<PAGE> 1
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(2)
(TO PROSPECTUS DATED DECEMBER 1, 2000) Registration Number 333-42884-01
(Post Logo) $185,000,000
POST APARTMENT HOMES, L.P.
7.7% NOTES DUE 2010
----------------------
Post Apartment Homes will pay interest on the notes on June 20 and December
20 of each year, beginning June 20, 2001. The notes will mature on December 20,
2010. The notes are not redeemable before maturity.
The notes will be unsecured obligations and rank equally with other
unsecured senior indebtedness. The notes will be issued only in registered form
in denominations of $1,000.
----------------------
<TABLE>
<CAPTION>
PER NOTE TOTAL
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<S> <C> <C>
Public offering price(1).................................. 100% $185,000,000
Underwriting discount..................................... .65% $1,202,500
Proceeds, before expenses, to Post Apartment Homes........ 99.35% $183,797,500
</TABLE>
(1) Plus accrued interest from December 20, 2000, if settlement occurs
after that date
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The notes will be ready for delivery in book-entry form only through The
Depository Trust Company on or about December 20, 2000.
----------------------
MERRILL LYNCH & CO.
FIRST UNION SECURITIES, INC.
WACHOVIA SECURITIES, INC.
----------------------
The date of this prospectus supplement is December 15, 2000.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Use of Proceeds............................................. S-3
Description of the Notes.................................... S-3
Underwriting................................................ S-11
Validity of the Notes....................................... S-12
PROSPECTUS
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Post Properties, Inc. and Post Apartment Homes, L.P......... 2
Forward-Looking Information................................. 3
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges and to Fixed Charges and
Preferred Stock Dividends................................. 6
Description of Debt Securities.............................. 7
Description of Common Stock................................. 15
Description of Preferred Stock.............................. 19
Description of Depositary Shares............................ 27
Federal Income Tax Considerations........................... 31
Plan of Distribution........................................ 46
Legal Matters............................................... 47
Experts..................................................... 47
</TABLE>
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You should rely only on the information contained or incorporated by
reference in this prospectus supplement and the accompanying prospectus. Neither
Post Apartment Homes nor any underwriter has authorized any other person to
provide you with different or additional information. If anyone provides you
with different or inconsistent information, you should not rely on it. Neither
Post Apartment Homes nor any underwriter is making an offer to sell the notes in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information appearing in this prospectus supplement, the accompanying
prospectus and the documents incorporated by reference is accurate only as of
their respective dates. Post Apartment Homes' business, financial condition,
results of operations and prospects may have changed since those dates.
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<PAGE> 3
USE OF PROCEEDS
The net proceeds from this offering, after payment of the underwriting
discount and all expenses of the offering, are expected to be approximately
$183.7 million. Post Apartment Homes intends to use the net proceeds from the
offering (1) to repay all amounts outstanding under its cash management line
($15.9 million outstanding at November 30, 2000) and (2) to reduce amounts
outstanding under its revolving credit facility ($186.0 million outstanding at
November 30, 2000). Borrowings under the cash management line and the revolving
credit facility were used primarily for funding development activities. For the
month of November 2000, amounts outstanding under the cash management line bore
interest at a weighted average annual rate of 7.27% and amounts outstanding
under the revolving credit facility bore interest at a weighted average annual
rate of 7.32%. The cash management line matures in March 2001 and the revolving
credit facility matures in April 2003. Affiliates of First Union Securities,
Inc. and Wachovia Securities, Inc., two of the underwriters of the offering, are
lenders under the revolving credit facility and will receive their proportionate
share of the amounts repaid under the facility with the net proceeds of this
offering. An affiliate of Wachovia Securities, Inc. is the lender under the cash
management line and will receive all of the amounts repaid under the line with
the net proceeds of this offering. The relationship with these affiliates is
described in this prospectus supplement under the heading "Underwriting."
DESCRIPTION OF THE NOTES
This description of particular terms of the notes supplements, and if
inconsistent with replaces, the description of the general terms and provisions
of debt securities under the caption "Description of Debt Securities" in the
accompanying prospectus.
GENERAL
The notes will be issued as a series of securities under an Indenture dated
as of September 15, 2000 between Post Apartment Homes and SunTrust Bank, as
trustee, as amended by the First Supplement Indenture.
The notes will be issued in the aggregate principal amount of $185,000,000.
Post Apartment Homes will issue the notes only in book-entry form, in
denominations of $1,000 and integral multiples of $1,000. The notes will mature
on December 20, 2010 and will bear interest from December 20, 2000 at the rate
of 7.7% per year, payable semiannually on June 20 and December 20 of each year,
beginning on June 20, 2001. Interest on the notes will be payable to the persons
in whose names the notes are registered at the close of business on the
applicable preceding June 5 and December 5. If any interest payment date or
maturity date falls on a day that is not a business day, the required payment
will be made on the next business day as if it were made on the date the payment
was due and no interest will accrue on the amount payable for the period from
and after the interest payment date or maturity date, as the case may be.
Except as described under the heading "Specific Covenants -- Limitations on
Incurrence of Debt" below and under the heading "Description of Debt
Securities -- Consolidation, Merger or Sale" in the accompanying prospectus, the
Indenture does not contain any other provisions that would limit the ability of
Post Apartment Homes to incur indebtedness or that would afford holders of the
notes protection in the event of:
(1) a highly leveraged or similar transaction involving Post Apartment
Homes, the management of Post Apartment Homes or Post, or any affiliate
of any of them;
(2) a change of control of Post Apartment Homes or Post; or
(3) a reorganization, restructuring, merger or similar transaction
involving Post Apartment Homes that may adversely affect the holders of
the notes.
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<PAGE> 4
In addition, subject to the limitations set forth under the heading "Description
of Debt Securities -- Consolidation, Merger or Sale" in the accompanying
prospectus, Post Apartment Homes may, in the future, enter into transactions
such as the sale of all or substantially all of its assets or the consolidation
or merger of Post Apartment Homes that would increase the amount of Post
Apartment Homes' indebtedness or substantially reduce or eliminate Post
Apartment Homes' assets, which may have an adverse effect on Post Apartment
Homes' ability to service its indebtedness, including the notes. Post Apartment
Homes and its management have no present intention of engaging in a highly
leveraged or similar transaction.
The notes are not redeemable before their maturity. There will be no
sinking fund.
RANKING
The notes will be unsecured senior notes, ranking the same as other
unsecured obligations of Post Apartment Homes. The notes will be effectively
subordinated to mortgages and other secured indebtedness of Post Apartment
Homes. As of November 30, 2000, on a pro forma basis, after giving effect to the
sale of the notes and the application of net proceeds from the sale, Post
Apartment Homes had approximately $471.4 million of secured debt that would rank
senior to the notes and $552.9 million of unsecured debt that would rank equally
with the notes. Subject to limitations set forth in the Indenture, and as
described under the heading "Specific Covenants -- Limitations on Incurrence of
Debt" below, Post Apartment Homes may incur additional secured and unsecured
debt.
SPECIFIC COVENANTS
Limitations on Incurrence of Debt. Post Apartment Homes will not, and will
not permit any Subsidiary to, incur any Debt, other than intercompany Debt
(representing Debt to which the only parties are Post Apartment Homes, Post and
any Subsidiaries, but only so long as such debt is held solely by any of Post
Apartment Homes, Post and any Subsidiaries), if, immediately after giving effect
to the incurrence of such additional Debt, the aggregate principal amount of all
outstanding Debt of Post Apartment Homes and its Subsidiaries on a consolidated
basis determined in accordance with generally accepted accounting principles is
greater than 60% of the sum of:
- Total Assets, as defined below, as of the end of the fiscal quarter
covered in Post Apartment Homes' annual report on Form 10-K or quarterly
report on Form 10-Q, as the case may be, most recently filed with the
Securities and Exchange Commission (or, if such filing is not permitted
under the Exchange Act, with the trustee) prior to the incurrence of such
additional Debt; and
- the increase in Total Assets from the end of such quarter including,
without limitation, any increase in Total Assets resulting from the
incurrence of such additional Debt (such increase together with Post
Apartment Homes' Total Assets is referred to as the "Adjusted Total
Assets").
In addition to the foregoing limitation on the incurrence of Debt, Post
Apartment Homes will not, and will not permit any Subsidiary to, incur any
Secured Debt, other than intercompany Debt, if, immediately after giving effect
to the incurrence of the additional Secured Debt, the aggregate principal amount
of all outstanding Secured Debt of Post Apartment Homes and its Subsidiaries on
a consolidated basis is greater than 40% of Adjusted Total Assets. Debt is
deemed to be "incurred" by Post Apartment Homes and its Subsidiaries on a
consolidated basis whenever Post Apartment Homes and its Subsidiaries create,
assume, guarantee or otherwise become liable in respect of the Debt.
In addition to the foregoing limitations on the incurrence of Debt, Post
Apartment Homes will not, and will not permit any Subsidiary to, incur any Debt,
other than intercompany Debt, if the ratio of Post Apartment Homes' Consolidated
Income Available for Debt Service to the Annual Debt Service Charge for the
period consisting of the four consecutive fiscal quarters most recently ended
prior to the date on which such additional Debt is to be incurred will have been
less than 1.5 to 1, on a pro forma basis after
S-4
<PAGE> 5
giving effect to the incurrence of the Debt and to the application of the
proceeds from the Debt, and calculated on the assumption that:
(1) the incurrence of the Debt and any other Debt by Post Apartment Homes
or its Subsidiaries since the first day of the four-quarter period and
the application of the proceeds from that Debt, including to refinance
other Debt, had occurred at the beginning of that period,
(2) the repayment or retirement of any other Debt by Post Apartment Homes
or its Subsidiaries since the first day of the four-quarter period had
been repaid or retired at the beginning of that period (except that, in
making such computation, the amount of Debt under any revolving credit
facility will be computed based upon the average daily balance of that
Debt during that period), and
(3) in the case of any increase or decrease in Total Assets, or any other
acquisition or disposition by Post Apartment Homes or any of its
Subsidiaries of any asset or group of assets, since the first day of
that four-quarter period, including, without limitation, by merger,
stock purchase or sale, or asset purchase or sale, such increase,
decrease, or other acquisition or disposition or any related repayment
of Debt had occurred as of the first day of that period with the
appropriate adjustments to net income and Debt levels with respect to
that increase, decrease, or other acquisition or disposition being
included in that pro forma calculation.
For purposes of the adjustments referred to in (3) above, any income earned
or loss incurred, as a result of any such increase, decrease or other
acquisition or disposition referred in (3) above for a period less than such
four-quarter period will be annualized for such four-quarter period.
Maintenance of Total Unencumbered Assets. Post Apartment Homes is required
to maintain Total Unencumbered Assets of not less than 150% of the aggregate
outstanding principal amount of its Unsecured Debt.
A breach of any of the foregoing covenants by Post Apartment Homes, and
continuance of such breach for a period of 60 days after there has been given to
Post Apartment Homes by the trustee or to Post Apartment Homes and the trustee
by the holders of at least 25% in principal amount of the outstanding notes a
written notice as set forth in the Indenture, will be an event of default under
the Indenture.
As used in this prospectus supplement:
"Annual Debt Service Charge" as of any date means the amount which is
expensed in any 12-month period for interest on Debt of Post Apartment Homes and
its Subsidiaries.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income plus amounts which have been deducted in determining
Consolidated Net Income during such period for:
(1) Consolidated Interest Expense,
(2) provision for taxes of Post Apartment Homes and its Subsidiaries based
on income,
(3) amortization, other than amortization of debt discount, and
depreciation,
(4) provisions for losses from sales or joint ventures,
(5) increases in deferred taxes and other non-cash items,
(6) charges resulting from a change in accounting principles, and
(7) charges for early extinguishment of debt, and
less amounts which have been added in determining Consolidated Net Income during
such period for (a) provisions for gains from sales or joint ventures, and (b)
decreases in deferred taxes and other non-cash items.
S-5
<PAGE> 6
"Consolidated Interest Expense" means, for any period, and without
duplication, all interest, including the interest component of rentals on
capitalized leases, letter of credit fees, commitment fees and other like
financial charges, and all amortization of debt discount on all Debt, including,
without limitation, payment-in-kind, zero coupon and other like securities, of
Post Apartment Homes and its Subsidiaries, but excluding legal fees, title
insurance charges and other out-of-pocket fees and expenses incurred in
connection with the issuance of Debt, all determined in accordance with
generally accepted accounting principles.
"Consolidated Net Income" for any period means the amount of consolidated
net income or loss of Post Apartment Homes and its Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Debt" of Post Apartment Homes or any of its Subsidiaries means any
indebtedness of Post Apartment Homes and its Subsidiaries, whether or not
contingent, in respect of:
(1) borrowed money evidenced by bonds, notes, debentures or similar
instruments,
(2) indebtedness secured by any mortgage, pledge, lien, charge, encumbrance
or any security interest existing on property owned by Post Apartment
Homes and its Subsidiaries,
(3) the reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing the
balance deferred and unpaid of the purchase price of any property
except any such balance that constitutes an accrued expense or trade
payable, or
(4) any lease of property by Post Apartment Homes and its Subsidiaries as
lessee which is reflected in Post Apartment Homes' consolidated balance
sheet as a capitalized lease in accordance with generally accepted
accounting principles,
in the case of items of indebtedness under (1) through (3) above to the extent
that any such items, other than letters of credit, would appear as a liability
on Post Apartment Homes' consolidated balance sheet in accordance with generally
accepted accounting principles, and also includes, to the extent not otherwise
included, any obligation by Post Apartment Homes or any of its Subsidiaries to
be liable for, or to pay, as obligor, guarantor or otherwise, other than for
purposes of collection in the ordinary course of business, Debt of another
person other than of Post Apartment Homes or of its Subsidiaries (it being
understood that Debt will be deemed to be incurred by Post Apartment Homes and
any of its Subsidiaries on a consolidated basis whenever Post Apartment Homes
and its Subsidiaries on a consolidated basis will create, assume, guarantee or
otherwise become liable in respect thereof); provided, however, that the term
"Debt" will not include any such indebtedness that has been the subject of an
"in substance" defeasance in accordance with generally accepted accounting
principles.
"Secured Debt" means Debt that is secured by any mortgage, trust deed, deed
of trust, deed to secure debt, security agreement, pledge, conditional sale or
other title retention agreement, capitalized lease, or other like agreement
granting or conveying security title to or a security interest in real property
or other tangible assets.
"Senior Executive Group" means, collectively, those individuals holding the
offices of Chairman, Vice Chairman, President, Chief Executive Officer, Chief
Operating Officer, or any Executive Vice President of Post.
"Subsidiary" means (1) any corporation or other entity the majority of the
shares of the non-voting capital stock or other equivalent ownership interests
of which (except directors' qualifying shares) are at the time directly or
indirectly owned by Post Apartment Homes, Post GP Holdings, Inc., Post Apartment
Homes' general partner, and the majority of the shares of the voting capital
stock or other equivalent ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by Post
Apartment Homes, Post GP Holdings, and/or one or more individuals of the Senior
Executive Group (or, in the event of death or disability of any of such
individuals, his/her respective legal representative(s)), or such individuals'
successors in office as one of Post Apartment Homes' officers or as
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<PAGE> 7
an officer of Post GP Holdings or the Secretary of such Subsidiary, and (2) any
other entity (other than Post GP Holdings) the accounts of which are
consolidated with Post Apartment Homes' accounts.
"Total Assets" as of any date means the sum of (1) the Undepreciated Real
Estate Assets and (2) all of Post Apartment Homes' other assets and assets of
its Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles, but excluding intangibles and accounts
receivable.
"Total Unencumbered Assets" as of any date means the sum of (1) those
Undepreciated Real Estate Assets not securing any portion of Secured Debt and
(2) all of Post Apartment Homes' other assets and assets of its Subsidiaries not
securing any portion of Secured Debt determined in accordance with generally
accepted accounting principles, but excluding accounts receivable and
intangibles.
"Undepreciated Real Estate Assets" as of any date means the cost, original
cost plus capital improvements, of real estate assets of Post Apartment Homes
and its Subsidiaries on such date, before depreciation and amortization,
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"Unsecured Debt" means Debt of Post Apartment Homes or any of its
Subsidiaries that is not Secured Debt.
Reference is made to the section entitled "Description of Debt
Securities -- Restrictive Covenants" in the accompanying prospectus for a
description of additional covenants applicable to the notes. Compliance with the
covenants described in this prospectus supplement and such additional covenants
with respect to the notes generally may not be waived by Post GP Holdings, as
Post Apartment Homes' general partner, or by the trustee unless the holders of
at least a majority in principal amount of all outstanding notes consent to such
waiver; provided, however, that the defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt
Securities -- Defeasance" in the accompanying prospectus will apply to the
notes, including with respect to the covenants described in this prospectus
supplement.
Neither Post, Post GP Holdings nor any of Post Apartment Homes' partners
will have any obligation or liability for payment of the notes, and holders of
the notes will have no claims or other recourse against Post, Post GP Holdings
or any of Post Apartment Homes' partners, or against any assets of Post, Post GP
Holdings or any of Post Apartment Homes' partners, in respect of the notes; and
the holders of the notes will not have any right to enforce any obligation of a
partner to make a contribution to Post Apartment Homes under any provision of
the Post Apartment Homes, L.P. Agreement of Limited Partnership. Neither Post,
Post GP Holdings nor any of Post Apartment Homes' partners nor any of their
respective assets will be subject to any lien, levy, execution or any other
enforcement procedure relating directly or indirectly to the notes or any
obligations thereunder; provided, however, that in the event of Post Apartment
Homes' dissolution, any of its assets that are received by Post or Post GP
Holdings in such dissolution will be subject to the claims of the holders of the
notes for the enforcement of payment thereof. Post Apartment Homes covenants
that Post GP Holdings will not acquire any assets other than interests in Post
Apartment Homes and other than such bank accounts or similar instruments or
accounts as necessary to carry out its responsibilities under the Post Apartment
Homes, L.P. Agreement of Limited Partnership without the prior written consent
of a majority in principal amount of all of the outstanding notes. A breach of
the foregoing covenant by Post Apartment Homes, and continuance of such breach
for a period of 60 days after there has been given to Post Apartment Homes by
the trustee or to Post Apartment Homes and the trustee by the holders of at
least 25% in principal amount of the outstanding notes a written notice as set
forth in the Indenture, will be an event of default under the Indenture.
BOOK-ENTRY SYSTEM
Post Apartment Homes has established a depositary arrangement with The
Depository Trust Company with respect to the notes, the terms of which are
summarized below.
Upon issuance, the notes will be represented by a single global security.
The global security representing the notes will be deposited with, or on behalf
of, DTC and will be registered in the name of
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DTC or a nominee of DTC. The global security may not be transferred except as a
whole by a nominee of DTC to DTC or to another nominee of DTC, or by DTC or
another nominee of DTC to a successor of DTC or a nominee of a successor to DTC.
So long as DTC or its nominee is the registered holder of the global
security, DTC or its nominee, as the case may be, will be the sole owner of the
notes represented thereby for all purposes under the Indenture. Except as
otherwise provided below, the beneficial owners of the global security
representing the notes will not be entitled to receive physical delivery of
certificated notes and will not be considered the registered holders thereof for
any purpose under the Indenture, and the global security representing the notes
will be exchangeable or transferable. Accordingly, each beneficial owner must
rely on the procedures of DTC and, if that beneficial owner is not a
Participant, on the procedures of the Participant through which that beneficial
owner owns its interest in order to exercise any rights of a registered holder
under the Indenture. The laws of some jurisdictions require that certain
purchasers of securities take physical delivery of securities in certificated
form. Such limits and laws may impair the ability to transfer beneficial
interests in the global security representing the notes.
The global security representing the notes will be exchangeable for
certificated notes of like tenor and terms and of differing authorized
denominations in a like aggregate principal amount, only if:
- DTC notifies Post Apartment Homes that it is unwilling or unable to
continue as depositary for the global securities or Post Apartment Homes
becomes aware that DTC has ceased to be a clearing agency registered
under the Exchange Act and, in any such case Post Apartment Homes fails
to appoint a successor to DTC within 60 calendar days;
- Post Apartment Homes, in its sole discretion, determines that the global
security will be exchangeable for certificated notes; or
- an Event of Default has occurred and is continuing with respect to the
notes under the Indenture.
Upon any such exchange, the certificated notes will be registered in the names
of the beneficial owners of the global security representing the notes, which
names will be provided by DTC's relevant Participants as identified by DTC to
the trustee.
The following is based on information furnished by DTC:
DTC will act as securities depository for the notes. The notes will be
issued as fully registered securities registered in the name of Cede & Co. Cede
& Co. is DTC's partnership nominee. One fully registered global security will be
issued for the issue of the notes in the aggregate principal amount of the
issue, and will be deposited with DTC. DTC is:
- a limited-purpose trust company organized under the New York Banking Law;
- a "banking organization" within the meaning of the New York Banking Law;
- a member of the Federal Reserve System;
- a "clearing corporation" within the meaning of the New York Uniform
Commercial Code; and
- a "clearing agency" registered pursuant to the provisions of Section 17A
of the Exchange Act.
DTC holds securities that its participants ("Participants") deposit with
DTC. DTC also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Direct Participants of DTC ("Direct Participants") include securities
brokers and dealers, including the underwriters, banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a number
of its Direct Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange, Inc., and the National Association of Securities
Dealers, Inc. Access to DTC's system is also available to others such as
securities brokers and dealers, banks and trust companies that clear
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<PAGE> 9
through or maintain a custodial relationship with a Direct Participant, either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of the notes under DTC's system must be made by or through Direct
Participants, which will receive a credit for such notes on DTC's records. The
ownership interest of each beneficial owner is in turn to be recorded on the
records of Direct Participants and Indirect Participants. Beneficial owners will
not receive written confirmation from DTC of their purchase, but beneficial
owners are expected to receive written confirmations providing details of the
transaction, as well as periodic statements of their holdings, from the Direct
Participants or Indirect Participants through which such beneficial owner
entered into the transaction. Transfers of ownership interests in the global
security representing the notes are to be accomplished by entries made on the
books of Participants acting on behalf of beneficial owners. Beneficial owners
of the global security representing the notes will not receive certificated
notes representing their ownership interests therein, except in the event that
use of the book-entry system for the notes is discontinued.
To facilitate subsequent transfers, the global security representing the
notes which is deposited with, or on behalf of, DTC is registered in the name of
DTC's nominee, Cede & Co. The deposit of the global security with, or on behalf
of, DTC and its registration in the name of Cede & Co. has no effect on
beneficial ownership. DTC has no knowledge of the actual beneficial owners of
the global security representing the notes; DTC's records reflect only the
identity of the Direct Participants to whose accounts such notes are credited,
which may or may not be the beneficial owners. The Participants will remain
responsible for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to beneficial owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Principal and/or interest, if any, payments on the global security
representing the notes will be made in immediately available funds to DTC. DTC's
practice is to credit Direct Participants' accounts on the applicable payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payment on such date.
Payments by Participants to beneficial owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the trustee or
Post Apartment Homes, subject to any statutory or regulatory requirements as may
be in effect from time to time. Payment of principal and/or interest, if any, to
DTC is the responsibility of Post Apartment Homes and the trustee, disbursement
of such payments to Direct Participants will be the responsibility of DTC, and
disbursement of such payments to the beneficial owners will be the
responsibility of Direct Participants and Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the notes at any time by giving reasonable notice to Post Apartment
Homes or the trustee. Under such circumstances, in the event that a successor
securities depository is not obtained, certificated notes are required to be
printed and delivered.
Post Apartment Homes may decide to discontinue use of the system of
book-entry transfers through DTC or a successor securities depository. In that
event, certificated notes will be printed and delivered.
The information in this section concerning DTC and DTC's system has been
obtained from sources that Post Apartment Homes believes to be reliable, but
neither Post Apartment Homes nor any underwriter takes any responsibility for
the accuracy thereof.
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SETTLEMENT PROCEDURES
Settlement for the notes will be made by the underwriters in immediately
available or same-day funds. Secondary trading in long-term notes of corporate
issuers is generally settled in clearinghouse or next-day funds. In contrast,
the notes will trade in DTC's Same-Day Funds Settlement System until maturity,
and secondary market trading activity in the notes will be required by DTC to
settle in same-day funds. Settlement in same-day funds may have an effect on the
level of trading activity in the notes.
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UNDERWRITING
Post Apartment Homes intends to offer the notes through the underwriters.
Subject to the terms and conditions contained in a purchase agreement and the
related terms agreement between Post Apartment Homes and the underwriters, Post
Apartment Homes has agreed to sell to the underwriters and the underwriters
severally have agreed to purchase, the principal amount of the notes listed
opposite their names below.
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
UNDERWRITER ------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... $138,750,000
First Union Securities, Inc................................. 23,125,000
Wachovia Securities, Inc.................................... 23,125,000
------------
Total........................................... $185,000,000
============
</TABLE>
The underwriters have agreed to purchase all of the notes sold pursuant to
a purchase agreement if any of these notes are purchased. If an underwriter
defaults, the purchase agreement provides that the purchase commitments of the
nondefaulting underwriters may be increased or the purchase agreement may be
terminated.
Post Apartment Homes has agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments the underwriters may be required to make in respect of
those liabilities.
The underwriters are offering the notes, subject to prior sale, when, as
and if issued to and accepted by them, subject to approval of legal matters by
their counsel, including the validity of the notes, and other conditions
contained in the purchase agreement, such as the receipt by the underwriters of
officer's certificates and legal opinions. The underwriters reserve the right to
withdraw, cancel or modify offers to the public and to reject orders in whole or
in part.
COMMISSIONS AND DISCOUNTS
The underwriters have advised Post Apartment Homes that they propose
initially to offer the notes to the public at the public offering price on the
cover page of this prospectus supplement, and to dealers at that price less a
concession not in excess of .4% of the principal amount of the notes. The
underwriters may allow, and the dealers may reallow, a discount not in excess of
.25% of the principal amount of the notes to other dealers. After the initial
public offering, the public offering price, concession and discount may be
changed.
The expenses of the offering, not including the underwriting discount, are
estimated to be $100,000 and are payable by Post Apartment Homes.
NEW ISSUE OF NOTES
The notes are a new issue of securities with no established trading market.
Post Apartment Homes does not intend to apply for listing of the notes on any
national securities exchange or for quotation of the notes on any automated
dealer quotation system. Post Apartment Homes has been advised by the
underwriters that they presently intend to make a market in the notes after
completion of the offering. However, they are under no obligation to do so and
may discontinue any market-making activities at any time without any notice.
Post Apartment Homes cannot assure the liquidity of the trading market for the
notes or that an active public market for the notes will develop. If an active
public trading market for the notes does not develop, the market price and
liquidity of the notes may be adversely affected.
S-11
<PAGE> 12
PRICE STABILIZATION AND SHORT POSITIONS
In connection with the offering, the underwriters are permitted to engage
in transactions that stabilize the market price of the notes. Such transactions
consist of bids or purchases to peg, fix or maintain the price of the notes. If
the underwriters create a short position in the notes in connection with the
offering, i.e., if they sell more notes than are on the cover page of this
prospectus supplement, the underwriters may reduce that short position by
purchasing notes in the open market. Purchases of a security to stabilize the
price or to reduce a short position could cause the price of the security to be
higher than it might be in the absence of such purchases.
Neither Post Apartment Homes nor any of the underwriters makes any
representation or prediction as to the direction or magnitude of any effect that
the transactions described above may have on the price of the notes. In
addition, neither Post Apartment Homes nor any of the underwriters makes any
representation that the underwriters will engage in these transactions or that
these transactions, once commenced, will not be discontinued without notice.
OTHER RELATIONSHIPS
Some of the underwriters and their affiliates have provided, and may in the
future provide, investment banking, financial advisory, commercial banking and
other services to Post Apartment Homes and have received and may continue to
receive, customary fees and commissions in connection with those services. First
Union National Bank, an affiliate of First Union Securities, Inc. is the
syndication agent and a lender under Post Apartment Homes' revolving credit
facility. Wachovia Bank, N.A., an affiliate of Wachovia Securities, Inc., is the
administrative agent and a lender under the revolving credit facility and the
lender under the cash management line. First Union National Bank and Wachovia
Bank, N.A. will receive a proportionate share of the amounts repaid under the
revolving credit facility with the net proceeds of this offering. Wachovia Bank,
N.A. will receive all of the amounts repaid under the cash management line.
Because more than ten percent of the net proceeds of the offering will be paid
to members or affiliates of members of the National Association of Securities
Dealers, Inc. participating in the offering, the offering will be conducted in
accordance with NASD Conduct Rule 2710(c)(8).
VALIDITY OF THE NOTES
The validity of the notes will be passed upon for Post Apartment Homes by
King & Spalding, and for the underwriters by Hogan & Hartson L.L.P., Washington,
D.C.
S-12
<PAGE> 13
PROSPECTUS
(POST PROPERTIES LOGO)
$287,000,000
POST PROPERTIES, INC.
----------------------
COMMON STOCK, PREFERRED STOCK
AND DEPOSITARY SHARES
----------------------
$319,000,000
POST APARTMENT HOMES, L.P.
----------------------
DEBT SECURITIES
----------------------
We will provide the specific terms of these securities in supplements to
this prospectus. You should read this prospectus and the applicable prospectus
supplement carefully before you invest.
----------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
----------------------
This prospectus is dated December 1, 2000
<PAGE> 14
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS OR ANY
PROSPECTUS SUPPLEMENT. YOU MUST NOT RELY ON ANY UNAUTHORIZED INFORMATION OR
REPRESENTATIONS. THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT CONSTITUTE AN
OFFER TO SELL ONLY THE SECURITIES OFFERED HEREBY AND THEREBY, AND ONLY UNDER
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION
CONTAINED IN THIS PROSPECTUS AND ANY PROSPECTUS SUPPLEMENT IS CURRENT ONLY AS OF
THEIR RESPECTIVE DATES.
----------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
About this Prospectus....................................... 1
Where You Can Find More Information......................... 1
Post Properties, Inc. and Post Apartment Homes, L.P. ....... 2
Forward-Looking Information................................. 3
Use of Proceeds............................................. 5
Ratio of Earnings to Fixed Charges and to Fixed Charges and
Preferred Stock Dividends................................. 6
Description of Debt Securities.............................. 7
Description of Common Stock................................. 15
Description of Preferred Stock.............................. 19
Description of Depositary Shares............................ 27
Federal Income Tax Considerations........................... 31
Plan of Distribution........................................ 46
Legal Matters............................................... 47
Experts..................................................... 47
</TABLE>
i
<PAGE> 15
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission using a "shelf" registration process. Under
this shelf process, we may sell:
- debt securities,
- common stock,
- preferred stock, and
- depositary shares
either separately or in units, in one or more offerings. This prospectus
provides you with a general description of those securities. Each time we sell
securities, we will provide a prospectus supplement that will contain specific
information about the terms of that offering. The prospectus supplement may also
add, update or change information contained in this prospectus. You should read
this prospectus and the applicable prospectus supplement together with the
additional information described under the heading "Where You Can Find More
Information."
The registration statement that contains this prospectus (including the
exhibits to the registration statement) contains additional information about
Post and Post Apartment Homes and the securities offered under this prospectus.
That registration statement can be read at the SEC's web site or at the SEC
offices mentioned under the heading "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, N.W., Washington, D.C. 20549, 7 World Trade Center, Suite 1300,
New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. You can also obtain copies of the documents
at prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
facilities. Our SEC filings are also available at the office of the New York
Stock Exchange at 20 Broad Street, New York, New York 10005. For further
information on obtaining copies of our public filings at the New York Stock
Exchange, you should call (212) 656-5060.
We "incorporate by reference" into this prospectus the information we file
with the SEC, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus and any prospectus supplement and
information that we file subsequently with the SEC will automatically update
this prospectus and any prospectus supplement. We incorporate by reference the
documents listed below and any future filings either Post or Post Apartment
Homes makes with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") after the date of this
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<PAGE> 16
prospectus and prior to the time that we sell all the securities offered by this
prospectus and any accompanying prospectus supplement:
- Annual Report on Form 10-K for Post and Post Apartment Homes for the year
ended December 31, 1999;
- Quarterly Reports on Form 10-Q for Post and Post Apartment Homes for the
quarters ended March 31, 2000, June 30, 2000 and September 30, 2000;
- Current Reports on Form 8-K for Post and Post Apartment Homes dated May
4, 2000, June 13, 2000, October 2, 2000 and November 30, 2000; and
- the description of Post's common stock contained in the Registration
Statement on Form 8-A dated July 22, 1993.
You may request a copy of these filings (other than an exhibit to a filing
unless that exhibit is specifically incorporated by reference into that filing)
at no cost, by writing to or telephoning us at the following address:
Post Properties, Inc.
4401 Northside Parkway
Suite 800
Atlanta, Georgia 30327
Attn: Secretary
(404) 846-5000
POST PROPERTIES, INC. AND POST APARTMENT HOMES, L.P.
We are one of the largest developers and operators of upscale multifamily
apartment communities in the Southeastern and Southwestern United States. As of
September 30, 2000, we owned 88 stabilized communities containing 30,209
apartment units located primarily in metropolitan Atlanta, Georgia; Dallas,
Texas and Tampa, Florida. In addition, we had under construction or in initial
lease-up 16 new communities and additions to two existing communities in the
Atlanta, Georgia; Dallas, Houston and Austin, Texas; Tampa, Florida; Denver,
Colorado; Charlotte, North Carolina; Phoenix, Arizona; Pasadena, California and
Washington, D.C. metropolitan areas that will contain an aggregate of 5,341
apartment units upon completion. For the year ended December 31, 1999, the
average economic occupancy rate, defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent, of the 76
communities stabilized for the entire year was 96.4%. The average monthly rental
rate per apartment unit at these communities for December 1999 was $885. At
December 31, 1999, we also managed through affiliates 13,553 additional
apartment units owned by third parties. We are a fully integrated organization
with multifamily development, acquisition, operation and asset management
expertise. At December 31, 1999, we had approximately 2,035 employees, none of
whom is a party to a collective bargaining agreement.
Post Properties, Inc., referred to in this prospectus as Post, is a
self-administered and self-managed equity real estate investment trust, or REIT.
Through its wholly owned subsidiaries, Post is the sole general partner of Post
Apartment Homes and it controls a majority of the limited partnership interests,
or Units, in Post Apartment Homes. Post conducts all of its business through
Post Apartment Homes and its other subsidiaries.
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<PAGE> 17
Since our founding in 1971, we have pursued three distinctive core business
strategies that have remained substantially unchanged:
- Investment Building. Investment building means taking a long-term view
of the assets we create. We develop communities with the intention of
operating them for periods that are relatively long by the standards of
the apartment industry. Key elements of our investment building strategy
include instilling a disciplined team approach to development decisions,
selecting sites in urban infill locations in strong primary markets,
consistently constructing new apartment communities with a uniformly high
quality and conducting ongoing property improvements.
- Promotion of the Post(R) Brand Name. The Post(R) brand name strategy has
been integral to our success and, to our knowledge, has not been
successfully duplicated within the multifamily real estate industry in
any major U.S. market. For such a strategy to work, a company must
develop and implement systems to achieve uniformly high quality and value
throughout its operations. As a result of our efforts in developing and
maintaining our communities, we believe that the Post(R) brand name is
synonymous with quality upscale apartment communities that are situated
in desirable locations and provide superior resident service. Key
elements in implementing our brand name strategy include extensively
utilizing the trademarked brand name, adhering to quality in all aspects
of our operations, developing and implementing leading edge training
programs and coordinating our advertising programs to increase brand name
recognition.
- Service Orientation. Our mission statement is: "To provide the superior
apartment living experience for our residents." By striving to provide a
superior product and superior service, we believe that we will be able to
achieve our long-term goals. We believe that we provide our residents
with a superior product and superior service through our uniformly high
quality construction, selective urban infill locations, award-winning
landscaping and numerous amenities, including on-site business centers,
on-site courtesy officers, urban vegetable gardens and state-of-the-art
fitness centers.
We believe that with the implementation of these strategies, multifamily
properties in our primary markets have the potential over the long term to
provide investment returns that exceed national averages.
Our offices are located at 4401 Northside Parkway, Suite 800, Atlanta,
Georgia 30327 and our telephone number is (404) 846-5000.
When we refer to "we," "our" and "us" in this prospectus, we mean Post
Properties, Inc. and its subsidiaries.
Post(R) and PostSmart.net(R) are registered trademarks of Post Properties,
Inc. This prospectus also includes trademarks, service marks, trade names and
references to intellectual property owned by other companies.
FORWARD-LOOKING INFORMATION
Certain statements made in or incorporated by reference into this
prospectus and any prospectus supplement, and other written or oral statements
made by or on behalf of Post and Post Apartment Homes, may constitute
"forward-looking statements" within the
3
<PAGE> 18
meaning of the federal securities laws. Statements regarding future events and
developments and our future performance, as well as management's expectations,
beliefs, plans, estimates or projections relating to the future, are
forward-looking statements within the meaning of these laws. Examples of such
statements in or incorporated by reference into this prospectus and any
prospectus supplement include descriptions of our plans with respect to the
development of new apartment communities, our plans to enter new markets and our
expectations relating to our continuing growth. All forward-looking statements
are subject to certain risks and uncertainties that could cause actual events to
differ materially from those projected. Management believes that these
forward-looking statements are reasonable; however, you should not place undue
reliance on such statements. These statements are based on current expectations
and speak only as of the date of such statements. We undertake no obligation to
publicly update or revise any forward-looking statement, whether as a result of
future events, new information or otherwise.
The following are some of the factors that could cause our actual results
to differ materially from the expected results described in our forward-looking
statements:
- conditions affecting the acquisition, development and ownership of
residential real estate, including local zoning and land use issues,
environmental regulations, the Americans with Disabilities Act, the Fair
Housing Amendments Act of 1988 and general conditions in the multi-family
residential real estate market;
- adverse or unanticipated weather conditions, which may affect our overall
level of development;
- our ability to obtain financing for the development of additional
apartment communities;
- the impact of competition, including competition for tenants and
locations and in other important aspects of our business. Our primary
competitors include other regional or national apartment communities. The
multifamily apartment community business is highly competitive;
- general economic conditions which affect consumer confidence and
purchases of new homes, including interest rates, the overall level of
economic activity, the availability of consumer credit and mortgage
financing, unemployment rates, and other factors;
- our ability to continue to qualify as a real estate investment trust
under the Internal Revenue Code; and
- changes in laws and regulations, including changes in accounting
standards, tax statutes or regulations, and environmental and land use
regulations, and uncertainties of litigation.
Additional information concerning the risks and uncertainties listed above
and other factors that you may wish to consider with respect to any investment
in our securities is contained elsewhere in the filings by Post and Post
Apartment Homes with the SEC.
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<PAGE> 19
USE OF PROCEEDS
Post is required, by the terms of the partnership agreement of Post
Apartment Homes, to invest the net proceeds of any sale of common stock,
preferred stock or depositary shares in Post Apartment Homes in exchange for
additional Units which will have preferences and rights that reflect the
security to be issued. Unless otherwise indicated in the applicable prospectus
supplement, Post Apartment Homes intends to use such net proceeds and the net
proceeds from the sale of debt securities for general corporate purposes
including, without limitation, the acquisition and development of multi-family
communities and the repayment of debt. Pending application of the net proceeds,
Post Apartment Homes will invest the proceeds in interest-bearing accounts and
short-term, interest-bearing securities, which are consistent with Post's
intention to continue to qualify for taxation as a REIT. Such investments may
include, for example, obligations of the Government National Mortgage
Association, other government and government agency securities, certificates of
deposit, interest-bearing bank deposits and mortgage loan participations.
5
<PAGE> 20
RATIOS OF EARNINGS TO FIXED CHARGES AND TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------- -------------
1995 1996 1997 1998 1999 1999 2000
---- ---- ---- ---- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Post Apartment Homes -- ratio of earnings
to fixed charges....................... 2.1 2.7 2.5 2.7 2.7 2.8 2.4
Post -- ratio of earnings to fixed
charges and preferred stock
dividends.............................. 2.1 2.6 2.2 2.2 2.2 2.3 1.9
</TABLE>
- For purposes of calculating the ratio for Post Apartment Homes, fixed
charges consist of:
-- interest costs, whether expensed or capitalized;
-- amortization of debt issuance costs; and
-- the interest component of rental expense.
- The ratio of earnings to fixed charges is calculated as follows:
(pre-tax income from continuing operations) + (fixed charges) -
(capitalized interest)
---------------------------------------------------------------------------
(fixed charges)
- For purposes of calculating the ratio for Post, fixed charges consist of:
-- interest costs, whether expensed or capitalized;
-- amortization of debt issuance costs;
-- the interest component of rental expense; and
-- preferred stock dividend requirements of consolidated subsidiaries.
- The ratio of earnings to fixed charges and preferred stock dividends is
calculated as follows:
(pre-tax income from continuing operations) + (fixed charges)* - (capitalized
interest)
+ (minority interest)
--------------------------------------------------------------------------------
(fixed charges) + (preferred stock dividends)
---------------
* For purposes of adding back fixed charges to the numerator, the preferred
stock dividend requirements of the consolidated subsidiaries is excluded.
6
<PAGE> 21
DESCRIPTION OF DEBT SECURITIES
This section describes the general terms and provisions of the debt
securities. The prospectus supplement will describe the specific terms of the
debt securities offered through that prospectus supplement and any general terms
outlined in this section that will not apply to those debt securities.
The debt securities will be issued under an Indenture, dated as of
September 15, 2000, between Post Apartment Homes and SunTrust Bank, as trustee,
as amended by the First Supplemental Indenture. The Indenture is subject to, and
governed by, the Trust Indenture Act of 1939, as amended. As used in this
prospectus, debt securities means the debentures, notes, bonds and other
evidences of indebtedness that Post Apartment Homes issues and the Trustee
authenticates and delivers under the Indenture.
We have summarized selected terms and provisions of the Indenture in this
section. The summary is not complete. We have also filed the Indenture and the
First Supplemental Indenture as an exhibit to the registration statement. You
should read the Indenture and the First Supplemental Indenture for additional
information before you buy any debt securities. The summary that follows
includes references to section numbers of the Indenture so that you can more
easily locate these provisions. Capitalized terms used but not defined in this
summary have the meanings specified in the Indenture.
GENERAL
The debt securities will be direct unsecured obligations of Post Apartment
Homes. The debt securities will rank equally with all other unsecured and
unsubordinated indebtedness of Post Apartment Homes. The Indenture does not
limit the amount of debt securities that Post Apartment Homes may issue and
permits Post Apartment Homes to issue debt securities from time to time. Debt
securities issued under the Indenture will be issued as part of a series that
has been established by Post Apartment Homes pursuant to the Indenture. (Section
301) Unless a prospectus supplement relating to debt securities states
otherwise, the Indenture and the terms of the debt securities will not contain
any covenants designed to afford holders of any debt securities protection in a
highly leveraged or other transaction involving Post Apartment Homes that may
adversely affect holders of the debt securities. If Post Apartment Homes ever
issues bearer securities Post Apartment Homes will summarize provisions of the
Indenture that relate to bearer securities in the applicable prospectus
supplement.
A prospectus supplement relating to a series of debt securities being
offered will include specific terms relating to the offering. (Section 301)
These terms will include some or all of the following:
- the title and type of the debt securities;
- any limit on the total principal amount of the debt securities;
- the price at which the debt securities will be issued;
- the date or dates on which the principal of and premium, if any, on the
debt securities will be payable;
- the maturity date of the debt securities;
- if the debt securities will bear interest:
-- the interest rate on the debt securities;
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<PAGE> 22
-- the date from which interest will accrue;
-- the record and interest payment dates for the debt securities; and
-- the first interest payment date;
- any circumstances under which Post Apartment Homes may defer interest
payments;
- any optional redemption provisions that would permit Post Apartment Homes
or the Holders (as defined below) of debt securities to elect redemption
of the debt securities prior to their final maturity;
- any sinking fund provisions that would obligate Post Apartment Homes to
redeem the debt securities prior to their final maturity;
- the currency or currencies in which the debt securities will be
denominated and payable, if other than U.S. dollars;
- any provisions that would permit Post Apartment Homes or the Holders of
the debt securities to elect the currency or currencies in which the debt
securities are paid;
- whether the provisions described under the heading "Defeasance" below
apply to the debt securities;
- any changes to or additional Events of Default (as defined below) or
covenants;
- whether the debt securities will be issued in whole or in part in the
form of Global Securities and, if so, the Depositary for those Global
Securities (as defined below);
- any special tax implications of the debt securities; and
- any other terms of the debt securities.
A "Holder," with respect to a registered security, means the person in whose
name the registered security is registered in Post Apartment Homes' security
register. (Section 101) "Global Security" means a debt security that Post
Apartment Homes issues in accordance with the Indenture to represent all or part
of a series of debt securities.
TRUSTEE
There may be more than one Trustee under the Indenture, each with respect
to one or more series of debt securities. Any Trustee under the Indenture may
resign or be removed with respect to one or more series of debt securities, and
a successor Trustee may be appointed to act with respect to such series.
(Section 608) In the event that two or more persons are acting as Trustee with
respect to different series of debt securities, each Trustee shall be a trustee
of a trust under the Indenture separate and apart from the trust administered by
any other Trustee. (Section 609) Except as otherwise indicated, any action
described herein to be taken by a Trustee may be taken by each Trustee with
respect to, and only with respect to, the one or more series of debt securities
for which it is Trustee under the Indenture.
PAYMENT; TRANSFER
Post Apartment Homes will designate a place of payment where you can
receive payment of the principal of and any premium and interest on the debt
securities or where you can transfer the debt securities. Even though Post
Apartment Homes will designate a
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<PAGE> 23
place of payment, Post Apartment Homes may elect to pay any interest on the debt
securities by mailing a check to the person listed as the owner of the debt
securities in the security register or by wire transfer to an account designated
by that person in writing not less than ten days before the date of the interest
payment. (Sections 305, 307, 1002) There will be no service charge for any
registration of transfer or exchange of the debt securities, but Post Apartment
Homes may require you to pay any tax or other governmental charge payable in
connection with a transfer or exchange of the debt securities. (Section 305)
DENOMINATIONS
Unless the prospectus supplement states otherwise, the debt securities will
be issued only in registered form, without coupons, in denominations of $1,000
each or multiples of $1,000.
ORIGINAL ISSUE DISCOUNT
Debt securities may be issued under the Indenture as Original Issue
Discount Securities and sold at a substantial discount below their stated
principal amount. If a debt security is an "Original Issue Discount Security,"
that means that an amount less than the principal amount of the debt security
will be due and payable upon a declaration of acceleration of the maturity of
the debt security pursuant to the Indenture. (Section 101) The applicable
prospectus supplement will describe the federal income tax consequences and
other special factors which should be considered prior to purchasing any
Original Issue Discount Securities.
CONSOLIDATION, MERGER OR SALE
The Indenture generally permits a consolidation or merger between Post
Apartment Homes and another entity. It also permits the sale or transfer by Post
Apartment Homes of all or substantially all of its property and assets and the
purchase by it of all or substantially all of the property and assets of another
entity. These transactions are permitted if:
- Post Apartment Homes is the continuing entity or, if not, the resulting
or acquiring entity assumes all of its responsibilities and liabilities
under the Indenture, including the payment of all amounts due on the debt
securities and performance of the covenants in the Indenture;
- immediately after the transaction, no Event of Default exists; and
- an officer's certificate and legal opinion covering these conditions are
delivered to the Trustee. (Section 801 and 803)
If Post Apartment Homes consolidates or merges with or into any other
company or sells all or substantially all of its assets according to the terms
and conditions of the Indenture, the resulting or acquiring company will be
substituted for Post Apartment Homes in the Indenture with the same effect as if
it had been an original party to the Indenture. As a result, such successor
company may exercise the rights and powers of Post Apartment Homes under the
Indenture, in the name of Post Apartment Homes or in its own name and Post
Apartment Homes will be released from all of its liabilities and obligations
under the Indenture and under the debt securities. (Section 802)
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<PAGE> 24
RESTRICTIVE COVENANTS
Existence. Except as permitted under "-- Consolidation, Merger or Sale"
above, Post Apartment Homes is required to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises unless it determines that the preservation of its existence,
rights and franchises is no longer desirable in the conduct of its business and
that the loss of the preservation is not disadvantageous in any material respect
to the Holders of the debt securities. (Section 1006)
Maintenance of Properties. Post Apartment Homes is required to cause all
of its material properties used or useful in the conduct of its business to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment. Post Apartment Homes is also required to cause to
be made all necessary repairs, renewals, replacements, betterments and
improvements on its material properties, so that the business carried on in
connection with the properties may be properly and advantageously conducted at
all times. Post Apartment Homes will not be prevented from selling or otherwise
disposing for value its properties in the ordinary course of business. (Section
1007)
Insurance. Post Apartment Homes is required to keep all of its insurable
properties insured against loss or damage at least equal to their then full
insurable value with financially sound and reputable insurance companies
(Section 1008).
Payment of Taxes and Other Claims. Post Apartment Homes is required to pay
or discharge or cause to be paid or discharged, before they become delinquent,
(1) all taxes, assessments and governmental charges levied or imposed upon it or
upon its income, profits or property, and (2) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon its
property. Post Apartment Homes is not required to pay or discharge or cause to
be paid or discharged any tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings. (Section 1009)
Provision of Financial Information. The Holders of debt securities will be
provided with copies of the annual reports and quarterly reports of Post
Apartment Homes. Whether or not Post Apartment Homes is subject to Section 13 or
15(d) of the Exchange Act and for so long as any debt securities are
outstanding, Post Apartment Homes will, to the extent permitted under the
Exchange Act, be required to file with the Commission the annual reports,
quarterly reports and other documents which Post Apartment Homes would have been
required to file with the Commission pursuant to Section 13 or 15(d) if it were
so subject. All of these documents are required to be filed with the Commission
on or prior to the respective dates (the "Required Filing Dates") by which Post
Apartment Homes would have been required to so file these documents if it were
so subject. Post Apartment Homes will also, (1) within 15 days of each Required
Filing Date, transmit by mail to all Holders of debt securities, as their names
and addresses appear in the security register for the debt securities, without
cost to them, and file with the Trustee copies of the annual reports and
quarterly reports which it would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if it were subject to such
Sections and (2) if filing such documents by Post Apartment Homes with the
Commission is not permitted under the Exchange Act, promptly upon written
request and
10
<PAGE> 25
payment of the reasonable cost of duplication and delivery, supply copies of
such documents to any prospective Holder. (Section 1010)
Additional Covenants. Any additional or different covenants of Post
Apartment Homes with respect to any series of debt securities will be set forth
in the prospectus supplement relating to the specific debt securities.
MODIFICATION AND WAIVER
Under the Indenture, some of the rights and obligations of Post Apartment
Homes and some of the rights of Holders of the debt securities may be modified
or amended with the consent of the Holders of a majority in aggregate principal
amount of the outstanding debt securities of each series of debt securities
affected by the modification or amendment. The following modifications and
amendments will not be effective against any Holder without its consent:
- a change in the stated maturity date of any payment of principal or
interest;
- a reduction in payments due on the debt securities;
- a change in the place of payment or currency in which any payment on the
debt securities is payable;
- a limitation of a Holder's right to sue Post Apartment Homes for the
enforcement of certain payments due on the debt securities;
- a reduction in the percentage of outstanding debt securities required to
consent to a modification or amendment of the Indenture; and
- a modification of any of the foregoing requirements. (Section 902)
Under the Indenture, the Holders of a majority in aggregate principal
amount of the outstanding debt securities of any series of debt securities may,
on behalf of all Holders of that series:
- waive compliance by Post Apartment Homes with certain restrictive
covenants of the Indenture; and
- waive any past default under the Indenture, except:
-- a default in the payment of the principal of or any premium or interest
on any debt securities of that series; or
-- a default under any provision of the Indenture which itself cannot be
modified or amended without the consent of the Holders of each
outstanding debt security of that series. (Sections 1013, 513)
EVENTS OF DEFAULT
"Event of Default," when used in the Indenture with respect to any series
of debt securities, means any of the following:
- failure to pay interest on any debt security of that series for 30 days
after the payment is due;
- failure to pay the principal of or any premium on any debt security of
that series when due;
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- failure to deposit any sinking fund payment when due on debt securities
of that series;
- failure to perform any other covenant in the Indenture that applies to
debt securities of that series for 60 days after Post Apartment Homes has
received written notice of the failure to perform in the manner specified
in the Indenture;
- default with respect to over $20 million of recourse indebtedness, or
with respect to over $20 million under any mortgage, lien or other
similar encumbrance, indenture or instrument, including the Indenture,
which secures any indebtedness or borrowed money, and which results in
acceleration of the maturity of the outstanding principal amount of the
indebtedness unless such acceleration is rescinded or the indebtedness is
discharged;
- certain events in bankruptcy, insolvency or reorganization; or
- any other Event of Default that may be specified for the debt securities
of that series when that series is created. (Section 501)
If an Event of Default for any series of debt securities occurs and continues,
the Trustee or the Holders of at least 25% in aggregate principal amount of the
outstanding debt securities of the series may declare the entire principal of
all the debt securities of that series to be due and payable immediately. If
such a declaration occurs, the Holders of a majority of the aggregate principal
amount of the outstanding debt securities of that series can, subject to certain
conditions, rescind the declaration. (Sections 502, 513)
The prospectus supplement relating to each series of debt securities which
are Original Issue Discount Securities will describe the particular provisions
that relate to the acceleration of maturity of a portion of the principal amount
of such series when an Event of Default occurs and continues.
An Event of Default for a particular series of debt securities does not
necessarily constitute an Event of Default for any other series of debt
securities issued under the Indenture. The Indenture requires Post Apartment
Homes to file an officers' certificate with the Trustee each year that states
that defaults do not exist under the terms of the Indenture. (Section 1011) The
Trustee may withhold notice to the Holders of debt securities of any default,
except defaults in the payment of principal, premium, interest or any sinking
fund installment, if it considers such withholding of notice to be in the best
interests of the Holders. (Section 601)
Other than its duties in the case of a default, a Trustee is not obligated
to exercise any of its rights or powers under the Indenture at the request,
order or direction of any Holders, unless the Holders offer the Trustee
reasonable indemnification. (Sections 602, 603) If reasonable indemnification is
provided, then, subject to certain other rights of the Trustee, the Holders of a
majority in principal amount of the outstanding debt securities of any series
may, with respect to the debt securities of that series, direct the time, method
and place of:
- conducting any proceeding for any remedy available to the Trustee; or
- exercising any trust or power conferred upon the Trustee. (Sections 512)
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The Holder of a debt security of any series will have the right to begin
any proceeding with respect to the Indenture or for any remedy only if:
- the Holder has previously given the Trustee written notice of a
continuing Event of Default with respect to that series;
- the Holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made a written request
of, and offered reasonable indemnification to, the Trustee to begin such
proceeding;
- the Trustee has not started such proceeding within 60 days after
receiving the request; and
- the Trustee has not received directions inconsistent with such request
from the Holders of a majority in aggregate principal amount of the
outstanding debt securities of that series during those 60 days. (Section
507)
However, the Holder of any debt security will have an absolute right to receive
payment of principal of and any premium and interest on the debt security when
due and to institute suit to enforce such payment. (Section 508)
DEFEASANCE
Defeasance and Discharge. At the time that Post Apartment Homes
establishes a series of debt securities under the Indenture, it can provide that
the debt securities of that series are subject to the defeasance and discharge
provisions of the Indenture. If Post Apartment Homes so provides, it will be
discharged from its obligations on the debt securities of that series if it
deposits with the Trustee, in trust, sufficient money or Government Obligations
(as defined below) to pay the principal, interest, any premium and any other
sums due on the debt securities of that series on the dates such payments are
due under the Indenture and the terms of the debt securities. (Sections 1401 and
1404) As used above, "Government Obligations" mean:
- securities of the same government which issued the currency in which the
series of debt securities are denominated and in which interest is
payable; or
- securities of government agencies backed by the full faith and credit of
such government. (Section 101)
In the event that Post Apartment Homes deposits funds in trust and
discharges its obligations under a series of debt securities as described above,
then:
- the Indenture will no longer apply to the debt securities of that series,
except for certain obligations to compensate, reimburse and indemnify the
Trustee, to register the transfer and exchange of debt securities, to
replace lost, stolen or mutilated debt securities and to maintain paying
agencies and the trust funds; and
- Holders of debt securities of that series can only look to the trust fund
for payment of principal, any premium and interest on the debt securities
of that series. (Section 1402)
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Defeasance of Certain Covenants and Certain Events of Default. At the time
that Post Apartment Homes establishes a series of debt securities under the
Indenture, it can provide that the debt securities of that series are subject to
the covenant defeasance provisions of the Indenture. If Post Apartment Homes so
provides and makes the deposit described under the heading "-- Defeasance and
Discharge" above:
- it will not have to comply with the following restrictive covenants
contained in the Indenture:
-- Existence (Sections 1006);
-- Maintenance of Properties (Section 1007);
-- Insurance (Section 1008);
-- Payment of Taxes and Other Claims (Section 1009);
-- Provision of Financial Information (Section 1010); and
-- any other covenant Post Apartment Homes designates when it establishes
the series of debt securities; and
- it will not have to treat the events described in the fourth bullet point
under the heading "-- Events of Default" as they relate to the covenants
listed above that have been defeased and no longer are in effect and the
events described in the last bullet point under the heading "-- Events of
Default" as Events of Default under the Indenture in connection with that
series.
In the event of a defeasance, the obligations of Post Apartment Homes under the
Indenture and the debt securities, other than with respect to the covenants and
the Events of Default specifically referred to above, will remain in effect.
(Sections 1402 and 1403)
If Post Apartment Homes exercises its option not to comply with the
covenants listed above and the debt securities of such series become immediately
due and payable because an Event of Default has occurred, other than as a result
of an Event of Default specifically referred to above, the amount of money
and/or Government Obligations on deposit with the Trustee will be sufficient to
pay the principal, interest, any premium and any other sums, due on the debt
securities of such series on the date such payments are due under the Indenture
and the terms of the debt securities, but may not be sufficient to pay amounts
due at the time of acceleration. However, Post Apartment Homes would remain
liable for the balance of the payments.
Condition. Such a trust will only be permitted to be established if, among
other things, Post Apartment Homes has delivered to the Trustee an opinion of
counsel (as specified in the Indenture) to the effect that the Holders of the
debt securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such opinion of counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service or a change in applicable U. S. federal income tax law occurring after
the date of the Indenture (Section 1404).
NO CONVERSION RIGHTS
The debt securities will not be convertible into or exchangeable for any
capital stock of Post or equity interest in Post Apartment Homes.
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DESCRIPTION OF COMMON STOCK
We have summarized certain terms and provisions of Post's common stock in
this section. The summary is not complete. We have also filed Post's Articles of
Incorporation and Bylaws as exhibits to the registration statement. You should
read Post's Articles of Incorporation and Bylaws for additional information
before you buy any common stock.
GENERAL
Shares Outstanding. Post's authorized common stock consists of 100,000,000
shares, par value $.01 per share. As of September 30, 2000, 39,607,167 shares
were issued and outstanding, 54,497 shares were held in treasury, 5,181,411
shares were reserved for issuance upon exchange of outstanding Units and 917,654
shares were reserved for issuance upon exercise of outstanding stock options.
Dividends. Holders of common stock may receive dividends when declared by
Post's board of directors out of funds that Post can legally use to pay
dividends. Post may pay dividends in cash, stock or other property. In certain
cases, holders of common stock may not receive dividends until Post has
satisfied its obligations to any holders of outstanding preferred stock.
Voting Rights. Holders of common stock have the exclusive power to vote on
all matters presented to Post's shareholders unless Georgia law or the
certificate of designations for an outstanding series of preferred stock gives
the holders of that series of preferred stock the right to vote on specified
matters. Each holder of common stock is entitled to one vote per share. Holders
of common stock have no cumulative voting rights for the election of directors.
This means that a holder of a single share of common stock cannot cast more than
one vote for each position to be filled on the board of directors.
Other Rights. If Post voluntarily or involuntarily liquidates, dissolves
or winds up its business, holders of common stock will receive pro rata,
according to shares held by them, any remaining assets distributable to Post's
shareholders after Post has provided for any liquidation preference for
outstanding shares of preferred stock. When Post issues securities in the
future, holders of common stock have no preemptive rights. This means that the
holders of common stock have no right, as holders of common stock, to buy any
portion of those issued securities.
Listing. Post's outstanding shares of common stock are listed on the New
York Stock Exchange under the symbol "PPS." Post intends to list with the New
York Stock Exchange any additional shares of common stock to be sold pursuant to
any prospectus supplement. EquiServe serves as the transfer agent and registrar
for the common stock.
Fully Paid. Post's outstanding shares of common stock are fully paid and
nonassessable. This means that the full purchase price for the outstanding
shares of common stock has been paid and the holders of such shares will not be
assessed any additional monies for such shares. Any additional common stock that
Post may issue in the future pursuant to any prospectus supplement or upon the
conversion or exercise of other securities offered under this prospectus will
also be fully paid and nonassessable.
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ANTI-TAKEOVER PROVISIONS CONTAINED IN POST'S ARTICLES OF INCORPORATION AND
BYLAWS
Certain provisions of Post's Articles of Incorporation and Bylaws may make
it less likely that management would be changed or someone would acquire voting
control of Post without consent by the board of directors. These provisions may
delay, deter or prevent tender offers or takeover attempts that shareholders may
believe are in their best interests, including tender offers or attempts that
might allow shareholders to receive premiums over the market price of their
common stock.
Preferred Stock. Post's board of directors can at any time, under its
Articles of Incorporation and without shareholder approval, issue one or more
new series of preferred stock. In some cases, the issuance of preferred stock
without shareholder approval could discourage or make more difficult attempts to
take control of Post through a merger, tender offer, proxy contest or otherwise.
Preferred stock with special voting rights or other features issued to persons
favoring management could stop a takeover by preventing the person trying to
take control of Post from acquiring enough voting shares necessary to take
control.
Classified Board. Members of Post's board of directors are divided into
three classes and serve staggered three-year terms under Post's Bylaws. This
means that only approximately one-third of the directors are elected at each
annual meeting of shareholders and that it would take two years to replace a
majority of the directors unless they are removed. Directors may be removed from
office at any time with or without cause.
Nomination Procedures. Shareholders, as well as Post's board of directors,
can nominate candidates for the board of directors. However, a shareholder must
follow the advance notice procedures described in the Bylaws. In general, a
shareholder must submit a written notice of the nomination to Post's corporate
secretary at least 60 days before the date set for the annual meeting of
shareholders.
Proposal Procedures. Shareholders can propose that business other than
nominations to the board of directors be considered at an annual meeting of
shareholders only if a shareholder follows the advance notice procedures
described in Post's Bylaws. In general, a shareholder must submit a written
notice of the proposal and the shareholder's interest in the proposal at least
60 days before the date set for the annual meeting of shareholders.
Amendment of Bylaws. Under Post's Bylaws, the board of directors can
adopt, amend or repeal the bylaws, subject to limitations under the Georgia
Business Corporation Act. Post's shareholders also have the power to change or
repeal Post's Bylaws.
GEORGIA ANTI-TAKEOVER STATUTES
The Georgia Business Combination Code restricts certain business
combinations with "interested shareholders" and contains fair price requirements
applicable to certain mergers with certain "interested shareholders" that are
summarized below. The restrictions imposed by these statutes will not apply to a
corporation unless it elects to be governed by these statutes. Post has not
elected to be covered by such restrictions. The Georgia business combination
statute regulates business combinations such as mergers, consolidations, share
exchanges and asset purchases where the acquired business has at least 100
shareholders residing in Georgia and has its principal office in Georgia, and
where the acquiror became an "interested shareholder" of the corporation, unless
either (1) the transaction resulting in such acquiror becoming an "interested
shareholder" or the business combination
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received the approval of the corporation's board of directors prior to the date
on which the acquiror became an "interested shareholder", or (2) the acquiror
became the owner of at least 90% of the outstanding voting stock of the
corporation, excluding shares held by directors, officers and affiliates of the
corporation and shares held by certain other persons, in the same transaction in
which the acquiror became an "interested shareholder." For purposes of this
statute, an "interested shareholder" generally is any person who directly or
indirectly, alone or in concert with others, beneficially owns or controls 10%
or more of the voting power of the outstanding voting shares of the corporation.
The statute prohibits business combinations with an unapproved "interested
shareholder" for a period of five years after the date on which such person
became an "interested shareholder." The statute restricting business
combinations is broad in its scope and is designed to inhibit unfriendly
acquisitions.
The Georgia fair price statute prohibits certain business combinations
between a Georgia business corporation and an "interested shareholder" unless:
- certain "fair price" criteria are satisfied;
- the business combination is unanimously approved by the continuing
directors;
- the business combination is recommended by at least two-thirds of the
continuing directors and approved by a majority of the votes entitled to
be cast by holders of voting shares, other than voting shares
beneficially owned by the "interested shareholder;" or
- the interested shareholder has been such for at least three years and has
not increased his ownership position in such three-year period by more
than one percent in any twelve-month period.
The fair price statute is designed to inhibit unfriendly acquisitions that do
not satisfy the specified "fair price" requirements.
LIMITATION ON MERGERS AND ASSET SALES
Post may not engage in any merger, consolidation or other combination with
or into another person or sale of all or substantially all of its assets unless
such transaction includes the merger of Post Apartment Homes or sale of
substantially all of the assets of Post Apartment Homes, which sale or merger
must be approved by the holders of a majority of the outstanding Units. If Post
were ever to hold less than a majority of the Units, this voting requirement
might limit the possibility for acquisition or change in the control of Post.
The foregoing limitation may have the effect of precluding a merger,
consolidation or other combination of Post without the consent of Post's board
of directors.
RESTRICTIONS ON TRANSFER
Ownership Limits. Post's Articles of Incorporation contain restrictions on
the number of shares of common stock that a single shareholder may own. For Post
to qualify as a REIT under the U.S. Internal Revenue Code, no more than 50% in
value of its outstanding shares of common stock may be owned, actually and
constructively under the applicable attribution provisions of the Code, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year or during a proportionate part of a shorter
taxable year. The common stock must also be beneficially owned by 100 or more
persons during at least 335 days of a taxable year or during a
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proportionate part of a shorter taxable year. Because Post has elected to be
treated as a REIT, Post's Articles of Incorporation contain restrictions on the
acquisition of common stock intended to ensure compliance with these
requirements.
Subject to exceptions specified in the Articles of Incorporation, no person
other than Messrs. Williams and Glover may own, or be deemed to own by virtue of
the applicable attribution provisions of the Code, more than 6% (the "Ownership
Limit") of the outstanding shares of common stock. Messrs. Williams and Glover
are subject to a separate limitation (referred to as the "Excluded Holder
Limit") pursuant to which they are prohibited from owning, actually and
constructively under the applicable attribution provisions of the Code, more
than 31%, in the aggregate, of the outstanding shares of common stock. In
addition, Messrs. Williams and Glover are prohibited from acquiring any shares
of common stock if their acquisition would cause five individuals to own,
actually and constructively under the applicable attribution provisions of the
Code, in the aggregate more than 50% in value of Post's outstanding stock.
If any shareholder purports to transfer shares to a person and either the
transfer would result in Post failing to qualify as a REIT, or the shareholder
knows that the transfer would cause the transferee to hold more than the
applicable Ownership Limit or Excluded Holder Limit, the purported transfer will
be null and void as to that number of shares the transfer of which would cause a
violation of the applicable limit, and the shareholder will be deemed not to
have transferred such excess shares. In addition, if any person holds shares of
common stock in excess of the applicable Ownership Limit or Excluded Holder
Limit, that person will be deemed to hold the shares that cause the applicable
limit to be exceeded in trust for Post, and will not receive dividends or
distributions with respect to such shares and will not be entitled to vote such
shares. The person will be required to sell such shares to Post for the lesser
of the amount paid for the shares and the average of the last reported sales
prices for the ten trading days immediately preceding the sale or to sell such
shares at the direction of Post, in which case Post will be reimbursed for its
expenses in connection with the sale plus any remaining amount of such proceeds
that exceeds the amount such person paid for the shares and such person will be
entitled to receive only the balance of the proceeds. If Post repurchases such
shares, it may elect to pay for the shares with Units.
All certificates representing shares of common stock will bear a legend
referring to the restrictions described above.
Every owner of more than 5%, or such lower percentage as may be required by
the Code or the related regulations, of the issued and outstanding shares of
common stock must file a written notice with Post containing the information
specified in the Articles of Incorporation no later than January 30 of each
year. In addition, each shareholder shall upon demand be required to disclose to
Post in writing such information as Post may request in good faith in order to
determine Post's status as a REIT. The foregoing ownership limitations may have
the effect of precluding acquisition of control of Post without the consent of
the board of directors.
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DESCRIPTION OF PREFERRED STOCK
This section describes the general terms and provisions of preferred stock
of Post that may be offered by this prospectus. The prospectus supplement will
describe the specific terms of the series of the preferred stock offered through
that prospectus supplement and any general terms outlined in this section that
will not apply to that series of preferred stock.
We have summarized the terms and provisions of the preferred stock in this
section. The summary is not complete. We have also filed Post's Articles of
Incorporation as an exhibit to the registration statement. You should read
Post's Articles of Incorporation and the Certificate of Designation, Preferences
and Rights ("Certificate of Designation") relating to the applicable series of
the preferred stock for additional information before you buy any preferred
stock.
GENERAL
Pursuant to Post's Articles of Incorporation, Post's board of directors has
the authority, without further shareholder action, to issue a maximum of
20,000,000 shares of Preferred Stock, including shares issued or reserved for
issuance. As of September 30, 2000, Post had 1,150,000 shares designated as
8 1/2% Series A cumulative redeemable preferred stock, of which 1,000,000 shares
were outstanding, 2,300,000 shares designated as 7 5/8% Series B cumulative
redeemable preferred stock, of which 2,000,000 shares were outstanding, and
2,300,000 shares designated as 7 5/8% Series C cumulative redeemable preferred
stock, of which 2,000,000 shares were outstanding. The board of directors has
the authority to determine or fix the following terms with respect to shares of
any series of preferred stock:
- the number of shares and designation or title of the shares;
- dividend rights;
- whether and upon what terms the shares will be redeemable;
- the rights of the holders upon Post's dissolution or upon the
distribution of its assets;
- whether and upon what terms the shares will have a purchase, retirement
or sinking fund;
- whether and upon what terms the shares will be convertible;
- the voting rights, if any, which will apply; and
- any other preferences, rights, limitations or restrictions of the series.
If Post purchases, redeems or converts shares of preferred stock, it will retire
and cancel them and restore them to the status of authorized but unissued shares
of preferred stock. These shares will not be part of any particular series of
preferred stock and may be reissued by Post.
As described under "Description of Depositary Shares" below, Post may elect
to offer depositary shares represented by depositary receipts. If Post so
elects, each depositary share will represent a fractional interest to be
specified in the applicable prospectus
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supplement in a share of preferred stock. If Post issues depositary shares
representing interests in preferred stock, the preferred stock will be deposited
with a depositary.
The preferred stock will have the dividend, liquidation, redemption, voting
and conversion rights described in this section unless the applicable prospectus
supplement provides otherwise. You should read the prospectus supplement
relating to the particular series of the preferred stock it offers for specific
terms, including:
- the title and liquidation preference of the preferred stock and the
number of shares offered;
- the initial public offering price at which Post will issue the preferred
stock;
- the dividend rate or rates (or method of calculation), the dividend
periods, the dates on which dividends will be payable and whether the
dividends will be cumulative or noncumulative and, if cumulative, the
dates from which the dividends will start to cumulate;
- any redemption or sinking fund provisions;
- any conversion provisions;
- whether Post has elected to offer depositary shares as described under
"Description of Depositary Shares" below; and
- any additional dividend, liquidation, redemption, sinking fund and other
rights, preferences, privileges, limitations and restrictions.
When Post issues the preferred stock, the shares will be fully paid and
nonassessable. This means that the full purchase price for the outstanding
preferred stock will have been paid and the holders of such preferred stock will
not be assessed any additional monies for such preferred stock. Unless the
applicable prospectus supplement specifies otherwise:
- each series of preferred stock will rank senior to Post's common stock
and equally in all respects with the outstanding shares of each other
series of preferred stock; and
- the preferred stock will have no preemptive rights to subscribe for any
additional securities which Post may issue in the future. This means that
the holders of preferred stock will have no right, as holders of
preferred stock, to buy any portion of those issued securities.
DIVIDENDS
The holders of the preferred stock of each series will be entitled to
receive cash dividends, if declared by Post's board of directors or its duly
authorized committee, out of assets that Post can legally use to pay dividends.
The prospectus supplement relating to a particular series of preferred stock
will set forth the dividend rates and dates on which dividends will be payable.
The rates may be fixed or variable or both. If the dividend rate is variable,
the applicable prospectus supplement will describe the formula used for
determining the dividend rate for each dividend period. Post will pay dividends
to the holders of record as they appear on Post's stock books on the record
dates fixed by the board of directors or its duly authorized committee.
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The applicable prospectus supplement will also state whether the dividends
on any series of the preferred stock are cumulative or non-cumulative.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable prospectus supplement. If Post's board of directors does not
declare a dividend payable on a dividend payment date on any non-cumulative
series of preferred stock, then the holders of that series will not be entitled
to receive a dividend for that dividend period and Post will not be obligated to
pay the dividend for that dividend period even if the board of directors
declares a dividend on that series payable in the future.
Post's board of directors will not declare and pay a dividend on any of its
stock ranking, as to dividends, equal with or junior to any series of the
preferred stock unless full dividends on such series of the preferred stock have
been declared and paid or declared and sufficient money is set aside for
payment. Until full dividends are paid, or declared and payment is set aside, on
each series of preferred stock ranking equal as to dividends, then:
- Post will declare any dividends pro rata among the preferred stock of
each series and any preferred stock ranking equal to the preferred stock
as to dividends. This means that the dividends Post declares per share on
each series of such preferred stock will bear the same relationship to
each other that the full accrued dividends per share on each such series
of the preferred stock bear to each other;
- other than such pro rata dividends, Post will not declare or pay any
dividends or declare or make any distributions upon any security ranking
junior to or equal with the preferred stock as to dividends or upon
liquidation except dividends or distributions paid for with securities
ranking junior to the preferred stock as to dividends and upon
liquidation; and
- Post will not redeem, purchase or otherwise acquire, or set aside money
for a sinking fund for, any securities ranking junior to or equal with
the preferred stock as to dividends or upon liquidation except by
conversion into or exchange for stock junior to the preferred stock as to
dividends and upon liquidation.
Post will not owe any interest, or any money in lieu of interest, on any
dividend payment(s) on any series of the preferred stock which may be past due.
REDEMPTION
A series of the preferred stock may be redeemable, in whole or in part, at
Post's option, and may be subject to mandatory redemption pursuant to a sinking
fund or otherwise, as described in the applicable prospectus supplement.
Redeemed preferred stock will become authorized but unissued shares of preferred
stock that Post may issue in the future.
If a series of the preferred stock is subject to mandatory redemption, the
applicable prospectus supplement will specify the number of shares that Post
will redeem each year and the redemption price. If preferred stock is redeemed,
Post will pay all accrued and unpaid dividends on the preferred stock up to, but
excluding, the redemption date. The prospectus supplement will also specify
whether the redemption price will be paid in cash or other property. If (1) Post
is only permitted to pay the redemption price for a series of preferred stock
from the proceeds of a capital stock issuance and (2) the proceeds from the
issuance are insufficient or no such issuance has occurred, then the terms of
that series
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may provide that the preferred stock will automatically and mandatorily be
converted into such capital stock.
If fewer than all of the outstanding shares of any series of the preferred
stock are to be redeemed, Post's board of directors will determine the number of
shares to be redeemed. Post will redeem the shares pro rata from the holders of
record in proportion to the number of shares held by them, with adjustments to
avoid redemption of fractional shares.
Even though the terms of a series of preferred stock may permit redemption
of the preferred stock in whole or in part, if any dividends, including
accumulated dividends, on that series are past due:
- Post will not redeem any preferred stock of that series unless Post
simultaneously redeems all outstanding preferred stock of that series;
and
- Post will not purchase or otherwise acquire any preferred stock of that
series.
The prohibition discussed in the prior sentence will not prohibit Post from
purchasing or acquiring preferred stock of that series to preserve its REIT
status or pursuant to a purchase or exchange offer if Post makes the offer on
the same terms to all holders of that series.
Unless the applicable prospectus supplement specifies otherwise, Post will
give notice of a redemption by mailing a notice to each record holder of the
shares to be redeemed, between 30 to 60 days prior to the date fixed for
redemption. If Post issues depositary shares representing interests in preferred
stock, it will send a notice to the depositary between 40 to 70 days prior to
the date fixed for redemption. Post will mail the notices to the holders'
addresses as they appear on its stock records. Each notice will state:
- the redemption date;
- the number of shares and the series of the preferred stock to be
redeemed;
- the redemption price;
- the place or places where holders can surrender the certificates for the
preferred stock for payment of the redemption price;
- that dividends on the shares to be redeemed will cease to accrue on the
redemption date; and
- the date when the holders' conversion rights, if any, will terminate.
If Post redeems fewer than all shares of any series of the preferred stock held
by any holder, it will also specify the number of shares to be redeemed from the
holder in the notice.
If Post has given notice of the redemption and has provided the funds for
the payment of the redemption price, then beginning on the redemption date:
- the dividends on the preferred stock called for redemption will no longer
accrue;
- such shares will no longer be considered outstanding; and
- the holders will no longer have any rights as shareholders except to
receive the redemption price.
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When the holder properly surrenders the redeemed shares, the redemption price
will be paid out of the funds provided by Post. If Post redeems fewer than all
of the shares represented by any certificate, Post will issue a new certificate
representing the unredeemed shares without cost to the holder.
In the event that a redemption described above is deemed to be a "Tender
Offer" within the meaning of Rule 14e-1 under the Exchange Act, Post will comply
with all applicable provisions of the Exchange Act.
CONVERSION
The applicable prospectus supplement relating to a series of convertible
preferred stock will describe the terms and conditions upon which shares of that
series are convertible into shares of common stock or a different series of
preferred stock.
RIGHTS UPON LIQUIDATION
Unless the applicable prospectus states otherwise, if Post voluntarily or
involuntarily liquidates, dissolves or wind ups its business, the holders of
shares of each series of the preferred stock will be entitled to receive:
- liquidation distributions in the amount stated in the applicable
prospectus supplement; and
- all accrued and unpaid dividends, whether or not earned or declared.
Post will pay these amounts to the holders of shares of each series of the
preferred stock, and all amounts owing on any preferred stock ranking equally
with such series of preferred stock as to distributions upon liquidation, out of
Post's assets available for distribution to shareholders before any distribution
is made to holders of any securities ranking junior to the preferred stock upon
liquidation.
The sale of all or substantially all of Post's property and assets, its
merger into or consolidation with any other corporation or the merger of any
other corporation into Post will not be considered a dissolution, liquidation or
winding up of Post's business.
If (1) Post voluntarily or involuntarily liquidates, dissolves or wind ups
its business and (2) the assets available for distribution to the holders of the
preferred stock of any series and any other shares of its stock ranking equal
with such series as to any such distribution are insufficient to pay all amounts
to which the holders are entitled, then Post will only make pro rata
distributions to the holders of all shares ranking equal as to distributions
upon dissolution, liquidation or winding up of its business. This means that the
distributions Post pays to the holders of all shares ranking equal as to
distributions upon dissolution, liquidation or winding up of its business will
bear the same relationship to each other that the full distributable amounts for
which such holders are respectively entitled upon such dissolution, liquidation
or winding up of Post's business bear to each other.
After Post pays the full amount of the liquidation distribution to which
the holders of a series of the preferred stock are entitled, such holders will
have no right or claim to any of Post's remaining assets.
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VOTING RIGHTS
Except as described in this section or in the applicable prospectus
supplement, or except as expressly required by applicable law, the holders of
the preferred stock will not be entitled to vote. If the holders of a series of
preferred stock are entitled to vote and the applicable prospectus supplement
does not state otherwise, then each share of preferred stock will be entitled to
one vote.
As more fully described under "Description of Depositary Shares" below, if
Post elects to provide for the issuance of depositary shares representing
fractional interests in a share of preferred stock, the holders of each
depositary share will be entitled to a fraction of a vote.
For any series of preferred stock having one vote per share, the voting
power of the series, on matters on which holders of such series and holders of
any other series of preferred stock are entitled to vote as a single class, will
solely depend on the total number of shares in such series, and not on the
aggregate liquidation preference or initial offering price.
Whenever dividends on any shares of preferred stock are in arrears for six
or more consecutive fiscal quarters, the holders of such shares of preferred
stock, voting separately as a class with all other series of preferred stock
that have similar voting rights, will be entitled to vote for the election of
two additional directors of Post a special meeting called by the holders of
record of at least 10% of any series of preferred stock so in arrears or, if
such request is received less than 90 days before the date fixed for the next
annual or special meeting of the shareholders, then at the next annual meeting
of shareholders, and at each subsequent annual meeting. This right will continue
until (1) if such series of preferred stock has a cumulative dividend, all
dividends accumulated on such shares of preferred stock for the past dividend
periods and the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment or
(2) if such series of preferred stock does not have a cumulative dividend, four
consecutive quarterly dividends shall have been fully paid or declared and a sum
sufficient for the payment of the dividends set aside. In such case, the entire
board of directors of Post will be increased by two directors.
Unless Post receives the consent of the holders of an outstanding series of
preferred stock and the outstanding shares of all other series of preferred
stock which (1) rank equally with such series either as to dividends or the
distribution of assets upon liquidation, dissolution or winding up of Post's
business and (2) have voting rights that are exercisable and that are similar to
those of such series, Post will not:
- authorize, create or issue, or increase the authorized or issued amount
of, any class or series of stock ranking prior to such outstanding
preferred stock with respect to payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up of Post's business;
or
- amend, alter or repeal, whether by merger, consolidation or otherwise,
the provisions of Post's Articles of Incorporation or of the resolutions
contained in a Certificate of Designation creating such series of the
preferred stock so as to materially and adversely affect any right,
preference, privilege or voting power of such outstanding preferred
stock.
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This consent must be given by the holders of at least two-thirds of all such
outstanding preferred stock described in the preceding sentence, voting together
as a single class. Post will not be required to obtain this consent with respect
to the actions listed in the second bullet point above, however, if it only (1)
increases the amount of the authorized preferred stock, (2) creates and issues
another series of preferred stock, or (3) increases the amount of authorized
shares of any series of preferred stock, if such preferred stock in each case
ranks equal with or junior to the preferred stock with respect to the payment of
dividends and the distribution of assets upon liquidation, dissolution or
winding up of its business.
Under Georgia law, holders of each series of preferred stock will be
entitled to vote as a class upon any proposed merger and any proposed amendment
to the Articles of Incorporation, whether or not the Articles of Incorporation
so state, if the merger or amendment would:
- increase or decrease the aggregate number of authorized shares of such
series;
- effect an exchange or reclassification of all or part of the shares of
the series into shares of another series;
- effect an exchange or reclassification, or create the right of exchange,
of all or part of the shares of another class or series into shares of
the series;
- change the designation, rights, preferences or limitations of all or a
part of the shares of the series;
- change the shares of all or part of the series into a different number of
shares of the same series;
- create a new series having rights or preferences with respect to
distributions or dissolution that are prior, superior or substantially
equal to the shares of the series;
- increase the rights, preferences or number of authorized shares of any
class or series that, after giving effect to the amendment, have rights
or preferences with respect to distributions or to dissolution that are
prior, superior or substantially equal to the shares of the series;
- limit or deny an existing preemptive right of all or part of the shares
of the series;
- cancel or otherwise affect rights to distributions or dividends that have
accumulated but have not yet been declared on all or part of the shares
of the series; or
- cancel, redeem or repurchase all or part of the shares of the series.
SHAREHOLDER LIABILITY
As discussed above under "Description of Common Stock -- General,"
applicable Georgia law provides that no shareholder, including holders of
preferred stock, shall be personally liable for the acts and obligations of Post
and that the funds and property of Post shall be the only recourse for such acts
or obligations.
RESTRICTIONS ON OWNERSHIP
As discussed above under "Description of Common Stock -- Restrictions on
Transfer," for Post to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital shares may be owned, directly or indirectly, by
five or fewer
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individuals (as defined in the Code to include certain entities) during the last
half of a taxable year. To assist Post in meeting this requirement, Post may
take certain actions to limit the beneficial ownership, directly or indirectly,
by a single person of Post's outstanding equity securities, including any
preferred stock of Post. Therefore, the Certificate of Designations for each
series of preferred stock may contain provisions restricting the ownership and
transfer of the preferred stock. The applicable prospectus supplement will
specify any additional ownership limitation relating to a series of preferred
stock.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the preferred stock will be set forth
in the applicable prospectus supplement.
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DESCRIPTION OF DEPOSITARY SHARES
GENERAL
This section describes the general terms and provisions of the depositary
shares. The prospectus supplement will describe the specific terms of the
depositary shares offered through that prospectus supplement and any general
terms outlined in this section that will not apply to those depositary shares.
Post may offer fractional interests in preferred stock, rather than full
preferred stock. If Post does, it will provide for the issuance by a depositary
to the public of receipts for depositary shares, each of which will represent a
fractional interest in a share of a particular series of preferred stock.
The shares of any series of preferred stock underlying the depositary
shares will be deposited under a separate deposit agreement between us and a
depositary which will be a bank or trust company having its principal office in
the United States and having a combined capital and surplus of at least $50
million. Post will name the depositary in the applicable prospectus supplement.
Subject to the terms of the deposit agreement, each owner of a depositary share
will have a fractional interest in all the rights and preferences of the share
of preferred stock underlying such depositary share. Those rights include any
dividend, voting, redemption, conversion and liquidation rights.
The depositary shares will be evidenced by depositary receipts issued under
the deposit agreement. If you purchase fractional interests in shares of the
related series of preferred stock, you will receive depositary receipts as
described in the applicable prospectus supplement. While the final depositary
receipts are being prepared, Post may order the depositary to issue temporary
depositary receipts substantially identical to the final depositary receipts
although not in final form. The holders of the temporary depositary receipts
will be entitled to the same rights as if they held the depositary receipts in
final form. Holders of the temporary depositary receipts can exchange them for
the final depositary receipts at Post's expense.
If you surrender depositary receipts at the principal office of the
depositary (unless the related depositary shares have previously been called for
redemption), you are entitled to receive at such office the number of preferred
stock and any money or other property represented by such depositary shares.
Post will not issue partial preferred stock. If you deliver depositary receipts
evidencing a number of depositary shares that represent more than a whole number
of preferred stock, the depositary will issue you a new depositary receipt
evidencing such excess number of depositary shares at the same time that the
preferred stock are withdrawn. Holders of preferred stock received in exchange
for depositary shares will no longer be entitled to deposit such shares under
the deposit agreement or to receive depositary shares in exchange for such
preferred stock.
We have summarized selected terms and provisions of the deposit agreement,
the depositary shares and the depositary receipts in this section. The summary
is not complete. We will file the form of deposit agreement, including the form
of depositary receipt, as an exhibit to a Current Report on Form 8-K before Post
issues the depositary shares. You should read the forms of deposit agreement and
depositary receipt relating to a series of preferred stock for additional
information before you buy any depositary shares that represent preferred stock
of such series.
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DIVIDENDS
The depositary will distribute all cash dividends received with respect to
the preferred stock to the record holders of depositary shares representing the
preferred stock in proportion to the numbers of depositary shares owned by the
holders on the relevant record date. The depositary will distribute only the
amount that can be distributed without attributing to any holder of depositary
shares a fraction of one cent. The balance not distributed will be added to and
treated as part of the next sum received by the depositary for distribution to
record holders of depositary shares.
REDEMPTION OF DEPOSITARY SHARES
If the series of the preferred stock underlying the depositary shares is
subject to redemption, the depositary shares will be redeemed from the
redemption proceeds, in whole or in part, of such series of the preferred stock
held by the depositary. The depositary will mail notice of redemption between 30
to 60 days prior to the date fixed for redemption to the record holders of the
depositary shares to be redeemed at their addresses appearing in the
depositary's records. The redemption price per depositary Share will bear the
same relationship to the redemption price per share of preferred stock that the
depositary share bears to the underlying share of preferred stock. Whenever Post
redeems preferred stock held by the depositary, the depositary will redeem, as
of the same redemption date, the number of depositary shares representing the
preferred stock redeemed. If less than all the depositary shares are to be
redeemed, the depositary shares to be redeemed will be selected pro rata or by
any other equitable method determined by Post that preserves Post's REIT status.
After the date fixed for redemption, the depositary shares called for
redemption will no longer be outstanding. When the depositary shares are no
longer outstanding, all rights of the holders will cease, except the right to
receive money or other property that the holders of the depositary shares were
entitled to receive upon such redemption. Such payments will be made when
holders surrender their depositary receipts to the depositary.
CONVERSION
If any series of preferred stock underlying the depositary shares is
subject to conversion, the applicable prospectus supplement will describe the
rights or obligations of each record holder of depositary receipts to convert
the depositary shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the preferred
stock are entitled to vote, the depositary will mail information about the
meeting contained in the notice to the record holders of the depositary shares
relating to such preferred stock. Each record holder of such depositary shares
on the record date, which will be the same date as the record date for the
preferred stock, will be entitled to instruct the depositary as to how the
preferred stock underlying the holder's depositary shares should be voted.
The depositary will to vote the number of shares of preferred stock
underlying the depositary shares according to the instructions received. Post
will agree to take all action requested by and deemed necessary by the
depositary in order to enable the depositary to vote the preferred stock in that
manner. The depositary will not vote any shares of
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preferred stock for which it does not receive specific instructions from the
holders of the depositary shares relating to such preferred stock.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of Post, whether
voluntary or involuntary, the applicable prospectus supplement will set forth
the fraction of the liquidation preference accorded each share of preferred
stock represented by the depositary share evidenced by a depositary receipt.
TAXATION
Owners of depositary shares will be treated for federal income tax purposes
as if they were owners of the preferred stock represented by the depositary
shares. Accordingly, for federal income tax purposes they will have the income
and deductions to which they would be entitled if they were holders of the
preferred stock. In addition:
- no gain or loss will be recognized for federal income tax purposes upon
the withdrawal of preferred stock in exchange for depositary shares as
provided in the deposit agreement;
- the tax basis of each share of preferred stock to an exchanging owner of
depositary shares will, upon the exchange, be the same as the aggregate
tax basis of the depositary shares exchanged for such share; and
- the holding period for the preferred stock, in the hands of an exchanging
owner of depositary shares who held the depositary shares as a capital
asset at the time of the exchange, will include the period that the owner
held such depositary shares.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of depositary receipt evidencing the depositary shares and any
provision of the deposit agreement may be amended by agreement between us and
the depositary at any time. However, any amendment that materially and adversely
alters the rights of the existing holders of depositary shares will not be
effective unless approved by the record holders of at least two-thirds of the
depositary shares then outstanding. A deposit agreement will automatically
terminate if:
- all outstanding depositary shares relating to the deposit agreement have
been redeemed; or
- there has been a final distribution on the preferred stock of the
relevant series in connection with Post's liquidation, dissolution or
winding up of its business and the distribution has been distributed to
the holders of the related depositary shares.
A deposit agreement may be terminated by Post upon not less than 30 days'
prior written notice to the applicable preferred stock depositary if (1)
termination is necessary to preserve Post's status as a REIT or (2) a majority
of each series of preferred stock affected by such termination consents to such
termination, whereupon such preferred stock depositary will be required to
deliver or make available to each holder of depositary receipts, upon surrender
of the depositary receipts held by such holder, such number of whole shares of
preferred stock as are represented by the depositary shares evidenced by such
depositary receipts together with any other property held by such preferred
stock
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depositary with respect to such depositary receipts. Post will agree that if a
deposit agreement is terminated to preserve its status as a REIT, then Post will
use its best efforts to list the preferred stock issued upon surrender of the
related depositary shares on a national securities exchange.
CHARGES OF DEPOSITARY
Post will pay all transfer and other taxes and governmental charges arising
solely from the existence of the depositary arrangements. Post will pay
associated charges of the depositary for the initial deposit of the preferred
stock and any redemption of the preferred stock. Holders of depositary shares
will pay transfer and other taxes and governmental charges and any other charges
that are stated to be their responsibility in the deposit agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The depositary may resign at any time by delivering notice to us. Post may
also remove the depositary at any time. Resignations or removals will take
effect upon the appointment of a successor depositary and its acceptance of the
appointment. The successor depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50 million.
MISCELLANEOUS
Post will forward to the holders of depositary shares all reports and
communications that it must furnish to the holders of the preferred stock.
Neither the depositary nor Post will be liable if the depositary is
prevented or delayed by law or any circumstance beyond its control in performing
its obligations under the deposit agreement. Post's obligations and the
depositary's obligations under the deposit agreement will be limited to
performance in good faith of duties set forth in the deposit agreement. Neither
the depositary nor Post will be obligated to prosecute or defend any legal
proceeding connected with any depositary shares or preferred stock unless
satisfactory indemnity is furnished to us and/or the depositary. Post and the
depositary may rely upon written advice of counsel or accountants, or
information provided by persons presenting preferred stock for deposit, holders
of depositary shares or other persons believed to be competent and on documents
believed to be genuine.
RESTRICTIONS ON OWNERSHIP
As discussed above under "Description of Common Stock -- Restrictions on
Transfer," for Post to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital shares may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist Post in meeting this
requirement, Post may take certain actions to limit the beneficial ownership,
directly or indirectly, by a single person of Post's outstanding equity
securities, including any preferred stock of Post. Therefore, the Certificate of
Designations for each series of preferred stock underlying the depositary shares
may contain provisions restricting the ownership and transfer of the preferred
stock. The deposit agreement may contain similar provisions. The applicable
prospectus supplement will specify any additional ownership limitation relating
to a series of preferred stock and any depositary shares.
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FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
This discussion summarizes the material federal income tax considerations
that may be relevant to a prospective holder of the securities. This discussion
is based on current law. The discussion is not exhaustive of all possible tax
considerations and does not give a detailed discussion of any state, local, or
foreign tax considerations. It also does not discuss all of the aspects of
federal income taxation that may be relevant to a prospective holder of
securities in light of his particular circumstances or to certain types of
holders (including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) who are subject to special treatment
under the federal income tax laws. As used in this section, the term "Post"
refers solely to Post Properties, Inc.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REAL ESTATE
INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
QUALIFICATION AND TAXATION OF POST AS A REIT
Post has made an election to be taxed as a REIT under Sections 856 through
860 of the Code effective for its short taxable year ending on December 31,
1993. Post's qualification and taxation as a REIT depends upon Post's ability to
meet on a continuing basis, through actual annual operating results,
distribution levels and diversity of stock ownership, the various qualification
tests and organizational requirements imposed under the Code, as discussed
below. Post believes that it is organized and has operated in such a manner as
to qualify under the Code for taxation as a REIT commencing with its 1993
taxable year, and Post intends to continue to operate in such a manner. No
assurance, however, can be given that Post will operate in a manner so as to
qualify or remain qualified as a REIT. See "Failure to Qualify" below.
In the opinion of King & Spalding, Post met the requirements for
qualification and taxation as a REIT for its taxable years ended December 31,
1993 through 1999, and its current and proposed method of operation should
enable it to continue to meet the requirements for qualification and taxation as
a REIT. This opinion is based on various assumptions relating to the
organization and operation of Post, Post Apartment Homes and the partnerships
and limited liability companies in which Post Apartment Homes owns or has owned
an interest (referred to herein as "Subsidiary Partnerships") and is conditioned
upon certain representations made by Post as to certain relevant factual matters
relating to the organization and expected manner of operation of Post, Post
Apartment Homes, and the Subsidiary Partnerships. King & Spalding is not aware
of any facts or circumstances that are inconsistent with these assumptions and
representations. Moreover, such qualification and taxation as a REIT will depend
upon Post's ability to meet on a continuing basis, through actual annual
operating results, distribution levels and diversity of stock ownership, the
various qualification tests imposed under the Code discussed below. King &
Spalding will not review compliance with these tests on a continuing basis. No
assurance can be given that Post will satisfy such tests on a continuing basis.
See "Failure to Qualify" below.
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The sections of the Code relating to qualification and operation as a REIT
are highly technical and complex. The following discussion sets forth certain
material aspects of the Code sections that govern the federal income tax
treatment of a REIT and its shareholders. The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change prospectively or retroactively.
So long as Post continues to qualify for taxation as a REIT, it generally
will not be subject to federal corporate income tax on its net income that is
distributed currently to its shareholders. That treatment substantially
eliminates the "double taxation" (i.e., taxation at both the corporate and
shareholder levels) that generally results from investment in a corporation.
However, Post will be subject to federal income tax in the following
circumstances. First, Post will be taxed at regular corporate rates on any
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, Post may be subject to the "alternative
minimum tax" on items of tax preference, if any. Third, if Post has (1) net
income from the sale or other disposition of "foreclosure property" (which is,
in general, property acquired by foreclosure or otherwise on default of a loan
or lease secured by the property) that is held primarily for sale to customers
in the ordinary course of business or (2) other nonqualifying income from
foreclosure property, it will be subject to tax at the highest corporate rate on
such income. Fourth, if Post has net income from prohibited transactions (which
are, in general, certain sales or other dispositions of property (other than
foreclosure property) held primarily for sale to customers in the ordinary
course of business), such income will be subject to a 100% tax. Fifth, if Post
should fail to satisfy the 75% gross income test or the 95% gross income test
(as discussed below), and nonetheless has maintained its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of the amounts by which it
fails the 75% or 95% gross income test (or for taxable years beginning after
December 31, 2000, a 90% test). Sixth, if Post should fail to distribute during
each calendar year at least the sum of:
- 85% of its REIT ordinary income for such year,
- 95% of its REIT capital gain net income for such year and
- any undistributed taxable income from prior periods,
it would be subject to a 4% excise tax on the excess of such required
distribution over the sum of the amounts actually distributed and amounts
retained for which federal income tax was paid. Finally, if Post acquires any
asset from a C corporation (i.e., a corporation generally subject to full
corporate-level tax) in a transaction in which the basis of the asset in Post's
hands is determined by reference to the basis of the asset (or any other
property) in the hands of the corporation, and Post recognizes gain on the
disposition of such asset during the ten-year period beginning on the date on
which such asset was acquired by Post, then, to the extent of such property's
"built-in" gain (the excess of the fair market value of such property at the
time of acquisition by Post over the adjusted basis of such property at such
time), such gain will be subject to the highest corporate rate applicable,
provided an election is made by Post to apply the principles of Section 1374 of
the Code to such gain (a "Section 1374 election").
When Columbus Realty Trust ("Columbus"), which Post acquired by merger in
1997, was formed in 1993, it acquired certain built-in gain assets from a C
corporation in a carryover basis transaction. Post believes that the aggregate
net built-in gain with respect
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to such assets is approximately $2.4 million. Columbus filed a Notice 88-19
election (the predecessor of the Section 1374 election) with its first REIT tax
return for the taxable year ended December 31, 1993. In addition, Post filed a
Notice 88-19 election, and intends to file a new Section 1374 election, with
respect to the built-in gain assets acquired from Columbus. Accordingly, Post
(as Columbus' successor) should be subject to a Section 1374 corporate-level tax
if Post or Post Apartment Homes sells a built-in gain asset in a taxable
transaction during the ten-year period commencing on the date such assets were
originally acquired by Columbus. Post has no current intention to incur the
built-in gain tax on assets that it acquired from Columbus other than one
property held for sale which has a built-in gain of approximately $330,000.
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association:
(1) that is managed by one or more trustees or directors;
(2) the beneficial ownership of which is evidenced by transferable
shares, or by transferable certificates of beneficial interest;
(3) that would be taxable as a domestic corporation, but for Sections
856 through 859 of the Code;
(4) that is neither a financial institution nor an insurance company
subject to certain provisions of the Code;
(5) the beneficial ownership of which is held by 100 or more persons;
(6) not more than 50% in value of the outstanding shares of which is
owned, directly or indirectly, by five or fewer individuals (as defined in
the Code to include certain entities) (the "5/50 Rule");
(7) that makes an election to be a REIT (or has made such election for
a previous taxable year which has not been revoked or terminated) and
satisfies all relevant filing and other administrative requirements
established by the IRS that must be met in order to elect and maintain REIT
status;
(8) that uses a calendar year for federal income tax purposes; and
(9) that meets certain other tests, described below, regarding the
nature of its income and assets.
The Code provides that conditions (1) to (4), inclusive, must be met during
the entire taxable year, that condition (5) must be met during at least 335 days
of a taxable year of 12 months, or during a proportionate part of a taxable year
of less than 12 months, and that condition (6) must be met during the last half
of the taxable year. For purposes of determining stock ownership under the 5/50
Rule, a supplemental unemployment compensation benefits plan, a private
foundation or a portion of a trust permanently set aside or used exclusively for
charitable purposes generally is considered an individual. A trust that is a
qualified trust under Section 401(a) of the Code, however, generally is not
considered an individual, and beneficiaries of such trust are treated as holding
shares of a REIT in proportion to their actuarial interests in such trust for
purposes of the 5/50 Rule. Finally, Post will be treated as having met condition
(6) above if it has complied with certain Treasury Regulations for ascertaining
the ownership of its stock for such year and if
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it did not know (or after the exercise of reasonable diligence would not have
known) that its stock was sufficiently closely held during such year to cause it
to fail condition (6).
Post's Articles of Incorporation contain restrictions regarding the
transfer of its shares that are intended to assist Post in continuing to satisfy
the share ownership requirements described in clauses (5) and (6) above. See
"Description of Common Stock -- Restrictions on Transfer."
Section 856(i) of the Code provides that a corporation that is a "qualified
REIT subsidiary" shall not be treated as a separate corporation for federal
income tax purposes, and all assets, liabilities and items of income, deduction
and credit of a "qualified REIT subsidiary" shall be treated as assets,
liabilities and items of income, deduction and credit of the REIT. A "qualified
REIT subsidiary" is a corporation, all of the capital stock of which is owned
directly by the REIT. Certain subsidiaries of Post constitute qualified REIT
subsidiaries. Accordingly, in applying the income and asset tests described
below, such subsidiaries will be ignored for federal income tax purposes, and
all assets, liabilities and items of income, deduction and credit of such
subsidiaries will be treated as assets, liabilities and items of income,
deduction, and credit of Post. Such subsidiaries therefore will not be subject
to federal corporate income taxation, although they may be subject to state and
local taxation.
In the case of a REIT that is a partner in an entity that is classified for
federal income tax purposes as a partnership, Treasury Regulations provide that
the REIT will be deemed to own its proportionate share of the assets of the
partnership (based on the REIT's capital interest in the partnership) and will
be deemed to be entitled to the gross income of the partnership attributable to
such share. In addition, the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income and asset tests described
below. The ownership of interests in Post Apartment Homes by Post will result in
its proportionate share of the assets, liabilities and items of income of Post
Apartment Homes being treated as assets, liabilities and items of income of Post
for purposes of the asset and income tests described below.
Income Tests. In order for Post to maintain its qualification as a REIT,
two requirements relating to gross income must be satisfied annually. First, at
least 75% of its gross income (excluding gross income from prohibited
transactions) for each taxable year must consist of defined types of income
derived directly or indirectly from investments relating to real property or
mortgages on real property (including "rents from real property" and, in certain
circumstances, interest) or temporary investment income. Second, at least 95% of
its gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived from such real property or temporary investments,
and from dividends, other types of interest and gain from the sale or
disposition of stock or securities, or from any combination of the foregoing.
The rent received by Post from its tenants will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions are met. First, the amount of rent must not be based,
in whole or in part, on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant of Post will not qualify as "rents from real property" in
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satisfying the gross income tests if Post, or a direct or indirect owner of 10%
or more of Post, directly or constructively owns 10% or more of such tenant (a
"Related Party Tenant"). Third, if rent attributable to personal property that
is leased in connection with a lease of real property is greater than 15% of the
total rent received under the lease, then the portion of rent attributable to
such personal property will not qualify as "rents from real property." Finally,
for the rent to qualify as "rents from real property," Post generally must not
operate or manage its properties or furnish or render services to the tenants of
such properties, other than through an "independent contractor" who is
adequately compensated and from whom Post derives or receives no income. The
"independent contractor" requirement, however, does not apply to the extent the
services provided by Post are "usually or customarily rendered" in connection
with the rental of space for occupancy only and are not otherwise considered
"rendered to the occupant." In addition, the "independent contractor"
requirement will not apply to noncustomary services provided by Post, the annual
value of which does not exceed 1% of the gross income derived from the property
with respect to which the services are provided (the "1% de minimis exception").
For this purpose, such services may not be valued at less than 150% of Post's
direct cost of providing the services, and any gross income deemed to have been
derived by Post from the performance of noncustomary services pursuant to the 1%
de minimis exception will constitute nonqualifying gross income under the 75%
and 95% gross income tests. Under the Tax Relief Extension Act of 1999, a
"taxable REIT subsidiary" of a REIT may provide, in taxable years beginning
after December 31, 2000, noncustomary services to the tenants of the REIT
without causing the rents paid by such tenants to be disqualified as "rents from
real property."
Post does not charge rent for any portion of any property that is based, in
whole or in part, on the income or profits of any person. In addition, Post does
not receive any material rent from a Related Party Tenant. Finally, Post intends
to provide any noncustomary services through qualifying independent contractors
or taxable REIT subsidiaries (beginning in 2001), or in compliance with the 1%
de minimis exception.
Post Apartment Homes receives fees in consideration of the performance of
management, landscaping and administrative services with respect to properties
that are not wholly owned, directly or indirectly, by Post Apartment Homes. A
portion of such fees (corresponding to that portion of any such property owned
by a third party) generally will not qualify under the 75% or 95% gross income
tests. Post will also receive certain other types of non-qualifying income,
including its allocable share of any dividends paid by Post Services to Post
Apartment Homes (which will qualify under the 95% gross income test but not
under the 75% gross income test). Post believes, however, that the aggregate
amount of such fees and other non-qualifying income in any taxable year will not
cause Post to exceed the limits on non-qualifying income under the 75% and 95%
gross income tests.
If Post fails to satisfy one or both of the 75% or 95% gross income tests
for any taxable year, it nevertheless may qualify as a REIT for such year if it
is entitled to relief under certain provisions of the Code. Those relief
provisions generally will be available if the failure to meet such tests is due
to reasonable cause and not due to willful neglect, Post attaches a schedule of
the sources of its income to its return, and any incorrect information on the
schedule was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances Post would be entitled to the
benefit of those relief provisions. As discussed above in "-- Qualification and
Taxation of
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Post as a REIT," even if those relief provisions apply, a 100% tax would be
imposed on the net income attributable to the greater of the amount by which
Post fails the 75% and 95% gross income tests (or a 90% test for taxable years
beginning after December 31, 2000).
Asset Tests. At the close of each quarter of its taxable year, Post also
must satisfy two tests relating to the nature of its assets. First, at least 75%
of the value of Post's total assets must be represented by real estate assets
(including (1) its allocable share of real estate assets held by Post Apartment
Homes and any subsidiary partnerships or limited liability companies, and (2)
stock or debt instruments held for not more than one year purchased with the
proceeds of a stock offering or long-term (at least five years) public debt
offering of Post), cash, cash items and government securities. Second, of the
investments not included in the 75% asset class, the value of any one issuer's
debt and equity securities owned by Post (including its allocable share of such
securities owned by Post Apartment Homes) may not exceed 5% of the value of
Post's total assets, and Post may not own more than 10% of any one issuer's
outstanding voting securities. Debt of an issuer that is secured by real estate
assets does not constitute a "security" for purposes of the 5% asset test. The
5% asset test generally must be met for any quarter in which a REIT acquires
securities of an issuer or other property. Thus, this requirement must be
satisfied not only on the date that Post initially acquires securities of Post
Services, but also each time Post increases its ownership of securities of Post
Services (e.g., as limited partners of Post Apartment Homes exercise their
redemption rights).
Post Apartment Homes owns 100% of the nonvoting stock and 1% of the voting
stock of Post Services, which is a nonqualified REIT subsidiary, and Post
Apartment Homes also holds a note of Post Services. In addition, Post Apartment
Homes owns 100% of the nonvoting stock (representing substantially all of the
equity value) and 2% of the voting stock of Addison Circle Access, Inc., an
inactive corporation which is also a nonqualified REIT subsidiary. By virtue of
its ownership of an interest in Post Apartment Homes, Post is deemed to own its
pro rata share of assets of Post Apartment Homes and any subsidiary
partnerships, including the debt and equity securities of Post Services and
Addison Circle Access. Because Post Apartment Homes does not own more than 10%
of the voting securities of Post Services and Addison Circle Access, Post
likewise does not own more than 10%. In addition, based upon its analysis of the
estimated value of the debt and equity securities of Post Services and Addison
Circle Access owned by Post Apartment Homes relative to the estimated value of
the other assets owned by Post Apartment Homes, Post believes that its pro rata
share of the debt and equity securities of Post Services and Addison Circle
Access at all relevant times has been less than 5% of the total value of Post's
assets. However, no independent appraisals have been obtained to support this
conclusion, and King & Spalding, in rendering its opinion as to Post's
qualification as a REIT, is relying on Post's representation with respect to the
value of Post Services and Addison Circle Access. After reasonable inquiry, King
& Spalding is not aware of any facts inconsistent with such representation.
Although Post plans to take steps to ensure that it satisfies the 5% value test
for any quarter with respect to which any actual or deemed acquisition of the
securities of Post Securities and Addison Circle Access is to occur, there can
be no assurance that such steps will always be successful or will not require a
reduction in Post Apartment Homes' overall interest in Post Services or Addison
Circle Access.
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Under the Tax Relief Extension Act of 1999, a REIT also will be prohibited,
in taxable years beginning after December 31, 2000, from owning more than 10% of
the value of the outstanding debt and equity securities of any non-qualified
REIT subsidiary, subject to two principal exceptions. First, under a
"grandfather rule," a REIT's ownership of the debt and equity securities of a
non-qualified REIT subsidiary held on July 12, 1999, will be exempt from the new
10% value test until the first day after July 12, 1999 on which the
non-qualified REIT subsidiary engages in a substantial new line of business or
acquires any substantial asset or until the REIT acquires additional securities
of the non-qualified REIT subsidiary. Second, a REIT and a non-qualified REIT
subsidiary may make a joint election for the non-qualified REIT subsidiary to be
treated as a "taxable REIT subsidiary." The securities of a taxable REIT
subsidiary held by a REIT are not subject to the new 10% value test.
Because Post, through Post Apartment Homes, owns more than 10% of the value
of the outstanding securities of both of its non-qualified REIT subsidiaries,
Post would be disqualified as a REIT beginning in 2001 unless either (1) the
securities of the non-qualified REIT subsidiaries were eligible for relief under
the grandfather rule or (2) Post and the non-qualified REIT subsidiaries were to
elect to treat the non-qualified REIT subsidiaries as taxable REIT subsidiaries.
Although the securities of Post Services and Addison Circle Access held by the
Post Apartment Homes may be eligible for relief under the grandfather rule, Post
anticipates that an election will be made, effective January 1, 2001, for Post
Services and Addison Circle Access to be treated as taxable REIT subsidiaries.
As noted above, a taxable REIT subsidiary is exempt from the new 10% value
test and also is exempt from the 5% asset test and the 10% voting securities
test under current law. Thus, Post Apartment Homes would be permitted to acquire
the voting stock of the non-qualified REIT subsidiaries which is currently held
by executive officers of Post.
Under the new rules, a number of constraints are imposed on REITs and their
taxable REIT subsidiaries to ensure that REITs cannot, through taxable REIT
subsidiaries, engage in substantial non-real estate activities and also to
ensure that taxable REIT subsidiaries pay an appropriate corporate-level tax on
their income. First, the value of the debt and equity securities of all taxable
REIT subsidiaries owned by a REIT cannot represent more than 20% of the value of
the REIT's total assets. Second, a taxable REIT subsidiary will be subject to
the "earnings stripping" rules of the Code with respect to interest paid to the
REIT, which could disallow a portion of the taxable REIT subsidiary's interest
deductions under certain circumstances. Third, a 100% excise tax may be imposed
on the REIT with respect to certain "redetermined rents, redetermined
deductions, and excess interest" to ensure arm's length (1) pricing for services
provided by the taxable REIT subsidiary to REIT tenants and (2) allocation of
shared expenses between the REIT and the taxable REIT subsidiary. Certain
additional limitations also would apply.
Distribution Requirements. Post, in order to qualify as a REIT, is
required to distribute with respect to each taxable year dividends (other than
capital gain dividends) to its shareholders in an aggregate amount at least
equal to (1) the sum of (A) 95% (90% beginning in 2001) of its "REIT taxable
income" (computed without regard to the dividends paid deduction and its net
capital gain) and (B) 95% (90% beginning in 2001) of the net income (after tax),
if any, from foreclosure property, minus (2) the sum of certain items of
non-cash income. Such distributions must be paid in the taxable year to
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which they relate, or in the following taxable year if declared before Post
timely files its federal income tax return for such year and if paid on or
before the first regular dividend payment date after such declaration. To the
extent that Post does not distribute all of its net capital gain or distributes
at least 95% (90% beginning in 2001), but less than 100%, of its "REIT taxable
income," as adjusted, it will be subject to tax thereon at regular ordinary and
capital gains corporate tax rates. Furthermore, if Post should fail to
distribute during each calendar year at least the sum of:
- 85% of its REIT ordinary income for such year,
- 95% of its REIT capital gain income for such year and
- any undistributed taxable income from prior periods,
it would be subject to a 4% nondeductible excise tax on the excess of such
required distribution over the sum of the amounts actually distributed and
amounts retained for which federal income tax was paid.
Post has made and intends to continue to make timely distributions
sufficient to satisfy the annual distribution requirements. In this regard, the
partnership agreement of Post Apartment Homes authorizes a qualified REIT
subsidiary of Post, as general partner, to take such steps as may be necessary
to cause Post Apartment Homes to distribute to its partners an amount sufficient
to permit Post to meet these distribution requirements. It is possible, however,
that Post, from time to time, may not have sufficient cash or other liquid
assets to meet the distribution requirements due to timing differences between
the actual receipt of income and actual payment of deductible expenses and the
inclusion of such income and deduction of such expenses in arriving at Post's
taxable income, or if the amount of nondeductible expenses (such as principal
amortization or capital expenses) exceeds the amount of noncash deductions. In
the event that such timing differences occur, in order to meet the distribution
requirements, Post may cause Post Apartment Homes to arrange for short-term, or
possibly long-term, borrowing to permit the payment of required dividends. If
the amount of nondeductible expenses exceeds noncash deductions, Post Apartment
Homes may refinance its indebtedness to reduce principal payments and borrow
funds for capital expenditures.
Under certain circumstances, Post may be able to rectify a failure to meet
the distribution requirements for a year by paying "deficiency dividends" to its
shareholders in a later year, which may be included in its deduction for
dividends paid for the earlier year. Although Post may be able to avoid being
taxed on amounts distributed as deficiency dividends, it will be required to pay
to the IRS interest based upon the amount of any deduction taken for deficiency
dividends.
Recordkeeping Requirements. Pursuant to applicable Treasury Regulations,
Post must maintain certain records and request on an annual basis certain
information from its shareholders designed to disclose the actual ownership of
its outstanding shares. Post intends to comply with these requirements.
FAILURE TO QUALIFY
If Post fails to qualify for taxation as a REIT in any taxable year, and
the relief provisions do not apply, it will be subject to tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates. Distributions to shareholders in any year in which Post fails to qualify
will not be deductible nor will they
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be required to be made. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, Post also will be
disqualified from taxation as a REIT for the four taxable years following the
year during which it ceased to qualify as a REIT. It is not possible to predict
whether in all circumstances Post would be entitled to such statutory relief.
OTHER TAX CONSIDERATIONS
Tax Status of Post Apartment Homes and Other Pass-Through Entities. All of
Post's investments have been made through Post Apartment Homes, which in turn
holds an interest in a number of Subsidiary Partnerships. In the opinion of King
& Spalding, Post Apartment Homes and the Subsidiary Partnerships (other than any
Subsidiary Partnerships that are 100% beneficially owned by Post Apartment Homes
and disregarded for federal income tax purposes) qualify as partnerships for
federal income tax purposes and not as associations taxable as corporations or
as publicly traded partnerships taxable as corporations.
A publicly traded partnership is a partnership whose interests are traded
on an established securities market or are readily tradable on a secondary
market or the substantial equivalent of a secondary market. Treasury
Regulations, which are effective for taxable years beginning after December 31,
1995 (the "PTP Regulations"), provide limited safe harbors, which, if satisfied,
will prevent a partnership's interests from being treated as readily tradable on
a secondary market or the substantial equivalent thereof. The "private
placement" safe harbor applies if (1) all interests in the partnership were
issued in a transaction (or transactions) that was not required to be registered
under the Securities Act and (2) the partnership does not have more than 100
partners at any time during the partnership's taxable year. Post Apartment Homes
does not currently meet the private placement safe harbor of the PTP Regulations
because it has more than 100 partners.
Under a special grandfather rule, an existing partnership may continue to
rely on safe harbors contained in IRS Notice 88-75 until its first taxable year
beginning after December 31, 2005, unless the partnership adds a "substantial
new line of business" after December 4, 1995. Post believes that Post Apartment
Homes has satisfied, and will continue to satisfy, the private placement safe
harbor under such Notice because, in part, it has fewer than 500 direct and
indirect partners. In addition, Post believes that it has not added a
"substantial new line of business" since December 4, 1995. Upon expiration of
the grandfather period, if Post Apartment Homes does not at that time satisfy
the private placement safe harbor of the PTP Regulations, it is possible that
Post Apartment Homes could be classified as a publicly traded partnership. In
that event, Post Apartment Homes should satisfy a special "passive income"
exception provided in Section 7704(c) of the Code and therefore should not be
subject to federal income tax at the corporate level. However, if Post Apartment
Homes were classified as a publicly traded partnership, the partners of Post
Apartment Homes would nevertheless be subject to special passive loss limitation
rules in Section 469(k) of the Code.
If Post Apartment Homes were treated as an association taxable as a
corporation, Post would fail the 75% asset test. Further, if the Subsidiary
Partnerships were treated as taxable corporations, then Post would cease to
qualify as a REIT if Post's ownership
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interest in such partnership exceeded 10% of the partnership's voting interests
or the value of such interest exceeded 5% of the value of Post's assets or,
beginning in 2001, 10% of the value of the outstanding interests in the
partnership. Furthermore, in such a situation, distributions from the Subsidiary
Partnerships to Post would be treated as dividends, which are not qualifying
income under the 75% gross income test described above and which could therefore
make it more difficult for Post to meet such test. See "-- Failure to Qualify"
above for a discussion of the effect of Post's failure to meet such tests for a
taxable year. Finally, Post would not be able to deduct its share of losses
generated by any of the Subsidiary Partnerships in computing its taxable income.
Taxation of Post Services and Operating Subsidiaries. Post Services and
its existing subsidiaries file a corporate consolidated return for federal
income tax purposes. The consolidated taxable income of these companies is
subject to tax at regular corporate rates. To the extent such entities are
required to pay federal, state and local income taxes, the cash available for
distribution to shareholders will be correspondingly reduced.
State and Local Taxes. Post, Post Apartment Homes and its subsidiaries may
be subject to state or local taxation in various state or local jurisdictions,
including those in which it or they transact business or own property. The state
and local tax treatment of Post, Post Apartment Homes and its subsidiaries may
not conform to the federal income tax consequences discussed above.
Consequently, prospective shareholders should consult their own tax advisors
regarding the effect of state and local tax laws on an investment in the
Securities.
TAXATION OF TAXABLE U.S. SHAREHOLDERS
As long as Post qualifies as a REIT, distributions made to taxable U.S.
Shareholders (as hereinafter defined) out of current or accumulated earnings and
profits (and not designated as capital gain dividends) will be taken into
account by such U.S. Shareholders (as hereinafter defined) as ordinary income
and will not be eligible for the dividends received deduction generally
available to corporations. As used herein, the term "U.S. Shareholder" means a
holder of Post's shares that for United States federal income tax purposes is:
(1) a citizen or resident of the United States,
(2) a corporation, partnership or other entity created or organized in
or under the laws of the United States, any State or the District of
Columbia,
(3) an estate the income of which is subject to United States federal
income taxation regardless of its source, or
(4) a trust if (A) a court within the United States is able to
exercise primary supervision over the administration of the trust, and (B)
one or more United States persons have the authority to control all
substantial decisions of the trust.
Distributions that are designated as capital gain dividends will be taxed
as gain from the sale or exchange of a capital asset held for more than one year
(to the extent they do not exceed Post's actual net capital gain for the taxable
year) without regard to the period for which the U.S. Shareholder has held his
or her shares. The tax rates applicable to such capital gain are discussed
below. However, corporate U.S. Shareholders may be required to treat up to 20%
of certain capital gain dividends as ordinary income. Distributions in excess of
current and accumulated earnings and profits will not be taxable to a U.S.
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Shareholder to the extent that they do not exceed the adjusted basis of the U.S.
Shareholder's shares, but will reduce the adjusted basis of such shares. To the
extent that such distributions in excess of current and accumulated earnings and
profits exceed the adjusted basis of a U.S. Shareholder's shares, such
distributions will be included in income as capital gain, assuming that such
shares are capital assets in the hands of the U.S. Shareholder. The tax rate to
which such capital gain will be subject will depend on the U.S. Shareholder's
holding period for his shares. In addition, any distribution declared by Post in
October, November or December of any year and payable to a U.S. Shareholder of
record on a specified date in any such month shall be treated as both paid by
Post and received by the U.S. Shareholder on December 31 of such year, provided
that the distribution is actually paid by Post during January of the following
calendar year.
Post may make an election to treat all or part of its undistributed net
capital gain as if it had been distributed to its shareholders. As described
above, these undistributed amounts would be subject to corporate level tax
payable by Post. If Post should make such an election, its shareholders would be
required to include in their income as long-term capital gain their
proportionate share of Post's undistributed net capital gain as designated by
Post. Each such shareholder would be deemed to have paid his proportionate share
of the income tax imposed on Post with respect to such undistributed net capital
gain, and this amount would be credited or refunded to the shareholder. In
addition, the tax basis of the shareholder's stock would be increased by his
proportionate share of undistributed net capital gains included in his income
less his proportionate share of the income tax imposed on Post with respect to
such gains.
U.S. Shareholders may not include in their individual income tax returns
any net operating losses or capital losses of Post. Instead, such losses would
be carried over by Post for potential offset against its future income (subject
to certain limitations). Taxable distributions from Post and gain from the
disposition of its shares will not be treated as passive activity income and,
therefore, U.S. Shareholders generally will not be able to apply any "passive
activity losses" (such as losses from certain types of limited partnerships in
which a shareholder is a limited partner) against such income. In addition,
taxable distributions from Post generally will be treated as investment income
for purposes of the investment interest limitations. Capital gains from the
disposition of Post's shares (or distributions treated as such), however, will
be treated as investment income only if the U.S. Shareholder so elects, in which
case such capital gains will be taxed at ordinary income rates. Post will notify
shareholders after the close of Post's taxable year as to the portions of the
distributions attributable to that year that constitute ordinary income, return
of capital and capital gain.
In general, any gain or loss realized upon a taxable disposition of Post's
shares by a U.S. Shareholder who is not a dealer in securities will be treated
as a capital gain or loss. Lower marginal tax rates for individuals may apply in
the case of capital gains, depending on the holding period of Post's shares that
are sold. However, any loss upon a sale or exchange by a U.S. Shareholder who
has held such shares for six months or less (after applying certain holding
period rules), will be treated as a long-term capital loss to the extent of
distributions from Post required to be treated by such U.S. Shareholder as long-
term capital gain. All or a portion of any loss realized upon a taxable
disposition of Post's shares may be disallowed if other Post shares are
purchased within 30 days before or after the disposition.
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For non-corporate taxpayers, the tax rate differential between capital gain
and ordinary income may be significant. The highest marginal non-corporate
income tax rate applicable to ordinary income is 39.6%, but any capital gain
generally will be taxed to a non-corporate taxpayer at a maximum rate of 20%
with respect to capital assets held for more than one year. The tax rates
applicable to ordinary income apply to gain from the sale or exchange of capital
assets held for one year or less. In the case of capital gain attributable to
the sale or exchange of certain real property held for more than one year, an
amount of such gain equal to the amount of all prior depreciation deductions not
otherwise required to be taxed as ordinary depreciation recapture income will be
taxed at a maximum rate of 25%. With respect to distributions designated by a
REIT as capital gain dividends (including any deemed distributions of retained
capital gains), the REIT also may designate and will notify shareholders,
subject to certain limits, whether the dividend is taxable to non-corporate
shareholders as a 20% rate gain distribution or an unrecaptured depreciation
distribution taxed at a 25% rate.
The characterization of income as capital or ordinary may affect the
deductibility of capital losses. Capital losses not offset by capital gains may
be deducted against a non-corporate taxpayer's ordinary income only up to a
maximum annual amount of $3,000. Non-corporate taxpayers may carry forward their
unused capital losses. All net capital gain of a corporate taxpayer is subject
to tax at ordinary corporate rates. A corporate taxpayer may deduct capital
losses only to the extent of its capital gains, with unused losses eligible to
be carried back three years and forward five years.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
Post will report to its U.S. Shareholders and to the IRS the amount of
distributions paid during each calendar year and the amount of tax withheld, if
any. Under the backup withholding rules, a U.S. Shareholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid unless
such holder (1) is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact or (2) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. A U.S. Shareholder who does not provide Post with his
correct taxpayer identification number also may be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
U.S. Shareholder's income tax liability. In addition, Post may be required to
withhold a portion of capital gain distributions to any U.S. Shareholders who
fail to certify their nonforeign status to Post. See "-- Taxation of Non-U.S.
Shareholders."
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has issued a published ruling
that dividend distributions from a REIT to an exempt employee pension trust do
not constitute UBTI, provided that the shares of the REIT are not otherwise used
in an unrelated trade or business of the exempt employee pension trust. Based on
that ruling, amounts distributed by Post to Exempt Organizations generally
should not constitute UBTI. However, if an Exempt Organization finances its
acquisition
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of shares with "acquisition indebtedness," a portion of its income from
distributions on such shares will constitute UBTI pursuant to the "debt-financed
property" rules. Furthermore, social clubs, voluntary employee benefit
associations, supplemental unemployment benefit trusts and qualified group legal
service plans that are exempt from taxation under paragraphs (7), (9), (17) and
(20), respectively, of Code section 501(c) are subject to different UBTI rules,
which generally will require them to characterize distributions from Post as
UBTI. In addition, in certain circumstances, a pension trust that owns more than
10% (by value) of the shares of a REIT would be required to treat a percentage
of the dividends on its shares as UBTI (the "UBTI Percentage"). The UBTI
Percentage is the gross income, less related direct expenses, derived by Post
from an unrelated trade or business (determined as if Post were a pension trust)
divided by the gross income, less related direct expenses, of Post for the year
in which the dividends are paid. The UBTI rule applies to a pension trust
holding more than 10% of the Common Stock only if (1) the UBTI Percentage is at
least 5%, (2) Post qualifies as a REIT by reason of the modification of the 5/50
Rule that allows the beneficiaries of the pension trust to be treated as holding
shares of Post, in proportion to their actuarial interests in the pension trust
and (3) either (A) one pension trust owns more than 25% of the value of such
shares or (B) a group of pension trusts individually holding more than 10% of
the value of shares collectively owns more than 50% of the value of the shares.
TAXATION OF NON-U.S. SHAREHOLDERS
The rules governing United States federal income taxation of nonresident
alien individuals and foreign corporations, foreign partnerships and other
foreign holders of Post's shares that are not U.S. Shareholders as defined above
(collectively, "Non-U.S. Shareholders") are complex and no attempt will be made
herein to provide more than a summary of such rules. NON-U.S. SHAREHOLDERS
SHOULD CONSULT WITH THEIR OWN TAX ADVISORS TO DETERMINE THE IMPACT OF FEDERAL,
STATE AND LOCAL INCOME TAX LAWS WITH REGARD TO AN INVESTMENT IN THE SECURITIES,
INCLUDING ANY REPORTING REQUIREMENTS.
Distributions to Non-U.S. Shareholders that are not attributable to gain
from sales or exchanges by Post of United States real property interests and are
not designated by Post as capital gain dividends will be treated as dividends of
ordinary income to the extent that they are made out of Post's current or
accumulated earnings and profits. Such distributions ordinarily will be subject
to a withholding tax equal to 30% of the gross amount of the distribution unless
an applicable tax treaty reduces or eliminates that tax. However, if income from
the investment in shares is treated as effectively connected with the Non-U.S.
Shareholder's conduct of a United States trade or business, the Non-U.S.
Shareholder generally will be subject to federal income tax at graduated rates,
in the same manner as U.S. Shareholders are taxed with respect to such
distributions (subject to applicable alternative minimum tax and a special
alternative minimum tax in the case of nonresident alien individuals). In
addition, a foreign corporation receiving income that is treated as effectively
connected income may be subject to an additional 30% "branch profits" tax,
unless an applicable tax treaty reduces or eliminates that tax. Post expects to
withhold United States income tax at the rate of 30% on the gross amount of any
such distributions made to a Non-U.S. Shareholder unless (1) a lower treaty rate
applies and any required form evidencing eligibility for that reduced rate is
filed with Post or (2) the Non-U.S. Shareholder files an IRS Form 4224 or W-8ECI
with Post.
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Distributions in excess of current and accumulated earnings and profits of
Post will not be taxable to a shareholder to the extent that such distributions
do not exceed the adjusted basis of the shareholder's shares but rather will
reduce the adjusted basis of such shares. To the extent that distributions in
excess of current and accumulated earnings and profits exceed the adjusted basis
of a Non-U.S. Shareholder's shares, such distributions will give rise to tax
liability if the Non-U.S. Shareholder otherwise would be subject to tax on any
gain from the sale or disposition of his shares as described below. Because it
generally cannot be determined at the time a distribution is made whether or not
such distribution will be in excess of current and accumulated earnings and
profits, the entire amount of any distribution normally will be subject to
withholding at the same rate as a dividend. However, amounts so withheld are
refundable to the extent it is determined subsequently that such distribution
was, in fact, in excess of the payor's current and accumulated earnings and
profits.
Post is required to withhold 10% of any distribution in excess of its
current and accumulated earnings and profits to the extent such shares
constitute "U.S. real property interests" under Section 897(c) of the Code.
Consequently, although Post intends to withhold at a rate of 30% on the entire
amount of any distribution to a Non-U.S. Shareholder, to the extent that Post
does not do so, any portion of a distribution not subject to 30% withholding may
be subject to 10% withholding under certain circumstances.
For any year in which Post qualifies as a REIT, distributions that are
attributable to gain from sales or exchanges of U.S. real property interests
will be taxed to a Non-U.S. Shareholder under the provisions of the Foreign
Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
distributions attributable to gain from sales of United States real property
interests are taxed to a Non-U.S. Shareholder as if such gain were effectively
connected with a United States business. Non-U.S. Shareholders thus would be
taxed at the normal capital gain rates applicable to U.S. Shareholders (subject
to applicable alternative minimum tax and a special alternative minimum tax in
the case of nonresident alien individuals). Distributions subject to FIRPTA also
may be subject to the 30% branch profits tax in the hands of a corporate
Non-U.S. Shareholder not entitled to treaty relief or exemption. Post is
required to withhold 35% of any distribution that is designated by it as a
capital gains dividend. The amount withheld is creditable against the Non-U.S.
Shareholder's U.S. tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of shares generally
will not be taxed under FIRPTA if Post is a "domestically controlled REIT,"
defined generally as a REIT in which at all times during a specified testing
period less than 50% in value of the stock was held directly or indirectly by
foreign persons. Post believes that it is currently a "domestically-controlled
REIT" and, therefore, the sale of Common Stock will not be subject to taxation
under FIRPTA. However, because Post's shares are publicly traded, no assurance
can be given that Post is or will continue to be a "domestically-controlled
REIT." In addition, a Non-U.S. Shareholder that owned (actually or
constructively under certain constructive ownership rules) 5% or less of Post's
outstanding shares at all times during a specified testing period will not be
subject to tax under FIRPTA if such shares are regularly traded on an
established securities market (e.g., the NYSE, on which the shares are currently
traded). Furthermore, gain not subject to FIRPTA will be taxable to a Non-U.S.
Shareholder if (1) investment in shares is effectively connected with the Non-
U.S. Shareholder's United States trade or business, in which case the Non-U.S.
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Shareholder will be subject to the same treatment as U.S. Shareholders with
respect to such gain, or (2) the Non-U.S. Shareholder is a nonresident alien
individual who was present in the United States for 183 days or more during the
taxable year and certain other conditions apply, in which case the nonresident
alien individual will be subject to a 30% tax on the individual's capital gains.
If the gain on the sale of shares were to be subject to taxation under FIRPTA,
the Non-U.S. Shareholder would be subject to the same treatment as U.S.
Shareholders with respect to such gain (subject to applicable alternative
minimum tax, a special alternative minimum tax in the case of nonresident alien
individuals.
OTHER TAX CONSEQUENCES
Post's shareholders may be subject to state or local taxation in various
state or local jurisdictions, including those in which they own property,
transact business or reside. The state and local tax treatment of Post's
shareholders may not conform to the federal income tax consequences discussed
above (although shareholders who are individuals generally should not be
required to file state income tax returns outside of their state of residence
with respect to Post's operations and distributions).
TAXATION OF HOLDERS OF PREFERRED STOCK, DEPOSITARY SHARES AND DEBT SECURITIES
If Post offers one or more series of preferred stock or depositary shares,
or if Post Apartment Homes offers one or more series of debt securities, then
there may be tax consequences for the holders of such Securities not discussed
herein. For a discussion of any such additional consequences, see the applicable
prospectus supplement.
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PLAN OF DISTRIBUTION
We may sell any securities:
- through underwriters or dealers;
- through agents; or
- directly to one or more purchasers.
The distribution of the securities may be effected from time to time in one
or more transactions:
- at a fixed price or prices, which may be changed from time to time;
- at market prices prevailing at the time of sale; or
- at prices related to such prevailing market prices, or at negotiated
prices.
For each series of securities, the prospectus supplement will set forth the
terms of the offering including:
- the initial public offering price;
- the names of any underwriters, dealers or agents;
- the purchase price of the securities;
- our proceeds from the sale of the securities;
- any underwriting discounts, agency fees, or other compensation payable to
underwriters or agents;
- any discounts or concessions allowed or reallowed or repaid to dealers;
and
- the securities exchanges on which the securities will be listed, if any.
If we use underwriters in the sale, they will buy the securities for their
own account. The underwriters may then resell the securities in one or more
transactions at a fixed public offering price or at varying prices determined at
the time of sale or thereafter. The obligations of the underwriters to purchase
the securities will be subject to certain conditions. The underwriters will be
obligated to purchase all the securities offered if they purchase any
securities. Any initial public offering price and any discounts or concessions
allowed or re-allowed or paid to dealers may be changed from time to time. In
connection with an offering, underwriters and selling group members and their
affiliates may engage in transactions to stabilize, maintain or otherwise affect
the market price of the securities in accordance with applicable law.
If we use dealers in the sale, we will sell securities to such dealers as
principals. The dealers may then resell the securities to the public at varying
prices to be determined by such dealers at the time of resale. If we use agents
in the sale, they will use their reasonable best efforts to solicit purchases
for the period of their appointment. If we sell directly, no underwriters or
agents would be involved. We are not making an offer of securities in any state
that does not permit such an offer.
Underwriters, dealers and agents that participate in the securities
distribution may be deemed to be underwriters as defined in the Securities Act
of 1933. Any discounts, commissions, or profit they receive when they resell the
securities may be treated as underwriting discounts and commissions under that
Act. We may have agreements with
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underwriters, dealers and agents to indemnify them against certain civil
liabilities, including certain liabilities under the Securities Act of 1933, or
to contribute with respect to payments that they may be required to make.
We may authorize underwriters, dealers or agents to solicit offers from
certain institutions whereby the institution contractually agrees to purchase
the securities from us on a future date at a specific price. This type of
contract may be made only with institutions that we specifically approve. Such
institutions could include banks, insurance companies, pension funds, investment
companies and educational and charitable institutions. The underwriters, dealers
or agents will not be responsible for the validity or performance of these
contracts.
The securities, other than the common stock, will be new issues of
securities with no established trading market and unless otherwise specified in
the applicable prospectus supplement, we will not list any series of the
securities on any exchange. It has not presently been established whether the
underwriters, if any, of the securities will make a market in the securities. If
the underwriters make a market in the securities, such market making may be
discontinued at any time without notice. No assurance can be given as to the
liquidity of the trading market for the securities.
LEGAL MATTERS
King & Spalding will pass upon the legality of the securities offered by
this prospectus. King & Spalding will pass upon certain tax matters related to
Post. Herschel M. Bloom, a member of King & Spalding, is a director of Post. Any
underwriters, dealers or agents will be represented by their own legal counsel.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference to the Annual Report on Form 10-K of Post Properties, Inc. and Post
Apartment Homes, L.P. for the year ended December 31, 1999, have been so
incorporated in reliance on the reports of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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$185,000,000
(POST LOGO)
POST APARTMENT HOMES, L.P.
7.7% NOTES DUE 2010
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PROSPECTUS SUPPLEMENT
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MERRILL LYNCH & CO.
FIRST UNION SECURITIES, INC.
WACHOVIA SECURITIES, INC.
DECEMBER 15, 2000
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