<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-28226
---------------------
POST APARTMENT HOMES, L.P.
(Exact name of registrant as specified in its charter)
GEORGIA 58-2053632
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3350 CUMBERLAND CIRCLE, SUITE 2200, ATLANTA, GEORGIA 30339
(Address of principal executive offices -- zip code)
(770) 850-4400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
---- ----
________________________
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POST APARTMENT HOMES, L.P.
INDEX
<TABLE>
<S> <C> <C>
Part I FINANCIAL INFORMATION Page
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 . . . . . . . . . 3
Consolidated Statements of Operations for the three months and the six months ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Partners' Equity for the six months ended June 30, 1996 . . .
5
Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PART II OTHER INFORMATION
ITEM 4 SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . 23
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . 23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
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POST APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
=========== ============
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 144,956 $ 118,988
Building and improvements . . . . . . . . . . . . . . . . . . . . . . . . . 698,931 589,869
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . 72,324 67,354
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . 102,111 149,514
Land held for future development . . . . . . . . . . . . . . . . . . . . . 16,487 12,199
---------- ---------
1,034,809 937,924
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (167,980) (156,824)
---------- ---------
Operating real estate assets . . . . . . . . . . . . . . . . . . . . 866,829 781,100
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 1,624 9,008
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,127 1,146
Deferred charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . 7,263 7,241
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,747 14,489
---------- ---------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 892,590 $ 812,984
========== =========
LIABILITIES AND PARTNERS' EQUITY
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 421,378 $ 349,719
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . 3,425 3,965
Distribution payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,504 13,091
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . 22,351 16,023
Deferred swap income . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 331
Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . . 5,094 4,366
---------- ---------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 467,000 387,495
Commitments and contingencies
Partners' equity 425,590 425,489
---------- ---------
Total liabilities and partners' equity . . . . . . . . . . . . . . . . $ 892,590 $ 812,984
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
========================= ========================
1996 1995 1996 1995
========= ========== ========== ==========
<S> <C> <C> <C> <C>
REVENUES
Rental . . . . . . . . . . . . . . . . . . . . . . . . $ 39,278 $ 32,795 $ 75,569 $ 63,877
Property management - third party . . . . . . . . . . 733 639 1,466 1,216
Landscape services - third party . . . . . . . . . . 1,309 1,340 2,221 2,149
Interest . . . . . . . . . . . . . . . . . . . . . . . 110 86 239 125
Other . . . . . . . . . . . . . . . . . . . . . . . . 1,148 790 2,288 1,446
-------- ---------- --------- ----------
Total revenues . . . . . . . . . . . . . . . . . . . 42,578 35,650 81,783 68,813
-------- ---------- --------- ----------
EXPENSES
Property operating and maintenance (exclusive of items
shown separately below) . . . . . . . . . . . . . . . 14,373 12,792 27,169 24,212
Depreciation (real estate assets) . . . . . . . . . . . 5,831 5,041 10,796 10,128
Depreciation (non-real estate assets) . . . . . . . . . 260 115 513 221
Property management - third party . . . . . . . . . . . 480 467 1,050 1,033
Landscape services - third party . . . . . . . . . . . 1,095 1,066 1,863 1,754
Interest . . . . . . . . . . . . . . . . . . . . . . . 5,711 5,759 10,768 10,836
Amortization of deferred loan costs, interest rate
protection agreement and swap gain, net. . . . . . . 380 513 732 996
General and administrative . . . . . . . . . . . . . . 2,005 1,185 4,017 2,760
Minority interest in consolidated property
partnership . . . . . . . . . . . . . . . . . . . . - 186 - 382
--------- ---------- --------- ----------
Total expenses . . . . . . . . . . . . . . . . . . 30,135 27,124 56,908 52,322
--------- ---------- --------- ----------
Income before extraordinary item . . . . . . . . . . . 12,443 8,526 24,875 16,491
Extraordinary item . . . . . . . . . . . . . . . . . . - (648) - (803)
--------- ---------- --------- ----------
Net income . . . . . . . . . . . . . . . . . . . . . . $ 12,443 $ 7,878 $ 24,875 $ 15,688
========= ========== ========= ==========
PER UNIT DATA:
Weighted average units outstanding . . . . . . . . . . 26,850,337 22,831,993 26,818,135 22,684,488
========== ========== ========== ==========
Income before extraordinary item . . . . . . . . . . . $ 0.46 $ 0.37 $ 0.93 $ 0.73
========== ========== ========== ==========
Net income . . . . . . . . . . . . . . . . . . . . . . $ 0.46 $ 0.34 $ 0.93 $ 0.69
========== ========== ========== ==========
Distributions declared . . . . . . . . . . . . . . . . $ 0.54 $ 0.49 $ 1.08 $ 0.98
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
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POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
======= ======== ========
<S> <C> <C> <C>
PARTNERS' EQUITY, DECEMBER 31, 1995 . . . . . . . . . . . . . . . $4,648 $420,841 $425,489
Contributions from PPI related to Dividend Reinvestment
and Employee Stock Purchase Plans . . . . . . . . . . . 42 4,161 4,203
Distributions paid . . . . . . . . . . . . . . . . . . . . . (145) (14,328) (14,473)
Distributions declared . . . . . . . . . . . . . . . . . . . (145) (14,359) (14,504)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . 249 24,626 24,875
------ -------- --------
PARTNERS' EQUITY, JUNE 30, 1996 . . . . . . . . . . . . . . . . . $4,649 $420,941 $425,590
====== ======== ========
</TABLE>
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POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
========================
1996 1995
=========== =========
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $24,875 $15,688
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,309 10,349
Write-off of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . - 804
Amortization of deferred loan costs, interest rate protection agreement
and swap gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 732 996
Changes in assets, (increase) decrease in:
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 6,954
Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (90)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,428) (5,390)
Changes in liabilities, increase (decrease) in:
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (540) (302)
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 7,713 4,495
Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . . . . . . 728 352
-------- ---------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . 43,408 33,856
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets, net of payables . . . . . . . . . (93,755) (62,822)
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,909) (2,926)
Recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,392) (766)
Corporate additions and improvements . . . . . . . . . . . . . . . . . . . . . . . . (339) (407)
Non-recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (775) (685)
-------- ---------
Net cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . (98,170) (67,606)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (924) (881)
Debt proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,364 239,297
Debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,705) (180,560)
Contributions from PPI related to Dividend Reinvestment and
Employee Stock Purchase Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,203 12,576
Capital distributions to partners . . . . . . . . . . . . . . . . . . . . . . . . . . (27,560) (21,170)
-------- ---------
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . 47,378 49,262
-------- ---------
Net (decrease) increase in cash and cash equivalents. . . . . . . . . . . . . . . . . (7,384) 15,512
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . 9,008 5,292
-------- ---------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . $ 1,624 $ 20,804
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE> 7
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 "Company"), 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 Post
Properties, Inc. ("PPI" or "General Partner").
PPI elected to be taxed as a real estate investment trust ("REIT") for
Federal income tax purposes beginning with the taxable year ended December
31, 1993. A REIT is a legal entity which holds real estate interests and,
through payments of dividends to shareholders, in practical effect is not
subject to Federal income taxes at the corporate level.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles for interim financial information and applicable rules and
regulations of the Securities and Exchange Commission. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting only of normally
recurring adjustments) considered necessary for a fair presentation have
been included. The results of operations for the six month period ended
June 30, 1996 are not necessarily indicative of the results that may be
expected for the full year. These financial statements should be read in
conjunction with the Company's audited financial statements and notes
thereto included in the Post Apartment Homes, L.P. Form 10 for the year
ended December 31, 1995.
2. EXTRAORDINARY ITEM
The extraordinary item for the three and six months ended June 30, 1995
resulted from costs associated with the early extinguishment of
indebtedness.
3. EARNINGS PER UNIT
Earnings per unit for income before extraordinary item and net income has
been computed by dividing income before extraordinary item and net income
by the weighted average number of units outstanding. The weighted average
numbers of units outstanding utilized in the calculations are 26,850,337
and 22,831,993 for the three months ended June 30, 1996 and 1995,
respectively, and 26,818,135 and 22,684,488 for the six months ended June
30, 1996 and 1995, respectively.
The non-recurring extraordinary items recognized in the three and six
months ended June 30, 1995 had the effect of reducing earnings per unit by
$.03 and $.04, respectively, based on the weighted average number of units
outstanding.
4. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the three months ended June
30, 1996 and 1995 are as follows:
(a) The Company committed to distribute $14,504 and $11,211 for the
quarters ended June 30, 1996 and 1995, respectively.
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<PAGE> 8
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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
Apartment Homes, L.P.
As of June 30, 1996, there were 26,859,783 units outstanding, of which
21,774,940, or 81.1%, were owned by PPI and 5,084,843, or 18.9% were owned by
other limited partners (including certain officers and directors of PPI.).
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND 1995
The Company recorded net income of $24,875 for the six months ended June 30,
1996, an increase of $9,187 over the prior corresponding period primarily as a
result of increased rental rates for fully stabilized communities and an
increase in apartment 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.
Currently, the Company's portfolio of apartment communities consists of
thirty-seven communities and the first phase of two additional communities
which were completed and stabilized for all of the current and prior year,
three communities and the second phase of an existing community which achieved
full stabilization during the prior year, four communities and the second phase
of an existing community which reached stabilization during 1996, one community
which was acquired during 1996 and six communities in the development or
lease-up stage.
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 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 typically exceed rental
revenues, resulting in a "lease-up deficit", which continues until such time as
rental revenues exceed such expenses.
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<PAGE> 9
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
Therefore, in order to evaluate the operating performance of its communities,
the Company has presented financial information which summarizes the operating
income on a comparative basis for all of its operating communities combined
and for communities which have reached stabilization prior to January 1, 1995.
The Company has also presented quarterly financial information reflecting the
dilutive impact of lease-up deficits incurred for communities in the
development and lease-up stage and not yet operating at break-even. In this
presentation, only those communities which were dilutive during the period are
included and, accordingly, different communities may be included in each
period.
ALL OPERATING COMMUNITIES
The operating performance for all of the Company's apartment communities
combined for the three and six months ended June 30, 1996 and 1995 is
summarized as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
================================ ===============================
1996 1995 %Change 1996 1995 %Change
======= ======= ========= ======= ======= ========
<S> <C> <C> <C>
Rental and other revenue:
Fully stabilized communities (1) . . $31,500 $29,880 5.4% $62,569 $59,214 5.7%
Communities stabilized during 1995 . 2,351 1,518 54.9% 4,647 2,279 103.9%
Acquired communities (2) . . . . . . 1,115 - N/A 1,115 - N/A
Development and lease-up
communities (3) . . . . . . . . . . 4,802 490 N/A 8,179 540 N/A
Sold communities (4) . . . . . . . . - 1,034 N/A - 2,083 N/A
Other revenue (5) . . . . . . . . . . 658 663 (0.8)% 1,347 1,207 11.6%
------- ------- ------- -------
40,426 33,585 20.4% 77,857 65,323 19.2%
------- ------- ------- -------
Property operating and maintenance
expense (exclusive of depreciation and
amortization):
Fully stabilized communities . . . . 10,782 10,491 2.8% 20,568 19,784 4.0%
Communities stabilized during 1995 . 674 505 33.5% 1,289 902 42.9%
Acquired communities . . . . . . . . 342 - N/A 342 - N/A
Development and lease-up
communities . . . . . . . . . . . 1,699 521 N/A 3,203 844 N/A
Sold communities . . . . . . . . . . - 479 N/A - 894 N/A
Other expenses (6) . . . . . . . . . 876 796 10.1% 1,767 1,788 (1.2)%
------- ------- ------- -------
14,373 12,792 12.4% 27,169 24,212 12.2%
------- ------- ------- -------
Revenue in excess of specified
expense . . . . . . . . . . . . . . . $26,053 $20,793 25.3% $50,688 $41,111 23.3%
======= ======= ======= =======
Recurring capital expenditures: (7)
Carpet . . . . . . . . . . . . . . . $236 $241 (2.1)% $410 $433 (5.3)%
Other . . . . . . . . . . . . . . . . 690 163 323.3% 982 333 194.9%
------- ------- ------- -------
Total . . . . . . . . . . . . . . . $926 $404 129.2% $1,392 $766 81.7%
======= ======= ======= =======
Average apartment units in service . . 17,155 15,665 9.5% 16,856 15,468 9.0%
======= ======= ======= =======
Recurring capital expenditures per
apartment unit . . . . . . . . . . . $54 $26 107.7% $83 $50 66.0%
======= ======= ======= =======
</TABLE>
- 9 -
<PAGE> 10
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
(1) Communities which reached stabilization prior to January 1, 1995.
(2) On May 7, 1996, the Company reacquired three contiguous Atlanta apartment
communities containing a total of 810 units which the Company now operates
as a single community.
(3) Communities in the "construction", "development" or "lease-up" stage
during 1996 and, therefore, not considered fully stabilized for all of
the periods presented.
(4) Three communities, containing 568 units, which were sold on September 13,
1995.
(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 three and six months ended June 30, 1996, rental and other revenue
increased $6,841, or 20.4% and $12,534, or 19.2%, respectively, compared to the
same period in the prior year, primarily as a result of increased rates for
fully stabilized communities, an increase in units placed in service and the
acquisition of a community, partially offset by a decrease in rental and other
revenue due to the sale of three communities during the third quarter of 1995.
For the three and six months ended June 30, 1996, rental and other revenue from
communities stabilized prior to January 1, 1995, increased $1,620, or 5.4% and
$3,355, or 5.7%, respectively, compared to the same periods in the prior year,
primarily as a result of higher rental rates. For the three and six months
ended June 30, 1996, rental and other revenue from communities stabilized
during 1995, development and lease-up communities and acquired communities
increased, in the aggregate, $6,260 and $11,122, respectively, compared to the
same periods in the prior year, primarily due to additional units placed in
service through the development and acquisition of communities. The historical
operating results include, for the six months ended June 30, 1995, revenues and
expenses related to three communities sold on September 13, 1995, all of which
had previously been included in the fully stabilized communities group.
For the six months ended June 30, 1996, property operating and maintenance
expenses (exclusive of depreciation and amortization) increased, compared to
the same period in the prior year, primarily due to the increase in the units
placed in service through the development and acquisition of communities.
- 10 -
<PAGE> 11
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
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 37 communities and the first phase of two
additional communities containing an aggregate of 14,160 units which were fully
stabilized as of January 1, 1995, is summarized as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
================================ ===================================
1996 1995 %Change 1996 1995 %Change
======= ======= ========== ======== ======== ==========
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenue . . . . . . . $31,500 $29,880 5.4% $62,569 $59,214 5.7%
Property operating and maintenance
expense (exclusive of depreciation and
amortization) 10,782 10,491 2.8% 20,568 19,784 4.0%
------- ------- ------- -------
Revenue in excess of specified expense $20,718 $19,389 6.9% $42,001 $39,430 6.5%
======= ======= ======= =======
Recurring capital expenditures:(1)
Carpet . . . . . . . . . . . . . . . $231 $229 0.9% $405 $400 1.3%
Other . . . . . . . . . . . . . . . . 651 153 325.5% 938 263 256.7%
------- ------- ------- -------
Total . . . . . . . . . . . . . . . $882 $382 130.9% $1,343 $663 102.6%
======= ======= ======= =======
Recurring capital expenditures per
apartment unit (2) . . . . . . . . . $62 $27 129.6% $95 $47 102.1%
======= ======= ======= =======
Average economic occupancy (3) . . . . 95.7% 96.1% 95.5% 96.0%
======= ======= ======= =======
Average monthly rental rate per
apartment unit (4) . . . . . . . . . $752 $717 4.9% $749 $712 5.2%
======= ======= ======= =======
Apartment units in service . . . . . . 14,160 14,160 14,160 14,160
======= ======= ======= =======
</TABLE>
(1) 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.
(2) In addition to such capitalized expenditures, the Company expensed $160 and
$280 per unit on building maintenance (inclusive of direct salaries) and
$72 and $115 per unit on landscaping (inclusive of direct salaries) for the
three and six months ended June 30, 1996, 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, including these amounts would have
been 95.2% and 95.6% and 95.0% and 95.5% for the three and six months ended
June 30, 1996 and 1995, respectively.) For the three months ended June 30,
1996 and 1995, concessions were $81 and $79 and employee discounts were $65
and $63, respectively. Concessions were $143 and $141 and employee
discounts were $136 and $122 for the six months ended June 30, 1996 and
1995, respectively.
(4) Average monthly rental rate is defined as the average of the gross actual
rental rates for occupied units and the anticipated rental rates for
unoccupied units.
- 11 -
<PAGE> 12
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
For the three and six months ended June 30, 1996, rental and other revenue
increased, compared to the same periods in the prior year, due to higher rental
rates. For the three and six months ended June 30, 1996, property operating
and maintenance expenses (exclusive of depreciation and amortization) increased
$291, or 2.8%, and $784, or 4.0%, respectively, compared to the same period in
the prior year, primarily as a result of an increase in ad valorem real estate
taxes.
The increase in recurring capital expenditures per apartment unit for the three
and six months ended June 30, 1996, compared to the same period in the prior
year, is due to the refurbishment of leasing offices and other common areas
within the communities.
LEASE-UP DEFICITS
As noted in the overview of Community Operations, 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 as well as other construction costs are capitalized and reflected on
the balance sheet as construction in progress. Once a unit is placed in
service, all 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 typically exceed rental revenues, resulting in a "lease-up
deficit", which continues until rental revenues exceed such expenses.
In this presentation, only those communities which were dilutive for the
respective period are included and, accordingly, different communities may be
included in different quarters.
For the quarters ended March 31 and June 30, 1996, the "lease-up deficit"
charged to and included in results of operations are summarized as follows:
<TABLE>
<CAPTION>
Six months
ended
June 30, 1996
========================
Qtr 1 Qtr 2
========= =========
<S> <C> <C>
Rental and other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 574 $ 294
Property operating and maintenance expense (exclusive of
depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 189
-------- --------
Revenue in excess of specified expense . . . . . . . . . . . . . . . . . . . . . . . . . 105 105
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 196
-------- --------
Lease-up deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (233) $ (91)
======== ========
</TABLE>
- 12 -
<PAGE> 13
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
THIRD PARTY MANAGEMENT SERVICES
The Company provides asset management, leasing and other consulting services to
non-related owners of apartment communities through two of its subsidiaries,
RAM Partners, Inc. ("RAM") and Post Asset Management, Inc. ("Post Asset
Management").
The operating performance of RAM and Post Asset Management for the three and
six months ended June 30, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
RAM PARTNERS, INC. Three months ended Six months ended
June 30, June 30,
================================= ====================================
1996 1995 %Change 1996 1995 %Change
======== ========= ======== ======= ======= ===========
<S> <C> <C> <C> <C> <C> <C>
Property management and other
revenue . . . . . . . . . . . . . . . $ 649 $ 531 22.2% $1,309 $1,059 23.6%
Property management expense . . . . . . 297 264 12.5% 653 582 12.2%
General and administrative expense . . 113 104 8.7% 231 223 3.6%
------ ------ ------- ------
Revenue in excess of specified
expense . . . . . . . . . . . . . . . $ 239 $ 163 46.6% $ 425 $ 254 67.3%
====== ====== ======= ======
Average apartment units managed . . . . 9,814 9,440 4.0% 9,829 9,440 4.1%
====== ====== ======= ======
</TABLE>
The increase in property management revenues and expenses from each of the 1995
to 1996 periods is primarily attributable to the increase in the average number
and the average gross revenues of units managed.
<TABLE>
<CAPTION>
POST ASSET MANAGEMENT Three months ended Six months ended
June 30, June 30,
================================= ====================================
1996 1995 %Change 1996 1995 %Change
======= ======= ====== ======= ====== =========
<S> <C> <C> <C> <C> <C> <C>
Property management and other
revenue . . . . . . . . . . . . . . . $ 88 $ 130 (32.3)% $ 169 $ 256 (34.0)%
Property management expense . . . . . . 60 85 (29.4)% 142 194 (26.8)%
General and administrative expense . . 11 14 (21.4)% 25 34 (26.5)%
----- ------ ------- ------
Revenue in excess of specified
expense . . . . . . . . . . . . . . $ 17 $ 31 (45.2)% $ 2 $ 28 (92.9)%
===== ====== ======= ======
Average apartment units managed . . . . 866 1,256 (31.1)% 866 1,256 (31.1)%
===== ====== ======= ======
</TABLE>
Property management revenues and the related expenses decreased for each of the
periods in 1996, compared to the same periods in 1995, primarily due to the
reduction in the average number of apartment units managed. This reduction
was primarily due to two management contracts which were cancelled effective
January 1996. The Company expects income from Post Asset Management to
continue to decline as contracts are cancelled and not replaced.
- 13 -
<PAGE> 14
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
THIRD PARTY LANDSCAPE SERVICES
The Company provides landscape maintenance, design and installation services to
non-related parties through a subsidiary, Post Landscape Services, Inc. ("Post
Landscape Services").
The operating performance of Post Landscape Services for the three and six
months ended June 30, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
==================================== ==================================
1996 1995 %Change 1996 1995 %Change
======== ======= ======== ====== ====== =========
<S> <C> <C> <C> <C> <C>
Landscape services and other
revenue . . . . . . . . . . . . . . . $1,356 $1,342 1.0% $2,268 $2,156 5.2%
Landscape services expense . . . . . . 991 884 12.1% 1,658 1,476 12.3%
General and administrative expense . . 104 182 (42.9)% 205 278 (26.3)%
------ ------ ------ ------
Revenue in excess of specified
expense . . . . . . . . . . . . . . . $ 261 $ 276 (5.4)% $ 405 $ 402 0.7%
====== ====== ====== ======
</TABLE>
The increase in landscape services revenue and landscape service expense for
each of the periods ended June 30, 1996, compared to the same period in 1995,
is primarily due to increases in landscape contracts.
OTHER INCOME AND EXPENSES
General and administrative expense increased for the three and six months ended
June 30, 1996, compared to the same period in the prior year, primarily as a
result of increased travel expenses and personnel costs.
The extraordinary item of $648 and $803 for the three and six months ended June
30, 1995, respectively, 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 $33,856
for the six months ended June 30, 1995 to $43,408 for the six months ended June
30, 1996, principally due to an increase in the Company's net income. Net
cash used in investing activities increased from $67,606 in the six months
ended June 30, 1995 to $98,170 in the six months ended June 30, 1996,
principally due to the increase in construction activities relating to new
development and acquisition of new communities. The Company's net cash
provided by financing activities decreased from $49,262 in the six months ended
June 30, 1995 to $47,378 in the six months ended June 30, 1996 due to an
increase in net borrowing activity to fund development offset by a decrease in
contributions from PPI of cash proceeds from the Dividend Reinvestment Plan
and an increase in distributions paid for the six months ended June 30, 1996.
- 14 -
<PAGE> 15
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
PPI has elected to be taxed as a Real Estate Investment Trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended,
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. The Company makes distributions to enable PPI to satisfy this
requirement. As a REIT, PPI generally will not be subject to Federal income
tax on net income.
At June 30, 1996, the Company had total indebtedness of $421,378 and cash and
cash equivalents of $1,624. The Company's indebtedness includes approximately
$33,340 in conventional mortgages payable secured by individual communities,
tax- exempt bond indebtedness of $149,038, senior unsecured notes of $100,000
and borrowings under an unsecured line of credit of approximately $139,000.
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 and the issuance of debt
securities or additional equity securities of the Company, sales of
communities, or, possibly in connection with acquisitions of land or improved
properties, units of the Company. The Company believes that its net cash
provided by operations will be adequate and anticipates that it will continue
to be adequate to meet both operating requirements and payment of distributions
by the Company in accordance with REIT requirements, of which PPI is subject
to, 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.
Line Of Credit
On February 1, 1995, the Company closed a 39-month unsecured revolving line of
credit (the "Revolver") in the amount of $180,000 with a bank syndicate to
provide funding for future construction, acquisitions and general business
obligations. Borrowings under the Revolver initially bore interest at LIBOR
plus 1.50% or prime minus .25% and had a maturity date of May 1, 1998. On
March 1, 1996, the Revolver was amended to reduce the interest rate to LIBOR
plus 0.95% or prime minus .25% and to extend the maturity to May 1, 1999. The
amendment also provides for the rate to be adjusted up or down based on changes
in the credit ratings on the Company's senior unsecured debt. On June 4, 1996,
the rating on the Company's senior unsecured debt by Standard and Poor's was
raised to BBB+ which further reduced the interest rate on the Revolver to its
current rate of LIBOR plus .80% or prime minus .25%. The credit agreement for
the Revolver contains customary representations, covenants and events of
default, including covenants which restrict the ability of the Company to make
distributions, in excess of stated amounts. In general, during any fiscal year
the Company may only distribute up to 100% of the Company'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 Company to make
distributions necessary to allow PPI to maintain its status as a REIT. The
Company does not anticipate that this covenant will adversely affect its
ability to make required distributions.
At June 30, 1996, the Company had $41,000 available under the Revolver to fund
future development and general corporate obligations.
In addition, the Company has a $3,000 facility to provide letters of credit for
general business purposes.
Northwestern Mutual Unsecured Loans
On June 7, 1995, the Company privately placed $50,000 of unsecured senior notes
with The Northwestern Mutual Life Insurance Company (the "NML Notes"). The NML
Notes were in two tranches: the first, aggregating $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
- 15 -
<PAGE> 16
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
matures on June 7, 2000; and the second, aggregating $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
issuance of the NML Notes were used to reduce secured indebtedness and to pay
down the Revolver. The note agreements pursuant to which the NML Notes were
purchased contain representations, covenants and events of default similar to
those contained in the note agreement for the Revolver.
Wachovia Unsecured Loans
On September 29, 1995, the Company privately placed $50,000 of unsecured senior
notes with Wachovia Bank of Georgia, N.A. (the "Wachovia Notes"). The Wachovia
Notes were in two tranches: the first tranche, aggregating $25,000, will
mature on September 29, 1999; the second tranche, aggregating $25,000 will
mature on September 29, 2001. Both tranches bear interest at 7.15% per annum
(1.10% over the corresponding treasury rate on the date such rate was set).
Proceeds from the issuance of the Wachovia Notes were used to reduce
indebtedness outstanding on the Revolver. The credit agreement for the notes
contain representations, covenants and events of default similar to those
contained in the note agreement for the Revolver.
Tax Exempt Bonds
On June 29, 1995, the Company replaced the bank letters of credit providing
credit enhancement for twelve of its outstanding tax-exempt bonds and three of
its economically defeased 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 five bond issues, aggregating
$52,675, which were reissued, and has agreed, subject to certain conditions,
to provide credit enhancement through June 1, 2025 for up to an additional
$101,853 with respect to ten other bond issues which mature and may be refunded
in 1996 through 1998. The agreement with FNMA contains representations,
covenants, and events of default customary to such secured loans.
Other Activities
During the second quarter of 1996, the Company reacquired three contiguous
Atlanta apartment communities, containing 810 units, which the Company
developed in the early 1980's and managed under the Post(R) brand name through
mid-1993. The Company's capital investment, after capital improvements, will
be approximately $48 million, or $59,000 per unit. The Company is operating
these communities as one under the name Post Creek(TM).
In addition, the Company listed in April 1996 two communities in Florida,
containing a total of 596 units, for sale. On July 19, 1996, one of the
communities, containing 180 units, was sold.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of
PPI. Under the DRIP, shareholders may elect for their dividends to be used to
acquire additional shares of PPI's Common Stock directly from PPI for 95% of
the market price on the date of purchase.
- 16 -
<PAGE> 17
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
Schedule of Indebtedness
The following table reflects the Company's indebtedness at June 30, 1996:
<TABLE>
<CAPTION>
Maturity Principal
Community Location Interest Rate Date(1) Balance
===================================== =========== ===================== =============== ==========
<S> <C> <C> <C> <C>
TAX EXEMPT FIXED RATE (SECURED)
Post Canyon(R) . . . . . . . . . . . Atlanta, GA 7.4% + .575% (2)(3) 07/01/96(4)(5) $16,845
Post Corners(R) . . . . . . . . . . . Atlanta, GA 7.4% + .575% (2)(3) 08/01/96(4)(6) 14,760
Post Bridge(R) . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 01/01/97 (4) 9,960
Post Village(R) (Atlanta) Gardens . . Atlanta, GA 7.5% + .575% (2)(3) 01/01/97 (4) 14,500
Post Chase(R) . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 07/01/97 (4) 12,000
Post Walk(R) . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 07/01/97 (4) 15,000
Post Court(R) . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 06/01/98 (4) 13,298
--------
96,363
--------
CONVENTIONAL FIXED RATE (SECURED)
Post Village(R) (Atlanta) Arbors . . Atlanta, GA 8.16% 02/10/97 7,684
Post Summit(R) . . . . . . . . . . . Atlanta, GA 7.72% 02/01/98 5,347
Post River(R) . . . . . . . . . . . . Atlanta, GA 7.72% 03/01/98 5,909
--------
18,940
--------
TAX EXEMPT FLOATING RATE (SECURED)
Post Ashford(R) Series 1995 . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 9,895
Post Valley(R) Series 1995 . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 18,600
Post Brook(R) Series 1995 . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 4,300
Post Village(R) (Atlanta) Hills . . .
Series 1995 . . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 7,000
Post Mill(R) . . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 12,880
--------
52,675
--------
CONVENTIONAL FLOATING RATE (SECURED)
Post Renaissance(R) (Phase I and II) Atlanta, GA LIBOR + .55% 07/01/98 14,400
--------
14,400
--------
SENIOR NOTES (UNSECURED)
Wachovia Bank of Georgia . . . . . . N/A 7.15% 09/29/99 25,000
Northwestern Mutual Life . . . . . . N/A 8.21% 06/07/2000 30,000
Wachovia Bank of Georgia . . . . . . N/A 7.15% 09/29/2001 25,000
Northwestern Mutual Life . . . . . . N/A 8.37% 06/07/2002 20,000
--------
100,000
--------
LINE OF CREDIT (UNSECURED)
Revolver . . . . . . . . . . . . . . N/A LIBOR + .80% or prime minus .25% 05/01/99 139,000
--------
139,000
--------
TOTAL . . . . . . . . . . . . . . . . $421,378
========
</TABLE>
- 17 -
<PAGE> 18
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
(1) All of the mortgages can be prepaid at any time, subject to certain
prepayment penalties. All dates listed are final maturity dates assuming
the exercise of any available extension option by the Company.
(2) Bond financed (interest rate on bonds + credit enhancement fees).
(3) These bonds are also secured by Post Fountains(TM) at Lee Vista, Post
Lake(R) (Orlando) and the Fountains and Meadows of Post Village(R) for
which the Company has economically defeased their respective bond
indebtedness.
(4) Subject to certain conditions at re-issuance, the credit enhancement runs
to June 1, 2025.
(5) On July 1, 1996, this bond was refunded with an issue having a maturity of
June 1, 2025 and an interest rate of SunTrust Bank, Atlanta Non-ATM "AAA"
tax free rate plus a credit enhancement fee of .575%.
(6) On August 1, 1996, this bond was refunded with an issue having a maturity
of June 1, 2025 and an interest rate of SunTrust Bank, Atlanta Non-ATM
"AAA" tax free rate plus a credit enhancement fee of .575%.
Refundable Tax Exempt Bonds
The Company has previously issued tax-exempt bonds, secured by certain
communities, totalling $235,880, of which $86,842 has been economically
defeased, leaving $149,038 of principal amount of tax-exempt bonds outstanding
at June 30, 1996. As of June 30, 1996, $52,675 of the bonds outstanding have
been reissued with a maturity of June 1, 2025. The remaining outstanding
bonds, together with the economically defeased bonds, mature and may be
reissued, during the years 1996 through 1998. The Company has chosen economic
defeasance of the bond obligations rather than a legal defeasance in order to
preserve the legal right to refund such obligations on a tax-exempt basis at
the stated maturity if the Company then determines that such refunding is
beneficial to the Company.
The following table shows the amount of bonds (both defeased and outstanding)
at June 30, 1996, which the Company may reissue during the years 1996 through
2025:
<TABLE>
<CAPTION>
Defeased Outstanding Total Reissue
Portion Portion Capacity
------------- ------------- --------------
<S> <C> <C> <C>
1996 (1) $ $ 31,605 $ 31,605
-
1997 5,490 51,460 56,950
1998 81,352 13,298 94,650
Thereafter - 52,675 52,675
------- -------- --------
$86,842 $149,038 $235,880
======= ======== ========
</TABLE>
(1) 1996 amounts include Post Canyon and Post Corners bonds which
matured and were reissued on July 1, 1996 and August 1, 1996,
respectively.
- 18 -
<PAGE> 19
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
Current Development Activity
The Company's communities under development or in initial lease-up are
summarized in the following table:
<TABLE>
<CAPTION>
Construction Actual or Actual or Units
Estimated Cost Estimated Estimated Leased
Construction Expended Quarter of Quarter Quarter of as of
# Of Cost (1) To Date (2) Construction First Units Stabilized August 3,
Metropolitan Area Units (Millions) (Millions) Commencement Available Occupancy 1996
- ----------------- ----- ------------ ------------ ------------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta, GA
- -----------
Post Terrace(R) 296 $ 25 $ 21 2Q'95 1Q'96 4Q'96 258
Post Crest(R) 410 31 24 1Q'95 1Q'96 1Q'97 332
Post Collier Hills(TM) 392 31 10 4Q'95 4Q'96 4Q'97 n/a
Post Glen(TM) 312 29 7 1Q'96 1Q'97 1Q'98 n/a
----- ---- --- ---
1,410 116 62 590
----- ---- --- ---
Tampa, FL
- ---------
Post Walk at Hyde Park(TM) 134 13 3 1Q'96 4Q'96 3Q'97 n/a
----- ---- --- ---
Charlotte, NC
- -------------
Post Park at Phillips Place(TM) 402 31 8 4Q'95 4Q'96 4Q'97 n/a
----- ---- --- ---
1,946 $160 $73 590
===== ==== === ===
</TABLE>
(1) Represents estimated total development costs, including capitalized
construction costs, lease-up deficits, and all construction period
interest.
(2) Construction cost incurred to date includes all costs associated with the
development and lease-up of the community, including interest and other
start-up costs which are expensed in the Company's consolidated financial
statements. These costs which were expensed amounted to approximately $359
at June 30, 1996.
The Company has also acquired a parcel in Atlanta on which it plans to build a
new community. The Home Depot, Inc. is constructing its corporate headquarters
campus and extensive infrastructure improvements are being made by the county
adjacent to the parcel. The Company will review its development plan for this
parcel closer to completion of these improvements. The Company is also
currently conducting feasibility and other pre-development studies for possible
new Post(R) communities in its primary market areas.
- 19 -
<PAGE> 20
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
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 six months
ended June 30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
Six months
ended
June 30,
=======================
1996 1995
<S> <C> <C>
New community development and acquisition activity . . . . . . . . . . . . . . . . . . . $95,664 $65,748
Non-recurring capital expenditures:
Vehicle access control gates . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 323
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743 362
Recurring capital expenditures:
Carpet replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410 433
Community additions and improvements . . . . . . . . . . . . . . . . . . . . . . . 982 333
Corporate additions and improvements . . . . . . . . . . . . . . . . . . . . . . . 339 407
------- -------
$98,170 $67,606
======= =======
</TABLE>
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.
- 20 -
<PAGE> 21
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Historical Funds from Operations
The Company considers funds from operations ("FFO") an appropriate measure of
performance of an equity REIT. Funds from operations is defined to mean net
income (loss) determined in accordance with GAAP, excluding gains (or losses)
from debt restructuring and sales of property, plus depreciation of real estate
assets, and after adjustment for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's financial
performance or to cash flow from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Company's needs. Cash
available for distribution ("CAD") is defined as FFO less capital expenditures
funded by operations and loan amortization payments. The Company believes that
in order to facilitate a clear understanding of the consolidated historical
operating results of the Company, FFO and CAD should be examined in
conjunction with net income as presented in the consolidated financial
statements and data included elsewhere in this report.
FFO and CAD for the six months ended June 30, 1996 and 1995 presented on a
historical basis are summarized in the following table:
Calculations of Funds from Operations and Cash Available for Distribution
<TABLE>
<CAPTION>
Six months ended
June 30,
=========================
1996 1995
========== ==========
<S> <C> <C>
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24,875 $ $15,688
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 803
---------- ----------
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,875 16,491
---------- ----------
Depreciation (real estate assets) . . . . . . . . . . . . . . . . . . . . . . . . . 10,796 10,128
---------- ----------
Funds from Operations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,671 26,619
Recurring capital expenditures (2) . . . . . . . . . . . . . . . . . . . . . . . . . . (1,392) (766)
Non-recurring capital expenditures (3) . . . . . . . . . . . . . . . . . . . . . . . . (775) (685)
Loan amortization payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (105) (103)
---------- ----------
Cash Available for Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,399 $ 25,065
========== ==========
Cash Flow Provided By (Used In):
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . S 43,408 $ 33,856
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,170) (67,606)
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,378 49,262
Weighted average units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . 26,818,135 22,684,488
========== ==========
</TABLE>
- 21 -
<PAGE> 22
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
(1) The Company uses the National Association of Real Estate Investment
Trusts ("NAREIT") definition of FFO which was adopted for periods
beginning after January 1, 1996. 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 generally
accepted accounting principles. FFO presented herein is not
necessarily comparable to FFO presented by other real estate
companies due to the fact that not all real estate companies use the
same definition. However, the Company's FFO is comparable to the FFO
of real estate companies that use the current NAREIT definition.
(2) Recurring capital expenditures consisted primarily of $410 and $433
of carpet replacement and $982 and $333 of other additions and
improvements to existing communities for the six months ended June
30, 1996 and 1995, respectively. Since the Company does not add back
the depreciation of non-real estate assets in its calculation of FFO,
capital expenditures of $339 and $407 are excluded from the
calculation of CAD for the six months ended June 30, 1996 and 1995,
respectively.
(3) Non-recurring capital expenditures consisted of community additions
and improvements of $743 and $362, for the six months ended June 30,
1996 and 1995, respectively, and the addition of vehicle access
control gates to communities of $32 and $323 for the six months ended
June 30, 1996 and 1995, respectively.
- 22 -
<PAGE> 23
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule (for SEC filing purposes only)
The registrant agrees to furnish a copy of all agreements relating to
long-term debt upon request of the Commission.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the six months ended June 30,
1996.
- 23 -
<PAGE> 24
SIGNATURES
Pursuant to the requirements 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 Properties, Inc., as General Partner
August 14, 1996 /s/ John T. Glover
--------------- -----------------------------------------
(Date) John T. Glover, President,
Chief Operating Officer, Treasurer
and a Director
(Principal Financial Officer)
August 14, 1996 /s/ R. Gregory Fox
--------------- -----------------------------------------
(Date) R. Gregory Fox
Senior Vice President, Chief
Accounting Officer
- 24 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF POST APARTMENT HOMES, L.P. FOR THE PERIOD ENDED JUNE
30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,624,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,034,809,000
<DEPRECIATION> 167,980,000
<TOTAL-ASSETS> 892,590,000
<CURRENT-LIABILITIES> 0
<BONDS> 421,378,000
0
0
<COMMON> 0
<OTHER-SE> 425,590,000
<TOTAL-LIABILITY-AND-EQUITY> 892,590,000
<SALES> 0
<TOTAL-REVENUES> 81,783,000
<CGS> 0
<TOTAL-COSTS> 40,878,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,768,000
<INCOME-PRETAX> 24,875,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,875,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,875,000
<EPS-PRIMARY> .93
<EPS-DILUTED> 0
</TABLE>
