<PAGE> 1
================================================================================
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 March 31, 1997
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 of other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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 X No
----- ----
________________________
================================================================================
<PAGE> 2
POST APARTMENT HOMES, L.P.
INDEX
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION Page
-----
<S> <C>
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996 . . . . . . . . . 3
Consolidated Statements of Operations for the three months ended
March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . 4
Consolidated Statement of Partners' Equity for the
three months ended March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 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 TO A VOTE OF SECURITYHOLDERS . . . . . . . . . . . . . . . 25
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . 25
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
- 2 -
<PAGE> 3
POST APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154,834 $ 150,072
Building and improvements . . . . . . . . . . . . . . . . . . . . . . . 752,969 730,518
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . 77,580 74,120
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . 164,303 140,437
Land held for future development . . . . . . . . . . . . . . . . . . . . 8,373 14,195
------------ --------------
1,158,059 1,109,342
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (184,020) (177,672)
------------ --------------
Operating real estate assets . . . . . . . . . . . . . . . . . . . . . . 974,039 931,670
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 3,672 233
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,111 1,148
Deferred charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . 9,162 9,459
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,576 16,165
------------ --------------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 997,560 $ 958,675
------------ ==============
LIABILITIES AND PARTNERS' EQUITY
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 464,726 $ 434,319
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . 7,547 4,264
Distribution payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,169 14,659
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . 23,710 17,915
Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . 5,157 5,084
------------ --------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 517,309 476,241
------------ --------------
Commitments and contingencies
Total partners' equity . . . . . . . . . . . . . . . . . . . . . . . . . 480,251 482,434
------------ --------------
Total liabilities and partners' equity . . . . . . . . . . . . . . . . . $ 997,560 $ 958,675
============ ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 3 -
<PAGE> 4
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------------
1997 1996
------------- ---------------
<S> <C> <C>
REVENUES
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,581 $ 36,545
Property management - third party . . . . . . . . . . . . . . . . . . . . . . 553 733
Landscape services - third party . . . . . . . . . . . . . . . . . . . . . . 1,044 912
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 129
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,381 1,124
------------- ------------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,566 39,443
------------- ------------
EXPENSES
Property operating and maintenance (exclusive of items shown
separately below) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,201 13,034
Depreciation (real estate assets) . . . . . . . . . . . . . . . . . . . . . . 6,137 4,965
Depreciation (non-real estate assets) . . . . . . . . . . . . . . . . . . . . 242 253
Property management - third party . . . . . . . . . . . . . . . . . . . . . . 420 570
Landscape services - third party . . . . . . . . . . . . . . . . . . . . . . 901 768
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,361 5,057
Amortization of deferred loan costs . . . . . . . . . . . . . . . . . . . . 302 352
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . 1,846 2,012
------------- ------------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,410 27,011
------------- ------------
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . 14,156 12,432
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (93) --
------------- ------------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,063 12,432
Distribution to preferred unitholders . . . . . . . . . . . . . . . . . . . (1,063) --
------------- ------------
Net income available to common unitholders . . . . . . . . . . . . . . . . . $ 13,000 $ 12,432
============= ============
PER COMMON UNIT DATA:
Weighted average common units outstanding . . . . . . . . . . . . . . . . . . 27,167,244 26,785,951
============= ============
Income before extraordinary item (net of preferred distribution) . . . . . . $ 0.48 $ 0.46
============= ============
Net income available to common unitholders . . . . . . . . . . . . . . . . . $ 0.48 $ 0.46
============= ============
Distributions declared . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.595 $ 0.540
============= ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 4 -
<PAGE> 5
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
------- -------- ------
<S> <C> <C> <C>
PARTNERS' EQUITY, DECEMBER 31, 1996 . . . . . . . . . . . . . . . . $ 5,216 $ 477,218 $ 482,434
Contributions from PPI related to Dividend Reinvestment
and Employee Stock Purchase Plans . . . . . . . . . . . . . . . . 10 976 986
Distributions to preferred unitholders . . . . . . . . . . . . . . (11) (1,052) (1,063)
Distributions to common unitholders . . . . . . . . . . . . . . . . (162) (16,007) (16,169)
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 13,922 14,063
---------- ----------- -----------
PARTNERS' EQUITY, MARCH 31, 1997 . . . . . . . . . . . . . . . . . $ 5,194 $ 475,057 $ 480,251
========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 5 -
<PAGE> 6
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,063 $ 12,432
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 --
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,379 5,218
Amortization of deferred loan costs . . . . . . . . . . . . . . . . . . . . . . . . 302 352
Changes in assets, (increase) decrease in:
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 (5)
Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (117) --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,558 (751)
Changes in liabilities, increase (decrease) in:
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,283 (71)
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 2,551 3,136
Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . . . . . . 73 77
---------- ----------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . 33,222 20,388
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets, net of payables . . . . . . . . . (40,960) (19,591)
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,829) (1,115)
Recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (704) (466)
Corporate additions and improvements . . . . . . . . . . . . . . . . . . . . . . . . (444) (204)
Non-recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . (374) (136)
Revenue generating capital expenditures . . . . . . . . . . . . . . . . . . . . . . . (1,050) --
---------- ---------
Net cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . (45,361) (21,512)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92) (343)
Debt proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,440 49,364
Proceeds from sale of notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000 --
Debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (136,033) (44,652)
Proceeds from contributions from PPI related to
Dividend Reinvestment Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . 986 2,221
Capital distributions to preferred unitholders . . . . . . . . . . . . . . . . . . . (1,063) --
Capital distributions to common unitholders
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,660) (13,091)
----------- ----------
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . 15,578 (6,501)
----------- -----------
Net increase(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . 3,439 (7,625)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . 233 9,008
----------- ----------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . $ 3,672 $ 1,383
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 6 -
<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 three month period ended
March 31, 1997 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. Annual Report on Form
10-K for the year ended December 31, 1996.
2. NOTES PAYABLE
On January 29, 1997, the Company filed, with the Securities and Exchange
Commission, a Prospectus Supplement relating to $175,000 aggregate
principal amount of Medium-Term Notes Due Nine Months or More from Date of
Issue (the "MTNs").
On March 3, 1997, the Company issued $30,000 of floating rate MTNs priced
at LIBOR plus .25%, due on March 3, 2000 (the "2000 MTNs"). Proceeds from
the 2000 MTNs were used to (i) pay off the mortgage on Post Renaissance
which bore an interest rate of LIBOR plus .55% and matured July 1, 1999 and
(ii) pay down existing indebtedness outstanding under the Company's
revolving line of credit (the "Revolver").
On March 31, 1997, the Company issued $50,000 of fixed rate MTNs as
follows: $37,000 due on April 2, 2001 (the "2001 MTNs") and $13,000 due on
April 1, 2004 (the "2004 MTNs"). The 2001 MTNs priced at par with a coupon
rate of 7.02% (.50% over the corresponding treasury rate on the date such
rate was set) and an effective rate reflecting the benefit of the treasury
lock of 6.57%. The 2004 MTNs priced at par with a coupon of 7.30% (.65%
over the corresponding treasury rate on the date such rate was set) and an
effective rate reflecting the benefit of the treasury lock of 6.86%. The
proceeds from the 2001 MTNs and the 2004 MTNs were used to prepay $50,000
of fixed rate notes that bore interest at 7.15% per annum.
3. EXTRAORDINARY ITEM
The extraordinary item for the three months ended March 31, 1997 resulted
from costs associated with the early extinguishment of indebtedness.
- 7 -
<PAGE> 8
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
4. EARNINGS PER UNIT
Primary earnings per common unit for income before extraordinary item, net
of preferred distributions, and net income available to common unitholders
has been computed by dividing income before extraordinary item, net of
preferred distributions, and net income available to common unitholder by
the weighted average number of common units outstanding. The weighted
average number of common units outstanding utilized in the calculations are
27,167,244 and 26,785,951 for the three months ended March 31, 1997 and
1996, respectively.
5. SUPPLEMENTAL CASH FLOW INFORMATION
The Company committed to distribute $16,169 and $14,469 for the quarters
ended March 31, 1997 and 1996, respectively.
- 8 -
<PAGE> 9
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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 March 31, 1997, there were 27,174,773 units outstanding, of which
21,958,299, or 80.8%, were owned by PPI and 5,216,474, or 19.2% were owned by
other limited partners (including certain officers and directors of PPI). As of
March 31, 1997, there were 1,000,000 Perpetual Preferred Units outstanding, all
of which were owned by PPI.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997, AND 1996
The Company recorded net income available to common unitholders of $13,000, for
the three months ended March 31, 1997, an increase of 4.6% 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.
As of March 31, 1997, the Company's portfolio of apartment communities
consisted of the following: (i) 40 communities and the first phase of an
additional community which were completed and stabilized for all of the current
and prior year, (ii) 8 communities and the second phase of an existing
community which achieved full stabilization during the prior year and (iii) 9
communities and the second phase of two existing 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.
- 9 -
<PAGE> 10
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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, 1996.
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 months ended March 31, 1997 and 1996 is summarized as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------------------
1997 1996 % CHANGE
-------------- ----------- ---------
<S> <C> <C> <C>
Rental and other revenue:
Fully stabilized communities (1) . . . . . . . . . . . . . . . . $ 33,186 $ 32,856 1.0%
Communities stabilized during 1996 . . . . . . . . . . . . . . . 8,403 3,377 148.8%
Development and lease-up
communities (2) . . . . . . . . . . . . . . . . . . . . . . . . 663 -- 100.0%
Sold communities (3) . . . . . . . . . . . . . . . . . . . . . . -- 462 (100.0)%
Other revenue (4) . . . . . . . . . . . . . . . . . . . . . . . . 710 974 (27.1)%
----------- -----------
42,962 37,669 14.1%
----------- -----------
Property operating and maintenance expense (exclusive of
depreciation and amortization):
Fully stabilized communities . . . . . . . . . . . . . . . . . . 10,474 10,256 2.1%
Communities stabilized during 1996 . . . . . . . . . . . . . . . 2,520 1,521 65.7%
Development and lease-up
communities . . . . . . . . . . . . . . . . . . . . . . . . . 504 -- 100.0%
Sold communities . . . . . . . . . . . . . . . . . . . . . . . . -- 165 (100.0)%
Other expenses (5) . . . . . . . . . . . . . . . . . . . . . . . 1,703 1,092 56.0%
----------- -----------
15,201 13,034 16.6%
----------- -----------
Revenue in excess of specified
expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,761 $ 24,635 12.7%
=========== ===========
Recurring capital expenditures: (6)
Carpet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 174 83.3%
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385 292 31.9%
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 704 $ 466 51.1%
=========== ===========
Average apartment units in service . . . . . . . . . . . . . . . . 18,266 16,369 9.5%
=========== ===========
Recurring capital expenditures per
apartment unit . . . . . . . . . . . . . . . . . . . . . . . . . $ 39 $ 28 37.9%
=========== ===========
</TABLE>
- 10 -
<PAGE> 11
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
<TABLE>
<S> <C>
(1) Communities which reached stabilization prior to January 1, 1996.
(2) Communities in the "construction", "development" or "lease-up" stage during 1996 and, therefore, not considered
fully stabilized for all of the periods presented.
(3) Includes one community, containing 180 units, which was sold on July 19, 1996.
(4) Other revenue includes revenue on furnished apartment rentals above the unfurnished rental rates and any revenue not
directly related to property operations.
(5) Other expenses includes certain indirect central office operating expenses related to management, grounds
maintenance, and costs associated with furnished apartment rentals.
(6) 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.
</TABLE>
For the three months ended March 31, 1997, rental and other revenue and
property operating and maintenance expenses increased $5,293, or 14.1%, and
$2,167, or 16.6%, respectively, compared to the same period in the prior year,
primarily as a result of an increase in the average number of apartment units
in service and increased rental rates.
For the three months ended March 31, 1997, recurring capital expenditures
increased $238, or 51.1%, compared to the same period in the prior year,
primarily due to the increase in the average number of apartment units in
service and the timing of scheduled capital improvements.
- 11 -
<PAGE> 12
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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 40 communities and the first phase of an
additional community containing an aggregate of 14,782 units which were fully
stabilized as of January 1, 1996, is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------------------------------
1997 1996 % Change
------------ ---------- ----------
<S> <C> <C> <C>
Rental and other revenue . . . . . . . . . . . . . . . . . . . $ 33,186 $ 32,856 1.0%
Property operating and maintenance expense (exclusive
of depreciation and amortization) . . . . . . . . . . . . . 10,474 10,256 2.1%
------------ ------------
Revenue in excess of specified expense $ 22,712 $ 22,600 .5%
============ ============
Recurring capital expenditures: (1)
Carpet . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 295 $ 169 74.6%
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 290 25.2%
------------ ------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 658 $ 459 43.4%
============ ============
Recurring capital expenditures per
apartment unit (2) . . . . . . . . . . . . . . . . . . . . . $ 45 $ 31 45.2%
============ ============
Average economic occupancy (3) . . . . . . . . . . . . . . . . 93.3% 95.2% (2.0)%
------------ ------------
Average monthly rental rate per
apartment unit (4) . . . . . . . . . . . . . . . . . . . . . $ 776 $ 748 3.7%
============ ============
Apartment units in service . . . . . . . . . . . . . . . . . . 14,782 14,782
============ ============
(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 $149 and $147 per unit on building maintenance
(inclusive of direct salaries) and $45 and $43 per unit on landscaping (inclusive of direct salaries) for the three
months ended March 31, 1997 and 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 92.7% and 94.8% for the three months ended March 31, 1997 and 1996,
respectively.) For the three month period ended March 31, 1997 and 1996, concessions were $153 and $61 and employee
discounts were $67 and $76, 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.
</TABLE>
For the three months ended March 31, 1997, rental and other revenue increased
$330, or 1.0%, compared to the same period in the prior year, due to higher
rental rates. For the three months ended March 31, 1997, property operating
and maintenance expenses (exclusive of depreciation and amortization) increased
$218, or 2.1%, compared to the same period in the prior year, primarily as a
result of increased advertising and promotion efforts and an increase in
building repair and maintenance expense.
- 12 -
<PAGE> 13
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
For the three months ended March 31, 1997, recurring capital expenditures per
apartment unit increased $14, or 45.2% compared to the same period in the prior
year, primarily due to the timing of carpet replacements and other recurring
capital expenditures of 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 three months ended March 31, 1997 and 1996, respectively, the "lease-up
deficit" charged to and included in results of operations is summarized as
follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------------
1997 1996
------------ -------------
<S> <C> <C>
Rental and other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 117 $ 574
Property operating and maintenance expense (exclusive of
depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . 207 469
---------- -----------
Revenue (expense) in excess of specified expense/revenue . . . . . . . . . . . . (90) 105
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 338
---------- -----------
Lease-up deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (179) $ (233)
========== ===========
</TABLE>
- 13 -
<PAGE> 14
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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 months
ended March 31, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
RAM PARTNERS, INC. Three Months Ended
March 31,
------------------------------------------------
1997 1996 % Change
------------- -------------- --------------
<S> <C> <C> <C>
Property management and other
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 554 $ 660 (16.1)%
Property management expense . . . . . . . . . . . . . . . . . . . . 295 356 (17.1)%
General and administrative expense . . . . . . . . . . . . . . . . 103 118 (12.7)%
----------- ----------
Revenue in excess of specified
expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 156 $ 186 (16.1)%
=========== ==========
Average apartment units managed . . . . . . . . . . . . . . . . . . 7,775 9,906 (21.5)%
=========== ==========
</TABLE>
The decrease in property management revenues in excess of specified expense for
the three months ended March 31, 1997 compared to the same period in the prior
year is primarily attributable to the decrease in the average number of units
managed.
<TABLE>
<CAPTION>
Post Asset Management Three Months Ended
March 31,
------------------------------------------------
1997 1996 % Change
-------------- --------------- ------------
<S> <C> <C> <C>
Property management and other
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 24 $ 81 (70.4)%
Property management expense . . . . . . . . . . . . . . . . . . . 8 82 (90.2)%
General and administrative expense . . . . . . . . . . . . . . . 14 14 --
------------ -------------
Revenue in excess of specified
expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2 $ (15) (113.3)%
============ =============
Average apartment units managed . . . . . . . . . . . . . . . . . 260 866 (70.0)%
============ =============
</TABLE>
Property management revenues and the related expenses decreased for the three
months ended March 31, 1997, compared to the same periods in 1996, primarily
due to the reduction in the average number of apartment units managed. This
reduction was primarily due to four management contracts which were terminated;
two effective January 1996, one effective July 1996 and one effective September
1996. As of March 31, 1997, Post Asset Management provided management services
to one Post(R) community, containing 260 apartment units. The Company
anticipates that the remaining contract will be terminated during 1997.
- 14 -
<PAGE> 15
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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 months ended
March 31, 1997 and 1996 is summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------------------------------
1997 1996 % Change
-------------- -------------- ----------
<S> <C> <C> <C>
Landscape services and other
revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,055 $ 912 15.7%
Landscape services expense . . . . . . . . . . . . . . . . . . . 756 667 13.3%
General and administrative expense . . . . . . . . . . . . . . . 145 101 43.6%
------------- -------------
Revenue in excess of specified
expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 154 $ 144 6.9%
============= =============
</TABLE>
The increase in landscape services revenue and landscape service expense for
the three months ended March 31, 1997, compared to the same period in 1996, is
primarily due to increases in landscape contracts.
OTHER REVENUES AND EXPENSES
Depreciation of real estate assets increased $1,172, or 23.6%, for the three
months ended March 31, 1997, compared to the same periods in the prior year,
due to the addition of depreciable real estate assets.
The extraordinary item of $93 for the three months ended March 31, 1997,
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 $20,388
for the three months ended March 31, 1996 to $33,222 for the three months ended
March 31, 1997, principally due to increases in the Company's working capital.
Net cash used in investing activities increased from $21,512 in the three
months ended March 31, 1996 to $45,361 in the three months ended March 31,
1997, principally due to the increase in construction activities relating to
new development. The Company's net cash provided by (used in) financing
activities increased from $(6,501) in the three months ended March 31, 1996 to
$15,578 in the three months ended March 31, 1997 primarily due to an increase
in net borrowing activity to fund development.
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.
- 15 -
<PAGE> 16
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
At March 31, 1997, the Company had total indebtedness of $464,726 and cash and
cash equivalents of $3,672. The Company's indebtedness includes approximately
$14,198 in conventional mortgages payable secured by individual communities,
tax-exempt bond indebtedness of $151,528, senior unsecured notes of $255,000
and borrowings under unsecured lines of credit of approximately $44,000.
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 PPI, 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.
Lines Of Credit
The Company has a syndicated line of credit (the "Revolver") in the amount of
$180,000 to provide funding for future construction, acquisitions and general
business obligations. The Revolver matures on April 30, 2000 and borrowings
currently bear interest at LIBOR plus .675% or prime minus .25%. 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 for up to $90,000 at
rates below the contract line rate. 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, which in turn restricts the discretion of PPI to
declare and pay dividends. 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.
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"), which was fully
funded and used to pay down the outstanding balance on the Revolver. The Cash
Management Line bears interest at LIBOR plus .75% or prime minus .25% and has a
maturity date of April 3, 1998. The Company chose this arrangement because the
Revolver requires three days advance notice to repay borrowings whereas this
facility 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.
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 nine bond issues, aggregating
$111,230, which were reissued, and has agreed, subject to certain conditions,
to provide credit enhancement through June 1, 2025 for up to an additional
$43,298 with respect to eight
- 16 -
<PAGE> 17
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
other bond issues which mature and may be refunded in 1997 and 1998. The
agreement with FNMA contains representations, covenants, and events of default
customary to such secured loans.
Refundable Tax Exempt Bonds
The Company has previously issued tax-exempt bonds, secured by certain
communities, totaling $235,880 of which $84,352 has been economically
defeased, leaving $151,528 of principal amount of tax-exempt bonds outstanding
at March 31, 1997 of which $111,230 of the bonds outstanding has 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 1997 and 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 March 31, 1997, which the Company may reissue during the years 1997 through
2025:
<TABLE>
<CAPTION>
Defeased Outstanding Total Reissue
Portion Portion Capacity
-------------- --------------- ------------
<S> <C> <C> <C>
1997 $ 3,000 $ 27,000 $ 30,000
1998 81,352 13,298 94,650
Thereafter -- 111,230 111,230
-------------- -------------- --------------
$ 84,352 $ 151,528 $ 235,880
============== ============== =============
</TABLE>
Senior Unsecured Debt Offering
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%, 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 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 pay down existing indebtedness outstanding under the Revolver.
Medium-Term Notes
On January 29, 1997, the Company filed, with the Securities and Exchange
Commission, a Prospectus Supplement relating to $175,000 aggregate principal
amount of Medium-Term Notes Due Nine Months or More from Date of Issue (the
"MTNs").
On March 3, 1997, the Company issued $30,000 of floating rate MTNs priced at
LIBOR plus .25%, due on March 3, 2000 (the "2000 MTNs"). Proceeds from the 2000
MTNs were used to (i) pay off the mortgage on Post Renaissance which bore an
interest rate of LIBOR plus .55% and matured July 1, 1999 and (ii) pay down
existing indebtedness outstanding under the Revolver.
- 17 -
<PAGE> 18
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
On March 31, 1997, the Company issued $50,000 of fixed rate MTNs as follows:
$37,000 due on April 2, 2001 (the "2001 MTNs") and $13,000 due on April 1, 2004
(the "2004 MTNs"). The 2001 MTNs priced at par with a coupon rate of 7.02%
(.50% over the corresponding treasury rate on the date such rate was set) and
an effective rate reflecting the benefit of the treasury lock of 6.57%. The
2004 MTNs priced at par with a coupon of 7.30% (.65% over the corresponding
treasury rate on the date such rate was set) and an effective rate reflecting
the benefit of a treasury lock of 6.86%. The proceeds from the 2001 MTNs and
the 2004 MTNs were used to prepay $50,000 of fixed rate notes that bore
interest at 7.15% per annum.
Perpetual Preferred Stock Offering
On October 1, 1996, PPI sold one million non-convertible 8.5% Series A
Cumulative Redeemable Shares (the "Perpetual Preferred Shares"), raising $50
million. Net proceeds of $48,700 from the sale of the Perpetual Preferred
Shares were contributed to the Company in exchange for one million Series A
Preferred Partnership Units (the "Perpetual Preferred Units"). The Company
used the proceeds to repay outstanding indebtedness.
- 18 -
<PAGE> 19
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
Schedule of Indebtedness
<TABLE>
<CAPTION>
The following table reflects the Company's indebtedness at March 31, 1997:
Maturity Principal
Description Location Interest Rate Date(1) Balance
- ----------- -------- ------------- -------- ---------
<S> <C> <C> <C> <C>
Tax Exempt Fixed Rate (Secured)
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
--------
40,298
--------
CONVENTIONAL FIXED RATE (SECURED)
Post Summit(R) . . . . . . . . . . . Atlanta, GA 7.72% 02/01/98 5,300
Post River(R) . . . . . . . . . . . . Atlanta, GA 7.72% 03/01/98 5,857
Post Hillsboro Village . . . . . . .Nashville, TN 9.20% 10/01/2001 3,041
--------
14,198
--------
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) Series 1995 . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 12,880
Post Canyon(R) Series 1996 . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 16,845
Post Corners(R) Series 1996 . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 14,760
Post Bridge(R) . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 12,450
Post Village(R) (Atlanta) Gardens . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 14,500
---------
111,230
---------
SENIOR NOTES (UNSECURED)
Medium Term Notes . . . . . . . . . . N/A LIBOR + .25% 03/03/2000 30,000
Northwestern Mutual Life . . . . . . N/A 8.21% 06/07/2000 30,000
Medium Term Notes . . . . . . . . . . N/A 7.02% 04/02/2001 37,000
Northwestern Mutual Life . . . . . . N/A 8.37% 06/07/2002 20,000
Senior Notes . . . . . . . . . . . . N/A 7.25% 10/01/2003 100,000
Medium Term Notes . . . . . . . . . . N/A 7.30% 04/01/2004 13,000
Senior Notes . . . . . . . . . . . . N/A 7.50% 10/01/2006 25,000
---------
255,000
---------
LINES OF CREDIT (UNSECURED)
Revolver . . . . . . . . . . . . . . N/A LIBOR + .80% or prime minus .25% (5) 05/01/99(5) 24,000
Cash Management Line . . . . . . . . N/A LIBOR + .75% or prime minus .25% 04/03/98 20,000
---------
44,000
---------
TOTAL . . . . . . . . . . . . . . . . $ 464,726
---------
</TABLE>
- 19 -
<PAGE> 20
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
<TABLE>
<S> <C>
(1) All of the mortgages can be prepaid at any time, subject to certain prepayment penalties.
(2) Bond financed (interest rate on bonds + credit enhancement fees).
(3) These bonds are also secured by Post Fountains at Lee Vista(R), 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 April 10, 1997, the terms of the Revolver were amended to reduce the interest rate to LIBOR + .675% or prime
minus .25% and extend the maturity to April 30, 2000.
</TABLE>
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.
- 20 -
<PAGE> 21
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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>
Actual or Actual or Units
Estimated Estimated Leased
Quarter of Quarter Quarter As of
# of Construction First Units of Stabilized May 5,
Metropolitan Area Units Commencement Available Occupancy 1997
- ----------------- ----- ------------ --------- --------- ----
Atlanta, GA
- -----------
<S> <C> <C> <C> <C> <C>
Post Collier Hills(TM) 396 4Q'95 4Q'96 1Q'98 242
Post Glen(R) 314 1Q'96 1Q'97 1Q'98 110
Post Lindbergh(TM) 396 3Q'96 3Q'97 4Q'98 n/a
Post Gardens(R) 397 3Q'96 4Q'97 1Q'99 n/a
Riverside by Post(TM) 537 3Q'96 1Q'98 4Q'99 n/a
Post Ridge(TM) 232 1Q'97 4Q'97 3Q'98 n/a
Post River(R)II 88 1Q'97 4Q'97 2Q'98 n/a
------ ---
2,360 352
------ ---
Tampa, FL
- ---------
Post Walk at Hyde Park(TM) 134 1Q'96 1Q'97 3Q'97 110
Post Rocky Point(R)II 174 4Q'96 2Q'97 4Q'97 n/a
------ ---
308 110
------ ---
Charlotte, NC
- -------------
Post Park at Phillips Place(TM) 402 4Q'95 4Q'96 1Q'98 204
------ ---
Nashville, TN
- -------------
Post Hillsboro Village(TM) 201 1Q'97 3Q'97 1Q'98 n/a
------ ----
3,271 666
------ ---
</TABLE>
Land
The Company has also acquired a parcel of land in Atlanta on which it plans to
build a new community. Adjacent to the parcel, the Home Depot, Inc. is
constructing its corporate headquarters campus and extensive infrastructure
improvements are being made by the county. In addition, the Company holds land
for a third and fourth phase of Rocky Point(R) in Tampa, Florida. The Company
is also currently conducting feasibility and other pre-development studies for
possible new Post(R) communities in its primary market areas.
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.
- 21 -
<PAGE> 22
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND PER APARTMENT UNIT DATA)
Acquisition of assets and community improvement expenditures for the three
months ended March 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
-------- --------
<S> <C> <C>
New community development and acquisition activity . . . . . . . . . . . . . . . . . . . $ 42,789 $ 20,706
Non-recurring capital expenditures:
Revenue generating additions and improvements . . . . . . . . . . . . . . . . . . . 1,050 --
Other community additions and improvements . . . . . . . . . . . . . . . . . . . . 374 136
Recurring capital expenditures:
Carpet replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 319 174
Community additions and improvements . . . . . . . . . . . . . . . . . . . . . . . 385 292
Corporate additions and improvements . . . . . . . . . . . . . . . . . . . . . . . 444 204
-------- --------
$ 45,361 21,512
======== ========
</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.
- 22 -
<PAGE> 23
POST APARTMENT HOMES, L.P.
MANAGEMENT S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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) available to common unitholders 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 three months ended March 31, 1997 and 1996 presented on a
historical basis are summarized in the following table:
<TABLE>
<CAPTION>
Calculations of Funds from Operations and Cash Available for Distribution
Three Months Ended
March 31,
-------------------------------
1997 1996
------------- -------------
<S> <C> <C>
Net income available to common unitholders . . . . . . . . . . . . . . . . . . . $ 13,000 $ 12,432
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 --
------------- ------------
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,093 12,432
Depreciation of real estate assets . . . . . . . . . . . . . . . . . . . . . . 6,137 4,965
------------- ------------
Funds from Operations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,230 17,397
Recurring capital expenditures (2) . . . . . . . . . . . . . . . . . . . . . . (704) (466)
Non-recurring capital expenditures (3) . . . . . . . . . . . . . . . . . . . . (374) (136)
Loan amortization payments . . . . . . . . . . . . . . . . . . . . . . . . . . (59) (52)
------------- ------------
Cash Available for Distribution . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,093 $ 16,743
============= ------------
Revenue generating capital expenditures (4) . . . . . . . . . . . . . . . . . . . $ 1,050 $ --
============= ============
Cash Flow Provided By (Used In):
$ 33,222 $ 20,388
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (45,361) $ (21,512)
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 15,578 $ (6,501)
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average units outstanding . . . . . . . . . . . . . . . . . . . . . . . 27,167,244 26,785,951
=============- ============
</TABLE>
- 23 -
<PAGE> 24
POST APARTMENT HOMES, L.P.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION 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 $319 and
$174 of carpet replacement and $385 and $292 of other additions
and improvements to existing communities for the three months
ended March 31, 1997 and 1996, respectively. Since the Company
does not add back the depreciation of non-real estate assets in
its calculation of FFO, capital expenditures of $444 and $204 for
the three months ended March 31, 1997 and 1996, respectively, are
excluded from the calculation of CAD.
(3) Non-recurring capital expenditures consisted of community
additions and improvements of $374 and $136 for the three months
ended March 31, 1997 and 1996, respectively.
(4) Revenue generating capital expenditures included a major
renovation of a community and submetering of communities in the
amount of $961 and $89, respectively, for the three months ended
March 31, 1997.
-24-
<PAGE> 25
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
Report on Form 8-K filed on February 27, 1997.
- 25 -
<PAGE> 26
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
/s/ John T. Glover
May 15, 1997 -----------------------------
- --------------- John T. Glover, President
(Date) (Principal Financial Officer)
/s/ R. Gregory Fox
May 15, 1997 ---------------------------------------
- --------------- R. Gregory Fox
(Date) Senior Vice President, Chief Accounting
Officer
- 26 -
<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 MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 4,783,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,158,059,000
<DEPRECIATION> 184,020,000
<TOTAL-ASSETS> 997,560,000
<CURRENT-LIABILITIES> 0
<BONDS> 464,726,000
0
0
<COMMON> 0
<OTHER-SE> 480,251,000
<TOTAL-LIABILITY-AND-EQUITY> 997,560,000
<SALES> 0
<TOTAL-REVENUES> 44,566,000
<CGS> 0
<TOTAL-COSTS> 22,659,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,361,000
<INCOME-PRETAX> 14,156,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 13,093,000
<DISCONTINUED> 0
<EXTRAORDINARY> 93,000
<CHANGES> 0
<NET-INCOME> 13,000,000
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0
</TABLE>
