<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________________
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-12080
________________________
POST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1550675
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
3350 CUMBERLAND CIRCLE, SUITE 2200, ATLANTA, GEORGIA 30339
(Address of principal executive offices -- zip code)
(770) 850-4400
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
________________________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
21,717,051 shares of common stock outstanding as of April 29, 1996.
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<PAGE> 2
POST PROPERTIES, INC.
INDEX
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION PAGE
----
<S> <C>
ITEM 1 FINANCIAL STATEMENTS
Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 . . . . . . . . . 2
Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Consolidated Statement of Shareholders' Equity and Accumulated Earnings for the
three months ended March 31, 1996 . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
PART II OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . 23
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
</TABLE>
- 1 -
<PAGE> 3
POST PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 134,442 $ 118,988
Building and improvements . . . . . . . . . . . . . . . . . . . . . . . . . 661,539 589,869
Furniture, fixtures and equipment . . . . . . . . . . . . . . . . . . . . . 70,291 67,354
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . 86,399 149,514
Land held for future development . . . . . . . . . . . . . . . . . . . . . 4,168 12,199
---------- -----------
956,839 937,924
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (161,973) (156,824)
---------- -----------
Operating real estate assets . . . . . . . . . . . . . . . . . . . . . . 794,866 781,100
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383 9,008
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,151 1,146
Deferred charges, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,138 7,241
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,157 14,489
---------- -----------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 819,695 $ 812,984
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 354,431 $ 349,719
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . 3,894 3,965
Dividend and distribution payable . . . . . . . . . . . . . . . . . . . . . . 14,469 13,091
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . 16,496 16,023
Deferred swap income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 331
Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . . . 4,443 4,366
---------- -----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394,022 387,495
---------- -----------
Minority interest of unitholders in Operating Partnership . . . . . . . . . . 81,644 81,865
---------- -----------
Commitments and contingencies
Shareholders' equity
Preferred stock, $.01 per value, 20,000,000 authorized,
0 shares issued and outstanding . . . . . . . . . . . . . . . . . . . . - -
Common stock, $.01 par value, 100,000,000 authorized,
21,656,115 and 21,577,636 shares issued and outstanding at
March 31, 1996 and December 31, 1995, respectively . . . . . . . . . . . 217 216
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 343,812 343,408
Accumulated earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
---------- -----------
Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 344,029 343,624
---------- -----------
Total liabilities and shareholders' equity . . . . . . . . . . . . . . . $ 819,695 $ 812,984
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 2 -
<PAGE> 4
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUES
Rental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,291 $ 31,082
Property management - third party . . . . . . . . . . . . . . . . . . . . . . . . . . 733 577
Landscape services - third party . . . . . . . . . . . . . . . . . . . . . . . . . . 912 809
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 39
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,140 656
----------- -----------
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,205 33,163
----------- -----------
EXPENSES
Property operating and maintenance (exclusive of items shown separately below) . . . 12,796 11,420
Depreciation and amortization (real estate assets) . . . . . . . . . . . . . . . . . 4,965 5,087
Depreciation and amortization (non-real estate assets) . . . . . . . . . . . . . . . 253 106
Property management - third party . . . . . . . . . . . . . . . . . . . . . . . . . . 570 566
Landscape services - third party . . . . . . . . . . . . . . . . . . . . . . . . . . 768 688
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,057 5,077
Amortization of deferred loan costs, interest rate protection agreement and swap
gain, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352 483
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,012 1,575
Minority interest in consolidated property partnership . . . . . . . . . . . . . . . - 196
----------- -----------
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,773 25,198
----------- -----------
Income before minority interest of unitholders in Operating Partnership and
extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,432 7,965
Minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . . (2,386) (1,842)
----------- -----------
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . 10,046 6,123
Extraordinary item, net of minority interest of unitholders in
Operating Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (120)
----------- -----------
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,046 $ 6,003
=========== ===========
Per share data:
Weighted average common shares outstanding . . . . . . . . . . . . . . . . . . . . .
21,646,708 17,322,233
=========== ===========
Income before extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.46 $ 0.35
=========== ===========
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.46 $ 0.35
=========== ===========
Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.54 $ 0.49
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 3 -
<PAGE> 5
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL EARNINGS TOTAL
------- --------- ----------- ----------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, DECEMBER 31, 1995 . . . . . . . . . . . . . . . $ 216 $343,408 $ - $343,624
Proceeds from Dividend Reinvestment and
Employee Stock Purchase Plans . . . . . . . . . . 1 2,220 - 2,221
Adjustment for minority interest of unitholders in
Operating Partnership to proceeds from Dividend
Reinvestment and Employee Stock Purchase Plans . . - (168) - (168)
Net income . . . . . . . . . . . . . . . . . . . . . . . - - 10,046 10,046
Dividends paid . . . . . . . . . . . . . . . . . . . . . - - -
Dividends declared . . . . . . . . . . . . . . . . . . . (1,648) (10,046) (11,694)
------- -------- --------- --------
SHAREHOLDERS' EQUITY AND ACCUMULATED
EARNINGS, MARCH 31, 1996 . . . . . . . . . . . . . . . . $ 217 $343,812 $ - $344,029
======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 4 -
<PAGE> 6
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1996 1995
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,046 $ 6,003
Adjustments to reconcile net income to net cash provided by
operating activities:
Minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . 2,386 1,842
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,218 5,193
Amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209 339
Write-off of deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . - 155
Amortization of interest rate protection agreement and swap gain . . . . . . . . . 143 144
Changes in assets, (increase) decrease in:
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 7,006
Deferred charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (90)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (751) 679
Changes in liabilities, increase (decrease) in:
Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71) (762)
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . 3,136 707
Security deposits and prepaid rents . . . . . . . . . . . . . . . . . . . . . . . . 77 (64)
- (35)
--------- ---------
Minority interest of unitholders in Operating Partnership . . . . . . . . . . . . . 20,388 21,117
--------- ---------
Net cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM INVESTING ACTIVITIES
Construction of real estate assets and land acquisitions, net of payables . . . . . . (19,591) (24,400)
Capitalized interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,115) (1,726)
Recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (466) (362)
Corporate additions and improvements . . . . . . . . . . . . . . . . . . . . . . . . (204) (292)
(136) (69)
--------- ---------
Non-recurring capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . .
(21,512) (26,849)
--------- ---------
Net cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . .
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (343) (601)
Debt proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,364 95,497
Debt payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (44,652) (87,745)
Capital distributions to unitholders . . . . . . . . . . . . . . . . . . . . . . . . (2,518) (2,356)
Proceeds from Dividend Reinvestment and Employee Stock Purchase Plans . . . . . . . . 2,221 4,992
(10,573) (7,737)
--------- ---------
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,501) 2,050
--------- ---------
Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . .
Net (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . (7,625) (3,682)
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . 9,008 5,292
--------- ---------
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . . . . . . . . $ 1,383 $ 1,610
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 5 -
<PAGE> 7
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND FORMATION OF THE COMPANY
ORGANIZATION AND FORMATION OF THE COMPANY
Post Properties, Inc. (the "Company"), which was incorporated on January
25, 1984, is the successor by merger to the original Post Properties, Inc.,
a Georgia Corporation which was formed in 1971. The Company was formed to
develop, lease and manage upscale multi-family apartment communities.
The Company elected to be taxed as a real estate investment trust ("REIT")
for Federal income tax purposes beginning with the taxable year ended
December 31, 1993. A corporate REIT is a legal entity which holds real
estate interests and, through payments of dividends to shareholders, is
permitted to reduce or avoid the payment of Federal income taxes at the
corporate level.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Company's management in accordance with generally accepted accounting
principles for interim financial information and in conjunction with the
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only
of normally recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the three
month period ended March 31, 1996 are not necessarily indicative of the
results that may be expected for the full year. These financial statements
should be read in conjunction with the Company's audited financial
statements and notes thereto included in the Post Properties, Inc. Annual
Report on Form 10-K for the year ended December 31, 1995. Certain items in
the Consolidated Statements of Operations and of Cash Flows for the three
months ended March 31, 1995 were reclassified for comparative purposes.
2. NOTES PAYABLE
CONVENTIONAL MORTGAGES PAYABLE
Conventional mortgages payable were comprised of four loans aggregating
$33,393 at March 31, 1996, each of which is collateralized by an apartment
community included in real estate assets.
BOND INDEBTEDNESS
Certain of the apartment communities are encumbered to secure tax-exempt
housing bonds. Such bonds are generally payable in monthly or semi-annual
installments of interest only and mature at various dates through 2025.
Bond indebtedness totalling $149,038 was outstanding at March 31, 1996.
LINE OF CREDIT
At March 31, 1996, the Company's line of credit consisted of an unsecured
revolving line of credit (the "Revolver") in the amount of $180,000. At
March 31, 1996, the outstanding balance of the Revolver was $72,000.
SENIOR UNSECURED NOTES
At March 31, 1996, the Company had outstanding senior unsecured notes
aggregating $100,000 with The Northwestern Mutual Life Insurance Company
and Wachovia Bank of Georgia, N.A.
- 6 -
<PAGE> 8
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
3. EXTRAORDINARY ITEM
The extraordinary item for the three months ended March 31, 1995 resulted
from costs associated with the early extinguishment of indebtedness. The
extraordinary item is net of the minority interest ($35) of the unitholders
calculated on the basis of weighted average units and shares outstanding
for the period.
4. EARNINGS PER SHARE
Primary earnings per share for income before extraordinary item and net
income has been computed by dividing income before extraordinary item and
net income by the weighted average number of shares outstanding. This
method derives the same per share information as the "two-class" method
prescribed for REIT's. The weighted average number of shares outstanding
utilized in the calculations are 21,646,708 and 17,322,233 for the three
months ended March 31, 1996 and 1995, respectively.
The non-recurring extraordinary items recognized had no effect on
primary earnings per share in the three months ended March 31, 1995.
5. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the three months ended
March 31, 1996 and 1995 are as follows:
(a) During the three months ended March 31, 1995, holders of 81,247
units in Post Apartment Homes, L.P. (the "Operating Partnership")
exercised their option to convert their units to shares of Common
Stock of the Company on a one-for-one basis. The net effect of
these conversions was a reclassification of minority interest to
shareholders' equity in the amount of $612.
(b) The Operating Partnership committed to distribute $14,469 and
$11,077 for the quarters ended March 31, 1996 and 1995,
respectively. As a result, the Company declared a dividend of
$.54 and $.49 per common share or $11,694 and $8,551 for the
quarters ended March 31, 1996 and 1995, respectively. The
remaining distributions from the Operating Partnership in the
amount of $2,775 and $2,526, respectively, were distributed to
minority interest unitholders in the Operating Partnership.
- 7 -
<PAGE> 9
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with all of the
financial statements appearing elsewhere in this report. The following
discussion is based primarily on the Consolidated Financial Statements of Post
Properties, Inc.
As of March 31, 1996, there were 26,795,358 units in the Operating Partnership
outstanding, of which 21,656,115, or 80.8%, were owned by the Company and
5,139,243, or 19.2% were owned by other limited partners (including certain
officers and directors of the Company).
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1996, AND 1995
The Company recorded net income of $10,046, for the three months ended March
31, 1996, an increase of $4,043 over the prior corresponding period primarily
as a result of increased rental rates for fully stabilized communities and an
increase in apartment units placed in service.
COMMUNITY OPERATIONS
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is generally
considered by the Company to have achieved stabilized occupancy on the earlier
to occur of (i) attainment of 95% physical occupancy on the first day of any
month or (ii) one year after completion of construction.
Currently, the Company's portfolio of apartment communities consisted of
thirty-seven communities and the first phase of two additional communities
which were completed and stabilized for all of the current and prior year,
three communities and the second phase of an existing community which achieved
full stabilization during the prior year, three communities which reached
stabilization during 1996 and seven communities and a second phase of an
existing community in the development or lease-up stage.
For communities with respect to which construction is completed and the
community has become fully operational, all property operating and maintenance
expenses are expensed as incurred and those recurring and non-recurring
expenditures relating to acquiring new assets, materially enhancing the value
of an existing asset, or substantially extending the useful life of an existing
asset are capitalized. (See "Capitalization of Fixed Assets and Community
Improvements").
The Company has adopted an accounting policy related to communities in the
development and lease-up stage whereby substantially all operating expenses
(including pre-opening marketing expenses) are expensed as incurred. The
Company treats each unit in an apartment community separately for cost
accumulation, capitalization and expense recognition purposes. Prior to the
commencement of leasing activities, interest and other construction costs are
capitalized and reflected on the balance sheet as construction in progress.
Once a unit is placed in service, all operating expenses allocated to that
unit, including interest, are expensed as incurred. During the lease-up phase,
the sum of interest expense on completed units and other operating expenses
(including pre-opening marketing expenses) will typically exceed rental
revenues, resulting in a "lease-up deficit," which continues until such time as
rental revenues exceed such expenses.
- 8 -
<PAGE> 10
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Therefore, in order to evaluate the operating performance of its communities,
the Company has presented financial information which summarizes the operating
income on a comparative basis for all of its operating communities combined
and for communities which have reached stabilization prior to January 1, 1995.
The Company has also presented quarterly financial information reflecting the
dilutive impact of lease-up deficits incurred for communities in the
development and lease-up stage and not yet operating at break-even. In this
presentation, only those communities which were dilutive during the period are
included and, accordingly, different communities may be included in each
period.
ALL OPERATING COMMUNITIES
The operating performance for all of the Company's apartment communities
combined for the three months ended March 31, 1996 and 1995 is summarized as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------------------
1996 1995 % CHANGE
-------- -------- ------------
<S> <C> <C> <C>
Rental and other revenue:
Fully stabilized communities (1) . . . . . . . . . . . . . . . . . $31,069 $29,334 5.9 %
Communities stabilized during 1995 . . . . . . . . . . . . . . . . 2,296 761 201.7 %
Development and lease-up communities (2) . . . . . . . . . . . . . 3,377 50 N/A
Sold communities (3) . . . . . . . . . . . . . . . . . . . . . . . . - 1,049 (100.0)%
Other revenue (4) . . . . . . . . . . . . . . . . . . . . . . . . . 689 544 26.7 %
------- ------- -------
37,431 31,738 17.9 %
------- ------- -------
Property operating and maintenance expense
(exclusive of depreciation and amortization):
Fully stabilized communities . . . . . . . . . . . . . . . . . . . 9,786 9,293 5.3 %
Communities stabilized during 1995 . . . . . . . . . . . . . . . . 615 397 54.9 %
Development and lease-up communities . . . . . . . . . . . . . . . 1,504 323 365.6 %
Sold communities . . . . . . . . . . . . . . . . . . . . . . . . . - 415 (100.0)%
Other expenses (5) . . . . . . . . . . . . . . . . . . . . . . . . 891 992 (10.2)%
12,796 11,420 12.0 %
------- ------- -------
Revenue in excess of specified expense . . . . . . . . . . . . . . . $24,635 $20,318 21.2 %
======= ======= =======
Recurring capital expenditures: (6)
Carpet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 174 $ 192 (9.4)%
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292 170 7.2 %
------- ------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 466 $ 362 28.7 %
------- ------- -------
Average apartment units in service . . . . . . . . . . . . . . . . . 16,369 15,164 7.9 %
======= ======= =======
Recurring capital expenditures per unit . . . . . . . . . . . . . . . $ 28 $ 24 16.7 %
======= ======= =======
</TABLE>
- 9 -
<PAGE> 11
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) Communities which reached stabilization prior to January 1, 1995.
(2) Communities in the "construction", "development" or "lease-up" stage during
1996 and, therefore, not considered fully stabilized for all of the periods
presented.
(3) Communities which were sold on September 13, 1995.
(4) Other revenue includes revenue on furnished apartment rentals above the
unfurnished rental rates and any revenue not directly related to property
operations.
(5) Other expenses includes certain indirect central office operating expenses
related to management, grounds maintenance, and costs associated with
furnished apartment rentals.
(6) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing asset,
or substantially extending the useful life of an existing asset, all of
which are capitalized.
For the quarter ended March 31, 1996, rental and other revenue increased
$5,693, or 17.9%, compared to the same period in the prior year, primarily as a
result of increased rates for fully stabilized communities and an increase in
units placed in service, partially offset by a decrease in rental and other
revenue due to the sale of three communities during the third quarter of 1995.
Rental and other revenue from communities stabilized since January 1, 1995,
increased $1,735, or 5.9%, compared to the same period in the prior year,
primarily as a result of higher rental rates. Rental and other revenue from
communities stabilized during 1995 and development and lease-up communities
increased $4,862, compared to the same period in the prior year, primarily due
to additional units placed in service. The historical operating results
include, for the three months ended March 31, 1995, revenues and expenses
related to three communities sold on September 13, 1995, all of which had been
previously included in the fully stabilized communities group.
Property operating and maintenance expenses (exclusive of depreciation and
amortization) increased primarily due to the increase in the units placed in
service from the first quarter of 1995 to the first quarter of 1996.
- 10 -
<PAGE> 12
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FULLY STABILIZED COMMUNITIES
The Company defines fully stabilized communities as those which have reached
stabilization prior to the beginning of the previous calendar year.
The operating performance of the 37 communities and the first phase of two
additional communities containing an aggregate of 14,160 units which were fully
stabilized as of January 1, 1995, are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
1996 1995 % Change
-------- ------- --------
<S> <C> <C> <C>
Rental and other revenue . . . . . . . . . . . . . . . . . . . . . . . . $ 31,069 $29,334 5.9 %
Property operating and maintenance expense
(exclusive of depreciation and amortization) . . . . . . . . . . . . . 9,786 9,293 5.3 %
-------- -------
Revenue in excess of specified expense . . . . . . . . . . . . . . . . . $ 21,283 $20,041 6.2 %
======== =======
Recurring capital expenditures:(1)
Carpet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 174 $ 171 1.8 %
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287 110 160.9 %
-------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 461 $ 281 64.1 %
======== =======
Recurring capital expenditures per unit (2) . . . . . . . . . . . . . . . $ 33 $ 20 65.0 %
======== =======
Average economic occupancy (3) . . . . . . . . . . . . . . . . . . . . . 95.5% 95.9%
======== =======
Average monthly rental rate per apartment
unit(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 746 $ 706 5.7 %
======== =======
Apartment units in service . . . . . . . . . . . . . . . . . . . . . . . 14,160 14,160 -
======== =======
</TABLE>
(1) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing asset,
or substantially extending the useful life of an existing asset, all of
which are capitalized.
(2) In addition to such capitalized expenditures, the Company expensed $120 and
$43, per unit, on building maintenance and landscaping (inclusive of
salaries) and such amounts were included in property operating and
maintenance expense.
(3) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts. (Average economic occupancy, including these amounts would have
been 95.1% and 95.5% for the three months ended March 31, 1996 and 1995,
respectively.) Concessions were $62 and $62 and employee discounts were
$71 and $59, for the quarters ended March 31, 1996 and 1995, respectively.
(4) Average monthly rental rate is defined as the average of the gross actual
rental rates for occupied units and the
- 11 -
<PAGE> 13
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
anticipated rental rates for unoccupied units.
During the first quarter of 1996, rental and other revenue increased due to
higher rental rates with occupancy remaining relatively stable. Property
operating and maintenance expenses (exclusive of depreciation and amortization)
increased $494, or 5.3%, compared to the same period in the prior year,
primarily as a result of ad valorem real estate taxes, which were up 13.3% as a
result of increased valuations in the second quarter of 1995.
LEASE-UP DEFICITS
As noted in the overview of Community Operations, the Company has adopted an
accounting policy related to communities in the development and lease-up stage
whereby substantially all operating expenses (including pre-opening marketing
expenses) are expensed as incurred. The Company treats each unit in an
apartment community separately for cost accumulation, capitalization and
expense recognition purposes. Prior to the commencement of leasing activities,
interest as well as other construction costs are capitalized and reflected on
the balance sheet as construction in progress. Once a unit is placed in
service, all expenses allocated to that unit, including interest, are expensed
as incurred. During the lease-up phase, the sum of interest expense on
completed units and other operating expenses (including pre-opening marketing
expenses) will typically exceed rental revenues, resulting in a "lease-up
deficit," which continues until rental revenues exceed such expenses.
In this presentation, only those communities which were dilutive for the
respective period are included and, accordingly, different communities may be
included in different quarters.
For the three months ended March 31, 1996 and 1995, the "lease-up deficit"
charged to and included in results of operations are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-----------------------
1996 1995
------- --------
<S> <C> <C>
Rental and other revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 574 $ 282
Property operating and maintenance expense (exclusive of
depreciation and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469 450
----- -----
Revenue in excess of specified expense . . . . . . . . . . . . . . . . . . . . . . . . . 105 (168)
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 175
----- -----
Lease-up deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(233) $(343)
===== =====
</TABLE>
- 12 -
<PAGE> 14
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THIRD PARTY MANAGEMENT SERVICES
The Company provides asset management, leasing and other consulting services to
non-related owners of apartment communities through two of its subsidiaries,
RAM Partners, Inc. ("RAM") and Post Asset Management, Inc. ("Post Asset
Management").
The operating performance of RAM and Post Asset Management for the three months
ended March 31, 1996 and 1995 are summarized as follows:
RAM PARTNERS, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
1996 1995 % Change
<S> <C> <C> <C>
Property management and other revenue . . . . . . . . . . . . . . . . . . $ 660 $ 528 25.0%
Property management expense . . . . . . . . . . . . . . . . . . . . . . . 356 318 11.9%
General and administrative expense . . . . . . . . . . . . . . . . . . . 118 118 -
------ ------ ------
Revenue in excess of specified expense . . . . . . . . . . . . . . . . . $ 186 $ 92 102.2%
====== ====== ======
Average apartment units in service . . . . . . . . . . . . . . . . . . . 9,906 8,321 19.0%
====== ====== ======
</TABLE>
The increase in property management revenues and expenses from 1995 to 1996 is
primarily attributable to the increase in the average number and the average
gross revenues of units managed.
POST ASSET MANAGEMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1996 1995 % Change
-------- -------- ---------
<S> <C> <C> <C>
Property management and other revenue . . . . . . . . . . . . . . . . . . $ 81 $ 127 (36.2)%
Property management expense . . . . . . . . . . . . . . . . . . . . . . . 82 100 (18.0)%
General and administrative expense . . . . . . . . . . . . . . . . . . . 14 20 (30.0)%
------- ------ ------
(Expense)\revenue in excess of specified revenue\expense . . . . . . . . $ (15) $ 7 (314.3)%
======= ====== ======
Average apartment units in service . . . . . . . . . . . . . . . . . . . 866 1,256 (31.1)%
======= ====== ======
</TABLE>
Property management revenues and the related expenses decreased for the three
months ended March 31, 1996, compared to the same period in 1995 primarily due
to the reduction in the average number of apartment units managed. This
reduction was primarily due to two management contracts which were cancelled
effective January 1996.
- 13 -
<PAGE> 15
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
THIRD PARTY LANDSCAPE SERVICES
The Company provides landscape maintenance, design and installation services to
non-related parties through a subsidiary, Post Landscape Services, Inc. ("Post
Landscape Services").
The operating performance of Post Landscape Services for the three months ended
March 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
1996 1995 % Change
------- --------- --------
<S> <C> <C> <C>
Landscape services and other revenue . . . . . . . . . . . . . . . . . . $912 $814 12.0%
Landscape services expense . . . . . . . . . . . . . . . . . . . . . . . 667 592 12.7%
General and administrative expense . . . . . . . . . . . . . . . . . . . 101 96 5.2%
---- ---- ----
Revenue in excess of specified expense . . . . . . . . . . . . . . . . . $144 $126 14.3%
==== ==== ====
</TABLE>
The increase in landscape services revenue, landscape service expense and
general and administrative expense for the three months ended March 31, 1996,
compared to the same period in 1995, is primarily due to increases in landscape
contracts.
OTHER INCOME AND EXPENSES
General and administrative expense increased for the three months ended March
31, 1996, compared to the same period in the prior year, primarily as a result
of increased travel expenses and personnel costs.
The extraordinary item of $120 for the three months ended March 31, 1995, net
of minority interest portion, resulted from the costs associated with the early
retirement of debt.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's net cash provided by operating activities decreased from $21,117
in the three months ended March 31, 1995 to $20,388 in the three months ended
March 31, 1996, principally due to changes in the Company's working capital.
Net cash used in investing activities decreased from $26,849 in the three
months ended March 31, 1995, to $21,512 in the three months ended March 31,
1996, principally due to the decrease in construction activities relating to
new development. The Company's net cash provided by (used in) financing
activities decreased from $2,050 in the three months ended March 31, 1995 to
$(6,501) in the three months ended March 31, 1996 due to a decrease in
borrowing activity to fund development and an increase in dividends paid for
the three months ended March 31, 1996.
The Company has elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended, commencing with its taxable year ended December 31, 1993. REITs are
subject to a number of organizational and operational requirements, including a
requirement that they currently distribute 95% of their ordinary taxable
income. The Company generally will not be subject to Federal income tax on net
income.
- 14 -
<PAGE> 16
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
At March 31, 1996, the Company had total indebtedness of $354,431 and cash and
cash equivalents of $1,383. The Company's indebtedness includes approximately
$33,393 in conventional mortgages payable secured by individual communities,
tax-exempt bond indebtedness of $149,038, senior unsecured notes of $100,000
and borrowings under an unsecured line of credit of approximately $72,000.
The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under credit
arrangements and expects to meet certain of its long-term liquidity
requirements, such as scheduled debt maturities, repayment of financing of
construction and development activities and possible property acquisitions,
through long-term secured and unsecured borrowings and the issuance of debt
securities or additional equity securities of the Company, sales of
communities, or, possibly in connection with acquisitions of land or improved
properties, Units of the Operating Partnership. The Company believes that its
net cash provided by operations will be adequate and anticipates that it will
continue to be adequate to meet both operating requirements and payment of
dividends by the Company in accordance with REIT requirements in both the short
and the long term. The budgeted expenditures for improvements and renovations
to certain of the communities are expected to be funded from property
operations.
Line Of Credit
On February 1, 1995, the Company closed a 39-month unsecured revolving line of
credit (the "Revolver") in the amount of $180,000 with a bank syndicate to
provide funding for future construction, acquisitions and general business
obligations. Borrowings under the Revolver initially bore interest at LIBOR
plus 1.50% or prime minus .25% and had a maturity date of May 1, 1998. The
credit agreement for the Revolver contains customary representations, covenants
and events of default, including covenants which restrict the ability of the
Operating Partnership to make distributions, in excess of stated amounts, which
in turn restricts the discretion of the Company to declare and pay dividends.
In general, during any fiscal year the Operating Partnership may only
distribute up to 100% of the Operating Partnership's consolidated income
available for distribution (as defined in the credit agreement) exclusive of
distributions of up to $30,000 of capital gains for such year. The credit
agreement contains exceptions to these limitations to allow the Operating
Partnership to make distributions necessary to allow the Company to maintain
its status as a REIT. The Company does not anticipate that this covenant will
adversely affect the ability of the Operating Partnership to make
distributions, or the Company to declare dividends, under the Company's current
dividend policy.
On March 1, 1996 the Revolver was amended to reduce the interest rate to LIBOR
plus 0.95% or prime minus .25% and to extend the maturity to May 1, 1999. The
amendment also provides for the rate to be adjusted up or down based on changes
in the Company's rating on senior unsecured debt. At March 31, 1996, the
Company had $108,000 available under the Revolver to fund future development
and general corporate obligations.
In addition, the Company has a $3,000 facility to provide letters of credit for
general business purposes.
Northwestern Mutual Unsecured Loans
On June 7, 1995, the Company privately placed $50,000 of unsecured senior notes
with The Northwestern Mutual Life Insurance Company (the "NML Notes"). The NML
Notes were in two tranches: the first, aggregating $30,000, carries an interest
rate of 8.21% per annum (1.25% over the corresponding treasury rate on
the date such rate was set) and matures on June 7, 2000; and the second,
aggregating $20,000 carries an interest rate of 8.37% per annum (1.35% over the
corresponding treasury rate on the date such rate was set) and matures on June
7, 2002. Proceeds from the issuance of the NML Notes were used to reduce
secured indebtedness and to pay down the Revolver. The note agreements
pursuant to which the NML Notes were purchased contain representations,
covenants and events of default
- 15 -
<PAGE> 17
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
similar to those contained in the note agreement for the Revolver.
Wachovia Unsecured Loans
On September 29, 1995, the Company privately placed $50,000 of unsecured senior
notes with Wachovia Bank of Georgia, N.A. (the "Wachovia Notes"). The Wachovia
Notes were in two tranches: the first tranche, aggregating $25,000, will
mature on September 29, 1999; the second tranche, aggregating $25,000 will
mature on September 29, 2001. Both tranches bear interest at 7.15% per annum
(1.10% over the corresponding treasury rate on the date such rate was set).
Proceeds from the issuance of the Wachovia Notes were used to reduce
indebtedness outstanding on the Revolver. The credit agreement for the notes
contain representations, covenants and events of default similar to those
contained in the note agreement for the Revolver.
Tax Exempt Bonds
On June 29, 1995, the Company replaced the bank letters of credit providing
credit enhancement for twelve of its outstanding tax-exempt bonds and three of
its economically defeased tax-exempt bonds. Under an agreement with the Federal
National Mortgage Association ("FNMA"), FNMA now provides, directly or
indirectly through other bank letters of credit, credit enhancement with
respect to such bonds. Under the terms of such agreement, FNMA has provided
replacement credit enhancement through 2025 for five bond issues, aggregating
$52,675, which were reissued, and has agreed, subject to certain conditions,
to provide credit enhancement through June 1, 2025 for up to an additional
$101,853 with respect to ten other bond issues which mature and may be refunded
in 1996 through 1998. The agreement with FNMA contains representations,
covenants, and events of default customary to such secured loans.
Other Activities
During the first quarter of 1996, the Company contracted to reacquire three
contiguous Atlanta apartment communities, containing 810 units, which the
Company developed in the early 1980's and managed under the Post(R) brand name
through mid-1993. The Company's capital investment will be approximately $48
million, or $59,000 per unit, and the transaction is expected to close during
the second quarter of 1996. Following the Company's purchase, the Company
intends once again to operate these three communities under the Post(R) brand
name.
In addition, the Company listed in April 1996 two communities in Florida,
containing a total of 596 units, for sale.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the
Company under the DRIP, shareholders may elect for their dividends to be used
to acquire additional shares of the Company's Common Stock directly from the
Company, for 95% of the market price on the date of purchase.
- 16 -
<PAGE> 18
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Schedule of Indebtedness
The following table reflects the Company's indebtedness at March 31, 1996:
<TABLE>
<CAPTION>
Maturity Principal
Community Location Interest Rate Date(1) Balance
- ------------------------------- -------- ------------- ------------- ---------
Tax Exempt Fixed Rate (Secured)
<S> <C> <C> <C> <C>
Post Canyon . . . . . . . . . . . . . . Atlanta, GA 7.4% + .575% (2)(3) 07/01/96(4) $ 16,845
Post Corners . . . . . . . . . . . . . Atlanta, GA 7.4% + .575% (2)(3) 08/01/96(4) 14,760
Post Bridge . . . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 01/01/97(4) 9,960
Post Village (Atlanta) Gardens . . . . Atlanta, GA 7.5% + .575% (2)(3) 01/01/97(4) 14,500
Post Chase . . . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 07/01/97(4) 12,000
Post Walk . . . . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 07/01/97(4) 15,000
Post Court . . . . . . . . . . . . . . Atlanta, GA 7.5% + .575% (2)(3) 06/01/98(4) 13,298
--------
96,363
--------
CONVENTIONAL FIXED RATE (SECURED)
Post Village (Atlanta) Arbors . . . . . Atlanta, GA 8.16% 02/10/97 7,706
Post Summit . . . . . . . . . . . . . . Atlanta, GA 7.72% 02/01/98 5,362
Post River . . . . . . . . . . . . . . Atlanta, GA 7.72% 03/01/98 5,925
--------
18,993
--------
TAX EXEMPT FLOATING RATE (SECURED)
Post Ashford Series 1995 . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 9,895
Post Valley Series 1995 . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 18,600
Post Brook Series 1995 . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 4,300
Post Village (Atlanta) Hills . . . . .
Series 1995 . . . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575% (2)(3) 06/01/2025 7,000
Post Mill . . . . . . . . . . . . . . . Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 12,880
--------
52,675
--------
CONVENTIONAL FLOATING RATE (SECURED)
Post Renaissance (Phase I and II) . . . Atlanta, GA LIBOR + .85% 07/01/98 14,400
--------
14,400
--------
SENIOR NOTES (UNSECURED)
Wachovia Bank of Georgia . . . . . . . N/A 7.15% 09/29/99 25,000
Northwestern Mutual Life . . . . . . . N/A 8.21% 06/07/2000 30,000
Wachovia Bank of Georgia . . . . . . . N/A 7.15% 09/29/2001 25,000
Northwestern Mutual Life . . . . . . . N/A 8.37% 06/07/2002 20,000
--------
100,000
--------
LINE OF CREDIT (UNSECURED)
Revolver . . . . . . . . . . . . . . . N/A LIBOR + .95% or prime minus .25%(5) 05/01/99 72,000
--------
72,000
--------
TOTAL . . . . . . . . . . . . . . . . . $354,431
========
</TABLE>
- 17 -
<PAGE> 19
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
- -------------------
(1) All of the mortgages can be prepaid at any time, subject to certain
prepayment penalties. All dates listed are final maturity dates assuming
the exercise of any available extension option by the Company.
(2) Bond financed (interest rate on bonds + credit enhancement fees).
(3) These bonds are also secured by Post Fountains at Lee Vista, Post Lake
(Orlando) and the Fountains and Meadows of Post Village for which the
Company has economically defeased their respective bond indebtedness.
(4) Subject to certain conditions at re-issuance, the credit enhancement runs
to June 1, 2025.
(5) On June 4, 1996, the Company received a credit rating upgrade which
further reduced the interest rate on the Revolver to LIBOR + 0.8%.
Refundable Tax Exempt Bonds
The Company has previously issued tax-exempt bonds, secured by certain
communities, totalling $235,880, of which $86,842 has been economically
defeased, leaving $149,038 of principal amount of tax-exempt bonds outstanding
at March 31, 1996. As of March 31, 1996, $52,675 of the bonds outstanding have
been reissued with a maturity of June 1, 2025. The remaining outstanding
bonds, together with the economically defeased bonds, mature and may be
reissued, during the years 1996 through 1998. The Company has chosen economic
defeasance of the bond obligations rather than a legal defeasance in order to
preserve the legal right to refund such obligations on a tax-exempt basis at
the stated maturity if the Company then determines that such refunding is
beneficial to the Company.
The following table shows the amount of bonds (both defeased and outstanding)
at March 31, 1996, which the Company may reissue during the years 1996 through
2025:
<TABLE>
<CAPTION>
DEFEASED OUTSTANDING TOTAL REISSUE
PORTION PORTION CAPACITY
---------- ----------- -------------
<S> <C> <C> <C>
1996 $ $ 31,605 $ 31,605
-
1997 5,490 51,460 56,950
1998 81,352 13,298 94,650
Thereafter - 52,675 52,675
--------- -------- --------
$ 86,842 $149,038 $235,880
========= ======== ========
</TABLE>
- 18 -
<PAGE> 20
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Current Development Activity
The Company's communities under development or in initial lease-up are
summarized in the following table:
<TABLE>
<CAPTION>
ACTUAL OR ACTUAL OR UNITS
ESTIMATED CONSTRUCTION ESTIMATED ESTIMATED LEASED
CONSTRUCTION COST QUARTER OF QUARTER QUARTER AS OF
# OF COST EXPENDED TO DATE CONSTRUCTION FIRST UNITS OF STABILIZED APRIL 13,
METROPOLITAN AREA UNITS (MILLIONS)(1) (MILLIONS)(2) COMMENCEMENT AVAILABLE OCCUPANCY 1996
- ----------------- ----- ------------- --------------- ------------ ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Atlanta, GA
- -----------
Post Dunwoody - phase II 328 $ 23 $ 21 4Q'94 3Q'95 3Q'96 292
Post Terrace 296 25 16 2Q'95 1Q'96 4Q'96 154
Post Crest 410 31 20 1Q'95 1Q'96 1Q'97 217
Post Collier Hills 392 31 9 4Q'95 3Q'96 4Q'97 N/A
Post Glen 312 29 6 1Q'96 1Q'97 1Q'98 N/A
------ ------ ------ ------ ------ ------ ----
1,738 139 72 663
------ ------ ------ ------ ------ ------ ----
Tampa, FL
- ---------
Post Walk at Hyde Park 134 13 3 1Q'96 4Q'96 3Q'97 N/A
------ ------ ------ ------ ------ ------ ----
Charlotte, NC
- -------------
Post South Park 402 31 6 4Q'95 3Q'96 3Q'97 N/A
------ ------ ------ ------ ------ ------ ----
2,274 $ 183 $ 81 663
====== ====== ===== ----
</TABLE>
(1) Represents estimated total development costs, including capitalized
construction costs, lease-up deficits, and all construction period
interest.
(2) Construction cost incurred to date includes all costs associated with the
development and lease-up of the community, including interest and other
start-up costs which are expensed in the Company's consolidated financial
statements. These costs which were expensed amounted to approximately $329
at March 31, 1996.
The Company has also acquired a parcel in Atlanta on which it plans to build a
new community. The Home Depot, Inc. is constructing its corporate headquarters
campus and extensive infrastructure improvements are being made by the county
adjacent to the parcel. The Company will review its development plan for this
parcel closer to completion of these improvements. The Company is also
currently conducting feasibility and other pre-development studies for possible
new Post(R) communities in its primary market areas.
- 19 -
<PAGE> 21
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Capitalization of Fixed Assets and Community Improvements
The Company has established a policy of capitalizing those expenditures
relating to acquiring new assets, materially enhancing the value of an existing
asset, or substantially extending the useful life of an existing asset. All
expenditures necessary to maintain a community in ordinary operating condition
are expensed as incurred. During the first five years of a community (which
corresponds to the estimated depreciable life), carpet replacements are
expensed as incurred. Thereafter, carpet replacements are capitalized.
Acquisition of assets and community improvement expenditures for the three
months ended March 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
----------------------
1996 1995
------- -------
<S> <C> <C>
New community development and acquisition activity . . . . . . . . . . . . . . . . . . . $20,706 $26,126
Non-recurring capital expenditures:
Vehicle access control gates . . . . . . . . . . . . . . . . . . . . . . . . . . . - 69
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 -
Recurring capital expenditures:
Carpet replacements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 192
Community additions and improvements . . . . . . . . . . . . . . . . . . . . . . . 292 170
Corporate additions and improvements . . . . . . . . . . . . . . . . . . . . . . . 204 292
------- -------
$21,512 $26,849
======= =======
</TABLE>
INFLATION
Substantially all of the leases at the communities allow, at the time of
renewal, for adjustments in the rent payable thereunder, and thus may enable
the Company to seek increases in rents. The substantial majority of these
leases are for one year or less and the remaining leases are for up to two
years. At the expiration of a lease term, the Company's lease agreements
provide that the term will be extended unless either the Company or the lessee
gives at least sixty (60) days written notice of termination; in addition, the
Company's policy permits the earlier termination of a lease by a lessee upon
thirty (30) days written notice to the Company and the payment of one month's
additional rent as compensation for early termination. The short-term nature
of these leases generally serves to reduce the risk to the Company of the
adverse effect of inflation.
- 20 -
<PAGE> 22
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Historical Funds from Operations
The Company considers funds from operations ("FFO") an appropriate measure of
performance of an equity REIT. Funds from operations is defined to mean net
income (loss) determined in accordance with GAAP, excluding gains (or losses)
from debt restructuring and sales of property, plus depreciation of real estate
assets, and after adjustment for unconsolidated partnerships and joint
ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's financial
performance or to cash flow from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Company's needs. Cash
available for distribution ("CAD") is defined as FFO less capital expenditures
funded by operations and loan amortization payments. The Company believes that
in order to facilitate a clear understanding of the consolidated historical
operating results of the Company, FFO and CAD should be examined in
conjunction with net income as presented in the consolidated financial
statements and data included elsewhere in this report.
FFO and CAD for the three months ended March 31, 1996 and 1995 presented on a
historical basis are summarized in the following table:
Calculations of Funds from Operations and Cash Available for Distribution
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1996 1995
----------- -------------
<S> <C> <C>
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,046 $ 6,003
Extraordinary item, net of minority interest . . . . . . . . . . . . . . . . . . . . . - 120
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,386 1,842
----------- -----------
Adjusted net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,432 7,965
Depreciation and amortization (real estate assets) . . . . . . . . . . . . . . . . . . 4,965 5,087
----------- -----------
Funds from Operations (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,397 13,052
Recurring capital expenditures (2) . . . . . . . . . . . . . . . . . . . . . . . . . . (466) (362)
Non-recurring capital expenditures (3) . . . . . . . . . . . . . . . . . . . . . . . . (136) (69)
Loan amortization payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52) (48)
----------- -----------
Cash Available for Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 16,743 $ 12,573
=========== ===========
Cash Flow Provided From (Used In):
Operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 20,388 $ 21,117
Investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21,512) (26,849)
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,501) 2,050
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,646,708 17,322,233
=========== ===========
Weighted average shares and units outstanding . . . . . . . . . . . . . . . . . . . . . . 26,785,951 22,535,331
=========== ===========
</TABLE>
- 21 -
<PAGE> 23
POST PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(1) In March 1995, the National Association of Real Estate Investment
Trusts ("NAREIT") modified the definition of FFO, among other things, to
eliminate amortization of deferred financing costs and depreciation of
non-real estate assets as items added back to net income when
computing FFO. The modified definition of FFO became effective as of
January 1, 1996. Under the previous definition, FFO for the three months
ended March 31, 1996 and 1995 would have been $18,002 and $13,641,
respectively. Since all companies do not calculate FFO in accordance with
NAREIT'S modified definition, the Company's FFO is only comparable to those
companies using NAREIT'S modified definition.
(2) Recurring capital expenditures consisted primarily of $174 and $192 of
carpet replacement and $292 and $170 of other additions and improvements to
existing communities for the three months ended March 31, 1996 and 1995,
respectively. Since the Company does not add back the depreciation of
non-real estate assets in its calculation of FFO, capital expenditures of
$204 and $292 are excluded from the calculation of CAD for the three months
ended March 31, 1996 and 1995, respectively.
(3) Non-recurring capital expenditures consisted of community additions and
improvements of $136 and the addition of vehicle access control gates to
communities of $69 for the three months ended March 31, 1996 and 1995,
respectively.
- 22 -
<PAGE> 24
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None. The registrant agrees to furnish a copy of all agreements
relating to long-term debt upon request of the Commission.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March 31, 1996.
- 23 -
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POST PROPERTIES, INC.
June , 1996 /s/ John T. Glover
- ------------------------------- --------------------------------------
(Date) John T. Glover, President,
Chief Operating Officer, Treasurer
and a Director
(Principal Financial Officer)
June , 1996 /s/ R. Gregory Fox
- ------------------------------- --------------------------------------
(Date) R. Gregory Fox Senior Vice President,
Chief Accounting Officer
- 24 -
