<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-03555
333-03555-01
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED AUGUST 9, 1996)
POST APARTMENT HOMES, L.P.
[LOGO] POST APARTMENT HOMES, $100,000,000 7 1/4% NOTES DUE OCTOBER 1, 2003
L.P. $25,000,000 7 1/2% NOTES DUE OCTOBER 1, 2006
------------------------
The 7 1/4% Notes due October 1, 2003 (the "2003 Notes") and the 7 1/2% Notes
due October 1, 2006 (the "2006 Notes," and together with the 2003 Notes, the
"Notes") offered hereby (the "Offering") are being issued by Post Apartment
Homes, L.P., a Georgia limited partnership (the "Operating Partnership"), in
aggregate principal amounts of $100,000,000 and $25,000,000, respectively. The
Notes will mature on October 1, 2003 and October 1, 2006, respectively, and are
redeemable at any time at the option of the Operating Partnership, in whole or
in part, at a redemption price equal to the sum of (i) the principal amount of
the Notes being redeemed plus accrued interest to the redemption date and (ii)
the Make-Whole Amount (as defined in "Description of the Notes -- Optional
Redemption"), if any. The Notes are not subject to any mandatory sinking fund.
Interest on the Notes is payable semi-annually in arrears on each April 1 and
October 1, commencing April 1, 1997. See "Description of the Notes."
Each series of Notes will be represented by a single fully-registered global
note in book-entry form, without coupons (each a "Global Note"), registered in
the name of the nominee of the Depository Trust Company ("DTC"). Beneficial
interests in the Global Notes will be shown on, and transfers thereof will be
effected only through, records maintained by DTC (with respect to beneficial
interests of participants) or by participants or persons that hold interests
through participants (with respect to beneficial interests of beneficial
owners). Owners of beneficial interests in the Global Notes will be entitled to
physical delivery of Notes in definitive form equal in principal amount to their
respective beneficial interest only under the limited circumstances described
under "Description of the Notes -- Book-Entry System." Settlement for the Notes
will be made in immediately available funds. The Notes will trade in DTC's
Same-Day Funds Settlement System until maturity or until the Notes are issued in
definitive form, and secondary market trading activity in the Notes will
therefore settle in immediately available funds. All payments of principal and
interest in respect of the Notes will be made by the Operating Partnership in
immediately available funds. See "Description of the Notes -- Same-Day
Settlement and Payment."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
UNDERWRITING
PRICE TO PUBLIC(1) DISCOUNT(2) PROCEEDS TO THE
OPERATING
PARTNERSHIP(1)(3)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 2003 Note...................................... 99.642% .625% 99.017%
- ---------------------------------------------------------------------------------------------------------
Total.............................................. $99,642,000 $625,000 $99,017,000
- ---------------------------------------------------------------------------------------------------------
Per 2006 Note...................................... 99.694% .65% 99.044%
- ---------------------------------------------------------------------------------------------------------
Total.............................................. $24,923,500 $162,500 $24,761,000
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from September 30, 1996.
(2) The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933.
See "Underwriting."
(3) Before deducting expenses payable by the Operating Partnership estimated at
$300,000.
------------------------
The Notes are being offered by the several Underwriters, subject to prior
sale, when, as and if issued by the Operating Partnership and delivered to and
accepted by them, subject to approval of certain legal matters by counsel for
the Underwriters and certain other conditions. The Underwriters reserve the
right to withdraw, cancel or modify such offer and to reject orders in whole or
in part. It is expected that delivery of the Notes will be made in New York, New
York on or about September 30, 1996.
------------------------
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
DEAN WITTER REYNOLDS INC.
------------------------
The date of this Prospectus Supplement is September 25, 1996.
<PAGE> 2
Post Apartment Homes, L.P.
[The graphic material to be included is (i) a map of the
southeastern part of the United States identifying the primary
markets in which the Operating Partnership (as defined) owns or
operates communities and (ii) a map of the Atlanta Metropolitan Area
identifying the location of the communities owned or operated by the
Operating Partnership in that market.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY EFFECT TRANSACTIONS
WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE NOTES AT LEVELS ABOVE THAT
WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information appearing elsewhere in this
Prospectus Supplement and the accompanying Prospectus or incorporated herein and
therein by reference. As used herein and in the accompanying Prospectus, the
term "Operating Partnership" includes Post Apartment Homes, L.P. and its
subsidiaries and predecessors, unless the context indicates otherwise.
THE OPERATING PARTNERSHIP
The Operating Partnership is one of the largest developers and operators of
upscale multifamily apartment communities in the Southeastern United States. As
of September 1, 1996, the Operating Partnership owned 46 stabilized communities
(the "Communities") containing 17,144 apartment units located primarily in
metropolitan Atlanta, Georgia and Tampa, Florida. In addition, as of September
1, 1996 the Operating Partnership had under construction or in initial lease-up
nine new communities in the Atlanta, Tampa and Charlotte metropolitan areas that
will contain an aggregate of 3,280 apartment units when completed. For the six
months ended June 30, 1996, the average economic occupancy rate of the 41
Communities and the first phase of an additional Community stabilized for the
entire period was 95.6%. The average monthly rental rate per apartment unit at
these Communities for the same period was $745. The Operating Partnership also
manages through affiliates one community under the Post(R) brand name for a
third party and approximately 9,700 additional apartment units owned by third
parties. The Operating Partnership is a fully-integrated organization with
multifamily development, acquisition, operation and asset management expertise
and has approximately 1,100 employees, none of whom is a party to a collective
bargaining agreement.
Post Properties, Inc. (the "Company"), a self-administered and self-managed
equity real estate investment trust, is the sole general partner of, and
controls a majority of the limited partnership interests in, the Operating
Partnership. As of June 30, 1996, the Company owned 81.1% of the outstanding
partnership interests in the Operating Partnership. The Company conducts all its
business through the Operating Partnership and its subsidiaries.
THE COMMUNITIES
As of September 1, 1996, the Communities consisted of 46 stabilized Post(R)
multifamily apartment communities located in the following metropolitan areas:
<TABLE>
<CAPTION>
NUMBER PERCENT
METROPOLITAN AREA COMMUNITIES OF UNITS OF TOTAL
--------------------------------------------------------- ----------- -------- --------
<S> <C> <C> <C>
Atlanta, GA.............................................. 33 12,352 72.0%
Tampa, FL................................................ 7 2,262 13.2
Orlando, FL.............................................. 2 1,248 7.3
Fairfax, VA.............................................. 2 700 4.1
Pompano Beach, FL........................................ 1 416 2.4
Nashville, TN............................................ 1 166 1.0
--
------ -----
46 17,144 100.0%
== ====== =====
</TABLE>
The Operating Partnership developed and currently manages all of the
Communities. Thirty-two of the Communities have in excess of 300 apartment
units, with the largest Community having a total of 810 apartment units. As of
September 1, 1996, the average age of the Communities was seven years and 41 of
the 46 Communities, comprising approximately 90.9% of the total number of the
Communities' apartment units, were completed after January 1, 1986.
S-3
<PAGE> 4
THE OFFERING
All capitalized terms used herein and not defined herein have the meanings
provided in "Description of the Notes." For a more complete description of the
terms of the Notes specified in the following summary, see "Description of the
Notes."
Securities Offered......... $100,000,000 aggregate principal amount of 7 1/4%
Notes due 2003 and $25,000,000 aggregate principal
amount of 7 1/2% Notes due 2006.
Maturity................... The 2003 Notes will mature on October 1, 2003 and
the 2006 Notes will mature on October 1, 2006.
Interest Payment Dates..... Interest on the Notes is payable semi-annually on
each April 1 and October 1, commencing April 1,
1997, and at maturity.
Ranking.................... The Notes will rank pari passu with each other and
with all other unsecured and unsubordinated
indebtedness of the Operating Partnership and the
Notes will be effectively subordinated to the prior
claims of each secured mortgage lender to any
specific Community which secures such lender's
mortgage. As of June 30, 1996, such mortgages
aggregated approximately $182.4 million and such
unsecured and unsubordinated indebtedness
aggregated approximately $239.0 million
(approximately $240.5 million on a pro forma
basis). See "Capitalization."
Use of Proceeds............ The net proceeds to the Operating Partnership from
the Offering (approximately $123.5 million) will be
used to pay down existing indebtedness under the
Company's revolving line of credit.
Limitations on Incurrence
of Debt.................. The Notes contain various covenants, including the
following:
(1) The Operating Partnership will not incur any
Debt if, after giving effect thereto, the
aggregate principal amount of all outstanding
Debt of the Operating Partnership is greater
than 60% of the sum of (i) the Operating
Partnership's Total Assets as of the end of the
most recent fiscal quarter and (ii) the
increase in the Operating Partnership's Total
Assets since the end of such quarter including
any increase in the Operating Partnership's
Total Assets resulting from the incurrence of
such additional Debt (such increase together
with the Operating Partnership's Total Assets
is referred to as "Adjusted Total Assets").
(2) The Operating Partnership will not incur any
Secured Debt if, after giving effect thereto,
the aggregate amount of all outstanding Secured
Debt of the Operating Partnership is greater
than 40% of the Operating Partnership's
Adjusted Total Assets.
(3) The Operating Partnership will not incur any
Debt if Consolidated Income Available for Debt
Service for the four consecutive fiscal
quarters most recently ended prior to the date
of the incurrence of such Debt, on a pro forma
basis, would be less than 1.5 times the Annual
Debt Service Charge on all Debt outstanding
immediately after the incurrence of such
additional Debt.
(4) The Operating Partnership will maintain Total
Unencumbered Assets of not less than 150% of
the aggregate outstanding principal amount of
the Unsecured Debt of the Operating
Partnership.
Optional Redemption........ The Notes are redeemable at any time at the option
of the Operating Partnership, in whole or in part,
at a redemption price equal to the sum of (i) the
principal amount of the Notes being redeemed plus
accrued interest to the redemption date and (ii)
the Make-Whole Amount, if any. See "Description of
the Notes -- Optional Redemption."
S-4
<PAGE> 5
BUSINESS AND COMMUNITIES
The Operating Partnership is managed by its general partner, the Company, a
self-administered and self-managed equity REIT that was founded in 1971 and
since inception has focused on the development, management, and ownership of
upscale multifamily apartment communities, primarily in metropolitan Atlanta,
Georgia. During the last nine years, the Operating Partnership has expanded its
focus to include metropolitan Tampa, Florida, other Florida markets, Nashville,
Tennessee, Charlotte, North Carolina and Fairfax County, Virginia. The Operating
Partnership and its affiliates have developed a total of 71 Post(R) upscale
garden and mid-rise apartment communities containing approximately 22,726
apartment units. Of these communities, 46 comprising 17,144 apartment units are
owned by the Operating Partnership in fee simple or pursuant to a long-term
ground lease, and are operated by the Operating Partnership. The Operating
Partnership and affiliates have sold 26 communities between 1972 and 1996 to
parties not affiliated with the Operating Partnership, one of which the
Operating Partnership continues to manage under the Post(R) brand name. Three
contiguous Atlanta apartment communities containing a total of 810 units which
the Operating Partnership developed in the early 1980s and sold in 1986 have
been reacquired and are currently operated as one community, Post Creek(TM). The
Operating Partnership's executive offices are located at 3350 Cumberland Circle,
Atlanta, Georgia 30339 and its telephone number is (770) 850-4400.
The Operating Partnership has benefitted, and expects to continue to
benefit, from the following competitive advantages:
- Implementing distinctive core business strategies: investment building,
promotion of the Post(R) brand name and a service orientation.
- Demonstrating a consistent record of operating performance.
- Promoting growth through maintenance of a disciplined development
philosophy in superior primary markets.
- Maintaining a flexible and conservative capital structure to provide
continued access to capital markets on favorable terms.
- Investing in upscale multifamily communities of a quality level
synonymous with the Post(R) brand name reputation.
DISTINCTIVE CORE BUSINESS STRATEGIES. The Operating Partnership benefits
from the pursuit of three distinctive core business strategies that, for almost
25 years, have remained substantially unchanged:
Investment Building. Investment building means taking a long-term
view of the assets the Operating Partnership creates. The Operating
Partnership develops communities with the intention of owning and operating
them for periods that are relatively long by the standard of the apartment
industry.
- The Operating Partnership's approach to development activities has
been characterized by a solid record of building apartment communities
on time, and with a uniformly high quality.
- Since 1988, the Operating Partnership has focused its strategy on a
limited number of markets that have shown and are forecasted to
continue to show employment, population and household formation growth
that generally exceed national averages. Within these limited markets,
the Operating Partnership has focused on building in infill, mature
locations, where land for competing uses is scarce.
- The Operating Partnership uses a disciplined team approach to
development decisions. Both the development division and the management
division are involved in the process by which a potential development
site is evaluated, the market is analyzed, the product is designed, and
both construction and operating feasibility are assessed.
- The Operating Partnership conducts an annual asset maintenance
program, which involves an annual review of each apartment community.
In addition, the Operating Partnership conducts a regular periodic
program of preventative maintenance in each apartment unit pursuant to
which
S-5
<PAGE> 6
appliances, heating and cooling systems and apartment interiors are
inspected, cleaned and serviced or repaired, as appropriate, at least
two times per year. The Operating Partnership believes that these
programs lower operating costs over the life of the Communities,
increase the long-term value of the Communities and contribute to
maintaining the upscale market position of the Communities.
Promotion of the Post(R) Brand Name. The Post(R) brand name strategy
is widely known and admired within the Operating Partnership's primary
markets and, to the knowledge of the Operating Partnership, has not been
successfully duplicated within the multifamily real estate industry in any
major U.S. market. For such a strategy to be effective, a company must
develop and implement systems to achieve uniformity, outstanding quality
and value through its operations.
- The Operating Partnership exclusively owns the federally registered
Post(R) service and trade marks, which it uses extensively in the
marketing of its Communities.
- The Post(R) brand name is synonymous with quality upscale apartment
communities which are situated in desirable locations and provide
superior resident service. This has been achieved in part by the
Operating Partnership's strategy of developing a superior product in
established infill locations.
- The Operating Partnership believes that a comprehensive program for
continuing training of all employees and a commitment to "promoting
from within" enhance the performance of the Operating Partnership's
personnel and reduce employee turnover. Bonuses and other financial
incentives, motivational seminars and Operating Partnership-wide
recognition programs also promote employee performance. The Operating
Partnership has created professional, long-term career paths for its
employees, especially for its field personnel (such as construction
managers, leasing consultants and landscape field employees). The
Operating Partnership believes that time spent at its Communities by
"main office" employees provides valuable information and experience
for employees throughout its organization.
- The Operating Partnership coordinates its advertising programs to
increase brand name recognition in its primary markets and to attract a
more desirable resident profile.
A Service Orientation. The Operating Partnership's mission statement
is: "To provide the superior apartment living experience for our
residents." A superior product delivered with superior service is the
surest way to achieve the Operating Partnership's long-term goals. The
Post(R) brand name has great value because of the Operating Partnership's
dedication to and success in carrying out its mission statement.
CONSISTENT OPERATING PERFORMANCE. The successful implementation of the
Operating Partnership's distinctive core business strategies accounts for the
Operating Partnership's consistent operating performance. Focus on the
operations of the existing portfolio, adherence to a disciplined development
philosophy and a continuing focus on quality and service are necessary to
realize consistent, sustained earnings growth. The Operating Partnership's
operating performance demonstrates the successful implementation of its
operating approach:
- Average economic occupancy of communities stabilized for both the current
and prior respective periods was 96.0%, 96.4% and 94.7% for the years
ended December 31, 1995, 1994 and 1993, respectively, and 95.5% and 96.0%
for the six months ended June 30, 1996 and 1995, respectively.
- Rental revenues have steadily increased from $104.5 million in 1993 to
$115.3 million in 1994 and $133.8 million in 1995, increases of 10.3% and
16.0%, respectively. Rental revenues continued to increase during the
first half of 1996, increasing from $63.9 million for the six months ended
June 30, 1995 to $75.6 million for the six months ended June 30, 1996, an
increase of 18.3%.
- Direct property operating expenses as a percentage of rental revenues
have steadily decreased from 39.4% in 1993 to 37.6% in 1994 and 37.3% in
1995, decreases of 4.6% and 0.8%, respectively, and continued to decrease
in the first half of 1996 from 37.9% at June 30, 1995 to 36.0% at June 30,
1996, a decrease of 5.0%.
S-6
<PAGE> 7
- Funds from Operations ("FFO") increased 12.1%, on a per Operating
Partnership unit basis, from the year ended December 31, 1994 to the year
ended December 31, 1995 and 13.7%, on a per Operating Partnership unit
basis, from the six months ended June 30, 1995 to the six months ended
June 30, 1996. FFO for any period means the Consolidated Net Income of the
Operating Partnership and its Subsidiaries for such period excluding gains
or losses from debt restructuring and sales of property, plus depreciation
of real estate assets, and after adjustment for unconsolidated
partnerships and joint ventures, all determined on a consistent basis in
accordance with generally accepted accounting principles.
- The Operating Partnership's payout ratio, based on FFO, has decreased
from 83.7% to 81.3% for the years ended December 31, 1994 and 1995,
respectively, and from 83.8% to 81.2% for the six months ended June 30,
1995 and 1996, respectively.
DEVELOPMENT PHILOSOPHY. The Operating Partnership uses a team approach to
development decisions. Both the development division and the management division
are involved in the process by which a potential development site is evaluated,
the market is analyzed, the product is designed, and both construction and
operating feasibility are assessed.
The Operating Partnership believes that multifamily properties in its
primary markets have the potential over the long term to provide investment
returns that exceed national averages. According to recent market surveys,
employment, population and household formation growth in the Operating
Partnership's primary markets have shown and are forecasted to continue to show
growth that generally exceeds national averages.
<TABLE>
<CAPTION>
EMPLOYMENT POPULATION HOUSEHOLD
GROWTH GROWTH GROWTH
MARKETS (1990-1995) (1990-1995) (1990-1995)
- ------------------------------------------------------------ ---------- ----------- -----------
<S> <C> <C> <C>
Atlanta..................................................... 18.6% 15.2% 16.4%
Nashville................................................... 18.9 10.6 11.7
Charlotte................................................... 13.7 10.3 12.0
Tampa Bay................................................... 13.1 5.0 6.0
Northern Virginia........................................... 9.3 9.0 10.5
Top 50 Metropolitan Statistical Areas....................... 7.1 9.2 9.6
</TABLE>
<TABLE>
<CAPTION>
FORECASTED FORECASTED FORECASTED
EMPLOYMENT POPULATION HOUSEHOLD
GROWTH GROWTH GROWTH
MARKETS (1995-2005) (1995-2005) (1995-2005)
- ------------------------------------------------------------ ---------- ----------- -----------
<S> <C> <C> <C>
Atlanta..................................................... 29.1% 25.2% 28.1%
Nashville................................................... 31.3 21.9 25.0
Charlotte................................................... 27.7 23.4 23.7
Tampa Bay................................................... 28.1 16.0 18.6
Northern Virginia........................................... 16.2 18.8 22.2
Top 50 Metropolitan Statistical Areas....................... 13.1 9.4 10.7
</TABLE>
- ---------------
Source: For the historical data -- the U.S. Census Bureau (Population Growth and
Household Growth) and the U.S. Bureau of Labor Statistics (Employment Growth).
For the forecasted data -- Siegel & Associates (Northern Virginia) and Dr.
Donald Ratajczak of Georgia State University (Atlanta, Nashville, Charlotte,
Tampa Bay and Top 50 Metropolitan Statistical Areas).
In addition, the Operating Partnership expects that the multifamily housing
market in its primary markets will be positively affected by the following
trends: (i) lifestyle changes that are resulting in an older, more affluent and
more demanding renter; and (ii) a decline in home price appreciation in recent
years, which changes the economic advantages of home ownership. The Operating
Partnership believes that these trends will offset to some extent the general
trend of a decline in the growth rate of the adult population in the prime
rental population of 20-35 year olds and the current low interest rates for home
mortgages.
S-7
<PAGE> 8
Within these primary markets, the Operating Partnership has concentrated on
building in infill, mature locations where land for competing uses is scarce.
The Operating Partnership believes this strategy reduces the amount of potential
competition faced by the Operating Partnership's apartment communities and
believes that these locations are more desirous places to live, which enables
the Operating Partnership to charge rents that result in higher returns on
costs. The Operating Partnership also believes that these sites have a higher
land appreciation over time.
FLEXIBLE AND CONSERVATIVE CAPITAL STRUCTURE. The Operating Partnership has
and plans to continue to maintain a flexible and conservative capital structure
that enhances its access to the capital markets on favorable terms and promotes
future earnings growth.
Since formation in July 1993, the Operating Partnership has concentrated on
enhancing its financial flexibility by improving its capital structure. The $180
million unsecured revolving line of credit (the "Revolver") with a bank
syndicate, the issuance of $50 million of unsecured senior notes to the
Northwestern Mutual Life Insurance Company (the "NML Notes"), the agreement with
the Federal National Mortgage Association ("FNMA") to provide credit enhancement
for the Operating Partnership's outstanding tax-exempt bonds (including
reissuance at maturity) and certain of its economically defeased bonds until
June 2025, the issuance of $50 million of unsecured senior notes to Wachovia
Bank of Georgia, N.A. (the "Wachovia Notes") and the $20 million unsecured
revolving line of credit with Wachovia Bank of Georgia, N.A. (the "Cash
Management Line") all demonstrate the Operating Partnership's successful efforts
to maintain a flexible and conservative capital structure.
The Operating Partnership's financial position reflects its conservative
financial strategy:
- As of June 30, 1996, the Operating Partnership had 33 Communities
unencumbered by mortgage debt with over $700 million of undepreciated book
value supporting the Operating Partnership's unsecured debt. Net operating
income from these unencumbered Communities as a percentage of total net
operating income for all Communities increased from 42.7% at June 30, 1995
to 63.9% at June 30, 1996.
- Since January 1, 1995, the Operating Partnership has greatly extended and
staggered debt maturities. FNMA has provided replacement credit
enhancement through 2025 for seven bond issues which were reissued, and
has agreed, subject to certain conditions, to provide credit enhancement
through June 1, 2025 with respect to eight other bond issues which mature
and may be refunded in 1997 and 1998. As of December 31, 1994, the
weighted average maturity of the Operating Partnership's debt was 2.0
years. At June 30, 1996, the weighted average maturity of the Operating
Partnership's debt had increased to 12.4 years. After giving effect to the
Offering, the Cash Management Line and the reissuance of the Post Canyon
and Post Corners bonds which matured and were refunded on July 1, 1996 and
August 1, 1996, respectively, the Operating Partnership's weighted average
maturity would have been 13.8 years.
- Total debt to total market capitalization ratio of 30.7% at June 30,
1996.
- Total debt as a percentage of undepreciated real estate assets of 40.7%
at June 30, 1996.
- Interest coverage for the six month period ending June 30, 1996 was 4.4x.
Management does not expect the interest coverage ratio to change
materially as a result of this Offering, as net proceeds from this
Offering will be used primarily to refinance interim debt with a current
interest rate comparable to the Notes.
MANAGEMENT EXPERIENCE IN DEVELOPING AND OPERATING UPSCALE MULTIFAMILY
APARTMENT COMMUNITIES. Since 1971, the Operating Partnership has developed a
total of 71 upscale garden and mid-rise apartment communities containing
approximately 22,726 apartment units. The Operating Partnership believes that
its unique business strategy and disciplined development philosophy have
produced the highest quality multifamily communities in its primary markets.
Uniform systems in construction, landscaping, and on-site management; superior
locations; superior asset quality; superior resident amenities and services;
luxurious landscaping; and a responsive 48-hour maintenance program are all
examples of the upscale nature of the Operating
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<PAGE> 9
Partnership's multifamily communities. See "The Communities." The 17 members of
the Operating Partnership's senior management team have an average tenure with
the Operating Partnership of 14 years. As of September 1, 1996, the executive
officers and directors of the Company owned approximately 20.0% of the Common
Stock of the Company assuming the exercise of all vested options held by
executive officers and directors and an exchange for Common Stock of all
Operating Partnership units.
THE COMMUNITIES
The Operating Partnership developed and currently manages all of the
Communities. Thirty-two of the Communities have in excess of 300 apartment
units, with the largest Community having a total of 810 apartment units. As of
September 1, 1996, the average age of the Communities was seven years and 41 of
the 46 Communities, comprising approximately 90.9% of the total number of the
Communities' apartment units, were completed after January 1, 1986.
The average economic occupancy rate for Communities stabilized for the six
months ended June 30, 1996 was 95.6% and the average monthly rental rate per
apartment unit at these Communities for the same period was $745. A Community is
considered by the Operating Partnership 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.
COMMUNITY INFORMATION
<TABLE>
<CAPTION>
AVERAGE ECONOMIC
OCCUPANCY FOR
THE
YEAR AVERAGE JUNE 1996 SIX MONTHS
COMPLETED/ UNIT SIZE NUMBER AVERAGE RENTAL ENDED
COMMUNITY LOCATION(1) ACQUIRED (SQUARE FEET) OF UNITS RATE PER UNIT JUNE 30, 1996(2)
- -------------------------------- ----------- ---------- ------------- -------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
GEORGIA
Post Ashford(R)................. Atlanta 1987 872 222 $ 745 97.5%
Post Bridge(R).................. Atlanta 1986 847 354 646 95.9
Post Brook(R)................... Atlanta 1984 916 130 749 99.0
Post Brookhaven(R).............. Atlanta 1990-92 (3) 991 735 934 96.9
Post Canyon(R).................. Atlanta 1986 899 494 690 93.5
Post Chase(R)................... Atlanta 1987 938 410 687 95.3
Post Chastain(R)................ Atlanta 1990 965 558 959 96.7
Post Corners(R)................. Atlanta 1986 860 460 662 95.3
Post Court(R)................... Atlanta 1988 838 446 667 96.1
Post Creek(TM)(4)............... Atlanta 1996 1,180 810 867 N/A
Post Crossing(R)................ Atlanta 1995 1,067 354 1,034 95.1
Post Dunwoody(R)(5)............. Atlanta 1989 941 530 837 92.8
Post Lane(R).................... Atlanta 1988 840 166 701 97.5
Post Lenox Park(TM)............. Atlanta 1995 1,030 206 1,034 97.6
Post Mill(R).................... Atlanta 1985 952 398 695 98.1
Post Oak(TM).................... Atlanta 1993 1,003 182 923 98.8
Post Oglethorpe(R).............. Atlanta 1994 1,205 250 1,204 96.7
Post Park(R).................... Atlanta 1988-90 (3) 904 770 781 94.0
Post Parkwood(TM)............... Atlanta 1995 1,071 125 908 99.3
Post Peachtree Hills(R)......... Atlanta 1992-94 (3) 982 300 952 99.3
Post Pointe(R).................. Atlanta 1988 835 360 647 94.5
Post Renaissance(R)(6).......... Atlanta 1992-94 (3) 890 342 877 99.4
Post River(R)................... Atlanta 1991 983 125 1,132 93.9
Post Summit(R).................. Atlanta 1990 957 148 810 97.1
Post Valley(R).................. Atlanta 1988 854 496 644 97.2
Post Village(R)................. Atlanta 906 704 94.4
The Arbors.................... 1983 1,063 301
The Fountains................. 1987 850 352
The Gardens................... 1986 891 494
The Hills..................... 1984 953 241
The Meadows................... 1988 817 350
Post Vinings(R)................. Atlanta 1989-91 (3) 964 403 778 94.7
Post Walk(R).................... Atlanta 1987 932 346 785 97.0
Post Woods(R)................... Atlanta 1977-83 (3) 1,057 494 810 98.7
----- ----- ------ ----
Subtotal -- Atlanta..... 942 12,352 799 96.1
----- ----- ------ ----
</TABLE>
S-9
<PAGE> 10
<TABLE>
<CAPTION>
AVERAGE ECONOMIC
OCCUPANCY FOR
THE
YEAR AVERAGE JUNE 1996 SIX MONTHS
COMPLETED/ UNIT SIZE NUMBER AVERAGE RENTAL ENDED
COMMUNITY LOCATION(1) ACQUIRED (SQUARE FEET) OF UNITS RATE PER UNIT JUNE 30, 1996(2)
- -------------------------------- ----- ----- ------ ----
<S> <C> <C> <C> <C> <C> <C>
FLORIDA
Post Bay(R)..................... Tampa 1988 782 312 650 96.8
Post Court(R)................... Tampa 1991 1,018 228 737 92.9
Post Crossing(R)(7)............. Pompano 1989 847 416 763 93.8
Post Fountains(TM).............. Orlando 1988 835 508 574 92.7
Post Hyde Park(R)............... Tampa 1996 1,009 270 897 N/A
Post Lake(R).................... Orlando 1988 850 740 604 95.0
Post Rocky Point(R)............. Tampa 1996 1,018 452 845 N/A
Post Village(R)................. Tampa 941 706 92.7
The Arbors.................... 1991 967 304
The Lakes..................... 1989 895 360
The Oaks...................... 1991 968 336
----- ----- ------ ----
Subtotal -- Florida..... 921 3,926 702 93.9(8)
----- ----- ------ ----
VIRGINIA
Post Corners(R) at Trinity
Centre........................ Fairfax 1996 1,030 336 919 N/A
Post Forest(R).................. Fairfax 1990 889 364 872 92.0
----- ----- ------ ----
Subtotal -- Virginia.... 960 700 894 92.0
----- ----- ------ ----
TENNESSEE
Post Green Hills(R)............. Nashville 1996 1,056 166 1,078 N/A
----- ----- ------ ----
Total................... 970 17,144 $ 824 95.6%(8)
===== ===== ====== ====
</TABLE>
- ---------------
(1) Refers to greater metropolitan areas of cities indicated.
(2) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. Includes only communities which were
stabilized for the entire period.
(3) These dates represent the respective completion dates for multiple phases of
a Community.
(4) On May 7, 1996, the Operating Partnership reacquired three contiguous
Atlanta apartment communities containing a total of 810 units which the
Operating Partnership developed in the early 1980's and managed under the
Post(R) brand name through mid-1993. The Operating Partnership's capital
investment, including expenditures to add perimeter fencing and steel entry
gates and construction of a new centralized leasing office, will be
approximately $48 million. The community was previously operated as
Dunwoody Crossing and, following the Operating Partnership's purchase, has
been operated as Post Creek(TM). Average economic occupancy for Post
Creek(TM) from May 7, 1996 through June 30, 1996 was 88.0%.
(5) Average economic occupancy rate for the first phase of the Community.
(6) The Operating Partnership has a leasehold interest in the land underlying
Post Renaissance(R) pursuant to a ground lease that expires on January 1,
2040. The Operating Partnership owns the remaining Communities in fee
simple.
(7) Currently listed for sale.
(8) Includes Post Gardens(R) which was sold on July 19, 1996. The average
economic occupancy for the six months ended June 30, 1996 for Post Gardens
was 96.1%.
S-10
<PAGE> 11
RECENT DEVELOPMENTS
DEVELOPMENT ACTIVITY
As of September 1, 1996, the Operating Partnership had under construction
or in initial lease-up nine new communities that will contain an aggregate of
3,280 units. The Operating Partnership's communities under development or in
initial lease-up are summarized in the following chart:
<TABLE>
<CAPTION>
ESTIMATED
ACTUAL OR QUARTER UNITS LEASED
NUMBER QUARTER OF ESTIMATED QUARTER OF AS OF
OF CONSTRUCTION FIRST UNITS STABILIZED SEPTEMBER 7,
METROPOLITAN AREA UNITS COMMENCEMENT AVAILABLE OCCUPANCY 1996
---------------------------- ------ ------------ ----------------- --------- ------------
<S> <C> <C> <C> <C> <C>
ATLANTA, GA
Post Terrace(R)............. 296 2Q'95 1Q'96 4Q'96 296
Post Crest(R)............... 410 1Q'95 1Q'96 1Q'97 340
Post Collier Hills(TM)...... 396 4Q'95 4Q'96 4Q'97 N/A
Post Glen(R)................ 312 1Q'96 1Q'97 1Q'98 N/A
Post Gardens(R)............. 397 3Q'96 3Q'97 3Q'98 N/A
Post Lindbergh(TM).......... 396 3Q'96 3Q'97 3Q'98 N/A
Riverside Village by
Post(TM).................. 537 3Q'96 4Q'97 1Q'99 N/A
----- ----
2,744 636
----- ----
TAMPA, FL
Post Walk at Hyde
Park(TM).................. 134 1Q'96 4Q'96 3Q'97 N/A
----- ----
CHARLOTTE, NC
Post Park at Phillips
Place(TM)................. 402 4Q'95 4Q'96 4Q'97 N/A
----- ----
3,280 636
===== ====
</TABLE>
The Operating Partnership has also acquired two parcels, one in Tampa and
one in Atlanta, on which it plans to build new communities. Construction is
expected to begin on the Tampa parcel in the fourth quarter of 1996. The Home
Depot, Inc. is constructing its corporate headquarters campus and extensive
infrastructure improvements are being made by the county adjacent to the Atlanta
parcel. The Operating Partnership will review its development plan for this
parcel closer to completion of these improvements. The Operating Partnership is
also currently conducting feasibility and other pre-development studies for
possible new Post(R) communities in its primary market areas. In addition, the
Operating Partnership continually reviews acquisition opportunities in its
primary market areas.
ACQUISITION ACTIVITY
On May 7, 1996, the Operating Partnership reacquired three contiguous
Atlanta apartment communities containing a total of 810 units which the
Operating Partnership developed in the early 1980's and managed under the
Post(R) brand name through mid-1993. The Operating Partnership's capital
investment, including planned expenditures to add perimeter fencing and steel
entry gates and construction of a new centralized leasing office, will be
approximately $48 million. At the time of acquisition the community was operated
as Dunwoody Crossing and is now operated by the Operating Partnership as Post
Creek(TM).
On August 26, 1996, the Operating Partnership acquired a 3.2 acre tract of
land in Nashville, Tennessee, with two existing apartment buildings containing
101 units (the "Vanderbilt Washington Apartments") and a 1.1 acre tract of land
in Nashville, Tennessee, with one existing apartment building containing 80
units. The Operating Partnership also has two tracts of land adjacent to the
Vanderbilt Washington Apartments under contract and expects to close on the
purchase of those two tracts early in November. In early 1997, the Vanderbilt
Washington Apartments will be completely renovated and additional apartment
buildings will be built on the two tracts under contract, with the entire
development being operated as one apartment community.
S-11
<PAGE> 12
DISPOSITION ACTIVITY
In April 1996 the Operating Partnership listed two communities in Florida,
containing a total of 596 units, for sale. On July 19, 1996, one of the
communities, containing 180 units, was sold. Post Crossing remains listed for
sale. These dispositions are consistent with the Company's strategy of selling
communities when the market demographics for a community are no longer
consistent with the Company's existing ownership strategy.
FINANCING ACTIVITY
Pursuant to the agreement with FNMA to provide credit enhancement for
certain tax-exempt bonds, on July 1, 1996 and August 1, 1996, the Operating
Partnership refunded two bonds with issues having a maturity of June 1, 2025 and
an interest rate of SunTrust Non-AMT "AAA" tax free rate plus a credit
enhancement fee of .575%.
On July 26, 1996, the Operating Partnership closed the $20 million Cash
Management Line with Wachovia Bank of Georgia, N.A. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
USE OF PROCEEDS
The net cash proceeds to the Operating Partnership from the sale of the
Notes offered hereby are expected to be approximately $123.5 million. The
Operating Partnership expects to use the net proceeds to pay down existing
indebtedness currently outstanding on the Company's Revolver. The Revolver
terminates on May 1, 1999 and borrowings thereunder bear interest, at the option
of the Operating Partnership, at LIBOR plus .80% or prime minus .25%. As of
September 1, 1996, interest accrued on borrowings outstanding under the Revolver
at a weighted average interest rate of 6.23% per annum.
S-12
<PAGE> 13
CAPITALIZATION
The following table sets forth the capitalization of the Operating
Partnership as of June 30, 1996 and as adjusted to give effect to the issuance
and sale of the Notes and the application of the net proceeds therefrom as
described above under the caption "Use of Proceeds". The information set forth
in the following table should be read in conjunction with the financial and
other information included elsewhere and incorporated by reference in this
Prospectus Supplement and the Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
Lines of Credit....................................................... $ 139,000 $ 15,522
Notes payable......................................................... 282,378 282,378
7 1/4% Notes due 2003................................................. -- 100,000
7 1/2% Notes due 2006................................................. -- 25,000
-------- --------
Total Debt.................................................... $ 421,378 $ 422,900
-------- --------
PARTNERS' CAPITAL:
General partner's interest............................................ $ 4,649 $ 4,649
Limited partners' interest............................................ 420,941 420,941
-------- --------
Total partners' capital....................................... 425,590 425,590
-------- --------
Total capitalization.......................................... $ 846,968 $ 848,490
======== ========
</TABLE>
S-13
<PAGE> 14
SELECTED FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following table sets forth certain financial and operating information
for (i) the Operating Partnership and its subsidiaries, for periods after the
initial public offering (completed on July 22, 1993) of the Company (the
"Initial Offering") and (ii) the portfolio of 40 Post(R) multifamily apartment
communities (the "Initial Properties") and other assets transferred to the
Operating Partnership and its subsidiaries in connection with the business
combination effected at the time of the Initial Offering (the "Formation
Transactions"), for periods prior to the Initial Offering. The financial
information of the Operating Partnership and predecessor for each of the five
years in the five year period ended December 31, 1995 have been derived from the
Operating Partnership's financial statements audited by Price Waterhouse LLP,
independent accountants. The consolidated financial information of the Operating
Partnership for the six months ended June 30, 1996 and 1995 have been derived
from the consolidated quarterly unaudited financial statements of the Operating
Partnership. In the opinion of management, the operating data for the six months
ended June 30, 1996 and 1995 include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the information set forth
therein. The results of operations for the six months ended June 30, 1996 are
not necessarily indicative of results that may be expected for the full year.
The following should be read in conjunction with Management's Discussion and
Analysis of Financial Condition and Results of Operations and all of the
financial statements and notes thereto included and incorporated by reference in
this Prospectus Supplement and the Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------- ------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Rental............................. $75,569 $63,877 $133,817 $115,309 $104,482 $ 94,754 $ 85,688
Property management -- third
party(1)......................... 1,466 1,216 2,764 2,508 3,057 2,793 2,296
Landscape services -- third
party(1)......................... 2,221 2,149 4,647 3,799 3,829 2,240 1,794
Other.............................. 2,527 1,571 3,477 3,123 2,879 2,750 2,581
------- ------- -------- -------- -------- -------- --------
Total revenues.............. 81,783 68,813 144,705 124,739 114,247 102,537 92,359
Property operating and maintenance
expense (exclusive of depreciation
and amortization).................. 27,169 24,212 49,912 43,376 41,209 39,080 35,626
Depreciation (real estate assets).... 10,796 10,128 20,127 19,967 19,427 19,085 19,172
Depreciation (non-real estate
assets)............................ 513 221 692 241 303 195 235
Property management -- third
party(1)........................... 1,050 1,033 2,166 2,229 2,453 2,057 1,518
Landscape services -- third
party(1)........................... 1,863 1,754 3,950 3,098 3,151 1,998 1,544
Interest............................. 10,768 10,836 22,698 19,231 34,309 41,548 43,074
Amortization of deferred loan costs,
interest rate protection agreement
and swap gain, net................. 732 996 1,967 1,999 969 2,105 2,920
General and administrative........... 4,017 2,760 6,071 6,269 4,384 5,015 3,987
Formation Transaction expense........ -- -- -- -- 2,783 -- --
Minority interest in consolidated
property partnership(2)............ -- 382 451 680 692 655 617
------- ------- -------- -------- -------- -------- --------
Income (loss) before gain on sale of
real estate assets, net of income
taxes and extraordinary item....... 24,875 16,491 36,671 27,649 4,567 (9,201) (16,334)
Gain on sale of real estate assets,
net of income taxes................ -- -- 1,746 1,494 -- -- --
------- ------- -------- -------- -------- -------- --------
Income (loss) before extraordinary
item............................... 24,875 16,491 38,417 29,143 4,567 (9,201) (16,334)
Extraordinary item(3)................ -- (803) (1,120) (4,413) (13,628) -- --
------- ------- -------- -------- -------- -------- --------
Net income (loss).................... $24,875 $15,688 $ 37,297 $ 24,730 $ (9,061) $ (9,201) $(16,334)
======= ======= ======== ======== ======== ======== ========
</TABLE>
S-14
<PAGE> 15
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
--------------------- ----------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- -------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation.................... $1,034,809 $895,807 $937,924 $828,585 $722,266 $616,289 $588,416
Real estate, net of accumulated
depreciation.................... 866,829 742,883 781,100 686,009 599,898 513,651 505,058
Total assets...................... 892,590 780,804 812,984 710,973 627,322 536,961 527,498
Total debt........................ 421,378 420,781 349,719 362,045 357,809 540,900 519,538
Partners' and owners' equity
(deficit)....................... 425,590 319,344 425,489 313,367 246,342 (25,812) (9,050)
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Cash flow provided from
(used in):
Operating activities...... $ 43,408 $ 33,856 $ 57,366 $ 43,819 $ 2,412 $ 11,400 $ 6,373
Investing activities...... $ (98,170) $ (67,606) $ (114,531) $ (99,364) $ (51,152) $(28,696) $(43,555)
Financing activities...... $ 47,378 $ 49,262 $ 60,881 $ 46,496 $ 49,647 $ 19,902 $ 31,600
Funds from operations(4).... $ 35,671 $ 26,619 $ 56,798 $ 47,616 $ 26,777 $ 9,884 $ 2,838
Consolidated Income
Available for Debt
Service(5)................ $ 47,684 $ 39,054 $ 82,606 $ 69,767 $ 60,267 $ 54,387 $ 49,684
Debt Service Coverage(6).... 4.4x 3.6x 3.6x 3.6x 1.8x 1.3x 1.2x
Weighted average Operating
Partnership Units
outstanding............... 26,818,135 22,684,488 23,541,639 22,125,890 13,574,767 N/A N/A
Total stabilized communities
(at end of period)........ 47 42 42 42 41 40 38
Total stabilized apartment
units (at end of
period)................... 16,996 15,051 14,962 14,845 14,270 14,088 13,532
Average economic occupancy
(stabilized
communities)(7)........... 95.5% 96.0% 96.0% 96.4% 94.7% 93.0% 92.8%
</TABLE>
- ---------------
(1) Consists of revenues and expenses from property management and landscape
services provided to properties owned by third parties (including services
provided to third-party owners of properties previously developed and sold
by the Operating Partnership that operate under the Post(R) name).
(2) Relates to the 49.99% interest in Post Woods(R) not owned by the Operating
Partnership. On September 1, 1995, the Operating Partnership purchased the
49.99% interest in Post Woods(R). Prior to the purchase, the Operating
Partnership owned a 50.01% interest.
(3) The extraordinary items resulted from costs associated with the early
extinguishment of indebtedness.
(4) The Operating Partnership uses the National Association of Real Estate
Investment Trust ("NAREIT") definition of FFO, which was adopted for
periods beginning after January 1, 1996. FFO for any period means the
Consolidated Net Income of the Operating Partnership and its Subsidiaries
for such period excluding gains or losses from debt restructuring and sales
of property, plus depreciation of real estate assets, and after adjustment
for unconsolidated partnerships and joint ventures, all determined on a
consistent basis in accordance with generally accepted accounting
principles ("GAAP"). FFO presented herein is not necessarily comparable to
FFO presented by other real estate companies due to the fact that not all
real estate companies use the same definition. However, the Operating
Partnership's FFO is comparable to the FFO of real estate companies that
use the current NAREIT definition. FFO should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indicator of the Operating Partnership's financial performance or to cash
flow from operating activities (determined in accordance with GAAP) as a
measure of the Operating Partnership's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Operating
Partnership's needs or ability to service indebtedness or make
distributions.
(5) Consolidated Income Available for Debt Service (as defined in the Indenture)
represents earnings before interest, income taxes, depreciation and
amortization and extraordinary items. Consolidated Income Available for
Debt Service is relevant to an understanding of the economics of the
Operating Partnership
S-15
<PAGE> 16
because it indicates cash flow available from the operations of the
Operating Partnership to service fixed obligations. Consolidated Income
Available for Debt Service should not be considered as an alternative to
net income, as determined in accordance with GAAP, as an indicator of the
Operating Partnership's operating performance, or to cash flows from
operating activities, as determined in accordance with GAAP, as a measure
of liquidity.
(6) Debt Service Coverage is defined as Consolidated Income Available for Debt
Service divided by interest expense.
(7) Amount represents average economic occupancy for communities stabilized for
both the current and prior respective periods. Average economic occupancy
is defined as gross potential rent less vacancy losses, model expenses and
bad debt divided by gross potential rent for the period, expressed as a
percentage. The calculation of average economic occupancy does not include
a deduction for concessions and employee discounts. (Average economic
occupancy, including these amounts, would have been 95.0% and 95.5% for the
six months ended June 30, 1996 and 1995, respectively, and 95.5% for the
year ended December 31, 1995.) For the six months ended June 30, 1996 and
1995 and the year ended December 31, 1995, concessions were $143, $141 and
$296, respectively, and employee discounts were $136, $122 and $213,
respectively. A community is considered by the Operating Partnership 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.
S-16
<PAGE> 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
OVERVIEW
The following discussion should be read in conjunction with all of the
financial statements appearing elsewhere and incorporated by reference into this
Prospectus Supplement. The following discussion is based primarily on the
Consolidated Financial Statements of Post Apartment Homes, L.P.
As of June 30, 1996, there were 26,859,783 Operating Partnership Units
outstanding, of which 21,774,940, or 81.1%, were owned by the Company and
5,084,843, or 18.9%, were owned by other limited partners ( including certain
officers and directors of the Company).
The Operating Partnership's net income is generated primarily from the
operation of its apartment communities. For purposes of evaluating comparative
operating performance, the Operating Partnership categorizes its operating
communities based on the period each community reaches stabilized occupancy. A
community is generally considered by the Operating Partnership 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.
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 Operating Partnership 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 Operating Partnership 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.
Therefore, in order to evaluate the operating performance of its
communities, the Operating Partnership 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 Operating Partnership 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.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996, AND 1995
The Operating Partnership recorded net income of $24,875 for the six months
ended June 30, 1996, an increase of $9,187 over the prior corresponding period
primarily as a result of increased rental rates for fully stabilized communities
and an increase in apartment units placed in service.
COMMUNITY OPERATIONS
At June 30, 1996, the Operating Partnership's portfolio of apartment
communities consists of thirty-seven communities and the first phase of two
additional communities which were completed and stabilized for all of the
current and prior year, three communities and the second phase of an existing
community which achieved
S-17
<PAGE> 18
full stabilization during the prior year, four communities and the second phase
of an existing community which reached stabilization during 1996, one community
which was acquired during 1996 and six communities in the development or
lease-up stage.
ALL OPERATING COMMUNITIES
The operating performance for all of the Operating Partnership's apartment
communities combined for the three and six months ended June 30, 1996 and 1995
is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------- ---------------------------
1996 1995 %CHANGE 1996 1995 %CHANGE
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenue:
Fully stabilized
communities(1).............. $31,500 $29,880 5.4% $62,569 $59,214 5.7%
Communities stabilized during
1995........................ 2,351 1,518 54.9% 4,647 2,279 103.9%
Acquired communities(2)........ 1,115 -- N/A 1,115 -- N/A
Development and lease-up
communities(3).............. 4,802 490 N/A 8,179 540 N/A
Sold communities(4)............ -- 1,034 N/A -- 2,083 N/A
Other revenue(5)............... 658 663 (0.8)% 1,347 1,207 11.6%
------- ------- ------- -------
40,426 33,585 20.4% 77,857 65,323 19.2%
------- ------- ------- -------
Property operating and
maintenance expense (exclusive
of depreciation and
amortization):
Fully stabilized communities... 10,782 10,491 2.8% 20,568 19,784 4.0%
Communities stabilized during
1995........................ 674 505 33.5% 1,289 902 42.9%
Acquired communities........... 342 -- N/A 342 -- N/A
Development and lease-up
communities................. 1,699 521 N/A 3,203 844 N/A
Sold communities............... -- 479 N/A -- 894 N/A
Other expenses(6).............. 876 796 10.1% 1,767 1,788 (1.2)%
------- ------- ------- -------
14,373 12,792 12.4% 27,169 24,212 12.2%
------- ------- ------- -------
Revenue in excess of specified
expense........................ $26,053 $20,793 25.3% $50,688 $41,111 23.3%
======= ======= ======= =======
Recurring capital
expenditures:(7)
Carpet......................... $ 236 $ 241 (2.1)% $ 410 $ 433 (5.3)%
Other.......................... 690 163 323.3% 982 333 194.9%
------- ------- ------- -------
Total.................. $ 926 $ 404 129.2% $ 1,392 $ 766 81.7%
======= ======= ======= =======
Average apartment units in
service........................ 17,155 15,665 9.5% 16,856 15,468 9.0%
======= ======= ======= =======
Recurring capital expenditures
per apartment unit............. $ 54 $ 26 107.7% $ 83 $ 50 66.0%
======= ======= ======= =======
</TABLE>
- ---------------
(1) Communities which reached stabilization prior to January 1, 1995.
(2) On May 7, 1996, the Operating Partnership reacquired three contiguous
Atlanta apartment communities containing a total of 810 units which the
Operating Partnership now operates as a single community.
(3) Communities in the "construction", "development" or "lease-up" stage during
1996 and, therefore, not considered fully stabilized for all of the periods
presented.
(4) Three communities, containing 568 units, which were sold on September 13,
1995.
S-18
<PAGE> 19
(5) Other revenue includes revenue on furnished apartment rentals above the
unfurnished rental rates and any revenue not directly related to property
operations.
(6) Other expenses includes certain indirect central office operating expenses
related to management, grounds maintenance, and costs associated with
furnished apartment rentals.
(7) In addition to those expenses which relate to property operations, the
Operating Partnership incurs recurring and nonrecurring expenditures
relating to acquiring new assets, materially enhancing the value of an
existing asset, or substantially extending the useful life of an existing
asset, all of which are capitalized.
For the three and six months ended June 30, 1996, rental and other revenue
increased $6,841, or 20.4% and $12,534, or 19.2%, respectively, compared to the
same period in the prior year, primarily as a result of increased rates for
fully stabilized communities, an increase in units placed in service and the
acquisition of a community, partially offset by a decrease in rental and other
revenue due to the sale of three communities during the third quarter of 1995.
For the three and six months ended June 30, 1996, rental and other revenue from
communities stabilized prior to January 1, 1995, increased $1,620, or 5.4%, and
$3,355, or 5.7%, respectively, compared to the same periods in the prior year,
primarily as a result of higher rental rates. For the three and six months ended
June 30, 1996, rental and other revenue from communities stabilized during 1995,
development and lease-up communities and acquired communities increased, in the
aggregate, $6,260 and $11,122, respectively, compared to the same periods in the
prior year, primarily due to additional units placed in service through the
development and acquisition of communities. The historical operating results
include, for the six months ended June 30, 1995, revenues and expenses related
to three communities sold on September 13, 1995, all of which had previously
been included in the fully stabilized communities group.
For the six months ended June 30, 1996, property operating and maintenance
expenses (exclusive of depreciation and amortization) increased, compared to the
same period in the prior year, primarily due to the increase in the units placed
in service through the development and acquisition of communities.
S-19
<PAGE> 20
FULLY STABILIZED COMMUNITIES
The Operating Partnership defines fully stabilized communities as those
which have reached stabilization prior to the beginning of the previous calendar
year.
The operating performance of the 37 communities and the first phase of two
additional communities containing an aggregate of 14,160 units which were fully
stabilized as of January 1, 1995, is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1996 1995 % CHANGE 1996 1995 % CHANGE
------- ------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenue........ $31,500 $29,880 5.4% $62,569 $59,214 5.7%
Property operating and
maintenance expense (exclusive
of depreciation and
amortization)................. 10,782 10,491 2.8% 20,568 19,784 4.0%
------- ------- ------- -------
Revenue in excess of specified
expense....................... $20,718 $19,389 6.9% $42,001 $39,430 6.5%
======= ======= ======= =======
Recurring capital
expenditures:(1)
Carpet........................ $ 231 $ 229 0.9% $ 405 $ 400 1.3%
Other......................... 651 153 325.5% 938 263 256.7%
------- ------- ------- -------
Total................. $ 882 $ 382 130.9% $ 1,343 $ 663 102.6%
======= ======= ======= =======
Recurring capital expenditures
per apartment unit(2)......... $ 62 $ 27 $ 95 $ 47
======= ======= ======= =======
Average economic occupancy(3)... 95.7% 96.1% 95.5% 96.0%
======= ======= ======= =======
Average monthly rental rate per
apartment unit(4)............. $ 752 $ 717 4.9% $ 749 $ 712 5.2%
======= ======= ======= =======
Apartment units in service...... 14,160 14,160 14,160 14,160
======= ======= ======= =======
</TABLE>
- ---------------
(1) In addition to those expenses which relate to property operations, the
Operating Partnership incurs recurring and nonrecurring 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 Operating Partnership
expensed $160 and $280 per unit on building maintenance (inclusive of
direct salaries) and $72 and $115 per unit on landscaping (inclusive of
direct salaries) for the three and six months ended June 30, 1996,
respectively.
(3) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts. (Average economic occupancy, including these amounts, would have
been 95.2% and 95.6% and 95.0% and 95.5% for the three and six months ended
June 30, 1996 and 1995, respectively.) For the three month period ended
June 30, 1996 and 1995, concessions were $81 and $79 and employee discounts
were $65 and $63, respectively. Concessions were $143 and $141 and employee
discounts were $136 and $122, for the six months ended June 30, 1996 and
1995, respectively.
(4) Average monthly rental rate is defined as the average of the gross actual
rental rates for occupied units and the anticipated rental rates for
unoccupied units.
For the three and six months ended June 30, 1996, rental and other revenue
increased, compared to the same periods in the prior year, due to higher rental
rates. For the three and six months ended June 30, 1996, property operating and
maintenance expenses (exclusive of depreciation and amortization) increased
$291, or 2.8%, and $784, or 4.0%, respectively, compared to the same period in
the prior year, primarily as a result of an increase in ad valorem real estate
taxes.
S-20
<PAGE> 21
The increase in recurring capital expenditures per apartment unit for the
three and six months ended June 30, 1996, compared to the same period in the
prior year, is primarily due to the refurbishment of leasing offices and other
common areas within the communities.
LEASE-UP DEFICITS
As noted in the overview of Community Operations, the Operating Partnership
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 Operating
Partnership treats each unit in an apartment community separately for cost
accumulation, capitalization and expense recognition purposes. Prior to the
commencement of leasing activities, interest as well as other construction costs
are capitalized and reflected on the balance sheet as construction in progress.
Once a unit is placed in service, all expenses allocated to that unit, including
interest, are expensed as incurred. During the lease-up phase, the sum of
interest expense on completed units and other operating expenses (including pre-
opening marketing expenses) will typically exceed rental revenues, resulting in
a "lease-up deficit," which continues until rental revenues exceed such
expenses.
In this presentation, only those communities which were dilutive for the
respective period are included and, accordingly, different communities may be
included in different quarters.
For the quarters ended March 31 and June 30, 1996, the "lease-up deficit"
charged to and included in results of operations is summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
1996
---------------
QTR 1 QTR 2
----- -----
<S> <C> <C>
Rental and other revenue............................................. $ 574 $ 294
Property operating and maintenance expense (exclusive of depreciation
and amortization).................................................. 469 189
----- ----
Revenue in excess of specified expense............................... 105 105
Interest expense..................................................... 338 196
----- ----
Lease-up deficit..................................................... $(233) $ (91)
===== ====
</TABLE>
THIRD PARTY MANAGEMENT SERVICES
The Operating Partnership provides asset management, leasing and other
consulting services to non-related owners of apartment communities through two
of its subsidiaries, RAM Partners, Inc. ("RAM") and Post Asset Management, Inc.
("Post Asset Management").
The operating performance of RAM and Post Asset Management for the three
and six months ended June 30, 1996 and 1995 is summarized as follows:
RAM PARTNERS, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1996 1995 %CHANGE 1996 1995 %CHANGE
------ ------ ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Property management and other
revenue............................ $ 649 $ 531 22.2% $1,309 $1,059 23.6%
Property management expense.......... 297 264 12.5% 653 582 12.2%
General and administrative expense... 113 104 8.7% 231 223 3.6%
------ ------ ------ ------
Revenue in excess of specified
expense............................ $ 239 $ 163 46.6% $ 425 $ 254 67.3%
====== ====== ====== ======
Average apartment units managed...... 9,814 9,440 4.0% 9,829 9,440 4.1%
====== ====== ====== ======
</TABLE>
S-21
<PAGE> 22
The increase in property management revenues and expenses from each of the
1995 to 1996 periods is primarily attributable to the increase in the average
number and the average gross revenues of units managed.
POST ASSET MANAGEMENT
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1996 1995 % CHANGE 1996 1995 % CHANGE
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Property management and other
revenue........................... $ 88 $ 130 (32.3)% $ 169 $ 256 (34.0)%
Property management expense......... 60 85 (29.4)% 142 194 (26.8)%
General and administrative
expense........................... 11 14 (21.4)% 25 34 (26.5)%
------ ------ ------ ------
Revenue in excess of specified
expense........................... $ 17 $ 31 (45.2)% $ 2 $ 28 (92.9)%
====== ====== ====== ======
Average apartment units managed..... 866 1,256 (31.1)% 866 1,256 (31.1)%
====== ====== ====== ======
</TABLE>
Property management revenues and the related expenses decreased for each of
the periods in 1996, compared to the same periods in 1995, primarily due to the
reduction in the average number of apartment units managed. This reduction was
primarily due to two management contracts which were cancelled effective January
1996. The Operating Partnership expects income from Post Asset Management to
continue to decline as contracts are cancelled and not replaced.
THIRD PARTY LANDSCAPE SERVICES
The Operating Partnership provides landscape maintenance, design and
installation services to non-related parties through a subsidiary, Post
Landscape Services, Inc. ("Post Landscape Services").
The operating performance of Post Landscape Services for the three and six
months ended June 30, 1996 and 1995 is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------------- --------------------------
1996 1995 % CHANGE 1996 1995 % CHANGE
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Landscape services and other
revenue......................... $1,356 $1,342 1.0% $2,268 $2,156 5.2%
Landscape services expense........ 991 884 12.1% 1,658 1,476 12.3%
General and administrative
expense......................... 104 182 (42.9)% 205 278 (26.3)%
------ ------ ------ ------
Revenue in excess of specified
expense......................... $ 261 $ 276 (5.4)% $ 405 $ 402 0.7%
====== ====== ====== ======
</TABLE>
The increase in landscape services revenue and landscape service expense
for each of the periods ended June 30, 1996, compared to the same period in
1995, is primarily due to increases in landscape contracts.
OTHER INCOME AND EXPENSES
General and administrative expense increased for the three and six months
ended June 30, 1996, compared to the same period in the prior year, primarily as
a result of increased travel expenses and personnel costs.
The extraordinary item of $648 and $803 for the three and six months ended
June 30, 1995, respectively, resulted from the costs associated with the early
retirement of debt.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The Operating Partnership recorded net income of $37,297 for the year ended
December 31, 1995 primarily as a result of increased rental rates for fully
stabilized communities and an increase in units placed in service. This is
compared to net income of $24,730 for the year ended December 31, 1994 and a net
loss of ($9,061) for the year ended December 31, 1993. The increase in net
income in 1994 was primarily due to
S-22
<PAGE> 23
lower interest expense as a result of the repayment or economic defeasance of
debt with contributions from the Company resulting from proceeds of the Initial
Offering and the public offering completed by the Company on February 7, 1994
(the "Second Offering").
COMMUNITY OPERATIONS
At December 31, 1995, the Operating Partnership's portfolio of apartment
communities consisted of thirty-four communities and the first phase of two
additional communities which were completed and stabilized for all of the
current and prior year, three communities which achieved full stabilization
during the prior year, three communities and the second phase of an existing
community which reached stabilization during the current year and eight
communities and a second phase of an existing community in the development or
lease-up stage. In addition, during the third quarter of 1995, the Operating
Partnership sold three of its communities which it had previously developed and
operated.
ALL OPERATING COMMUNITIES
The operating performance for all of the Operating Partnership's apartment
communities combined for the years ended December 31, 1995, 1994 and 1993 is
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------
1995 1994 % CHANGE 1994 1993 % CHANGE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenue:
Fully stabilized
communities(1)............... $112,048 $106,421 5.3% $106,421 $ 99,853 6.6%
Communities stabilized less than
two years(2)................. 8,417 5,364 56.9% 5,364 1,015 428.5%
Development and lease-up
communities(3)............... 10,852 133 N/A 133 -- N/A
Sold communities(4)............. 2,926 3,998 (26.8)% 3,998 3,854 3.7%
Other revenue(5)................ 2,458 2,074 18.5% 2,074 2,170 (4.4)%
-------- -------- -------- --------
136,701 117,990 15.9% 117,990 106,892 10.4%
-------- -------- -------- --------
Property operating and maintenance
expense (exclusive of
depreciation and amortization):
Fully stabilized communities.... 38,460 36,699 4.8% 36,699 35,724 2.7%
Communities stabilized less than
two years.................... 2,306 1,780 29.6% 1,780 544 227.2%
Development and lease-up
communities.................. 4,450 515 N/A 515 -- N/A
Sold communities................ 1,279 1,722 (25.7)% 1,722 1,788 (3.7)%
Other expenses(6)............... 3,417 2,660 28.5% 2,660 3,153 (15.6)%
-------- -------- -------- --------
49,912 43,376 15.1% 43,376 41,209 5.3%
-------- -------- -------- --------
Revenue in excess of specified
expense......................... $ 86,789 $ 74,614 16.3% $ 74,614 $ 65,683 13.6%
======== ======== ======== ========
Recurring capital expenditures(7):
Carpet.......................... $ 897 $ 729 23.0% $ 729 $ 742 (1.8)%
Other........................... 803 1,087 (26.1)% 1,087 979 11.0%
-------- -------- -------- --------
Total................... $ 1,700 $ 1,816 (6.4)% $ 1,816 $ 1,721 5.5%
======== ======== ======== ========
Average apartment units in
service......................... 15,519 14,619 6.2% 14,619 14,179 3.1%
======== ======== ======== ========
</TABLE>
- ---------------
(1) Communities which reached stabilization prior to January 1, 1994.
(2) Communities which reached stabilization during the year ended December 31,
1994.
S-23
<PAGE> 24
(3) Communities in the "construction", "development" or "lease-up" stage during
1995 and, therefore, not considered fully stabilized for all of the periods
presented.
(4) Communities which were sold on September 13, 1995.
(5) Other revenue includes revenue on furnished apartment rentals above the
unfurnished rental rates and any revenue not directly related to property
operations.
(6) Other expenses includes certain indirect central office operating expenses
related to management, grounds maintenance, and costs associated with
furnished apartment rentals.
(7) In addition to those expenses which relate to property operations, the
Operating Partnership 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.
Rental and other revenue increased for 1995 and 1994 primarily as a result
of increased rates for fully stabilized communities and an increase in units
placed in service. Rental and other revenue from communities stabilized since
January 1, 1994, increased $5,627 from 1994 to 1995 primarily as a result of
higher rental rates. Rental and other revenue from all other communities
increased by $12,700 from 1994 to 1995 primarily due to additional units placed
in service. On September 13, 1995, the Operating Partnership sold three
communities, all of which had been previously included in the fully stabilized
community group and are now shown separately.
Property operating and maintenance expenses (exclusive of depreciation and
amortization) increased from 1993 to 1994 and 1994 to 1995 primarily due to the
increase in the units placed in service.
FULLY STABILIZED COMMUNITIES
The Operating Partnership defines fully stabilized communities as those
which have reached stabilization prior to the beginning of the previous calendar
year.
The operating performance of the 34 communities and the first phase of two
additional communities containing an aggregate of 13,428 units which were fully
stabilized as of January 1, 1994, are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------
1995 1994 % CHANGE 1994 1993 % CHANGE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Rental and other revenue.... $112,048 $106,421 5.3% $106,421 $ 99,853 6.6%
Property operating and
maintenance expense
(exclusive of depreciation
and amortization)(1)...... 38,460 36,699 4.8% 36,699 35,724 2.7%
------- ------- ------- -------
Revenue in excess of
specified expense......... $ 73,588 $ 69,722 5.5% $ 69,722 $ 64,129 8.7%
======= ======= ======= =======
Average economic
occupancy(2).............. 96.0% 96.5% 96.5% 94.6%
======= ======= ======= =======
Average monthly rental rate
per apartment unit(3)..... $ 710 $ 668 6.3% $ 668 $ 628 6.4%
======= ======= ======= =======
Apartment units in
service................... 13,428 13,428 -- 13,428 13,428 --
======= ======= ======= =======
</TABLE>
- ---------------
(1) In addition to those expenses which relate to property operations, the
Operating Partnership incurs recurring and non-recurring expenditures
relating to acquiring new assets, materially enhancing the value of an
existing asset, or substantially extending the useful life of an existing
asset, all of which are capitalized. For the year ended December 31, 1995
and 1994, recurring expenditures were $1,601 and $1,470, or $119 and $109
on a per unit basis, respectively.
S-24
<PAGE> 25
(2) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. 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 95.5%, 96.1% and 93.8% for the year ended December 31, 1995, 1994 and
1993, respectively.) For the year ended December 31, 1995, concessions were
$296 and employee discounts were $213.
(3) Average monthly rental rate is defined as the average of the gross actual
rental rates for leased units and the average of the anticipated rental
rates for unoccupied units.
Rental and other revenue increased from 1994 to 1995 due to higher rental
rates with occupancy slightly declining. Property operating and maintenance
expenses (exclusive of depreciation and amortization) increased $1,761, or 4.8%.
Ad valorem real estate taxes increased from $9,376 in 1994 to $10,340 in 1995,
an increase of 10.3%. This increase alone accounted for 55% of the overall
operating expense increase. The remaining increase was primarily due to modest
increases in utilities, advertising and promotion and building repairs and
maintenance offset by a modest decrease in landscaping and grounds and
maintenance expense.
Rental and other revenue increased from 1993 to 1994 as a result of
increased rental rates and occupancy. The modest increase in property and
maintenance expense from 1993 to 1994 was primarily due to increases in real
estate taxes, insurance and personnel costs which were partially offset by
reductions in advertising and promotion expense due to lower vacancies. In
addition, utilities expense remained relatively flat despite rising rates due to
the effect of installation of cost saving devices and implemented cost controls.
Building repairs and maintenance increased from 1993 to 1994 due to various cost
reduction programs implemented at the communities and cost savings achieved as
grounds matured during the period.
LEASE-UP DEFICITS
As noted in the overview of Community Operations, the Operating Partnership
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 Operating
Partnership 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 during
each period are included in that period and, accordingly, different communities
may be included in different periods.
For each quarter of the year ended December 31, 1995, the "lease-up
deficit" charged to and included in results of operations are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
------------------------------
QTR 1 QTR 2 QTR 3 QTR 4
----- ----- ------ -----
<S> <C> <C> <C> <C>
Rental and other revenue............................... $ 282 $ 591 $1,591 $ 863
Property operating and maintenance expense (exclusive
of depreciation and amortization).................... 450 631 840 501
------ ------ ------ ------
Revenue in excess of specified expense................. (168) (40) 751 362
Interest expense....................................... 175 347 1,002 548
------ ------ ------ ------
Lease-up deficit....................................... $(343) $(387) $ (251) $(186)
====== ====== ====== ======
</TABLE>
S-25
<PAGE> 26
THIRD PARTY MANAGEMENT SERVICES
The Operating Partnership provides asset management, leasing and other
consulting services to non-related owners of apartment communities through two
of its subsidiaries, RAM and Post Asset Management.
The operating performance of RAM and Post Asset Management for the years
ended December 31, 1995, 1994 and 1993 are summarized as follows:
RAM PARTNERS, INC.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
% %
1995 1994 CHANGE 1994 1993 CHANGE
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Property management and other
revenue............................ $2,331 $2,184 6.7% $2,184 $2,318 (5.8 )%
Property management expense.......... 1,213 1,278 (5.1)% 1,278 1,388 (7.9 )%
General and administrative expense... 467 433 7.9% 433 492 (12.0 )%
------ ------ ------ ------
Revenue in excess of specified
expense............................ $ 651 $ 473 37.6% $ 473 $ 438 8.0 %
====== ====== ====== ======
Average apartment units in service... 8,798 8,488 3.7% 8,488 9,488 (10.5 )%
====== ====== ====== ======
</TABLE>
The change in property management revenues and expenses from 1994 to 1995
and 1993 to 1994 is primarily attributable to the change in the average number
and the average gross revenues of units managed.
POST ASSET MANAGEMENT
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
% %
1995 1994 CHANGE 1994 1993 CHANGE
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Property management and other
revenue............................ $ 550 $ 578 (4.8 )% $ 578 $1,001 (42.3 )%
Property management expense.......... 392 408 (3.9 )% 408 431 (5.3 )%
General and administrative expense... 94 110 (14.5 )% 110 142 (22.5 )%
------ ------ ------ ------
Revenue in excess of specified
expense............................ $ 64 $ 60 6.7 % $ 60 $ 428 (86.0 )%
====== ====== ====== ======
Average apartment units in service... 1,061 1,498 (29.2 )% 1,498 2,145 (30.2 )%
====== ====== ====== ======
</TABLE>
The decreases in property management revenues and the related expenses for
1995 to 1994 were primarily due to the reduction in the average number of
apartment units managed during the periods. These reductions were primarily due
to cancellation of three management contracts during 1993 and one during 1994
for communities developed by the Operating Partnership and sold to third-party
owners prior to the Initial Offering. Two additional contracts were canceled
effective in January 1996. The Operating Partnership expects income from Post
Asset Management to continue to decline as contracts are canceled and not
replaced.
THIRD PARTY LANDSCAPE SERVICES
The Operating Partnership provides landscape maintenance, design and
installation services to non-related parties through a subsidiary, Post
Landscape.
S-26
<PAGE> 27
The operating performance of Post Landscape for the years ended December
31, 1995, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
% %
1995 1994 CHANGE 1994 1993 CHANGE
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Landscape services and other revenue... $4,662 $3,808 22.4% $3,808 $3,829 (0.5)%
Landscape services expense............. 3,255 2,685 21.2% 2,685 2,703 (0.7)%
General and administrative expense..... 695 413 68.3% 413 448 (7.8)%
------ ------ ------ ------
Revenue in excess of specified
expense.............................. $ 712 $ 710 0.3% $ 710 $ 678 4.7%
====== ====== ====== ======
</TABLE>
The change in landscape services revenue, landscape services expense and
general and administrative expense from 1994 to 1995 is primarily due to an
increase in landscape contracts. Revenues and expenses for 1993 and 1994
remained consistent.
OTHER INCOME AND EXPENSES
Depreciation and amortization expense increased from 1994 to 1995 primarily
due to the completion of new communities in 1995. The decrease from 1993 to 1994
is primarily due to the write-off of deferred loan cost related to early
extinguishment of indebtedness with contributions made by the Company from
proceeds of the Initial Offering and Second Offering.
Interest expense increased from 1994 to 1995 due to additional outstanding
borrowings until the time of the public offering completed by the Company on
October 20, 1995 (the "Third Offering"). The decrease from 1993 to 1994 is
primarily due to the repayment or economic defeasance of debt with contributions
made by the Company from proceeds of the Initial Offering and Second Offering.
Amortization of interest rate protection agreement and swap gain increased
from 1993 to 1994 due to lower amortization of swap gain from the extinguishment
of debt with contributions made by the Company from proceeds of the Initial
Offering and Second Offering.
General and administrative expense remained relatively consistent from 1994
to 1995. The increase from 1993 to 1994 is due to increased costs associated
with operating the Company as a public company, write-off of costs ($282)
relating to abandoned development projects and additional incentive based
executive compensation.
Formation Transaction expense was incurred during the year ended December
31, 1993 relating to legal, accounting and other costs arising in connection
with the business combination completed at the time of the Initial Offering.
Gain on sale of real estate assets during 1995 and 1994 resulted from the
sale of three communities and a parcel of land, respectively.
The extraordinary item of $1,120, $4,413 and $13,628 for the years ended
December 31, 1995, 1994 and 1993, resulted from the costs associated with the
early retirement of debt.
LIQUIDITY AND CAPITAL RESOURCES
LIQUIDITY
The Operating Partnership's net cash provided by operating activities
increased from $2,412 in 1993 to $43,819 in 1994, principally due to decreased
interest expense ($18,603) resulting from retirements of debt with contributions
from the Company of proceeds from the Initial and Second Offerings, increased
property revenue in excess of specified expenses ($8,931) and 1993 non-recurring
payments for debt prepayment penalties ($13,803) and REIT formation expenses
($2,783), and increased from $43,819 in 1994 to $57,366 in 1995, principally due
to increased property revenue in excess of specified expenses, and increased
from $33,856 in the six months ended June 30, 1995 to $43,408 in the six months
ended June 30, 1996, principally
S-27
<PAGE> 28
due to increased property revenue in excess of specified expenses. Net cash used
in investing activities increased from $51,152 in 1993 to $99,364 in 1994,
principally due to the increase in spending on new community development, and
increased from $99,364 in 1994 to $114,531 in 1995, principally due to a $27,740
increase in spending on new community development and acquisition activity
offset by an increase in net proceeds from the sale of real estate assets of
$15,152. Net cash used in investing activities increased from $67,606 in the six
months ended June 30, 1995 to $98,170 in the six months ended June 30, 1996
principally due to the increase in construction activities relating to new
development and acquisition of new communities. The Operating Partnership's net
cash provided by financing activities decreased from $49,647 in 1993 to $46,496
in 1994, principally due to the effects of contributions from the Company of
proceeds from the Initial and Second Offerings and the payment of dividends in
1994, and increased from $46,496 in 1994 to $60,881 in 1995, primarily due to
the effects of contributions from the Company of proceeds from the Third
Offering and dividend reinvestment plan and the Operating Partnership's
additional borrowings and distributions, and decreased from $49,262 in the six
months ended June 30, 1995 to $47,378 in the six months ended June 30, 1996 due
to an increase in net borrowing activity to fund development offset by a
decrease in contributions from the Company of cash proceeds from the dividend
reinvestment plan and an increase in distributions paid for the six months ended
June 30, 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 Operating Partnership makes distributions to enable the Company to satisfy
this requirement. As a REIT, the Company generally will not be subject to
Federal income tax on net income.
At June 30, 1996, the Operating Partnership had total indebtedness of
$421,378 and cash and cash equivalents of $1,624. The Operating Partnership's
indebtedness includes approximately $33,340 in conventional mortgages payable
secured by individual communities, tax-exempt bond indebtedness of $149,038,
senior unsecured notes of $100,000 and borrowings under an unsecured line of
credit of approximately $139,000.
The Operating Partnership expects to meet its short-term liquidity
requirements generally through its net cash provided by operations and
borrowings under credit arrangements and expects to meet certain of its long-
term liquidity requirements, such as scheduled debt maturities, repayment of
financing of construction and development activities and possible property
acquisitions, through long-term secured and unsecured borrowings, possible sales
of properties and the issuance of debt securities or additional equity
securities of the Company, or, possibly in connection with acquisitions of land
or improved properties, Units of the Operating Partnership. The Operating
Partnership believes that its net cash provided by operations will be adequate
and anticipates that it will continue to be adequate to meet both operating
requirements and payment of distributions by the Operating Partnership in
accordance with REIT requirements, of which the Company is subject to, in both
the short and the long term. The budgeted expenditures for improvements and
renovations to certain of the communities are expected to be funded from
property operations.
At June 30, 1996, on a pro forma basis giving effect to the Offering, the
Cash Management Line and the reissuance of the Post Canyon and Post Corners
bonds, the ratio of Debt to Adjusted Total Assets would have been 40%, the ratio
of Secured Debt to Adjusted Total Assets would have been 17%, the ratio of Total
Unencumbered Assets to Unsecured Debt would have been 297% and Consolidated
Income Available for Debt Service would have been 4.4x the Annual Debt Service
Charge (calculated based upon the last four fiscal quarters in accordance with
the Indenture).
LINES OF CREDIT
On February 1, 1995, the Operating Partnership closed a 39-month unsecured
revolving line of credit (the "Revolver") in the amount of $180,000 with a bank
syndicate to provide funding for future construction, acquisitions and general
business obligations. Borrowings under the Revolver initially bore interest at
LIBOR plus 1.50% or prime minus .25% and had a maturity date of May 1, 1998. On
March 1, 1996 the Revolver was
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<PAGE> 29
amended to reduce the interest rate to LIBOR plus 0.95% or prime minus .25% and
to extend the maturity to May 1, 1999. The amendment also provides for the rate
to be adjusted up or down based on changes in the credit ratings on the
Operating Partnership's senior unsecured debt. On June 4, 1996, the rating on
the Operating Partnership's senior unsecured debt by Standard & Poor's was
raised to BBB+ which further reduced the interest rate on the Revolver to its
current rate of LIBOR plus .80% or prime minus .25%. The credit agreement for
the Revolver contains customary representations, covenants and events of
default, including covenants which restrict the ability of the Operating
Partnership to make distributions in excess of stated amounts. 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 Operating
Partnership does not anticipate that this covenant will adversely affect its
ability to make distributions.
On July 26, 1996, the Operating Partnership closed a $20,000 unsecured line
of credit with Wachovia Bank of Georgia, N.A. (the "Cash Management Line"),
which was fully funded and used to pay down the outstanding balance on the
Revolver. The Cash Management Line bears interest at LIBOR plus .75% and has a
maturity date of July 25, 1997. The Operating Partnership has an automatic daily
sweep which applies all available cash to reduce the outstanding balance on the
Cash Management Line.
At June 30, 1996, the Operating Partnership had $41,000 available under the
Revolver to fund future development and general corporate obligations. Pro forma
for the Offering and the Cash Management Line, at June 30, 1996 the Operating
Partnership would have had $180,000 available under the Revolver and $4,478
available under the Cash Management Line. In addition, the Operating Partnership
has a $3,000 facility to provide letters of credit for general business
purposes.
NORTHWESTERN MUTUAL UNSECURED LOANS
On June 7, 1995, the Operating Partnership issued $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 and matures on June 7, 2000; and the
second, aggregating $20,000, carries an interest rate of 8.37% per annum and
matures on June 7, 2002. Proceeds from the issuance of the NML Notes were used
to reduce secured indebtedness and to pay down the Revolver. The note agreements
pursuant to which the NML Notes were purchased contain representations,
covenants and events of default similar to those contained in the note agreement
for the Revolver.
WACHOVIA UNSECURED LOANS
On September 29, 1995, the Operating Partnership issued $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. 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 Operating Partnership 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
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<PAGE> 30
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
On May 7, 1996, the Operating Partnership reacquired three contiguous
Atlanta apartment communities containing a total of 810 units which the
Operating Partnership developed in the early 1980's and managed under the
Post(R) brand name through mid-1993. The Operating Partnership's capital
investment, including expenditures to add perimeter fencing and steel entry
gates and construction of a new centralized leasing office, will be
approximately $48 million. At the time of acquisition the community was operated
as Dunwoody Crossing and is now operated by the Operating Partnership as Post
Creek(TM).
In April 1996, the Operating Partnership listed two communities in Florida,
containing a total of 596 units, for sale. On July 19, 1996, one of the
communities, containing 180 units, was sold.
DIVIDEND REINVESTMENT PLAN
The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of
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.
SCHEDULE OF INDEBTEDNESS
The following table reflects the Operating Partnership's indebtedness at
June 30, 1996 and on a pro forma basis after giving effect to the Offering, the
funding of the Cash Management Line on July 26, 1996, and the reissuance of the
Post Canyon and Post Corners bonds which matured and were refunded on July 1,
1996 and August 1, 1996, respectively:
<TABLE>
<CAPTION>
MATURITY PRINCIPAL PRO
COMMUNITY LOCATION INTEREST RATE DATE(1) BALANCE FORMA
- ---------------------------------- ------------ --------------------------------- ---------- --------- --------
<S> <C> <C> <C> <C> <C>
TAX EXEMPT FIXED RATE (SECURED)
Post Canyon....................... Atlanta, GA 7.4% + .575%(2)(3) 07/01/96(4)(5) $ 16,845 $ --
Post Corners...................... Atlanta, GA 7.4% + .575%(2)(3) 08/01/96(4)(6) 14,760 --
Post Bridge....................... Atlanta, GA 7.5% + .575%(2)(3) 01/01/97(4) 9,960 9,960
Post Village (Atlanta) Gardens.... Atlanta, GA 7.5% + .575%(2)(3) 01/01/97(4) 14,500 14,500
Post Chase........................ Atlanta, GA 7.5% + .575%(2)(3) 07/01/97(4) 12,000 12,000
Post Walk......................... Atlanta, GA 7.5% + .575%(2)(3) 07/01/97(4) 15,000 15,000
Post Court........................ Atlanta, GA 7.5% + .575%(2)(3) 06/01/98(4) 13,298 13,298
-------- --------
96,363 64,758
-------- --------
CONVENTIONAL FIXED RATE (SECURED)
Post Village (Atlanta) Arbors..... Atlanta, GA 8.16% 02/10/97 7,684 7,684
Post Summit....................... Atlanta, GA 7.72% 02/01/98 5,347 5,347
Post River........................ Atlanta, GA 7.72% 03/01/98 5,909 5,909
-------- --------
18,940 18,940
-------- --------
TAX EXEMPT FLOATING RATE (SECURED)
Post Ashford Series 1995.......... Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 9,895 9,895
Post Valley Series 1995........... Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 18,600 18,600
Post Brook Series 1995............ Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 4,300 4,300
Post Village (Atlanta) Hills
Series 1995..................... Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 7,000 7,000
Post Mill Series 1995............. Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 12,880 12,880
Post Canyon Series 1996........... Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 0 16,845
Post Corners Series 1996.......... Atlanta, GA "AAA" NON-AMT + .575%(2)(3) 06/01/2025 0 14,760
-------- --------
52,675 84,280
-------- --------
CONVENTIONAL FLOATING RATE
(SECURED)
Post Renaissance (Phase I and
II)............................. Atlanta, GA LIBOR + .55% 07/01/99 14,400 14,400
-------- --------
$ 14,400 $ 14,400
-------- --------
</TABLE>
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<PAGE> 31
<TABLE>
<CAPTION>
MATURITY PRINCIPAL PRO
COMMUNITY LOCATION INTEREST RATE DATE(1) BALANCE FORMA
- ---------------------------------- ------------ --------------------------------- -------- --------
<S> <C> <C> <C> <C> <C>
SENIOR NOTES (UNSECURED)
Wachovia Bank of Georgia.......... N/A 7.15% 09/29/99 $ 25,000 $ 25,000
Northwestern Mutual Life.......... N/A 8.21% 06/07/2000 30,000 30,000
Wachovia Bank of Georgia.......... N/A 7.15% 09/29/2001 25,000 25,000
Northwestern Mutual Life.......... N/A 8.37% 06/07/2002 20,000 20,000
7 1/4% Notes due 2003............. N/A 7.25% 10/01/2003 N/A 100,000
7 1/2% Notes due 2006............. N/A 7.50% 10/01/2006 N/A 25,000
-------- --------
100,000 225,000
-------- --------
LINES OF CREDIT (UNSECURED)
Cash Management Line.............. N/A LIBOR + .75% or prime minus .25% 07/25/97 N/A 15,522
Revolver.......................... N/A LIBOR + .80% or prime minus .25% 05/01/99 139,000 --
-------- --------
139,000 15,522
-------- --------
Total............................. $ 421,378 $422,900
======== ========
</TABLE>
- ---------------
(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 Operating
Partnership.
(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
Operating Partnership has economically defeased their respective bond
indebtedness.
(4) Subject to certain conditions at re-issuance, the credit enhancement runs to
June 1, 2025.
(5) On July 1, 1996, this bond was refunded with an issue having a maturity of
June 1, 2025 and an interest rate of SunTrust Non-AMT "AAA" tax free rate
plus a credit enhancement fee of .575%.
(6) On August 1, 1996, this bond was refunded with an issue having a maturity of
June 1, 2025 and an interest rate of SunTrust Non-AMT "AAA" tax free rate
plus a credit enhancement fee of .575%.
REFUNDABLE TAX EXEMPT BONDS
The Operating Partnership has previously issued tax-exempt bonds, secured
by certain communities, totaling $235,880, of which $86,842 has been
economically defeased, leaving $149,038 of principal amount of tax-exempt bonds
outstanding at June 30, 1996. As of June 30, 1996, $52,675 of the bonds
outstanding have been reissued with a maturity of June 1, 2025. The remaining
outstanding bonds, together with the economically defeased bonds, mature and may
be reissued, during the years 1996 through 1998. The Operating Partnership 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 Operating Partnership then
determines that such refunding is beneficial to the Operating Partnership.
The following table shows the amount of bonds (both defeased and
outstanding) at June 30, 1996, which the Operating Partnership may reissue
during the years 1996 through 2025:
<TABLE>
<CAPTION>
DEFEASED OUTSTANDING TOTAL REISSUE
PORTION PORTION CAPACITY
-------- ----------- -------------
<S> <C> <C> <C>
1996(1).............................................. $ -- $ 31,605 $ 31,605
1997................................................. 5,490 51,460 56,950
1998................................................. 81,352 13,298 94,650
Thereafter -- 52,675 52,675
------- -------- --------
$ 86,842 $ 149,038 $ 235,880
======= ======== ========
</TABLE>
- ---------------
(1) 1996 amounts include Post Canyon and Post Corners bonds which matured and
were refunded on July 1, 1996 and August 1, 1996, respectively.
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<PAGE> 32
CAPITALIZATION OF FIXED ASSETS AND COMMUNITY IMPROVEMENTS
The Operating Partnership has established a policy of capitalizing those
expenditures relating to acquiring new assets, materially enhancing the value of
an existing asset, or substantially extending the useful life of an existing
asset. All expenditures necessary to maintain a community in ordinary operating
condition are expensed as incurred. During the first five years of a community
(which corresponds to the estimated depreciable life), carpet replacements are
expensed as incurred. Thereafter, carpet replacements are capitalized.
Acquisition of assets and community improvement expenditures for the six
months ended June 30, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1996 1995
------- -------
<S> <C> <C>
New community development and acquisition activity................. $95,664 $65,748
Non-recurring capital expenditures:
Vehicle access control gates..................................... 32 323
Other............................................................ 743 362
Recurring capital expenditures:
Carpet replacements.............................................. 410 433
Community additions and improvements............................. 982 333
Corporate additions and improvements............................. 339 407
------- -------
$98,170 $67,606
======= =======
</TABLE>
INFLATION
Substantially all of the leases at the communities allow, at the time of
renewal, for adjustments in the rent payable thereunder, and thus may enable the
Operating Partnership 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 Operating Partnership's lease
agreements provide that the term will be extended unless either the Operating
Partnership or the lessee gives at least sixty (60) days written notice of
termination; in addition, the Operating Partnership's policy permits the earlier
termination of a lease by a lessee upon thirty (30) days written notice to the
Operating Partnership 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 Operating Partnership of the adverse
effect of inflation.
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Historical Funds from Operations. The Operating Partnership considers FFO
an appropriate measure of performance of an equity REIT. The Operating
Partnership uses the National Association of Real Estate Investment Trust
("NAREIT") definition of FFO, which was adopted for periods beginning after
January 1, 1996. FFO for any period means the Consolidated Net Income of the
Operating Partnership and its Subsidiaries for such period excluding gains or
losses from debt restructuring and sales of property, plus depreciation of real
estate assets, and after adjustment for unconsolidated partnerships and joint
ventures, all determined on a consistent basis in accordance with generally
accepted accounting principles ("GAAP"). FFO presented herein is not necessarily
comparable to FFO presented by other real estate companies due to the fact that
not all real estate companies use the same definition. However, the Operating
Partnership's FFO is comparable to the FFO of real estate companies that use the
current NAREIT definition. FFO should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indicator of the Operating
Partnership's financial performance or to cash flow from operating activities
(determined in accordance with GAAP) as a measure of the Operating Partnership's
liquidity, nor is it necessarily indicative of sufficient cash flow to fund all
of the Operating Partnership's needs or ability to service indebtedness or make
distributions. Cash available for distribution is defined as FFO less capital
expenditures funded by operations and loan amortization payments. The Operating
Partnership believes that in order to facilitate a
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<PAGE> 33
clear understanding of the consolidated historical operating results of the
Operating Partnership, FFO and cash available for distribution should be
examined in conjunction with net income as presented in the consolidated
financial statements and data included elsewhere and incorporated by reference
in this Prospectus Supplement and the Prospectus.
FFO and cash available for distribution for the six months ended June 30,
1996 and 1995, and FFO for the years ended December 31, 1995, 1994 and 1993
presented on a historical basis are summarized in the following tables:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------------- ---------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Income.............. $ 24,875 $ 15,688 $ 37,297 $ 24,730 $ (9,061)
Extraordinary item.... -- 803 1,120 4,413 13,628
Gain on sale of real
estate assets...... -- -- (1,746) (2,832) --
Formation Transaction
expense............ -- -- -- -- 2,783
Income tax related to
gain on sale of
real estate
assets............. -- -- -- 1,338 --
----------- ----------- ----------- ----------- -----------
Adjusted net
income........... 24,875 16,491 36,671 27,649 7,350
Depreciation (real
estate assets)..... 10,796 10,128 20,127 19,967 19,427
----------- ----------- ----------- ----------- -----------
Funds from Operations... 35,671 26,619 56,798 47,616 26,777
Recurring capital
expenditures(1).... (1,392) (766) (2,967) (2,599) (2,047)
Non-recurring capital
expenditures(2).... (775) (685) (1,287) (1,302) (706)
Loan amortization
payments........... (105) (103) (199) (184) (149)
----------- ----------- ----------- ----------- -----------
Cash Available for
Distribution.......... $ 33,399 $ 25,065 $ 52,345 $ 43,531 $ 23,875
=========== =========== =========== =========== ===========
Cash Flow Provided From
(Used In):
Operating
activities......... $ 43,408 $ 33,856 $ 57,366 $ 43,819 $ 2,412
Investing
activities......... $ (98,170) $ (67,606) $ (114,531) $ (99,364) $ (51,152)
Financing
activities......... $ 47,378 $ 49,262 $ 60,881 $ 46,496 $ 49,647
Weighted average
Operating Partnership
Units outstanding..... 26,818,135 22,684,488 23,541,639 22,125,890 13,574,767
=========== =========== =========== =========== ===========
</TABLE>
- ---------------
(1) Recurring capital expenditures consisted primarily of $410 and $433 of
carpet replacement, $982 and $333 of other additions and improvements to
existing communities for the six months ended June 30, 1996 and 1995,
respectively. Since the Company does not add back the depreciation of
non-real estate assets in its calculation of FFO, capital expenditures of
$339 and $407 are excluded from the calculation of cash available for
distribution for the six months ended June 30, 1996 and 1995, respectively.
(2) Non-recurring capital expenditures consisted of community additions and
improvements of $743 and $362 for the six months ended June 30, 1996 and
1995, respectively, and the addition of vehicle access control gates to
communities of $32 and $323 for the six months ended June 30, 1996 and
1995, respectively.
S-33
<PAGE> 34
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus Supplement and the accompanying Prospectus, including
documents incorporated by reference herein and therein, contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements are inherently subject to risks and uncertainties,
many of which cannot be predicted with accuracy and some of which might not even
be anticipated. Future events and actual results, financial and otherwise, may
differ materially from the results discussed in the forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in "Management's Discussion and Analysis of Results of
Operations and Financial Condition" included and incorporated by reference
herein.
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<PAGE> 35
MANAGEMENT
The directors and executive officers of the Company and their positions are
as follows:
<TABLE>
<CAPTION>
NAME POSITION AND OFFICES HELD
- ------------------------- ----------------------------------------------------------
<S> <C>
John A. Williams......... Chairman of the Board, Chief Executive Officer and
Director
John T. Glover........... President, Chief Operating Officer, Treasurer and Director
W. Daniel Faulk, Jr...... President -- Post Apartment Development
Jeffrey A. Harris........ President -- Post Management Services
Martha J. Logan.......... President -- Post Management Division
Terry L. Chapman......... Executive Vice President -- Post Management Services
Richard A. Denny, III.... Executive Vice President -- Post Apartment Development
John D. Hooks............ Executive Vice President -- Post Management Services
Donald J. Rutzen......... Executive Vice President -- Post Landscape Services, Inc.
Sherry W. Cohen.......... Senior Vice President -- Post Corporate Services and
Secretary
Judy M. Denman........... Senior Vice President -- Post Corporate Services
R. Gregory Fox........... Senior Vice President -- Post Corporate Services
Leona J. McElroy......... Senior Vice President -- Post Corporate Services
John B. Mears............ Senior Vice President -- Post Apartment Development
Timothy A. Peterson...... Senior Vice President -- Post Corporate Services
Janie S. Maddox.......... Vice President -- Post Corporate Services
Arthur M. Blank.......... Director; President and Chief Operating Officer -- The
Home Depot, Inc.
Herschel M. Bloom........ Director; Partner -- King & Spalding
Virginia C. Crawford..... Director; Chairman of the Executive Committee and Vice
President -- Crawford & Company
Russell R. French........ Director; General Partner -- Noro-Moseley Partners, L.P.
William A. Parker, Jr.... Director; Chairman of the Board -- Seminole Investment
Company, L.L.C.
J.C. Shaw................ Director; Chairman Emeritus of the Board -- Shaw
Industries, Inc.
</TABLE>
S-35
<PAGE> 36
DESCRIPTION OF THE NOTES
GENERAL
The 2003 Notes and the 2006 Notes constitute separate series of securities
(which are more fully described in the accompanying Prospectus), each to be
issued pursuant to an indenture dated as of September 25, 1996, as amended or
supplemented (the "Indenture"), between the Operating Partnership and SunTrust
Bank, Atlanta, as trustee (the "Trustee"), and will be limited to aggregate
principal amounts of $100,000,000 and $25,000,000, respectively. The terms of
the Notes include those provisions contained in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Notes are subject to all such terms,
and holders of Notes are referred to the Indenture and the Trust Indenture Act
for a statement thereof. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to and qualified in its
entirety by reference to the Indenture.
The Notes will be direct, unsecured and unsubordinated obligations of the
Operating Partnership and will rank pari passu with each other and with all
other unsecured and unsubordinated indebtedness of the Operating Partnership
from time to time outstanding. The Notes will be effectively subordinated to
mortgages and other secured indebtedness of the Operating Partnership. As of
June 30, 1996, such secured indebtedness aggregated approximately $182.4 million
and such unsecured and unsubordinated indebtedness aggregated approximately
$239.0 million (approximately $240.5 million on a pro forma basis). See
"Capitalization." Subject to certain limitations set forth in the Indenture, and
as described under "Certain Covenants -- Limitations on Incurrence of Debt"
below, the Indenture will permit the Operating Partnership to incur additional
secured and unsecured indebtedness.
The 2003 Notes will mature on October 1, 2003 and the 2006 Notes will
mature on October 1, 2006, (each a "Maturity Date"). The Notes are not subject
to any sinking fund provisions. The Notes will be issued only in fully
registered, book-entry form without coupons, in denominations of $1,000 and
integral multiples thereof, except under the limited circumstances described
below under "Book-Entry System."
Except as described under "Certain Covenants -- Limitations on Incurrence
of Debt" below and under "Description of Debt Securities -- Merger,
Consolidation or Sale" in the accompanying Prospectus, the Indenture does not
contain any other provisions that would limit the ability of the Operating
Partnership to incur indebtedness or that would afford holders of the Notes
protection in the event of (i) a highly leveraged or similar transaction
involving the Operating Partnership, the management of the Operating Partnership
or the Company, or any affiliate of any of them, (ii) a change of control of the
Operating Partnership or the Company, or (iii) a reorganization, restructuring,
merger or similar transaction involving the Operating Partnership that may
adversely affect the holders of the Notes. In addition, subject to the
limitations set forth under "Description of Debt Securities -- Merger,
Consolidation or Sale" in the accompanying Prospectus, the Operating Partnership
may, in the future, enter into certain transactions such as the sale of all or
substantially all of its assets or the merger or consolidation of the Operating
Partnership that would increase the amount of the Operating Partnership's
indebtedness or substantially reduce or eliminate the Operating Partnership's
assets, which may have an adverse effect on the Operating Partnership's ability
to service its indebtedness, including the Notes. The Operating Partnership and
its management have no present intention of engaging in a highly leveraged or
similar transaction involving the Operating Partnership.
PRINCIPAL AND INTEREST
The 2003 Notes will bear interest at 7 1/4% per annum and the 2006 Notes
will bear interest at 7 1/2% per annum, each from September 30, 1996 or from the
immediately preceding Interest Payment Date (as defined below) to which interest
has been paid, payable semi-annually in arrears on each April 1 and October 1,
commencing April 1, 1997 (each, an "Interest Payment Date"), and on the
applicable Maturity Date, to the persons (the "Holders") in whose names the
applicable Notes are registered in the security register applicable to the Notes
at the close of business on the date 15 calendar days prior to such payment day
regardless of whether such day is a Business Day, as defined below (each, a
"Regular Record Date"). Interest on the Notes will be computed on the basis of a
360-day year of twelve 30-day months.
S-36
<PAGE> 37
The principal of each Note payable on the applicable Maturity Date will be
paid against presentation and surrender of such Note at the corporate trust
office of the Trustee, located initially c/o First National Bank of Chicago, 14
Wall Street, Suite 4607, New York, New York 10005, in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts.
If any Interest Payment Date or a Maturity Date falls on a day that is not
a Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or such Maturity Date, as the case may be. "Business Day" means any day, other
than a Saturday or Sunday, on which banking institutions in The City of New York
are open for business.
CERTAIN COVENANTS
LIMITATIONS ON INCURRENCE OF DEBT. The Operating Partnership will not, and
will not permit a Subsidiary to, incur any Debt (as defined below), other than
intercompany Debt (representing Debt to which the only parties are the Company,
the Operating Partnership and any of their Subsidiaries, but only so long as
such Debt is held solely by any of the Company, the Operating Partnership and
any Subsidiary) if, immediately after giving effect to the incurrence of such
additional Debt, the aggregate principal amount of all outstanding Debt of the
Operating Partnership and its Subsidiaries on a consolidated basis determined in
accordance with generally accepted accounting principles is greater than 60% of
the sum of (i) Total Assets (as defined below) as of the end of the fiscal
quarter covered in the Operating Partnership's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or, if such filing is not permitted under the Exchange Act, with the
Trustee) prior to the incurrence of such additional Debt and (ii) 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 the Operating Partnership's Total Assets is
referred to as the "Adjusted Total Assets").
In addition to the foregoing limitations on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Secured Debt of the Operating Partnership or any Subsidiary if, immediately
after giving effect to the incurrence of such additional Secured Debt, the
aggregate principal amount of all outstanding Secured Debt of the Operating
Partnership and its Subsidiaries on a consolidated basis is greater than 40% of
Adjusted Total Assets.
In addition to the foregoing limitation on the incurrence of Debt, the
Operating Partnership will not, and will not permit any Subsidiary to, incur any
Debt, other than intercompany Debt, if the ratio of Consolidated Income
Available for Debt Service to the Annual Debt Service Charge (in each case as
defined below) 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 shall have been less than 1.5 to 1, on a pro forma basis after giving
effect to the incurrence of such Debt and to the application of the proceeds
therefrom, and calculated on the assumption that (i) such Debt and any other
Debt incurred by the Operating Partnership or its Subsidiaries since the first
day of such four-quarter period and the application of the proceeds therefrom,
including to refinance other Debt, had occurred at the beginning of such period,
(ii) the repayment or retirement of any other Debt by the Operating Partnership
or its Subsidiaries since the first day of such four-quarter period had been
repaid or retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility shall be
computed based upon the average daily balance of such Debt during such period),
and (iii) in the case of any increase or decrease in Total Assets, or any other
acquisition or disposition by the Operating Partnership or any Subsidiary of any
asset or group of assets, since the first day of such 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 such period
with the appropriate adjustments to net income and Debt levels with respect to
such increase, decrease or other acquisition or disposition being included in
such pro forma calculation. For purposes of the adjustments referred to in
clause (iii) of the preceding sentence, any income earned (or loss incurred) as
a result of any such increase, decrease or other acquisition or disposition
referred to in clause (iii) for a period less than such four-quarter period
shall be annualized for such four-quarter period.
S-37
<PAGE> 38
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Operating Partnership is
required to maintain Total Unencumbered Assets of not less than 150% of the
aggregate outstanding principal amount of the Unsecured Debt of the Operating
Partnership.
As used herein:
"Annual Debt Service Charge" as of any date means the amount which is
expensed in any 12-month period for interest on Debt of the Operating
Partnership 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 (i) Consolidated
Interest Expense, (ii) provision for taxes of the Operating Partnership and
its Subsidiaries based on income, (iii) amortization (other than
amortization of debt discount) and depreciation, (iv) provisions for losses
from sales or joint ventures, (v) increases in deferred taxes and other
non-cash items, (vi) charges resulting from a change in accounting
principles, and (vii) 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.
"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 the Operating Partnership 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 the Operating Partnership and its
Subsidiaries for such period determined on a consolidated basis in
accordance with generally accepted accounting principles.
"Debt" of the Operating Partnership or any Subsidiary means any
indebtedness of the Operating Partnership and its Subsidiaries, whether or
not contingent, in respect of (i) borrowed money evidenced by bonds, notes,
debentures or similar instruments, (ii) indebtedness secured by any
mortgage, pledge, lien, charge, encumbrance or any security interest
existing on property owned by the Operating Partnership and its
Subsidiaries, (iii) 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 (iv) any lease of property by the Operating Partnership
and its Subsidiaries as lessee which is reflected in the Operating
Partnership's consolidated balance sheet as a capitalized lease in
accordance with generally accepted accounting principles, in the case of
items of indebtedness under (i) through (iii) above to the extent that any
such items (other than letters of credit) would appear as a liability on
the Operating Partnership's consolidated balance sheet in accordance with
generally accepted accounting principles, and also includes, to the extent
not otherwise included, any obligation by the Operating Partnership or any
Subsidiary to be liable for, or to pay, as obligor, guarantor or otherwise
(other than for purposes of collection in the ordinary course of business),
indebtedness of another person (other than the Operating Partnership or any
Subsidiary) (it being understood that Debt shall be deemed to be incurred
by the Operating Partnership and its Subsidiaries on a consolidated basis
whenever the Operating Partnership and its Subsidiaries on a consolidated
basis shall create, assume, guarantee or otherwise become liable in respect
thereof).
"Secured Debt" means Debt 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.
S-38
<PAGE> 39
"Senior Executive Group" shall mean, collectively, those individuals
holding the offices of Chairman, President, Chief Executive Officer, Chief
Operating Officer, or any Executive Vice President of the Company.
"Subsidiary" means (i) 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 the Operating Partnership or the Company,
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 the Operating
Partnership, the Company, any other Subsidiary, 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 an officer
of the Company or the Secretary of such Subsidiary, and (ii) any other
entity (other than the Company) the accounts of which are consolidated with
the accounts of the Operating Partnership.
"Total Assets" as of any date means the sum of (i) Undepreciated Real
Estate Assets and (ii) all other assets of the Operating Partnership and
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 (i) those
Undepreciated Real Estate Assets not securing any portion of Secured Debt
and (ii) all other assets of the Operating Partnership and 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 the
Operating Partnership 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 the Operating Partnership or any
Subsidiary that is not Secured Debt.
Reference is made to the section entitled "Description of Debt
Securities -- Certain Covenants" in the accompanying Prospectus for a
description of additional covenants applicable to the Notes. Compliance with the
covenants described herein and such additional covenants with respect to the
Notes generally may not be waived by the Board of Directors of the Company, as
general partner of the Operating Partnership, 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 -- Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus will apply to the Notes, including with respect to the covenants
described in this Prospectus Supplement.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Operating
Partnership, in whole or from time to time in part, at a redemption price equal
to the sum of (i) the principal amount of the Notes being redeemed plus accrued
interest thereon to the redemption date and (ii) the Make-Whole Amount (as
defined below), if any, with respect to such Notes (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of the Notes will be to receive payment of the
Redemption Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the security register for the Notes, not more than
60 nor less than 30 days prior to the date fixed for
S-39
<PAGE> 40
redemption. The notice of redemption will specify, among other items, the
Redemption Price and the principal amount of the Notes held by such Holder to be
redeemed.
If less than all the Notes are to be redeemed at the option of the
Operating Partnership, the Operating Partnership will notify the Trustee at
least 45 days prior to giving notice of redemption (or such shorter period as is
satisfactory to the Trustee) of the aggregate principal amount of Notes to be
redeemed and their redemption date. The Trustee shall select, in such manner as
it shall deem fair and appropriate, Notes to be redeemed in whole or in part.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption
or accelerated payment of any Notes, the excess, if any, of (i) the
aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount
of interest (exclusive of interest accrued to the date of redemption or
accelerated payment) that would have been payable in respect of each such
dollar if such redemption or accelerated payment had not been made,
determined by discounting, on a semi-annual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date such notice of redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would have been payable if such redemption or accelerated payment
had not been made to the date of redemption or accelerated payment, over
(ii) the aggregate principal amount of the Notes being redeemed or paid.
"Reinvestment Rate" means .25% plus the arithmetic mean of the yields
under the heading "Week Ending" published in the most recent Statistical
Release under the caption "Treasury Constant Maturities" for the maturity
(rounded to the nearest month) corresponding to the remaining life to
maturity, as of the payment date of the principal being redeemed or paid.
If no maturity exactly corresponds to such maturity, yields for the two
published maturities most closely corresponding to such maturity shall be
calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields on
a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which reports yields on actively traded United
States government securities adjusted to constant maturities, or, if such
statistical release is not published at the time of any determination under
the Indenture, then such other reasonably comparable index which shall be
designated by the Operating Partnership.
BOOK-ENTRY SYSTEM
The following are summaries of certain rules and operating procedures of
DTC that affect the payment of principal and interest and transfers of interests
in the Global Notes. Upon issuance, each series of Notes will only be issued in
the form of a Global Note which will be deposited with, or on behalf of, DTC and
registered in the name of Cede & Co., as nominee of DTC. Unless and until it is
exchanged in whole or in part for Notes in definitive form under the limited
circumstances described below, a Global Note may not be transferred except as a
whole (i) by DTC to a nominee of DTC, (ii) by a nominee of DTC to DTC or another
nominee of DTC or (iii) by DTC or any such nominee to a successor of DTC or a
nominee of such successor.
Ownership of beneficial interests in a Global Note will be limited to
persons that have accounts with DTC for such Global Note ("participants") or
persons that may hold interests through participants. Upon the issuance of a
Global Note, DTC will credit, on its book-entry registration and transfer
system, the participants' accounts with the respective principal amounts of the
Notes represented by such Global Note beneficially owned by such participants.
Ownership of beneficial interests in the Global Notes will be shown on, and the
transfer of such ownership interests will be effected only through, records
maintained by DTC (with respect to
S-40
<PAGE> 41
interests of participants) and on the records of participants (with respect to
interests of persons holding through participants). The laws of some states may
require that certain purchasers of securities take physical delivery of such
securities in definitive form. Such laws may limit or impair the ability to own,
transfer or pledge beneficial interests in the Global Notes.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole owner or Holder
of the Notes represented by such Global Note for all purposes under the
Indenture. Except as set forth below, owners of beneficial interests in a Global
Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of such Notes in certificated form and will not be considered the
registered owners or Holders thereof under the Indenture. Accordingly, each
person owning a beneficial interest in a Global Note must rely on the procedures
of DTC and, if such person is not a participant, on the procedures of the
participant through which such person owns its interest, to exercise any rights
of a Holder under the Indenture. The Operating Partnership understands that
under existing industry practices, if the Operating Partnership requests any
action of Holders or if an owner of a beneficial interest in a Global Note
desires to give or take any action that a Holder is entitled to give or take
under the Indenture, DTC would authorize the participants holding the relevant
beneficial interests to give or take such action, and such participants would
authorize beneficial owners owning through such participants to give or take
such action or would otherwise act upon the instructions of beneficial owners
holding through them.
Principal and interest payments on interests represented by a Global Note
will be made to DTC or its nominee, as the case may be, as the registered owner
of such Global Note. None of the Operating Partnership, the Trustee or any other
agent of the Operating Partnership or agent of the Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership of interests in the Global
Notes or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Operating Partnership expects that DTC, upon receipt of any payment of
principal or interest in respect of a Global Note, will immediately credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in such Global Note as shown on the records of
DTC. The Operating Partnership also expects that payments by participants to
owners of beneficial interests in the Global Notes held through such
participants will be governed by standing customer instructions and customary
practice, as is now 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 participants.
If DTC is at any time unwilling or unable to continue as depository for the
Notes and the Operating Partnership fails to appoint a successor depository
registered as a clearing agency under the Exchange Act within 90 days, the
Operating Partnership will issue the Notes in definitive form in exchange for
the respective Global Notes. Any Notes issued in definitive form in exchange for
the Global Notes will be registered in such name or names, and will be issued in
denominations of $1,000 and such integral multiples thereof, as DTC shall
instruct the Trustee. It is expected that such instructions will be based upon
directions received by DTC from participants with respect to ownership of
beneficial interests in the Global Notes.
DTC is a limited-purpose trust company organized under the Banking Law of
the State of New York, 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 was created to hold securities of its participants and to
facilitate the clearance and settlement of transactions among its participants
in such securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers, banks,
trust companies, clearing corporations and certain other organizations, some of
which (and/or their representatives) own DTC. Access to the DTC book-entry
system is also available to others, such as banks, brokers and dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly.
S-41
<PAGE> 42
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters (as defined
herein) in immediately available funds. All payments of principal and interest
in respect of the Notes will be made by the Operating Partnership in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, the Notes
will trade in DTC's Same-Day Funds Settlement System until maturity or until the
Notes are issued in certificated form, and secondary market trading activity in
the Notes will therefore be required by DTC to settle in immediately available
funds. No assurance can be given as to the effect, if any, of settlement in
immediately available funds on trading activity in the Notes.
S-42
<PAGE> 43
UNDERWRITING
Subject to the terms and conditions contained in the terms agreement and
related purchase agreement (collectively, the "Underwriting Agreement"), the
Operating Partnership has agreed to sell to Merrill Lynch, Pierce Fenner & Smith
Incorporated ("Merrill Lynch"), J.P. Morgan Securities Inc. and Dean Witter
Reynolds Inc. (the "Underwriters"), and the Underwriters have severally agreed
to purchase, the respective principal amount of the Notes set forth after their
names below. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, and that the
Underwriters will be obligated to purchase all of the Notes if any are
purchased.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT PRINCIPAL AMOUNT
UNDERWRITER OF 2003 NOTES OF 2006 NOTES
----------- ---------------- ----------------
<S> <C> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................................... $ 33,400,000 $ 8,400,000
J.P. Morgan Securities Inc................................... 33,300,000 8,300,000
Dean Witter Reynolds Inc..................................... 33,300,000 8,300,000
------------ ------------
Total........................................... $100,000,000 $ 25,000,000
============ ============
</TABLE>
The Underwriters have advised the Operating Partnership that they propose
initially to offer each series of Notes to the public at the public offering
price set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession not in excess of .375% (in the case of
the 2003 Notes) and .4% (in the case of the 2006 Notes) of the principal amount
thereof. The Underwriters may allow, and such dealers may reallow, a discount
not in excess of .25% of the principal amount to certain other dealers. After
the initial public offering, the public offering price, concession and discount
may be changed.
Each series of Notes is a new issue of securities with no established
trading market. The Operating Partnership does not intend to apply for listing
of the Notes on a national securities exchange. The Operating Partnership has
been advised by the Underwriters that the Underwriters intend to make a market
in the Notes as permitted by applicable laws and regulations, but the
Underwriters are not obligated to do so and may discontinue market-making at any
time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
The Operating Partnership has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, as
amended, or to contribute to payments the Underwriters may be required to make
in respect thereof.
Each of the Underwriters from time to time has provided investment banking
and financial advisory services to the Company and the Operating Partnership.
Merrill Lynch and Dean Witter Reynolds Inc. acted as representatives of various
underwriters in connection with public offerings of the Company's Common Stock
in 1993, 1994 and 1995.
LEGAL MATTERS
The legality of the Notes offered pursuant to this Prospectus Supplement
and the Prospectus will be passed upon for the Operating Partnership by King &
Spalding, Atlanta, Georgia. Herschel M. Bloom, a member of King & Spalding, is a
director of the Company.
Certain legal matters related to the Offering will be passed upon for the
Underwriters by Hogan & Hartson L.L.P., Washington, D.C.
S-43
<PAGE> 44
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE OPERATING PARTNERSHIP OR THE
UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO,
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS NOR ANY
SALE MADE HEREUNDER AND THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE OPERATING
PARTNERSHIP OR THE COMPANY SINCE THE DATE AS OF WHICH INFORMATION IS FURNISHED.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary......... S-3
Business and Communities.............. S-5
Community Information................. S-9
Recent Developments................... S-11
Use of Proceeds....................... S-12
Capitalization........................ S-13
Selected Financial Information........ S-14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... S-17
Management............................ S-35
Description of the Notes.............. S-36
Underwriting.......................... S-43
Legal Matters......................... S-43
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company and the Operating
Partnership......................... 3
Use of Proceeds....................... 3
Ratio of Earnings to Fixed Charges.... 3
Description of Debt Securities........ 4
Description of Common Stock........... 15
Description of Preferred Stock........ 17
Description of Depositary Shares...... 23
Federal Income Tax Considerations..... 26
Plan of Distribution.................. 35
Experts............................... 35
Legal Matters......................... 36
</TABLE>
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POST APARTMENT HOMES, L.P.
$100,000,000
7 1/4% NOTES
DUE OCTOBER 1, 2003
$25,000,000
7 1/2% NOTES
DUE OCTOBER 1, 2006
---------------------------
PROSPECTUS SUPPLEMENT
---------------------------
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
DEAN WITTER REYNOLDS INC.
SEPTEMBER 25, 1996
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