##### Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, DC 20549




---

Form 10-K

[X]       ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For fiscal year ended December 31, 2004


OR

[ ]       TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934


For the transition period from

to

Commission file number 1-12080


Commission file number 0-28226




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POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.


(Exact name of registrants as specified in their
charters)


|                                                                                      |  |                                                                  
|------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------
|Georgia
    Georgia(State or other jurisdiction of
    incorporation or organization) |  | 58-1550675
    58-2053632(I.R.S. Employer
    Identification No.)

4401 Northside Parkway, Suite 800,
Atlanta, Georgia 30327

(Address of principal executive
office  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
    Redeemable Preferred Shares,
    $.01 par value |  | New York Stock Exchange 
|7 5/8% Series B Cumulative
    Redeemable Preferred Shares,
    $.01 par value |  | New York Stock Exchange 

Securities registered pursuant to
Section 12(g) of the Act: None

|                    |  |                         
|------------------- |  | ------------------------
|                    |  | Name of Each Exchange on
|Title of each class |  | Which Registered        
|                    |  |                         



---

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 June 30, 2004 was
approximately $1,135,323,152. As of February  28, 2005
there were 40,225,666 shares of common stock, $.01 par
value, outstanding.

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).

|                           |  |           |  |         
|-------------------------- |  | --------- |  | --------
|Post Properties, Inc.      |  | Yes   [X] |  | No   [ ]
|Post Apartment Homes, L.P. |  | Yes   [X] |  | No   [ ]



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DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Post Properties, Inc.s
Proxy Statement in connection with its Annual Meeting of
Shareholders to be held May 19, 2005 are incorporated by
reference in Part III.



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POST PROPERTIES, INC.


POST APARTMENT HOMES, L.P.




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TABLE OF CONTENTS

FINANCIAL INFORMATION

|                                              |  |                                                                                                                              |  |      |    | 
|--------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|Item                                          |  |                                                                                                                              |  | Page
|No.                                           |  |                                                                                                                              |  | No. 
|                                              |  |                                                                                                                              |  |     
|PART I                                       
|1.                                            |  | Business                                                                                                                     |  |      | 1  | 
|2.                                            |  | Properties                                                                                                                   |  |      | 14 | 
|3.                                            |  | Legal Proceedings                                                                                                            |  |      | 18 | 
|4.                                            |  | Submission of Matters to a
    Vote of Security Holders                                                                      |  |      | 18 | 
|X.                                            |  | Executive Officers of the
    Registrant                                                                                     |  |      | 18 | 
|                                             
|PART II                                      
|5.                                            |  | Market Price of the
    Registrants Common Stock, Related Shareholder Matters and
    Issuer Purchases of Equity Securities |  |      | 20 | 
|6.                                            |  | Selected Financial Data                                                                                                      |  |      | 21 | 
|7.                                            |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                                    |  |      | 23 | 
|7A.                                           |  | Quantitative and Qualitative
    Disclosures about Market Risk                                                               |  |      | 47 | 
|8.                                            |  | Financial Statements and
    Supplementary Data                                                                              |  |      | 48 | 
|9.                                            |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                                     |  |      | 48 | 
|9A.                                           |  | Controls and Procedures                                                                                                      |  |      | 48 | 
|9B.                                           |  | Other Information                                                                                                            |  |      | 48 | 
|                                             
|PART III                                     
|10.                                           |  | Directors and Executive
    Officers of the Registrant                                                                       |  |      | 49 | 
|11.                                           |  | Executive Compensation                                                                                                       |  |      | 49 | 
|12.                                           |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Shareholder
    Matters                       |  |      | 49 | 
|13.                                           |  | Certain Relationships and
    Related Transactions                                                                           |  |      | 49 | 
|14.                                           |  | Principal Accountant Fees
    and Services                                                                                   |  |      | 49 | 
|                                             
|PART IV                                      
|15.                                           |  | Exhibits, Financial
    Statements and Schedules                                                                             |  |      | 50 | 
|EX-21.1 List of Subsidiaries                 
|EX-23.1 Consent of PricewaterhouseCoopers LLP
|EX-23.2 Consent of PricewaterhouseCoopers LLP
|EX-31.1 302 Certification of CEO             
|EX-31.2 302 Certification of CFO             
|EX-32.1 906 Certification of CEO             
|EX-32.2 906 Certification of CFO             





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##### Table of Contents






PART I






|        |         
|------- | --------
|ITEM 1. | BUSINESS

THE COMPANY

Post Properties, Inc. and its subsidiaries
develop, own and manage upscale multifamily apartment
communities in selected markets in the United States. As used in
this report, the term Company includes Post
Properties, Inc. and its subsidiaries, including Post Apartment
Homes, L.P. (the Operating Partnership), unless the
context indicates otherwise. The Company, through its
wholly-owned subsidiaries, is the general partner and owns a
majority interest in the Operating Partnership which, through
its subsidiaries, conducts substantially all of the on-going
operations of the Company. At December 31, 2004,
approximately 51.6%, 17.6%, 9.0% and 8.0% (on a unit basis) of
the Companys communities were located in the Atlanta,
Georgia, Dallas, Texas, Tampa, Florida and the greater
Washington, D.C. metropolitan areas, respectively. At
December 31, 2004, the Company owned 24,905 apartment units
in 66 apartment communities, including 666 apartment units in
three communities held in unconsolidated entities, including 205
apartment units currently under development in one community and
including 127 units in one community that will be converted
into for-sale condominium homes through a taxable REIT
subsidiary starting in 2005. The Company is also developing 145
for-sale condominium homes through a taxable REIT subsidiary.
Subsequent to December 31, 2004, the Company announced
plans to convert another community, containing 134 units,
into for-sale condominium homes through a taxable REIT
subsidiary. The Company is a fully integrated organization with
multifamily development, operations and asset management
expertise. The Company has approximately 859 employees, 17 of
whom are parties to a collective bargaining agreement.

The Company is a self-administrated and
self-managed equity real estate investment trust (a
REIT). A REIT is a legal entity which holds real
estate interests and, through the payment of dividends to
shareholders, in practical effect is not subject to federal
income taxes.

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® 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, 2004, the Company, through
wholly-owned subsidiaries, controlled the Operating Partnership
as the sole general partner and as the holder of 94.1% of the
common units in the Operating Partnership (the Common
Units) and 100% of the preferred units (the
Perpetual Preferred Units). The other limited
partners of the Operating Partnership who hold Common Units are
those persons who, at the time of the Companys initial
public offering, elected to hold all or a portion of their
interests in the form of Common Units rather than receiving
shares of common stock. Holders of Common Units may cause the
Operating Partnership to redeem any of their Common Units for,
at the option of the Operating Partnership, either one share of
Common Stock or cash equal to the fair market value thereof at
the time of such redemption. The Operating Partnership presently
anticipates that it will cause shares of common stock to be
issued in connection with each such redemption (as has been done
in all redemptions to date) rather than paying cash. With each
redemption of outstanding Common 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 to the Operating Partnership, and the Operating
Partnership will issue an equivalent number of Common 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 limited partnership agreement of the
Operating Partnership to manage and conduct the business of the
Operating Partnership, subject to the consent of a majority of
the outstanding Common 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. In general, the Operating Partnership cannot be
terminated, except in connection with a sale of all or
substantially all of the assets of the Company, until January
2044 without the approval of each limited partner who received
Common Units of the Operating Partnership in connection with the




Post Properties, Inc.


1


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Companys initial public offering. 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 in the Operating Partnership and indirectly
entitle the Company to vote on all matters requiring a vote of
the Operating Partnership.


As part of the formation of the Operating
Partnership, a holding company, Post Services, Inc. (Post
Services) was organized as a separate corporate subsidiary
of the Operating Partnership. Through Post Services and its
subsidiaries, the Operating Partnership will develop and sell
for-sale condominium units and provide leasing, landscaping and
property management services to third parties. Post Services is
a taxable REIT subsidiary as defined in the Internal
Revenue Code. Effective in 2004, the Operating Partnership owns
100% of the voting and nonvoting common stock of Post Services,
Inc. In prior years, the Operating Partnership owned 1% of the
voting common stock and 100% of the nonvoting common stock,
representing a 99% equity and economic interest in Post
Services, Inc.

Business Strategy

The Companys business strategy is to
deliver superior satisfaction and value to its residents,
associates and investors, with a vision to be the first choice
in quality multifamily living. Key elements of the
Companys business strategy are as follows:

Investment, Disposition and Acquisition
Strategy

The Companys investment, disposition and
acquisition strategy is to shape and rebalance its real estate
portfolio to achieve uniformly high quality, low average age
properties and cash flow diversification. The Company plans to
achieve its objectives by reducing its asset concentration in
Atlanta, Georgia and Dallas, Texas, while at the same time,
building critical mass in other core markets where it may
currently lack the portfolio size to achieve operating
efficiencies and the full value of the Post® brand. The
Company defines critical mass for this purpose as at least 2,000
apartment units or $200 million of investment in a
particular market. The Companys goal ultimately is to
reduce its concentration in Atlanta, Georgia, measured by
dollars invested, to 25% to 30% of the portfolio.


The Company plans to achieve its objectives by
selling its oldest and least competitively located properties,
and it may also consider selling joint venture interests in some
of its core properties or selectively converting some of these
properties to for-sale (condominium) housing. The Company
expects that this strategy will provide capital to reinvest in
new communities in dynamic neighborhoods and may also allow for
leveraged returns through joint venture structures that preserve
Post® branded property and asset management.

The Company is focusing on a limited number of
major cities and has substantially re-established its regional
value creation capabilities. The Company has added skilled
personnel to pursue acquisitions, development, dispositions and
select multifamily for-sale (condominium) opportunities
that are consistent with its market strategy. The Companys
value creation capabilities include regional value creation
teams in Atlanta, Georgia (focusing on the Southeast),
Washington, DC (focusing on that market and New York, New York)
and Dallas, Texas (focusing on the Southwest). The Company has
reduced the number of markets where it operates from thirteen to
ten, and may exit one or more additional markets in the future
if it does not believe it can achieve critical mass within a
reasonable period of time.

Key elements of the Companys investment and
acquisition strategy include instilling a disciplined team
approach to development and acquisition decisions and selecting
sites and properties in infill suburban and urban locations in
strong primary markets that serve the higher-end multifamily
consumer. The Company will focus development on the product
types that are more affordable to the deepest segment of the
upper end market in each city. The Company will, therefore, look
to develop more infill garden style communities in its sunbelt
markets and urban and mixed-use communities in those markets and
submarkets with existing density and barriers to entry to
warrant such communities. The Company plans to develop,
construct and continually maintain and improve its apartment
communities consistent with quality standards management
believes are synonymous with the Post® brand. New
acquisitions will be limited to properties that meet or that are
expected to be repositioned and improved to meet its quality and
location requirements. The Company will generally pursue
acquisitions either to rebalance its property portfolio, using
the proceeds of asset sales to redeploy capital in markets where
critical mass is desired, or to pursue opportunistic purchases
on a selective basis where market conditions warrant.

Post®Brand
Name Strategy

The Post® brand name has been cultivated for
more than 30 years, and its promotion has been integral to
the Companys success. Company management believes that the
Post® brand name is synonymous with quality upscale





Post Properties, Inc.


2


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##### Table of Contents



apartment communities that are situated in
desirable locations and that provide a high level of resident
service. The Company believes that it provides its residents
with a high level of service, including attractive landscaping
and numerous amenities, including controlled access, high-speed
connectivity, on-site business centers, on-site courtesy
officers, urban vegetable gardens and fitness centers at a
number of its communities.


Key elements in implementing the Companys
brand name strategy include extensively utilizing the
trademarked brand name and coordinating its advertising programs
to increase brand name recognition. During 2004, the Company
initiated a new marketing campaign, started new customer service
programs designed to raise resident satisfaction and provided
employees and residents new opportunities for community
involvement, all intended to enhance what it believes is a
valuable asset.

In early 2005, the Company announced the launch
of a new for-sale housing brand, Post Preferred
HomesTM, which will serve as the unified marketing
umbrella for the Companys for-sale ventures, including
developing new communities and converting existing assets into
upscale for-sale condominium housing in several key markets. The
Companys for-sale ventures will be marketed under the Post
Preferred HomesTM brand to differentiate for-sale
product from the Companys rental portfolio while
capitalizing on the Companys unique brand heritage.

Service and Associate Development
Strategy

The Companys service orientation strategy
includes utilizing independent third parties to regularly
measure resident satisfaction and providing performance
incentives to its associates linked to delivering a high level
of service and enhancing resident satisfaction. The Company also
plans to achieve its objective by investing in the development
and implementation of training programs focused on associates
development, improving the quality of its operations and the
delivery of resident service.


Operating Strategy

The Companys operating strategy includes
striving to be an innovator and a leader in anticipating
customer needs while achieving operating consistency across its
properties. The Company also will continue to explore
opportunities to improve processes and technology that drive
efficiency in its business. In 2005, the Company intends to
implement new property operating and centralized procurement
software for this purpose.


Financing Strategy

The Companys financing strategy is to
maintain a strong balance sheet and to maintain its investment
grade credit rating. The Company plans to achieve its objectives
by generally maintaining total effective leverage (debt and
preferred equity) as a percentage of undepreciated real estate
assets in a range of 50% to 55%, by generally limiting variable
rate indebtedness as a percentage of total indebtedness to not
more than 20% to 25% of aggregate indebtedness, and by
maintaining adequate liquidity through its unsecured lines of
credit. At December 31, 2004, the Companys total
effective leverage (debt and preferred equity) as a percentage
of undepreciated real estate assets and its total variable rate
indebtedness as a percentage of total indebtedness were within
or below these ranges.


Operating Divisions

The major operating divisions of the Company
include Post Apartment Management, Post Investment Group and
Post Corporate Services. Each of these operating divisions is
discussed below.


Post Apartment Management

Post Apartment Management is responsible for the
day-to-day operations of all Post® communities including
community leasing, property management, 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 (based on the number of employees).


Post Investment Group

Post Investment Group is responsible for all
development, acquisition, disposition, for-sale
(condominium) and asset management activities of the
Company. For development, this includes site selection, zoning
and regulatory approvals, project design and construction
management. This division is also responsible for apartment
community acquisitions as well as property dispositions and
strategic joint ventures that the Company undertakes as part of
its investment strategy. Within the asset management area, the
division recommends and executes major value added renovations
and redevelopments of existing communities as well as direction
for investment levels within each city and any new geographic
market areas and new product types that the Company may consider.





Post Properties, Inc.


3


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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 Segments

The Post Apartment Management division and the
Company manage the owned apartment communities based on the
operating segments associated with the various stages in the
apartment ownership lifecycle. The Companys primary
operating segments are described below. In addition to these
segments, all commercial properties and other ancillary service
and support operations are reviewed and managed separately and
in the aggregate by Company management.



|  |                                                                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Fully stabilized communities  those
    apartment communities which have been stabilized (the earlier of
    the point at which a property reaches 95% occupancy or one year
    after completion of construction) for both the current and prior
    year.
| 
| | Communities stabilized during prior
    year  communities which reached stabilized occupancy
    in the prior year.                                                                                                                                        
| 
| | Development and lease-up communities 
    those communities that are in lease-up but were not stabilized
    by the beginning of the current year, including communities that
    stabilized during the current year.                                      
| 
| | Acquired communities  those
    communities acquired in the current or prior year.                                                                                                                                                                         
| 
| | Sold communities  communities which
    were sold in the current or prior year and not reflected as
    discontinued operations (see notes 1 and 5 to the
    consolidated financial statements included herein).                                          

A summary of segment operating results for 2004,
2003 and 2002 is included in note 15 to the Companys
consolidated financial statements. Additionally, segment
operating performance for such years is discussed in
Item 7, Managements Discussion and Analysis of
Financial Condition and Results of Operations in this
annual report on Form 10-K.

Summary of Investment and Disposition
Activity

During the five-year period from January 1,
2000 through December 31, 2004, the Company and its
affiliates have developed and completed 8,045 apartment units in
24 apartment communities, and sold 35 apartment communities
containing an aggregate of 13,564 apartment units. During the
same period, the Company acquired one apartment community
containing 499 units. The Company and its affiliates have
sold apartment communities after holding them for investment
periods that generally range up to twenty years after
acquisition or development. The following table shows a summary
of the Companys development and sales activity during
these periods.

|                                                                                                                  |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                                  |  | 2004 |         | 2003 |  | 2002 |         | 2001 |  | 2000
|                                                                                                                  |  |      |         |      |  |      |         |      |  |     
|Units developed and completed                                                                                     |  |      |        |      |  |      | 468     |      |  |      | 2,140   |   |  |   | 2,651   |   |  |   | 2,786   |  
|Units acquired                                                                                                    |  |      | 499     |      |  |      |        |      |  |      |        |   |  |   |        |   |  |   |        |  
|Units sold                                                                                                        |  |      | (3,880  | )    |  |      | (2,236  | )    |  |      | (2,665  | ) |  |   | (2,799  | ) |  |   | (1,984  | )
|Total units completed and owned by the Company
    and its affiliates (including units held for sale) at year-end |  |      | 24,700  | (1)  |  |      | 28,081  |      |  |      | 29,849  |   |  |   | 30,374  |   |  |   | 30,522  |  
|Total rental revenues from continuing operations
    (in thousands)                                               |  | $    | 281,664 |      |  | $    | 269,400 |      |  | $    | 265,301 |   |  | $ | 283,032 |   |  | $ | 284,560 |  



|    |                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes 261 units being converted into
    for-sale condominiums in 2005, but excludes 205 apartment units
    currently under development.




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##### Table of Contents



Current Development Activity

At December 31, 2004, the Company had one
community under development, containing 350 apartment and
for-sale condominium units. This community is summarized in the
table below.

|                                                    |  |                 |     |              |  |            |    |              |  |             |    |              |  |  |        |  |  |  |        |  |  |  |        | 
|--------------------------------------------------- |  | --------------- | --- | ------------ |  | ---------- | -- | ------------ |  | ----------- | -- | ------------ |  |  | ------ |  |  |  | ------ |  |  |  | ------ | 
|                                                    |  |                 |     |              |  | Costs      |    |              |  |             |    | Estimated   
|                                                    |  |                 |     | Estimated    |  | Incurred   |    | Quarter of   |  | Quarter of  |    | Quarter of  
|                                                    |  | Number of       |     | Construction |  | As of      |    | Construction |  | First Units |    | Stabilized  
|Metropolitan Area                                   |  | Units           |     | Cost         |  | 12/31/2004 |    | Start        |  | Available   |    | Occupancy(1)
|                                                    |  |                 |     |              |  |            |    |              |  |             |    |             
|                                                    |  |                
|                                                    |  | ($ in millions)
|Construction/ Lease-up Communities                  |  |                 |     |              |  |            |    |              |  |             |    |              |  |  |        |  |  |  |        |  |  |  |        | 
|Washington D.C.                                     |  |                 |     |              |  |            |    |              |  |             |    |              |  |  |        |  |  |  |        |  |  |  |        | 
|Post CarlyleTM  Apartments
    and Condominiums(2) |  |                 | 350 |              |  | $          | 95 |              |  | $           | 20 |              |  |  | 4Q 04 |  |  |  | 2Q 06 |  |  |  | 2Q 07 | 
|                                                    |  |                 |     |              |  |            |    |              |  |             |    |              |  |  |        |  |  |  |        |  |  |  |        | 
|Construction/ Lease-up Communities                  |  |                 | 350 |              |  | $          | 95 |              |  | $           | 20 |              |  |  |        |  |  |  |        |  |  |  |        | 
|                                                    |  |                 |     |              |  |            |    |              |  |             |    |              |  |  |        |  |  |  |        |  |  |  |        | 



|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company defines stabilized occupancy for
    apartment communities as the earlier to occur of (i) the
    attainment of 95% physical occupancy on the first day of any
    month or (ii) one year after completion of construction.
|(2) | The condominium component of the project,
    consisting of 145 units, will be developed through a
    taxable REIT subsidiary in a majority owned joint venture with a
    Washington D.C. based developer.                           

Competition

All of the Companys apartment and for-sale
(condominium) communities are located in developed markets
that include other upscale apartments and for-sale
(condominium) projects owned by numerous public and private
companies. Some of these companies may have substantially
greater resources and greater access to capital than the
Company, allowing them to grow at rates greater than the
Company. The number of competitive upscale apartment and
for-sale (condominium) properties and companies in a
particular market could have a material effect on the
Companys ability to lease apartment units at its apartment
communities, including any newly developed or acquired
communities, and on the rents charged, and could have a material
effect on the Companys ability to sell for-sale
(condominium) units and on the selling prices of such
units. In addition, other forms of residential properties,
including single family housing, condominiums and town homes,
provide housing alternatives to potential residents of upscale
apartment communities.

The Company competes for residents in its
apartment communities based on its high level of resident
service, the quality of its apartment communities (including its
landscaping and amenity offerings) and the desirability of its
locations. Resident leases at its apartment communities are
priced competitively based on market conditions, supply and
demand characteristics, and the quality and resident service
offerings of its communities. The Company does not seek to
compete solely on the basis of providing the low-cost solution
for all residents.

Americans with Disabilities Act

The Companys apartment 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
apartment 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, in all material
respects, 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 and financial condition could be adversely
affected.

Environmental Regulations

The Company is subject to federal, state and
local environmental laws, ordinances, and regulations that apply
to the development of real property, including construction
activities, the ownership of real property, and the operation of
multifamily apartment and for-sale (condominium) communities.




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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
third-party environmental consultant in accordance with
recognized industry standards. The environmental investigation
report is reviewed by the Company and counsel prior to purchase
and/or development of any property. If the environmental
investigation identifies evidence of potentially significant
environmental contamination that merits additional
investigation, sampling of the property is performed by the
environmental consultant.

If necessary, remediation or migration of
contamination, including removal of underground storage tanks,
is undertaken either prior to development or at another
appropriate time. When performing remediation activities, the
Company is subject to a variety of environmental requirements.
In some cases, the Company obtains state approval of the
selected remediation measures by entering into voluntary
environmental cleanup programs administered by state agencies.

In developing properties and constructing
apartment and for-sale (condominium) communities, the
Company utilizes independent environmental consultants to
determine whether there are any flood plains, wetlands or other
environmentally sensitive areas that are part of the property to
be developed. If flood plains are identified, development and
construction work 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. If wetlands or other environmentally sensitive
areas are identified, the Company plans and conducts its
development and construction activities and obtains the
necessary permits and authorizations in compliance with
applicable legal standards. In some cases, however, the presence
of wetlands and/or other environmentally sensitive areas could
preclude, severely limit, or otherwise alter the proposed site
development and construction activities.

Storm water discharge from a construction site is
subject to the storm water permit requirements mandated under
the Clean Water Act. In most jurisdictions, the state
administers the permit programs. The Company currently
anticipates that it will be able to obtain and materially comply
with any storm water permits required for new development. The
Company has obtained and is in material compliance with the
construction site storm water permits required for its existing
development activities.

The Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. sec. 9601
et seq. (CERCLA), and comparable state laws
subject the owner or operator of real property or a facility and
persons who arranged for off-site disposal activities to claims
or liability for the costs of removal or remediation of
hazardous substances that are released at, in, on, under, or
from real property or a facility. In addition to claims for
cleanup costs, the presence of hazardous substances on or the
release of hazardous substances from a property or a facility
could result in a claim by a private party for personal injury
or property damage or could result in a claim from a
governmental agency for other damages. Liability under CERCLA
and comparable state laws can be imposed on the owner or the
operator of real property or a facility without regard to fault
or even knowledge of the release of hazardous substances and
other regulated materials on, at, in, under, or from the
property or facility. Environmental liabilities associated with
hazardous substances also could be imposed on the Company under
other applicable environmental laws, such as the Resource
Conservation and Recovery Act (and comparable state laws), or
common-law principles. The presence of hazardous substances in
amounts requiring response action or the failure to undertake
necessary remediation may adversely affect the owners
ability to use or sell real estate or borrow money using such
real estate as collateral.

Various environmental laws govern certain aspects
of the Companys ongoing operation of its communities. Such
environmental laws include those regulating the existence of
asbestos-containing materials in buildings, management of
surfaces with lead-based paint (and notices to residents about
the lead-based paint), use of active underground petroleum
storage tanks, and waste-management activities. The failure to
comply with such requirements could subject the Company to a
government enforcement action and/or claims for damages by a
private party.

The Company has not been notified by any
governmental authority of any material noncompliance, claim, or
liability in connection with environmental conditions associated
with any of its apartment and for-sale
(condominium) communities. The Company has not been
notified of a material claim for personal injury or property
damage by a private party relating to any of its apartment and
for-sale (condominium) communities in connection with
environmental conditions. The Company is not aware of any
environmental condition with respect to any of its apartment and
for-sale (condominium) communities that could be considered
to be material.

It is possible, however, that the environmental
investigations of the Companys properties might not have
revealed all potential environmental liabilities associated with
the Companys real property and its apartment and for-sale
(condominium) communities or the Company might have
underestimated any potential environmental issues




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identified in the investigations. It is also
possible that future environmental laws, ordinances, or
regulations or new interpretations of existing environmental
laws, ordinances, or regulations will impose material
environmental liabilities on the Company; the current
environmental conditions of properties that the Company owns or
operates will be affected adversely by hazardous substances
associated with other nearby properties or the actions of third
parties unrelated to the Company; or our residents and/or
commercial tenants may engage in activities prohibited by their
leases or otherwise expose the Company to liability under
applicable environmental laws, ordinances, or regulations. The
costs of defending any future environmental claims, performing
any future environmental remediation, satisfying any such
environmental liabilities, or responding to any changed
environmental conditions could materially adversely affect the
Companys financial conditions and results of operations.


Where You Can Find More Information

The Company makes its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on
Form 8-K, and all amendments to such reports filed pursuant
to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, available (free of charge) on or through its
Internet website, located at http://www.postproperties.com, as
soon as reasonably practicable after they are filed with or
furnished to the SEC.

RISK FACTORS

The following risk factors apply to Post
Properties, Inc. (the Company) and Post Apartment
Homes, L.P. (the Operating Partnership). All
indebtedness described in the risk factors has been incurred by
the Operating Partnership.

Unfavorable changes in apartment markets and
economic conditions could adversely affect occupancy levels and
rental rates.

Market and economic conditions in the various
metropolitan areas of the United States where the Company
operates, particularly Atlanta, Georgia, Dallas, Texas, Tampa,
Florida and the greater Washington, D.C. area where a
substantial majority of the Companys apartment communities
are located, may significantly affect occupancy levels and
rental rates and therefore profitability. Factors that may
adversely affect these conditions include the following:



|  |                                                                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the economic climate, which may be adversely
    impacted by a reduction in jobs, industry slowdowns and other
    factors;                                                        
| 
| | local conditions, such as oversupply of, or
    reduced demand for, apartment homes;                                                                                               
| 
| | continued or worsened weak economic and market
    conditions that simultaneously affect one or more of the
    Companys geographic markets;                                      
| 
| | declines in household formation;                                                                                                                                                   
| 
| | favorable residential mortgage rates;                                                                                                                                              
| 
| | rent control or stabilization laws, or other laws
    regulating rental housing, which could prevent the Company from
    raising rents to offset increases in operating costs; and
| 
| | competition from other available apartments and
    other housing alternatives and changes in market rental rates.                                                                 

Any of these factors could adversely affect the
Companys ability to achieve desired operating results from
its communities.

Development and construction risks could
impact the companys profitability.

The Company intends to continue to develop and
construct apartment communities and may convert existing
apartment communities into condominiums or develop for-sale
(condominium) housing. Development activities may be conducted
through wholly-owned affiliated companies or through joint
ventures with unaffiliated parties. The Companys
development and construction activities may be exposed to the
following risks:



|  |                                                                                                                                                                                                                                                  
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the Company may be unable to obtain, or face
    delays in obtaining, necessary zoning, land-use, building,
    occupancy, and other required governmental permits and
    authorizations, which could result in increased development
    costs;




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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the Company may incur construction costs for a
    property that exceed original estimates due to increased
    materials, labor or other costs, which could make completion of
    the property uneconomical, and the Company may not be able to
    increase rents or for-sale (condominium) unit sales prices to
    compensate for the increase in construction costs;                                                                              
| 
| | the Company may abandon development opportunities
    that it has already begun to explore, and it may fail to recover
    expenses already incurred in connection with exploring those
    opportunities;                                                                                                                                                                                                                                              
| 
| | the Company has been and may continue to be
    unable to complete construction and lease-up of a community on
    schedule and meet financial goals for development projects;                                                                                                                                                                                                                                                                          
| 
| | because occupancy rates and rents at a newly
    developed community may fluctuate depending on a number of
    factors, including market and economic conditions, the Company
    may be unable to meet its profitability goals for that
    community; and                                                                                                                                                                                            
| 
| | land costs and construction costs have been
    increasing in the Companys existing markets, and may
    continue to increase in the future and, in some cases, the costs
    of upgrading acquired communities have, and may continue to,
    exceed original estimates and the Company may be unable to
    charge rents, or sales prices with respect to for-sale
    (condominium) product, that would compensate for these increases
    in costs.

Possible Difficulty of Selling Apartment
Communities Could Limit the Companys Operational and
Financial Flexibility.

Purchasers may not be willing to pay acceptable
prices for apartment communities that the Company wishes to
sell. A weak market may limit the Companys ability to
change its portfolio promptly in response to changing economic
conditions. Also, if the Company is unable to sell apartment
communities or if it can only sell apartment communities at
prices lower than are generally acceptable, then the Company may
have to take on additional leverage in order to provide adequate
capital to execute its development and construction and
acquisitions strategy. Furthermore, a portion of the proceeds
from the Companys overall property sales in the future may
be held in escrow accounts in order for some sales to qualify as
like-kind exchanges under Section 1031 of the Internal
Revenue Code so that any related capital gain can be deferred
for federal income tax purposes. As a result, the Company may
not have immediate access to all of the cash flow generated from
property sales.

Changing Interest Rates Could Increase
Interest Costs and Could Affect the Market Price of the
Companys Securities.

The Company has incurred, and expects to continue
to incur, debt bearing interest at rates that vary with market
interest rates. Therefore, if interest rates increase, the
Companys interest costs will rise to the extent its
variable rate debt is not hedged effectively. Further, while the
Companys stated goal is to limit variable rate debt to not
more than 20% to 25% of total indebtedness, management may
adjust these levels over time. In addition, an increase in
market interest rates may lead purchasers of the Companys
securities to demand a higher annual yield, which could
adversely affect the market price of the Companys common
and preferred stock and debt securities.

Failure to Generate Sufficient Cash Flows
Could Affect the Companys Debt Financing and Create
Refinancing Risk.

The Company is subject to the risks normally
associated with debt financing, including the risk that its cash
flow will be insufficient to make required payments of principal
and interest. Although the Company may be able to use cash flow
to make future principal payments, it cannot assure investors
that sufficient cash flow will be available to make all required
principal payments and still satisfy the distribution
requirements that the Company must satisfy in order to maintain
its status as a real estate investment trust or REIT
for federal income tax purposes. The following factors, among
others, may affect the cash flows generated by the
Companys apartment communities:



|  |                                                                                                                                                                             
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the national and local economies;                                                                                                                                           
| 
| | local real estate market conditions, such as an
    oversupply of apartment homes;                                                                                          
| 
| | the perceptions by prospective residents of the
    safety, convenience and attractiveness of the Companys
    communities and the neighborhoods in which they are located;
| 
| | the Companys ability to provide adequate
    management, maintenance and insurance; and                                                                                    
| 
| | rental expenses, including real estate taxes and
    utilities.                                                                                                             




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Expenses associated with the Companys
investment in apartment communities, such as debt service, real
estate taxes, insurance and maintenance costs, are generally not
reduced when circumstances cause a reduction in cash flows from
operations from that community. If a community is mortgaged to
secure payment of debt and the Company is unable to make the
mortgage payments, the Company could sustain a loss as a result
of foreclosure on the community or the exercise of other
remedies by the mortgagee. The Company is likely to need to
refinance at least a portion of its outstanding debt as it
matures. There is a risk that the Company may not be able to
refinance existing debt or that the terms of any refinancing
will not be as favorable as the terms of the existing debt. As
of December 31, 2004, the Company had outstanding mortgage
indebtedness of approximately $481.7 million and senior
unsecured debt of approximately $597.0 million (of which
approximately $212.0 million matures in 2005).

The Company Could Become More Highly Leveraged
Which Could Result in an Increased Risk of Default and in an
Increase in its Debt Service Requirements.

The Companys stated goal is to generally
maintain total effective leverage (debt and preferred equity) as
a percentage of undepreciated real estate assets in a range of
50% to 55%, to generally limit variable rate indebtedness as a
percentage of total indebtedness to not more than 20% to 25% of
aggregate indebtedness, and to maintain adequate liquidity
through the Companys unsecured lines of credit.

At December 31, 2004, the Companys
total effective leverage (debt and preferred equity) as a
percentage of undepreciated real estate assets and the
Companys total variable rate indebtedness as a percentage
of total indebtedness were within or below these ranges. If
management adjusts the Companys stated goal in the future,
the Company could become more highly leveraged, resulting in an
increase in debt service that could adversely affect funds from
operations, the Companys ability to make expected
distributions to its shareholders and the Operating
Partnerships ability to make expected distributions to its
limited partners and in an increased risk of default on the
obligations of the Company and the Operating Partnership. In
addition, the Companys and the Operating
Partnerships ability to incur debt is limited by covenants
in bank and other credit agreements and in the Companys
outstanding senior unsecured notes. The Company manages its debt
to be in compliance with its stated policy and with these debt
covenants, but subject to compliance with these covenants, the
Company may increase the amount of outstanding debt at any time
without a concurrent improvement in the Companys ability
to service the additional debt. Accordingly, the Company could
become more leveraged, resulting in an increased risk of default
on its obligations and in an increase in debt service
requirements, both of which could adversely affect the
Companys financial condition and ability to access debt
and equity capital markets in the future.

Debt Financing May Not be Available and Equity
Issuances Could be Dilutive to the Companys
Shareholders.

The Companys ability to execute its
business strategy depends on its access to an appropriate blend
of debt financing, including unsecured lines of credit and other
forms of secured and unsecured debt, and equity financing,
including common and preferred equity. Debt financing may not be
available in sufficient amounts, or on favorable terms or at
all. If the Company issues additional equity securities to
finance developments and acquisitions instead of incurring debt,
the interests of existing shareholders could be diluted.

Acquired Apartment Communities May Not Achieve
Anticipated Results.

The Company may selectively acquire apartment
communities that meet its investment criteria. The
Companys acquisition activities and their success may be
exposed to the following risks:



|  |                                                                                                                                                                                           
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | an acquired community may fail to achieve
    expected occupancy and rental rates and may fail to perform as
    expected;                                                                
| 
| | the Company may not be able to successfully
    integrate acquired properties and operations; and                                                                                         
| 
| | the Companys estimates of the costs of
    repositioning or redeveloping the acquired property may prove
    inaccurate, causing the Company to fail to meet its
    profitability goals.

Increased Competition and Increased
Affordability of Residential Homes Could Limit the
Companys Ability to Retain its Residents, Lease Apartment
Homes or Increase or Maintain Rents.

The Companys apartment communities compete
with numerous housing alternatives in attracting residents,
including other apartment communities and single-family rental
homes, as well as owner occupied single- and multi-family homes.
Competitive housing in a particular area and the increasing
affordability of owner occupied single and multi-family homes
caused by declining mortgage interest rates and government
programs to promote




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home ownership could adversely affect the
Companys ability to retain its residents, lease apartment
homes and increase or maintain rents.


Expansion of the Companys Operations
into Condominium Conversion and For-sale
(Condominium) Housing Involves New Business Risks and
Challenges for Management.

Expansion into condominium conversions and
for-sale (condominium) housing is a new area of the
Companys operations. The Companys ability to
successfully complete a condominium conversion or other for-sale
housing project, sell the units and achieve managements
economic goals in connection with the transaction is subject to
various risks and challenges, which if they materialize, may
have an adverse effect on the Companys business, results
of operations and financial condition including:



|  |                                                                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | the inability to obtain approvals to rezone the
    property and releases from financing obligations and increases
    in costs resulting from delays in obtaining such approvals and
    releases;
| 
| | increases in costs of improving the property;                                                                                                                                                      
| 
| | lack of demand by prospective buyers;                                                                                                                                                              
| 
| | over supply of condominiums in a given market;                                                                                                                                                     
| 
| | the inability of buyers to qualify for financing;                                                                                                                                                  
| 
| | lower than anticipated sale prices;                                                                                                                                                                
| 
| | the inability to close on sales of individual
    units under contract;                                                                                                                            
| 
| | competition from other condominiums and other
    types of residential housing; and                                                                                                                
| 
| | liability claims.                                                                                                                                                                                  

In addition, if the Company is unable to sell
for-sale units, the expenses and carrying costs associated with
the ownership of such units would continue.

Limited Investment Opportunities Could
Adversely Affect the Companys Growth.

The Company expects that other real estate
investors will compete to acquire existing properties and to
develop new properties. These competitors include insurance
companies, pension and investment funds, developer partnerships,
investment companies and other apartment REITs. This competition
could increase prices for properties of the type that the
Company would likely pursue, and competitors may have greater
resources than the Company. As a result, the Company may not be
able to make attractive investments on favorable terms, which
could adversely affect its growth.

The Company May Not be Able to Maintain its
Current Dividend Level.

For the full year of 2005, management of the
Company currently expects to maintain its current quarterly
dividend payment rate to common shareholders of $0.45 per
share. At this dividend rate, the Company currently expects that
net cash flows from operations reduced by annual operating
capital expenditures for 2005 will not be sufficient to fund the
dividend payments to common and preferred shareholders by
approximately $15 to $20 million. The Company intends to
use primarily the proceeds from 2005 asset (including
condominium) sales to fund the additional cash flow necessary to
fully fund the dividend payments to common shareholders. In
prior periods, the additional funding, in excess of cash flows
from operating activities less operating capital expenditures,
required to pay the quarterly dividends was funded through a
combination of line of credit borrowings and proceeds from asset
sales. The Company reduced the level of its quarterly dividend
from $0.78 per share to $0.45 per share effective with
the quarterly dividend paid for the first quarter of 2003. The
Companys board of directors reviews the dividend
quarterly, and there can be no assurance that the current
dividend level will be maintained.

Interest Rate Hedging Contracts May be
Ineffective and May Result in Material Charges.

From time to time when the Company anticipates
issuing debt securities, it may seek to limit exposure to
fluctuations in interest rates during the period prior to the
pricing of the securities by entering into interest rate hedging
contracts. The Company may do this to increase the
predictability of its financing costs. Also, from time to time,
the Company may rely on interest rate hedging contracts to limit
its exposure under variable rate debt to unfavorable changes in
market interest rates. If the pricing of new debt securities is
not within the parameters of, or market interest rates produce a
lower interest cost than the Company incurs under, a particular
interest rate hedging contract, the contract is ineffective.
Furthermore, the settlement of interest rate hedging contracts
has involved and




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may in the future involve material charges. These
charges are typically related to the extent and timing of
fluctuations in interest rates. Despite the Companys
efforts to minimize its exposure to interest rate fluctuations,
the Company cannot guarantee that it will maintain coverage for
all of its outstanding indebtedness at any particular time. If
the Company does not effectively protect itself from this risk,
it may be subject to increased interest costs resulting from
interest rate fluctuations.


Failure to Succeed in New Markets May Limit
the Companys Growth.

The Company may from time to time commence
development activity or make acquisitions outside of its
existing market areas if appropriate opportunities arise. The
Companys historical experience in its existing markets
does not ensure that it will be able to operate successfully in
new markets. The Company may be exposed to a variety of risks if
it chooses to enter new markets. These risks include, among
others:



|  |                                                                                                      
|- | -----------------------------------------------------------------------------------------------------
| | an inability to evaluate accurately local
    apartment market conditions and local economies;       
| 
| | an inability to obtain land for development or to
    identify appropriate acquisition opportunities;
| 
| | an inability to hire and retain key
    personnel; and                                               
| 
| | lack of familiarity with local governmental and
    permitting procedures.                           

Any Weaknesses Identified in the
Companys System of Internal Controls by the Company and
its Independent Registered Public Accounting Firm Pursuant to
Section 404 of the Sarbanes-Oxley Act of 2002 Could Have an
Adverse Effect on the Companys Business.

Section 404 of the Sarbanes-Oxley Act of
2002 requires that companies evaluate and report on their
systems of internal control over financial reporting. In
addition, the Companys independent registered public
accounting firm must report on managements evaluation of
those controls. In future periods, the Company may identify
deficiencies in its system of internal controls over financial
reporting that may require remediation. There can be no
assurances that any such future deficiencies identified may not
be significant deficiencies or material weaknesses that would be
required to be reported in future periods.

Losses from Natural Catastrophes May Exceed
Insurance Coverage.

The Company carries comprehensive liability,
fire, flood, extended coverage and rental loss insurance on its
properties, which are believed to be of the type and amount
customarily obtained on real property assets. The Company
intends to obtain similar coverage for properties acquired in
the future. However, some losses, generally of a catastrophic
nature, such as losses from floods or earthquakes, may be
subject to limitations. The Company exercises discretion in
determining amounts, coverage limits and deductibility
provisions of insurance, with a view to maintaining appropriate
insurance on its investments at a reasonable cost and on
suitable terms; however, the Company may not be able to maintain
its insurance at a reasonable cost or in sufficient amounts to
protect it against potential losses. Further, the Companys
insurance costs could increase in future periods. If the Company
suffers a substantial loss, its insurance coverage may not be
sufficient to pay the full current market value or current
replacement value of the lost investment. Inflation, changes in
building codes and ordinances, environmental considerations and
other factors also might make it infeasible to use insurance
proceeds to replace a property after it has been damaged or
destroyed.

Potential Liability for Environmental
Contamination Could Result in Substantial Costs.

The Company is in the business of owning,
operating, developing, acquiring and, from time to time, selling
real estate. Under various federal, state and local
environmental laws, as a current or former owner or operator,
the Company could be required to investigate and remediate the
effects of contamination of currently or formerly owned real
estate by hazardous or toxic substances, often regardless of its
knowledge of or responsibility for the contamination and solely
by virtue of its current or former ownership or operation of the
real estate. In addition, the Company could be held liable to a
governmental authority or to third parties for property damage
and for investigation and clean-up costs incurred in connection
with the contamination. These costs could be substantial, and in
many cases environmental laws create liens in favor of
governmental authorities to secure their payment. The presence
of such substances or a failure to properly remediate any
resulting contamination could materially and adversely affect
the Companys ability to borrow against, sell or rent an
affected property.




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Compliance or Failure to Comply with Laws
Requiring Access to the Companys Properties by Disabled
Persons Could Result in Substantial Cost.

The Americans with Disabilities Act, the Fair
Housing Act of 1988 and other federal, state and local laws
generally require that public accommodations be made accessible
to disabled persons. Noncompliance could result in the
imposition of fines by the government or the award of damages to
private litigants. These laws may require the Company to modify
its existing properties. These laws may also restrict
renovations by requiring improved access to such buildings by
disabled persons or may require the Company to add other
structural features that increase construction costs.
Legislation or regulations adopted in the future may impose
further burdens or restrictions on the Company with respect to
improved access by disabled persons. The Company cannot
ascertain the costs of compliance with these laws, which may be
substantial.

The Company May Fail to Qualify as a REIT for
Federal Income Tax Purposes.

The Companys qualification as a REIT for
federal income tax purposes depends upon its ability to meet on
a continuing basis, through actual annual operating results,
distribution levels and diversity of stock ownership, the
various qualification tests and organizational requirements
imposed upon REITs under the Internal Revenue Code. The Company
believes that it has qualified for taxation as a REIT for
federal income tax purposes commencing with its taxable year
ended December 31, 1993, and plans to continue to meet the
requirements to qualify as a REIT in the future. Many of these
requirements, however, are highly technical and complex. The
Company cannot guarantee, therefore, that it has qualified or
will continue to qualify in the future as a REIT. The
determination that the Company qualifies as a REIT for federal
income tax purposes requires an analysis of various factual
matters that may not be totally within the Companys
control. Even a technical or inadvertent mistake could
jeopardize the Companys REIT status. Furthermore, Congress
and the IRS might make changes to the tax laws and regulations,
and the courts might issue new decisions that make it more
difficult, or impossible, for the Company to remain qualified as
a REIT. The Company does not believe, however, that any pending
or proposed tax law changes would jeopardize its REIT status.

If the Company were to fail to qualify for
taxation as a REIT in any taxable year, and certain relief
provisions of the Internal Revenue Code did not apply, the
Company would be subject to tax (including any applicable
alternative minimum tax) on its taxable income at regular
corporate rates, leaving less money available for distributions
to its shareholders. In addition, distributions to shareholders
in any year in which the Company failed to qualify would not be
deductible by the Company for federal income tax purposes nor
would they be required to be made. Unless entitled to relief
under specific statutory provisions, the Company also would be
disqualified from taxation as a REIT for the four taxable years
following the year during which it ceased to qualify as a REIT.
It is not possible to predict whether in all circumstances the
Company would be entitled to such statutory relief. The
Companys failure to qualify as a REIT likely would have a
significant adverse effect on the value of its securities.

The Operating Partnership May Fail to be
Treated as a Partnership for Federal Income Tax
Purposes.

Management believes that the Operating
Partnership qualifies, and has so qualified since its formation,
as a partnership for federal income tax purposes and not as a
publicly traded partnership taxable as a corporation. No
assurance can be provided, however, that the IRS will not
challenge the treatment of the Operating Partnership as a
partnership for federal income tax purposes or that a court
would not sustain such a challenge. If the IRS were successful
in treating the Operating Partnership as a corporation for
federal income tax purposes, then the taxable income of the
Operating Partnership would be taxable at regular corporate
income tax rates. In addition, the treatment of the Operating
Partnership as a corporation would cause the Company to fail to
qualify as a REIT. See The Company may fail to qualify as
a REIT for federal income tax purposes above.

The Companys Real Estate Assets May be
Subject to Impairment Charges.

The Company continually evaluates the
recoverability of the carrying value of its real estate assets
for impairment indicators. Factors considered in evaluating
impairment of the Companys existing real estate assets
held for investment include significant declines in property
operating profits, recurring property operating losses and other
significant adverse changes in general market conditions that
are considered permanent in nature. Generally, a real estate
asset held for investment is not considered impaired if the
undiscounted, estimated future cash flows of the asset over its
estimated holding period are in excess of the assets net
book value at the balance sheet date. Assumptions used to
estimate annual and residual cash flow and the estimated holding
period of such assets require the judgment of management.




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In 2004 and in prior years, the Company recorded
impairment charges on assets held for investment and assets
designated as held for sale. There can be no assurance that the
Company will not take additional charges in the future related
to the impairment of its assets. For the years ended
December 31, 2004, 2003 and 2002, management believes it
has applied reasonable estimates and judgments in determining
the proper classification of its real estate assets. However,
should external or internal circumstances change requiring the
need to shorten the holding periods or adjust the estimated
future cash flows of certain of the Companys assets, the
Company could be required to record additional impairment
charges. If any real estate asset held for investment is
considered impaired, a loss is provided to reduce the carrying
value of the asset to its fair value, less selling costs. Any
future impairment could have a material adverse affect on the
Companys results of operations and funds from operations
in the period in which the charge is taken.

The Companys Shareholders May Not be
Able to Effect a Change in Control.

The articles of incorporation and bylaws of the
Company and the partnership agreement of the Operating
Partnership contain a number of provisions that could delay,
defer or prevent a transaction or a change in control that might
involve a premium price for the Companys shareholders or
otherwise be in their best interests, including the following:

Preferred Shares.The Companys articles of incorporation provide that the
Company has the authority to issue up to 20,000,000 shares
of preferred stock, of which 2,900,000 were outstanding as of
December 31, 2004. The board of directors has the
authority, without the approval of the shareholders, to issue
additional shares of preferred stock and to establish the
preferences and rights of such shares. The issuance of preferred
stock could have the effect of delaying or preventing a change
of control of the Company, even if a change of control were in
the shareholders interest.

Consent Rights of the
Unitholders.Under the partnership
agreement of the Operating Partnership, the Company may not
merge or consolidate with another entity unless the merger
includes the merger of the Operating Partnership, which requires
the approval of the holders of a majority of the outstanding
units of the Operating Partnership. If the Company were to ever
hold less than a majority of the units, this voting requirement
might limit the possibility for an acquisition or a change of
control.

Ownership Limit.One
of the requirements for maintenance of the Companys
qualification as a REIT for federal income tax purposes is that
no more than 50% in value of its outstanding capital stock may
be owned by five or fewer individuals, including entities
specified in the Internal Revenue Code, during the last half of
any taxable year. To facilitate maintenance of its qualification
as a REIT for federal income tax purposes, the ownership limit
under the Companys articles of incorporation prohibits
ownership, directly or by virtue of the attribution provisions
of the Internal Revenue Code, by any person or persons acting as
a group of more than 6.0% of the issued and outstanding shares
of the Companys common stock, subject to certain
exceptions, including an exception for shares of common stock
held by Mr. John A. Williams and Mr. John T. Glover,
the Companys former chairman and former vice chairman and
certain investors for which the Company has waived the ownership
limit. Together, these limitations are referred to as the
ownership limit. Further, the Companys
articles of incorporation include provisions allowing it to stop
transfers of and redeem its shares that are intended to assist
the Company in complying with these requirements. While the
Company has committed that it will not utilize the ownership
limit in its articles of incorporation as an anti-takeover
device, these provisions could still deter, delay or defer
someone from taking control of the Company.

Terrorist Attacks and the Possibility of Wider
Armed Conflict May Have an Adverse Effect on the Companys
Business and Operating Results and Could Decrease the Value of
the Companys Assets.

Terrorist attacks and other acts of violence or
war could have a material adverse effect on the Companys
business and operating results. Attacks or armed conflicts that
directly impact one or more of the Companys apartment
communities could significantly affect the Companys
ability to operate those communities and thereby impair its
ability to achieve the Companys expected results. Further,
the Companys insurance coverage may not cover any losses
caused by a terrorist attack. In addition, the adverse effects
that such violent acts and threats of future attacks could have
on the U.S. economy could similarly have a material adverse
effect on the Companys business and results of operations.
Finally, if the United States enters into and remains engaged in
a wider armed conflict, the Companys business and
operating results could be adversely effected.




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|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

At December 31, 2004, the Company owned 65
Post® multifamily apartment communities, including three
communities held in unconsolidated entities that were operating
during all or part of 2004. These communities are summarized
below by metropolitan area.

|                         |  |             |    |            |  |            |        |  |  |  |        |  
|------------------------ |  | ----------- | -- | ---------- |  | ---------- | ------ |  |  |  | ------ | -
|Metropolitan Area        |  | Communities |    | # of Units |  | % of Total
|                         |  |             |    |            |  |           
|Atlanta, GA              |  |             | 30 |            |  |            | 12,743 |  |  |  | 51.6   | %
|Dallas, TX               |  |             | 16 |            |  |            | 4,353  |  |  |  | 17.6   | %
|Tampa, FL                |  |             | 4  |            |  |            | 2,223  |  |  |  | 9.0    | %
|Greater Washington, D.C. |  |             | 5  |            |  |            | 1,972  |  |  |  | 8.0    | %
|Charlotte, NC            |  |             | 3  |            |  |            | 1,065  |  |  |  | 4.3    | %
|Houston, TX              |  |             | 2  |            |  |            | 980    |  |  |  | 4.0    | %
|Denver, CO               |  |             | 1  |            |  |            | 696    |  |  |  | 2.8    | %
|New York, NY             |  |             | 2  |            |  |            | 337    |  |  |  | 1.4    | %
|Orlando, FL              |  |             | 1  |            |  |            | 245    |  |  |  | 1.0    | %
|Nashville, TN            |  |             | 1  |            |  |            | 86     |  |  |  | 0.3    | %
|                         |  |             |    |            |  |            |        |  |  |  |        |  
|                         |  |             | 65 |            |  |            | 24,700 |  |  |  | 100.00 | %
|                         |  |             |    |            |  |            |        |  |  |  |        |  

Thirty-seven of the communities have in excess of
300 apartment units, with the largest community having a total
of 1,738 apartment units. The average age of the communities is
approximately eight years. The average economic occupancy rate
was 93.5% and 91.9%, respectively, and the average monthly
rental rate per apartment unit was $991 and $1,015,
respectively, for the 52 communities stabilized for each of the
years ended December 31, 2004 and 2003. See Selected
Financial Information.

At December 31, 2004, the Company also had
one community, containing 205 apartment units and 145 for-sale
condominium units, located in the Washington D.C. metropolitan
area under development.




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COMMUNITY INFORMATION

|                               |                                 |             |         |           |  |        |              |               |  |              |       |        |  |   |       |     |  |  |      |      |  
|------------------------------ | ------------------------------- | ----------- | ------- | --------- |  | ------ | ------------ | ------------- |  | ------------ | ----- | ------ |  | - | ----- | --- |  |  | ---- | ---- | -
|                               |                                 |             |         |           |  |        |              | December 2004 |  | 2004        
|                               |                                 |             |         |           |  |        |              | Average       |  | Average     
|                               |                                 |             |         | Year      |  | No. of |              | Rental Rates  |  | Economic    
|Communities                    |                                 | Location(1) |         | Completed |  | Units  |              | Per Unit      |  | Occupancy(2)
|                               |                                 |             |         |           |  |        |              |               |  |             
|Georgia                        |                                 |             |         |           |  |        |              |               |  |              |       |        |  |   |       |     |  |  |      |     
|Post Ashford®                  |                                 |             | Atlanta |           |  |        | 1987         |               |  |              | 222   |        |  | $ | 778   |     |  |  | 92.5 | %   
|Post BiltmoreTM(3)             |                                 |             | Atlanta |           |  |        | 2001         |               |  |              | 276   |        |  |   | 1,074 |     |  |  | 93.5 | %   
|Post BriarcliffTM              |                                 |             | Atlanta |           |  |        | 1999         |               |  |              | 688   |        |  |   | 1,042 |     |  |  | 92.6 | %   
|Post Brookhaven®               |                                 |             | Atlanta |           |  |        | 1990-1992(4) |               |  |              | 735   |        |  |   | 906   |     |  |  | 92.3 | %   
|Post Chastain®                 |                                 |             | Atlanta |           |  |        | 1990         |               |  |              | 558   |        |  |   | 910   |     |  |  | 92.4 | %   
|Post Collier Hills®            |                                 |             | Atlanta |           |  |        | 1997         |               |  |              | 396   |        |  |   | 956   |     |  |  | 92.6 | %   
|Post Corners®(5)               |                                 |             | Atlanta |           |  |        | 1986         |               |  |              | 460   |        |  |   | 613   |     |  |  | 93.3 | %   
|Post Crest®                    |                                 |             | Atlanta |           |  |        | 1996         |               |  |              | 410   |        |  |   | 982   |     |  |  | 94.5 | %   
|Post Crossing®                 |                                 |             | Atlanta |           |  |        | 1995         |               |  |              | 354   |        |  |   | 998   |     |  |  | 93.5 | %   
|Post Dunwoody®                 |                                 |             | Atlanta |           |  |        | 1989-1996(4) |               |  |              | 530   |        |  |   | 899   |     |  |  | 94.1 | %   
|Post Gardens®                  |                                 |             | Atlanta |           |  |        | 1998         |               |  |              | 397   |        |  |   | 1,077 |     |  |  | 90.3 | %   
|Post Glen®                     |                                 |             | Atlanta |           |  |        | 1997         |               |  |              | 314   |        |  |   | 1,101 |     |  |  | 93.7 | %   
|Post Lenox Park®               |                                 |             | Atlanta |           |  |        | 1995         |               |  |              | 206   |        |  |   | 992   |     |  |  | 94.2 | %   
|Post Lindbergh®                |                                 |             | Atlanta |           |  |        | 1998         |               |  |              | 396   |        |  |   | 976   |     |  |  | 94.1 | %   
|Post OakTM                     |                                 |             | Atlanta |           |  |        | 1993         |               |  |              | 182   |        |  |   | 965   |     |  |  | 92.5 | %   
|Post Oglethorpe®               |                                 |             | Atlanta |           |  |        | 1994         |               |  |              | 250   |        |  |   | 1,212 |     |  |  | 94.0 | %   
|Post ParksideTM                |                                 |             | Atlanta |           |  |        | 2000         |               |  |              | 188   |        |  |   | 1,223 |     |  |  | 94.6 | %   
|Post PeachtreeTM(3)            |                                 |             | Atlanta |           |  |        | 2001         |               |  |              | 121   |        |  |   | 2,221 |     |  |  | 85.0 | %   
|Post Peachtree Hills®          |                                 |             | Atlanta |           |  |        | 1992-1994(4) |               |  |              | 300   |        |  |   | 975   |     |  |  | 93.9 | %   
|Post Renaissance®(6)           |                                 |             | Atlanta |           |  |        | 1992-1994(4) |               |  |              | 342   |        |  |   | 978   |     |  |  | 94.0 | %   
|Post Ridge®                    |                                 |             | Atlanta |           |  |        | 1998         |               |  |              | 434   |        |  |   | 991   |     |  |  | 95.8 | %   
|Post Riverside®                |                                 |             | Atlanta |           |  |        | 1998         |               |  |              | 527   |        |  |   | 1,330 |     |  |  | 94.6 | %   
|Post SpringTM                  |                                 |             | Atlanta |           |  |        | 2000         |               |  |              | 452   |        |  |   | 947   |     |  |  | 93.6 | %   
|Post StratfordTM(6)            |                                 |             | Atlanta |           |  |        | 2000         |               |  |              | 250   |        |  |   | 1,130 |     |  |  | 94.8 | %   
|Post Summit®                   |                                 |             | Atlanta |           |  |        | 1990         |               |  |              | 148   |        |  |   | 856   |     |  |  | 92.9 | %   
|Post Valley®                   |                                 |             | Atlanta |           |  |        | 1988         |               |  |              | 496   |        |  |   | 657   |     |  |  | 91.0 | %   
|Post Village®(8)               |                                 |             | Atlanta |           |  |        | 1983-1988(4) |               |  |              | 1,738 |        |  |   | 705   |     |  |  | 93.3 | %   
|Post Vinings®                  |                                 |             | Atlanta |           |  |        | 1989-1991(4) |               |  |              | 403   |        |  |   | 792   |     |  |  | 95.1 | %   
|Post Walk®(5)                  |                                 |             | Atlanta |           |  |        | 1984-1987(4) |               |  |              | 476   |        |  |   | 777   |     |  |  | 93.0 | %   
|Post Woods®                    |                                 |             | Atlanta |           |  |        | 1977-1983(4) |               |  |              | 494   |        |  |   | 860   |     |  |  | 92.7 | %   
|                               |                                 |             |         |           |  |        |              |               |  |              |       |        |  |   |       |     |  |  |      |     
|                               | Subtotal/ Average 
    Georgia |             |         |           |  |        |              |               |  |              |       | 12,743 |  |   |       | 930 |  |  |      | 93.2 | %
|                               |                                 |             |         |           |  |        |              |               |  |              |       |        |  |   |       |     |  |  |      |     
|Texas                          |                                 |             |         |           |  |        |              |               |  |              |       |        |  |   |       |     |  |  |      |     
|Post AbbeyTM                   |                                 |             | Dallas  |           |  |        | 1996         |               |  |              | 34    |        |  |   | 1,662 |     |  |  | 92.4 | %   
|Post Addison CircleTM          |                                 |             | Dallas  |           |  |        | 1998-2000(4) |               |  |              | 1,334 |        |  |   | 921   |     |  |  | 90.7 | %   
|Post American Beauty MillTM(5) |                                 |             | Dallas  |           |  |        | 1998         |               |  |              | 80    |        |  |   | 903   |     |  |  | 82.9 | %   
|Post Block 588TM(7)            |                                 |             | Dallas  |           |  |        | 2000         |               |  |              | 127   |        |  |   | 1,563 |     |  |  | 92.2 | %   
|Post Coles CornersTM          |                                 |             | Dallas  |           |  |        | 1998         |               |  |              | 186   |        |  |   | 935   |     |  |  | 94.0 | %   
|Post Columbus SquareTM         |                                 |             | Dallas  |           |  |        | 1996         |               |  |              | 218   |        |  |   | 1,069 |     |  |  | 94.4 | %   




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|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |      |  
|--------------------------------------- | ---------------------------------------- | ----------- | --------------- | --------- |  | ------ | ------------ | ------------- |  | ------------ | --- | ----- |  |  | ----- | ----- |  |  | ---- | ---- | -
|                                        |                                          |             |                 |           |  |        |              | December 2004 |  | 2004        
|                                        |                                          |             |                 |           |  |        |              | Average       |  | Average     
|                                        |                                          |             |                 | Year      |  | No. of |              | Rental Rates  |  | Economic    
|Communities                             |                                          | Location(1) |                 | Completed |  | Units  |              | Per Unit      |  | Occupancy(2)
|                                        |                                          |             |                 |           |  |        |              |               |  |             
|Post GalleryTM                          |                                          |             | Dallas          |           |  |        | 1999         |               |  |              | 34  |       |  |  | 2,811 |       |  |  | 92.7 | %   
|Post HeightsTM                          |                                          |             | Dallas          |           |  |        | 1998-1999(4) |               |  |              | 368 |       |  |  | 984   |       |  |  | 94.3 | %   
|Post Legacy                             |                                          |             | Dallas          |           |  |        | 2000         |               |  |              | 384 |       |  |  | 831   |       |  |  | 92.5 | %   
|Post MeridianTM                         |                                          |             | Dallas          |           |  |        | 1991         |               |  |              | 133 |       |  |  | 995   |       |  |  | 93.6 | %   
|Post Midtown SquareTM                   |                                          |             | Houston         |           |  |        | 1999-2000(4) |               |  |              | 672 |       |  |  | 1,076 |       |  |  | 89.4 | %   
|Post Rice LoftsTM(6)                    |                                          |             | Houston         |           |  |        | 1998         |               |  |              | 308 |       |  |  | 1,269 |       |  |  | 85.2 | %   
|Post Uptown VillageTM                   |                                          |             | Dallas          |           |  |        | 1995-2000(4) |               |  |              | 496 |       |  |  | 850   |       |  |  | 94.4 | %   
|Post VineyardTM                         |                                          |             | Dallas          |           |  |        | 1996         |               |  |              | 116 |       |  |  | 903   |       |  |  | 93.2 | %   
|Post VintageTM                          |                                          |             | Dallas          |           |  |        | 1993         |               |  |              | 161 |       |  |  | 909   |       |  |  | 95.4 | %   
|Post White Rock®(5)                     |                                          |             | Dallas          |           |  |        | 1988         |               |  |              | 207 |       |  |  | 736   |       |  |  | 91.4 | %   
|Post Wilson BuildingTM(6)               |                                          |             | Dallas          |           |  |        | 1999         |               |  |              | 143 |       |  |  | 1,168 |       |  |  | 92.0 | %   
|Post WorthingtonTM                      |                                          |             | Dallas          |           |  |        | 1993         |               |  |              | 332 |       |  |  | 1,066 |       |  |  | 92.4 | %   
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|                                        | Subtotal/ Average  Texas                |             |                 |           |  |        |              |               |  |              |     | 5,333 |  |  |       | 1,000 |  |  |      | 91.4 | %
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Florida                                 |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Post ParksideTM                         |                                          |             | Orlando         |           |  |        | 1999         |               |  |              | 245 |       |  |  | 1,164 |       |  |  | 98.2 | %   
|Post Harbour PlaceTM                    |                                          |             | Tampa           |           |  |        | 1999-2002(4) |               |  |              | 784 |       |  |  | 1,162 |       |  |  | 95.7 | %   
|Post Hyde Park®                         |                                          |             | Tampa           |           |  |        | 1996         |               |  |              | 389 |       |  |  | 1,075 |       |  |  | 95.9 | %   
|Post Rocky Point®                       |                                          |             | Tampa           |           |  |        | 1996-1998(4) |               |  |              | 916 |       |  |  | 994   |       |  |  | 94.7 | %   
|Post Walk at Old Hyde Park VillageTM(9) |                                          |             | Tampa           |           |  |        | 1997         |               |  |              | 134 |       |  |  | 1,246 |       |  |  | 96.0 | %   
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|                                        | Subtotal/ Average 
    Florida          |             |                 |           |  |        |              |               |  |              |     | 2,468 |  |  |       | 1,091 |  |  |      | 96.1 | %
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|North Carolina                          |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Post Gateway PlaceTM                    |                                          |             | Charlotte       |           |  |        | 2000         |               |  |              | 436 |       |  |  | 916   |       |  |  | 95.9 | %   
|Post Park at Phillips Place®            |                                          |             | Charlotte       |           |  |        | 1998         |               |  |              | 402 |       |  |  | 1,161 |       |  |  | 92.7 | %   
|Post Uptown PlaceTM                     |                                          |             | Charlotte       |           |  |        | 2000         |               |  |              | 227 |       |  |  | 967   |       |  |  | 97.1 | %   
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|                                        | Subtotal/ Average  North
    Carolina   |             |                 |           |  |        |              |               |  |              |     | 1,065 |  |  |       | 1,020 |  |  |      | 94.8 | %
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Colorado                                |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Post Uptown SquareTM                    |                                          |             | Denver          |           |  |        | 1999-2001(4) |               |  |              | 696 |       |  |  | 948   |       |  |  | 89.5 | %   
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Tennessee                               |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Post Bennie DillionTM(5)                |                                          |             | Nashville       |           |  |        | 1999         |               |  |              | 86  |       |  |  | 1,021 |       |  |  | 98.7 | %   
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Greater Washington, D.C.                |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|Post Corners at Trinity Centre          |                                          |             | Fairfax Co., VA |           |  |        | 1996         |               |  |              | 336 |       |  |  | 1,251 |       |  |  | 96.8 | %   
|Post Forest®                            |                                          |             | Fairfax Co., VA |           |  |        | 1990         |               |  |              | 364 |       |  |  | 1,173 |       |  |  | 98.0 | %   
|Post Tysons Corner                      |                                          |             | Fairfax Co., VA |           |  |        | 1990         |               |  |              | 499 |       |  |  | 1,439 |       |  |  | 96.6 | %   
|Post Pentagon RowTM(6)                  |                                          |             | D.C.            |           |  |        | 2001         |               |  |              | 504 |       |  |  | 1,974 |       |  |  | 97.8 | %   
|Post Massachusetts AvenueTM(3)          |                                          |             | D.C.            |           |  |        | 2002         |               |  |              | 269 |       |  |  | 2,389 |       |  |  | 89.5 | %   
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     
|                                        | Subtotal/ Average 
    Washington, D.C. |             |                 |           |  |        |              |               |  |              |     | 1,972 |  |  |       | 1,624 |  |  |      | 97.8 | %
|                                        |                                          |             |                 |           |  |        |              |               |  |              |     |       |  |  |       |       |  |  |      |     




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|                 |                                  |             |          |           |  |        |      |               |  |              |     |        |  |  |       |       |  |  |      |      |  
|---------------- | -------------------------------- | ----------- | -------- | --------- |  | ------ | ---- | ------------- |  | ------------ | --- | ------ |  |  | ----- | ----- |  |  | ---- | ---- | -
|                 |                                  |             |          |           |  |        |      | December 2004 |  | 2004        
|                 |                                  |             |          |           |  |        |      | Average       |  | Average     
|                 |                                  |             |          | Year      |  | No. of |      | Rental Rates  |  | Economic    
|Communities      |                                  | Location(1) |          | Completed |  | Units  |      | Per Unit      |  | Occupancy(2)
|                 |                                  |             |          |           |  |        |      |               |  |             
|New York         |                                  |             |          |           |  |        |      |               |  |              |     |        |  |  |       |       |  |  |      |     
|Post LuminariaTM |                                  |             | New York |           |  |        | 2002 |               |  |              | 138 |        |  |  | 3,260 |       |  |  | 93.3 | %   
|Post ToscanaTM   |                                  |             | New York |           |  |        | 2003 |               |  |              | 199 |        |  |  | 3,355 |       |  |  | 90.4 | %   
|                 |                                  |             |          |           |  |        |      |               |  |              |     |        |  |  |       |       |  |  |      |     
|                 | Subtotal/ Average  New
    York |             |          |           |  |        |      |               |  |              |     | 337    |  |  |       | 3,316 |  |  |      | 91.6 | %
|                 |                                  |             |          |           |  |        |      |               |  |              |     |        |  |  |       |       |  |  |      |     
|                 | Total                            |             |          |           |  |        |      |               |  |              |     | 24,700 |  |  | $     | 1,054 |  |  |      | 93.4 | %
|                 |                                  |             |          |           |  |        |      |               |  |              |     |        |  |  |       |       |  |  |      |     



|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | These communities are owned in unconsolidated
    entities (Company equity ownership is 35%).                                                                                                        
|(4) | These dates represent the respective completion
    dates for multiple phases of a community.                                                                                                        
|(5) | These communities are held for sale at
    December 31, 2004.                                                                                                                                        
|(6) | The Company has a leasehold interest in the land
    underlying these communities.                                                                                                                   
|(7) | This community is held for sale at
    December 31, 2004 and will be converted into condominiums.                                                                                                    
|(8) | This community was classified as held for sale in
    2005.                                                                                                                                          
|(9) | This community was classified as held for sale in
    2005 and will be converted into condominiums.                                                                                                  




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|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

On May 13, 2004, an alleged Company
shareholder filed a purported pro se derivative and direct
action in the Superior Court of Fulton County, Georgia, against
the Company, certain members of the Companys board of
directors, and certain of its executive officers. The case was
removed to the United States District Court for the Northern
District of Georgia on May 21, 2004. The complaint alleges,
among other things, breaches of fiduciary duties, fraud,
corporate waste, withholding certain documents from shareholder
inspection and certain securities laws claims. The complaint
requests various types of relief, such as injunctive relief and
damages and demands production of certain Company records. The
Company believes the allegations are wholly without merit and
has moved to dismiss the litigation.

On May 5, 203, the Company received notice
that a shareholder derivative and purported class action lawsuit
was filed against members of the board of directors of the
Company and the Company as a nominal defendant. This complaint
was filed in the Superior Court of Fulton County, Atlanta,
Georgia on May 2, 2003 and alleged various breaches of
fiduciary duties by the board of directors of the Company and
sought, among other relief, the disclosure of certain
information by the defendants. This complaint also sought to
compel the defendants to undertake various actions to facilities
a sale of the Company. On May 7, 2003, the plaintiff made a
request for voluntary expedited discovery. On May 13, 2003,
the Company received notice that a similar shareholder
derivative and purported class action lawsuit was filed against
certain members of the board of directors of the Company and
against the Company as a nominal defendant. The complaint was
filed in the Superior Court of Fulton County, Atlanta, Georgia
on May 12, 2003 and alleged breaches of fiduciary duties,
abuse of control and corporate waste by the defendants. The
plaintiff sought monetary damages and, as appropriate,
injunctive relief. These lawsuits were settled, and in October
2004, the Superior Court of Fulton County entered an order
approving the settlement and related orders dismissing the
litigation. The estimated legal and settlement costs, not
covered by insurance, associated with the expected resolution of
the lawsuits were recorded in the second quarter of 2003 as a
component of a proxy contest and related costs charge. An
alleged Company shareholder, who has filed a separate purported
derivative and direct action against the Company and certain of
its officers and directors, has appealed from the Superior
Courts orders approving the settlement, overruling the
shareholders objection to the settlement (which is
described in the paragraph above), denying the
shareholders motion to intervene, and dismissing the
litigation with prejudice. The Company plans to contest the
shareholders appeal vigorously.

The Company is involved in various other legal
proceedings incidental to its business from time to time, most
of which are expected to be covered by liability or other
insurance. Management of the Company believes that any
resolution of pending proceedings or liability to the Company
which may arise as a result of these proceedings will not have a
material adverse effect on the Companys results of
operations or financial position.






|        |                                                        
|------- | -------------------------------------------------------
|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 as of
February 28, 2005 are as follows:

|                    |  |                                                                       
|------------------- |  | ----------------------------------------------------------------------
|NAME                |  | POSITIONS AND OFFICES HELD                                            
|David P. Stockert   |  | President and Chief Executive Officer                                 
|Thomas L. Wilkes    |  | Executive Vice President and
    President  Post Apartment Management
|Thomas D. Senkbeil  |  | Executive Vice President and Chief Investment
    Officer             
|Christopher J. Papa |  | Executive Vice President and Chief Financial
    Officer              
|Sherry W. Cohen     |  | Executive Vice President and Corporate Secretary                      
|Arthur J. Quirk     |  | Senior Vice President and Chief Accounting Officer                    

The following is a biographical summary of the
experience of the executive officers of the Company:

David P. Stockert.Mr. Stockert is the President and Chief Executive Officer
of the Company. Mr. Stockert has been the Chief Executive
Officer since July 2002. From January 2001 to June 2002,
Mr. Stockert was President and Chief Operating Officer.
From July 1999 to October 2000, Mr. Stockert was Executive
Vice President of Duke 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




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was a predecessor by merger to Duke 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). Mr. Stockert is
42 years old.


Thomas D. Senkbeil.Mr. Senkbeil has been an Executive Vice President and Chief
Investment Officer of the Company since June 2003. From July
2000 to December 2002, Mr. Senkbeil was President and Chief
Operating Officer of Carter & Associates, a leading
regional full-service real estate firm, overseeing the daily
operation of Carters four business units: Brokerage,
Corporate Real Estate Services, Development, and Property
Management and Leasing. Prior to joining Carter &
Associates, Mr. Senkbeil was Chief Investment Officer and a
member of the board of directors at Duke Realty Corporation and
its predecessor, Weeks Corporation, from June 1992 to July 2000.
Mr. Senkbeil is 55 years old.

Thomas L. Wilkes.Mr. Wilkes has been an Executive Vice President and
President of Post Apartment Management since January 2001. From
October 1997 through December 2000, he was an Executive Vice
President and Director of Operations for Post Apartment
Management responsible for the operations of Post communities in
the Western United States. Mr. Wilkes was a Senior Vice
President of Columbus Realty Trust from December 1993 through
October 1997. Mr. Wilkes served as President of CRH
Management Company, a member of the Columbus Group, from its
formation in October 1990 to December 1993. Mr. Wilkes is a
Certified Property Manager. Mr. Wilkes is 45 years old.

Christopher J. Papa.Mr. Papa has been an Executive Vice President and Chief
Financial Officer of the Company since December 2003. Prior to
joining the Company, he was an audit partner at BDO Seidman, LLP
from June 2003 to November 2003, the Chief Financial Officer at
Plast-O-Matic Valves, Inc., a privately-held company, from June
2002 to June 2003, and until June 2002, an audit partner at
Arthur Andersen LLP where he was employed for over
10 years. Mr. Papa is a Certified Public Accountant.
Mr. Papa is 39 years old.

Sherry W. Cohen.Ms. Cohen has been with the Company for twenty 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
has 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
50 years old.

Arthur J. Quirk.Mr. Quirk has been a Senior Vice President and Chief
Accounting Officer of the Company since January 2003.
Mr. Quirk served as the Companys Vice President and
Chief Accounting Officer from March 2001 to December 2002. From
July 1999 to March 2001, Mr. Quirk was Vice President and
Controller of Duke Realty Corporation, a publicly traded real
estate company. From December 1994 to July 1999, Mr. Quirk
was the Vice President and Controller of Weeks Corporation, also
a publicly traded real estate company that was a predecessor by
merger to Duke Realty Corporation. Mr. Quirk is a Certified
Public Accountant. Mr. Quirk is 47 years old.




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PART II






|        |                                                                                                                              
|------- | -----------------------------------------------------------------------------------------------------------------------------
|ITEM 5. | MARKET PRICE OF THE REGISTRANTS COMMON
    STOCK , RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF
    EQUITY SECURITIES

(in thousands, except per share
amounts)

The Companys 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 prices per share reported on the NYSE, as well as
the quarterly dividends declared per share:

|               |  |      |       |     |  |           |       |  |  |   |      | 
|-------------- |  | ---- | ----- | --- |  | --------- | ----- |  |  | - | ---- | 
|               |  |      |       |     |  | Dividends
|Quarter        |  | High |       | Low |  | Declared 
|               |  |      |       |     |  |          
|2003           |  |      |       |     |  |           |       |  |  |   |      | 
|First Quarter  |  | $    | 25.00 |     |  | $         | 22.43 |  |  | $ | 0.45 | 
|Second Quarter |  |      | 27.85 |     |  |           | 23.98 |  |  |   | 0.45 | 
|Third Quarter  |  |      | 28.92 |     |  |           | 25.70 |  |  |   | 0.45 | 
|Fourth Quarter |  |      | 28.99 |     |  |           | 26.29 |  |  |   | 0.45 | 
|              
|2004           |  |      |       |     |  |           |       |  |  |   |      | 
|First Quarter  |  | $    | 29.78 |     |  | $         | 26.95 |  |  | $ | 0.45 | 
|Second Quarter |  |      | 30.14 |     |  |           | 25.95 |  |  |   | 0.45 | 
|Third Quarter  |  |      | 30.99 |     |  |           | 27.50 |  |  |   | 0.45 | 
|Fourth Quarter |  |      | 35.70 |     |  |           | 29.75 |  |  |   | 0.45 | 

On February 28, 2005, the Company had 1,827
common shareholders of record and 40,226 shares of common
stock outstanding.

The Company pays regular quarterly dividends to
holders of shares of its common stock. Future dividend payments
by the Company will be paid 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 other factors that the board of
directors deems relevant. Beginning with the first quarter of
2003, the Companys dividend was reduced from $0.78 to
$0.45 per share. For a discussion of the Companys
credit agreements and their restrictions on dividend payments,
see note 3 to the consolidated financial statements.

During 2004, the Company did not sell any
unregistered securities.

There is no established public trading market for
the Common Units. On February 28, 2005, the Operating
Partnership had 70 holders of record of Common Units and 2,425
Common Units outstanding.

For each quarter during 2004 and 2003, the
Operating Partnership paid a cash distribution to holders of
Common Units equal in amount to the dividends paid on the
Companys common stock for such quarter.

During 2004, the Operating Partnership did not
sell any unregistered securities.

In the fourth quarter of 2004, the Companys
board of directors adopted a new stock repurchase program under
which the Company may repurchase up to $200,000 of common or
preferred stock at market prices from time to time until
December 31, 2006. Under its previous stock repurchase
program which expired on December 31, 2004, the Company
repurchased $2,268 of common stock and $120,000 of preferred
stock and units during 2004. The Company did not acquire any
common or preferred stock in the three months ended
December 31, 2004.

Subsequent to year-end through February 28,
2005, the Company has repurchased approximately 144 shares
of its common stock totaling approximately $4,614 under an
existing 10b5-1 stock purchase plan, which expires on
March 31, 2005.




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|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA

Post Properties, Inc.

(In thousands, except per share and apartment
unit data)


|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |          |         | 
|------------------------------------------------------------------------------------------------------------------------ | --------------------------------------------- | ----------------------- | --------- | -------- | ------- | ---- | --------- | -------- | ------- | ---- | --------- | ------- | ------- | - | --------- | -------- | ------- | - | --------- | -------- | ------- | 
|                                                                                                                         |                                               |                        
|                                                                                                                         |                                               | Year Ended December 31,
|                                                                                                                         |                                               |                        
|                                                                                                                         |                                               | 2004                    |           | 2003     |         | 2002 |           | 2001     |         | 2000
|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |     
|STATEMENT OF OPERATIONS DATA                                                                                             |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Revenues                                                                                                                 |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|                                                                                                                         | Rental                                        |                         | $         | 281,664  |         |      | $         | 269,400  |         |      | $         | 265,301 |         |   | $         | 283,032  |         |   | $         | 284,560  |        
|                                                                                                                         | Other                                         |                         |           | 18,166   |         |      |           | 16,357   |         |      |           | 15,695  |         |   |           | 16,429   |         |   |           | 17,843   |        
|                                                                                                                         | Third-party services(1)                       |                         |           |         |         |      |           |         |         |      |           |        |         |   |           | 14,088   |         |   |           | 15,249   |        
|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|                                                                                                                         |                                               | Total revenues          |           | $        | 299,830 |      |           | $        | 285,757 |      |           | $       | 280,996 |   |           | $        | 313,549 |   |           | $        | 317,652 | 
|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Income (loss) from continuing operations(2)                                                                              |                                               | $                       | (21,820   | )        |         | $    | (22,091   | )        |         | $    | 28,475    |         |         | $ | 64,452    |          |         | $ | 74,678    |         
|Income from discontinued operations(3)                                                                                   |                                               |                         | 110,039   |          |         |      | 36,247    |          |         |      | 32,271    |         |         |   | 23,088    |          |         |   | 25,842    |         
|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Income before cumulative effect of accounting
    change                                                                 |                                               | $                       | 88,219    |          |         | $    | 14,156    |          |         | $    | 60,746    |         |         | $ | 87,540    |          |         | $ | 100,520   |         
|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Net income(4)                                                                                                            |                                               | $                       | 88,219    |          |         | $    | 14,156    |          |         | $    | 60,746    |         |         | $ | 86,927    |          |         | $ | 100,520   |         
|                                                                                                                         | Dividends to preferred shareholders           |                         |           | (8,325   | )       |      |           | (11,449  | )       |      |           | (11,449 | )       |   |           | (11,768  | )       |   |           | (11,875  | )      
|                                                                                                                         | Redemption costs on preferred stock and units |                         |           | (3,526   | )       |      |           |         |         |      |           |        |         |   |           | (239     | )       |   |           |         |        
|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Net income available to common shareholders                                                                              |                                               | $                       | 76,368    |          |         | $    | 2,707     |          |         | $    | 49,297    |         |         | $ | 74,920    |          |         | $ | 88,645    |         
|                                                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|PER COMMON SHARE DATA                                                                                                    |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Income (loss) from continuing operations (net of
    preferred dividends and redemption costs)  basic                   |                                               | $                       | (0.85     | )        |         | $    | (0.89     | )        |         | $    | 0.46      |         |         | $ | 1.38      |          |         | $ | 1.60      |         
|Income from discontinued operations 
    basic                                                                          |                                               |                         | 2.77      |          |         |      | 0.96      |          |         |      | 0.87      |         |         |   | 0.61      |          |         |   | 0.65      |         
|Income before cumulative effect of accounting
    change (net of preferred dividends and redemption
    costs)  basic   |                                               |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.98      |          |         |   | 2.25      |         
|Net income available to common
    shareholders  basic                                                                  |                                               |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.97      |          |         |   | 2.25      |         
|Income (loss) from continuing operations (net of
    preferred dividends and redemption costs)  diluted                 |                                               | $                       | (0.85     | )        |         | $    | (0.89     | )        |         | $    | 0.46      |         |         | $ | 1.37      |          |         | $ | 1.58      |         
|Income from discontinued operations 
    diluted                                                                        |                                               |                         | 2.77      |          |         |      | 0.96      |          |         |      | 0.87      |         |         |   | 0.60      |          |         |   | 0.64      |         
|Income before cumulative effect of accounting
    change (net of preferred dividends and redemption
    costs)  diluted |                                               |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.97      |          |         |   | 2.22      |         
|Net income available to common
    shareholders  diluted                                                                |                                               |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.96      |          |         |   | 2.22      |         
|Dividends declared                                                                                                       |                                               |                         | 1.80      |          |         |      | 1.80      |          |         |      | 3.12      |         |         |   | 3.12      |          |         |   | 3.04      |         
|Weighted average common shares
    outstanding  basic                                                                   |                                               |                         | 39,777    |          |         |      | 37,688    |          |         |      | 36,939    |         |         |   | 38,053    |          |         |   | 39,318    |         
|Weighted average common shares
    outstanding  diluted                                                                 |                                               |                         | 39,777    |          |         |      | 37,688    |          |         |      | 36,954    |         |         |   | 38,268    |          |         |   | 39,853    |         
|                                                                                                                        
|BALANCE SHEET DATA                                                                                                       |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Real estate, before accumulated depreciation                                                                             |                                               | $                       | 2,502,418 |          |         | $    | 2,596,376 |          |         | $    | 2,705,215 |         |         | $ | 2,777,980 |          |         | $ | 2,827,094 |         
|Real estate, net of accumulated depreciation                                                                             |                                               |                         | 1,977,719 |          |         |      | 2,085,517 |          |         |      | 2,258,037 |         |         |   | 2,371,256 |          |         |   | 2,468,334 |         
|Total assets                                                                                                             |                                               |                         | 2,053,842 |          |         |      | 2,215,451 |          |         |      | 2,508,151 |         |         |   | 2,538,351 |          |         |   | 2,551,237 |         
|Total debt                                                                                                               |                                               |                         | 1,129,478 |          |         |      | 1,186,322 |          |         |      | 1,414,555 |         |         |   | 1,336,520 |          |         |   | 1,213,309 |         
|Shareholders equity                                                                                                     |                                               |                         | 788,070   |          |         |      | 796,526   |          |         |      | 833,699   |         |         |   | 901,517   |          |         |   | 1,028,610 |         
|                                                                                                                        
|OTHER DATA                                                                                                               |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Cash flow provided by (used in):                                                                                         |                                               |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|                                                                                                                         | Operating activities                          |                         | $         | 77,424   |         |      | $         | 91,549   |         |      | $         | 119,763 |         |   | $         | 161,564  |         |   | $         | 185,073  |        
|                                                                                                                         | Investing activities                          |                         |           | 129,748  |         |      |           | 234,195  |         |      |           | (48,821 | )       |   |           | (51,213  | )       |   |           | (255,986 | )      
|                                                                                                                         | Financing activities                          |                         |           | (208,383 | )       |      |           | (330,800 | )       |      |           | (69,355 | )       |   |           | (113,007 | )       |   |           | 72,502   |        
|Total stabilized communities (at end of period)                                                                          |                                               |                         | 65        |          |         |      | 70        |          |         |      | 75        |         |         |   | 78        |          |         |   | 78        |         
|Total stabilized apartment units (at end of
    period)                                                                  |                                               |                         | 24,700    |          |         |      | 27,613    |          |         |      | 29,199    |         |         |   | 27,710    |          |         |   | 28,736    |         
|Average economic occupancy (fully stabilized
    communities)(5)                                                         |                                               |                         | 93.5      | %        |         |      | 91.9      | %        |         |      | 90.9      | %       |         |   | 94.9      | %        |         |   | 96.8      | %       



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of revenues from property management and
    landscape services provided to properties owned by third
    parties. These businesses were sold in the fourth quarter of
    2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | Income (loss) from continuing operations in 2004
    included the impact of costs associated with the termination of
    a debt remarketing agreement (interest expense) and an early
    debt extinguishment loss totaling $14,626. See note 3 to
    the consolidated financial statements for a discussion of these
    costs. Income (loss) from continuing operations in 2003 included
    the impact of severance and proxy costs totaling $26,737. See
    note 7 to the consolidated financial statements for a
    discussion of these costs. Income from continuing operations in
    2001 and 2000 included the impact of project abandonment,
    employee severance and other charges totaling $17,450 and
    $9,365, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(3) | Upon the implementation of
    SFAS No. 144, Accounting for the Impairment or
    Disposal of Long-Lived Assets, on January 1, 2002,
    the operating results of real estate held for sale and sold are
    reported as discontinued operations for all years presented.
    Additionally, all gains and losses on the sale of assets
    classified as held for sale subsequent to January 1, 2002
    are included in discontinued operations. As the operating
    results and gains or losses from the sale of real estate assets
    prior to January 1, 2002 are included in continuing
    operations, the presentation of results is not comparable
    between years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(4) | Includes the impact of $613, net of minority
    interest, resulting from the cumulative effect of accounting
    change from the Companys adoption of
    SFAS No. 133 in 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(5) | Calculated based on fully stabilized communities
    as defined for each year (unadjusted for the impact of assets
    designated as held for sale in subsequent years). 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 net concessions and employee discounts (average
    economic occupancy, taking account of these amounts, would have
    been 93.0%, 90.8%, 89.1%, 93.8% and 94.9% for the years ended
    December 31, 2004, 2003, 2002, 2001 and 2000,
    respectively). Net concessions were $621, $2,518, $4,215, $1,860
    and $3,250 for the years ended December 31, 2004, 2003,
    2002, 2001 and 2000, respectively. Employee discounts were $442,
    $535, $660, $895 and $1,143 for the years ended
    December 31, 2004, 2003, 2002, 2001 and 2000, 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.




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Post Apartment Homes, L.P.

(In thousands, except per unit and apartment
unit data)


|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |          |         | 
|---------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ----------------------- | --------- | -------- | ------- | ---- | --------- | -------- | ------- | ---- | --------- | ------- | ------- | - | --------- | -------- | ------- | - | --------- | -------- | ------- | 
|                                                                                                                             |                                        |                        
|                                                                                                                             |                                        | Year Ended December 31,
|                                                                                                                             |                                        |                        
|                                                                                                                             |                                        | 2004                    |           | 2003     |         | 2002 |           | 2001     |         | 2000
|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |     
|STATEMENT OF OPERATIONS DATA                                                                                                 |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Revenues                                                                                                                     |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|                                                                                                                             | Rental                                 |                         | $         | 281,664  |         |      | $         | 269,400  |         |      | $         | 265,301 |         |   | $         | 283,032  |         |   | $         | 284,560  |        
|                                                                                                                             | Other                                  |                         |           | 18,166   |         |      |           | 16,357   |         |      |           | 15,695  |         |   |           | 16,429   |         |   |           | 17,843   |        
|                                                                                                                             | Third-party services(1)                |                         |           |         |         |      |           |         |         |      |           |        |         |   |           | 14,088   |         |   |           | 15,249   |        
|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|                                                                                                                             |                                        | Total revenues          |           | $        | 299,830 |      |           | $        | 285,757 |      |           | $       | 280,996 |   |           | $        | 313,549 |   |           | $        | 317,652 | 
|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Income (loss) from continuing operations(2)                                                                                  |                                        | $                       | (20,323   | )        |         | $    | (20,292   | )        |         | $    | 36,409    |         |         | $ | 77,113    |          |         | $ | 88,561    |         
|Income from discontinued operations(3)                                                                                       |                                        |                         | 117,500   |          |         |      | 40,389    |          |         |      | 36,709    |         |         |   | 26,219    |          |         |   | 29,250    |         
|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Income before cumulative effect of accounting
    change                                                                     |                                        | $                       | 97,177    |          |         | $    | 20,097    |          |         | $    | 73,118    |         |         | $ | 103,332   |          |         | $ | 117,811   |         
|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Net income(4)                                                                                                                |                                        | $                       | 97,177    |          |         | $    | 20,097    |          |         | $    | 73,118    |         |         | $ | 102,637   |          |         | $ | 117,811   |         
|                                                                                                                             | Distributions to preferred unitholders |                         |           | (12,105  | )       |      |           | (17,049  | )       |      |           | (17,049 | )       |   |           | (17,368  | )       |   |           | (17,475  | )      
|                                                                                                                             | Redemption costs on preferred units    |                         |           | (3,526   | )       |      |           |         |         |      |           |        |         |   |           | (239     | )       |   |           |         |        
|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Net income available to common unitholders                                                                                   |                                        | $                       | 81,546    |          |         | $    | 3,048     |          |         | $    | 56,069    |         |         | $ | 85,030    |          |         | $ | 100,336   |         
|                                                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|PER COMMON UNIT DATA                                                                                                         |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Income (loss) from continuing operations (net of
    preferred distributions and redemption costs)  basic                   |                                        | $                       | (0.85     | )        |         | $    | (0.89     | )        |         | $    | 0.46      |         |         | $ | 1.38      |          |         | $ | 1.60      |         
|Income from discontinued operations 
    basic                                                                              |                                        |                         | 2.77      |          |         |      | 0.96      |          |         |      | 0.87      |         |         |   | 0.61      |          |         |   | 0.65      |         
|Income before cumulative effect of accounting
    change (net of preferred distributions and redemption
    costs)  basic   |                                        |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.98      |          |         |   | 2.25      |         
|Net income available to common
    unitholders  basic                                                                       |                                        |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.97      |          |         |   | 2.25      |         
|Income (loss) from continuing operations (net of
    preferred distributions and redemption costs)  diluted                 |                                        | $                       | (0.85     | )        |         | $    | (0.89     | )        |         | $    | 0.46      |         |         | $ | 1.37      |          |         | $ | 1.58      |         
|Income from discontinued operations 
    diluted                                                                            |                                        |                         | 2.77      |          |         |      | 0.96      |          |         |      | 0.87      |         |         |   | 0.60      |          |         |   | 0.64      |         
|Income before cumulative effect of accounting
    change (net of preferred distributions and redemption
    costs)  diluted |                                        |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.97      |          |         |   | 2.22      |         
|Net income available to common
    unitholders  diluted                                                                     |                                        |                         | 1.92      |          |         |      | 0.07      |          |         |      | 1.33      |         |         |   | 1.97      |          |         |   | 2.22      |         
|Distributions declared                                                                                                       |                                        |                         | 1.80      |          |         |      | 1.80      |          |         |      | 3.12      |         |         |   | 3.12      |          |         |   | 3.04      |         
|Weighted average common units
    outstanding  basic                                                                        |                                        |                         | 42,474    |          |         |      | 42,134    |          |         |      | 42,021    |         |         |   | 43,212    |          |         |   | 44,503    |         
|Weighted average common units
    outstanding  diluted                                                                      |                                        |                         | 42,474    |          |         |      | 42,134    |          |         |      | 42,036    |         |         |   | 43,427    |          |         |   | 45,038    |         
|BALANCE SHEET DATA                                                                                                           |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Real estate, before accumulated depreciation                                                                                 |                                        | $                       | 2,502,418 |          |         | $    | 2,596,376 |          |         | $    | 2,705,215 |         |         | $ | 2,777,980 |          |         | $ | 2,827,094 |         
|Real estate, net of accumulated depreciation                                                                                 |                                        |                         | 1,977,719 |          |         |      | 2,085,517 |          |         |      | 2,258,037 |         |         |   | 2,371,256 |          |         |   | 2,468,334 |         
|Total assets                                                                                                                 |                                        |                         | 2,053,842 |          |         |      | 2,215,451 |          |         |      | 2,508,151 |         |         |   | 2,538,351 |          |         |   | 2,551,237 |         
|Total debt                                                                                                                   |                                        |                         | 1,129,478 |          |         |      | 1,186,322 |          |         |      | 1,414,555 |         |         |   | 1,336,520 |          |         |   | 1,213,309 |         
|Partners equity                                                                                                             |                                        |                         | 831,411   |          |         |      | 928,935   |          |         |      | 993,976   |         |         |   | 1,077,670 |          |         |   | 1,216,701 |         
|OTHER DATA                                                                                                                   |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|Cash flow provided by (used in):                                                                                             |                                        |                         |           |          |         |      |           |          |         |      |           |         |         |   |           |          |         |   |           |         
|                                                                                                                             | Operating activities                   |                         | $         | 77,424   |         |      | $         | 91,549   |         |      | $         | 119,763 |         |   | $         | 161,564  |         |   | $         | 185,073  |        
|                                                                                                                             | Investing activities                   |                         | $         | 129,748  |         |      | $         | 234,195  |         |      | $         | (48,821 | )       |   | $         | (51,213  | )       |   | $         | (255,986 | )      
|                                                                                                                             | Financing activities                   |                         | $         | (208,383 | )       |      | $         | (330,800 | )       |      | $         | (69,355 | )       |   | $         | (113,007 | )       |   | $         | 72,502   |        
|Total stabilized communities (at end of period)                                                                              |                                        |                         | 65        |          |         |      | 70        |          |         |      | 75        |         |         |   | 78        |          |         |   | 78        |         
|Total stabilized apartment units (at end of
    period)                                                                      |                                        |                         | 24,700    |          |         |      | 27,613    |          |         |      | 29,199    |         |         |   | 27,710    |          |         |   | 28,736    |         
|Average economic occupancy (fully stabilized
    communities)(5)                                                             |                                        |                         | 93.5      | %        |         |      | 91.9      | %        |         |      | 90.9      | %       |         |   | 94.9      | %        |         |   | 96.8      | %       



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of revenues from property management and
    landscape services provided to properties owned by third
    parties. These businesses were sold in the fourth quarter of
    2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(2) | Income (loss) from continuing operations in 2004
    included the impact of costs associated with the termination of
    a debt remarketing agreement (interest expense) and an early
    debt extinguishment loss totaling $14,626. See note 3 to
    the consolidated financial statements for a discussion of these
    costs. Income (loss) from continuing operations in 2003 included
    the impact of severance and proxy costs totaling $26,737. See
    note 7 to the consolidated financial statements for a
    discussion of these costs. Income from continuing operations in
    2001 and 2000 included the impact of project abandonment,
    employee severance and other charges totaling $17,450 and
    $9,365, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(3) | Upon the implementation of
    SFAS No. 144, Accounting for the Impairment or
    Disposal of Long-Lived Assets, on January 1, 2002,
    the operating results of real estate held for sale and sold are
    reported as discontinued operations for all years presented.
    Additionally, all gains and losses on the sale of assets
    classified as held for sale subsequent to January 1, 2002
    are included in discontinued operations. As the operating
    results and gains or losses from the sale of real estate assets
    prior to January 1, 2002 are included in continuing
    operations, the presentation of results are not comparable
    between years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(4) | Includes the impact of $695 resulting from the
    cumulative effect of accounting change from the Companys
    adoption of SFAS No. 133 in 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(5) | Calculated based on fully stabilized communities
    as defined for each year (unadjusted for the impact of assets
    designated as held for sale in subsequent years). 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 net concessions and employee discounts (average
    economic occupancy, taking account of these amounts, would have
    been 93.0%, 90.8%, 89.1%, 93.8% and 94.9% for the years ended
    December 31, 2004, 2003, 2002, 2001 and 2000,
    respectively). Net concessions were $621, $2,518, $4,215, $1,860
    and $3,250 for the years ended December 31, 2004, 2003,
    2002, 2001 and 2000, respectively. Employee discounts were $442,
    $535, $660, $895 and $1,143 for the years ended
    December 31, 2004, 2003, 2002, 2001 and 2000, 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.




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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(In thousands, except apartment unit data)

Company Overview

Post Properties, Inc. and its subsidiaries
develop, own and manage upscale multifamily apartment
communities in selected markets in the United States. As used in
this report, the term Company includes Post
Properties, Inc. and its subsidiaries, including Post Apartment
Homes, L.P. (the Operating Partnership), unless the
context indicates otherwise. The Company, through its
wholly-owned subsidiaries is the general partner and owns a
majority interest in the Operating Partnership which, through
its subsidiaries, conducts substantially all of the on-going
operations of the Company. At December 31, 2004, the
Company owned 24,905 apartment units in 66 apartment
communities, including 666 apartment units in three communities
held in unconsolidated entities, including 205 apartment
units currently under development in one community and including
127 units in one community that will be converted into
for-sale condominium homes through a taxable REIT subsidiary
starting in 2005. The Company is also developing 145 for-sale
condominium homes through a taxable REIT subsidiary. Subsequent
to December 31, 2004, the Company announced plans to
convert another community, containing 134 units, into
for-sale condominium homes through a taxable REIT subsidiary. At
December 31, 2004, approximately 51.6%, 17.6%, 9.0% and
8.0% (on a unit basis) of the Companys operating
communities were located in the Atlanta, Dallas, Tampa and the
greater Washington D.C. metropolitan areas, respectively.

The Company has elected to qualify and operate as
a self-administrated and self-managed real estate investment
trust (REIT) for federal income tax purposes. A REIT
is a legal entity which holds real estate interests and, through
payments of dividends to shareholders, in practical effect is
not subject to federal income taxes at the corporate level.

At December 31, 2004, the Company owned
approximately 94.1% of the common limited partnership interests
(Common Units) in the Operating Partnership. Common
Units held by persons other than the Company represented a 5.9%
common minority interest in the Operating Partnership.

Over the past several years, the multifamily
apartment sector has been adversely impacted by the supply of
multifamily apartments outpacing demand. While the construction
of new multifamily apartments had continued at historical norms
due primarily to the availability of capital and the low
interest rate environment, demand for multifamily apartments was
adversely impacted by overall weakness in the economy and the
job market, as well as increased rates of homeownership due
primarily to historically low mortgage interest rates. These
factors contributed to the Company reporting declining apartment
rental rates, same-store revenue and net operating income since
2001. In 2004, however, there have been gradual signs of
stabilization as the Company has reported increased year over
year average economic occupancy rates, positive growth in year
over year same store revenues in the later half of the year and
positive growth in year over year same store net operating
income in the fourth quarter. On a sequential basis, the Company
has also reported positive growth in quarterly average effective
rents during the later half of 2004. See Results of
Operations below where the Companys operating
results are discussed in more detail.

Over the past several years, the Company has also
been a net seller of apartment assets in an effort to exploit
opportunities to harvest value and recycle capital through the
sale of non-core assets that no longer met the Companys
growth objectives. The Companys asset sales program is
consistent with its strategy of reducing its concentration in
Atlanta, Georgia and Dallas, Texas, building critical mass in
fewer markets and leveraging the Post® brand in order to
improve operating efficiencies. The Company has redeployed
capital raised from asset sales to strengthen its balance sheet,
through the reduction of high-coupon preferred equity and debt,
and to reinvest in assets that the Company believes demonstrate
better growth potential, such as the Companys 2004
acquisition of a 499-unit apartment community in the Tysons
Corner submarket of suburban Washington, D.C. and the
Companys start of a 350-unit apartment and for-sale
condominium development project in 2004 in the master planned
Carlyle submarket of suburban Washington, D.C.

At December 31, 2004, the Company had
classified five apartment communities, containing
1,309 units as held for sale (in addition to one community
being converted to condominiums). Subsequent to
December 31, 2004, the Company classified as held for sale
one additional apartment community, containing 1,738 units.
As of February 28, 2005, the Company is currently marketing
for sale six apartment communities (in addition to the
condominium conversion activities at two communities discussed
below), containing a total of 3,047 units, that it expects
to sell in 2005 for aggregate gross purchase prices in the range
of approximately $195,000 to $210,000, including the assumption
and/or repayment of approximately $81,560 of tax-exempt secured
indebtedness encumbering three of




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the communities. Four of the six communities
currently held for sale are garden-style communities located in
Atlanta, Georgia and Dallas, Texas, containing 2,881 units
and with an average age of approximately 18 years. One of
the properties held for sale is the Companys only property
located in Nashville, Tennessee. The remaining property held for
sale is an urban redevelopment community located in Dallas,
Texas. The Companys planned asset sales are expected to
close in 2005.


In early 2005, the Company, through a taxable
REIT subsidiary, commenced the conversion of two existing
apartment communities to for-sale condominium housing units.
These communities are located in Dallas, Texas and Tampa,
Florida. The Company transferred these communities to a taxable
REIT subsidiary at their aggregate fair value of approximately
$36,000. The Company expects to begin selling these for-sale
condominium units in 2005. The Company also announced the launch
of a new for-sale housing brand, Post Preferred
HomesTM, which will serve as the new unified
marketing umbrella for the Companys for-sale ventures,
including developing new communities, such as The Condominiums
at Carlyle Square, and converting existing assets into upscale
for-sale housing in several key markets.

The Company expects to utilize net asset sales
proceeds (including net proceeds from sales of for-sale
condominium units) primarily to repay a portion of its debt that
matures in 2005. The Company may also consider utilizing asset
sales proceeds to repurchase its common stock, if the Company is
able to do so at prices it considers attractive relative to its
estimates of net asset value per share, or to pay a special
dividend to common shareholders depending on the level of
undistributed taxable gains, if any, during 2005. Based on
current expectations regarding the timing of asset sales and
related capital reinvestment activities, the Company expects
that disposition activities will result in earnings dilution in
2005, in part, due to the assumption and/or repayment of
low-floater, tax-exempt debt encumbering three of the Atlanta,
Georgia communities held for sale. The timing and amount of
these asset sales, and the related capital reinvestment
activities, could significantly impact short-term operating
results. There can be no assurances that these asset sales
(including the sale of for-sale condominium units) will close.
See Liquidity and Capital Resources below where the
Companys capital activities are discussed in more detail.

The following discussion should be read in
conjunction with the selected financial data and with all of the
accompanying consolidated financial statements appearing
elsewhere in this report. This discussion is combined for the
Company and the Operating Partnership as their results of
operations and the financial condition are substantially the
same except for the effect of the 5.9% common minority interest
in the Operating Partnership. See the summary financial
information in the section below titled, Results of
Operations.

Disclosure Regarding Forward-Looking
Statements

Certain statements made in this report, and other
written or oral statements made by or on behalf of the Company,
may constitute forward-looking statements within the
meaning of the federal securities laws. In addition, the
Company, or the executive officers on the Companys behalf,
may from time to time make forward-looking statements in reports
and other documents the Company files with the SEC or in
connection with oral statements made to the press, potential
investors or others. Statements regarding future events and
developments and the Companys future performance, as well
as managements expectations, beliefs, plans, estimates or
projections relating to the future, are forward-looking
statements within the meaning of these laws. Forward-looking
statements include statements preceded by, followed by or that
include the words believes, expects,
anticipates, plans,
estimates, or similar expressions. Examples of such
statements in this report include the Companys
expectations with regard to: anticipated apartment community
sales in 2005 (including the estimated proceeds, estimated gains
on sales and the use of proceeds from such sales), anticipated
conversion of apartment communities into condominium units and
the related sales of the for-sale condominium units, net
operating income for 2005, occupancy levels and rental rates,
operating expenses, stabilized community net operating income,
accounting recognition and measurement of guarantees, debt
maturities and financing needs, dividend payments, its ability
to meet new construction, development and other long-term
liquidity requirements, and its ability to execute future asset
sales. Forward-looking statements are only predictions and are
not guarantees of performance. These statements are based on
beliefs and assumptions of the Companys management, which
in turn are based on currently available information. Important
assumptions relating to the forward-looking statements include,
among others, assumptions regarding the market for the
Companys apartment communities held for sale, demand for
apartments in the markets in which it operates, competitive
conditions and general economic conditions. These assumptions
could prove inaccurate. The forward-looking statements also
involve risks and uncertainties, which could cause actual
results to differ materially from those contained in any
forward-looking statement. Many of these




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factors are beyond the Companys ability to
control or predict. Such factors include, but are not limited
to, the following:




|  |                                                                                                                                                                                                      
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The success of the Companys business
    strategies described on pages 2-3 in this Annual Report on
    Form 10-K;                                                                                  
| 
| | Future local and national economic conditions,
    including changes in job growth, interest rates, the
    availability of financing and other factors;                                             
| 
| | Demand for apartments in the Companys
    markets and the effect on occupancy and rental rates;                                                                                                     
| 
| | The impact of competition on the Companys
    business, including competition for residents and development
    locations;                                                                          
| 
| | The Companys ability to obtain financing or
    self-fund the development of additional apartment communities;                                                                                      
| 
| | The uncertainties associated with the
    Companys real estate development, including actual costs
    exceeding the Companys budgets or development periods
    exceeding expectations;           
| 
| | Uncertainties associated with the timing and
    amount of apartment community sales and the resulting
    gains/losses associated with such sales;                                                  
| 
| | Uncertainties associated with the Companys
    expansion into the condominium conversion and for-sale housing
    business;                                                                         
| 
| | Conditions affecting ownership of residential
    real estate and general conditions in the multi-family
    residential real estate market;                                                         
| 
| | The effects of changes in accounting policies and
    other regulatory matters detailed in the Companys filings
    with the Securities and Exchange Commission and uncertainties of
    litigation;
| 
| | The Companys ability to continue to qualify
    as a REIT under the Internal Revenue Code; and                                                                                                      
| 
| | Other factors, including the risk factors
    discussed on pages 7 through 14 in this Annual Report on
    Form 10-K.                                                                                

Management believes these forward-looking
statements are reasonable; however, undue reliance should not be
placed on any forward-looking statements, which are based on
current expectations. Further, forward-looking statements speak
only as of the date they are made, and management undertakes no
obligation to update publicly any of them in light of new
information or future events.

Critical Accounting Policies and New
Accounting Pronouncements

In the preparation of financial statements and in
the determination of Company operating performance, the Company
utilizes certain significant accounting polices and these
accounting policies are discussed in note 1 to the
Companys consolidated financial statements. Also discussed
in note 1 to the consolidated financial statements, there
are several new accounting pronouncements issued in 2004 and
2003 that may have an impact on future reported results. The
potential impact of certain new pronouncements on the Company is
discussed below and in the consolidated financial statements. As
the Company is in the business of developing, owning and
managing apartment communities, its critical accounting
policies, ones that are subject to significant management
estimates and adjustments, relate to cost capitalization and
asset impairment evaluation.

For communities under development, the Company
capitalizes interest, real estate taxes, and certain internal
personnel and associated costs directly related to apartment
communities under development and construction. Interest
capitalized to projects under development can fluctuate
significantly from year to year based on the level of projects
under development and to a lesser extent, changes in the
weighted average interest rate used in the calculation. For the
years ended December 31, 2004, 2003 and 2002, the Company
capitalized interest totaling $1,078, $3,555 and $13,223,
respectively. This decline was principally due to an intentional
reduction in the size of the Companys development
pipeline. The weighted average interest rates used in the
calculation of the capitalized interest amounts ranged from 7.3%
in 2004 to 6.8% in 2002 and, as a result, were not the primary
driver of the reduction in interest capitalization discussed
above. In future periods, the Company anticipates an increase in
development activity which will result in increased interest
capitalization over 2004 levels. Aggregate interest
capitalization increases are expected even as the average
interest rate used in the calculation is expected to decline.
The decline in the weighted average rate is expected to result
from the maturity of high rate debt in 2005, the expected
refinancing of a portion of this debt at lower rates and
expected higher average balances outstanding under the
Companys lower variable rate credit facilities.




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Internal personnel and associated costs are
capitalized to the projects under development based upon the
effort identifiable with such projects. As the Company
intentionally slowed its development efforts due to a weaker
economic environment in 2002 and 2003, the Company capitalized
less to development projects. The Company elected to retain
certain development personnel and capabilities during this
period in order to position the Company for increased
development activities in future years. In 2004 and 2003, the
Company expensed $1,070 and $919, respectively, of development
personnel and associated costs. If future development volume
increases over 2004 levels, some or all of such costs may be
capitalized to development projects.

The Company continually evaluates the
recoverability of the carrying value of its real estate assets
using the methodology summarized in its accounting policies (see
note 1 to the consolidated financial statements). Under
current accounting literature, the evaluation of the
recoverability of the Companys real estate assets requires
the judgment of Company management in the determination of the
value of the future cash flows expected from the assets and the
estimated holding period for the assets. The Company uses market
capitalization rates to determine the estimated residual value
of its real estate assets (capitalization rates ranged from 5.0%
to 7.0% at December 31, 2004) and, generally, takes a
long-term view on the holding period of its assets unless
specific facts and considerations warrant shorter holding
periods (expected sales, departures from certain markets, etc).
At December 31, 2004 and 2003, management believes it has
applied reasonable estimates and judgments in determining the
proper classification of its real estate assets. Should external
or internal circumstances change requiring the need to shorten
the holding periods or adjust the estimated future cash flows of
certain of the Companys assets, the Company could be
required to record future impairment charges. As discussed in
note 5 to the consolidated financial statements, the
Company recorded impairment losses in 2004 and 2003 on assets
held for sale or for investment under the application of its
policies.

FASB Interpretation No. 46R,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 was issued in 2003
requiring the consolidation of all legal entities in which the
enterprise holds contractual, ownership or other monetary
interests that change with changes in the entitys net
asset value (such entities being designated as variable interest
entities) where the enterprise is deemed the primary
beneficiary. The provisions of FIN No. 46R were
generally applicable as of March 31, 2004. The Company
currently does not have any interests in special purpose
entities or other variable interest entities and
FIN No. 46R did not have a significant effect on its
results of operations or financial position.

SFAS No. 123R, Share-Based
Payment, was issued in December 2004.
SFAS No. 123R revises SFAS No. 123,
Accounting for Stock-Based Compensation and requires
companies to expense the fair value of employee stock options
and other forms of stock-based compensation.
SFAS No. 123R also supersedes the provisions of APB
No. 25. The provisions of SFAS No. 123R are
effective as of the beginning of the Companys interim
reporting period starting after June  15, 2005. The
Company plans to adopt the provisions of SFAS No. 123R
in the third quarter of 2005 and is currently evaluating the
alternative methods of adoption. Since the Company elected to
apply the provisions of SFAS No. 123 on
January 1, 2003, the adoption of SFAS No. 123R is
not expected to have a significant impact on the Companys
financial position or results of operations.

Results of Operations

The following discussion of results of operations
should be read in conjunction with the consolidated statements
of operations, the accompanying selected financial data and the
community operations/segment performance information included
below.

The Companys revenues and earnings are
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.
The Company generally considers a community to have achieved
stabilized occupancy on the earlier to occur of
(1) attainment of 95% physical occupancy on the first day
of any month or (2) one year after completion of
construction.

For the year ended December 31, 2004, the
Companys portfolio of operating apartment communities,
excluding three communities held in unconsolidated entities and
six communities held for sale, consisted of the following:
(1) 52 communities that were completed and stabilized for
all of the current and prior year, (2) two communities that
achieved full stabilization during 2003, (3) one community
that was in the lease-up stage during the year, and (4) one
community that was acquired in 2004. Sold communities include
communities sold in 2002 that were not reflected in discontinued
operations under SFAS No. 144 (see discussion under
Discontinued Operations). These operating segments
exclude the operations of apartment communities classified as
discontinued operations and apartment communities held in
unconsolidated entities for the years presented.




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The Company has adopted an accounting policy
related to communities in the lease-up stage whereby
substantially all operating expenses (including pre-opening
marketing and management and leasing personnel expenses) 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 and management and leasing
personnel 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, 2004, 2003 and
2002 were $0, $3,574 and $1,553, respectively.

In order to evaluate the operating performance of
its communities for the comparative years listed below, the
Company has presented financial information which summarizes the
rental and other revenues, property operating and maintenance
expenses (excluding depreciation and amortization) and net
operating income on a comparative basis for all of its operating
communities and for its stabilized operating communities. Net
operating income is a supplemental non-GAAP financial measure.
The Company believes that the line on the Companys
consolidated statement of operations entitled net
income is the most directly comparable GAAP measure to net
operating income. Net operating income is reconciled to GAAP net
income in the financial information accompanying the tables. The
Company believes that net operating income is an important
supplemental measure of operating performance for a REITs
operating real estate because it provides a measure of the core
operations, rather than factoring in depreciation and
amortization, financing costs and general and administrative
expenses. This measure is particularly useful, in the opinion of
the Company, in evaluating the performance of geographic
operations, operating segment groupings and individual
properties. Additionally, the Company believes that net
operating income, as defined, is a widely accepted measure of
comparative operating performance in the real estate investment
community.

Comparison of Year Ended December 31,
2004 to Year Ended December 31, 2003

The operating performance from continuing
operations for all of the Companys apartment communities
summarized by segment for the years ended December 31, 2004
and 2003 is summarized as follows:

|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|-------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | -------- | ------- |  |  |  | ----- | --
|                                                                                             |  |                         |         |     
|                                                                                             |  | Year Ended December 31, |         |     
|                                                                                             |  |                         |         |     
|                                                                                             |  | 2004                    |         | 2003 |  | % Change
|                                                                                             |  |                         |         |      |  |         
|Rental and other property revenues                                                           |  |                         |         |      |  |          |         |  |  |  |       |   
|Fully stabilized communities(1)                                                              |  | $                       | 250,372 |      |  | $        | 248,991 |  |  |  | 0.6   | % 
|Communities stabilized in 2003                                                               |  |                         | 15,784  |      |  |          | 14,695  |  |  |  | 7.4   | % 
|Development and lease-up communities(2)                                                      |  |                         | 7,001   |      |  |          | 2,006   |  |  |  | 249.0 | % 
|Acquired communities(3)                                                                      |  |                         | 4,472   |      |  |          |        |  |  |  |      |   
|Other property segments(4)                                                                   |  |                         | 21,201  |      |  |          | 19,608  |  |  |  | 8.1   | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|                                                                                             |  |                         | 298,830 |      |  |          | 285,300 |  |  |  | 4.7   | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|Property operating and maintenance expenses
    (exclusive of depreciation and amortization) |  |                         |         |      |  |          |         |  |  |  |       |   
|Fully stabilized communities(1)                                                              |  |                         | 97,247  |      |  |          | 93,829  |  |  |  | 3.6   | % 
|Communities stabilized in 2003                                                               |  |                         | 5,933   |      |  |          | 5,854   |  |  |  | 1.3   | % 
|Development and lease-up communities(2)                                                      |  |                         | 2,122   |      |  |          | 1,893   |  |  |  | 12.1  | % 
|Acquired communities(3)                                                                      |  |                         | 1,309   |      |  |          |        |  |  |  |      |   
|Other expense(5)                                                                             |  |                         | 26,127  |      |  |          | 22,602  |  |  |  | 15.6  | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|                                                                                             |  |                         | 132,738 |      |  |          | 124,178 |  |  |  | 6.9   | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|Property net operating income(6)                                                             |  | $                       | 166,092 |      |  | $        | 161,122 |  |  |  | 3.1   | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|Capital Expenditures                                                                         |  |                         |         |      |  |          |         |  |  |  |       |   
|Recurring capital expenditures:(7)(8)                                                        |  |                         |         |      |  |          |         |  |  |  |       |   
|Carpet                                                                                       |  | $                       | 2,907   |      |  | $        | 2,044   |  |  |  | 42.2  | % 
|Other                                                                                        |  |                         | 5,878   |      |  |          | 4,745   |  |  |  | 23.9  | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|Total                                                                                        |  | $                       | 8,785   |      |  | $        | 6,789   |  |  |  | 29.4  | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|Non-recurring capital expenditures                                                           |  | $                       | 3,761   |      |  | $        | 4,474   |  |  |  | (15.9 | )%
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   
|Average apartment units in service                                                           |  |                         | 22,598  |      |  |          | 22,479  |  |  |  | 0.5   | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |       |   




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---



|    |                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Communities which reached stabilization prior to
    January 1, 2003.                                                                                                                                                                                                                                                                                                                      
|(2) | Communities in the construction,
    development or lease-up stage during
    2003 and, therefore, not considered fully stabilized for all of
    the periods presented.                                                                                                                                                                                                             
|(3) | Communities acquired subsequent to
    January 1, 2003.                                                                                                                                                                                                                                                                                                                                    
|(4) | Other property segment revenues include revenue
    from commercial properties, from furnished apartment rentals
    above the unfurnished rental rates and any property revenue not
    directly related to property operations. Other property segment
    revenues exclude other corporate revenues of $1,000 and $457 for
    the years ended December 31, 2004 and 2003, respectively.
|(5) | Other expenses includes certain indirect central
    office operating expenses related to management, grounds
    maintenance, and costs associated with commercial properties and
    furnished apartment rentals.                                                                                                                                                                        
|(6) | A reconciliation of property net operating income
    to GAAP net income is detailed below.                                                                                                                                                                                                                                                                                                

|                                           |                                                                  |              |         |         |   |   |         |         |  
|------------------------------------------ | ---------------------------------------------------------------- | ------------ | ------- | ------- | - | - | ------- | ------- | -
|                                           |                                                                  |             
|                                           |                                                                  | Year Ended  
|                                           |                                                                  | December 31,
|                                           |                                                                  |             
|                                           |                                                                  | 2004         |         | 2003   
|                                           |                                                                  |              |         |        
|Total same store NOI                       |                                                                  | $            | 153,126 |         |   | $ | 155,162 |        
|Property NOI from other operating segments |                                                                  |              | 12,966  |         |   |   | 5,960   |        
|                                           |                                                                  |              |         |         |   |   |         |        
|Consolidated property NOI                  |                                                                  |              | 166,092 |         |   |   | 161,122 |        
|Add (subtract):                            |                                                                  |              |         |         |   |   |         |        
|                                           | Other revenues                                                   |              |         | 1,000   |   |   |         | 457     |  
|                                           | Interest income                                                  |              |         | 817     |   |   |         | 894     |  
|                                           | Minority interest in consolidated property
    partnerships      |              |         | 671     |   |   |         | 1,605   |  
|                                           | Depreciation                                                     |              |         | (83,029 | ) |   |         | (81,201 | )
|                                           | Interest expense                                                 |              |         | (65,415 | ) |   |         | (63,182 | )
|                                           | Amortization of deferred financing costs                         |              |         | (4,304  | ) |   |         | (3,801  | )
|                                           | General and administrative                                       |              |         | (21,275 | ) |   |         | (15,102 | )
|                                           | Development costs and other expenses                             |              |         | (1,337  | ) |   |         | (2,137  | )
|                                           | Termination of debt remarketing agreement
    (interest expense) |              |         | (10,615 | ) |   |         |        |  
|                                           | Loss on early extinguishment of indebtedness                     |              |         | (4,011  | ) |   |         |        |  
|                                           | Proxy contest and related costs                                  |              |         |        |   |   |         | (5,231  | )
|                                           | Severance charges                                                |              |         |        |   |   |         | (21,506 | )
|                                           | Equity in income of unconsolidated entities                      |              |         | 1,083   |   |   |         | 7,790   |  
|                                           | Minority interest of preferred unitholders                       |              |         | (3,780  | ) |   |         | (5,600  | )
|                                           | Minority interest of common unitholders                          |              |         | 2,283   |   |   |         | 3,801   |  
|                                           |                                                                  |              |         |         |   |   |         |        
|                                           | Loss from continuing operations                                  |              |         | (21,820 | ) |   |         | (22,091 | )
|                                           | Income from discontinued operations                              |              |         | 110,039 |   |   |         | 36,247  |  
|                                           |                                                                  |              |         |         |   |   |         |        
|Net income                                 |                                                                  | $            | 88,219  |         |   | $ | 14,156  |        
|                                           |                                                                  |              |         |         |   |   |         |        



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(7) | In addition to those expenses which relate to
    property operations, the Company incurs recurring and
    non-recurring expenditures relating to acquiring and developing
    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. Recurring capital expenditures are
    those that are generally expected to be incurred on an annual
    basis. Non-recurring capital expenditures are those that
    generally occur less frequently than on an annual basis.
|(8) | A reconciliation of property capital expenditures
    from continuing operations to total recurring and non-recurring
    capital expenditures as presented in the consolidated statements
    of cash flows under GAAP is detailed below.                                                                                                                                                                                                                                                                                                                                            

|                                   |                                                                           |              |   |       |  |  |   |       | 
|---------------------------------- | ------------------------------------------------------------------------- | ------------ | - | ----- |  |  | - | ----- | 
|                                   |                                                                           |             
|                                   |                                                                           | Year Ended  
|                                   |                                                                           | December 31,
|                                   |                                                                           |             
|                                   |                                                                           | 2004         |   | 2003 
|                                   |                                                                           |              |   |      
|Recurring capital expenditures     |                                                                           |              |   |       |  |  |   |      
|                                   | Continuing operations                                                     |              | $ | 8,785 |  |  | $ | 6,789 | 
|                                   | Discontinued operations                                                   |              |   | 1,099 |  |  |   | 2,684 | 
|                                   |                                                                           |              |   |       |  |  |   |      
|                                   | Total recurring capital expenditures per
    statements of cash flows     |              | $ | 9,884 |  |  | $ | 9,473 | 
|                                   |                                                                           |              |   |       |  |  |   |      
|Non-recurring capital expenditures |                                                                           |              |   |       |  |  |   |      
|                                   | Continuing operations                                                     |              | $ | 3,761 |  |  | $ | 4,474 | 
|                                   | Discontinued operations                                                   |              |   | 844   |  |  |   | 678   | 
|                                   |                                                                           |              |   |       |  |  |   |      
|                                   | Total non-recurring capital expenditures per
    statements of cash flows |              | $ | 4,605 |  |  | $ | 5,152 | 
|                                   |                                                                           |              |   |       |  |  |   |      

The Operating Partnership reported net income
available to common unitholders of $81,546 and $3,048 for the
years ended December 31, 2004 and 2003, respectively, and
the Company reported net income available to common




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shareholders of $76,368 and $2,707 for the years
ended December 31, 2004 and 2003, respectively. The
improvement in net income in 2004 compared to 2003 primarily
reflected increased gains on property sales of $72,947
($69,542 net of minority interest) between years. The
change between years was also impacted by larger accounting
charges in 2003 of $44,199 ($39,232 net of minority
interest) relating to severance, proxy contest and asset
impairment charges compared to expense items in 2004 of $20,987
($19,637 net of minority interest) relating to losses on
early debt extinguishments, costs of terminating a debt
remarketing agreement (interest expense) and asset impairment
charges. These items are discussed in more detail in the
sections below along with a discussion of the changes in the
operating performance of the Companys assets.


Rental and other revenues increased $13,530 or
4.7% from 2003 to 2004 primarily due to increased revenues from
the Companys lease-up and acquired communities of $9,467
or 471.9%. In addition, revenues from stabilized communities and
newly stabilized communities increased from 2003 to 2004 due to
improving market conditions between years. The revenue increase
from lease-up communities in 2004 reflects almost a full year of
operating performance in 2004 for the one community compared to
an initial lease-up period in 2003. The revenue increase from
acquired communities reflects the acquisition of one community
in June 2004. Property operating and maintenance expenses
(exclusive of depreciation and amortization) increased $8,560 or
6.9% primarily due to increased expenses from stabilized
communities and increased management division expenses. The
expense increase from stabilized communities is discussed below.
The management division expense increase primarily reflects the
impact of casualty losses to repair hurricane damage of $1,321
to the Companys Florida communities, severance costs of
$569 relating to the elimination of certain positions resulting
from recent asset sales and other expense increases due to the
increased volume of corporate apartment business in 2004.

For the year ended December 31, 2004, the
Company recognized net gains from discontinued operations of
$113,739 ($106,039 net of minority interest) from the sale
of eight communities containing 3,880 units, and certain
land parcels. These sales generated net proceeds of
approximately $242,962, including debt assumed by the purchasers
of $104,325. For the year ended December 31, 2003, the
Company recognized net gains from discontinued operations of
$40,792 ($36,497 net of minority interest) on the sale of
four communities containing 1,844 units and certain land
parcels. These sales generated net proceeds of approximately
$163,560. The Company plans to continue to be an active seller
of its older communities based on an assessment of market
conditions and consistent with its investment strategy of
recycling investment capital to fund new development and
acquisition activities.

Depreciation expense increased $1,828, or 2.3%
from 2003 to 2004 primarily due to depreciation on a community
acquired in June 2004 and due to increased depreciation on a
lease-up community that was placed in service in 2003.

Interest expense (excluding $10,615 of costs
associated with the termination of a debt remarketing
agreement  discussed below) increased $2,233 or 3.5%
from 2003 to 2004 primarily due to a $2,477 reduction in
capitalized interest to development properties between years as
the Companys prior year development pipeline transitioned
to operating properties through early 2003. Excluding the
reduction in capitalized interest between periods, the combined
interest expense in continuing and discontinued operations
decreased by $4,253 or 5.7% between years. This decrease results
from lower overall debt levels between years and lower interest
rates on unsecured public debt refinanced in 2004. Lower debt
levels in 2004 were a result of the partial use of 2003 and 2004
asset sales proceeds to reduce debt.

In December 2004, the Company terminated a
remarketing agreement related to its $100,000, 6.85% Mandatory
Par Put Remarketed Securities (MOPPRS) due March
2015. In connection with the termination of the remarketing
agreement, the Company paid $10,615, including transaction
expenses. Under the terms of the remarketing agreement, the
remarketing agent had the right to remarket the $100,000
unsecured notes in March 2005 for a ten-year term at an interest
rate calculated as 5.715% plus the Companys then current
credit spread to the ten-year treasury rate. As a result of the
termination of the remarketing agreement, the underlying debt
matures in March 2005 and the Company expects to retire the debt.

The loss on early extinguishment of indebtedness
in 2004 of $4,011 represented the debt repurchase premiums,
transactions expenses and the write-off of unamortized deferred
financing costs associated with the early retirement of debt. In
October 2004, the Company purchased and retired $87,957 of the
Companys 8.125% medium term, unsecured notes through a
tender offer. The debt was originally scheduled to mature in
2005. The Company retired a portion of this debt prior to
maturity to take advantage of favorable lower interest rates in
October 2004 and to reduce its debt refinancing risk in 2005.




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General and administrative expenses increased
$6,173, or 40.9%, from 2003 to 2004 primarily due to higher
expenses related to the amortization of incentive stock
compensation awards, directors and officers insurance, legal,
audit, corporate governance and other consulting expenses. The
increase in legal expenses includes approximately $1,584 of
additional costs associated with the settlement with the
Companys former chairman and CEO (see note 7 to the
consolidated financial statements), shareholder litigation and
other matters. The increase in audit and corporate governance
expense includes approximately $1,164 of additional costs
associated with the Companys compliance with the
Sarbanes/Oxley regulations. The increase in consulting expenses
of approximately $620 between years reflects costs associated
with a review and valuation of each asset in the Companys
real estate portfolio to assist with future capital investment
decisions and strategic planning and professional services to
assist with the selection of new property management software.

Development costs and other decreased $800 or
37.4% from 2003 to 2004. Development costs and other expenses of
$1,337 in 2004 consisted of development personnel and associated
costs and land carry expenses not allocable to development
projects. Development costs and other expenses of $2,137 in 2003
included development personnel and associated costs and land
carry expenses not allocable to development projects of $1,237,
the write-off of the Companys remaining investment in a
property management software company of $276, legal expenses of
$373 relating to board of directors governance and transition
matters, the settlement cost of $100 relating to the bankruptcy
of a former technology investment and losses of $152 on the
disposal of the Companys partial ownership interest in a
corporate aircraft.

The Company recorded severance and proxy contest
charges of $21,506 and $5,231, respectively, in 2003. These
charges are discussed in more detail below. Comparable charges
were not incurred in 2004.

Equity in income of unconsolidated real estate
entities decreased from $7,790 in 2003 to $1,083 in 2004. This
decrease was primarily due to the recognition of the
Companys share of a gain of $8,395 resulting from the sale
of an apartment community by one of the limited liability
companies in 2003. Excluding the impact of this gain, the net
income of the unconsolidated entities improved in 2004 primarily
due to the completion of the lease-up of one community held by
the entities and the generally improving apartment market
fundamentals resulting in improved operating performance of the
communities held by the entities.

Recurring and nonrecurring capital expenditures
from continuing operations increased $1,283 or 11.4% from 2003
to 2004. The increase in recurring capital expenditures of
$1,996 or 29.4% reflects the impact of several communities
beginning to capitalize carpet, vinyl and blinds in 2004 (the
communities expensed these expenditures under the Companys
accounting policies for the initial five years), more leasing
office upgrades in 2004, more parking lot resurfacings in 2004
as well as the timing of capital spending between years. The
decrease in nonrecurring capital expenditures of $713 or 15.9%
in 2004 reflects primarily lower expenditures on projects to
prevent water infiltration on two communities in Florida.




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Fully Stabilized Communities

The Company defines fully stabilized communities
as those which have reached stabilization prior to the beginning
of the previous year. For the 2004 to 2003 comparison, fully
stabilized communities are defined as those communities which
reached stabilization prior to January 1, 2003. This
portfolio consisted of 52 communities with 20,978 units,
including 26 communities with 11,410 units (54.4%) located
in Atlanta, Georgia, 13 communities with 3,939 units
(18.8%) located in Dallas, Texas, three communities with
1,439 units (6.9%) located in Tampa, Florida, three
communities with 1,204 units (5.7%) located in Washington
D.C. and seven communities with 2,986 units (14.2%) located
in other markets. The operating performance of these communities
is summarized as follows:

|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |      |       |      |  
|----------------------------------------------------------------------------------------- | ------------------------------------------------------- | ----------------------------- | --------------- | ---- | ------ | -------- | ------- | --- | ------ | ----- | ---- | ---- | ----- | ---- | -
|                                                                                          |                                                         |                              
|                                                                                          |                                                         | Year-ended December 31,      
|                                                                                          |                                                         |                              
|                                                                                          |                                                         | 2004                          |                 | 2003 |        | % Change
|                                                                                          |                                                         |                               |                 |      |        |         
|Rental and other revenues                                                                 |                                                         | $                             | 250,372         |      |        | $        | 248,991 |     |        |       | 0.6  | %   
|Property operating and maintenance expenses
    (excluding depreciation and amortization) |                                                         |                               | 97,246          |      |        |          | 93,829  |     |        |       | 3.6  | %   
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|Same store net operating income(1)                                                        |                                                         | $                             | 153,126         |      |        | $        | 155,162 |     |        |       | (1.3 | )%  
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|Capital expenditures(2)                                                                   |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|                                                                                          |                                                         | Recurring Carpet              |                 | $    | 2,711  |          |         | $   | 2,029  |       |      |      | 33.6  | %   
|                                                                                          |                                                         | Other                         |                 |      | 5,581  |          |         |     | 4,553  |       |      |      | 22.6  | %   
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|                                                                                          |                                                         |                               | Total recurring |      |        | 8,292    |         |     |        | 6,582 |      |      |       | 26.0 | %
|                                                                                          |                                                         | Non-recurring                 |                 |      | 3,032  |          |         |     | 3,509  |       |      |      | (13.6 | )%  
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|                                                                                          |                                                         | Total capital expenditures(A) |                 | $    | 11,324 |          |         | $   | 10,091 |       |      |      | 12.2  | %   
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|                                                                                          | Total capital expenditures per
    unit(A÷20,978 units) |                               | $               | 540  |        |          | $       | 481 |        |       |      | 12.2 | %    
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|Average monthly rental per apartment unit(3)                                              |                                                         | $                             | 991             |      |        | $        | 1,015   |     |        |       | (2.4 | )%  
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     
|Average economic occupancy(4)                                                             |                                                         |                               | 93.5            | %    |        |          | 91.9    | %   |        |       | 1.6  | %   
|                                                                                          |                                                         |                               |                 |      |        |          |         |     |        |       |      |     



---



|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net operating income of stabilized communities is
    a supplemental non-GAAP financial measure. See note 15 to
    the consolidated financial statements for a reconciliation of
    net operating income for stabilized communities to GAAP net
    income.
|(2) | A reconciliation of these segment components of
    property capital expenditures to total recurring and
    non-recurring capital expenditures as presented in the
    consolidated statements of cash flows prepared under GAAP is
    detailed below.     

|                                                                           |  |              |       |      |  |   |       | 
|-------------------------------------------------------------------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                                                                           |  |             
|                                                                           |  | Year-ended  
|                                                                           |  | December 31,
|                                                                           |  |             
|                                                                           |  | 2004         |       | 2003
|                                                                           |  |              |       |     
|Recurring capital expenditures by operating
    segment                    |  |              |       |      |  |   |       | 
|Fully stabilized                                                           |  | $            | 8,292 |      |  | $ | 6,582 | 
|Stabilized in prior year                                                   |  |              | 275   |      |  |   | 74    | 
|Construction and lease-up                                                  |  |              | 25    |      |  |   |      | 
|Other property segments, including discontinued
    operations             |  |              | 1,292 |      |  |   | 2,817 | 
|                                                                           |  |              |       |      |  |   |       | 
|Total recurring capital expenditures per
    statements of cash flows      |  | $            | 9,884 |      |  | $ | 9,473 | 
|                                                                           |  |              |       |      |  |   |       | 
|Non-recurring capital expenditures by operating
    segment                |  |              |       |      |  |   |       | 
|Fully stabilized                                                           |  | $            | 3,032 |      |  | $ | 3,509 | 
|Stabilized in prior year                                                   |  |              | 231   |      |  |   | 335   | 
|Construction and lease-up                                                  |  |              |      |      |  |   |      | 
|Other property segments, including discontinued
    operations             |  |              | 1,342 |      |  |   | 1,308 | 
|                                                                           |  |              |       |      |  |   |       | 
|Total non-recurring capital expenditures, per
    statements of cash flows |  | $            | 4,605 |      |  | $ | 5,152 | 
|                                                                           |  |              |       |      |  |   |       | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company uses same store recurring and
    non-recurring capital expenditures as cash flow measures. Same
    store recurring and non- recurring capital expenditures are
    supplemental non-GAAP financial measures. The Company believes
    that same store recurring and non-recurring capital expenditures
    are important indicators of the costs incurred by the Company in
    maintaining same store communities. The corresponding GAAP
    measures include information with respect to the Companys
    other operating segments consisting of communities




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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | stabilized in the prior year, lease-up
    communities, and sold communities in addition to same store
    information. Therefore, the Company believes that the
    Companys presentation of same store recurring and
    non-recurring capital expenditures is necessary to demonstrate
    same store replacement costs over time. The Company believes
    that the most directly comparable GAAP measure to same store
    recurring and non-recurring capital expenditures are the lines
    on the Companys consolidated statements of cash flows
    entitled recurring capital expenditures and
    non-recurring capital expenditures.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Average monthly rental rate is defined as the
    average of the gross actual rental rates for leased units and
    the average of the anticipated rental rates for unoccupied
    units, divided by total units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|(4) | Average economic occupancy is defined as gross
    potential rent less vacancy losses, model expenses and bad debt
    expenses divided by gross potential rent for the period,
    expressed as a percentage. Gross potential rent is defined as
    the sum of the gross actual rental rates for leased units and
    the anticipated rental rates for unoccupied units. The
    calculation of average economic occupancy does not include a
    deduction for net concessions and employee discounts. Average
    economic occupancy including these amounts would have been 93.0%
    and 90.7% for the years ended December 31, 2004 and 2003,
    respectively. For the years ended December 31, 2004 and
    2003, net concessions were $621 and $2,518, respectively, and
    employee discounts were $442 and $535, respectively.

Rental and other revenues increased $1,382 or
0.6% from 2003 to 2004. This increase resulted from increased
average economic occupancy levels in 2004 offset somewhat by a
2.4% decline in the average monthly rental rate per apartment
unit. The increase in the average economic occupancy of the
portfolio from 91.9% in 2003 to 93.5% in 2004 resulted in lower
net rental concessions of $1,897 and lower vacancy losses of
$4,868 in 2004. Other property revenues also increased $726. The
decline in average rental rates resulted in a revenue decrease
of approximately $6,109 between years. Overall, the improving
performance of the operating portfolio reflects gradually
improving market conditions in most of the Companys
markets resulting generally from improved economic conditions.

Beginning in mid 2003 and through 2004, the
Company focused its leasing strategy on retaining higher average
occupancy levels as detailed above. The overall revenue impact
of the increase in occupancy levels, offset by declining year
over year percentage decreases in average monthly rental rates,
has resulted in increased year over year total rental and other
revenues between years (0.6% in 2004). In periods prior to mid
2003, the Companys leasing strategy focused more on
maintaining average monthly rental rates than on retaining
occupancy. The Company believed this strategy change was
necessary to maximize its operating results under the market
conditions existing in 2003 and 2004, to operate the
Companys communities more efficiently at higher occupancy
levels and to be in a better position to increase rental rates
as market conditions improved in 2004 and in future years.

Property operating and maintenance expenses
(exclusive of depreciation and amortization) increased $3,418 or
3.6% from 2003 to 2004. Increased personnel expenses of $1,614
or 7.4%, increased property tax expenses of $1,181 or 3.9%, and
increased utility expenses of $1,027 or 8.7% were offset by
decreased insurance expenses of $342 or 6.6%. Personnel expenses
increased due to annual salary increases, increased bonus
expenses and increased health and benefit expenses in 2004.
Property tax expense increased due primarily to rising property
valuations in the Dallas, Texas market. Utility expenses
increased primarily due to higher water and sewer rates in
Atlanta, Georgia. Insurance expenses decreased due to lower
insurance rates for the 2004 insurance renewal period.




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##### Table of Contents



Comparison of Year Ended December 31,
2003 to Year Ended December 31, 2002

For the purposes of comparative operating
performance, the Company categorizes its operating communities
based on the period each community reaches stabilized occupancy,
as defined above. For the 2003 to 2002 comparison, the operating
community categories were based on the status of each community
as of December 31, 2003. As a result, these categories are
different from the operating community categories used in the
2004 to 2003 comparison discussed earlier in this section.
Further, the amounts reported in the table below have been
adjusted from the amounts reported in the Companys
December 31, 2003 financial statements due to the
restatement impact of reclassifying the operating results of
assets designated as held for sale in 2004 to discontinued
operations under SFAS No. 144 (see the related
discussion under the caption, Discontinued
Operations). The operating performance from continuing
operations for all of the Companys apartment communities
combined for the years ended December 31, 2003 and 2002 is
summarized as follows:

|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|-------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ---- |  | -------- | ------- |  |  |  | ---- | --
|                                                                                             |  |                         |         |     
|                                                                                             |  | Year Ended December 31, |         |     
|                                                                                             |  |                         |         |     
|                                                                                             |  | 2003                    |         | 2002 |  | % Change
|                                                                                             |  |                         |         |      |  |         
|Rental and other property revenues                                                           |  |                         |         |      |  |          |         |  |  |  |      |   
|Fully stabilized communities(1)                                                              |  | $                       | 217,028 |      |  | $        | 223,864 |  |  |  | (3.1 | )%
|Communities stabilized in 2002                                                               |  |                         | 31,962  |      |  |          | 26,782  |  |  |  | 19.3 | % 
|Development and lease-up communities(2)                                                      |  |                         | 16,701  |      |  |          | 9,170   |  |  |  | 82.1 | % 
|Sold communities                                                                             |  |                         |        |      |  |          | 773     |  |  |  |     |   
|Other property segments(3)                                                                   |  |                         | 19,609  |      |  |          | 20,147  |  |  |  | (2.7 | )%
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|                                                                                             |  |                         | 285,300 |      |  |          | 280,736 |  |  |  | 1.6  | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|Property operating and maintenance expenses
    (exclusive of depreciation and amortization) |  |                         |         |      |  |          |         |  |  |  |      |   
|Fully stabilized communities(1)                                                              |  |                         | 81,780  |      |  |          | 79,989  |  |  |  | 2.2  | % 
|Communities stabilized in 2002                                                               |  |                         | 12,049  |      |  |          | 10,746  |  |  |  | 12.1 | % 
|Development and lease-up communities(2)                                                      |  |                         | 7,747   |      |  |          | 4,316   |  |  |  | 79.5 | % 
|Sold communities                                                                             |  |                         |        |      |  |          | 403     |  |  |  |     |   
|Other expense(4)                                                                             |  |                         | 22,602  |      |  |          | 21,576  |  |  |  | 4.8  | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|                                                                                             |  |                         | 124,178 |      |  |          | 117,030 |  |  |  | 6.1  | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|Property net operating income(5)                                                             |  | $                       | 161,122 |      |  | $        | 163,706 |  |  |  | (1.6 | )%
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|Capital Expenditures                                                                         |  |                         |         |      |  |          |         |  |  |  |      |   
|Recurring capital expenditures:(6)(7)                                                        |  |                         |         |      |  |          |         |  |  |  |      |   
|Carpet                                                                                       |  | $                       | 2,044   |      |  | $        | 1,595   |  |  |  | 28.2 | % 
|Other                                                                                        |  |                         | 4,745   |      |  |          | 4,245   |  |  |  | 11.8 | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|Total                                                                                        |  | $                       | 6,789   |      |  | $        | 5,840   |  |  |  | 16.3 | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|Non-recurring capital expenditures                                                           |  | $                       | 4,474   |      |  | $        | 2,770   |  |  |  | 61.5 | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   
|Average apartment units in service                                                           |  |                         | 22,479  |      |  |          | 21,776  |  |  |  | 3.2  | % 
|                                                                                             |  |                         |         |      |  |          |         |  |  |  |      |   



|    |                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Communities which reached stabilization prior to
    January 1, 2002.                                                                                                                                                                                                                                                                                                                    
|(2) | Communities in the construction,
    development or lease-up stage during
    2002 and, therefore, not considered fully stabilized for all of
    the periods presented.                                                                                                                                                                                                           
|(3) | Other property segment revenues include revenue
    from commercial properties, from furnished apartment rentals
    above the unfurnished rental rates and any property revenue not
    directly related to property operations. Other property segment
    revenues exclude other corporate revenues of $457 and $260 for
    the years ended December 31, 2003 and 2002, respectively.
|(4) | Other expenses includes certain indirect central
    office operating expenses related to management, grounds
    maintenance, and costs associated with commercial properties and
    furnished apartment rentals.                                                                                                                                                                      




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|    |                                                                                            
|--- | -------------------------------------------------------------------------------------------
|(5) | A reconciliation of property net operating income
    to GAAP net income is detailed below.

|                                           |                                                             |                         |         |         |   |   |         |         |  
|------------------------------------------ | ----------------------------------------------------------- | ----------------------- | ------- | ------- | - | - | ------- | ------- | -
|                                           |                                                             |                        
|                                           |                                                             | Year Ended December 31,
|                                           |                                                             |                        
|                                           |                                                             | 2003                    |         | 2002   
|                                           |                                                             |                         |         |        
|Total same store NOI                       |                                                             | $                       | 135,248 |         |   | $ | 143,875 |        
|Property NOI from other operating segments |                                                             |                         | 25,874  |         |   |   | 19,831  |        
|                                           |                                                             |                         |         |         |   |   |         |        
|Consolidated property NOI                  |                                                             |                         | 161,122 |         |   |   | 163,706 |        
|Add (subtract):                            |                                                             |                         |         |         |   |   |         |        
|                                           | Other revenues                                              |                         |         | 457     |   |   |         | 260     |  
|                                           | Interest income                                             |                         |         | 894     |   |   |         | 1,288   |  
|                                           | Minority interest in consolidated property
    partnerships |                         |         | 1,605   |   |   |         | 1,771   |  
|                                           | Depreciation                                                |                         |         | (81,201 | ) |   |         | (74,482 | )
|                                           | Interest expense                                            |                         |         | (63,182 | ) |   |         | (50,231 | )
|                                           | Amortization of deferred financing costs                    |                         |         | (3,801  | ) |   |         | (2,327  | )
|                                           | General and administrative                                  |                         |         | (15,102 | ) |   |         | (14,430 | )
|                                           | Development costs and other expenses                        |                         |         | (2,137  | ) |   |         | (694    | )
|                                           | Loss on early extinguishment of indebtedness                |                         |         |        |   |   |         | (136    | )
|                                           | Proxy contest and related costs                             |                         |         | (5,231  | ) |   |         |        |  
|                                           | Severance charges                                           |                         |         | (21,506 | ) |   |         |        |  
|                                           | Equity in income (loss) of unconsolidated entities          |                         |         | 7,790   |   |   |         | (1,591  | )
|                                           | Gain on property sales  continuing
    operations          |                         |         |        |   |   |         | 13,275  |  
|                                           | Minority interest of preferred unitholders                  |                         |         | (5,600  | ) |   |         | (5,600  | )
|                                           | Minority interest of common unitholders                     |                         |         | 3,801   |   |   |         | (2,334  | )
|                                           |                                                             |                         |         |         |   |   |         |        
|                                           | Income (loss) from continuing operations                    |                         |         | (22,091 | ) |   |         | 28,475  |  
|                                           | Income from discontinued operations                         |                         |         | 36,247  |   |   |         | 32,271  |  
|                                           |                                                             |                         |         |         |   |   |         |        
|Net income                                 |                                                             | $                       | 14,156  |         |   | $ | 60,746  |        
|                                           |                                                             |                         |         |         |   |   |         |        



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | In addition to those expenses which relate to
    property operations, the Company incurs recurring and
    non-recurring expenditures relating to acquiring and developing
    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. Recurring capital expenditures are
    those that are generally expected to be incurred on an annual
    basis. Non-recurring capital expenditures are those that
    generally occur less frequently than on an annual basis.
|(7) | A reconciliation of property capital expenditures
    from continuing operations to total recurring and non-recurring
    capital expenditures as presented in the consolidated statements
    of cash flows under GAAP is detailed below.                                                                                                                                                                                                                                                                                                                                            

|                                   |                                                                           |              |   |       |  |  |   |       | 
|---------------------------------- | ------------------------------------------------------------------------- | ------------ | - | ----- |  |  | - | ----- | 
|                                   |                                                                           |             
|                                   |                                                                           | Year Ended  
|                                   |                                                                           | December 31,
|                                   |                                                                           |             
|                                   |                                                                           | 2003         |   | 2002 
|                                   |                                                                           |              |   |      
|Recurring capital expenditures     |                                                                           |              |   |       |  |  |   |      
|                                   | Continuing operations                                                     |              | $ | 6,789 |  |  | $ | 5,840 | 
|                                   | Discontinued operations                                                   |              |   | 2,684 |  |  |   | 3,541 | 
|                                   |                                                                           |              |   |       |  |  |   |      
|                                   | Total recurring capital expenditures per
    statements of cash flows     |              | $ | 9,473 |  |  | $ | 9,381 | 
|                                   |                                                                           |              |   |       |  |  |   |      
|Non-recurring capital expenditures |                                                                           |              |   |       |  |  |   |      
|                                   | Continuing operations                                                     |              | $ | 4,474 |  |  | $ | 2,770 | 
|                                   | Discontinued operations                                                   |              |   | 678   |  |  |   | 671   | 
|                                   |                                                                           |              |   |       |  |  |   |      
|                                   | Total non-recurring capital expenditures per
    statements of cash flows |              | $ | 5,152 |  |  | $ | 3,441 | 
|                                   |                                                                           |              |   |       |  |  |   |      

The Operating Partnership reported net income
available to common unitholders of $3,048 and $56,069 for the
years ended December 31, 2003 and 2002, respectively, and
the Company reported net income available to common shareholders
of $2,707 and $49,297 for the years ended December 31, 2003
and 2002, respectively. The decline in Company operating
performance in 2003 compared to 2002 primarily reflected the
impact of severance, proxy and asset impairment charges totaling
$44,199 ($39,232 net of minority interest) recorded in
2003. Severance charges included $1,795 ($1,598 net of
minority interest) recorded in the second quarter of 2003
related to the departures of two executive officers and $19,711
($17,467 net of minority interest) recorded in the first
quarter of 2003 related to the change in roles from executive to
non-executive status of the Companys former chairman and
vice chairman of the board of directors. The proxy charge of
$5,231 ($4,658 net of minority interest) reflected the
legal, advisory and other costs associated with the proxy
contest in the second quarter of 2003. The $5,231 charge also
included the estimated legal and settlement costs associated
with resolution of two derivative and purported class action
lawsuits filed against the Company during the proxy contest.
Asset impairment charges totaling $17,462 ($15,509 net of




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##### Table of Contents



minority interest) were recorded under the
provisions of SFAS No. 144 to write-down the cost of
certain apartment communities to their estimated fair value.
These charges are discussed in more detail in the section below
titled, Discontinued Operations. In addition, the
decline in net income reflects a decrease in fully stabilized
communities operating performance and reduced earnings resulting
from the Companys asset sale and capital recycling
program. The impact of these items is also discussed below.


Rental and other property revenues increased
$4,564 or 1.6% from 2002 to 2003 primarily due to increased
revenues from the Companys newly stabilized and lease-up
communities of $12,711 or 35.3% offset by the revenue decline of
$6,836 or 3.1% from fully stabilized communities discussed
further below. The revenue increase from communities stabilized
in 2002 reflects full year stabilized operating performance in
2003 compared to a partial lease-up period in 2002. The revenue
increase from lease-up communities in 2003 reflects the
increased occupancy of the communities between periods as these
communities continued their initial lease-up. Property operating
and maintenance expenses (exclusive of depreciation and
amortization) increased $7,148 or 6.1% primarily due to
increased expenses from newly stabilized and lease-up
communities as these expenses typically increase as property
occupancy levels increase towards stabilized occupancy levels
and as new lease-up properties are placed in service. Property
operating and maintenance expenses (excluding depreciation and
amortization) for fully stabilized communities also increased
$1,791 or 2.2% between periods (see discussion below).

The Company reported no net gains on property
sales in continuing operations in 2003, as all gains on sales of
properties classified as held for sale subsequent to
January 1, 2002 are classified in discontinued operations.
The net gains on property sales included in continuing
operations of $13,275 in 2002 resulted from the sale of two
communities, containing 540 units, and one commercial
property. These assets were all classified as assets held for
sale at December 31, 2001. For the year ended
December 31, 2003, the Company recognized net gains from
discontinued operations of $40,792 ($36,497 net of minority
interest) on the sale of four communities, containing
1,844 units, and certain land parcels. These sales
generated net proceeds of approximately $163,560. For the year
ended December 31, 2002, the Company recognized net gains
of $16,571 ($14,568 net of minority interest) from the sale
of six communities, containing 2,125 units, one commercial
property and certain land parcels. These sales generated net
proceeds of approximately $140,823 (excluding net proceeds of
$41,393 from the sale of two apartment communities and one
commercial property classified in continuing operations).

Depreciation expense increased $6,719 or 9.0%
from 2002 to 2003 primarily due to increased depreciation on
newly stabilized and lease-up properties, as these properties
were placed in service.

Interest expense increased $12,951 or 25.8% from
2002 to 2003 primarily due to a $9,668 reduction in capitalized
interest to development properties between years as the
Companys development pipeline transitioned to operating
properties in late 2002 and early 2003. In addition to the
impact of capitalized interest, the remaining increase in
interest expense from continuing operations results from more of
overall interest being reflected in discontinued operations in
2002 as compared to 2003. Excluding the reduction in capitalized
interest between periods, the combined interest expense in
continuing and discontinued operations was relatively flat
between periods.

General and administrative expenses increased
$672, or 4.7%, from 2002 to 2003 primarily due to higher
expenses related to incentive stock compensation awards,
directors and officers insurance and recruiting expenses offset
by lower executive salaries and associated costs due to the
change in roles from executive to non-executive status of the
Companys former chairman and vice chairman in February
2003, as the Companys on-going contractual obligations to
these individuals were charged against the $19,711 severance
reserve established during the first quarter of 2003. The
severance charges recorded in 2003 are discussed further below.

Development costs and other expenses of $2,137 in
2003 include development personnel and associated costs and land
carry expenses not allocable to development projects of $1,237,
the write-off of the Companys remaining investment in a
property management software company of $276, legal expenses of
$373 relating to board of directors governance and transition
matters, the settlement cost of $100 relating to the bankruptcy
of a former technology investment and losses of $152 on the
disposal of the Companys partial ownership interest in a
corporate aircraft. Development costs and other expenses in 2002
represented the write down of an investment in a property
management software development company of $694.

The Company recorded severance and proxy charges
of $21,506 and $5,231, respectively, in 2003. These charges are
discussed in more detail below. No such charges were recorded in
2002.

Equity in income (losses) of unconsolidated real
estate entities increased from a loss of $1,591 in 2002 to
income of $7,790 in 2003. This increase was primarily due to the
recognition of the Companys share of a gain of $8,395
resulting from the sale of an apartment community by one of the
limited liability companies accounted for on the equity method
(see note 4 to the consolidated financial statements).




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Recurring and nonrecurring capital expenditures
from continuing operations increased $2,653 or 30.8% from 2002
to 2003 primarily due to higher recurring expenditures incurred
to maintain the quality and competitive position of the
Companys apartment communities and to higher non-recurring
capital expenditures in 2003. The increase in nonrecurring
capital expenditures of $1,704 or 61.5% in 2003 primarily
reflected special projects to prevent water infiltration on two
properties located in Florida and the replacement of a retaining
wall at a property in Georgia.

Fully Stabilized Communities

The Company defines fully stabilized communities
as those which have reached stabilization prior to the beginning
of the previous year. For the 2003 to 2002 comparison, fully
stabilized communities are defined as those communities which
reached stabilization prior to January 1, 2002. This
portfolio consisted of 48 communities with 18,670 units,
including 26 communities with 11,410 units (61.1%) located
in Atlanta, Georgia, 13 communities with 3,939 units
(21.1%) located in Dallas, Texas, three communities with
1,439 units (7.7%) located in Tampa, Florida, two
communities with 700 units (4.0%) located in Washington
D.C. and four communities with 1,182 units (6.1%) located
in other markets. The operating performance of these communities
is summarized as follows:

|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |      |      |  
|----------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------ | ------- | ----- | ----- | -------- | ------- | ----- | ----- |  | ----- | ---- | ---- | -
|                                                                                          |                                                          |                               
|                                                                                          |                                                          | Year-ended December 31,       
|                                                                                          |                                                          |                               
|                                                                                          |                                                          | 2003                           |         | 2002  |       | % Change
|                                                                                          |                                                          |                                |         |       |       |         
|Rental and other revenues                                                                 |                                                          | $                              | 217,028 |       |       | $        | 223,864 |       |       |  | (3.1  | )%  
|Property operating and maintenance expenses
    (excluding depreciation and amortization) |                                                          |                                | 81,780  |       |       |          | 79,989  |       |       |  | 2.2   | %   
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|Same store net operating income(1)                                                        |                                                          | $                              | 135,248 |       |       | $        | 143,875 |       |       |  | (6.0  | )%  
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|Capital expenditures(2)                                                                   |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|                                                                                          | Recurring                                                |                                |         |       |       |          |         |       |       |  |       |      |     
|                                                                                          | Carpet                                                   |                                | $       | 2,029 |       |          | $       | 1,532 |       |  |       | 32.4 | %   
|                                                                                          | Other                                                    |                                |         | 4,503 |       |          |         | 4,113 |       |  |       | 9.5  | %   
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|                                                                                          |                                                          | Total recurring                |         |       | 6,532 |          |         |       | 5,645 |  |       |      | 15.7 | %
|Non-recurring                                                                             |                                                          |                                | 3,441   |       |       |          | 1,450   |       |       |  | 137.3 | %   
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|                                                                                          |                                                          | Total capital expenditures (A) |         | $     | 9,973 |          |         | $     | 7,095 |  |       |      | 40.6 | %
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|                                                                                          | Total capital expenditures per unit
    (A÷18,670 units) |                                | $       | 534   |       |          | $       | 380   |       |  |       | 40.6 | %   
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|Average monthly rental per apartment unit(3)                                              |                                                          | $                              | 991     |       |       | $        | 1,046   |       |       |  | (5.3  | )%  
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     
|Average economic occupancy(4)                                                             |                                                          |                                | 92.0    | %     |       |          | 91.0    | %     |       |  | 1.0   | %   
|                                                                                          |                                                          |                                |         |       |       |          |         |       |       |  |       |     



|    |                                                                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Net operating income of stabilized communities is
    a supplemental non-GAAP financial measure. See note 15 to
    the consolidated financial statements for a reconciliation of
    net operating income for stabilized communities to GAAP net
    income.
|(2) | A reconciliation of these segment components of
    property capital expenditures to total recurring and
    non-recurring capital expenditures as presented in the
    consolidated statements of cash flows prepared under GAAP is
    detailed below.     

|                                                                           |  |              |       |      |  |   |       | 
|-------------------------------------------------------------------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                                                                           |  |             
|                                                                           |  | Year-ended  
|                                                                           |  | December 31,
|                                                                           |  |             
|                                                                           |  | 2003         |       | 2002
|                                                                           |  |              |       |     
|Recurring capital expenditures by operating
    segment                    |  |              |       |      |  |   |       | 
|Fully stabilized                                                           |  | $            | 6,532 |      |  | $ | 5,645 | 
|Communities stabilized in prior year                                       |  |              | 50    |      |  |   | 54    | 
|Construction and lease-up                                                  |  |              | 74    |      |  |   | 67    | 
|Other property segments, including discontinued
    operations             |  |              | 2,817 |      |  |   | 3,615 | 
|                                                                           |  |              |       |      |  |   |       | 
|Total recurring capital expenditures per
    statements of cash flows      |  | $            | 9,473 |      |  | $ | 9,381 | 
|                                                                           |  |              |       |      |  |   |       | 
|Non-recurring capital expenditures by operating
    segment                |  |              |       |      |  |   |       | 
|Fully stabilized                                                           |  | $            | 3,441 |      |  | $ | 1,450 | 
|Communities stabilized in prior year                                       |  |              | 68    |      |  |   | 48    | 
|Construction and lease-up                                                  |  |              | 335   |      |  |   | 14    | 
|Other property segments, including discontinued
    operations             |  |              | 1,308 |      |  |   | 1,929 | 
|                                                                           |  |              |       |      |  |   |       | 
|Total non-recurring capital expenditures, per
    statements of cash flows |  | $            | 5,152 |      |  | $ | 3,441 | 
|                                                                           |  |              |       |      |  |   |       | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Company uses same store recurring and
    non-recurring capital expenditures as cash flow measures. Same
    store recurring and non-recurring capital expenditures are
    supplemental non-GAAP financial measures. The Company believes
    that same store recurring and non-recurring capital expenditures
    are important indicators of the costs incurred by the Company in
    maintaining same store communities. The corresponding GAAP
    measures include information with respect to the Companys
    other operating segments consisting of communities stabilized in
    the prior year, lease-up communities, and sold communities in
    addition to same store information. Therefore, the Company
    believes that the Companys presentation of same store




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| |                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | recurring and non-recurring capital expenditures
    is necessary to demonstrate same store replacement costs over
    time. The Company believes that the most directly comparable
    GAAP measure to same store recurring and non-recurring capital
    expenditures are the lines on the Companys consolidated
    statements of cash flows entitled recurring capital
    expenditures and non-recurring capital
    expenditures.

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Average monthly rental rate is defined as the
    average of the gross actual rental rates for leased units and
    the average of the anticipated rental rates for unoccupied
    units, divided by total units.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(4) | Average economic occupancy is defined as gross
    potential rent less vacancy losses, model expenses and bad debt
    expenses divided by gross potential rent for the period,
    expressed as a percentage. Gross potential rent is defined as
    the sum of the gross actual rental rates for leased units and
    the anticipated rental rates for unoccupied units. The
    calculation of average economic occupancy does not include a
    deduction for net concessions and employee discounts. Average
    economic occupancy including these amounts would have been 90.9%
    and 89.2% for the years ended December 31, 2003 and 2002,
    respectively. For the years ended December 31, 2003 and
    2002, net concessions were $1,967 and $3,697, respectively, and
    employee discounts were $415 and $604, respectively.

Rental and other revenues decreased $6,836 or
3.1% from 2002 to 2003. This decrease resulted from a 5.3%
decline in the average monthly rental rate per apartment unit.
The decline in average rental rates resulted in a revenue
decrease of approximately $12,159 between years. The aggregate
decline in other property revenues totaled approximately $104.
These declines were offset by lower rental concessions of $1,731
and lower vacancy losses of $3,697, resulting from an increase
in average economic occupancy of the portfolio from 91.0% in
2002 to 92.0% in 2003. These declines in rental rates in 2003
reflect the effect of the soft economy on the Companys
primary markets coupled with a continuing over supply of new
apartment units. This trend was especially true for the
Companys largest markets, Atlanta, Georgia, and Dallas,
Texas, which experienced rental and other revenue declines of
$5,236 and $1,016, respectively, between years.

In 2003, the Company modified its leasing
strategy to focus on retaining higher average occupancy levels
in 2003 as reflected above. This strategy resulted in increased
year over year reductions in the average rental rate per
apartment unit between periods (5.3% in 2003 compared to 2.4% in
2002), and an overall decline in year over year total rental and
other revenues between years (3.1% in 2003 compared to 6.7% in
2002). In 2002, the Companys leasing strategy focused more
on maintaining average monthly rental rates than on retaining
occupancy. The Company believed this strategy change was
necessary to maximize its operating results under the market
conditions existing in 2003, to operate the Companys
communities more efficiently at higher occupancy levels and to
be in a better position to increase rental rates as market
conditions improve.

Property operating and maintenance expenses
(exclusive of depreciation and amortization) increased $1,791 or
2.2% from 2002 to 2003. These expenses increased primarily due
to increased property tax expenses of $661 or 2.6%, increased
repairs and maintenance expenses of $567 or 6.6%, increased
insurance expenses of $599 or 15.7%, and increased promotional
expenses of $451 or 11.1%. Personnel expenses remained flat
between years. Property tax expense increases of 2.6% resulted
primarily from 2002 including larger prior year favorable tax
settlements than in 2003. The increase in repairs and
maintenance expenses primarily reflects increased exterior
painting and exterior repairs between periods. Insurance costs
increased primarily due to higher premiums caused by the
volatility in insurance markets in late 2002 caused by, among
other things, increased terrorism risks and lower insurance
company investment returns. Promotional expenses increased
primarily due to increased locator fees paid to brokers as a
result of occupancy increases between periods.

Discontinued Operations

In accordance with SFAS No. 144, the
operating results and gains and losses on property sales of real
estate assets designated as held for sale subsequent to
January 1, 2002 are included in discontinued operations in
the consolidated statement of operations.

For the year ended December 31, 2004, income
from discontinued operations included the results of operations
of six communities, containing 1,436 units, classified as
held for sale at December 31, 2004 and the results of
operations of eight communities sold in 2004 through their sale
date. For the years ended December 31, 2003 and 2002,
income from discontinued operations included the results of
operations of all communities classified as held for sale at
December 31, 2004, communities sold in 2004 and the results
of operations of 11 communities and one commercial property
designated as held for sale and sold in 2003 and 2002 through
their sale dates.




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The revenues and expenses of these communities
for the years ended December 31, 2004, 2003 and 2002 were
as follows:

|                                                                          |                                                                                    |                         |       |        |        |      |      |        |        |   |        |        |        | 
|------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | ----------------------- | ----- | ------ | ------ | ---- | ---- | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                          |                                                                                    |                        
|                                                                          |                                                                                    | Year Ended December 31,
|                                                                          |                                                                                    |                        
|                                                                          |                                                                                    | 2004                    |       | 2003   |        | 2002
|                                                                          |                                                                                    |                         |       |        |        |     
|Revenues                                                                  |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       
|                                                                          | Rental                                                                             |                         | $     | 26,107 |        |      | $    | 52,275 |        |   | $      | 69,889 |       
|                                                                          | Other                                                                              |                         |       | 2,043  |        |      |      | 3,767  |        |   |        | 4,444  |       
|                                                                          |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       
|                                                                          |                                                                                    | Total revenues          |       |        | 28,150 |      |      |        | 56,042 |   |        |        | 74,333 | 
|                                                                          |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       
|Expenses                                                                  |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       
|                                                                          | Property operating and maintenance (exclusive of
    items shown separately below) |                         |       | 12,316 |        |      |      | 22,949 |        |   |        | 29,455 |       
|                                                                          | Depreciation                                                                       |                         |       | 2,281  |        |      |      | 8,775  |        |   |        | 13,444 |       
|                                                                          | Interest                                                                           |                         |       | 3,669  |        |      |      | 7,678  |        |   |        | 11,580 |       
|                                                                          | Asset impairment charges                                                           |                         |       | 2,233  |        |      |      | 17,462 |        |   |        |       |       
|                                                                          | Minority interest in consolidated property
    partnerships                        |                         |       | (238   | )      |      |      | (419   | )      |   |        | (284   | )     
|                                                                          |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       
|                                                                          |                                                                                    | Total expenses          |       |        | 20,261 |      |      |        | 56,445 |   |        |        | 54,195 | 
|                                                                          |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       
|Income (loss) from discontinued operations
    (before minority interest) |                                                                                    |                         | 7,889 |        |        |      | (403 | )      |        |   | 20,138 |       
|Minority interest                                                         |                                                                                    |                         | (40   | )      |        |      | 153  |        |        |   | (2,435 | )     
|                                                                          |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       
|Income (loss) from discontinued operations                                |                                                                                    | $                       | 7,849 |        |        | $    | (250 | )      |        | $ | 17,703 |       
|                                                                          |                                                                                    |                         |       |        |        |      |      |        |        |   |        |       

The decrease in revenues and expenses between
years results from the Companys continuing asset sales
program and the impact of the continued reclassification of the
operating results relating to the aggregate number of
communities held for sale and sold during the periods presented.
Likewise, the gains on sales of properties included in
discontinued operations for each year fluctuate with the timing
and amounts of such sales. A discussion of the gains on property
sales for the years presented is included under the caption
Results of Operations.

As discussed under Liquidity and Capital
Resources, the Company expects to continue to sell real
estate assets in future periods as part of its overall
investment and disposition strategy. As such, the Company may
continue to have additional assets classified as held for sale,
however, the timing and amount of such asset sales and their
impact on the aggregate revenues and expenses included in
discontinued operations will vary from year to year.

In the fourth quarter of 2004, the Company
recorded an asset impairment charge of $1,607 to write-down the
cost of an apartment community, located in Dallas, Texas to its
estimated fair value as the asset was classified as held for
sale during the fourth quarter. In the second quarter of 2004,
the Company recorded an asset impairment loss of $626 to
write-down the cost of an apartment community, located in
Dallas, Texas, to its realized value. In the third quarter of
2003, the Company recorded a $3,344 asset impairment charge to
write-down the Dallas, Texas asset sold in the second quarter of
2004 to its then estimated fair value at the date the asset was
classified as held for sale. In the first quarter of 2003, the
Company recorded an asset impairment charge of $14,118 to
write-down the cost of the Companys apartment community
located in Phoenix, Arizona to its estimated fair value.

Additionally, should the Company change its
expectations regarding the holding period for certain assets or
decide to classify certain assets as held for sale, this could
cause the Company to recognize impairment losses in future
periods if the carrying value of these assets is not deemed
recoverable.

2003 Management Transition and Severance and
Proxy Contest Charges

In 2002, the Company began a planned management
succession process. A new chief executive officer was named and
the roles of the chairman of the board of directors and the
chief executive officer were separated into individual
positions. In the first quarter of 2003, the Companys
former chairman and vice chairman of the board of directors
changed their status from executive officers to non-executive
board members and an independent board member was elected as
chairman of the board. The Companys new chairman of the
board and the chief executive officer embarked on additional
management changes, which included the departures of the
Companys executive vice president and chief financial
officer and executive vice president of asset management, in the
second quarter of 2003. These changes and executive departures
in 2003 lead to the severance charges discussed in the following
paragraphs.




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Following a proxy contest initiated by the
Companys former chairman of the board, as discussed more
fully below, the Company completed the transition to a new
management team. A new chief investment officer was added in the
second quarter of 2003 to lead the Companys development,
acquisition and asset disposition efforts and a new chief
financial officer was added in the fourth quarter of 2003 to
lead the financial disciplines of the Company.


In 2003, the Company recorded a first quarter
charge of $19,711 relating to the change in roles from executive
to non-executive status of the Companys former chairman
and vice chairman of the board of directors and recorded a
second quarter severance charge of $1,795 relating to the
departures of its executive vice president and chief financial
officer and its executive vice president of asset management.
The first quarter charge consisted of a $13,993 charge
representing the discounted present value of the estimated
payments to be made to the former chairman and vice chairman
under their existing employment arrangements and a $5,718 charge
representing the discounted present value of estimated net costs
that may be incurred by the Company as a result of the
settlement of split-dollar life insurance obligations to the
individuals under their employment contracts. The second quarter
charge of $1,795 represented the aggregate amount of the
estimated payments and benefits to be made to the departing
executive officers.

In August 2004, the Company entered into a final
settlement agreement with its former chairman of the board of
directors. Under the terms of the agreement, the former
chairmans employment and non-competition agreements were
terminated and the Company agreed to continue to provide the
former chairman certain payments and benefits through May 2013,
the approximate expiration date of the original employment
agreement. Because the present value of the estimated payments
under the settlement agreement approximated the Companys
remaining accrued charge under the former employment agreement,
no additional charges were recorded as a result of the
settlement.

A summary of the change in the accrued severance
balance for years ended December 31, 2004 and 2003 is
included in note 7 to the consolidated financial
statements. Substantially all of these remaining severance
amounts will be paid over the remaining terms of the former
executives employment and settlement agreements (9 to
12 years).

Proxy and related costs of $5,231 represent the
legal, advisory and other expenses associated with the
solicitation of proxies from shareholders resulting from the
proxy contest initiated in April 2003 by the Companys
former chairman of the board of directors. Additionally, the
$5,231 amount includes the estimated legal and resolution costs
associated with the settlement of two derivative and purported
class action lawsuits filed against the Company during the proxy
contest. These lawsuits were settled in October 2004.
Substantially all of the proxy and related costs were paid in
2003.

Outlook for 2005

The Companys outlook for 2005 is based on
the expectation that apartment fundamentals will continue to
steadily improve throughout the year. Rental and other revenues
from fully stabilized communities are expected to increase
modestly when compared to 2004, primarily driven by expected
rental rate increases. However, operating expenses of fully
stabilized communities are also expected to increase in 2005.
The Company expects the primary drivers of this expense increase
will be personnel expenses, property taxes, utility expenses and
repairs and maintenance expenses, which are expected to increase
mainly due to increases in exterior painting between years.
Based on these assumptions for 2005, management expects
stabilized community net operating income to increase modestly
in 2005.

In 2005, management expects to continue to sell
apartment communities and had six communities identified as held
for sale, including one community classified as held for sale in
2005. These sales are expected to begin closing in the second
quarter of 2005 and are expected to generate accounting gains in
2005. The expected net proceeds from these sales are intended to
be used for various corporate purposes, including repayments of
debt maturing in 2005 and possible common stock repurchases.
Additionally, the Company, through a taxable REIT subsidiary,
expects to convert two to three of its existing apartment
communities into for-sale condominium units and to sell those
units during 2005 and 2006. The Company expects to realize net
accounting gains in 2005 for these condominium sales.

Management expects interest expense in 2005 to be
lower than in 2004 due generally to lower average debt levels
between years and the refinancing of maturing public debt at
lower rates in 2004 and 2005. Management also expects modest
declines in general and administrative expenses due primarily to
reductions in estimated legal costs and in the estimated costs
associated with Sarbanes-Oxley compliance.

The Company has one project under construction
with a total expected cost of approximately $95,000 and expects
to begin additional development projects later in 2005. In 2004,
the Company added additional executive development personnel
with the purpose of increasing its development and investment
activities in 2005. The Company expects




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these additional personnel resources will be
dilutive to earnings in 2005 until the incremental personnel and
associated costs can be fully absorbed by new development and
value creation activities.


Further, the Company expects to realize a gain on
the sale of an investment in a real estate technology company in
the first quarter of 2005. The gain is expected to be
approximately $5,200, or $0.12 per diluted share.

For the first quarter of 2005, management expects
to report net income compared to a net loss in the fourth
quarter of 2004. Net income for the first quarter is expected to
be driven by the gain on the sale of a technology investment
(discussed above). Management expects same store property net
operating income to be lower when compared to the fourth quarter
of 2004, primarily driven by higher projected operating
expenses, due partly to resetting annual accruals for property
taxes and increased utility expenses. Same store operating
revenues are expected to be flat to up slightly compared to the
fourth quarter of 2004. Due to the impact of changes to the
MOPPRS debt (discussed above), the amortization of the remaining
deferred financing costs relating to the MOPPRS debt will be
increased by approximately $600 in the first quarter of 2005 to
amortize the costs through the March 2005 maturity date.
Expensed development costs are expected to increase in the first
quarter due to increased development personnel as these
increased costs will not be fully absorbed by new development
activities. General and administrative costs are expected to be
relatively flat compared to the fourth quarter of 2004.

Liquidity and Capital Resources

The discussion in this Liquidity and Capital
Resources section is the same for the Company and the Operating
Partnership, except that all indebtedness described herein has
been incurred by the Operating Partnership.

The Companys net cash provided by operating
activities decreased from $91,549 in 2003 to $77,424 in 2004
primarily due to lower net income (before depreciation and gains
on property sales) resulting from early debt extinguishment
costs, costs (additional interest) associated with the
termination of a debt remarketing agreement, increased general
and administrative expenses (as discussed above) and reduced
earnings from the dilutive impact of the Companys asset
sale and capital recycling program. The Companys net cash
provided by operating activities decreased from $119,763 in 2002
to $91,549 in 2003 primarily due to lower net income (before
depreciation and gain on sale of assets) resulting from the
weaker operating performance of the Companys fully
stabilized properties, the impact of proxy and severance costs
paid in 2003 and reduced earnings from the dilutive impact of
the Companys asset sale and capital recycling program. The
Company expects cash flows from operating activities to improve
in 2005 primarily driven by the expected improved operating
performance of the Companys fully stabilized properties
and the lack of cash payments for early debt extinguishments
offset somewhat by the continued dilutive cash flow impact from
asset and condominium sales.

Net cash provided by investing activities
decreased from $234,195 in 2003 to $129,748 in 2004 primarily
due to the net repayment of construction loan advances and cash
distributions from unconsolidated entities in 2003 offset
somewhat by the timing and amount of assets sales and
acquisitions between years. Net cash used in investing
activities increased from a net use of $48,821 in 2002 to net
cash provided by investing activities of $234,195 in 2003
primarily due to reduced development and construction
expenditures in 2003 and the net repayment of construction loan
advances and cash distributions from unconsolidated entities in
2003, partially offset by reduced proceeds from wholly-owned
asset sales between periods. In 2005, the Company expects to
continue to be an active seller of assets both through sales of
communities and through the conversion and sale of condominium
units. The Company expects to reinvest a larger portion of these
asset sale proceeds into increased development and acquisition
activities in future periods through its recently established
regional value creation teams.

Net cash used in financing activities decreased
from $330,800 in 2003 to $208,383 in 2004 primarily due to
having less net proceeds from investing activities to retire
outstanding debt in 2004. Net cash used in financing activities
increased from $69,355 in 2002 to $330,800 in 2003 primarily due
to the increased repayment of outstanding debt in 2003. The
proceeds used to repay consolidated debt balances in 2003 were
generated from asset sale proceeds and through the repayment of
construction loan advances and cash distributions from
unconsolidated entities.

Since 1993, the Company has elected to be taxed
as a real estate investment trust (REIT) under the
Internal Revenue Code of 1986, as amended (the
Code). Management currently intends to continue
operating the Company as a REIT in 2005. As a REIT, the Company
is subject to a number of organizational and operating
requirements, including a requirement to distribute 90% of its
taxable income to its shareholders. As a REIT, the Company
generally will not be subject to federal income taxes on its
taxable income.

Generally, the Companys objective is to
meet its short-term liquidity requirement of funding the payment
of its current level of quarterly preferred and common stock
dividends to shareholders through its net cash flows provided by
operating activities, less its annual recurring and nonrecurring
property and corporate capital expenditures. These




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operating capital expenditures are the capital
expenditures necessary to maintain the earnings capacity of the
Companys operating assets over time.


For the year ended December 31, 2004, the
Companys net cash flow from operations, reduced by annual
operating capital expenditures, was not sufficient to fully fund
the Companys current level of dividend payments to common
and preferred shareholders by approximately $26,000 (including
payment of $10,615 for the termination of a debt remarketing
agreement and the payment of $3,837 of early debt extinguishment
costs in 2004). The Company used a combination of proceeds from
asset sales and line of credit borrowings to fund the additional
cash flow necessary to fully fund the Companys quarterly
dividend to common shareholders of $0.45 per share. The
Companys net cash flow from operations continues to be
sufficient to meet the dividend requirements necessary to
maintain its REIT status under the Code.

For 2005, management of the Company expects to
maintain its current quarterly dividend payment rate to common
shareholders of $0.45 per share. At this dividend rate, the
Company expects that net cash flows from operations reduced by
annual operating capital expenditures will not be sufficient to
fund the dividend payments to common and preferred shareholders
by approximately $15,000 to $20,000. The Company intends to use
primarily the proceeds from 2005 apartment community and
condominium sales and the sale of a real estate technology
investment to fund the additional cash flow necessary to fully
fund the dividend payments to common shareholders. The primary
factor leading to the shortfall is the negative cash flow impact
of sales of operating properties (discussed below) prior to the
reinvestment of such proceeds. The Companys board of
directors, however, will continue to review the dividend
quarterly.

The Company generally expects to utilize net cash
flow from operations, available cash and cash equivalents and
available capacity under its revolving lines of credit to fund
its short-term liquidity requirements, including capital
expenditures, development and construction expenditures, land
and apartment community acquisitions, dividends and
distributions on its common and preferred equity and its debt
service requirements. Available borrowing capacity under the
Companys revolving lines of credit as of December 31,
2004 was created primarily through the Companys asset
sales program. The Company generally expects to fund its
long-term liquidity requirements, including maturities of
long-term debt and acquisition and development activities,
through long-term unsecured and secured borrowings, through
additional sales of selected operating and condominium
conversion properties, and possibly through equity or leveraged
joint venture arrangements. The Company may also continue to use
joint venture arrangements in future periods to reduce its
market concentrations in certain markets, build critical mass in
other markets and to reduce its exposure to certain risks of its
future development activities.

As previously discussed, the Company intends to
use the proceeds from the sale of operating and condominium
conversion properties and availability under its unsecured
revolving line of credit as the primary source of capital to
fund its current and future development and acquisition
expenditures. The Company began an active asset sale and capital
recycling program in 2000 as the primary means to fund its
on-going community development and acquisition program. Total
net sales proceeds in 2004, 2003 and 2002 were $242,962
(including $104,325 of debt assumed), $163,560 and $182,216,
respectively. Additionally in 2003, the Company received net
proceeds of approximately $75,000 (including the repayment of
the construction loan from the venture) from the sale of one
apartment community held in an unconsolidated entity. A more
detailed discussion of the assets sales is included in
note 5 to the consolidated financial statements.

In the first half of 2004, the Company sold eight
apartment communities, containing 3,880 units, as part of
an asset sales program designed to focus its operations in fewer
markets, maintain the low average age and high quality of the
portfolio and reduce the Companys market concentrations in
Atlanta, Georgia and Dallas, Texas. These sales generated
significant capital gains for tax purposes in 2004. The Company
was able to use its regular quarterly dividend of $0.45 per
share to distribute these capital gains to shareholders in 2004.
At December 31, 2004, the Company had six additional
communities, one of which will be converted and sold as
condominiums, classified as held for sale. The five apartment
communities at December 31, 2004 (plus one additional
community classified as held for sale in January 2005) expected
to be sold in 2005 are expected to generate net proceeds of
$195,000 to $210,000, including the assumption and/or repayment
of associated tax-exempt secured debt of approximately $81,560.
The Company also expects to generate additional sales proceeds
from the sale of converted condominium units. It is the current
intent of management to continue to recycle capital through
selling assets and reinvesting the proceeds as a strategy to
diversify the cash flows of the Company across its markets and
focus on building critical mass in fewer markets.

In 2004, the Company used a portion of the
proceeds from its asset sales program to redeem its $50,000
7.625% Series C preferred stock, its $70,000 8.0%
Series D preferred units and to repay maturing debt. As
discussed below, the Company plans to continue to use these sale
proceeds and its line of credit borrowing capacity to repay its




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maturing unsecured notes (including the MOPPRS)
in 2005. Additionally in October 2004, the Company purchased and
retired $87,957 of the Companys 8.125% medium term
unsecured notes through a public tender offer. Thereafter in
October 2004, the Company issued $100,000 of new unsecured
notes, the proceeds of which were used to repay borrowings under
the Companys revolving credit facility used to retire the
previously tendered notes. The senior notes bear interest at
5.125% and mature in October 2011. The $87,957, 8.125% medium
term notes were retired early, at a prepayment cost of
approximately $4,011, in order to reduce the size of the
Companys 2005 debt repayment and refinancing risk (from
approximately $300,000 to $212,000, including the MOPPRS) and to
lock-in lower interest rates.


At December 31, 2004, the Company had
available credit facility borrowing capacity of approximately
$317,000 under its line of credit facilities. The Companys
credit facilities with total capacity of $370,000 mature in
January 2007. The terms, conditions and restrictive covenants
associated with the Companys lines of credit facilities
are summarized in note 3 to the consolidated financial
statements. Management believes it will have adequate capacity
under its facilities to execute its 2005 business plan and meet
its short-term liquidity requirements without a significant
level of additional asset sales (other than those asset sales
discussed above) or other secured and unsecured debt financings.
In 2005, the Company has approximately $212,000 of maturing
unsecured notes (including the MOPPRS). The notes are expected
to be repaid from a combination of asset sale proceeds, the
available capacity under the credit facilities and possibly
through the issuance of unsecured notes.

Contractual Obligations

A summary of the Companys future
contractual obligations related to long-term debt,
non-cancelable operating leases and other obligations at
December 31, 2004, were as follows:

|                                            |  |                     |           |           |  |       |         |       |  |         |         |  |  |   |        |  |  |   |         | 
|------------------------------------------- |  | ------------------- | --------- | --------- |  | ----- | ------- | ----- |  | ------- | ------- |  |  | - | ------ |  |  | - | ------- | 
|                                            |  |                    
|                                            |  | Obligation Due Date
|                                            |  |                    
|                                            |  |                     |           | 1 Year or |  | 2-3   |         | 4-5   |  | After  
|Contractual Obligations                     |  | Total               |           | Less      |  | Years |         | Years |  | 5 Years
|                                            |  |                     |           |           |  |       |         |       |  |        
|Long-term debt(1)                           |  | $                   | 1,078,730 |           |  | $     | 218,119 |       |  | $       | 242,462 |  |  | $ | 86,557 |  |  | $ | 531,592 | 
|Lines of credit(2)                          |  |                     | 50,748    |           |  |       |        |       |  |         | 50,748  |  |  |   |       |  |  |   |        | 
|Operating leases(3)                         |  |                     | 173,495   |           |  |       | 1,534   |       |  |         | 3,004   |  |  |   | 3,037  |  |  |   | 165,920 | 
|Other long-term obligations(4)              |  |                     | 21,415    |           |  |       | 3,970   |       |  |         | 6,150   |  |  |   | 4,901  |  |  |   | 6,394   | 
|Development and construction obligations(5) |  |                     | 75,512    |           |  |       | 19,184  |       |  |         | 56,328  |  |  |   |       |  |  |   |        | 
|                                            |  |                     |           |           |  |       |         |       |  |         |         |  |  |   |        |  |  |   |         | 
|                                            |  | $                   | 1,399,900 |           |  | $     | 242,807 |       |  | $       | 358,692 |  |  | $ | 94,495 |  |  | $ | 703,906 | 
|                                            |  |                     |           |           |  |       |         |       |  |         |         |  |  |   |        |  |  |   |         | 



|    |                                                                                                                                                                                                                                                                                                                                     
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Amounts include principal payments only. The
    Company paid $66,992, $78,822 and $79,115 for the years ended
    December 31, 2004, 2003 and 2002, respectively. The Company
    will pay interest on outstanding indebtedness based on the rates
    and terms summarized in note 3 to the consolidated
    financial statements.
|(2) | At December 31, 2004, the Company had issued
    letters of credit to third parties totaling $1,828 under its
    credit facility arrangements.                                                                                                                                                                                     
|(3) | Primarily includes ground leases relating to
    apartment communities owned by the Company.                                                                                                                                                                                                                                        
|(4) | Represents amounts committed to current and
    former executive officers under the terms of employment and
    settlement agreements.                                                                                                                                                                                              
|(5) | Represents estimated remaining amounts necessary
    to complete one project currently under development, including
    amounts due under general construction contracts.                                                                                                                                                           

In addition to these contractual obligations, the
Company incurs annual capital expenditures to maintain and
enhance its existing portfolio of operating properties.
Aggregate capital expenditures for the Companys operating
properties totaled $14,515, $15,865 and $14,857 for the years
ended December 31, 2004, 2003 and 2002, respectively. Based
on the size of the Companys operating property portfolio
at December 31, 2004, the Company expects that its capital
expenditures in 2005 will be modestly higher than the amount
incurred in 2004 as the Company seeks to maintain the operating
performance of its assets.

At December 31, 2004, the Company had
outstanding interest rate swap derivative financial instruments
with a notional value of approximately $123,000 with maturity
dates ranging from 2005 to 2009. The contractual payment terms
of these arrangements are summarized in Item 7A,
Quantitative and Qualitative Disclosures About Market
Risk in this Form 10-K. Additional information
regarding the accounting and disclosure of these arrangements is
included in note 13 to the Companys consolidated
financial statements.

Off-Balance Sheet Arrangements

The Company holds investments in three
unconsolidated entities. Each of these unconsolidated entities
has third-party mortgage indebtedness and the aggregate
indebtedness totaled $83,468 at December 31, 2004. As
discussed in




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note 4 to the consolidated financial
statements, the Company has outstanding a limited guarantee and
indemnity relating to certain customary non-recourse carve-out
provisions and environmental matters on one of these loans with
a maximum potential net exposure to the Company of $1,750. The
Company believes that is not reasonably likely that it will be
required to fund any obligations under this arrangement.


Long-term Debt Issuances and
Retirements

A summary of the Companys outstanding debt
and debt maturities at December 31, 2004 is included in
note 3 to the consolidated financial statements. A summary
of changes in secured and unsecured debt in 2004 is discussed
below.

In March 2004, the Company closed a $35,000
secured, fixed rate mortgage note payable in a consolidated real
estate entity. The note bears interest at 4.27%, requires
monthly interest only payments through March 2007 and monthly
principal and interest payments based on a 30-year amortization
schedule from April 2007 through the note maturity date in March
2009.

Additionally, in March 2004, one of the
Companys unconsolidated entities repaid its outstanding
construction note payable to the Company of $53,916 through the
proceeds from a third-party non-recourse permanent mortgage note
totaling $50,000 and from member equity contributions. The
mortgage note bears interest at 4.13%, requires monthly interest
payments and annual principal payments of $1 through 2009.
Thereafter, the note requires monthly principal and interest
payments and matures in April 2034. The note is callable by the
lender in May 2009 and on each successive fifth year anniversary
of the note thereafter. The note is prepayable without penalty
in May 2008.

Upon their maturity on April 1, 2004, the
Company repaid $13,000 of its 7.30% medium term, unsecured
notes, using its available cash balances and borrowings under
its unsecured lines of credit.

In conjunction with an apartment community
acquisition (see note 5) in June 2004, the Company assumed
a secured, fixed rate mortgage note payable. The mortgage note
was valued at $49,496 yielding an effective interest rate of
4.7%. The mortgage note bears interest at a coupon rate of 6.8%,
requires monthly principal and interest payments and matures in
2007. Also in June 2004, the Company sold certain apartment
communities subject to the assumption of $104,325 of tax exempt
mortgage indebtedness (see note 5). As a result of this
debt assumption, the Company recorded a loss on early
extinguishment of indebtedness of $4,128 ($3,849 net of
minority interest) related to the write-off of unamortized
deferred financing costs of $3,187 ($2,972 net of minority
interest) relating to such assumed indebtedness and the
realization of a $941 ($877 net of minority interest) loss
in connection with the termination of related interest rate cap
agreements that were used as cash flow hedges of the assumed
debt.

Upon their maturity in September 2004, the
Company repaid $10,000 of its 6.69% medium term, unsecured notes
from available borrowings under its unsecured line of credit.

In October 2004, the Company purchased and
retired $87,957 of the Companys 8.125% medium term
unsecured notes through a public tender offer using available
borrowings under its unsecured lines of credit. Subsequent to
the debt retirement, $62,043 of 8.125% medium term notes
remained outstanding with a maturity in June 2005. The Company
recorded a fourth quarter loss on the early extinguishment of
this indebtedness of approximately $4,011 representing the debt
repurchase premiums, the expenses of the tender offer and the
write-off of the deferred loan costs associated with the retired
indebtedness. In addition, in October 2004, the Company issued
$100,000 of unsecured notes. The notes bear interest at 5.125%
and mature in October 2011. The net proceeds from the unsecured
notes were used to repay amounts outstanding under the
Companys unsecured lines of credit.




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Stock Repurchase Program

In the fourth quarter of 2004, the Companys
board of directors adopted a new stock repurchase program under
which the Company may repurchase up to $200,000 of common or
preferred stock at market prices from time to time until
December 31, 2006. Under its previous stock repurchase
program which expired on December 31, 2004, the Company
repurchased $2,268 of common stock and $120,000 of preferred
stock and units during 2004.

Subsequent to year-end through February 28,
2005, the Company has repurchased approximately 144 shares
of its common stock totaling approximately $4,614 under an
existing 10b5-1 stock purchase plan, which expires on
March 31, 2005.

Capitalization of Fixed Assets and Community
Improvements

The Company has a policy of capitalizing those
expenditures relating to the acquisition of new assets and the
development and construction of new apartment communities. In
addition, the Company capitalizes expenditures that enhance the
value of existing assets and expenditures that substantially
extend the life of existing assets. All other expenditures
necessary to maintain a community in ordinary operating
condition are expensed as incurred. Additionally, for new
development communities, carpet, vinyl and blind replacements
are expensed as incurred during the first five years (which
corresponds to the estimated depreciable life of these assets)
after construction completion. Thereafter, these replacements
are capitalized. Further, the Company expenses as incurred all
interior and exterior painting of communities.

The Company capitalizes interest, real estate
taxes, and certain internal personnel and associated costs
related to apartment communities under development and
construction. The incremental personnel and associated costs are
capitalized to the projects under development based upon the
effort identifiable with such projects. 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 included in construction
in progress. The Company ceases the capitalization of such costs
as the residential units in a community become substantially
complete and available for occupancy. This practice results in a
proration of these costs between amounts that are capitalized
and expensed as the residential units in a development community
become available for occupancy. In addition, prior to the
completion of units, the Company expenses as incurred
substantially all operating expenses (including pre-opening
marketing expenses) of such communities.

Acquisition of assets and community improvement
and other capitalized expenditures for the years ended
December 31, 2004, 2003 and 2002 are summarized as follows:

|                                                           |                                            |                         |        |       |  |      |        |       |  |   |         |       | 
|---------------------------------------------------------- | ------------------------------------------ | ----------------------- | ------ | ----- |  | ---- | ------ | ----- |  | - | ------- | ----- | 
|                                                           |                                            |                        
|                                                           |                                            | Year Ended December 31,
|                                                           |                                            |                        
|                                                           |                                            | 2004                    |        | 2003  |  | 2002
|                                                           |                                            |                         |        |       |  |     
|New community development and acquisition
    activity(1)  |                                            | $                       | 43,708 |       |  | $    | 24,914 |       |  | $ | 152,163 |      
|Revenue generating additions and improvements(2)           |                                            |                         | 26     |       |  |      | 1,240  |       |  |   | 2,035   |      
|Nonrecurring capital expenditures(3)                       |                                            |                         | 4,605  |       |  |      | 5,152  |       |  |   | 3,441   |      
|Recurring capital expenditures(4)                          |                                            |                         |        |       |  |      |        |       |  |   |         |      
|                                                           | Carpet replacements                        |                         |        | 3,387 |  |      |        | 3,049 |  |   |         | 2,755 | 
|                                                           | Other community additions and improvements |                         |        | 6,497 |  |      |        | 6,424 |  |   |         | 6,626 | 
|                                                           | Corporate additions and improvements       |                         |        | 681   |  |      |        | 799   |  |   |         | 1,100 | 
|                                                           |                                            |                         |        |       |  |      |        |       |  |   |         |      
|                                                           |                                            | $                       | 58,904 |       |  | $    | 41,578 |       |  | $ | 168,120 |      
|                                                           |                                            |                         |        |       |  |      |        |       |  |   |         |      
|Other Data                                                 |                                            |                         |        |       |  |      |        |       |  |   |         |      
|Capitalized interest                                       |                                            | $                       | 1,078  |       |  | $    | 3,555  |       |  | $ | 13,223  |      
|                                                           |                                            |                         |        |       |  |      |        |       |  |   |         |      
|Capitalized internal personnel and associated
    costs(5) |                                            | $                       | 998    |       |  | $    | 1,566  |       |  | $ | 5,196   |      
|                                                           |                                            |                         |        |       |  |      |        |       |  |   |         |      



|    |                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reflects aggregate community development and
    acquisition costs, exclusive of the change in construction
    payables between years.                                
|(2) | Represents expenditures for major renovations of
    communities, water sub-metering equipment and other upgrade
    costs that enhance the rental value of such units.
|(3) | Represents property improvement expenditures that
    generally occur less frequently than on an annual basis.                                                         
|(4) | Represents property improvement expenditures of a
    type that are expected to be incurred on an annual basis.                                                        
|(5) | Reflects internal personnel and associated costs
    capitalized to construction and development activities.                                                           




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Current Development Activity

At December 31, 2004, the Company had one
community under development containing 350 apartment and
for-sale condominium units. This community is summarized in the
table below.

|                                                    |                                   |                 |     |              |  |            |    |              |  |             |    |              |  |  |       |  |  |  |       |  |  |  |       |  | 
|--------------------------------------------------- | --------------------------------- | --------------- | --- | ------------ |  | ---------- | -- | ------------ |  | ----------- | -- | ------------ |  |  | ----- |  |  |  | ----- |  |  |  | ----- |  | 
|                                                    |                                   |                 |     |              |  | Costs      |    |              |  |             |    | Estimated   
|                                                    |                                   |                 |     | Estimated    |  | Incurred   |    | Quarter of   |  | Quarter of  |    | Quarter of  
|                                                    |                                   | Number of       |     | Construction |  | as of      |    | Construction |  | First Units |    | Stabilized  
|Metropolitan Area                                   |                                   | Units           |     | Cost         |  | 12/31/2004 |    | Start        |  | Available   |    | Occupancy(1)
|                                                    |                                   |                 |     |              |  |            |    |              |  |             |    |             
|                                                    |                                   |                 |     |              |  |            |    |             
|                                                    |                                   | ($ in millions) |     |              |  |            |    |             
|Construction/Lease-up Communities                   |                                   |                 |     |              |  |            |    |              |  |             |    |              |  |  |       |  |  |  |       |  |  |  |       | 
|Washington D.C.                                     |                                   |                 |     |              |  |            |    |              |  |             |    |              |  |  |       |  |  |  |       |  |  |  |       | 
|Post CarlyleTM  Apartments
    and Condominiums(2) |                                   |                 | 350 |              |  | $          | 95 |              |  | $           | 20 |              |  |  | 4Q04 |  |  |  | 2Q06 |  |  |  | 2Q07 | 
|                                                    |                                   |                 |     |              |  |            |    |              |  |             |    |              |  |  |       |  |  |  |       |  |  |  |       | 
|                                                    | Construction/Lease-up Communities |                 |     | 350          |  |            | $  | 95           |  |             | $  | 20           |  |  |       |  |  |  |       |  |  |  |       |  | 
|                                                    |                                   |                 |     |              |  |            |    |              |  |             |    |              |  |  |       |  |  |  |       |  |  |  |       | 

|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The Company defines stabilized occupancy as the
    earlier to occur of (i) the attainment of 95% physical
    occupancy on the first day of any month or (ii) one year
    after completion of construction.
|(2) | The condominium component of the project,
    consisting of 145 units, will be developed through a
    taxable REIT subsidiary in a majority owned joint venture with a
    Washington D.C. based developer. 

Inflation

Substantially all of the leases at the
communities allow, at the time of renewal, for adjustments in
the rent payable thereunder, and thus may enable the Company to
seek increases in rents. The substantial majority of these
leases are for one year or less and the remaining leases are for
up to two years. At the expiration of a lease term, the
Companys lease agreements generally provide that the term
will be extended unless either the Company or the lessee gives
at least sixty (60) days written notice of termination. In
addition, the Companys policy generally permits the
earlier termination of a lease by a lessee upon thirty
(30) days written notice to the Company and the payment of
an amount equal to two months rent as compensation for
early termination. The short-term nature of these leases
generally serves to reduce the risk to the Company of the
adverse effect of inflation.

Funds from Operations

The Company uses the National Association of Real
Estate Investment Trusts (NAREIT) definition of
funds from operations (FFO). FFO is defined by
NAREIT as net income available to common shareholders determined
in accordance with GAAP, excluding gains (or losses) from
extraordinary items 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 is a supplemental non-GAAP
financial measure. 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.

The Company also uses FFO as an operating
measure. Accounting for real estate assets using historical cost
accounting under GAAP assumes that the value of real estate
assets diminishes predictably over time. NAREIT stated in its
April 2002 White Paper on Funds from Operations since real
estate asset values have historically risen or fallen with
market conditions, many industry investors have considered
presentations of operating results for real estate companies
that use historical cost accounting to be insufficient by
themselves. As a result, the concept of FFO was created by
NAREIT for the REIT industry to provide an alternate measure.
Since the Company agrees with the concept of FFO and appreciates
the reasons surrounding its creation, management believes that
FFO is an important supplemental measure of operating
performance. In addition, since most equity REITs provide FFO
information to the investment community, the Company believes
FFO is a useful supplemental measure for comparing the
Companys results to those of other equity REITs. The
Company believes that the line on the Companys
consolidated statement of operations entitled net income
available to common shareholders is the most directly
comparable GAAP measure to FFO.

FFO should not be considered as an alternative to
net income available to common shareholders (determined in
accordance with GAAP) as an indicator of the Companys
financial performance. While management believes that FFO is an
important supplemental non-GAAP financial measure, management
believes it is also important to stress that FFO should not be
considered as an alternative to cash flow from operating
activities (determined in accordance with GAAP) as a measure of
the Companys liquidity. Further, FFO is not necessarily
indicative of sufficient cash flow to fund all of the
Companys needs or ability to service indebtedness or make
distributions.




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A reconciliation of net income available to
common shareholders to FFO is provided below.

|                                                                       |  |                         |          |      |  |      |          |   |  |   |         |  
|---------------------------------------------------------------------- |  | ----------------------- | -------- | ---- |  | ---- | -------- | - |  | - | ------- | -
|                                                                       |  |                        
|                                                                       |  | Year-ended December 31,
|                                                                       |  |                        
|                                                                       |  | 2004                    |          | 2003 |  | 2002
|                                                                       |  |                         |          |      |  |     
|Net income available to common
    shareholders                        |  | $                       | 76,368   |      |  | $    | 2,707    |   |  | $ | 49,297  |  
|Minority interest of common
    unitholders  continuing operations    |  |                         | (2,283   | )    |  |      | (3,801   | ) |  |   | 2,334   |  
|Minority interest in discontinued operations(1)                        |  |                         | 7,461    |      |  |      | 4,142    |   |  |   | 4,438   |  
|Gains on property sales  continuing
    operations                    |  |                         |         |      |  |      |         |   |  |   | (13,275 | )
|Gains on property sales 
    unconsolidated entities                  |  |                         |         |      |  |      | (8,395   | ) |  |   |        |  
|Gains on property sales  discontinued
    operations                  |  |                         | (113,739 | )    |  |      | (40,792  | ) |  |   | (27,921 | )
|Depreciation on wholly-owned real estate assets,
    net(2)            |  |                         | 81,433   |      |  |      | 84,530   |   |  |   | 82,917  |  
|Depreciation on real estate assets held in
    unconsolidated entities |  |                         | 1,328    |      |  |      | 1,567    |   |  |   | 1,104   |  
|                                                                       |  |                         |          |      |  |      |          |   |  |   |         |  
|Funds from operations available to common
    shareholders             |  | $                       | 50,568   |      |  | $    | 39,958   |   |  | $ | 98,894  |  
|                                                                       |  |                         |          |      |  |      |          |   |  |   |         |  
|Cash flow provided by (used in):                                       |  |                         |          |      |  |      |          |   |  |   |         |  
|Operating activities                                                   |  | $                       | 77,424   |      |  | $    | 91,549   |   |  | $ | 119,763 |  
|Investing activities                                                   |  | $                       | 129,748  |      |  | $    | 234,195  |   |  | $ | (48,821 | )
|Financing activities                                                   |  | $                       | (208,383 | )    |  | $    | (330,800 | ) |  | $ | (69,355 | )
|Weighted average shares outstanding 
    basic                        |  |                         | 39,777   |      |  |      | 37,688   |   |  |   | 36,939  |  
|Weighted average shares and units
    outstanding  basic              |  |                         | 42,474   |      |  |      | 42,134   |   |  |   | 42,021  |  
|Weighted average shares outstanding 
    diluted(3)                   |  |                         | 39,892   |      |  |      | 37,699   |   |  |   | 36,954  |  
|Weighted average shares and units
    outstanding  diluted(3)         |  |                         | 42,589   |      |  |      | 42,145   |   |  |   | 42,036  |  



|    |                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the minority interest in earnings and
    gains (losses) on properties held for sale and sold reported as
    discontinued operations for the periods presented.                                                                                                   
|(2) | Depreciation on wholly-owned real estate assets
    is net of the minority interest portion of depreciation in
    consolidated entities.                                                                                                                                     
|(3) | Diluted weighted average shares and units for the
    years ended December 31, 2004 and 2003 include 115 and
    11 shares and units, respectively, that were antidilutive
    to all income (loss) per share computations under generally
    accepted accounting principles.




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ITEM 7A. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

Interest Rate Sensitivity


The Companys primary market risk exposure
is interest rate risk. At December 31, 2004, the Company
had $174,248 of variable rate debt tied to LIBOR. In addition,
the Company had $110,055 in variable tax-exempt debt with
interest based on the FNMA AAA tax exempt rate. In
addition, the Company has interest rate risk associated with
fixed rate debt at maturity. The discussion in this Interest
Rate Sensitivity section is the same for the Company and the
Operating Partnership, except that all indebtedness described
herein has been incurred by the Operating Partnership.

Management has and will continue to manage
interest rate risk as follows:



|  |                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------
| | maintain a conservative ratio of fixed rate,
    long-term debt to total debt such that variable rate exposure is
    kept at an acceptable level; 
| 
| | fix certain long-term variable rate debt through
    the use of interest rate swaps or interest rate caps with
    appropriate matching maturities;
| 
| | use treasury locks where appropriate to fix rates
    on anticipated debt transactions; and                                                        
| 
| | take advantage of favorable market conditions for
    long-term debt and/or equity.                                                                

Management uses various financial models and
advisors to achieve these objectives.

The tables below provide information about the
Companys fixed and floating rate debt and derivative
financial instruments that are sensitive to changes in interest
rates. For debt obligations, the table presents principal cash
flows and related weighted average interest rates by expected
maturity dates. For interest rate swap and cap arrangements, the
table presents notional amounts and weighted average interest
rates by (expected) contractual maturity dates. Notional
amounts are used to calculate the contractual payments to be
exchanged under the contract. Weighted average variable rates
are based upon implied forward rates in the yield curve at the
reporting date. The information is presented in U.S. dollar
equivalents, which is the Companys reporting currency.

|                         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |     |         |         | 
|------------------------ | ---------------------- | -------------------------- | --------------------------- | ------ | ------ | ------ | ------ | ---- | ----- | ----- | ------- | ----- | ------ | ------ | ----- | ---------- | ----- | ----- | ------ | ---- | ----- | ----- | ------- | ---- | ------- | ------ | --------- | --- | ------- | ------- | --------- | --- | ------- | ------- | 
|                         |                        |                           
|                         |                        | Expected Maturity Date    
|                         |                        |                           
|                         |                        |                            |                             | There- |        |       
|                         |                        | 2005                       |                             | 2006   |        | 2007   |        | 2008 |       | 2009  |         | after |        | Total  |       | Fair Value
|                         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |           
|                         |                        |                           
|                         |                        | (in thousands)            
|Debt obligations         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    
|Long-term debt:          |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    
|Fixed rate               |                        | $                          | 191,534                     | (6)    |        | $      | 79,779 |      |       | $     | 156,583 |       |        | $      | 2,822 |            |       | $     | 74,036 |      |       | $     | 340,421 |      |         | $      | 845,175   |     |         | $       | 891,579   |    
|                         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    
|                         | Average interest rate  |                            |                             |        |        |        |        | 7.24 | %     |       |         | 6.93  | %      |        |       | 6.43       | %     |       |        | 5.75 | %     |       |         | 5.47 | %       |        |           | 6.6 | %       |         |           | 6.6 | %      
|Floating rate            |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    
|                         | LIBOR-based and other: |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |     |        
|                         |                        | Cash management line(1)(2) |                             |        |       |        |        |      |      |       |         |       | 10,748 |        |       |            |      |       |        |      |      |       |         |      |        |        |           |     | 10,748  |         |           |     | 10,748  |        
|                         |                        | MTN(1)(3)                  |                             |        | 25,000 |        |        |      |      |       |         |       |       |        |       |            |      |       |        |      |      |       |         |      |        |        |           |     | 25,000  |         |           |     | 25,000  |        
|                         |                        | Revolver(1)(2)             |                             |        |       |        |        |      |      |       |         |       | 40,000 |        |       |            |      |       |        |      |      |       |         |      |        |        |           |     | 40,000  |         |           |     | 40,000  |        
|                         |                        | FNMA(4)                    |                             |        | 1,385  |        |        |      | 1,490 |       |         |       | 1,610  |        |       |            | 1,735 |       |        |      | 1,865 |       |         |      | 90,415  |        |           |     | 98,500  |         |           |     | 98,500  |        
|                         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    
|                         |                        |                            | Total LIBOR-based and other |        |        | 26,385 |        |      |       | 1,490 |         |       |        | 52,358 |       |            |       | 1,735 |        |      |       | 1,865 |         |      |         | 90,415 |           |     |         | 174,248 |           |     |         | 174,248 | 
|                         |                        | Tax-exempt(5)              |                             |        | 200    |        |        |      | 1,200 |       |         |       | 1,800  |        |       |            | 3,000 |       |        |      | 3,100 |       |         |      | 100,755 |        |           |     | 110,055 |         |           |     | 110,055 |        
|                         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    
|Total floating rate debt |                        |                            | 26,585                      |        |        |        | 2,690  |      |       |       | 54,158  |       |        |        | 4,735 |            |       |       | 4,965  |      |       |       | 191,170 |      |         |        | 284,303   |     |         |         | 284,303   |    
|                         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    
|Total debt               |                        | $                          | 218,119                     |        |        | $      | 82,469 |      |       | $     | 210,741 |       |        | $      | 7,557 |            |       | $     | 79,001 |      |       | $     | 531,591 |      |         | $      | 1,129,478 |     |         | $       | 1,175,882 |    
|                         |                        |                            |                             |        |        |        |        |      |       |       |         |       |        |        |       |            |       |       |        |      |       |       |         |      |         |        |           |     |         |         |           |    






|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Interest on these debt instruments is based on
    LIBOR plus 0.75% at December 31, 2004. At December 31,
    2004, the one-month LIBOR rate was 2.4%.                                                                                                                                                                                       
|(2) | Assumes the Companys Revolver and Cash
    Management lines of credit are repaid at their maturity dates.                                                                                                                                                                                                                                   
|(3) | Through an interest rate swap transaction, the
    interest rate on this note is fixed at 7.28%.                                                                                                                                                                                                                                             
|(4) | In December 2000, the Company entered into a swap
    transaction that fixed the rate on the note at 6.975%, inclusive
    of credit enhancement and other fees, from January 1, 2001
    through July 31, 2009.                                                                                                                             
|(5) | At December 31, 2004, the FNMA
    AAA tax exempt rate was 2.00%. Interest on these
    debt instruments is equal to the FNMA AAA tax exempt
    rate plus credit enhancement and other fees of 0.639%. The
    Company has purchased an interest rate cap that limits the
    Companys exposure to increases in the base rate to 5.00%.
|(6) | Includes $100,000 of Mandatory Par Put Remarketed
    Securities (MOPPRS). As discussed in note 3 to
    the consolidated financial statements, the MOPPRS are subject to
    mandatory tender in March 2005. As such, the $100,000
    outstanding debt balance is included in 2005 maturities in the
    table.                          




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|                          |                   |                 |        |                        |  |              |      |            |   |               |               |               |  |  |         |         |  |   |        |     |  
|------------------------- | ----------------- | --------------- | ------ | ---------------------- |  | ------------ | ---- | ---------- | - | ------------- | ------------- | ------------- |  |  | ------- | ------- |  | - | ------ | --- | -
|                          |                   |                 |        |                        |  |              |      | Expected   |   |              
|                          |                   |                 |        | Average                |  | Average      |      | Settlement |   | Fair Value   
|Interest Rate Derivatives |                   | Notional Amount |        | Pay Rate/Cap Rate      |  | Receive Rate |      | Date       |   | Asset (Liab.)
|                          |                   |                 |        |                        |  |              |      |            |   |              
|Interest Rate Swaps       |                   |                 |        |                        |  |              |      |            |   |               |               |               |  |  |         |         |  |   |        |    
|                          | Variable to fixed |                 |        | $104,000 amortizing to |  |              |      |            |   |               |               |               |  |  |         |         |  |   |        |     |  
|                          |                   |                 | 90,270 |                        |  |              | 6.04 | %          |   |               | 1 month LIBOR |               |  |  | 7/31/09 |         |  | $ | (8,833 | )  
|                          | Variable to fixed |                 |        | 25,000                 |  |              |      | 6.53       | % |               |               | 3 month LIBOR |  |  |         | 2/01/05 |  |   |        | (94 | )
|Interest rate cap         |                   |                 | 95,295 |                        |  |              | 5.00 | %          |   |               |              |               |  |  | 2/01/08 |         |  |   | 95     |    
|Interest rate cap         |                   |                 | 14,760 |                        |  |              | 5.00 | %          |   |               |              |               |  |  | 2/01/08 |         |  |   | 15     |    
|                          |                   |                 |        |                        |  |              |      |            |   |               |               |               |  |  |         |         |  |   |        |    
|                          |                   |                 |        |                        |  |              |      |            |   |               |               |               |  |  |         |         |  | $ | (8,817 | )  
|                          |                   |                 |        |                        |  |              |      |            |   |               |               |               |  |  |         |         |  |   |        |    

As more fully described in note 1 to the
consolidated financial statements, the interest rate swap and
cap arrangements are carried on the consolidated balance sheet
at the fair value shown above in accordance with
SFAS No. 133, as amended. If interest rates under the
Companys floating rate LIBOR-based and tax-exempt
borrowings, in excess of the $98,500 FNMA borrowings and $25,000
medium-term notes effectively converted to fixed rates discussed
above, fluctuated by 1.0%, interest costs to the Company, based
on outstanding borrowings at December 31, 2004, would
increase or decrease by approximately $1,608 on an annualized
basis.






|        |                                                
|------- | -----------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY
    DATA

The financial statements are listed under
Item 15(a) and are filed as part of this report on the
pages indicated. The supplementary data are included in
note 17 of the Notes to Consolidated Financial Statements.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
    ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.




ITEM 9A. CONTROLS AND PROCEDURES

As required by Securities and Exchange Commission
rules, the Company has evaluated the effectiveness of the design
and operation of its disclosure controls and procedures as of
the end of the period covered by this Annual Report on
Form 10-K. This evaluation was carried out under the
supervision and with the participation of the Companys
management, including its principal executive officer and
principal financial officer. Based on this evaluation, these
officers have concluded that the design and operation of the
Companys disclosure controls and procedures were effective
as of the end of the period covered by this annual report on
Form 10-K. Disclosure controls and procedures (as defined
in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended (the Exchange Act))
are the Companys controls and other procedures that are
designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act, is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange
Commissions rules and forms.

There were no changes to the Companys
internal control over financial reporting (as defined in
Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during
the registrants fourth quarter of 2004 that materially
affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

Managements report on internal control over
financial reporting and the report of the Companys
independent registered public accounting firm are included in
Part IV, Item 15 of this annual report on
Form 10-K and are incorporated herein by reference.




ITEM 9B. OTHER INFORMATION

None.




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PART III






|         |                                                       
|-------- | ------------------------------------------------------
|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE
    REGISTRANT

The sections under the heading Corporate
Governance and the section under the headings
Proposal 1  Election of Directors
entitled Nominees for Election to Serve until the 2006
Annual Meeting, of the Proxy Statement for Annual Meeting
of Shareholders to be held May 19, 2005 (the Proxy
Statement) are incorporated herein by reference for
information on Directors of the Registrant. See Item X in
Part I hereof for information regarding executive officers
of the Registrant. The section under the heading Other
Matters entitled Section 16(a) Beneficial
Ownership Reporting Compliance of the Proxy Statement is
incorporated herein by reference.

Code of Ethics

The Company has adopted a Code of Ethics for
Senior Executive and Financial Officers (the Code of
Ethics) that applies to our chief executive officer, chief
financial officer and chief accounting officer and persons
performing similar functions. The Code of Ethics is available on
the Companys website at www.postproperties.com under the
Corporate Governance caption. Any amendments to, or
waivers of, the Code of Ethics will be disclosed on our website
promptly following the date of such amendment or waiver.






|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

The sections under the heading Corporate
Governance entitled Director Compensation of
the Proxy Statement and the sections under the heading titled
Executive Compensation entitled Summary
Compensation Table, Option Grants Table,
Fiscal Year-End Option Value Table, Long Term
Incentive Plan Table, Employee Agreements and Change
of Control Agreements, and Compensation Committee
Interlocks and Insider Participation of the Proxy
Statement are incorporated herein by reference.






|         |                                                                                                   
|-------- | --------------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
    OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The sections under the heading Common Stock
Ownership by Management and Principal Shareholders and
Equity Compensation Plan Information of the Proxy
Statement are incorporated herein by reference.






|         |                                                   
|-------- | --------------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED
    TRANSACTIONS

The section under the heading Certain
Relationships and Related Party Transactions of the Proxy
Statement is incorporated herein by reference.






|         |                                           
|-------- | ------------------------------------------
|ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND
    SERVICES

The sections under the heading titled
Principal Accountant Fees and Services of the Proxy
Statement are incorporated herein by reference.




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##### Table of Contents






PART IV






|         |                                                 
|-------- | ------------------------------------------------
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS AND
    SCHEDULES

(a) 1. and 2. Financial Statements and
Schedules

The financial statements and schedules listed
below are filed as part of this annual report on the pages
indicated.

INDEX TO FINANCIAL STATEMENTS

|                                   |                                                                                                      |      |  |     | 
|---------------------------------- | ---------------------------------------------------------------------------------------------------- | ---- |  | --- | 
|                                   |                                                                                                      | Page
|                                   |                                                                                                      |     
|POST PROPERTIES, INC.              |                                                                                                      |      |  |    
|Consolidated Financial Statements: |                                                                                                      |      |  |    
|                                   | Managements Report on Internal Control over
    Financial Reporting                                 |      |  | 52  | 
|                                   | Report of Independent Registered Public
    Accounting Firm                                          |      |  | 53  | 
|                                   | Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                     |      |  | 54  | 
|                                   | Consolidated Statements of Operations for the
    Years Ended December 31, 2004, 2003 and 2002       |      |  | 55  | 
|                                   | Consolidated Statements of Shareholders
    Equity and Accumulated Earnings for the Years Ended     |      |  |     | 
|                                   | December 31, 2004, 2003 and 2002                                                                     |      |  | 56  | 
|                                   | Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2004, 2003 and 2002       |      |  | 58  | 
|                                   | Notes to the Consolidated Financial Statements                                                       |      |  | 59  | 
|POST APARTMENT HOMES, L.P.         |                                                                                                      |      |  |    
|Consolidated Financial Statements: |                                                                                                      |      |  |    
|                                   | Managements Report on Internal Control over
    Financial Reporting                                 |      |  | 84  | 
|                                   | Report of Independent Registered Public
    Accounting Firm                                          |      |  | 85  | 
|                                   | Consolidated Balance Sheets as of
    December 31, 2004 and 2003                                     |      |  | 86  | 
|                                   | Consolidated Statements of Operations for the
    Years Ended December 31, 2004, 2003 and 2002       |      |  | 87  | 
|                                   | Consolidated Statements of Partners Equity
    for the Years Ended December 31, 2004, 2003 and 2002 |      |  | 88  | 
|                                   | Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2004, 2003 and 2002       |      |  | 89  | 
|                                   | Notes to the Consolidated Financial Statements                                                       |      |  | 90  | 
|Schedule III:                      |                                                                                                      |      |  |    
|                                   | Real Estate and Accumulated Depreciation                                                             |      |  | 113 | 

All other schedules are omitted because they are
either not applicable or not required.




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Post Properties, Inc.

Consolidated Financial Statements


December 31, 2004 and 2003







Post Properties, Inc.


51




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MANAGEMENTS REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

The management of Post Properties, Inc. is
responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Under
the supervision and with the participation of the management of
Post Properties, Inc., including the Companys principal
executive officer and principal financial officer, Company
management conducted an evaluation of the effectiveness of its
internal control over financial reporting as of
December 31, 2004 based on the framework in Internal
Control  Integrated Frameworkissued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on its evaluation under the framework in
Internal Control  Integrated Framework, the
management of Post Properties, Inc. concluded that its internal
control over financial reporting was effective as of
December 31, 2004. Managements assessment of the
effectiveness of the Companys internal control over
financial reporting as of December 31, 2004 has been
audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report which is
included herein.




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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Post Properties, Inc.:

We have completed an integrated audit of Post
Properties, Inc. 2004 consolidated financial statements and of
its internal control over financial reporting as of
December 31, 2004 and audits of its 2003 and 2002
consolidated financial statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Our opinions, based on our audits, are
presented below.

Consolidated financial statements and
financial statement schedule

In our opinion, the consolidated financial
statements listed in the index appearing under Item 15(a)
present fairly, in all material respects, the financial position
of Post Properties, Inc. and subsidiaries at December 31,
2004 and 2003, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 2004 in conformity with accounting principles
generally accepted in the United States of America. In addition,
in our opinion, the financial statement schedule listed in the
index appearing under Item 15(a) presents fairly, in all
material respects, the information set forth therein when read
in conjunction with the related consolidated financial
statements. These financial statements and the financial
statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based
on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit of financial statements includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

Internal control over financial
reporting

Also, in our opinion, managements
assessment, included in Managements Report on Internal
Control Over Financial Reporting appearing under
Item 15(a), that the Company maintained effective internal
control over financial reporting as of December 31, 2004
based on criteria established in Internal Control 
Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly
stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2004, based on criteria
established in Internal Control  Integrated
Frameworkissued by the COSO. The Companys management
is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting. Our responsibility
is to express opinions on managements assessment and on
the effectiveness of the Companys internal control over
financial reporting based on our audit. We conducted our audit
of internal control over financial reporting in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was
maintained in all material respects. An audit of internal
control over financial reporting includes obtaining an
understanding of internal control over financial reporting,
evaluating managements assessment, testing and evaluating
the design and operating effectiveness of internal control, and
performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.

A companys internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A
companys internal control over financial reporting
includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may deteriorate.

PricewaterhouseCoopers LLP

Atlanta, Georgia

March 15, 2005





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POST PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands)


|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |           |           |           | 
|---------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                         |                                                                                                                                          |                                                                                                                                 
|                                         |                                                                                                                                          | December 31,                                                                                                                    
|                                         |                                                                                                                                          |                                                                                                                                 
|                                         |                                                                                                                                          | 2004                                                                                                                             |                                                                                                                                                                                       | 2003     
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |          
|Assets                                   |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         | Real estate assets                                                                                                                       |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |           |          
|                                         |                                                                                                                                          | Land                                                                                                                             |                                                                                                                                                                                       | $         | 266,520   |           |           | $         | 254,000   |          
|                                         |                                                                                                                                          | Building and improvements                                                                                                        |                                                                                                                                                                                       |           | 1,887,514 |           |           |           | 1,883,582 |          
|                                         |                                                                                                                                          | Furniture, fixtures and equipment                                                                                                |                                                                                                                                                                                       |           | 214,954   |           |           |           | 214,002   |          
|                                         |                                                                                                                                          | Construction in progress                                                                                                         |                                                                                                                                                                                       |           | 19,527    |           |           |           | 12,946    |          
|                                         |                                                                                                                                          | Land held for future development                                                                                                 |                                                                                                                                                                                       |           | 18,910    |           |           |           | 11,994    |          
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | 2,407,425                                                                                                                                                                             |           |           |           | 2,376,524 |          
|                                         |                                                                                                                                          | Less: accumulated depreciation                                                                                                   |                                                                                                                                                                                       |           | (498,367  | )         |           |           | (436,245  | )        
|                                         |                                                                                                                                          | Assets held for sale, net of accumulated
    depreciation of $26,332 and $74,614 at December 31, 2004
    and 2003, respectively |                                                                                                                                                                                       |           | 68,661    |           |           |           | 145,238   |          
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | Total real estate assets                                                                                                                                                              |           |           | 1,977,719 |           |           |           | 2,085,517 | 
|                                         | Investments in and advances to unconsolidated
    real estate entities                                                                   |                                                                                                                                  |                                                                                                                                                                                       | 21,320    |           |           |           | 74,786    |          
|                                         | Cash and cash equivalents                                                                                                                |                                                                                                                                  |                                                                                                                                                                                       | 123       |           |           |           | 1,334     |          
|                                         | Restricted cash                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       | 1,844     |           |           |           | 2,065     |          
|                                         | Deferred charges, net                                                                                                                    |                                                                                                                                  |                                                                                                                                                                                       | 15,574    |           |           |           | 16,373    |          
|                                         | Other assets                                                                                                                             |                                                                                                                                  |                                                                                                                                                                                       | 37,262    |           |           |           | 35,376    |          
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | Total assets                                                                                                                                                                          |           | $         | 2,053,842 |           |           | $         | 2,215,451 | 
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|Liabilities and shareholders
    equity |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         | Indebtedness, including $34,060 and $119,085 of
    debt secured by assets held for sale at December 31, 2004
    and 2003, respectively |                                                                                                                                  | $                                                                                                                                                                                     | 1,129,478 |           |           | $         | 1,186,322 |          
|                                         | Accounts payable and accrued expenses                                                                                                    |                                                                                                                                  |                                                                                                                                                                                       | 58,837    |           |           |           | 65,872    |          
|                                         | Dividend and distribution payable                                                                                                        |                                                                                                                                  |                                                                                                                                                                                       | 19,203    |           |           |           | 19,509    |          
|                                         | Accrued interest payable                                                                                                                 |                                                                                                                                  |                                                                                                                                                                                       | 7,677     |           |           |           | 6,923     |          
|                                         | Security deposits and prepaid rents                                                                                                      |                                                                                                                                  |                                                                                                                                                                                       | 7,236     |           |           |           | 7,890     |          
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | Total liabilities                                                                                                                                                                     |           |           | 1,222,431 |           |           |           | 1,286,516 | 
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         | Minority interest of preferred unitholders in
    Operating Partnership                                                                  |                                                                                                                                  |                                                                                                                                                                                       |          |           |           |           | 70,000    |          
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         | Minority interest of common unitholders in
    Operating Partnership                                                                     |                                                                                                                                  |                                                                                                                                                                                       | 43,341    |           |           |           | 62,409    |          
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         | Commitments and contingencies                                                                                                            |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |           |          
|                                         | Shareholders equity                                                                                                                     |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |           |          
|                                         |                                                                                                                                          | Preferred stock, $.01 par value, 20,000
    authorized:                                                                          |                                                                                                                                                                                       |           |           |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | 8 1/2% Series A Cumulative Redeemable
    Shares, liquidation preference $50 per share,
    900 shares issued and outstanding                                                         |           |           | 9         |           |           |           | 9         | 
|                                         |                                                                                                                                          |                                                                                                                                  | 7 5/8% Series B Cumulative Redeemable
    Shares, liquidation preference $25 per share,
    2,000 shares issued and outstanding                                                       |           |           | 20        |           |           |           | 20        | 
|                                         |                                                                                                                                          |                                                                                                                                  | 7 5/8% Series C Cumulative Redeemable
    Shares, liquidation preference $25 per share, 0 and
    2,000 shares issued and outstanding at December 31,
    2004 and 2003, respectively |           |           |          |           |           |           | 20        | 
|                                         | Common stock, $.01 par value, 100,000
    authorized:                                                                                    |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |           |          
|                                         |                                                                                                                                          | 40,164 and 39,676 shares issued, 40,164 and
    38,686 shares outstanding at December 31, 2004 and
    2003, respectively        |                                                                                                                                                                                       |           | 401       |           |           |           | 396       |          
|                                         |                                                                                                                                          | Additional paid-in capital                                                                                                       |                                                                                                                                                                                       |           | 775,221   |           |           |           | 849,632   |          
|                                         |                                                                                                                                          | Accumulated earnings                                                                                                             |                                                                                                                                                                                       |           | 25,075    |           |           |           |          |          
|                                         |                                                                                                                                          | Accumulated other comprehensive loss                                                                                             |                                                                                                                                                                                       |           | (8,668    | )         |           |           | (12,362   | )        
|                                         |                                                                                                                                          | Deferred compensation                                                                                                            |                                                                                                                                                                                       |           | (3,988    | )         |           |           | (4,424    | )        
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | 788,070                                                                                                                                                                               |           |           |           | 833,291   |          
|                                         | Less common stock in treasury, at cost, 0 and
    990 shares at December 31, 2004 and 2003, respectively                                 |                                                                                                                                  |                                                                                                                                                                                       |          |           |           |           | (36,765   | )        
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | Total shareholders equity                                                                                                                                                            |           |           | 788,070   |           |           |           | 796,526   | 
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          
|                                         |                                                                                                                                          |                                                                                                                                  | Total liabilities and shareholders equity                                                                                                                                            |           | $         | 2,053,842 |           |           | $         | 2,215,451 | 
|                                         |                                                                                                                                          |                                                                                                                                  |                                                                                                                                                                                       |           |           |           |           |          

The accompanying notes are an integral part of
these consolidated financial statements.




Post Properties, Inc.


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POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF
OPERATIONS


(In thousands, except per share
data)


|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |         |         | 
|----------------------------------------------- | --------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------- | ------- | ---- | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                                |                                                                                                           |                                             
|                                                |                                                                                                           | Year Ended December 31,                     
|                                                |                                                                                                           |                                             
|                                                |                                                                                                           | 2004                                         |        | 2003    |         | 2002
|                                                |                                                                                                           |                                              |        |         |         |     
|Revenues                                        |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Rental                                                                                                    |                                              | $      | 281,664 |         |      | $      | 269,400 |         |   | $      | 265,301 |        
|                                                | Other property revenues                                                                                   |                                              |        | 17,166  |         |      |        | 15,900  |         |   |        | 15,435  |        
|                                                | Other                                                                                                     |                                              |        | 1,000   |         |      |        | 457     |         |   |        | 260     |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                |                                                                                                           | Total revenues                               |        |         | 299,830 |      |        |         | 285,757 |   |        |         | 280,996 | 
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|Expenses                                        |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Property operating and maintenance (exclusive of
    items shown separately below)                        |                                              |        | 132,738 |         |      |        | 124,178 |         |   |        | 117,030 |        
|                                                | Depreciation                                                                                              |                                              |        | 83,029  |         |      |        | 81,201  |         |   |        | 74,482  |        
|                                                | General and administrative                                                                                |                                              |        | 21,275  |         |      |        | 15,102  |         |   |        | 14,430  |        
|                                                | Development costs and other                                                                               |                                              |        | 1,337   |         |      |        | 2,137   |         |   |        | 694     |        
|                                                | Proxy contest and related costs                                                                           |                                              |        |        |         |      |        | 5,231   |         |   |        |        |        
|                                                | Severance charges                                                                                         |                                              |        |        |         |      |        | 21,506  |         |   |        |        |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                |                                                                                                           | Total expenses                               |        |         | 238,379 |      |        |         | 249,355 |   |        |         | 206,636 | 
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|Operating Income                                |                                                                                                           |                                              | 61,451 |         |         |      | 36,402 |         |         |   | 74,360 |        
|                                                | Interest income                                                                                           |                                              |        | 817     |         |      |        | 894     |         |   |        | 1,288   |        
|                                                | Interest expense                                                                                          |                                              |        | (65,415 | )       |      |        | (63,182 | )       |   |        | (50,231 | )      
|                                                | Termination of debt remarketing agreement
    (interest expense)                                          |                                              |        | (10,615 | )       |      |        |        |         |   |        |        |        
|                                                | Loss on early extinguishment of indebtedness                                                              |                                              |        | (4,011  | )       |      |        |        |         |   |        | (136    | )      
|                                                | Amortization of deferred financing costs                                                                  |                                              |        | (4,304  | )       |      |        | (3,801  | )       |   |        | (2,327  | )      
|                                                | Equity in income (loss) of unconsolidated real
    estate entities                                        |                                              |        | 1,083   |         |      |        | 7,790   |         |   |        | (1,591  | )      
|                                                | Gains on property sales                                                                                   |                                              |        |        |         |      |        |        |         |   |        | 13,275  |        
|                                                | Minority interest in consolidated property
    partnerships                                               |                                              |        | 671     |         |      |        | 1,605   |         |   |        | 1,771   |        
|                                                | Minority interest of preferred unitholders                                                                |                                              |        | (3,780  | )       |      |        | (5,600  | )       |   |        | (5,600  | )      
|                                                | Minority interest of common unitholders                                                                   |                                              |        | 2,283   |         |      |        | 3,801   |         |   |        | (2,334  | )      
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                |                                                                                                           | Income (loss) from continuing
    operations |        |         | (21,820 | )    |        |         | (22,091 | ) |        |         | 28,475  | 
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|Discontinued operations                         |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Income (loss) from discontinued operations, net
    of minority interest                                  |                                              |        | 7,849   |         |      |        | (250    | )       |   |        | 17,703  |        
|                                                | Gains on property sales, net of minority interest                                                         |                                              |        | 106,039 |         |      |        | 36,497  |         |   |        | 14,568  |        
|                                                | Loss on early extinguishment of indebtedness
    associated with property sales, net of minority interest |                                              |        | (3,849  | )       |      |        |        |         |   |        |        |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                |                                                                                                           | Income from discontinued operations          |        |         | 110,039 |      |        |         | 36,247  |   |        |         | 32,271  | 
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|Net income                                      |                                                                                                           |                                              | 88,219 |         |         |      | 14,156 |         |         |   | 60,746 |        
|                                                | Dividends to preferred shareholders                                                                       |                                              |        | (8,325  | )       |      |        | (11,449 | )       |   |        | (11,449 | )      
|                                                | Redemption costs on preferred stock and units                                                             |                                              |        | (3,526  | )       |      |        |        |         |   |        |        |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|Net income available to common
    shareholders |                                                                                                           | $                                            | 76,368 |         |         | $    | 2,707  |         |         | $ | 49,297 |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|Per common share data 
    Basic               |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Income (loss) from continuing operations (net of
    preferred dividends and redemption costs)            |                                              | $      | (0.85   | )       |      | $      | (0.89   | )       |   | $      | 0.46    |        
|                                                | Income from discontinued operations                                                                       |                                              |        | 2.77    |         |      |        | 0.96    |         |   |        | 0.87    |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Net income available to common shareholders                                                               |                                              | $      | 1.92    |         |      | $      | 0.07    |         |   | $      | 1.33    |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Weighted average common shares
    outstanding  basic                                                    |                                              |        | 39,777  |         |      |        | 37,688  |         |   |        | 36,939  |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|Per common share data 
    Diluted             |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Income (loss) from continuing operations (net of
    preferred dividends and redemption costs)            |                                              | $      | (0.85   | )       |      | $      | (0.89   | )       |   | $      | 0.46    |        
|                                                | Income from discontinued operations                                                                       |                                              |        | 2.77    |         |      |        | 0.96    |         |   |        | 0.87    |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Net income available to common shareholders                                                               |                                              | $      | 1.92    |         |      | $      | 0.07    |         |   | $      | 1.33    |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Weighted average common shares
    outstanding  diluted                                                  |                                              |        | 39,777  |         |      |        | 37,688  |         |   |        | 36,954  |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        
|                                                | Common dividends declared                                                                                 |                                              | $      | 1.80    |         |      | $      | 1.80    |         |   | $      | 3.12    |        
|                                                |                                                                                                           |                                              |        |         |         |      |        |         |         |   |        |        

The accompanying notes are an integral part of
these consolidated financial statements.




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POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY AND


ACCUMULATED EARNINGS


FOR THE YEARS ENDED DECEMBER 31, 2004,
2003 AND 2002


(In thousands, except per share
data)


|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |         |          |        | 
|-------------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------ | - | ---------- | --- | ----------- | - | ------------- | ------- | ------------ | ------- | -------- | - | ----- | ------- | ------ | ------- | ------ | ------ | ----- | ------ | ---- | ------ | - | ------- | -------- | ------ | - | ------- | ------- | -------- | ------ | 
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   | Accumulated   |         |              |         |          |   |      
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   | Other         |         |              |         |          |   |      
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   | Additional |     |             |   | Comprehensive |         |              |         |          |   |      
|                                                                     |                                                | Preferred                                                                                                                                                         |                                                              | Common |   | Paid-in    |     | Accumulated |   | Income        |         | Deferred     |         | Treasury |   |      
|                                                                     |                                                | Stock                                                                                                                                                             |                                                              | Stock  |   | Capital    |     | Earnings    |   | (Loss)        |         | Compensation |         | Stock    |   | Total
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |      
|Shareholders Equity and
    Accumulated                             |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |        
|                                                                     | Earnings, December 31, 2001                    |                                                                                                                                                                   | $                                                            | 49     |   |            | $   | 396         |   |               | $       | 1,010,954    |         |          | $ |      |         |        | $       | (5,864 | )      |       | $      | (445 | )      |   | $       | (103,573 | )      |   | $       | 901,517 |         
|                                                                     |                                                | Comprehensive income                                                                                                                                              |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |         |          |       
|                                                                     |                                                | Net income                                                                                                                                                        |                                                              |        |  |            |     |             |  |               |         |              |        |          |   |       | 60,746  |        |         |        |       |       |        |      |       |   |         |          |       |   |         |         | 60,746   |       
|                                                                     |                                                | Net change in derivative value, net of minority
    interest                                                                                                      |                                                              |        |  |            |     |             |  |               |         |              |        |          |   |       |        |        |         |        | (8,958 | )     |        |      |       |   |         |          |       |   |         |         | (8,958   | )     
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |        
|                                                                     |                                                | Total comprehensive income                                                                                                                                        |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |         | 51,788   |       
|                                                                     |                                                | Proceeds from employee stock purchase and stock
    option plans                                                                                                  |                                                              |        |  |            |     |             |  |               |         |              | (218    | )        |   |       |        |        |         |        |       |       |        |      |       |   |         |          | 1,472  |   |         |         | 1,2,,054 |       
|                                                                     |                                                | Adjustment for minority interest of unitholders
    in Operating Partnership upon conversion of units into common
    shares and at dates of capital transactions |                                                              |        |  |            |     |             |  |               |         |              | (4,561  | )        |   |       |        |        |         |        |       |       |        |      |       |   |         |          | 10,217 |   |         |         | 5,656    |       
|                                                                     | Restricted stock issuances, net of forfeitures |                                                                                                                                                                   |                                                              |       |   |            |     |            |   |               |         | (18          | )       |          |   |      |         |        |         |       |        |       |        | (459 | )      |   |         | 477      |        |   |         |        |         
|                                                                     |                                                | Amortization of deferred compensation                                                                                                                             |                                                              |        |  |            |     |             |  |               |         |              |        |          |   |       |        |        |         |        |       |       |        |      | 265    |   |         |          |       |   |         |         | 265      |       
|                                                                     |                                                | Dividends to preferred shareholders                                                                                                                               |                                                              |        |  |            |     |             |  |               |         |              |        |          |   |       | (11,449 | )      |         |        |       |       |        |      |       |   |         |          |       |   |         |         | (11,449  | )     
|                                                                     |                                                | Dividends to common shareholders                                                                                                                                  |                                                              |        |  |            |     |             |  |               |         |              | (66,035 | )        |   |       | (49,297 | )      |         |        |       |       |        |      |       |   |         |          |       |   |         |         | (115,332 | )     
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |        
|Shareholders Equity and Accumulated
    Earnings, December 31, 2002 |                                                |                                                                                                                                                                   | 49                                                           |        |   |            | 396 |             |   |               | 940,122 |              |         |          |  |       |         |        | (14,822 | )      |        |       | (639   | )    |        |   | (91,407 | )        |        |   | 833,699 |        
|                                                                     |                                                | Comprehensive income                                                                                                                                              |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |         |          |       
|                                                                     |                                                |                                                                                                                                                                   | Net income                                                   |        |   |           |     |             |   |              |         |              |         |         |   |       |         | 14,156 |         |        |        |      |        |      |        |  |         |          |        |  |         |         |          | 14,156 | 
|                                                                     |                                                |                                                                                                                                                                   | Net change in derivative value, net of minority
    interest |        |   |           |     |             |   |              |         |              |         |         |   |       |         |       |         |        |        | 2,460 |        |      |        |  |         |          |        |  |         |         |          | 2,460  | 
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |        
|                                                                     |                                                | Total comprehensive income                                                                                                                                        |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |         | 16,616   |       
|                                                                     |                                                | Proceeds from employee stock purchase and stock
    option plans                                                                                                  |                                                              |        |  |            |     |             |  |               |         |              | (1,341  | )        |   |       |        |        |         |        |       |       |        |      |       |   |         |          | 5,480  |   |         |         | 4,139    |       
|                                                                     |                                                | Adjustment for minority interest of unitholders
    in Operating Partnership upon conversion of units into common
    shares and at dates of capital transactions |                                                              |        |  |            |     |             |  |               |         |              | (22,096 | )        |   |       |        |        |         |        |       |       |        |      |       |   |         |          | 42,898 |   |         |         | 20,802   |       
|                                                                     |                                                | Stock-based compensation                                                                                                                                          |                                                              |        |  |            |     |             |  |               |         |              | 218     |          |   |       |        |        |         |        |       |       |        |      |       |   |         |          |       |   |         |         | 218      |       
|                                                                     |                                                | Restricted stock issuances, net of forfeitures                                                                                                                    |                                                              |        |  |            |     |             |  |               |         |              | (1,737  | )        |   |       |        |        |         |        |       |       |        |      | (4,527 | ) |         |          | 6,264  |   |         |         |         |       
|                                                                     |                                                | Amortization of deferred compensation                                                                                                                             |                                                              |        |  |            |     |             |  |               |         |              |        |          |   |       |        |        |         |        |       |       |        |      | 742    |   |         |          |       |   |         |         | 742      |       
|                                                                     |                                                | Dividends to preferred shareholders                                                                                                                               |                                                              |        |  |            |     |             |  |               |         |              |        |          |   |       | (11,449 | )      |         |        |       |       |        |      |       |   |         |          |       |   |         |         | (11,449  | )     
|                                                                     |                                                | Dividends to common shareholders                                                                                                                                  |                                                              |        |  |            |     |             |  |               |         |              | (65,534 | )        |   |       | (2,707  | )      |         |        |       |       |        |      |       |   |         |          |       |   |         |         | (68,241  | )     
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |        
|Shareholders Equity and Accumulated
    Earnings, December 31, 2003 |                                                | $                                                                                                                                                                 | 49                                                           |        |   | $          | 396 |             |   | $             | 849,632 |              |         | $        |  |       |         | $      | (12,362 | )      |        | $     | (4,424 | )    |        | $ | (36,765 | )        |        | $ | 796,526 |        
|                                                                     |                                                |                                                                                                                                                                   |                                                              |        |   |            |     |             |   |               |         |              |         |          |   |       |         |        |         |        |        |       |        |      |        |   |         |          |        |   |         |        

The accompanying notes are an integral part of
these consolidated financial statements.




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##### Table of Contents



POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY AND


ACCUMULATED EARNINGS 
(Continued)


FOR THE YEARS ENDED DECEMBER 31, 2004,
2003 AND 2002


(In thousands, except per share
data)


|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     |             |   |               |         |              |   |          |        |         |        |   |         |   |       |   |        |       |   |   |         |        |   |   |         |         |        | 
|-------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | -- | ------ | - | ------- | --- | ----------- | - | ------------- | ------- | ------------ | - | -------- | ------ | ------- | ------ | - | ------- | - | ----- | - | ------ | ----- | - | - | ------- | ------ | - | - | ------- | ------- | ------ | 
|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     |             |   | Accumulated   |         |              |   |          |        |        
|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     |             |   | Other         |         |              |   |          |        |        
|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     | Additional  |   | Comprehensive |         |              |   |          |        |        
|                                                                     |                                                                                                                                                                   | Preferred                                                    |    | Common |   | Paid-in |     | Accumulated |   | Income        |         | Deferred     |   | Treasury |        |        
|                                                                     |                                                                                                                                                                   | Stock                                                        |    | Stock  |   | Capital |     | Earnings    |   | (Loss)        |         | Compensation |   | Stock    |        | Total  
|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     |             |   |               |         |              |   |          |        |        
|Shareholders Equity and Accumulated
    Earnings, December 31, 2003 |                                                                                                                                                                   | $                                                            | 49 |        |   | $       | 396 |             |   | $             | 849,632 |              |   | $        |       |         |        | $ | (12,362 | ) |       | $ | (4,424 | )     |   | $ | (36,765 | )      |   | $ | 796,526 |        
|                                                                     | Comprehensive income                                                                                                                                              |                                                              |    |        |   |         |     |             |   |               |         |              |   |          |        |         |        |   |         |   |       |   |        |       |   |   |         |        |   |   |         |         |       
|                                                                     |                                                                                                                                                                   | Net income                                                   |    |        |  |         |     |             |  |               |         |              |  |          |        |         | 88,219 |   |         |   |      |   |        |       |  |   |         |        |  |   |         |         | 88,219 | 
|                                                                     |                                                                                                                                                                   | Net change in derivative value, net of minority
    interest |    |        |  |         |     |             |  |               |         |              |  |          |        |         |       |   |         |   | 3,694 |   |        |       |  |   |         |        |  |   |         |         | 3,694  | 
|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     |             |   |               |         |              |   |          |        |         |        |   |         |   |       |   |        |       |   |   |         |        |   |   |         |        
|                                                                     |                                                                                                                                                                   | Total comprehensive income                                   |    |        |  |         |     |             |  |               |         |              |  |          |        |         |       |   |         |   |      |   |        |       |  |   |         |        |  |   |         |         | 91,913 | 
|                                                                     | Proceeds from employee stock purchase and stock
    option plans                                                                                                  |                                                              |    |       |   |         |     | 5           |   |               |         | 6,115        |   |          |        |        |        |   |         |  |       |   |        |      |   |   |         | 4,345  |   |   |         | 10,465  |       
|                                                                     | Adjustment for minority interest of unitholders
    in Operating Partnership upon conversion of units into common
    shares and at dates of capital transactions |                                                              |    |       |   |         |     |            |   |               |         | (14,042      | ) |          |        |        |        |   |         |  |       |   |        |      |   |   |         | 33,890 |   |   |         | 19,848  |       
|                                                                     | Redemption of preferred stock                                                                                                                                     |                                                              |    | (20    | ) |         |     |            |   |               |         | (49,980      | ) |          |        |        |        |   |         |  |       |   |        |      |   |   |         |       |   |   |         | (50,000 | )     
|                                                                     | Stock-based compensation                                                                                                                                          |                                                              |    |       |   |         |     |            |   |               |         | 633          |   |          |        |        |        |   |         |  |       |   |        |      |   |   |         |       |   |   |         | 633     |       
|                                                                     | Restricted stock issuances, net of forfeitures                                                                                                                    |                                                              |    |       |   |         |     |            |   |               |         | (125         | ) |          |        |        |        |   |         |  |       |   |        | (673  | ) |   |         | 798    |   |   |         |        |       
|                                                                     | Amortization of deferred compensation                                                                                                                             |                                                              |    |       |   |         |     |            |   |               |         |             |   |          |        |        |        |   |         |  |       |   |        | 1,109 |   |   |         |       |   |   |         | 1,109   |       
|                                                                     | Treasury stock acquisitions                                                                                                                                       |                                                              |    |       |   |         |     |            |   |               |         |             |   |          |        |        |        |   |         |  |       |   |        |      |   |   |         | (2,268 | ) |   |         | (2,268  | )     
|                                                                     | Dividends to preferred shareholders                                                                                                                               |                                                              |    |       |   |         |     |            |   |               |         |             |   |          |        | (8,325  | )      |   |         |  |       |   |        |      |   |   |         |       |   |   |         | (8,325  | )     
|                                                                     | Dividends to common shareholders                                                                                                                                  |                                                              |    |       |   |         |     |            |   |               |         | (17,012      | ) |          |        | (54,819 | )      |   |         |  |       |   |        |      |   |   |         |       |   |   |         | (71,831 | )     
|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     |             |   |               |         |              |   |          |        |         |        |   |         |   |       |   |        |       |   |   |         |        |   |   |         |        
|Shareholders Equity and Accumulated
    Earnings, December 31, 2004 |                                                                                                                                                                   | $                                                            | 29 |        |   | $       | 401 |             |   | $             | 775,221 |              |   | $        | 25,075 |         |        | $ | (8,668  | ) |       | $ | (3,988 | )     |   | $ |        |        |   | $ | 788,070 |        
|                                                                     |                                                                                                                                                                   |                                                              |    |        |   |         |     |             |   |               |         |              |   |          |        |         |        |   |         |   |       |   |        |       |   |   |         |        |   |   |         |        

The accompanying notes are an integral part of
these consolidated financial statements.




Post Properties, Inc.


57




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##### Table of Contents



POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

(In thousands, except per share
data)


|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------ | -------- | -------- | ---- | ------ | -------- | ------- | - | ----- | -------- | ------- | -
|                                                         |                                                                                       |                                                                                                                   
|                                                         |                                                                                       | Year Ended December 31,                                                                                           
|                                                         |                                                                                       |                                                                                                                   
|                                                         |                                                                                       | 2004                                                                                                               |        | 2003     |          | 2002
|                                                         |                                                                                       |                                                                                                                    |        |          |          |     
|Cash Flows From Operating Activities                     |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net income                                                                            |                                                                                                                    | $      | 88,219   |          |      | $      | 14,156   |         |   | $     | 60,746   |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |        
|                                                         |                                                                                       | Depreciation                                                                                                       |        |          | 85,310   |      |        |          | 89,975  |   |       |          | 87,927  |  
|                                                         |                                                                                       | Amortization of deferred financing costs                                                                           |        |          | 4,304    |      |        |          | 3,801   |   |       |          | 2,327   |  
|                                                         |                                                                                       | Minority interest of preferred unitholders in
    Operating Partnership                                            |        |          | 3,780    |      |        |          | 5,600   |   |       |          | 5,600   |  
|                                                         |                                                                                       | Minority interest of common unitholders in
    Operating Partnership                                               |        |          | (2,283   | )    |        |          | (3,801  | ) |       |          | 2,334   |  
|                                                         |                                                                                       | Minority interest in discontinued operations                                                                       |        |          | 7,461    |      |        |          | 4,141   |   |       |          | 4,438   |  
|                                                         |                                                                                       | Gains on property sales  discontinued
    operations                                                              |        |          | (113,739 | )    |        |          | (40,792 | ) |       |          | (16,571 | )
|                                                         |                                                                                       | Gains on property sales  continuing
    operations                                                                |        |          |         |      |        |          |        |   |       |          | (13,275 | )
|                                                         |                                                                                       | Asset impairment charges                                                                                           |        |          | 2,233    |      |        |          | 17,462  |   |       |          |        |  
|                                                         |                                                                                       | Equity in (income) losses of unconsolidated real
    estate entities, net of distributions of accumulated earnings |        |          | (694     | )    |        |          | (7,790  | ) |       |          | 1,591   |  
|                                                         |                                                                                       | Stock-based compensation                                                                                           |        |          | 1,785    |      |        |          | 1,071   |   |       |          |        |  
|                                                         |                                                                                       | Loss on early extinguishment of indebtedness                                                                       |        |          | 4,302    |      |        |          |        |   |       |          |        |  
|                                                         | Changes in assets, (increase) decrease in:                                            |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |        
|                                                         |                                                                                       | Restricted cash                                                                                                    |        |          | 221      |      |        |          | (696    | ) |       |          | (54     | )
|                                                         |                                                                                       | Other assets                                                                                                       |        |          | (2,858   | )    |        |          | 4,676   |   |       |          | 8,098   |  
|                                                         |                                                                                       | Deferred charges                                                                                                   |        |          | (361     | )    |        |          | (2,210  | ) |       |          | (1,226  | )
|                                                         | Changes in liabilities, increase (decrease) in:                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |        
|                                                         |                                                                                       | Accrued interest payable                                                                                           |        |          | 754      |      |        |          | (2,071  | ) |       |          | (666    | )
|                                                         |                                                                                       | Accounts payable and accrued expenses                                                                              |        |          | (356     | )    |        |          | 8,387   |   |       |          | (20,740 | )
|                                                         |                                                                                       | Security deposits and prepaid rents                                                                                |        |          | (654     | )    |        |          | (360    | ) |       |          | (766    | )
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net cash provided by operating activities                                             |                                                                                                                    |        | 77,424   |          |      |        | 91,549   |         |   |       | 119,763  |        
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Cash Flows From Investing Activities                     |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Construction and acquisition of real estate
    assets, net of payables               |                                                                                                                    |        | (42,777  | )        |      |        | (24,179  | )       |   |       | (150,792 | )      
|                                                         | Net proceeds from property sales                                                      |                                                                                                                    |        | 138,637  |          |      |        | 163,560  |         |   |       | 182,216  |        
|                                                         | Capitalized interest                                                                  |                                                                                                                    |        | (1,078   | )        |      |        | (3,555   | )       |   |       | (13,223  | )      
|                                                         | Recurring capital expenditures                                                        |                                                                                                                    |        | (9,884   | )        |      |        | (9,473   | )       |   |       | (9,381   | )      
|                                                         | Non-recurring capital expenditures                                                    |                                                                                                                    |        | (4,605   | )        |      |        | (5,152   | )       |   |       | (3,441   | )      
|                                                         | Revenue generating capital expenditures                                               |                                                                                                                    |        | (26      | )        |      |        | (1,240   | )       |   |       | (2,035   | )      
|                                                         | Corporate additions and improvements                                                  |                                                                                                                    |        | (681     | )        |      |        | (799     | )       |   |       | (1,100   | )      
|                                                         | Distributions from (investments in and advances
    to) unconsolidated entities       |                                                                                                                    |        | 53,968   |          |      |        | 115,033  |         |   |       | (51,065  | )      
|                                                         | Capital distributions to minority interests                                           |                                                                                                                    |        | (3,806   | )        |      |        |         |         |   |       |         |        
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net cash provided by (used in) investing
    activities                               |                                                                                                                    |        | 129,748  |          |      |        | 234,195  |         |   |       | (48,821  | )      
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Cash Flows From Financing Activities                     |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Proceeds from indebtedness                                                            |                                                                                                                    |        | 135,000  |          |      |        |         |         |   |       | 95,500   |        
|                                                         | Payments on indebtedness                                                              |                                                                                                                    |        | (115,753 | )        |      |        | (103,875 | )       |   |       | (47,632  | )      
|                                                         | Payments of financing costs                                                           |                                                                                                                    |        | (5,631   | )        |      |        |         |         |   |       | (561     | )      
|                                                         | Lines of credit proceeds (repayments), net                                            |                                                                                                                    |        | (21,262  | )        |      |        | (124,358 | )       |   |       | 30,167   |        
|                                                         | Redemption of preferred stock                                                         |                                                                                                                    |        | (50,000  | )        |      |        |         |         |   |       |         |        
|                                                         | Redemption of preferred units                                                         |                                                                                                                    |        | (70,000  | )        |      |        |         |         |   |       |         |        
|                                                         | Treasury stock acquisitions                                                           |                                                                                                                    |        | (2,268   | )        |      |        |         |         |   |       |         |        
|                                                         | Proceeds from employee stock purchase and stock
    option plans                      |                                                                                                                    |        | 10,465   |          |      |        | 4,139    |         |   |       | 1,254    |        
|                                                         | Distributions to preferred unitholders                                                |                                                                                                                    |        | (4,246   | )        |      |        | (5,600   | )       |   |       | (5,600   | )      
|                                                         | Distributions to common unitholders                                                   |                                                                                                                    |        | (5,219   | )        |      |        | (9,789   | )       |   |       | (15,972  | )      
|                                                         | Dividends paid to preferred shareholders                                              |                                                                                                                    |        | (8,325   | )        |      |        | (11,449  | )       |   |       | (11,449  | )      
|                                                         | Dividends paid to common shareholders                                                 |                                                                                                                    |        | (71,144  | )        |      |        | (79,868  | )       |   |       | (115,062 | )      
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net cash used in financing activities                                                 |                                                                                                                    |        | (208,383 | )        |      |        | (330,800 | )       |   |       | (69,355  | )      
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Net increase (decrease) in cash and cash
    equivalents |                                                                                       |                                                                                                                    | (1,211 | )        |          |      | (5,056 | )        |         |   | 1,587 |         
|Cash and cash equivalents, beginning of period           |                                                                                       |                                                                                                                    | 1,334  |          |          |      | 6,390  |          |         |   | 4,803 |         
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Cash and cash equivalents, end of period                 |                                                                                       | $                                                                                                                  | 123    |          |          | $    | 1,334  |          |         | $ | 6,390 |         
|                                                         |                                                                                       |                                                                                                                    |        |          |          |      |        |          |         |   |       |         

The accompanying notes are an integral part of
these consolidated financial statements.




Post Properties, Inc.


58




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##### Table of Contents



POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(In thousands, except per share
data)







|   |                                                               
|-- | --------------------------------------------------------------
|1. | ORGANIZATION AND SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICES

Organization

Post Properties, Inc. and its subsidiaries
develop, own and manage upscale multifamily apartment
communities in selected markets in the United States. As used
herein, the term Company includes Post Properties,
Inc. and its subsidiaries, including Post Apartment Homes, L.P.
(the Operating Partnership), unless the context indicates
otherwise. The Company, through its wholly-owned subsidiaries is
the general partner and owns a majority interest in the
Operating Partnership which, through its subsidiaries, conducts
substantially all of the on-going operations of the Company. At
December 31, 2004, the Company owned 24,905 apartment units
in 66 apartment communities, including 666 apartment units in
three communities held in unconsolidated entities, including 205
apartment units currently under development in one community and
including 127 units in one community that will be converted
into for-sale condominium homes through a taxable REIT
subsidiary starting in 2005. The Company is also developing 145
for-sale condominium homes through a taxable subsidiary.
Subsequent to December 31, 2004, the Company announced
plans to convert another community, containing 134 units,
into for-sale condominium homes. At December 31, 2004,
approximately 51.6%, 17.6%, 9.0% and 8.0% (on a unit basis) of
the Companys operating communities were located in the
Atlanta, Dallas, Tampa and the greater Washington D.C.
metropolitan areas, respectively.

The Company has elected to qualify and operate as
a self-administrated and self-managed real estate investment
trust (REIT) for federal income tax purposes. A REIT
is a legal entity which holds real estate interests and, through
payments of dividends to shareholders, in practical effect is
not subject to federal income taxes at the corporate level.

At December 31, 2004, the Company had
outstanding 40,164 shares of common stock and owned the
same number of units of common limited partnership interests
(Common Units) in the Operating Partnership,
representing an 94.1% ownership interest in the Operating
Partnership. Common Units held by persons other than the Company
totaled 2,499 at December 31, 2004 and represented a 5.9%
common minority interest in the Operating Partnership. Each
Common Unit may be redeemed by the holder thereof for either one
share of Company common stock or cash equal to the fair market
value thereof at the time of redemption, at the option of the
Company. The Companys weighted average common ownership
interest in the Operating Partnership was 93.7%, 89.5% and 87.9%
for the years ended December 31, 2004, 2003 and 2002,
respectively.

Basis of presentation

The accompanying consolidated financial
statements include the consolidated accounts of the Company and
the Operating Partnership. The Companys investments in
non-majority owned entities in which it does not exercise
unilateral control, but has the ability to exercise significant
influence over operating and financial policies, are accounted
for on the equity method of accounting. Accordingly, the
Companys share of the net earnings or losses of these
entities is included in consolidated net income. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The minority interest of unitholders in the
operations of the Operating Partnership is calculated based on
the weighted average unit ownership during the period.

Certain items in the 2003 and 2002 consolidated
financial statements were reclassified for comparative purposes
with the 2004 consolidated financial statements.

Cost capitalization

The Company capitalizes those expenditures
relating to the acquisition of new assets, the development and
construction of new apartment communities, the enhancement of
the value of existing assets and those expenditures that
substantially extend the life of existing assets. Recurring
capital expenditures are expenditures of a type that are
expected to be incurred on an annual basis during the life of an
apartment community, such as carpet, appliances and flooring.
Non-recurring capital expenditures are expenditures that
generally occur less frequently than on an annual basis, such as
major exterior projects relating to landscaping and structural
improvements. Revenue generating capital expenditures are
expenditures for the major renovation of communities, the new
installation of water sub-metering equipment and other property
upgrade costs that enhance the rental value of such communities.
All other expenditures necessary to maintain a community in
ordinary operating condition are expensed as incurred.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Additionally, for new development communities,
carpet, vinyl, and blind replacements are expensed as incurred
during the first five years (which corresponds to their
estimated depreciable life). Thereafter, these replacements are
capitalized and depreciated. The Company expenses as incurred
all interior and exterior painting of communities.

For communities under development, the Company
capitalizes interest, real estate taxes, and certain internal
personnel and associated costs directly related to apartment
communities under development and construction. Interest is
capitalized to projects under development based upon the
weighted average cumulative project costs for each month
multiplied by the Companys weighted average borrowing
costs, expressed as a percentage. Weighted average borrowing
costs include the costs of the Companys fixed rate secured
and unsecured borrowings and the variable rate unsecured
borrowings under its line of credit facilities. The weighted
average borrowing costs, expressed as a percentage, for the
years ended December, 31, 2004, 2003 and 2002 were
approximately 7.3%, 7.0% and 6.8%, respectively. Internal
personnel and associated costs are capitalized to projects under
development based upon the effort identifiable with such
projects. 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. The Company ceases the capitalization of such costs
as the residential units in a community become substantially
complete and available for occupancy. This results in a
proration of costs between amounts that are capitalized and
expensed as the residential units in a development community
become available for occupancy. In addition, prior to the
completion of units, the Company expenses as incurred
substantially all operating expenses (including pre-opening
marketing as well as property management and leasing personnel
expenses) of such communities.

Real estate assets, depreciation and
impairment

Real estate assets are stated at the lower of
depreciated cost or fair value, if deemed impaired. Major
replacements and betterments are capitalized and depreciated
over their estimated useful lives. Depreciation is computed on a
straight-line basis over the useful lives of the properties
(buildings and components and related land
improvements  20-40 years; furniture, fixtures
and equipment  5-10 years).

The Company continually evaluates the
recoverability of the carrying value of its real estate assets
using the methodology prescribed in Statement of Financial
Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. Factors considered by management in evaluating
impairment of its existing real estate assets held for
investment include significant declines in property operating
profits, recurring property operating losses and other
significant adverse changes in general market conditions that
are considered permanent in nature. Under
SFAS No. 144, a real estate asset held for investment
is not considered impaired if the undiscounted, estimated future
cash flows of an asset (both the annual estimated cash flow from
future operations and the estimated cash flow from the
theoretical sale of the asset) over its estimated holding period
are in excess of the assets net book value at the balance
sheet date. If any real estate asset held for investment is
considered impaired, a loss is provided to reduce the carrying
value of the asset to its estimated fair value. The Company
periodically classifies real estate assets as held for sale. An
asset is classified as held for sale after the approval of the
Companys investment committee and after an actual program
to sell the asset has commenced. Upon the classification of a
real estate asset as held for sale, the carrying value of the
asset is reduced to the lower of its net book value or its
estimated fair value, less costs to sell the asset. Subsequent
to the classification of assets as held for sale, no further
depreciation expense is recorded.

Real estate assets held for sale are stated
separately on the accompanying consolidated balance sheets.
Effective January 1, 2002 (through the implementation of
SFAS No. 144), the operating results of real estate
assets held for sale and sold are reported as discontinued
operations in the accompanying statements of operations. Income
from discontinued operations includes the revenues and expenses,
including depreciation and allocated interest expense,
associated with the assets. Interest expense is allocated to
assets held for sale based on actual interest costs for assets
with secured mortgage debt. Interest expense is allocated to
unencumbered assets based on the ratio of unsecured debt to
unencumbered assets multiplied by the weighted average interest
rate on the Companys unsecured debt for the period and
further multiplied by the book value of the assets held for sale
and sold. This classification of operating results as
discontinued operations applies retroactively for all periods
presented for assets designated as held for sale subsequent to
January 1, 2002. Additionally, gains and losses on assets
designated as held for sale subsequent to January 1, 2002
are classified as part of discontinued operations.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Revenue recognition

Residential properties are leased under operating
leases with terms of generally one year or less. Rental revenues
from residential leases are recognized on the straight-line
method over the approximate life of the leases, which is
generally one year. The recognition of rental revenues from
residential leases when earned has historically not been
materially different from rental revenues recognized on a
straight-line basis.

Under the terms of residential leases, the
residents of the Companys residential communities are
obligated to reimburse the Company for certain utility usage,
water and electricity (at selected properties), where the
Company is the primary obligor to the public utility entity.
These utility reimbursements from residents are reflected as
other property revenues in the consolidated statements of
operations.

Apartment Community Acquisitions

In accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 141,
Business Combinations, the aggregate purchase price
of apartment community acquisitions is allocated to the tangible
assets, intangible assets and liabilities (including mortgage
indebtedness) acquired in each transaction, based on their
estimated fair values at the acquisition date. The acquired
tangible assets, principally land, building and improvements and
furniture, fixtures and equipment, are reflected in real estate
assets and depreciated over their estimated useful lives. The
acquired intangible assets, principally above/below market
leases, in-place leases and resident relationships, are
reflected in other assets and amortized over the average
remaining lease terms of the acquired leases and resident
relationships (generally 6 months to 18 months).

Stock-based compensation

On January 1, 2003, the Company elected to
voluntarily change its method of accounting for stock-based
compensation to the fair value method prescribed by Statement of
Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation, using the
prospective method prescribed in SFAS No. 148,
Accounting for Stock-Based Compensation 
Transition and Disclosure. For stock-based compensation
granted prior to January 1, 2003, the Company accounted for
stock-based compensation under the intrinsic value method
prescribed by Accounting Principles Board (APB)
Opinion 25, Accounting for Stock Issued to
Employees.

Under the prospective method of adoption
prescribed by SFAS No. 123 and SFAS No. 148,
the Company reflects as an expense each period the vested
portion of the estimated cost of stock-based compensation,
calculated under the Black-Scholes option pricing model for
stock options, for all stock-based compensation granted after
January 1, 2003. For stock-based compensation granted prior
to December 31, 2002, compensation expense was not
recognized for stock options granted at the Companys
current stock price on the grant date. As a result, the
Companys general and administrative expenses may not be
comparable between periods.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





The following table reflects the effect on the
Companys net income and net income per common share had
the fair value method of accounting under SFAS No. 123
been applied for each year.

|                                            |                                                                                               |      |   |        |   |      |   |        |   |  |   |        |  
|------------------------------------------- | --------------------------------------------------------------------------------------------- | ---- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                            |                                                                                               | 2004 |   | 2003   |   | 2002
|                                            |                                                                                               |      |   |        |   |     
|Net income available to common shareholders |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | As reported                                                                                   |      | $ | 76,368 |   |      | $ | 2,707  |   |  | $ | 49,297 |  
|                                            | Stock-based compensation included in net income
    as reported, net of minority interest     |      |   | 1,672  |   |      |   | 958    |   |  |   | 233    |  
|                                            | Stock-based compensation determined under the
    fair value method, net of minority interest |      |   | (1,735 | ) |      |   | (1,088 | ) |  |   | (732   | )
|                                            |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | Pro forma                                                                                     |      | $ | 76,305 |   |      | $ | 2,577  |   |  | $ | 48,798 |  
|                                            |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|Net income per common share  basic         |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | As reported                                                                                   |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.33   |  
|                                            | Pro forma                                                                                     |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.32   |  
|Net income per common share  diluted       |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | As reported                                                                                   |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.33   |  
|                                            | Pro forma                                                                                     |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.32   |  

Derivative financial instruments

The Company accounts for derivative financial
instruments at fair value under the provisions of
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. The
Company uses derivative financial instruments, interest rate
swap and interest rate cap arrangements, to manage or hedge its
exposure to interest rate changes. The Company designates each
derivative instrument as a hedge of specific interest expense
cash flow exposure. Under SFAS 133, as amended, derivative
instruments qualifying as hedges of specific cash flows are
recorded on the balance sheet at fair value with an offsetting
increase or decrease to accumulated other comprehensive income,
a shareholders equity account, until the hedged
transactions are recognized in earnings. Any ineffective portion
of cash flow hedges are recognized immediately in earnings.

Cash and cash equivalents

For purposes of the statement of cash flows, all
investments purchased with an original maturity of three months
or less are considered to be cash equivalents.

Restricted cash

Restricted cash is generally comprised of
resident security deposits for communities located in Florida
and Tennessee and required maintenance reserves for communities
located in DeKalb County, Georgia.

Deferred financing costs

Deferred financing costs are amortized using the
straight-line method, which approximates the interest method,
over the terms of the related debt.

Per share data

The Company reports both basic and diluted
earnings per share amounts. Basic earnings per common share is
computed by dividing net income available to common shareholders
by the weighted average number of common shares outstanding
during the year. Diluted earnings per common share is computed
by dividing net income available to common shareholders by the
weighted average number of common shares and common share
equivalents outstanding during the year, which are computed
using the treasury stock method for outstanding stock options.
Common share equivalents are excluded from the computations in
years in which they have an anti-dilutive effect.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Conversion of common units in the Operating
Partnership

In accordance with the conclusions summarized in
Emerging Issue Task Force, Issue No. 95-7,
Implementation Issues Related to the Treatment of Minority
Interests In Certain Real Estate Investment Trusts, the
Company accounts for the conversion of original sponsors
common units in the Operating Partnership into shares of company
common stock at the net book value of the minority interest
acquired. These transactions result in a reduction in the
minority interest of common unit holders in the Operating
Partnership and a corresponding increase in shareholders
equity in the accompanying consolidated balance sheet at the
date of conversion.

Use of estimates

The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.

New accounting pronouncements

In 2004 and 2003, several new accounting
pronouncements were issued and the pronouncements with a
potential impact on the Company in 2004 and in future periods
are discussed below.

FASB Interpretation No. 46R,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 was issued in December
2003. FIN No. 46R requires consolidation of all legal
entities in which the enterprise holds contractual, ownership or
other monetary interests that change with changes in the
entitys net asset value (such entities being designated as
variable interest entities) where the enterprise is deemed the
primary beneficiary. The provisions of FIN No. 46R
generally became applicable in the fourth quarter of 2003 and
the first quarter of 2004 depending on the nature and timing of
the legal entities involves in these types of relationships. The
Company currently does not have any interests in special purpose
entities or other variable interest entities, as defined in
FIN No. 46R.

SFAS No. 123R, Share-Based
Payment, was issued in December 2004.
SFAS No. 123R revises SFAS No. 123,
Accounting for Stock-Based Compensation and requires
companies to expense the fair value of employee stock options
and other forms of stock-based compensation.
SFAS No. 123R also supersedes the provisions of APB
No. 25. The provisions of SFAS No. 123R are
effective as of the beginning of the Companys interim
reporting period starting after June 15, 2005. The Company
plans to adopt the provisions of SFAS No. 123R in the
third quarter of 2005 and is currently evaluating the
alternative methods of adoption. Since the Company elected to
apply the provisions of SFAS No. 123 on
January 1, 2003, the adoption of SFAS No. 123R is
not expected to have a significant impact on the Companys
financial position or results of operations.



|   |                 
|-- | ----------------
|2. | DEFERRED CHARGES

Deferred charges consist of the following:

|                               |  |              |         |      |  |   |         |  
|------------------------------ |  | ------------ | ------- | ---- |  | - | ------- | -
|                               |  |             
|                               |  | December 31,
|                               |  |             
|                               |  | 2004         |         | 2003
|                               |  |              |         |     
|Deferred financing costs       |  | $            | 33,542  |      |  | $ | 37,289  |  
|Other                          |  |              | 4,350   |      |  |   | 4,424   |  
|                               |  |              |         |      |  |   |         |  
|                               |  |              | 37,892  |      |  |   | 41,713  |  
|Less: accumulated amortization |  |              | (22,318 | )    |  |   | (25,340 | )
|                               |  |              |         |      |  |   |         |  
|                               |  | $            | 15,574  |      |  | $ | 16,373  |  
|                               |  |              |         |      |  |   |         |  




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)







|   |             
|-- | ------------
|3. | INDEBTEDNESS

At December 31, 2004 and 2003, the
Companys indebtedness consisted of the following:

|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|-------------------------------------------- |  | ------------- | -------------- | ------------- |  | -------- | -------------- | ------------ |  | --------- |  | - | --------- |  |  | - | --------- | 
|                                             |  |               |                |               |  |          |                |             
|                                             |  |               |                |               |  |          |                | December 31,
|                                             |  |               |                |               |  | Maturity |                |             
|Description                                  |  | Payment Terms |                | Interest Rate |  | Date     |                | 2004         |  | 2003     
|                                             |  |               |                |               |  |          |                |              |  |          
|Unsecured Notes                              |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|Senior Notes                                 |  |               | Int.           |               |  |          | 5.125% - 7.70% |              |  | 2006-2011 |  | $ | 385,000   |  |  | $ | 285,000   | 
|Medium Term Notes                            |  |               | Int.           |               |  |          | 6.78% - 8.12%  | (1)          |  | 2005      |  |   | 212,043   |  |  |   | 323,000   | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   | 597,043   |  |  |   | 608,000   | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|Unsecured Lines of Credit                    |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|Syndicated Line of Credit                    |  |               | N/A            |               |  |          | LIBOR + 0.75%  | (2)          |  | 2007      |  |   | 40,000    |  |  |   | 60,000    | 
|Cash Management Line                         |  |               | N/A            |               |  |          | LIBOR + 0.75%  |              |  | 2007      |  |   | 10,748    |  |  |   | 12,010    | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   | 50,748    |  |  |   | 72,010    | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|Conventional Fixed Rate (Secured)            |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|FNMA                                         |  |               | Prin. and Int. |               |  |          | 6.975%         | (3)          |  | 2029      |  |   | 98,500    |  |  |   | 99,800    | 
|Other                                        |  |               | Prin. and Int. |               |  |          | 4.27% - 7.69%  |              |  | 2007-2013 |  |   | 273,132   |  |  |   | 192,132   | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   | 371,632   |  |  |   | 291,932   | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|Tax Exempt Floating Rate Bonds
    (Secured) |  |               | Int.           |               |  |          | 2.00%          | (4)          |  | 2025      |  |   | 110,055   |  |  |   | 214,380   | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 
|Total                                        |  |               |                |               |  |          |                |              |  |           |  | $ | 1,129,478 |  |  | $ | 1,186,322 | 
|                                             |  |               |                |               |  |          |                |              |  |           |  |   |           |  |  |   |           | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $100,000 of Mandatory Par Put Remarketed
    Securities (MOPPRS). The annual interest rate on
    these securities to March 2005 is 6.85%. As a result of the
    termination of the remarketing agreement related to this debt,
    the debt is subject to mandatory tender by the Company in March
    2005 (see below for discussion).                                                          
|(2) | Represents stated rate. At December 31,
    2004, the weighted average interest rate was 2.76%.                                                                                                                                                                                                                                                                                                               
|(3) | Interest rate is fixed at 6.975%, inclusive of
    credit enhancement and other fees, to 2009 through an interest
    rate swap arrangement after which time it is prepayable at the
    option of the Company without prepayment penalty.                                                                                                                                                                    
|(4) | FNMA credit enhanced bond indebtedness. Interest
    based on FNMA AAA tax exempt rate plus credit
    enhancement and other fees of 0.639%. Interest rate represents
    rate at December 31, 2004 before credit enhancements. At
    December 31, 2004, the Company has outstanding interest
    rate cap arrangements that limit the Companys exposure to
    increases in the base interest rate to 5%.

Debt maturities

The aggregate maturities of the Companys
indebtedness are as follows (1):

|           |  |   |           |    
|---------- |  | - | --------- | ---
|2005       |  | $ | 218,119   | (2)
|2006       |  |   | 82,469    |    
|2007       |  |   | 210,741   | (3)
|2008       |  |   | 7,556     |    
|2009       |  |   | 79,001    |    
|Thereafter |  |   | 531,592   |    
|           |  |   |           |    
|           |  | $ | 1,129,478 |    
|           |  |   |           |    



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Aggregate maturities of debt for the years
    presented include repayments of tax-exempt debt of $0 in 2005,
    $500 in 2006, $1,200 in 2007, $2,200 in 2008 and $2,400 in 2009
    relating to three apartment communities expected to be sold in
    2005, and include $200 in 2005, $700 in 2006, $600 in 2007, $800
    in 2008 and $700 in 2009 relating to two apartment communities
    held for investment. The principal repayments relate to certain
    principal reserve requirements under the applicable debt
    arrangements commencing in July 2005. The Company expects




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)







|    |                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | to either retire the debt upon sale of the
    communities or refinance the debt to eliminate or defer these
    principal reserve requirements in 2005, however, there can be no
    assurance that it will be able to do so.
|(2) | Includes $100,000 MOPPRS indebtedness subject to
    mandatory tender by the Company in March 2005 (see below for
    discussion).                                                                                            
|(3) | Includes outstanding balance on lines of credit
    totaling $50,748.                                                                                                                                                         

Debt issuances, retirements and
modifications

In December 2004, the Company terminated a
remarketing agreement related to its $100,000, 6.85% Mandatory
Par Put Remarketed Securities (MOPPRS) due in March
2015. In connection with the termination of the remarketing
agreement, the Company paid $10,615 (interest expense),
including transaction expenses. Under the provisions of the
remarketing agreement, the remarketing agent had the right to
remarket the $100,000 unsecured notes in March 2005 for a
ten-year term at an interest rate calculated as 5.715% plus the
Companys then current credit spread to the ten-year
treasury rate. As a result of the termination of the remarketing
agreement, the underlying debt matures in March 2005.

In October 2004, the Company purchased and
retired $87,957 of the Companys 8.125% medium term,
unsecured notes through a tender offer using available
borrowings under its unsecured lines of credit. Subsequent to
the debt retirement, $62,043 of the 8.125% medium term notes
remain outstanding with a maturity in June 2005. In the fourth
quarter of 2004, the Company recorded a loss on the early
extinguishment of this indebtedness of $4,011 representing the
debt repurchase premiums, the expenses of the tender offer and
the write-off of the unamortized deferred financing costs
associated with the retired indebtedness.

In addition in October 2004, the company issued
$100,000 of senior unsecured notes. The notes bear interest at
5.125% and mature in October 2011. The net proceeds from the
unsecured notes were used to reduce amounts outstanding under
the Companys unsecured lines of credit.

Upon their maturity in September 2004, the
Company repaid $10,000 of its 6.69% medium term, unsecured
notes, from available borrowings under its unsecured lines of
credit.

In conjunction with an apartment community
acquisition (see note 5) in June 2004, the Company assumed
a secured, fixed rate mortgage note payable. The mortgage note
was valued at $49,496 yielding an effective rate of 4.7%. The
mortgage note bears interest at a coupon rate of 6.8%, requires
monthly principal and interest payments and matures in 2007.

In June 2004, the Company sold certain apartment
communities subject to the assumption of $104,325 of tax exempt
mortgage indebtedness (see note 5). As a result of this
debt assumption, the Company recorded a loss on early
extinguishment of indebtedness of $4,128 ($3,849 net of
minority interest) related to the write-off of unamortized
deferred financing costs of $3,187 ($2,972 net of minority
interest) relating to such assumed indebtedness and the
realization of a $941 ($877 net of minority interest) loss
in connection with the termination of related interest rate cap
agreements that were used as cash flow hedges of the assumed
debt.

Upon their maturity in April 2004, the Company
repaid $13,000 of 7.30% medium term, unsecured notes, using its
available cash balances and borrowings under its unsecured lines
of credit.

In March 2004, the Company closed a $35,000
secured, fixed rate mortgage note payable in a consolidated real
estate entity. The note bears interest at 4.27%, requires
monthly interest only payments through March 2007 and monthly
principal and interest payments based on a 30-year amortization
schedule from April 2007 through the note maturity date in March
2009.

Unsecured lines of credit

In January 2004, the Company refinanced its
previous revolving line of credit with a new $350,000 three-year
unsecured revolving line of credit (the Revolver)
that matures in January 2007. The Revolver, as amended in
December 2004, has a current stated interest rate of LIBOR plus
0.75% or the prime rate and was provided by a syndicate of nine
banks led by Wachovia Bank, N.A. Additionally, the Revolver
currently requires the payment of annual facility fees currently
equal to 0.15% of the aggregate loan commitment. The Revolver
provides for the interest rate and facility fee rate to be
adjusted up or down based on changes in the credit ratings on
the Companys senior unsecured debt. The rates under the
Revolver are based on the higher of the Companys unsecured
debt




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





ratings in instances where the Company has split
unsecured debt ratings. The Revolver also includes a money
market competitive bid option for short-term funds up to
$175,000 at rates generally below the stated line rate. The
credit agreement for the Revolver contains customary
representations, covenants and events of default, including
fixed charge coverage and maximum leverage ratios as well as
covenants which restrict the ability of the Operating
Partnership to make distributions, in excess of stated amounts,
which in turn restrict 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 $15,000 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 these ratios and covenants will
adversely affect the ability of the Operating Partnership to
borrow money or make distributions, or the Company to declare
dividends, at the Companys current dividend level. At
December 31, 2004, the Company had issued letters of credit
to third parties totaling $1,828 under this facility.

Additionally, the Company has a $20,000 unsecured
line of credit with Wachovia Bank, N.A. (the Cash
Management Line). The Cash Management line matures in
January 2007 and carries pricing and terms, including debt
covenants, substantially consistent with those of the Revolver.

Interest paid

Interest paid (including capitalized amounts of
$1,078, $3,555 and $13,223 for the years ended December 31,
2004, 2003 and 2002, respectively), aggregated $66,992, $78,822
and $79,115 for the years ended December 31, 2004, 2003 and
2002, respectively.

Pledged assets

The aggregate net book value at December 31,
2004 of property pledged as collateral for indebtedness amounted
to approximately $545,531.



|   |                                                       
|-- | ------------------------------------------------------
|4. | INVESTMENTS IN UNCONSOLIDATED REAL ESTATE
    ENTITIES

At December 31, 2004, the Company holds
investments in three individual limited liability companies (the
Property LLCs) with an institutional investor. Each
Property LLC owns a recently developed apartment community. At
December 31, 2004, each of the apartment communities had
achieved stabilized occupancy. The Company holds a 35% equity
interest in the Property LLCs. The initial development costs of
the apartment communities were funded through member equity
contributions proportionate to the members ownership
interests and through construction financing provided by the
Company.

The Company accounts for its investments in these
Property LLCs using the equity method of accounting. The excess
of the Companys investment over its equity in the
underlying net assets of the Property LLCs was approximately
$6,571 at December 31, 2004. This excess investment is
being amortized as a reduction to earnings on a straight-line
basis over the lives of the related assets. The Company provides
real estate services (development, construction and property
management) to the Property LLCs.




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





In June 2003, the underlying apartment community
held by a fourth Property LLC was sold. The financial
information below for the year ended December 31, 2003
reflects the gain on property sale of $26,179 and the operating
results of this Property LLC as discontinued operations through
the sale date. The Companys share of this gain of $8,395
is included in the Companys share of net income (loss)
shown in the table below.

The operating results of the Company include its
allocable share of net income (loss) from the investments in the
Property LLCs. A summary of financial information for the
Property LLCs in the aggregate is as follows:

|                                                                                           |                                       |              |         |         |  |   |         |         | 
|------------------------------------------------------------------------------------------ | ------------------------------------- | ------------ | ------- | ------- |  | - | ------- | ------- | 
|                                                                                           |                                       |             
|                                                                                           |                                       | December 31,
|                                                                                           |                                       |             
|Balance Sheet Data                                                                         |                                       | 2004         |         | 2003   
|                                                                                           |                                       |              |         |        
|Real estate assets, net of accumulated
    depreciation of $9,712 and $5,939, respectively |                                       | $            | 124,072 |         |  | $ | 127,513 |        
|Cash and other                                                                             |                                       |              | 2,797   |         |  |   | 2,516   |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|                                                                                           | Total assets                          |              | $       | 126,869 |  |   | $       | 130,029 | 
|                                                                                           |                                       |              |         |         |  |   |         |        
|Mortgage notes payable                                                                     |                                       | $            | 83,468  |         |  | $ | 33,763  |        
|Construction notes payable to Company                                                      |                                       |              |        |         |  |   | 53,769  |        
|Other liabilities                                                                          |                                       |              | 1,296   |         |  |   | 1,742   |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|                                                                                           | Total liabilities                     |              |         | 84,764  |  |   |         | 89,274  | 
|Members equity                                                                            |                                       |              | 42,105  |         |  |   | 40,755  |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|                                                                                           | Total liabilities and members equity |              | $       | 126,869 |  |   | $       | 130,029 | 
|                                                                                           |                                       |              |         |         |  |   |         |        
|Companys equity investment                                                                |                                       | $            | 21,320  |         |  | $ | 21,017  |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|Companys share of notes payable                                                           |                                       | $            | 29,214  |         |  | $ | 30,636  |        
|                                                                                           |                                       |              |         |         |  |   |         |        

|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |        |  
|------------------------------------------ | ---------------------------------- | ----------------------- | ----- | ------ |  | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                           |                                    |                        
|                                           |                                    | Year Ended December 31,
|                                           |                                    |                        
|Income Statement Data                      |                                    | 2004                    |       | 2003   |  | 2002
|                                           |                                    |                         |       |        |  |     
|Revenues                                   |                                    |                         |       |        |  |      |        |        |   |   |        |       
|                                           | Rental                             |                         | $     | 13,112 |  |      | $      | 9,350  |   |   | $      | 3,174  |  
|                                           | Other                              |                         |       | 923    |  |      |        | 470    |   |   |        | 322    |  
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|                                           | Total revenues                     |                         |       | 14,035 |  |      |        | 9,820  |   |   |        | 3,496  |  
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|Expenses                                   |                                    |                         |       |        |  |      |        |        |   |   |        |       
|                                           | Property operating and maintenance |                         |       | 4,718  |  |      |        | 4,497  |   |   |        | 2,578  |  
|                                           | Depreciation and amortization      |                         |       | 3,867  |  |      |        | 3,757  |   |   |        | 1,990  |  
|                                           | Interest                           |                         |       | 3,370  |  |      |        | 3,061  |   |   |        | 1,601  |  
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|                                           | Total expenses                     |                         |       | 11,955 |  |      |        | 11,315 |   |   |        | 6,169  |  
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|Income (loss) from continuing operations   |                                    |                         | 2,080 |        |  |      | (1,495 | )      |   |   | (2,673 | )     
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|Discontinued Operations                    |                                    |                         |       |        |  |      |        |        |   |   |        |       
|                                           | Loss from discontinued operations  |                         |       |       |  |      |        | (274   | ) |   |        | (1,871 | )
|                                           | Gain on property sales             |                         |       |       |  |      |        | 26,179 |   |   |        |       |  
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|Income (loss) from discontinued operations |                                    |                         |      |        |  |      | 25,905 |        |   |   | (1,871 | )     
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|Net income (loss)                          |                                    | $                       | 2,080 |        |  | $    | 24,410 |        |   | $ | (4,544 | )     
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       
|Companys share of net income (loss)       |                                    | $                       | 1,083 |        |  | $    | 7,790  |        |   | $ | (1,591 | )     
|                                           |                                    |                         |       |        |  |      |        |        |   |   |        |       

At December 31, 2004, mortgage notes payable
include a $50,000 mortgage note that bears interest at 4.13%,
requires monthly interest payments and annual principal payments
of $1 through 2009. Thereafter, the note requires monthly
principal and interest payments based on a 25-year amortization
schedule and matures in April 2034. The note is callable by the
lender in May 2009 and on each successive fifth year anniversary
of the note thereafter. The note is prepayable without penalty
in May 2008. The additional mortgage notes payable include a
$17,000 mortgage note that bears interest at a fixed rate of
4.04%, requires interest only payments and matures in 2008 as
well as a mortgage note payable with an outstanding balance of
$16,468 at December 31, 2004 that bears interest at 4.28%,
requires monthly principal and interest payments and matures in
2008. Upon issuance of the mortgage note (in February 2003) with
an outstanding balance of $16,468, the Company issued a limited
guarantee and indemnity to the lender regarding certain
customary non-recourse carve-out provisions and environmental
matters up to a maximum potential exposure of $5,000. The other
member of the Property LLC is obligated to reimburse the Company
for up to its 65% share ($3,250) of the maximum potential
exposure under these arrangements.




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67




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)







|   |                                              
|-- | ---------------------------------------------
|5. | REAL ESTATE ACQUISITIONS AND
    DISPOSITIONS



| |             
| | ------------
| | Acquisitions

In June 2004, the Company acquired a 499-unit
apartment community located in suburban Washington, D.C.
for approximately $85,814, including the assumption of mortgage
indebtedness and closing costs. Additionally, through
December 31, 2004, the Company had incurred additional
costs of approximately $1,253, of an estimated total cost of
approximately $2,000, to improve the community. The assumed
mortgage note payable was valued at $49,496 yielding an
effective interest rate of 4.7%. The mortgage note bears
interest at a coupon rate of 6.8%, requires monthly principal
and interest payments and matures in 2007. The purchase of this
community was allocated to the assets acquired and the
liabilities assumed based on their estimated fair values.



| |             
| | ------------
| | Dispositions

The Company classifies real estate assets as held
for sale after the approval of its investment committee and
after the Company has commenced an active program to sell the
assets. At December 31, 2004, the Company had six apartment
communities containing 1,436 units, including one community
that will be converted into condominiums through a taxable REIT
subsidiary starting in 2005, and certain tracts of land
classified as held for sale. These real estate assets are
classified separately in the accompanying consolidated balance
sheet at $68,661, which represented the lower of depreciated
cost or estimated fair value, less costs to sell. The Company
expects the sale of these assets to occur in the next twelve
months.

Under SFAS No. 144, the operating
results of assets designated as held for sale subsequent to
January 1, 2002 are included in discontinued operations for
all periods presented. Additionally, all gains and losses on the
sale of these assets are included in discontinued operations.
For the year ended December 31, 2004, income from
discontinued operations included the results of operations of
six communities, containing 1,436 units, classified as held
for sale at December 31, 2004 and the results of operations
of eight communities sold in 2004 through their sale date. For
the years ended December 31, 2003 and 2002, income from
discontinued operations included the results of operations of
all communities classified as held for sale at December 31,
2004, communities sold in 2004 and the results of operations of
11 communities and one commercial property designated as held
for sale and sold in 2003 and 2002 through their sale dates.

The revenues and expenses of these communities
for the years ended December 31, 2004, 2003 and 2002 were
as follows:

|                                                                        |                                                                                    |                |       |        |        |      |      |        |        |   |        |        |        | 
|----------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------- | ----- | ------ | ------ | ---- | ---- | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                        |                                                                                    | 2004           |       | 2003   |        | 2002
|                                                                        |                                                                                    |                |       |        |        |     
|Revenues                                                                |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                                                        | Rental                                                                             |                | $     | 26,107 |        |      | $    | 52,275 |        |   | $      | 69,889 |       
|                                                                        | Other                                                                              |                |       | 2,043  |        |      |      | 3,767  |        |   |        | 4,444  |       
|                                                                        |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                                                        |                                                                                    | Total revenues |       |        | 28,150 |      |      |        | 56,042 |   |        |        | 74,333 | 
|                                                                        |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|Expenses                                                                |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                                                        | Property operating and maintenance (exclusive of
    items shown separately below) |                |       | 12,316 |        |      |      | 22,949 |        |   |        | 29,455 |       
|                                                                        | Depreciation                                                                       |                |       | 2,281  |        |      |      | 8,775  |        |   |        | 13,444 |       
|                                                                        | Interest                                                                           |                |       | 3,669  |        |      |      | 7,678  |        |   |        | 11,580 |       
|                                                                        | Asset impairment charges                                                           |                |       | 2,233  |        |      |      | 17,462 |        |   |        |       |       
|                                                                        | Minority interest in consolidated property
    partnerships                        |                |       | (238   | )      |      |      | (419   | )      |   |        | (284   | )     
|                                                                        |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                                                        |                                                                                    | Total expenses |       |        | 20,261 |      |      |        | 56,445 |   |        |        | 54,195 | 
|                                                                        |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|Income (loss) from discontinued operations
    before minority interest |                                                                                    |                | 7,889 |        |        |      | (403 | )      |        |   | 20,138 |       
|                                                                        | Minority interest                                                                  |                |       | (40    | )      |      |      | 153    |        |   |        | (2,435 | )     
|                                                                        |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|Income (loss) from discontinued
    operations                          |                                                                                    | $              | 7,849 |        |        | $    | (250 | )      |        | $ | 17,703 |       
|                                                                        |                                                                                    |                |       |        |        |      |      |        |        |   |        |       

In the fourth quarter of 2004, the Company
recorded an asset impairment charge of $1,607 to write-down the
cost of an apartment community, located in Dallas, Texas, to its
estimated fair value when the asset was classified as held




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





for sale during the fourth quarter. In the second
quarter of 2004, the Company recorded an asset impairment loss
of $626 to write-down the cost of an apartment community,
located in Dallas, Texas, to its realized value. In the third
quarter of 2003, the Company recorded a $3,344 asset impairment
charge to write-down the Dallas, Texas asset sold in the second
quarter of 2004 to its then estimated fair value at the date the
asset was classified as held for sale. In the first quarter of
2003, the Company recorded an asset impairment charge of $14,118
to write-down the cost of the Companys apartment community
located in Phoenix, Arizona to its estimated fair value.

For the year ended December 31, 2004, the
Company recognized net gains from discontinued operations of
$113,739 ($106,039 net of minority interest) from the sale
of eight communities, containing 3,880 units, and certain
land parcels. These sales generated net proceeds of
approximately $242,962, including debt assumed by the purchasers
of $104,325. For the year ended December 31, 2003, the
Company recognized net gains from discontinued operations of
$40,792 ($36,497 net of minority interest) on the sale of
four communities, containing 1,844 units, and certain land
parcels. These sales generated net proceeds of approximately
$163,560. For the year ended December 31, 2002, the Company
recognized net gains from discontinued operations of $16,571
($14,568 net of minority interest) from the sale of six
communities, containing 2,125 units, one commercial
property and certain land parcels. These sales generated net
proceeds of approximately $140,823.

Under prior accounting literature, operating
results and net gains or losses on the sale of assets classified
as held for sale prior to December 31, 2001 are included in
continuing operations. As a result of this presentation, income
from continuing operations and gains on property sales are not
comparable between periods. The discussion below relates to the
gains on property sales reported in continuing operations in the
consolidated statements of operations for the year ended
December 31, 2002. For the year ended December 31,
2002, the Company sold two apartment communities containing
540 units and one commercial property for net proceeds of
$41,393. These sales resulted in net gains of $13,275. For the
year ended December 31, 2002, the consolidated statement of
operations included net income from these properties of $369.

In January 2005, the Company designated two
additional apartment communities, containing 1,872 units,
as assets held for sale. The aggregate net book value of these
assets totaled approximately $80,000, which represented the
lower of depreciated cost or estimated fair value of the assets.
The Company expects to convert one of the communities,
containing 134 units, into for-sale condominium units
through a taxable REIT subsidiary and to sell those units
starting in 2005.



|   |                                            
|-- | -------------------------------------------
|6. | SHAREHOLDERS EQUITY/ MINORITY
    INTEREST

Preferred Stock

At December 31, 2004, the Company had two
outstanding series of cumulative redeemable preferred stock with
the following characteristics:

|            |  |             |       |             |  |            |       |                 |  |          |          |  |  |   |       |  |  |  |       |  
|----------- |  | ----------- | ----- | ----------- |  | ---------- | ----- | --------------- |  | -------- | -------- |  |  | - | ----- |  |  |  | ----- | -
|            |  |             |       | Liquidation |  | Optional   |       | Redemption      |  | Stated  
|            |  | Outstanding |       | Preference  |  | Redemption |       | Price           |  | Dividend
|Description |  | Shares      |       | (per share) |  | Date (1)   |       | (per share) (1) |  | Rate    
|            |  |             |       |             |  |            |       |                 |  |         
|Series A    |  |             | 900   |             |  | $          | 50.00 |                 |  |          | 10/01/26 |  |  | $ | 50.00 |  |  |  | 8.5   | %
|Series B    |  |             | 2,000 |             |  | $          | 25.00 |                 |  |          | 10/28/07 |  |  | $ | 25.00 |  |  |  | 7.625 | %



|    |                                                                          
|--- | -------------------------------------------------------------------------
|(1) | The preferred stock is redeemable, at the
    Companys option, for cash.

In March 2004, the Company redeemed its 7.625%
series C cumulative redeemable preferred stock
(Series C Preferred Stock) for $25.00 per
share (an aggregate of $50,000), plus accrued and unpaid
dividends through the redemption date. In connection with the
issuance of the Series C Preferred Stock in 1998, the
Company incurred $1,716 in issuance costs and recorded such
costs as a reduction of shareholders equity. The
redemption price of the Series C Preferred Stock exceeded
the related carrying value by the $1,716 of issuance costs. In
connection with the redemption, in accordance with generally
accepted accounting principles, the Company reflected the $1,716
of issuance costs as a reduction of earnings in arriving at net
income available to common shareholders in 2004.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Preferred Units

In September 2004, the Operating Partnership
redeemed its 8.0% Series D cumulative redeemable preferred
units (Series D Preferred Units) for
$25.00 per unit (an aggregate of $70,000), plus accrued and
unpaid distributions through the redemption date. In connection
with the issuance of the Series D Preferred Units in 1998,
the Operating Partnership incurred $1,810 in issuance costs and
recorded such costs as a reduction of partners equity. The
redemption price of the Series D Preferred Units exceeded
the related carrying value by the $1,810 of issuance costs. In
connection with the redemption, in accordance with generally
accepted accounting principles, the Company reflected the $1,810
of issuance costs as a reduction of earnings in arriving at net
income available to common shareholders in 2004.



| |                                             
| | --------------------------------------------
| | Computation of Earnings Per Common
    Share

For the years ended December 31, 2004, 2003
and 2002, basic and diluted earnings per common share for income
(loss) from continuing operations available to common
shareholders has been computed as follows:

|                                                                       |  |                              |         |               |  |           |        |     |  |   |       |  
|---------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | --------- | ------ | --- |  | - | ----- | -
|                                                                       |  |                             
|                                                                       |  | Year ended December 31, 2004
|                                                                       |  |                             
|                                                                       |  | Income                       |         | Shares        |  | Per-Share
|                                                                       |  | (Numerator)                  |         | (Denominator) |  | Amount   
|                                                                       |  |                              |         |               |  |          
|Loss from continuing operations                                        |  | $                            | (21,820 | )             |  |           |        |     |  |   |       |  
|Less: Preferred stock dividends                                        |  |                              | (8,325  | )             |  |           |        |     |  |   |       |  
|Less: Preferred stock redemption and unit costs                        |  |                              | (3,526  | )             |  |           |        |     |  |   |       |  
|                                                                       |  |                              |         |               |  |           |        |     |  |   |       |  
|Basic EPS                                                              |  |                              |         |               |  |           |        |     |  |   |       |  
|Loss from continuing operations available to
    common shareholders   |  |                              | (33,671 | )             |  |           | 39,777 |     |  | $ | (0.85 | )
|                                                                       |  |                              |         |               |  |           |        |     |  |   |       |  
|Effect of dilutive securities                                          |  |                              |         |               |  |           |        |     |  |   |       |  
|Stock options                                                          |  |                              |        |               |  |           |       | (1) |  |   |       |  
|                                                                       |  |                              |         |               |  |           |        |     |  |   |       |  
|Diluted EPS                                                            |  |                              |         |               |  |           |        |     |  |   |       |  
|Income from continuing operations available to
    common shareholders |  | $                            | (33,671 | )             |  |           | 39,777 |     |  | $ | (0.85 | )
|                                                                       |  |                              |         |               |  |           |        |     |  |   |       |  

|                                                                     |  |                              |         |               |  |           |        |     |  |   |       |  
|-------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | --------- | ------ | --- |  | - | ----- | -
|                                                                     |  |                             
|                                                                     |  | Year ended December 31, 2003
|                                                                     |  |                             
|                                                                     |  | Income                       |         | Shares        |  | Per-Share
|                                                                     |  | (Numerator)                  |         | (Denominator) |  | Amount   
|                                                                     |  |                              |         |               |  |          
|Loss from continuing operations                                      |  | $                            | (22,091 | )             |  |           |        |     |  |   |       |  
|Less: Preferred stock dividends                                      |  |                              | (11,449 | )             |  |           |        |     |  |   |       |  
|                                                                     |  |                              |         |               |  |           |        |     |  |   |       |  
|Basic EPS                                                            |  |                              |         |               |  |           |        |     |  |   |       |  
|Loss from continuing operations available to
    common shareholders |  |                              | (33,540 | )             |  |           | 37,688 |     |  | $ | (0.89 | )
|                                                                     |  |                              |         |               |  |           |        |     |  |   |       |  
|Effect of dilutive securities                                        |  |                              |         |               |  |           |        |     |  |   |       |  
|Stock options                                                        |  |                              |        |               |  |           |       | (1) |  |   |       |  
|                                                                     |  |                              |         |               |  |           |        |     |  |   |       |  
|Diluted EPS                                                          |  |                              |         |               |  |           |        |     |  |   |       |  
|Loss from continuing operations available to
    common shareholders |  | $                            | (33,540 | )             |  |           | 37,688 |     |  | $ | (0.89 | )
|                                                                     |  |                              |         |               |  |           |        |     |  |   |       |  




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70




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





|                                                                       |  |                              |         |               |  |           |        |  |  |   |      | 
|---------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | --------- | ------ |  |  | - | ---- | 
|                                                                       |  |                             
|                                                                       |  | Year ended December 31, 2002
|                                                                       |  |                             
|                                                                       |  | Income                       |         | Shares        |  | Per-Share
|                                                                       |  | (Numerator)                  |         | (Denominator) |  | Amount   
|                                                                       |  |                              |         |               |  |          
|Income from continuing operations                                      |  | $                            | 28,475  |               |  |           |        |  |  |   |      | 
|Less: Preferred stock dividends                                        |  |                              | (11,449 | )             |  |           |        |  |  |   |      | 
|                                                                       |  |                              |         |               |  |           |        |  |  |   |      | 
|Basic EPS                                                              |  |                              |         |               |  |           |        |  |  |   |      | 
|Income from continuing operations available to
    common shareholders |  |                              | 17,026  |               |  |           | 36,939 |  |  | $ | 0.46 | 
|                                                                       |  |                              |         |               |  |           |        |  |  |   |      | 
|Effect of dilutive securities                                          |  |                              |         |               |  |           |        |  |  |   |      | 
|Stock options                                                          |  |                              |        |               |  |           | 15     |  |  |   |      | 
|                                                                       |  |                              |         |               |  |           |        |  |  |   |      | 
|Diluted EPS                                                            |  |                              |         |               |  |           |        |  |  |   |      | 
|Income from continuing operations available to
    common shareholders |  | $                            | 17,026  |               |  |           | 36,954 |  |  | $ | 0.46 | 
|                                                                       |  |                              |         |               |  |           |        |  |  |   |      | 



|    |                                                                                                                                                                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the years ended December 31, 2004 and
    2003, the potential dilution from the Companys outstanding
    stock options of 115 and 11 shares, respectively, was
    antidilutive to the loss from continuing operations per share
    calculation. As such, these amounts were excluded from weighted
    average shares in these years.

In 2004, 2003 and 2002, stock options to
purchase 4,491, 4,735 and 3,843 shares of common
stock, respectively, were excluded from the computation of
diluted earnings per share as these options were antidilutive.



|   |                                    
|-- | -----------------------------------
|7. | SEVERANCE AND PROXY CONTEST CHARGES

In 2003, the Company recorded a first quarter
charge of $19,711 relating to the change in roles from executive
to non-executive status of the Companys former chairman
and vice-chairman of the board of directors and recorded a
second quarter severance charge of $1,795 relating to the
departures of its executive vice president and chief financial
officer and its executive vice president of asset management.
The first quarter charge consisted of a $13,993 charge
representing the discounted present value of the estimated
payments to be made to the former chairman and vice-chairman
under their existing employment arrangements and a $5,718 charge
representing the discounted present value of estimated net costs
to be incurred by the Company as a result of the settlement of
split-dollar life insurance obligations to the individuals under
their employment contracts. The second quarter charge of $1,795
represented the aggregate amount of the estimated payments and
benefits to be made to the departing executive officers.

In August 2004, the Company entered into a final
settlement agreement with its former chairman of the board of
directors. Under the terms of the agreement, the former
chairmans employment and non-competition agreements were
terminated and the Company agreed to continue to provide the
former chairman certain payments and benefits through May 2013,
the approximate expiration date of the original employment
agreement. Because the present value of the estimated payments
under the settlement agreement approximated the Companys
remaining accrued charge under the former employment agreement,
no additional charges were recorded in 2004 as a result of the
settlement.

The Company recorded severance charges in the
first and second quarters of 2003. The following table
summarizes the activity relating to the accrued severance
charges for the years ended December 31, 2004 and 2003:

|                                             |  |      |        |      |  |   |        |  
|-------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                             |  | 2004 |        | 2003
|                                             |  |      |        |     
|Accrued severance charges, beginning of year |  | $    | 19,171 |      |  | $ |       |  
|Severance charges                            |  |      |       |      |  |   | 21,506 |  
|Payments for period                          |  |      | (4,858 | )    |  |   | (3,237 | )
|Interest accretion                           |  |      | 1,004  |      |  |   | 902    |  
|                                             |  |      |        |      |  |   |        |  
|Accrued severance charges, end of year       |  | $    | 15,317 |      |  | $ | 19,171 |  
|                                             |  |      |        |      |  |   |        |  




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Substantially all of these remaining amounts will
be paid over the remaining terms of the former executives
employment and settlement agreements (9 to 12 years).

Proxy and related costs of $5,231 represented the
legal, advisory and other expenses associated with the
solicitation of proxies from shareholders resulting from the
proxy contest initiated in April 2003 by the Companys
former chairman of the board of directors. Additionally, the
$5,231 amount included the estimated legal and resolution costs
associated with the settlement of two derivative and purported
class action lawsuits filed against the Company during the proxy
contest. These lawsuits were settled in October 2004 (see
note 11).



|   |             
|-- | ------------
|8. | INCOME TAXES

The Company has elected to be taxed as a REIT
under the Internal Revenue Code of 1986, as amended (the
Code). To qualify as a REIT, the Company must
distribute annually at least 90% of its adjusted taxable income,
as defined in the Code, to its shareholders and satisfy certain
other organizational and operating requirements. It is
managements current intention to adhere to these
requirements and maintain the Companys REIT status. As a
REIT, the Company generally will not be subject to federal
income tax at the corporate level on the taxable income it
distributes to its shareholders. If the Company fails to qualify
as a REIT in any taxable year, it will be subject to federal
income taxes at regular corporate rates (including any
applicable alternative minimum tax) and may not be able to
qualify as a REIT for four subsequent taxable years. The Company
may be subject to certain state and local taxes on its income
and property, and to federal income taxes and excise taxes on
its undistributed taxable income.

The Company utilizes taxable REIT subsidiaries to
perform such non-REIT activities as asset and property
management, for-sale housing (condominiums) conversions and
sales, leasing and landscaping services for third parties. These
taxable REIT subsidiaries are subject to federal, state and
local income taxes. For the three years in the period ended
December 31, 2004, the impact of these taxable REIT
subsidiaries income taxes and their related tax attributes
were not material to the accompanying consolidated financial
statements. At December 31, 2004, the Companys
taxable REIT subsidiaries had consolidated federal income tax
net operating loss carryforwards totaling approximately $9,000.
These tax loss carryforwards begin to expire in 2019. At
December 31, 2004, management had established a valuation
allowance against the deferred tax asset associated with these
net operating loss carryforwards due to the historical and
continuing operating losses of these subsidiaries. The tax
benefits associated with such net operating loss carryforwards
may be recognized in future periods, if the taxable REIT
subsidiaries generate sufficient taxable income to utilize such
amounts or if the Company determines that it more likely than
not that the related deferred tax assets are realizable.

Reconciliation of net income to taxable
income

As discussed in note 1, the Company conducts
substantially all of its operations through its majority-owned
subsidiary, the Operating Partnership. For income tax reporting
purposes, the Company receives an allocable share of the
Operating Partnerships ordinary income and capital gains
based on its weighted average ownership, adjusted for certain
specially allocated items. All adjustments to net income in the
table below are net of amounts




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





attributable to minority interests and taxable
REIT subsidiaries. A reconciliation of net income to taxable
income for the years ended December 31, 2004, 2003 and 2002
is detailed below.

|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |        |  
|------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------- | -------- | - | -------- | ------- | ------ | - | - | ------- | ------ | -
|                                                              |                                                         | 2004       |         | 2003     |   | 2002    
|                                                              |                                                         | (Estimate) |         | (Actual) |   | (Actual)
|                                                              |                                                         |            |         |          |   |         
|Net income                                                    |                                                         | $          | 88,219  |          |   | $        | 14,156  |        |   | $ | 60,746  |       
|Add net loss (income) of taxable REIT subsidiaries            |                                                         |            | 402     |          |   |          | 691     |        |   |   | (780    | )     
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |       
|Adjusted net income                                           |                                                         |            | 88,621  |          |   |          | 14,847  |        |   |   | 59,966  |       
|                                                              | Book/tax depreciation difference                        |            |         | (6,374   | ) |          |         | (4,309 | ) |   |         | (6,431 | )
|                                                              | Book/tax difference on gains from real estate
    sales |            |         | (5,149   | ) |          |         | 3,010  |   |   |         | 12,802 |  
|                                                              | Other book/tax differences, net                         |            |         | (9,603   | ) |          |         | 20,005 |   |   |         | (8,412 | )
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |       
|Taxable income before allocation of taxable
    capital gains |                                                         |            | 67,495  |          |   |          | 33,553  |        |   |   | 57,925  |       
|Income taxable as capital gains                               |                                                         |            | (89,597 | )        |   |          | (35,620 | )      |   |   | (39,207 | )     
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |       
|Taxable ordinary income (loss)                                |                                                         | $          | (22,102 | )        |   | $        | (2,067  | )      |   | $ | 18,718  |       
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |       

Income tax characterization of
dividends

For income tax purposes, dividends to common
shareholders are characterized as ordinary income, capital gains
or as a return of a shareholders invested capital. A
summary of the income tax characterization of the Companys
dividends paid per common share is as follows for the years
ended December 31, 2004, 2003 and 2002:

|                                |  |        |      |      |  |        |       |   |  |        |      |   |  |  |       |   |  |   |      |  |  |  |       |  
|------------------------------- |  | ------ | ---- | ---- |  | ------ | ----- | - |  | ------ | ---- | - |  |  | ----- | - |  | - | ---- |  |  |  | ----- | -
|                                |  |        |      |      |  |       
|                                |  | 2004   |      | 2003 |  | 2002  
|                                |  |        |      |      |  |       
|                                |  | Amount |      | %    |  | Amount |       | % |  | Amount |      | %
|                                |  |        |      |      |  |        |       |   |  |        |      |  
|Ordinary income                 |  | $      |     |      |  |        |      |   |  | $      | 0.16 |   |  |  | 7.4   | % |  | $ | 0.93 |  |  |  | 29.9  | %
|Capital gains                   |  |        | 0.74 |      |  |        | 40.9  | % |  |        | 0.36 |   |  |  | 16.8  | % |  |   | 0.41 |  |  |  | 13.1  | %
|Unrecaptured Section 1250 gains |  |        | 1.06 |      |  |        | 59.1  | % |  |        | 0.31 |   |  |  | 14.5  | % |  |   | 0.39 |  |  |  | 12.6  | %
|Return of capital               |  |        |     |      |  |        |      |   |  |        | 1.30 |   |  |  | 61.3  | % |  |   | 1.39 |  |  |  | 44.4  | %
|                                |  |        |      |      |  |        |       |   |  |        |      |   |  |  |       |   |  |   |      |  |  |  |       |  
|                                |  | $      | 1.80 |      |  |        | 100.0 | % |  | $      | 2.13 |   |  |  | 100.0 | % |  | $ | 3.12 |  |  |  | 100.0 | %
|                                |  |        |      |      |  |        |       |   |  |        |      |   |  |  |       |   |  |   |      |  |  |  |       |  

The income tax characterization of dividends to
common shareholders is based on the calculation of Taxable
Earnings and Profits, as defined in the Code. Taxable Earnings
and Profits differ from regular taxable income due primarily to
differences in the estimated useful lives and methods used to
compute depreciation and in the recognition of gains and losses
on the sale of real estate assets.

As of December 31, 2004, the net basis for
federal income tax purposes, taking into account the special
allocation of gain to the partners contributing property to the
Operating Partnership and including minority interest in the
Operating Partnership, was lower than the net assets as reported
in the Companys consolidated financial statements by
$16,558.



|   |                               
|-- | ------------------------------
|9. | STOCK-BASED COMPENSATION PLANS

Stock Compensation Plans

Effective January 1, 2003, the Company
elected to voluntarily change its method of accounting for
stock-based compensation to the fair value method prescribed in
SFAS No. 123 (see note 1). The Company elected
the prospective method of adoption prescribed by
SFAS No. 148. For stock-based compensation granted
prior to January 1, 2003, the Company accounted for
stock-based compensation under the intrinsic value method
prescribed by APB No. 25. A table in note 1 summarizes
the Companys net income and earnings per common share had
the fair value method of accounting under SFAS No. 123
been applied for the years ended December 31, 2004, 2003
and 2002.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Stock Option Plans

The Companys 2003 Incentive Stock Plan (the
2003 Stock Plan) was approved by the Companys
shareholders in May 2003. Under the 2003 Stock Plan, an
aggregate of 4,000 shares of common stock were reserved for
issuance. Of this amount, not more than 500 shares of
common stock are available for grants of restricted stock. The
exercise price of each option granted under the 2003 Stock Plan
may not be less than the market price of the Companys
common stock on the date of the option grant and all options may
have a maximum life of ten years. Participants receiving
restricted stock grants are generally eligible to vote such
shares and receive dividends on such shares. Substantially all
stock option and restricted stock grants are subject to annual
vesting provisions (generally three to five years) as determined
by the administrative committee overseeing the 2003 Stock Plan.
At December 31, 2004, stock options outstanding under the
2003 Stock Plan totaled 1,092. The Companys former stock
plan (the 1993 Stock Plan) expired in July 2003. At
December 31, 2004, stock options outstanding under the 1993
Stock Plan totaled 3,399.

In 2004, 2003 and 2002, the Company granted stock
options to purchase 283, 1,252 and 18 shares of
Company common stock to Company officers and directors, of which
50 and 100 shares in 2004 and 2003, respectively, were
granted to the Companys non-executive chairman of the
board. For the years ended December 31, 2004 and 2003,
general and administrative expenses included compensation
expense related to stock options of $590 ($553 net of
minority interest) and $244 ($218, net of minority interest),
respectively, recognized under the fair value method.

The following table sets forth information about
the fair value of each stock option grant on the date of the
grant using the Black-Scholes option-pricing model and the
weighted average assumptions used for such grants:

|                        |  |      |          |      |  |      |          |   |  |  |          |  
|----------------------- |  | ---- | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                        |  | 2004 |          | 2003 |  | 2002
|                        |  |      |          |      |  |     
|Dividend yield          |  |      | 6.3      | %    |  |      | 6.5      | % |  |  | 7.2      | %
|Expected volatility     |  |      | 16.9     | %    |  |      | 17.1     | % |  |  | 22.7     | %
|Risk-free interest rate |  |      | 3.1      | %    |  |      | 2.9      | % |  |  | 3.5      | %
|Expected option life    |  |      | 5  years |      |  |      | 5  years |   |  |  | 7  years |  

A summary of stock option activity under all
plans for the years ended December 31, 2004, 2003 and 2003,
is presented below.

|                                                                   |  |        |       |                |  |        |    |                |  |        |       |                |  |   |    |  |  |   |       |   |  |   |    | 
|------------------------------------------------------------------ |  | ------ | ----- | -------------- |  | ------ | -- | -------------- |  | ------ | ----- | -------------- |  | - | -- |  |  | - | ----- | - |  | - | -- | 
|                                                                   |  |        |       |                |  |       
|                                                                   |  | 2004   |       | 2003           |  | 2002  
|                                                                   |  |        |       |                |  |       
|                                                                   |  |        |       | Weighted       |  |        |    | Weighted       |  |        |       | Weighted      
|                                                                   |  |        |       | Average        |  |        |    | Average        |  |        |       | Average       
|                                                                   |  | Shares |       | Exercise Price |  | Shares |    | Exercise Price |  | Shares |       | Exercise Price
|                                                                   |  |        |       |                |  |        |    |                |  |        |       |               
|Outstanding at beginning of year                                   |  |        | 4,735 |                |  | $      | 34 |                |  |        | 4,089 |                |  | $ | 35 |  |  |   | 4,228 |   |  | $ | 36 | 
|Granted                                                            |  |        | 283   |                |  |        | 28 |                |  |        | 1,252 |                |  |   | 26 |  |  |   | 18    |   |  |   | 24 | 
|Exercised                                                          |  |        | (277  | )              |  |        | 29 |                |  |        | (217  | )              |  |   | 28 |  |  |   | (15   | ) |  |   | 31 | 
|Forfeited                                                          |  |        | (250  | )              |  |        | 36 |                |  |        | (389  | )              |  |   | 32 |  |  |   | (142  | ) |  |   | 38 | 
|                                                                   |  |        |       |                |  |        |    |                |  |        |       |                |  |   |    |  |  |   |       |   |  |   |    | 
|Outstanding at end of year                                         |  |        | 4,491 |                |  |        | 33 |                |  |        | 4,735 |                |  |   | 34 |  |  |   | 4,089 |   |  |   | 35 | 
|                                                                   |  |        |       |                |  |        |    |                |  |        |       |                |  |   |    |  |  |   |       |   |  |   |    | 
|Options exercisable at year-end                                    |  |        | 3,131 |                |  |        |    |                |  |        | 3,233 |                |  |   |    |  |  |   | 3,465 |   |  |   |    | 
|                                                                   |  |        |       |                |  |        |    |                |  |        |       |                |  |   |    |  |  |   |       |   |  |   |    | 
|Weighted-average fair value of options granted
    during the year |  | $      | 1.86  |                |  |        |    |                |  | $      | 1.59  |                |  |   |    |  |  | $ | 2.13  |   |  |   |    | 
|                                                                   |  |        |       |                |  |        |    |                |  |        |       |                |  |   |    |  |  |   |       |   |  |   |    | 

At December 31, 2004, the Company has
separated its outstanding options into two ranges based on
exercise prices. There were 1,851 options outstanding with
exercise prices ranging from $23.90 to $33.95. These options
have a weighted average exercise price of $27.58 and a weighted
average remaining contractual life of 7 years. Of these
outstanding options, 641 were exercisable at December 31,
2004 at a weighted average exercise price of $29.90. In
addition, there were 2,640 options outstanding with exercise
prices ranging from $34.76 to $44.13. These options have a
weighted average exercise price of $37.92 and a weighted average
remaining contractual life of 4 years. Of these outstanding
options, 2,490 were exercisable at December 31, 2004 at a
weighted average exercise price of $37.45.




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





In 2004, 2003 and 2002, the Company
granted 27, 175 and 15 shares of restricted stock,
respectively, to Company officers and directors, of which 7 and
8 shares in 2004 and 2003, respectively, were granted to
the Companys non-executive chairman of the board. The
restricted shares granted in 2004 vest ratably over three to
five year periods. The restricted shares granted in 2003 and
2002 vest ratably over three to eight year periods. For each
year, the total value of the restricted share grants of $777,
$4,555 and $459, respectively, was initially reflected in
shareholders equity as additional paid-in capital and as
deferred compensation, a contra-shareholders equity
account. Such deferred compensation is amortized ratably into
compensation expense over the applicable vesting period. Total
compensation expense relating to the restricted stock was
$1,109, $742 and $265 in 2004, 2003 and 2002, respectively.

Employee Stock Purchase Plan

The Company maintained an Employee Stock Purchase
Plan (ESPP) under a plan approved by Company
shareholders in 1995, which was terminated in December 2004. The
Company is seeking shareholder approval for a new ESPP at its
2005 annual shareholder meeting. The provisions of the old and
new plans are substantially similar with certain exceptions
including that the maximum number of shares issuable under the
new plan will be 300. To participate in the ESPP,
(i) directors must have been a member of the Board of
Directors for at least one month and (ii) an employee must
have been employed full or part-time by the Company or the
Operating Partnership for at least one month; provided, an
individual who is a director and who is an employee shall be a
participant exclusively with respect to his or her status as an
employee. The purchase price of shares of Common Stock under the
ESPP is equal to 85% of the lesser of the closing price per
share of Common Stock on the first or last day of the trading
period, as defined.

Effective January 1, 2003, under
SFAS No. 123, the Company records the aggregate cost
of the ESPP (generally the 15% discount on the share purchases)
as a period expense. Total compensation expense relating to the
ESPP was $86 and $85 in 2004 and 2003, respectively. Prior to
2003, under APB No. 25, no compensation expense was
required to be recognized for purchases under the ESPP (the
discounted purchase price of the acquired shares was recorded in
shareholders equity).



|    |                      
|--- | ---------------------
|10. | EMPLOYEE BENEFIT PLAN

The employees of the Company are participants in
a defined contribution plan pursuant to Section 401 of the
Internal Revenue Code. Beginning in 1996, Company contributions,
if any, to this plan are based on the performance of the Company
and are allocated to each participant based on the relative
contribution of the participant to the total contributions of
all participants. For purposes of allocating the Company
contribution, the maximum employee contribution included in the
calculation is 4% (3% in years prior to 2003) of salary. Company
contributions of $541, $513 and $452 were made to this plan in
2004, 2003 and 2002, respectively.



|    |                              
|--- | -----------------------------
|11. | COMMITMENTS AND CONTINGENCIES

Land, office and equipment leases

The Company is party to two ground leases with
terms expiring in years 2040 and 2043 relating to a single
operating community and four ground leases expiring in 2012,
2038, 2066 and 2074 for four separate operating communities and
to other facility, office, equipment and other operating leases
with terms expiring through 2057. The ground leases generally
provide for future increases in minimum lease payments tied to
an inflation index or that contain stated rent increases that
generally compensate for the impact of inflation. The Company
has historically expensed ground leases as incurred which, where
applicable, has not been materially different than recognizing
expense on a




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





straight-line basis. Future minimum lease
payments for non-cancelable land, office, equipment and other
leases at December 31, 2004, are as follows:

|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2005                |  | $ | 1,534   | 
|2006                |  |   | 1,521   | 
|2007                |  |   | 1,483   | 
|2008                |  |   | 1,506   | 
|2009                |  |   | 1,531   | 
|2010 and thereafter |  |   | 165,920 | 

The Company incurred $4,981, $4,382 and $5,223 of
rent expense, including rent expense under short-term rental and
lease arrangements, for the years ended December 31, 2004,
2003 and 2002, respectively.

Legal proceedings

On May 13, 2004, an alleged Company
shareholder filed a purported pro se derivative and direct
action in the Superior Court of Fulton County, Atlanta, Georgia,
against the Company, certain members of the Companys board
of directors, and certain of its executive officers. The case
was removed to the United States District Court for the Northern
District of Georgia on May 21, 2004. The complaint alleges,
among other things, breaches of fiduciary duties, fraud,
corporate waste, withholding certain documents from shareholder
inspection and certain securities laws claims. The complaint
requests various types of relief, such as injunctive relief and
damages and demands production of certain Company records. The
Company believes the allegations are wholly without merit and
has moved to dismiss the litigation.

On May 5, 2003, the Company received notice
that a shareholder derivative and purported class action lawsuit
was filed against members of the board of directors of the
Company and the Company as a nominal defendant. This complaint
was filed in the Superior Court of Fulton County, Atlanta,
Georgia on May 2, 2003 and alleged various breaches of
fiduciary duties by the board of directors of the Company and
sought, among other relief, the disclosure of certain
information by the defendants. This complaint also sought to
compel the defendants to undertake various actions to facilitate
a sale of the Company. On May 7, 2003, the plaintiff made a
request for voluntary expedited discovery. On May 13, 2003,
the Company received notice that a similar shareholder
derivative and purported class action lawsuit was filed against
certain members of the board of directors of the Company and
against the Company as a nominal defendant. The complaint was
filed in the Superior Court of Fulton County, Atlanta, Georgia
on May 12, 2003 and alleged breaches of fiduciary duties,
abuse of control and corporate waste by the defendants. The
plaintiff sought monetary damages and, as appropriate,
injunctive relief. These lawsuits were settled, and in October
2004, the Superior Court of Fulton County entered an order
approving the settlement and related orders dismissing the
litigation. The estimated legal and settlement costs, not
covered by insurance, associated with the expected resolution of
the lawsuits were recorded in the second quarter of 2003 as a
component of a proxy contest and related costs charge. An
alleged Company shareholder, who has filed a separate purported
derivative and direct action against the Company and certain of
its officers and directors (which is described in the paragraph
above), has appealed from the Superior Courts orders
approving the settlement, overruling the shareholders
objection to the settlement, denying the shareholders
motion to intervene, and dismissing the litigation with
prejudice. The Company plans to contest the shareholders
appeal vigorously.

The Company is involved in various other legal
proceedings incidental to its business from time to time, most
of which are expected to be covered by liability insurance.
Management of the Company believes that any resolution of
pending proceedings or liability to the Company, which may arise
as a result of these proceedings, will not have a material
adverse effect on the Companys results of operations or
financial position.



|    |                           
|--- | --------------------------
|12. | RELATED PARTY TRANSACTIONS

In 2004, 2003 and 2002, the Company held
investments in Property LLCs accounted for under the
equity method of accounting (see note 4). In 2004, 2003 and
2002, the Company recorded, before elimination of the
Companys equity interests, development fees, general
construction contract billings, management fees and expense
reimbursements (primarily personnel costs) of approximately
$1,756, $2,913 and $11,916, respectively, from these related
companies. Additionally in 2004, 2003 and 2002, the Company
earned interest under construction loans to the




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Project LLCs totaling $308, $3,186 and $4,482,
respectively. The Company portion of all significant
intercompany transactions was eliminated in the accompanying
consolidated financial statements.

In prior years, the Company provided landscaping
services for executive officers, employees, directors and other
related parties. For the years ended December 31, 2003 and
2002, the Company received landscaping revenue of $742 and $775,
respectively, for such services. Such revenue includes
reimbursement of direct and indirect expenses.

At December 31, 2004 and 2003, the Company
had outstanding loan balances to certain current and former
company executives totaling $5,095 and $6,075, respectively.
These loans mature ten years from the issue date and bear
interest at a rate of 6.32% per annum. Proceeds from these
loans were used by these executives to acquire the
Companys common shares on the open market. Additionally,
at December 31, 2004 and 2003, the Company had outstanding
additional loans to certain company executives totaling $780 and
$920, respectively. The loans bear interest at 6.32% per
annum. If the executives continue to be employed by the Company,
the loans will be forgiven annually over five to ten year
periods, as defined in the agreements. The annual loan
forgiveness of $140, $160 and $160 was recorded as compensation
expense in 2004, 2003 and 2002, respectively.

13. DERIVATIVE FINANCIAL
INSTRUMENTS

At December 31, 2004 and 2003, the Company
had outstanding interest rate swap agreements with a notional
value of approximately $123,000 with maturity dates ranging from
2005 to 2009. At December 31, 2004 and 2003, the fair value
of the interest rate swap agreements of $8,927 and $12,833,
respectively, were included in consolidated liabilities in the
accompanying consolidated balance sheets. The Company records
the changes in the fair value of these cash flow hedges as
changes in accumulated other comprehensive income (loss), a
shareholders equity account, in the accompanying
consolidated balance sheet.

At December 31, 2004, the Company had
outstanding interest rate cap agreements with two financial
institutions with a notional value of $110,055. These interest
rate cap agreements are cash flow hedges that provide a fixed
interest ceiling at 5% for the Companys variable rate,
tax-exempt borrowings aggregating $110,055 at December 31,
2004. The Company is required to maintain the interest rate
exposure protection under the terms of the financing
arrangements. The interest rate cap arrangements are included on
the accompanying balance sheet at fair value. At
December 31, 2004, the difference between the amortized
costs of the interest rate cap arrangements and their fair value
of $110 is included in accumulated other comprehensive income
(loss), a shareholders equity account. The original cost
of $1,396 of the arrangements is being amortized to expense over
their five-year term.

The impact of the change in the value of the
derivatives on comprehensive income (loss) is included in the
statement of shareholders equity.

In June 2004, in connection with the sale of five
properties discussed in note 5 above, the Company sold its
interest in interest rate cap agreements with a notional value
of $104,325 for aggregate proceeds of $379 and realized a loss
of $941 ($877 net of minority interest) that was included
in the loss on early extinguishment of indebtedness associated
with asset sales on the accompanying statement of operations.
The unrealized loss on these interest rate cap agreements was
previously reflected in accumulated other comprehensive income
(loss), a shareholders equity account. These interest rate
cap agreements were sold as the underlying hedged indebtedness
was assumed by the purchaser in connection with the sale of the
related assets.

14. FAIR VALUE OF FINANCIAL
INSTRUMENTS

The following disclosures of estimated fair value
were determined by management using available market information
and appropriate valuation methodologies. Considerable judgment
is necessary to interpret market data and develop estimated fair
value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize
on disposition of the financial instruments. The use of
different market assumptions and/or estimation methodologies may
have a material effect on the estimated fair value amounts.

Cash equivalents, rents and accounts receivables,
accounts payable, accrued expenses and other liabilities are
carried at amounts which reasonably approximate their fair
values because of the short-term nature of these instruments.
The fair value of fixed rate debt was approximately $891,579
(carrying value of $845,175) and the fair




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





value of floating rate debt approximated its
carrying value due to the adjustable nature of the arrangements
at December 31, 2004. The fair value of fixed rate debt was
approximately $830,454 (carrying value of $775,132) and the fair
value of floating rate debt approximated its carrying value due
to the adjustable nature of the arrangements at
December 31, 2003.

In order to manage the impact of interest rate
changes on earnings and cash flow, the Company entered into and
has outstanding interest rate swap and interest rate cap
arrangements. As more fully described in note 1, these
interest rate cap and interest rate swap agreements are carried
on the consolidated balance sheet at fair market value in
accordance with SFAS No. 133, as amended. At
December 31, 2004, the carrying amounts of the interest
rate swap arrangements represented net liabilities totaling
$8,927 ($8,360, net of minority interest) and the carrying value
of the interest rate cap arrangements represented net assets of
$110 ($103, net of minority interest). At December 31,
2003, the carrying amounts of the interest rate swap
arrangements represented net liabilities totaling $12,833
($11,167, net of minority interest) and the carrying value of
the interest rate cap arrangements represented net assets of
$1,406 ($1,284, net of minority interest).

Disclosure about fair value of financial
instruments is based on pertinent information available to
management as of December 31, 2004. Although management is
not aware of any factors that would significantly affect the
reasonable fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial
statements since that date and current estimates of fair value
may differ significantly from the amounts presented herein.

15. SEGMENT INFORMATION

Segment Description

In accordance with SFAS No. 131,
Disclosure About the Segments of an Enterprise and Related
Information, the Company presents segment information
based on the way that management organizes the segments within
the enterprise for making operating decisions and assessing
performance. The segment information is prepared on
substantially the same basis as the internally reported
information used by the Companys chief operating decision
makers to manage the business.

The Companys chief operating decision
makers focus on the Companys primary sources of income
from property rental operations. Apartment community rental
operations are broken down into five segments based on the
various stages in the apartment community ownership lifecycle.
These segments are described below. All commercial and other
ancillary service and support operations are aggregated in the
line item other property segments in the
accompanying segment information. The segment information
presented below reflects the segment categories based on the
lifecycle status of each community as of December 31, 2004.
The segment information for the years ended December 31,
2003 and 2002 have been adjusted due to the restatement impact
of reclassifying the operating results of the assets designated
as held for sale in 2004 to discontinued operations under
SFAS No. 144 (see note 5).



| |   |                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Fully stabilized communities  those
    apartment communities which have been stabilized (the earlier of
    the point at which a property reaches 95% occupancy or one year
    after completion of construction) for both the current and prior
    year.
|
| |  | Communities stabilized during prior
    year  communities which reached stabilized occupancy
    in the prior year.                                                                                                                                        
|
| |  | Development and lease up communities 
    those communities that are in lease-up but were not stabilized
    by the beginning of the current year, including communities that
    stabilized during the current year.                                      
|
| |  | Acquired communities  those
    communities acquired in the current or prior year.                                                                                                                                                                         
|
| |  | Sold communities  communities which
    were sold in prior years and not reflected as discontinued
    operations (see notes 1 and 5).                                                                                                                     

Segment Performance Measure

Management uses contribution to consolidated
property net operating income (NOI) as the
performance measure for its operating segments. The Company uses
net operating income, including net operating income of
stabilized communities, as an operating measure. Net operating
income is defined as rental and other revenue from




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





real estate operations less total property and
maintenance expenses from real estate operations (excluding
depreciation and amortization). The Company believes that net
operating income is an important supplemental measure of
operating performance for a REITs operating real estate
because it provides a measure of the core operations, rather
than factoring in depreciation and amortization, financing costs
and general and administrative expenses generally incurred at
the corporate level. This measure is particularly useful, in the
opinion of the Company, in evaluating the performance of
geographic operations, operating segment groupings and
individual properties. Additionally, the Company believes that
net operating income, as defined, is a widely accepted measure
of comparative operating performance in the real estate
investment community. The Company believes that the line on the
Companys consolidated statement of operations entitled
net income is the most directly comparable GAAP
measure to net operating income.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





Segment Information

The following table reflects each segments
contribution to consolidated revenues and NOI together with a
reconciliation of segment contribution to NOI to consolidated
net income for the years ended December 31, 2004, 2003 and
2002. Additionally, substantially all of the Companys
assets relate to the Companys property rental operations.
Asset cost, depreciation and amortization by segment are not
presented because such information is not reported internally at
the segment level.

|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |         | 
|-------------------------------------------------------------------- | --------------------- | ----------------------- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                                                     |                       |                        
|                                                                     |                       | Year ended December 31,
|                                                                     |                       |                        
|                                                                     |                       | 2004                    |         | 2003    |  | 2002
|                                                                     |                       |                         |         |         |  |     
|Revenues                                                             |                       |                         |         |         |  |      |         |         |  |   |         |        
|Fully stabilized communities                                         |                       | $                       | 250,372 |         |  | $    | 248,991 |         |  | $ | 250,646 |        
|Communities stabilized during prior year                             |                       |                         | 15,784  |         |  |      | 14,695  |         |  |   | 9,170   |        
|Development and lease-up communities                                 |                       |                         | 7,001   |         |  |      | 2,006   |         |  |   |        |        
|Acquired communities                                                 |                       |                         | 4,472   |         |  |      |        |         |  |   |        |        
|Sold communities                                                     |                       |                         |        |         |  |      |        |         |  |   | 773     |        
|Other property segments                                              |                       |                         | 21,201  |         |  |      | 19,608  |         |  |   | 20,147  |        
|Other                                                                |                       |                         | 1,000   |         |  |      | 457     |         |  |   | 260     |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|                                                                     | Consolidated revenues |                         | $       | 299,830 |  |      | $       | 285,757 |  |   | $       | 280,996 | 
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Contribution to Property Net Operating
    Income                    |                       |                         |         |         |  |      |         |         |  |   |         |        
|Fully stabilized communities                                         |                       | $                       | 153,126 |         |  | $    | 155,162 |         |  | $ | 159,911 |        
|Communities stabilized during prior year                             |                       |                         | 9,851   |         |  |      | 8,841   |         |  |   | 4,854   |        
|Development and lease-up communities                                 |                       |                         | 4,879   |         |  |      | 113     |         |  |   |        |        
|Acquired communities                                                 |                       |                         | 3,163   |         |  |      |        |         |  |   |        |        
|Sold communities                                                     |                       |                         |        |         |  |      |        |         |  |   | 369     |        
|Other                                                                |                       |                         | (4,927  | )       |  |      | (2,994  | )       |  |   | (1,428  | )      
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Consolidated property net operating income                           |                       |                         | 166,092 |         |  |      | 161,122 |         |  |   | 163,706 |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Interest income                                                      |                       |                         | 817     |         |  |      | 894     |         |  |   | 1,288   |        
|Other revenues                                                       |                       |                         | 1,000   |         |  |      | 457     |         |  |   | 260     |        
|Minority interest in consolidated property
    partnerships          |                       |                         | 671     |         |  |      | 1,605   |         |  |   | 1,771   |        
|Gains on property sales                                              |                       |                         |        |         |  |      |        |         |  |   | 13,275  |        
|Depreciation                                                         |                       |                         | (83,029 | )       |  |      | (81,201 | )       |  |   | (74,482 | )      
|Interest                                                             |                       |                         | (65,415 | )       |  |      | (63,182 | )       |  |   | (50,231 | )      
|Amortization of deferred financing costs                             |                       |                         | (4,304  | )       |  |      | (3,801  | )       |  |   | (2,327  | )      
|General and administrative                                           |                       |                         | (21,275 | )       |  |      | (15,102 | )       |  |   | (14,430 | )      
|Development costs and other                                          |                       |                         | (1,337  | )       |  |      | (2,137  | )       |  |   | (694    | )      
|Termination of debt remarketing agreement
    (interest expense)     |                       |                         | (10,615 | )       |  |      |        |         |  |   |        |        
|Loss on early extinguishment of indebtedness                         |                       |                         | (4,011  | )       |  |      |        |         |  |   | (136    | )      
|Severance charges                                                    |                       |                         |        |         |  |      | (21,506 | )       |  |   |        |        
|Proxy and related costs                                              |                       |                         |        |         |  |      | (5,231  | )       |  |   |        |        
|Equity in income (losses) of unconsolidated real
    estate entities |                       |                         | 1,083   |         |  |      | 7,790   |         |  |   | (1,591  | )      
|Minority interest of preferred unitholders                           |                       |                         | (3,780  | )       |  |      | (5,600  | )       |  |   | (5,600  | )      
|Minority interest of common unitholders                              |                       |                         | 2,283   |         |  |      | 3,801   |         |  |   | (2,334  | )      
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Income (loss) from continuing operations                             |                       |                         | (21,820 | )       |  |      | (22,091 | )       |  |   | 28,475  |        
|Income from discontinued operations                                  |                       |                         | 110,039 |         |  |      | 36,247  |         |  |   | 32,271  |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Net income                                                           |                       | $                       | 88,219  |         |  | $    | 14,156  |         |  | $ | 60,746  |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        

16. SUPPLEMENTAL CASH FLOW
INFORMATION

Non-cash investing and financing activities for
the years ended December 31, 2004, 2003 and 2002 were as
follows:

In June 2004, the Company acquired an apartment
community for cash and the assumption of mortgage indebtedness
with an estimated fair value of $49,496. Also in June 2004, the
Company sold certain apartment




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





communities subject to $104,325 of mortgage
indebtedness assumed by the purchasers. These transactions
involving mortgage indebtedness were excluded from the statement
of cash flows as non-cash transactions.

For the year ended December 31, 2004, the
Companys derivative financial instruments increased in
value causing a decrease in accounts payable and accrued
expenses and a corresponding increase in shareholders
equity of $3,694, net of minority interest. For the year ended
December 31, 2003, the Companys derivative financial
instruments increased in value causing a decrease in accounts
payable and accrued expenses and a corresponding increase in
shareholders equity of $2,460, net of minority interest.
For the year ended December 31, 2002, the Companys
derivative financial instruments decreased in value causing an
increase in accounts payable and accrued expenses and a
corresponding decrease in shareholders equity of $8,958,
net of minority interest.

For the years ended December 31, 2004, 2003
and 2002, holders of 1,168, 1,162 and 289 Common Units in the
Operating Partnership, respectively, exercised their option to
convert their Common Units to shares of the Company on a
one-for-one basis. The net effect of the conversion of Common
Units of the Operating Partnership to shares of the Company and
the adjustments to minority interest for the impact of the
Companys employee stock purchase and stock options plans,
decreased minority interest and increased shareholders
equity in the amounts of $19,848, $20,802 and $5,656 for the
years ended December 31, 2004, 2003 and 2002, respectively.

The Operating Partnership committed to distribute
$19,203, $19,043 and $32,785 for the quarters ended
December 31, 2004, 2003 and 2002, respectively. As a
result, the Company declared dividends of $18,078, $17,391 and
$29,018 for the quarters ended December 31, 2004, 2003 and
2002, respectively. The remaining distributions from the
Operating Partnership in the amount of $1,125, $1,652 and $3,767
for the quarters ended December 31, 2004, 2003 and 2002,
respectively, are distributed to minority interest unitholders
in the Operating Partnership.

17. QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)

Under SFAS No. 144, as further
discussed in note 5, the operating results of apartment
communities classified as held for sale were included in
discontinued operations in the accompanying statements of
operations for all periods presented. To conform with this
presentation, the quarterly financial information presented
below reflects the reclassification of the operating results of
these assets to discontinued operations, which differs from the
presentation of discontinued operations included in the
Companys previously issued financial statements included
in its quarterly reports on Form 10-Q. Quarterly financial
information for the years ended December 31, 2004 and 2003,
as revised to reflect the change discussed above, was as follows:

|                                                                 |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|---------------------------------------------------------------- |  | ---------------------------- | ------ | ------ |  | ----- | ------- | ------ |  | - | ------ | - |  | - | ------- | -
|                                                                 |  |                             
|                                                                 |  | Year ended December 31, 2004
|                                                                 |  |                             
|                                                                 |  | First                        |        | Second |  | Third |         | Fourth
|                                                                 |  |                              |        |        |  |       |         |       
|Revenues                                                         |  | $                            | 72,912 |        |  | $     | 74,160  |        |  | $ | 77,207 |   |  | $ | 75,551  |  
|                                                                 |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Loss from continuing operations                                  |  |                              | (2,169 | )      |  |       | (2,313  | )      |  |   | (3,101 | ) |  |   | (14,237 | )
|Income (loss) from discontinued operations                       |  |                              | 5,580  |        |  |       | 103,421 |        |  |   | 1,308  |   |  |   | (270    | )
|                                                                 |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Net income (loss)                                                |  |                              | 3,411  |        |  |       | 101,108 |        |  |   | (1,793 | ) |  |   | (14,507 | )
|Dividends to preferred shareholders                              |  |                              | (2,597 | )      |  |       | (1,910  | )      |  |   | (1,909 | ) |  |   | (1,909  | )
|Redemption costs on preferred stock and units                    |  |                              | (1,716 | )      |  |       |        |        |  |   | (1,810 | ) |  |   |        |  
|                                                                 |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Net income (loss) available to common shareholders               |  | $                            | (902   | )      |  | $     | 99,198  |        |  | $ | (5,512 | ) |  | $ | (16,416 | )
|                                                                 |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Earnings per common share:                                       |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Net income (loss) available to common
    shareholders  basic   |  | $                            | (0.02  | )      |  | $     | 2.49    |        |  | $ | (0.14  | ) |  | $ | (0.41   | )
|Net income (loss) available to common
    shareholders  diluted |  | $                            | (0.02  | )      |  | $     | 2.49    |        |  | $ | (0.14  | ) |  | $ | (0.41   | )




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(In thousands, except per share
data)





|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|---------------------------------------------------------------- |  | ---------------------------- | ------- | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | -
|                                                                 |  |                             
|                                                                 |  | Year ended December 31, 2003
|                                                                 |  |                             
|                                                                 |  | First                        |         | Second |  | Third |        | Fourth
|                                                                 |  |                              |         |        |  |       |        |       
|Revenues                                                         |  | $                            | 70,353  |        |  | $     | 71,132 |        |  | $ | 72,398 |   |  | $ | 71,874 |  
|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations                         |  |                              | (17,986 | )      |  |       | 836    |        |  |   | (2,363 | ) |  |   | (2,578 | )
|Income (loss) from discontinued operations                       |  |                              | (2,602  | )      |  |       | 26,854 |        |  |   | 712    |   |  |   | 11,283 |  
|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income (loss)                                                |  |                              | (20,588 | )      |  |       | 27,690 |        |  |   | (1,651 | ) |  |   | 8,705  |  
|Dividends to preferred shareholders                              |  |                              | (2,862  | )      |  |       | (2,863 | )      |  |   | (2,862 | ) |  |   | (2,862 | )
|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income available to common shareholders                      |  | $                            | (23,450 | )      |  | $     | 24,827 |        |  | $ | (4,513 | ) |  | $ | 5,843  |  
|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Earnings per common share: (1)                                   |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income (loss) available to common
    shareholders  basic   |  | $                            | (0.63   | )      |  | $     | 0.66   |        |  | $ | (0.12  | ) |  | $ | 0.15   |  
|Net income (loss) available to common
    shareholders  diluted |  | $                            | (0.63   | )      |  | $     | 0.66   |        |  | $ | (0.12  | ) |  | $ | 0.15   |  



|    |                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The total of the four quarterly amounts for
    earnings per share does not equal the total for the year. These
    differences result from the use of a weighted average to compute
    minority interest in the Operating Partnership and to compute
    the number of shares outstanding for the purpose of calculating
    the Companys earnings per share.




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Post Apartment Homes, L.P.

Consolidated Financial Statements


December 31, 2004 and 2003







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MANAGEMENTS REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING

The management of Post Apartment Homes, L.P. is
responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in
Exchange Act Rule 13a-15(f). Internal control over
financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. Under
the supervision and with the participation of the management of
Post Apartment Homes, L.P., including the Partnerships
principal executive officer and principal financial officer,
Partnership management conducted an evaluation of the
effectiveness of its internal control over financial reporting
as of December 31, 2004 based on the framework in
Internal Control  Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on its evaluation under the framework
in Internal Control  Integrated Framework, the
management of Post Apartment Homes, L.P. concluded that its
internal control over financial reporting was effective as of
December 31, 2004. Managements assessment of the
effectiveness of the Partnerships internal control over
financial reporting as of December 31, 2004 has been
audited by PricewaterhouseCoopers LLP, an independent registered
public accounting firm, as stated in their report which is
included herein.




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REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Partners of Post Apartment Homes, L.P.:

We have completed an integrated audit of Post
Apartment Homes, L.P. 2004 consolidated financial statements and
of its internal control over financial reporting as of
December 31, 2004 and audits of its 2003 and 2002
consolidated financial statements in accordance with the
standards of the Public Company Accounting Oversight Board
(United States). Our opinions, based on our audits, are
presented below.

Consolidated financial statements and
financial statement schedule

In our opinion, the consolidated financial
statements listed in the index appearing under Item 15(a)
present fairly, in all material respects, the financial position
of Post Apartment Homes, L.P. and subsidiaries at
December 31, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2004 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 15(a)
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. These financial statements
and the financial statement schedule are the responsibility of
the Companys management. Our responsibility is to express
an opinion on these financial statements and the financial
statement schedule based on our audits. We conducted our audits
of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit of financial statements
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.

Internal control over financial
reporting

Also, in our opinion, managements
assessment, included in Managements Report on Internal
Control Over Financial Reporting appearing under
Item 15(a), that the Company maintained effective internal
control over financial reporting as of December 31, 2004
based on criteria established in Internal Control 
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly
stated, in all material respects, based on those criteria.
Furthermore, in our opinion, the Company maintained, in all
material respects, effective internal control over financial
reporting as of December 31, 2004, based on criteria
established in Internal Control  Integrated
Framework issued by the COSO. The Companys management
is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness
of internal control over financial reporting. Our responsibility
is to express opinions on managements assessment and on
the effectiveness of the Companys internal control over
financial reporting based on our audit. We conducted our audit
of internal control over financial reporting in accordance with
the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was
maintained in all material respects. An audit of internal
control over financial reporting includes obtaining an
understanding of internal control over financial reporting,
evaluating managements assessment, testing and evaluating
the design and operating effectiveness of internal control, and
performing such other procedures as we consider necessary in the
circumstances. We believe that our audit provides a reasonable
basis for our opinions.

A companys internal control over financial
reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A
companys internal control over financial reporting
includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions
of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance
with authorizations of management and directors of the company;
and (iii) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or
disposition of the companys assets that could have a
material effect on the financial statements.

Because of its inherent limitations, internal
control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures
may deteriorate.

PricewaterhouseCoopers LLP

Atlanta, Georgia

March 15, 2005





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POST APARTMENT HOMES, L.P.

CONSOLIDATED BALANCE SHEETS


(In thousands)


|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |           |           |         | 
|------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | --------------- | --------- | --------- | ------- | --------- | --------- | --------- | ------- | 
|                                     |                                                                                                                                          |                                                                                                                                 
|                                     |                                                                                                                                          | December 31,                                                                                                                    
|                                     |                                                                                                                                          |                                                                                                                                 
|                                     |                                                                                                                                          | 2004                                                                                                                             |                 | 2003     
|                                     |                                                                                                                                          |                                                                                                                                  |                 |          
|ASSETS                               |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     | Real estate assets                                                                                                                       |                                                                                                                                  |                 |           |           |         |           |           |          
|                                     |                                                                                                                                          | Land                                                                                                                             |                 | $         | 266,520   |         |           | $         | 254,000   |        
|                                     |                                                                                                                                          | Building and improvements                                                                                                        |                 |           | 1,887,514 |         |           |           | 1,883,582 |        
|                                     |                                                                                                                                          | Furniture, fixtures and equipment                                                                                                |                 |           | 214,954   |         |           |           | 214,002   |        
|                                     |                                                                                                                                          | Construction in progress                                                                                                         |                 |           | 19,527    |         |           |           | 12,946    |        
|                                     |                                                                                                                                          | Land held for future development                                                                                                 |                 |           | 18,910    |         |           |           | 11,994    |        
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     |                                                                                                                                          |                                                                                                                                  | 2,407,425       |           |           |         | 2,376,524 |          
|                                     |                                                                                                                                          | Less: accumulated depreciation                                                                                                   |                 |           | (498,367  | )       |           |           | (436,245  | )      
|                                     |                                                                                                                                          | Assets held for sale, net of accumulated
    depreciation of $26,332 and $74,614 at December 31, 2004
    and 2003, respectively |                 |           | 68,661    |         |           |           | 145,238   |        
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     |                                                                                                                                          | Total real estate assets                                                                                                         |                 |           | 1,977,719 |         |           |           | 2,085,517 |        
|                                     | Investments in and advances to unconsolidated
    real estate entities                                                                   |                                                                                                                                  |                 | 21,320    |           |         |           | 74,786    |          
|                                     | Cash and cash equivalents                                                                                                                |                                                                                                                                  |                 | 123       |           |         |           | 1,334     |          
|                                     | Restricted cash                                                                                                                          |                                                                                                                                  |                 | 1,844     |           |         |           | 2,065     |          
|                                     | Deferred charges, net                                                                                                                    |                                                                                                                                  |                 | 15,574    |           |         |           | 16,373    |          
|                                     | Other assets                                                                                                                             |                                                                                                                                  |                 | 37,262    |           |         |           | 35,376    |          
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     |                                                                                                                                          | Total assets                                                                                                                     |                 | $         | 2,053,842 |         |           | $         | 2,215,451 |        
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|LIABILITIES AND PARTNERS
    EQUITY |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     | Indebtedness, including $34,060 and $119,085 of
    debt secured by assets held for sale at December 31, 2004
    and 2003, respectively |                                                                                                                                  | $               | 1,129,478 |           |         | $         | 1,186,322 |          
|                                     | Accounts payable and accrued expenses                                                                                                    |                                                                                                                                  |                 | 58,837    |           |         |           | 65,872    |          
|                                     | Dividend and distribution payable                                                                                                        |                                                                                                                                  |                 | 19,203    |           |         |           | 19,509    |          
|                                     | Accrued interest payable                                                                                                                 |                                                                                                                                  |                 | 7,677     |           |         |           | 6,923     |          
|                                     | Security deposits and prepaid rents                                                                                                      |                                                                                                                                  |                 | 7,236     |           |         |           | 7,890     |          
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     |                                                                                                                                          | Total liabilities                                                                                                                |                 |           | 1,222,431 |         |           |           | 1,286,516 |        
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     | Commitments and contingencies                                                                                                            |                                                                                                                                  |                 |           |           |         |           |           |          
|                                     | Partners equity                                                                                                                         |                                                                                                                                  |                 |           |           |         |           |           |          
|                                     |                                                                                                                                          | Preferred units                                                                                                                  |                 |           | 95,000    |         |           |           | 215,000   |        
|                                     |                                                                                                                                          | Common units                                                                                                                     |                 |           |           |         |           |           |           |        
|                                     |                                                                                                                                          |                                                                                                                                  | General partner |           |           | 8,673   |           |           |           | 8,464   | 
|                                     |                                                                                                                                          |                                                                                                                                  | Limited partner |           |           | 737,940 |           |           |           | 719,618 | 
|                                     |                                                                                                                                          | Accumulated other comprehensive income (loss)                                                                                    |                 |           | (10,202   | )       |           |           | (14,147   | )      
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     |                                                                                                                                          | Total partners equity                                                                                                           |                 |           | 831,411   |         |           |           | 928,935   |        
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          
|                                     |                                                                                                                                          | Total liabilities and partners equity                                                                                           |                 | $         | 2,053,842 |         |           | $         | 2,215,451 |        
|                                     |                                                                                                                                          |                                                                                                                                  |                 |           |           |         |           |          

The accompanying notes are an integral part of
these consolidated financial statements.




Post Apartment Homes, L.P.


86




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##### Table of Contents



POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF
OPERATIONS


(In thousands, except per unit
data)


|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |         |         | 
|---------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------ | ------- | ------- | ---- | ------ | ------- | ------- | - | ------ | ------- | ------- | 
|                                               |                                                                                                    |                                             
|                                               |                                                                                                    | Year Ended December 31,                     
|                                               |                                                                                                    |                                             
|                                               |                                                                                                    | 2004                                         |        | 2003    |         | 2002
|                                               |                                                                                                    |                                              |        |         |         |     
|Revenues                                       |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Rental                                                                                             |                                              | $      | 281,664 |         |      | $      | 269,400 |         |   | $      | 265,301 |        
|                                               | Other property revenues                                                                            |                                              |        | 17,166  |         |      |        | 15,900  |         |   |        | 15,435  |        
|                                               | Other                                                                                              |                                              |        | 1,000   |         |      |        | 457     |         |   |        | 260     |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               |                                                                                                    | Total revenues                               |        |         | 299,830 |      |        |         | 285,757 |   |        |         | 280,996 | 
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|Expenses                                       |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Property operating and maintenance (exclusive of
    items shown separately below)                 |                                              |        | 132,738 |         |      |        | 124,178 |         |   |        | 117,030 |        
|                                               | Depreciation                                                                                       |                                              |        | 83,029  |         |      |        | 81,201  |         |   |        | 74,482  |        
|                                               | General and administrative                                                                         |                                              |        | 21,275  |         |      |        | 15,102  |         |   |        | 14,430  |        
|                                               | Development costs and other                                                                        |                                              |        | 1,337   |         |      |        | 2,137   |         |   |        | 694     |        
|                                               | Proxy contest and related costs                                                                    |                                              |        |        |         |      |        | 5,231   |         |   |        |        |        
|                                               | Severance charges                                                                                  |                                              |        |        |         |      |        | 21,506  |         |   |        |        |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               |                                                                                                    | Total expenses                               |        |         | 238,379 |      |        |         | 249,355 |   |        |         | 206,636 | 
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|Operating Income                               |                                                                                                    |                                              | 61,451 |         |         |      | 36,402 |         |         |   | 74,360 |        
|                                               | Interest income                                                                                    |                                              |        | 817     |         |      |        | 894     |         |   |        | 1,288   |        
|                                               | Interest expense                                                                                   |                                              |        | (65,415 | )       |      |        | (63,182 | )       |   |        | (50,231 | )      
|                                               | Termination of debt remarketing agreement
    (interest expense)                                   |                                              |        | (10,615 | )       |      |        |        |         |   |        |        |        
|                                               | Loss on early extinguishment of indebtedness                                                       |                                              |        | (4,011  | )       |      |        |        |         |   |        | (136    | )      
|                                               | Amortization of deferred financing costs                                                           |                                              |        | (4,304  | )       |      |        | (3,801  | )       |   |        | (2,327  | )      
|                                               | Equity in income of unconsolidated real estate
    entities                                        |                                              |        | 1,083   |         |      |        | 7,790   |         |   |        | (1,591  | )      
|                                               | Gains on property sales                                                                            |                                              |        |        |         |      |        |        |         |   |        | 13,275  |        
|                                               | Minority interest in consolidated property
    partnerships                                        |                                              |        | 671     |         |      |        | 1,605   |         |   |        | 1,771   |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               |                                                                                                    | Income (loss) from continuing
    operations |        |         | (20,323 | )    |        |         | (20,292 | ) |        |         | 36,409  | 
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|Discontinued operations                        |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Income (loss) from discontinued operations                                                         |                                              |        | 7,889   |         |      |        | (403    | )       |   |        | 20,138  |        
|                                               | Gains on property sales                                                                            |                                              |        | 113,739 |         |      |        | 40,792  |         |   |        | 16,571  |        
|                                               | Loss on early extinguishment of indebtedness
    associated with property sales                    |                                              |        | (4,128  | )       |      |        |        |         |   |        |        |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               |                                                                                                    | Income from discontinued operations          |        |         | 117,500 |      |        |         | 40,389  |   |        |         | 36,709  | 
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|Net income                                     |                                                                                                    |                                              | 97,177 |         |         |      | 20,097 |         |         |   | 73,118 |        
|                                               | Distributions to preferred unitholders                                                             |                                              |        | (12,105 | )       |      |        | (17,049 | )       |   |        | (17,049 | )      
|                                               | Redemption costs on preferred units                                                                |                                              |        | (3,526  | )       |      |        |        |         |   |        |        |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|Net income available to common
    unitholders |                                                                                                    | $                                            | 81,546 |         |         | $    | 3,048  |         |         | $ | 56,069 |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|Per common unit data 
    Basic               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Income (loss) from continuing operations (net of
    preferred distributions and redemption costs) |                                              | $      | (0.85   | )       |      | $      | (0.89   | )       |   | $      | 0.46    |        
|                                               | Income from discontinued operations                                                                |                                              |        | 2.77    |         |      |        | 0.96    |         |   |        | 0.87    |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Net income available to common unitholders                                                         |                                              | $      | 1.92    |         |      | $      | 0.07    |         |   | $      | 1.33    |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Weighted average common units outstanding                                                          |                                              |        | 42,474  |         |      |        | 42,134  |         |   |        | 42,021  |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|Per common unit data 
    Diluted             |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Income (loss) from continuing operations (net of
    preferred distributions and redemption costs) |                                              | $      | (0.85   | )       |      | $      | (0.89   | )       |   | $      | 0.46    |        
|                                               | Income from discontinued operations                                                                |                                              |        | 2.77    |         |      |        | 0.96    |         |   |        | 0.87    |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Net income available to common unitholders                                                         |                                              | $      | 1.92    |         |      | $      | 0.07    |         |   | $      | 1.33    |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Weighted average common units outstanding                                                          |                                              |        | 42,474  |         |      |        | 42,134  |         |   |        | 42,036  |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        
|                                               | Common distributions declared                                                                      |                                              | $      | 1.80    |         |      | $      | 1.80    |         |   | $      | 3.12    |        
|                                               |                                                                                                    |                                              |        |         |         |      |        |         |         |   |        |        

The accompanying notes are an integral part of
these consolidated financial statements.




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##### Table of Contents



POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS
EQUITY


FOR THE YEARS ENDED DECEMBER 31, 2004,
2003 AND 2002


(In thousands, except per unit
data)


|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |          |         |  
|--------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------- | ------------ | ------ | ------------- | ----- | ------ | --- | ----- | ------- | -------- | ------ | - | ------- | - | ------- | - | --------- | -------- | ------- | -
|                                        |                                                                                                                |                                |         |              |        | Accumulated   |       |       
|                                        |                                                                                                                |                                |         | Common Units |        | Other         |       |       
|                                        |                                                                                                                |                                |         |              |        | Comprehensive |       |       
|                                        |                                                                                                                | Preferred                      |         | General      |        | Limited       |       | Income |     |      
|                                        |                                                                                                                | Units                          |         | Partner      |        | Partners      |       | (Loss) |     | Total
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |      
|Partners Equity, December 31,
    2001 |                                                                                                                | $                              | 215,000 |              |        | $             | 9,877 |        |     | $     | 859,438 |          |        | $ | (6,645  | ) |         | $ | 1,077,670 |         
|                                        | Comprehensive income                                                                                           |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |          |        
|                                        |                                                                                                                | Net income                     |         |              | 17,049 |               |       |        | 561 |       |         |          | 55,508 |   |         |   |        |   |           |          | 73,118  |  
|                                        |                                                                                                                | Net change in derivative value |         |              |       |               |       |        |    |       |         |          |       |   |         |   | (10,204 | ) |           |          | (10,204 | )
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |         
|                                        |                                                                                                                | Total comprehensive income     |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |          | 62,914  |  
|                                        | Contributions from the Company related to
    employee stock purchase and stock option plans                   |                                |         |             |        |               |       | 13     |     |       |         | 1,241    |        |   |         |  |         |   |           | 1,254    |        
|                                        | Distributions to preferred Unitholders                                                                         |                                |         | (17,049      | )      |               |       |       |     |       |         |         |        |   |         |  |         |   |           | (17,049  | )      
|                                        | Distributions to common Unitholders                                                                            |                                |         |             |        |               |       | (1,311 | )   |       |         | (129,767 | )      |   |         |  |         |   |           | (131,078 | )      
|                                        | Contributions from the Company related to shares
    issued for restricted stock, net of deferred compensation |                                |         |             |        |               |       | 3      |     |       |         | 262      |        |   |         |  |         |   |           | 265      |        
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |         
|Partners Equity, December 31,
    2002 |                                                                                                                |                                | 215,000 |              |        |               | 9,143 |        |     |       | 786,682 |          |        |   | (16,849 | ) |         |   | 993,976   |         
|                                        | Comprehensive income                                                                                           |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |          |        
|                                        |                                                                                                                | Net income                     |         |              | 17,049 |               |       |        | 30  |       |         |          | 3,018  |   |         |   |        |   |           |          | 20,097  |  
|                                        |                                                                                                                | Net change in derivative value |         |              |       |               |       |        |    |       |         |          |       |   |         |   | 2,702   |   |           |          | 2,702   |  
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |         
|                                        |                                                                                                                | Total comprehensive income     |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |          | 22,799  |  
|                                        | Contributions from the Company related to
    employee stock purchase and stock option plans                   |                                |         |             |        |               |       | 41     |     |       |         | 4,098    |        |   |         |  |         |   |           | 4,139    |        
|                                        | Equity-based compensation                                                                                      |                                |         |             |        |               |       | 2      |     |       |         | 242      |        |   |         |  |         |   |           | 244      |        
|                                        | Distributions to preferred Unitholders                                                                         |                                |         | (17,049      | )      |               |       |       |     |       |         |         |        |   |         |  |         |   |           | (17,049  | )      
|                                        | Distributions to common Unitholders                                                                            |                                |         |             |        |               |       | (759   | )   |       |         | (75,157  | )      |   |         |  |         |   |           | (75,916  | )      
|                                        | Contributions from the Company related to shares
    issued for restricted stock, net of deferred compensation |                                |         |             |        |               |       | 7      |     |       |         | 735      |        |   |         |  |         |   |           | 742      |        
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |         
|Partners Equity, December 31,
    2003 |                                                                                                                |                                | 215,000 |              |        |               | 8,464 |        |     |       | 719,618 |          |        |   | (14,147 | ) |         |   | 928,935   |         
|                                        | Comprehensive income                                                                                           |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |          |        
|                                        |                                                                                                                | Net income                     |         |              | 12,105 |               |       |        | 851 |       |         |          | 84,221 |   |         |   |        |   |           |          | 97,177  |  
|                                        |                                                                                                                | Net change in derivative value |         |              |       |               |       |        |    |       |         |          |       |   |         |   | 3,945   |   |           |          | 3,945   |  
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |         
|                                        |                                                                                                                | Total comprehensive income     |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |          | 101,122 |  
|                                        | Contributions from the Company related to
    employee stock purchase and stock option plans                   |                                |         |             |        |               |       | 105    |     |       |         | 10,360   |        |   |         |  |         |   |           | 10,465   |        
|                                        | Redemption of preferred units                                                                                  |                                |         | (120,000     | )      |               |       |       |     |       |         |         |        |   |         |  |         |   |           | (120,000 | )      
|                                        | Equity-based compensation                                                                                      |                                |         |             |        |               |       | 7      |     |       |         | 669      |        |   |         |  |         |   |           | 676      |        
|                                        | Purchase of common units                                                                                       |                                |         |             |        |               |       |       |     |       |         | (2,268   | )      |   |         |  |         |   |           | (2,268   | )      
|                                        | Distributions to preferred Unitholders                                                                         |                                |         | (12,105      | )      |               |       |       |     |       |         |         |        |   |         |  |         |   |           | (12,105  | )      
|                                        | Distributions to common Unitholders                                                                            |                                |         |             |        |               |       | (765   | )   |       |         | (75,758  | )      |   |         |  |         |   |           | (76,523  | )      
|                                        | Contributions from the Company related to shares
    issued for restricted stock, net of deferred compensation |                                |         |             |        |               |       | 11     |     |       |         | 1,098    |        |   |         |  |         |   |           | 1,109    |        
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |         
|Partners Equity, December 31,
    2004 |                                                                                                                | $                              | 95,000  |              |        | $             | 8,673 |        |     | $     | 737,940 |          |        | $ | (10,202 | ) |         | $ | 831,411   |         
|                                        |                                                                                                                |                                |         |              |        |               |       |        |     |       |         |          |        |   |         |   |         |   |           |         

The accompanying notes are an integral part of
these consolidated financial statements.




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POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(In thousands, except per unit
data)


|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |         |  
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------ | ------ | -------- | -------- | ---- | ------ | -------- | ------- | - | ----- | -------- | ------- | -
|                                                         |                                                                                          |                                                                                                                   
|                                                         |                                                                                          | Year Ended December 31,                                                                                           
|                                                         |                                                                                          |                                                                                                                   
|                                                         |                                                                                          | 2004                                                                                                               |        | 2003     |          | 2002
|                                                         |                                                                                          |                                                                                                                    |        |          |          |     
|Cash Flows From Operating Activities                     |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net income                                                                               |                                                                                                                    | $      | 97,177   |          |      | $      | 20,097   |         |   | $     | 73,118   |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities:    |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |        
|                                                         |                                                                                          | Depreciation                                                                                                       |        |          | 85,310   |      |        |          | 89,975  |   |       |          | 87,927  |  
|                                                         |                                                                                          | Amortization of deferred loan costs                                                                                |        |          | 4,304    |      |        |          | 3,801   |   |       |          | 2,327   |  
|                                                         |                                                                                          | Gains on property sales  discontinued
    operations                                                              |        |          | (113,739 | )    |        |          | (40,792 | ) |       |          | (16,571 | )
|                                                         |                                                                                          | Gains on property sales  continuing
    operations                                                                |        |          |         |      |        |          |        |   |       |          | (13,275 | )
|                                                         |                                                                                          | Asset impairment charges                                                                                           |        |          | 2,233    |      |        |          | 17,462  |   |       |          |        |  
|                                                         |                                                                                          | Equity in (income) losses of unconsolidated real
    estate entities, net of distributions of accumulated earnings |        |          | (694     | )    |        |          | (7,790  | ) |       |          | 1,591   |  
|                                                         |                                                                                          | Equity-based compensation                                                                                          |        |          | 1,785    |      |        |          | 1,071   |   |       |          |        |  
|                                                         |                                                                                          | Loss on early extinguishment of indebtedness                                                                       |        |          | 4,302    |      |        |          |        |   |       |          |        |  
|                                                         | Changes in assets, (increase) decrease in:                                               |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |        
|                                                         |                                                                                          | Restricted cash                                                                                                    |        |          | 221      |      |        |          | (696    | ) |       |          | (54     | )
|                                                         |                                                                                          | Other assets                                                                                                       |        |          | (2,858   | )    |        |          | 4,676   |   |       |          | 8,098   |  
|                                                         |                                                                                          | Deferred charges                                                                                                   |        |          | (361     | )    |        |          | (2,210  | ) |       |          | (1,226  | )
|                                                         | Changes in liabilities, increase (decrease) in:                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |          |        
|                                                         |                                                                                          | Accrued interest payable                                                                                           |        |          | 754      |      |        |          | (2,071  | ) |       |          | (666    | )
|                                                         |                                                                                          | Accounts payable and accrued expenses                                                                              |        |          | (356     | )    |        |          | 8,386   |   |       |          | (20,740 | )
|                                                         |                                                                                          | Security deposits and prepaid rents                                                                                |        |          | (654     | )    |        |          | (360    | ) |       |          | (766    | )
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net cash provided by operating activities                                                |                                                                                                                    |        | 77,424   |          |      |        | 91,549   |         |   |       | 119,763  |        
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Cash Flows From Investing Activities                     |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Construction and acquisition of real estate
    assets, net of payables                  |                                                                                                                    |        | (42,777  | )        |      |        | (24,179  | )       |   |       | (150,792 | )      
|                                                         | Net proceeds from property sales                                                         |                                                                                                                    |        | 138,637  |          |      |        | 163,560  |         |   |       | 182,216  |        
|                                                         | Capitalized interest                                                                     |                                                                                                                    |        | (1,078   | )        |      |        | (3,555   | )       |   |       | (13,223  | )      
|                                                         | Recurring capital expenditures                                                           |                                                                                                                    |        | (9,884   | )        |      |        | (9,473   | )       |   |       | (9,381   | )      
|                                                         | Non-recurring capital expenditures                                                       |                                                                                                                    |        | (4,605   | )        |      |        | (5,152   | )       |   |       | (3,441   | )      
|                                                         | Revenue generating capital expenditures                                                  |                                                                                                                    |        | (26      | )        |      |        | (1,240   | )       |   |       | (2,035   | )      
|                                                         | Corporate additions and improvements                                                     |                                                                                                                    |        | (681     | )        |      |        | (799     | )       |   |       | (1,100   | )      
|                                                         | Distributions from (investments in and advances
    to) unconsolidated entities          |                                                                                                                    |        | 53,968   |          |      |        | 115,033  |         |   |       | (51,065  | )      
|                                                         | Capital distributions to minority interests                                              |                                                                                                                    |        | (3,806   | )        |      |        |         |         |   |       |         |        
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net cash provided by (used in) investing
    activities                                  |                                                                                                                    |        | 129,748  |          |      |        | 234,195  |         |   |       | (48,821  | )      
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Cash Flows From Financing Activities                     |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Proceeds from notes payable                                                              |                                                                                                                    |        | 135,000  |          |      |        |         |         |   |       | 95,500   |        
|                                                         | Payments on notes payable                                                                |                                                                                                                    |        | (115,753 | )        |      |        | (103,875 | )       |   |       | (47,632  | )      
|                                                         | Payment of financing costs                                                               |                                                                                                                    |        | (5,631   | )        |      |        |         |         |   |       | (561     | )      
|                                                         | Lines of credit proceeds (repayments), net                                               |                                                                                                                    |        | (21,262  | )        |      |        | (124,358 | )       |   |       | 30,167   |        
|                                                         | Redemption of preferred units                                                            |                                                                                                                    |        | (120,000 | )        |      |        |         |         |   |       |         |        
|                                                         | Redemption of common units                                                               |                                                                                                                    |        | (2,268   | )        |      |        |         |         |   |       |         |        
|                                                         | Contributions from company related to employee
    stock purchase and stock option plans |                                                                                                                    |        | 10,465   |          |      |        | 4,139    |         |   |       | 1,254    |        
|                                                         | Distributions to preferred unitholders                                                   |                                                                                                                    |        | (12,571  | )        |      |        | (17,049  | )       |   |       | (17,049  | )      
|                                                         | Distributions to common unitholders                                                      |                                                                                                                    |        | (76,363  | )        |      |        | (89,657  | )       |   |       | (131,034 | )      
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|                                                         | Net cash used in financing activities                                                    |                                                                                                                    |        | (208,383 | )        |      |        | (330,800 | )       |   |       | (69,355  | )      
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Net increase (decrease) in cash and cash
    equivalents |                                                                                          |                                                                                                                    | (1,211 | )        |          |      | (5,056 | )        |         |   | 1,587 |         
|Cash and cash equivalents, beginning of period           |                                                                                          |                                                                                                                    | 1,334  |          |          |      | 6,390  |          |         |   | 4,803 |         
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         
|Cash and cash equivalents, end of period                 |                                                                                          | $                                                                                                                  | 123    |          |          | $    | 1,334  |          |         | $ | 6,390 |         
|                                                         |                                                                                          |                                                                                                                    |        |          |          |      |        |          |         |   |       |         

The accompanying notes are an integral part of
these consolidated financial statements.




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POST APARTMENT HOMES, L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)







|   |                                                               
|-- | --------------------------------------------------------------
|1. | ORGANIZATION AND SUMMARY OF SIGNIFICANT
    ACCOUNTING POLICES

Organization

Post Apartment Homes, L.P. (the Operating
Partnership), a Georgia limited partnership, and its
subsidiaries develop, own and manage upscale multi-family
apartment communities in selected markets in the United States.
Post Properties, Inc. (the Company) through its
wholly-owned subsidiaries is the sole general partner, a limited
partner and owns a majority interest in the Operating
Partnership. The Operating Partnership, through its operating
divisions and subsidiaries conducts substantially all of the
on-going operations of Post Properties, Inc., a publicly traded
company which operates as a self-administered and self-managed
real estate investment trust.

At December 31, 2004, the Company owned
94.1% of the common limited partnership interests (Common
Units) in the Operating Partnership and 100% of the
preferred limited partnership interests (Preferred
Units). The Companys weighted average common
ownership interest in the Operating Partnership was 93.7%, 89.5%
and 87.9% for the years ended December 31, 2004, 2003 and
2002 respectively. Common Units held by persons other than the
Company represented a 5.9% ownership interest in the Operating
Partnership. Each Common Unit may be redeemed by the holder
thereof for either one share of Company common stock or cash
equal to the fair market value thereof at the time of such
redemptions, 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 Common
Units for Company common stock, the Companys percentage
ownership interest in the Operating Partnership will increase.
In addition, whenever the Company issues shares of common stock,
the Company will contribute any net proceeds therefrom to the
Operating Partnership and the Operating Partnership will issue
an equivalent number of Common Units to the Company.

At December 31, 2004, the Company owned
24,905 apartment units in 66 apartment communities, including
666 apartment units in three communities held in unconsolidated
entities, including 205 apartment units currently under
development in one community and including 127 units in one
community that will be converted into for-sale condominium homes
through a taxable REIT subsidiary starting in 2005. The Company
is also developing 145 for-sale condominium homes through a
taxable REIT subsidiary. Subsequent to December 31, 2004,
the Operating Partnership announced plans to convert another
community, containing 134 units, into for-sale condominium
homes through a taxable REIT subsidiary. At December 31,
2004, approximately 51.6%, 17.6%, 9.0% and 8.0% (on a unit
basis) of the Operating Partnerships operating communities
were located in the Atlanta, Dallas, Tampa and the greater
Washington D.C. metropolitan areas, respectively.

Under the provisions of the limited partnership
agreement, as amended, Operating Partnership net profits, net
losses and cash flow (after allocations to preferred ownership
interests) are allocated to the partners in proportion to their
common ownership interests. Cash distributions from the
Operating Partnership shall be, at a minimum, sufficient to
enable the Company to satisfy its annual dividend requirements
to maintain its REIT status under the Code.

Basis of presentation

The accompanying consolidated financial
statements include the consolidated accounts of the Operating
Partnership. The Operating Partnerships investments in
non-majority owned entities in which it does not exercise
unilateral control, but has the ability to exercise significant
influence over operating and financial policies, are accounted
for on the equity method of accounting. Accordingly, the
Operating Partnerships share of the net earnings or losses
of these entities is included in consolidated net income. All
significant intercompany accounts and transactions have been
eliminated in consolidation.

Certain items in the 2003 and 2002 consolidated
financial statements were reclassified for comparative purposes
with the 2004 consolidated financial statements.

Cost capitalization

The Operating Partnership capitalizes those
expenditures relating to the acquisition of new assets, the
development and construction of new apartment communities, the
enhancement of the value of existing assets and those
expenditures that substantially extend the life of existing
assets. Recurring capital expenditures are expenditures of a
type that are expected to be incurred on an annual basis during
the life of an apartment community, such as carpet,




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





appliances and flooring. Non-recurring capital
expenditures are expenditures that generally occur less
frequently than on an annual basis, such as major exterior
projects relating to landscaping and structural improvements.
Revenue generating capital expenditures are expenditures for the
major renovation of communities, the new installation of water
sub-metering equipment and other property upgrade costs that
enhance the rental value of such communities. All other
expenditures necessary to maintain a community in ordinary
operating condition are expensed as incurred. Additionally, for
new development communities, carpet, vinyl, and blind
replacements are expensed as incurred during the first five
years (which corresponds to their estimated depreciable life).
Thereafter, these replacements are capitalized and depreciated.
The Operating Partnership expenses as incurred all interior and
exterior painting of communities.

For communities under development, the Operating
Partnership capitalizes interest, real estate taxes, and certain
internal personnel and associated costs directly related to
apartment communities under development and construction.
Interest is capitalized to projects under development based upon
the weighted average cumulative project costs for each month
multiplied by the Operating Partnerships weighted average
borrowing costs, expressed as a percentage. Weighted average
borrowing costs include the costs of the Operating
Partnerships fixed rate secured and unsecured borrowings
and the variable rate unsecured borrowings under its line of
credit facilities. The weighted average borrowing costs,
expressed as a percentage, for the years ended
December, 31, 2004, 2003 and 2002 were approximately 7.3%,
7.0% and 6.8%, respectively. Internal personnel and associated
costs are capitalized to projects under development based upon
the effort identifiable with such projects. The Operating
Partnership treats each unit in an apartment community
separately for cost accumulation, capitalization and expense
recognition purposes. Prior to the commencement of leasing
activities, interest and other construction costs are
capitalized and reflected on the balance sheet as construction
in progress. The Operating Partnership ceases the capitalization
of such costs as the residential units in a community become
substantially complete and available for occupancy. This results
in a proration of costs between amounts that are capitalized and
expensed as the residential units in a development community
become available for occupancy. In addition, prior to the
completion of units, the Operating Partnership expenses as
incurred substantially all operating expenses (including
pre-opening marketing as well as property management and leasing
personnel expenses) of such communities.

Real estate assets, depreciation and
impairment

Real estate assets are stated at the lower of
depreciated cost or fair value, if deemed impaired. Major
replacements and betterments are capitalized and depreciated
over their estimated useful lives. Depreciation is computed on a
straight-line basis over the useful lives of the properties
(buildings and components and related land
improvements  20-40 years; furniture, fixtures
and equipment  5-10 years).

The Operating Partnership continually evaluates
the recoverability of the carrying value of its real estate
assets using the methodology prescribed in Statement of
Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. Factors considered by management in evaluating
impairment of its existing real estate assets held for
investment include significant declines in property operating
profits, recurring property operating losses and other
significant adverse changes in general market conditions that
are considered permanent in nature. Under
SFAS No. 144, a real estate asset held for investment
is not considered impaired if the undiscounted, estimated future
cash flows of an asset (both the annual estimated cash flow from
future operations and the estimated cash flow from the
theoretical sale of the asset) over its estimated holding period
are in excess of the assets net book value at the balance
sheet date. If any real estate asset held for investment is
considered impaired, a loss is provided to reduce the carrying
value of the asset to its estimated fair value. The Operating
Partnership periodically classifies real estate assets as held
for sale. An asset is classified as held for sale after the
approval of the Operating Partnerships investment
committee and after an actual program to sell the asset has
commenced. Upon the classification of a real estate asset as
held for sale, the carrying value of the asset is reduced to the
lower of its net book value or its estimated fair value, less
costs to sell the asset. Subsequent to the classification of
assets as held for sale, no further depreciation expense is
recorded.

Real estate assets held for sale are stated
separately on the accompanying consolidated balance sheets.
Effective January 1, 2002 (through the implementation of
SFAS No. 144), the operating results of real estate
assets held for sale and sold are reported as discontinued
operations in the accompanying statements of operations. Income
from discontinued operations includes the revenues and expenses,
including depreciation and allocated interest expense,
associated with the assets. Interest expense is allocated to
assets held for sale based on actual interest costs for assets




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





with secured mortgage debt. Interest expense is
allocated to unencumbered assets based on the ratio of unsecured
debt to unencumbered assets multiplied by the weighted average
interest rate on the Operating Partnerships unsecured debt
for the period and further multiplied by the book value of the
assets held for sale and sold. This classification of operating
results as discontinued operations applies retroactively for all
periods presented for assets designated as held for sale
subsequent to January 1, 2002. Additionally, gains and
losses on assets designated as held for sale subsequent to
January 1, 2002 are classified as part of discontinued
operations.

Revenue recognition

Residential properties are leased under operating
leases with terms of generally one year or less. Rental revenues
from residential leases are recognized on the straight-line
method over the approximate life of the leases, which is
generally one year. The recognition of rental revenues from
residential leases when earned has historically not been
materially different from rental revenues recognized on a
straight-line basis.

Under the terms of residential leases, the
residents of the Operating Partnerships residential
communities are obligated to reimburse the Operating Partnership
for certain utility usage, water and electricity (at selected
properties), where the Operating Partnership is the primary
obligor to the public utility entity. These utility
reimbursements from residents are reflected as other property
revenues in the consolidated statements of operations.

Apartment Community Acquisitions

In accordance with the provisions of Statement of
Financial Accounting Standards (SFAS) No. 141,
Business Combinations, the aggregate purchase price
of apartment community acquisitions is allocated to the tangible
assets, intangible assets and liabilities (including mortgage
indebtedness) acquired in each transaction, based on their
estimated fair values at the acquisition date. The acquired
tangible assets, principally land, building and improvements and
furniture, fixtures and equipment, are reflected in real estate
assets and depreciated over their estimated useful lives. The
acquired intangible assets, principally above/below market
leases, in-place leases and resident relationships, are
reflected in other assets and amortized over the average
remaining lease terms of the acquired leases and resident
relationships (generally 6 months to 18 months).

Equity-based compensation

On January 1, 2003, the Operating
Partnership elected to voluntarily change its method of
accounting for stock-based compensation to the fair value method
prescribed by Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for
Stock-Based Compensation, using the prospective method
prescribed in SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and
Disclosure. For stock-based compensation granted prior to
January 1, 2003, the Operating Partnership accounted for
stock-based compensation under the intrinsic value method
prescribed by Accounting Principles Board (APB)
Opinion 25, Accounting for Stock Issued to
Employees.

Under the prospective method of adoption
prescribed by SFAS No. 123 and SFAS No. 148,
the Operating Partnership reflects as an expense each period the
vested portion of the estimated cost of stock-based
compensation, calculated under the Black-Scholes option pricing
model for stock options, for all stock-based compensation
granted after January 1, 2003. For stock-based compensation
granted prior to December 31, 2002, compensation expense
was not recognized for stock options granted at the
Companys current stock price on the grant date. As a
result, the Operating Partnerships general and
administrative expenses may not be comparable between periods.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





The following table reflects the effect on the
Operating Partnerships net income and net income per
common unit had the fair value method of accounting under
SFAS No. 123 been applied for each year.

|                                           |                                                                      |      |   |        |   |      |   |        |   |  |   |        |  
|------------------------------------------ | -------------------------------------------------------------------- | ---- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                           |                                                                      | 2004 |   | 2003   |   | 2002
|                                           |                                                                      |      |   |        |   |     
|Net income available to common unitholders |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | As reported                                                          |      | $ | 81,546 |   |      | $ | 3,048  |   |  | $ | 56,069 |  
|                                           | Equity-based compensation included in net income,
    as reported    |      |   | 1,785  |   |      |   | 1,071  |   |  |   | 265    |  
|                                           | Equity-based compensation determined under the
    fair value method |      |   | (1,853 | ) |      |   | (1,216 | ) |  |   | (833   | )
|                                           |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | Pro forma                                                            |      | $ | 81,478 |   |      | $ | 2,903  |   |  | $ | 55,501 |  
|                                           |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|Net income per common unit-basic           |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | As reported                                                          |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.33   |  
|                                           | Pro forma                                                            |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.32   |  
|Net income per common unit-diluted         |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | As reported                                                          |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.33   |  
|                                           | Pro forma                                                            |      | $ | 1.92   |   |      | $ | 0.07   |   |  | $ | 1.32   |  

Derivative financial instruments

The Operating Partnership accounts for derivative
financial instruments at fair value under the provisions of
SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended. The
Operating Partnership uses derivative financial instruments,
interest rate swap and interest rate cap arrangements, to manage
or hedge its exposure to interest rate changes. The Operating
Partnership designates each derivative instrument as a hedge of
specific interest expense cash flow exposure. Under
SFAS 133, as amended, derivative instruments qualifying as
hedges of specific cash flows are recorded on the balance sheet
at fair value with an offsetting increase or decrease to
accumulated other comprehensive income, a partners equity
account, until the hedged transactions are recognized in
earnings. Any ineffective portion of cash flow hedges are
recognized immediately in earnings.

Cash and cash equivalents

For purposes of the statement of cash flows, all
investments purchased with an original maturity of three months
or less are considered to be cash equivalents.

Restricted cash

Restricted cash is generally comprised of
resident security deposits for communities located in Florida
and Tennessee and required maintenance reserves for communities
located in DeKalb County, Georgia.

Deferred financing costs

Deferred financing costs are amortized using the
straight-line method, which approximates the interest method,
over the terms of the related debt.

Per unit data

The Operating Partnership reports both basic and
diluted earnings per unit amounts. Basic earnings per common
unit is computed by dividing net income available to common
unitholders by the weighted average number of common units
outstanding during the year. Diluted earnings per common unit is
computed by dividing net income available to common unitholders
by the weighted average number of common units and common unit
equivalents outstanding during the year, which are computed
using the treasury stock method for outstanding stock options.
Common unit equivalents are excluded from the computations in
years in which they have an anti-dilutive effect.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





Use of estimates

The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.

New accounting pronouncements

In 2004 and 2003, several new accounting
pronouncements were issued and the pronouncements with a
potential impact on the Operating Partnership in 2004 and in
future periods are discussed below.

FASB Interpretation No. 46R,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 was issued in December
2003. FIN No. 46R requires consolidation of all legal
entities in which the enterprise holds contractual, ownership or
other monetary interests that change with changes in the
entitys net asset value (such entities being designated as
variable interest entities) where the enterprise is deemed the
primary beneficiary. The provisions of FIN No. 46R
generally became applicable in the fourth quarter of 2003 and
the first quarter of 2004 depending on the nature and timing of
the legal entities involves in these types of relationships. The
Operating Partnership currently does not have any interests in
special purpose entities or other variable interest entities, as
defined in FIN No. 46R.

SFAS No. 123R, Share-Based
Payment, was issued in December 2004.
SFAS No. 123R revises SFAS No. 123,
Accounting for Stock-Based Compensation and requires
companies to expense the fair value of employee stock options
and other forms of stock-based compensation.
SFAS No. 123R also supersedes the provisions of APB
No. 25. The provisions of SFAS No. 123R are
effective as of the beginning of the Operating
Partnerships interim reporting period starting after
June 15, 2005. The Operating Partnership plans to adopt the
provisions of SFAS No. 123R in the third quarter of
2005 and is currently evaluating the alternative methods of
adoption. Since the Operating Partnership elected to apply the
provisions of SFAS No. 123 on January 1, 2003,
the adoption of SFAS No. 123R is not expected to have
a significant impact on the Operating Partnerships
financial position or results of operations.



|   |                 
|-- | ----------------
|2. | DEFERRED CHARGES

Deferred charges consist of the following:

|                               |  |              |         |      |  |   |         |  
|------------------------------ |  | ------------ | ------- | ---- |  | - | ------- | -
|                               |  |             
|                               |  | December 31,
|                               |  |             
|                               |  | 2004         |         | 2003
|                               |  |              |         |     
|Deferred financing costs       |  | $            | 33,542  |      |  | $ | 37,289  |  
|Other                          |  |              | 4,350   |      |  |   | 4,424   |  
|                               |  |              |         |      |  |   |         |  
|                               |  |              | 37,892  |      |  |   | 41,713  |  
|Less: accumulated amortization |  |              | (22,318 | )    |  |   | (25,340 | )
|                               |  |              |         |      |  |   |         |  
|                               |  | $            | 15,574  |      |  | $ | 16,373  |  
|                               |  |              |         |      |  |   |         |  




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)







|   |             
|-- | ------------
|3. | INDEBTEDNESS

At December 31, 2004 and 2003, the Operating
Partnerships indebtedness consisted of the following:

|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|-------------------------------------------- |  | ------------- | -------------- | -------- |  | -------- | -------------- | ------------ |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                             |  |               |                |          |  |          |                |             
|                                             |  |               |                |          |  |          |                | December 31,
|                                             |  |               |                | Interest |  | Maturity |                |             
|Description                                  |  | Payment Terms |                | Rate     |  | Date     |                | 2004         |  | 2003
|                                             |  |               |                |          |  |          |                |              |  |     
|Unsecured Notes                              |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|Senior Notes                                 |  |               | Int.           |          |  |          | 5.125% - 7.70% |              |  |      | 2006-2011 |  |  | $ | 385,000   |  |  | $ | 285,000   | 
|Medium Term Notes                            |  |               | Int.           |          |  |          | 6.78% -  8.12% | (1)          |  |      | 2005      |  |  |   | 212,043   |  |  |   | 323,000   | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   | 597,043   |  |  |   | 608,000   | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|Unsecured Lines of Credit                    |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|Syndicated Line of Credit                    |  |               | N/A            |          |  |          | LIBOR + 0.75%  | (2)          |  |      | 2007      |  |  |   | 40,000    |  |  |   | 60,000    | 
|Cash Management Line                         |  |               | N/A            |          |  |          | LIBOR + 0.75%  |              |  |      | 2007      |  |  |   | 10,748    |  |  |   | 12,010    | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   | 50,748    |  |  |   | 72,010    | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|Conventional Fixed Rate (Secured)            |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|FNMA                                         |  |               | Prin. and Int. |          |  |          | 6.975%         | (3)          |  |      | 2029      |  |  |   | 98,500    |  |  |   | 99,800    | 
|Other                                        |  |               | Prin. and Int. |          |  |          | 4.27% - 7.69%  |              |  |      | 2007-2013 |  |  |   | 273,132   |  |  |   | 192,132   | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   | 371,632   |  |  |   | 291,932   | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|Tax Exempt Floating Rate Bonds
    (Secured) |  |               | Int.           |          |  |          | 2.00%          | (4)          |  |      | 2025      |  |  |   | 110,055   |  |  |   | 214,380   | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 
|Total                                        |  |               |                |          |  |          |                |              |  |      |           |  |  | $ | 1,129,478 |  |  | $ | 1,186,322 | 
|                                             |  |               |                |          |  |          |                |              |  |      |           |  |  |   |           |  |  |   |           | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes $100,000 of Mandatory Par Put Remarketed
    Securities (MOPPRS). The annual interest rate on
    these securities to March 2005 is 6.85%. As a result of the
    termination of the remarketing agreement related to this debt,
    the debt is subject to mandatory tender by the Operating
    Partnership in March 2005 (see discussion below).                                                                                
|(2) | Represents stated rate. At December 31,
    2004, the weighted average interest rate was 2.76%.                                                                                                                                                                                                                                                                                                                                               
|(3) | Interest rate is fixed at 6.975%, inclusive of
    credit enhancement and other fees, to 2009 through an interest
    rate swap arrangement after which time it is prepayable at the
    option of the Operating Partnership without prepayment penalty.                                                                                                                                                                                      
|(4) | FNMA credit enhanced bond indebtedness. Interest
    based on FNMA AAA tax exempt rate plus credit
    enhancement and other fees of 0.639%. Interest rate represents
    rate at December 31, 2004 before credit enhancements. At
    December 31, 2004, the Operating Partnership has
    outstanding interest rate cap arrangements that limit the
    Operating Partnerships exposure to increases in the base
    interest rate to 5%.

Debt maturities

The aggregate maturities of the Operating
Partnerships indebtedness are as follows (1):

|           |  |   |           |    
|---------- |  | - | --------- | ---
|2005       |  | $ | 218,119   | (2)
|2006       |  |   | 82,469    |    
|2007       |  |   | 210,741   | (3)
|2008       |  |   | 7,556     |    
|2009       |  |   | 79,001    |    
|Thereafter |  |   | 531,592   |    
|           |  |   |           |    
|           |  | $ | 1,129,478 |    
|           |  |   |           |    



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Aggregate maturities of debt for the years
    presented include repayments of tax-exempt debt of $0 in 2005,
    $500 in 2006, $1,200 in 2007, $2,200 in 2008 and $2,400 in 2009
    relating to three apartment communities expected to be sold in
    2005, and include $200 in 2005, $700 in 2006, $600 in 2007, $800
    in 2008 and $700 in 2009 relating to two apartment communities
    held for investment. The principal repayments relate to certain
    principal reserve requirements under the applicable debt
    arrangements commencing in July 2005. The Company expects to
    either retire the debt upon sale of the communities or refinance
    the debt to eliminate or defer these principal reserve
    requirements in 2005, however, there can be no assurance that it
    will be able to do so.
|(2) | Includes $100,000 MOPPRS indebtedness subject to
    mandatory tender by the Operating Partnership in March 2005 (see
    below for discussion).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(3) | Includes outstanding balance on lines of credit
    totaling $50,748.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





Debt issuances, retirements and
modifications

In December 2004, the Operating Partnership
terminated a remarketing agreement related to its $100,000,
6.85% Mandatory Par Put Remarketed Securities
(MOPPRS) due in March 2015. In connection with the
termination of the remarketing agreement, the Operating
Partnership paid $10,615 (interest expense), including
transaction expenses. Under the provisions of the remarketing
agreement, the remarketing agent had the right to remarket the
$100,000 unsecured notes in March 2005 for a ten-year term at an
interest rate calculated as 5.715% plus the Operating
Partnerships then current credit spread to the ten-year
treasury rate. As a result of the termination of the remarketing
agreement, the underlying debt matures in March 2005.

In October 2004, the Operating Partnership
purchased and retired $87,957 of the Operating
Partnerships 8.125% medium term, unsecured notes through a
tender offer using available borrowings under its unsecured
lines of credit. Subsequent to the debt retirement, $62,043 of
the 8.125% medium term notes remain outstanding with a maturity
in June 2005. In the fourth quarter of 2004, the Operating
Partnership recorded a loss on the early extinguishment of this
indebtedness of $4,011 representing the debt repurchase
premiums, the expenses of the tender offer and the write-off of
the unamortized deferred financing costs associated with the
retired indebtedness.

In addition in October 2004, the Operating
Partnership issued $100,000 of senior unsecured notes. The notes
bear interest at 5.125% and mature in October 2011. The net
proceeds from the unsecured notes were used to reduce amounts
outstanding under the Operating Partnerships unsecured
lines of credit.

Upon their maturity in September 2004, the
Operating Partnership repaid $10,000 of its 6.69% medium term,
unsecured notes, from available borrowings under its unsecured
lines of credit.

In conjunction with an apartment community
acquisition (see note 5) in June 2004, the Operating
Partnership assumed a secured, fixed rate mortgage note payable.
The mortgage note was valued at $49,496 yielding an effective
rate of 4.7%. The mortgage note bears interest at a coupon rate
of 6.8%, requires monthly principal and interest payments and
matures in 2007.

In June 2004, the Operating Partnership sold
certain apartment communities subject to the assumption of
$104,325 of tax exempt mortgage indebtedness (see note 5).
As a result of this debt assumption, the Operating Partnership
recorded a loss on early extinguishment of indebtedness of
$4,128 ($3,849 net of minority interest) related to the
write-off of unamortized deferred financing costs of $3,187
($2,972 net of minority interest) relating to such assumed
indebtedness and the realization of a $941 ($877 net of
minority interest) loss in connection with the termination of
related interest rate cap agreements that were used as cash flow
hedges of the assumed debt.

Upon their maturity in April 2004, the Operating
Partnership repaid $13,000 of 7.30% medium term, unsecured
notes, using its available cash balances and borrowings under
its unsecured lines of credit.

In March 2004, the Operating Partnership closed a
$35,000 secured, fixed rate mortgage note payable in a
consolidated real estate entity. The note bears interest at
4.27%, requires monthly interest only payments through March
2007 and monthly principal and interest payments based on a
30-year amortization schedule from April 2007 through the note
maturity date in March 2009.

Unsecured lines of credit

In January 2004, the Operating Partnership
refinanced its previous revolving line of credit with a new
$350,000 three-year unsecured revolving line of credit (the
Revolver) that matures in January 2007. The
Revolver, as amended in December 2004, has a current stated
interest rate of LIBOR plus 0.75% or the prime rate and was
provided by a syndicate of nine banks led by Wachovia Bank, N.A.
Additionally, the Revolver currently requires the payment of
annual facility fees currently equal to 0.15% of the aggregate
loan commitment. The Revolver provides for the interest rate and
facility fee rate to be adjusted up or down based on changes in
the credit ratings on the Operating Partnerships senior
unsecured debt. The rates under the Revolver are based on the
higher of the Operating Partnerships unsecured debt
ratings in instances where the Operating Partnership has split
unsecured debt ratings. The Revolver also includes a money
market competitive bid option for short-term funds up to
$175,000 at rates generally below the stated line rate. The
credit agreement for the Revolver contains customary
representations, covenants and events of default, including
fixed charge coverage and maximum leverage ratios as well as
covenants which restrict the ability of the Operating
Partnership to make distributions, in excess of stated




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





amounts, which in turn restrict 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 $15,000 of capital gains for
such year. The credit agreement contains exceptions to these
limitations to allow the Operating Partnership to make
distributions necessary to allow the Company to maintain its
status as a REIT. The Operating Partnership does not anticipate
that these ratios and covenants will adversely affect the
ability of the Operating Partnership to borrow money or make
distributions, or the Company to declare dividends, at the
Companys current dividend level. At December 31,
2004, the Operating Partnership had issued letters of credit to
third parties totaling $1,828 under this facility.

Additionally, the Operating Partnership has a
$20,000 unsecured line of credit with Wachovia Bank, N.A. (the
Cash Management Line). The Cash Management line
matures in January 2007 and carries pricing and terms, including
debt covenants, substantially consistent with those of the
Revolver.

Interest paid

Interest paid (including capitalized amounts of
$1,078, $3,555 and $13,223 for the years ended December 31,
2004, 2003 and 2002, respectively), aggregated $66,992, $78,822
and $79,115 for the years ended December 31, 2004, 2003 and
2002, respectively.

Pledged assets

The aggregate net book value at December 31,
2004 of property pledged as collateral for indebtedness amounted
to approximately $545,531.



|   |                                                       
|-- | ------------------------------------------------------
|4. | INVESTMENTS IN UNCONSOLIDATED REAL ESTATE
    ENTITIES

At December 31, 2004, the Operating
Partnership holds investments in three individual limited
liability companies (the Property LLCs) with an
institutional investor. Each Property LLC owns a recently
developed apartment community. At December 31, 2004, each
of the apartment communities had achieved stabilized occupancy.
The Operating Partnership holds a 35% equity interest in the
Property LLCs. The initial development costs of the apartment
communities were funded through member equity contributions
proportionate to the members ownership interests and
through construction financing provided by the Operating
Partnership.

The Operating Partnership accounts for its
investments in these Property LLCs using the equity method of
accounting. The excess of the Operating Partnerships
investment over its equity in the underlying net assets of the
Property LLCs was approximately $6,571 at December 31,
2004. This excess investment is being amortized as a reduction
to earnings on a straight-line basis over the lives of the
related assets. The Operating Partnership provides real estate
services (development, construction and property management) to
the Property LLCs.

In June 2003, the underlying apartment community
held by a fourth Property LLC was sold. The financial
information below for the year ended December 31, 2003
reflects the gain on property sale of $26,179 and the operating
results of this Property LLC as discontinued operations through
the sale date. The Operating Partnerships share of this
gain of $8,395 is included in the Operating Partnerships
share of net income (loss) shown in the table below.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





The operating results of the Operating
Partnership include its allocable share of net income (loss)
from the investments in the Property LLCs. A summary of
financial information for the Property LLCs in the aggregate is
as follows:

|                                                                                           |                                       |              |         |         |  |   |         |         | 
|------------------------------------------------------------------------------------------ | ------------------------------------- | ------------ | ------- | ------- |  | - | ------- | ------- | 
|                                                                                           |                                       |             
|                                                                                           |                                       | December 31,
|                                                                                           |                                       |             
|Balance Sheet Data                                                                         |                                       | 2004         |         | 2003   
|                                                                                           |                                       |              |         |        
|Real estate assets, net of accumulated
    depreciation of $9,712 and $5,939, respectively |                                       | $            | 124,072 |         |  | $ | 127,513 |        
|Cash and other                                                                             |                                       |              | 2,797   |         |  |   | 2,516   |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|                                                                                           | Total assets                          |              | $       | 126,869 |  |   | $       | 130,029 | 
|                                                                                           |                                       |              |         |         |  |   |         |        
|Mortgage notes payable                                                                     |                                       | $            | 83,468  |         |  | $ | 33,763  |        
|Construction notes payable to Operating
    Partnership                                    |                                       |              |        |         |  |   | 53,769  |        
|Other liabilities                                                                          |                                       |              | 1,296   |         |  |   | 1,742   |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|                                                                                           | Total liabilities                     |              |         | 84,764  |  |   |         | 89,274  | 
|Members equity                                                                            |                                       |              | 42,105  |         |  |   | 40,755  |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|                                                                                           | Total liabilities and members equity |              | $       | 126,869 |  |   | $       | 130,029 | 
|                                                                                           |                                       |              |         |         |  |   |         |        
|Operating Partnerships equity investment                                                  |                                       | $            | 21,320  |         |  | $ | 21,017  |        
|                                                                                           |                                       |              |         |         |  |   |         |        
|Operating Partnerships share of notes
    payable                                         |                                       | $            | 29,214  |         |  | $ | 30,636  |        
|                                                                                           |                                       |              |         |         |  |   |         |        

|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |        |  
|------------------------------------------------------ | ------------------------------------------ | ----------------------- | ----- | ------ |  | ---- | ------ | ------ | - | - | ------ | ------ | -
|                                                       |                                            |                        
|                                                       |                                            | Year ended December 31,
|                                                       |                                            |                        
|Income Statement Data                                  |                                            | 2004                    |       | 2003   |  | 2002
|                                                       |                                            |                         |       |        |  |     
|Revenues                                               |                                            |                         |       |        |  |      |        |        |   |   |        |       
|                                                       | Rental                                     |                         | $     | 13,112 |  |      | $      | 9,350  |   |   | $      | 3,174  |  
|                                                       | Other                                      |                         |       | 923    |  |      |        | 470    |   |   |        | 322    |  
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|                                                       | Total revenues                             |                         |       | 14,035 |  |      |        | 9,820  |   |   |        | 3,496  |  
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|Expenses                                               |                                            |                         |       |        |  |      |        |        |   |   |        |       
|                                                       | Property operating and maintenance         |                         |       | 4,718  |  |      |        | 4,497  |   |   |        | 2,578  |  
|                                                       | Depreciation and amortization              |                         |       | 3,867  |  |      |        | 3,757  |   |   |        | 1,990  |  
|                                                       | Interest                                   |                         |       | 3,370  |  |      |        | 3,061  |   |   |        | 1,601  |  
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|                                                       | Total expenses                             |                         |       | 11,955 |  |      |        | 11,315 |   |   |        | 6,169  |  
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|Income (loss) from continuing operations               |                                            |                         | 2,080 |        |  |      | (1,495 | )      |   |   | (2,673 | )     
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|Discontinued Operations                                |                                            |                         |       |        |  |      |        |        |   |   |        |       
|                                                       | Loss from discontinued operations          |                         |       |       |  |      |        | (274   | ) |   |        | (1,871 | )
|                                                       | Gain on property sales                     |                         |       |       |  |      |        | 26,179 |   |   |        |       |  
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|                                                       | Income (loss) from discontinued operations |                         |       |       |  |      |        | 25,905 |   |   |        | (1,871 | )
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|Net income (loss)                                      |                                            | $                       | 2,080 |        |  | $    | 24,410 |        |   | $ | (4,544 | )     
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       
|Operating Partnerships share of net income
    (loss) |                                            | $                       | 1,083 |        |  | $    | 7,790  |        |   | $ | (1,591 | )     
|                                                       |                                            |                         |       |        |  |      |        |        |   |   |        |       

At December 31, 2004, mortgage notes payable
include a $50,000 mortgage note that bears interest at 4.13%,
requires monthly interest payments and annual principal payments
of $1 through 2009. Thereafter, the note requires monthly
principal and interest payments based on a 25-year amortization
schedule and matures in April 2034. The note is callable by the
lender in May 2009 and on each successive fifth year anniversary
of the note thereafter. The note is prepayable without penalty
in May 2008. The additional mortgage notes payable include a
$17,000 mortgage note that bears interest at a fixed rate of
4.04%, requires interest only payments and matures in 2008 as
well as a mortgage note payable with an outstanding balance of
$16,468 at December 31, 2004 that bears interest at 4.28%,
requires monthly principal and interest payments and matures in
2008. Upon issuance of the mortgage note (in February 2003) with
an outstanding balance of $16,468, the Operating Partnership
issued a limited guarantee and indemnity to the lender regarding
certain customary non-recourse carve-out provisions and
environmental matters up to a maximum potential exposure of
$5,000. The other member of the Property LLC is obligated to
reimburse




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





the Operating Partnership for up to its 65% share
($3,250) of the maximum potential exposure under these
arrangements.



|   |                                              
|-- | ---------------------------------------------
|5. | REAL ESTATE ACQUISITIONS AND
    DISPOSITIONS

Acquisitions

In June 2004, the Operating Partnership acquired
a 499-unit apartment community located in suburban
Washington, D.C. for approximately $85,814, including the
assumption of mortgage indebtedness and closing costs.
Additionally, through December 31, 2004, the Operating
Partnership had incurred additional costs of approximately
$1,253, of an estimated total cost of approximately $2,000, to
improve the community. The assumed mortgage note payable was
valued at $49,496 yielding an effective interest rate of 4.7%.
The mortgage note bears interest at a coupon rate of 6.8%,
requires monthly principal and interest payments and matures in
2007. The purchase of this community was allocated to the assets
acquired and the liabilities assumed based on their estimated
fair values.

Dispositions

The Operating Partnership classifies real estate
assets as held for sale after the approval of its investment
committee and after the Operating Partnership has commenced an
active program to sell the assets. At December 31 2004, the
Operating Partnership had six apartment communities containing
1,436 units, including one community that will be converted
into condominiums starting in 2005, and certain tracts of land
classified as held for sale. These real estate assets are
classified separately in the accompanying consolidated balance
sheet at $68,661, which represented the lower of depreciated
cost or estimated fair value, less costs to sell. The Operating
Partnership expects the sale of these assets to occur in the
next twelve months.

Under SFAS No. 144, the operating
results of assets designated as held for sale subsequent to
January 1, 2002 are included in discontinued operations for
all periods presented. Additionally, all gains and losses on the
sale of these assets are included in discontinued operations.
For the year ended December 31, 2004, income from
discontinued operations included the results of operations of
six communities, containing 1,436 units, classified as held
for sale at December 31, 2004 and the results of operations
of eight communities sold in 2004 through their sale date. For
the years ended December 31, 2003 and 2002, income from
discontinued operations included the results of operations of
all communities classified as held for sale at December 31,
2004, communities sold in 2004 and the results of operations of
11 communities and one commercial property designated as held
for sale and sold in 2003 and 2002 through their sale dates.




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





The revenues and expenses of these communities
for the years ended December 31, 2004, 2003 and 2002 were
as follows:

|                                               |                                                                                    |                |       |        |        |      |      |        |        |   |        |        |        | 
|---------------------------------------------- | ---------------------------------------------------------------------------------- | -------------- | ----- | ------ | ------ | ---- | ---- | ------ | ------ | - | ------ | ------ | ------ | 
|                                               |                                                                                    | 2004           |       | 2003   |        | 2002
|                                               |                                                                                    |                |       |        |        |     
|Revenues                                       |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                               | Rental                                                                             |                | $     | 26,107 |        |      | $    | 52,275 |        |   | $      | 69,889 |       
|                                               | Other                                                                              |                |       | 2,043  |        |      |      | 3,767  |        |   |        | 4,444  |       
|                                               |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                               |                                                                                    | Total revenues |       |        | 28,150 |      |      |        | 56,042 |   |        |        | 74,333 | 
|                                               |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|Expenses                                       |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                               | Property operating and maintenance (exclusive of
    items shown separately below) |                |       | 12,316 |        |      |      | 22,949 |        |   |        | 29,455 |       
|                                               | Depreciation                                                                       |                |       | 2,281  |        |      |      | 8,775  |        |   |        | 13,444 |       
|                                               | Interest                                                                           |                |       | 3,669  |        |      |      | 7,678  |        |   |        | 11,580 |       
|                                               | Asset impairment charges                                                           |                |       | 2,233  |        |      |      | 17,462 |        |   |        |       |       
|                                               | Minority interest in consolidated property
    partnerships                        |                |       | (238   | )      |      |      | (419   | )      |   |        | (284   | )     
|                                               |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|                                               |                                                                                    | Total expenses |       |        | 20,261 |      |      |        | 56,445 |   |        |        | 54,195 | 
|                                               |                                                                                    |                |       |        |        |      |      |        |        |   |        |       
|Income (loss) from discontinued
    operations |                                                                                    | $              | 7,889 |        |        | $    | (403 | )      |        | $ | 20,138 |       
|                                               |                                                                                    |                |       |        |        |      |      |        |        |   |        |       

In the fourth quarter of 2004, the Operating
Partnership recorded an asset impairment charge of $1,607 to
write-down the cost of an apartment community, located in
Dallas, Texas, to its estimated fair value when the asset was
classified as held for sale during the fourth quarter. In the
second quarter of 2004, the Operating Partnership recorded an
asset impairment loss of $626 to write-down the cost of an
apartment community, located in Dallas, Texas, to its realized
value. In the third quarter of 2003, the Operating Partnership
recorded a $3,344 asset impairment charge to write-down the
Dallas, Texas asset sold in the second quarter of 2004 to its
then estimated fair value at the date the asset was classified
as held for sale. In the first quarter of 2003, the Operating
Partnership recorded an asset impairment charge of $14,118 to
write-down the cost of the Operating Partnerships
apartment community located in Phoenix, Arizona to its estimated
fair value.

For the year ended December 31, 2004, the
Operating Partnership recognized net gains from discontinued
operations of $113,739 from the sale of eight communities,
containing 3,880 units, and certain land parcels. These
sales generated net proceeds of approximately $242,962,
including debt assumed by the purchasers of $104,325. For the
year ended December 31, 2003, the Operating Partnership
recognized net gains from discontinued operations of $40,792 on
the sale of four communities, containing 1,844 units, and
certain land parcels. These sales generated net proceeds of
approximately $163,560. For the year ended December 31,
2002, the Operating Partnership recognized net gains from
discontinued operations of $16,571 from the sale of six
communities, containing 2,125 units, one commercial
property and certain land parcels. These sales generated net
proceeds of approximately $140,823.

Under prior accounting literature, operating
results and net gains or losses on the sale of assets classified
as held for sale prior to December 31, 2001 are included in
continuing operations. As a result of this presentation, income
from continuing operations and gains on property sales are not
comparable between periods. The discussion below relates to the
gains on property sales reported in continuing operations in the
consolidated statements of operations for the year ended
December 31, 2002. For the year ended December 31,
2002, the Operating Partnership sold two apartment communities
containing 540 units and one commercial property for net
proceeds of $41,393. These sales resulted in net gains of
$13,275. For the year ended December 31, 2002, the
consolidated statement of operations included net income from
these properties of $369.

In January 2005, the Operating Partnership
designated two additional apartment communities, containing
1,872 units, as assets held for sale. The aggregate net
book value of these assets totaled approximately $80,000, which
represented the lower of depreciated cost or estimated fair
value of the assets. The Operating Partnership




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





expects to convert one of the communities,
containing 134 units, into for-sale condominium units
through a taxable REIT subsidiary and to sell those units
starting in 2005.



|   |                 
|-- | ----------------
|6. | PARTNERS EQUITY

Common and Preferred Units

At December 31, 2004 and 2003, the Operating
Partnership had outstanding Common Units totaling 42,663 and
42,354, respectively. At December 31, 2004, the Operating
Partnership had outstanding two separate series of cumulative
redeemable preferred partnership units as more fully described
below. The preferred partnership units are reflected in the
accompanying financial statements at their liquidation value.

The Operating Partnership has outstanding 900,000
8.5% Series A cumulative redeemable preferred partnership
units (the Series A Preferred Units). The
Series A Preferred Units have a liquidation preference of
$50.00 per unit and are redeemable at the option of the
Operating Partnership on or after October  1, 2026, at
a redemption price of $50.00 per unit. The Series A
Preferred Units are owned by the Company.

The Operating Partnership also has outstanding
2,000,000, 7.625% Series B cumulative redeemable preferred
partnership units (the Series B Preferred
Units). The Series B Preferred Units have a
liquidation preference of $25.00 per unit and are
redeemable at the option of the Operating Partnership on or
after October 28, 2007, at a redemption price of
$25.00 per unit. The Series B Preferred Units are
owned by the Company.

In March 2004, the Company redeemed its 7.625%
Series C cumulative redeemable preferred stock.
Correspondingly, the Operating Partnership redeemed its
Series C Preferred Units on the same date and under the
same terms. The redemption price was $25.00 per unit, plus
accrued and unpaid distributions through the redemption date. In
connection with the issuance of the Series C Preferred
Units in 1998, the Operating Partnership incurred $1,716 in
issuance costs and recorded such costs as a reduction of
partners equity. The redemption price of the Series C
Preferred Units exceeds the related carrying value by the $1,716
of issuance costs. In connection with the redemption, in
accordance with generally accepted accounting principles, the
Operating Partnership reflected the $1,716 of issuance costs as
a reduction of earnings in arriving at net income available to
common unitholders in 2004.

In September 2004, the Operating Partnership
redeemed its 8.0% Series D cumulative redeemable preferred
units (Series D Preferred Units) for
$25.00 per unit (an aggregate of $70,000), plus accrued and
unpaid distributions through the redemption date. In connection
with the issuance of the Series D Preferred Units in 1998,
the Operating Partnership incurred $1,810 in issuance costs and
recorded such costs as a reduction of partners equity. The
redemption price of the Series D Preferred Units exceeded
the related carrying value by the $1,810 of issuance costs. In
connection with the redemption, in accordance with generally
accepted accounting principles, the Company reflected the $1,810
of issuance costs as a reduction of earnings in arriving at net
income available to common unitholders in 2004.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





Computation of Earnings per Common
Unit

For the years ended December 31, 2004, 2003
and 2002, basic and diluted earnings per Common Unit for income
from continuing operations available to common unitholders,
before cumulative effect of accounting change, has been computed
as follows:

|                                                                    |  |                              |         |               |  |          |        |     |  |   |       |  
|------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | -------- | ------ | --- |  | - | ----- | -
|                                                                    |  |                             
|                                                                    |  | Year Ended December 31, 2004
|                                                                    |  |                             
|                                                                    |  | Income                       |         | Units         |  | Per-Unit
|                                                                    |  | (Numerator)                  |         | (Denominator) |  | Amount  
|                                                                    |  |                              |         |               |  |         
|Loss from continuing operations                                     |  | $                            | (20,323 | )             |  |          |        |     |  |   |       |  
|Less: Preferred Unit distributions                                  |  |                              | (12,105 | )             |  |          |        |     |  |   |       |  
|Less: Redemption costs on preferred units                           |  |                              | (3,526  | )             |  |          |        |     |  |   |       |  
|                                                                    |  |                              |         |               |  |          |        |     |  |   |       |  
|Basic EPU                                                           |  |                              |         |               |  |          |        |     |  |   |       |  
|Loss from continuing operations available to
    common unitholders |  |                              | (35,954 | )             |  |          | 42,474 |     |  | $ | (0.85 | )
|                                                                    |  |                              |         |               |  |          |        |     |  |   |       |  
|Effect of dilutive securities                                       |  |                              |         |               |  |          |        |     |  |   |       |  
|Stock options                                                       |  |                              |        |               |  |          |       | (1) |  |   |       |  
|                                                                    |  |                              |         |               |  |          |        |     |  |   |       |  
|Diluted EPU                                                         |  |                              |         |               |  |          |        |     |  |   |       |  
|Loss from continuing operations available to
    common unitholders |  | $                            | (35,954 | )             |  |          | 42,474 |     |  | $ | (0.85 | )
|                                                                    |  |                              |         |               |  |          |        |     |  |   |       |  

|                                                                    |  |                              |         |               |  |          |        |  |  |   |       |  
|------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | -------- | ------ |  |  | - | ----- | -
|                                                                    |  |                             
|                                                                    |  | Year Ended December 31, 2003
|                                                                    |  |                             
|                                                                    |  | Income                       |         | Units         |  | Per-Unit
|                                                                    |  | (Numerator)                  |         | (Denominator) |  | Amount  
|                                                                    |  |                              |         |               |  |         
|Loss from continuing operations                                     |  | $                            | (20,292 | )             |  |          |        |  |  |   |       |  
|Less: Preferred Unit distributions                                  |  |                              | (17,049 | )             |  |          |        |  |  |   |       |  
|                                                                    |  |                              |         |               |  |          |        |  |  |   |       |  
|Basic EPU                                                           |  |                              |         |               |  |          |        |  |  |   |       |  
|Loss from continuing operations available to
    common unitholders |  |                              | (37,341 | )             |  |          | 42,134 |  |  | $ | (0.89 | )
|                                                                    |  |                              |         |               |  |          |        |  |  |   |       |  
|Effect of dilutive securities                                       |  |                              |         |               |  |          |        |  |  |   |       |  
|Stock options                                                       |  |                              |        |               |  |          |       |  |  |   |       |  
|                                                                    |  |                              |         |               |  |          |        |  |  |   |       |  
|Diluted EPU                                                         |  |                              |         |               |  |          |        |  |  |   |       |  
|Loss from continuing operations available to
    common unitholders |  | $                            | (37,341 | )             |  |          | 42,134 |  |  | $ | (0.89 | )
|                                                                    |  |                              |         |               |  |          |        |  |  |   |       |  

|                                                                      |  |                              |         |               |  |          |        |  |  |   |      | 
|--------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | -------- | ------ |  |  | - | ---- | 
|                                                                      |  |                             
|                                                                      |  | Year Ended December 31, 2002
|                                                                      |  |                             
|                                                                      |  | Income                       |         | Units         |  | Per-Unit
|                                                                      |  | (Numerator)                  |         | (Denominator) |  | Amount  
|                                                                      |  |                              |         |               |  |         
|Income from continuing operations                                     |  | $                            | 36,409  |               |  |          |        |  |  |   |      | 
|Less: Preferred unit distributions                                    |  |                              | (17,049 | )             |  |          |        |  |  |   |      | 
|                                                                      |  |                              |         |               |  |          |        |  |  |   |      | 
|Basic EPU                                                             |  |                              |         |               |  |          |        |  |  |   |      | 
|Income from continuing operations available to
    common unitholders |  |                              | 19,360  |               |  |          | 42,021 |  |  | $ | 0.46 | 
|                                                                      |  |                              |         |               |  |          |        |  |  |   |      | 
|Effect of dilutive securities                                         |  |                              |         |               |  |          |        |  |  |   |      | 
|Stock options                                                         |  |                              |        |               |  |          | 15     |  |  |   |      | 
|                                                                      |  |                              |         |               |  |          |        |  |  |   |      | 
|Diluted EPU                                                           |  |                              |         |               |  |          |        |  |  |   |      | 
|Income from continuing operations available to
    common unitholders |  | $                            | 19,360  |               |  |          | 42,036 |  |  | $ | 0.46 | 
|                                                                      |  |                              |         |               |  |          |        |  |  |   |      | 



|    |                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the years ended December 31, 2004 and
    2003, the potential dilution from the Companys outstanding
    stock options of 115 and 11, respectively, was antidilutive
    to the loss from continuing operations per unit calculation. As
    such, these amounts were excluded from weighted average units in
    these years.

In 2004, 2003 and 2002, stock options to
purchase 4,491, 4,735 and 3,843 shares of common
stock, respectively, were excluded from the computation of
diluted earnings per unit as these options were antidilutive.




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)







|   |                                    
|-- | -----------------------------------
|7. | SEVERANCE AND PROXY CONTEST CHARGES

In 2003, the Operating Partnership recorded a
first quarter charge of $19,711 relating to the change in roles
from executive to non-executive status of the Companys
former chairman and vice-chairman of the board of directors and
recorded a second quarter severance charge of $1,795 relating to
the departures of its executive vice president and chief
financial officer and its executive vice president of asset
management. The first quarter charge consisted of a $13,993
charge representing the discounted present value of the
estimated payments to be made to the former chairman and
vice-chairman under their existing employment arrangements and a
$5,718 charge representing the discounted present value of
estimated net costs to be incurred by the Operating Partnership
as a result of the settlement of split-dollar life insurance
obligations to the individuals under their employment contracts.
The second quarter charge of $1,795 represented the aggregate
amount of the estimated payments and benefits to be made to the
departing executive officers.

In August 2004, the Operating Partnership entered
into a final settlement agreement with its former chairman of
the board of directors. Under the terms of the agreement, the
former chairmans employment and non-competition agreements
were terminated and the Operating Partnership agreed to continue
to provide the former chairman certain payments and benefits
through May 2013, the approximate expiration date of the
original employment agreement. Because the present value of the
estimated payments under the settlement agreement approximated
the Operating Partnerships remaining accrued charge under
the former employment agreement, no additional charges were
recorded in 2004 as a result of the settlement.

The Operating Partnership recorded severance
charges in the first and second quarters of 2003. The following
table summarizes the activity relating to the accrued severance
charges for the years ended December 31, 2004 and 2003:

|                                             |  |      |        |      |  |   |        |  
|-------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | -
|                                             |  | 2004 |        | 2003
|                                             |  |      |        |     
|Accrued severance charges, beginning of year |  | $    | 19,171 |      |  | $ |       |  
|Severance charges                            |  |      |       |      |  |   | 21,506 |  
|Payments for period                          |  |      | (4,858 | )    |  |   | (3,237 | )
|Interest accretion                           |  |      | 1,004  |      |  |   | 902    |  
|                                             |  |      |        |      |  |   |        |  
|Accrued severance charges, end of year       |  | $    | 15,317 |      |  | $ | 19,171 |  
|                                             |  |      |        |      |  |   |        |  

Substantially all of these remaining amounts will
be paid over the remaining terms of the former executives
employment and settlement agreements (9 to 12 years).

Proxy and related costs of $5,231 represented the
legal, advisory and other expenses associated with the
solicitation of proxies from shareholders resulting from the
proxy contest initiated in April 2003 by the Companys
former chairman of the board of directors. Additionally, the
$5,231 amount included the estimated legal and resolution costs
associated with the settlement of two derivative and purported
class action lawsuits filed against the Operating Partnership
during the proxy contest. These lawsuits were settled in October
2004 (see note 11).



|   |             
|-- | ------------
|8. | INCOME TAXES

Income or losses of the Operating Partnership are
allocated to the partners of the Operating Partnership for
inclusion in their respective income tax returns. Accordingly,
no provisions or benefit for income taxes has been made in the
accompanying financial statements. The Company elected to be
taxed as a REIT under the Internal Revenue Code of 1986, as
amended (the Code) commencing with the taxable year
ended December 31, 1993. In order for the Company to
qualify as a REIT, it must distribute 90% of its REIT taxable
incomes, as defined in the Code, to its shareholders and satisfy
certain other requirements. The Operating Partnership intends to
make sufficient cash distributions to the Company to enable it
to meet its annual REIT distribution requirements.

The Operating Partnership utilizes taxable
subsidiaries to perform such activities as asset and property
management, for-sale housing (condominium) conversions and
sales, leasing and landscape services for third parties. These
taxable subsidiaries are subject to federal, state and local
income taxes. For the three years in the period ended
December 31, 2004, the impact of these taxable
subsidiaries income taxes and their related tax attributes
were not material to the accompanying consolidated financial
statements. At December 31, 2004, the Operating
Partnerships




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





taxable subsidiaries had consolidated federal
income tax net operating loss carryforwards totaling
approximately $9,000. These tax loss carryforwards begin to
expire in 2019.

At December 31, 2004, management had
established a valuation allowance against the deferred tax asset
associated with these net operating loss carryforwards due to
the historical and continuing operating losses of these
subsidiaries. The tax benefits associated with such net
operating loss carryforwards may be recognized in future
periods, if the taxable subsidiaries generate sufficient taxable
income to utilize such amounts or if the Operating Partnership
determines that it more likely than not that the related
deferred tax assets are realizable.

As of December 31, 2004, the net basis for
Federal income tax purposes, taking into account the special
allocation of gain to the partners contributing property to the
Operating Partnership was lower that the net assets as reported
in the Operating Partnerships consolidated financial
statements by $16,558.



|   |                                
|-- | -------------------------------
|9. | EQUITY-BASED COMPENSATION PLANS

Equity Compensation Plans

As the primary operating subsidiary of the
Company, the Operating Partnership participates in and bears the
compensation expenses associated with the Companys
stock-based compensation plans. The information discussed below
relating to the Companys stock-based compensation plans is
also applicable for the Operating Partnership. Effective
January 1, 2003, the Operating Partnership elected to
voluntarily change its method of accounting for equity-based
compensation to the fair value method prescribed in
SFAS No. 123 (see note 1). The Operating
Partnership elected the prospective method of adoption
prescribed by SFAS No. 148. For equity-based
compensation granted prior to January 1, 2003, the
Operating Partnership accounted for equity-based compensation
under the intrinsic value method prescribed by APB No. 25.
A table in note 1 summarizes the Operating
Partnerships net income and earnings per common unit had
the fair value method of accounting under SFAS No. 123
been applied for the years ended December 31, 2004, 2003
and 2002.

Stock Option Plans

The Companys 2003 Incentive Stock Plan (the
2003 Stock Plan) was approved by the Companys
shareholders in May 2003. Under the 2003 Stock Plan, an
aggregate of 4,000 shares of common stock were reserved for
issuance. Of this amount, not more than 500 shares of
common stock are available for grants of restricted stock. The
exercise price of each option granted under the 2003 Stock Plan
may not be less than the market price of the Companys
common stock on the date of the option grant and all options may
have a maximum life of ten years. Participants receiving
restricted stock grants are generally eligible to vote such
shares and receive dividends on such shares. Substantially all
stock option and restricted stock grants are subject to annual
vesting provisions (generally three to five years) as determined
by the administrative committee overseeing the 2003 Stock Plan.
At December 31, 2004, stock options outstanding under the
2003 Stock Plan totaled 1,092. The Companys former stock
plan (the 1993 Stock Plan) expired in July 2003. At
December 31, 2004, stock options outstanding under the 1993
Stock Plan totaled 3,399.

In 2004, 2003 and 2002, the Company granted stock
options to purchase 283, 1,252 and 18 shares of
Company common stock to Company officers and directors, of which
50 and 100 shares in 2004 and 2003, respectively, were
granted to the Companys non-executive chairman of the
board. For the years ended December 31, 2004 and 2003,
general and administrative expenses included compensation
expense related to stock options of $590 and $244, respectively,
recognized under the fair value method.

The following table sets forth information about
the fair value of each stock option grant on the date of the
grant using the Black-Scholes option-pricing model and the
weighted average assumptions used for such grants:

|                        |  |      |          |      |  |      |          |  |  |  |          | 
|----------------------- |  | ---- | -------- | ---- |  | ---- | -------- |  |  |  | -------- | 
|                        |  | 2004 |          | 2003 |  | 2002
|                        |  |      |          |      |  |     
|Dividend yield          |  |      | 6.3%     |      |  |      | 6.5%     |  |  |  | 7.2%     | 
|Expected volatility     |  |      | 16.9%    |      |  |      | 17.1%    |  |  |  | 22.7%    | 
|Risk-free interest rate |  |      | 3.1%     |      |  |      | 2.9%     |  |  |  | 3.5%     | 
|Expected option life    |  |      | 5  years |      |  |      | 5  years |  |  |  | 7  years | 




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





A summary of stock option activity under all
plans for the years ended December 31, 2004, 2003 and 2003,
is presented below.

|                                                                   |  |        |       |                  |  |        |    |                  |  |        |       |                  |  |   |    |  |  |   |       |   |  |   |    | 
|------------------------------------------------------------------ |  | ------ | ----- | ---------------- |  | ------ | -- | ---------------- |  | ------ | ----- | ---------------- |  | - | -- |  |  | - | ----- | - |  | - | -- | 
|                                                                   |  |        |       |                  |  |       
|                                                                   |  | 2004   |       | 2003             |  | 2002  
|                                                                   |  |        |       |                  |  |       
|                                                                   |  |        |       | Weighted Average |  |        |    | Weighted Average |  |        |       | Weighted Average
|                                                                   |  | Shares |       | Exercise Price   |  | Shares |    | Exercise Price   |  | Shares |       | Exercise Price  
|                                                                   |  |        |       |                  |  |        |    |                  |  |        |       |                 
|Outstanding at beginning of year                                   |  |        | 4,735 |                  |  | $      | 34 |                  |  |        | 4,089 |                  |  | $ | 35 |  |  |   | 4,228 |   |  | $ | 36 | 
|Granted                                                            |  |        | 283   |                  |  |        | 28 |                  |  |        | 1,252 |                  |  |   | 26 |  |  |   | 18    |   |  |   | 24 | 
|Exercised                                                          |  |        | (277  | )                |  |        | 29 |                  |  |        | (217  | )                |  |   | 28 |  |  |   | (15   | ) |  |   | 31 | 
|Forfeited                                                          |  |        | (250  | )                |  |        | 36 |                  |  |        | (389  | )                |  |   | 32 |  |  |   | (142  | ) |  |   | 38 | 
|                                                                   |  |        |       |                  |  |        |    |                  |  |        |       |                  |  |   |    |  |  |   |       |   |  |   |    | 
|Outstanding at end of year                                         |  |        | 4,491 |                  |  |        | 33 |                  |  |        | 4,735 |                  |  |   | 34 |  |  |   | 4,089 |   |  |   | 35 | 
|                                                                   |  |        |       |                  |  |        |    |                  |  |        |       |                  |  |   |    |  |  |   |       |   |  |   |    | 
|Options exercisable at year-end                                    |  |        | 3,131 |                  |  |        |    |                  |  |        | 3,233 |                  |  |   |    |  |  |   | 3,465 |   |  |   |    | 
|                                                                   |  |        |       |                  |  |        |    |                  |  |        |       |                  |  |   |    |  |  |   |       |   |  |   |    | 
|Weighted-average fair value of options granted
    during the year |  | $      | 1.86  |                  |  |        |    |                  |  | $      | 1.59  |                  |  |   |    |  |  | $ | 2.13  |   |  |   |    | 
|                                                                   |  |        |       |                  |  |        |    |                  |  |        |       |                  |  |   |    |  |  |   |       |   |  |   |    | 

At December 31, 2004, the Company has
separated its outstanding options into two ranges based on
exercise prices. There were 1,851 options outstanding with
exercise prices ranging from $23.90 to $33.95. These options
have a weighted average exercise price of $27.58 and a weighted
average remaining contractual life of 7 years. Of these
outstanding options, 641 were exercisable at December 31,
2004 at a weighted average exercise price of $29.90. In
addition, there were 2,640 options outstanding with exercise
prices ranging from $34.76 to $44.13. These options have a
weighted average exercise price of $37.92 and a weighted average
remaining contractual life of 4 years. Of these outstanding
options, 2,490 were exercisable at December 31, 2004 at a
weighted average exercise price of $37.45.

In 2004, 2003 and 2002, the Company
granted 27, 175 and 15 shares of restricted stock,
respectively, to Company officers and directors, of which 7 and
8 shares in 2004 and 2003, respectively, were granted to
the Companys non-executive chairman of the board. The
restricted shares granted in 2004 vest ratably over three to
five year periods. The restricted shares granted in 2003 and
2002 vest ratably over three to eight year periods. For each
year, the total value of the restricted share grants of $777,
$4,555 and $459, respectively, was initially reflected in
partners equity as additional paid-in capital reduced by
unamortized deferred compensation expense. Such deferred
compensation is amortized ratably into compensation expense over
the applicable vesting period. Total compensation expense
relating to the restricted stock was $1,109, $742 and $265 in
2004, 2003 and 2002, respectively.

Employee Stock Purchase Plan

The Company maintained an Employee Stock Purchase
Plan (ESPP) under a plan approved by Company
shareholders in 1995, which was terminated in December 2004. The
Company is seeking shareholder approval for a new ESPP at its
2005 annual shareholder meeting. The provisions of the old and
new plans are substantially similar with certain exceptions
including that the maximum number of shares issuable under the
new plan will be 300. To participate in the ESPP,
(i) directors must have been a member of the Board of
Directors for at least one month and (ii) an employee must
have been employed full or part-time by the Company or the
Operating Partnership for at least one month; provided, an
individual who is a director and who is an employee shall be a
participant exclusively with respect to his or her status as an
employee. The purchase price of shares of Common Stock under the
ESPP is equal to 85% of the lesser of the closing price per
share of Common Stock on the first or last day of the trading
period, as defined.

Effective January 1, 2003, under
SFAS No. 123, the Operating Partnership records the
aggregate cost of the ESPP (generally the 15% discount on the
share purchases) as a period expense. Total compensation expense
relating to the ESPP was $86 and $85 in 2004 and 2003,
respectively. Prior to 2003, under APB No. 25, no
compensation expense was required to be recognized for purchases
under the ESPP (the discounted purchase price of the acquired
shares was recorded in partners equity).




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





10. EMPLOYEE BENEFIT PLAN

Through a plan adopted by the Company, the
employees of the Operating Partnership are participants in a
defined contribution plan pursuant to Section 401 of the
Internal Revenue Code. Beginning in 1996, Operating Partnership
contributions, if any, to this plan are based on the performance
of the Company and the Operating Partnership and are allocated
to each participant based on the relative contribution of the
participant to the total contributions of all participants. For
purposes of allocating the Operating Partnership contribution,
the maximum employee contribution included in the calculation is
4% (3% in years prior to 2003) of salary. Operating Partnership
contributions of $541, $513 and $452 were made to this plan in
2004, 2003 and 2002, respectively.

11. COMMITMENTS AND
CONTINGENCIES

Land, office and equipment leases

The Operating Partnership is party to two ground
leases with terms expiring in years 2040 and 2043 relating to a
single operating community and four ground leases expiring in
2012, 2038, 2066 and 2074 for four separate operating
communities and to other facility, office, equipment and other
operating leases with terms expiring through 2057. The ground
leases generally provide for future increases in minimum lease
payments tied to an inflation index or that contain stated rent
increases that generally compensate for the impact of inflation.
The Operating Partnership has historically expensed ground
leases as incurred which, where applicable, has not been
materially different than recognizing expense on a straight-line
basis. Future minimum lease payments for non-cancelable land,
office, equipment and other leases at December 31, 2004,
are as follows:

|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2005                |  | $ | 1,534   | 
|2006                |  |   | 1,521   | 
|2007                |  |   | 1,483   | 
|2008                |  |   | 1,506   | 
|2009                |  |   | 1,531   | 
|2010 and thereafter |  |   | 165,920 | 

The Operating Partnership incurred $4,981, $4,382
and $5,223 of rent expense, including rent expense under
short-term rental and lease arrangements, for the years ended
December 31, 2004, 2003 and 2002, respectively.

Legal proceedings

On May 13, 2004, an alleged Company
shareholder filed a purported pro se derivative and direct
action in the Superior Court of Fulton County, Atlanta, Georgia,
against the Company and the Operating Partnership, certain
members of the Companys board of directors, and certain of
its executive officers. The case was removed to the United
States District Court for the Northern District of Georgia on
May 21, 2004. The complaint alleges, among other things,
breaches of fiduciary duties, fraud, corporate waste,
withholding certain documents from shareholder inspection and
certain securities laws claims. The complaint requests various
types of relief, such as injunctive relief and damages and
demands production of certain Operating Partnership records. The
Operating Partnership believes the allegations are wholly
without merit and has moved to dismiss the litigation.

On May 5, 2003, the Operating Partnership
received notice that a shareholder derivative and purported
class action lawsuit was filed against members of the board of
directors of the Company and the Operating Partnership as a
nominal defendant. This complaint was filed in the Superior
Court of Fulton County, Atlanta, Georgia on May 2, 2003 and
alleged various breaches of fiduciary duties by the board of
directors of the Company and sought, among other relief, the
disclosure of certain information by the defendants. This
complaint also sought to compel the defendants to undertake
various actions to facilitate a sale of the Operating
Partnership. On May 7, 2003, the plaintiff made a request
for voluntary expedited discovery. On May 13, 2003, the
Operating Partnership received notice that a similar shareholder
derivative and purported class action lawsuit was filed against
certain members of the board of directors of the Company and
against the Operating Partnership as a nominal defendant. The
complaint was filed in the Superior Court of Fulton County,
Atlanta, Georgia on May 12, 2003 and alleged breaches of
fiduciary duties, abuse of control and corporate waste by the
defendants. The plaintiff sought monetary damages and, as
appropriate, injunctive relief. These lawsuits were settled, and
in October 2004, the Superior Court of Fulton County entered an
order approving the settlement and related orders dismissing the
litigation. The estimated legal




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NOTES TO CONSOLIDATED FINANCIAL
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(Dollars in thousands, except per unit
data)





and settlement costs, not covered by insurance,
associated with the expected resolution of the lawsuits were
recorded in the second quarter of 2003 as a component of a proxy
contest and related costs charge. An alleged Company
shareholder, who has filed a separate purported derivative and
direct action against the Company and certain of its officers
and directors (which is described in the paragraph above), has
appealed from the Superior Courts orders approving the
settlement, overruling the shareholders objection to the
settlement, denying the shareholders motion to intervene,
and dismissing the litigation with prejudice. The Company plans
to contest the shareholders appeal vigorously.

The Operating Partnership is involved in various
other legal proceedings incidental to its business from time to
time, most of which are expected to be covered by liability
insurance. Management of the Operating Partnership believes that
any resolution of pending proceedings or liability to the
Operating Partnership, which may arise as a result of these
proceedings, will not have a material adverse effect on the
Operating Partnerships results of operations or financial
position.

12. RELATED PARTY TRANSACTIONS

In 2004, 2003 and 2002, the Operating Partnership
held investments in Property LLCs accounted for under the
equity method of accounting (see note 4). In 2004, 2003 and
2002, the Operating Partnership recorded, before elimination of
the Operating Partnerships equity interests, development
fees, general construction contract billings, management fees
and expense reimbursements (primarily personnel costs) of
approximately $1,756, $2,913 and $11,916, respectively, from
these related companies. Additionally in 2004, 2003 and 2002,
the Operating Partnership earned interest under construction
loans to the Project LLCs totaling $308, $3,186 and $4,482,
respectively. The Operating Partnership portion of all
significant intercompany transactions was eliminated in the
accompanying consolidated financial statements

In prior years, the Operating Partnership
provided landscaping services for executive officers, employees,
directors and other related parties. For the years ended
December 31, 2003 and 2002, the Operating Partnership
received landscaping revenue of $742 and $775, respectively, for
such services. Such revenue includes reimbursement of direct and
indirect expenses.

At December 31, 2004 and 2003, the Operating
Partnership had outstanding loan balances to certain current and
former Operating Partnership executives totaling $5,095 and
$6,075, respectively. These loans mature ten years from the
issue date and bear interest at a rate of 6.32% per annum.
Proceeds from these loans were used by these executives to
acquire the Companys common shares on the open market.
Additionally, at December 31, 2004 and 2003, the Operating
Partnership had outstanding additional loans to certain
Operating Partnership executives totaling $780 and $920,
respectively. The loans bear interest at 6.32% per annum.
If the executives continue to be employed by the Operating
Partnership, the loans will be forgiven annually over five to
ten year periods, as defined in the agreements. The annual loan
forgiveness of $140, $160 and $160 was recorded as compensation
expense in 2004, 2003 and 2002, respectively.



|    |                                 
|--- | --------------------------------
|13. | DERIVATIVE FINANCIAL INSTRUMENTS

At December 31, 2004 and 2003, the Operating
Partnership had outstanding interest rate swap agreements with a
notional value of approximately $123,000 with maturity dates
ranging from 2005 to 2009. At December 31, 2004 and 2003,
the fair value of the interest rate swap agreements of $8,927
and $12,833, respectively, were included in consolidated
liabilities in the accompanying consolidated balance sheets. The
Operating Partnership records the changes in the fair value of
these cash flow hedges as changes in accumulated other
comprehensive income (loss), a partners equity account, in
the accompanying consolidated balance sheet.

At December 31, 2004, the Operating
Partnership had outstanding interest rate cap agreements with
two financial institutions with a notional value of $110,055.
These interest rate cap agreements are cash flow hedges that
provide a fixed interest ceiling at 5% for the Operating
Partnerships variable rate, tax-exempt borrowings
aggregating $110,055 at December 31, 2004. The Operating
Partnership is required to maintain the interest rate exposure
protection under the terms of the financing arrangements. The
interest rate cap arrangements are included on the accompanying
balance sheet at fair value. At December 31, 2004, the
difference between the amortized costs of the interest rate cap
arrangements and their fair value of $110 is included in
accumulated other comprehensive income




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NOTES TO CONSOLIDATED FINANCIAL
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(Dollars in thousands, except per unit
data)





(loss), a partners equity account. The
original cost of $1,396 of the arrangements is being amortized
to expense over their five-year term.

The impact of the change in the value of the
derivatives on comprehensive income (loss) is included in the
statement of partners equity.

In June 2004, in connection with the sale of five
properties discussed in note 5 above, the Operating
Partnership sold its interest in interest rate cap agreements
with a notional value of $104,325 for aggregate proceeds of $379
and realized a loss of $941 ($877 net of minority interest)
that was included in the loss on early extinguishment of
indebtedness associated with asset sales on the accompanying
statement of operations. The unrealized loss on these interest
rate cap agreements was previously reflected in accumulated
other comprehensive income (loss), a partners equity
account. These interest rate cap agreements were sold as the
underlying hedged indebtedness was assumed by the purchaser in
connection with the sale of the related assets.



|    |                                    
|--- | -----------------------------------
|14. | FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of estimated fair value
were determined by management using available market information
and appropriate valuation methodologies. Considerable judgment
is necessary to interpret market data and develop estimated fair
value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Operating Partnership
could realize on disposition of the financial instruments. The
use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair
value amounts.

Cash equivalents, rents and accounts receivables,
accounts payable, accrued expenses and other liabilities are
carried at amounts which reasonably approximate their fair
values because of the short-term nature of these instruments.
The fair value of fixed rate debt was approximately $891,579
(carrying value of $845,175) and the fair value of floating rate
debt approximated its carrying value due to the adjustable
nature of the arrangements at December 31, 2004. The fair
value of fixed rate debt was approximately $830,454 (carrying
value of $775,132) and the fair value of floating rate debt
approximated its carrying value due to the adjustable nature of
the arrangements at December 31, 2003.

In order to manage the impact of interest rate
changes on earnings and cash flow, the Operating Partnership
entered into and has outstanding interest rate swap and interest
rate cap arrangements. As more fully described in note 1,
these interest rate cap and interest rate swap agreements are
carried on the consolidated balance sheet at fair market value
in accordance with SFAS No. 133, as amended. At
December 31, 2004, the carrying amounts of the interest
rate swap arrangements represented net liabilities totaling
$8,927 and the carrying value of the interest rate cap
arrangements represented net assets of $110. At
December 31, 2003, the carrying amounts of the interest
rate swap arrangements represented net liabilities totaling
$12,832 and the carrying value of the interest rate cap
arrangements represented net assets of $1,406.

Disclosure about fair value of financial
instruments is based on pertinent information available to
management as of December 31, 2004. Although management is
not aware of any factors that would significantly affect the
reasonable fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial
statements since that date and current estimates of fair value
may differ significantly from the amounts presented herein.



|    |                    
|--- | -------------------
|15. | SEGMENT INFORMATION

Segment Description

In accordance with SFAS No. 131,
Disclosure About the Segments of an Enterprise and Related
Information, the Operating Partnership presents segment
information based on the way that management organizes the
segments within the enterprise for making operating decisions
and assessing performance. The segment information is prepared
on substantially the same basis as the internally reported
information used by the Operating Partnerships chief
operating decision makers to manage the business.

The Operating Partnerships chief operating
decision makers focus on the Operating Partnerships
primary sources of income from property rental operations.
Apartment community rental operations are broken down into five
segments based on the various stages in the apartment community
ownership lifecycle. These segments are




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NOTES TO CONSOLIDATED FINANCIAL
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(Dollars in thousands, except per unit
data)





described below. All commercial and other
ancillary service and support operations are aggregated in the
line item other property segments in the
accompanying segment information. The segment information
presented below reflects the segment categories based on the
lifecycle status of each community as of December 31, 2004.
The segment information for the years ended December 31,
2003 and 2002 have been adjusted due to the restatement impact
of reclassifying the operating results of the assets designated
as held for sale in 2004 to discontinued operations under
SFAS No. 144 (see note 5).



|  |                                                                                                                                                                                                                                                             
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Fully stabilized communities  those
    apartment communities which have been stabilized (the earlier of
    the point at which a property reaches 95% occupancy or one year
    after completion of construction) for both the current and prior
    year.
| 
| | Communities stabilized during prior
    year  communities which reached stabilized occupancy
    in the prior year.                                                                                                                                        
| 
| | Development and lease up communities 
    those communities that are in lease-up but were not stabilized
    by the beginning of the current year, including communities that
    stabilized during the current year.                                      
| 
| | Acquired communities  those
    communities acquired in the current or prior year.                                                                                                                                                                         
| 
| | Sold communities  communities which
    were sold in prior years and not reflected as discontinued
    operations (see notes 1 and 5).                                                                                                                     

Segment Performance Measure

Management uses contribution to consolidated
property net operating income (NOI) as the
performance measure for its operating segments. The Operating
Partnership uses net operating income, including net operating
income of stabilized communities, as an operating measure. Net
operating income is defined as rental and other revenue from
real estate operations less total property and maintenance
expenses from real estate operations (excluding depreciation and
amortization). The Operating Partnership believes that net
operating income is an important supplemental measure of
operating performance for a REITs operating real estate
because it provides a measure of the core operations, rather
than factoring in depreciation and amortization, financing costs
and general and administrative expenses generally incurred at
the corporate level. This measure is particularly useful, in the
opinion of the Operating Partnership, in evaluating the
performance of geographic operations, operating segment
groupings and individual properties. Additionally, the Operating
Partnership believes that net operating income, as defined, is a
widely accepted measure of comparative operating performance in
the real estate investment community. The Operating Partnership
believes that the line on the Operating Partnerships
consolidated statement of operations entitled net
income is the most directly comparable GAAP measure to net
operating income.

Segment Information

The following table reflects each segments
contribution to consolidated revenues and NOI together with a
reconciliation of segment contribution to NOI to consolidated
net income for the years ended December 31, 2004, 2003 and
2002. Additionally, substantially all of the Operating
Partnerships assets relate to the Operating




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





Partnerships property rental operations.
Asset cost, depreciation and amortization by segment are not
presented because such information is not reported internally at
the segment level.

|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |         | 
|-------------------------------------------------------------------- | --------------------- | ----------------------- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                                                     |                       |                        
|                                                                     |                       | Year Ended December 31,
|                                                                     |                       |                        
|                                                                     |                       | 2004                    |         | 2003    |  | 2002
|                                                                     |                       |                         |         |         |  |     
|Revenues                                                             |                       |                         |         |         |  |      |         |         |  |   |         |        
|Fully stabilized communities                                         |                       | $                       | 250,372 |         |  | $    | 248,991 |         |  | $ | 250,646 |        
|Communities stabilized during prior year                             |                       |                         | 15,784  |         |  |      | 14,695  |         |  |   | 9,170   |        
|Development and lease-up communities                                 |                       |                         | 7,001   |         |  |      | 2,006   |         |  |   |        |        
|Acquired communities                                                 |                       |                         | 4,472   |         |  |      |        |         |  |   |        |        
|Sold communities                                                     |                       |                         |        |         |  |      |        |         |  |   | 773     |        
|Other property segments                                              |                       |                         | 21,201  |         |  |      | 19,608  |         |  |   | 20,147  |        
|Other                                                                |                       |                         | 1,000   |         |  |      | 457     |         |  |   | 260     |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|                                                                     | Consolidated revenues |                         | $       | 299,830 |  |      | $       | 285,757 |  |   | $       | 280,996 | 
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Contribution to Property Net Operating
    Income                    |                       |                         |         |         |  |      |         |         |  |   |         |        
|Fully stabilized communities                                         |                       | $                       | 153,126 |         |  | $    | 155,162 |         |  | $ | 159,911 |        
|Communities stabilized during prior year                             |                       |                         | 9,851   |         |  |      | 8,841   |         |  |   | 4,854   |        
|Development and lease-up communities                                 |                       |                         | 4,879   |         |  |      | 113     |         |  |   |        |        
|Acquired communities                                                 |                       |                         | 3,163   |         |  |      |        |         |  |   |        |        
|Sold communities                                                     |                       |                         |        |         |  |      |        |         |  |   | 369     |        
|Other                                                                |                       |                         | (4,927  | )       |  |      | (2,994  | )       |  |   | (1,428  | )      
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Consolidated property net operating income                           |                       |                         | 166,092 |         |  |      | 161,122 |         |  |   | 163,706 |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Interest income                                                      |                       |                         | 817     |         |  |      | 894     |         |  |   | 1,288   |        
|Other revenues                                                       |                       |                         | 1,000   |         |  |      | 457     |         |  |   | 260     |        
|Minority interest in consolidated property
    partnerships          |                       |                         | 671     |         |  |      | 1,605   |         |  |   | 1,771   |        
|Gains on property sales                                              |                       |                         |        |         |  |      |        |         |  |   | 13,275  |        
|Depreciation                                                         |                       |                         | (83,029 | )       |  |      | (81,201 | )       |  |   | (74,482 | )      
|Interest                                                             |                       |                         | (65,415 | )       |  |      | (63,182 | )       |  |   | (50,231 | )      
|Amortization of deferred loan costs                                  |                       |                         | (4,304  | )       |  |      | (3,801  | )       |  |   | (2,327  | )      
|General and administrative                                           |                       |                         | (21,275 | )       |  |      | (15,102 | )       |  |   | (14,430 | )      
|Development costs and other                                          |                       |                         | (1,337  | )       |  |      | (2,137  | )       |  |   | (694    | )      
|Termination of debt remarketing agreement
    (interest expense)     |                       |                         | (10,615 | )       |  |      |        |         |  |   |        |        
|Loss on early extinguishment of indebtedness                         |                       |                         | (4,011  | )       |  |      |        |         |  |   | (136    | )      
|Severance charges                                                    |                       |                         |        |         |  |      | (21,506 | )       |  |   |        |        
|Proxy and related costs                                              |                       |                         |        |         |  |      | (5,231  | )       |  |   |        |        
|Equity in income (losses) of unconsolidated real
    estate entities |                       |                         | 1,083   |         |  |      | 7,790   |         |  |   | (1,591  | )      
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Income (loss) from continuing operations                             |                       |                         | (20,323 | )       |  |      | (20,292 | )       |  |   | 36,409  |        
|Income from discontinued operations                                  |                       |                         | 117,500 |         |  |      | 40,389  |         |  |   | 36,709  |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        
|Net income                                                           |                       | $                       | 97,177  |         |  | $    | 20,097  |         |  | $ | 73,118  |        
|                                                                     |                       |                         |         |         |  |      |         |         |  |   |         |        




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)







|    |                                   
|--- | ----------------------------------
|16. | SUPPLEMENTAL CASH FLOW INFORMATION

Non-cash investing and financing activities for
the years ended December 31, 2004, 2003 and 2002 are as
follows:

In June 2004, the Operating Partnership acquired
an apartment community for cash and the assumption of mortgage
indebtedness with an estimated fair value of $49,496. Also in
June 2004, the Operating Partnership sold certain apartment
communities subject to $104,325 of mortgage indebtedness assumed
by the purchasers. These transactions involving mortgage
indebtedness were excluded from the statement of cash flows as
non-cash transactions.

For the year ended December 31, 2004, the
Operating Partnerships derivative financial instruments
increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in partners
equity of $3,945. For the year ended December 31, 2003, the
Operating Partnerships derivative financial instruments
increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in partners
equity of $2,702. For the year ended December 31, 2002, the
Operating Partnerships derivative financial instruments
decreased in value causing an increase in accounts payable and
accrued expenses and a corresponding decrease in partners
equity of $10,204.

The Operating Partnership committed to distribute
$19,203, $19,043 and $32,785 for the quarters ended
December 31, 2004, 2003 and 2002, respectively.



|    |                                                
|--- | -----------------------------------------------
|17. | QUARTERLY FINANCIAL INFORMATION
    (UNAUDITED)

Under SFAS No. 144, as further
discussed in note 5, the operating results of apartment
communities classified as held for sale were included in
discontinued operations in the accompanying statements of
operations for all periods presented. To conform with this
presentation, the quarterly financial information presented
below reflects the reclassification of the operating results of
these assets to discontinued operations, which differs from the
presentation of discontinued operations included in the
Operating Partnerships previously issued financial
statements included in its quarterly reports on Form 10-Q.
Quarterly financial information for the years ended
December 31, 2004 and 2003, as revised to reflect the
change discussed above, was as follows:

|                                                                |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|--------------------------------------------------------------- |  | ---------------------------- | ------ | ------ |  | ----- | ------- | ------ |  | - | ------ | - |  | - | ------- | -
|                                                                |  |                             
|                                                                |  | Year Ended December 31, 2004
|                                                                |  |                             
|                                                                |  | First                        |        | Second |  | Third |         | Fourth
|                                                                |  |                              |        |        |  |       |         |       
|Revenues                                                        |  | $                            | 72,912 |        |  | $     | 74,160  |        |  | $ | 77,207 |   |  | $ | 75,551  |  
|                                                                |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Income (loss) from continuing operations                        |  |                              | (1,276 | )      |  |       | (1,183  | )      |  |   | (2,564 | ) |  |   | (15,300 | )
|Income (loss) from discontinued operations                      |  |                              | 6,016  |        |  |       | 110,900 |        |  |   | 1,072  |   |  |   | (488    | )
|                                                                |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Net income (loss)                                               |  |                              | 4,740  |        |  |       | 109,717 |        |  |   | (1,492 | ) |  |   | (15,788 | )
|Distributions to preferred unitholders                          |  |                              | (3,997 | )      |  |       | (3,310  | )      |  |   | (2,889 | ) |  |   | (1,909  | )
|Redemption costs on preferred units                             |  |                              | (1,716 | )      |  |       |        |        |  |   | (1,810 | ) |  |   |        |  
|                                                                |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Net income (loss) available to common unitholders               |  | $                            | (973   | )      |  | $     | 106,407 |        |  | $ | (6,191 | ) |  | $ | (17,697 | )
|                                                                |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Earnings per Common Unit(1):                                    |  |                              |        |        |  |       |         |        |  |   |        |   |  |   |         |  
|Net income (loss) available to common
    unitholders  basic   |  | $                            | (0.02  | )      |  | $     | 2.50    |        |  | $ | (0.15  | ) |  | $ | (0.42   | )
|Net income (loss) available to common
    unitholders  diluted |  | $                            | (0.02  | )      |  | $     | 2.50    |        |  | $ | (0.15  | ) |  | $ | (0.42   | )




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





|                                                         |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|-------------------------------------------------------- |  | ---------------------------- | ------- | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | -
|                                                         |  |                             
|                                                         |  | Year Ended December 31, 2003
|                                                         |  |                             
|                                                         |  | First                        |         | Second |  | Third |        | Fourth
|                                                         |  |                              |         |        |  |       |        |       
|Revenues                                                 |  | $                            | 70,353  |        |  | $     | 71,132 |        |  | $ | 72,398 |   |  | $ | 71,874 |  
|                                                         |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Income from continuing operations                        |  |                              | (19,267 | )      |  |       | 1,970  |        |  |   | (1,336 | ) |  |   | (1,659 | )
|Income (loss) from discontinued operations               |  |                              | (2,936  | )      |  |       | 30,202 |        |  |   | 642    |   |  |   | 12,481 |  
|                                                         |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income                                               |  |                              | (22,203 | )      |  |       | 32,172 |        |  |   | (694   | ) |  |   | 10,822 |  
|Distributions to preferred unitholders                   |  |                              | (4,262  | )      |  |       | (4,263 | )      |  |   | (4,262 | ) |  |   | (4,262 | )
|                                                         |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income available to common unitholders               |  | $                            | (26,465 | )      |  | $     | 27,909 |        |  | $ | (4,956 | ) |  | $ | 6,560  |  
|                                                         |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Earnings per Common Unit:                                |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income available to common
    unitholders  basic   |  | $                            | (0.63   | )      |  | $     | 0.66   |        |  | $ | (0.12  | ) |  | $ | 0.16   |  
|Net income available to common
    unitholders  diluted |  | $                            | (0.63   | )      |  | $     | 0.66   |        |  | $ | (0.12  | ) |  | $ | 0.16   |  



|    |                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The total of the four quarterly amounts for net
    income and earnings per unit does not equal the total for the
    year. These differences result from the use of a weighted
    average to compute the number of units outstanding for the
    purpose of calculating the Operating Partnerships earnings
    per unit.




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##### Table of Contents



POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.


REAL ESTATE INVESTMENTS AND ACCUMULATED
DEPRECIATION


December 31, 2004


(Dollars in thousands)


|                     |                               |             |            |              |  |               |        |              |     |                            |        |      |  |              |   |          |  |   |         |        |  |   |        |     |  |   |         |        |  |   |         |        | 
|-------------------- | ----------------------------- | ----------- | ---------- | ------------ |  | ------------- | ------ | ------------ | --- | -------------------------- | ------ | ---- |  | ------------ | - | -------- |  | - | ------- | ------ |  | - | ------ | --- |  | - | ------- | ------ |  | - | ------- | ------ | 
|                     |                               |             |            |              |  |               |        |              |     |                            |        |     
|                     |                               |             |            |              |  |               |        |              |     | Gross amount at which     
|                     |                               |             |            |              |  | Initial costs |        | Costs        |     | Carried at close of period
|                     |                               |             |            |              |  |               |        | Capitalized  |     |                           
|                     |                               |             |            | Related      |  |               |        | Building and |     | Subsequent                 |        |      |  | Building and |   |         
|                     |                               | Description |            | Encumbrances |  | Land          |        | Improvements |     | to Acquisition             |        | Land |  | Improvements |   | Total(1)
|                     |                               |             |            |              |  |               |        |              |     |                            |        |      |  |              |   |         
|Georgia              |                               |             |            |              |  |               |        |              |     |                            |        |      |  |              |   |          |  |   |         |        |  |   |        |     |  |   |         |        |  |   |         |       
|Post Ashford         |                               |             | Apartments |              |  | $             | 9,895  | (2)          |     | $                          | 1,906  |      |  | $            |  |          |  | $ | 9,039   |        |  | $ | 1,906  |     |  | $ | 9,039   |        |  | $ | 10,945  |       
|Post Briarcliff      |                               |             | Apartments |              |  |               |       |              |     |                            | 13,344 |      |  |              |  |          |  |   | 47,145  |        |  |   | 13,344 |     |  |   | 47,145  |        |  |   | 60,489  |       
|Post Brookhaven      |                               |             | Apartments |              |  |               |       |              |     |                            | 7,921  |      |  |              |  |          |  |   | 33,226  |        |  |   | 7,921  |     |  |   | 33,226  |        |  |   | 41,147  |       
|Post Chastain        |                               |             | Apartments |              |  |               | 29,020 |              |     |                            | 6,352  |      |  |              |  |          |  |   | 41,504  |        |  |   | 6,779  |     |  |   | 41,077  |        |  |   | 47,856  |       
|Post Collier Hills   |                               |             | Apartments |              |  |               |       |              |     |                            | 6,487  |      |  |              |  |          |  |   | 25,773  |        |  |   | 7,203  |     |  |   | 25,057  |        |  |   | 32,260  |       
|Post Corners(4)      |                               |             | Apartments |              |  |               | 14,760 | (2)          |     |                            | 1,473  |      |  |              |  |          |  |   | 16,225  |        |  |   | 1,473  |     |  |   | 16,225  |        |  |   | 17,698  |       
|Post Crest           |                               |             | Apartments |              |  |               | 25,221 |              |     |                            | 4,733  |      |  |              |  |          |  |   | 25,333  |        |  |   | 4,763  |     |  |   | 25,303  |        |  |   | 30,066  |       
|Post Crossing        |                               |             | Apartments |              |  |               |       |              |     |                            | 3,951  |      |  |              |  |          |  |   | 20,191  |        |  |   | 3,951  |     |  |   | 20,191  |        |  |   | 24,142  |       
|Post Dunwoody        |                               |             | Apartments |              |  |               |       |              |     |                            | 4,917  |      |  |              |  |          |  |   | 29,608  |        |  |   | 4,961  |     |  |   | 29,564  |        |  |   | 34,525  |       
|Post Gardens         |                               |             | Apartments |              |  |               |       |              |     |                            | 5,859  |      |  |              |  |          |  |   | 34,349  |        |  |   | 5,931  |     |  |   | 34,277  |        |  |   | 40,208  |       
|Post Glen            |                               |             | Apartments |              |  |               | 19,316 |              |     |                            | 5,591  |      |  |              |  |          |  |   | 22,037  |        |  |   | 5,784  |     |  |   | 21,844  |        |  |   | 27,628  |       
|Post Lenox Park      |                               |             | Apartments |              |  |               | 10,713 |              |     |                            | 3,132  |      |  |              |  |          |  |   | 11,199  |        |  |   | 3,132  |     |  |   | 11,199  |        |  |   | 14,331  |       
|Post Lindbergh       |                               |             | Apartments |              |  |               |       |              |     |                            | 6,268  |      |  |              |  |          |  |   | 27,453  |        |  |   | 6,652  |     |  |   | 27,069  |        |  |   | 33,721  |       
|Post Oak             |                               |             | Apartments |              |  |               |       |              |     |                            | 2,027  |      |  |              |  |          |  |   | 8,714   |        |  |   | 2,027  |     |  |   | 8,714   |        |  |   | 10,741  |       
|Post Oglethorpe      |                               |             | Apartments |              |  |               |       |              |     |                            | 3,662  |      |  |              |  |          |  |   | 17,629  |        |  |   | 3,662  |     |  |   | 17,629  |        |  |   | 21,291  |       
|Post Parkside        |                               |             | Mixed Use  |              |  |               |       |              |     |                            | 3,402  |      |  |              |  |          |  |   | 20,296  |        |  |   | 3,465  |     |  |   | 20,233  |        |  |   | 23,698  |       
|Post Peachtree Hills |                               |             | Apartments |              |  |               |       |              |     |                            | 4,215  |      |  |              |  |          |  |   | 14,788  |        |  |   | 4,857  |     |  |   | 14,146  |        |  |   | 19,003  |       
|Post Renaissance(5)  |                               |             | Apartments |              |  |               |       |              |     |                            |       |      |  |              |  |          |  |   | 20,778  |        |  |   |       |     |  |   | 20,778  |        |  |   | 20,778  |       
|Post Ridge           |                               |             | Apartments |              |  |               |       |              |     |                            | 5,150  |      |  |              |  |          |  |   | 32,014  |        |  |   | 5,150  |     |  |   | 32,014  |        |  |   | 37,164  |       
|Post Spring          |                               |             | Apartments |              |  |               |       |              |     |                            | 2,105  |      |  |              |  |          |  |   | 38,352  |        |  |   | 2,105  |     |  |   | 38,352  |        |  |   | 40,457  |       
|Post Summit          |                               |             | Apartments |              |  |               |       |              |     |                            | 1,575  |      |  |              |  |          |  |   | 6,654   |        |  |   | 1,575  |     |  |   | 6,654   |        |  |   | 8,229   |       
|Post Valley          |                               |             | Apartments |              |  |               | 18,600 | (2)          |     |                            | 1,117  |      |  |              |  |          |  |   | 20,104  |        |  |   | 1,117  |     |  |   | 20,104  |        |  |   | 21,221  |       
|Post Vinings         |                               |             | Apartments |              |  |               |       |              |     |                            | 4,322  |      |  |              |  |          |  |   | 22,753  |        |  |   | 5,668  |     |  |   | 21,407  |        |  |   | 27,075  |       
|Post Village         |                               |             | Apartments |              |  |               |        |              |     |                            |        |      |  |              |   |          |  |   |         |        |  |   |        |     |  |   |         |        |  |   |         |       
|                     | The Arbors                    |             |            | Apartments   |  |               |        |             |     |                            |        | 373  |  |              |   |         |  |   |         | 17,905 |  |   |        | 373 |  |   |         | 17,905 |  |   |         | 18,278 | 
|                     | The Fountains and the Meadows |             |            | Apartments   |  |               |        | 26,000       | (2) |                            |        | 611  |  |              |   |         |  |   |         | 40,056 |  |   |        | 878 |  |   |         | 39,789 |  |   |         | 40,667 | 
|                     | The Gardens                   |             |            | Apartments   |  |               |        | 14,500       | (2) |                            |        | 187  |  |              |   |         |  |   |         | 29,297 |  |   |        | 637 |  |   |         | 28,847 |  |   |         | 29,484 | 
|                     | The Hills                     |             |            | Apartments   |  |               |        | 7,000        | (2) |                            |        | 91   |  |              |   |         |  |   |         | 13,147 |  |   |        | 307 |  |   |         | 12,931 |  |   |         | 13,238 | 
|Post Walk(4)         |                               |             | Apartments |              |  |               | 19,300 | (2)          |     |                            | 2,954  |      |  |              |  |          |  |   | 19,015  |        |  |   | 2,954  |     |  |   | 19,015  |        |  |   | 21,969  |       
|Post Woods           |                               |             | Apartments |              |  |               | 25,691 |              |     |                            | 1,378  |      |  |              |  |          |  |   | 28,747  |        |  |   | 3,070  |     |  |   | 27,055  |        |  |   | 30,125  |       
|Post Stratford(5)    |                               |             | Apartments |              |  |               |       |              |     |                            | 328    |      |  |              |  |          |  |   | 24,434  |        |  |   | 620    |     |  |   | 24,142  |        |  |   | 24,762  |       
|Post Riverside       |                               |             | Mixed Use  |              |  |               |       |              |     |                            | 11,130 |      |  |              |  |          |  |   | 109,961 |        |  |   | 12,457 |     |  |   | 108,634 |        |  |   | 121,091 |       

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                     |                               |              |        |              |  |          |               |               |  |  |               |       |  |  |            |            | 
|-------------------- | ----------------------------- | ------------ | ------ | ------------ |  | -------- | ------------- | ------------- |  |  | ------------- | ----- |  |  | ---------- | ---------- | 
|                     |                               | Accumulated  |        | Date of      |  | Date     |               | Depreciable  
|                     |                               | Depreciation |        | Construction |  | Acquired |               | Lives Years  
|                     |                               |              |        |              |  |          |               |              
|Georgia              |                               |              |        |              |  |          |               |               |  |  |               |       |  |  |            |           
|Post Ashford         |                               | $            | 4,465  |              |  |          | 04/86  06/87 |               |  |  | 04/86         |       |  |  | 5-40 Years |           
|Post Briarcliff      |                               |              | 11,769 |              |  |          | 12/96         |               |  |  | 09/96         |       |  |  | 5-40 Years |           
|Post Brookhaven      |                               |              | 15,606 |              |  |          | 07/89  12/92 |               |  |  | 03/89         |       |  |  | 5-40 Years |           
|Post Chastain        |                               |              | 18,855 |              |  |          | 06/88  10/90 |               |  |  | 06/88         |       |  |  | 5-40 Years |           
|Post Collier Hills   |                               |              | 7,450  |              |  |          | 10/95         |               |  |  | 06/95         |       |  |  | 5-40 Years |           
|Post Corners(4)      |                               |              | 7,836  |              |  |          | 08/84  04/86 |               |  |  | 08/84         |       |  |  | 5-40 Years |           
|Post Crest           |                               |              | 7,864  |              |  |          | 09/95         |               |  |  | 10/94         |       |  |  | 5-40 Years |           
|Post Crossing        |                               |              | 6,019  |              |  |          | 04/94  08/95 |               |  |  | 11/93         |       |  |  | 5-40 Years |           
|Post Dunwoody        |                               |              | 10,419 |              |  |          | 11/88         |               |  |  | 12/84 & 08/94 | (3)   |  |  | 5-40 Years |           
|Post Gardens         |                               |              | 8,753  |              |  |          | 07/96         |               |  |  | 05/96         |       |  |  | 5-40 Years |           
|Post Glen            |                               |              | 6,272  |              |  |          | 07/96         |               |  |  | 05/96         |       |  |  | 5-40 Years |           
|Post Lenox Park      |                               |              | 3,471  |              |  |          | 03/94  05/95 |               |  |  | 03/94         |       |  |  | 5-40 Years |           
|Post Lindbergh       |                               |              | 6,896  |              |  |          | 11/96         |               |  |  | 08/96         |       |  |  | 5-40 Years |           
|Post Oak             |                               |              | 3,507  |              |  |          | 09/92  12/93 |               |  |  | 09/92         |       |  |  | 5-40 Years |           
|Post Oglethorpe      |                               |              | 5,539  |              |  |          | 03/93  10/94 |               |  |  | 03/93         |       |  |  | 5-40 Years |           
|Post Parkside        |                               |              | 4,420  |              |  |          | 02/99         |               |  |  | 12/97         |       |  |  | 5-40 Years |           
|Post Peachtree Hills |                               |              | 5,067  |              |  |          | 02/92  09/94 |               |  |  | 02/92 & 09/92 | (3)   |  |  | 5-40 Years |           
|Post Renaissance(5)  |                               |              | 7,750  |              |  |          | 07/91  12/94 |               |  |  | 06/91 & 01/94 | (3)   |  |  | 5-40 Years |           
|Post Ridge           |                               |              | 7,888  |              |  |          | 10/96         |               |  |  | 07/96         |       |  |  | 5-40 Years |           
|Post Spring          |                               |              | 6,140  |              |  |          | 09/99         |               |  |  | 09/99         |       |  |  | 5-40 Years |           
|Post Summit          |                               |              | 3,324  |              |  |          | 01/90  12/90 |               |  |  | 01/90         |       |  |  | 5-40 Years |           
|Post Valley          |                               |              | 9,764  |              |  |          | 03/86  04/88 |               |  |  | 12/85         |       |  |  | 5-40 Years |           
|Post Vinings         |                               |              | 10,578 |              |  |          | 05/88  09/91 |               |  |  | 05/88         |       |  |  | 5-40 Years |           
|Post Village         |                               |              |        |              |  |          |               |               |  |  |               |       |  |  |            |           
|                     | The Arbors                    |              |        | 8,371        |  |          |               | 04/82  10/83 |  |  |               | 03/82 |  |  |            | 5-40 Years | 
|                     | The Fountains and the Meadows |              |        | 18,602       |  |          |               | 08/85  05/88 |  |  |               | 08/85 |  |  |            | 5-40 Years | 
|                     | The Gardens                   |              |        | 13,487       |  |          |               | 06/88  07/89 |  |  |               | 05/84 |  |  |            | 5-40 Years | 
|                     | The Hills                     |              |        | 6,046        |  |          |               | 05/84  04/86 |  |  |               | 04/83 |  |  |            | 5-40 Years | 
|Post Walk(4)         |                               |              | 9,640  |              |  |          | 03/86  08/87 |               |  |  | 06/85         |       |  |  | 5-40 Years |           
|Post Woods           |                               |              | 14,144 |              |  |          | 03/76  09/83 |               |  |  | 06/76         |       |  |  | 5-40 Years |           
|Post Stratford(5)    |                               |              | 4,967  |              |  |          | 04/99         |               |  |  | 01/99         |       |  |  | 5-40 Years |           
|Post Riverside       |                               |              | 27,019 |              |  |          | 07/96         |               |  |  | 01/96         |       |  |  | 5-40 Years |           




Post Properties, Inc.


113


Post Apartment Homes, L.P.




---



##### Table of Contents



POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.


REAL ESTATE INVESTMENTS AND ACCUMULATED
DEPRECIATION


December 31, 2004


(Dollars in thousands)


|                                       |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |          |  |  |         |  |  |  |        |  |  |  |         |     |  |  |         |    
|-------------------------------------- |  | ----------- | ---------- | ------------ |  | ------------- | ------ | ------------ |  | -------------------------- | ------ | ---- |  | ------------ | ------ | -------- |  |  | ------- |  |  |  | ------ |  |  |  | ------- | --- |  |  | ------- | ---
|                                       |  |             |            |              |  |               |        |              |  |                            |        |     
|                                       |  |             |            |              |  |               |        |              |  | Gross amount at which     
|                                       |  |             |            |              |  | Initial costs |        | Costs        |  | Carried at close of period
|                                       |  |             |            |              |  |               |        | Capitalized  |  |                           
|                                       |  |             |            | Related      |  |               |        | Building and |  | Subsequent                 |        |      |  | Building and |        |         
|                                       |  | Description |            | Encumbrances |  | Land          |        | Improvements |  | to Acquisition             |        | Land |  | Improvements |        | Total(1)
|                                       |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |         
|Texas                                  |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |          |  |  |         |  |  |  |        |  |  |  |         |     |  |  |         |    
|Addison Circle Apartment Homes By Post |  |             | Mixed Use  |              |  |               | 87,835 |              |  |                            | 2,885  |      |  |              | 41,482 |          |  |  | 120,811 |  |  |  | 8,382  |  |  |  | 156,796 |     |  |  | 165,178 |    
|Post American Beauty Mill(4)           |  |             | Apartments |              |  |               |       |              |  |                            | 156    |      |  |              | 2,786  |          |  |  | 2,891   |  |  |  | 156    |  |  |  | 5,677   |     |  |  | 5,833   | (7)
|Post Block 588(4)(6)                   |  |             | Apartments |              |  |               |       |              |  |                            | 1,278  |      |  |              | 48     |          |  |  | 18,952  |  |  |  |       |  |  |  | 20,278  |     |  |  | 20,278  |    
|Post Coles Corner                     |  |             | Mixed Use  |              |  |               |       |              |  |                            | 1,886  |      |  |              | 18,006 |          |  |  | 1,958   |  |  |  | 2,086  |  |  |  | 19,764  |     |  |  | 21,850  |    
|Post Columbus Square                   |  |             | Mixed Use  |              |  |               |       |              |  |                            | 4,565  |      |  |              | 24,595 |          |  |  | 1,244   |  |  |  | 4,565  |  |  |  | 25,839  |     |  |  | 30,404  |    
|Heights of State- Thomas/Gallery       |  |             | Mixed Use  |              |  |               |       |              |  |                            | 5,455  |      |  |              | 15,559 |          |  |  | 29,925  |  |  |  | 5,812  |  |  |  | 45,127  |     |  |  | 50,939  |    
|Legacy at Town Center                  |  |             | Apartments |              |  |               |       |              |  |                            | 684    |      |  |              |       |          |  |  | 33,296  |  |  |  | 811    |  |  |  | 33,169  |     |  |  | 33,980  |    
|Post Midtown                           |  |             | Mixed Use  |              |  |               |       |              |  |                            | 4,408  |      |  |              | 1,412  |          |  |  | 75,125  |  |  |  | 4,498  |  |  |  | 76,447  |     |  |  | 80,945  |    
|Post White Rock(4)                     |  |             | Apartments |              |  |               |       |              |  |                            | 1,560  |      |  |              | 9,969  |          |  |  | 2,673   |  |  |  | 1,560  |  |  |  | 12,642  |     |  |  | 14,202  |    
|The Abbey of State-Thomas              |  |             | Apartments |              |  |               |       |              |  |                            | 575    |      |  |              | 6,276  |          |  |  | 1,714   |  |  |  | 575    |  |  |  | 7,990   |     |  |  | 8,565   |    
|The Meridian at State-Thomas           |  |             | Apartments |              |  |               |       |              |  |                            | 1,535  |      |  |              | 11,605 |          |  |  | 1,141   |  |  |  | 1,535  |  |  |  | 12,746  |     |  |  | 14,281  |    
|The Rice(5)                            |  |             | Mixed Use  |              |  |               |       |              |  |                            | 449    |      |  |              | 13,393 |          |  |  | 26,629  |  |  |  | 449    |  |  |  | 40,022  |     |  |  | 40,471  |    
|The Vineyard of Uptown                 |  |             | Apartments |              |  |               |       |              |  |                            | 1,133  |      |  |              | 8,560  |          |  |  | 383     |  |  |  | 1,133  |  |  |  | 8,943   |     |  |  | 10,076  |    
|The Vintage of Uptown                  |  |             | Apartments |              |  |               |       |              |  |                            | 2,614  |      |  |              | 12,188 |          |  |  | 618     |  |  |  | 2,614  |  |  |  | 12,806  |     |  |  | 15,420  |    
|The Worthington of State-Thomas        |  |             | Mixed Use  |              |  |               |       |              |  |                            | 3,744  |      |  |              | 34,700 |          |  |  | 2,468   |  |  |  | 3,744  |  |  |  | 37,168  |     |  |  | 40,912  |    
|Uptown Village                         |  |             | Apartments |              |  |               | 15,602 |              |  |                            | 3,955  |      |  |              | 22,120 |          |  |  | 18,875  |  |  |  | 6,682  |  |  |  | 38,268  |     |  |  | 44,950  |    
|Post Wilson Building(5)                |  |             | Mixed Use  |              |  |               |       |              |  |                            |       |      |  |              | 689    |          |  |  | 20,616  |  |  |  |       |  |  |  | 21,305  |     |  |  | 21,305  |    
|Florida                                |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |          |  |  |         |  |  |  |        |  |  |  |         |     |  |  |         |    
|Post Harbour Place                     |  |             | Mixed Use  |              |  |               |       |              |  |                            | 3,854  |      |  |              |       |          |  |  | 86,781  |  |  |  | 10,695 |  |  |  | 79,940  |     |  |  | 90,635  |    
|Post Hyde Park                         |  |             | Apartments |              |  |               |       |              |  |                            | 3,498  |      |  |              |       |          |  |  | 26,677  |  |  |  | 5,108  |  |  |  | 25,067  |     |  |  | 30,175  |    
|Post Parkside (Orlando)                |  |             | Mixed Use  |              |  |               |       |              |  |                            | 2,493  |      |  |              |       |          |  |  | 30,618  |  |  |  | 2,493  |  |  |  | 30,618  |     |  |  | 33,111  |    
|Post Rocky Point                       |  |             | Apartments |              |  |               | 57,000 |              |  |                            | 10,510 |      |  |              |       |          |  |  | 62,288  |  |  |  | 10,567 |  |  |  | 62,231  |     |  |  | 72,798  |    
|Post Walk at Hyde Park(6)              |  |             | Apartments |              |  |               |       |              |  |                            | 1,943  |      |  |              |       |          |  |  | 11,117  |  |  |  | 1,974  |  |  |  | 11,086  |     |  |  | 13,060  |    
|Virginia                               |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |          |  |  |         |  |  |  |        |  |  |  |         |     |  |  |         |    
|Post Corners at Trinity Centre         |  |             | Apartments |              |  |               | 17,474 |              |  |                            | 4,404  |      |  |              |       |          |  |  | 24,143  |  |  |  | 4,493  |  |  |  | 24,054  |     |  |  | 28,547  |    
|Post Forest                            |  |             | Apartments |              |  |               |       |              |  |                            | 8,590  |      |  |              |       |          |  |  | 26,783  |  |  |  | 9,106  |  |  |  | 26,267  | (7) |  |  | 35,373  |    
|Post Pentagon Row(5)                   |  |             | Apartments |              |  |               |       |              |  |                            | 2,359  |      |  |              | 7,659  |          |  |  | 82,289  |  |  |  | 3,470  |  |  |  | 88,837  |     |  |  | 92,307  |    
|Post Carlyle I                         |  |             | Mixed Use  |              |  |               |       |              |  |                            | 5,774  |      |  |              |       |          |  |  | 13,754  |  |  |  | 5,774  |  |  |  | 13,754  |     |  |  | 19,528  |    
|Post Tysons Corner                     |  |             | Apartments |              |  |               | 48,760 |              |  |                            | 20,000 |      |  |              | 65,478 |          |  |  |        |  |  |  | 20,000 |  |  |  | 65,478  |     |  |  | 85,478  |    

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                       |  |              |        |              |  |          |               |             |  |  |             |     |  |  |            | 
|-------------------------------------- |  | ------------ | ------ | ------------ |  | -------- | ------------- | ----------- |  |  | ----------- | --- |  |  | ---------- | 
|                                       |  | Accumulated  |        | Date of      |  | Date     |               | Depreciable
|                                       |  | Depreciation |        | Construction |  | Acquired |               | Lives Years
|                                       |  |              |        |              |  |          |               |            
|Texas                                  |  |              |        |              |  |          |               |             |  |  |             |     |  |  |            | 
|Addison Circle Apartment Homes By Post |  |              | 35,825 |              |  |          | 10/97         |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Post American Beauty Mill(4)           |  |              | 1,129  |              |  |          | 10/97         |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Post Block 588(4)(6)                   |  |              |       |              |  |          | 10/97         |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Post Coles Corner                     |  |              | 5,189  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Post Columbus Square                   |  |              | 4,952  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Heights of State- Thomas/Gallery       |  |              | 9,139  |              |  |          | 10/97         |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Legacy at Town Center                  |  |              | 4,894  |              |  |          | 03/99         |             |  |  | 03/99       |     |  |  | 5-40 Years | 
|Post Midtown                           |  |              | 11,705 |              |  |          | 10/97         |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Post White Rock(4)                     |  |              | 3,007  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|The Abbey of State-Thomas              |  |              | 1,520  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|The Meridian at State-Thomas           |  |              | 2,895  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|The Rice(5)                            |  |              | 6,321  |              |  |          | 10/97         |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|The Vineyard of Uptown                 |  |              | 1,690  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|The Vintage of Uptown                  |  |              | 2,721  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|The Worthington of State-Thomas        |  |              | 7,958  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Uptown Village                         |  |              | 6,859  |              |  |          | N/A           |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Post Wilson Building(5)                |  |              | 2,451  |              |  |          | 10/97         |             |  |  | 10/97       |     |  |  | 5-40 Years | 
|Florida                                |  |              |        |              |  |          |               |             |  |  |             |     |  |  |            | 
|Post Harbour Place                     |  |              | 14,246 |              |  |          | 03/97         |             |  |  | 01/97       |     |  |  | 5-40 Years | 
|Post Hyde Park                         |  |              | 6,736  |              |  |          | 09/94         |             |  |  | 07/94       |     |  |  | 5-40 Years | 
|Post Parkside (Orlando)                |  |              | 5,419  |              |  |          | 03/99         |             |  |  | 03/99       |     |  |  | 5-40 Years | 
|Post Rocky Point                       |  |              | 15,688 |              |  |          | 04/94 - 11/96 |             |  |  | 02/94&09/96 | (3) |  |  | 5-40 Years | 
|Post Walk at Hyde Park(6)              |  |              | 3,712  |              |  |          | 10/95 - 10/97 |             |  |  | 09/95       |     |  |  | 5-40 Years | 
|Virginia                               |  |              |        |              |  |          |               |             |  |  |             |     |  |  |            | 
|Post Corners at Trinity Centre         |  |              | 6,462  |              |  |          | 06/94         |             |  |  | 06/94       |     |  |  | 5-40 Years | 
|Post Forest                            |  |              | 13,773 |              |  |          | 01/89 - 12/90 |             |  |  | 03/88       |     |  |  | 5-40 Years | 
|Post Pentagon Row(5)                   |  |              | 7,216  |              |  |          | 06/99         |             |  |  | 2/99        |     |  |  | 5-40 Years | 
|Post Carlyle I                         |  |              |       |              |  |          | 12/04         |             |  |  | N/A         |     |  |  | 5-40 Years | 
|Post Tysons Corner                     |  |              | 1,118  |              |  |          | N/A           |             |  |  | 06/04       |     |  |  | 5-40 Years | 




Post Properties, Inc.


114


Post Apartment Homes, L.P.




---



##### Table of Contents



POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.


REAL ESTATE INVESTMENTS AND ACCUMULATED
DEPRECIATION


December 31, 2004


(Dollars in thousands)


|                            |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |          |         |  |  |         |           |  |  |         |           | 
|--------------------------- | ----- | ----------- | ---------- | ------------ |  | ------------- | ------ | ------------ |  | -------------------------- | ------ | ------- |  | ------------ | ----- | -------- |  |  | ------- | --------- |  |  | -------- | ------- |  |  | ------- | --------- |  |  | ------- | --------- | 
|                            |       |             |            |              |  |               |        |              |  |                            |        |        
|                            |       |             |            |              |  |               |        |              |  | Gross amount at which     
|                            |       |             |            |              |  | Initial costs |        |              |  | Carried at close of period
|                            |       |             |            |              |  |               |        | Subsequent   |  |                           
|                            |       |             |            | Related      |  |               |        | Building and |  | to                         |        |         |  | Building and |       |         
|                            |       | Description |            | Encumbrances |  | Land          |        | Improvements |  | Acquisition                |        | Land    |  | Improvements |       | Total(1)
|                            |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |         
|New York                    |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |          |         |  |  |         |           |  |  |         |          
|Post Toscana                |       |             | Apartments |              |  |               |       |              |  |                            | 15,976 |         |  |              |      |          |  |  | 76,190  |           |  |  | 17,156   |         |  |  | 75,010  |           |  |  | 92,166  |          
|Post Luminaria              |       |             | Apartments |              |  |               | 35,000 |              |  |                            | 4,938  |         |  |              |      |          |  |  | 45,859  |           |  |  | 4,938    |         |  |  | 45,859  |           |  |  | 50,797  |          
|North Carolina              |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |          |         |  |  |         |           |  |  |         |          
|Uptown Place                |       |             | Mixed Use  |              |  |               |       |              |  |                            | 2,336  |         |  |              |      |          |  |  | 28,716  |           |  |  | 2,363    |         |  |  | 28,689  |           |  |  | 31,052  |          
|Gateway                     |       |             | Apartments |              |  |               |       |              |  |                            | 2,424  |         |  |              |      |          |  |  | 60,658  |           |  |  | 3,481    |         |  |  | 59,601  |           |  |  | 63,082  |          
|Post Park at Phillips Place |       |             | Mixed Use  |              |  |               |       |              |  |                            | 4,305  |         |  |              |      |          |  |  | 37,489  |           |  |  | 4,307    |         |  |  | 37,487  |           |  |  | 41,794  |          
|Tennessee                   |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |          |         |  |  |         |           |  |  |         |          
|Bennie Dillon(4)            |       |             | Mixed Use  |              |  |               |       |              |  |                            |       |         |  |              |      |          |  |  | 9,958   |           |  |  |         |         |  |  | 9,958   |           |  |  | 9,958   |          
|Colorado                    |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |          |         |  |  |         |           |  |  |         |          
|Uptown Square               |       |             | Apartments |              |  |               |       |              |  |                            | 2,963  |         |  |              | 580   |          |  |  | 104,565 |           |  |  | 4,813    |         |  |  | 103,295 |           |  |  | 108,108 |          
|Miscellaneous Investments   |       |             |            |              |  |               |       |              |  |                            | 13,212 |         |  |              | 5,496 |          |  |  | 21,865  |           |  |  | 13,212(7 | )       |  |  | 27,361  |           |  |  | 40,573  |          
|                            |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |          |         |  |  |         |           |  |  |         |          
|                            | Total |             |            |              |  |               | $      | 481,687      |  |                            | $      | 263,022 |  |              | $     | 302,601  |  |  | $       | 1,936,795 |  |  | $        | 293,274 |  |  | $       | 2,209,144 |  |  | $       | 2,502,418 | 
|                            |       |             |            |              |  |               |        |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |          |         |  |  |         |           |  |  |         |          

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                            |       |              |        |              |  |          |       |             |  |  |       |  |  |  |            |  | 
|--------------------------- | ----- | ------------ | ------ | ------------ |  | -------- | ----- | ----------- |  |  | ----- |  |  |  | ---------- |  | 
|                            |       | Accumulated  |        | Date of      |  | Date     |       | Depreciable
|                            |       | Depreciation |        | Construction |  | Acquired |       | Lives Years
|                            |       |              |        |              |  |          |       |            
|New York                    |       |              |        |              |  |          |       |             |  |  |       |  |  |  |            | 
|Post Toscana                |       |              | 3,156  |              |  |          | 01/02 |             |  |  | 01/02 |  |  |  | 5-40 Years | 
|Post Luminaria              |       |              | 5,187  |              |  |          | 03/01 |             |  |  | 03/01 |  |  |  | 5-40 Years | 
|North Carolina              |       |              |        |              |  |          |       |             |  |  |       |  |  |  |            | 
|Uptown Place                |       |              | 4,310  |              |  |          | 09/98 |             |  |  | 09/98 |  |  |  | 5-40 Years | 
|Gateway                     |       |              | 6,880  |              |  |          | 09/98 |             |  |  | 09/98 |  |  |  | 5-40 Years | 
|Post Park at Phillips Place |       |              | 10,296 |              |  |          | 01/96 |             |  |  | 11/95 |  |  |  | 5-40 Years | 
|Tennessee                   |       |              |        |              |  |          |       |             |  |  |       |  |  |  |            | 
|Bennie Dillon(4)            |       |              | 1,420  |              |  |          | 07/98 |             |  |  | 07/98 |  |  |  | 5-40 Years | 
|Colorado                    |       |              |        |              |  |          |       |             |  |  |       |  |  |  |            | 
|Uptown Square               |       |              | 12,661 |              |  |          | 10/97 |             |  |  | 10/97 |  |  |  | 5-40 Years | 
|Miscellaneous Investments   |       |              | 16,236 |              |  |          |       |             |  |  |       |  |  |  | 5-40 Years | 
|                            |       |              |        |              |  |          |       |             |  |  |       |  |  |  |            | 
|                            | Total |              | $      | 524,699      |  |          |       |             |  |  |       |  |  |  |            |  | 
|                            |       |              |        |              |  |          |       |             |  |  |       |  |  |  |            | 



|    |                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The aggregate cost for Federal Income Tax
    purposes to the Company was approximately $2,099,236 at
    December 31, 2004, taking into account the special
    allocation of gain to the partners contributing property to the
    Operating Partnership.
|(2) | These properties serve as collateral for the
    Federal National Mortgage Association credit enhancement.                                                                                                                                                 
|(3) | Additional land was acquired for construction of
    an additional phase.                                                                                                                                                                                  
|(4) | These properties were held for sale at
    December 31, 2004.                                                                                                                                                                                              
|(5) | The Company has a leasehold interest in the land
    underlying these communities.                                                                                                                                                                         
|(6) | These properties are currently being converted
    into for-sale condominiums.                                                                                                                                                                             
|(7) | Balance is net of reserves of $2,665 to write
    down certain land parcels to fair value. The carrying value of
    Post American Beauty Mill reflects a write-down of $1,607
    recorded in 2004.                                                       

A summary of activity for real estate investments
and accumulated depreciation is as follows:

|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |   |  | 
|------------------------ | ---------------------------- | --------------------------------------------- | - | --------- | -------- | ---- | - | --------- | -------- | - | - | --------- | -------- | - |  | 
|                         |                              | 2004                                          |   | 2003      |          | 2002 |   |          
|                         |                              |                                               |   |           |          |      |   |          
|Real estate investments  |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at beginning of year |                                               | $ | 2,596,376 |          |      | $ | 2,705,215 |          |   | $ | 2,777,980 |          |   | 
|                         |                              | Improvements                                  |   |           | 98,943   |      |   |           | 25,360   |   |   |           | 121,110  |   |  | 
|                         |                              | Disposition of property                       |   |           | (192,901 | )    |   |           | (134,199 | ) |   |           | (193,875 | ) |  | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at end of year       |                                               | $ | 2,502,418 |          |      | $ | 2,596,376 |          |   | $ | 2,705,215 |          |   | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|Accumulated depreciation |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at beginning of year |                                               | $ | 510,859   |          |      | $ | 447,178   |          |   | $ | 406,724   |          |   | 
|                         |                              | Depreciation                                  |   |           | 85,310   |      |   |           | 89,975   |   |   |           | 87,927   |   |  | 
|                         |                              | Accumulated depreciation on disposed property |   |           | (71,470  | )    |   |           | (26,294  | ) |   |           | (47,473  | ) |  | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at end of year       |                                               | $ | 524,699   | (a)      |      | $ | 510,859   | (a)      |   | $ | 447,178   | (a)      |   | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  



|    |                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Accumulated depreciation on the balance sheet is
    net of accumulated depreciation on assets held for sale in the
    amounts of $26,332, $74,614, and $17,829 for the years ended
    December 31, 2004, 2003 and 2002, respectively.




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3. Exhibits

Certain exhibits required by Item 601 of
Regulation S-K have been filed with previous reports by the
registrants and are incorporated by reference herein.

The Registrants agree to furnish a copy of all
agreements relating to long-term debt upon request of the SEC.

|        |    |         |  |             |  |   |  |                                                                                                                                                                                                                                         
|------- | -- | ------- |  | ----------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |    |         |  |            
|Exhibit |    |         |  |            
|No.     |    |         |  | Description
|        |    |         |  |            
|        | 2  | .1(a)   |  |             |  |  |  | Redemption Agreement between Post Apartment
    Homes, L.P. and JRC Acquisition Corporation                                                                                                                                             
|        | 2  | .2(a)   |  |             |  |  |  | First Amendment to the Redemption Agreement                                                                                                                                                                                             
|        | 2  | .3(a)   |  |             |  |  |  | Second Amendment to the Redemption Agreement                                                                                                                                                                                            
|        | 2  | .4(a)   |  |             |  |  |  | Third Amendment to the Redemption Agreement                                                                                                                                                                                             
|        | 2  | .5(a)   |  |             |  |  |  | Fourth Amendment to the Redemption Agreement                                                                                                                                                                                            
|        | 3  | .1(b)   |  |             |  |  |  | Articles of Incorporation of the Company                                                                                                                                                                                                
|        | 3  | .2(c)   |  |             |  |  |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3  | .3(c)   |  |             |  |  |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3  | .4(c)   |  |             |  |  |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3  | .5(d)   |  |             |  |  |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3  | .6(e)   |  |             |  |  |  | Bylaws of the Company (as Amended and Restated as
    of November 5, 2003)                                                                                                                                                              
|        | 3  | .7(w)   |  |             |  |  |  | Amendment No. 1 to the Amended and Restated
    Bylaws of the Company                                                                                                                                                                   
|        | 4  | .1(f)   |  |             |  |  |  | Indenture between the Company and SunTrust Bank,
    as Trustee                                                                                                                                                                         
|        | 4  | .2(f)   |  |             |  |  |  | Form of First Supplemental Indenture to the
    Indenture between the Company and SunTrust Bank, as Trustee                                                                                                                             
|        | 10 | .1(c)   |  |             |  |  |  | Second Amended and Restated Agreement of Limited
    Partnership of the Operating Partnership                                                                                                                                           
|        | 10 | .2(c)   |  |             |  |  |  | First Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10 | .3(c)   |  |             |  |  |  | Second Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                               
|        | 10 | .4(h)   |  |             |  |  |  | Third Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10 | .5(h)   |  |             |  |  |  | Fourth Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                               
|        | 10 | .6(d)   |  |             |  |  |  | Fifth Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10 | .7(i)   |  |             |  |  |  | Sixth Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10 | .8(j)*  |  |             |  |  |  | Employee Stock Plan                                                                                                                                                                                                                     
|        | 10 | .9(c)*  |  |             |  |  |  | Amendment to Employee Stock Plan                                                                                                                                                                                                        
|        | 10 | .10(c)* |  |             |  |  |  | Amendment No. 2 to Employee Stock Plan                                                                                                                                                                                                  
|        | 10 | .11(c)* |  |             |  |  |  | Amendment No. 3 to Employee Stock Plan                                                                                                                                                                                                  
|        | 10 | .12(c)* |  |             |  |  |  | Amendment No. 4 to Employee Stock Plan                                                                                                                                                                                                  
|        | 10 | .13(k)* |  |             |  |  |  | 2003 Incentive Stock Plan                                                                                                                                                                                                               
|        | 10 | .14(l)* |  |             |  |  |  | Settlement Agreement, dated as of August 27,
    2004, by and among John A. Williams, The John A. Williams
    Irrevocable Trust, Post Properties, Inc., Post GP Holdings,
    Inc., Post Apartment Homes, L.P., and Post Services, Inc.
|        | 10 | .15(j)* |  |             |  |  |  | Noncompetition Agreement between the Company, the
    Operating Partnership and John T. Glover                                                                                                                                          
|        | 10 | .16(h)* |  |             |  |  |  | Amendment of Noncompetition Agreement between the
    Company, the Operating Partnership and John T. Glover dated as
    of June 1, 1998                                                                                                
|        | 10 | .17(j)* |  |             |  |  |  | Option and Transfer Agreement among the Operating
    Partnership, Post Services, John A. Williams and John T. Glover                                                                                                                   
|        | 10 | .19(c)  |  |             |  |  |  | Form of Indemnification Agreement for officers
    and directors                                                                                                                                                                        
|        | 10 | .20(b)* |  |             |  |  |  | Profit Sharing Plan of the Company                                                                                                                                                                                                      
|        | 10 | .21(c)* |  |             |  |  |  | Amendment Number One to Profit Sharing Plan                                                                                                                                                                                             




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|        |    |         |  |             |  |   |  |                                                                                                                                                                              
|------- | -- | ------- |  | ----------- |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |    |         |  |            
|Exhibit |    |         |  |            
|No.     |    |         |  | Description
|        |    |         |  |            
|        | 10 | .22(c)* |  |             |  |  |  | Amendment Number Two to Profit Sharing Plan                                                                                                                                  
|        | 10 | .23(c)* |  |             |  |  |  | Amendment Number Three to Profit Sharing Plan                                                                                                                                
|        | 10 | .24(c)* |  |             |  |  |  | Amendment Number Four to Profit Sharing Plan                                                                                                                                 
|        | 10 | .25(b)  |  |             |  |  |  | Form of General Partner 1% Exchange Agreement                                                                                                                                
|        | 10 | .26(m)* |  |             |  |  |  | Dividend Reinvestment Stock Purchase Plan                                                                                                                                    
|        | 10 | .27(n)  |  |             |  |  |  | Credit Agreement dated as of January 16,
    2004 among Post Apartment Homes, L.P., Wachovia Bank, N.A., and
    certain other lenders                                       
|        | 10 | .28(u)  |  |             |  |  |  | First Amendment to Credit Agreement                                                                                                                                          
|        | 10 | .29(o)  |  |             |  |  |  | Letter Agreement, dated as of December 22,
    2004, by and among Post Apartment Homes, L.P., certain lenders                                                                
|        |    |         |  |             |  |   |  | under the Credit Agreement and Wachovia Bank,
    N.A., as the Administrative Agent                                                                                          
|        | 10 | .30(o)  |  |             |  |  |  | Letter Agreement, dated as of December 23,
    2004, by and among Post Apartment Homes, L.P. and Fannie Mae                                                                  
|        | 10 | .31(p)* |  |             |  |  |  | Deferred Compensation Plan for Directors and
    Executive Committee Members                                                                                                 
|        | 10 | .32(q)* |  |             |  |  |  | Form of Change in Control Agreement (3.0X) and
    schedule of executive officers who have entered into such
    agreement                                                   
|        | 10 | .33(s)* |  |             |  |  |  | Form of Change in Control Agreement (2.0X) and
    schedule of executive officers who have entered into such
    agreement                                                   
|        | 10 | .34(r)* |  |             |  |  |  | Form of Change in Control Agreement (1.5X) and
    schedule of executive officers who have entered into such
    agreement                                                   
|        | 10 | .35(r)* |  |             |  |  |  | Form of Change in Control Agreement (1.0X) and
    schedule of executive officers who have entered into such
    agreement                                                   
|        | 10 | .36(r)* |  |             |  |  |  | Form of Amendment No. 1 to Change in Control
    Agreement and schedule of executive officers who have entered
    into such amendment                                       
|        | 10 | .37(r)* |  |             |  |  |  | Version One Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                   
|        | 10 | .38(r)* |  |             |  |  |  | Version Two Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                   
|        | 10 | .39(s)* |  |             |  |  |  | Master Employment Agreement between the Company,
    the Operating Partnership, Post GP Holdings, Inc., Post
    Services, Inc. and John T. Glover dated as of March 22, 2002
|        | 10 | .40(r)* |  |             |  |  |  | Employment Agreement with David P. Stockert                                                                                                                                  
|        | 10 | .41(e)* |  |             |  |  |  | Form of Amendment No. 1 to Employment
    Agreement with David P. Stockert                                                                                                   
|        | 10 | .42(r)* |  |             |  |  |  | Employment Agreement with Thomas D. Senkbeil                                                                                                                                 
|        | 10 | .43(r)* |  |             |  |  |  | Amendment No. 1 to Employment Agreement with
    Thomas D. Senkbeil                                                                                                          
|        | 10 | .44(n)* |  |             |  |  |  | Employment Agreement with Christopher J. Papa                                                                                                                                
|        | 10 | .45(e)* |  |             |  |  |  | Form of Amendment No. 2 to Employment
    Agreement with Thomas D. Senkbeil                                                                                                  
|        | 10 | .46(e)* |  |             |  |  |  | Restricted Stock Grant Certificate for Robert C.
    Goddard, III, dated July 17, 2003                                                                                       
|        | 10 | .47(e)* |  |             |  |  |  | Non-Incentive Stock Option Certificate for Robert
    C. Goddard, III, dated July 17, 2003                                                                                   
|        | 10 | .48(t)* |  |             |  |  |  | Employment Agreement, dated as of
    October 11, 2004, by and among Martin Howle, Post
    Properties, Inc., Post Apartment Homes, L.P., and Post Services,
    Inc.        
|        | 10 | .49(t)* |  |             |  |  |  | Employment Agreement, dated as of
    October 11, 2004, by and among Charles A. Konas, Post
    Properties, Inc., Post Apartment Homes, L.P., and Post Services,
    Inc.    
|        | 11 | .1(v)   |  |             |  |  |  | Statement Regarding Computation of Per Share
    Earnings                                                                                                                    
|        | 21 | .1      |  |             |  |  |  | List of Subsidiaries                                                                                                                                                         




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|        |    |    |  |             |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | -- | -- |  | ----------- |  | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|        |    |    |  |            
|Exhibit |    |    |  |            
|No.     |    |    |  | Description
|        |    |    |  |            
|        | 23 | .1 |  |             |  |  |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-3 (No. 33-81772),
    Form S-3 (No. 333-47399), Form S-3 (No. 333-80427),
    Form S-3 (No. 333-44722), Form S-8
    (No. 333-62243), Form S-8 (No. 33-00020),
    Form S-8 (No. 333-94121), Form S-8
    (No. 333-38725), Form S-8 (No. 333-02374),
    Form S-8 (No. 333-107092), Form S-8
    (No. 333-107093)
|        | 23 | .2 |  |             |  |  |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-3 (No. 333-36595),
    Form S-3 (No. 333-42884), Form S-3 (No. 333-55994)                                                                                                                                                                                                                                        
|        | 31 | .1 |  |             |  |  |  | Certification of the Chief Executive Officer
    pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
    Exchange Act of 1934, as amended, and adopted under
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                        
|        | 31 | .2 |  |             |  |  |  | Certification of the Chief Financial Officer
    pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
    Exchange Act of 1934, as amended, and adopted under
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                        
|        | 32 | .1 |  |             |  |  |  | Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. 1350, as adopted under
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                  
|        | 32 | .2 |  |             |  |  |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. 1350, as adopted under
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                  



| |   |                                                                                   
| | - | ----------------------------------------------------------------------------------
| | * | Identifies each management contract or
    compensatory plan required to be filed.

|    |  |                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed July 13, 2004 and
    incorporated herein by reference.                        
|(b) |  | Filed as an exhibit to the Registration Statement
    on Form S-11 (SEC File No. 33-61936), as amended, of
    the Company and incorporated herein by reference.  
|(c) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2002 and incorporated herein by reference.       
|(d) |  | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 1999 and incorporated herein by reference.
|(e) |  | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 2003 and incorporated herein by reference.
|(f) |  | Filed as an exhibit to the Registration Statement
    on Form S-3 (SEC File No. 333-42884), as amended, of
    the Company and incorporated herein by reference.  
|(g) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed October 12, 2004 and
    incorporated herein by reference.                     
|(h) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1998 and incorporated herein by reference.       
|(i) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2000 and incorporated herein by reference.       
|(j) |  | Filed as an exhibit to the Registration Statement
    on Form S-11 (SEC File No. 33-71650), as amended, of
    the Company and incorporated herein by reference.  
|(k) |  | Filed as Appendix A to the 2003 proxy
    statement and incorporated herein by reference.                                                                         
|(l) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed August 30, 2004 and
    incorporated herein by reference.                      
|(m) |  | Filed as part of the Registration Statement on
    Form S-3 (File No. 333-39461) of the Company and
    incorporated herein by reference.                         
|(n) |  | Filed as an exhibit to the Annual Report on
    Form 10-K for the Registrants for the year ended
    December 31, 2003 and incorporated herein by reference.      
|(o) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed December 28, 2004
    and incorporated herein by reference.                    
|(p) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1999 and incorporated herein by reference.       
|(q) |  | Filed as an exhibit to the Registration Statement
    on Form S-8 (SEC File No. 33-86674) of the Company and
    incorporated herein by reference.                
|(r) |  | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    June 30, 2003 and incorporated herein by reference.     




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|    |  |                                                                                                                                                            
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------
|(s) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2001 and incorporated herein by reference.
|(t) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed October 12, 2004 and
    incorporated herein by reference.              
|(u) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed December 22, 2004
    and incorporated herein by reference.             
|(v) |  | The information required by this exhibit is
    included in note 6 to the consolidated financial statement
    and incorporated herein by reference.       
|(w) |  | Filed as Appendix A to the 2004 proxy statement
    and incorporated herein by reference.                                                                  




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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|               |  |                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------
|               |  | POST PROPERTIES, INC.                                                                                                  
|               |  | (Registrant)                                                                                                           
|              
|March 15, 2005 |  | By  /s/ DAVID P. STOCKERTDavid P. Stockert, President and Chief
    Executive Officer
    (Principal Executive Officer)

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

|                                                 |  |                                                                                        |  |                |  | 
|------------------------------------------------ |  | -------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                                 |  |                                                                                        |  |               
|Signature                                        |  | Title                                                                                  |  | Date          
|                                                 |  |                                                                                        |  |               
|                                                
|/s/ ROBERT C. GODDARD, IIIRobert C. Goddard, III |  | Chairman of the Board and Director                                                     |  | March 15, 2005
|                                                
|/s/ DAVID P. STOCKERTDavid P. Stockert           |  | President, Chief Executive Officer and Director
    (Principal Executive Officer)      |  | March 15, 2005
|                                                
|/s/ CHRISTOPHER J. PAPAChristopher J. Papa       |  | Executive Vice President and Chief Financial
    Officer (Principal Financial Officer) |  | March 15, 2005
|                                                
|/s/ ARTHUR J. QUIRKArthur J. Quirk               |  | Senior Vice President and Chief Accounting
    Officer (Principal Accounting Officer)  |  | March 15, 2005
|                                                
|/s/ HERSCHEL M. BLOOMHerschel M. Bloom           |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ DOUGLAS CROCKER IIDouglas Crocker II         |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ WALTER M. DERISO, JR.Walter M. Deriso, Jr.   |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ RUSSELL R. FRENCHRussell R. French           |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ NICHOLAS B. PAUMGARTENNicholas B. Paumgarten |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ CHARLES E. RICECharles E. Rice               |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ RONALD DE WAALRonald de Waal                 |  | Director                                                                               |  | March 15, 2005




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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

|               |  |                                                                                                                        
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------
|               |  | POST APARTMENT HOMES, L.P.                                                                                             
|               |  | By: Post G.P. Holdings, Inc., as General Partner                                                                       
|              
|March 15, 2005 |  | By  /s/ DAVID P. STOCKERTDavid P. Stockert, President and Chief
    Executive Officer
    (Principal Executive Officer)

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated:

|                                                 |  |                                                                                        |  |                |  | 
|------------------------------------------------ |  | -------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                                 |  |                                                                                        |  |               
|Signature                                        |  | Title                                                                                  |  | Date          
|                                                 |  |                                                                                        |  |               
|                                                
|/s/ ROBERT C. GODDARD, IIIRobert C. Goddard, III |  | Chairman of the Board and Director                                                     |  | March 15, 2005
|                                                
|/s/ DAVID P. STOCKERTDavid P. Stockert           |  | President, Chief Executive Officer and Director
    (Principal Executive Officer)      |  | March 15, 2005
|                                                
|/s/ CHRISTOPHER J. PAPAChristopher J. Papa       |  | Executive Vice President and Chief Financial
    Officer (Principal Financial Officer) |  | March 15, 2005
|                                                
|/s/ ARTHUR J. QUIRKArthur J. Quirk               |  | Senior Vice President and Chief Accounting
    Officer (Principal Accounting Officer)  |  | March 15, 2005
|                                                
|/s/ HERSCHEL M. BLOOMHerschel M. Bloom           |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ DOUGLAS CROCKER IIDouglas Crocker II         |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ WALTER M. DERISO, JR.Walter M. Deriso, Jr.   |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ RUSSELL R. FRENCHRussell R. French           |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ NICHOLAS B. PAUMGARTENNicholas B. Paumgarten |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ CHARLES E. RICECharles E. Rice               |  | Director                                                                               |  | March 15, 2005
|                                                
|/s/ RONALD DE WAALRonald de Waal                 |  | Director                                                                               |  | March 15, 2005




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EXHIBIT INDEX

|        |           |  |  |             |  |                                                                                                                                                                                                                                         
|------- | --------- |  |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |  |  |            
|No.     |           |  |  | Description
|        |           |  |  |            
|        | 2.1(a)    |  |  |            |  | Redemption Agreement between Post Apartment
    Homes, L.P. and JRC Acquisition Corporation                                                                                                                                             
|        | 2.2(a)    |  |  |            |  | First Amendment to the Redemption Agreement                                                                                                                                                                                             
|        | 2.3(a)    |  |  |            |  | Second Amendment to the Redemption Agreement                                                                                                                                                                                            
|        | 2.4(a)    |  |  |            |  | Third Amendment to the Redemption Agreement                                                                                                                                                                                             
|        | 2.5(a)    |  |  |            |  | Fourth Amendment to the Redemption Agreement                                                                                                                                                                                            
|        | 3.1(b)    |  |  |            |  | Articles of Incorporation of the Company                                                                                                                                                                                                
|        | 3.2(c)    |  |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3.3(c)    |  |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3.4(c)    |  |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3.5(d)    |  |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                                                                                                               
|        | 3.6(e)    |  |  |            |  | Bylaws of the Company (as Amended and Restated as
    of November 5, 2003)                                                                                                                                                              
|        | 3.7(w)    |  |  |            |  | Amendment No. 1 to the Amended and Restated
    Bylaws of the Company                                                                                                                                                                   
|        | 4.1(f)    |  |  |            |  | Indenture between the Company and SunTrust Bank,
    as Trustee                                                                                                                                                                         
|        | 4.2(f)    |  |  |            |  | Form of First Supplemental Indenture to the
    Indenture between the Company and SunTrust Bank, as Trustee                                                                                                                             
|        | 10.1(c)   |  |  |            |  | Second Amended and Restated Agreement of Limited
    Partnership of the Operating Partnership                                                                                                                                           
|        | 10.2(c)   |  |  |            |  | First Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10.3(c)   |  |  |            |  | Second Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                               
|        | 10.4(h)   |  |  |            |  | Third Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10.5(h)   |  |  |            |  | Fourth Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                               
|        | 10.6(d)   |  |  |            |  | Fifth Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10.7(i)   |  |  |            |  | Sixth Amendment to Second Amended and Restated
    Partnership Agreement                                                                                                                                                                
|        | 10.8(j)*  |  |  |            |  | Employee Stock Plan                                                                                                                                                                                                                     
|        | 10.9(c)*  |  |  |            |  | Amendment to Employee Stock Plan                                                                                                                                                                                                        
|        | 10.10(c)* |  |  |            |  | Amendment No. 2 to Employee Stock Plan                                                                                                                                                                                                  
|        | 10.11(c)* |  |  |            |  | Amendment No. 3 to Employee Stock Plan                                                                                                                                                                                                  
|        | 10.12(c)* |  |  |            |  | Amendment No. 4 to Employee Stock Plan                                                                                                                                                                                                  
|        | 10.13(k)* |  |  |            |  | 2003 Incentive Stock Plan                                                                                                                                                                                                               
|        | 10.14(l)* |  |  |            |  | Settlement Agreement, dated as of August 27,
    2004, by and among John A. Williams, The John A. Williams
    Irrevocable Trust, Post Properties, Inc., Post GP Holdings,
    Inc., Post Apartment Homes, L.P., and Post Services, Inc.
|        | 10.15(j)* |  |  |            |  | Noncompetition Agreement between the Company, the
    Operating Partnership and John T. Glover                                                                                                                                          
|        | 10.16(h)* |  |  |            |  | Amendment of Noncompetition Agreement between the
    Company, the Operating Partnership and John T. Glover dated as
    of June 1, 1998                                                                                                
|        | 10.17(j)* |  |  |            |  | Option and Transfer Agreement among the Operating
    Partnership, Post Services, John A. Williams and John T. Glover                                                                                                                   
|        | 10.19(c)  |  |  |            |  | Form of Indemnification Agreement for officers
    and directors                                                                                                                                                                        
|        | 10.20(b)* |  |  |            |  | Profit Sharing Plan of the Company                                                                                                                                                                                                      
|        | 10.21(c)* |  |  |            |  | Amendment Number One to Profit Sharing Plan                                                                                                                                                                                             
|        | 10.22(c)* |  |  |            |  | Amendment Number Two to Profit Sharing Plan                                                                                                                                                                                             
|        | 10.23(c)* |  |  |            |  | Amendment Number Three to Profit Sharing Plan                                                                                                                                                                                           
|        | 10.24(c)* |  |  |            |  | Amendment Number Four to Profit Sharing Plan                                                                                                                                                                                            
|        | 10.25(b)  |  |  |            |  | Form of General Partner 1% Exchange Agreement                                                                                                                                                                                           
|        | 10.26(m)* |  |  |            |  | Dividend Reinvestment Stock Purchase Plan                                                                                                                                                                                               
|        | 10.27(n)  |  |  |            |  | Credit Agreement dated as of January 16,
    2004 among Post Apartment Homes, L.P., Wachovia Bank, N.A., and
    certain other lenders                                                                                                  
|        | 10.28(u)  |  |  |            |  | First Amendment to Credit Agreement                                                                                                                                                                                                     
|        | 10.29(o)  |  |  |            |  | Letter Agreement, dated as of December 22,
    2004, by and among Post Apartment Homes, L.P., certain lenders
    under the Credit Agreement and Wachovia Bank, N.A., as the
    Administrative Agent                                   
|        | 10.30(o)  |  |  |            |  | Letter Agreement, dated as of December 23,
    2004, by and among Post Apartment Homes, L.P. and Fannie Mae                                                                                                                             




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##### Table of Contents



|        |           |  |  |             |  |                                                                                                                                                                                                                                                                                                                                                                                               
|------- | --------- |  |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |  |  |            
|No.     |           |  |  | Description
|        |           |  |  |            
|        | 10.31(p)* |  |  |            |  | Deferred Compensation Plan for Directors and
    Executive Committee Members                                                                                                                                                                                                                                                                                                                  
|        | 10.32(q)* |  |  |            |  | Form of Change in Control Agreement (3.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                                                                                                    
|        | 10.33(s)* |  |  |            |  | Form of Change in Control Agreement (2.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                                                                                                    
|        | 10.34(r)* |  |  |            |  | Form of Change in Control Agreement (1.5X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                                                                                                    
|        | 10.35(r)* |  |  |            |  | Form of Change in Control Agreement (1.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                                                                                                    
|        | 10.36(r)* |  |  |            |  | Form of Amendment No. 1 to Change in Control
    Agreement and schedule of executive officers who have entered
    into such amendment                                                                                                                                                                                                                                                        
|        | 10.37(r)* |  |  |            |  | Version One Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                                                                                                                                                                                                                                    
|        | 10.38(r)* |  |  |            |  | Version Two Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                                                                                                                                                                                                                                    
|        | 10.39(s)* |  |  |            |  | Master Employment Agreement between the Company,
    the Operating Partnership, Post GP Holdings, Inc., Post
    Services, Inc. and John T. Glover dated as of March 22, 2002                                                                                                                                                                                                                 
|        | 10.40(r)* |  |  |            |  | Employment Agreement with David P. Stockert                                                                                                                                                                                                                                                                                                                                                   
|        | 10.41(e)* |  |  |            |  | Form of Amendment No. 1 to Employment
    Agreement with David P. Stockert                                                                                                                                                                                                                                                                                                                    
|        | 10.42(r)* |  |  |            |  | Employment Agreement with Thomas D. Senkbeil                                                                                                                                                                                                                                                                                                                                                  
|        | 10.43(r)* |  |  |            |  | Amendment No. 1 to Employment Agreement with
    Thomas D. Senkbeil                                                                                                                                                                                                                                                                                                                           
|        | 10.44(n)* |  |  |            |  | Employment Agreement with Christopher J. Papa                                                                                                                                                                                                                                                                                                                                                 
|        | 10.45(e)* |  |  |            |  | Form of Amendment No. 2 to Employment
    Agreement with Thomas D. Senkbeil                                                                                                                                                                                                                                                                                                                   
|        | 10.46(e)* |  |  |            |  | Restricted Stock Grant Certificate for Robert C.
    Goddard, III, dated July 17, 2003                                                                                                                                                                                                                                                                                                        
|        | 10.47(e)* |  |  |            |  | Non-Incentive Stock Option Certificate for Robert
    C. Goddard, III, dated July 17, 2003                                                                                                                                                                                                                                                                                                    
|        | 10.48(t)* |  |  |            |  | Employment Agreement, dated as of
    October 11, 2004, by and among Martin Howle, Post
    Properties, Inc., Post Apartment Homes, L.P., and Post Services,
    Inc.                                                                                                                                                                                                                         
|        | 10.49(t)* |  |  |            |  | Employment Agreement, dated as of
    October 11, 2004, by and among Charles A. Konas, Post
    Properties, Inc., Post Apartment Homes, L.P., and Post Services,
    Inc.                                                                                                                                                                                                                     
|        | 11.1(v)   |  |  |            |  | Statement Regarding Computation of Per Share
    Earnings                                                                                                                                                                                                                                                                                                                                     
|        | 21.1      |  |  |            |  | List of Subsidiaries                                                                                                                                                                                                                                                                                                                                                                          
|        | 23.1      |  |  |            |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-3 (No. 33-81772),
    Form S-3 (No. 333-47399), Form S-3 (No. 333-80427),
    Form S-3 (No. 333-44722), Form S-8
    (No. 333-62243), Form S-8 (No. 33-00020),
    Form S-8 (No. 333-94121), Form S-8 (No. 333-
    38725), Form S-8 (No. 333-02374), Form S-8
    (No. 333-107092), Form S-8 (No. 333-107093)
|        | 23.2      |  |  |            |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-3 (No. 333-36595),
    Form S-3 (No. 333-42884), Form S-3 (No. 333-55994)                                                                                                                                                                                                                                     
|        | 31.1      |  |  |            |  | Certification of the Chief Executive Officer
    pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
    Exchange Act of 1934, as amended, and adopted under
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                     
|        | 31.2      |  |  |            |  | Certification of the Chief Financial Officer
    pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities
    Exchange Act of 1934, as amended, and adopted under
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                     
|        | 32.1      |  |  |            |  | Certification of the Chief Executive Officer
    pursuant to 18 U.S.C. 1350, as adopted under
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                               
|        | 32.2      |  |  |            |  | Certification of the Chief Financial Officer
    pursuant to 18 U.S.C. 1350, as adopted under
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                               



---



|  |                                                                                   
|- | ----------------------------------------------------------------------------------
|* | Identifies each management contract or
    compensatory plan required to be filed.



|    |  |                                                                                                                                                                 
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed July 13, 2004 and
    incorporated herein by reference.                      
|   
|(b) |  | Filed as an exhibit to the Registration Statement
    on Form S-11 (SEC File No. 33-61936), as amended, of
    the Company and incorporated herein by reference.




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|    |  |                                                                                                                                                                   
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2002 and incorporated herein by reference.       
|   
|(d) |  | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 1999 and incorporated herein by reference.
|   
|(e) |  | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 2003 and incorporated herein by reference.
|   
|(f) |  | Filed as an exhibit to the Registration Statement
    on Form S-3 (SEC File No. 333-42884), as amended, of
    the Company and incorporated herein by reference.  
|   
|(g) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed October 12, 2004 and
    incorporated herein by reference.                     
|   
|(h) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1998 and incorporated herein by reference.       
|   
|(i) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2000 and incorporated herein by reference.       
|   
|(j) |  | Filed as an exhibit to the Registration Statement
    on Form S-11 (SEC File No. 33-71650), as amended, of
    the Company and incorporated herein by reference.  
|   
|(k) |  | Filed as Appendix A to the 2003 proxy
    statement and incorporated herein by reference.                                                                         
|   
|(l) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed August 30, 2004 and
    incorporated herein by reference.                      
|   
|(m) |  | Filed as part of the Registration Statement on
    Form S-3 (File No. 333-39461) of the Company and
    incorporated herein by reference.                         
|   
|(n) |  | Filed as an exhibit to the Annual Report on
    Form 10-K for the Registrants for the year ended
    December 31, 2003 and incorporated herein by reference.      
|   
|(o) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed December 28, 2004
    and incorporated herein by reference.                    
|   
|(p) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1999 and incorporated herein by reference.       
|   
|(q) |  | Filed as an exhibit to the Registration Statement
    on Form S-8 (SEC File No. 33-86674) of the Company and
    incorporated herein by reference.                
|   
|(r) |  | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    June 30, 2003 and incorporated herein by reference.     
|   
|(s) |  | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2001 and incorporated herein by reference.       
|   
|(t) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed October 12, 2004 and
    incorporated herein by reference.                     
|   
|(u) |  | Filed as an exhibit to the Current Report on
    Form 8-K of the Registrants filed December 22, 2004
    and incorporated herein by reference.                    
|   
|(v) |  | The information required by this exhibit is
    included in note 6 to the consolidated financial statement
    and incorporated herein by reference.              
|   
|(w) |  | Filed as Appendix A to the 2004 proxy statement
    and incorporated herein by reference.                                                                         




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