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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSMISSION PERIOD FROM TO
---------- ----------
COMMISSION FILE NUMBER 1-12080
COMMISSION FILE NUMBER 0-28226
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
(Exact name of registrants as specified in their charters)
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)
----------------------------
Securities registered pursuant to section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
---------------------------- ------------------------
Common Stock, $.01 par value New York Stock Exchange
8 1/2% Series A Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
7 5/8% Series B Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
7 5/8% Series C Cumulative New York Stock Exchange
Redeemable Preferred Shares,
$.01 par value
Securities registered pursuant to Section 12(g) of the Act: None
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
---------------------------- ------------------------
Units of Limited Partnership None
----------------------------
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
Registrants were 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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the shares of common stock held by
non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on March 13, 2001 was approximately $1,437,365,412. As of March 13,
2001, there were 38,763,900 shares of common stock, $.01 par value, outstanding.
----------------------------
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement in connection with its Annual
Meeting of Shareholders to be held May 22, 2001 are incorporated by reference in
Part III.
================================================================================
POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
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TABLE OF CONTENTS
ITEM FINANCIAL INFORMATION PAGE
NO. NO.
- ---- ----
PART I
1. Business............................................................................. 1
2. Properties........................................................................... 7
3. Legal Proceedings.................................................................... 10
4. Submission of Matters to a Vote of Security Holders.................................. 10
X. Executive Officers of the Registrant................................................. 10
PART II
5. Market Price of the Registrant's Common Stock and Related Stockholder Matters........ 12
6. Selected Financial Data.............................................................. 13
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................... 17
7A. Quantitative and Qualitative Disclosures about Market Risk........................... 36
8. Financial Statements and Supplementary Data.......................................... 38
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure..................................................... 38
PART III
10. Directors and Executive Officers of the Registrant................................... 39
11. Executive Compensation............................................................... 39
12. Security Ownership of Certain Beneficial Owners and Management....................... 39
13. Certain Relationships and Related Transactions....................................... 39
PART IV
14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.................... 40
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PART I
ITEM 1. BUSINESS
THE COMPANY
Post Properties, Inc. (the "Company") is one of the largest developers and
operators of upscale multifamily apartment communities in the Southeastern and
Southwestern United States. The Company currently owns 87 stabilized communities
(the "Communities") containing 30,522 apartment units located primarily in
metropolitan Atlanta, Georgia; Dallas, Texas and Tampa and Orlando, Florida. In
addition, the Company currently has under construction or in initial lease-up 12
new communities and additions to three existing communities in the Atlanta,
Georgia; Dallas, Houston and Austin, Texas; Tampa, Florida; Denver, Colorado;
Charlotte, North Carolina; Phoenix, Arizona; Pasadena, California and Washington
D. C. metropolitan areas that will contain an aggregate of 4,661 apartment units
upon completion. For the year ended December 31, 2000, the average economic
occupancy rate (defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent) of the 75 Communities
stabilized for the entire year was 96.7%. The average monthly rental rate per
apartment unit at these Communities for December 2000 was $933. The Company also
manages through affiliates 15,651 additional apartment units owned by third
parties. The Company is a fully integrated organization with multifamily
development, acquisition, operation and asset management expertise. The Company
has approximately 2,036 employees, none of whom is a party to a collective
bargaining agreement.
Since its founding in 1971, the Company has pursued three distinctive core
business strategies that have remained substantially unchanged:
Investment Building
Investment building means taking a long-term view of the assets the Company
creates. The Company develops communities with the intention of operating them
for periods that are relatively long by the standards of the apartment industry.
Key elements of the Company's investment building strategy include instilling a
disciplined team approach to development decisions, selecting sites in urban
infill locations in strong primary markets, consistently constructing new
apartment communities with a uniformly high quality, and conducting ongoing
property improvements.
Promotion of the Post(R) Brand Name
The Post(R) brand name strategy has been integral to the success of the Company
and, to the knowledge of the Company, has not been successfully duplicated
within the multifamily real estate industry in any major U.S. market. For such a
strategy to work, a company must develop and implement systems to achieve
uniformly high quality and value throughout its operations. As a result of the
Company's efforts in developing and maintaining its communities, the Company
believes that the Post(R) brand name is synonymous with quality upscale
apartment communities that are situated in desirable locations and provide
superior resident service. Key elements in implementing the Company's brand name
strategy include extensively utilizing the trademarked brand name, adhering to
quality in all aspects of the Company's operations, developing and implementing
leading edge training programs, and coordinating the Company's advertising
programs to increase brand name recognition.
Service Orientation
The Company's mission statement is: "To provide the superior apartment living
experience for our residents." By striving to provide a superior product and
superior service, the Company believes that it will be able to achieve its
long-term goals. The Company believes that it provides its residents with
superior product and superior service through its uniformly high quality
construction, selective urban infill locations, award winning landscaping and
numerous amenities, including on site business centers, on site courtesy
officers, urban vegetable gardens and state of the art fitness centers.
The Company believes that with the implementation of these strategies,
multifamily properties in its primary markets have the potential over the long
term to provide investment returns that exceed national averages. According to
recent market surveys, employment growth, population growth and household
formation growth in the Company's primary markets have exceeded, and are
forecasted to continue to exceed, national averages.
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The Company is a self-administered and self-managed equity real estate
investment trust (a "REIT"). In 1993, the Company completed an initial public
offering of its Common Stock (the "Initial Offering") and a business combination
involving entities under varying common ownership. Proceeds from the Initial
Offering were used by the Company, in part, to acquire a controlling interest in
Post Apartment Homes, L.P. (the "Operating Partnership"), the Company's
principal operating subsidiary, which was formed to succeed to substantially all
of the ownership interest in a portfolio of 40 Post(R) multifamily apartment
communities, all of which were developed by the Company and owned by affiliates
of the Company, and to the development, leasing, landscaping and management
business of the Company and certain other affiliates.
The Company, through wholly owned subsidiaries, is the sole general partner of,
and controls a majority of the limited partnership interests in, the Operating
Partnership. The Company conducts all of its business through the Operating
Partnership and its subsidiaries.
The Company's and the Operating Partnership's executive offices are located at
4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327 and their telephone
number is (404) 846-5000. Post Properties, Inc., a Georgia corporation, was
incorporated on January 25, 1984, and is the successor by merger to the original
Post Properties, Inc., a Georgia corporation, which was formed in 1971. The
Operating Partnership is a Georgia limited partnership that was formed in July
1993 for the purpose of consolidating the operating and development businesses
of the Company and the Post(R) apartment portfolio described herein.
THE OPERATING PARTNERSHIP
The Operating Partnership, through the operating divisions and subsidiaries
described below, is the entity through which all of the Company's operations are
conducted. At December 31, 2000, the Company, through wholly owned subsidiaries,
controlled the Operating Partnership as the sole general partner and as the
holder of 88.2% of the common units in the Operating Partnership ("Units") and
64.1% of the preferred Units (the "Perpetual Preferred Units"). The other
limited partners of the Operating Partnership, who hold units, are those persons
(including certain officers and directors of the Company) who, at the time of
the Initial Offering, elected to hold all or a portion of their interest in the
form of Units rather than receiving shares of Common Stock. Each Unit may be
redeemed by the holder thereof for either one share of Common Stock or cash
equal to the fair market value thereof at the time of such redemption, at the
option of the Operating Partnership. The Operating Partnership presently
anticipates that it will cause shares of Common Stock to be issued in connection
with each such redemption rather than paying cash (as has been done in all
redemptions to date). With each redemption of outstanding Units for Common
Stock, the Company's percentage ownership interest in the Operating Partnership
will increase. In addition, whenever the Company issues shares of stock, the
Company will contribute any net proceeds therefrom to the Operating Partnership
and the Operating Partnership will issue an equivalent number of Units or
Perpetual Preferred Units, as appropriate, to the Company.
As the sole shareholder of the Operating Partnership's sole general partner, the
Company has the exclusive power under the agreement of limited partnership of
the Operating Partnership to manage and conduct the business of the Operating
Partnership, subject to the consent of the holders of the Units in connection
with the sale of all or substantially all of the assets of the Operating
Partnership or in connection with a dissolution of the Operating Partnership.
The board of directors of the Company manages the affairs of the Operating
Partnership by directing the affairs of the Company. The Operating Partnership
cannot be terminated, except in connection with a sale of all or substantially
all of the assets of the Company, for a period of 50 years without a vote of
limited partners of the Operating Partnership. The Company's indirect limited
and general partner interests in the Operating Partnership entitle it to share
in cash distributions from, and in the profits and losses of, the Operating
Partnership in proportion to the Company's percentage interest therein and
indirectly entitle the Company to vote on all matters requiring a vote of the
limited partners.
As part of the formation of the Operating Partnership, a new holding company,
Post Services, Inc. ("Post Services") was organized as a separate corporate
subsidiary of the Operating Partnership. Post Services, in turn, owns all the
outstanding stock of its principal two operating subsidiaries, RAM Partners,
Inc. ("RAM") and Post Landscape Services, Inc. ("Post Landscape"). Certain
officers and directors of the Company received 99%, collectively, of the voting
common stock of Post Services, and the Operating Partnership
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received 1% of the voting common stock and 100% of the nonvoting common stock of
Post Services. The voting and nonvoting common stock of Post Services held by
the Operating Partnership represents 99% of the equity interests therein. The
voting common stock held by officers and directors in Post Services is subject
to an agreement that is designed to ensure that the stock will be held by one or
more officers of Post Services. The by-laws of Post Services provide that a
majority of the board of directors of Post Services must be persons who are not
employees, members of management or affiliates of the Company or its
subsidiaries. This by-law provision cannot be amended without the vote of 100%
of the outstanding voting common stock of Post Services. Post Services currently
has the same board of directors as the Company.
For taxable years ending on or before December 31, 2000, the Operating
Partnership could not own more than 10% of the voting stock of Post Services
without causing the Company to fail to qualify as a REIT for federal income tax
purposes. This restriction no longer applies to the voting stock of a "taxable
REIT subsidiary" as defined in the Internal Revenue Code. The Company and Post
Services have filed a joint election to have Post Services treated as a taxable
REIT subsidiary of the Company. This will enable the Operating Partnership to
acquire all of the voting stock of Post Services without jeopardizing the
company's status as a REIT. Management believes the Operating Partnership will
acquire the remaining interest of Post Services in 2001.
OPERATING DIVISIONS
The major operating divisions of the Operating Partnership include:
Post Apartment Management
Post Apartment Management is responsible for the day-to-day operations of all
the Post(R) communities including community leasing, property management and
personnel recruiting, training and development, maintenance and security. Post
Apartment Management also conducts short-term corporate apartment leasing
activities and is the largest division in the Company.
Post Apartment Development
Post Apartment Development conducts the development and construction activities
of the Company. These activities include site selection, zoning and regulatory
approvals, project design, and the full range of construction management
services.
Post Corporate Services
Post Corporate Services provides executive direction and control to the
Company's other divisions and subsidiaries and has responsibility for the
creation and implementation of all Company financing and capital strategies. All
accounting, management reporting, information systems, human resources, legal
and insurance services required by the Company and all of its affiliates are
centralized in Post Corporate Services.
OPERATING SUBSIDIARIES
The operating subsidiaries of the Operating Partnership, each of which is wholly
owned by Post Services, include:
RAM
RAM provides third party asset management and leasing services for multifamily
properties that do not operate under the Post(R) name. RAM's clients include
pension funds, independent private investors, financial institutions and
insurance companies. RAM's asset management contracts generally are subject to
annual renewal or are terminable upon specified notice. As of December 31, 2000,
RAM managed 72 properties (located in Georgia, Florida, Tennessee, Kansas, South
Carolina, North Carolina, Texas, Maryland, Missouri, Alabama and Virginia) with
15,651 units under management.
Post Landscape Group
As a result of the reputation the Company developed in connection with the
landscaping of Post(R) communities, in 1990, the Company began providing third
party design landscape services for clients other than Post(R) communities.
Projects with third parties include the design, installation and maintenance of
the landscape for golf courses, office
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parks, commercial buildings and other commercial enterprises, and private
residences. Post Landscape Group provides such third party landscape services.
See Note 14 to the Company's Consolidated Financial Statements for information
regarding the industry segments into which the Company organizes its operations.
HISTORY OF POST PROPERTIES, INC.
During the five-year period from January 1, 1996 through December 31, 2000, the
Company and affiliates have developed and completed 11,152 apartment units in 27
apartment communities, acquired 7,186 units in 28 apartment communities (26
communities containing 6,296 apartment units were as a result of the merger with
Columbus Realty Trust (the "Merger")) and sold 11 apartment communities
containing an aggregate of 2,778 apartment units. Historically, the Company has
primarily developed its apartment communities to the Company's specifications as
opposed to buying or refurbishing existing properties built by others. The
Company and its affiliates have sold apartment communities after holding them
for investment periods that typically have been seven to twelve years after
development. The following table shows the results of the Company's developments
during this period:
2000 1999 1998 1997 1996
--------- ---------- -------- ---------- ---------
Units completed 2,786 1,955 2,025 2,128 2,258
Units acquired(1) -- -- -- 6,296 890
Units sold (1,984) (198) -- (416) (180)
Total units owned by Company
affiliates 30,522 29,720 27,963 25,938 17,930
Total apartment rental income (in
thousands) $ 365,895 $ 318,697 $275,755 $ 185,732 $ 158,618
(1) As part of the Merger, the Company acquired 26 communities containing
6,296 units. Of the communities acquired in the Merger, 14 communities
containing 3,916 units were built by Columbus and 12 communities
containing 2,380 units were acquired by Columbus.
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CURRENT DEVELOPMENT ACTIVITY
The Company currently has under construction or in initial lease-up 12 new
communities and additions to three existing communities that will contain an
aggregate of 4,661 units upon completion. The Company's communities under
development or in initial lease-up are summarized in the following table:
ESTIMATED ESTIMATED ESTIMATED
QUARTER OF QUARTER OF QUARTER OF
# OF CONSTRUCTION FIRST UNITS STABILIZED
METROPOLITAN AREA UNITS START AVAILABLE OCCUPANCY
- ----------------- ----- ------------ ----------- ---------
ATLANTA, GA
Post Spring(TM) 452 3Q'99 2Q'00 3Q'01
Post Peachtree(TM) 121 2Q'00 4Q'01 2Q'02
Post Biltmore(TM) 276 3Q'00 4Q'01 3Q'02
-----
849
-----
CHARLOTTE, NC
Post Uptown Place(TM) 226 3Q'98 1Q'00 2Q'01
Post Gateway Place(TM) 232 3Q'99 3Q'00 3Q'01
Post Gateway Place II(TM) 204 3Q'00 3Q'01 1Q'02
-----
662
-----
TAMPA, FL
Post Harbour Place(TM)Phase II 319 4Q'98 2Q'00 1Q'01
-----
DALLAS, TX
Post Legacy 384 3Q'99 3Q'00 4Q'01
Post Addison Circle(TM)III 264 3Q'99 3Q'00 2Q'01
-----
648
-----
HOUSTON, TX
Post Midtown Square(TM)Phase II 193 1Q'00 4Q'00 4Q'01
-----
DENVER, CO
Post Uptown Square(TM)I 449 1Q'98 3Q'99 3Q'01
Post Uptown Square(TM)Phase II 247 1Q'00 4Q'01 3Q'02
-----
696
-----
PHOENIX, AZ
Post Roosevelt Square(TM) 403 4Q'98 1Q'00 4Q'01
-----
GREATER WASHINGTON AREA
Post Pentagon Row(TM) 504 2Q'99 2Q'01 2Q'02
-----
PASADENA, CA
Post Paseo Colorado(TM) 387 2Q'00 2Q'02 2Q'03
-----
TOTAL 4,661
=====
The Company is also currently conducting feasibility and other pre-development
studies for possible new Post(R) communities in selected market areas.
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COMPETITION
All of the Communities are located in developed areas that include other upscale
apartments. The number of competitive upscale apartment properties in a
particular area could have a material effect on the Company's ability to lease
apartment units at the Communities or at any newly developed or acquired
communities and on the rents charged. The Company may be competing with others
that have greater resources than the Company. In addition, other forms of
residential properties, including single family housing, provide housing
alternatives to potential residents of upscale apartment communities.
AMERICANS WITH DISABILITIES ACT
The Communities and any newly acquired apartment communities must comply with
Title III of the Americans with Disabilities Act (the "ADA") to the extent that
such properties are "public accommodations" and/or "commercial facilities" as
defined by the ADA. Compliance with the ADA requirements could require removal
of structural barriers to handicapped access in certain public areas of the
Company's Communities where such removal is readily achievable. The ADA does
not, however, consider residential properties, such as apartment communities, to
be public accommodations or commercial facilities, except to the extent portions
of such facilities, such as the leasing office, are open to the public. The
Company believes that its properties comply with all present requirements under
the ADA and applicable state laws. Noncompliance could result in imposition of
fines or an award of damages to private litigants. If required to make material
additional changes, the Company's results of operations could be adversely
affected.
ENVIRONMENTAL REGULATIONS
The Company is subject to Federal, state and local environmental regulations
that apply to the development of real property, including construction
activities, the ownership of real property, and the operation of multifamily
apartment communities.
In developing properties and constructing apartments, the Company utilizes
environmental consultants to determine whether there are any flood plains,
wetlands or environmentally sensitive areas that are part of the property to be
developed. If flood plains are identified, development and construction is
planned so that flood plain areas are preserved or alternative flood plain
capacity is created in conformance with Federal and local flood plain management
requirements.
Storm water discharge from a construction facility is evaluated in connection
with the requirements for storm water permits under the Clean Water Act. This is
an evolving program in most states. The Company currently anticipates it will be
able to obtain storm water permits for existing or new development.
The Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. sec. 9601 et seq. ("CERCLA"), and applicable state superfund laws subject
the owner of real property to claims or liability for the costs of removal or
remediation of hazardous substances that are disposed of on real property in
amounts that require removal or remediation. Liability under CERCLA and
applicable state superfund laws can be imposed on the owner of real property or
the operator of a facility without regard to fault or even knowledge of the
disposal of hazardous substances on the property or at the facility. The
presence of hazardous substances in amounts requiring response action or the
failure to undertake remediation where it is necessary may adversely affect the
owner's ability to sell real estate or borrow money using such real estate as
collateral. In addition to claims for cleanup costs, the presence of hazardous
substances on a property could result in a claim by a private party for personal
injury or a claim by an adjacent property owner for property damage.
The Company has instituted a policy that requires an environmental investigation
of each property that it considers for purchase or that it owns and plans to
develop. The environmental investigation is conducted by a qualified
environmental consultant. If there is any indication of contamination, sampling
of the property is performed by the environmental consultant. The environmental
investigation report is reviewed by the Company and counsel prior to purchase of
any property. If necessary, remediation of contamination, including underground
storage tanks, is undertaken prior to development.
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The Company has not been notified by any governmental authority of any
noncompliance, claim, or liability in connection with any of the Communities.
The Company has not been notified of a claim for personal injury or property
damage by a private party in connection with any of the Communities in
connection with environmental conditions. The Company is not aware of any other
environmental condition with respect to any of the Communities that could be
considered to be material.
ITEM 2. PROPERTIES
At February 3, 2001, the Communities consisted of 87 stabilized Post(R)
multifamily apartment communities located in the following metropolitan areas:
METROPOLITAN AREA COMMUNITIES # OF UNITS % OF TOTAL
----------------- ----------- ---------- ----------
Atlanta, GA .................... 40 16,102 52.8%
Dallas, TX ..................... 29 7,846 25.7%
Houston, TX .................... 1 309 1.0%
Tampa, FL ...................... 9 3,504 11.5%
Orlando, FL .................... 3 1,493 4.9%
Fairfax, VA .................... 2 700 2.3%
Nashville, TN .................. 2 166 0.5%
Charlotte, NC .................. 1 402 1.3%
------ ------ -----
87 30,522 100.0%
====== ====== =====
The Company or its predecessors developed all but 14 of the Post(R) Communities
and currently manages all of the Communities. Fifty-two of the Communities have
in excess of 300 apartment units, with the largest Community having a total of
916 apartment units. Eighty of the eighty-seven Communities, comprising
approximately 92% of the Communities' apartment units, were completed after
January 1, 1986. The average age of the Communities is approximately nine years.
The average economic occupancy rate was 96.8% and 96.4%, respectively, and the
average monthly rental rate per apartment unit was $897 and $862, respectively,
for communities stabilized for each of the entire years ended December 31, 2000
and 1999. See "Selected Financial Information."
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COMMUNITY INFORMATION
DECEMBER 2000 2000
AVERAGE NUMBER AVERAGE AVERAGE
YEAR UNIT SIZE OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2)
- ----------- ----------- --------- ------------- ------ ------------- ------------
GEORGIA
Post Ashford(R) ......................... Atlanta 1987 872 222 $ 873 97.3%
Post Briarcliff(TM) ..................... Atlanta 1999 1,062 688 1,137 N/A (3)
Post Bridge(R) .......................... Atlanta 1986 847 354 747 96.8%
Post Brookhaven(R) ...................... Atlanta 1990-92 (4) 991 735 1,037 96.6%
Post Canyon(R) .......................... Atlanta 1986 899 494 775 97.5%
Post Chase(R) ........................... Atlanta 1987 938 410 759 96.7%
Post Chastain(R) ........................ Atlanta 1990 965 558 1,066 96.2%
Post Collier Hills(R) ................... Atlanta 1997 967 396 1,085 97.4%
Post Corners(R) ......................... Atlanta 1986 860 460 765 96.8%
Post Court(R) ........................... Atlanta 1988 838 446 723 97.4%
Post Creek(R) ........................... Atlanta 1983 (5) 1,180 810 972 97.1%
Post Crest(R) ........................... Atlanta 1996 1,073 410 1,076 97.2%
Post Crossing(R) ........................ Atlanta 1995 1,067 354 1,121 96.5%
Post Dunwoody(R) ........................ Atlanta 1989-96 (4) 941 530 1,005 95.7%
Post Gardens(R) ......................... Atlanta 1998 1,066 397 1,290 95.7%
Post Glen(R) ............................ Atlanta 1997 1,113 314 1,262 96.8%
Post Lane(R) ............................ Atlanta 1988 840 166 792 97.6%
Post Lenox Park(R) ...................... Atlanta 1995 1,030 206 1,153 95.3%
Post Lindbergh(R) ....................... Atlanta 1998 960 396 1,107 95.2%
Post Mill(R) ............................ Atlanta 1985 952 398 800 97.9%
Post Oak(TM) ............................ Atlanta 1993 1,003 182 1,107 97.1%
Post Oglethorpe(R) ...................... Atlanta 1994 1,205 250 1,355 96.0%
Post Park(R) ............................ Atlanta 1988-90 (4) 904 770 848 96.7%
Post Parkside(TM) ....................... Atlanta 2000 903 188 1,355 N/A (3)
Post Peachtree Hills(R) ................. Atlanta 1992-94 (4) 982 300 1,108 96.2%
Post Pointe(R) .......................... Atlanta 1988 835 360 740 95.4%
Post Renaissance(R)(6) .................. Atlanta 1992-94 (4) 890 342 1,051 95.5%
Post Ridge(R) ........................... Atlanta 1998 1,045 434 1,092 96.2%
Post Stratford(TM) ...................... Atlanta 2000 1,013 250 1,365 N/A (3)
Post Summit(R) .......................... Atlanta 1990 957 148 960 96.8%
Post Valley(R) .......................... Atlanta 1988 854 496 756 96.8%
Post Village(R) ......................... Atlanta 798 98.0%
The Arbors ............................. 1983 1,063 301
The Fountains .......................... 1987 850 352
The Gardens ............................ 1986 891 494
The Hills .............................. 1984 953 241
The Meadows ............................ 1988 817 350
Post Vinings(R) ......................... Atlanta 1989-91 (4) 964 403 882 96.5%
Post Walk(R) ............................ Atlanta 1984-87 (4) 932 476 888 96.4%
Post Woods(R) ........................... Atlanta 1977-83 (4) 1,057 494 972 96.4%
Post Riverside(TM) ...................... Atlanta 1998 989 527 1,532 N/A (3)
----- ------ ------- -------
Subtotal/Average-- Georgia ............. 964 16,102 980 96.7%
----- ------ ------- -------
TEXAS
Addison Circle Apartment Homes
by Post(R)- Phase I ................... Dallas 1998 896 460 968 95.4%
Addison Circle Apartment Homes
by Post(R)- Phase II .................. Dallas 2000 898 610 1,058 N/A (3)
Post American Beauty Mill(TM) ........... Dallas 1998 980 80 1,016 96.1%
Post Block 588(TM) ...................... Dallas 2000 1,570 127 1,874 N/A
Post Cole's Corner(TM) .................. Dallas 1998 796 186 983 96.1%
Post Columbus Square by Post(TM) ........ Dallas 1996 861 218 1,129 97.3%
Post Gallery(TM) ........................ Dallas 1999 2,307 34 3,735 N/A (3)
Post Midtown Square(R)(7) ............... Dallas 2000 940 672 1,230 N/A (3)
Post Parkwood(R) ........................ Dallas 1962-70 (4) 1,042 96 983 97.7%
Post Ascension(R) ....................... Dallas 1985-95 (4) 929 167 847 96.5%
Post Hackberry Creek(R) ................. Dallas 1988-96 (4) 865 432 820 96.7%
Post Lakeside(TM) ....................... Dallas 1986 791 327 845 97.0%
Post Townlake(R)/Parks .................. Dallas 1986-87 (4) 869 398 775 96.6%
Post White Rock(R) ...................... Dallas 1988 659 207 770 97.2%
Post Winsted(R) ......................... Dallas 1996 728 314 802 96.3%
Post Shores(TM) ......................... Dallas 1988-97 (4) 874 908 943 96.7%
The Abbey of State-Thomas by Post(TM) ... Dallas 1996 1,276 34 1,951 97.2%
The Commons at Turtle Creek by Post(TM).. Dallas 1985 645 158 776 96.9%
The Heights of State-Thomas by Post(TM).. Dallas 1998 813 198 1,024 95.5%
8
11
DECEMBER 2000 2000
AVERAGE NUMBER AVERAGE AVERAGE
YEAR UNIT SIZE OF RENTAL RATES ECONOMIC
COMMUNITIES LOCATION(1) COMPLETED (SQUARE FEET) UNITS PER UNIT OCCUPANCY(2)
- ----------- ----------- --------- ------------- ------ ------------- ------------
TEXAS CONTINUED
The Heights of State-Thomas II by ............. Dallas 1999 894 170 1,061 93.7%
Post(TM)
The Meridian of State-Thomas by Post(TM)....... Dallas 1991 798 132 1,073 96.1%
The Residences on McKinney by Post(TM) ........ Dallas 1986 749 196 1,026 95.0%
The Rice by Post .............................. Houston 1998 977 309 1,436 97.4%
The Vineyard by Post(TM) ...................... Dallas 1996 728 116 949 96.8%
The Vintage by Post(TM) ....................... Dallas 1993 781 161 934 96.9%
Post Wilson Building(TM) ...................... Dallas 1999 1,015 143 1,352 N/A (3)
Post Worthington(TM) .......................... Dallas 1993 818 332 1,147 96.0%
Post Uptown Village(TM) ....................... Dallas 1995 767 300 929 96.2%
Post Uptown Village II(TM) .................... Dallas 2000 730 196 834 N/A (3)
Post Windhaven(TM)(8) ......................... Dallas 1991 825 474 615 100.0%
----- ------ ------ -----
Subtotal/Average-- Texas ..................... 927 8,155 1,001 91.5%
----- ------ ------ -----
FLORIDA
Post Bay(R) ................................... Tampa 1988 782 312 727 97.5%
Post Court(R) ................................. Tampa 1991 1,018 228 822 96.2%
Post Fountains at Lee Vista(R) ................ Orlando 1988 835 508 680 96.4%
Post Harbour Place(TM)(7) ..................... Tampa 1999 1,037 525 1,166 N/A (3)
Post Hyde Park(R) ............................. Tampa 1996 1,009 389 1,064 97.2%
Post Lake(R) .................................. Orlando 1988 850 740 687 97.6%
Post Parkside(TM) ............................. Orlando 1999 891 245 1,103 N/A (3)
Post Rocky Point(R) ........................... Tampa 1996-98 (4) 1,018 916 1,019 96.2%
Post Village(R) ............................... Tampa 764 95.8%
The Arbors ................................... 1991 967 304
The Lakes .................................... 1989 895 360
The Oaks ..................................... 1991 968 336
Post Walk(TM) at
Old Hyde Park Village ........................ Tampa 1997 984 134 1,260 96.6%
----- ------ -------- -----
Subtotal/Average-- Florida ................... 938 4,997 887 96.5%
----- ------ -------- -----
VIRGINIA
Post Corners at Trinity Centre ................ Fairfax 1996 1,030 336 1,154 99.6%
Post Forest(R) ................................ Fairfax 1990 889 364 1,109 99.2%
----- ------ -------- -----
Subtotal/Average-- Virginia .................. 960 700 1,131 99.4%
----- ------ -------- -----
NORTH CAROLINA
Post Park at Phillips Place(R) ................ Charlotte 1998 912 402 1,272 95.0%
----- ------ -------- -----
TENNESSEE
Post Bennie Dillon(TM) ........................ Nashville 1999 719 86 944 96.6%
The Lee Apartments ............................ Nashville 1924 (9) 808 80 731 98.5%
----- ------ -------- -----
Subtotal/Average-- Tennessee ................. 764 166 842 97.3%
----- ------ -------- -----
TOTAL ...................................... 911 30,522 $ 977 96.7%
===== ====== ======== =====
(1) Refers to greater metropolitan areas of cities indicated.
(2) Average economic occupancy is defined as gross potential rent less
vacancy losses, model expenses and bad debt divided by gross potential
rent for the period, expressed as a percentage.
(3) During 2000, this community or a phase in this community was in
lease-up and, therefore, is not included.
(4) These dates represent the respective completion dates for multiple
phases of a community.
(5) This community was completed by the Company in 1983, sold during 1986,
managed by the Company through 1993 and reacquired by the Company in
1996.
(6) The Company has a leasehold interest in the land underlying Post
Renaissance pursuant to a ground lease that expires on January 1, 2040.
(7) These communities are comprised of two phases. Only the first phase of
each of these communities is stabilized as of February 3, 2001.
(8) Post Windhaven(TM) is subject to a master lease with Electronic Data
Systems.
(9) The Company acquired this community in 1996.
9
12
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The persons who are executive officers of the Company and its affiliates and
their positions are as follows:
NAME POSITIONS AND OFFICES HELD
---- --------------------------
John A. Williams........................ Chairman of the Board, Chief Executive Officer and Director
John T. Glover.......................... Vice Chairman and Director
David P. Stockert....................... President and Chief Operating Officer
W. Daniel Faulk, Jr..................... President-- Post Apartment Development and Chief Development
Officer
Thomas L. Wilkes........................ President-- Post Management Services and Chief Management Officer
R. Gregory Fox.......................... Executive Vice President-- Post Corporate Services and Chief
Financial Officer
Sherry W. Cohen......................... Executive Vice President and Secretary-- Post Corporate Services
Douglas S. Gray......................... Senior Vice President-- Post Corporate Services
The following is a biographical summary of the experience of the executive
officers of the Company:
John A. Williams. Mr. Williams is the Chairman of the Board and Chief Executive
Officer of the Company and is a Director. Mr. Williams founded the business of
the Company in 1971 and since that time has acted as Chairman and Chief
Executive Officer. Mr. Williams is currently serving on the board of directors
of Crawford & Co. and the Atlanta Regional Commission and was formerly Chairman
of the Metro Atlanta Chamber of Commerce. Mr. Williams is 58 years old.
John T. Glover. Mr. Glover has been the Vice Chairman of the Company since
February 29, 2000 and a Director since 1984. From 1984 through February 29,
2000, Mr. Glover was President, Chief Operating Officer, and Treasurer of the
Company. Mr. Glover is a Director of SunTrust Bank, Haverty's Furniture
Companies, Inc. and Emory Healthcare, Inc. Mr. Glover is 54 years old.
David P. Stockert. Mr. Stockert joined the Company January 1, 2001 as President
and Chief Operating Officer. From July 1999 to October 2000, Mr. Stockert was
Executive Vice President of Duke-Weeks Realty Corporation, a publicly traded
real estate company. From June 1995 to July 1999, Mr. Stockert was Senior Vice
President and Chief Financial Officer of Weeks Corporation, also a publicly
traded real estate company that was a predecessor by merger to Duke-Weeks Realty
Corporation. From August 1990 to May 1995, Mr. Stockert was an investment banker
in the Real Estate Group at Dean Witter Reynolds Inc. (now Morgan Stanley Dean
Witter). Mr. Stockert is 38 years old.
10
13
W. Daniel Faulk, Jr. Mr. Faulk has been with the Company for fourteen years and
is currently President of Post Apartment Development and Chief Development
Officer. From April 1993 to December 1999, he was President of Post Apartment
Development, which is responsible for the development and construction of all
Post(R)apartment communities. Prior thereto, Mr. Faulk was President of Post
Atlanta since February 1987. Mr. Faulk is currently on the board of directors of
Mountain National Bank. Mr. Faulk is 58 years old.
Thomas L. Wilkes. Mr. Wilkes joined the Company in October 1997 and, since
January 2001, has been the President of Post Apartment Management and the
Company's Chief Management Officer. From December 1998 through December 2000, he
was an Executive Vice President and Director of Operations for Post Apartment
Management responsible for the operations of Post(R)communities in the Western
United States. From October 1997 to December 1998 he was an Executive Vice
President and Director of Operations of Post West. Mr. Wilkes was a Senior Vice
President of Columbus from October 1993 through October 1997. Mr. Wilkes served
as President of CRH Management Company, a multifamily property management firm
and a member of the Columbus Group, since its formation in October 1990 to
December 1993. Mr. Wilkes is a Certified Property Manager. Mr. Wilkes is 41
years old.
R. Gregory Fox. Mr. Fox has been with the Company since February 1996 and, since
October 2000 has served as the Company's Chief Financial Officer. From December
1998 through September 2000, he served as Executive Vice President of Post
Corporate Services and the Company's Chief Accounting Officer responsible for
financial reporting and planning, accounting, management information systems and
human resources. From February 1996 to December 1998, Mr. Fox was a Senior Vice
President. Prior to joining the Company, he was a senior manager in the audit
division of Price Waterhouse LLP where he was employed for ten years. Mr. Fox is
a Certified Public Accountant and is currently on the board of directors of
Realeum, Inc. Mr. Fox is 41 years old.
Sherry W. Cohen. Ms. Cohen has been with the Company for sixteen years. Since
October 1997, she has been an Executive Vice President of Post Corporate
Services responsible for supervising and coordinating legal affairs and
insurance. Since April 1990, Ms. Cohen had also been Corporate Secretary. She
was a Senior Vice President with Post Corporate Services from July 1993 to
October 1997. Prior thereto, Ms. Cohen was a Vice President of Post Properties,
Inc. since April 1990. Ms. Cohen is 46 years old.
Douglas S. Gray. Mr. Gray joined the Company in December 1997 and, since January
1999, has been a Senior Vice President of Post Corporate Services responsible
for dispositions and asset management. He was a Vice President of Post Corporate
Services from December 1997 to December 1998. Prior to joining Post, Mr. Gray
was Vice President of Dutch Institutional Holding Co. from July 1994 to
November 1997. Prior thereto, he was Director of Property Services for The
Landmarks Group from June 1988 to June 1994. Mr. Gray is a Certified Public
Accountant and holds the CCIM designation. Mr. Gray is 41 years old.
11
14
PART II
ITEM 5. MARKET PRICE OF THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The Common Stock is traded on the New York Stock Exchange ("NYSE") under the
symbol "PPS." The following table sets forth the quarterly high and low closing
sales prices per share reported on the NYSE, as well as the quarterly dividends
declared per share:
DIVIDENDS
QUARTER ENDED HIGH LOW DECLARED
------------- --------- --------- ---------
1999
First Quarter $ 38.8125 $ 35.2500 $ 0.700
Second Quarter 42.0625 35.3750 0.700
Third Quarter 41.0000 38.8750 0.700
Fourth Quarter 39.7500 36.7500 0.700
2000
First Quarter $ 40.3125 $ 36.5000 $ 0.760
Second Quarter 46.0938 39.9375 0.760
Third Quarter 46.7500 42.0312 0.760
Fourth Quarter 38.2500 33.9375 0.760
On February 12, 2001, the Company had 1,735 common shareholders of record.
The Company pays regular quarterly dividends to holders of shares of Common
Stock. Future distributions by the Company will be at the discretion of the
board of directors and will depend on the actual funds from operations of the
Company, the Company's financial condition and capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended (the "Code") and such other factors as the board of
directors deems relevant. For a discussion of the Company's credit agreements
and their restrictions on dividend payments, see Liquidity and Capital Resources
at Management's Discussion and Analysis of Financial Condition and Results of
Operations.
During 2000, the Company did not sell any unregistered securities.
There is no established public trading market for the Units. As of February 12,
2001, the Operating Partnership had 109 holders of record of Units of the
Operating Partnership.
For each quarter during 1999 and 2000, the Operating Partnership paid a cash
distribution to holders of Units equal in amount to the dividend paid on the
Company's common stock for such quarter.
During 2000, the Operating Partnership did not sell any unregistered securities.
12
15
ITEM 6. SELECTED FINANCIAL DATA
POST PROPERTIES, INC.
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
OPERATING DATA:
Revenue:
Rental ......................................... $ 365,895 $ 318,697 $ 275,755 $ 185,732 $ 158,618
Property management - third-party (1) .......... 3,826 3,368 3,164 2,421 2,828
Landscape services - third-party (1) ........... 11,423 9,118 7,252 5,148 4,882
Other .......................................... 18,688 14,744 12,734 6,815 5,247
--------- --------- --------- --------- ---------
Total revenue .............................. 399,832 345,927 298,905 200,116 171,575
--------- --------- --------- --------- ---------
Property operating and maintenance
expense (exclusive of depreciation
and amortization) ............................ 131,349 113,152 99,717 67,515 58,202
Depreciation ................................... 71,113 58,013 46,646 29,048 23,603
Property management expenses - third-party (1) 3,099 2,925 2,499 1,959 2,055
Landscape services expenses - third-party (1) .. 9,993 7,904 6,264 4,284 3,917
Interest expense ............................... 50,303 33,192 31,297 24,658 22,131
Amortization of deferred loan costs ............ 1,636 1,496 1,185 980 1,352
General and administrative ..................... 10,066 7,788 8,495 7,364 7,716
Minority interest in consolidated property
partnerships ................................. (1,695) 511 397 -- --
--------- --------- --------- --------- ---------
Total expense ............................. 275,864 224,981 196,500 135,808 118,976
--------- --------- --------- --------- ---------
Income before net gain (loss) on sale of assets,
loss on unused treasury locks, loss on
relocation of corporate office, other charges,
minority interest of unitholders, and
extraordinary item ........................... 123,968 120,946 102,405 64,308 52,599
Net gain (loss) on sale of assets ................ 3,208 (1,522) -- 3,270 854
Loss on unused treasury locks .................... -- -- (1,944) -- --
Loss on relocation of corporate office ........... -- -- -- (1,500) --
Project abandonment, employee severance and
impairment charges (2) ........................... (9,365) -- -- -- --
Minority interest of preferred unitholders in
Operating Partnership ........................ (5,600) (1,851) -- -- --
Minority interest of common unitholders in
Operating Partnership ........................ (11,691) (12,598) (11,511) (11,131) (9,984)
--------- --------- --------- --------- ---------
Income before extraordinary item ................. 100,520 104,975 88,950 54,947 43,469
Extraordinary item, net of minority
interest (3) ................................. -- (458) -- (75) --
--------- --------- --------- --------- ---------
Net income ....................................... 100,520 104,517 88,950 54,872 43,469
Dividends to preferred shareholders .............. (11,875) (11,875) (11,473) (4,907) (1,063)
--------- --------- --------- --------- ---------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS ............................ $ 88,645 $ 92,642 $ 77,477 $ 49,965 $ 42,406
========= ========= ========= ========= =========
PER COMMON SHARE DATA:
Income before extraordinary item
(net of preferred dividends) - basic ........... $ 2.25 $ 2.42 $ 2.21 $ 2.11 $ 1.95
Net income available to common
shareholders - basic ........................... 2.25 2.41 2.21 2.11 1.95
Income before extraordinary item
(net of preferred dividends) - diluted ......... 2.22 2.39 2.18 2.09 1.94
Net income available to common
shareholders - diluted ......................... 2.22 2.38 2.18 2.09 1.94
Dividends declared ............................... 3.04 2.80 2.60 2.38 2.16
13
16
DECEMBER 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ----------- ---------- -------
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation................................... $2,827,094 $2,582,785 $2,255,074 $ 1,936,011 $ 1,109,342
Real estate, net of accumulated
depreciation................................... 2,469,914 2,279,769 2,007,926 1,734,916 931,670
Total assets..................................... 2,551,237 2,350,173 2,066,713 1,780,563 958,675
Total debt....................................... 1,213,309 989,583 800,008 821,209 434,319
Shareholders' equity............................. 1,028,610 1,058,862 1,051,686 756,920 398,993
DECEMBER 31,
------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------- ------------ ------------ ------------
OTHER DATA:
Cash flow provided from (used in):
Operating activities ............. $ 185,073 $ 153,038 $ 148,618 $ 109,554 $ 78,966
Investing activities ............. $ (255,986) $ (317,960) $ (328,216) $ (208,377) $ (166,762)
Financing activities ............. $ 72,502 $ 149,638 $ 189,873 $ 109,469 $ 79,021
Funds from operations (4) ........... $ 163,411 $ 162,581 $ 134,202 $ 85,892 $ 74,212
Weighted average common shares
outstanding - basic .............. 39,317,725 38,460,689 35,028,596 23,664,044 21,787,648
Weighted average common shares and
units outstanding - basic ........ 44,503,290 43,663,373 40,244,351 28,880,928 26,917,723
Weighted average common shares
outstanding - diluted ............ 39,852,514 38,916,987 35,473,587 23,887,906 21,879,248
Weighted average common shares and
units outstanding - diluted ...... 45,038,079 44,119,671 40,689,342 29,104,790 27,009,323
Total stabilized communities
(at end of period) ............... 82 85 83 78 49
Total stabilized apartment units
(at end of period) ............... 28,736 29,032 27,568 25,938 17,930
Average economic occupancy
(fully stabilized communities)(5). 96.8% 96.4% 96.5% 94.8% 95.3%
(1) Consists of revenues and expenses from property management and
landscape services provided to properties owned by third parties.
(2) Project abandonment, employee severance and impairment charges
consisted of the following: Write-off of pursuit costs on abandoned
development projects - $4,389 Severance cost related to management
changes - $3,066 Impairment reserves on for-sale housing - $407
Write-off of investment in Darwin Networks - $1,503.
(3) The extraordinary item resulted from costs associated with the early
extinguishment of indebtedness. The extraordinary item has been reduced
by the portion related to the minority interest of the unitholders
calculated on the basis of weighted average Units outstanding for the
year.
(4) 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. ("GAAP"). 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 GAAP. FFO presented
herein is not necessarily comparable to FFO presented by other real
estate companies because not all real estate companies use the same
definition. The Company's FFO is comparable to the FFO of real estate
companies that use the current NAREIT definition. FFO should not be
considered as an alternative to net income (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company's needs or ability to service indebtedness or make
distributions. FFO for 1998 and 1997 has been restated to reflect the
requirements of the new NAREIT definition.
(5) Amount represents average economic occupancy for communities stabilized
for both the current and prior respective periods. Average economic
occupancy is defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent for the period,
expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts (average economic occupancy, taking account of these amounts,
would have been 94.9% for both years ended December 31, 2000 and 1999).
Concessions were $3,250 and $2,745 and employee discounts were $1,143
and $599 for the years ended December 31, 2000 and 1999, respectively.
A community is 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.
14
17
POST APARTMENT HOMES, L.P.
(DOLLARS IN THOUSANDS, EXCEPT PER UNIT AND APARTMENT UNIT DATA)
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
2000 1999 1998 1997 1996
--------- --------- --------- --------- ---------
OPERATING DATA:
Revenue:
Rental ..................................................... $ 365,895 $ 318,697 $ 275,755 $ 185,732 $ 158,618
Property management - third-party (1) ...................... 3,826 3,368 3,164 2,421 2,828
Landscape services - third-party (1) ....................... 11,423 9,118 7,252 5,148 4,882
Other ...................................................... 18,688 14,744 12,734 6,815 5,247
--------- --------- --------- --------- ---------
Total revenue ............................................ 399,832 345,927 298,905 200,116 171,575
--------- --------- --------- --------- ---------
Property operating and maintenance
expense (exclusive of depreciation
and amortization) .......................................... 131,349 113,152 99,717 67,515 58,202
Depreciation (real estate and non-real estate assets)......... 71,113 58,013 46,646 29,048 23,603
Property management expenses - third-party (1) ............... 3,099 2,925 2,499 1,959 2,055
Landscape services expenses - third-party (1) ................ 9,993 7,904 6,264 4,284 3,917
Interest expense ............................................. 50,303 33,192 31,297 24,658 22,131
Amortization of deferred loan costs .......................... 1,636 1,496 1,185 980 1,352
General and administrative ................................... 10,066 7,788 8,495 7,364 7,716
Minority interest in consolidated ............................
property partnerships ...................................... (1,695) 511 397 -- --
--------- --------- --------- --------- ---------
Total expenses ........................................... 275,864 224,981 196,500 135,808 118,976
--------- --------- --------- --------- ---------
Income before net gain (loss) on sale of assets, loss on
unused treasury locks, loss on relocation of corporate
office, other charges and extraordinary item ............... 123,968 120,946 102,405 64,308 52,599
Net gain (loss) on sale of assets ............................ 3,208 (1,522) -- 3,270 854
Loss on unused treasury locks ................................ -- -- (1,944) -- --
Loss on relocation of corporate office ....................... -- -- -- (1,500) --
Project abandonment, employee severance and
impairment charges (2) ....................................... (9,365) -- -- -- --
--------- --------- --------- --------- ---------
Income before extraordinary item ............................. 117,811 119,424 100,461 66,078 53,453
Extraordinary item (3) ....................................... -- (521) -- (93) --
--------- --------- --------- --------- ---------
Net income ................................................... 117,811 118,903 100,461 65,985 53,453
Distributions to preferred unitholders ....................... (17,475) (13,726) (11,473) (4,907) (1,063)
--------- --------- --------- --------- ---------
NET INCOME AVAILABLE TO
COMMON UNITHOLDERS ......................................... $ 100,336 $ 105,177 $ 88,988 $ 61,078 $ 52,390
========= ========= ========= ========= =========
PER COMMON UNIT DATA:
Income before extraordinary item
(net of preferred distributions) - basic ................... $ 2.25 $ 2.42 $ 2.21 $ 2.11 $ 1.95
Net income available to common
unitholders - basic ........................................ 2.25 2.41 2.21 2.11 1.95
Income before extraordinary item
(net of preferred distributions) - diluted ................. 2.22 2.39 2.18 2.09 1.94
Net income available to common
unitholders - diluted ...................................... 2.22 2.38 2.18 2.09 1.94
Distributions declared ....................................... 3.04 2.80 2.60 2.38 2.16
15
18
DECEMBER 31,
--------------------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- -----------
BALANCE SHEET DATA:
Real estate, before accumulated
depreciation .................. $2,827,094 $2,582,785 $2,255,074 $1,936,011 $1,109,342
Real estate, net of accumulated
depreciation................... 2,469,914 2,279,769 2,007,926 1,734,916 931,670
Total assets ................... 2,551,237 2,350,173 2,066,713 1,780,563 958,675
Total debt ..................... 1,213,309 989,583 800,008 821,209 434,319
Partners' equity ............... 1,216,701 1,251,342 1,177,051 869,304 482,434
DECEMBER 31,
------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------ ------------ ----------- ------------ ------------
OTHER DATA:
Cash flow provided from (used in):
Operating activities .............. $ 185,073 $ 153,038 $ 148,618 $ 109,554 $ 78,966
Investing activities .............. $ (255,986) $ (317,960) $ (328,216) $ (208,377) $ (166,762)
Financing activities .............. $ 72,502 $ 149,638 $ 189,873 $ 109,469 $ 79,021
Funds from operations (4) ............. $ 163,411 $ 162,581 $ 134,202 $ 85,892 $ 74,212
Weighted average common Units
outstanding - basic ............... 44,503,290 43,663,373 40,244,351 28,880,928 26,917,723
Weighted average common Units
outstanding - diluted ............. 45,038,079 44,119,671 40,689,342 29,104,790 27,009,323
Total stabilized communities
(at end of period) ................ 82 85 83 78 49
Total stabilized apartment units
(at end of period) ................ 28,736 29,032 27,568 25,938 17,930
Average economic occupancy
(fully stabilized communities)(5).. 96.8% 96.4% 96.5% 94.8% 95.3%
(1) Consists of revenues and expenses from property management and
landscape services provided to properties owned by third parties.
(2) Project abandonment, employee severance and impairment charges
consisted of the following: Write-off of pursuit costs on abandoned
development projects - $4,389 Severance cost related to management
changes - $3,066 Impairment reserves on for-sale housing - $407
Write-off of investment in Darwin Networks - $1,503.
(3) The extraordinary item resulted from costs associated with the early
extinguishment of indebtedness. The extraordinary item has been reduced
by the portion related to the minority interest of the unitholders
calculated on the basis of weighted average Units outstanding for the
year.
(4) 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. ("GAAP"). 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 GAAP. FFO presented
herein is not necessarily comparable to FFO presented by other real
estate companies because not all real estate companies use the same
definition. The Company's FFO is comparable to the FFO of real estate
companies that use the current NAREIT definition. FFO should not be
considered as an alternative to net income (determined in accordance
with GAAP) as a measure of the Company's liquidity, nor is it
necessarily indicative of sufficient cash flow to fund all of the
Company's needs or ability to service indebtedness or make
distributions. FFO for 1998 and 1997 has been restated to reflect the
requirements of the new NAREIT definition.
(5) Amount represents average economic occupancy for communities stabilized
for both the current and prior respective periods. Average economic
occupancy is defined as gross potential rent less vacancy losses, model
expenses and bad debt divided by gross potential rent for the period,
expressed as a percentage. The calculation of average economic
occupancy does not include a deduction for concessions and employee
discounts (average economic occupancy, taking account of these amounts,
would have been 94.9% for each of the years ended December 31, 2000 and
1999). Concessions were $3,250 and $2,745 and employee discounts were
$1,143 and $599 for the years ended December 31, 2000 and 1999,
respectively. A community is 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.
16
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT APARTMENT UNIT DATA)
OVERVIEW
The following discussion should be read in conjunction with all of the financial
statements appearing elsewhere 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 December 31, 2000, there were 44,035,007 Units outstanding, of which
38,853,596 or 88.2%, were owned by the Company and 5,181,411, or 11.8% were
owned by other limited partners (including certain officers and directors of the
Company). As of December 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 YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
The Operating Partnership recorded net income available to common unitholders of
$100,336, $105,177, and $88,988 for the years ended December 31, 2000, 1999 and
1998, respectively. The Company recorded net income available to common
shareholders of $88,645, $92,642 and $77,477 for the years ended December 31,
2000, 1999 and 1998, respectively. The Company's decrease in net income
available to common shareholders of $3,997 from 1999 to 2000 was primarily
related to project abandonment, employee severance and impairment charges,
increased interest expense resulting from higher interest rates, and increased
general and administrative expenses, partially offset by a gain on the sale of
assets, increased rental rates for fully stabilized communities and an increase
in units placed in service. The Company's increase in net income available to
common shareholders of $15,165 from 1998 to 1999 is primarily related to
increased rental rates for fully stabilized communities and an increase in units
placed in service.
COMMUNITY OPERATIONS
The Company's net income is generated primarily from the operation of its
apartment communities. For purposes of evaluating comparative operating
performance, the Company categorizes its operating communities based on the
period each community reaches stabilized occupancy. A community is generally
considered by the Company to have achieved stabilized occupancy on the earlier
to occur of (i) attainment of 95% physical occupancy on the first day of any
month or (ii) one year after completion of construction.
At December 31, 2000, the Company's portfolio of apartment communities consisted
of the following: (i) 63 communities that were completed and stabilized for all
of the current and prior year, (ii) eight communities that achieved full
stabilization during the prior year, (iii) nine communities which reached
stabilization during 2000, (iv) 16 communities and additions to three existing
communities currently in the development or lease-up stage, and (v) four
stabilized communities that are currently held for sale.
For communities with respect to which construction is completed and the
community has become fully operational, all property operating and maintenance
expenses are expensed as incurred and those recurring and non-recurring
expenditures relating to acquiring new assets, materially enhancing the value of
an existing asset, or substantially extending the useful life of an existing
asset are capitalized. (See "Capitalization of Fixed Assets and Community
Improvements").
The Company has adopted an accounting policy related to communities in the
development and lease-up stage whereby substantially all operating expenses
(including pre-opening marketing expenses) are expensed as incurred. The Company
treats each unit in an apartment community separately for cost accumulation,
capitalization and expense recognition purposes. Prior to the commencement of
leasing activities, interest and other construction costs are capitalized and
reflected on the balance sheet as construction in progress. Once a unit is
placed in service, all
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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 initially 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 years ended December 31, 2000, 1999, and 1998 were $2,665,
$2,798 and $2,063, respectively.
In order to evaluate the operating performance of its communities, the Company
has presented financial information which summarizes the revenue in excess of
specified expense on a comparative basis for all of its operating communities
combined and for fully stabilized communities.
ALL OPERATING COMMUNITIES
The operating performance for all of the Company's apartment communities
combined for the years ended December 31, 2000, 1999 and 1998 is summarized as
follows:
YEAR ENDED DECEMBER 31 YEAR ENDED DECEMBER 31
----------------------------------- -----------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
-------- -------- ------- -------- -------- -------
Rental and other revenue:
Fully stabilized communities (1) ......... $232,435 $221,901 4.7% $221,901 $213,043 4.2%
Communities stabilized during 1999 ....... 42,710 38,097 12.1% 38,097 20,845 82.8%
Development and lease-up communities (2).. 54,486 17,408 213.0% 17,408 2,106 726.6%
Communities held for sale (3) ............ 19,706 18,552 6.2% 18,552 18,359 1.1%
Sold communities (4) ..................... 15,928 24,285 (34.4)% 24,285 24,004 1.2%
Other revenue (5) ........................ 17,396 12,434 39.9% 12,434 9,660 28.7%
-------- -------- -------- --------
382,661 332,677 15.0% 332,677 288,017 15.5%
-------- -------- -------- --------
Property operating and maintenance expense
(exclusive of depreciation and
amortization):
Fully stabilized communities (1) ......... 70,238 67,841 3.5% 67,841 66,612 1.8%
Communities stabilized during 1999 ....... 13,957 11,898 17.3% 11,898 8,176 45.5%
Development and lease-up communities (2).. 20,802 7,729 169.1% 7,729 2,290 237.5%
Communities held for sale (3) ............ 7,314 6,748 8.4% 6,748 6,463 4.4%
Sold communities (4) ..................... 4,471 6,118 (26.9)% 6,118 6,790 (9.9)%
Other expense (6) ........................ 14,568 12,818 13.7% 12,818 9,386 36.6%
-------- -------- -------- --------
131,350 113,152 16.1% 113,152 99,717 13.5%
-------- -------- -------- --------
Revenue in excess of specified expense ..... $251,311 $219,525 14.5% $219,525 $188,300 16.6%
======== ======== ======== ========
Recurring capital expenditures: (7)
Carpet ................................... $ 2,890 $ 2,864 0.9% $ 2,864 $ 2,550 12.3%
Other .................................... 6,267 5,777 8.5% 5,777 4,929 17.2%
-------- -------- -------- --------
Total ................................. $ 9,157 $ 8,641 6.0% $ 8,641 $ 7,479 15.5%
======== ======== ======== ========
Average apartment units in service ......... 31,722 29,304 8.3% 29,304 27,416 6.9%
======== ======== ======== ========
(1) Communities which reached stabilization prior to January 1, 1999.
Includes fully stabilized communities acquired as a result of the
Merger.
(2) Communities in the "construction", "development" or "lease-up" stage
during 2000 and, therefore, not considered fully stabilized for all of
the periods presented.
(3) Includes one community in Tennessee and three communities and two
commercial properties in Texas.
(4) Includes one community containing 213 units, which was sold on February
4, 2000, three communities containing 983 units which were sold
September 6, 2000, two communities containing 367 units which were sold
on November 9, 2000, one community containing 296 units which was sold
on December 21, 2000 and one community containing 125 units which was
sold on December 28, 2000.
(5) Other revenue includes revenue on furnished apartment rentals above the
unfurnished rental rates and any revenue not directly related to
property operations.
(6) Other expenses includes certain indirect central office operating
expenses related to management, grounds maintenance, and costs
associated with furnished apartment rentals.
(7) In addition to those expenses which relate to property operations, the
Company incurs recurring and non- recurring expenditures relating to
acquiring new assets, materially enhancing the value of an existing
asset, or substantially extending the useful life of an existing asset,
all of which are capitalized.
For the year ended December 31, 2000, rental and other revenue increased $49,984
or 15.0% compared to 1999, primarily as a result of the completion of new
communities and increased rental rates for existing communities.
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For the year ended December 31, 1999, rental and other revenue increased $44,660
or 15.5% compared to 1998, primarily as a result of the completion of new
communities and increased rental rates for existing communities.
Property operating and maintenance expenses (exclusive of depreciation and
amortization) increased from 1999 to 2000 and from 1998 to 1999 primarily due to
an increase in the number of units placed in service through the development of
communities.
For the years ended December 31, 2000 and 1999, recurring capital expenditures
increased $516 or 6.0% and $1,162 or 15.5%, respectively, compared to the prior
years, primarily due to additional units placed in service and the timing and
extent of scheduled capital improvements.
FULLY STABILIZED COMMUNITIES
The Company defines fully stabilized communities as those which have reached
stabilization prior to the beginning of the previous calendar year.
The operating performance of the 63 communities containing an aggregate of
21,591 units which were stabilized as of January 1, 1999, are summarized as
follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------------ -----------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
-------- -------- ------- -------- -------- -------
Rental and other revenue (1) ............ $232,435 $221,901 4.7% $221,901 $213,043 4.2%
Property operating and maintenance
expense (exclusive of depreciation
and amortization) (2) ................. 70,238 67,841 3.5% 67,841 66,612 1.8%
-------- -------- -------- --------
Revenue in excess of specified expense .. $162,197 $154,060 5.3% $154,060 $146,431 5.2%
======== ======== ======== ========
Average economic occupancy (3) .......... 96.8% 96.4% 0.4% 96.4% 96.5% (0.1)%
Average monthly rental rate per apartment
unit (4) .............................. $ 897 $ 862 4.1% $ 862 $ 836 3.1%
======== ======== ======== ========
Apartment units in service .............. $ 21,591 21,591 21,591 21,591
======== ======== ======== ========
(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. For the years ended December 31, 2000 and
1999, recurring expenditures were $7,573 and $7,768, or $351 and $360
on a per unit basis, respectively.
(3) Average economic occupancy is defined as gross potential rent less
vacancy losses, model expenses and bad debt divided by gross potential
rent for the period, expressed as a percentage. The calculation of
average economic occupancy does not include a deduction for concessions
and employee discounts. (Average economic occupancy, taking account of
these amounts would have been 94.9% for both years ended December 31,
2000 and 1999.) Concessions were $3,250 and $2,745 and employee
discounts were $1,143 and $599 for the years ended December 31, 2000
and 1999, respectively.
(4) Average monthly rental rate is defined as the average of the gross
actual rental rates for leased units and the average of the anticipated
rental rates for unoccupied units.
Rental and other revenue increased from 1999 to 2000 primarily due to increased
rental rates. The increase in property and maintenance expense (exclusive of
depreciation and amortization) from 1999 to 2000 was primarily due to increased
personnel and property tax expenses.
Rental and other revenue increased from 1998 to 1999 due to increased rental
rates. The increase in property and maintenance expenses (exclusive of
depreciation and amortization) from 1998 to 1999 was primarily due to an
increase in personnel and property tax expenses, partially offset by a decline
in utilities expense as a result of water sub-metering and lower repairs and
maintenance expense.
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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. The
operating performance of RAM for the years ended December 31, 2000, 1999 and
1998 is summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------------- --------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
------- ------- ------- ------- ------- ------
Property management and
other revenue .................. $ 3,826 $ 3,368 13.6% $ 3,368 $ 3,164 6.4%
Property management expense ..... 3,099 2,925 5.9% 2,925 2,499 17.0%
Depreciation expense ............ 27 27 0.0% 27 34 (20.6)%
------- ------- ------- -------
Revenue in excess of specified
expense ........................ 700 $ 416 68.3% $ 416 $ 631 (34.1)%
======= ======= ======= =======
Average apartment units managed... 14,422 12,572 14.7% 12,572 11,046 13.8%
======= ======= ======= =======
The increase in revenue in excess of specified expense from 1999 to 2000 is
primarily attributable to an increase in the average number of units managed.
The change from 1998 to 1999 is primarily attributable to 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., formerly
Post Landscape Services, Inc. ("Post Landscape Group").
The operating performance of Post Landscape Group for the years ended December
31, 2000, 1999 and 1998 are summarized as follows:
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- ------------------------------
% %
2000 1999 CHANGE 1999 1998 CHANGE
------- ------- ------- ------- ------- ------
Landscape services and
other revenue .............. $11,423 $9,118 25.3% $9,118 $7,252 25.7%
Landscape services expense ... 9,993 7,904 26.4% 7,904 6,264 26.2%
Depreciation expense ......... 374 293 27.6% 293 173 69.4%
------- ------ ------ ------
Revenue in excess of specified
expense .................... $ 1,056 $ 921 14.7% $ 921 $ 815 13.0%
======= ====== ====== ======
The change in landscape services revenue and landscape services expense from
1999 to 2000 and 1998 to 1999 is primarily due to an increase in landscape
contracts.
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OTHER INCOME AND EXPENSES
Depreciation expense increased from 1999 to 2000 and from 1998 to 1999 primarily
as a result of an increase in units in service, additional leasehold
improvements and technology expenditures.
Interest expense increased from 1999 to 2000 and from 1998 to 1999 primarily due
to an increase in debt used to fund the development of new communities and
increased interest rates (1999 to 2000 only).
Amortization of deferred loan costs increased from 1999 to 2000 due primarily to
three unsecured debt issues and two secured debt issues completed by the Company
in 2000. Amortization of deferred loan costs increased from 1998 to 1999 due
primarily to two secured debt issues completed by the Company in 1999. See
"Liquidity and Capital Resources" below.
General and administrative expenses increased from 1999 to 2000 primarily due to
increased personnel costs and a reduction in development support. General and
administrative expenses decreased from 1998 to 1999 as a result of a reduction
in personnel related expenditures and an increase in development support.
The net gain on sale of assets in 2000 resulted from the sale of eight
communities, reduced by management's best estimate of the effect of the
anticipated sale of communities currently held for sale. The net loss on sale of
assets in 1999 resulted from the net loss on the sale of one community and two
tracts of land.
In the fourth quarter of 2000, management decided to restrict its development
activities to fewer markets, refine its development investment strategy, exit
the for-sale housing business and make changes in its executive management team.
As a result of this decision, the Company wrote off $4,389 of costs it had
incurred in markets it will no longer pursue for development opportunities and
on individual development deals that are no longer consistent with management's
revised strategy.
At December 31, 2000, all employees included in the severance charge of $3,066
had been notified of their termination and severance agreement. As of February
15, 2001, these employees were no longer providing any service to the Company.
The employees included in the accrual at December 31, 2000, were primarily four
executives and five accounting department employees in the Dallas regional
office. At December 31, 2000, the accrual for unpaid severance charges was
$2,250.
In addition to these charges, the Company also recorded an impairment charge of
$407 to adjust the cost of for-sale housing in Atlanta and Dallas to its
estimated net sales proceeds. Additionally, the Company recorded a charge of
$1,503 to write off its investment in Darwin Networks, a high-speed Internet
provider that filed for Chapter 11 bankruptcy in January 2001.
The loss on unused treasury locks in 1998 resulted from the termination of
treasury locks intended for debt securities that were not issued by the
Operating Partnership.
The extraordinary item in 1999, net of the minority interest portion,
resulted from the costs associated with the early retirement of debt.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's net cash provided by operating activities increased from $148,618
in 1998 to $153,038 in 1999, primarily due to increased net income partially
offset by a net decrease in cash from changes in current assets. The change in
current assets is primarily attributable to $7,750 of employee loans, $9,500 in
tax increment financing receivables with public/private development projects and
additional expenditures for pre-development activities.
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Net cash provided by operating activities increased from $153,038 in 1999 to
$185,073 in 2000 primarily due to changes in working capital and an increase in
net income before depreciation.
Net cash used in investing activities decreased from $328,216 in 1998 to
$317,960 in 1999 primarily due to proceeds from the sale of one community in
March 1999 and reduced capital expenditures. Net cash used in investing
activities decreased from $317,960 in 1999 to $255,986 in 2000 primarily due to
proceeds from the sale of eight communities partially offset by increased
spending on construction and acquisition of real estate assets.
Net cash provided by financing activities decreased from $189,873 in 1998 to
$149,638 in 1999 primarily due to reduced proceeds from debt and equity
offerings partially offset by reduced debt payments. Net cash provided by
financing activities decreased from $149,638 in 1999 to $72,502 in 2000
primarily due to increased debt payments and treasury stock purchases partially
offset by increased debt proceeds.
The Company has elected to be taxed as a Real Estate Investment Trust ("REIT")
under Sections 856 through 860 of the Code 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 (90% beginning in 2001). As a REIT, the
Company generally will not be subject to Federal income tax on net income.
The discussion in this Liquidity section is the same for the Company and the
Operating Partnership, except that all indebtedness described herein has been
incurred by the Operating Partnership. At December 31, 2000, the Company had
total indebtedness of $1,213,309 and cash and cash equivalents of $7,459. The
Company's indebtedness includes approximately $232,504 in conventional mortgages
payable and $235,880 in tax-exempt bond indebtedness secured by communities,
senior unsecured notes of $720,000, and other unsecured debt and borrowings
under unsecured lines of credit totaling approximately $24,925. A schedule of
indebtedness is included in Item 7.
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, possible sale of properties
and the issuance of debt securities or additional equity securities of the
Company or Units of the Operating Partnership in connection with acquisitions of
land or improved properties. The Company believes that its net cash provided by
operations 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
On January 12, 2001, the Company closed a $320,000 three-year syndicated
revolving line of credit (the "Revolver") which matures in April 2004. This line
of credit bears interest of LIBOR plus .75% or prime minus .25% and replaces the
Company's previous line. The Revolver provides for the rate to be adjusted up or
down based on changes in the credit ratings on the Company's senior unsecured
debt. The Revolver also includes a money market competitive bid option for
short-term funds up to $160,000 at rates below the stated line rate. The credit
agreement for the Revolver contains customary representations, covenants and
events of default, including covenants which restrict the ability of the
Operating Partnership to make distributions, in excess of stated amounts, which
in turn restricts the discretion of the Company to declare and pay dividends. In
general, during any fiscal year the Operating Partnership may only distribute up
to 100% of the Operating Partnership's consolidated income available for
distribution (as defined in the credit agreement) exclusive of distributions of
up to $30,000 of capital gains for such year. The credit agreement contains
exceptions to these limitations to allow the Operating Partnership to make
distributions necessary to allow the Company to maintain its status as a REIT.
The Company does not anticipate that this covenant will adversely affect the
ability of the Operating Partnership to make distributions, or the Company to
declare dividends, under the Company's current dividend policy.
Also in January 2001, the Company reached an agreement with a syndicated group
of banks for an incremental $185,000, 364 day facility at terms substantially
equal to the Revolver.
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On July 26, 1996, the Company closed a $20,000 unsecured line of credit with
Wachovia Bank of Georgia, N.A. (The "Cash Management Line"). The Cash Management
Line bears interest at LIBOR plus .675% or prime minus .25% and matures on March
31, 2002. The Revolver requires three days advance notice to repay borrowings
whereas the Cash Management Line provides the Company with an automatic daily
sweep which applies all available cash to reduce the outstanding balance. In
addition, the Company has a $3,000 facility to provide letters of credit for
general business purposes.
Other Unsecured Debt
On March 1, 1998, the Company entered into a Disposition and Development
Agreement with the City of Phoenix, Arizona. Pursuant to this agreement, the
City of Phoenix loaned the Company $2,000. This loan is interest-free for the
first three years, with a 5.00% interest rate thereafter. Repayment of the loan
commences on March 1, 2001 with equal semi-annual payments due on March 1 and
September 1 of each year through March 1, 2021.
Tax Exempt Bonds
On June 29, 1995, the Company replaced the bank letters of credit providing
credit enhancement for its outstanding tax-exempt bonds. Under an agreement with
the Federal National Mortgage Association ("FNMA"), FNMA now provides, directly
or indirectly through other bank letters of credit, credit enhancement with
respect to such bonds. Under the terms of such agreement, FNMA has provided
replacement credit enhancement through 2025 for the bond issues, aggregating
$235,880, which were reissued. The agreement with FNMA contains representations,
covenants, and events of default customary to such secured loans.
Secured Debt
On March 30, 1999, the Company issued $50,000 of secured notes to The
Northwestern Mutual Life Insurance Company. These notes bear interest at 6.5%
with an effective rate of 7.3% after consideration of a terminated swap
agreement, mature on March 1, 2009 and are secured by two apartment communities.
Net proceeds of $49,933 were used to repay outstanding indebtedness.
On July 23, 1999, the Company issued $104,000 of secured notes to FNMA. Net
proceeds of $101,988 were used to repay outstanding indebtedness. These notes
bear interest at 30-day LIBOR plus credit enhancement, liquidity and service
fees of .935%, mature on July 23, 2029 and are secured by five apartment
communities. The notes include a prepayment penalty that is an amount equal to a
percentage of the principal amount remaining under the notes at the time of
prepayment. The penalty ranges from 4.8% in the first year to .65% in the tenth
year. The Company has an option to call these notes after ten years from the
issuance date. In December 2000, the Company entered into a swap transaction
that fixed the rate of interest on this note at 6.975%, inclusive of credit
enhancement and other fees, from January 1, 2001 through July 31, 2009.
On October 3, 2000, the Company issued two secured notes totaling $80,000 to The
Northwestern Mutual Life Insurance Company. The notes bear interest at 7.69% and
mature on October 1, 2007. Each note is secured by an apartment community. Net
proceeds of $79,334 were used to repay outstanding indebtedness.
Senior Unsecured Debt Offerings
On June 7, 1995, the Company issued $50,000 of unsecured senior notes with The
Northwestern Mutual Life Insurance Company. The notes were in two tranches; the
first, totaling $30,000, carries an interest rate of 8.21% per annum (1.25% over
the corresponding treasury rate on the date such rate was set) and matures on
June 7, 2001; and the second, totaling $20,000 carries an interest rate of 8.37%
per annum (1.35% over the corresponding treasury rate on the date such rate was
set) and matures on June 7, 2002. Proceeds from the notes were used to repay
outstanding indebtedness. The note agreements pursuant to which the notes were
purchased contain customary representations, covenants and events of default
similar to those contained in the note agreement for the Revolver.
On September 30, 1996, the Company completed a public offering of $125,000
senior unsecured debt comprised of two tranches. The first tranche, $100,000 of
7.25% Notes due on October 1, 2003 (the "2003 Notes"), was priced at 99.642% to
yield 7.316%, or 71 basis points over the rate on U.S. Treasury securities with
a comparable maturity. The second tranche, $25,000 of 7.50% Notes due on October
1, 2006 (the "2006 Notes", and together with the 2003
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Notes, the "Notes"), was priced at 99.694% to yield 7.544%, or 83 basis points
over the rate on U.S. Treasury securities with a comparable maturity. Proceeds
from the Notes were used to repay outstanding indebtedness.
On December 20, 2000, the Company issued $185,000 of unsecured senior notes. The
notes bear interest at 7.70% and mature on December 20, 2010. Net proceeds of
approximately $183,798 were used to repay outstanding indebtedness.
Medium Term Notes and Mandatory Par Put Remarketed Securities
On January 29, 1997, the Company established a program for the sale of
Medium-Term Notes due three months or more from the date of issue (the "MTNs").
As of December 31, 2000, the Company had $360,000 aggregate principal amount of
notes outstanding under the MTN Program. Proceeds from the MTNs were used to (i)
prepay certain outstanding notes and (ii) repay outstanding indebtedness.
On March 12, 1998, the Company issued $100,000 of 6.85% Mandatory Par Put
Remarketed Securities(SM) ("MOPPRS(SM)") under the MTN Program. The net proceeds
of $99,087 from the sale of the MOPPRS(SM) were used to repay outstanding
indebtedness. In connection with the MOPPRS(SM) transaction, Merrill Lynch & Co.
purchased an option to remarket the securities as of March 16, 2005 (the
"Remarketing Date") reducing the effective borrowing rate through the
Remarketing Date to 6.59%. In anticipation of the offering, the Company entered
into forward-treasury-lock agreements in the fall of 1997. As a result of the
termination of these agreements, the effective borrowing rate was increased to
approximately 6.85%, the coupon rate on the MOPPRS(SM).
On May 9, 2000, the Company sold $25,000 aggregate principal amount of notes
under the MTN Program. These notes bear interest at the London Interbank O