
Cash and cash equivalents, beginning of period ......................... 5,870 21,154 10,879
--------- --------- ---------
Cash and cash equivalents, end of period ............................... $ 7,459 $ 5,870 $ 21,154
========= ========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
45
48
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND FORMATION OF THE COMPANY
ORGANIZATION AND FORMATION OF THE COMPANY
Post Properties, Inc. (the "Company" or "PPI") through its majority owned
subsidiary, Post Apartment Homes, L.P. (the "Operating Partnership") currently
owns and manages or is in the process of developing apartment communities
located in the Atlanta, Dallas, Tampa, Orlando, Washington, D.C., Nashville,
Houston, Austin, Phoenix, Denver, Pasadena and Charlotte metropolitan areas. At
December 31, 2000, approximately 52.8%, 25.7% and 11.5% (on a unit basis) of the
Company's communities are located in the Atlanta, Dallas and Tampa metropolitan
areas, respectively.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
accounts of the Company and the Operating Partnership. All significant
intercompany accounts and transactions have been eliminated in consolidation.
Since units can be redeemed for shares of the Company on a one-for-one basis at
the Operating Partnership's option, minority interest of unitholders in the
operations of the Operating Partnership is calculated based on the weighted
average of shares and units outstanding during the period.
Certain items in the 1999 and 1998 consolidated financial statements were
reclassified for comparative purposes with the 2000 consolidated financial
statements.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"
The Company will adopt SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by Statement No. 137 on January 1, 2001. This
standard establishes accounting and reporting standards for derivatives and
hedging activities and will require the Company to recognize all derivatives on
the balance sheet at fair value. Derivatives that do not qualify as hedges must
be adjusted to fair value through earnings. If the derivative is a hedge,
depending on the nature of the hedge, changes in the fair value of the
derivative will either be offset against the change in fair value of the hedged
asset, liability, or firm commitment through earnings or be recognized in other
comprehensive income until the hedged item affects earnings. If the change in
fair value or cash flows of a derivative designated as a hedge is not
effectively offset, as defined, by the change in value or cash flows of the item
it is hedging, this difference will be immediately recognized in earnings. Upon
adoption of SFAS 133 on January 1, 2001, the Company will record a net
transition adjustment loss in the statement of operations of $728 and a net
transition adjustment of $1,472 in other comprehensive income (equity). Adoption
of this standard will also result in the recording of a derivative instrument
liability of $1,472.
The Company only utilizes qualifying cash flow hedges that are designated
specifically to reduce exposure to interest rate risk by locking in the expected
future cash payments on certain designated liabilities. This is typically
accomplished using an interest rate swap or interest rate cap. For financial
reporting purposes, the gain or loss on the effective portion of the cash flow
hedge will be recorded as a component of other comprehensive income. The
ineffective portion of the cash flow hedge will be recorded immediately in
earnings.
On the date the Company enters into a derivative contract, management will
designate the derivative as a hedge of the identified cash flow exposure. The
Company will formally document all relationships between hedging instruments and
hedged items, as well as its risk-management objective and strategy for
undertaking various hedge transactions. In this documentation, the Company will
specifically identify the asset, liability, firm commitment, or forecasted
transaction that has been designated as a hedged item and will state how the
hedging instrument is expected to hedge the risks related to the hedged item.
The Company will formally measure effectiveness of its hedging relationships
both at the hedge inception and on an ongoing basis in accordance with its risk
management policy. The Company may discontinue hedge accounting
46
49
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
prospectively when it is determined that the derivative is no longer effective
in offsetting changes in the fair value or cash flows of a hedged item; when the
derivative expires or is sold, terminated or exercised; or when the derivative
is re-designated to no longer be a hedge instrument.
STAFF ACCOUNTING BULLETIN NO. 101, "REVENUE RECOGNITION"
The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
No. 101 (SAB 101), "Revenue Recognition," which provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements.
SAB 101 was implemented in the fourth quarter of 2000 by the Company and the
adoption had no effect on its results of operations or financial position.
REAL ESTATE ASSETS AND DEPRECIATION
Real estate assets are stated at the lower of depreciated cost or fair value, if
deemed impaired. Ordinary repairs and maintenance are expensed as incurred;
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).
REVENUE RECOGNITION
Rental -- Residential properties are leased under operating leases with terms of
generally one year or less. Rental income is recognized when earned, which is
not materially different from revenue recognition on a straight line basis.
Property management and landscaping services -- Income is recognized when earned
for property management and landscaping services provided to third parties.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, all investments purchased with an
original maturity of three months or less are considered to be cash equivalents.
RESTRICTED CASH
Restricted cash generally is comprised of resident security deposits for
communities located in Florida and Tennessee and required maintenance reserves
for communities located in DeKalb County, Georgia.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized using the interest method over the terms
of the related debt.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes incurred during the construction period are
capitalized and depreciated over the lives of the constructed assets. Interest
paid (including capitalized amounts of $25,426, $21,417, and $15,707 during
2000, 1999 and 1998, respectively), aggregated $74,419, $51,337 and $46,889 for
the years ended December 31, 2000, 1999 and 1998, respectively.
DERIVATIVES
The Company has entered into various interest rate swap and interest rate cap
agreements. These arrangements are used to manage the Company's exposure to
fluctuations in interest rates. Premiums paid to purchase interest rate
protection agreements (i.e. interest rate caps) have been deferred and are being
amortized over the terms of those agreements using the interest method.
Unamortized premiums are included in deferred charges in the consolidated
balance sheet. Amounts
47
50
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
receivable under the interest rate protection agreements are accrued as a
reduction of interest expense. Interest rate swaps qualifying for hedge
accounting treatment are recorded on an accrual basis as an adjustment of the
interest rate yield. Interest rate swaps not qualifying for hedge accounting
treatment are recorded at fair value and recognized through the statement of
operations.
PER SHARE DATA
Basic earnings per common share with respect to the Company for the years ended
December 31, 2000, 1999 and 1998 is computed based upon the weighted average
number of shares outstanding during the period. Diluted earnings per common
share is based upon the weighted average number of shares outstanding during the
period and includes the effect of the potential issuance of additional shares if
stock options were exercised or converted into common stock.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. DEFERRED CHARGES
Deferred charges consist of the following:
DECEMBER 31,
----------------------------
2000 1999
-------- --------
Deferred financing costs ........... $ 36,068 $ 31,148
Other .............................. 5,240 5,394
-------- --------
41,308 36,542
Less: accumulated amortization ..... (19,608) (15,722)
-------- --------
$ 21,700 $ 20,820
======== ========
48
51
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. NOTES PAYABLE
At December 31, 2000 and 1999, the Company's indebtedness consisted of the
following:
12/31/00 12/31/99
PAYMENT MATURITY PRINCIPAL PRINCIPAL
DESCRIPTION TERMS INTEREST RATE DATE (1) BALANCE BALANCE
- ---------------------------------- ---------------------- ------------------------ ----------------- ----------- -----------
CONVENTIONAL FIXED RATE (SECURED)
Parkwood Townhomes(TM) ........... Principal and Interest 7.375% 4/01/14 $ 799 $ 833
Post Hillsboro Village and
The Lee Apartments ............... Principal and Interest 9.20% 10/01/01 -- 2,915
Northwestern Mutual Life ......... Principal and Interest 6.50%(2) 3/01/09 48,601 49,462
Northwestern Mutual Life ......... Principal and Interest 7.69% 10/01/07 28,666 --
Northwestern Mutual Life ......... Principal and Interest 7.69% 10/01/07 51,238 --
FNMA ............................. Principal and Interest 6.975%(3) 7/23/29 103,200 --
-------- -------
232,504 53,210
-------- -------
CONVENTIONAL FLOATING RATE (SECURED)
Addison Circle Apartment
Homes by Post(R)- Phase I........ Principal and Interest LIBOR + .75% 6/15/00 -- 22,067
FNMA ............................. Principal and Interest LIBOR + .935%(3) 7/23/29 -- 104,000
-------- -------
-- 126,067
-------- -------
TAX EXEMPT FLOATING RATE (SECURED) "AAA" NON-AMT + .515%
Interest only (4)(5) 6/01/25 235,880 235,880
-------- -------
SENIOR NOTES (UNSECURED)
Northwestern Mutual Life.......... Interest only 8.21% - 8.37% 6/07/01-6/07/02 50,000 50,000
Senior Notes...................... Interest only 7.25% - 7.70% 10/01/03-12/20/10 310,000 125,000
Medium Term Notes................. Interest only 6.69% - 8.12%(6)(7) 4/02/01-3/16/15 360,000 215,000
-------- -------
720,000 390,000
-------- -------
LINES OF CREDIT & OTHER UNSECURED
DEBT
LIBOR + .825% or prime -
Revolver ......................... N/A .25% (8) 4/30/03 18,000 165,000
LIBOR + .675% or prime -
Cash Management Line.............. N/A .25% 3/31/01 4,925 17,426
City of Phoenix................... N/A 5.00% (9) 3/01/21 2,000 2,000
---------- ----------
24,925 184,426
---------- ----------
TOTAL............................. $1,213,309 $ 989,583
========== ==========
(1) All of the mortgages can be prepaid at any time, subject to certain
prepayment penalties.
(2) This note bears interest at 6.50% with an effective rate of 7.30% after
consideration of a terminated swap agreement.
(3) In December 2000, the Company entered into a swap transaction that
fixed the rate of interest on this note at 6.975%, inclusive of credit
enhancement and other fees, from January 1, 2001 through July 31, 2009.
(4) Bond financed (interest rate on bonds + credit enhancement fees
effective October 1, 1998). The Company pays credit enhancement fees of
.515% of the amount of such bonds or the amount of the letters of
credit, as the case may be. "AAA" NON-AMT rate was 5.00% at December
31, 2000.
(5) These bonds are cross-collateralized. The Company has purchased an
interest rate cap that limits the Company's exposure to increases in
the base rate to 5%.
(6) Contains $100,000 of Mandatory Par Put Remarketed Securities. The
annual interest rate on these securities to March 16, 2005 (the
"Remarketing Date") is 6.85%. On the Remarketing Date, they are subject
to mandatory tender for remarketing.
(7) In October 2000, the Company entered into a swap transaction that fixed
the rate on a $25,000 MTN at 7.28%, inclusive of credit enhancement and
other fees.
49
52
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(8) Represents stated rate. The Company may also make "money market" loans
of up to $175,000 at rates below the stated rate. At December 31, 2000,
the outstanding balance of the Revolver consisted of "money market"
loans with an average interest rate of 7.49%. Effective January 12,
2001, the interest rate is LIBOR plus .75% or prime minus .25% and the
debt matures April 30, 2004. Also effective January 12, 2001, the
Company may make "money market" loans of up to $160,000 at rates below
the stated rate.
(9) This loan is interest free for the first three years, with interest at
5.00% thereafter. Repayment is to commence on March 1, 2001 subject to
the conditions set forth in the Agreement.
CONVENTIONAL FIXED RATE MORTGAGES PAYABLE (SECURED)
Conventional mortgages payable were comprised of five loans at December 31, 2000
and 1999, each of which is collateralized by certain apartment communities
located in Atlanta and Dallas which are included in real estate assets.
On July 23, 1999, the Company issued $104,000 of secured notes to FNMA. Net
proceeds of $101,988 were used to repay outstanding indebtedness. These notes
are secured by five apartment communities. The notes include a prepayment
penalty that is an amount equal to a percentage of the principal amount
remaining under the notes at the time of prepayment. The penalty ranges from
4.8% in the first year to .65% in the tenth year. The Company has an option to
call these notes after ten years from the issuance date. In December 2000, the
Company entered into a swap transaction that fixed the rate of interest on this
note at 6.975%, inclusive of credit enhancement and other fees, from January 1,
2001 through July 31, 2009.
TAX-EXEMPT FLOATING RATE BOND INDEBTEDNESS (SECURED)
Tax exempt floating rate bond indebtedness is comprised of AAA Fannie Mae credit
enhanced debt maturing in 2025. The Federal National Mortgage Association
("FNMA") has provided replacement credit enhancement through 2025 for the bond
issues, aggregating $235,880, which were reissued. The agreement with FNMA
contains representations, covenants, and events of default customary to such
secured loans. Certain of the apartment communities are encumbered to secure
tax-exempt housing bonds.
SENIOR NOTES (UNSECURED)
NORTHWESTERN MUTUAL LIFE NOTES
On June 7, 1995, the Company issued $50,000 of unsecured senior notes with the
Northwestern Mutual Life Insurance Company. The notes were in two tranches: the
first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over
the corresponding treasury rate on the date such rate was set) and matures on
June 7, 2001; and the second, totaling $20,000 carries an interest rate of 8.37%
per annum (1.35% over the corresponding treasury rate on the date such rate was
set) and matures on June 7, 2002. Proceeds from the notes were used to repay
outstanding indebtedness. The note agreements pursuant to which the notes were
purchased contain customary representations, covenants and events of default
similar to those contained in the note agreement for the Revolver.
SENIOR NOTES
On September 30, 1996, the Company completed a $125,000 senior unsecured debt
offering comprised of two tranches. The first tranche, $100,000 of 7.25% Notes
due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to yield 7.316%
per annum (.71% over the corresponding treasury rate on the date such rate was
set). The second tranche, $25,000 of 7.50% Notes due on October 1, 2006 (the
"2006 Notes", and together with the 2003 Notes, the "Notes"), was priced at
99.694% to yield 7.544% per annum (.83% over the corresponding treasury rate on
the date such rate was set). Proceeds from the Notes were used to repay
outstanding indebtedness. On December 20, 2000, the Company issued $185,000 of
unsecured senior notes. These notes bear interest at 7.70% and mature on
December 20, 2010. Net proceeds of approximately $183,798 were used to repay
outstanding indebtedness.
50
53
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
MEDIUM TERM NOTES
The Company has established a program for the sale of Medium-Term Notes due
three months or more from the date of issue (the "MTNs"). Proceeds from the MTNs
were used to (i) prepay certain outstanding notes and (ii) repay outstanding
indebtedness.
The following table sets forth MTNs issued and outstanding as of December 31,
2000:
ISSUE INTEREST MATURITY
DATE AMOUNT RATE DATE
------------------ --------- ---------- ------------------
March 31, 1997 $ 37,000 7.02% April 2, 2001
March 31, 1997 13,000 7.30% April 1, 2004
September 22, 1997 10,000 6.69% September 22, 2004
September 22, 1997 25,000 6.78% September 22, 2005
March 12, 1998 100,000 6.85% March 16, 2015
May 9, 2000 25,000 (1) 7.28% February 1, 2005
June 15, 2000 150,000 8.12% June 15, 2005
---------
$ 360,000
=========
(1) In October 2000, the Company entered into a swap transaction that fixed
the rate on the note at 7.28%, inclusive of credit enhancement and
other fees, through maturity.
On March 12, 1998, the Company issued $100,000 of 6.85% Mandatory Par Put
Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds
in the amount of $99,087 from the sale of the MOPPRS(SM) were used to repay
outstanding indebtedness. In connection with the MOPPRS(SM) transaction, Merrill
Lynch & Co. purchased an option to remarket the securities as of March 16, 2005
(the "Remarketing Date") reducing the effective borrowing rate through the
Remarketing Date to 6.59%. In anticipation of the offering, the Company entered
into forward-treasury-lock agreements in the fall of 1997. As a result of the
termination of these agreements, the effective borrowing rate was increased to
approximately 6.85%, the coupon rate on the MOPPRS(SM).
On April 8, 1998, the Company sold $50,000 of Remarketed Reset Notes due April
7, 2009 under the MTN program. The notes bear an interest rate of LIBOR plus the
applicable spread with the spread being reset from time to time. The initial
spread is equal to .40% for a period of one year. The Company has entered into
an interest rate swap for the entire term of the notes to fix the interest rate
index. Under the terms of the swap, the Company paid a fixed rate of 6.02% and
received LIBOR. This swap was settled in February 1999 at a loss of $1,495. This
loss was deferred to amortize over the remaining term of the Remarketed Reset
Notes. On April 7, 1999, the Company repaid the Remarketed Reset Notes with the
proceeds of conventional fixed rate secured debt. The remaining unamortized
balance of the deferred swap loss was redesignated to the new debt and will be
amortized over the remaining term of the new debt.
On May 9, 2000, the Company sold $25,000 aggregate principal amount of notes
under the MTN Program. These notes bear interest at the London Interbank Offer
Rate ("LIBOR") plus .75% and mature on February 1, 2005. Net proceeds of $24,875
were used to repay outstanding indebtedness. In October 2000, the Company
entered into a swap transaction that fixed the rate on the notes at 7.28%,
inclusive of credit enhancement and other fees, through maturity.
On June 16, 2000, the Company sold $150,000 aggregate principal amount of notes
under the MTN Program. These notes bear interest at 8.12% and mature on June 15,
2005. Net proceeds of $148,865 were used to repay outstanding indebtedness.
51
54
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The aggregate maturities of the Company's indebtedness are as follows (1):
2001................................................... $ 67,000
2002................................................... 20,000
2003................................................... 100,000
2004................................................... 23,000
2005................................................... 200,000
Thereafter............................................. 778,384
----------
$1,188,384
==========
(1) Excludes principal amortization payments and payments on lines of
credit and other unsecured debt.
LINES OF CREDIT AND OTHER (UNSECURED)
On January 12, 2001, the Company closed a $320,000 three-year syndicated
revolving line of credit (the "Revolver"), which matures April 2004. This line
of credit bears interest at LIBOR plus .75% or prime minus .25% and replaces the
Company's previous line. The Revolver provides for the rate to be adjusted up or
down based on changes in the credit ratings on the Company's senior unsecured
debt. The Revolver also includes a money market competitive bid option for
short-term funds up to $160,000 at rates below the stated line rate. The credit
agreement for the Revolver contains customary representations, covenants and
events of default, including covenants which restrict the ability of the
Operating Partnership to make distributions, in excess of stated amounts, which
in turn restrict the discretion of the Company to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute up
to 100% of the Operating Partnership's consolidated income available for
distribution (as defined in the credit agreement) exclusive of distributions of
up to $30,000 of capital gains for such year. The credit agreement contains
exceptions to these limitations to allow the Operating Partnership to make
distributions necessary to allow the Company to maintain its status as a REIT.
The Company does not anticipate that this covenant will adversely affect the
ability of the Operating Partnership to make distributions, or the Company to
declare dividends, under the Company's current dividend policy.
Also in January 2001, the Company reached an agreement with a syndicated group
of banks for an incremental $185,000, 364 day facility at terms substantially
equal to the Revolver.
On July 26, 1996, the Company closed a $20,000 unsecured line of credit with
Wachovia Bank of Georgia, N.A. (The "Cash Management Line"). The Cash Management
Line bears interest at LIBOR plus .675% or prime minus .25% and matures on March
31, 2002. Management believes the Cash Management Line will be renewed at
maturity with similar terms. The Revolver requires three days advance notice to
repay borrowings whereas the Cash Management Line provides the Company with an
automatic daily sweep which applies all available cash to reduce the outstanding
balance.
In addition, the Company has a $3,000 facility to provide letters of credit for
general business purposes.
At December 31, 2000, the outstanding balances on the Revolver and Cash
Management Line were $18,000 and $4,925, respectively. There were no outstanding
balances on any of the other facilities at December 31, 2000.
On March 1, 1998 the Company entered into a Disposition and Development
Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the
City of Phoenix loaned the Company $2,000. This loan is interest-free for the
first three years, with a 5.00% interest rate thereafter. Repayment of the loan
commences on March 1, 2001 with equal semi-annual payments due on March 1 and
September 1 of each year through March 1, 2021. All repayment terms are subject
to the conditions set forth in the Agreement.
52
55
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
PLEDGED ASSETS
The aggregate net book value at December 31, 2000 of property pledged as
collateral for indebtedness amounted to approximately $469,473.
UNUSED TREASURY LOCKS
The loss on unused treasury locks in 1998 resulted from the termination of
treasury locks intended for debt securities that were not issued by the
Operating Partnership.
EXTRAORDINARY ITEM
The extraordinary item for the year ended December 31, 1999 was due to the write
off of loan costs resulting from the early extinguishment of debt. The
extraordinary item is net of $63 in minority interest of the unitholders
calculated on the basis of weighted average units and common shares outstanding
for the year ended December 31, 1999.
All indebtedness described in this Note 3 has been incurred by the Operating
Partnership.
4. INCOME TAXES
The Company has 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
annually at least 95% (90% beginning in 2001) of its REIT taxable income, as
defined in the Code, to its shareholders and satisfy certain other requirements.
As a result, the Company generally will not be subject to Federal income
taxation at the corporate level on the income it distributes to the
shareholders. Although Post Properties, Inc. has elected to be taxed as a REIT,
Post Services, Inc. ("Post Services") was formed as a subsidiary of the
Operating Partnership to provide through its subsidiaries asset management,
leasing and landscaping services to third parties. The consolidated taxable
income of Post Services, if any, will be subject to tax at regular corporate
rates.
As of December 31, 2000, 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 $29,794.
5. RELATED PARTY TRANSACTIONS
The Company provides landscaping services for executive officers, employees,
directors and other related parties. For the years ended December 31, 2000, 1999
and 1998, the Company received landscaping fees of $667, $610 and $961 for such
services. These amounts include reimbursements of direct expenses in the amount
of $11, $10 and $295, which are not included in landscape services revenue.
Accordingly, these transactions resulted in the Company recording landscape
services net fees in excess of direct expenses of $656, $600, and $666 in the
accompanying financial statements for the years ended December 31, 2000, 1999
and 1998, respectively.
The Company provides accounting and administrative services to entities
controlled by certain executive officers of the Company. Fees under this
arrangement aggregated $25 for each year ended December 31, 2000, 1999 and 1998,
respectively.
The Company was contracted to assist in the development of apartment complexes
constructed by a former executive and current shareholder. Fees under this
arrangement were $29, $100, and $349 for the years ended December 31, 2000, 1999
and 1998, respectively.
On February 15, 2000 and December 10, 1999, the Company loaned $1,500 and
$7,750, respectively, to certain executives. These loans are payable ten years
from the issue date and bear interest at a rate of 6.32% per annum. Proceeds
from these loans were used by these executives to acquire the Company's common
shares on the open market. As of February 10, 2001, $2,000 of the loans have
been repaid.
53
56
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
6. SALE OF ASSETS AND ASSETS HELD FOR SALE
During the first quarter of 2000, the Company authorized the sale of five
communities: one community in Atlanta, Georgia, three communities in Jackson,
Mississippi and one commercial property in Dallas, Texas. During the third
quarter of 2000, the Company authorized the sale of two communities in
Nashville, Tennessee. During the fourth quarter of 2000, the Company authorized
the sale of one tract of land in Dallas, Texas and seven communities: two
communities in Atlanta, Georgia, one community in Nashville, Tennessee and three
communities and one commercial property in Dallas, Texas.
In February 2000, the Company sold the 213 community in Atlanta, Georgia, for
$32,350. Net proceeds of approximately $31,500 were used to pay down outstanding
indebtedness.
In September 2000, the Company sold the three communities in Jackson,
Mississippi, containing a total of 983 units for $44,600. Net proceeds of
approximately $42,903 were used to pay down outstanding indebtedness.
In November 2000, the Company sold two properties located in Nashville,
Tennessee containing a total of 367 units for $36,885. Net proceeds of
approximately $36,290 were used to repay outstanding indebtedness.
In December 2000, the Company sold two properties located in Atlanta, Georgia,
containing a total of 421 units for $47,250. Net proceeds of approximately
$46,651 were used to repay outstanding indebtedness and to repurchase the
Company's common stock.
At December 31, 2000, the remaining tract of land, four communities and two
commercial properties held for sale, consisting of land, building and
improvements and furniture, fixtures and equipment were recorded at $122,047,
which represented the lower of cost or fair value less costs to sell. The
Company has recorded a net gain on the sale of the Atlanta, Jackson and
Nashville assets in the statement of operations, reduced by its best estimate of
the effect of the anticipated sale of the remaining communities and commercial
properties, as a net gain on the sale of assets of $3,208. The Company expects
the sale of the remaining properties to occur in 2001.
For the years ended December 31, 2000 and 1999, the consolidated statements of
operations include net income of $12,392 and $11,804, respectively, from
communities held for sale at December 31, 2000. Through December 31, 2000,
depreciation expense totaling $4,109 was recognized on these assets prior to the
assets being classified as held for sale. Depreciation expense has not been
recognized subsequent to the date of held for sale classification.
7. PROJECT ABANDONMENT, EMPLOYEE SEVERANCE AND IMPAIRMENT CHARGES
In the fourth quarter of 2000, management decided to restrict its development
activities to fewer markets, refine its development investment strategy, exit
the for-sale housing business and make changes in its executive management team.
As a result of these decisions, the Company wrote off $4,389 of costs it had
incurred in markets it will no longer pursue for development opportunities and
on individual development deals that are no longer consistent with management's
revised strategy.
In connection with the management changes at December 31, 2000, all employees
included in the severance charge of $3,066 had been notified of their
termination and severance agreement. As of February 15, 2001, these employees
were no longer providing any service to the Company. The employees included in
the accrual at December 31, 2000, were primarily four executives and five
accounting department employees in the Dallas regional office. At December 31,
2000, the accrual for unpaid severance charges was $2,250.
In addition to these charges, the Company also recorded an impairment charge of
$407 to adjust the cost of for-sale housing in Atlanta and Dallas to its
estimated net sales proceeds. Additionally, the Company recorded a charge of
$1,503
54
57
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
to write off its investment in Darwin Networks, a high-speed Internet
provider that filed for Chapter 11 bankruptcy in January 2001.
8. EMPLOYEE BENEFIT PLANS
The employees of the Company are participants in a defined contribution plan
pursuant to Section 401 of the Internal Revenue Code. Beginning in 1996, Company
contributions, if any, to this plan are based on the performance of the Company
and are allocated to each participant based on the relative contribution of the
participant to the total contributions of all participants. For purposes of
allocating the Company contribution, the maximum employee contribution included
in the calculation is 3% of salary. Company contributions of $514, $346 and $179
were made in 2000, 1999 and 1998, respectively.
The Company maintains an Employee Stock Purchase Plan ("ESPP") to encourage
stock ownership by eligible directors and employees. To participate in the ESPP,
(i) directors must not be employed by the Company or the Operating Partnership
and must have been a member of the Board of Directors for at least one month and
(ii) an employee must have been employed full or part-time by the Company or the
Operating Partnership for at least one month. The purchase price of shares of
Common Stock under the ESPP is equal to 85% of the lesser of the closing price
per share of Common Stock on the first or last day of the trading period, as
defined.
9. STOCK-BASED COMPENSATION PLANS
STOCK COMPENSATION PLANS
At December 31, 2000, the Company had two stock-based compensation plans, the
Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the
"ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as
described below. The Company applies APB Opinion 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its plans.
Accordingly, based upon the criteria of APB Opinion 25 no compensation cost is
required to be recognized for the Stock Plan and the ESPP. The compensation cost
which is required to be charged against income for the Grant Plan, was $138,
$205 and $182 for 2000, 1999 and 1998, respectively. Had compensation cost for
the Company's Stock Plan and ESPP been determined based on the fair value at the
grant dates for awards under the Plans consistent with the method of FASB
Statement 123, "Accounting for Stock-Based Compensation," the Company's net
income and earnings per share would have been reduced to the pro forma amounts
indicated below:
2000 1999 1998
------- ------- -------
Net income available to common
shareholders..................... As reported..... $88,645 $92,642 $77,477
Pro forma....... $86,463 $90,459 $76,589
Net income per common share -
basic............................ As reported..... $ 2.25 $ 2.41 $ 2.21
Pro forma....... $ 2.20 $ 2.35 $ 2.19
Net income per common share -
diluted.......................... As reported..... $ 2.22 $ 2.38 $ 2.18
Pro forma....... $ 2.17 $ 2.32 $ 2.16
For purposes of the pro forma presentation, the fair value of each option grant
is estimated as of the date of grant using the Black-Scholes option-pricing
model. The weighted-average of all assumptions used in the calculation for
various grants under all of the Company's plans during 2000, 1999, and 1998, are
as follows:
55
58
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2000 1999 1998
-------------- -------------- --------------
Dividend yield............................ 8.0% 7.3% 7.0%
Expected volatility....................... 24.8% 15.4% 15.3%
Risk-free interest rate................... 6.7% to 6.9% 4.5% to 6.6% 4.7% to 5.8%
Expected option life...................... 5 to 7 years 5 to 7 years 5 to 7 years
FIXED STOCK OPTION PLANS
Under the Stock Plan, the Company may grant to its employees and directors
options to purchase up to 6,000,000 shares of common stock. Of this amount,
550,000 shares are available for grants of restricted stock. Options granted to
any key employee or officer cannot exceed 100,000 shares a year (500,000 shares
if such key employee or officer is a member of the Company's Executive
Committee). The exercise price of each option may not be less than the market
price on the date of grant and all options have a maximum term of ten years from
the grant date.
A summary of the status of the Company's Stock Plan as of December 31, 2000,
1999 and 1998, changes during the years then ended, and the weighted-average
fair value of options granted during the years is presented below:
2000 1999 1998
--------------------------- ---------------------------- -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- --------------- ---------- -------------- ---------- --------------
Outstanding at beginning of year ........ 4,054,876 $34 3,030,852 $31 2,237,551 $31
Granted ................................. 740,538 38 1,288,232 36 1,440,784 39
Exercised ............................... (334,194) 32 (164,053) 30 (67,326) 31
Forfeited ............................... (189,612) 38 (100,155) 37 (580,157) 39
---------- ---------- ----------
Outstanding at end of year .............. 4,271,608 35 4,054,876 35 3,030,852 34
========== ========== ==========
Options exercisable at year-end ......... 2,413,595 2,290,143 2,065,438
========== ========== ==========
Weighted-average fair value of options
granted during the year ............... $ 4.76 $ 2.08 $ 2.54
========== ========== ==========
At December 31, 2000, the range of exercise prices for options outstanding was
$27.625 - $44.125 and the weighted-average remaining contractual life was 7
years.
10. COMMITMENTS AND CONTINGENCIES
LAND, OFFICE AND EQUIPMENT LEASES
The Company is party to two ground leases with terms expiring in years 2040 and
2043 relating to a single operating community, one ground lease expiring in 2038
for a second operating community, three ground leases expiring in 2066, 2069 and
2074 for three communities under development and to office, equipment and other
operating leases with terms expiring in years 2001 through 2004. Future minimum
lease payments for non-cancelable land, office, equipment and other leases at
December 31, 2000 are as follows:
2001......................... $ 2,122
2002......................... 1,392
2003......................... 1,300
2004......................... 1,274
2005......................... 1,279
2006 and thereafter.......... 159,456
56
59
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The Company incurred $5,935, $5,109 and $4,915 of rent expense for the years
ended December 31, 2000, 1999 and 1998, respectively.
CONTINGENCIES
The Company is party to various legal actions which are incidental to its
business. Management believes that these actions will not have a material
adverse affect on the consolidated balance sheets and statements of operations.
11. 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 landscape service receivables, accounts payable,
accrued expenses, notes payable and other liabilities are carried at amounts
which reasonably approximate their fair values.
The fair value of fixed rate debt was approximately $822,043 at December 31,
2000.
The fair values of interest rate protection agreements and interest rate swaps
(used for hedging purposes) are estimated by obtaining quotes from an investment
broker. At December 31, 2000, carrying amounts related to these arrangements in
the consolidated balance sheet were approximately $728. As of December 31, 2000,
the net cost to terminate these contracts was approximately $1,438.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 2000. 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.
57
60
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
12. EARNINGS PER SHARE
For the years ended December 31, 2000, 1999 and 1998, basic and diluted earnings
per common share for income before extraordinary item, net of preferred
dividends, and net income available to common shareholders before extraordinary
item has been computed as follows:
YEAR ENDED 2000
-------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Income before extraordinary item .................................. $ 100,520
Less: Preferred stock dividends ................................... (11,875)
---------
BASIC EPS
Income available to common shareholders before
extraordinary item .............................................. 88,645 39,317,725 $ 2.25
=========
EFFECT OF DILUTIVE SECURITIES
Options ........................................................... -- 534,789
--------- ----------
DILUTED EPS
Income available to common shareholders + assumed
conversions before extraordinary item ........................... $ 88,645 39,852,514 $ 2.22
========= ========== =========
YEAR ENDED 1999
-------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Income before extraordinary item .................................. $ 104,975
Less: Preferred stock dividends ................................... (11,875)
---------
BASIC EPS
Income available to common shareholders before
extraordinary item .............................................. 93,100 38,460,689 $ 2.42
=========
EFFECT OF DILUTIVE SECURITIES
Options ........................................................... -- 456,298
--------- ----------
DILUTED EPS
Income available to common shareholders + assumed
conversions before extraordinary item ........................... $ 93,100 38,916,987 $ 2.39
========= ========== =========
YEAR ENDED 1998
-------------------------------------
INCOME SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- ---------
Income before extraordinary item .................................. $ 88,950
Less: Preferred stock dividends ................................... (11,473)
---------
BASIC EPS
Income available to common shareholders before
extraordinary item .............................................. 77,477 35,028,596 $ 2.21
=========
EFFECT OF DILUTIVE SECURITIES
Options ........................................................... -- 444,991
--------- ----------
DILUTED EPS
Income available to common shareholders + assumed
conversions before extraordinary item ........................... $ 77,477 35,473,587 $ 2.18
========= ========== =========
13. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December 31,
2000, 1999 and 1998 are as follows:
(a) On the date of the Second Offering and Third Offering, holders of
5,401,185 and 5,139,243 Units of the Operating Partnership,
respectively, were allocated capital on a pro rata basis in proportion
to their Units over total Units
58
61
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
outstanding in the Operating Partnership. During 2000, 1999 and 1998,
holders of 12,014, 22,299 and 750 Units in the Operating Partnership,
respectively, exercised their option to convert their Units to shares
of the Company on a one-for-one basis. The net effect of the capital
allocated to the unitholders of the Operating Partnership on the dates
of the offerings, the subsequent conversion of Units of the Operating
Partnership to shares of the Company, and the adjustments to minority
interest for the dilutive impact of the Dividend Reinvestment and
Employee Stock Purchase Plans, decreased minority interest and
increased shareholders' equity in the amounts of $320 and $857 for the
years ended December 31, 2000 and 1999, respectively, and increased
minority interest and decreased shareholders' equity in the amount of
$15,031 for the year ended December 31, 1998.
(b) The Operating Partnership committed to distribute $33,466, $30,818, and
$25,115 for the quarters ended December 31, 2000, 1999 and 1998,
respectively. As a result, the Company declared dividends of $29,528,
$27,184, and $21,725 for the quarters ended December 31, 2000, 1999 and
1998, respectively. The remaining distributions from the Operating
Partnership in the amount of $3,938, $3,634, and $3,390 for the
quarters ended December 31, 2000, 1999 and 1998, respectively, are
distributed to minority interest unitholders in the Operating
Partnership.
(c) For cash flow purposes, treasury stock is net of $2,435 of donated
stock, $1,708 of treasury stock transactions settled in 2001, less $152
of shares re-issued from treasury stock.
14. SEGMENT INFORMATION
SEGMENT DESCRIPTION
In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise
and Related Information," the Company presents segment information based on the
way that management organizes the segments within the enterprise for making
operating decisions and assessing performance. The segment information is
prepared on substantially the same basis as the internally reported information
used by the Company's chief operating decision makers to manage the business.
The Company's chief operating decision makers focus on the Company's primary
sources of income which are property rental operations and third party services.
Third party services are designated as one segment. Property rental operations
are broken down into five segments based on the various stages in the property
ownership lifecycle. The Company's six segments are further described as
follows:
Property Rental Operations
- 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 1999 - communities which reached
stabilized occupancy in the prior year.
- Development and lease up communities - those communities that
are in lease-up but were not stabilized by the beginning of
the current year, including communities that stabilized during
the current year.
- Communities held for sale - those communities that are being
marketed for sale.
- Sold communities - communities which were sold in the current
or prior year.
Third Party Services - fee income and related expenses from the
Company's apartment community management, landscaping and corporate
apartment rental services.
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the performance
measure for its segments. Effective January 1, 2000, FFO is defined by the
National Association of Real Estate Investment Trusts as net income available to
common shareholders determined in accordance with generally accepted accounting
principles ("GAAP"), excluding
59
62
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
gains (or losses) from debt restructuring and sales of property, plus
depreciation of real estate assets, and after adjustment for unconsolidated
partnerships and joint ventures. FFO should not be considered as an alternative
to net income (determined in accordance with GAAP) as an indicator of the
Company's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Company's liquidity,
nor is it necessarily indicative of sufficient cash flow to fund all of the
Company's needs. FFO for 1998 has been restated to reflect the requirements of
the new NAREIT definition.
SEGMENT INFORMATION
The following table reflects each segment's contribution to consolidated
revenues and FFO together with a reconciliation of segment contribution to FFO,
total FFO and income before extraordinary item and preferred dividends.
Additionally, substantially all of the Company's assets relate to the Company's
property rental operations. Asset cost, depreciation and amortization by segment
are not presented because such information at the segment level is not reported
internally.
YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
--------- --------- ---------
REVENUES
Fully stabilized communities................................. $ 232,435 $ 221,901 $ 213,043
Communities stabilized during 1999........................... 42,710 38,097 20,845
Development and lease-up communities......................... 54,486 17,408 2,106
Communities held for sale.................................... 19,706 18,552 18,359
Sold communities............................................. 15,928 24,285 24,004
Third party services......................................... 15,249 12,486 10,416
Other........................................................ 19,318 13,198 10,132
--------- --------- ---------
Consolidated revenues........................................ $ 399,832 $ 345,927 $ 298,905
========= ========= =========
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities................................. $ 162,197 $ 154,060 $ 146,431
Communities stabilized during 1999........................... 28,753 26,199 12,669
Development and lease-up communities......................... 33,684 9,679 (184)
Communities held for sale.................................... 12,392 11,804 11,896
Sold communities............................................. 11,457 18,167 17,213
Third party services......................................... 2,157 1,657 1,653
--------- --------- ---------
Contribution to FFO.......................................... 250,640 221,566 189,678
--------- --------- ---------
Other operating income, net of expense....................... (3,274) (2,161) (1,197)
Depreciation on non-real estate assets....................... (2,405) (1,962) (1,432)
Minority interest in consolidated property Partnerships...... 1,695 (511) (397)
Project abandonment, employee severance and impairment
charges.................................................... (9,365) -- --
Interest expense............................................. (50,303) (33,192) (31,297)
Amortization of deferred loan costs.......................... (1,636) (1,496) (1,185)
General and administrative................................... (10,066) (7,788) (8,495)
Dividends to preferred shareholders.......................... (11,875) (11,875) (11,473)
--------- --------- ---------
Total FFO.................................................... 163,411 162,581 134,202
--------- --------- ---------
Depreciation on real estate assets........................... (66,283) (55,361) (45,214)
Net gain (loss) on sale of assets............................ 3,208 (1,522) --
Minority interest of common unitholders in
Operating Partnership...................................... (11,691) (12,598) (11,511)
Dividends to preferred shareholders.......................... 11,875 11,875 11,473
--------- --------- ---------
Income before extraordinary item
and preferred dividends.................................... $ 100,520 $ 104,975 $ 88,950
========= ========= =========
60
63
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended 2000 and 1999 are as
follows:
YEAR ENDED DECEMBER 31, 2000*
-------------------------------------------------
FIRST SECOND THIRD FOURTH
--------- -------- --------- ---------
Revenues ................................................................. $ 95,443 $ 99,482 $ 101,342 $ 103,565
--------- -------- --------- ---------
Net income before net gain (loss) on sale of assets, other charges and
minority interest of unitholders in Operating Partnership .............. 31,965 33,734 30,676 27,593
Net gain (loss) on sale of assets ........................................ 687 (19) 959 1,581
Project abandonment, employee severance and impairment charges ........... -- -- -- (9,365)
Minority interest of preferred unitholders in Operating Partnership ......
(1,400) (1,400) (1,400) (1,400)
Minority interest of common unitholders in Operating Partnership .........
(3,321) (3,421) (3,156) (1,793)
--------- -------- --------- ---------
Net income ............................................................... 27,931 28,894 27,079 16,616
Dividends to preferred shareholders ...................................... (2,968) (2,969) (2,969) (2,969)
--------- -------- --------- ---------
Net income available to common shareholders .............................. $ 24,963 $ 25,925 $ 24,110 $ 13,647
========= ======== ========= =========
Earnings per common share:
Net income available to common shareholders - basic ...................... $ 0.64 $ 0.66 $ 0.61 $ 0.35
Net income available to common shareholders - diluted .................... $ 0.63 $ 0.65 $ 0.60 $ 0.34
YEAR ENDED DECEMBER 31, 1999*
-------------------------------------------------
FIRST SECOND THIRD FOURTH
--------- -------- --------- ---------
Revenues ................................................................. $ 80,891 $ 85,503 $ 88,158 $ 91,375
--------- -------- --------- ---------
Net income before net gain (loss) on sale of assets,
minority interest of unitholders in Operating
Partnership and extraordinary items .................................... 29,406 29,624 30,626 31,290
Net gain (loss) on sale of assets ........................................ (1,567) 476 (246) (185)
Minority interest of preferred unitholders in
Operating Partnership .................................................. -- -- (435) (1,416)
Minority interest of common unitholders in Operating Partnership ......... (2,992) (3,237) (3,206) (3,163)
Extraordinary items ...................................................... (458) -- -- --
--------- -------- --------- ---------
Net income ............................................................... 24,389 26,863 26,739 26,526
Dividends to preferred shareholders ...................................... (2,969) (2,969) (2,969) (2,968)
--------- -------- --------- ---------
Net income available to common shareholders .............................. $ 21,420 $ 23,894 $ 23,770 $ 23,558
========= ======== ========= =========
Earnings per common share:
Net income available to common shareholders - basic ...................... $ 0.56 $ 0.62 $ 0.62 $ 0.61
Net income available to common shareholders - diluted .................... $ 0.56 $ 0.61 $ 0.61 $ 0.60
* The total of the four quarterly amounts for minority interest of unitholders
in Operating Partnership, extraordinary item, net income and earnings per share
may not equal the total for the year. These differences result from the use of a
weighted average to compute minority interest in the Operating Partnership and
average number of shares outstanding.
61
64
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Post Apartment Homes, L.P.:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of shareholders' equity and accumulated
earnings, and of cash flows, present fairly, in all material respects, the
financial position of Post Apartment Homes, L.P. at December 31, 2000 and
December 31, 1999, and the results of their operations and their cash flows for
the years then ended in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP (signed)
Atlanta, Georgia
February 16, 2001
62
65
POST APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
-----------------------------------
2000 1999
------------ ------------
ASSETS
Real estate assets
Land ................................................................... $ 281,525 $ 277,784
Building and improvements .............................................. 1,681,798 1,574,158
Furniture, fixtures and equipment ...................................... 190,968 137,602
Construction in progress ............................................... 509,702 576,361
Land held for future development ....................................... 28,995 16,880
------------ ------------
2,692,988 2,582,785
Less: accumulated depreciation ......................................... (345,121) (303,016)
Assets held for sale ................................................. 122,047 --
------------ ------------
Real estate assets ................................................... 2,469,914 2,279,769
Cash and cash equivalents ................................................ 7,459 5,870
Restricted cash .......................................................... 1,272 1,380
Deferred charges, net .................................................... 21,700 20,820
Other assets ............................................................. 50,892 42,334
------------ ------------
Total assets ...................................................... $ 2,551,237 $ 2,350,173
============ ============
LIABILITIES AND PARTNERS' EQUITY
Notes payable ............................................................ $ 1,213,309 $ 989,583
Accrued interest payable ................................................. 10,751 9,160
Distribution payable ..................................................... 33,933 31,285
Accounts payable and accrued expenses .................................... 67,136 59,780
Security deposits and prepaid rents ...................................... 9,407 9,023
------------ ------------
Total liabilities ................................................. 1,334,536 1,098,831
------------ ------------
Partners' equity ......................................................... 1,216,701 1,251,342
------------ ------------
Total liabilities and Partners' equity ............................ $ 2,551,237 $ 2,350,173
============ ============
The accompanying notes are an integral part of these consolidated
financial statements
63
66
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
2000 1999 1998
------------- ------------- -------------
REVENUES
Rental ............................................................. $ 365,895 $ 318,697 $ 275,755
Property management - third party .................................. 3,826 3,368 3,164
Landscape services - third party ................................... 11,423 9,118 7,252
Interest ........................................................... 1,922 764 472
Other .............................................................. 16,766 13,980 12,262
------------- ------------- -------------
Total revenue .................................................. 399,832 345,927 298,905
------------- ------------- -------------
EXPENSES
Property operating and maintenance (exclusive of items
shown separately below) .......................................... 131,349 113,152 99,717
Depreciation ....................................................... 71,113 58,013 46,646
Property management - third party .................................. 3,099 2,925 2,499
Landscape services - third party ................................... 9,993 7,904 6,264
Interest ........................................................... 50,303 33,192 31,297
Amortization of deferred loan costs ................................ 1,636 1,496 1,185
General and administrative ......................................... 10,066 7,788 8,495
Minority interest in consolidated property partnerships ............ (1,695) 511 397
------------- ------------- -------------
Total expenses ................................................. 275,864 224,981 196,500
------------- ------------- -------------
Income before net gain (loss) on sale of assets, loss on unused
treasury locks, other charges, and extraordinary item ............ 123,968 120,946 102,405
Net gain (loss) on sale of assets .................................. 3,208 (1,522) --
Loss on unused treasury locks ...................................... -- -- (1,944)
Project abandonment, employee severance and impairment
charges .......................................................... (9,365) -- --
------------- ------------- -------------
Income before extraordinary item ................................... 117,811 119,424 100,461
Extraordinary item ................................................. -- (521) --
------------- ------------- -------------
Net income ......................................................... 117,811 118,903 100,461
Distributions to preferred Unitholders ............................. (17,475) (13,726) (11,473)
------------- ------------- -------------
Net income available to common Unitholders ......................... $ 100,336 $ 105,177 $ 88,988
============= ============= =============
EARNINGS PER COMMON UNIT - BASIC
Income before extraordinary item
(net of preferred distributions) ................................. $ 2.25 $ 2.42 $ 2.21
Extraordinary item ................................................. -- (.01) --
------------- ------------- -------------
Net income available to common Unitholders ......................... $ 2.25 $ 2.41 $ 2.21
============= ============= =============
Weighted average common Units outstanding .......................... 44,503,290 43,663,373 40,244,351
============= ============= =============
Distributions declared ............................................. $ 3.04 $ 2.80 $ 2.60
============= ============= =============
EARNINGS PER COMMON UNIT - DILUTED
Income before extraordinary item
(net of preferred distributions) ................................. $ 2.22 $ 2.39 $ 2.18
Extraordinary item ................................................. -- (.01) --
------------- ------------- -------------
Net income available to common Unitholders ......................... $ 2.22 $ 2.38 $ 2.18
============= ============= =============
Weighted average common Units outstanding .......................... 45,038,079 44,119,671 40,689,342
============= ============= =============
The accompanying notes are an integral part of these consolidated
financial statements.
64
67
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(DOLLARS IN THOUSANDS)
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ------------ ------------
PARTNERS' EQUITY, DECEMBER 31, 1997 .................................. 9,085 860,219 869,304
Contributions from PPI related to Preferred Shares ................... -- 48,284 48,284
Contributions from PPI related to Common Shares ...................... 2,559 253,348 255,907
Contributions from PPI related to Dividend Reinvestment
and Employee Stock Purchase Plans ................................. 189 18,671 18,860
Distributions to preferred Unitholders ............................... -- (11,473) (11,473)
Distributions to common Unitholders .................................. (792) (78,385) (79,177)
Distributions declared to common Unitholders ......................... (251) (24,864) (25,115)
Net income ........................................................... 1,005 99,456 100,461
--------- ------------ ------------
PARTNERS' EQUITY, DECEMBER 31, 1998 .................................. 11,795 1,165,256 1,177,051
Contributions from PPI related to Dividend Reinvestment
and Employee Stock Purchase Plans ................................. 233 23,079 23,312
Proceeds from issuance of preferred units, net of offering costs ..... -- 68,190 68,190
Distributions to preferred Unitholders ............................... -- (13,726) (13,726)
Distributions to common Unitholders .................................. (916) (90,654) (91,570)
Distributions declared to common Unitholders ......................... (308) (30,510) (30,818)
Net income ........................................................... 1,189 117,714 118,903
--------- ------------ ------------
PARTNERS' EQUITY, DECEMBER 31, 1999 .................................. $ 11,993 $ 1,239,349 $ 1,251,342
Contributions from the Company related to Dividend Reinvestment
and Employee Stock Purchase Plans ................................. 290 28,747 29,037
Purchase of units .................................................... -- (28,903) (28,903)
Distributions to preferred Unitholders ............................... -- (17,475) (17,475)
Distributions to common Unitholders .................................. (1,351) (133,760) (135,111)
Net income ........................................................... 1,178 116,633 117,811
--------- ------------ ------------
PARTNERS' EQUITY, DECEMBER 31, 2000 .................................. $ 12,110 $ 1,204,591 $ 1,216,701
========= ============ ============
The accompanying notes are an integral part of these consolidated
financial statements.
65
68
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
YEAR ENDED DECEMBER 31,
------------------------------------------------------
2000 1999 1998
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................... $ 117,811 $ 118,903 $ 100,461
Adjustments to reconcile net income to net cash provided
by operating activities:
Net (gain) loss on sale of assets ............................ (3,208) 1,522 --
Loss on unused treasury locks ................................ -- -- 1,944
Extraordinary item ........................................... -- 521 --
Depreciation ................................................. 71,113 58,013 46,623
Amortization of deferred loan costs .......................... 1,636 1,496 1,209
Other ........................................................ -- -- 168
Changes in assets, (increase) decrease in:
Restricted cash ............................................ 108 (32) 194
Deferred charges ........................................... (1,591) (4,106) (7,115)
Other assets ............................................... (8,904) (24,735) 2,998
Changes in liabilities, increase (decrease) in:
Accrued interest payable ................................... 1,591 1,551 104
Accounts payable and accrued expenses ...................... 6,133 (402) 1,433
Security deposits and prepaid rents ........................ 384 307 599
------------ ------------ ------------
Net cash provided by operating activities .................... 185,073 153,038 148,618
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets,
net of payables ............................................ (362,981) (286,696) (279,473)
Proceeds from sale of assets ................................. 157,265 16,587 --
Payment for unused treasury locks ............................ -- -- (1,944)
Capitalized interest ......................................... (25,426) (21,417) (15,707)
Recurring capital expenditures ............................... (9,157) (8,641) (7,479)
Corporate capital expenditures ............................... (3,441) (6,811) (8,576)
Non-recurring capital expenditures ........................... (5,576) (2,971) (1,423)
Revenue generating capital expenditures ...................... (6,670) (8,011) (13,614)
------------ ------------ ------------
Net cash used in investing activities ........................ (255,986) (317,960) (328,216)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs ................................... (3,128) (1,495) --
Debt proceeds ................................................ 440,001 279,000 253,930
Debt payments ................................................ (216,275) (89,425) (275,131)
Offering proceeds, net of underwriters discount
and offering costs ......................................... -- -- 255,907
Proceeds from issuance of preferred units,
net of offering costs ...................................... -- 68,190 --
Proceeds from contributions from PPI related
to Preferred Shares ........................................ -- -- 48,284
Purchase of units ............................................ (24,912) -- --
Proceeds from contributions from PPI related
to Dividend Reinvestment Plan .............................. 26,754 23,312 18,860
Capital distributions to preferred Unitholders ............... (17,475) (13,259) (11,473)
Capital distributions to common Unitholders .................. (132,463) (116,685) (100,504)
------------ ------------ ------------
Net cash provided by financing activities .................... 72,502 149,638 189,873
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents ......... 1,589 (15,284) 10,275
Cash and cash equivalents, beginning of period ............... 5,870 21,154 10,879
------------ ------------ ------------
Cash and cash equivalents, end of period ..................... $ 7,459 $ 5,870 $ 21,154
============ ============ ============
The accompanying notes are an integral part of these consolidated
financial statements
66
69
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
1. ORGANIZATION AND FORMATION OF THE COMPANY
ORGANIZATION AND FORMATION OF THE COMPANY
Post Apartment Homes, L.P. (the "Operating Partnership"), a Georgia limited
partnership, was formed on January 22, 1993, to conduct the business of
developing, leasing and managing upscale multi-family apartment communities for
its general partner, Post Properties, Inc. (the "Company" or "PPI"). The
Operating Partnership, through its operating divisions and subsidiaries, is the
entity through which all of the Company's operations are conducted. At December
31, 2000, the Company, through wholly owned subsidiaries, controlled the
Operating Partnership as the sole general partner and as the holder of 88.2% of
the common units in the Operating Partnership ("Units") and 64.1% of the
Perpetual Preferred Units. The other limited partners of the Operating
Partnership, who hold Units, are those persons (including certain officers and
directors of the Company) who, at the time of the Initial Offering, elected to
hold all or a portion of their interest in the form of Units rather than
receiving shares of Common Stock. Each Unit may be redeemed by the holder
thereof for either one share of Common Stock or cash equal to the fair market
value thereof at the time of such redemption, at the option of the Operating
Partnership. The Operating Partnership presently anticipates that it will cause
shares of Common Stock to be issued in connection with each such redemption
rather than paying cash (as has been done in all redemptions to date). With each
redemption of outstanding Units for Common Stock, the Company's percentage
ownership interest in the Operating Partnership will increase. In addition,
whenever the Company issues shares of Common Stock, the Company will contribute
any net proceeds therefrom to the Operating Partnership and the Operating
Partnership will issue an equivalent number of Units to the Company.
The Company elected to be taxed as a real estate investment trust ("REIT") for
Federal income tax purposes beginning with the year ended December 31, 1993. A
REIT is a legal entity which holds real estate interest and, through payments of
dividends to shareholders, in practical effect is not subject to Federal income
taxes at the corporate level.
The Operating Partnership currently owns and manages or is in the process of
developing apartment communities located in the Atlanta, Dallas, Tampa, Orlando,
Northern Virginia, Nashville, Houston, Phoenix, Denver and Charlotte
metropolitan areas. At December 31, 2000, approximately 52.8%, 25.7% and 11.5%
(on a unit basis) of the Company's communities are located in the Atlanta,
Dallas and Tampa metropolitan areas, respectively.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the consolidated
accounts of the Operating Partnership. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Certain items in the 1999 and 1998 consolidated financial statements were
reclassified for comparative purposes with the 2000 consolidated financial
statements.
NEW ACCOUNTING PRONOUNCEMENTS
SFAS NO. 133, "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES"
The Operating Partnership will adopt SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," as amended by Statement No. 137 on January
1, 2001. This standard establishes accounting and reporting standards for
derivatives and hedging activities and will require the Operating Partnership to
recognize all derivatives on the balance sheet at fair value. Derivatives that
do not qualify as hedges must be adjusted to fair value through earnings. If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of the derivative will either be offset against the change in fair value
of the hedged asset, liability, or firm commitment through earnings or be
recognized in other comprehensive income until the hedged item affects earnings.
If the change in fair value or cash flows of a derivative designated as a hedge
is not effectively offset, as defined, by the change in value or cash flows of
the item it is hedging, this difference will be immediately recognized in
earnings. Upon adoption of SFAS 133 on January 1, 2001, the Operating
Partnership will record a net transition adjustment loss in the statement of
operations of $728 and a net transition adjustment of $1,472 in accumulated
other comprehensive income (equity). Adoption of this standard will also result
in the recording of a derivative instrument liability of $1,472.
67
70
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
The Operating Partnership only utilizes qualifying cash flow hedges that are
designated specifically to reduce exposure to interest rate risk by locking in
the expected future cash payments on certain designated liabilities. This is
typically accomplished using an interest rate swap or interest rate cap. For
financial reporting purposes, the gain or loss on the effective portion of the
cash flow hedge is recorded as a component of other comprehensive income. The
ineffective portion of the cash flow hedge will be recorded immediately in
earnings.
On the date the Operating Partnership enters into a derivative contract,
management will designate the derivative as a hedge of the identified cash flow
exposure. The Operating Partnership will formally document all relationships
between hedging instruments and hedged items, as well as its risk-management
objective and strategy for undertaking various hedge transactions. In this
documentation, the Operating Partnership will specifically identify the asset,
liability, firm commitment, or forecasted transaction that has been designated
as a hedged item and will state how the hedging instrument is expected to hedge
the risks related to the hedged item.
The Operating Partnership will formally measure effectiveness of its hedging
relationships both at the hedge inception and on an ongoing basis in accordance
with its risk management policy. The Operating Partnership may discontinue hedge
accounting prospectively when it is determined that the derivative is no longer
effective in offsetting changes in the fair value or cash flows of a hedged
item; when the derivative is re-designated to no longer be a hedge instrument.
STAFF ACCOUNTING BULLETIN NO. 101, "REVENUE RECOGNITION"
The Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin
No. 101 (SAB 101), "Revenue Recognition," which provides guidance on the
recognition, presentation, and disclosure of revenue in financial statements.
SAB 101 was implemented in the fourth quarter of 2000 by the Operating
Partnership and the adoption had no effect on its results of operations or
financial position.
REAL ESTATE ASSETS AND DEPRECIATION
Real estate assets are stated at the lower of depreciated cost or fair value, if
deemed impaired. Ordinary repairs and maintenance are expensed as incurred;
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).
PREFERRED UNITS
On September 3, 1999, the Operating Partnership issued $70,000 of Series D
Cumulative Redeemable Preferred Units to an institutional investor in a private
placement meeting the requirements of Regulation D promulgated under the
Securities Act of 1933, as amended. The $25 preferred units may be redeemed by
the Company after five years at par, but are otherwise perpetual in term. The
preferred units may also be exchanged, under certain circumstances, for shares
of the Company's 8 percent Series D Cumulative Redeemable Preferred Stock. Net
proceeds to the Operating Partnership of approximately $68,000 were used to
repay outstanding indebtedness.
REVENUE RECOGNITION
Rental -- Residential properties are leased under operating leases with terms of
generally one year or less. Rental income is recognized when earned, which is
not materially different from revenue recognition on a straight line basis.
Property management and landscaping services -- Income is recognized when earned
for property management and landscaping services provided to third parties.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, all investments purchased with an
original maturity of three months or less are considered to be cash equivalents.
68
71
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
RESTRICTED CASH
Restricted cash generally is comprised of resident security deposits for
communities located in Florida and Tennessee and required maintenance reserves
for communities located in DeKalb County, Georgia.
DEFERRED FINANCING COSTS
Deferred financing costs are amortized using the interest method over the terms
of the related debt.
INTEREST AND REAL ESTATE TAXES
Interest and real estate taxes incurred during the construction period are
capitalized and depreciated over the lives of the constructed assets. Interest
paid (including capitalized amounts of $25,426, $21,417, and $15,707 during
2000, 1999 and 1998, respectively), aggregated $74,419, $51,337, and $46,889 for
the years ended December 31, 2000, 1999 and 1998, respectively.
DERIVATIVES
The Operating Partnership has entered into various interest rate swap and
interest rate cap agreements. These arrangements are used to manage the
Operating Partnership's exposure to fluctuations in interest rates. Premiums
paid to purchase interest rate protection agreements (i.e. interest rate caps)
have been deferred and are being amortized over the terms of those agreements
using the interest method. Unamortized premiums are included in deferred charges
in the consolidated balance sheet. Amounts receivable under the interest rate
protection agreements is accrued as a reduction of interest expense. Interest
rate swaps qualifying for hedge accounting treatment are recorded on an accrual
basis as an adjustment of the interest rate yield. Interest rate swaps not
qualifying for hedge accounting treatment are recorded at fair value and
recognized through the statement of operations.
PER UNIT DATA
Basic earnings per common Unit with respect to the Operating Partnership for the
years ended December 31, 2000, 1999 and 1998 is computed based upon the weighted
average number of units outstanding during the period. Diluted earnings per
common Unit is based upon the weighted average number of Units outstanding
during the period and includes the effect of the potential issuance of
additional Units if stock options were exercised or converted into common stock
of the Company.
USE OF ESTIMATES IN FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. DEFERRED CHARGES
Deferred charges consist of the following:
DECEMBER 31,
--------------------------
2000 1999
--------- ---------
Deferred financing costs.............................. $ 36,068 $ 31,148
Other................................................. 5,240 5,394
--------- ---------
41,308 36,542
Less: accumulated amortization........................ (19,608) (15,722)
--------- ---------
$ 21,700 $ 20,820
========= =========
69
72
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
3. NOTES PAYABLE
At December 31, 2000 and 1999, the Operating Partnership's indebtedness
consisted of the following:
12/31/00 12/31/99
PAYMENT MATURITY PRINCIPAL PRINCIPAL
DESCRIPTION TERMS INTEREST RATE DATE (1) BALANCE BALANCE
----------- ----- ------------- -------- ------- -------
CONVENTIONAL FIXED RATE
(SECURED)
Parkwood Townhomes(TM)........ Principal and Interest 7.375% 4/01/14 $ 799 $ 833
Post Hillsboro Village and
The Lee Apartments............ Principal and Interest 9.20% 10/01/01 -- 2,915
Northwestern Mutual Life...... Principal and Interest 6.50%(2) 3/01/09 48,601 49,462
Northwestern Mutual Life...... Principal and Interest 7.69% 10/01/07 28,666 --
Northwestern Mutual Life...... Principal and Interest 7.69% 10/01/07 51,238 --
FNMA.......................... Principal and Interest 6.975%(3) 7/23/29 103,200 --
---------- --------
232,504 53,210
---------- --------
CONVENTIONAL FLOATING RATE
(SECURED)
Addison Circle Apartment
Homes by Post(R)- Phase I .... Principal and Interest LIBOR + .75% 6/15/00 -- 22,067
FNMA.......................... Principal and Interest LIBOR + .935% (3) 7/23/29 -- 104,000
---------- --------
-- 126,067
---------- --------
TAX EXEMPT FLOATING RATE
(SECURED) Interest only "AAA" NON-AMT + .515%(4)(5) 6/01/25 235,880 235,880
---------- --------
SENIOR NOTES (UNSECURED)
Northwestern Mutual Life...... Interest only 8.21% - 8.37% 6/07/01-6/07/02 50,000 50,000
Senior Notes.................. Interest only 7.25% - 7.70% 10/01/03-12/20/10 310,000 125,000
Medium Term Notes............. Interest only 6.69% -8.12% (6) (7) 4/02/01-3/16/15 360,000 215,000
---------- --------
720,000 390,000
---------- --------
LINES OF CREDIT & OTHER
UNSECURED DEBT
Revolver ..................... N/A LIBOR + .825% or prime - .25%(8) 4/30/03 18,000 165,000
Cash Management Line.......... N/A LIBOR + .675% or prime - .25% 3/31/01 4,925 17,426
City of Phoenix............... N/A 5.00% (9) 3/01/21 2,000 2,000
---------- --------
24,925 184,426
---------- --------
TOTAL......................... $1,213,309 $989,583
========== ========
(1) All of the mortgages can be prepaid at any time, subject to certain
prepayment penalties.
(2) This note bears interest at 6.50% with an effective rate of 7.30% after
consideration of a terminated swap agreement.
(3) In December 2000, the Operating Partnership entered into a swap
transaction that fixed the rate of interest on this note at 6.975%,
inclusive of credit enhancement and other fees, from January 1, 2001
through July 31, 2009.
(4) Bond financed (interest rate on bonds + credit enhancement fees
effective October 1, 1998). The Operating Partnership pays credit
enhancement fees of .515% of the amount of such bonds or the amount of
the letters of credit, as the case may be. "AAA" NON-AMT rate was 5.00%
at December 31, 2000.
(5) These bonds are cross-collateralized. The Operating Partnership has
purchased an interest rate cap that limits the Operating Partnership's
exposure to increases in the base rate to 5%.
(6) Contains $100,000 of Mandatory Par Put Remarketed Securities. The
annual interest rate on these securities to March 16, 2005 (the
"Remarketing Date") is 6.85%. On the Remarketing Date, they are subject
to mandatory tender for remarketing.
(7) In October 2000, the Operating Partnership entered into a swap
transaction that fixed the rate on a $25,000 MTN at 7.28%, inclusive of
credit enhancement and other fees.
70
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POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
(8) Represents stated rate. The Operating Partnership may also make "money
market" loans of up to $175,000 at rates below the stated rate. At
December 31, 2000, the outstanding balance of the Revolver consisted of
"money market" loans with an average interest rate of 7.49%. Effective
January 12, 2001, the interest rate is LIBOR plus .75% or prime minus
.25% and the debt matures April 30, 2004. Also effective January 12,
2001, the Operating Partnership may make "money market" loans of up to
$160,000 at rates below the stated rate.
(9) This loan is interest free for the first three years, with interest at
5.00% thereafter. Repayment is to commence on March 1, 2001 subject to
the conditions set forth in the Agreement.
CONVENTIONAL FIXED RATE MORTGAGES PAYABLE (SECURED)
Conventional mortgages payable were comprised of five loans at December 31, 2000
and 1999, each of which is collateralized by certain apartment communities
located in Atlanta and Dallas which are included in real estate assets.
On July 23, 1999, the Operating Partnership issued $104,000 of secured notes to
FNMA. Net proceeds of $101,988 were used to repay outstanding indebtedness.
These notes are secured by five apartment communities. The notes include a
prepayment penalty that is an amount equal to a percentage of the principal
amount remaining under the notes at the time of prepayment. The penalty ranges
from 4.8% in the first year to .65% in the tenth year. The Operating Partnership
has an option to call these notes after ten years from the issuance date. In
December 2000, the Operating Partnership entered into a swap transaction that
fixed the rate of interest on this note at 6.975%, inclusive of credit
enhancement and other fees, from January 1, 2001 through July 31, 2009.
TAX-EXEMPT FLOATING RATE BOND INDEBTEDNESS (SECURED)
Tax exempt floating rate bond indebtedness is comprised of AAA Fannie Mae credit
enhanced debt maturing in 2025. The Federal National Mortgage Association
("FNMA") has provided replacement credit enhancement through 2025 for the bond
issues, aggregating $235,880, which were reissued. The agreement with FNMA
contains representations, covenants, and events of default customary to such
secured loans. Certain of the apartment communities are encumbered to secure
tax-exempt housing bonds.
SENIOR NOTES (UNSECURED)
NORTHWESTERN MUTUAL LIFE NOTES On June 7, 1995, the Operating Partnership issued
$50,000 of unsecured senior notes with the Northwestern Mutual Life Insurance
Company. The notes were in two tranches: the first, totaling $30,000, carries an
interest rate of 8.21% per annum (1.25% over the corresponding treasury rate on
the date such rate was set) and matures on June 7, 2001; and the second,
totaling $20,000 carries an interest rate of 8.37% per annum (1.35% over the
corresponding treasury rate on the date such rate was set) and matures on June
7, 2002. Proceeds from the notes were used to repay outstanding indebtedness.
The note agreements pursuant to which the notes were purchased contain customary
representations, covenants and events of default similar to those contained in
the note agreement for the Revolver.
SENIOR NOTES On September 30, 1996, the Operating Partnership completed a
$125,000 senior unsecured debt offering comprised of two tranches. The first
tranche, $100,000 of 7.25% Notes due on October 1, 2003 (the "2003 Notes"), was
priced at 99.642% to yield 7.316% per annum (.71% over the corresponding
treasury rate on the date such rate was set). The second tranche, $25,000 of
7.50% Notes due on October 1, 2006 (the "2006 Notes", and together with the 2003
Notes, the "Notes"), was priced at 99.694% to yield 7.544% per annum (.83% over
the corresponding treasury rate on the date such rate was set). Proceeds from
the Notes were used to repay outstanding indebtedness. On December 20, 2000, the
Operating Partnership issued $185,000 of unsecured senior notes. These notes
bear interest at 7.70% and mature on December 20, 2010. Net proceeds of
approximately $183,798 were used to repay outstanding indebtedness.
71
74
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
MEDIUM TERM NOTES The Operating Partnership has established a program for the
sale of Medium-Term Notes due three months or more from the date of issue (the
"MTNs"). Proceeds from the MTNs were used to (i) prepay certain outstanding
notes and (ii) repay outstanding indebtedness.
The following table sets forth MTNs issued and outstanding as of December 31,
2000:
ISSUE INTEREST MATURITY
DATE AMOUNT RATE DATE
----- ---------- -------- --------
March 31, 1997 $ 37,000 7.02% April 2, 2001
March 31, 1997 13,000 7.30% April 1, 2004
September 22, 1997 10,000 6.69% September 22, 2004
September 22, 1997 25,000 6.78% September 22, 2005
March 12, 1998 100,000 6.85% March 16, 2015
May 9, 2000 25,000 (1) 7.28% February 1, 2005
June 15, 2000 150,000 8.12% June 15, 2005
----------
$ 360,000
==========
(1) In October 2000, the Operating Partnership
entered into a swap transaction that fixed
the rate on the note at 7.28%, inclusive of
credit enhancement and other fees, through
maturity.
On March 12, 1998, the Operating Partnership issued $100,000 of 6.85% Mandatory
Par Put Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net
proceeds in the amount of $99,087 from the sale of the MOPPRS(SM) were used to
repay outstanding indebtedness. In connection with the MOPPRS(SM) transaction,
Merrill Lynch & Co. purchased an option to remarket the securities as of March
16, 2005 (the "Remarketing Date") reducing the effective borrowing rate through
the Remarketing Date to 6.59%. In anticipation of the offering, the Operating
Partnership entered into forward-treasury-lock agreements in the fall of 1997.
As a result of the termination of these agreements, the effective borrowing rate
was increased to approximately 6.85%, the coupon rate on the MOPPRS(SM).
On April 8, 1998, the Operating Partnership sold $50,000 of Remarketed Reset
Notes due April 7, 2009 under the MTN program. The notes bear an interest rate
of LIBOR plus the applicable spread with the spread being reset from time to
time. The initial spread is equal to .40% for a period of one year. The
Operating Partnership has entered into an interest rate swap for the entire term
of the notes to fix the interest rate index. Under the terms of the swap, the
Operating Partnership paid a fixed rate of 6.02% and received LIBOR. This swap
was settled in February 1999 at a loss of $1,495. This loss was deferred to
amortize over the remaining term of the Remarketed Reset Notes. On April 7,
1999, the Operating Partnership repaid the Remarketed Reset Notes with the
proceeds of conventional fixed rate secured debt. The remaining unamortized
balance of the deferred swap loss was redesignated to the new debt and will be
amortized over the remaining term of the new debt.
On May 9, 2000, the Operating Partnership sold $25,000 aggregate principal
amount of notes under the MTN Program. These notes bear interest at the London
Interbank Offer Rate ("LIBOR") plus .75% and mature on February 1, 2005. Net
proceeds of $24,875 were used to repay outstanding indebtedness. In October
2000, the Operating Partnership entered into a swap transaction that fixed the
rate on the notes at 7.28%, inclusive of credit enhancement and other fees,
through maturity.
On June 16, 2000, the Operating Partnership sold $150,000 aggregate principal
amount of notes under the MTN Program. These notes bear interest at 8.12% and
mature on June 15, 2005. Net proceeds of $148,865 were used to repay outstanding
indebtedness.
72
75
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
The aggregate maturities of the Company's indebtedness are as follows (1):
2001................................................... $ 67,000
2002................................................... 20,000
2003................................................... 100,000
2004................................................... 23,000
2005................................................... 200,000
Thereafter............................................. 778,384
------------
$ 1,188,384
============
(1) Excludes principal amortization payments and
payments on lines of credit and other
unsecured debt.
LINES OF CREDIT AND OTHER (UNSECURED)
On January 12, 2001, the Operating Partnership closed a $320,000 three-year
syndicated revolving line of credit (the "Revolver"), which matures April 2004.
This line of credit bears interest at LIBOR plus .75% or prime minus .25% and
replaces the Operating Partnership's previous line. The Revolver provides for
the rate to be adjusted up or down based on changes in the credit ratings on the
Operating Partnership's senior unsecured debt. The Revolver also includes a
money market competitive bid option for short-term funds up to $160,000 at rates
below the stated line rate. The credit agreement for the Revolver contains
customary representations, covenants and events of default, including covenants
which restrict the ability of the Operating Partnership to make distributions,
in excess of stated amounts, which in turn restrict the discretion of the
Company to declare and pay dividends. In general, during any fiscal year the
Operating Partnership may only distribute up to 100% of the Operating
Partnership's consolidated income available for distribution (as defined in the
credit agreement) exclusive of distributions of up to $30,000 of capital gains
for such year. The credit agreement contains exceptions to these limitations to
allow the Operating Partnership to make distributions necessary to allow the
Company to maintain its status as a REIT. The Company does not anticipate that
this covenant will adversely affect the ability of the Operating Partnership to
make distributions, or the Company to declare dividends, under the Company's
current dividend policy.
Also in January 2001, the Operating Partnership reached an agreement with a
syndicated group of banks for an incremental $185,000, 364 day facility at terms
substantially equal to the Revolver.
On July 26, 1996, the Operating Partnership closed a $20,000 unsecured line of
credit with Wachovia Bank of Georgia, N.A. (The "Cash Management Line"). The
Cash Management Line bears interest at LIBOR plus .675% or prime minus .25% and
matures on March 31, 2002. Management believes the Cash Management Line will be
renewed at maturity with similar terms. The Revolver requires three days advance
notice to repay borrowings whereas the Cash Management Line provides the
Operating Partnership with an automatic daily sweep which applies all available
cash to reduce the outstanding balance.
In addition, the Operating Partnership has a $3,000 facility to provide letters
of credit for general business purposes.
At December 31, 2000, the outstanding balances on the Revolver and Cash
Management Line were $18,000 and $4,925, respectively. There were no outstanding
balances on any of the other facilities at December 31, 2000.
On March 1, 1998 the Operating Partnership entered into a Disposition and
Development Agreement with the City of Phoenix, Arizona. Pursuant to this
agreement, the City of Phoenix loaned the Operating Partnership $2,000. This
loan is interest-free for the first three years, with a 5.00% interest rate
thereafter. Repayment of the loan commences on March 1, 2001 with equal
semi-annual payments due on March 1 and September 1 of each year through March
1, 2021. All repayment terms are subject to the conditions set forth in the
Agreement.
73
76
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
PLEDGED ASSETS
The aggregate net book value at December 31, 2000 of property pledged as
collateral for indebtedness amounted to approximately $469,473.
UNUSED TREASURY LOCKS
The loss on unused treasury locks in 1998 resulted from the termination of
treasury locks intended for debt securities that were not issued by the
Operating Partnership.
EXTRAORDINARY ITEM
The extraordinary item for the year ended December 31, 1999 was due to the write
off of loan costs resulting from the early extinguishment of debt. The
extraordinary item for the year ended December 31, 1997 resulted from the
write-off of deferred financing costs on the mortgage debt satisfied.
4. INCOME TAXES
Income or losses of the Operating Partnership are allocated to the partners of
the Operating Partnership for inclusion in their respective income tax returns.
Accordingly, no provision or benefit for income taxes has been made in the
accompanying financial statements. The Company has 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 annually at least 95% (90% beginning in 2001) of its
REIT taxable income, as defined in the Code, to its shareholders and satisfy
certain other requirements. As a result, the Operating Partnership generally
will not be subject to Federal income taxation at the corporate level on the
income the Company distributes to the shareholders. Although the Company has
elected to be taxed as a REIT, Post Services, Inc. ("Post Services") was formed
as a subsidiary of the Operating Partnership to provide through its subsidiaries
asset management, leasing and landscaping services to third parties. The
consolidated taxable income of Post Services, if any, will be subject to tax at
regular corporate rates.
As of December 31, 2000, the net basis for Federal income tax purposes, taking
into account the special allocation of gain to the partners contributing
property to the Operating Partnership, was lower than the net assets as reported
in the Operating Partnership's consolidated financial statements by $29,794.
5. RELATED PARTY TRANSACTIONS
The Operating Partnership provides landscaping services for executive officers,
employees, directors and other related parties. For the years ended December 31,
2000, 1999 and 1998, the Operating Partnership received landscaping fees of
$667, $610, and $961 for such services. These amounts include reimbursements of
direct expenses in the amount of $11, $10, and $295, which are not included in
landscape services revenue. Accordingly, these transactions resulted in the
Operating Partnership recording landscape services net fees in excess of direct
expenses of $656, $600, and $666 in the Operating Partnership financial
statements for the years ended December 31, 2000, 1999 and 1998, respectively.
The Operating Partnership provides accounting and administrative services to
entities controlled by certain executive officers of the Operating Partnership.
Fees under this arrangement aggregated $25 for each year ended December 31,
2000, 1999 and 1998, respectively.
The Operating Partnership was contracted to assist in the development of
apartment complexes constructed by a former executive and current shareholder.
Fees under this arrangement were $29, $100, and $349 for the years ended
December 31, 2000, 1999 and 1998, respectively.
On February 15, 2000 and December 10, 1999, the Company loaned $1,500 and
$7,750, respectively, to certain executives. These loans are payable ten years
from the issue date, and bear interest at a rate of 6.32% per annum.
74
77
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Proceeds from these loans were used by these executives to acquire the Company's
common shares on the open market. As of February 10, 2001, $2,000 of the loans
have been repaid.
6. SALE OF ASSETS AND ASSETS HELD FOR SALE
During the first quarter of 2000, the Operating Partnership authorized the sale
of five communities: one community in Atlanta, Georgia, three communities in
Jackson, Mississippi and one commercial property in Dallas, Texas. During the
third quarter of 2000, the Operating Partnership authorized the sale of two
communities in Nashville, Tennessee. During the fourth quarter of 2000, the
Operating Partnership authorized the sale of one tract of land in Dallas, Texas
and seven communities: two communities in Atlanta, Georgia, one community in
Nashville, Tennessee and three communities and one commercial property in
Dallas, Texas.
In February 2000, the Operating Partnership sold the 213 community in Atlanta,
Georgia, for $32,350. Net proceeds of approximately $31,500 were used to pay
down outstanding indebtedness.
In September 2000, the Operating Partnership sold the three communities in
Jackson, Mississippi, containing a total of 983 units for $44,600. Net proceeds
of approximately $42,903 were used to pay down outstanding indebtedness.
In November 2000, the Operating Partnership sold two properties located in
Nashville, Tennessee containing a total of 367 units for $36,885. Net proceeds
of approximately $36,290 were used to repay outstanding indebtedness.
In December 2000, the Operating Partnership sold two properties located in
Atlanta, Georgia, containing a total of 421 units for $47,250. Net proceeds of
approximately $46,651 were used to repay outstanding indebtedness and to
repurchase the Company's common stock.
At December 31, 2000, the remaining tract of land, four communities and two
commercial properties consisting of land, building and improvements and
furniture, fixtures and equipment were recorded at $122,047, which represented
the lower of cost or fair value less costs to sell. The Operating Partnership
has recorded a net gain on the sale of the Atlanta, Jackson and Nashville assets
in the statement of operations, reduced by its best estimate of the effect of
the anticipated sale of the remaining communities and commercial properties, as
a net gain on the sale of assets of $3,208. The Operating Partnership expects
the sale of the remaining properties to occur in 2001.
For the years ended December 31, 2000 and 1999, the consolidated statements of
operation include net income of $12,392 and $11,804, respectively, from
communities held for sale at December 31, 2000. Through December 31, 2000,
depreciation expense totaling $4,109 was recognized on these assets prior to the
assets being classified as held for sale. Depreciation expense has not been
recognized subsequent to the date of held for sale classification.
7. PROJECT ABANDONMENT, EMPLOYEE SEVERANCE AND IMPAIRMENT CHARGES
In the fourth quarter of 2000, management decided to restrict its development
activities to fewer markets, refine its development investment strategy, exit
the for-sale housing business and make changes in its executive management team.
As a result of this decision, the Operating Partnership wrote off $4,389 of
costs it had incurred in markets it will no longer pursue for development
opportunities and on individual development deals that are no longer consistent
with management's revised strategy.
In connection with the management changes at December 31, 2000, all employees
included in the severance charge of $3,066 had been notified of their
termination and severance agreement. As of February 15, 2001, these employees
were no longer providing any service to the Operating Partnership. The employees
included in the accrual at December 31, 2000, were primarily four executives and
five accounting department employees in the Dallas regional office. At December
31, 2000, the accrual for unpaid severance charges was $2,250.
In addition to these charges, the Operating Partnership also recorded an
impairment charge of $407 to adjust the cost of for-sale housing in Atlanta and
Dallas to its estimated net sales proceeds. Additionally, the Operating
Partnership
75
78
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
recorded a charge of $1,503 to write off its investment in Darwin Networks, a
high-speed Internet provider that filed for Chapter 11 bankruptcy in January
2001.
8. EMPLOYEE BENEFIT PLANS
Through a plan adopted by the Company, the employees of the Operating
Partnership are participants in a defined contribution plan pursuant to Section
401 of the Internal Revenue Code. Beginning in 1996, Operating Partnership
contributions, if any, to this plan are based on the performance of the Company
and are allocated to each participant based on the relative contribution of the
participant to the total contributions of all participants. For purposes of
allocating the Operating Partnership contribution, the maximum employee
contribution included in the calculation is 3% of salary. Operating Partnership
contributions of $514, $346, and $179 were made in 2000, 1999 and 1998,
respectively.
During 1995, the Company adopted the Employee Stock Purchase Plan ("ESPP") to
encourage stock ownership by eligible directors and employees. To participate in
the ESPP, (i) directors must not be employed by the Company or the Operating
Partnership and must have been a member of the Board of Directors for at least
one month and (ii) an employee must have been employed full-time by the Company
or the Operating Partnership for at least one month. The purchase price of
shares of Common Stock under the ESPP is equal to 85% of the lesser of the
closing price per share of Common Stock on the first or last day of the trading
period, as defined.
9. STOCK-BASED COMPENSATION PLANS
STOCK COMPENSATION PLANS
At December 31, 2000, the Company had two stock-based compensation plans, the
Employee Stock Plan (the "Stock Plan"), the Employee Stock Purchase Plan (the
"ESPP") and, under the Stock Plan, a stock grant program (the "Grant Plan") as
described below. The Operating Partnership applies APB Opinion 25 and related
Interpretations in accounting for its plans. Accordingly, based upon the
criteria of APB Opinion 25 no compensation cost is required to be recognized for
the Stock Plan and the ESPP. The compensation cost which is required to be
charged against income for the Grant Plan was $138, $205, and $182 for 2000,
1999 and 1998, respectively. Had compensation cost for the Company's Stock Plan
and ESPP been determined based on the fair value at the grant dates for awards
under the Plans consistent with the method of FASB Statement 123, the Operating
Partnership's net income and earnings per Unit would have been reduced to the
pro forma amounts indicated below:
2000 1999 1998
---------- ---------- ---------
Net income available to common
unitholders .............................. As reported ... $ 100,336 $ 105,177 $ 88,988
Pro forma ..... $ 98,154 $ 102,994 $ 88,100
Net income per common Unit -
basic .................................... As reported ... $ 2.25 $ 2.41 $ 2.21
Pro forma ..... $ 2.21 $ 2.36 $ 2.19
Net income per common Unit -
diluted .................................. As reported ... $ 2.22 $ 2.39 $ 2.18
Pro forma ..... $ 2.18 $ 2.33 $ 2.16
For purposes of the pro forma presentation, the fair value of each option grant
is estimated as of the date of grant using the Black-Scholes option-pricing
model. The weighted-average of all assumptions used in the calculation for
various grants under all of the Company's plans during 2000, 1999 and 1998, are
as follows:
76
79
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
2000 1999 1998
------------ ------------ ------------
Dividend yield............................. 8.0% 7.3% 7.0%
Expected volatility........................ 24.8% 15.4% 15.3%
Risk-free interest rate.................... 6.7% to 6.9% 4.5% to 6.6% 4.7% to 5.8%
Expected option life....................... 5 to 7 years 5 to 7 years 5 to 7 years
FIXED STOCK OPTION PLANS
Under the Stock Plan, the Company may grant to its employees and directors
options to purchase up to 6,000,000 shares of common stock. Of this amount,
550,000 shares are available for grants of restricted stock. Options granted to
any key employee or officer cannot exceed 100,000 shares a year (500,000 shares
if such key employee or officer is a member of the Company's Executive
Committee). The exercise price of each option may not be less than the market
price on the date of grant and all options have a maximum term of ten years from
the grant date.
A summary of the status of the Company's Stock Plan as of December 31, 2000,
1999 and 1998, changes during the years then ended, and the weighted-average
fair value of options granted during the years is presented below:
2000 1999 1998
------------------------ ------------------------ -------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- -------- ----------- -------- ------------ --------
Outstanding at beginning of year .... 4,054,876 $ 34 3,030,852 $ 31 $ 2,237,551 31
Granted ............................. 740,538 38 1,288,232 36 1,440,784 39
Exercised ........................... (334,194) 32 (164,053) 30 (67,326) 31
Forfeited ........................... (189,612) 38 (100,155) 37 (580,157) 39
----------- ----------- ------------
Outstanding at end of year .......... 4,271,608 35 4,054,876 35 3,030,852 34
=========== =========== ============
Options exercisable at year-end...... 2,413,595 2,290,143 2,065,438
=========== =========== ============
Weighted-average fair value of
options granted during the year...... $ 4.76 $ 2.08 $ 2.54
=========== =========== ============
At December 31, 2000, the range of exercise prices for options outstanding was
$27.625 - $44.125 and the weighted-average remaining contractual life was 7
years.
10. COMMITMENTS AND CONTINGENCIES
LAND, OFFICE AND EQUIPMENT LEASES
The Operating Partnership is party to two ground leases with terms expiring in
years 2040 and 2043 relating to a single operating community, one ground lease
expiring in 2038 for a second operating community, three ground leases expiring
in 2066, 2069 and 2074 for three communities under development and to office,
equipment and other operating leases with terms expiring in years 2001 through
2004. Future minimum lease payments for non-cancelable land, office, equipment
and other leases at December 31, 2000 are as follows:
77
80
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
2001......................... $ 2,122
2002......................... 1,392
2003......................... 1,300
2004......................... 1,274
2005......................... 1,279
2006 and thereafter.......... 159,456
The Operating Partnership incurred $5,935, $5,109, and $4,915 of rent expense
for the years ended December 31, 2000, 1999 and 1998, respectively.
CONTINGENCIES
The Operating Partnership is party to various legal actions which are incidental
to its business. Management believes that these actions will not have a material
adverse affect on the consolidated balance sheets and statements of operations.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
Considerable judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Operating Partnership could realize on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Cash equivalents, rents and landscape service receivables, accounts payable,
accrued expenses, and other liabilities are carried at amounts which reasonably
approximate their fair values.
The fair value of fixed rate debt was approximately $822,043 at December 31,
2000.
The fair values of interest rate protection agreements and interest rate swaps
(used for hedging purposes) are estimated by obtaining quotes from an investment
broker. At December 31, 2000, carrying amounts related to these arrangements in
the consolidated balance sheet were approximately $728. As of December 31, 2000,
the net cost to terminate these contracts was approximately $1,438.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 2000. 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.
78
81
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
12. EARNINGS PER UNIT
For the years ended December 31, 2000, 1999 and 1998, basic and diluted earnings
per common Unit for income before extraordinary item, net of preferred
distributions, and net income available to common Unitholders before
extraordinary item has been computed as follows:
YEAR ENDED 2000
--------------------------------------------------
INCOME UNITS PER-UNIT
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------
Income before extraordinary item............................... $ 117,811
Less: Preferred stock distributions............................ (17,475)
-----------
BASIC EPS
Income available to common Unitholders before extraordinary item ... 100,336 44,503,290 $ 2.25
=======
EFFECT OF DILUTIVE SECURITIES
Options........................................................ -- 534,789
---------- ------------
DILUTED EPS
Income available to common Unitholders + assumed
conversions before extraordinary item ............................ $ 100,336 45,038,079 $ 2.22
========== ============ =======
YEAR ENDED 1999
--------------------------------------------------
INCOME UNITS PER-UNIT
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------
Income before extraordinary item................................ $ 119,424
Less: Preferred stock distributions............................. (13,726)
----------
BASIC EPS
Income available to common Unitholders before extraordinary item ... 105,698 43,663,373 $ 2.42
=======
EFFECT OF DILUTIVE SECURITIES
Options......................................................... -- 456,298
--------- ------------
DILUTED EPS
Income available to common Unitholders + assumed
conversions before extraordinary item ............................ $ 105,698 44,119,671 $ 2.39
========== ============ =======
YEAR ENDED 1998
--------------------------------------------------
INCOME UNITS PER-UNIT
(NUMERATOR) (DENOMINATOR) AMOUNT
----------- ------------- --------
Income before extraordinary item................................ $ 100,461
Less: Preferred stock distributions............................. (11,473)
----------
BASIC EPS
Income available to common Unitholders before extraordinary item ... 88,988 40,244,351 $ 2.21
=======
EFFECT OF DILUTIVE SECURITIES
Options......................................................... -- 444,991
---------- ------------
DILUTED EPS
Income available to common Unitholders + assumed
conversions before extraordinary item ............................ $ 88,988 40,689,342 $ 2.18
========== ============ =======
13. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December 31,
2000, 1999 and 1998 are as follows:
(a) The Operating Partnership committed to distribute $33,466, $30,818, and
$25,115 for the quarters ended December 31, 2000, 1999 and 1998,
respectively.
(b) For cash flow purposes, treasury stock is net of $2,435 of donated
stock, $1,708 of treasury stock transactions settled in 2001, less $152
of shares re-issued from treasury stock.
79
82
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
14. SEGMENT INFORMATION
SEGMENT DESCRIPTION
In accordance with SFAS No. 131, "Disclosure About the Segments of an Enterprise
and Related Information," the Operating Partnership presents segment information
based on the way that management organizes the segments within the enterprise
for making operating decisions and assessing performance. The segment
information is prepared on substantially the same basis as the internally
reported information used by the Operating Partnership's chief operating
decision makers to manage the business.
The Operating Partnership's chief operating decision makers focus on the
Operating Partnership's primary sources of income which are property rental
operations and third party services. Third party services are designated as one
segment. Property rental operations are broken down into five segments based on
the various stages in the property ownership lifecycle. The Operating
Partnership's six segments are further described as follows:
Property Rental Operations
- Fully stabilized communities - those apartment communities
which have been stabilized (the earlier of the point at which
a property reached 95% occupancy or one year after completion
of construction) for both the current and prior year.
- Communities stabilized during 1999 - communities which reached
stabilized occupancy in the prior year.
- Development and Lease up Communities - those communities which
are in lease-up but were not stabilized by the beginning of
the current year including communities which stabilized during
the current year.
- Communities held for sale - those communities that are
being marketed for sale.
- Sold communities - communities which were sold in the current
or prior year.
Third Party Services - fee income and related expenses from the
Operating Partnership's apartment community management, landscaping and
corporate apartment rental services.
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the performance
measure for its segments. Effective January 1, 2000, FFO is defined by the
National Association of Real Estate Investment Trusts as net income available to
common shareholders determined in accordance with generally accepted accounting
principles ("GAAP"), excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation of real estate assets, and after adjustment
for unconsolidated partnerships and joint ventures. FFO should not be considered
as an alternative to net income (determined in accordance with GAAP) as an
indicator of the Operating Partnership's financial performance or to cash flow
from operating activities (determined in accordance with GAAP) as a measure of
the Operating Partnership's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Operating Partnership's needs.
SEGMENT INFORMATION
The following table reflects each segment's contribution to consolidated
revenues and FFO together with a reconciliation of segment contribution to FFO,
total FFO and income before extraordinary item. Additionally, substantially all
of the Operating Partnership's assets relate to the Operating Partnership's
property rental operations. Asset cost, depreciation and amortization by segment
are not presented because such information at the segment level is not reported
internally.
80
83
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998
----------- ----------- -----------
REVENUES
Fully stabilized communities ......................................... $ 232,435 $ 221,901 $ 213,043
Communities stabilized during 1999 ................................... 42,710 38,097 20,845
Development and lease-up communities ................................. 54,486 17,408 2,106
Communities held for sale ............................................ 19,706 18,552 18,359
Sold communities ..................................................... 15,928 24,285 24,004
Third party services ................................................. 15,249 12,486 10,416
Other ................................................................ 19,318 13,198 10,132
----------- ----------- -----------
Consolidated revenues ................................................ $ 399,832 $ 345,927 $ 298,905
=========== =========== ===========
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities ......................................... $ 162,197 $ 154,060 $ 146,431
Communities stabilized during 1999 ................................... 28,753 26,199 12,669
Development and lease-up communities ................................. 33,684 9,679 (184)
Communities held for sale ............................................ 12,392 11,804 11,896
Sold communities ..................................................... 11,457 18,167 17,213
Third party services ................................................. 2,157 1,657 1,653
----------- ----------- -----------
Contribution to FFO .................................................. 250,640 221,566 189,678
----------- ----------- -----------
Other operating income, net of expense ............................... 2,326 (310) (1,197)
Depreciation on non-real estate assets ............................... (2,405) (1,962) (1,432)
Minority interest in consolidated property
partnerships ...................................................... 1,695 (511) (397)
Project abandonment, employee severance and impairment charges ....... (9,365) -- --
Interest expense ..................................................... (50,303) (33,192) (31,297)
Amortization of deferred loan costs .................................. (1,636) (1,496) (1,185)
General and administrative ........................................... (10,066) (7,788) (8,495)
Distributions to preferred unitholders ............................... (17,475) (13,726) (11,473)
----------- ----------- -----------
Total FFO ............................................................ 163,411 162,581 134,202
----------- ----------- -----------
Depreciation on real estate assets ................................... (66,283) (55,361) (45,214)
Net gain (loss) on sale of assets .................................... 3,208 (1,522) --
Distributions to preferred unitholders................................ 17,475 13,726 11,473
----------- ----------- -----------
Income before extraordinary item and preferred distributions ......... $ 117,811 $ 119,424 $ 100,461
=========== =========== ===========
81
84
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
15. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years ended 2000 and 1999 are
as follows:
YEAR ENDED DECEMBER 31, 2000*
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- ---------- ----------
Revenues ............................................................ $ 95,443 $ 99,482 $ 101,342 $ 103,565
--------- --------- ---------- ----------
Net income before net gain (loss) on sale of assets
and other charges ................................................... 31,965 33,734 30,676 27,593
Net gain (loss) on sale of assets ................................... 687 (19) 959 1,581
Project abandonment, employee severance and
impairment charges .................................................. -- -- -- (9,365)
--------- --------- ---------- ----------
Net income .......................................................... 32,652 33,715 31,635 19,809
Distributions to preferred Unitholders .............................. (4,368) (4,369) (4,369) (4,369)
--------- --------- ---------- ----------
Net income available to common Unitholders .......................... $ 28,284 $ 29,346 $ 27,266 $ 15,440
========= ========= ========== ==========
Earnings per common Unit:
Net income available to common Unitholders -
basic ............................................................. $ 0.64 $ 0.66 $ 0.61 $ 0.35
Net income available to common Unitholders -
diluted ........................................................... $ 0.63 $ 0.65 $ 0.60 $ 0.34
YEAR ENDED DECEMBER 31, 1999*
--------------------------------------------------------
FIRST SECOND THIRD FOURTH
--------- --------- ---------- ----------
Revenues ............................................................ $ 80,891 $ 85,503 $ 88,158 $ 91,375
--------- --------- ---------- ----------
Net income before gain (loss) on sale of assets and
extraordinary items ................................................. 29,406 29,624 30,626 31,290
Net gain (loss) on sale of assets ................................... (1,567) 476 (246) (185)
Extraordinary items ................................................. (521) -- -- --
--------- --------- ---------- ----------
Net income .......................................................... 27,318 30,100 30,380 31,105
Distributions to preferred Unitholders .............................. (2,969) (2,969) (3,404) (4,384)
--------- --------- ---------- ----------
Net income available to common Unitholders .......................... $ 24,349 $ 27,131 $ 26,976 $ 26,721
========= ========= ========== ==========
Earnings per common Unit:
Net income available to common Unitholders -
basic ............................................................. $ 0.56 $ 0.62 $ 0.62 $ 0.61
Net income available to common Unitholders -
diluted ........................................................... $ 0.56 $ 0.61 $ 0.61 $ 0.60
* The total of the four quarterly amounts for earnings per Unit may not equal
the total for the year. These differences result from the use of a weighted
average to compute average number of Units outstanding.
82
85
SCHEDULE III
POST PROPERTIES, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(DOLLARS IN THOUSANDS)
GROSS AMOUNTS AT WHICH
INITIAL COSTS CARRIED AT CLOSE OF PERIOD
--------------------- -------------------------------------
COST
CAPITALIZED
SUBSEQUENT
RELATED BUILDING AND TO BUILDING AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION LAND IMPROVEMENTS TOTAL (1)
----------- ------------ -------- ------------ ----------- ---------- ------------ ---------
GEORGIA
Post Ashford................. Apartments $ 9,895 (2) $ 1,906 $ -- $ 8,578 $ 1,906 $ 8,578 $ 10,484
Post Biltmore................ Apartments -- 4,470 -- 4,831 4,470 4,831 9,301
Post Briarcliff.............. Apartments -- 18,785 -- 40,957 13,310 46,432 59,742
Post Bridge.................. Apartments 12,450 (2) 868 -- 12,273 869 12,272 13,141
Post Brookhaven.............. Apartments -- 7,921 -- 31,317 7,921 31,317 39,238
Post Canyon.................. Apartments 16,845 (2) 931 -- 18,184 931 18,184 19,115
Post Chase................... Apartments 15,000 (2) 1,438 -- 15,978 1,438 15,978 17,416
Post Chastain................ Apartments 30,573 6,352 -- 40,312 6,779 39,885 46,664
Post Collier Hills........... Apartments -- 6,487 -- 25,210 7,183 24,514 31,697
Post Corners................. Apartments 14,760 (2) 1,473 -- 15,216 1,473 15,216 16,689
Post Court................... Apartments 18,650 (2) 1,769 -- 17,386 1,769 17,386 19,155
Post Creek................... Apartments -- 10,406 36,756 6,403 10,442 43,123 53,565
Post Crest................... Apartments 24,461 4,733 -- 24,725 4,763 24,695 29,458
Post Crossing................ Apartments -- 3,951 -- 19,496 3,951 19,496 23,447
Post Dunwoody................ Apartments -- 4,917 -- 28,590 4,961 28,546 33,507
Post Gardens................. Apartments -- 5,859 -- 33,809 5,931 33,737 39,668
Post Glen.................... Apartments 24,140 5,591 -- 21,657 5,784 21,464 27,248
Post Lane.................... Apartments -- 1,512 -- 8,302 2,067 7,747 9,814
Post Lenox Park.............. Apartments 10,908 3,132 -- 10,795 3,132 10,795 13,927
Post Lindbergh............... Apartments -- 6,268 -- 28,013 6,652 27,629 34,281
Post Mill.................... Apartments 12,880 (2) 915 -- 12,938 922 12,931 13,853
Post Oak..................... Apartments -- 2,028 -- 8,295 2,027 8,296 10,323
Post Oglethorpe.............. Apartments -- 3,662 -- 17,045 3,662 17,045 20,707
Post Park.................... Apartments -- 6,253 -- 40,106 8,830 37,529 46,359
Post Parkside................ Mixed Use -- 3,402 -- 20,030 3,465 19,967 23,432
Post Peachtree............... Apartments -- 2,024 -- 6,995 2,024 6,995 9,019
Post Peachtree Hills......... Apartments -- 4,215 -- 13,868 4,857 13,226 18,083
Post Pointe.................. Apartments -- 2,417 -- 15,914 3,027 15,304 18,331
Post Renaissance............. Apartments -- -- -- 19,835 -- 19,835 19,835
Post Ridge................... Apartments -- 11,332 -- 25,427 5,150 31,609 36,759
Post Spring.................. Apartments -- 3,316 -- 32,791 3,316 32,791 36,107
Post Summit.................. Apartments -- 1,575 -- 6,376 1,575 6,376 7,951
Post Valley.................. Apartments 18,600 (2) 1,117 -- 18,965 1,117 18,965 20,082
Post Vinings................. Apartments -- 4,322 -- 21,783 5,668 20,437 26,105
Post Village
The Arbors.................. Apartments -- 384 -- 16,196 373 16,207 16,580
The Fountains The Meadows... Apartments 26,000 (2) 611 -- 38,401 878 38,134 39,012
The Gardens................. Apartments 14,500 (2) 187 -- 28,097 637 27,647 28,284
The Hills................... Apartments 7,000 (2) 91 -- 13,563 307 13,347 13,654
Post Walk.................... Apartments 19,300 (2) 2,954 -- 17,722 2,954 17,722 20,676
Post Woods................... Apartments 16,716 1,378 -- 27,416 3,070 25,724 28,794
3400 Stratford............... Apartments -- 328 -- 24,023 485 23,866 24,351
Post Riverside............... Mixed Use -- 11,130 -- 108,311 12,434 107,007 119,441
TEXAS
Addison Circle Apartment
Homes by Post - Phase I..... Mixed Use 28,666 2,885 41,482 5,327 3,243 46,451 49,694
Addison Circle Apartment
Homes by Post - Phase II.... Mixed Use 51,238 3,417 1,128 80,662 3,759 81,448 85,207
Addison Circle Apartment
Homes by Post - Phase III... Mixed Use -- 752 -- 20,062 532 20,282 20,814
Post American Beauty Mill.... Apartments -- 234 2,786 3,446 571 5,895 6,466
Post Block 588............... Apartments -- 1,278 48 21,047 1,415 20,958 22,373
Clyde Lane................... Apartments -- 1,628 895 1,833 1,628 2,728 4,356
Post Cole's Corner........... Mixed Use -- 1,886 18,006 1,401 2,086 19,207 21,293
Post Columbus Square ........ Mixed Use -- 4,565 24,595 525 4,565 25,120 29,685
Heights of State-Thomas...... Mixed Use -- 5,455 15,559 28,667 5,803 43,878 49,681
Legacy at Town Center........ Apartments -- 684 -- 29,955 684 29,955 30,639
Post Midtown - Phase I....... Apartments -- 2,456 1,134 34,926 2,648 35,868 38,516
Post Midtown - Phase II...... Apartments -- 865 278 20,488 865 20,766 21,631
Post Midtown - Phase III..... Apartments -- 1,087 -- 1,008 1,087 1,008 2,095
Post Parkwood................ Apartments 799 306 2,592 4,574 864 6,608 7,472
Post Ascension............... Apartments -- 1,230 8,976 488 1,253 9,441 10,694
Post Hackberry Creek......... Apartments -- 7,269 23,579 944 7,269 24,523 31,792
Post Lakeside................ Apartments -- 3,924 20,334 1,394 3,924 17,663 (7) 21,587
Post Town Lake/Parks......... Apartments -- 2,985 19,464 1,597 2,985 21,061 24,046
Post White Rock.............. Apartments -- 1,560 9,969 1,343 1,560 11,312 12,872
Post Winsted................. Apartments -- 2,826 18,632 389 2,826 16,590 (7) 19,416
Post Windhaven............... Apartments -- 4,029 23,385 553 4,029 23,938 27,967
Post Shores.................. Apartments -- 11,572 69,794 4,828 11,572 62,445 (7) 74,017
The Abbey of State-Thomas.... Apartments -- 575 6,276 1,608 575 7,884 8,459
The Commons at Turtle Creek.. Apartments -- 1,406 7,938 534 1,406 8,472 9,878
The Meridian at State-Thomas. Apartments -- 1,535 11,605 597 1,535 12,202 13,737
The Residences on McKinney... Mixed Use -- 1,494 18,022 1,568 1,494 19,590 21,084
DEPRECIABLE
ACCUMULATED DATE OF DATE LIVES
DEPRECIATION CONSTRUCTION ACQUIRED YEARS
------------ --------------- --------------- ------------
GEORGIA
Post Ashford................... Apartments $ 3,350 4/86 - 6/87 6/87 5 - 40 Years
Post Biltmore.................. Apartments -- 9/00 (4) 12/99 --
Post Briarcliff................ Apartments 1,393 12/96 9/96 5 - 40 Years
Post Bridge.................... Apartments 5,210 9/84 - 12/86 9/84 5 - 40 Years
Post Brookhaven................ Apartments 11,143 7/89 - 12/92 3/89 5 - 40 Years
Post Canyon.................... Apartments 7,703 4/84 - 4/86 10/81 5 - 40 Years
Post Chase..................... Apartments 6,349 6/85 - 4/87 6/85 5 - 40 Years
Post Chastain.................. Apartments 13,512 6/88 - 10/90 6/88 5 - 40 Years
Post Collier Hills............. Apartments 3,629 10/95 6/95 5 - 40 Years
Post Corners................... Apartments 6,503 8/84 - 4/86 8/84 5 - 40 Years
Post Court..................... Apartments 6,684 6/86 - 4/88 12/85 5 - 40 Years
Post Creek..................... Apartments 7,122 9/81 - 8/83 5/96 5 - 40 Years
Post Crest..................... Apartments 4,396 9/95 10/94 5 - 40 Years
Post Crossing.................. Apartments 3,576 4/94 - 8/95 11/93 5 - 40 Years
Post Dunwoody.................. Apartments 6,686 11/88 12/84 & 8/94 (6) 5 - 40 Years
Post Gardens................... Apartments 2,494 7/96 5/96 5 - 40 Years
Post Glen...................... Apartments 2,514 7/96 5/96 5 - 40 Years
Post Lane...................... Apartments 3,150 4/87 - 5/88 1/87 5 - 40 Years
Post Lenox Park................ Apartments 2,099 3/94 - 5/95 3/94 5 - 40 Years
Post Lindbergh................. Apartments 1,983 11/96 8/96 5 - 40 Years
Post Mill...................... Apartments 5,866 5/83 - 5/85 5/81 5 - 40 Years
Post Oak....................... Apartments 2,413 9/92 - 12/93 9/92 5 - 40 Years
Post Oglethorpe................ Apartments 3,395 3/93 - 10/94 3/93 5 - 40 Years
Post Park...................... Apartments 14,003 6/87 - 9/90 6/87 5 - 40 Years
Post Parkside.................. Mixed Use 318 2/99 12/97 5 - 40 Years
Post Peachtree................. Apartments -- 6/00 (4) 5/00 --
Post Peachtree Hills........... Apartments 3,257 2/92 - 9/94 2 & 11/92 (6) 5 - 40 Years
Post Pointe.................... Apartments 6,363 4/87 - 12/88 12/86 5 - 40 Years
Post Renaissance............... Apartments 5,263 7/91 - 12/94 6/91 & 1/94 (6) 5 - 40 Years
Post Ridge..................... Apartments 1,957 10/96 7/96 5 - 40 Years
Post Spring.................... Apartments -- 9/99 (4) 9/99 --
Post Summit.................... Apartments 2,406 1/90 - 12/90 1/90 5 - 40 Years
Post Valley.................... Apartments 7,322 3/86 - 4/88 12/85 5 - 40 Years
Post Vinings................... Apartments 7,613 5/88 - 9/91 5/88 5 - 40 Years
Post Village
The Arbors................... Apartments 5,729 4/82 - 10/83 3/82 5 - 40 Years
The Fountains The Meadows Apartments 13,479 8/85 - 5/88 8/85 5 - 40 Years
The Gardens.................. Apartments 9,772 6/88 - 7/89 5/84 5 - 40 Years
The Hills.................... Apartments 4,718 5/84 - 4/86 4/83 5 - 40 Years
Post Walk...................... Apartments 7,450 3/86 - 8/87 6/85 5 - 40 Years
Post Woods..................... Apartments 10,667 3/76 - 9/83 6/76 5 - 40 Years
3400 Stratford................. Apartments -- 4/99(4) 1/99 --
Post Riverside................. Mixed Use 2,695 7/96 1/96 5 - 40 Years
TEXAS
Addison Circle Apartment
Homes by Post - Phase I....... Mixed Use 5,517 10/97 10/97 5 - 40 Years
Addison Circle Apartment
Homes by Post - Phase II...... Mixed Use 3,858 10/97(4) 10/97 5 - 40 Years
Addison Circle Apartment
Homes by Post - Phase III..... Mixed Use 14 7/99(4) 10/97 5 - 40 Years
Post American Beauty Mill...... Apartments 428 10/97 10/97 5 - 40 Years
Block 588...................... Apartments 2 10/97 10/97 5 - 40 Years
Clyde Lane..................... Apartments -- 10/97(4) 10/97 --
Cole's Corner.................. Mixed Use 2,443 n/a 10/97 5 - 40 Years
Post Columbus Square........... Mixed Use 2,099 n/a 10/97 5 - 40 Years
Heights of State-Thomas........ Mixed Use 3,403 10/97 10/97 5 - 40 Years
Legacy at Town Center.......... Apartments -- (4) --
Post Midtown - Phase I......... Apartments 548 10/97 10/97 5 - 40 Years
Post Midtown - Phase II........ Apartments -- 10/97 (4) 10/97 --
Post Midtown - Phase III....... Apartments -- -- (4) 2/00 --
Post Parkwood.................. Apartments 629 n/a 10/97 5 - 40 Years
Post Ascension................. Apartments 964 n/a 10/97 5 - 40 Years
Post Hackberry Creek........... Apartments 2,359 n/a 10/97 5 - 40 Years
Post Lakeside.................. Apartments 2,433 n/a 10/97 5 - 40 Years
Post Town Lake/Parks........... Apartments 2,353 n/a 10/97 5 - 40 Years
Post White Rock................ Apartments 1,171 n/a 10/97 5 - 40 Years
Post Winsted................... Apartments 1,583 n/a 10/97 5 - 40 Years
Post Windhaven................. Apartments 2,297 n/a 10/97 5 - 40 Years
Post Shores.................... Apartments 6,870 n/a 10/97 5 - 40 Years
The Abbey of State-Thomas...... Apartments 653 n/a 10/97 5 - 40 Years
The Commons at Turtle Creek.... Apartments 1,017 n/a 10/97 5 - 40 Years
The Meridian at State-Thomas... Apartments 1,179 n/a 10/97 5 - 40 Years
The Residences on McKinney..... Mixed Use 2,238 n/a 10/97 5 - 40 Years
83
86
The Rice..................... Mixed Use -- -- 13,393 24,192 -- 37,585 37,585
The Vineyard of Uptown....... Apartments -- 1,133 8,560 128 1,133 8,688 9,821
The Vintage of Uptown........ Apartments -- 2,614 12,188 264 2,614 12,452 15,066
West Avenue Lofts............ Apartments -- 4,454 16,490 -- 4,454 16,490 20,944
The Worthington of
State-Thomas................ Mixed Use -- 3,744 34,700 959 3,744 35,659 39,403
Uptown Village I & II........ Mixed Use 22,608 3,955 22,120 17,694 6,551 37,218 43,769
Post Wilson Building......... Mixed Use -- 2,766 689 14,313 -- 17,768 17,768
Campus Circle................ Retail -- 1,045 3,084 734 1,045 3,631 (7) 4,676
Towne Crossing............... Retail -- 3,703 10,721 897 3,703 11,618 15,321
Post & Paddock............... Retail -- 2,352 7,383 560 2,352 6,820 (7) 9,172
FLORIDA
Post Bay..................... Apartments -- 2,203 -- 15,481 2,573 15,111 17,684
Post Court................... Apartments -- 2,083 -- 10,185 2,083 10,185 12,268
Post Fountains............... Apartments 21,500 (2) 3,856 -- 24,063 3,856 24,063 27,919
Post Harbour Place........... Apartments -- 3,854 -- 64,929 16,183 52,600 68,783
Post Hyde Park............... Apartments -- 3,498 -- 25,891 5,108 24,281 29,389
Post Lake.................... Apartments 28,500 (2) 6,113 -- 32,144 6,724 31,533 38,257
Post Parkside (Orlando) Mixed Use -- 8,673 -- 23,108 2,493 29,288 31,781
Post Rocky Point............. Apartments -- 10,510 -- 59,406 10,510 59,406 69,916
Post Village
The Arbors.................. Apartments -- 2,063 -- 14,668 2,906 13,825 16,731
The Lakes Apartments -- 2,813 -- 17,265 3,488 16,590 20,078
The Oaks.................... Apartments -- 3,229 -- 15,733 3,294 15,668 18,962
Post Walk at Hyde Park....... Apartments -- 1,943 -- 10,841 1,974 10,810 12,784
VIRGINIA
Post Corners at Trinity Centre Apartments 22,395 4,404 -- 23,568 4,493 23,479 27,972
Post Forest.................. Apartments -- 8,590 -- 24,663 9,106 24,147 (3) 33,253
NEW YORK
1499 Mass. Avenue..... Apartments -- 19,199 -- 1,051 19,199 1,051 20,250
CALIFORNIA
Post Paseo............ Apartments -- 8,524 -- 4,324 8,524 4,324 12,848
WASHINGTON, D.C.
Post Pentagon Row..... Mixed Use -- -- 7,659 39,457 -- 47,116 47,116
NORTH CAROLINA
Uptown Place.......... Apartments -- 2,336 -- 27,485 2,336 27,485 29,821
Gateway............... Apartments -- 2,424 -- 28,762 2,424 28,762 31,186
Post Park at Phillips Place.. Mixed Use -- 4,305 -- 36,583 4,307 36,581 40,888
ARIZONA
Roosevelt Sq. I....... Mixed Use -- 1,920 -- 42,181 1,680 42,421 44,101
Roosevelt Sq. II...... Mixed Use -- 1,175 -- 2,017 1,800 1,392 3,192
TENNESSEE
Bennie Dillon......... Mixed Use -- 145 -- 8,324 -- 8,469 8,469
The Lee Apartments.... Apartments -- 720 2,125 532 761 2,616 3,377
COLORADO
Uptown Denver I & II.. Apartments -- 3,257 580 71,399 2,963 72,273 75,236
MISCELLANEOUS
INVESTMENTS -- 18,129 4,035 38,378 32,848 27,694 60,542
--------- --------- ---------- ---------- --------- ---------- ----------
TOTAL $ 468,384 $ 382,045 $ 526,960 $1,938,072 $ 409,917 $2,417,177 $2,827,094
========= ========= ========== ========== ========== ========== ==========
The Rice..................... Mixed Use 1,522 10/97 10/97 5 - 40 Years
The Vineyard of Uptown....... Apartments 724 n/a 10/97 5 - 40 Years
The Vintage of Uptown........ Apartments 1,160 n/a 10/97 5 - 40 Years
West Avenue Lofts............ Apartments -- 9/99 (4) 8/99 --
The Worthington of
State-Thomas................ Mixed Use 3,324 n/a 10/97 5 - 40 Years
Uptown Village I & II........ Mixed Use 1,996 n/a 10/97 5 - 40 Years
Post Wilson Building......... Mixed Use 287 10/97 10/97 --
Campus Circle................ Retail 427 n/a 10/97 5 - 40 Years
Towne Crossing............... Retail 922 n/a 10/97 5 - 40 Years
Post & Paddock............... Retail 469 n/a 10/97 5 - 40 Years
FLORIDA
Post Bay..................... Apartments 5,661 5/87 - 12/88 5/87 5 - 40 Years
Post Court................... Apartments 3,673 4/90 - 5/91 10/87 5 - 40 Years
Post Fountains............... Apartments 8,503 12/85 - 3/88 12/85 5 - 40 Years
Post Harbour Place........... Apartments 826 3/97 (4) 1/97 5 - 40 Years
Post Hyde Park............... Apartments 2,967 9/94 7/94 5 - 40 Years
Post Lake.................... Apartments 12,240 11/85 - 3/88 10/85 5 - 40 Years
Post Parkside (Orlando) Mixed Use 2 3/99 3/99 5 - 40 Years
Post Rocky Point............. Apartments 6,580 4/94 - 11/96 2/94 & 9/96 (6) 5 - 40 Years
Post Village
The Arbors.................. Apartments 4,814 6/90 - 12/91 11/90 5 - 40 Years
The Lakes Apartments 5,777 7/88 - 12/89 5/88 5 - 40 Years
The Oaks.................... Apartments 5,456 11/89 - 7/91 12/89 5 - 40 Years
Post Walk at Hyde Park....... Apartments 1,943 10/95 - 9/97 9/95 5 - 40 Years
VIRGINIA
Post Corners at Trinity Centre Apartments 3,688 6/94 6/94 5 - 40 Years
Post Forest.................. Apartments 9,935 1/89 - 12/90 3/88 5 - 40 Years
NEW YORK
1499 Mass. Avenue..... Apartments -- -- 9/00 --
CALIFORNIA
Post Paseo............ Apartments -- 6/00(4) 4/00 --
WASHINGTON, D.C.
Post Pentagon Row..... Mixed Use -- 6/99(4) 2/99 --
NORTH CAROLINA
Uptown Place.......... Apartments 1 9/98(4) 9/98 5 - 40 Years
Gateway............... Apartments -- 9/99(4) 6/99 --
Post Park at Phillips Place.. Mixed Use 4,701 1/96 11/95 5 - 40 Years
ARIZONA
Roosevelt Sq. I....... Mixed Use 1 2/99(4) 2/99 5 - 40 Years
Roosevelt Sq. II...... Mixed Use -- 2/99(4) 2/99 --
TENNESSEE
Bennie Dillon......... Mixed Use 208 7/98 7/98 5 - 40 Years
The Lee Apartments.... Apartments 277 n/a(5) 8/96 5 - 40 Years
COLORADO
Uptown Denver I & II.. Apartments 1 10/97 (4) 10/97 5 - 40 Years
MISCELLANEOUS
INVESTMENTS 10,855 5 - 40 Years
----------
TOTAL $ 357,180
==========
(1) The aggregate cost for Federal Income Tax purposes to the Company was
approximately $2,440,712 at December 31, 2000, taking into account the
special allocation of gain to the partners contributing property to the
Operating Partnership.
(2) These properties serve as collateral for the Federal National Mortgage
Association credit enhancement.
(3) Balance includes an allowance for possible loss of $3,700, which was
taken in prior years.
(4) Construction still in process as of December 31, 2000.
(5) The Company acquired this community during 1996. The Company is
operating the community while evaluating whether to hold, renovate or
sell the community.
(6) Additional land was acquired for construction of a second phase.
(7) These properties are currently held for sale. The carrying value of the
assets has been adjusted based on management's best estimate of the
expected proceeds from sales.
84
87
A summary of activity for real estate investments and accumulated depreciation
is as follows:
YEAR ENDED DECEMBER 31,
---------------------------------------------------
2000 1999 1998
----------- ----------- -----------
Real estate investments:
Balance at beginning of year .................. $ 2,582,785 $ 2,255,074 $ 1,936,011
Improvements ............................... 380,856 345,994 319,408
Disposition of property .................... (136,547) (18,283) (345)
----------- ----------- -----------
Balance at end of year ........................ $ 2,827,094 $ 2,582,785 $ 2,255,074
=========== =========== ===========
Accumulated depreciation:
Balance at beginning of year .................. $ 303,016 $ 247,148 $ 201,095
Depreciation ................................ 71,605 (a) 57,136 (a) 46,288 (a)
Joint Venture Depreciation .................. (2,425) (690) --
Depreciation on disposed property ........... (15,016) (578) (235)
----------- ----------- -----------
Balance at end of year ........................... $ 357,180 (b) $ 303,016 $ 247,148
=========== =========== ===========
(a) Depreciation expense in the Consolidated Statements for the years ended
December 31, 2000, 1999 and 1998, includes $492, $877 and $335,
respectively, of depreciation expense on other assets.
(b) Accumulated depreciation on the balance sheet is net of $12,059 of
accumulated depreciation on assets held for sale.
85
88
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator of the Post Properties, Inc. 1995
Non-Qualified Employee Stock Purchase Plan
In our opinion, the accompanying statements of net assets available for plan
benefits and of changes in net assets available for plan benefits present
fairly, in all material respects, the net assets of the Post Properties, Inc.
1995 Non-Qualified Employee Stock Purchase Plan at December 31, 2000 and 1999
and the changes in net assets available for plan benefits for the years then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States of America which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Atlanta, Georgia
February 16, 2001
86
89
POST PROPERTIES, INC.
1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999
---------- ----------
ASSETS
Receivable from Post Apartment Homes, L.P. .............................. $ 473,017 $ 492,698
========== ==========
NET ASSETS AVAILABLE FOR PLAN BENEFITS
Net assets available for plan benefits .................................. $ 473,017 $ 492,698
========== ==========
87
90
POST PROPERTIES, INC.
1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999
---------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, JANUARY 1 ......................... $ 492,698 $ 563,764
DEDUCTIONS:
Purchase of participants' shares ........................................ (898,218) (974,817)
Payment for payroll taxes on behalf
of participants ....................................................... (69,322) (49,104)
ADDITIONS:
Participant contributions ............................................... 947,859 952,855
---------- ----------
NET ASSETS AVAILABLE FOR PLAN BENEFITS, DECEMBER 31 ....................... $ 473,017 $ 492,698
========== ==========
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POST PROPERTIES, INC.
1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) Post Properties, Inc. (the "Company") established the 1995
Non-Qualified Employee Stock Purchase Plan (the "Plan") to encourage
stock ownership by eligible directors and employees.
(B) The financial statements have been prepared on the accrual basis of
accounting.
(C) All expenses incurred in the administration of the Plan are paid by the
Company and are excluded from these financial statements.
NOTE 2 - THE PLAN
The Plan became effective as of January 1, 1995. Under the Plan, eligible
participating employees and directors of the Company can purchase Common Stock
at a discount (up to 15% as set by the Compensation Committee of the Company's
Board of Directors) from the Company through salary withholding or cash
contributions. The Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974, nor is it intended to qualify for
special tax treatment under Section 401(a) of the Internal Revenue Code.
Directors who have been a member of the Board of Directors for at least one full
calendar month and full-time employees who have been employed a full calendar
month are eligible to participate in the Plan. Eligible directors and employees
(the "Participants") may contribute in cash or as a specified dollar amount or
percentage of their compensation to the Plan. The minimum payroll deduction for
a Participant for each payroll period for purchases under the Plan is $10.00.
The maximum contribution which a Participant can make for purchases under the
Plan for any calendar year is $100,000. All contributions to the Plan are held
in the general assets of Post Apartment Homes, L.P., the Company's operating
partnership.
Shares of the Company's Common Stock are purchased by an investment firm
semi-annually after the end of each six-month period, as defined, and credited
to each Participant's individual account. The purchase price of the Common Stock
purchased pursuant to the Plan is currently equal to 85% of the closing price on
either the first or last trading day of each purchase period, whichever is
lower.
All Common Stock of the Company purchased by Participants pursuant to the Plan
may be voted by the Participants or as directed by the Participants.
The Plan does not discriminate, in scope, terms, or operation, in favor of
officers or directors of the Company and is available, subject to the
eligibility rules of the Plan, to all employees of the Company on the same
basis.
NOTE 3 - FEDERAL INCOME TAXES
The Plan is not subject to Federal income taxes. The difference between the fair
market value of the shares acquired under the Plan, and the amount contributed
by the Participants is treated as ordinary income to the Participants' for
Federal income tax purposes. Accordingly, the Company withholds all applicable
taxes from the employee contributions. The fair market value of the shares is
determined as of the stock purchase date.
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3. EXHIBITS
Certain of the exhibits required by Item 601 of Regulation S-K have been filed
with previous reports by the registrant and are herein incorporated by reference
thereto.
The Registrants agree to furnish a copy of all agreements relating to long-term
debt upon request of the Commission.
EXHIBIT
NO. DESCRIPTION
3.1(a) -- Articles of Incorporation of the Company
3.2(b) -- Articles of Amendment to the Articles of Incorporation of the Company
3.3(c) -- Articles of Amendment to the Articles of Incorporation of the Company
3.4(d) -- Articles of Amendment to the Articles of Incorporation of the Company
3.5(e) -- Articles of Amendment to the Articles of Incorporation of the Company
3.6(a) -- Bylaws of the Company
4.1(f) -- Indenture between the Company and SunTrust Bank, as Trustee
4.2(f) -- First Supplemental Indenture to the Indenture between the Company and SunTrust Bank, as Trustee
10.1(g) -- Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership
10.2(g) -- First Amendment to Second Amended and Restated Partnership Agreement
10.3(g) -- Second Amendment to Second Amended and Restated Partnership Agreement
10.4(k) -- Third Amendment to Second Amended and Restated Partnership Agreement
10.5(k) -- Fourth Amendment to Second Amended and Restated Partnership Agreement
10.6(e) -- Fifth Amendment to the Second Amended and Restated Partnership Agreement
10.7 -- Sixth Amendment to Amended and Restated Partnership Agreement
10.8(h) -- Employee Stock Plan
10.9(g) -- Amendment to Employee Stock Plan
10.10(g) -- Amendment No. 2 to Employee Stock Plan
10.11(g) -- Amendment No. 3 to Employee Stock Plan
10.12(g) -- Amendment No. 4 to Employee Stock Plan
10.13(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John A. Williams
10.14(h) -- Noncompetition Agreement between the Company, the Operating Partnership and John T. Glover
10.15(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John A.
Williams dated as of June 1, 1998
10.16(k) -- Amendment of Noncompetition Agreement between the Company, the Operating Partnership and John T.
Glover dated as of June 1, 1998
10.17(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and
John A. Williams dated June 1, 1998
10.18(k) -- Master Employment Agreement between the Company, the Operating Partnership, Post Services, Inc. and
John T. Glover dated as of June 1, 1998
10.19(e) -- Option and Transfer Agreement among the Operating Partnership, Post Services, John A. Williams and
John T. Glover
10.20(h) -- Promissory Note made by Post Services, Inc. in favor of RAM Partners, Inc.
10.21(g) -- Form of officers and directors Indemnification Agreement
10.22(a) -- Form of Option Agreement to be entered into between the Operating Partnership and the owners of four
parcels of undeveloped land
10.23(a) -- Profit Sharing Plan of the Company
10.24(g) -- Amendment Number One to Profit Sharing Plan
10.25(g) -- Amendment Number Two to Profit Sharing Plan
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10.26(g) -- Amendment Number Three to Profit Sharing Plan
10.27(g) -- Amendment Number Four to Profit Sharing Plan
10.28(h) -- Form of General Partner 1% Exchange Agreement
10.29(i) -- Employee Stock Purchase Plan
10.30(g) -- Amendment to Employee Stock Purchase Plan
10.31(i) -- Amended and Restated Dividend Reinvestment and Stock Purchase Plan
10.32 -- Fifth Amended and Restated Credit Agreement dated as of January 1, 2001 among Post Apartment
Homes, L.P., Wachovia Bank of Georgia, N.A., and the banks listed on the signature pages there to (the
"Fifth Credit Agreement")
10.33(l) -- Deferred Compensation Plan for Directors and Executive Committee Members
21.1 -- List of Subsidiaries
23.1 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-62243)
23.2 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-70689)
23.3 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 33-81772)
23.4 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-36595)
23.5 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-47399)
23.6 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 33-00020)
23.7 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-8 (No. 333-94121)
23.8 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-80427)
23.9 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-44722)
23.10 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-42884)
23.11 -- Consent of PricewaterhouseCoopers LLP for Registration Statement on Form S-3 (No. 333-55994)
- ---------------
(a) Filed as an exhibit to the Registration Statement on Form S-11 (SEC
File No. 33-61936), as amended, of the Company.
(b) Filed as an exhibit to the Current Report on Form 8-K, dated as of
October 1, 1996, of the Company.
(c) Filed as an exhibit to the Current Report on Form 8-K, dated as of
October 28, 1997, of the Company.
(d) Filed as an exhibit to the Current Report on Form 8-K, dated as of
February 9, 1998, of the Company.
(e) Filed as an exhibit to the Quarterly Report on Form 10-Q, dated as of
November 15, 1999, of the Company.
(f) Filed as an exhibit to the Registration Statement on Form S-3 (SEC File
No. 333-42884) of the Company.
(g) Filed as an exhibit to the Annual Report on Form 10-K of the Company
for the year ended December 31, 1997.
(h) Filed as an exhibit to the Registration Statement on Form S-11 (SEC
File No. 33-71650), as amended, of the Company.
(i) Filed as an exhibit to the Registration Statement on Form S-8 (SEC File
No. 33-86674) of the Company.
(j) Filed as part of the Registration Statement on Form S-3 (SEC File No.
333-39461) of the Company.
(k) Filed as an exhibit to the Annual Report on Form 10-K of the
Registrants for the year ended December 31, 1998.
(l) Filed as an exhibit to the Annual Report on Form 10-K of the
Registrants for the year ended December 31, 1999.
(b) Reports on Form 8-K
During the fourth quarter of fiscal 2000 the Company and the
Operating Partnership each filed Reports on Form 8-K on
October 2, 2000, November 30, 2000 and December 20, 2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
POST PROPERTIES, INC.
(Registrant)
/s/ John T. Glover
March 21, 2001 --------------------------------------------
John T. Glover, Vice Chairman and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ John A. Williams
------------------------------ Chairman of the Board, Chief Executive Officer
John A. Williams and Director (Principal Executive Officer)
/s/ John T. Glover
------------------------------ Vice Chairman and Director
John T. Glover
/s/ R. Gregory Fox
------------------------------ Executive Vice President, Chief Financial Officer
R. Gregory Fox
/s/ Robert Anderson
------------------------------ Director
Robert Anderson
/s/ Arthur M. Blank
------------------------------ Director
Arthur M. Blank
/s/ Herschel M. Bloom
------------------------------ Director
Herschel M. Bloom
/s/ Russell R. French
------------------------------ Director
Russell R. French
/s/ Charles E. Rice
------------------------------ Director
Charles E. Rice
/s/ Ronald de Waal
------------------------------ Director
Ronald de Waal
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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 21, 2001 By: /s/ John T. Glover
----------------------------------------
John T. Glover, Vice Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
/s/ John A. Williams
------------------------------ Chief Executive Officer
John A. Williams
/s/ John T. Glover
------------------------------ Vice Chairman
John T. Glover
/s/ R. Gregory Fox
------------------------------ Executive Vice President, Chief Financial Officer
R. Gregory Fox
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