<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file numbers 1-12080 and 0-28226
------------------------
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
(Exact name of registrant as specified in its charter)
GEORGIA 58-1550675
GEORGIA 58-2053632
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
4401 NORTHSIDE PARKWAY, SUITE 800, ATLANTA, GEORGIA 30327
(Address of principal executive offices -- zip code)
(404) 846-5000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
Post Properties, Inc. Yes [X] No [ ]
Post Apartment Homes, L.P. Yes [X] No [ ]
------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
39,307,227 shares of common stock outstanding as of May 10, 2000.
5,185,058 common units outstanding as of May 10, 2000.
================================================================================
<PAGE> 2
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
INDEX
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
----
<S> <C> <C>
ITEM 1 FINANCIAL STATEMENTS
POST PROPERTIES, INC.
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999...............................1
Consolidated Statements of Operations for the three months ended
March 31, 2000 and 1999...........................................................................2
Consolidated Statement of Shareholders' Equity and Accumulated Earnings for the
three months ended March 31, 2000.................................................................3
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999...........................................................................4
Notes to Consolidated Financial Statements...........................................................5
POST APARTMENT HOMES, L.P.
Consolidated Balance Sheets as of March 31, 2000 and December 31, 1999...............................9
Consolidated Statements of Operations for the three months ended
March 31, 2000 and 1999..........................................................................10
Consolidated Statement of Partners' Equity for the three months ended
March 31, 2000...................................................................................11
Consolidated Statements of Cash Flows for the three months ended
March 31, 2000 and 1999..........................................................................12
Notes to Consolidated Financial Statements .........................................................13
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS....................................................................................17
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................28
PART II OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS.............................................................................29
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS.....................................................
ITEM 3 DEFAULTS UPON SENIOR SECURITIES...............................................................
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDER............................................
ITEM 5 OTHER INFORMATION.............................................................................
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K..............................................................
SIGNATURES..............................................................................................30
</TABLE>
<PAGE> 3
POST PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land .................................................................. $ 277,397 $ 277,784
Building and improvements ............................................. 1,581,605 1,574,158
Furniture, fixtures and equipment ..................................... 149,337 137,602
Construction in progress .............................................. 563,735 576,361
Land held for future development ...................................... 16,584 16,880
----------- -----------
2,588,658 2,582,785
Less: accumulated depreciation ........................................ (310,988) (303,016)
Assets held for sale .................................................. 50,471 --
----------- -----------
Real estate assets .................................................... 2,328,141 2,279,769
Cash and cash equivalents ............................................... 19,343 5,870
Restricted cash ......................................................... 2,006 1,380
Deferred charges, net ................................................... 19,668 20,820
Other assets ............................................................ 50,773 42,334
----------- -----------
Total assets .......................................................... $ 2,419,931 $ 2,350,173
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable ........................................................... $ 1,046,847 $ 989,583
Accrued interest payable ................................................ 11,411 9,160
Dividends and distributions payable ..................................... 34,141 31,285
Accounts payable and accrued expenses ................................... 62,864 59,780
Security deposits and prepaid rents ..................................... 9,293 9,023
----------- -----------
Total liabilities ..................................................... 1,164,556 1,098,831
----------- -----------
Minority interest of preferred unitholders in Operating Partnership ..... 70,000 70,000
Minority interest of common unitholders in Operating Partnership ........ 122,122 122,480
----------- -----------
Commitments and contingencies ........................................... -- --
Shareholders' equity
Preferred stock, $.01 par value, 20,000,000 authorized:
8 1/2% Series A Cumulative Redeemable Shares, liquidation
preference $50 per share, 1,000,000 shares issued and outstanding ... 10 10
7 5/8% Series B Cumulative Redeemable Shares, liquidation
preference $25 per share, 2,000,000 shares issued and
outstanding ......................................................... 20 20
7 5/8% Series C Cumulative Redeemable Shares, liquidation
preference $25 per share, 2,000,000 shares issued and
outstanding ......................................................... 20 20
Common stock, $.01 par value, 100,000,000 authorized,
39,115,481 and 38,834,323 shares issued and outstanding at
March 31, 2000 and December 31, 1999, respectively .................. 391 388
Additional paid-in capital .............................................. 1,062,812 1,058,424
Accumulated earnings .................................................... -- --
----------- -----------
Total shareholders' equity ............................................ 1,063,253 1,058,862
----------- -----------
Total liabilities and shareholders' equity ............................ $ 2,419,931 $ 2,350,173
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 1 -
<PAGE> 4
POST PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
2000 1999
----------- -----------
<S> <C> <C>
REVENUE:
Rental ................................................................... $ 87,825 $ 75,585
Property management - third-party ........................................ 908 871
Landscape services - third-party ......................................... 2,102 1,730
Interest ................................................................. 539 65
Other .................................................................... 4,069 2,641
----------- -----------
Total revenue ........................................................... 95,443 80,892
----------- -----------
EXPENSES:
Property operating and maintenance expense (exclusive of
depreciation and amortization) .......................................... 30,651 26,369
Depreciation expense ..................................................... 17,005 12,710
Property management expenses - third-party ............................... 788 719
Landscape services expenses - third-party ................................ 2,005 1,660
Interest expense ......................................................... 10,701 7,217
Amortization of deferred loan costs ...................................... 385 336
General and administrative ............................................... 2,497 2,383
Minority interest in consolidated property partnerships .................. (555) 92
----------- -----------
Total expense ........................................................... 63,477 51,486
----------- -----------
Income before net gain (loss) on sale of assets, minority interest
of unitholders in Operating Partnership and extraordinary item .......... 31,966 29,406
Net gain (loss) on sale of assets ........................................ 687 (1,567)
Minority interest of preferred unitholders in Operating Partnership ...... (1,400) --
Minority interest of common unitholders in Operating Partnership ......... (3,320) (2,992)
----------- -----------
Income before extraordinary item ......................................... 27,933 24,847
Extraordinary item, net of minority interest of unitholders in
Operating Partnership ................................................... -- (458)
----------- -----------
Net income .............................................................. 27,933 24,389
Dividends to preferred shareholders ..................................... (2,969) (2,969)
----------- -----------
Net income available to common shareholders ............................. $ 24,964 $ 21,420
=========== ===========
EARNINGS PER COMMON SHARE - BASIC
Income before extraordinary item (net of preferred dividend) ............. $ 0.64 $ 0.57
Extraordinary item ....................................................... -- (0.01)
----------- -----------
Net income available to common shareholders .............................. $ 0.64 $ 0.56
=========== ===========
Weighted average common shares outstanding ................................. 39,025,775 38,149,210
=========== ===========
EARNINGS PER COMMON SHARE - DILUTED
Income before extraordinary item (net of preferred dividend) ............. $ 0.63 $ 0.57
Extraordinary item ....................................................... -- (0.01)
----------- -----------
Net income available to common shareholders .............................. $ 0.63 $ 0.56
=========== ===========
Weighted average common shares outstanding ............................... 39,407,667 38,474,982
=========== ===========
Dividends declared ....................................................... $ 0.76 $ 0.70
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 2 -
<PAGE> 5
POST PROPERTIES, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED COMMON PAID-IN ACCUMULATED
SHARES SHARES CAPITAL EARNINGS TOTAL
--------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
DECEMBER 31, 1999 ........................................ $50 $388 $ 1,058,424 $ -- $ 1,058,862
Proceeds from Dividend Reinvestment and
Employee Stock Purchase and Option Plans ................ -- 3 9,421 -- 9,424
Adjustment for minority interest of common unitholders
in Operating Partnership at dates of capital
transactions............................................. -- -- (269) -- (269)
Net income ............................................... -- -- -- 27,933 27,933
Dividends to preferred shareholders ...................... -- -- -- (2,969) (2,969)
Dividends to common shareholders ......................... -- -- (4,764) (24,964) (29,728)
--- ---- ----------- -------- -----------
SHAREHOLDERS' EQUITY AND
ACCUMULATED EARNINGS,
MARCH 31, 2000 ........................................... $50 $391 $ 1,062,812 $ -- $ 1,063,253
=== ==== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 3 -
<PAGE> 6
POST PROPERTIES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income .............................................................. $ 27,933 $ 24,389
Adjustments to reconcile net income to net cash provided by operating
activities:
Net (gain) loss on sale of assets ..................................... (687) 1,567
Minority interest of preferred unitholders in Operating Partnership ... 1,400 --
Minority interest of common unitholders in Operating Partnership ...... 3,320 2,992
Extraordinary item, net of minority interest of unitholders in
Operating Partnership ................................................ -- 458
Depreciation .......................................................... 17,005 12,704
Amortization of deferred loan costs ................................... 385 341
Changes in assets, (increase) decrease in:
Restricted cash ....................................................... (626) 2
Other assets .......................................................... (8,439) (4,293)
Deferred charges ...................................................... 122 (295)
Changes in liabilities, increase (decrease) in:
Accrued interest payable .............................................. 2,251 3,263
Accounts payable and accrued expenses ................................. (574) 1,681
Security deposits and prepaid rents ................................... 270 (127)
--------- --------
Net cash provided by operating activities ............................... 42,360 42,682
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets, net of payables ..... (81,996) (74,751)
Net proceeds from sale of assets ........................................ 31,432 9,364
Capitalized interest .................................................... (5,567) (4,599)
Recurring capital expenditures .......................................... (1,938) (1,873)
Corporate additions and improvements .................................... (912) (955)
Non-recurring capital expenditures ...................................... (830) (554)
Revenue generating capital expenditures ................................. (576) (1,018)
--------- --------
Net cash used in investing activities ................................... (60,387) (74,386)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs .............................................. -- (1,495)
Debt proceeds ........................................................... 105,000 70,000
Debt payments ........................................................... (47,736) (127)
Distributions to preferred unitholders .................................. (1,400) --
Distributions to common unitholders ..................................... (3,635) (3,390)
Proceeds from Dividend Reinvestment and Employee
Stock Purchase and Option Plans ........................................ 9,424 1,231
Dividends paid to preferred shareholders ................................ (2,969) (2,969)
Dividends paid to common shareholders ................................... (27,184) (21,725)
--------- --------
Net cash provided by financing activities ............................... 31,500 41,525
--------- --------
Net increase in cash and cash equivalents ............................... 13,473 9,821
Cash and cash equivalents, beginning of period .......................... 5,870 21,154
--------- --------
Cash and cash equivalents, end of period ................................ $ 19,343 $ 30,975
========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 4 -
<PAGE> 7
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND FORMATION OF THE COMPANY
ORGANIZATION AND FORMATION OF THE COMPANY
Post Properties, Inc. (the "Company"), which was incorporated on
January 25, 1984, is the successor by merger to the original Post
Properties, Inc., which was formed in 1971. The Company was formed to
develop, lease and manage upscale multi-family apartment communities.
The Company elected to be taxed as a real estate investment trust
("REIT") for Federal income tax purposes beginning with the taxable
year ended December 31, 1993. A REIT is a legal entity which holds real
estate interests and, through payments of dividends to shareholders, in
practical effect is not subject to Federal income taxes at the
corporate level.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by
the Company's management in accordance with generally accepted
accounting principles for interim financial information and applicable
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting only of normally recurring adjustments) considered
necessary for a fair presentation have been included. The results of
operations for the three-month period ended March 31, 2000 are not
necessarily indicative of the results that may be expected for the full
year. These financial statements should be read in conjunction with the
Company's audited financial statements and notes thereto included in
the Post Properties, Inc. Annual Report on Form 10-K for the year ended
December 31, 1999. Certain 1999 amounts have been reclassified to
conform to the current year's financial statement presentation.
2. NOTES PAYABLE
Post Apartment Homes, L.P. (the "Operating Partnership") has
established a program for the sale of up to $344,000 aggregate
principal amount of Medium-Term Notes due three months or more from
date of issue (the "MTN Program"). A $30,000 Medium Term Note was
repaid on March 3, 2000. As of March 31, 2000, the Operating
Partnership had $185,000 aggregate principal amount of notes
outstanding under the MTN Program. On May 9, 2000, the Operating
Partnership sold an additional $25,000 aggregate principal amount of
notes under the MTN Program, and consequently currently has a total of
$210,000 aggregate principal amount of notes outstanding under the MTN
Program. Net proceeds of $24,875 were used to repay outstanding
indebtedness.
3. SALE OF ASSET AND ASSETS HELD FOR SALE
During the first quarter of 2000, the Company authorized the sale of
five communities, one community in Atlanta, Georgia, three communities
in Jackson, Mississippi and one commercial property in Dallas, Texas.
In February 2000, the Company sold the 213 unit community in Atlanta,
Georgia for $32,350. Net proceeds of approximately $31,500 were used to
pay down outstanding indebtedness. At March 31, 2000, the remaining
four properties consisting of land, building and improvements and
furniture, fixtures and equipment were recorded at the lower of cost or
fair value less costs to sell of $50,471. The Company has recorded a
gain on the sale of the Atlanta community, reduced by its best estimate
of the effect of anticipated sales of the remaining properties in the
statement of operations as net gain on the sale of assets of $767. The
Company expects the sale of the remaining four properties to occur
during the current fiscal year.
The Company's consolidated statement of operations includes net income
of $1,302 and $1,355 for the periods ending March 31, 2000 and 1999,
respectively, from communities held for sale at March 31, 2000.
Depreciation expense on these assets, which was not recognized
subsequent to the date of held for sale classification, totaled $477
for the three months ended March 31, 2000.
- 5 -
<PAGE> 8
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
4. EARNINGS PER SHARE
For the three months ended March 31, 2000 and 1999, a reconciliation of
the numerator and denominator used in the computation of basic and
diluted earnings per share is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Basic and diluted income available to common shareholders (numerator):
Income before extraordinary item .................................................... $ 27,933 $ 24,847
Less: Preferred stock dividends ..................................................... (2,969) (2,969)
------------ ------------
Income available to common shareholders before extraordinary item ................... $ 24,964 $ 21,878
============ ============
Common shares (denominator):
Weighted average shares outstanding-basic ........................................... 39,025,775 38,149,210
Incremental shares from assumed conversion of options ............................... 381,892 325,772
------------ ------------
Weighted average shares outstanding - diluted ....................................... 39,407,667 38,474,982
============ ============
</TABLE>
5. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the three months ended
March 31, 2000 and 1999 were as follows:
During the three months ended March 31, 1999, holders of 750 units in
the Operating Partnership exercised their option to convert their units
to shares of Common Stock of the Company on a one-for-one basis. These
conversions and adjustments for the dilutive impact of the Dividend
Reinvestment and Employee Stock Purchase and Option Plans and capital
transactions result in adjustments to minority interest. The net effect
of the conversions and adjustments was a reclassification increasing
minority interest and decreasing shareholder's equity in the amount of
$269 for the three months ended March 31, 2000 and decreasing minority
interest and increasing shareholder's equity in the amount of $1,189
for the three months ended March 31, 1999.
6. NEW ACCOUNTING PRONOUNCEMENT
On June 15, 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (FAS 133). FAS 133,
as amended by FAS 137, "Deferral of the Effective Date of FAS 133," is
effective for all fiscal quarters of all fiscal years beginning after
June 15, 2000 (January 1, 2001 for the Company). FAS 133 requires that
all derivative instruments be recorded on the balance sheet at their
fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and,
if it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments, the
adoption of FAS 133 will not have a significant effect on the Company's
results of operations or its financial position.
7. SEGMENT INFORMATION
SEGMENT DESCRIPTION
The Company adopted SFAS No. 131, "Disclosure About the Segments of an
Enterprise and Related Information" in the fourth quarter of 1998. SFAS
No. 131 requires companies to present segment information based on the
way that management organizes the segments within the enterprise for
making operating decisions and assessing performance. The segment
information is prepared on substantially the same basis as the
internally reported information used by the Company's chief operating
decision makers to manage the business.
The Company's chief operating decision makers focus on the Company's
primary sources of income, which are property rental operations and
third party services. Property rental operations are broken down into
five segments
- 6 -
<PAGE> 9
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
based on the various stages in the property ownership lifecycle. Third
party services are designated as one segment. The Company's six
segments are further described as follows:
Property Rental Operations
- Fully stabilized communities - those apartment communities
that have been stabilized (the point at which a property
reaches 95% occupancy or one year after completion of
construction) for both the current and prior year.
- Communities stabilized during 1999 - communities that reached
stabilized occupancy in the prior year.
- Development and lease up communities - those communities that
are in lease-up but were not stabilized by the beginning of
the current year, including communities that stabilized during
the current year.
- Communities held for sale - those communities that are
currently being actively marketed for sale.
- Sold communities - communities that were sold in the current
or prior year.
Third Party Services - fee income and related expenses from the
Company's apartment community management, landscaping and corporate
apartment rental services.
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the
performance measure for its segments. Effective January 1, 2000, FFO is
defined by the National Association of Real Estate Investment Trusts as
net income available to common shareholders determined in accordance
with generally accepted accounting principles ("GAAP"), excluding gains
(or losses) from debt restructuring and sales of property, plus
depreciation of real estate assets, and after adjustment for
unconsolidated partnerships and joint ventures. FFO should not be
considered as an alternative to net income (determined in accordance
with GAAP) as an indicator of the Company's financial performance or to
cash flow from operating activities (determined in accordance with
GAAP) as a measure of the Company's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Company's needs.
SEGMENT INFORMATION
The following table reflects each segment's contribution to FFO
together with a reconciliation of segment contribution to FFO, total
FFO and income before extraordinary item and preferred dividends.
Additionally, substantially all of the Company's assets relate to the
Company's property rental operations. Asset cost, depreciation and
amortization by segment are not presented because such information is
not reported internally at the segment level.
- 7 -
<PAGE> 10
POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Summarized financial information concerning the Company's reportable segments is
shown in the following tables:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUES
Fully stabilized communities ............................................... $ 63,851 $ 61,090
Communities stabilized during 1999 ......................................... 10,451 8,345
Development and lease-up communities ....................................... 9,358 2,175
Communities held for sale .................................................. 1,970 1,953
Sold communities ........................................................... 296 1,059
Third party services ....................................................... 3,010 2,601
Other ...................................................................... 6,507 3,669
-------- --------
Consolidated revenues ...................................................... $ 95,443 $ 80,892
======== ========
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities ............................................... $ 45,034 $ 42,902
Communities stabilized during 1999 ......................................... 7,048 5,406
Development and lease-up communities ....................................... 5,173 1,206
Communities held for sale .................................................. 1,302 1,355
Sold communities ........................................................... 468 742
Third party services ....................................................... 217 222
-------- --------
Contribution to FFO ........................................................ 59,242 51,833
-------- --------
Other operating income, net of expense ..................................... 821 311
Depreciation on non-real estate assets ..................................... (576) (393)
Minority interest in consolidated property
Partnerships ............................................................ 555 (92)
Interest expense ........................................................... (10,701) (7,217)
Amortization of deferred loan costs ........................................ (385) (336)
General and administrative ................................................. (2,497) (2,383)
Dividends to preferred shareholders ........................................ (2,969) (2,969)
-------- --------
Total FFO .................................................................. 43,490 38,754
-------- --------
Depreciation on real estate assets ......................................... (15,893) (12,317)
Net gain (loss) on sale of assets .......................................... 687 (1,567)
Minority interest of unitholders in
Operating Partnership ................................................... (3,320) (2,992)
Dividends to preferred shareholders ........................................ 2,969 2,969
-------- --------
Income before extraordinary item
and preferred dividends ................................................. $ 27,933 $ 24,847
======== ========
</TABLE>
- 8 -
<PAGE> 11
POST APARTMENT HOMES, L.P.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Real estate:
Land .................................................................. $ 277,397 $ 277,784
Building and improvements ............................................. 1,581,605 1,574,158
Furniture, fixtures and equipment ..................................... 149,337 137,602
Construction in progress .............................................. 563,735 576,361
Land held for future development ...................................... 16,584 16,880
----------- -----------
2,588,658 2,582,785
Less: accumulated depreciation ........................................ (310,988) (303,016)
Assets held for sale .................................................. 50,471 --
----------- -----------
Real estate assets .................................................... 2,328,141 2,279,769
Cash and cash equivalents ............................................... 19,343 5,870
Restricted cash ......................................................... 2,006 1,380
Deferred charges, net ................................................... 19,668 20,820
Other assets ............................................................ 50,773 42,334
----------- -----------
Total assets .......................................................... $ 2,419,931 $ 2,350,173
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Notes payable ........................................................... $ 1,046,847 $ 989,583
Accrued interest payable ................................................ 11,411 9,160
Distributions payable ................................................... 34,141 31,285
Accounts payable and accrued expenses ................................... 62,864 59,780
Security deposits and prepaid rents ..................................... 9,293 9,023
----------- -----------
Total liabilities ..................................................... 1,164,556 1,098,831
----------- -----------
Commitments and contingencies
Partners' equity ........................................................ 1,255,375 1,251,342
----------- -----------
Total liabilities and partners' equity ................................ $ 2,419,931 $ 2,350,173
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 9 -
<PAGE> 12
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
2000 1999
------------ ------------
<S> <C> <C>
REVENUES
Rental ................................................................... $ 87,825 $ 75,585
Property management - third party ........................................ 908 871
Landscape services - third party ......................................... 2,102 1,730
Interest ................................................................. 539 65
Other .................................................................... 4,069 2,641
------------ ------------
Total revenue ..................................................... 95,443 80,892
------------ ------------
EXPENSES
Property operating and maintenance expense (exclusive
of items shown separately below) ....................................... 30,651 26,369
Depreciation expense ..................................................... 17,005 12,710
Property management expenses - third party ............................... 788 719
Landscape services expenses - third party ................................ 2,005 1,660
Interest expense ......................................................... 10,701 7,217
Amortization of deferred loan costs ...................................... 385 336
General and administrative ............................................... 2,497 2,383
Minority interest in consolidated property partnerships .................. (555) 92
------------ ------------
Total expenses ......................................................... 63,477 51,486
------------ ------------
Income before net gain (loss) on sale of assets, and extraordinary item .. 31,966 29,406
Net gain (loss) on sale of assets ........................................ 687 (1,567)
------------ ------------
Income before extraordinary item ......................................... 32,653 27,839
Extraordinary item ....................................................... -- (521)
------------ ------------
Net income ............................................................... 32,653 27,318
Distributions to preferred unitholders ................................... (4,369) (2,969)
------------ ------------
Net income available to common unitholders ............................... $ 28,284 $ 24,349
============ ============
EARNINGS PER COMMON UNIT - BASIC
Income before extraordinary item (net of preferred
distributions) ........................................................... $ 0.64 $ 0.57
Extraordinary item ....................................................... -- (0.01)
------------ ------------
Net income available to common unitholders ............................... $ 0.64 $ 0.56
------------ ------------
Weighted average common units outstanding ................................ 44,219,200 43,364,934
============ ============
EARNINGS PER COMMON UNIT- DILUTED
Income before extraordinary item (net of preferred
distributions) ........................................................... $ 0.63 $ 0.57
Extraordinary item ....................................................... -- (0.01)
------------ ------------
Net income available to common unitholders ............................... $ 0.63 $ 0.56
============ ============
Weighted average common units outstanding ................................ 44,601,092 43,690,706
============ ============
Distributions declared ................................................... $ 0.76 $ 0.70
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 10 -
<PAGE> 13
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
-------- ---------- ----------
<S> <C> <C> <C>
PARTNERS' EQUITY, DECEMBER 31, 1999 ................................. $ 11,993 $1,239,349 $1,251,342
Contributions from the Company related to Dividend
Reinvestment and Employee Stock Purchase and Option Plans ......... 94 9,330 9,424
Distributions to preferred unitholders .............................. -- (4,369) (4,369)
Distributions to common unitholders ................................. (337) (33,338) (33,675)
Net income .......................................................... 327 32,326 32,653
-------- ---------- ----------
PARTNERS' EQUITY, MARCH 31, 2000 .................................... $ 12,077 $1,243,298 $1,255,375
======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 11 -
<PAGE> 14
POST APARTMENT HOMES, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
2000 1999
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................................ $ 32,653 $ 27,318
Adjustments to reconcile net income to net cash provided
by operating activities:
Net (gain) loss on sale of assets ........................................ (687) 1,567
Extraordinary item ....................................................... -- 521
Depreciation ............................................................. 17,005 12,704
Amortization of deferred loan costs ...................................... 385 341
Changes in assets, (increase) decrease in:
Restricted cash ......................................................... (626) 2
Other assets ............................................................ (8,439) (4,293)
Deferred charges ........................................................ 122 (295)
Changes in liabilities, increase (decrease) in:
Accrued interest payable ................................................ 2,251 3,263
Accounts payable and accrued expenses ................................... (574) 1,681
Security deposits and prepaid rents ..................................... 270 (127)
--------- --------
Net cash provided by operating activities ................................. 42,360 42,682
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction and acquisition of real estate assets,
net of payables ......................................................... (81,996) (74,751)
Net proceeds from sale of assets .......................................... 31,432 9,364
Capitalized interest ...................................................... (5,567) (4,599)
Recurring capital expenditures ............................................ (1,938) (1,873)
Corporate additions and improvements ...................................... (912) (955)
Non-recurring capital expenditures ........................................ (830) (554)
Revenue generating capital expenditures ................................... (576) (1,018)
--------- --------
Net cash used in investing activities ..................................... (60,387) (74,386)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of financing costs ................................................ -- (1,495)
Debt proceeds ............................................................. 105,000 70,000
Debt payments ............................................................. (47,736) (127)
Proceeds from contributions from the Company related to Dividend
Reinvestment and Employee Stock Purchase and Option Plans ............... 9,424 1,231
Distributions paid to preferred unitholders ............................... (4,369) (2,969)
Distributions paid to common unitholders .................................. (30,819) (25,115)
--------- --------
Net cash provided by financing activities ................................. 31,500 41,525
--------- --------
Net increase in cash and cash equivalents ................................. 13,473 9,821
Cash and cash equivalents, beginning of period ............................ 5,870 21,154
--------- --------
Cash and cash equivalents, end of period .................................. $ 19,343 $ 30,975
========= ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
- 12 -
<PAGE> 15
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND FORMATION OF THE COMPANY
ORGANIZATION AND FORMATION OF THE COMPANY Post Apartment Homes, L.P. (the
"Operating Partnership"), a Georgia limited partnership, was formed on
January 22, 1993, to conduct the business of developing, leasing and
managing upscale multi-family apartment communities for Post Properties,
Inc. (the "Company").
The Company elected to be taxed as a real estate investment trust ("REIT")
for Federal income tax purposes beginning with the taxable year ended
December 31, 1993. A REIT is a legal entity which holds real estate
interests and, through payments of dividends to shareholders, in practical
effect is not subject to Federal income taxes at the corporate level.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
Operating Partnership's management in accordance with generally accepted
accounting principles for interim financial information and applicable
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting only
of normally recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the
three-month period ended March 31, 2000 are not necessarily indicative of
the results that may be expected for the full year. These financial
statements should be read in conjunction with the Operating Partnership's
audited financial statements and notes thereto included in the Post
Apartment Homes, L.P. Annual Report on Form 10-K for the year ended
December 31, 1999. Certain 1999 amounts have been reclassified to conform
to the current year's financial statement presentation.
2. NOTES PAYABLE
The Operating Partnership has established a program for the sale of up to
$344,000 aggregate principal amount of Medium-Term Notes due three months
or more from date of issue (the "MTN Program"). A $30,000 Medium Term Note
was repaid on March 3, 2000. As of March 31, 2000, the Operating
Partnership had $185,000 aggregate principal amount of notes outstanding
under the MTN Program. On May 9, 2000, the Operating Partnership sold an
additional $25,000 aggregate principal amount of notes under the MTN
Program, and consequently currently has a total of $210,000 aggregate
principal amount of notes outstanding under the MTN Program. Net proceeds
of $24,875 were used to repay outstanding indebtedness.
3. SALE OF ASSET AND ASSETS HELD FOR SALE
During the first quarter of 2000, the Operating Partnership authorized the
sale of five communities, one community in Atlanta, Georgia, three
communities in Jackson, Mississippi and one commercial property in Dallas,
Texas. In February 2000, the Operating Partnership sold the 213 unit
community in Atlanta, Georgia for $32,350. Net proceeds of approximately
$31,500 were used to pay down outstanding indebtedness. At March 31, 2000,
the remaining four properties consisting of land, building and improvements
and furniture, fixtures and equipment were recorded at the lower of cost or
fair value less costs to sell of $50,471. The Operating Partnership has
recorded a gain on the sale of the Atlanta community, reduced by its best
estimate of the effect of anticipated sales of the remaining properties in
the statement of operations as net gain on the sale of assets of $767. The
Operating Partnership expects the sale of the remaining four properties to
occur during the current fiscal year.
The Operating Partnership's consolidated statement of operations includes
net income of $1,302 and $1,355 for the periods ending March 31, 2000 and
1999, respectively, from communities held for sale at March 31, 2000.
-13-
<PAGE> 16
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Depreciation expense on these assets, which was not recognized subsequent
to the date of held for sale classification, totaled $477 for the three
months ended March 31, 2000.
4. EARNINGS PER UNIT
For the three months ended March 31, 2000 and 1999, a reconciliation of the
numerator and denominator used in the computation of basic and diluted
earnings per unit is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
----------- ----------
<S> <C> <C>
Basic and diluted income available to common
unitholders (numerator):
Income before extraordinary item............................................ $ 32,653 $ 27,839
Less: Preferred unit distributions............................................ (4,369) (2,969)
----------- ----------
Income available to common unitholders
before extraordinary item................................................... $ 28,284 $ 24,870
=========== ==========
Common units (denominator):
Weighted average units outstanding - basic.................................... 44,219,200 43,364,934
Incremental units from assumed conversion
of options.................................................................. 381,892 325,772
----------- ----------
Weighted average units outstanding - diluted.................................. 44,601,092 43,690,706
=========== ==========
</TABLE>
5. NEW ACCOUNTING PRONOUNCEMENT
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (FAS 133). FAS 133, as
amended by FAS 137, "Deferral of the Effective Date of FAS 133," is
effective for all fiscal quarters of all fiscal years beginning after June
15, 2000 (January 1, 2001 for the Operating Partnership). FAS 133 requires
that all derivative instruments be recorded on the balance sheet at their
fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on
whether a derivative is designated as part of a hedge transaction and, if
it is, the type of hedge transaction. Management of the Operating
Partnership anticipates that, due to its limited use of derivative
instruments, the adoption of FAS 133 will not have a significant effect on
the Operating Partnership's results of operations or its financial
position.
6. SEGMENT INFORMATION
SEGMENT DESCRIPTION
The Operating Partnership adopted SFAS No. 131, "Disclosure About the
Segments of an Enterprise and Related Information" in the fourth quarter of
1998. SFAS No. 131 requires companies to present segment information based
on the way that management organizes the segments within the enterprise for
making operating decisions and assessing performance. The segment
information is prepared on substantially the same basis as the internally
reported information used by the Operating Partnership's chief operating
decision-makers to manage the business.
The Operating Partnership's chief operating decision-makers focus on the
Operating Partnership's primary sources of income, which are property
rental operations and third party services. Property rental operations are
broken down into five segments based on the various stages in the property
ownership lifecycle. Third party services are designated as one segment.
The Operating Partnership's six segments are further described as follows:
-14-
<PAGE> 17
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Property Rental Operations
- Fully stabilized communities - those apartment communities that have
been stabilized (the point in time which a property reached 95%
occupancy or one year after completion of construction) for both the
current and prior year.
- Communities stabilized during 1999 - communities that reached
stabilized occupancy in the prior year.
- Development and lease up communities - those communities that are in
lease-up but were not stabilized by the beginning of the current year
including communities that stabilized during the current year.
- Communities held for sale - those communities that are currently being
actively marketed for sale.
- Sold communities - communities that were sold in the current or prior
year.
Third Party Services - fee income and related expenses from the Operating
Partnership's apartment community management, landscaping and corporate
apartment rental services.
SEGMENT PERFORMANCE MEASURE
Management uses contribution to funds from operations ("FFO") as the
performance measure for its segments. Effective January 1, 2000, FFO is
defined by the National Association of Real Estate Investment Trusts as net
income available to common unitholders determined in accordance with
generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sales of property, plus depreciation of
real estate assets, and after adjustment for unconsolidated partnerships
and joint ventures. FFO should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indicator of the
Operating Partnership's financial performance or to cash flow from
operating activities (determined in accordance with GAAP) as a measure of
the Operating Partnership's liquidity, nor is it necessarily indicative of
sufficient cash flow to fund all of the Operating Partnership's needs.
SEGMENT INFORMATION
The following table reflects each segment's contribution to FFO together
with a reconciliation of segment contribution to FFO, total FFO and income
before extraordinary item. Additionally, substantially all of the Operating
Partnership's assets relate to the Operating Partnership's property rental
operations. Asset cost, depreciation and amortization by segment are not
presented because such information is not reported internally at the
segment level.
-15-
<PAGE> 18
POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT DATA)
Summarized financial information concerning the Operating Partnership's
reportable segments is shown in the following tables.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
2000 1999
-------- --------
<S> <C> <C>
REVENUES
Fully stabilized communities.............................................. $ 63,851 $ 61,090
Communities stabilized during 1999........................................ 10,451 8,345
Development and lease-up communities...................................... 9,358 2,175
Communities held for sale................................................. 1,970 1,953
Sold communities.......................................................... 296 1,059
Third party services...................................................... 3,010 2,601
Other..................................................................... 6,507 3,669
-------- --------
Consolidated revenues..................................................... $ 95,443 $ 80,892
======== ========
CONTRIBUTION TO FUNDS FROM OPERATIONS
Fully stabilized communities.............................................. $ 45,034 $ 42,902
Communities stabilized during 1999........................................ 7,048 5,406
Development and lease-up communities...................................... 5,173 1,206
Communities held for sale................................................. 1,302 1,355
Sold communities.......................................................... 468 742
Third party services...................................................... 217 222
-------- --------
Contribution to FFO....................................................... 59,242 51,833
-------- --------
Other operating income, net of expense.................................... 2,221 311
Depreciation on non-real estate assets.................................... (576) (393)
Minority interest in consolidated property partnership.................... 555 (92)
Interest expense.......................................................... (10,701) (7,217)
Amortization of deferred loan costs....................................... (385) (336)
General and administrative................................................ (2,497) (2,383)
Distributions to preferred unitholders.................................... (4,369) (2,969)
-------- --------
Total FFO................................................................. 43,490 38,754
-------- --------
Depreciation on real estate assets........................................ (15,893) (12,317)
Net gain (loss) on sale of assets......................................... 687 (1,567)
Distributions to preferred unitholders.................................... 4,369 2,969
-------- --------
Income before extraordinary item and preferred distributions.............. $ 32,653 $ 27,839
======== ========
</TABLE>
-16-
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The following discussion should be read in conjunction with all of the financial
statements appearing elsewhere in this report. The following discussion is based
primarily on the Consolidated Financial Statements of Post Properties, Inc. (the
"Company") and Post Apartment Homes, L.P. (the "Operating Partnership"). Except
for the effect of minority interest in the Operating Partnership, the following
discussion with respect to the Company is the same for the Operating
Partnership.
As of March 31, 2000, there were 44,308,906 common units in the Operating
Partnership outstanding, of which 39,115,481, or 88.3%, were owned by the
Company and 5,193,425, or 11.7%, were owned by other limited partners (including
certain officers and directors of the Company). As of March 31, 2000, there were
7,800,000 preferred units outstanding, of which 5,000,000 were owned by the
Company.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
The Company recorded net income available to common shareholders of $24,964 for
the three months ended March 31, 2000. This represents an increase of 16.5% over
the corresponding period in 1999 primarily as a result of additional units
placed in service through the development of new communities and increases in
rental rates on existing units.
COMMUNITY OPERATIONS
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is generally
considered by the Company to have achieved stabilized occupancy on the earlier
to occur of (i) attainment of 95% physical occupancy on the first day of any
month or (ii) one year after completion of construction.
As of March 31, 2000, the Company's portfolio of apartment communities consisted
of the following: (i) 71 communities which were completed and stabilized for all
of the current and prior year, (ii) 11 communities which achieved full
stabilization during the prior year and (iii) 18 communities which either
stabilized in the current year or are presently in the development or lease-up
stages.
For communities with respect to which construction is completed and the
community has become fully operational, all property operating and maintenance
expenses are expensed as incurred and those recurring and non-recurring
expenditures relating to acquiring new assets, materially enhancing the value of
an existing asset, or substantially extending the useful life of an existing
asset are capitalized. (See "Capitalization of Fixed Assets and Community
Improvements").
Since its inception, the Company has applied an accounting policy related to
communities in the development and lease-up stage whereby substantially all
operating expenses (including pre-opening marketing expenses) are expensed as
incurred. The Company treats each unit in an apartment community separately for
cost accumulation, capitalization and expense recognition purposes. Prior to the
commencement of leasing activities, interest and other construction costs are
capitalized and reflected on the balance sheet as construction in progress. Once
a unit is placed in service, all operating expenses allocated to that unit,
including interest, are expensed as incurred. During the lease-up phase, the sum
of interest expense on completed units and other operating expenses (including
pre-opening marketing expenses) will typically exceed rental revenues, resulting
in a "lease-up deficit," which continues until such time as rental revenues
exceed such expenses. Lease up deficits for the three months ended March 31,
2000 and 1999 were $852 and $409, respectively.
-17-
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
In order to evaluate the operating performance of its communities, the Company
has presented financial information, which summarizes the operating income on a
comparative basis, for all of its operating communities combined and for
communities which have reached stabilization prior to January 1, 1999.
ALL OPERATING COMMUNITIES
The operating performance for all of the Company's apartment communities
combined for the three months ended March 31, 2000 is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
2000 1999 %CHANGE
-------- ------- --------
<S> <C> <C> <C>
Rental and other revenue:
Fully stabilized communities(1) ......................................... $ 63,851 $61,090 4.5%
Communities stabilized during 1999 ...................................... 10,451 8,345 25.2%
Development and lease-up communities(2) ................................. 9,358 2,175 330.3%
Communities held for sale(3) ............................................ 1,970 1,953 0.9%
Sold communities(4) ..................................................... 296 1,059 (72.0)%
Other revenue(5) ........................................................ 5,968 3,604 65.6%
-------- ------- ------
91,894 78,226 17.5%
-------- ------- ------
Property operating and maintenance expense (exclusive of
depreciation and amortization):
Fully stabilized communities(1) ......................................... 18,817 18,188 3.5%
Communities stabilized during 1999 ...................................... 3,403 2,939 15.8%
Development and lease-up communities(2) ................................. 4,185 969 331.9%
Communities held for sale(3) ............................................ 668 598 11.7%
Sold communities(4) ..................................................... (172) 317 (154.3)%
Other expenses(6) ....................................................... 3,750 3,358 11.7%
-------- ------- ------
30,651 26,369 16.2%
-------- ------- ------
Revenue in excess of specified expense .................................. $ 61,243 $51,857 18.1%
======== ======= ======
Recurring capital expenditures:(7)
Carpet ............................................................... $ 792 $ 707 12.0%
Other ................................................................ 1,146 1,166 (1.7)%
-------- ------- ------
Total ................................................................ $ 1,938 $ 1,873 3.5%
======== ======= ======
Average apartment units in service ...................................... 30,852 28,666 7.6%
======== ======= ======
Recurring capital expenditures per apartment unit ....................... $ 63 $ 65 (3.1)%
======== ======= ======
</TABLE>
(1) Communities which reached stabilization prior to January 1, 1999.
(2) Communities in the "construction", "development" or "lease-up"
stage during 1999 and, therefore, not considered fully stabilized for all
the periods presented.
(3) Includes three communities in Mississippi and one commercial property in
Texas.
(4) Includes one community, containing 213 units, which was sold on February 4,
2000.
(5) Includes revenue from furnished apartment rentals above the unfurnished
rental rates, revenue from commercial properties and other revenue not
directly related to property operations.
(6) Includes certain indirect central office operating expenses related to
management, ground maintenance, costs associated with furnished apartment
rentals and operating expenses from commercial properties.
(7) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing asset,
or substantially extending the useful life of an existing asset, all of
which are capitalized.
-18-
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
For the three months ended March 31, 2000, rental and other revenue increased
$13,668, or 17.5%, compared to the same period in the prior year primarily as a
result of the completion of new communities and increased rental rates for
existing communities. For the three months ended March 31, 2000, property
operating and maintenance expenses increased $4,282, or 16.2%, compared to the
same period in the prior year, primarily as a result of the completion of new
communities.
For the three months ended March 31, 2000, recurring capital expenditures
increased $65, or 3.5%, compared to the same period in the prior year, primarily
due to the completion of new communities and the timing of capital expenditures.
On a per unit basis, recurring capital expenditures decreased $2, or 3.1%.
-19-
<PAGE> 22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
FULLY STABILIZED COMMUNITIES
The Company defines fully stabilized communities as those that have reached
stabilization prior to the beginning of the previous calendar year.
The operating performance of the 71 communities containing an aggregate of
24,006 units that were fully stabilized as of January 1, 1999, is summarized as
follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------------
2000 1999 % CHANGE
-------- ------- --------
<S> <C> <C> <C>
Rental and other revenue(1) ............................................ $ 63,851 $61,090 4.5%
Property operating and maintenance expense
(exclusive of depreciation and amortization)(1) ..................... 18,817 18,188 3.5%
-------- -------
Revenue in excess of specified expense .................................. 45,034 42,902 5.0%
-------- -------
Recurring capital expenditures:(2)
Carpet ............................................................... $ 766 $ 659 16.2%
Other ................................................................ 583 587 (0.7)%
-------- -------
Total ................................................................ $ 1,349 $ 1,246 8.3%
-------- -------
Recurring capital expenditures per apartment unit(3) ................... $ 56 $ 52 7.7%
======== =======
Average economic occupancy(4) .......................................... 96.7% 96.2% 0.5%
======== =======
Average monthly rental rate per apartment unit(5) ...................... $ 890 $ 855 4.1%
======== =======
Apartment units in service .............................................. 24,006 24,006
======== =======
</TABLE>
(1) Communities which reached stabilization prior to January 1, 1999.
(2) In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing asset,
or substantially extending the useful life of an existing asset, all of
which are capitalized.
(3) In addition to such capitalized expenditures, the Company expensed $157 and
$153 per unit on building maintenance (inclusive of direct salaries) and
$45 per unit on landscaping (inclusive of direct salaries) for the three
months ended March 31, 2000 and 1999, respectively.
(4) Average economic occupancy is defined as gross potential rent less vacancy
losses, model expenses and bad debt divided by gross potential rent for the
period, expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts. Average economic occupancy, including these amounts would have
been 94.5% for the three months ended March 31, 2000. For the three months
ended March 31, 2000 and 1999, concessions were $1,163 and $658,
respectively, and employee discounts were $262 and $149, respectively.
(5) Average monthly rental rate is defined as the average of the gross actual
rates for occupied units and the anticipated rental rates for unoccupied
units.
For the three months ended March 31, 2000, rental and other revenue increased
$2,761, or 4.5%, compared to the same period in the prior year, primarily due to
increased rental rates. For the three months ended March 31, 2000, property
operating and maintenance expenses (exclusive of depreciation and amortization)
increased $629, or 3.5%, compared to the same period in the prior year,
primarily as a result of increased personnel and property tax expenses.
For the three months ended March 31, 2000, recurring capital expenditures per
unit increased $4, or 7.7%, as a result of the timing of expenditures.
-20-
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
THIRD PARTY SERVICES
THIRD PARTY MANAGEMENT SERVICES
The Company provides asset management, leasing and other consulting services to
non-related owners of apartment communities through its subsidiary, RAM
Partners, Inc. ("RAM"). The operating performance of RAM for the three months
ended March 31, 2000 and 1999 is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
2000 1999 %CHANGE
-------- ------- -------
<S> <C> <C> <C>
Property management and other revenue ................................... $ 908 $ 871 4.2%
Property management expense ............................................. 788 719 9.6%
Depreciation expense .................................................... 7 6 16.7%
-------- -------
Revenue in excess of specified expense .................................. $ 113 $ 146 (22.6)%
======== =======
Average apartment units managed ......................................... 13,616 12,485 9.1%
======== =======
</TABLE>
The decrease in revenue in excess of specified expense for the three months
ended March 31, 2000 compared to the same period in the prior year is primarily
attributable to the management of more communities in lease-up phases as a
result of turnover in management contracts.
THIRD PARTY LANDSCAPE SERVICES
The Company provides landscape maintenance, design and installation services to
non-related parties through a subsidiary, Post Landscape Group, Inc. ("Post
Landscape Group"), formerly called Post Landscape Services, Inc.
The operating performance of Post Landscape Group for the three months ended
March 31, 2000 and 1999 is summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------------
2000 1999 %CHANGE
-------- ------- -------
<S> <C> <C> <C>
Landscape services and other revenue .................................... $ 2,102 $ 1,730 21.5%
Landscape services expense .............................................. 2,005 1,660 20.8%
Depreciation expense .................................................... 87 61 42.6%
-------- -------
Revenue in excess of specified expense .................................. $ 10 $ 9 11.1%
======== =======
</TABLE>
The increase in landscape services and other revenue and landscape services
expense for the three months ended March 31, 2000 compared to the same period in
1999 is primarily due to increases in landscape contracts. The increase in
depreciation expense is primarily due the additions of vehicles and equipment.
-21-
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
OTHER EXPENSES
Depreciation expense increased $4,295, or 33.8%, for the three months ended
March 31, 2000 compared to the same period in the prior year, primarily as a
result of an increase in units in service, additional leasehold improvements and
technology expenditures.
General and administrative expense increased $114, or 4.8%, for the three months
ended March 31, 2000 compared to the same period in the prior year, primarily as
a result of an increase in personnel costs.
The extraordinary item of $458 for the three months ended March 31, 1999, net of
minority interest portion, was due to the write off of loan costs resulting from
the early extinguishment of debt.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's net cash provided by operating activities decreased from $42,682
for the three months ended March 31, 1999 to $42,360 for the three months ended
March 31, 2000, principally due to an increase in other assets related to tax
increment financing receivables associated with public and private development
projects. Net cash used in investing activities decreased from $74,386 for the
three months ended March 31, 1999 to $60,387 for the three months ended March
31, 2000, principally due to proceeds from the sale of one community in February
2000. The Company's net cash provided by financing activities decreased from
$41,525 for the three months ended March 31, 1999 to $31,500 for the three
months ended March 31, 2000, primarily due to increased debt payments offset by
borrowings on the Company's lines of credit.
The Company has elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended,
commencing with its taxable year ended December 31, 1993. REITs are subject to a
number of organizational and operational requirements, including a requirement
that they currently distribute 95% of their ordinary taxable income. The Company
generally will not be subject to Federal income tax on net income.
At March 31, 2000, the Company had total indebtedness of $1,046,847, an increase
of $57,264 from its total indebtedness at December 31, 1999, and cash and cash
equivalents of $19,343. At March 31, 2000, the Company's indebtedness included
approximately $178,967 in conventional mortgages payable secured by individual
communities, tax-exempt bond indebtedness of $235,880, senior unsecured notes of
$360,000, borrowings under the Revolver of $265,000 and other unsecured lines of
credit and unsecured debt of $7,000.
The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under credit
arrangements and expects to meet certain of its long-term liquidity
requirements, such as scheduled debt maturities, repayment of financing of
construction and development activities, and possible property acquisitions,
through long-term secured and unsecured borrowings and the issuance of debt
securities or additional equity securities of the Company, sales of communities,
or possibly in connection with acquisitions of land or improved properties,
units of the Operating Partnership. The Company believes that its net cash
provided by operations will be adequate and anticipates that it will continue to
be adequate to meet both operating requirements and payment of dividends by the
Company in accordance with REIT requirements in both the short and the long
term. The budgeted expenditures for improvements and renovations to certain of
the communities are expected to be funded from property operations.
Lines Of Credit
During the quarter, the Operating Partnership extended the maturity date on its
syndicated unsecured line of credit (the "Revolver") by one year to April 30,
2003. Borrowing under the Revolver bears interest at LIBOR plus .825% or prime
minus .25%. Also, during the quarter, the Company reached an agreement with a
syndicated group of banks for an
-22-
<PAGE> 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
incremental $200 million, 364 day facility at terms equal to the Revolver. At
March 31, 2000, there was $265,000 outstanding under the Revolver and $5,000
outstanding under other lines of credit.
Medium Term Notes
The Operating Partnership has established a program for the sale of up to
$344,000 aggregate principal amount of Medium Term Notes due three months or
more from date of issue (the "MTN Program"). A $30,000 Medium Term Note was
repaid on March 3, 2000. As of March 31, 2000, the Operating Partnership had
$185,000 aggregate principle amount of notes outstanding under the MTN Program.
On May 9, 2000, the Operating Partnership sold an additional $25,000 aggregate
principal amount of notes under the MTN Program and, consequently, currently has
a total of $210,000 aggregate principal amount of notes outstanding under the
MTN Program. Net proceeds of $24,875 were used to repay outstanding
indebtedness.
-23-
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
Schedule of Indebtedness
The following table reflects the Company's indebtedness at March 31, 2000:
<TABLE>
<CAPTION>
MATURITY PRINCIPAL
DESCRIPTION LOCATION INTEREST RATE DATE (1) BALANCE
----------- -------- ------------- -------- -------
<S> <C> <C> <C> <C>
CONVENTIONAL FIXED RATE (SECURED)
Post Hillsboro Village & The Lee
Apartments........................... Nashville, TN 9.20% 10/01/01 $ 2,902
Parkwood Townhomes(TM)............... Dallas, TX 7.375% 04/01/14 825
Northwestern Mutual Life............. Atlanta, GA 6.50% 03/01/09 49,248
-----------
52,975
-----------
CONVENTIONAL FLOATING RATE (SECURED)
Addison Circle Apartment Homes
by Post(TM)- Phase I.............. Dallas, TX LIBOR + .75% 06/15/00 21,992
FNMA................................. Atlanta, GA LIBOR + .935% 07/23/29 104,000
-----------
125,992
-----------
TAX EXEMPT FLOATING RATE (SECURED)
Post Ashford(R)Series 1995............ Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 9,895
Post Valley(R)Series 1995............. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 18,600
Post Brook(R)Series 1995.............. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 4,300
Post Village(R)(Atlanta) Hills
Series 1995........................ Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 7,000
Post Mill(R)Series 1995............... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 12,880
Post Canyon(R)Series 1996............. Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 16,845
Post Corners(R)Series 1996............ Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 14,760
Post Bridge(R)......................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 12,450
Post Village(R)(Atlanta) Gardens...... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 14,500
Post Chase(R).......................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 15,000
Post Walk(R)........................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 15,000
Post Lake(R)........................... Orlando, FL "AAA" NON-AMT + .515% (2)(3) 06/01/25 28,500
Post Fountains at Lee Vista(R)......... Orlando, FL "AAA" NON-AMT + .515% (2)(3) 06/01/25 21,500
Post Village(R)(Atlanta) Fountains
and Meadows......................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 26,000
Post Court(R).......................... Atlanta, GA "AAA" NON-AMT + .515% (2)(3) 06/01/25 18,650
-----------
235,880
-----------
SENIOR NOTES (UNSECURED)
Northwestern Mutual Life............. N/A 8.21% 06/07/00 30,000
Medium Term Notes.................... N/A 7.02% 04/02/01 37,000
Northwestern Mutual Life............. N/A 8.37% 06/07/02 20,000
Senior Notes......................... N/A 7.25% 10/01/03 100,000
Medium Term Notes.................... N/A 7.30% 04/01/04 13,000
Medium Term Notes.................... N/A 6.69% 09/22/04 10,000
Medium Term Notes.................... N/A 6.78% 09/22/05 25,000
Senior Notes......................... N/A 7.50% 10/01/06 25,000
Mandatory Par Put Remarketed
Securities........................ N/A 6.85% (4) 03/16/15 100,000
-----------
360,000
-----------
LINES OF CREDIT & OTHER UNSECURED DEBT
City of Phoenix...................... N/A 5.00% (6) 03/01/21 2,000
Revolver - Syndicated ............... N/A LIBOR + .825% or prime minus .25% (5) 04/30/03
265,000
Revolver - Swing..................... N/A LIBOR + .825% or prime minus .25% 04/21/01 5,000
-----------
272,000
-----------
TOTAL................................ $ 1,046,847
===========
</TABLE>
(1) All of the mortgages can be prepaid at any time, subject to certain
prepayment penalties.
(2) Bond financed (interest rate on bonds + credit enhancement fees
effective October 1, 1998).
(3) These bonds are cross-collateralized. The Company has purchased an
interest rate cap that limits the Company's exposure to increases in
the base rate to 5%.
(4) The annual interest rate on these securities to March 16, 2005 (the
"Remarketing Date") is 6.85%. On the Remarketing Date, they are subject
to mandatory tender for remarketing.
(5) Represents stated rate. The Company may also make "money market" loans
of up to $175,000 at rates below the stated rate. At March 31, 2000,
the outstanding balance of the Revolver consisted of "money market"
loans with an average interest rate of 7.11%.
(6) This loan is interest-free for the first three years, with interest at
5.00% thereafter. Repayment is to commence on March 1, 2001 subject to
the conditions set forth in the Agreement.
-24-
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
Dividend Reinvestment Plan
The Dividend Reinvestment Plan ("DRIP") is available to all shareholders of the
Company. Under the DRIP, shareholders may elect for their dividends to be used
to acquire additional shares of the Company's Common Stock directly from the
Company for 95% of the market price on the date of purchase.
Current Development Activity
The Company's apartment communities under development or in initial lease-up are
summarized in the following table:
<TABLE>
<CAPTION>
QUARTER OF ACTUAL OR ESTIMATED ACTUAL OR ESTIMATED
# OF CONSTRUCTION QUARTER FIRST UNITS QUARTER OF STABILIZED
METROPOLITAN AREA UNITS COMMENCEMENT AVAILABLE OCCUPANCY
----------------- ----- ------------- ------------------- ---------------------
<S> <C> <C> <C> <C>
Atlanta, GA
Post Stratford(TM).................. 250 2Q'99 1Q'00 1Q'01
Post Spring(TM)..................... 452 3Q'99 2Q'00 3Q'01
------
702
Charlotte, NC ------
Post Uptown Place(TM)............... 227 3Q'98 1Q'00 3Q'00
Post Gateway Place(TM).............. 232 3Q'99 3Q'00 2Q'01
------
459
------
Tampa, FL
Post Harbour Place(TM).............. 319 4Q'98 2Q'00 1Q'01
Dallas, TX
Post Block 588(TM).................... 127 4Q'98 1Q'00 2Q'00
Post Legacy 384 3Q'99 3Q'00 4Q'01
Post Addison Circle(TM)(III).......... 264 3Q'99 3Q'00 2Q'01
Post Uptown Village(TM)(II)........... 196 3Q'99 2Q'00 4Q'00
------
971
------
Houston, TX
Post Midtown Square(TM)(II)......... 193 1Q'00 1Q'01 4Q'01
Denver, CO
Post Uptown Square(TM)(I)........... 449 1Q'98 3Q'99 4Q'00
Post Uptown Square(TM)(II).......... 247 1Q'00 1Q'01 4Q'01
------
696
------
Phoenix, AZ
Post Roosevelt Square(TM)........... 410 4Q'98 1Q'00 1Q'01
Orlando, FL
Post Parkside(TM)................... 244 1Q'99 2Q'99 3Q'00
Washington, D.C.
Post Pentagon Row................... 504 2Q'99 4Q'00 1Q'02
Austin, TX
Post West Avenue Lofts(TM)............ 239 3Q'99 4Q'00 3Q'01
------
4,737
======
</TABLE>
The Company is also currently conducting feasibility and other pre-development
studies for possible new Post(R) communities in its primary market areas.
Capitalization of Fixed Assets and Community Improvements
The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. All expenditures
necessary to maintain a community in ordinary operating condition are expensed
as incurred. During the first five years of a community (which corresponds to
the estimated depreciable life), carpet replacements are expensed as incurred.
Thereafter, carpet replacements are capitalized.
-25-
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
Acquisition of assets and community improvement expenditures for the three
months ended March 31, 2000 and 1999 are summarized as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------
2000 1999
------------ ----------
<S> <C> <C>
New community development and acquisition activity................................ $ 91,011 $ 79,350
Non-recurring capital expenditures:
Revenue generating additions and improvements.................................... 576 1,018
Other community additions and improvements....................................... 830 554
Recurring capital expenditures:
Carpet replacements.............................................................. 792 707
Community additions and improvements............................................. 1,146 1,166
Corporate additions and improvements............................................. 912 955
---------- ----------
$ 95,267 $ 83,750
========== ==========
</TABLE>
INFLATION
Substantially all of the leases at the communities allow, at the time of
renewal, for adjustments in the rent payable thereunder, and thus may enable the
Company to seek increases in rents. The substantial majority of these leases are
for one year or less and the remaining leases are for up to two years. At the
expiration of a lease term, the Company's lease agreements provide that the term
will be extended unless either the Company or the lessee gives at least sixty
(60) days written notice of termination; in addition, the Company's policy
permits the earlier termination of a lease by a lessee upon thirty (30) days
written notice to the Company and the payment of one month's additional rent as
compensation for early termination. The short-term nature of these leases
generally serves to reduce the risk to the Company of the adverse effect of
inflation.
NEW ACCOUNTING PRONOUNCEMENTS
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (FAS 133). FAS 133, as amended by FAS 137,
"Deferral of the Effective Date of FAS 133," is effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000 (January 1, 2001 for
the Company). FAS 133 requires that all derivative instruments be recorded on
the balance sheet at their fair value. Changes in the fair value derivatives are
recorded each period in current earnings or other comprehensive income,
depending on whether a derivative is designated as part of a hedge transaction
and, if it is, the type of hedge transaction. Management of the Company
anticipates that, due to its limited use of derivative instruments, the adoption
of FAS 133 will not have a significant effect on the Company's results of
operations or its financial position.
-26-
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION
Historical Funds from Operations
The Company considers funds from operations ("FFO") an appropriate measure of
performance of an equity REIT. Effective January 1, 2000, funds from operations
is defined to mean net income (loss) available to common shareholders determined
in accordance with GAAP, excluding gains (or losses) from sales of property and
extraordinary items determined in accordance with GAAP, plus depreciation of
real estate assets, and after adjustment for unconsolidated partnerships and
joint ventures. FFO should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's financial
performance or to cash flow from operating activities (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it necessarily
indicative of sufficient cash flow to fund all of the Company's needs. Cash
available for distribution ("CAD") is defined as FFO less capital expenditures
funded by operations and loan amortization payments. The Company believes that
in order to facilitate a clear understanding of the consolidated historical
operating results of the Company, FFO and CAD should be examined in conjunction
with net income as presented in the consolidated financial statements and data
included elsewhere in this report.
FFO and CAD for the three months ended March 31, 2000 and 1999 presented on a
historical basis are summarized in the following table:
Calculations of Funds from Operations and Cash Available for Distribution
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Net income available to common shareholders ................................. $ 24,964 $ 21,420
Extraordinary item, net of minority interest ............................. -- 458
Net (gain) loss on sale of assets ........................................ (687) 1,567
Minority interest of common unitholders in the Operating Partnership ..... 3,320 2,992
------------ ------------
Adjusted net income ......................................................... 27,597 26,437
Depreciation of real estate assets(1) .................................... 15,893 12,317
------------ ------------
Funds from Operations(2) .................................................... 43,490 38,754
Recurring capital expenditures(3) ........................................ (1,938) (1,873)
Non-recurring capital expenditures(4) .................................... (830) (554)
Loan amortization payments ............................................... (310) (20)
------------ ------------
Cash Available for Distribution ............................................. $ 40,412 $ 36,307
============ ============
Revenue generating capital expenditures (5) ................................. $ 576 $ 1,018
============ ============
Cash Flow Provided By (Used In):
Operating activities ........................................................ $ 42,360 $ 42,682
Investing activities ........................................................ $ (60,387) $ (74,386)
Financing activities ........................................................ $ 31,500 $ 41,525
Weighted average common shares outstanding - basic .......................... 39,025,775 38,149,210
============ ============
Weighted average common shares and units outstanding - basic ................ 44,219,200 43,364,934
============ ============
Weighted average common shares outstanding - diluted ........................ 39,407,667 38,474,982
============ ============
Weighted average common shares and units outstanding - diluted .............. 44,601,092 43,690,706
============ ============
</TABLE>
(1) Depreciation on real estate assets is net of the minority interest
portion of depreciation in consolidated partnerships.
-27-
<PAGE> 30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
- --------------------------------------------------------------------------------
(2) The Company uses the National Association of Real Estate Investment
Trusts ("NAREIT") definition of FFO. Effective January 1, 2000, NAREIT
amended its definition of FFO to include in FFO all non-recurring
transactions, except those that are defined as extraordinary under
generally accepted accounting principles. The Company adopted this new
definition effective January 1, 2000. FFO for any period means the
Consolidated Net Income of the Company and its subsidiaries for such
period excluding gains or losses from debt restructuring and sales of
property plus depreciation of real estate assets, and after adjustment
for unconsolidated partnerships and joint ventures, all determined on a
consistent basis in accordance with generally accepted accounting
principles. FFO presented herein is not necessarily comparable to FFO
presented by other real estate companies due to the fact that not all
real estate companies use the same definition. However, the Company's
FFO is comparable to the FFO of real estate companies that use the
current NAREIT definition.
(3) Recurring capital expenditures consisted primarily of $792 and $707 of
carpet replacement and $1,146 and $1,166 of other additions and
improvements to existing communities for the three months ended March
31, 2000 and 1999, respectively. Since the Company does not add back
the depreciation of non-real estate assets in its calculation of FFO,
capital expenditures of $912 and $955 for the three months ended March
31, 2000 and 1999, respectively, are excluded from the calculation of
CAD.
(4) Non-recurring capital expenditures consisted of community additions and
improvements of $830 and $554 for the three months ended March 31, 2000
and 1999, respectively.
(5) Revenue generating capital expenditures are primarily comprised of
major renovations of communities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes since December 31, 1999.
-28-
<PAGE> 31
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule for the Company - First Quarter
2000 (for SEC filing purposes only)
27.2 Financial Data Schedule for the Operating Partnership -
First Quarter 2000 (for SEC filing purposes only)
The registrants agree to furnish a copy of all agreements
relating to long-term debt upon request of the Commission.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by either registrant
during the three month period ended March 31, 2000.
-29-
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POST PROPERTIES, INC.
May 15, 2000 /s/ John T. Glover
- -------------------------- --------------------------------
(Date) John T. Glover, President
(Principal Financial Officer)
May 15, 2000 /s/ R. Gregory Fox
- -------------------------- --------------------------------
(Date) R. Gregory Fox
Executive Vice President, Chief
Accounting Officer
-30-
<PAGE> 33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
POST APARTMENT HOMES, L.P.
By: Post GP Holdings, Inc., as
General Partner
May 15, 2000 /s/ John T. Glover
- ------------------------- --------------------------------------
(Date) John T. Glover, President
(Principal Financial Officer)
May 15, 2000 /s/ R. Gregory Fox
- ------------------------- --------------------------------------
(Date) R. Gregory Fox
Executive Vice President, Chief
Accounting Officer
-31-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF POST PROPERTIES, INC. FOR THE PERIOD ENDED MARCH 31,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000903127
<NAME> POST PROPERTIES INC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 21,349,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,588,658,000
<DEPRECIATION> 310,988,000
<TOTAL-ASSETS> 2,419,931,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,046,847,000
0
50,000
<COMMON> 391,000
<OTHER-SE> 1,062,812,000
<TOTAL-LIABILITY-AND-EQUITY> 2,419,931,000
<SALES> 0
<TOTAL-REVENUES> 95,443,000
<CGS> 0
<TOTAL-COSTS> 49,338,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,701,000
<INCOME-PRETAX> 31,966,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,964,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,964,000
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.63
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF POST APARTMENT HOMES, L.P. FOR THE PERIOD ENDED MARCH
31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001012271
<NAME> POST APARTMENT HOMES LP
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 21,349,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,588,658,000
<DEPRECIATION> 310,988,000
<TOTAL-ASSETS> 2,419,931,000
<CURRENT-LIABILITIES> 0
<BONDS> 1,046,847,000
0
0
<COMMON> 0
<OTHER-SE> 1,255,375,000
<TOTAL-LIABILITY-AND-EQUITY> 2,419,931,000
<SALES> 0
<TOTAL-REVENUES> 95,443,000
<CGS> 0
<TOTAL-COSTS> 49,338,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,701,000
<INCOME-PRETAX> 31,966,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 28,284,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,284,000
<EPS-BASIC> 0.64
<EPS-DILUTED> 0.63
</TABLE>
