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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 23, 1998
REGISTRATION NO. 333-47399
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST PROPERTIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<CAPTION>
GEORGIA 58-1550675
<S> <C>
(State or Other Jurisdiction of Incorporation) (I.R.S. Employer Identification Number)
</TABLE>
3350 CUMBERLAND CIRCLE, N.W., SUITE 2200
ATLANTA, GEORGIA 30339
(770) 850-4400
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Principal Executive Offices)
JOHN T. GLOVER
PRESIDENT
3350 CUMBERLAND CIRCLE, N.W., SUITE 2200
ATLANTA, GEORGIA 30339
(770) 850-4400
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
COPIES TO:
JOHN J. KELLEY III
KING & SPALDING
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303-1763
(404) 572-4600
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after the effective date of this Registration Statement, as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH 23, 1998
PROSPECTUS
209,100 SHARES
POST PROPERTIES, INC.
COMMON STOCK
This Prospectus relates to the offer and sale from time to time of up
to 209,100 shares (the "Option Shares") of common stock, par value $.01 per
share ("Common Stock"), of Post Properties, Inc. (the "Company") that may be
issued to the holders of options to purchase the Option Shares (the "Options")
(such persons, the "Selling Shareholders"). The Options were originally issued
by Columbus Realty Trust, which was acquired by the Company pursuant to a
merger whereby Columbus Realty Trust was merged with and into a subsidiary of
the Company on October 24, 1997, in connection with the acquisition of certain
properties. In connection with the merger, the optionholders received options
to purchase shares of Common Stock of the Company. The Company is registering
the Option Shares to provide the holders thereof with freely tradeable
securities, but the registration of such shares does not necessarily mean that
any of such shares will be issued by the Company or be offered or sold by the
holders thereof.
The Common Stock is listed on the New York Stock Exchange (the "NYSE")
under the symbol "PPS." To ensure that the Company maintains its qualification
as a REIT, ownership by any person is limited to 6% of the outstanding shares of
Common Stock, with certain exceptions.
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. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Selling Shareholders from time to time may offer and sell the
Option Shares directly or through agents or broker-dealers on terms to be
determined at the time of sale. To the extent required, the names of any agent
or broker-dealer and applicable commissions or discounts and any other required
information with respect to any particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." Each of the
Selling Shareholders reserves the sole right to accept or reject, in whole or in
part, any proposed purchase of the Option Shares to be made directly or through
agents.
The Company will receive the exercise price with respect to the Options
upon the issuance of the Option Shares. The Company will not receive any of the
proceeds from the sale of the Option Shares by the Selling Shareholders but has
agreed to bear certain expenses of registration of the Option Shares under
Federal and state securities laws.
The Selling Shareholders and any agents or broker-dealers that
participate with the Selling Shareholders in the distribution of Option Shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and any commissions received by them
and any profit on the resale of the Option Shares may be deemed to be
underwriting commissions or discounts under the Securities Act.
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The date of this Prospectus is March 23, 1998.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"), pursuant to the
Exchange Act. Such reports, proxy statements and other information filed by the
Company may be examined without charge at, or copies obtained upon payment of
prescribed fees from, the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and are also
available for inspection and copying at the regional offices of the Commission
located at 7 World Trade Center, New York, New York 10048 and at 500 West
Madison Street, Chicago, Illinois 60661-2511. The Common Stock of the Company is
listed on the New York Stock Exchange, and such material can also be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad Street,
New York, New York 10005. Such reports, proxy statements, and other information
can also be obtained from the Internet at http://www.sec.gov.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations promulgated thereunder, with respect to the Common Stock offered
pursuant to this Prospectus. This Prospectus, which is part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and financial schedules thereto. For further
information concerning the Company and the Common Stock offered hereby,
reference is made to the Registration Statement and the exhibits and schedules
filed therewith, which may be examined without charge at, or copies obtained
upon payment of prescribed fees from, the Commission and its regional offices at
the locations listed above. Any statements contained herein concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission (File No. 1-12080) are incorporated herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31,
1997, June 30, 1997 and September 30, 1997;
(c) The Company's Current Reports on Form 8-K filed on February 27,
1997, August 6, 1997, September 17, 1997, October 22, 1997,
October 28, 1997, February 9, 1998, February 26, 1998, March 3,
1998 and March 16, 1998; and
(d) the description of the Common Stock of the Company included in
the Company's Registration Statement on Form 8-A, dated July 22,
1993
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the securities made hereby shall be
deemed to be incorporated by reference in this Prospectus and made a part hereof
from the date of the filing of such documents. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other document subsequently
filed with the Commission which also is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
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The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference herein (not including
the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents). Requests for such copies should be
directed to: Post Properties, Inc., 3350 Cumberland Circle, Suite 2200, Atlanta,
Georgia 30339, Attention: Secretary, telephone (770) 850-4400.
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THE COMPANY
Post Properties, Inc. (the "Company") is one of the largest developers
and operators of upscale multifamily apartment communities in the Southeastern
and Southwestern United States. The Company currently owns 78 stabilized
communities (the "Communities") containing 25,938 apartment units located
primarily in metropolitan Atlanta, Georgia, Dallas, Texas and Tampa, Florida. In
addition, the Company currently has under construction or in initial lease-up 12
new communities and additions to three existing communities in the Atlanta,
Georgia, Dallas and Houston, Texas, Tampa, Florida, Denver, Colorado and
Nashville, Tennessee metropolitan areas that will contain an aggregate of 4,742
apartment units upon completion. For the year ended December 31, 1997, the
average economic occupancy rate (gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent) of the 45 Communities
stabilized for the entire year was 94.9%. The average monthly rental rate per
apartment unit at these Communities for December 1997 was $811. The Company also
manages through affiliates approximately 10,000 additional apartment units owned
by third parties. The Company is a fully-integrated organization with
multifamily development, acquisition, operation and asset management expertise
and has approximately 1,600 employees.
Since it was founded in 1971, the Company has pursued three distinctive
core business strategies that, for over 25 years, have remained substantially
unchanged:
- Investment Building. Investment building means taking a long-term
view of the assets the Company creates. The Company develops
communities with the intention of operating them for periods that
are relatively long by the standards of the apartment industry.
Key elements of the Company's investment building strategy include
instilling a disciplined team approach to development decisions;
selecting sites in niche and infill locations in strong primary
markets; consistently constructing new apartment communities with
a uniformly high quality; and conducting ongoing property
improvements.
- Promotion of the Post(R)Brand Name. The Post(R)brand name strategy
has been integral to the success of the Company and, to the
knowledge of the Company, has not been successfully duplicated
within the multifamily real estate industry in any major U.S.
market. For such a strategy to work, a company must develop and
implement systems to achieve uniformly high quality and value
throughout its operations. As a result of the Company's efforts in
developing and maintaining its communities, the Company believes
that the Post(R)brand name is synonymous with quality upscale
apartment communities that are situated in desirable locations and
provide superior resident service. Key elements in implementing
the Company's brand name strategy include extensively utilizing
the trademarked brand name; adhering to quality in all aspects of
the Company's operations; developing and implementing leading edge
training programs; and coordinating the Company's advertising
programs to increase brand name recognition.
- Service Orientation. The Company's mission statement is: "To
provide the superior apartment living experience for our
residents." By striving to provide a superior product and superior
service, the Company believes that it will be able to achieve its
long-term goals. The Company believes that it provides its
residents with superior product and superior service through its
uniformly high quality construction, award-winning landscaping and
numerous amenities, including on-site business centers, on-site
courtesy officers, urban vegetable gardens and state-of-the-art
fitness centers.
The Company believes that with the implementation of these strategies,
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 growth, population growth and household
formation growth in the Company's primary markets have exceeded, and are
forecasted to continue to exceed, national averages.
The Company, through wholly owned subsidiaries, is the sole general
partner of, and controls a majority of the limited partnership interests in, the
Operating Partnership. The Company conducts all of its business through the
Operating Partnership and its subsidiaries. As of December 31, 1997, the Company
indirectly owed 85.5% of the outstanding partnership interests in the Operating
Partnership.
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The Company's executive offices are located at 3350 Cumberland Circle,
N.W., Suite 2200, Atlanta, Georgia 30339, and its telephone number is (770)
850-4400. The Company is a Georgia corporation that was incorporated on January
25, 1984.
THE MERGER
On October 24, 1997, Columbus Realty Trust, a Texas real estate
investment trust ("Columbus"), merged with and into Post Interim Holding
Company, Inc. (formerly Post LP Holdings, Inc.), a wholly owned subsidiary of
the Company (the "Merger") pursuant to the terms of an Agreement and Plan of
Merger dated as of August 1, 1997. In connection with the Merger, each
outstanding common share of beneficial interest, par value $.01 per share, of
Columbus has been converted into the right to receive 0.615 shares of Common
Stock of the Company, with cash being paid in lieu of fractional shares of
Common Stock.
As a result of the Merger, the Company is the largest multi-family REIT
concentrating on the development of upscale multi-family apartment homes in the
major metropolitan markets of the Southeast and Southwest, with a total market
capitalization of approximately $2.4 billion as of December 31, 1997.
RECENT DEVELOPMENTS
YEAR AND QUARTER ENDED DECEMBER 31, 1997 FINANCIAL RESULTS
On February 3, 1998, the Company announced that funds from operations
("FFO") for the fourth quarter of 1997 totaled $27.29 million, an increase of
41.9% over the fourth quarter of 1996. FFO for the year ended December 31, 1997
totaled $87.39 million, an increase of 17.8% over FFO for 1996. The weighted
average number of shares and Units outstanding for the quarter and year ended
December 31, 1997 was 33,722,727 and 28,880,928, respectively.
The Company also announced fourth quarter 1997 net income available to
common shareholders of $13.89 million or $0.49 per common share. These per share
results are the same as those achieved in the fourth quarter of 1996,
notwithstanding an increase during 1997 in depreciation resulting from assets
obtained in the merger with Columbus, and a one-time charge in 1997 of $1.5
million for the relocation of the Company's corporate offices.
For the year ended December 31, 1997, the Company's net income
available to common shareholders was $49.97 million or $2.11 per common share,
an 8% increase over the per common share results for 1996.
Earnings comparisons between 1997 and 1996 are affected by
Olympics-related income during 1996. During the third quarter of 1996, the
Company recorded FFO and net income of approximately $525,000, or $0.02 per
common share, related to the Company's Olympic initiatives.
Eliminating the impact of the Olympics-related income in 1996, net
income per common share was up by 9% for 1997.
The average economic occupancy rate for the Communities stabilized for
all of 1996 and all of 1997 ("Fully Stabilized Communities") was 95.5% for the
fourth quarter of 1997, up 1.6% over the same quarter of 1996. The average
economic occupancy rate for Fully Stabilized Communities was 94.8% for the year
ended December 31, 1997, down 0.6% from the year ended December 31, 1996.
Total revenue from Fully Stabilized Communities was up 2.6% during the
1997 fourth quarter compared to the 1996 fourth quarter, while operating
expenses for these Communities decreased 0.3%. Consequently, net operating
income from Fully Stabilized Communities increased 4%.
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Total revenue for Fully Stabilized Communities was up 1.3% for the year
ended December 31, 1997 over 1996, while operating expenses were up 0.3%. This
resulted in an increase of 1.7% in net operating income from Fully Stabilized
Communities for the year ended December 31, 1997.
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THE OFFERING
This Prospectus relates to the offer and sale from time to time of up
to 209,100 shares (the "Option Shares") of common stock, par value $.01 per
share ("Common Stock") of the Company that may be issued to the holders of
options to purchase the Option Shares (the "Options") (such persons, the
"Selling Shareholders"). The Options were originally issued by Columbus, which
was merged with and into the Company on October 24, 1997, in connection with the
acquisition of certain properties. In connection with the Merger, the
optionholders received options to purchase shares of Common Stock of the
Company. The Company is registering the Option Shares to provide the holders
thereof with freely tradeable securities, but the registration of such shares
does not necessarily mean that any of such shares will be issued by the Company
or be offered or sold by the holders thereof.
The Company will receive the exercise price with respect to the Options
upon the issuance of the Option Shares. The Company will not receive any of the
proceeds from the sale of the Option Shares by the Selling Shareholders but has
agreed to bear certain expenses of registration of the Option Shares under
Federal and state securities laws. The Company is registering the Shares for
sale to provide the holders thereof with freely tradeable securities, but the
registration of such shares does not necessarily mean that any of such shares
will be issued by the Company or offered or sold by the holders thereof.
SELLING SHAREHOLDERS
As described herein, "Selling Shareholder" are only those persons who,
at the time of the Merger, owned options to purchase shares of beneficial
interest of Columbus that were not issued pursuant to any employee benefit plans
of Columbus. The following table provides the names of and the number of shares
of Common Stock beneficially owned by each Selling Shareholder. Since the
Selling Shareholders may sell all, or some or none of their Option Shares, no
estimate can be made of the aggregate number of Option Shares that are to be
offered hereby or that will be owned by each Selling Shareholder upon completion
of the offering to which this Prospectus relates.
The Option Shares offered by this Prospectus may be offered from time
to time by the Selling Shareholders named below:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
NAME BENEFICIALLY OWNED OFFERED HEREBY
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The Richard and Nancy Bloch Family Trust (1) .......... 223,500(2) 27,675
Will Cureton(3) ....................................... 342,840(4) 12,300
Roger T. Staubach(5) .................................. 140,995(6) 17,220
The Donald Pitt Separate Property Trust ............... 226,869(2) 27,675
Charles Diker ......................................... 159,219(2) 27,675
The Alan J. Hirschfield Trust ......................... 140,625(2) 27,675
John A. Gates ......................................... 7,380(7) 7,380
Interstate Mississippi Project Limited Partnership..... 61,500(7) 61,500
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Total ........................................ 1,302,928 209,100
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</TABLE>
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(1) Richard Bloch who was the Chairman of the Board of Columbus, may be
deemed to beneficially own some of all of these shares.
(2) Includes 27,675 shares of Common Stock issuable upon the exercise of
outstanding options.
(3) Will Cureton was the Chief Operating Officer of Columbus.
(4) Includes 225,498 shares of Common Stock issuable upon the exercise of
outstanding options.
(5) Roger T. Staubach was a trust manager of Columbus.
(6) Includes 38,745 shares of Common Stock issuable upon the exercise of
outstanding options.
(7) Represents shares of Common Stock issuable upon the exercise of
outstanding options.
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PLAN OF DISTRIBUTION
This Prospectus relates to the offer and sale from time to time of up
to 209,100 shares (the "Option Shares") of Common Stock of the Company that may
be issued to the Selling Shareholders. The Options were originally issued by
Columbus, which was acquired by the Company pursuant to a merger whereby
Columbus was merged with and into a subsidiary of the Company on October 24,
1997, in connection with the acquisition of certain properties. In connection
with the Merger, the optionholders received options to purchase shares of Common
Stock of the Company. The Company is registering the Option Shares to provide
the holders thereof with freely tradeable securities, but the registration of
such shares does not necessarily mean that any of such shares will be issued by
the Company or be offered or sold by the holders thereof.
This Prospectus relates to the sale by the Selling Shareholders of the
Option Shares if, and to the extent that, outstanding options to purchase the
Option Shares are exercised. The Company is registering the Option Shares for
sale to provide the holders thereof with freely tradeable securities, but the
registration of such shares does not necessarily mean that any of such shares
will be issued by the Company or offered or sold by the holders thereof.
The Option Shares may be sold from time to time to purchasers directly
by any of the Selling Shareholders. Alternatively, the Selling Shareholders may
from time to time offer the Option Shares through dealers or agents, who may
receive compensation in the form of commissions from the Selling Shareholders
and/or the purchasers of Option Shares for whom they may act as agent. Without
limiting the foregoing, such sales may be in the form of secondary
distributions, exchange distributions, block trades, ordinary brokerage
transactions or a combination of such methods of sale. The Selling Shareholders
and any dealers or agents that participate in the distribution of Option Shares
may be deemed to be "underwriters" within the meaning of the Securities Act and
any profit on the sale of Option Shares by them and any commissions received by
any such dealers or agents might be deemed to be underwriting commissions under
the Securities Act.
At a time a particular offer of Option Shares is made, a Prospectus
Supplement, if required, will be distributed that will set forth the name and
names of any dealers or agents and any commissions and other terms constituting
compensation from the Selling Shareholders and any other required information.
The Option Shares may be sold from time to time at varying prices determined at
the time of sale or at negotiated prices.
In order to comply with the securities laws of certain states, if
applicable, the Option Shares may be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the Option Shares may not be
sole unless they have been registered or qualified for sale in such state or an
exemption from such registration or qualification requirement is available and
is complied with.
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FEDERAL INCOME TAX CONSIDERATIONS
INTRODUCTORY NOTES
This discussion summarizes the material Federal income tax
considerations that may be relevant to a prospective holder of the Common Stock.
This discussion is based on current law. The discussion is not exhaustive of all
possible tax considerations and does not give a detailed discussion of any
state, local, or foreign tax considerations. It also does not discuss all of the
aspects of Federal income taxation that may be relevant to a prospective holder
of Common Stock in light of his or her particular circumstances or to certain
types of holders (including insurance companies, tax-exempt entities, financial
institutions or broker-dealers, foreign corporations and persons who are not
citizens or residents of the United States) who are subject to special treatment
under the Federal income tax laws. As used in this section, the term "Company"
refers solely to Post Properties, Inc.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO OF THE PURCHASE,
OWNERSHIP AND SALE OF SECURITIES IN AN ENTITY ELECTING TO BE TAXED AS A REAL
ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER
TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE, AND ELECTION AND OF
POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
QUALIFICATION AND TAXATION OF THE COMPANY AS A REIT
The Company made an election to be taxed as a REIT under Sections 856
through 860 of the Code effective for its short taxable year ended December 31,
1993. The Company's qualification and taxation as a REIT depends upon the
Company's ability to meet on a continuing basis, through actual annual operating
results, distribution levels and diversity of stock ownership, the various
qualification tests and organizational requirements imposed under the Code, as
discussed below. The Company believes that it is organized and has operated in
such manner as to qualify under the Code for taxation as a REIT commencing with
its taxable year ended December 31, 1993, and the Company intends to continue to
operate in such manner. No assurance, however, can be given that the Company
will operate in a manner so as to qualify or remain qualified as a REIT. See
"Failure to Qualify" below.
In the opinion of King & Spalding, the Company met the requirements for
qualification and taxation as a REIT for its taxable years ended December 31,
1993, 1994, 1995, 1996 and 1997, and its current and proposed method of
operation should enable it to continue to meet the requirements for
qualification and taxation as a REIT. This opinion is based on various
assumptions relating to the organization and operation of the Operating
Partnership and the partnerships and limited liability companies in which the
Operating Partnership owns or has owned an interest (referred to herein as the
"Pass-Through Affiliates") and is conditioned upon certain representations made
by the
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Company as to certain relevant factual matters relating to the organization and
expected manner of operation of the Company, the Operating Partnership, and the
Pass-Through Affiliates. Moreover, such qualification and taxation as a REIT
will depend upon the Company's ability to meet on a continuing basis, through
actual annual operating results, distribution levels and diversity of stock
ownership, the various qualification tests imposed under the Code discussed
below. King & Spalding will not review compliance with these tests on a
continuing basis. No assurance can be given that the Company will satisfy such
tests on a continuing basis. See "Failure to Qualify" below.
The sections of the Code relating to qualification and operation as a
REIT are highly technical and complex. The following discussion sets forth
certain material aspects of the Code sections that govern the Federal income tax
treatment of a REIT and its shareholders. The discussion is qualified in its
entirety by the applicable Code provisions, Treasury Regulations promulgated
thereunder and administrative and judicial interpretations thereof, all of which
are subject to change prospectively or retroactively.
So long as the Company continues to qualify for taxation as a REIT, it
generally will not be subject to Federal corporate income tax on its net income
that is distributed currently to its shareholders. That treatment substantially
eliminates the "double taxation" (i.e., taxation at both the corporate and
shareholder levels) that generally results from investment in a corporation.
However, the Company will be subject to Federal income tax in the following
circumstances. First, the Company will be taxed at regular corporate rates on
any undistributed REIT taxable income, including undistributed net capital
gains. Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on items of tax preference, if any. Third, if the
Company has (i) net income from the sale or other disposition of "foreclosure
property" (which is, in general, property acquired by foreclosure or otherwise
on default of a loan or lease secured by the property) that is held primarily
for sale to customers in the ordinary course of business or (ii) other
nonqualifying income from foreclosure property, it will be subject to tax at the
highest corporate rate on such income. Fourth, if the Company has net income
from prohibited transactions (which are, in general, certain sales or other
dispositions of property (other than foreclosure property) held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax. Fifth, if the Company should fail to satisfy the 75%
gross income test or the 95% gross income test (as discussed below), and
nonetheless has maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the gross income
attributable to the greater of the amounts by which it fails the 75% or 95%
gross income test, multiplied by a fraction intended to reflect the Company's
profitability. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year (ii) 95% of its REIT capital gain net income for such year and (iii) any
undistributed taxable income from prior periods, it would be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed. Finally, if the Company acquires any asset from a C corporation
(i.e., a corporation generally subject to full corporate-level tax) in a
transaction in which the basis of the asset in the Company's hands is determined
by reference to the basis of the asset (or any other property) in the hands of
the C corporation, and the Company recognizes gain on the disposition of such
asset during the ten-year period beginning on the date on which such asset was
acquired by the Company, then, to the extent of such property's "built-in" gain
(the excess of the fair market value of such property at the time of acquisition
by the Company over
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the adjusted basis of such property at such time), such gain will be subject to
tax at the highest corporate rate applicable (as provided in retroactive IRS
regulations that were announced in IRS Notice 88-19 but which have not yet been
promulgated), provided an election is made by the Company to apply the
principles of Section 1374 of the Code to such gain (a "Notice 88-19 election").
REQUIREMENTS FOR QUALIFICATION
The Code defines a REIT as a corporation, trust or association (i) that
is managed by one or more trustees or directors; (ii) the beneficial ownership
of which is evidenced by transferable shares, or by transferable certificates of
beneficial interest; (iii) that would be taxable as a domestic corporation, but
for Sections 856 through 860 of the Code; (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code;
(v) the beneficial ownership of which is held by 100 or more persons; (vi) not
more than 50% in value of the outstanding shares of which is owned, directly or
indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of each taxable year (the "5/50 Rule");
(vii) that makes an election to be a REIT (or has made such election for a
previous taxable year which has not been revoked or terminated) and satisfies
all relevant filing and other administrative requirements established by the IRS
that must be met in order to elect and maintain REIT status; (viii) that uses a
calendar year for Federal income tax purposes and complies with the record
keeping requirements of the Code and Treasury Regulations promulgated
thereunder; and (ix) that meets certain other tests, described below, regarding
the nature of its income and assets. The Code provides that conditions (i) and
(iv), inclusive, must be met during the entire taxable year and that condition
(v) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months. For
purposes of determining stock ownership under the 5/50 Rule, a supplemental
unemployment compensation benefits plan, a private foundation or a portion of a
trust permanently set aside or used exclusively for charitable purposes
generally is considered an individual. A trust that is a qualified trust under
Section 401(a) of the Code, however, generally is not considered an individual,
and beneficiaries of such trust are treated as holding shares of a REIT in
proportion to their actuarial interests in such trust for purposes of the 5/50
Rule. For taxable years beginning after December 31, 1997, the Company will be
treated as having satisfied the 5/50 Rule for a taxable year if it complies with
certain Treasury regulations for ascertaining the ownership of its stock and if
it does not know (or after the exercise of reasonable diligence would not have
known) that its stock is sufficiently closely held during such year to cause it
to violate the 5/50 Rule.
The Company's Articles of Incorporation contains restrictions regarding
the transfer of its shares that are intended to assist the Company in continuing
to satisfy the share ownership requirements described in clauses (v) and (vi)
above.
Section 856(i) of the Code provides that a corporation that is a
"qualified REIT subsidiary" shall not be treated as a separate corporation for
Federal income tax purposes, and all assets, liabilities and items of income,
deduction and credit of a "qualified REIT subsidiary" shall be treated as
assets, liabilities and items of income, deduction and credit of the REIT. For
taxable years ending on or before December 31, 1997, a "qualified REIT
subsidiary" is a corporation, all of the capital stock of which has been held by
the REIT "at all times during the period such corporation was in
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existence." For post-1997 taxable years the stock of a qualified REIT subsidiary
no longer needs to have been held by the REIT "at all times during the period
such corporation was in existence." Certain subsidiaries of the Company
constitute qualified REIT subsidiaries. Accordingly, in applying the income and
asset tests described below, such subsidiaries will be ignored for Federal
income tax purposes, and all assets, liabilities and items of income, deduction
and credit of such subsidiaries will be treated as assets, liabilities and items
of income, deduction, and credit of the Company. Such subsidiaries therefore
will not be subject to Federal corporate income taxation, although they may be
subject to state and local taxation.
In the case of a REIT that is a partner in an entity that is classified
for Federal income tax purposes as a partnership, Treasury Regulations provide
that the REIT will be deemed to own its proportionate share of the assets of the
partnership (based on the REIT's capital interest in the partnership) and will
be deemed to be entitled to the gross income of the partnership attributable to
such share. In addition, the assets and gross income of the partnership will
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income and asset tests described
below. The ownership of interests in the Opening Partnership by the Company will
result in its proportionate share of the assets, liabilities and items of income
of the Operating Partnership being treated as assets, liabilities and items of
income of the Company for purposes of the asset and income tests described
below.
Income Tests. To qualify as a REIT, at least 75% of the Company's gross
income (excluding gross income from prohibited transactions) for each taxable
year must consist of defined types of income derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or temporary
investment income. At least 95% of the Company's gross income (excluding gross
income from prohibited transactions) for each taxable year must be derived from
such real property or temporary investments, and from dividends, other types of
interest and gain from the sale or disposition of stock or securities, or from
any combination of the foregoing. In addition, for taxable years ending on or
before December 31, 1997, short-term gain from the sale or other disposition of
stock or securities, gain from prohibited transactions, and gain on the sale or
other disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the REIT's gross income (including gross income from prohibited
transactions) for each such taxable year (the "30% Gross Income Test"). The 30%
Gross Income Test has been repealed, effective for the Company's taxable year
beginning January 1, 1998 and for future taxable years.
The rent received by the Company from its tenants will qualify as
"rents from real property" in satisfying the gross income requirements for a
REIT described above only if several conditions are met. First, the amount of
rent must not be based, in whole or in part, on the income or profits of any
person. However, an amount received or accrued generally will not be excluded
from the term "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts or sales. Second, the Code provides
that rents received from a tenant of the Company will not qualify as "rents from
real property" in satisfying the gross income tests if the Company, or a direct
or indirect owner of 10% or more of the Company, directly or constructively owns
10% or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property
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that is leased in connection with a lease of real property is greater than 15%
of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." Finally, for the rent to qualify as "rents from real property," the
Company generally must not operate or manage its properties or furnish or render
services to the tenants of such properties other than through an "independent
contractor" who is adequately compensated and from whom the Company derives or
receives no income. The "independent contractor" requirement, however, does not
apply to the extent the services provided by the Company are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not otherwise considered "rendered to the occupant." In addition, for
the Company's taxable years beginning after December 31, 1997, the "independent
contractor" requirement will not apply to noncustomary services provided by the
Company, the annual value of which does not exceed 1% of the gross income
derived from the property with respect to which the services are provided (the
"1% de minimis exception"). For this purpose, such services may not be valued at
less that 150% of the Company's direct cost of providing the services.
The Company does not charge rent for any portion of any property that
is based, in whole or in part, on the income or profits of any person. In
addition, the Company does not receive any material rent from a Related Party
Tenant. Finally, any noncustomary services will be provided through qualifying
independent contractors or will satisfy the 1% de minimis exception.
The Operating Partnership receives fees in consideration of the
performance of management, landscaping and administrative services with respect
to properties that are not wholly owned, directly or indirectly, by the
Operating Partnership. A portion of such fees (corresponding to that portion of
any such property owned by a third party) generally will not qualify under the
75% or 95% gross income tests. The Company will also receive certain other types
of non-qualifying income, including its allocable share of any dividends paid by
Post Services, Inc. ("Post Services") and Addison Circle Access, Inc. ("Addison
Circle") to the Operating Partnership (which will qualify under the 95% gross
income test but not under the 75% gross income test). The Company believes,
however, that the aggregate amount of such fees and other non-qualifying income
in any taxable year will not cause the Company to exceed the limits on
non-qualifying income under the 75% and 95% gross income tests.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it nevertheless may qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
Those relief provisions generally will be available if the failure to meet such
tests is due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of those relief provisions. As
discussed above in "__Qualification and Taxation of the Company as a REIT," even
if those relief provisions apply, a 100% tax would be imposed on the gross
income attributable to the greater of the amount by which the Company fails the
75% and 95% gross income tests, multiplied by a fraction intended to reflect the
Company's profitability. No such relief is available for violations of the 30%
Gross Income Test (which, as noted above, has been repealed commencing with the
Company's 1998 taxable year).
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<PAGE> 15
Asset Tests. At the close of each quarter of its taxable year, the
Company also must satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by real estate assets, including (i) its allocable share of real
estate assets held by the Operating Partnership and any subsidiary partnerships
or limited liability companies, and (ii) stock or debt instruments held for not
more than one year purchased with the proceeds of a stock offering or long-term
(at least five years) public debt offering of the Company, cash, cash items and
government securities. Second, not more than 25% of the Company's total assets
may be represented by securities other than those in the 75% asset class. Third,
of the investments included in the 25% asset class, the value of any one
issuer's debt and equity securities owned by the Company (including its
allocable share of such securities owned by the Operating Partnership) may not
exceed 5% of the value of the Company's total assets, and the Company may not
own more than 10% of any one issuer's outstanding voting securities. Debt of an
issuer that is secured by real estate assets does not constitute a "security"
for purposes of the 5% asset test. The 5% asset test generally must be met for
any quarter in which a REIT acquires securities of an issuer or other property.
The Operating Partnership owns 100% of the nonvoting stock and 1% of
the voting stock of Post Services and also holds a note of Post Services. In
addition, the Operating Partnership owns 100% of the nonvoting stock and 2% of
the voting stock of Addison Circle. By virtue of its ownership of an interest in
the Operating Partnership, the Company is deemed to own its pro rata share of
assets of the Operating Partnership and any Pass-Through Affiliates, including
the securities of Post Services and Addison Circle. Because the Operating
Partnership does not own more than 10% of the voting securities of Post Services
or Addison Circle, the Company likewise does not own more than 10%. In addition,
based upon its analysis of the estimated value of the debt and equity securities
of Post Services and Addison Circle owned by the Operating Partnership relative
to the estimated value of the other assets owned by the Operating Partnership,
the Company believes that its pro rata share of the debt and equity securities
of each such corporate subsidiary at all relevant times has been less than 5% of
the total value of the Company's assets. However, no independent appraisals have
been obtained to support this conclusion, and King & Spalding, in rendering its
opinion as to the Company's qualification as a REIT, is relying on the Company's
representation with respect to the value of Post Services (and its wholly owned
subsidiaries) and Addison Circle. Although the Company plans to take steps to
ensure that it satisfies the 5% value test for any quarter with respect to which
any actual or deemed acquisition of the securities of Post Services or Addison
Circle is to occur, there can be no assurance that such steps will always be
successful or will not require a reduction in the Operating Partnership's
overall interest in Post Services or Addison Circle.
Clinton Administration's Proposed Changes to REIT Asset Tests. The
Clinton Administration's budget proposal announced on February 2, 1998 includes
a proposal to amend the REIT asset tests with respect to non-qualified REIT
subsidiaries, such as Post Services and Addison Circle. The proposal would
prohibit a REIT from owning more than 10% of the vote or value of the
outstanding stock of any non-qualified REIT subsidiary. Existing non-qualified
REIT subsidiaries would be grandfathered, and therefore subject only to the 5%
asset test and 10% voting securities test of current law, except that such
grandfathering would terminate if the subsidiary engaged in a new trade or
business or acquired substantial new assets. As a result, if the proposal were
to be enacted, Post Services and Addison Circle would become subject to the new
10%-vote-and-value limitation if either corporation commenced new trade or
business activities or acquired substantial
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new assets after the specified effective date. The Company could not satisfy the
new test because it would be considered to own more than 10% of the value of the
stock of Post Services and Addison Circle. Accordingly, the proposal, if
enacted, would materially impede the ability of the Company to engage in other
activities without jeopardizing its REIT status.
Distribution Requirements. The Company, in order to qualify as a REIT,
is required to distribute with respect to each taxable year dividends (other
than capital gain dividends) to its shareholders in an aggregate amount at least
equal to (i) the sum of (A) 95% of its "REIT taxable income" (computed without
regard to the dividends paid deduction and its net capital gain) and (B) 95% of
the net income (after tax), if any, from foreclosure property, minus (ii) the
sum of certain items of non-cash income. Such distributions must be paid in the
taxable year to which they relate, or in the following taxable year if declared
before the Company timely files its Federal income tax return for such year and
if paid on or before the first regular dividend payment date after such
declaration. To the extent that the Company does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
ordinary and capital gains corporate tax rates. Furthermore, if the Company
should fail to distribute during each calendar year at least the sum of (i) 85%
of its REIT ordinary income for such year, (ii) 95% of its REIT capital gain
income for such year and (iii) any undistributed taxable income from prior
periods, it would be subject to a 4% nondeductible excise tax on the excess of
such required distribution over the amounts actually distributed.
The Company has made and intends to continue to make timely
distributions sufficient to satisfy the annual distribution requirements. In
this regard, the Partnership Agreement authorizes the Company, as general
partner, to take such steps as may be necessary to cause the Operating
Partnership to distribute to its partners an amount sufficient to permit the
Company to meet these distribution requirements. It is possible, however, that
the Company, from time to time, may not have sufficient cash or other liquid
assets to meet the distribution requirements due to timing differences between
the actual receipt of income and actual payment of deductible expenses and the
inclusion of such income and deduction, of such expenses in arriving at the
Company's taxable income, or if the amount of nondeductible expenses (such as
principal amortization or capital expenses) exceeds the amount of noncash
deductions. In the event that such timing differences occur, in order to meet
the distribution requirements, the Company may cause the Operating Partnership
to arrange for short-term, or possibly long-term, borrowing to permit the
payment of required dividends. If the amount of nondeductible expenses exceeds
noncash deductions, the Operating Partnership may refinance its indebtedness to
reduce principal payments and borrow funds for capital expenditures.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirements for a year by paying "deficiency
dividends" to its shareholders in a later year, which may be included in its
deduction for dividends paid for the earlier year. Although the Company may be
able to avoid being taxed on amounts distributed as deficiency dividends, it
will be required to pay the IRS interest based upon the amount of any deduction
taken for deficiency dividends.
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Recordkeeping Requirements. Pursuant to applicable Treasury
Regulations, the Company must maintain certain records and request on an annual
basis certain information from its shareholders designed to disclose the actual
ownership of its outstanding stock. The Company intends to comply with these
requirements.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, it will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distribution to shareholders in any year in which the
Company fails to qualify will not be deductible nor will they be required to be
made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to shareholders will be taxable as ordinary income
and, subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, the Company also will be disqualified from
taxation as a REIT for the four taxable years following the year during which it
ceased to qualify as a REIT. It is not possible to predict whether in all
circumstances the Company would be entitled to such statutory relief.
OTHER TAX CONSIDERATIONS
Tax Status of Operating Partnership and Other Pass-Through Entities.
All of the Company's investments have been made through the Operating
Partnership, which in turn holds interests in various partnerships and limited
liability companies (the "Pass-Through Affiliates"). In the opinion of King &
Spalding, the Operating Partnership and each Pass-Through Affiliate which is not
100% beneficially owned by the Operating Partnership qualifies as a partnership
for Federal income tax purposes and is not an association taxable as a
corporation or otherwise subject to corporate-level tax by reason of being a
publicly traded partnership subject to corporate-level tax under Section 7704 of
the Code. Each Pass-Through Affiliate that is 100% beneficially owned by the
Operating Partnership is disregarded for Federal income tax purposes.
A publicly traded partnership is a partnership whose interests are
traded on an established securities market or are readily tradable on a
secondary market or the substantial equivalent of a secondary market. For
taxable years beginning after December 31, 1995, Treasury regulations (the "PTP
Regulations") provide limited safe harbors, which, if satisfied, will prevent a
partnership's interests from being treated as readily tradable on a secondary
market or the substantial equivalent thereof. A so-called "private placement"
safe harbor applies if (i) all interests in the partnership were issued in a
transaction (or transactions) that was not required to be registered under the
Securities Act and (ii) the partnership does not have more than 100 partners at
any time during the partnership's taxable year. In determining the number of
partners in a partnership, a person owning an interest in a flow-through entity
(i.e.,a partnership, grantor trust, or S corporation) that owns an interest in
the partnership is treated as a partner in such partnership only if (i)
substantially all of the value of the person's interest in the flow through
entity is attributable to the flow-through entity's interest (direct or
indirect) in the partnership and (ii) a principal purpose of the use of the
tiered arrangement is to permit the partnership to satisfy the 100-partner
limitation. The Operating Partnership does not
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currently meet the private placement safe harbor of the PTP Regulations because
it has more than 100 partners.
Under a special grandfather rule in the PTP Regulations, an existing
partnership may continue to rely on safe harbors contained in IRS Notice 88-75
for a 10-year period. The Company believes that the Operating Partnership has
satisfied, and will continue to satisfy, the private placement safe harbor under
such Notice because, in part, it has fewer than 500 direct and indirect
partners. Upon expiration of the grandfather period, if the Operating
Partnership does not at that time satisfy the private placement safe harbor of
the PTP Regulations, it is possible that the Operating Partnership could be
classified as a publicly traded partnership. In that event, the Operating
Partnership should satisfy a special "passive income" exception provided in
Section 7704(c) of the Code and therefore should not be subject to Federal
income tax at the corporate level. However, if the Operating Partnership were
classified as a publicly traded partnership, the partners of the Operating
Partnership would nevertheless be subject to special passive loss rules in
Section 469(k) of the Code.
If the Operating Partnership were treated as an association taxable as
a corporation, the Company would fail the 75% asset test and therefore would not
qualify as a REIT. Further, if a Pass-Through Affiliate were treated as a
taxable corporation, then the Company would cease to qualify as a REIT if the
Company's ownership interest in the Pass-Through Affiliate exceeded 10% of the
entity's voting interests or the value of such interest exceeded 5% of the value
of the Company's assets. Furthermore, in such a situation, distributions from
the Pass-Through Affiliate to the Company would be treated as dividends, which
are not taken into account in satisfying the 75% gross income test described
above and which could therefore make it more difficult for the Company to meet
such test. Finally, in computing the Company's taxable income, the Company would
not be able to deduct its share of losses generated by a Pass-Through Entity
that is treated as an association taxable as a corporation. See "---- Failure to
Qualify" above for a discussion of the effect of the Company's failure to
qualify as a REIT.
Taxation of Post Services and Operating Subsidiaries. Post Services and
its existing subsidiaries file a corporate consolidated return for Federal
income tax purposes. Addison Circle is not included in Post Service's
consolidated group and files a separate Federal income tax return. The
consolidated taxable income of the Post Services group and the taxable income of
Addison Circle are subject to tax at regular corporate rates. To the extent such
entities are required to pay Federal, state and local taxes, the cash available
for distribution to shareholders will be correspondingly reduced.
State and Local Taxes. The Company and its shareholders may be subject
to state or local taxation in various state or local jurisdictions, including
those in which it or they transact business or reside (although shareholders who
are individuals generally should not be required to file state income tax
returns outside of their state of residence with respect to the Company's
operations and distributions). The state and local tax treatment of the Company
and its shareholders may not conform to the Federal income tax consequences
discussed above. Consequently, prospective shareholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the Common Stock.
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TAXATION OF TAXABLE U.S. SHAREHOLDERS
As long as the Company qualifies as a REIT, distributions made to
taxable U.S. Shareholders (as hereinafter defined) out of current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by such U.S. Shareholders (as hereinafter defined) as
ordinary income and will not be eligible for the dividends received deduction
generally available to corporations. As used herein, the term "U.S. Shareholder"
means a holder of the Company's Common Stock that for United Stated Federal
income tax purposes is (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any political subdivision thereof, (iii) an estate
the income of which is subject to United States Federal income taxation
regardless of its source, or (iv) a trust if (A) a court within the United
States is able to exercise primary supervision over the administration of the
trust, and (B) one or more United States persons have the authority to control
all substantial decisions of the trust. Distributions that are designated as
capital gain dividends will be taxed to the Company's shareholders as a capital
gain (to the extent such distributions do not exceed the Company's actual net
capital gain for the taxable year) without regard to the period for which the
U.S. Shareholder has held his or her Common Stock. The tax rate applicable to
capital gain dividends is described under "-- Capital Gains Rates" below.
However, corporate U.S. Shareholders may be required to treat up to 20% of
certain capital gain dividends as ordinary income. Distributions in excess of
current and accumulated earnings and profits will not be taxable to a U.S.
Shareholder to the extent that they do not exceed the adjusted basis of the U.S.
Shareholder's shares of Common Stock, but will reduce the adjusted basis of such
shares. To the extent that such distributions in excess of current and
accumulated earnings and profits exceed the adjusted basis of a U.S.
Shareholder's shares of Common Stock, such distributions will be included in
income as capital gain, assuming that such shares are capital assets in the
hands of the U.S. Shareholder. The tax rate to which such capital gain will be
subject will depend on the U.S. Shareholder's holding period for his or her
shares. See "---- Capital Gains Rates" below. In addition, any distribution
declared by the Company in October, November or December of any year and payable
to a U.S. Shareholder of record on a specified date in any such month shall be
treated as both paid by the Company and received by the U.S. Shareholder on
December 31 of such year, provided that the distribution is actually paid by the
Company during January of the following year.
The Company may elect to treat all or part of its undistributed net
capital gain as if it had been distributed to the Company's shareholders. If the
Company should make such an election, its shareholders would be required to
include in their income as long-term capital gain their proportionate share of
the Company's undistributed net capital gain as designated by the Company. Each
such shareholder would be deemed to have paid his or her proportionate share of
the income tax imposed on the Company with respect to such undistributed net
capital gain, and this amount would be credited or refunded to the Shareholder.
In addition, the tax basis of the shareholder's stock would be increased by his
or her proportionate share of undistributed net capital gain included in his or
her income less his or her proportionate share of the income tax imposed on the
Company with respect to such gain.
U.S. Shareholders may not include in their individual income tax
returns any net operating losses or capital losses of the Company. Instead, such
losses would be carried over by the Company
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for potential offset against its future income (subject to certain limitations).
Taxable distributions from the Company and gain from the disposition of the
Common Stock will not be treated as passive activity income and, therefore, U.S.
Shareholders generally will not be able to apply any "passive activity losses"
(such as losses from certain types of limited partnerships in which a
shareholder is a limited partner) against such income. In addition, taxable
distributions from the Company generally will be treated as investment income
for purposes of the investment interest limitations. Capital gains from the
disposition of the Common Stock (or distributions treated as such), however,
will be treated as investment income only if the U.S. Shareholder so elects, in
which case such capital gains will be taxed at ordinary income rates. The
Company will notify shareholders after the close of the Company's taxable year
as to the portions of the distributions attributable to that year that
constitute ordinary income, return of capital and capital gain.
TAXATION OF U.S. SHAREHOLDERS ON THE DISPOSITION OF THE COMMON STOCK
In general, any gain or loss realized upon a taxable disposition of the
Common Stock by a U.S. Shareholder who is not a dealer in securities will be
treated as a capital gain or loss. Lower marginal tax rates for individuals may
apply in the case of capital gains, depending on the holding period for the
shares of Common Stock that are sold. See "--Capital Gains Rates" below.
However, any loss upon a sale or exchange by a U.S. Shareholder who has held
such shares for six months or less (after applying certain holding period
rules), will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such U.S. Shareholder
as long-term capital gain. All or a portion of any loss realized upon a taxable
disposition of the Common Stock may be disallowed if other Company shares are
purchased within 30 days before or after the disposition. In addition, capital
losses not offset by capital gains may be deducted from an individual's ordinary
income only up to a maximum of $3,000 per year. Unused capital losses may be
carried forward. A corporate taxpayer may deduct capital losses only to the
extent of capital gains, but may carry unused capital losses back three years
and forward five years.
CAPITAL GAINS RATES
For non-corporate taxpayers, the tax rate differential between capital
gain and ordinary income may be significant. The highest marginal income tax
rate applicable to a non-corporate taxpayer's ordinary income is 39.6 percent.
Any capital gain generally will be taxed to a non-corporate taxpayer at a
maximum rate of 20 percent with respect to capital assets held for more than 18
months, and generally will be taxed at a maximum rate of 28 percent with respect
to capital assets held for more than one year but not more than 18 months. The
tax rates applicable to ordinary income apply to gain attributable to the sale
or exchange of capital assets held for one year or less. In the case of capital
gain attributable to the sale or exchange of certain real property held for more
than 18 months, an amount of such gain equal to the amount of all prior
depreciation deductions not otherwise required to be taxed as ordinary
depreciation recapture income will be taxed at a maximum rate of 25 percent.
With respect to distributions designated by a REIT as capital gain dividends,
the REIT also may designate (subject to certain limits) whether the dividend is
taxable to shareholders as a 20 percent rate gain distribution, an unrecaptured
depreciation distribution taxed at a 25 percent rate, or a 28 percent rate gain
distribution.
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INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING
The Company will report to its U.S. Shareholders and to the IRS the
amount of distributions paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a U.S. Shareholder may be
subject to backup withholding at the rate of 31% with respect to distributions
paid unless such holder (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with the applicable requirements of the
backup withholding rules. A U.S. Shareholder who does not provide the Company
with his or her correct taxpayer identification number also may be subject to
penalties imposed by the IRS. Any amount paid as backup withholding will be
creditable against the U.S. Shareholder's income tax liability. In addition, the
Company may be required to withhold a portion of capital gain distributions to
any U.S. Shareholders who fail to certify their nonforeign status to the
Company. The Treasury Department issued final regulations in October 1997
regarding the backup withholding rules as applied to Non-U.S. Shareholders. The
new regulations will alter the current system of backup withholding compliance
and generally will be effective for distributions made after December 31, 1998.
See "--Taxation of Non-U.S. Shareholders."
TAXATION OF TAX-EXEMPT SHAREHOLDERS
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts ("Exempt Organizations"),
generally are exempt from Federal income taxation. However, they are subject to
taxation on their unrelated business taxable income ("UBTI"). While many
investments in real estate generate UBTI, the IRS has issued a published ruling
that dividend distributions from a REIT to an exempt employee pension trust do
not constitute UBTI, provided that the shares of the REIT are not otherwise used
in an unrelated trade or business of the exempt employee pension trust. Based on
that ruling, amounts distributed by the Company to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt Organization
finances its acquisition of Common Stock with "acquisition indebtedness," a
portion of its income from distributions on such Common Stock will constitute
UBTI pursuant to the "debt-financed property" rules. Furthermore, social clubs,
voluntary employee benefit associations, supplemental unemployment benefit trust
and qualified group legal service plans that are exempt from taxation under
paragraphs (7), (9), (17) and (20), respectively, of Code section 501(c) are
subject to different UBTI rules, which generally will require them to
characterize distributions from the Company as UBTI. In addition, in certain
circumstances, a pension trust that owns more than 10% of the value of the
Company's outstanding stock would be required to treat a percentage of the
dividends received from the Company as UBTI (the "UBTI Percentage"). The UBTI
percentage is the gross income, less related direct expenses, derived by the
Company from an unrelated trade or business (determined as if the Company were a
pension trust) divided by the gross income, less related direct expenses, of the
Company for the year in which the dividends are paid. The UBTI rule applies to a
pension trust holding more than 10% of the value of the Company's outstanding
stock only if (i) the UBTI Percentage is at least 5%, (ii) the Company qualifies
as a REIT by reason of the modification of the 5/50 Rule that allows the
beneficiaries of the pension trust to be treated as holding shares of the
Company in proportion to their actuarial interests in the pension trust and
(iii)
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<PAGE> 22
either (A) one pension trust owns more than 25% of the value of such shares or
(B) a group of pension trusts, each of whom holds more than 10% of the value of
shares, collectively owns more than 50% of the value of the shares.
TAXATION OF NON-U.S. SHAREHOLDERS
The rules governing United States Federal income taxation of
nonresident alien individuals, foreign corporations, foreign partnerships and
other foreign holders of the Common Stock (collectively, "Non-U.S.
Shareholders") are complex and no attempt will be made herein to provide more
than a summary of such rules. NON-U.S. SHAREHOLDERS SHOULD CONSULT WITH THEIR
OWN TAX ADVISORS TO DETERMINE THE IMPACT OF FEDERAL, STATE AND LOCAL INCOME TAX
LAWS WITH REGARD TO AN INVESTMENT IN THE COMMON STOCK, INCLUDING ANY REPORTING
REQUIREMENTS.
Distributions to Non-U.S. Shareholders that are not attributable to
gain from sales or exchanges by the Company of United States real property
interests and are not designated by the Company as capital gain dividends will
be treated as dividends of ordinary income to the extent that they are made out
of the Company's current or accumulated earnings and profits. Such distributions
ordinarily will be subject to a withholding tax equal to 30% of the gross amount
of the distribution unless an applicable tax treaty reduces or eliminates that
tax. However, if income from the investment in the Common Stock is treated as
effectively connected with the Non-U.S. Shareholder's conduct of a United States
trade or business, the Non-U.S. Shareholder generally will be subject to Federal
income tax at graduated rates, in the same manner as U.S. Shareholders are taxed
with respect to such distributions (and also may be subject to the 30% branch
profits tax in the case of a Non-U.S. Shareholder that is a corporate Non-U.S.
Shareholder). The Company expects to withhold United States income tax at the
rate of 30% on the gross amount of any such distributions made to a Non-U.S.
Shareholder unless (i) a lower treaty rate applies and any required form
evidencing eligibility for that reduced rate is filed with the Company or (ii)
the Non-U.S. Shareholder files an IRS Form 4224 with the Company claiming that
the distribution is effectively connected income. The Treasury Department issued
final regulations in October 1997 that will modify the manner in which the
Company complies with its obligations to withhold against distributions to
Non-U.S. Shareholders. The new regulations generally will be effective for
distributions made after December 31, 1998, subject to certain transition rules.
Prospective investors should consult their own tax advisors as to the effect, if
any, of the final regulations on their purchase, ownership and disposition of
the Common Stock.
Distributions in excess of current and accumulated earnings and profits
of the Company will not be taxable to a shareholder to the extent that such
distributions do not exceed the adjusted basis of the shareholder's shares of
Common Stock but rather will reduce the adjusted basis of such shares. To the
extent that distributions in excess of current and accumulated earnings and
profits exceed the adjusted basis of a Non-U.S. Shareholder's shares, such
distributions will give rise to tax liability if the Non-U.S. Shareholder
otherwise would be subject to tax on any gain from the sale or disposition of
the Common Stock as described below. Because it generally cannot be determined
at the time a distribution is made whether or not such distribution will be in
excess of current and accumulated earnings and profits, the entire amount of any
distribution normally will be subject to withholding
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<PAGE> 23
at the same rate as a dividend. However, amounts so withheld are refundable to
the extent it is determined subsequently that such distribution was, in fact, in
excess of the payor's current and accumulated earnings and profits. The Company
is required to withhold 10% of any distribution in excess of its current and
accumulated earnings and profits to the extent that shares of Common Stock
constitute "U.S. real property interests" under Section 897(c) of the Code.
Consequently, although the Company intends to withhold at a rate of 30% on the
entire amount of any distribution to a Non-U.S. Shareholder, to the extent that
the Company does not do so, any portion of a distribution not subject to 30%
withholding will be subject to 10% withholding.
For any year in which the Company qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges of U.S. real property
interests will be taxed to a Non-U.S. Shareholder under the provisions of the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
distributions attributable to gain from sales of United States real property
interests are taxed to a Non-U.S. Shareholder as if such gain were effectively
connected with a United States business. Non-U.S. Shareholders thus would be
taxed at the normal capital gain rates applicable to U.S. Shareholders (subject
to applicable alternative minimum tax and a special minimum tax in the case of
nonresident alien individuals). Distributions subject to FIRPTA also may be
subject to the 30% branch profits tax in the hands of a corporate Non-U.S.
Shareholder not entitled to treaty relief or exemption. The Company is required
to withhold 35% of any distribution that is designated by it as a capital gains
dividend. The amount withheld is creditable against the Non-U.S. Shareholder's
U.S. tax liability.
Gain recognized by a Non-U.S. Shareholder upon a sale of Common Stock
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of the stock was held directly
or indirectly by foreign persons. The Company is currently a
"domestically-controlled REIT" and, therefore, the sale of Common Stock will not
be subject to taxation under FIRPTA. However, because the Company's stock is
publicly traded, no assurance can be given that the Company is or will continue
to be a "domestically-controlled REIT." In addition, a Non-U.S. Shareholder that
owned (actually or constructively under certain constructive ownership rules) 5%
or less of the Company's outstanding shares at all times during a specified
testing period will not be subject to tax under FIRPTA if such shares are
regularly traded on an established securities market (e.g., the NYSE, on which
the Common Stock currently is traded). Furthermore, gain not subject to FIRPTA
will be taxable to a Non-U.S. Shareholder if (i) investment in Common Stock is
effectively connected with the Non-U.S. Shareholder's United States trade or
business, in which case the Non-U.S. Shareholder will be subject to the same
treatment as U.S. Shareholders with respect to such gain, or (ii) the Non-U.S.
Shareholder is a nonresident alien individual who was present in the United
States for 183 days or more during the taxable year and certain other conditions
apply, in which case the nonresident alien individual will be subject to a 30%
tax on the individual's capital gains. If the gain on the sale of Common Stock
were to be subject to taxation under FIRPTA, the Non-U.S. Shareholder would be
subject to the same treatment as U.S. Shareholders with respect to such gain
(subject to applicable alternative minimum tax, a special alternative minimum
tax in the case of nonresident alien individuals, and the possible application
of the 30% branch profits tax in the case of corporate Non-U.S. Shareholders).
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<PAGE> 24
OTHER TAX CONSEQUENCES
The Company, the Operating Partnership, the Pass-Through Affiliates,
the corporate subsidiaries of the Company or the Company's shareholders may be
subject to state or local taxation in various state or local jurisdictions,
including those in which it or they own property, transact business or reside.
The state and local tax treatment of the Company and the Company's shareholders
may not conform to the Federal income tax consequences discussed above.
EXPERTS
The consolidated financial statements incorporated in this Prospectus
by reference to the Annual Report on Form 10-K of the Company for the year ended
December 31, 1996, have been so incorporated in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of Columbus Realty Trust for the
year ended December 31, 1996 and 1995 and for each of the three years in the
period ended December 31, 1996, included in the Current Report on Form 8-K dated
September 17, 1997 filed by Post Properties, Inc. have been audited by Ernst &
Young LLP, independent auditors, as set forth in the report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements have been incorporated herein by reference in reliance upon such
reports given the authority of such firm as experts in accounting and auditing.
-24-
<PAGE> 25
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered
pursuant to this Prospectus will be passed upon for the Company by King &
Spalding, Atlanta, Georgia. Herschel M. Bloom, a member of King & Spalding, is a
director of the Company.
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<PAGE> 26
<TABLE>
<S> <C>
================================================================ =============================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN POST PROPERTIES, INC.
AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN CONNECTION
WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
SELLING SHAREHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN COMMON STOCK
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK, IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM,
IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET
FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE -----------------------
THE DATE HEREOF.
---------- PROSPECTUS
-----------------------
TABLE OF CONTENTS
Page
----
Available Information........................................3
Incorporation of Certain Documents
by Reference..............................................3
The Company..................................................5
The Offering.................................................8
Selling Shareholders.........................................8
Plan of Distribution.........................................9
Federal Income Tax Considerations............................10
Experts......................................................24
Legal Matters................................................25
MARCH 23, 1998
================================================================ =============================================================
</TABLE>
<PAGE> 27
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the fees and expenses in connection with
the issuance and distribution of the securities being registered hereunder.
Except for the SEC registration fee and NYSE filing fee, all amounts are
estimates.
<TABLE>
<S> <C>
SEC registration fee....................................... $ 2,398
Legal fees and expenses.................................... 20,000
Blue Sky fees and expenses (including counsel fees)........ 5,000
Printing and Engraving expenses............................ 20,000
Miscellaneous Expenses..................................... 2,602
----------
Total............................................ 50,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Part 5 of Article 8 of the Georgia Business Corporation Code states:
14-2-850. PART DEFINITIONS.
As used in this part, the term:
(1) "Corporation" includes any domestic or foreign predecessor
entity of a corporation in a merger or other transaction in which the
predecessor's existence ceased upon consummation of the transaction.
(2) "Director" means an individual who is or was a director of
a corporation or an individual who, while a director of a corporation,
is or was serving at the corporation's request as a director, officer,
partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise. A director is considered to be serving an employee
benefit plan at the corporation's request if his duties to the
corporation also impose duties on, or otherwise involve services by,
him to the plan or to participants in or beneficiaries of the plan.
Director includes, unless the context requires otherwise, the estate or
personal representative of a director.
(3) "Expenses" include attorneys' fees.
(4) "Liability" means the obligation to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with
respect to an employee benefit plan), or reasonable expenses incurred
with respect to a proceeding.
(5) "Party" includes an individual who was, is, or is
threatened to be made a named defendant
or respondent in a proceeding.
(6) "Proceeding" means any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative,
or investigative and whether formal or informal.
II-1
<PAGE> 28
14-2-851. AUTHORITY TO INDEMNIFY.
(a) Except as provided in subsections (d) and (e) of this Code section,
a corporation may indemnify or obligate itself to indemnify an individual made a
party to a proceeding because he is or was a director against liability incurred
in the proceeding if he acted in a manner he believed in good faith to be in or
not opposed to the best interests of the corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful.
(b) A director's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection (a) of this Code section.
(c) The termination of a proceeding by judgment, order, settlement, or
conviction, or upon a plea of nolo contendere or its equivalent is not, of
itself, determinative that the director did not meet the standard of conduct set
forth in subsection (a) of this Code section.
(d) A corporation may not indemnify a director under this Code section:
(1) In connection with a proceeding by or in the right of the
corporation in which the director was adjudged liable to the
corporation; or
(2) In connection with any other proceeding in which he was
adjudged liable on the basis that personal benefit was improperly
received by him.
(e) Indemnification permitted under this Code section in connection
with a proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
14-2-852. MANDATORY INDEMNIFICATION.
Unless limited by its articles of incorporation, to the extent that a
director has been successful, on the merits or otherwise, in the defense of any
proceeding to which he was a party, or in defense of any claim, issue, or matter
therein, because he is or was a director of the corporation, the corporation
shall indemnify the director against reasonable expenses incurred by him in
connection therewith.
14-2-853. ADVANCE FOR EXPENSES.
(a) A corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance of final
disposition of the proceeding if:
(1) The director furnishes the corporation a written
affirmation of his good faith belief that he has met the standard of
conduct set forth in subsection (a) of Code Section 14-2-851; and
(2) The director furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay any
advances if it is ultimately determined that he is not entitled to
indemnification under this part.
(b) The undertaking required by paragraph (2) of subsection (a) of
this Code section must be an unlimited general obligation of the director but
need not be secured and may be accepted without reference to financial ability
to make repayment.
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<PAGE> 29
14-2-854. COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES.
Unless a corporation's articles of incorporation provide otherwise, a
director of the corporation who is a party to a proceeding may apply for
indemnification or advances for expenses to the court conducting the proceeding
or to another court of competent jurisdiction. On receipt of an application, the
court after giving any notice the court considers necessary may order
indemnification or advances for expenses if it determines:
(1) The director is entitled to mandatory indemnification
under Code Section 14-2-852, in which case the court also order the
corporation to pay the director's reasonable expenses incurred to
obtain court ordered indemnification;
(2) The director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances, whether or
not he met the standard of conduct set forth in subsection (a) of Code
Section 14-2-851 or was adjudged liable as described in subsection (d)
of Code Section 14-2-851, but if he was adjudged so liable his
indemnification is limited to reasonable expenses incurred unless the
articles of incorporation or a bylaw, contract, or resolution approved
or ratified by the shareholders pursuant to Code Section 14-2-856
provides otherwise; or
(3) In the case of advances for expenses, the director is
entitled, pursuant to the articles of incorporation, bylaws, or any
applicable resolution or agreement, to payment or reimbursement of his
reasonable expenses incurred as a party to a proceeding in advance of
final disposition of the proceeding.
14-2-855. DETERMINATION AND AUTHORIZATION OF INDEMNIFICATION.
(a) A corporation may not indemnify a director under Code Section
14-2-851 unless authorized thereunder and a determination has been made in the
specific case that indemnification of the director is permissible in the
circumstances because he has met the standard of conduct set forth in subsection
(a) of Code Section 14-2-851.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(2) If a quorum cannot be obtained under paragraph (1) of this
subsection, by majority vote of a committee duly designated by the
board of directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not at the
time parties to the proceeding;
(3) By special legal counsel:
(A) Selected by the board of directors or its committee
in the manner prescribed in paragraph (1) or (2) of this
subsection; or
(B) If a quorum of the board of directors cannot be
obtained under paragraph (1) of this subsection and a
committee cannot be designated under paragraph (2) of this
subsection, selected by majority vote of the full board of
directors (in which selection directors who are parties may
participate); or
(4) By the shareholders, but shares owned by or voted under
the control of directors who are at the time parties to the proceeding
may not be voted on the determination.
II-3
<PAGE> 30
(c) Authorization of indemnification or an obligation to indemnify and
evaluation as to reasonableness of expenses shall be made in the manner as the
determination that indemnification is permissible, except that if the
determination is made by special legal counsel, authorization of indemnification
and evaluation as to reasonableness of expenses shall be made by those entitled
under paragraph (3) of subsection (b) of this Code section to select counsel.
14-2-856. SHAREHOLDER APPROVED INDEMNIFICATION.
(a) If authorized by the articles of incorporation or a bylaw,
contract, or resolution approved or ratified by the shareholders by a majority
of the votes entitled to be cast, a corporation may indemnify or obligate itself
to indemnify a director made a party to a proceeding including a proceeding
brought by or in the right of the corporation, without regard to the limitations
in other Code sections of this part.
(b) The corporation shall not indemnify a director under this Code
section for any liability incurred in a proceeding in which the director is
adjudged liable to the corporation or is subjected to injunctive relief in favor
of the corporation:
(1) For any appropriation, in violation of his duties, of any
business opportunity of the corporation;
(2) For acts or omissions which involve intentional misconduct or a
knowing violation of law;
(3) For the types of liability set forth in Code Section 14-2-832;
or
(4) For any transaction from which he received an improper personal
benefit.
(c) Where approved or authorized in the manner described in subsection
(a) of this Code section, a corporation may advance or reimburse expenses
incurred in advance of final disposition of the proceeding only if:
(1) the director furnishes the corporation a written affirmation of
his good faith belief that his conduct does not constitute behavior of
the kind described in subsection (b) of this Code section; and
(2) The director furnishes the corporation a written undertaking,
executed personally or on his behalf, to repay any advances if it is
ultimately determined that he is not entitled to indemnification under
this Code section.
14-2-857. INDEMNIFICATION OF OFFICERS, EMPLOYEES, AND AGENTS.
Unless a corporation's articles of incorporation provide otherwise:
(1) An officer of the corporation who is not a director is entitled
to mandatory indemnification under Code Section 14-2-852 and is
entitled to apply for court ordered indemnification under Code Section
14-2-854, in each case to the same extent as a director, and
(2) A corporation may also indemnify and advance expenses to an
officer, employee, or agent who is not a director to the extent,
consistent with public policy, that may be provided by its articles of
incorporation, bylaws, general or specific action of its board of
directors, or contract.
14-2-858. INSURANCE.
A corporation may purchase and maintain insurance on behalf of an
individual who is or was a director, officer, employee, or agent of the
corporation or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee, or agent of another foreign or
II-4
<PAGE> 31
domestic corporation, partnership, joint venture, trust, employee benefit plan,
or other enterprise against liability asserted against or incurred by him in
that capacity or arising from his status as a director, officer, employee, or
agent, whether or not the corporation would have power to indemnify him against
the same liability under Code Section 14-2- 851 or Code Section 14-2-852.
14-2-859. APPLICATION OF PART.
(a) A provision treating a corporation's indemnification of or advance
for expenses to directors that is contained in its articles of incorporation,
bylaws, a resolution of its shareholders or board of directors, or in a contract
or otherwise, is valid only if and to the extent the provision is consistent
with this part. If articles of incorporation limit indemnification or advance
for expenses, indemnification and advance for expenses are valid only to the
extent consistent with the articles.
(b) This part does not limit a corporation's power to pay or reimburse
expenses incurred by a director in connection with his appearance as a witness
in a proceeding at a time when he has not been made a named defendant or
respondent to the proceeding.
ARTICLES OF INCORPORATION
As permitted by the Georgia Business Corporation Code, the Company's
Charter provides that a director shall not be personally liable to the Company
or its shareholders for monetary damages for breach of duty of care or other
duty as a director, except that such provision shall not eliminate or limit the
liability of a director (a) for any appropriation, in violation of his duties,
of any business opportunity of the Company, (b) for acts or omissions that
involve intentional misconduct or a knowing violation of law, (c) for unlawful
corporate distributions or (d) for any transaction from which the director
derived an improper personal benefit. The Company's Charter further provide that
if the Georgia Business Corporation Code is amended to authorize corporate
action further eliminating or limiting the personal liability of directors, then
the liability of a director of the Company shall be eliminated or limited to the
fullest extent permitted by the Georgia Business Corporation Code, as amended.
Under Article IV of the Company's Bylaws and certain agreements entered
into by the Company, the Company is required to indemnify to the fullest extent
permitted by the Georgia Business Corporation Code, any individual made a party
to a proceeding (as defined in the Georgia Business Corporation Code) because he
is or was a director or officer against liability (as defined in the Georgia
Business Corporation Code), incurred in the proceeding, if he acted in a manner
he believed in good faith to be in or not opposed to the best interests of the
Company and, in the case of any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful. The Company is required to pay for or
reimburse the reasonable expenses incurred by a director or officer who is a
party to a proceeding in advance of final disposition of the proceeding if:
(a) Such person furnishes the Company a written affirmation of his
good faith belief that he has met the standard of conduct set forth
above; and
(b) Such person furnishes the Company a written undertaking,
executed personally on his behalf to repay any advances if it is
ultimately determined that he is not entitled to indemnification.
The written undertaking required by paragraph (b) above must be an unlimited
general obligation of such person but need not be secured and may be accepted
without reference to financial ability to make repayment.
The right to indemnification and the payment of expenses incurred in
defending a proceeding in advance of its final disposition conferred in Article
VI of the Company's Bylaws are not exclusive of any other right which any person
may have under any statute, provision of the Company's Articles of
Incorporation, provision of the Company's Bylaws, agreement, vote of
shareholders or disinterested directors or otherwise.
II-5
<PAGE> 32
The Partnership Agreement of the Operating Partnership also provides
for indemnification of the Company and its officers and directors to the same
extent indemnification is provided to officers and directors of the Company in
the Company's Charter, and limits the liability of the Company and its officers
and directors to the Operating Partnership and its partners to the same extent
liability of officers and directors of the Company to the Company and its
shareholders is limited under the Company's Charter.
In connection with the formation transactions, the Company agreed to
indemnify Messrs. Williams and Glover from any exposure to personal liability
for or under personal guarantees of certain indebtedness of partnerships of the
Company aggregating $107,900,000 in principal amount as to which Messrs.
Williams and Glover currently have personal liability either directly or as a
guarantor of such indebtedness.
The Company's director's and officers are insured against damages from
actions and claims incurred in the course of their duties, and the Company is
insured against expenses incurred in defending lawsuits arising from certain
alleged acts of its directors and officers.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO.
---
DESCRIPTION
-----------
<S> <C> <C>
5.1* -- Opinion of King & Spalding regarding the validity of the securities being registered
8.1 -- Opinion of King & Spalding regarding tax matters
23.1 -- Consent of King & Spalding (included as part of Exhibit 5.1)
23.2 -- Consent of Price Waterhouse LLP
23.3 -- Consent of Ernst & Young LLP
24.1* -- Power of Attorney (included on page II-2)
</TABLE>
- --------------------
* Previously filed
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a) (3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
II-6
<PAGE> 33
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Securities Exchange Act of 1934 (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
II-7
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Amendment to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Atlanta on March 23, 1998.
POST PROPERTIES, INC.
By: /s/ John A. Williams
------------------------------------
John A. Williams
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated as of the 23rd day of March, 1998.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ John A. Williams Chairman of the Board,
- --------------------------------- Chief Executive Officer and a Director
John A. Williams (Principal Executive Officer)
/s/ John T. Glover President, Chief Operating Officer,
- --------------------------------- Treasurer and a Director (Principal
John T. Glover Financial Officer)
* Senior Vice President - Post Corporate
- --------------------------------- Services (Chief Accounting Officer)
R. Gregory Fox
* Director
- ---------------------------------
Arthur M. Blank
</TABLE>
II-8
<PAGE> 35
<TABLE>
<S> <C>
* Director
- ---------------------------------
Herschel M. Bloom
* Director
- ---------------------------------
Russell R. French
Director
- ---------------------------------
William A. Parker, Jr.
* Director
- ---------------------------------
Charles E. Rice
* Director
- ---------------------------------
J. C. Shaw
* Director
- ---------------------------------
Robert L. Shaw
* /s/ Sherry W. Cohen
-------------------------------
By: Sherry W. Cohen
Attorney-in-fact
</TABLE>
II-9
<PAGE> 36
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Exhibit No. Exhibit Page Number
----------- ------- ------------
<S> <C> <C>
5.1* Opinion of King & Spalding regarding the validity
of the securities being registered
8.1 Opinion of King & Spalding regarding tax matters
23.1 Consent of King & Spalding (included as part of Exhibit 5.1)
23.2 Consent of Price Waterhouse LLP
23.3 Consent of Ernst & Young LLP
24.1* Power of Attorney (included on page II-2)
</TABLE>
- --------------------
* Previously filed
II-10
<PAGE> 1
EXHIBIT 8.1
March 23, 1998
Post Properties, Inc.
Post Apartment Homes, L.P.
Suite 2200
3350 Cumberland Circle
Atlanta, Georgia 30339
Re: Post Properties, Inc. Common Stock
Ladies and Gentlemen:
We have acted as counsel to Post Properties, Inc. (the "Company") and
Post Apartment Homes, L.P. (the "Operating Partnership") in connection with the
registration under the Securities Act of 1933, as amended, of 209,100 shares of
Common Stock of the Company, as described in that certain Registration Statement
filed with the Securities and Exchange Commission (the "Commission") on even
date herewith (the "Registration Statement"). In connection therewith, you have
requested our opinion with respect to (i) the qualification of the Company as a
real estate investment trust ("REIT") under the Internal Revenue Code of 1986,
as amended (the "Code"), (ii) the classification, for Federal income tax
purposes, of the Operating Partnership and each of the partnerships and limited
liability companies in which the Operating Partnership has, at any time through
the date hereof, held an interest (the "Pass-Through Affiliates"), and (iii) the
accuracy of the discussion included in the Prospectus, which is part of the
Registration Statement, under the heading "Federal Income Tax Considerations."
We hereby consent to the filing of this opinion letter as an Exhibit to
the Registration Statement and to the reference to us in the Prospectus under
the heading "Federal Income Tax Considerations".
Unless otherwise indicated, all defined terms used herein shall have
the same meaning as in the Registration Statement.
<PAGE> 2
March 23, 1998
Page 2
FACTS AND ASSUMPTIONS RELIED UPON
In rendering the opinions expressed herein, we have examined such
documents as we have deemed appropriate, including (but not limited to) the
Registration Statement and the analyses of qualifying income prepared by the
Company with the assistance of Price Waterhouse LLP, the Company's accountants.
We have also examined the organizational documents, as amended, of the
following entities: the Company, the Operating Partnership, Post Development
Services Limited Partnership, Addison Circle One, Ltd., Addison Circle Two,
Ltd., Rice Lofts, L.P., Post Rice Lofts, LLC, Post Uptown, LLC, Akard-McKinney
Investment Company, LLC, Columbus Management Services, LLC, Post Mississippi
Properties, LLC, Post Knox Park, LLC, Greenwood Residential, LLC, Uptown
Denver, LLC, Post Services, Inc. and Addison Circle Access, Inc. In our
examination of documents, we have assumed, with your consent, that all
documents submitted to us are authentic originals, or if submitted as
photocopies or telecopies, that they faithfully reproduce the originals
thereof, that all such documents have been or will be duly executed to the
extent required, that all representations and statements set forth in such
documents are true and correct, and that all obligations imposed by any such
documents on the parties thereto have been or will be performed or satisfied in
accordance with their terms. We also have obtained such additional information
and representations as we have deemed relevant and necessary through
consultation with officers of the Company and with Price Waterhouse LLP,
including representations from the Company in a letter to us of even date
herewith.
OPINIONS
Based upon and subject to the foregoing, we are of the following
opinions:
(1) The Company was organized and has operated in conformity with the
requirements for qualification and taxation as a REIT under the Code for each of
its taxable years beginning with its taxable year ended December 31, 1993, and
its organization and proposed method of operation should enable it to continue
to meet the requirements for qualification and taxation as a REIT.
(2) The Operating Partnership and each Pass-Through Affiliate which is
not 100% beneficially owned by the Operating Partnership are properly classified
as partnerships, and not as corporations, associations taxable as corporations
or "publicly traded partnerships" under Section 7704 of the Code, for Federal
income tax purposes. Each Pass-Through Affiliate that is 100% beneficially
owned by the Operating Partnership is disregarded for Federal income tax
purposes.
(3) The information in the Prospectus under the heading "Federal Income
Tax Considerations" constitutes, in all material respects, a fair and accurate
summary of the material United States Federal income tax consequences of the
purchase, ownership and disposition of the Common Stock under current law, and,
to the extent such discussion contains statements of law or legal conclusions,
such statements and conclusions are the opinion of King & Spalding.
The opinions expressed herein are given as of the date hereof and are
based upon the Code, the U.S. Treasury regulations promulgated thereunder,
current administrative positions of the U.S. Internal Revenue Service, and
existing judicial decisions, any of which could be changed at any time,
possibly on a retroactive basis. Any such changes could adversely affect the
opinions rendered herein and the tax
<PAGE> 3
March 23, 1998
Page 3
consequences to the Company, the Operating Partnership and the investors in the
Common Stock. In addition, as noted above, our opinions are based solely on the
documents that we have examined, the additional information that we have
obtained, and the representations that have been made to us, and cannot be
relied upon if any of the facts contained in such documents or in such
additional information is, or later becomes, inaccurate or if any of the
representations made to us is, or later becomes, inaccurate.
We will advise you of any facts or circumstances that come to our
attention, or of any changes in law that occur, and which affect the opinions
expressed herein, prior to the date that the Registration Statement is declared
effective by the Commission. We assume no such obligation, however, to so advise
you after such date.
Finally, our opinions are limited to the tax matters specifically
covered thereby, and we have not been asked to address, nor have we addressed,
any other tax consequences of an investment in the Common Stock.
Very truly yours,
King & Spalding
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Amendment No. 1 to the Registration Statement on
Form S-3 of our report dated February 11, 1997 appearing on page 34 of Post
Properties, Inc.'s Annual Report on Form 10-K for the year ended December 31,
1996. We also consent to the reference to us under the headings "Experts"
in such Prospectus.
Price Waterhouse LLP
Atlanta, Georgia
March 20, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and the related Prospectus of Post
Properties, Inc. for the registration of 209,100 shares of Post Properties,
Inc. Common Stock and to the incorporation by reference therein of our report
dated January 28, 1997, except for Note 15, as to which the date is March 7,
1997, with respect to the consolidated financial statements of Columbus Realty
Trust as of December 31, 1996 and 1995 and for the three years in the period
ended December 31, 1996, included in Post Properties, Inc.'s Current Report on
Form 8-K dated September 17, 1997 filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
Dallas, Texas
March 20, 1998
