##### 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, 2003


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




---

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 
|7  5/8% Series C 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.    [X]

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, 2003 was
approximately $945,859,000. As of March 1, 2004 there were
39,611,948 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   [ ]



---

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrants Proxy Statement
in connection with its Annual Meeting of Shareholders to be held
May 27, 2004 are incorporated by reference in Part III.



---




POST PROPERTIES, INC.


POST APARTMENT HOMES, L.P.




---










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 and Related Shareholder
    Matters                  |  |      | 19 | 
|6.                                                |  | Selected Financial Data                                                                                |  |      | 21 | 
|7.                                                |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations              |  |      | 24 | 
|7A.                                               |  | Quantitative and Qualitative
    Disclosures about Market Risk                                         |  |      | 50 | 
|8.                                                |  | Financial Statements and
    Supplementary Data                                                        |  |      | 51 | 
|9.                                                |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure               |  |      | 51 | 
|9A.                                               |  | Controls and Procedures                                                                                |  |      | 51 | 
|PART III                                         
|10.                                               |  | Directors and Executive
    Officers of the Registrant                                                 |  |      | 52 | 
|11.                                               |  | Executive Compensation                                                                                 |  |      | 52 | 
|12.                                               |  | Security Ownership of
    Certain Beneficial Owners and Management and Related Shareholder
    Matters |  |      | 52 | 
|13.                                               |  | Certain Relationships and
    Related Transactions                                                     |  |      | 52 | 
|14.                                               |  | Principal Accountant Fees
    and Services                                                             |  |      | 52 | 
|PART IV                                          
|15.                                               |  | Exhibits, Financial
    Statements, Schedules and Reports on Form 8-K                                  |  |      | 53 | 
|EX-10.30 CREDIT AGREEMENT DATED JANUARY 16, 2004 
|EX-10.45 EMPLOYMENT AGREEMENT/CHRISTOPHER J. PAPA
|EX-21.1 LIST OF SUBSIDIARIES                     
|EX-23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLP    
|EX-23.2 CONSENT OF PRICEWATERHOUSECOOPERS LLP    
|EX-23.3 CONSENT OF PRICEWATERHOUSECOOPERS LLP    
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO     
|EX-31.2 SECTION 302 CERTIFICATION OF CFO         
|EX-32.1 SECTION 906 CERTIFICATION OF CEO         
|EX-32.2 SECTION 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, 2003,
approximately 53.5%, 18.6% and 7.9% (on a unit basis) of the
Companys communities were located in the Atlanta, Georgia,
Dallas, Texas and Tampa, Florida metropolitan areas,
respectively. At December 31, 2003, the Company owned
28,081 apartment units in 72 apartment communities, including
666 apartment units in three communities held in unconsolidated
entities and including 468 apartment units currently in lease-up
in two apartment communities. The Company is a fully-integrated
organization with multifamily development, operations and asset
management expertise. The Company has approximately 930
employees, fourteen 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). In 1993, the Company completed an initial
public offering of its common stock and a business combination
involving entities under varying common ownership. Proceeds from
the initial public offering were used by the Company, in part,
to acquire a controlling interest in the Operating Partnership,
the Companys principal operating subsidiary, which was
formed to succeed to substantially all of the ownership interest
in a portfolio of 40 Post® multifamily apartment
communities, all of which were developed by the Company and
owned by affiliates of the Company, and to the development,
leasing, landscaping and management businesses of the Company
and certain other affiliates.

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, 2003, the Company, through
wholly-owned subsidiaries, controlled the Operating Partnership
as the sole general partner and as the holder of 91.3% of the
common units in the Operating Partnership (the Common
Units) and 63.6% of the preferred units (the
Perpetual Preferred Units). The other limited
partners of the Operating Partnership who hold Common Units are
those persons (including directors of the Company) 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
provides leasing, landscaping and property management services
to third parties. Certain directors of the Company own 99%,
collectively, of the voting common stock of Post Services, and
the Operating Partnership owns 1% of the voting common stock and
100% of the nonvoting common stock of Post Services. The voting
and nonvoting common stock held by the Operating Partnership
represents 99% of the equity interests in Post Services. The
voting common stock held by directors in Post Services is
subject to an agreement that is designed to ensure that the
stock will be held by one or more officers or directors of Post
Services.

For taxable years ending on or before
December 31, 2000, the Operating Partnership could not own
more than 10% of the voting stock of Post Services without
causing the Company to fail to qualify as a REIT for federal
income tax purposes. This restriction no longer applies to the
voting stock of a taxable REIT subsidiary as defined
in the Internal Revenue Code. In prior years, the Company and
Post Services filed an election to have Post Services treated as
a taxable REIT subsidiary of the Company. This election will
enable the Operating Partnership to acquire all of the voting
stock of Post Services without jeopardizing the Companys
status as a REIT. Management believes the Operating Partnership
will acquire the remaining interests of Post Services in 2004.

Business Strategy

The Company is pursuing a business strategy which
is part of its larger mission: delivering superior
satisfaction and value to the Companys residents,
associates and investors, with a vision to be the first
choice in quality multifamily living.

While a number of the Companys core
business strategies, such as the cultivation and promotion of
the Post® brand name and the Companys resident
service orientation have been and will continue to be
cornerstones of its overall business plan, new elements of its
business strategy have taken shape during 2003 and into 2004.
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 concentration in Atlanta,
Georgia and Dallas, Texas, while at the same time, building
critical mass in other core markets, such as the greater
Washington, DC area, where it currently lacks 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 $200,000 of
investment in a particular market. The Companys goal
ultimately is to reduce its concentration in Atlanta, GA,
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 may also consider selling joint venture interests in some of
its core properties. 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 will focus in a limited number of
major cities and build regional value creation capabilities,
adding skilled personnel in order to more effectively pursue
acquisitions, development, dispositions and selective
multifamily for-sale (condominium) opportunities that are
consistent with its high quality market niche. The
Companys near-term goal is to build up its regional value
creation teams in Atlanta, Georgia (focusing on the Southeast),
Washington, DC (focusing on that market and New York) and
Dallas, Texas (focusing on the Southwest). Sales in 2003 of
single assets in Austin, Texas, Pasadena, California and
Phoenix, Arizona reduced the number of cities the Company is
operating in from thirteen to ten. These sales reflect the
Companys objective to achieve greater depth in fewer core
markets.

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
market. The Company will focus its development on the product
types that are more affordable to the deepest segment of the
upper end market in each city. The




Post Properties, Inc.


2


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Company will therefore look to develop more
in-fill garden style communities in its sunbelt markets and
urban and mix-use communities in those markets and submarkets
with existing density and barriers to entry that warrant such
communities. The Companys apartment communities will be
developed, constructed, and continually maintained and improved,
consistent with uniformly high quality standards 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 Posts high quality and location
requirements. The Company will generally pursue acquisitions
either to rebalance the portfolio, using asset sales proceeds,
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 success of the Company. For such a strategy to continue to
work, the Company must develop and implement systems to achieve
uniformly high quality and value throughout its operations. As a
result of the Companys efforts in developing and
maintaining its communities, the Company believes that the
Post® brand name is synonymous with quality upscale
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 quality
product and a high level of service through its uniformly high
quality construction, selective infill suburban and urban
locations, award-winning landscaping and numerous amenities,
including controlled access, high-speed connectivity, on-site
business centers, on-site courtesy officers, urban vegetable
gardens and state of the art 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, adhering to quality in all aspects of
the Companys operations, developing and implementing
leading edge training programs, and coordinating the
Companys advertising programs to increase brand name
recognition.

In 2004, the Company plans to roll out a new
marketing campaign, new customer service initiatives designed to
raise its high levels of resident satisfaction and new
opportunities for community involvement, all intended to enhance
what the Company believes today is a valuable asset.

Service and Associate Development
Strategy

While the Company believes the Post® brand
reflects the high quality of its communities, the Company also
believes what differentiates Post is a culture of delivering a
high level of resident service. 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 objectives by investing in the
development and implementation of leading edge training programs
focused on development of its associates, improving the quality
of its operations and continuously improving the delivery of
resident service. The Company recently hired an experienced Vice
President of Career Development that will focus on fulfilling
these objectives in 2004.


Operating Strategy

The Company believes it has been an innovator in
the multifamily business throughout its more than 30 year
history. The Companys operating strategy includes striving
to be an innovator, 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.


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 stock and units) as a percentage of undepreciated real
estate asset value to a range of 50% to 55%, by generally
limiting variable rate indebtedness as a percentage of total
indebtedness to no more than 20% to 25% of aggregate
indebtedness, and by maintaining adequate liquidity through its
unsecured line of credit. At December 31, 2003, the
Companys total effective leverage (debt and preferred
stock and units) as a percentage of undepreciated real estate
asset value, and its total variable rate indebtedness as a
percentage of total indebtedness were within these ranges. In
January 2004, the Company renewed its unsecured revolving line
of credit and increased its borrowing capacity under this
facility by $30,000 to $350,000.





Post Properties, Inc.


3


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##### Table of Contents



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 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 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.                                      
| 
| | 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 2003,
2002 and 2001 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.

Operating Subsidiaries

In periods prior to December 31, 2001, the
Company provided third party asset management and leasing
services for multifamily properties not operated under the
Post® name through RAM Partners, Inc.
(RAM). Additionally in prior periods, the Company
provided landscape installation and maintenance services to
third parties through Post Landscape Services, Inc.
(Post Landscape). In the fourth quarter of 2001, the
net assets and operating businesses of RAM and Post Landscape
were sold to their respective management teams. The Company and
the Operating Partnership no longer provide these services to
unaffiliated third parties. The sale of these entities reflected
managements decision to focus its continuing efforts on
its core business of owning, developing and managing Post®
brand multifamily real estate assets and to do so with a smaller
workforce and less overhead expenses.




Post Properties, Inc.


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##### Table of Contents



Summary of Investment and Disposition
Activity

During the five-year period from January 1,
1999 through December 31, 2003, the Company and its
affiliates have developed and completed 10,000 apartment units
in 31 apartment communities, and sold 28 apartment communities
containing an aggregate of 9,882 apartment units. The Company
did not acquire any apartment communities during the five-year
period from January 1, 1999 through December 31, 2003.
The Company and its affiliates have sold apartment communities
after holding them for investment periods that generally ranged
from seven to twelve years after acquisition or development. The
following table shows a summary of the Companys
development and sales activity during these periods.

|                                                                                                      |  |      |         |      |  |      |         |      |  |      |         |   |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                      |  | 2003 |         | 2002 |  | 2001 |         | 2000 |  | 1999
|                                                                                                      |  |      |         |      |  |      |         |      |  |     
|Units developed and completed                                                                         |  |      | 468     |      |  |      | 2,140   |      |  |      | 2,651   |   |  |   | 2,786   |   |  |   | 1,955   |  
|Units sold                                                                                            |  |      | (2,236  | )    |  |      | (2,665  | )    |  |      | (2,799  | ) |  |   | (1,984  | ) |  |   | (198    | )
|Total units completed and owned by the Company
    and its affiliates (including units held for sale) |  |      | 28,081  |      |  |      | 29,849  |      |  |      | 30,374  |   |  |   | 30,522  |   |  |   | 29,720  |  
|Total rental revenues from continuing operations
    (in thousands)                                   |  | $    | 279,325 |      |  | $    | 275,605 |      |  | $    | 293,836 |   |  | $ | 294,654 |   |  | $ | 252,931 |  

Current Development and Lease-Up
Activity

At December 31, 2003, the Company had in
initial lease-up two new communities containing 468 apartment
units and had no communities under development. The
Companys communities in initial lease-up are summarized in
the following table.

|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|------------------------------------------------------------ |  | ------ | --- | --------------- |  | ---------- | --- | ------------ |  | ----------- | --- | ------------ |  | --------- | ------ | --------- |  |  | ------ |  |  |  | ------ |  |  |  | ----- |  |  |  | ----- | 
|                                                             |  |        |     | Estimated       |  | Amount     |     |              |  |             |     | Estimated    |  |           |        |          
|                                                             |  | Number |     | Construction    |  | Spent      |     | Quarter of   |  | Quarter of  |     | Quarter of   |  | %         |        | %        
|                                                             |  | of     |     | Cost            |  | As of      |     | Construction |  | First Units |     | Stabilized   |  | Leased    |        | Occupied 
|Metropolitan Area                                            |  | Units  |     | ($ in millions) |  | 12/31/2003 |     | Start        |  | Available   |     | Occupancy(1) |  | 2/28/2004 |        | 2/28/2004
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |          
|Wholly-Owned Construction/Lease-up
    Communities           |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|New York City, NY                                            |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Post Toscana                                                |  |        | 199 |                 |  | $          | 92  |              |  | $           | 92  |              |  |           | 1Q 02 |           |  |  | 1Q 03 |  |  |  | 1Q 04 |  |  |  | 94.5% |  |  |  | 89.4% | 
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Subtotal Wholly-Owned Construction/Lease-up
    Communities  |  |        | 199 |                 |  | $          | 92  |              |  | $           | 92  |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Co-Investment Construction/Lease-up
    Communities          |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Washington D.C.                                              |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Post Massachusetts Avenue(2)                                |  |        | 269 |                 |  | $          | 72  |              |  | $           | 72  |              |  |           | 2Q 01 |           |  |  | 4Q 02 |  |  |  | 1Q 04 |  |  |  | 90.0% |  |  |  | 89.2% | 
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Subtotal Co-Investment Construction/Lease-up
    Communities |  |        | 269 |                 |  | $          | 72  |              |  | $           | 72  |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Construction Totals                                          |  |        | 468 |                 |  | $          | 164 |              |  | $           | 164 |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Less Partners Portion                                       |  |        |     |                 |  | $          | (47 | )            |  | $           | (47 | )            |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|Post Properties Funding
    Commitment                      |  |        |     |                 |  | $          | 117 |              |  | $           | 117 |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 
|                                                             |  |        |     |                 |  |            |     |              |  |             |     |              |  |           |        |           |  |  |        |  |  |  |        |  |  |  |       |  |  |  |       | 






|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | This community was being developed as a joint
    venture (Company equity ownership is 35%).                                                                                                                 

At December 31, 2003, the Company had one
project located in the Washington D.C. area in the
predevelopment stage. The Company expects to begin development
and construction of the project in 2004.

Competition

All of the Companys apartment communities
are located in developed markets that include other upscale
apartments 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 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 or at any newly developed or acquired communities
and on the rents charged. In addition, other forms of residential




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properties, including single family housing,
condominiums and town homes, provide housing alternatives to
potential residents of upscale apartment communities.


The Company competes for residents 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 communities.

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
apartments, 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 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 and persons
who arranged for off-site disposal activities




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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 the 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 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
communities in connection with environmental conditions. The
Company is not aware of any environmental condition with respect
to any of its apartment communities that could be considered to
be material.

It is possible, however, that the environmental
investigations of our properties might not have revealed all
potential environmental liabilities associated with the
Companys real property and its apartment communities or
might have underestimated any potential environmental issues
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 l0-K, quarterly reports on Form 10-Q, current
reports on Form 8-K, and all amendments to such reports
filed pursuant to Section 13(a) 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.




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RISK FACTORS

The following risk factors apply to the Company
and 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 and
Tampa, Florida 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. 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;                                                                                                                              
| 
| | 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 to compensate for the increase in construction
    costs;                                                 
| 
| | the Company intends to concentrate its attention
    on fewer markets and reduce annual development expenditures, and
    it 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 that would compensate for these increases in costs.




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Members of the Companys Board of
Directors may have Conflicts of Interest because there could be
Adverse Tax Consequences Upon the Sale or Refinancing of some of
the Operating Partnerships Apartment
Communities.

Limited partners of the Operating Partnership may
suffer different and more adverse tax consequences than the
Company upon the sale or refinancing of some of the Operating
Partnerships apartment communities. These limited
partners, including two of the Companys directors, may
have different objectives regarding the appropriate pricing and
timing of any sale or refinancing of certain apartment
communities. One of these directors has announced that he will
not stand for re-election as a director at the Companys
next annual shareholders meeting in May 2004. While the
Company, through wholly-owned subsidiaries, has the exclusive
authority as to whether and on what terms to sell or refinance
any individual apartment community, these directors may
influence the Company not to sell or refinance these apartment
communities, even though a sale might otherwise be financially
advantageous to the Company. In addition, these directors could
influence the Company to refinance an apartment community with a
high level of debt.

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. 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.                                                                                                             

Expenses associated with the Companys
investment in a community, 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




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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, 2003, the Company had outstanding mortgage
indebtedness of approximately $506,312, senior unsecured debt of
approximately $608,000 and outstanding indebtedness under its
lines of credit aggregating $72,010.


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 board of directors has adopted
a policy of limiting indebtedness to approximately 60% of the
undepreciated book value of its assets, but the Companys
organizational documents do not contain any limitation on the
amount or percentage of indebtedness, funded or otherwise, that
it might incur. If this policy were changed, 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. 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 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 home ownership could adversely affect the
Companys ability to retain its residents, lease apartment
homes and increase or maintain rents.

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




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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.


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 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.                           

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.

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.




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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.

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




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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.

In 2003 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. As of the years ended
December 31, 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.

Expansion of the Companys Operations
into Condominium Conversion and For-Sale Housing (Condominiums)
Would be a New Segment of the Companys Operations
Involving New Business Risks and Challenges for
Management.

Expansion into condominium conversions and
for-sale housing (condominiums) would be a new segment 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;                                                                                                                                                              
| 
| | the inability of buyers to qualify for financing;                                                                                                                                                  
| 
| | lower than anticipated sale prices;                                                                                                                                                                
| 
| | the inability to close on sales of individual
    units under contract; and                                                                                                                        
| 
| | competition from other condominiums and other
    types of residential housing.                                                                                                                    

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

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:

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




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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 an exception for shares of common stock held by
Mr. Williams and Mr. 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.


Staggered Board.The
Companys articles of incorporation provide that the board
of directors will consist of eight members and can be increased
or decreased after that according to its bylaws, provided that
the total number of directors is not less than three nor more
than 15. Pursuant to the Companys bylaws, the number of
directors will be fixed by the board of directors within the
limits in its articles of incorporation. The board of directors
is divided into three classes of directors. Directors for each
class are chosen for a three-year term. The staggered terms for
directors may affect the ability of the Companys
shareholders to effect a change of control, even if a change of
control would be in the interest of the shareholders. Under a
proposed amendment to the Companys bylaws that the board
of directors will recommend to the shareholders for approval at
the Companys 2004 annual meeting of shareholders, the
board of directors would be declassified and each director
elected at or after the 2004 annual meeting would be elected
annually by the shareholders.

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 4,900,000 were outstanding as of
December 31, 2003. 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.






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

At December 31, 2003, the Company owned 72
Post® multifamily apartment communities, including 3
communities held in unconsolidated entities, located in the
following metropolitan areas:

|                  |  |             |    |            |  |            |        |  |  |  |        | 
|----------------- |  | ----------- | -- | ---------- |  | ---------- | ------ |  |  |  | ------ | 
|Metropolitan Area |  | Communities |    | # of Units |  | % of Total
|                  |  |             |    |            |  |           
|Atlanta, GA       |  |             | 35 |            |  |            | 15,011 |  |  |  | 53.5%  | 
|Dallas, TX        |  |             | 18 |            |  |            | 5,225  |  |  |  | 18.6%  | 
|Tampa, FL         |  |             | 4  |            |  |            | 2,223  |  |  |  | 7.9%   | 
|Charlotte, NC     |  |             | 3  |            |  |            | 1,065  |  |  |  | 3.8%   | 
|Orlando, FL       |  |             | 2  |            |  |            | 985    |  |  |  | 3.5%   | 
|Houston, TX       |  |             | 2  |            |  |            | 980    |  |  |  | 3.5%   | 
|Fairfax, VA       |  |             | 2  |            |  |            | 700    |  |  |  | 2.5%   | 
|Denver, CO        |  |             | 1  |            |  |            | 696    |  |  |  | 2.5%   | 
|Washington, D.C.  |  |             | 2  |            |  |            | 773    |  |  |  | 2.7%   | 
|New York, NY      |  |             | 2  |            |  |            | 337    |  |  |  | 1.2%   | 
|Nashville, TN     |  |             | 1  |            |  |            | 86     |  |  |  | 0.3%   | 
|                  |  |             |    |            |  |            |        |  |  |  |        | 
|                  |  |             | 72 |            |  |            | 28,081 |  |  |  | 100.0% | 
|                  |  |             |    |            |  |            |        |  |  |  |        | 

Forty-three 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 91.9% and 91.0%, respectively, and the average monthly
rental rate per apartment unit was $989 and $1,043,
respectively, for the 53 communities stabilized for each of the
years ended December 31, 2003 and 2002. See Selected
Financial Information.




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COMMUNITY INFORMATION

|                      |                            |             |         |           |  |               |             |        |  |               |       |              |  |  |       |        |  |  |       |     |  |  |      |      |  
|--------------------- | -------------------------- | ----------- | ------- | --------- |  | ------------- | ----------- | ------ |  | ------------- | ----- | ------------ |  |  | ----- | ------ |  |  | ----- | --- |  |  | ---- | ---- | -
|                      |                            |             |         |           |  |               |             |        |  | December 2003 |       | 2003        
|                      |                            |             |         |           |  | Average       |             |        |  | Average       |       | Average     
|                      |                            |             |         | Year      |  | Unit Size     |             | No. of |  | Rental Rates  |       | Economic    
|Communities           |                            | Location(1) |         | Completed |  | (Square Feet) |             | Units  |  | Per Unit      |       | Occupancy(2)
|                      |                            |             |         |           |  |               |             |        |  |               |       |             
|Georgia               |                            |             |         |           |  |               |             |        |  |               |       |              |  |  |       |        |  |  |       |     |  |  |      |     
|Post Ashford®         |                            |             | Atlanta |           |  |               | 1987        |        |  |               | 872   |              |  |  | 222   |        |  |  | 772   |     |  |  | 88.8 | %   
|Post BiltmoreTM(3)    |                            |             | Atlanta |           |  |               | 2001        |        |  |               | 785   |              |  |  | 276   |        |  |  | 1,100 |     |  |  | 94.8 | %   
|Post BriarcliffTM     |                            |             | Atlanta |           |  |               | 1999        |        |  |               | 1,034 |              |  |  | 688   |        |  |  | 1,065 |     |  |  | 92.3 | %   
|Post Brookhaven®      |                            |             | Atlanta |           |  |               | 1990-1992(5 | )      |  |               | 990   |              |  |  | 735   |        |  |  | 900   |     |  |  | 91.1 | %   
|Post Canyon®(7)       |                            |             | Atlanta |           |  |               | 1986        |        |  |               | 899   |              |  |  | 494   |        |  |  | 689   |     |  |  | 91.8 | %   
|Post Chase®(7)        |                            |             | Atlanta |           |  |               | 1987        |        |  |               | 938   |              |  |  | 410   |        |  |  | 660   |     |  |  | 90.4 | %   
|Post Chastain®        |                            |             | Atlanta |           |  |               | 1990        |        |  |               | 965   |              |  |  | 558   |        |  |  | 908   |     |  |  | 89.3 | %   
|Post Collier Hills®   |                            |             | Atlanta |           |  |               | 1997        |        |  |               | 984   |              |  |  | 396   |        |  |  | 962   |     |  |  | 90.2 | %   
|Post Corners®(7)      |                            |             | Atlanta |           |  |               | 1986        |        |  |               | 860   |              |  |  | 460   |        |  |  | 642   |     |  |  | 88.7 | %   
|Post Court®(7)        |                            |             | Atlanta |           |  |               | 1988        |        |  |               | 838   |              |  |  | 446   |        |  |  | 625   |     |  |  | 92.1 | %   
|Post Crest®           |                            |             | Atlanta |           |  |               | 1996        |        |  |               | 1,069 |              |  |  | 410   |        |  |  | 962   |     |  |  | 93.1 | %   
|Post Crossing®        |                            |             | Atlanta |           |  |               | 1995        |        |  |               | 1,027 |              |  |  | 354   |        |  |  | 997   |     |  |  | 92.7 | %   
|Post Dunwoody®        |                            |             | Atlanta |           |  |               | 1989-1996(5 | )      |  |               | 1,010 |              |  |  | 530   |        |  |  | 907   |     |  |  | 92.6 | %   
|Post Gardens®         |                            |             | Atlanta |           |  |               | 1998        |        |  |               | 1,068 |              |  |  | 397   |        |  |  | 1,092 |     |  |  | 90.1 | %   
|Post Glen®            |                            |             | Atlanta |           |  |               | 1997        |        |  |               | 1,117 |              |  |  | 314   |        |  |  | 1,103 |     |  |  | 91.6 | %   
|Post Lane®(7)         |                            |             | Atlanta |           |  |               | 1988        |        |  |               | 840   |              |  |  | 166   |        |  |  | 736   |     |  |  | 94.1 | %   
|Post Lenox Park®      |                            |             | Atlanta |           |  |               | 1995        |        |  |               | 1,030 |              |  |  | 206   |        |  |  | 1,009 |     |  |  | 92.1 | %   
|Post Lindbergh®       |                            |             | Atlanta |           |  |               | 1998        |        |  |               | 956   |              |  |  | 396   |        |  |  | 980   |     |  |  | 92.9 | %   
|Post Mill®(7)         |                            |             | Atlanta |           |  |               | 1985-1986(5 | )      |  |               | 952   |              |  |  | 752   |        |  |  | 689   |     |  |  | 91.5 | %   
|Post OakTM            |                            |             | Atlanta |           |  |               | 1993        |        |  |               | 1,003 |              |  |  | 182   |        |  |  | 992   |     |  |  | 91.3 | %   
|Post Oglethorpe®      |                            |             | Atlanta |           |  |               | 1994        |        |  |               | 1,218 |              |  |  | 250   |        |  |  | 1,210 |     |  |  | 90.3 | %   
|Post ParksideTM       |                            |             | Atlanta |           |  |               | 2000        |        |  |               | 903   |              |  |  | 188   |        |  |  | 1,236 |     |  |  | 93.3 | %   
|Post PeachtreeTM(3)   |                            |             | Atlanta |           |  |               | 2001        |        |  |               | 1,332 |              |  |  | 121   |        |  |  | 2,228 |     |  |  | 80.8 | %   
|Post Peachtree Hills® |                            |             | Atlanta |           |  |               | 1992-1994(5 | )      |  |               | 971   |              |  |  | 300   |        |  |  | 989   |     |  |  | 92.6 | %   
|Post Renaissance®(6)  |                            |             | Atlanta |           |  |               | 1992-1994(5 | )      |  |               | 903   |              |  |  | 342   |        |  |  | 971   |     |  |  | 92.7 | %   
|Post Ridge®           |                            |             | Atlanta |           |  |               | 1998        |        |  |               | 1,061 |              |  |  | 434   |        |  |  | 965   |     |  |  | 94.5 | %   
|Post Riverside®       |                            |             | Atlanta |           |  |               | 1998        |        |  |               | 1,049 |              |  |  | 527   |        |  |  | 1,319 |     |  |  | 92.7 | %   
|Post SpringTM         |                            |             | Atlanta |           |  |               | 2000        |        |  |               | 977   |              |  |  | 452   |        |  |  | 938   |     |  |  | 92.8 | %   
|Post StratfordTM(6)   |                            |             | Atlanta |           |  |               | 2000        |        |  |               | 1,007 |              |  |  | 250   |        |  |  | 1,132 |     |  |  | 91.9 | %   
|Post Summit®          |                            |             | Atlanta |           |  |               | 1990        |        |  |               | 957   |              |  |  | 148   |        |  |  | 884   |     |  |  | 90.2 | %   
|Post Valley®          |                            |             | Atlanta |           |  |               | 1988        |        |  |               | 854   |              |  |  | 496   |        |  |  | 673   |     |  |  | 92.0 | %   
|Post Village®         |                            |             | Atlanta |           |  |               | 1983-1988(5 | )      |  |               | 906   |              |  |  | 1,738 |        |  |  | 717   |     |  |  | 93.4 | %   
|Post Vinings®         |                            |             | Atlanta |           |  |               | 1989-1991(5 | )      |  |               | 972   |              |  |  | 403   |        |  |  | 801   |     |  |  | 93.1 | %   
|Post Walk®            |                            |             | Atlanta |           |  |               | 1984-1987(5 | )      |  |               | 927   |              |  |  | 476   |        |  |  | 798   |     |  |  | 90.8 | %   
|Post Woods®           |                            |             | Atlanta |           |  |               | 1977-1983(5 | )      |  |               | 1,057 |              |  |  | 494   |        |  |  | 878   |     |  |  | 91.1 | %   
|                      |                            |             |         |           |  |               |             |        |  |               |       |              |  |  |       |        |  |  |       |     |  |  |      |     
|                      | Subtotal/Average  Georgia |             |         |           |  |               |             |        |  |               |       | 981          |  |  |       | 15,011 |  |  |       | 897 |  |  |      | 91.7 | %
|                      |                            |             |         |           |  |               |             |        |  |               |       |              |  |  |       |        |  |  |       |     |  |  |      |     




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##### Table of Contents



COMMUNITY INFORMATION

|                                     |  |           |         |           |  |               |             |        |  |               |       |              |  |  |       |  |  |  |       |  |  |  |      |  
|------------------------------------ |  | --------- | ------- | --------- |  | ------------- | ----------- | ------ |  | ------------- | ----- | ------------ |  |  | ----- |  |  |  | ----- |  |  |  | ---- | -
|                                     |  |           |         |           |  |               |             |        |  | December 2003 |       | 2003        
|                                     |  |           |         |           |  | Average       |             |        |  | Average       |       | Average     
|                                     |  |           |         | Year      |  | Unit Size     |             | No. of |  | Rental Rates  |       | Economic    
|Communities                          |  | Locations |         | Completed |  | (Square Feet) |             | Units  |  | Per Unit      |       | Occupancy(2)
|                                     |  |           |         |           |  |               |             |        |  |               |       |             
|Texas                                |  |           |         |           |  |               |             |        |  |               |       |              |  |  |       |  |  |  |       |  |  |  |      |  
|Post AbbeyTM                         |  |           | Dallas  |           |  |               | 1996        |        |  |               | 1,275 |              |  |  | 34    |  |  |  | 1,722 |  |  |  | 89.9 | %
|Post Addison CircleTM                |  |           | Dallas  |           |  |               | 1998-2000(5 | )      |  |               | 895   |              |  |  | 1,334 |  |  |  | 931   |  |  |  | 88.8 | %
|Post American Beauty MillTM          |  |           | Dallas  |           |  |               | 1998        |        |  |               | 993   |              |  |  | 80    |  |  |  | 993   |  |  |  | 85.0 | %
|Post Block 588TM                     |  |           | Dallas  |           |  |               | 2000        |        |  |               | 1,570 |              |  |  | 127   |  |  |  | 1,513 |  |  |  | 89.4 | %
|Post Coles CornersTM                |  |           | Dallas  |           |  |               | 1998        |        |  |               | 819   |              |  |  | 186   |  |  |  | 940   |  |  |  | 92.3 | %
|Post Columbus SquareTM               |  |           | Dallas  |           |  |               | 1996        |        |  |               | 863   |              |  |  | 218   |  |  |  | 1,063 |  |  |  | 93.5 | %
|Post GalleryTM                       |  |           | Dallas  |           |  |               | 1999        |        |  |               | 2,307 |              |  |  | 34    |  |  |  | 2,757 |  |  |  | 91.0 | %
|Post HeightsTM                       |  |           | Dallas  |           |  |               | 1998-1999(5 | )      |  |               | 1,267 |              |  |  | 368   |  |  |  | 965   |  |  |  | 92.1 | %
|Post Legacy                          |  |           | Dallas  |           |  |               | 2000        |        |  |               | 843   |              |  |  | 384   |  |  |  | 832   |  |  |  | 89.6 | %
|Post MeridianTM                      |  |           | Dallas  |           |  |               | 1991        |        |  |               | 835   |              |  |  | 133   |  |  |  | 985   |  |  |  | 91.5 | %
|Post Midtown SquareTM                |  |           | Houston |           |  |               | 1999-2000(5 | )      |  |               | 937   |              |  |  | 672   |  |  |  | 1,105 |  |  |  | 88.7 | %
|Post Rice LoftsTM(6)                 |  |           | Houston |           |  |               | 1998        |        |  |               | 964   |              |  |  | 308   |  |  |  | 1,312 |  |  |  | 87.6 | %
|Post Town Lake®(7)                   |  |           | Dallas  |           |  |               | 1986-1987(5 | )      |  |               | 880   |              |  |  | 398   |  |  |  | 736   |  |  |  | 89.0 | %
|Post Uptown VillageTM                |  |           | Dallas  |           |  |               | 1995-2000(5 | )      |  |               | 767   |              |  |  | 496   |  |  |  | 834   |  |  |  | 93.0 | %
|Post VineyardTM                      |  |           | Dallas  |           |  |               | 1996        |        |  |               | 733   |              |  |  | 116   |  |  |  | 906   |  |  |  | 92.5 | %
|Post VintageTM                       |  |           | Dallas  |           |  |               | 1993        |        |  |               | 783   |              |  |  | 161   |  |  |  | 893   |  |  |  | 93.2 | %
|Post White Rock®                     |  |           | Dallas  |           |  |               | 1988        |        |  |               | 660   |              |  |  | 207   |  |  |  | 752   |  |  |  | 92.5 | %
|Post Wilson BuildingTM(6)            |  |           | Dallas  |           |  |               | 1999        |        |  |               | 1,016 |              |  |  | 143   |  |  |  | 1,134 |  |  |  | 89.3 | %
|Post WindhavenTM(7)                  |  |           | Dallas  |           |  |               | 1991        |        |  |               | 885   |              |  |  | 474   |  |  |  | 680   |  |  |  | 87.0 | %
|Post WorthingtonTM                   |  |           | Dallas  |           |  |               | 1993        |        |  |               | 846   |              |  |  | 332   |  |  |  | 1,058 |  |  |  | 90.7 | %
|                                     |  |           |         |           |  |               |             |        |  |               |       |              |  |  |       |  |  |  |       |  |  |  |      |  
|Subtotal/Average  Texas             |  |           |         |           |  |               |             |        |  |               | 1,007 |              |  |  | 6,205 |  |  |  | 962   |  |  |  | 89.9 | %
|                                     |  |           |         |           |  |               |             |        |  |               |       |              |  |  |       |  |  |  |       |  |  |  |      |  
|                                    
|Florida                              |  |           |         |           |  |               |             |        |  |               |       |              |  |  |       |  |  |  |       |  |  |  |      |  
|Post Harbour PlaceTM(4)              |  |           | Tampa   |           |  |               | 1999-2002   |        |  |               | 942   |              |  |  | 784   |  |  |  | 1,137 |  |  |  | N/A  |  
|Post Hyde Park®                      |  |           | Tampa   |           |  |               | 1996        |        |  |               | 970   |              |  |  | 389   |  |  |  | 1,046 |  |  |  | 93.4 | %
|Post Lake®(7)                        |  |           | Orlando |           |  |               | 1988        |        |  |               | 850   |              |  |  | 740   |  |  |  | 644   |  |  |  | 92.8 | %
|Post ParksideTM                      |  |           | Orlando |           |  |               | 1999        |        |  |               | 873   |              |  |  | 245   |  |  |  | 1,110 |  |  |  | 94.0 | %
|Post Rocky Point®                    |  |           | Tampa   |           |  |               | 1996-1998(5 | )      |  |               | 1,070 |              |  |  | 916   |  |  |  | 993   |  |  |  | 93.4 | %
|Post Walk at Old Hyde Park VillageTM |  |           | Tampa   |           |  |               | 1997        |        |  |               | 889   |              |  |  | 134   |  |  |  | 1,224 |  |  |  | 91.1 | %
|                                     |  |           |         |           |  |               |             |        |  |               |       |              |  |  |       |  |  |  |       |  |  |  |      |  
|Subtotal/Average  Florida           |  |           |         |           |  |               |             |        |  |               | 932   |              |  |  | 3,208 |  |  |  | 973   |  |  |  | 92.4 | %
|                                     |  |           |         |           |  |               |             |        |  |               |       |              |  |  |       |  |  |  |       |  |  |  |      |  




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COMMUNITY INFORMATION

|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |       | 
|--------------------------------- | --------------------------------------- | --------- |  | --------- | ------------ | ------------- |  | ------ | ----- | ------------- |  | ------------ | --- | ------ |  |  | ----- | ----- |  |  | ----- | ----- | 
|                                  |                                         |           |  |           |              |               |  |        |       | December 2003 |  | 2003        
|                                  |                                         |           |  |           |              | Average       |  |        |       | Average       |  | Average     
|                                  |                                         |           |  | Year      |              | Unit Size     |  | No. of |       | Rental Rates  |  | Economic    
|Communities                       |                                         | Locations |  | Completed |              | (Square Feet) |  | Units  |       | Per Unit      |  | Occupancy(2)
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |             
|Virginia                          |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Post Corners at Trinity Centre    |                                         | Fairfax   |  |           | 1996         |               |  |        | 1,027 |               |  |              | 336 |        |  |  | 1,202 |       |  |  | 94.8% |      
|Post Forest®                      |                                         | Fairfax   |  |           | 1990         |               |  |        | 888   |               |  |              | 364 |        |  |  | 1,144 |       |  |  | 95.0% |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|                                  | Subtotal/Average 
    Virginia         |           |  |           |              |               |  |        |       | 958           |  |              |     | 700    |  |  |       | 1,172 |  |  |       | 94.9% | 
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|North Carolina                    |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Post Gateway PlaceTM              |                                         | Charlotte |  |           | 2000         |               |  |        | 698   |               |  |              | 436 |        |  |  | 897   |       |  |  | 91.2% |      
|Post Park at Phillips Place®      |                                         | Charlotte |  |           | 1998         |               |  |        | 1,136 |               |  |              | 402 |        |  |  | 1,156 |       |  |  | 92.1% |      
|Post Uptown PlaceTM               |                                         | Charlotte |  |           | 2000         |               |  |        | 800   |               |  |              | 227 |        |  |  | 931   |       |  |  | 93.7% |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|                                  | Subtotal/Average  North
    Carolina   |           |  |           |              |               |  |        |       | 878           |  |              |     | 1,065  |  |  |       | 1,002 |  |  |       | 92.1% | 
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Colorado                          |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Post Uptown SquareTM              |                                         | Denver    |  |           | 1999-2001(5) |               |  |        | 847   |               |  |              | 696 |        |  |  | 982   |       |  |  | 87.7% |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Tennessee                         |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Post Bennie DillionTM             |                                         | Nashville |  |           | 1999         |               |  |        | 714   |               |  |              | 86  |        |  |  | 985   |       |  |  | 97.4% |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Washington, D.C.                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Post Pentagon RowTM(6)            |                                         | D.C.      |  |           | 2001         |               |  |        | 855   |               |  |              | 504 |        |  |  | 1,836 |       |  |  | 96.0% |      
|Post Massachusetts AvenueTM(3)(4) |                                         | D.C.      |  |           | 2003         |               |  |        | 922   |               |  |              | 269 |        |  |  | 2,432 |       |  |  | N/A   |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|                                  | Subtotal/Average 
    Washington, D.C. |           |  |           |              |               |  |        |       | 888           |  |              |     | 773    |  |  |       | 2,044 |  |  |       | 96.0% | 
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|New York                          |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|Post LuminariaTM(4)               |                                         | New York  |  |           | 2002         |               |  |        | 743   |               |  |              | 138 |        |  |  | 3,198 |       |  |  | N/A   |      
|Post ToscanaTM(4)                 |                                         | New York  |  |           | 2003         |               |  |        | 818   |               |  |              | 199 |        |  |  | 3,421 |       |  |  | N/A   |      
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|                                  | Subtotal/Average 
    New York         |           |  |           |              |               |  |        |       | 780           |  |              |     | 337    |  |  |       | 3,330 |  |  |       | N/A   | 
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      
|                                  | Total                                   |           |  |           |              |               |  |        |       | 887           |  |              |     | 28,081 |  |  |       | 994   |  |  |       | 91.6% | 
|                                  |                                         |           |  |           |              |               |  |        |       |               |  |              |     |        |  |  |       |       |  |  |       |      



|    |                                                                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | During 2003, this community or a phase in this
    community was in lease-up and, therefore, the average economic
    occupancy information for these communities is not included
    above.         
|(5) | These dates represent the respective completion
    dates for multiple phases of a community.                                                                                                        
|(6) | The Company has a leasehold interest in the land
    underlying these communities.                                                                                                                   
|(7) | These communities are held for sale at
    December 31, 2003.                                                                                                                                        




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

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 alleges various breaches of
fiduciary duties by the board of directors of the Company and
seeks, among other relief, the disclosure of certain information
by the defendants. This complaint also seeks 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. This lawsuit is expected to
be settled in 2004.

On May 13, 2003, the Company received notice
that a 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 alleges breaches of
fiduciary duties, abuse of control and corporate waste by the
defendants. The plaintiff seeks monetary damages and, as
appropriate, injunctive relief. This lawsuit is expected to be
settled in 2004.

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
March 1, 2004 are as follows:

|                    |  |                                                                       
|------------------- |  | ----------------------------------------------------------------------
|NAME                |  | POSITIONS AND OFFICES HELD                                            
|David P. Stockert   |  | President and Chief Executive Officer                                 
|Thomas L. Wilkes    |  | President  Post Apartment Management and
    Chief Management Officer
|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 Secretary 
    Post Corporate Services  
|John B. Mears       |  | Executive Vice President  Development                                
|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 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
41 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 54 years old.

Thomas L. Wilkes.Mr. Wilkes has been the President of Post Apartment
Management and the Companys Chief Management Officer 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




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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 44 years old.


Christopher J. Papa.Mr. Papa has been an the 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 38 years old.

Sherry W. Cohen.Ms. Cohen has been with the Company for eighteen 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 49 years old.

John B. Mears.Mr. Mears has been with the Company since November 1993.
Since March 2002, he has been an Executive Vice President of
Development responsible for the oversight of all the
Companys new development and construction activities. From
October 1997 to February 2002, he was an Executive Vice
President of Post East Development, responsible for sourcing and
executing new development opportunities in the Companys
primary markets outside of Atlanta, Georgia in the Eastern
United States. From November 1993 through September 1997, he was
a Senior Vice President of Post Apartment Development. Prior to
joining the Company, Mr. Mears was an associate in the Real
Estate Investment Banking Group at Merrill Lynch and Company.
Mr. Mears is 40 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 was Vice
President-Controller and Chief Accounting Officer for Allegiant
Physician Services, Inc., a physician management services
company, from August 1993 to November 1994. From November 1991
to July 1993, Mr. Quirk was Chief Financial Officer and
Controller for TransTel Group Inc., a start-up
telecommunications company. Mr. Quirk is 46 years old.




PART II






|         |                                                                                  
|-------- | ---------------------------------------------------------------------------------
|ITEM  5. | MARKET PRICE OF THE REGISTRANTS COMMON
    STOCK AND RELATED SHAREHOLDER MATTERS

The Common Stock is traded on the New York
Stock Exchange (NYSE) under the symbol
PPS. The following table sets forth the quarterly
high and low prices per share reported on the NYSE, as well as
the quarterly dividends declared per share:

|               |  |      |       |     |  |           |       |  |  |   |      | 
|-------------- |  | ---- | ----- | --- |  | --------- | ----- |  |  | - | ---- | 
|               |  |      |       |     |  | Dividends
|Quarter End    |  | High |       | Low |  | Declared 
|               |  |      |       |     |  |          
|2002           |  |      |       |     |  |           |       |  |  |   |      | 
|First Quarter  |  | $    | 35.91 |     |  | $         | 32.20 |  |  | $ | 0.78 | 
|Second Quarter |  |      | 35.40 |     |  |           | 30.02 |  |  |   | 0.78 | 
|Third Quarter  |  |      | 30.85 |     |  |           | 25.41 |  |  |   | 0.78 | 
|Fourth Quarter |  |      | 26.05 |     |  |           | 22.40 |  |  |   | 0.78 | 
|              
|2003           |  |      |       |     |  |           |       |  |  |   |      | 
|First Quarter  |  | $    | 24.74 |     |  | $         | 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 | 

On March 1, 2004, the Company had 39,611,948
common shareholders of record.

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




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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 Liquidity and
Capital Resources in Managements Discussion and
Analysis of Financial Condition and Results of Operations.


During 2003, the Company did not sell any
unregistered securities.

There is no established public trading market for
the Common Units. As of March 1, 2004, the Operating
Partnership had 42,476,619 holders of record of Common Units of
the Operating Partnership.

For each quarter during 2003 and 2002, 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 2003, the Operating Partnership did not
sell any unregistered securities.




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

Post Properties, Inc.

(Dollars in thousands, except per share and
apartment unit data)


|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |          |         | 
|------------------------------------------------------------------------------------------------------------------------ | ----------------------------------- | ----------------------- | ---------- | -------- | ------- | ---- | ---------- | ------- | ------- | ---- | ---------- | -------- | ------- | - | ---------- | -------- | ------- | - | ---------- | -------- | ------- | 
|                                                                                                                         |                                     |                        
|                                                                                                                         |                                     | Year Ended December 31,
|                                                                                                                         |                                     |                        
|                                                                                                                         |                                     | 2003                    |            | 2002     |         | 2001 |            | 2000    |         | 1999
|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |     
|STATEMENT OF OPERATIONS DATA                                                                                             |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Revenues Rental                                                                                                          |                                     | $                       | 279,325    |          |         | $    | 275,605    |         |         | $    | 293,836    |          |         | $ | 294,654    |          |         | $ | 252,931    |         
|                                                                                                                         | Other                               |                         |            | 11,059   |         |      |            | 11,701  |         |      |            | 13,165   |         |   |            | 15,765   |         |   |            | 12,275   |        
|                                                                                                                         | Third-party services(1)             |                         |            |         |         |      |            |        |         |      |            | 14,088   |         |   |            | 15,249   |         |   |            | 12,486   |        
|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|                                                                                                                         |                                     | Total revenues          |            | $        | 290,384 |      |            | $       | 287,306 |      |            | $        | 321,089 |   |            | $        | 325,668 |   |            | $        | 277,692 | 
|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Income (loss) from continuing operations(2)                                                                              |                                     | $                       | (19,973    | )        |         | $    | 31,000     |         |         | $    | 67,161     |          |         | $ | 78,106     |          |         | $ | 82,700     |         
|Income from discontinued operations(3)                                                                                   |                                     |                         | 34,129     |          |         |      | 29,746     |         |         |      | 20,379     |          |         |   | 22,414     |          |         |   | 21,817     |         
|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Income before cumulative effect of accounting
    change                                                                 |                                     |                         | 14,156     |          |         |      | 60,746     |         |         |      | 87,540     |          |         |   | 100,520    |          |         |   | 104,517    |         
|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Net income(4)                                                                                                            |                                     | $                       | 14,156     |          |         | $    | 60,746     |         |         | $    | 86,927     |          |         | $ | 100,520    |          |         | $ | 104,517    |         
|                                                                                                                         | Dividends to preferred shareholders |                         |            | (11,449  | )       |      |            | (11,449 | )       |      |            | (11,768  | )       |   |            | (11,875  | )       |   |            | (11,875  | )      
|                                                                                                                         | Redemption costs on preferred stock |                         |            |         |         |      |            |        |         |      |            | (239     | )       |   |            |         |         |   |            |         |        
|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Net income available to common shareholders                                                                              |                                     | $                       | 2,707      |          |         | $    | 49,297     |         |         | $    | 74,920     |          |         | $ | 88,645     |          |         | $ | 92,642     |         
|                                                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|PER COMMON SHARE DATA                                                                                                    |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Income (loss) from continuing operations (net of
    preferred dividends and redemption costs)  basic                   |                                     | $                       | (0.83      | )        |         | $    | 0.53       |         |         | $    | 1.45       |          |         | $ | 1.68       |          |         | $ | 1.84       |         
|Income from discontinued operations 
    basic                                                                          |                                     |                         | 0.90       |          |         |      | 0.80       |         |         |      | 0.54       |          |         |   | 0.57       |          |         |   | 0.57       |         
|Income before cumulative effect of accounting
    change (net of preferred dividends and redemption
    costs)  basic   |                                     |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.98       |          |         |   | 2.25       |          |         |   | 2.41       |         
|Net income available to common
    shareholders  basic                                                                  |                                     |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.97       |          |         |   | 2.25       |          |         |   | 2.41       |         
|Income (loss) from continuing operations (net of
    preferred dividends and redemption costs)  diluted                 |                                     | $                       | (0.83      | )        |         | $    | 0.53       |         |         | $    | 1.44       |          |         | $ | 1.66       |          |         | $ | 1.82       |         
|Income from discontinued operations 
    diluted                                                                        |                                     |                         | 0.90       |          |         |      | 0.80       |         |         |      | 0.53       |          |         |   | 0.56       |          |         |   | 0.56       |         
|Income before cumulative effect of accounting
    change (net of preferred dividends and redemption
    costs)  diluted |                                     |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.97       |          |         |   | 2.22       |          |         |   | 2.38       |         
|Net income available to common
    shareholders  diluted                                                                |                                     |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.96       |          |         |   | 2.22       |          |         |   | 2.38       |         
|Dividends declared                                                                                                       |                                     |                         | 1.80       |          |         |      | 3.12       |         |         |      | 3.12       |          |         |   | 3.04       |          |         |   | 2.80       |         
|Weighted average common shares
    outstanding  basic                                                                   |                                     |                         | 37,687,524 |          |         |      | 36,939,144 |         |         |      | 38,052,673 |          |         |   | 39,317,725 |          |         |   | 38,460,689 |         
|Weighted average common shares
    outstanding  diluted                                                                 |                                     |                         | 37,687,524 |          |         |      | 36,953,962 |         |         |      | 38,267,939 |          |         |   | 39,852,514 |          |         |   | 38,916,987 |         
|                                                                                                                        
|BALANCE SHEET DATA                                                                                                       |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Real estate, before accumulated depreciation                                                                             |                                     | $                       | 2,671,162  |          |         | $    | 2,887,500  |         |         | $    | 2,867,672  |          |         | $ | 2,827,094  |          |         | $ | 2,582,785  |         
|Real estate, net of accumulated depreciation                                                                             |                                     |                         | 2,164,391  |          |         |      | 2,443,535  |         |         |      | 2,463,398  |          |         |   | 2,469,914  |          |         |   | 2,279,769  |         
|Total assets                                                                                                             |                                     |                         | 2,215,451  |          |         |      | 2,508,151  |         |         |      | 2,538,351  |          |         |   | 2,551,237  |          |         |   | 2,350,173  |         
|Total debt                                                                                                               |                                     |                         | 1,186,322  |          |         |      | 1,414,555  |         |         |      | 1,336,520  |          |         |   | 1,213,309  |          |         |   | 989,583    |         
|Shareholders equity                                                                                                     |                                     |                         | 796,526    |          |         |      | 833,699    |         |         |      | 901,517    |          |         |   | 1,028,610  |          |         |   | 1,058,862  |         
|                                                                                                                        
|OTHER DATA                                                                                                               |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Cash flow provided by (used in):                                                                                         |                                     |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|                                                                                                                         | Operating activities                |                         | $          | 91,549   |         |      | $          | 119,763 |         |      | $          | 161,564  |         |   | $          | 185,073  |         |   | $          | 153,038  |        
|                                                                                                                         | Investing activities                |                         | $          | 234,195  |         |      | $          | (48,821 | )       |      | $          | (51,213  | )       |   | $          | (255,986 | )       |   | $          | (317,960 | )      
|                                                                                                                         | Financing activities                |                         | $          | (330,800 | )       |      | $          | (69,355 | )       |      | $          | (113,007 | )       |   | $          | 72,502   |         |   | $          | 149,638  |        
|Total stabilized communities (at end of period)                                                                          |                                     |                         | 70         |          |         |      | 75         |         |         |      | 78         |          |         |   | 78         |          |         |   | 81         |         
|Total stabilized apartment units (at end of
    period)                                                                  |                                     |                         | 27,613     |          |         |      | 29,199     |         |         |      | 27,710     |          |         |   | 28,736     |          |         |   | 29,032     |         
|Average economic occupancy (fully stabilized
    communities)(5)                                                         |                                     |                         | 91.9%      |          |         |      | 90.9%      |         |         |      | 94.9%      |          |         |   | 96.8%      |          |         |   | 96.4%      |         



|    |                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 2003
    included the impact of severance and proxy costs totaling
    $26,737. 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. See
    note 7 to the consolidated financial statements for a
    discussion of these costs.




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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 $613 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 concessions and employee discounts (average
    economic occupancy, taking account of these amounts, would have
    been 90.8%, 89.1%, 93.8%, 94.9% and 95.0% for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999,
    respectively). Concessions were $2,129, $4,215, $1,860, $3,250
    and $2,847 for the years ended December 31, 2003, 2002,
    2001, 2000 and 1999, respectively. Employee discounts were $424,
    $660, $895, $1,143 and $583 for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999, respectively.
    A community is considered by the Company to have achieved
    stabilized occupancy on the earlier to occur of
    (i) attainment of 95% physical occupancy on the first day
    of any month, or (ii) one year after completion of
    construction.




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##### Table of Contents



Post Apartment Homes, L.P.

(Dollars in thousands, except per unit and
apartment unit data)


|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |          |         | 
|---------------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | ----------------------- | ---------- | -------- | ------- | ---- | ---------- | ------- | ------- | ---- | ---------- | -------- | ------- | - | ---------- | -------- | ------- | - | ---------- | -------- | ------- | 
|                                                                                                                             |                                        |                        
|                                                                                                                             |                                        | Year Ended December 31,
|                                                                                                                             |                                        |                        
|                                                                                                                             |                                        | 2003                    |            | 2002     |         | 2001 |            | 2000    |         | 1999
|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |     
|STATEMENT OF OPERATIONS DATA                                                                                                 |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Revenues Rental                                                                                                              |                                        | $                       | 279,325    |          |         | $    | 275,605    |         |         | $    | 293,836    |          |         | $ | 294,654    |          |         | $ | 252,931    |         
|                                                                                                                             | Other                                  |                         |            | 11,059   |         |      |            | 11,701  |         |      |            | 13,165   |         |   |            | 15,765   |         |   |            | 12,275   |        
|                                                                                                                             | Third-party services (1)               |                         |            |         |         |      |            |        |         |      |            | 14,088   |         |   |            | 15,249   |         |   |            | 12,486   |        
|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|                                                                                                                             |                                        | Total revenues          |            | $        | 290,384 |      |            | $       | 287,306 |      |            | $        | 321,089 |   |            | $        | 325,668 |   |            | $        | 277,692 | 
|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Income (loss) from continuing operations (2)                                                                                 |                                        | $                       | (17,925    | )        |         | $    | 39,281     |         |         | $    | 80,190     |          |         | $ | 92,442     |          |         | $ | 94,133     |         
|Income from discontinued operations (3)                                                                                      |                                        |                         | 38,022     |          |         |      | 33,837     |         |         |      | 23,142     |          |         |   | 25,369     |          |         |   | 24,770     |         
|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Income before cumulative effect of accounting
    change                                                                     |                                        |                         | 20,097     |          |         |      | 73,118     |         |         |      | 103,332    |          |         |   | 117,811    |          |         |   | 118,903    |         
|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Net income (4)                                                                                                               |                                        | $                       | 20,097     |          |         | $    | 73,118     |         |         | $    | 102,637    |          |         | $ | 117,811    |          |         | $ | 118,903    |         
|                                                                                                                             | Distributions to preferred unitholders |                         |            | (17,049  | )       |      |            | (17,049 | )       |      |            | (17,368  | )       |   |            | (17,475  | )       |   |            | (13,726  | )      
|                                                                                                                             | Redemption costs on preferred units    |                         |            |         |         |      |            |        |         |      |            | (239     | )       |   |            |         |         |   |            |         |        
|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Net income available to common unitholders                                                                                   |                                        | $                       | 3,048      |          |         | $    | 56,069     |         |         | $    | 85,030     |          |         | $ | 100,336    |          |         | $ | 105,177    |         
|                                                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|PER COMMON UNIT DATA                                                                                                         |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Income (loss) from continuing operations (net of
    preferred distributions and redemption costs)  basic                   |                                        | $                       | (0.83      | )        |         | $    | 0.53       |         |         | $    | 1.45       |          |         | $ | 1.68       |          |         | $ | 1.84       |         
|Income from discontinued operations 
    basic                                                                              |                                        |                         | 0.90       |          |         |      | 0.80       |         |         |      | 0.54       |          |         |   | 0.57       |          |         |   | 0.57       |         
|Income before cumulative effect of accounting
    change (net of preferred distributions and redemption
    costs)  basic   |                                        |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.98       |          |         |   | 2.25       |          |         |   | 2.41       |         
|Net income available to common
    unitholders  basic                                                                       |                                        |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.97       |          |         |   | 2.25       |          |         |   | 2.41       |         
|Income (loss) from continuing operations (net of
    preferred distributions and redemption costs)  diluted                 |                                        | $                       | (0.83      | )        |         | $    | 0.53       |         |         | $    | 1.44       |          |         | $ | 1.66       |          |         | $ | 1.82       |         
|Income from discontinued operations 
    diluted                                                                            |                                        |                         | 0.90       |          |         |      | 0.80       |         |         |      | 0.53       |          |         |   | 0.56       |          |         |   | 0.56       |         
|Income before cumulative effect of accounting
    change (net of preferred distributions and redemption
    costs)  diluted |                                        |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.97       |          |         |   | 2.22       |          |         |   | 2.38       |         
|Net income available to common
    unitholders  diluted                                                                     |                                        |                         | 0.07       |          |         |      | 1.33       |         |         |      | 1.96       |          |         |   | 2.22       |          |         |   | 2.38       |         
|Dividends declared                                                                                                           |                                        |                         | 1.80       |          |         |      | 3.12       |         |         |      | 3.12       |          |         |   | 3.04       |          |         |   | 2.80       |         
|Weighted average common units
    outstanding  basic                                                                        |                                        |                         | 42,134,072 |          |         |      | 42,020,759 |         |         |      | 43,211,834 |          |         |   | 44,503,290 |          |         |   | 43,663,373 |         
|Weighted average common units
    outstanding  diluted                                                                      |                                        |                         | 42,134,072 |          |         |      | 42,035,577 |         |         |      | 43,427,100 |          |         |   | 45,038,079 |          |         |   | 44,119,671 |         
|BALANCE SHEET DATA                                                                                                           |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Real estate, before accumulated depreciation                                                                                 |                                        | $                       | 2,671,162  |          |         | $    | 2,887,500  |         |         | $    | 2,867,672  |          |         | $ | 2,827,094  |          |         | $ | 2,582,785  |         
|Real estate, net of accumulated depreciation                                                                                 |                                        |                         | 2,164,391  |          |         |      | 2,443,535  |         |         |      | 2,463,398  |          |         |   | 2,469,914  |          |         |   | 2,279,769  |         
|Total assets                                                                                                                 |                                        |                         | 2,215,451  |          |         |      | 2,508,151  |         |         |      | 2,538,351  |          |         |   | 2,551,237  |          |         |   | 2,350,173  |         
|Total debt                                                                                                                   |                                        |                         | 1,186,322  |          |         |      | 1,414,555  |         |         |      | 1,336,520  |          |         |   | 1,213,309  |          |         |   | 989,583    |         
|Partners equity                                                                                                             |                                        |                         | 928,935    |          |         |      | 993,976    |         |         |      | 1,077,670  |          |         |   | 1,216,701  |          |         |   | 1,251,342  |         
|OTHER DATA                                                                                                                   |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|Cash flow provided by (used in):                                                                                             |                                        |                         |            |          |         |      |            |         |         |      |            |          |         |   |            |          |         |   |            |         
|                                                                                                                             | Operating activities                   |                         | $          | 91,549   |         |      | $          | 119,763 |         |      | $          | 161,564  |         |   | $          | 185,073  |         |   | $          | 153,038  |        
|                                                                                                                             | Investing activities                   |                         | $          | 234,195  |         |      | $          | (48,821 | )       |      | $          | (51,213  | )       |   | $          | (255,986 | )       |   | $          | (317,960 | )      
|                                                                                                                             | Financing activities                   |                         | $          | (330,800 | )       |      | $          | (69,355 | )       |      | $          | (113,007 | )       |   | $          | 72,502   |         |   | $          | 149,638  |        
|Total stabilized communities (at end of period)                                                                              |                                        |                         | 70         |          |         |      | 75         |         |         |      | 78         |          |         |   | 78         |          |         |   | 81         |         
|Total stabilized apartment units (at end of
    period)                                                                      |                                        |                         | 27,613     |          |         |      | 29,199     |         |         |      | 27,710     |          |         |   | 28,736     |          |         |   | 29,032     |         
|Average economic occupancy (fully stabilized
    communities) (5)                                                            |                                        |                         | 91.9%      |          |         |      | 90.9%      |         |         |      | 94.9%      |          |         |   | 96.8%      |          |         |   | 96.4%      |         



|    |                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 2003
    included the impact of severance and proxy costs totaling
    $26,737. 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. See
    note 7 to the consolidated financial statements for a
    discussion of these costs.




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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 concessions and employee discounts (average
    economic occupancy, taking account of these amounts, would have
    been 90.8%, 89.1%, 93.8%, 94.9% and 95.0% for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999,
    respectively). Concessions were $2,129, $4,215, $1,860, $3,250
    and $2,847 for the years ended December 31, 2003, 2002,
    2001, 2000 and 1999, respectively. Employee discounts were $424,
    $660, $895, $1,143 and $583 for the years ended
    December 31, 2003, 2002, 2001, 2000 and 1999, respectively.
    A community is considered by the Company to have achieved
    stabilized occupancy on the earlier to occur of
    (i) attainment of 95% physical occupancy on the first day
    of any month, or (ii) one year after completion of
    construction.






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

(Dollars 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, 2003, the
Company owned 28,081 apartment units in 72 apartment
communities, including 666 apartment units in 3 communities held
in unconsolidated entities, and including 468 apartment units
currently under lease up in two apartment communities. At
December 31, 2003, approximately 53.5%, 18.6% and 7.9% (on
a unit basis) of the Companys communities were located in
the Atlanta, Dallas and Tampa metropolitan area, 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, 2003, the Company owned
approximately 91.3% of the common limited partnership interests
(Common Units) in the Operating Partnership. Common
Units held by persons (including certain directors) other than
the Company represented a 8.7% common minority interest in the
Operating Partnership.

Over the last few years, the multifamily sector
has experienced weakness caused primarily by overall weakness in
the U.S. economy and a soft employment market, the strong
single-family housing market caused by historically low mortgage
interest rates and excess multifamily supply. These factors have
contributed to an increase in apartment vacancies and, in turn,
lower net effective rents as multifamily apartment owners have
sought to compete in this increasingly competitive environment.
As a result, the Companys same-store revenue and net
operating income have declined, turning negative since 2001 and
continuing into 2004, although there have been ongoing signs of
gradual stabilization. A number of the Companys markets,
particularly its largest markets in Atlanta, Georgia and Dallas,
Texas which constitute approximately three-quarters (on a unit
basis) of the Companys portfolio, were particularly
adversely impacted, with multifamily vacancy rates in those
markets increasing over that same period. In order to
effectively compete, the Company has had to offer concessions
and reduce net effective rents in its portfolio. As a result of
these factors, revenues and net operating income at the
Companys fully stabilized (same store) communities
experienced declines of 6.7% and 9.6% in 2002 and 3.4% and 6.1%
in 2003, respectively. Average economic occupancy at the
Companys fully stabilized (same store) communities also
declined from 93.3% in 2001 to 91.9% in 2003.

In response to weakness in the economy and the
multifamily sector, the Company enacted a number of cost
containment and cost reduction measures during fiscal 2002 and
fiscal 2003. The Company reduced its associate workforce by
about one-quarter, from 1,235 associates at December 31,
2001 to 930 associates at December 31, 2003. As a result of
such measures, the Company was able to hold fully stabilized
(same store) operating expense growth to 1.6% in 2003. This is
the second year in a row the Company has been able to hold
operating expense growth to less than 2%.




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During 2003, the Company exited three single
asset markets, Austin, Texas, Pasadena, California and Phoenix,
Arizona, in an effort to focus in fewer markets in order to
improve operating efficiency and leverage the Post® brand.
This reduced the number of the Companys markets from
thirteen to ten.

The Company has also been taking advantage of
strong capital market conditions to sell many of its older and
least well-located communities. During 2003, the Company sold a
total of five apartment communities (one held in an
unconsolidated entity). The Company also expects to sell nine
additional communities in the first and second quarters of 2004.
This asset sales program is consistent with the Companys
overall strategy to take advantage of high demand for apartment
assets, reduce the average age of the portfolio and lessen its
market concentration in Atlanta, Georgia and Dallas, Texas. The
Company plans to utilize the proceeds from these asset sales
partly to strengthen its balance sheet and partly to reinvest in
new developments and acquisitions that enhance the
diversification of its cash flow stream and the quality of its
portfolio, such as in the greater Washington, DC, Tampa and
Orlando markets, among others.

In an effort to strengthen its balance sheet, the
Company redeemed its $50,000, 7 5/8% Series C
Cumulative Redeemable Preferred Stock on March 5, 2004 with
proceeds from asset sales. The Operating Partnership is also
considering redeeming its $70,000, 8% Series D Cumulative
Redeemable Preferred Units when those preferred units become
callable on September 3, 2004 with expected proceeds from
asset sales, although there are no assurances that the Company
will do so. During 2003, the Company reduced its total debt and
preferred shares and units as a percentage of undepreciated real
estate assets from 56.4% at December 31, 2002 to 52.5% at
December 31, 2003 (see table 1 below). In January 2004, the
Company also closed on a $350,000, three-year unsecured
revolving line of credit facility that matures in January 2007.
The revolving line of credit replaced the Companys
previous revolving credit facility which was scheduled to mature
in April 2004.

Table 1

Computation of the Ratio of Debt and Preferred
Shares and Units to Undepreciated Real Estate Assets


|                                                 |                                                                                                |                   |           |                   |  |   |           |           | 
|------------------------------------------------ | ---------------------------------------------------------------------------------------------- | ----------------- | --------- | ----------------- |  | - | --------- | --------- | 
|                                                 |                                                                                                | As of             |           | As of            
|                                                 |                                                                                                | December 31, 2003 |           | December 31, 2002
|                                                 |                                                                                                |                   |           |                  
|Total real estate assets per balance sheet       |                                                                                                | $                 | 2,164,391 |                   |  | $ | 2,443,535 |          
|Plus:                                            |                                                                                                |                   |           |                   |  |   |           |          
|Accumulated depreciation per balance sheet       |                                                                                                |                   | 432,157   |                   |  |   | 426,136   |          
|Accumulated depreciation on assets held for sale |                                                                                                |                   | 74,614    |                   |  |   | 17,829    |          
|                                                 |                                                                                                |                   |           |                   |  |   |           |          
|                                                 | Total undepreciated real estate assets (A)                                                     |                   | $         | 2,671,162         |  |   | $         | 2,887,500 | 
|                                                 |                                                                                                |                   |           |                   |  |   |           |          
|                                                 | Total debt per balance sheet                                                                   |                   | $         | 1,186,322         |  |   | $         | 1,414,555 | 
|Plus:                                            |                                                                                                |                   |           |                   |  |   |           |          
|Preferred shares at liquidation value            |                                                                                                |                   | 145,000   |                   |  |   | 145,000   |          
|Preferred units at liquidation value             |                                                                                                |                   | 70,000    |                   |  |   | 70,000    |          
|                                                 |                                                                                                |                   |           |                   |  |   |           |          
|                                                 | Total debt and preferred shares and units
    (B)                                              |                   | $         | 1,401,322         |  |   | $         | 1,629,555 | 
|                                                 |                                                                                                |                   |           |                   |  |   |           |          
|                                                 | Total debt and preferred shares and units as a %
    of undepreciated real estate assets (B÷A) |                   |           | 52.5%             |  |   |           | 56.4%     | 
|                                                 |                                                                                                |                   |           |                   |  |   |           |          

The Company has also taken steps to strengthen
its independent board and management team. Douglas
Crocker II, formerly Trustee, President, Chief Executive
Officer and Vice Chairman of Equity Residential, and Walter M.
Sonny Deriso, Jr., Vice Chairman of Synovus,
will be standing for election to the Companys Board of
Directors at the 2004 annual meeting of shareholders on
May 27, 2004. The Company also announced that John T.
Glover and Robert L. Anderson have decided not to stand for
re-election as directors when their terms expire at the 2004
annual meeting of shareholders. In addition, on November 5,
2003, Nicholas B. Paumgarten, Managing Director at
J.P. Morgan Chase & Co. and Chairman of
J.P. Morgan Corsair II Capital Partners, L.P., was
appointed to the Companys Board of Directors. In June
2003, Thomas D. Senkbeil joined the Company as its Executive
Vice President and Chief Investment Officer and in December 2003
Christopher J. Papa joined the Company as its Executive Vice
President and Chief Financial Officer.

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 8.7% common minority interest
in the Operating Partnership. See the summary financial
information in the section below titled, Results of
Operations.




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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 the first half of 2004 (including the estimated
proceeds, estimated gains on sales and the use of proceeds from
such sales), net operating income for 2004, occupancy levels and
rental rates, operating expenses, stabilized community revenues
in excess of specified expenses, 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 our 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 we operate, 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 factors are beyond our 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;                                                  
| 
| | 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 8 through 15 in this Annual Report on
    Form 10-K.                                                                                

Management believe 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 2003 and
2002. The potential impact of certain new




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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 relate to cost
capitalization, asset impairment evaluation and the asset
classification and accounting for real estate assets held for
sale.


The Company capitalizes those expenditures
relating to acquiring new assets, developing new apartment
communities and enhancing of the value of existing assets and
those 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 their estimated
depreciable lives). Thereafter, these replacements are
capitalized and depreciated. Further, 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 period
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, 2003, 2002 and 2001 were 6.98%,
6.80% and 7.41%, respectively. The weighted average borrowing
costs used by the Company for interest capitalization generally
increases as the Companys variable rate unsecured debt
decreases and decreases as the Companys variable rate
unsecured debt increases. The internal personnel and associated
costs are capitalized to the projects under development based
upon the effort identifiable with such projects. As the
Companys annual development activities fall below a range
of $50,000 to $60,000, the Company must either reduce its
internal personnel and associated costs related to development
and construction activities or reflect such costs as current
period expenses. In 2003, the Company expensed approximately
$919 of internal personnel and associated costs related to
development activities due to the reduced volume of development
expenditures in the last half of 2003.

The Company treats each unit in an apartment
community separately for cost accumulation, capitalization and
expense recognition purposes. Prior to commencing leasing
activities, interest and other construction costs are
capitalized and reflected on the balance sheet as construction
in progress. The Company ceases capitalizing such costs as the
residential units in a community become substantially complete
and available for occupancy. This accounting 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 as well as property management and leasing personnel
expenses) of such communities. This has historically resulted in
operating deficits during the lease-up of newly developed
communities (see below for discussion).

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. Assumptions used to estimate annual and residual
cash flow and the estimated holding period of such assets
require the judgment of Company management. At December 31,
2003 and 2002, 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. 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. As
discussed in note 5 to the consolidated financial
statements, the Company recognized an impairment loss in 2003 on
one asset held for investment under the application of this
standard.

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 internal 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




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to the lower of its net book value or its 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. The 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
unencumbered assets to unsecured debt 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.


In years prior to 2002, real estate assets held
for sale were stated separately on the consolidated balance
sheet in a manner consistent with the approach discussed above.
However, the operating results and gains or losses on the sale
of such assets were included in continuing operations. As a
result of this presentation, income from continuing operations
and gains on property sales are not comparable for years prior
to 2002.

In 2003 and 2002, the Financial Accounting
Standards Board issued several new accounting pronouncements,
and the pronouncements with a potential impact on the Company
are discussed in the following paragraphs.

SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13 and Technical Corrections was issued in May
2002. SFAS No. 145 rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishments of
Debt, which provided that gains and losses from early debt
retirements be treated as extraordinary items. Under
SFAS No. 145, gains and losses from early debt
retirements will only be treated as extraordinary items if they
meet the criteria for extraordinary items under APB No. 30.
Since the definition of an extraordinary item is more
restrictive under APB No. 30, SFAS No. 145 will
generally cause the Company to treat gains or losses from early
debt retirements as part of income before extraordinary items.
This part of SFAS No. 145 was effective for fiscal years
beginning after May 15, 2002 and required the
reclassification of prior period extraordinary items not meeting
the APB No. 30 criteria. The Company adopted this
requirement of SFAS No. 145 on January 1, 2003.
Upon implementation, the Company reclassified $120, net of
minority interest, in 2002 and $77, net of minority interest, in
2001 from extraordinary items to expenses used in the
determination of income from continuing operations. The
remaining provisions of SFAS No. 145 were generally
not applicable to the Company.

SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities was
issued in July 2002. This Statement addressed financial
accounting and reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force
(EITF) Issue No. 94-3, Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a
Restructuring). SFAS 146 was effective for exit or
disposal activities initiated after December 31, 2002. The
implementation of this Statement did not have a significant
effect on the Companys results of operations or its
financial position.

SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and
Disclosure, was issued in December 2002.
SFAS No. 148 amended SFAS No. 123,
Accounting for Stock-Based Compensation, to provide
alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amended the
disclosure requirements in both annual and interim financial
statements about the method of accounting for stock-based
compensation and the effect of the method on reported results.
Effective January 1, 2003, the Company elected to
voluntarily change to the fair value method of accounting under
SFAS No. 123 using the prospective method prescribed
in SFAS No. 148. The impact of the implementation of
SFAS Nos. 123 and 148 is more fully discussed in
notes 1 and 9 to the consolidated financial statements.

FASB Interpretation No. 45 (FIN
No. 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including
Guarantees of Indebtedness of Others was issued in
November 2002. FIN No. 45 clarified disclosure requirements
to be made by a guarantor in its interim and annual financial
statements regarding its obligations under certain guarantees
that it has issued. Additionally, it clarified that a guarantor
is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in
issuing the guarantee. The disclosure requirements of FIN
No. 45 were effective for interim and annual financial
statements issued after December 15, 2002. The initial
recognition and measurement provisions of FIN No. 45 were
applicable for guarantees issued or modified after
December 31, 2002. The Company implemented the disclosure
requirements of FIN No. 45 effective with its
December 31, 2002 financial statements and implemented the
recognition and




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measurement provisions effective January 1,
2003. The adoption of the recognition and measurement provisions
of FIN No. 45 did not have a significant impact on the
Companys financial position or results of operations.


FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 was originally issued in
January 2003 and subsequently revised and restated in December
2003 through FASB Interpretation No. 46  Revised
(together these pronouncements are referred to as FIN
No. 46). FIN No. 46 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 consolidation provisions
of FIN No. 46 were generally applicable as of
December 31, 2003 for all variable interest entities
created after January 31, 2003. For special purpose
entities, as defined, created prior to February 1, 2003,
the consolidation provisions of FIN No. 46 were generally
applicable as of December 31, 2003. For other variable
interest entities created prior to February 1, 2003 where
the Company is deemed to be the primary beneficiary,
consolidation of such entities will be required for the interim
period ending March 31, 2004. Information required to be
disclosed in 2003 pursuant to FIN No. 46 includes the
nature, purpose, size and activities of all variable interest
entities where it is reasonably possible that such entities will
be required to be consolidated by the Company and the
Companys maximum exposure to loss from these entities. The
Company currently does not have any interests in special purpose
entities or other variable interest entities and FIN No. 46
did not and will not have a significant effect on its results of
operations or financial position.

SFAS No. 150, Accounting for
Certain Financial Instruments with Characteristics of Both
Liabilities and Equity, was issued in May 2003.
SFAS No. 150 established standards for how an issuer
classifies and measures certain liabilities and equity. This
Statement was to be effective for financial instruments entered
into or modified after May 31, 2003, and otherwise
effective at the beginning of the first quarterly period
beginning after June 15, 2003. On October 29, 2003,
the FASB deferred certain provisions of SFAS No. 150,
as they were to apply to non-controlling interests, in which
redemption is mandatory, in finite-lived entities. The deferral
of these provisions is expected to remain in effect until these
issues are incorporated into future FASB accounting standards.
The Company has not entered into any transactions involving
financial instruments impacted by the provisions, currently in
effect, of SFAS No. 150, and the implementation of
SFAS No. 150 in 2003 had no effect 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, 2003, the
Companys portfolio of apartment communities, excluding
three communities held in unconsolidated entities and nine
communities held for sale, consisted of the following:
(1) 53 communities that were completed and stabilized for
all of the current and prior year, (2) four communities
that achieved full stabilization during 2002, and (3) three
communities that were in the lease-up stage during the year.
Sold communities include communities sold in 2002 and 2001 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.

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, 2003, 2002 and
2001 were $3,574, $1,553 and $3,173, respectively.




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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 and 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 income
(loss) from continuing operations is the most directly
comparable GAAP measure to net operating income. See
note 15 to the consolidated financial statements for a
reconciliation of net operating income to GAAP income (loss)
from continuing operations. 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,
2003 to Year Ended December 31, 2002

The operating performance from continuing
operations for all of the Companys apartment communities
summarized by segment for the years ended December 31, 2003
and 2002 is summarized as follows:

|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |      |      |  
|-------------------------------------------------------------------------------------------- | ----- | ----- | ------- | ----- | ----- | -------- | ------- | ----- | ----- |  | ------ | ---- | ---- | -
|                                                                                             |       | 2003  |         | 2002  |       | % Change
|                                                                                             |       |       |         |       |       |         
|Rental and other revenues                                                                    |       |       |         |       |       |          |         |       |       |  |        |     
|Fully stabilized communities (1)                                                             |       | $     | 221,592 |       |       | $        | 229,477 |       |       |  | (3.4   | )%  
|Communities stabilized in prior year                                                         |       |       | 31,294  |       |       |          | 26,322  |       |       |  | 18.9   | %   
|Lease-up communities (2)                                                                     |       |       | 16,539  |       |       |          | 9,064   |       |       |  | 82.5   | %   
|Sold communities (3)                                                                         |       |       |        |       |       |          | 745     |       |       |  | (100.0 | )%  
|Other revenue (4)                                                                            |       |       | 20,065  |       |       |          | 20,410  |       |       |  | (1.7   | )%  
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|                                                                                             |       |       | 289,490 |       |       |          | 286,018 |       |       |  | 1.2    | %   
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|Property operating and maintenance expenses
    (exclusive of depreciation and amortization) |       |       |         |       |       |          |         |       |       |  |        |     
|Fully stabilized communities (1)                                                             |       |       | 80,173  |       |       |          | 78,934  |       |       |  | 1.6    | %   
|Communities stabilized in prior year                                                         |       |       | 11,381  |       |       |          | 10,285  |       |       |  | 10.7   | %   
|Lease-up communities (2)                                                                     |       |       | 7,584   |       |       |          | 4,210   |       |       |  | 80.1   | %   
|Sold communities (3)                                                                         |       |       |        |       |       |          | 376     |       |       |  | (100.0 | )%  
|Other expense (5)                                                                            |       |       | 22,603  |       |       |          | 21,577  |       |       |  | 4.8    | %   
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|                                                                                             |       |       | 121,741 |       |       |          | 115,382 |       |       |  | 5.5    | %   
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|Net operating income                                                                         |       | $     | 167,749 |       |       | $        | 170,636 |       |       |  | (1.7   | )%  
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|Recurring capital expenditures: (6)                                                          |       |       |         |       |       |          |         |       |       |  |        |     
|Carpet                                                                                       |       | $     | 2,202   |       |       | $        | 1,712   |       |       |  | 28.6   | %   
|                                                                                             | Other |       |         | 5,162 |       |          |         | 4,633 |       |  |        | 11.4 | %   
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|                                                                                             |       | Total |         | $     | 7,364 |          |         | $     | 6,345 |  |        |      | 16.1 | %
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|Non-recurring capital expenditures                                                           |       | $     | 4,737   |       |       | $        | 2,806   |       |       |  | 68.8   | %   
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     
|Average apartment units in service                                                           |       |       | 20,679  |       |       |          | 22,859  |       |       |  | (9.5   | )%  
|                                                                                             |       |       |         |       |       |          |         |       |       |  |        |     



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Communities which reached stabilization prior to
    January 1, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(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) | Includes results from two communities containing
    540 units and one commercial property in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(4) | Other revenue includes revenue from commercial
    properties, from furnished apartment rentals above the
    unfurnished rental rates and any revenue not directly related to
    property operations. Other revenue excludes interest income
    included in total revenues in the consolidated statements of
    operations.                                                                                                                                                                                                                                                       
|(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) | 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.




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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
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 revenues increased $3,472 or
1.2% from 2002 to 2003 primarily due to increased revenues from
the Companys newly stabilized and lease-up communities of
$12,447 or 35.2% offset by the revenue decline of $7,885 or 3.4%
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
$6,359 or 5.5% 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 $1,239 or 1.6% between periods (see
discussion below).

The Company reported no net gains on property
sales in continuing operations in 2003, as under the provisions
of SFAS No. 144 all gains (losses) 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 $42,205 ($37,736 net of minority
interest) on the sale of four communities containing
1,844 units and one land parcel, reduced by losses of
$4,757 ($4,239 net of minority interest) resulting from losses
on the sale of certain land parcels and reserves to write-down
to fair value, less selling costs, one community and certain
other land parcels classified as held for sale. These sales
generated net proceeds of approximately $163,560. For the year
ended December 31, 2002, the Company recognized net gains
of $27,921 ($24,545 net of minority interest) from the sale of
six communities containing 2,125 units, one commercial
property and certain land parcels offset by reserves of $11,351
($9,978 net of minority interest) to write-down to fair market
value, less selling costs, certain land parcels classified as
held for sale. 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 $6,940, 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, partially offset by the cessation of
depreciation on properties sold and classified as held for sale.

Interest expense increased $12,870 or 24.7% 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
$671, or 4.6%, 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




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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 $2,138 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 of $830
in 2002 include the write down of an investment in a property
management software development company of $694 and costs
related to the early extinguishment of indebtedness of $136. The
$136 amount was reclassified from its prior year presentation as
an extraordinary item as a result of the current year
implementation of SFAS No. 145.

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 $1,590 in 2002 to
income of $7,791 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).

Recurring and nonrecurring capital expenditures
increased $2,980 or 32.6% from 2002 to 2003 primarily due to the
Companys emphasis on maintaining the quality and
competitive position of its apartment communities in 2003. The
increase in nonrecurring capital expenditures of $1,931 or 68.8%
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.

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 53 communities with
19,646 units, including 27 communities with
11,886 units (60.5%) located in Atlanta, Georgia,
16 communities with 4,353 units (22.2%) located in
Dallas, Texas, three communities with 1,439 units (7.3%)
located in Tampa, Florida and seven communities with
1,968 units (10.0%) located in other markets. The operating
performance of these communities is summarized as follows:

|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |       |      |  
|----------------------------------------------------------------------------------------- | -------------------------------------------------------- | --------------- | ------- | ------ | ----- | -------- | ------- | ----- | ----- |  | ---- | ----- | ---- | -
|                                                                                          |                                                          | 2003            |         | 2002   |       | % Change
|                                                                                          |                                                          |                 |         |        |       |         
|Rental and other revenues                                                                 |                                                          | $               | 221,592 |        |       | $        | 229,477 |       |       |  | (3.4 | )%   
|Property operating and maintenance expenses
    (excluding depreciation and amortization) |                                                          |                 | 80,173  |        |       |          | 78,934  |       |       |  | 1.6  | %    
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|Same store net operating income (1)                                                       |                                                          | $               | 141,419 |        |       | $        | 150,543 |       |       |  | (6.1 | )%   
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|Capital expenditures (2)                                                                  |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|                                                                                          | Recurring                                                |                 |         |        |       |          |         |       |       |  |      |       |     
|                                                                                          | Carpet                                                   |                 | $       | 2,202  |       |          | $       | 1,692 |       |  |      | 30.1  | %   
|                                                                                          | Other                                                    |                 |         | 4,906  |       |          |         | 4,457 |       |  |      | 10.1  | %   
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|                                                                                          |                                                          | Total recurring |         |        | 7,108 |          |         |       | 6,149 |  |      |       | 15.6 | %
|                                                                                          | Non-recurring                                            |                 |         | 3,704  |       |          |         | 1,487 |       |  |      | 149.1 | %   
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|                                                                                          | Total capital expenditures (A)                           |                 | $       | 10,812 |       |          | $       | 7,636 |       |  |      | 41.6  | %   
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|                                                                                          | Total capital expenditures per unit
    (A÷19,646 units) |                 | $       | 550    |       |          | $       | 389   |       |  |      | 41.4  | %   
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|Average monthly rental per apartment unit (3)                                             |                                                          | $               | 989     |        |       | $        | 1,043   |       |       |  | (5.2 | )%   
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      
|Average economic occupancy (4)                                                            |                                                          |                 | 91.9    | %      |       |          | 91.0    | %     |       |  | 0.9  | %    
|                                                                                          |                                                          |                 |         |        |       |          |         |       |       |  |      |      



|    |                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 income
    (loss) from continuing operations.
|(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.                                   




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|                                                                           |  |      |       |      |  |   |       | 
|-------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                                                                           |  | 2003 |       | 2002
|                                                                           |  |      |       |     
|Recurring capital expenditures by operating
    segment                    |  |      |       |      |  |   |       | 
|Same store                                                                 |  | $    | 7,108 |      |  | $ | 6,149 | 
|Partially stabilized                                                       |  |      | 50    |      |  |   | 54    | 
|Construction and lease-up                                                  |  |      | 74    |      |  |   | 67    | 
|Other, including discontinued operations                                   |  |      | 2,241 |      |  |   | 3,111 | 
|                                                                           |  |      |       |      |  |   |       | 
|Total recurring capital expenditures per
    statements of cash flows      |  | $    | 9,473 |      |  | $ | 9,381 | 
|                                                                           |  |      |       |      |  |   |       | 
|Non-recurring capital expenditures by operating
    segment                |  |      |       |      |  |   |       | 
|Same store                                                                 |  | $    | 3,704 |      |  | $ | 1,487 | 
|Partially stabilized                                                       |  |      | 68    |      |  |   | 48    | 
|Construction and lease-up                                                  |  |      | 335   |      |  |   | 14    | 
|Other, including discontinued operations                                   |  |      | 1,045 |      |  |   | 1,892 | 
|                                                                           |  |      |       |      |  |   |       | 
|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
    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 concessions and employee discounts. Average
    economic occupancy including these amounts would have been 90.8%
    and 89.1% for the years ended December 31, 2003 and 2002,
    respectively. For the years ended December 31, 2003 and
    2002, concessions were $2,129 and $3,924, respectively, and
    employee discounts were $424 and $614, respectively.

Rental and other revenues decreased $7,885 or
3.4% from 2002 to 2003. This decrease resulted from a 5.2%
decline in the average monthly rental rate per apartment unit.
The decline in average rental rates resulted in a revenue
decrease of approximately $12,788 between years. The aggregate
decline in revenues related to other property fees totaled
approximately $841. These declines were offset by lower up-front
rental concessions of $1,796 and lower vacancy losses of $3,948,
resulting from an increase in average economic occupancy of the
portfolio from 91.0% in 2002 to 91.9% 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 $5,891 and $1,306, 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 (5.2% in 2003 compared to 2.4% in
2002), and an overall decline in year over year total rental and
other revenues between years (3.4% in 2003 compared to 6.7% in
2002). In years prior to 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, 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 $1,239 or
1.6% from 2002 to 2003. Increased property tax expenses of $870
or 3.2%, increased repairs and maintenance expenses of $474 or
5.2%, increased insurance expenses of $624 or 15.6%, and
increased promotional expenses of $471 or 10.9% were offset by
decreased utility expenses of $891 or 15.2%. Personnel expenses
remained flat between years. Property tax expense increases of
3.2% 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




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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.
Utility expenses decreased primarily due to the benefits
associated with the conversion to the Companys in-house
water billing system.





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Comparison of Year Ended December 31,
2002 to Year Ended December 31, 2001

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 2002 to 2001 comparison, the operating
community categories were based on the status of each community
as of December 31, 2002. As a result, these categories are
different from the operating community categories used in the
2003 to 2002 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, 2002 financial statements due to the
restatement impact of reclassifying the operating results of
assets designated as held for sale in 2003 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, 2002 and 2001 is
summarized as follows:

|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|-------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | -------- | ------- |  |  |  | ----- | --
|                                                                                             |  | 2002 |         | 2001 |  | % Change
|                                                                                             |  |      |         |      |  |         
|Rental and other revenues                                                                    |  |      |         |      |  |          |         |  |  |  |       |   
|Fully stabilized communities (1)                                                             |  | $    | 220,756 |      |  | $        | 236,484 |  |  |  | (6.7  | )%
|Communities stabilized during prior year                                                     |  |      | 14,048  |      |  |          | 12,459  |  |  |  | 12.8  | % 
|Lease-up communities (2)                                                                     |  |      | 36,088  |      |  |          | 22,812  |  |  |  | 58.2  | % 
|Sold communities (3)                                                                         |  |      | 745     |      |  |          | 19,659  |  |  |  | (96.2 | )%
|Other revenue (4)                                                                            |  |      | 14,381  |      |  |          | 13,816  |  |  |  | 4.1   | % 
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|                                                                                             |  |      | 286,018 |      |  |          | 305,230 |  |  |  | (6.3  | )%
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|Property operating and maintenance expenses
    (exclusive of depreciation and amortization) |  |      |         |      |  |          |         |  |  |  |       |   
|Fully stabilized communities (1)                                                             |  |      | 76,022  |      |  |          | 76,324  |  |  |  | (0.4  | )%
|Communities stabilized during prior year                                                     |  |      | 4,751   |      |  |          | 4,838   |  |  |  | (1.8  | )%
|Lease-up communities (2)                                                                     |  |      | 14,776  |      |  |          | 9,274   |  |  |  | 59.3  | % 
|Sold communities (3)                                                                         |  |      | 376     |      |  |          | 7,330   |  |  |  | (94.9 | )%
|Other expense (5)                                                                            |  |      | 19,457  |      |  |          | 16,227  |  |  |  | 19.9  | % 
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|                                                                                             |  |      | 115,382 |      |  |          | 113,993 |  |  |  | 1.2   | % 
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|Net operating income                                                                         |  | $    | 170,636 |      |  | $        | 191,237 |  |  |  | (10.8 | )%
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|Recurring capital expenditures: (6)                                                          |  |      |         |      |  |          |         |  |  |  |       |   
|Carpet                                                                                       |  | $    | 1,712   |      |  | $        | 1,654   |  |  |  | 3.5   | % 
|Other                                                                                        |  |      | 4,633   |      |  |          | 5,017   |  |  |  | (7.7  | )%
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|Total                                                                                        |  | $    | 6,345   |      |  | $        | 6,671   |  |  |  | (4.9  | )%
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|Non recurring capital expenditures                                                           |  | $    | 2,806   |      |  | $        | 3,065   |  |  |  | (8.5  | )%
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   
|Average apartment units in service                                                           |  |      | 22,859  |      |  |          | 23,176  |  |  |  | (1.4  | )%
|                                                                                             |  |      |         |      |  |          |         |  |  |  |       |   



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Communities which reached stabilization prior to
    January 1, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (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) | Includes the results from two communities
    containing 540 units and one commercial property in 2002
    and six communities containing 2,799 units and one
    commercial property sold in 2001.                                                                                                                                                                                                                                                                                                                                                                                   
| | (4) | Other revenue includes revenue from commercial
    properties, from furnished apartment rentals above the
    unfurnished rental rates and other revenue not directly related
    to property operations. Other revenue excludes interest income
    and third-party services revenues included in the total revenues
    in the consolidated statements of operations.                                                                                                                                                                                                               
| | (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) | 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.

The Operating Partnership reported net income
available to common unitholders of $56,069 and $85,030 for the
years ended December 31, 2002 and 2001, respectively, and
the Company reported net income available to common shareholders
of $49,297 and $74,920 for the years ended December 31,
2002 and 2001, respectively. The decline in Company operating
performance in 2002 compared to 2001 reflects a decrease in
fully stabilized community operating performance (see discussion
below), reduced earnings resulting from the Companys asset
sale and capital reinvestment program, increased depreciation
and interest expense relating to new communities completed in
2001 and 2002 and increased general and administrative expenses.
The weaker operating performance in 2002 was




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somewhat offset by increased gains on asset sales
between years and by the negative impact of severance and
impairment charges in 2001. The impact of these items is
discussed below.


Rental and other revenues decreased $19,212 or
6.3% from 2001 to 2002 primarily due to the $15,728 or 6.7%
decline in revenues from fully stabilized communities discussed
further below. The rental and other revenue increases from the
Companys newly stabilized and lease-up properties of
$14,865 were offset by the revenue reduction of $18,914, from
assets sold between years (see discussion under
Discontinued Operations  comparisons of
the impact of assets sold between 2002 and prior years is not
comparable due to the implementation of SFAS No. 144).
Property operating and maintenance expenses (exclusive of
depreciation and amortization) increased $1,389 or 1.2%
primarily due to increased central office management expenses as
well as increased costs associated with a higher volume of
corporate apartment rentals.

As discussed above and in Note 7 to the
consolidated financial statements, the Company exited the third
party property management and landscape service businesses in
the fourth quarter of 2001 through the sale of the businesses to
their respective management teams. These sales allowed the
Company to simplify its operations through a reduced work force
(from approximately 2,100 employees prior to the sale to
approximately 1,050 employees as of December 31, 2002) and
focus on its core business of owning, developing and managing
multifamily real estate assets.

The net gain on property sales included in
continuing operations of $23,942 for 2001 resulted from the sale
of six communities containing 2,799 units, one commercial
property and five land parcels. The net gain on property sales
included in continuing operations of $13,275 for 2002 resulted
from the sale of two communities containing 540 units and
one commercial property. For the year ended December 31, 2002,
the Company recognized net gains from discontinued operations of
$27,921 ($24,545 net of minority interest) from the sale of six
communities containing 2,125 units, one commercial property and
certain land parcels, offset by reserves of $11,351 ($9,978 net
of minority interest) to write-down to fair market value, less
selling costs, certain land parcels classified as held for sale.

Depreciation expense increased $13,448, or 21.2%
from 2001 to 2002 primarily due to increased depreciation on
newly stabilized and lease-up properties, as these properties
were placed in service, partially offset by the cessation of
depreciation on properties sold and held for sale between
periods.

Interest expense increased $8,382 or 19.2% from
2001 to 2002 primarily due to a $8,901 reduction in capitalized
interest to development properties between years as the
Companys development pipeline transitioned to operating
properties. Exclusive of the reduction in capitalized interest,
the decrease in interest expense was a result of lower interest
costs on the Companys variable rate borrowings in 2002.

General and administrative expenses increased
$1,175, or 8.9%, from 2001 to 2002 primarily due to reduced
capitalization of certain costs associated with the
Companys development and construction efforts resulting
from the reduced volume of development and construction activity
between periods.

Development costs and other expenses of $830 in
2002 include the $694 write-down of a technology investment to
its estimated fair value and $136 of costs associated with the
early extinguishment of indebtedness. Development costs and
other expenses of $88 in 2001 represented costs associated with
the early extinguishment of indebtedness. The $136 and $88
amounts were reclassified from their prior year presentations as
extraordinary items as a result of the 2003 implementation of
SFAS No. 145.

The Company recorded project abandonment,
employee severance and other charges of $17,450 in 2001. These
charges are discussed in more detail below. No such charges were
recorded in 2002.

Equity in losses of unconsolidated real estate
entities increased from $186 in 2001 to $1,590 in 2002. These
losses reflect the Companys share of earnings and losses
from four single community limited liability companies (see
note 4 to the consolidated financial statements). The
losses increased in 2002 as the majority of the properties
entered the lease-up phase in 2002. These lease-up phase
communities were incurring lease-up deficits, as
defined earlier in this section.




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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 calendar year. For the 2002 to 2001 comparison,
fully stabilized communities are defined as those communities
which reached stabilization prior to January 1, 2001
(adjusted to reduce the portfolio for communities classified as
discontinued operations under SFAS No. 144). This
portfolio consisted of 52 communities with 18,752 units
including 26 communities with 11,434 units (61.0%) located
in Atlanta, Georgia, 17 communities with 4,137 units
(22.1%) in Dallas, Texas, three communities with
1,439 units (7.7%) located in Tampa, Florida and six
communities with 1,742 units (9.2%) located in other
markets. The operating performance of these communities is
summarized as follows:

|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |      |      |     |  
|----------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------ | --------------- | ----- | ----- | -------- | ------- | ----- | ----- | ----- | ---- | ---- | ---- | --- | -
|                                                                                          |                                                          | 2002                           |                 | 2001  |       | % Change
|                                                                                          |                                                          |                                |                 |       |       |         
|Rental and other revenues                                                                 |                                                          | $                              | 220,756         |       |       | $        | 236,484 |       |       |       | (6.7 | )%  
|Property operating and maintenance expenses
    (excluding depreciation and amortization) |                                                          |                                | 76,022          |       |       |          | 76,324  |       |       |       | (0.4 | )%  
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|Same store net operating income (1)                                                       |                                                          | $                              | 144,734         |       |       | $        | 160,160 |       |       |       | (9.6 | )%  
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|Capital expenditures (2)                                                                  |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|                                                                                          |                                                          | Recurring                      |                 |       |       |          |         |       |       |       |      |      |      |    
|                                                                                          |                                                          | Carpet                         |                 | $     | 1,692 |          |         | $     | 1,332 |       |      |      | 27.0 | %  
|                                                                                          |                                                          | Other                          |                 |       | 4,443 |          |         |       | 4,310 |       |      |      | 3.1  | %  
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|                                                                                          |                                                          |                                | Total recurring |       |       | 6,135    |         |       |       | 5,642 |      |      |      | 8.7 | %
|                                                                                          | Non-recurring                                            |                                |                 | 1,807 |       |          |         | 1,926 |       |       |      | (6.2 | )%  
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|                                                                                          |                                                          | Total capital expenditures (A) |                 | $     | 7,942 |          |         | $     | 7,568 |       |      |      | 4.9  | %  
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|                                                                                          | Total capital expenditures per unit
    (A÷18,752 units) |                                | $               | 424   |       |          | $       | 404   |       |       |      | 5.0  | %   
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|Average monthly rental per apartment unit (3)                                             |                                                          | $                              | 1,050           |       |       | $        | 1,076   |       |       |       | (2.4 | )%  
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     
|Average economic occupancy (4)                                                            |                                                          |                                | 91.1%           |       |       |          | 94.3%   |       |       |       | (3.2 | )%  
|                                                                                          |                                                          |                                |                 |       |       |          |         |       |       |       |      |     



|    |                                                                                                                                                                                                                                                                                            
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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 income
    (loss) from continuing operations.
|(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.                                   

|                                                                           |  |      |       |      |  |   |        | 
|-------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ------ | 
|                                                                           |  | 2002 |       | 2001
|                                                                           |  |      |       |     
|Recurring capital expenditures by operating
    segment                    |  |      |       |      |  |   |        | 
|Same store                                                                 |  | $    | 6,135 |      |  | $ | 5,642  | 
|Partially stabilized                                                       |  |      | 27    |      |  |   | 14     | 
|Construction and lease-up                                                  |  |      | 121   |      |  |   | 50     | 
|Other, including discontinued operations                                   |  |      | 3,098 |      |  |   | 4,735  | 
|                                                                           |  |      |       |      |  |   |        | 
|Total recurring capital expenditures per
    statements of cash flows      |  | $    | 9,381 |      |  | $ | 10,441 | 
|                                                                           |  |      |       |      |  |   |        | 
|Non-recurring capital expenditures by operating
    segment Same store     |  | $    | 1,807 |      |  | $ | 1,926  | 
|Partially stabilized                                                       |  |      | 23    |      |  |   | 20     | 
|Construction and lease-up                                                  |  |      | 62    |      |  |   | 31     | 
|Other, including discontinued operations                                   |  |      | 1,549 |      |  |   | 558    | 
|                                                                           |  |      |       |      |  |   |        | 
|Total non-recurring capital expenditures, per
    statements of cash flows |  | $    | 3,441 |      |  | $ | 2,535  | 
|                                                                           |  |      |       |      |  |   |        | 



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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
    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




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| |                                                                                                                                                                                                                                                                                                                                                                                                                   
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | occupancy does not include a deduction for
    concessions and employee discounts. Average economic occupancy
    including these amounts would have been 89.3% and 93.8% for the
    years ended December 31, 2002 and 2001, respectively. For
    the years ended December 31, 2002 and 2001, concessions
    were $3,591 and $1,946, respectively, and employee discounts
    were $572 and $770, respectively.

Rental and other revenue decreased $15,728 or
6.7% from 2001 to 2002. This decrease resulted from a decline in
the average economic occupancy of the portfolio from 94.3% in
2001 to 91.1% in 2002 and a 2.4% decline in the average monthly
rental rate per apartment unit. The decline in average rental
rates resulted in a revenue decrease of approximately $5,690
between years. The aggregate decline in revenues related to
vacancy loss, up-front concessions and other property fees
totaled approximately $7,197, $1,644 and $1,197, respectively.
These declines in 2002 reflect the effect of the national
recession on the Companys primary markets coupled with an
excess supply of new apartment units. This was especially true
for the Companys largest market, Atlanta, Georgia, which
experienced job losses in 2001 and 2002 as many major employers
downsized their workforces in response to slow economic activity.

Property operating and maintenance expenses
(exclusive of depreciation and amortization) were essentially
flat between years. Increased insurance expenses of $1,346 or
55.6% were largely offset by decreased personnel expenses of
$178 or 0.9%, decreased property tax expenses of $639 or 2.4%
and decreased repairs and maintenance expenses of $672 or 7.0%.
Insurance costs increased primarily due to the volatility in
insurance markets caused by, among other things, increased
terrorism risks and lower insurance company investment returns.
The cost of property and liability coverage were both
significantly higher for the 2002 renewal period. Personnel
costs decreased due to both staff reductions and tighter control
of wage levels between years. Property tax expenses decreased
due to approximately $500 of tax reductions for 2001 property
taxes received and recognized in 2002 and a focused effort to
control 2002 property taxes resulting in effectively no increase
between years. Repairs and maintenance expenses decreased due to
reduced grounds maintenance and overall expenses resulting from
intensive cost control efforts in 2002.

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, 2003, income
from discontinued operations included the results of operations
of nine communities, containing 4,340 units, classified as
held for sale at December 31, 2003 and the results of
operations of four communities sold in 2003 through their sale
date. For the years ended December 31, 2002 and 2001,
income from discontinued operations included the results of
operations of all communities classified as held for sale at
December 31, 2003, communities sold in 2003 and the results
of operations of six communities and one commercial property
sold in 2002 through their sale dates.

The revenues and expenses of these communities
for the years ended December 31, 2003, 2002 and 2001 were
as follows:

|                                                                   |                                                                                    |                |     |        |        |      |        |        |        |   |        |        |        | 
|------------------------------------------------------------------ | ---------------------------------------------------------------------------------- | -------------- | --- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                   |                                                                                    | 2003           |     | 2002   |        | 2001
|                                                                   |                                                                                    |                |     |        |        |     
|Revenues                                                           |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                   | Rental                                                                             |                | $   | 42,350 |        |      | $      | 59,585 |        |   | $      | 74,206 |       
|                                                                   | Other                                                                              |                |     | 1,935  |        |      |        | 2,531  |        |   |        | 3,138  |       
|                                                                   |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                   |                                                                                    | Total revenues |     |        | 44,285 |      |        |        | 62,116 |   |        |        | 77,344 | 
|                                                                   |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Expenses                                                           |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                   | Property operating and maintenance (exclusive of
    items shown separately below) |                |     | 17,362 |        |      |        | 23,906 |        |   |        | 27,126 |       
|                                                                   | Depreciation                                                                       |                |     | 6,276  |        |      |        | 11,167 |        |   |        | 12,799 |       
|                                                                   | Interest                                                                           |                |     | 5,955  |        |      |        | 9,776  |        |   |        | 14,277 |       
|                                                                   | Asset impairment charges                                                           |                |     | 14,118 |        |      |        |       |        |   |        |       |       
|                                                                   |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                   |                                                                                    | Total expenses |     |        | 43,711 |      |        |        | 44,849 |   |        |        | 54,202 | 
|                                                                   |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Income from discontinued operations (before
    minority interest) |                                                                                    |                | 574 |        |        |      | 17,267 |        |        |   | 23,142 |       
|Minority interest                                                  |                                                                                    |                | 58  |        |        |      | (2,088 | )      |        |   | (2,763 | )     
|                                                                   |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Income from discontinued operations                                |                                                                                    | $              | 632 |        |        | $    | 15,179 |        |        | $ | 20,379 |       
|                                                                   |                                                                                    |                |     |        |        |      |        |        |        |   |        |       




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The decrease in revenues and expenses between
periods results from the timing and size of the communities
sold. 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, disposition and acquisition 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 will vary from period to period.

During the third quarter of 2003, the Company
reclassified an impairment loss of $14,118 from continuing
operations to discontinued operations. The impairment loss,
originally recorded in the first quarter 2003, related to the
write-down of the cost of the Companys apartment community
located in Phoenix, Arizona to its estimated fair value. The
reclassification of the impairment loss to discontinued
operations reflected the designation of this community as held
for sale during the third quarter of 2003 and the final sale of
the community in the fourth quarter of 2003.

For the year ended December 31, 2003, the
Company recognized net gains from discontinued operations of
$42,205 ($37,736 net of minority interest) on the sale of
four communities containing 1,844 units and one land
parcel, reduced by losses of $4,757 ($4,239 net of minority
interest) resulting from losses on the sale of certain land
parcels and reserves to write-down to fair value, less selling
costs, one community and certain other land parcels classified
as held for sale. These sales generated net proceeds of
approximately $163,560. For the year ended December 31,
2002, the Company recognized net gains of $27,921
($24,545 net of minority interest) from the sale of six
communities containing 2,125 units, one commercial property
and certain land parcels, offset by reserves of $11,351
($9,978 net of minority interest) to write-down to fair
market value, less selling costs, certain land parcels
classified as held for sale. These sales generated net proceeds
of approximately $140,823 (excludes net proceeds of $41,393 from
the sale of two apartment communities and one commercial
property classified in continuing operations as discussed above).

Management Transition and Severance, Proxy and
Project Abandonment, Employee 
 Severance and Other 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
lead to the severance charges discussed in the following
paragraphs.

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.

As discussed above, 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 period from the date of the charges
through December 31, 2003:

|                                                   |  |   |        |  
|-------------------------------------------------- |  | - | ------ | -
|Aggregate severance charges                        |  | $ | 21,506 |  
|Payments in 2003                                   |  |   | (3,237 | )
|Interest accretion                                 |  |   | 902    |  
|                                                   |  |   |        |  
|Accrued severance charges at December 31,
    2003 |  | $ | 19,171 |  
|                                                   |  |   |        |  




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Substantially all of these remaining amounts will
be paid over the remaining terms of the employment contracts (10
to 13 years) of the former chairman and vice chairman of
the board of directors.

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 are expected to be settled in 2004.
Through December 31, 2003, substantially all of the proxy
and related costs have been paid.

In the fourth quarter of 2001, the Company
recorded project abandonment, employee severance and other
charges totaling $17,450. These charges, precipitated by the
sharp decline in economic and market conditions, reflected
managements decision to focus its business and new
development strategy on fewer markets, to focus on its core
business of owning, developing and managing multifamily real
estate assets and to do so with a smaller workforce and lower
overhead expenses. The project abandonment charge of $8,122
represents reserves on certain predevelopment and transaction
pursuit costs in markets the Company will no longer pursue for
development opportunities and for certain projects that will no
longer be pursued due to economic and market conditions. The
employee severance charge of $3,560 was primarily for severance
costs related to an approximately 100 person senior management
and staff workforce reduction plan initiated and completed in
the fourth quarter of 2001. Other charges included a loss of
$2,831 related to the disposition of the Companys
corporate aircraft, a loss of $452 on the sale of the
Companys third party landscape business discussed more
fully below, write-downs of $1,000 related to the Companys
exit from the then-existing for-sale housing business in all
markets, and the write-down to estimated market value of certain
internet and technology investments of $1,485. As of
December 31, 2003, substantially all of these charges have
been paid.

In the fourth quarter of 2001, the Company sold
substantially all of the net assets of Post Landscape
Group, Inc., a subsidiary entity that provided landscape
maintenance, design and installation services to third parties,
and RAM Partners, Inc., a separate subsidiary entity that
managed apartment communities for third parties. These
businesses were sold to members of the respective former
management teams of the subsidiaries. The Company financed 100%
of the sales price of $5,767 (adjusted for working capital
transfers at closing) through purchase money notes with fixed
interest rates of 9%. The notes require periodic interest,
annual principal and final balloon principal payments in 2006.
The notes can be extended for two one-year periods. Under
generally accepted accounting principles, the transactions were
not recorded as sales at December 31, 2001, as the
conditions for sale recognition, primarily the receipt of an
adequate down payment on the notes, were not met. The sale of
the Post Landscape Group resulted in a loss of $452. Under
generally accepted accounting principles, this loss was
recognized in 2001 and included in the project abandonment,
employee severance and impairment charges discussed above. In
2002, the Company recognized the sales of both businesses. The
impact of the sales recognition was to record a net gain of $510
on the sale of RAM Partners, Inc. See note 7 to the
consolidated financial statements for an additional discussion
of these transactions.

During the first quarter of 2002, the Company
transferred certain construction contracts of Post Construction
Services Inc., its third party construction business, to Oxford
Properties, LLC in exchange for Oxford Properties, LLCs
assumption of substantially all of Post Construction
Services liabilities related to the transferred assets. In
approving the transaction, the Companys board of directors
ascribed nominal value to the assets being transferred. The
assets consisted principally of third party construction
contracts for the construction of four garden style apartment,
condominium and townhouse communities as well as related
subcontracts, indemnities and guarantees. In connection with the
transfer of Post Construction Services construction
contracts, Oxford Properties, LLC had the right to receive a
deferred fee upon completion of one of the construction projects
in the amount of $500. Oxford Properties, LLC also agreed to
employ 28 former Company and Post Construction Services
employees. As a result, the Company was not responsible for
costs that would have otherwise resulted from winding up the
third party construction business. The Company recorded a charge
of $500 in the fourth quarter of 2001 relating to its exit from
the third party construction business. Oxford Properties, LLC is
an entity owned by former officers of the Company and by the son
of the Companys former chairman and chief executive
officer.

Outlook for 2004

In 2004 management expects a moderation in the
rate of decline in rental and other revenues from fully
stabilized communities compared to 2003. This flattening of
total revenues reflects smaller year over year reductions in the
average monthly rents offset by expected higher average
occupancies in 2004. Through continued cost control efforts into
2004, management expects modest full year increases in fully
stabilized community operating expenses




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primarily driven by projected full year increases
in property taxes and personnel expenses offset somewhat by
lower insurance expenses. Lower insurance expenses reflect
reduced insurance rates resulting from more stable insurance
markets in the 2004 renewal period. In light of the expectation
of flatter revenues and modestly higher operating expenses for
the full year of 2004, management expects stabilized community
net operating income to continue to show modest year over year
declines when compared to 2003.


During the first two quarters of 2004, management
expects to sell nine apartment communities held for sale at
December 31, 2003. These sales are expected to generate
accounting gains of approximately $136,000 to $140,000 during
the year. The expected gross proceeds from these sales of
$276,000 to $280,000 are intended to be used for various
corporate purposes, which may include preferred equity
redemption (see discussion below), common equity repurchases and
debt reductions intended to maintain the strength of the
Companys balance sheet, combined with reinvestment in
developments and acquisitions that enhance the diversification
of the Companys cash flow stream and the quality of its
portfolio. The retirement of outstanding debt and the redemption
of outstanding preferred stock are expected to result in
additional expenses associated with the write off of unamortized
issuance costs, as well as the termination of related derivative
contract hedges and prepayment premiums, if any (see discussion
below). As the timing of the sales and the resulting reduction
in property net operating income may not coincide with the
reinvestment of the proceeds in similar yielding assets or
financing cost reductions, the Companys overall net income
will be somewhat diluted in 2004 until such reinvestments or
similar financing cost reductions occur.

Management expects interest expense in 2004 to be
lower than in 2003 due generally to lower average debt levels
between years. Management expects general and administrative,
development costs and other expenses to increase in 2004
resulting from the increased amortization of prior year
restricted stock and stock option awards, generally higher costs
related to Sarbanes-Oxley and corporate governance compliance
and the expensing of a larger portion of previously capitalized
development personnel and related costs. On a quarterly basis in
2004, management expects general and administrative costs will
be moderately higher than was experienced in the fourth quarter
of 2003. The Company has retained key development personnel in
late 2003 and into 2004 as it assessed the timing, nature and
location of its future development efforts. The Company expects
to start the development of new projects in 2004 and, as
previously discussed, the Company has one project in the
predevelopment stage with an expected construction start date in
2004. To the extent new developments commence in 2004, the
Company expects to capitalize development personnel and related
costs to such projects.

For the first quarter of 2004, management expects
same store property net operating income to be somewhat lower as
compared to the fourth quarter of 2003, driven primarily by
lower rental rates as leasing efforts are anticipated to be
impacted by the traditionally slower winter season. In addition,
operating expenses are expected to increase 3% to 4%
sequentially, due partly to resetting annual accruals for
property taxes and insurance, as well as amounts the Company
expects to spend on exterior painting in the first quarter of
2004. The Company also expects lower net income as a result of
dilution from the assets sold in the fourth quarter of 2003.

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 $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. Net cash provided by
operating activities decreased from $161,564 in 2001 to $119,763
in 2002 primarily due to lower net income (before depreciation
and gain on sale of assets), also resulting from the weaker
operating performance of the Companys fully stabilized
properties and the dilutive impact of the Companys asset
sale and capital recycling program. As noted above, the Company
expects cash flows from operating activities to continue to show
declines into 2004 primarily driven by the expected weaker
performance of the Companys fully stabilized properties
and the continued dilutive cash flow impact from asset sales.

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. The reduction in development and construction
expenditures was a planned strategy in 2003 and 2002 to reduce
the Companys development pipeline due to difficult market
conditions (lower market rental rates and an over supply of
apartment communities) in the Companys primary markets.
Net cash used in investing activities decreased from $51,213 in
2001 to $48,821 in




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2002 primarily due to reduced spending on the
construction and acquisition of real estate assets offset by
lower proceeds from assets sales.


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 were generated from
asset sale proceeds and through the repayment of construction
loan advances and cash distributions from unconsolidated
entities. Net cash used in financing activities decreased from
$113,007 in 2001 to $69,355 in 2002 primarily due to the Company
not acquiring any treasury stock in 2002, partially offset by
reduced net borrowings between periods.

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 2004. 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 dividends
to shareholders through its net cash flows provided by operating
activities, less its annual recurring and nonrecurring property
and corporate capital expenditures. These operating capital
expenditures are the capital expenditures necessary to maintain
the earnings capacity of the Companys operating assets
over time.

In order to better align with this objective in
2003, the Company reduced its quarterly dividend payment rate to
common shareholders from a rate of $0.78 per share to
$0.45 per share effective with the quarterly dividend paid
for the first quarter of 2003. In 2002, the additional funding,
in excess of cash flows from operating activities less operating
capital expenditures (as discussed above), required to pay the
2002 quarterly dividends was funded through a combination of
line of credit borrowings and proceeds from asset sales. The
factors that led to the 2003 dividend reduction were the decline
in economic and market conditions in the Companys major
markets resulting in lower cash flow from its operating property
portfolio, the slower lease-up of its existing development
community portfolio and the short-term negative cash flow impact
of funding its current development portfolio through the sale of
operating real estate assets.

For the year ended December 31, 2003, 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 $20,000 (including
payment for proxy and executive severance costs of approximately
$8,000). 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 2004, 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 $10,000 to $15,000. The Company intends to use
primarily the proceeds from 2004 asset sales to fund the
additional cash flow necessary to fully fund the dividend
payments to common shareholders. The factors leading to this net
operating cash flow shortfall are the continuing soft market
conditions for the Companys operating properties and the
short-term impact 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.

Management expects the Company to meet its future
construction and development and certain of its other long-term
liquidity requirements, including maturities of long-term debt
and lines of credit, debt and equity commitments to
unconsolidated entities (summarized below) and possible land and
property acquisitions through the selective sale of operating
properties and through long-term secured and unsecured
borrowings. Management believes the Company has adequate
borrowing capacity and access to real estate sales markets to
fund these requirements. The capacity under the Companys
lines of credit was created primarily through proceeds from
property sales and from the repayment of construction advances
to unconsolidated entities. Additionally, in prior years the
Company has utilized equity joint ventures as a means of raising
capital and reducing the size and exposure of its development
property pipeline. The Company may continue to use joint venture
arrangements in future years as a source of capital, to reduce
its market concentrations in certain markets and to reduce its
exposure to certain risks of its future development pipeline.




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As previously discussed, the Company intends to
use the proceeds from the sale of operating 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
asset sale and capital recycling program in 2000 as the primary
means to fund its on-going community development program. Total
funds raised in 2003, 2002 and 2001 were $163,560, $182,216 and
$220,122, 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 third quarter of 2003, the Company
initiated marketing efforts to sell 11 apartment communities
containing 5,175 units. In the fourth quarter of 2003, the
Company sold two of these apartment communities, containing 835
apartment units, for net proceeds of $63,702. The remaining nine
communities, containing 4,340 apartment units, are expected to
generate gross sales proceeds totaling approximately $276,000 to
$280,000. The anticipated closing dates of the nine communities
range from the first quarter of 2004 to the second quarter of
2004. The nine communities are located in Atlanta, Georgia,
Dallas, Texas, and Orlando, Florida. The proceeds from these
sales are intended to be used for various corporate purposes and
may be used to fund future development expenditures, future
property acquisitions, future debt reduction and to
opportunistically repurchase the Companys preferred (see
discussion below) and common stock. These sales are also
expected to generate capital gains for tax purposes in 2004 of
approximately $102,000 to $106,000. Realized capital gains must
generally be distributed to shareholders, in the form of
dividends, in order to avoid the payment of income taxes at the
corporate level. The Company expects to be able to use its
regular quarterly dividend of $0.45 per share, as well as
other tax planning strategies, to pay out or otherwise mitigate
the impact of these capital gains. Although the Company
currently does not have plans to do so, the Company may also
evaluate a special dividend. These sales are part of the
Companys plans 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. In connection with the sale of six of
the properties discussed above, the Company expects that the
purchaser(s) will acquire those properties subject to a combined
total of approximately $119,000 of tax-exempt mortgage debt. In
connection with the assumption of this tax-exempt mortgage debt,
the Company expects to record expenses of an estimated $3,000 to
$3,500 in connection with the write-off of related unamortized
deferred financing costs and the termination of related interest
rate cap agreements in 2004.

On March 5, 2004, the Company redeemed its
7 5/8% 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 March 5, 2004. 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 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 Company will reflect the
$1,716 of issuance costs as a reduction of earnings in arriving
at net income available to common shareholders in the first
quarter of 2004. In addition to the redemption of its
Series C Preferred Stock, the Company is considering
redeeming its $70,000 Series D Cumulative Redeemable
Preferred Units, which become callable on September 3,
2004, with expected proceeds from the asset sales discussed
above, although there are no assurances that the Company will do
so.

At December 31, 2003, adjusted for the
increased capacity under the Companys new $350,000 credit
facility in January 2004, the Company had available credit
facility borrowing capacity of approximately $298,000 under its
line of credit facilities. The Companys primary credit
facility with total capacity of $350,000 matures in January 2007
and its $20,000 cash management facility matures in April 2004.
Management expects to renew and extend its $20,000 cash
management credit facility prior to its maturity. Management
believes it will have adequate capacity under its facilities to
execute its 2004 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 the third quarter of 2003, the Companys
unsecured public debt ratings were downgraded by Moodys
Investor Service from Baa2 to Baa3. The Companys current
unsecured debt ratings are BBB by Standard &
Poors and Baa3 by Moodys Investors Service. The
Company continues to be rated investment grade by both rating
agencies. Under the terms of the Companys new credit
facility, closed in January 2004, the stated interest rate on
borrowings will be LIBOR plus 0.90%. Interest rates under the
new credit facility are based on the lower of the Companys
unsecured debt ratings in instances where the Company has split
unsecured debt ratings. Any downgrades below Baa3 (Moodys
Investor Service) and BBB- (Standard & Poors)
would lead to increased pricing under its primary credit
facility to LIBOR plus 1.35%. Future downgrades may also
increase the pricing of new issuances of public




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unsecured debt. Should the Company not maintain
its investment grade credit ratings, its total dividend payout,
exclusive of the portion of the dividend attributable to capital
gains from asset sales up to $15,000, would be limited to 95%
versus 100% of consolidated income available for distribution,
as defined. 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. Management believes the Companys current
business plan and financing strategy are consistent with the
fundamentals of maintaining its investment grade ratings.


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, 2003, were as follows:

|                                                               |  |                     |           |                |  |           |         |           |  |               |         |  |  |   |         |  |  |   |         | 
|-------------------------------------------------------------- |  | ------------------- | --------- | -------------- |  | --------- | ------- | --------- |  | ------------- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                               |  |                    
|                                                               |  | Obligation Due Date
|                                                               |  |                    
|Contractual Obligations                                        |  | Total               |           | 1 Year or Less |  | 2-3 Years |         | 4-5 Years |  | After 5 Years
|                                                               |  |                     |           |                |  |           |         |           |  |              
|Long-term debt                                                 |  | $                   | 1,114,312 |                |  | $         | 27,094  |           |  | $             | 284,134 |  |  | $ | 116,192 |  |  | $ | 686,892 | 
|Lines of credit (1)                                            |  |                     | 72,010    |                |  |           | 72,010  |           |  |               |        |  |  |   |        |  |  |   |        | 
|Operating leases (2)                                           |  |                     | 155,209   |                |  |           | 1,285   |           |  |               | 2,480   |  |  |   | 2,535   |  |  |   | 148,909 | 
|Other long-term obligations (3)                                |  |                     | 16,949    |                |  |           | 3,123   |           |  |               | 6,988   |  |  |   | 4,624   |  |  |   | 2,214   | 
|Debt and equity commitments to unconsolidated
    entities (4) |  |                     | 4,946     |                |  |           | 4,946   |           |  |               |        |  |  |   |        |  |  |   |        | 
|                                                               |  |                     |           |                |  |           |         |           |  |               |         |  |  |   |         |  |  |   |         | 
|                                                               |  | $                   | 1,363,426 |                |  | $         | 108,458 |           |  | $             | 293,602 |  |  | $ | 123,351 |  |  | $ | 838,015 | 
|                                                               |  |                     |           |                |  |           |         |           |  |               |         |  |  |   |         |  |  |   |         | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | At December 31, 2003, the Company had issued
    letters of credit to third parties totaling $1,913 under its
    credit facility arrangements. Subsequent to December 31,
    2003, the Companys primary line of credit was refinanced
    and the maturity date was extended to January 2007.                                                                                                                                                                                                                                                                                       
|(2) | Includes six ground leases relating to apartment
    communities owned by the Company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(3) | Represents amounts committed to current and
    former executive officers under the terms of employment and
    severance agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(4) | At December 31, 2003, the Company was
    obligated to fund approximately $4,946 of equity contributions
    to unconsolidated entities. In addition, the Company has
    guaranteed the final cost of certain construction cost
    categories of one of the underlying real estate projects. As of
    December 31, 2003, the maximum exposure under the cost
    guarantee provision of the arrangements is approximately $5,200.
    At December 31, 2003, the Company estimates that it will
    have no additional funding obligations under these cost
    guarantee provisions.

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 $15,865, $14,857 and $17, 202 for the years
ended December 31, 2003, 2002 and 2001, respectively. Based
on the size of the Companys operating property portfolio
at December 31, 2003, the Company expects that its capital
expenditures in 2004 will be relatively consistent with the
amount incurred in 2003 as the Company seeks to maintain the
operating performance of its assets. At December 31, 2003,
the Company did not have any material future cash expenditure
obligations with respect to future development projects as the
Company had no projects currently under construction. As
previously discussed, the Company has one project in the
predevelopment stage at December 31, 2003. Project
construction is anticipated to begin in 2004.

At December 31, 2003, the Company had
outstanding interest rate swap derivative financial instruments
with a notional value of $129,000 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. Two of these unconsolidated entities
have third-party mortgage loans aggregating $33,763 at
December 31, 2003. As discussed in note 4 to the
consolidated financial statements, the Company issued 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.

Unsecured Lines of Credit

At December 31, 2003, the Company utilized a
$320,000 three-year syndicated revolving line of credit, for its
short-term financing requirements. At December 31, 2003,
the stated interest rate for this line of credit was LIBOR plus




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0.85% or prime minus 0.25%. This line of credit
required the payment of annual facility fees equal to 0.20% of
the aggregate loan commitment. 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). The Revolver has a stated interest rate
of LIBOR plus 0.90% or the prime rate and was provided by a
syndicate of nine banks led by Wachovia Bank, N.A.
Additionally, the Revolver requires the payment of annual
facility fees equal to 0.20% 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 lower of the Companys
unsecured debt 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.


Additionally, the Company has a $20,000 unsecured
line of credit with Wachovia Bank of Georgia, N.A. (the
Cash Management Line). The Cash Management Line
bears interest at LIBOR plus 0.75% or prime minus .25% and
matures in April 2004. Management expects to renew and extend
the maturity of this facility prior to April 2004. At
December 31, 2003, the Company had issued letters of credit
to third parties totaling $1,913 under this facility.

At December 31, 2002, the Company had in
place an additional $125,000 line of credit facility for general
corporate purposes. This line was not renewed upon its maturity
in April 2003 as the Companys liquidity needs were reduced
as a result of reduced development activity.

Long-term Debt Issuances and
Retirements

In February 2003, one of the Companys
unconsolidated equity ventures closed a $17,000 mortgage loan
with a life insurance company. In November 2003, a second
unconsolidated equity venture closed a $17,000 mortgage loan
with a second life insurance company. These loans are secured by
the apartment communities owned by the ventures in which the
Company has a 35% ownership interest. The Company received 100%
of the proceeds from these loans in repayment of its outstanding
construction loans to the ventures. Under the first loan,
payments of principal and interest are based upon an interest
rate of 4.28% per annum and a 30-year amortization
schedule, with a balance due at maturity in March 2008. Under
the November 2003 loan, interest only payments are based on an
interest rate of 4.04% with a maturity date in December 2008.

Upon their maturity in October 2003, the Company
repaid $100,000 of its 7.25% senior unsecured notes using
borrowings under its unsecured lines of credit.

The Company expects to place mortgage loans in
consolidated and unconsolidated entities in 2004. The proceeds
from these mortgage loans will generally be used to repay
construction loans to the Company. The Company will, in turn,
use the proceeds to repay line of credit borrowings.

Stock Repurchase Program

In the fourth quarter of 2003, the Companys
board of directors adopted a new stock repurchase program under
which the Company may repurchase up to $200,000 of common stock
or preferred stock at market prices from time to time through
December 31, 2004. Under a previous program, which expired
in September 2003, the Company repurchased 3,127,600 shares
of common stock and 100,000 shares of preferred stock over
a two-year period at an aggregate cost of approximately
$119,226. The Company acquired no common or preferred stock in
2003. Management has indicated it will be opportunistic with
respect to additional share repurchases and intends to finance
additional repurchases with asset sale proceeds rather than
additional borrowings.

On March 5, 2004, the Company redeemed all
2,000,000 shares of its 7 5/8% Series C Preferred
Stock at a redemption price of $25.00 per share (an
aggregate amount of $50,000), plus accrued and unpaid dividends
through March 5, 2004.




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Schedule of Indebtedness

The following table reflects a summary of the
Companys indebtedness at December 31, 2003 and 2002:

|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|-------------------------------------------- |  | ------------- | -------------- | -------- |  | -------- | ------------- | ------------ |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                             |  |               |                |          |  |          |               |             
|                                             |  |               |                |          |  |          |               | December 31,
|                                             |  |               |                | Interest |  | Maturity |               |             
|Description                                  |  | Payment Terms |                | Rate     |  | Date(1)  |               | 2003         |  | 2002
|                                             |  |               |                |          |  |          |               |              |  |     
|Unsecured Notes                              |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Senior Notes                                 |  |               | Int.           |          |  |          | 6.11%  7.70% |              |  |      | 2006-2010 |  |  | $ | 285,000   |  |  | $ | 385,000   | 
|Medium Term Notes                            |  |               | Int.           |          |  |          | 6.69%  8.12% | (2)          |  |      | 2004-2015 |  |  |   | 323,000   |  |  |   | 323,000   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   | 608,000   |  |  |   | 708,000   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Unsecured Lines of Credit                    |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Syndicated Line of Credit                    |  |               | N/A            |          |  |          | LIBOR + 0.85% | (3)          |  |      | 2004      |  |  |   | 60,000    |  |  |   | 185,000   | 
|Cash Management Line                         |  |               | N/A            |          |  |          | LIBOR + 0.75% |              |  |      | 2004      |  |  |   | 12,010    |  |  |   | 11,369    | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   | 72,010    |  |  |   | 196,369   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Conventional Fixed Rate (Secured)            |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|FNMA                                         |  |               | Prin. and Int. |          |  |          | 6.975%        | (4)          |  |      | 2029      |  |  |   | 99,800    |  |  |   | 101,100   | 
|Other                                        |  |               | Prin. and Int. |          |  |          | 5.5%  7.69%  |              |  |      | 2007-2013 |  |  |   | 192,132   |  |  |   | 194,706   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   | 291,932   |  |  |   | 295,806   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Tax Exempt Floating Rate Bonds
    (Secured) |  |               | Int.           |          |  |          | 1.15%         | (5)          |  |      | 2025      |  |  |   | 214,380   |  |  |   | 214,380   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Total                                        |  |               |                |          |  |          |               |              |  |      |           |  |  | $ | 1,186,322 |  |  | $ | 1,414,555 | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All outstanding indebtedness can be prepaid at
    any time, subject to certain prepayment penalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(2) | Includes $100,000 of Mandatory Par Put Remarketed
    Securities (MOPPRS). The annual interest rate on
    these securities to March 2005 is 6.85%. The MOPPRS mature in
    March 2015, but are subject to mandatory tender for remarketing
    in March 2005. In March 2005, if the remarking dealer elects not
    to remarket the MOPPRS, the Company is required to redeem the
    MOPPRS at par. If the remarketing dealer elects to remarket the
    securities in March 2005, the interest rate on the MOPPRS will
    be established at a rate of 5.715% plus the Companys
    applicable credit spread for Company securities with similar
    maturities. The MOPPRS may be redeemed, at the Companys
    option, immediately prior to their remarketing in March 2005 at
    an optional redemption price equal to the outstanding principal
    balance plus a prepayment penalty (generally equivalent to the
    make-whole amount necessary to compensate for the amount by
    which the base rate of 5.715% exceeds the then-existing 10-year
    treasury rate).
|(3) | Represents stated rate. At December 31,
    2003, the weighted average interest rate was 1.96%. Subsequent
    to December 31, 2003, this line of credit was refinanced
    and its maturity was extended to 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(4) | Interest rate is fixed at 6.975%, inclusive of
    credit enhancement and other fees, to 2009 through an interest
    rate swap arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(5) | 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, 2003 before credit enhancements. At
    December 31, 2003, the Company has outstanding interest
    rate cap arrangements that limit the Companys exposure to
    increases in the base interest rate to 5%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         




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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, 2003, 2002 and 2001 are summarized as follows:

|                                                           |                                            |      |        |       |  |      |         |       |  |   |         |       | 
|---------------------------------------------------------- | ------------------------------------------ | ---- | ------ | ----- |  | ---- | ------- | ----- |  | - | ------- | ----- | 
|                                                           |                                            | 2003 |        | 2002  |  | 2001
|                                                           |                                            |      |        |       |  |     
|New community development activity(1)                      |                                            | $    | 24,914 |       |  | $    | 152,163 |       |  | $ | 232,569 |      
|Revenue generating additions and improvements(2)           |                                            |      |        |       |  |      |         |       |  |   |         |      
|                                                           | Property renovations                       |      |        | 320   |  |      |         | 1,025 |  |   |         | 4,019 | 
|                                                           | Sub-metering of water service              |      |        | 920   |  |      |         | 1,010 |  |   |         | 207   | 
|Nonrecurring capital expenditures(3)                       |                                            |      | 5,152  |       |  |      | 3,441   |       |  |   | 2,535   |      
|Recurring capital expenditures(4)                          |                                            |      |        |       |  |      |         |       |  |   |         |      
|                                                           | Carpet replacements                        |      |        | 3,049 |  |      |         | 2,755 |  |   |         | 2,935 | 
|                                                           | Other community additions and improvements |      |        | 6,424 |  |      |         | 6,626 |  |   |         | 7,506 | 
|                                                           | Corporate additions and improvements       |      |        | 799   |  |      |         | 1,100 |  |   |         | 3,021 | 
|                                                           |                                            |      |        |       |  |      |         |       |  |   |         |      
|                                                           |                                            | $    | 41,578 |       |  | $    | 168,120 |       |  | $ | 252,792 |      
|                                                           |                                            |      |        |       |  |      |         |       |  |   |         |      
|Other Data                                                 |                                            |      |        |       |  |      |         |       |  |   |         |      
|Capitalized interest                                       |                                            | $    | 3,555  |       |  | $    | 13,223  |       |  | $ | 22,124  |      
|                                                           |                                            |      |        |       |  |      |         |       |  |   |         |      
|Capitalized internal personnel and associated
    costs(5) |                                            | $    | 1,566  |       |  | $    | 5,196   |       |  | $ | 13,833  |      
|                                                           |                                            |      |        |       |  |      |         |       |  |   |         |      



|    |                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Reflects aggregate community development 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, 2003, the Company has in
initial lease-up two new communities that contain an aggregate
of 468 units. The Companys communities in initial
lease-up are summarized in the following table:

|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|------------------------------------------------------------ |  | --------- | --- | --------------- |  | ---------- | --- | ------------ |  | ----------- | --- | ------------ |  | --------- | ----- | --------- |  |  | ----- |  |  |  | ----- |  |  |  | ----- |  |  |  | ----- | 
|                                                             |  |           |     | Estimated       |  | Amount     |     |              |  |             |     | Estimated    |  |           |       |          
|                                                             |  |           |     | Construction    |  | Spent      |     | Quarter of   |  | Quarter of  |     | Quarter of   |  | %         |       | %        
|                                                             |  | Number of |     | Cost            |  | As of      |     | Construction |  | First Units |     | Stabilized   |  | Leased    |       | Occupied 
|Metropolitan Area                                            |  | Units     |     | ($ in millions) |  | 12/31/2003 |     | Start        |  | Available   |     | Occupancy(1) |  | 2/28/2004 |       | 2/28/2004
|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |          
|Wholly-Owned Construction/Lease-up
    Communities           |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|New York City, NY                                            |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Post ToscanaTM                                               |  |           | 199 |                 |  | $          | 92  |              |  | $           | 92  |              |  |           | 1Q02 |           |  |  | 1Q03 |  |  |  | 1Q04 |  |  |  | 94.5% |  |  |  | 89.4% | 
|Subtotal Wholly-Owned Construction/Lease-up
    Communities  |  |           | 199 |                 |  | $          | 92  |              |  | $           | 92  |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Co-Investment Construction/Lease-up
    Communities          |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Washington D.C.                                              |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Post Massachusetts AvenueTM(2)                               |  |           | 269 |                 |  | $          | 72  |              |  | $           | 72  |              |  |           | 2Q01 |           |  |  | 4Q02 |  |  |  | 1Q04 |  |  |  | 90.0% |  |  |  | 89.2% | 
|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Subtotal Co-Investment Construction/Lease-up
    Communities |  |           | 269 |                 |  | $          | 72  |              |  | $           | 72  |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Construction Totals                                          |  |           | 468 |                 |  | $          | 164 |              |  | $           | 164 |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Less Partners Portion                                       |  |           |     |                 |  | $          | (47 | )            |  | $           | (47 | )            |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|Post Properties Funding
    Commitment                      |  |           |     |                 |  | $          | 117 |              |  | $           | 117 |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 
|                                                             |  |           |     |                 |  |            |     |              |  |             |     |              |  |           |       |           |  |  |       |  |  |  |       |  |  |  |       |  |  |  |       | 



|    |                                                                                                                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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) | This community is being developed as a joint
    venture (Post equity ownership is 35%).                                                                                                                     

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 (loss) 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. In October 2003,
NAREIT issued additional guidance modifying the definition of
FFO. The first modification revised the treatment of asset
impairment losses and impairment losses incurred to write-down
assets to their fair value at the date assets are classified as
held for sale, to include such losses in FFO. Previously such
losses were excluded from FFO consistent with the treatment of
gains on property sales. The second modification clarified the
treatment of original issue costs and premiums paid on preferred
stock redemptions to deduct such costs and premiums in
determining FFO available to common shareholders. This
modification was consistent with the recently clarified
treatment of these costs under GAAP. The Company has adopted the
modifications to the definition of FFO effective with its
reported results for the third quarter of 2003. Prior year
presentations of FFO have been restated to conform with the
revised definition of FFO. 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




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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.

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

|                                                                                           |  |         |            |         |  |         |            |   |  |   |            |  
|------------------------------------------------------------------------------------------ |  | ------- | ---------- | ------- |  | ------- | ---------- | - |  | - | ---------- | -
|                                                                                           |  | 2003(1) |            | 2002(1) |  | 2001(1)
|                                                                                           |  |         |            |         |  |        
|Net income available to common
    shareholders                                            |  | $       | 2,707      |         |  | $       | 49,297     |   |  | $ | 74,920     |  
|Cumulative effect of accounting change, net of
    minority interest                       |  |         |           |         |  |         |           |   |  |   | 613        |  
|Minority interest of common
    unitholders  continuing operations                        |  |         | (3,552     | )       |  |         | 2,681      |   |  |   | 7,429      |  
|Minority interest in discontinued operations(2)                                            |  |         | 3,893      |         |  |         | 4,091      |   |  |   | 2,763      |  
|Gains on property sales  continuing
    operations                                        |  |         |           |         |  |         | (13,275    | ) |  |   | (41,273    | )
|Gains on property sales 
    unconsolidated entities                                      |  |         | (8,395     | )       |  |         |           |   |  |   |           |  
|Gains on property sales  discontinued
    operations (excluding asset impairment charges) |  |         | (40,793    | )       |  |         | (27,921    | ) |  |   |           |  
|Depreciation on wholly-owned real estate assets,
    net(3)                                |  |         | 84,530     |         |  |         | 82,917     |   |  |   | 70,956     |  
|Depreciation on real estate assets held in
    unconsolidated entities                     |  |         | 1,568      |         |  |         | 1,104      |   |  |   | 67         |  
|                                                                                           |  |         |            |         |  |         |            |   |  |   |            |  
|Funds from operations available to common
    shareholders                                 |  | $       | 39,958     |         |  | $       | 98,894     |   |  | $ | 115,475    |  
|Cash flow provided by (used in):                                                           |  |         |            |         |  |         |            |   |  |   |            |  
|Operating activities                                                                       |  | $       | 91,549     |         |  | $       | 119,763    |   |  | $ | 161,564    |  
|Investing activities                                                                       |  | $       | 234,195    |         |  | $       | (48,821    | ) |  | $ | (51,213    | )
|Financing activities                                                                       |  | $       | (330,800   | )       |  | $       | (69,355    | ) |  | $ | (113,007   | )
|Weighted average shares outstanding 
    basic                                            |  |         | 37,687,524 |         |  |         | 36,939,144 |   |  |   | 38,052,673 |  
|Weighted average shares and units
    outstanding  basic                                  |  |         | 42,134,072 |         |  |         | 42,020,759 |   |  |   | 43,211,834 |  
|Weighted average shares outstanding 
    diluted                                          |  |         | 37,698,576 |         |  |         | 36,953,962 |   |  |   | 38,267,939 |  
|Weighted average shares and units
    outstanding  diluted                                |  |         | 42,145,124 |         |  |         | 42,035,577 |   |  |   | 43,427,100 |  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the years ended December 31, 2002 and
    2001, FFO available to common shareholders has been restated
    from the prior year presentations to reflect reductions of
    $11,351 and $17,331 for impairment losses on real estate assets
    resulting from the NAREIT modification of the definition of FFO.
    Additionally, for the years ended December 31, 2002 and
    2001, FFO available to common shareholders has been restated
    from the prior year presentation to reflect a reduction of $136
    and $88, respectively, for early debt extinguishment costs
    reclassified from extraordinary items to operating expenses
    under SFAS No. 145. For the year ended December 31,
    2003, FFO available to common shareholders has been restated to
    reflect a reduction of $14,118 for impairment losses on real
    estate recognized in the first half of 2003.
|(2) | Represents the minority interest in earnings and
    gains (losses) on properties held for sale and sold reported as
    discontinued operations for the periods presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(3) | Depreciation on wholly-owned real estate assets
    is net of the minority interest portion of depreciation in
    consolidated entities.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       




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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, 2003, the Company
had $196,810 of variable rate debt tied to LIBOR. In addition,
the Company had $214,380 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- |        |       
|                         |                       | 2004                    |                   | 2005   |        | 2006   |         | 2007  |        | 2008   |        | after |       | Total |         | Fair Value
|                         |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |           
|                         |                       |                        
|                         |                       | (in thousands)         
|Long-term debt:          |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           | 
|Fixed rate               |                       | $                       | 25,759            |        |        | $      | 177,967 |       |        | $      | 78,182 |       |       | $     | 110,508 |            |       | $     | 2,214 |       |       | $     | 380,502 | (6)   |         | $      | 775,132   |       |         | $       | 830,454   | 
|                         |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           | 
|                         | Average interest rate |                         |                   | 7.04%  |        |        |         | 7.91% |        |        |        | 6.98% |       |       |         | 7.16%      |       |       |       | 6.15% |       |       |         | 7.03% |         |        |           | 7.24% |         |         |           |  |        
|Floating rate(1)         |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           | 
|                         | LIBOR-based:          |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           |  |        
|                         |                       | Cash management line(2) |                   |        | 12,010 |        |         |       |       |        |        |       |      |       |         |            |      |       |       |       |      |       |         |       |        |        |           |       | 12,010  |         |           |  | 12,010  |        
|                         |                       | MTN(3)                  |                   |        |       |        |         |       | 25,000 |        |        |       |      |       |         |            |      |       |       |       |      |       |         |       |        |        |           |       | 25,000  |         |           |  | 25,000  |        
|                         |                       | Revolver(2)             |                   |        | 60,000 |        |         |       |       |        |        |       |      |       |         |            |      |       |       |       |      |       |         |       |        |        |           |       | 60,000  |         |           |  | 60,000  |        
|                         |                       | FNMA(4)                 |                   |        | 1,335  |        |         |       | 1,435  |        |        |       | 1,550 |       |         |            | 1,670 |       |       |       | 1,800 |       |         |       | 92,010  |        |           |       | 99,800  |         |           |  | 99,800  |        
|                         |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           | 
|                         |                       |                         | Total LIBOR-based |        |        | 73,345 |         |       |        | 26,435 |        |       |       | 1,550 |         |            |       | 1,670 |       |       |       | 1,800 |         |       |         | 92,010 |           |       |         | 196,810 |           |  |         | 196,810 | 
|                         |                       | Tax-exempt(5)           |                   |        |       |        |         |       |       |        |        |       |      |       |         |            |      |       |       |       |      |       |         |       | 214,380 |        |           |       | 214,380 |         |           |  | 214,380 |        
|                         |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           | 
|Total floating rate debt |                       |                         | 73,345            |        |        |        | 26,435  |       |        |        | 1,550  |       |       |       | 1,670   |            |       |       | 1,800 |       |       |       | 306,390 |       |         |        | 411,190   |       |         |         | 411,190   | 
|                         |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           | 
|Total debt               |                       | $                       | 99,104            |        |        | $      | 204,402 |       |        | $      | 79,732 |       |       | $     | 112,178 |            |       | $     | 4,014 |       |       | $     | 686,892 |       |         | $      | 1,186,322 |       |         | $       | 1,241,644 | 
|                         |                       |                         |                   |        |        |        |         |       |        |        |        |       |       |       |         |            |       |       |       |       |       |       |         |       |         |        |           |       |         |         |           | 






|    |                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Interest on these debt instruments is based on
    LIBOR ranging from LIBOR plus 0.75% to LIBOR plus 0.85%. At
    December 31, 2003, the one-month LIBOR rate was 1.13%. See
    Schedule of indebtedness in Managements Discussion and
    Analysis for rates on individual debt instruments.                                             
|(2) | Assumes the Companys Revolver and Cash
    Management Line are repaid at the maturity date. Subsequent to
    December 31, 2003, this line of credit was refinanced with
    a new line of credit with a maturity date in January 2007 (see
    note 3 to the consolidated financial statements).                                           
|(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, 2003, the FNMA
    AAA tax exempt rate was 1.15%. 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). The annual interest rate on
    these securities to March 2005 is 6.85%. The MOPPRS mature in
    March 2015, but are subject to mandatory tender for remarketing
    in March 2005. In March 2005, if the                                                      




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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | remarking dealer elects not to remarket the
    MOPPRS, the Company is required to redeem the MOPPRS at par. If
    the remarketing dealer elects to remarket the securities in
    March 2005, the interest rate on the MOPPRS will be established
    at a rate of 5.715% plus the Companys applicable credit
    spread for Company securities with similar maturities. The
    MOPPRS may be redeemed, at the Companys option,
    immediately prior to their remarketing in March 2005 at an
    optional redemption price equal to the outstanding principal
    balance plus a prepayment penalty (generally equivalent to the
    make-whole amount necessary to compensate for the amount by
    which the base rate of 5.715% exceeds the then-existing 10-year
    treasury rate).

|                          |                   |                 |          |                        |  |              |      |            |   |               |               |               |  |  |         |         |  |   |         |        |  
|------------------------- | ----------------- | --------------- | -------- | ---------------------- |  | ------------ | ---- | ---------- | - | ------------- | ------------- | ------------- |  |  | ------- | ------- |  | - | ------- | ------ | -
|                          |                   |                 |          |                        |  |              |      | 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 |         |  | $ | (11,447 | )     
|                          | Variable to fixed |                 |          | $ 25,000               |  |              |      | 6.53       | % |               |               | 3 month LIBOR |  |  |         | 2/01/05 |  |   |         | (1,385 | )
|Interest rate cap         |                   |                 | $107,190 |                        |  |              | 5.00 | %          |   |               |              |               |  |  | 2/01/08 |         |  |   | 703     |       
|Interest rate cap         |                   |                 | $107,190 |                        |  |              | 5.00 | %          |   |               |              |               |  |  | 2/01/08 |         |  |   | 703     |       
|                          |                   |                 |          |                        |  |              |      |            |   |               |               |               |  |  |         |         |  |   |         |       
|                          |                   |                 |          |                        |  |              |      |            |   |               |               |               |  |  |         |         |  | $ | (11,426 | )     
|                          |                   |                 |          |                        |  |              |      |            |   |               |               |               |  |  |         |         |  |   |         |       

As more fully described in note 1 to the
consolidated financial statements, the interest rate swap and
cap arrangements are carried on the consolidated 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 $99,800 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, 2003, would
increase or decrease by approximately $720 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. 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 are effective. There were no changes to the
Companys internal controls over financial reporting during
the period covered by this report that materially affected, or
are reasonably likely to materially affect, the Companys
internal controls over financial reporting subsequent to the
date of their evaluation.

Disclosure controls and procedures 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
Securities Exchange Act of 1934, as amended (the Exchange
Act), is recorded, processed, summarized and reported,
within the time periods specified in the Securities and Exchange
Commissions rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act are accumulated and communicated to the
Companys management, including its principal executive
officer and principal financial officer, as appropriate, to
allow timely decisions regarding required disclosure.




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PART III




ITEM
10.     DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT

The sections under the heading Corporate
Governance and the sections under the headings
Proposal 1  Election of Directors
entitled Nominees for Election  Term Expiring
2007, Incumbent Directors  Term Expiring
2006, and Incumbent Directors  Term
Expiring 2005 of the Proxy Statement for Annual Meeting of
Shareholders to be held May 27, 2004 (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

In November 2003, the Company 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
will be 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, Noncompetition Agreements,
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 headings Principal
Accountant Fees and Services entitled Audit
Fees, Audit-Related Fees, Tax
Fees, and All Other Fees of the Proxy
Statement are incorporated herein by reference.




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PART IV






|         |                                                                      
|-------- | ---------------------------------------------------------------------
|ITEM 15. | EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
    REPORTS ON FORM 8-K

(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:                                                         |                                                                                                                                       |      |  |    
|                                                                                           | Report of Independent Auditors                                                                                                        |      |  | 54  | 
|                                                                                           | Consolidated Balance Sheets as of
    December 31, 2003 and 2002                                                                      |      |  | 55  | 
|                                                                                           | Consolidated Statements of Operations for the
    Years Ended December 31, 2003, 2002 and 2001                                        |      |  | 56  | 
|                                                                                           | Consolidated Statements of Shareholders
    Equity and Accumulated Earnings for the Years Ended
    December 31, 2003, 2002 and 2001 |      |  | 57  | 
|                                                                                           | Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2003, 2002 and 2001                                        |      |  | 58  | 
|                                                                                           | Notes to Consolidated Financial Statements                                                                                            |      |  | 59  | 
|POST APARTMENT HOMES, L.P.                                                                 |                                                                                                                                       |      |  |    
|Consolidated Financial Statements:                                                         |                                                                                                                                       |      |  |    
|                                                                                           | Report of Independent Auditors                                                                                                        |      |  | 81  | 
|                                                                                           | Consolidated Balance Sheets as of
    December 31, 2003 and 2002                                                                      |      |  | 82  | 
|                                                                                           | Consolidated Statements of Operations for the
    Years Ended December 31, 2003, 2002 and 2001                                        |      |  | 83  | 
|                                                                                           | Consolidated Statements of Partners Equity
    for the Years Ended December 31, 2003, 2002 and 2001                                  |      |  | 84  | 
|                                                                                           | Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2003, 2002 and 2001                                        |      |  | 85  | 
|                                                                                           | Notes to Consolidated Financial Statements                                                                                            |      |  | 86  | 
|Schedule III:                                                                              |                                                                                                                                       |      |  |    
|                                                                                           | Real Estate and Accumulated Depreciation                                                                                              |      |  | 108 | 
|All other schedules are omitted because they are
    either not applicable or not required |                                                                                                                                       |      |  |    
|POST PROPERTIES, INC.  1995
    NON-QUALIFIED EMPLOYEE STOCK PURCHASE PLAN                |                                                                                                                                       |      |  |    
|Financial Statements:                                                                      |                                                                                                                                       |      |  |    
|                                                                                           | Report of Independent Auditors                                                                                                        |      |  | 112 | 
|                                                                                           | Statement of Net Assets Available for Plan
    Benefits as of December 31, 2003 and 2002                                              |      |  | 113 | 
|                                                                                           | Statement of Changes in Net Assets Available for
    Plan Benefits for the Years Ended December 31, 2003 and 2002                     |      |  | 114 | 
|                                                                                           | Notes to Financial Statements                                                                                                         |      |  | 115 | 




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REPORT OF INDEPENDENT AUDITORS

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

In our opinion, the consolidated financial
statements listed in the index appearing under
Item 15(a)(1) present fairly, in all material respects, the
financial position of Post Properties, Inc. and subsidiaries at
December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2003 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)(2) 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 financial
statement schedule are the responsibility of the Companys
management; our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
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.

As discussed in Note 1, on January 1, 2003,
the Company elected to 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 by SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and
Disclosure. Also discussed in Note 1, the Company adopted
SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by SFAS No. 138, on
January 1, 2001.

PricewaterhouseCoopers LLP (signed)

Atlanta, Georgia

March 11, 2004





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POST PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS


(Dollars in thousands, except per share
data)


|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |           |           |           | 
|----------------------------------------------------------------------- | ------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------- | --------- | --------- | --------- | --------- | --------- | --------- | --------- | 
|                                                                        |                                       |                                                                                                                                 
|                                                                        |                                       | December 31,                                                                                                                    
|                                                                        |                                       |                                                                                                                                 
|                                                                        |                                       | 2003                                                                                                                             |                                                                                                                                           | 2002     
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |          
|Assets                                                                  |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        | Real estate assets                    |                                                                                                                                  |                                                                                                                                           |           |           |           |           |           |          
|                                                                        |                                       | Land                                                                                                                             |                                                                                                                                           | $         | 254,000   |           |           | $         | 273,058   |          
|                                                                        |                                       | Building and improvements                                                                                                        |                                                                                                                                           |           | 1,883,582 |           |           |           | 1,976,809 |          
|                                                                        |                                       | Furniture, fixtures and equipment                                                                                                |                                                                                                                                           |           | 214,002   |           |           |           | 246,634   |          
|                                                                        |                                       | Construction in progress                                                                                                         |                                                                                                                                           |           | 12,946    |           |           |           | 92,945    |          
|                                                                        |                                       | Investments in and advances to unconsolidated
    real estate entities                                                           |                                                                                                                                           |           | 74,786    |           |           |           | 182,285   |          
|                                                                        |                                       | Land held for future development                                                                                                 |                                                                                                                                           |           | 11,994    |           |           |           | 24,879    |          
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | 2,451,310                                                                                                                                 |           |           |           | 2,796,610 |          
|                                                                        |                                       | Less: accumulated depreciation                                                                                                   |                                                                                                                                           |           | (432,157  | )         |           |           | (426,136  | )        
|                                                                        |                                       | Assets held for sale, net of accumulated
    depreciation of $74,614 and $17,829 at December 31, 2003
    and 2002, respectively |                                                                                                                                           |           | 145,238   |           |           |           | 73,061    |          
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | Total real estate assets                                                                                                                  |           |           | 2,164,391 |           |           |           | 2,443,535 | 
|                                                                        |                                       | Cash and cash equivalents                                                                                                        |                                                                                                                                           |           | 1,334     |           |           |           | 6,390     |          
|                                                                        |                                       | Restricted cash                                                                                                                  |                                                                                                                                           |           | 2,065     |           |           |           | 1,369     |          
|                                                                        |                                       | Deferred charges, net                                                                                                            |                                                                                                                                           |           | 12,285    |           |           |           | 15,584    |          
|                                                                        |                                       | Other assets                                                                                                                     |                                                                                                                                           |           | 35,376    |           |           |           | 41,273    |          
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | Total assets                                                                                                                              |           | $         | 2,215,451 |           |           | $         | 2,508,151 | 
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|Liabilities and Shareholders
    Equity                                |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        | Indebtedness                          |                                                                                                                                  | $                                                                                                                                         | 1,186,322 |           |           | $         | 1,414,555 |          
|                                                                        | Accounts payable and accrued expenses |                                                                                                                                  |                                                                                                                                           | 65,872    |           |           |           | 49,124    |          
|                                                                        | Dividend and distribution payable     |                                                                                                                                  |                                                                                                                                           | 19,509    |           |           |           | 33,252    |          
|                                                                        | Accrued interest payable              |                                                                                                                                  |                                                                                                                                           | 6,923     |           |           |           | 8,994     |          
|                                                                        | Security deposits and prepaid rents   |                                                                                                                                  |                                                                                                                                           | 7,890     |           |           |           | 8,250     |          
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | Total liabilities                                                                                                                         |           |           | 1,286,516 |           |           |           | 1,514,175 | 
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|Minority interest of preferred unitholders in
    Operating Partnership |                                       |                                                                                                                                  | 70,000                                                                                                                                    |           |           |           | 70,000    |          
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|Minority interest of common unitholders in
    Operating Partnership    |                                       |                                                                                                                                  | 62,409                                                                                                                                    |           |           |           | 90,277    |          
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|Commitments and contingencies                                           |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|Shareholders equity                                                    |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       | Preferred stock, $.01 par value, 20,000,000
    authorized:                                                                      |                                                                                                                                           |           |           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | 8 1/2 % Series A Cumulative Redeemable
    Shares, liquidation preference $50 per share, 900,000 shares
    issued and outstanding        |           |           | 9         |           |           |           | 9         | 
|                                                                        |                                       |                                                                                                                                  | 7 5/8 % Series B Cumulative Redeemable
    Shares, liquidation preference $25 per share, 2,000,000 shares
    issued and outstanding      |           |           | 20        |           |           |           | 20        | 
|                                                                        |                                       |                                                                                                                                  | 7 5/8 % Series C Cumulative Redeemable
    Shares, liquidation preference $25 per share, 2,000,000 shares
    issued and outstanding      |           |           | 20        |           |           |           | 20        | 
|                                                                        |                                       | Common stock, $.01 par value, 100,000,000
    authorized:                                                                        |                                                                                                                                           |           |           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | 39,676,204 and 39,676,204 shares issued,
    38,686,315 and 37,202,290 shares outstanding at
    December 31, 2003 and 2002, respectively |           |           | 396       |           |           |           | 396       | 
|                                                                        |                                       | Additional paid-in capital                                                                                                       |                                                                                                                                           |           | 849,632   |           |           |           | 940,122   |          
|                                                                        |                                       | Accumulated earnings                                                                                                             |                                                                                                                                           |           |          |           |           |           |          |          
|                                                                        |                                       | Accumulated other comprehensive income                                                                                           |                                                                                                                                           |           | (12,362   | )         |           |           | (14,822   | )        
|                                                                        |                                       | Deferred compensation                                                                                                            |                                                                                                                                           |           | (4,424    | )         |           |           | (639      | )        
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | 833,291                                                                                                                                   |           |           |           | 925,106   |          
|                                                                        |                                       | Less common stock in treasury, at cost, 989,889
    shares and 2,473,914 shares at December 31, 2003 and 2002,
    respectively  |                                                                                                                                           |           | (36,765   | )         |           |           | (91,407   | )        
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | Total shareholders equity                                                                                                                |           |           | 796,526   |           |           |           | 833,699   | 
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          
|                                                                        |                                       |                                                                                                                                  | Total liabilities and shareholders equity                                                                                                |           | $         | 2,215,451 |           |           | $         | 2,508,151 | 
|                                                                        |                                       |                                                                                                                                  |                                                                                                                                           |           |           |           |           |          

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




Post Properties, Inc.


55


Post Apartment Homes, L.P.




---



##### Table of Contents



POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF
OPERATIONS


(Dollars in thousands, except per share
data)


|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |            |         | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------- | ---------- | ------- | ---- | ------ | ---------- | ------- | - | ------ | ---------- | ------- | 
|                                                                                                                                                            |                                                                                                            |                                         
|                                                                                                                                                            |                                                                                                            | Year ended December 31,                 
|                                                                                                                                                            |                                                                                                            |                                         
|                                                                                                                                                            |                                                                                                            | 2003                                     |         | 2002       |         | 2001
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |     
|Revenues                                                                                                                                                    |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Rental                                                                                                     |                                          | $       | 279,325    |         |      | $      | 275,605    |         |   | $      | 293,836    |        
|                                                                                                                                                            | Other                                                                                                      |                                          |         | 10,165     |         |      |        | 10,413     |         |   |        | 11,394     |        
|                                                                                                                                                            | Interest                                                                                                   |                                          |         | 894        |         |      |        | 1,288      |         |   |        | 1,771      |        
|                                                                                                                                                            | Third party services                                                                                       |                                          |         |           |         |      |        |           |         |   |        | 14,088     |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            |                                                                                                            | Total revenues                           |         |            | 290,384 |      |        |            | 287,306 |   |        |            | 321,089 | 
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Expenses                                                                                                                                                    |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Property operating and maintenance (exclusive of
    items shown separately below)                         |                                          |         | 121,741    |         |      |        | 115,382    |         |   |        | 113,993    |        
|                                                                                                                                                            | Depreciation                                                                                               |                                          |         | 83,700     |         |      |        | 76,760     |         |   |        | 63,312     |        
|                                                                                                                                                            | Interest                                                                                                   |                                          |         | 64,905     |         |      |        | 52,035     |         |   |        | 43,653     |        
|                                                                                                                                                            | Amortization of deferred loan costs                                                                        |                                          |         | 3,801      |         |      |        | 2,327      |         |   |        | 1,978      |        
|                                                                                                                                                            | General and administrative                                                                                 |                                          |         | 15,102     |         |      |        | 14,431     |         |   |        | 13,256     |        
|                                                                                                                                                            | Development costs and other                                                                                |                                          |         | 2,138      |         |      |        | 830        |         |   |        | 88         |        
|                                                                                                                                                            | Severance charges                                                                                          |                                          |         | 21,506     |         |      |        |           |         |   |        |           |        
|                                                                                                                                                            | Proxy and related costs                                                                                    |                                          |         | 5,231      |         |      |        |           |         |   |        |           |        
|                                                                                                                                                            | Project abandonment, employee severance and other
    charges                                              |                                          |         |           |         |      |        |           |         |   |        | 17,450     |        
|                                                                                                                                                            | Minority interest in consolidated property
    partnerships                                                |                                          |         | (2,024     | )       |      |        | (2,055     | )       |   |        | (2,098     | )      
|                                                                                                                                                            | Third party services                                                                                       |                                          |         |           |         |      |        |           |         |   |        | 13,023     |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            |                                                                                                            | Total expenses                           |         |            | 316,100 |      |        |            | 259,710 |   |        |            | 264,655 | 
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Income (loss) from continuing operations
    before equity in income (losses) of unconsolidated entities,
    gains on property sales and minority interest |                                                                                                            |                                          | (25,716 | )          |         |      | 27,596 |            |         |   | 56,434 |           
|                                                                                                                                                            | Equity in income (losses) of unconsolidated
    real estate entities                                       |                                          |         | 7,791      |         |      |        | (1,590     | )       |   |        | (186       | )      
|                                                                                                                                                            | Gains on property sales                                                                                    |                                          |         |           |         |      |        | 13,275     |         |   |        | 23,942     |        
|                                                                                                                                                            | Minority interest of preferred unitholders in
    Operating Partnership                                    |                                          |         | (5,600     | )       |      |        | (5,600     | )       |   |        | (5,600     | )      
|                                                                                                                                                            | Minority interest of common unitholders in
    Operating Partnership                                       |                                          |         | 3,552      |         |      |        | (2,681     | )       |   |        | (7,429     | )      
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            |                                                                                                            | Income (loss) from continuing operations |         |            | (19,973 | )    |        |            | 31,000  |   |        |            | 67,161  | 
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Discontinued operations                                                                                                                                     |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Income from discontinued operations, net of
    minority interest                                          |                                          |         | 632        |         |      |        | 15,179     |         |   |        | 20,379     |        
|                                                                                                                                                            | Gains on property sales, net of minority interest                                                          |                                          |         | 33,497     |         |      |        | 14,567     |         |   |        |           |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            |                                                                                                            | Income from discontinued operations      |         |            | 34,129  |      |        |            | 29,746  |   |        |            | 20,379  | 
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Income before cumulative effect of accounting
    change                                                                                                    |                                                                                                            |                                          | 14,156  |            |         |      | 60,746 |            |         |   | 87,540 |           
|                                                                                                                                                            | Cumulative effect of accounting change, net of
    minority interest                                       |                                          |         |           |         |      |        |           |         |   |        | (613       | )      
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Net income                                                                                                                                                  |                                                                                                            |                                          | 14,156  |            |         |      | 60,746 |            |         |   | 86,927 |           
|                                                                                                                                                            | Dividends to preferred shareholders                                                                        |                                          |         | (11,449    | )       |      |        | (11,449    | )       |   |        | (11,768    | )      
|                                                                                                                                                            | Redemption costs on preferred stock                                                                        |                                          |         |           |         |      |        |           |         |   |        | (239       | )      
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Net income available to common
    shareholders                                                                                                             |                                                                                                            | $                                        | 2,707   |            |         | $    | 49,297 |            |         | $ | 74,920 |           
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Per common share data 
    basic                                                                                                                           |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Income (loss) from continuing operations
    (net of preferred dividends and redemption costs)             |                                          | $       | (0.83      | )       |      | $      | 0.53       |         |   | $      | 1.45       |        
|                                                                                                                                                            | Income from discontinued operations                                                                        |                                          |         | 0.90       |         |      |        | 0.80       |         |   |        | 0.54       |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Income before cumulative effect of accounting
    change (net of preferred dividends and redemption costs) |                                          |         | 0.07       |         |      |        | 1.33       |         |   |        | 1.99       |        
|                                                                                                                                                            | Cumulative effect of accounting change, net of
    minority interest                                       |                                          |         |           |         |      |        |           |         |   |        | (0.02      | )      
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Net income available to common shareholders                                                                |                                          | $       | 0.07       |         |      | $      | 1.33       |         |   | $      | 1.97       |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Weighted average common shares
    outstanding  basic                                                     |                                          |         | 37,687,524 |         |      |        | 36,939,144 |         |   |        | 38,052,673 |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|Per common share data 
    diluted                                                                                                                         |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Income (loss) from continuing operations
    (net of preferred dividends and redemption costs)             |                                          | $       | (0.83      | )       |      | $      | 0.53       |         |   | $      | 1.44       |        
|                                                                                                                                                            | Income from discontinued operations                                                                        |                                          |         | 0.90       |         |      |        | 0.80       |         |   |        | 0.53       |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Income before cumulative effect of accounting
    change (net of preferred dividends and redemption costs) |                                          |         | 0.07       |         |      |        | 1.33       |         |   |        | 1.98       |        
|                                                                                                                                                            | Cumulative effect of accounting change, net of
    minority interest                                       |                                          |         |           |         |      |        |           |         |   |        | (0.02      | )      
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Net income available to common shareholders                                                                |                                          | $       | 0.07       |         |      | $      | 1.33       |         |   | $      | 1.96       |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Weighted average common shares
    outstanding  diluted                                                   |                                          |         | 37,687,524 |         |      |        | 36,953,962 |         |   |        | 38,267,939 |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           
|                                                                                                                                                            | Common dividends declared                                                                                  |                                          | $       | 1.80       |         |      | $      | 3.12       |         |   | $      | 3.12       |        
|                                                                                                                                                            |                                                                                                            |                                          |         |            |         |      |        |            |         |   |        |           

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




Post Properties, Inc.


56


Post Apartment Homes, L.P.




---



##### Table of Contents



POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY AND


ACCUMULATED EARNINGS


FOR THE YEARS ENDED DECEMBER 31, 2003,
2002 AND 2001


(Dollars in thousands, except per share
data)


|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |         |         |        |         |   |        |        |        |        |      |   |          |         |         |   |         |           |          |        |        |  
|-------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | -------------------------- | - | ---------- | --- | ----------- | - | ------------- | --------- | ------------ | ------- | -------- | ------ | ------- | ------- | ------ | ------- | - | ------ | ------ | ------ | ------ | ---- | - | -------- | ------- | ------- | - | ------- | --------- | -------- | ------ | ------ | -
|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   |            |     |             |   | Accumulated   |           |              |         |          |        |        
|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   | Additional |     |             |   | Other         |           |              |         |          |        |        
|                                                                     |                                                                                                                                                                   | Preferred                                                                                                                                                         |                                                              | Common                     |   | Paid-in    |     | Accumulated |   | Comprehensive |           | Deferred     |         | Treasury |        |        
|                                                                     |                                                                                                                                                                   | Stock                                                                                                                                                             |                                                              | Stock                      |   | Capital    |     | Earnings    |   | Income        |           | Compensation |         | Stock    |        | Total  
|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |        
|Shareholders Equity and
    Accumulated                             |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |         |         |        |         |   |        |        |        |        |      |   |          |         |         |   |         |          
|                                                                     | Earnings, December 31, 2000                                                                                                                                       |                                                                                                                                                                   | $                                                            | 50                         |   |            | $   | 396         |   |               | $         | 1,057,067    |         |          | $      |        |         |        | $       |  |        |        | $      |       |      |   | $        | (28,903 | )       |   | $       | 1,028,610 |         
|                                                                     |                                                                                                                                                                   | Comprehensive income                                                                                                                                              |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |         |         |        |         |   |        |        |        |        |      |   |          |         |         |   |         |           |          |       
|                                                                     |                                                                                                                                                                   | Net income                                                                                                                                                        |                                                              |                            |  |            |     |             |  |               |           |              |        |          |        |         | 86,927  |        |         |   |       |        |        |        |     |   |          |         |        |   |         |           | 86,927   |       
|                                                                     |                                                                                                                                                                   | Cumulative effect of adoption of SFAS 133,
    net of minority interest                                                                                           |                                                              |                            |  |            |     |             |  |               |           |              |        |          |        |         |        |        |         |   | (1,299 | )      |        |        |     |   |          |         |        |   |         |           | (1,299   | )     
|                                                                     |                                                                                                                                                                   | Net change in derivative value, net of minority
    interest                                                                                                      |                                                              |                            |  |            |     |             |  |               |           |              |        |          |        |         |        |        |         |   | (4,565 | )      |        |        |     |   |          |         |        |   |         |           | (4,565   | )     
|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |         |         |        |         |   |        |        |        |        |      |   |          |         |         |   |         |          
|                                                                     |                                                                                                                                                                   | Total comprehensive income                                                                                                                                        |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |         |         |        |         |   |        |        |        |        |      |   |          |         |         |   |         |           | 81,063   |       
|                                                                     |                                                                                                                                                                   | Proceeds from employee stock purchase and stock
    option plans                                                                                                  |                                                              |                            |  |            |     |             |  |               |           |              | (1,410  | )        |        |         |        |        |         |   |       |        |        |        |     |   |          |         | 10,176  |   |         |           | 8,766    |       
|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              | Preferred Stock repurchase |   |            | (1  | )           |   |               |          |              |         |          | (5,099 | )       |         |        |        |   |        |        |       |        |      |   |         |         |         |   |        |           |          |        | (5,100 | )
|                                                                     |                                                                                                                                                                   | Adjustment for minority interest of unitholders
    in Operating Partnership upon conversion of units into common
    shares and at dates of capital transactions |                                                              |                            |  |            |     |             |  |               |           |              | 3,063   |          |        |         |        |        |         |   |       |        |        |        |     |   |          |         | 2,131   |   |         |           | 5,194    |       
|                                                                     |                                                                                                                                                                   | Restricted stock issuances, net of forfeitures                                                                                                                    |                                                              |                            |  |            |     |             |  |               |           |              | 46      |          |        |         |        |        |         |   |       |        |        |        | (616 | ) |          |         | 570     |   |         |           |         |       
|                                                                     |                                                                                                                                                                   | Amortization of deferred compensation                                                                                                                             |                                                              |                            |  |            |     |             |  |               |           |              |        |          |        |         |        |        |         |   |       |        |        |        | 171  |   |          |         |        |   |         |           | 171      |       
|                                                                     |                                                                                                                                                                   | Treasury stock acquisitions                                                                                                                                       |                                                              |                            |  |            |     |             |  |               |           |              |        |          |        |         |        |        |         |   |       |        |        |        |     |   |          |         | (87,547 | ) |         |           | (87,547  | )     
|                                                                     |                                                                                                                                                                   | Dividends to preferred shareholders                                                                                                                               |                                                              |                            |  |            |     |             |  |               |           |              |        |          |        |         | (11,768 | )      |         |   |       |        |        |        |     |   |          |         |        |   |         |           | (11,768  | )     
|                                                                     |                                                                                                                                                                   | Dividends to common shareholders                                                                                                                                  |                                                              |                            |  |            |     |             |  |               |           |              | (42,713 | )        |        |         | (75,159 | )      |         |   |       |        |        |        |     |   |          |         |        |   |         |           | (117,872 | )     
|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |         |         |        |         |   |        |        |        |        |      |   |          |         |         |   |         |          
|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   |   |         |           | 1,254    |       
|                                                                     |                                                                                                                                                                   | 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 |          
|                                                                     |                                                                                                                                                                   |                                                                                                                                                                   |                                                              |                            |   |            |     |             |   |               |           |              |         |          |        |         |         |        |         |   |        |        |        |        |      |   |          |         |         |   |         |          
|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.




Post Properties, Inc.


57


Post Apartment Homes, L.P.




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##### Table of Contents



POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Dollars in thousands, except per share
data)


|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |          |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------ | -------- | ------- | ---- | ----- | -------- | ------- | - | ------ | -------- | ------- | -
|                                                         |                                                                                       |                                                                        
|                                                         |                                                                                       | Year ended December 31,                                                
|                                                         |                                                                                       |                                                                        
|                                                         |                                                                                       | 2003                                                                    |        | 2002     |         | 2001
|                                                         |                                                                                       |                                                                         |        |          |         |     
|Cash Flows From Operating Activities                     |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|                                                         | Net income                                                                            |                                                                         | $      | 14,156   |         |      | $     | 60,746   |         |   | $      | 86,927   |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                         |        |          |         |      |       |          |         |   |        |          |        
|                                                         |                                                                                       | Depreciation                                                            |        |          | 89,975  |      |       |          | 87,927  |   |        |          | 76,178  |  
|                                                         |                                                                                       | Amortization of deferred loan costs                                     |        |          | 3,801   |      |       |          | 2,327   |   |        |          | 1,978   |  
|                                                         |                                                                                       | Minority interest of preferred unitholders in
    Operating Partnership |        |          | 5,600   |      |       |          | 5,600   |   |        |          | 5,600   |  
|                                                         |                                                                                       | Minority interest of common unitholders in
    Operating Partnership    |        |          | (3,552  | )    |       |          | 2,681   |   |        |          | 7,429   |  
|                                                         |                                                                                       | Minority interest in discontinued operations                            |        |          | 3,893   |      |       |          | 4,091   |   |        |          | 2,763   |  
|                                                         |                                                                                       | Gains on property sales  discontinued
    operations                   |        |          | (37,448 | )    |       |          | (16,570 | ) |        |          |        |  
|                                                         |                                                                                       | Gains on property sales   continuing
    operations                    |        |          |        |      |       |          | (13,275 | ) |        |          | (23,942 | )
|                                                         |                                                                                       | Asset impairment charge                                                 |        |          | 14,118  |      |       |          |        |   |        |          |        |  
|                                                         |                                                                                       | Equity in (income) losses of unconsolidated
    real estate entities    |        |          | (7,791  | )    |       |          | 1,590   |   |        |          | 186     |  
|                                                         |                                                                                       | Stock-based compensation                                                |        |          | 1,071   |      |       |          |        |   |        |          |        |  
|                                                         |                                                                                       | Cumulative effect of accounting change, net of
    minority interest    |        |          |        |      |       |          |        |   |        |          | 613     |  
|                                                         | Changes in assets, (increase) decrease in:                                            |                                                                         |        |          |         |      |       |          |         |   |        |          |        
|                                                         |                                                                                       | Restricted cash                                                         |        |          | (696    | )    |       |          | (54     | ) |        |          | (43     | )
|                                                         |                                                                                       | Other assets                                                            |        |          | 4,676   |      |       |          | 8,098   |   |        |          | (1,626  | )
|                                                         |                                                                                       | Deferred charges                                                        |        |          | (2,210  | )    |       |          | (1,226  | ) |        |          | (841    | )
|                                                         | Changes in liabilities, increase
    (decrease) in:                                   |                                                                         |        |          |         |      |       |          |         |   |        |          |        
|                                                         |                                                                                       | Accrued interest payable                                                |        |          | (2,071  | )    |       |          | (666    | ) |        |          | (1,091  | )
|                                                         |                                                                                       | Accounts payable and accrued expenses                                   |        |          | 8,387   |      |       |          | (20,740 | ) |        |          | 7,824   |  
|                                                         |                                                                                       | Security deposits and prepaid rents                                     |        |          | (360    | )    |       |          | (766    | ) |        |          | (391    | )
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|                                                         | Net cash provided by operating activities                                             |                                                                         |        | 91,549   |         |      |       | 119,763  |         |   |        | 161,564  |        
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|Cash Flows From Investing Activities                     |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|                                                         | Construction and acquisition of real estate
    assets, net of payables               |                                                                         |        | (24,179  | )       |      |       | (150,792 | )       |   |        | (220,297 | )      
|                                                         | Net proceeds from property sales                                                      |                                                                         |        | 163,560  |         |      |       | 182,216  |         |   |        | 220,122  |        
|                                                         | Capitalized interest                                                                  |                                                                         |        | (3,555   | )       |      |       | (13,223  | )       |   |        | (22,124  | )      
|                                                         | Recurring capital expenditures                                                        |                                                                         |        | (9,473   | )       |      |       | (9,381   | )       |   |        | (10,441  | )      
|                                                         | Non-recurring capital expenditures                                                    |                                                                         |        | (5,152   | )       |      |       | (3,441   | )       |   |        | (2,535   | )      
|                                                         | Revenue generating capital expenditures                                               |                                                                         |        | (1,240   | )       |      |       | (2,035   | )       |   |        | (4,226   | )      
|                                                         | Corporate additions and improvements                                                  |                                                                         |        | (799     | )       |      |       | (1,100   | )       |   |        | (3,021   | )      
|                                                         | Distributions from (investments in and advances
    to) unconsolidated entities       |                                                                         |        | 115,033  |         |      |       | (51,065  | )       |   |        | (8,691   | )      
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|                                                         | Net cash provided by (used in) investing
    activities                               |                                                                         |        | 234,195  |         |      |       | (48,821  | )       |   |        | (51,213  | )      
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|Cash Flows From Financing Activities                     |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|                                                         | Lines of credit proceeds (repayments), net                                            |                                                                         |        | (124,358 | )       |      |       | 30,167   |         |   |        | 143,277  |        
|                                                         | Payments on notes payable                                                             |                                                                         |        | (103,875 | )       |      |       | (47,632  | )       |   |        | (70,066  | )      
|                                                         | Proceeds from notes payable                                                           |                                                                         |        |         |         |      |       | 95,500   |         |   |        | 50,000   |        
|                                                         | Payment of financing costs                                                            |                                                                         |        |         |         |      |       | (561     | )       |   |        | (300     | )      
|                                                         | Proceeds from employee stock purchase and stock
    option plans                      |                                                                         |        | 4,139    |         |      |       | 1,254    |         |   |        | 8,766    |        
|                                                         | Treasury stock acquisitions                                                           |                                                                         |        |         |         |      |       |         |         |   |        | (87,547  | )      
|                                                         | Preferred stock repurchases                                                           |                                                                         |        |         |         |      |       |         |         |   |        | (5,100   | )      
|                                                         | Distributions to preferred unitholders                                                |                                                                         |        | (5,600   | )       |      |       | (5,600   | )       |   |        | (5,600   | )      
|                                                         | Distributions to common unitholders                                                   |                                                                         |        | (9,789   | )       |      |       | (15,972  | )       |   |        | (16,018  | )      
|                                                         | Dividends paid to preferred shareholders                                              |                                                                         |        | (11,449  | )       |      |       | (11,449  | )       |   |        | (11,768  | )      
|                                                         | Dividends paid to common shareholders                                                 |                                                                         |        | (79,868  | )       |      |       | (115,062 | )       |   |        | (118,651 | )      
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|                                                         | Net cash used in financing activities                                                 |                                                                         |        | (330,800 | )       |      |       | (69,355  | )       |   |        | (113,007 | )      
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|Net increase (decrease) in cash and cash
    equivalents |                                                                                       |                                                                         | (5,056 | )        |         |      | 1,587 |          |         |   | (2,656 | )       
|Cash and cash equivalents, beginning of period           |                                                                                       |                                                                         | 6,390  |          |         |      | 4,803 |          |         |   | 7,459  |         
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         
|Cash and cash equivalents, end of period                 |                                                                                       | $                                                                       | 1,334  |          |         | $    | 6,390 |          |         | $ | 4,803  |         
|                                                         |                                                                                       |                                                                         |        |          |         |      |       |          |         |   |        |         

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




Post Properties, Inc.


58


Post Apartment Homes, L.P.




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##### Table of Contents



POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars 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, 2003, the Company owned 28,081 apartment units
in 72 apartment communities, including 666 apartment units in
three communities held in unconsolidated entities and including
468 apartment units currently in lease-up in two apartment
communities. At December 31, 2003, approximately 53.5%,
18.6% and 7.9% (on a unit basis) of the Companys
communities were located in the Atlanta, Dallas and Tampa
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.

As of December 31, 2003, the Company had
outstanding 38,686,315 shares of common stock and owned the same
number of units of common limited partnership interests
(Common Units) in the Operating Partnership,
representing an 91.3% ownership interest in the Operating
Partnership. Common Units held by persons (including certain
Company directors) other than the Company totaled 3,667,507 as
of December 31, 2003 and represented a 8.7% 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 89.5%, 87.9% and 88.1% for the years
ended December 31, 2003, 2002 and 2001, 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 2002 and 2001 consolidated
financial statements were reclassified for comparative purposes
with the 2003 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. 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 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




Post Properties, Inc.


59


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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





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, 2003, 2002 and
2001 were 6.98%, 6.80% and 7.41%, 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 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 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 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 internal 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 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. The 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 unencumbered assets to
unsecured debt 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.

In years prior to 2002, real estate assets held
for sale were stated separately on the consolidated balance
sheet in a manner consistent with the approach discussed above.
However, the operating results and gains or losses on the sale
of such assets were included in continuing operations. As a
result of this presentation, income from continuing operations
and gains on property sales are not comparable for years prior
to 2002.




Post Properties, Inc.


60


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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





Revenue recognition

Residential properties are leased under operating
leases with terms of generally one year or less. Rental income
is recognized when earned, which is not materially different
from revenue recognition on a straight-line basis.

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. SFAS No. 148 also amended
the disclosure requirements in both annual and interim financial
statements about the method of accounting used for stock-based
compensation and the effect of the method on reported results.
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 will reflect as an expense each period 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 generally 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.

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.

|                                            |                                                                                               |      |   |        |   |      |   |        |   |  |   |        |  
|------------------------------------------- | --------------------------------------------------------------------------------------------- | ---- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                            |                                                                                               | 2003 |   | 2002   |   | 2001
|                                            |                                                                                               |      |   |        |   |     
|Net income available to common shareholders |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | As reported                                                                                   |      | $ | 2,707  |   |      | $ | 49,297 |   |  | $ | 74,920 |  
|                                            | Stock-based compensation included in net income
    as reported, net of minority interest     |      |   | 958    |   |      |   | 233    |   |  |   | 151    |  
|                                            | Stock-based compensation determined under the
    fair value method, net of minority interest |      |   | (1,088 | ) |      |   | (732   | ) |  |   | (1,299 | )
|                                            |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | Pro forma                                                                                     |      | $ | 2,577  |   |      | $ | 48,798 |   |  | $ | 73,772 |  
|                                            |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|Net income per common share  basic         |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | As reported                                                                                   |      | $ | 0.07   |   |      | $ | 1.33   |   |  | $ | 1.97   |  
|                                            | Pro forma                                                                                     |      | $ | 0.07   |   |      | $ | 1.32   |   |  | $ | 1.94   |  
|Net income per common share  diluted       |                                                                                               |      |   |        |   |      |   |        |   |  |   |       
|                                            | As reported                                                                                   |      | $ | 0.07   |   |      | $ | 1.33   |   |  | $ | 1.96   |  
|                                            | Pro forma                                                                                     |      | $ | 0.07   |   |      | $ | 1.32   |   |  | $ | 1.93   |  

Accounting for derivative financial
instruments

Effective January 1, 2001, 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
by SFAS No. 138, Accounting for Certain Derivative
and Hedging Activities.

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 generally 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.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





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 generally is 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
interest method over the terms of the related debt.

Per share data

Basic earnings per common share is computed by
dividing net income by the weighted average number of shares
outstanding during the period. Diluted earnings per common share
is computed by dividing net income by the weighted average
number of shares outstanding during the period, including the
dilutive effect of outstanding stock options.

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 2003 and 2002, the Financial Accounting
Standards Board issued several new accounting pronouncements and
the pronouncements with a potential impact on the Company are
discussed herein.

SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13 and Technical Corrections was issued in May
2002. SFAS No. 145 rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishments of
Debt, which provided that gains and losses from early debt
retirements be treated as extraordinary items. Under SFAS
No. 145, gains and losses from early debt retirements will
only be treated as extraordinary items if they meet the criteria
for extraordinary items under APB No. 30. Since the
definition of an extraordinary item is more restrictive under
APB No. 30, SFAS No. 145 will generally cause the
Company to treat gains or losses from early debt retirements as
part of income before extraordinary items. This part of SFAS
No. 145 was effective for fiscal years beginning after
May 15, 2002 and required the reclassification of prior
period extraordinary items not meeting the APB No. 30
criteria. The Company adopted this requirement of SFAS
No. 145 on January 1, 2003. Upon implementation, the
Company reclassified $120, net of minority interest, in 2002 and
$77, net of minority interest, in 2001 from extraordinary items
to expenses used to determine income from continuing operations.
The remaining provisions of SFAS No. 145 were generally not
applicable to the Company.

SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities was issued in
July 2002. This Statement addressed financial accounting and
reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).
SFAS 146 was effective for exit or disposal activities
initiated after December 31, 2002. The implementation of
this Statement did not have a significant effect on the
Companys results of operations or its financial position.

FASB Interpretation No. 45 (FIN
No. 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others was issued in November 2002. FIN
No. 45 clarified disclosure requirements to be made by a
guarantor in its interim and annual financial statements
regarding its




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





obligations under certain guarantees that it has
issued. Additionally, it clarified that a guarantor is required
to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN No. 45 were
effective for interim and annual financial statements issued
after December 15, 2002. The initial recognition and
measurement provisions of FIN No. 45 were applicable for
guarantees issued or modified after December 31, 2002. The
Company implemented the disclosure requirements of FIN
No. 45 effective with its December 31, 2002 financial
statements and implemented the recognition and measurement
provisions of FIN No. 45 effective January 1, 2003.
The adoption of the recognition and measurement provisions of
FIN No. 45 did not have a significant impact on the
Companys financial position or results of operations.

FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 was originally issued in
January 2003 and subsequently revised and restated in December
2003 through FASB Interpretation No. 46  Revised
(together these pronouncements are referred to as FIN No.
46). FIN No. 46 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 consolidation provisions of FIN
No. 46 were generally applicable as of December 31,
2003 for all variable interest entities created after
January 31, 2003. For special purpose entities, as defined,
created prior to February 1, 2003, the consolidation
provisions of FIN No. 46 were generally applicable as of
December 31, 2003. For other variable interest entities
created prior to February 1, 2003 where the Company is
deemed to be the primary beneficiary, consolidation of such
entities will be required for the interim period ending
March 31, 2004. Information required to be disclosed in
2003 pursuant to FIN No. 46 includes the nature, purpose,
size and activities of all variable interest entities where it
is reasonably possible that such entities will be required to be
consolidated by the Company and the Companys maximum
exposure to loss from these entities. The Company currently does
not have any interests in special purpose entities or other
variable interest entities and FIN No. 46 did not and will
not have a significant effect on its results of operations or
financial position.

SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity, was issued in May 2003. SFAS No. 150
established standards for how an issuer classifies and measures
certain liabilities and equity. This Statement was to be
effective for financial instruments entered into or modified
after May 31, 2003, and otherwise effective at the
beginning of the first quarterly period beginning after June 15,
2003. On October 29, 2003, the FASB deferred certain
provisions of SFAS No. 150, as they were to apply to
non-controlling interests, in which redemption is mandatory, in
finite-lived entities. The deferral of these provisions is
expected to remain in effect until these issues are incorporated
into future FASB accounting standards. The Company has not
entered into any transactions involving financial instruments
impacted by the provisions, currently in effect, of SFAS
No. 150 and the implementation of SFAS No. 150 in 2003
had no effect on the Companys financial position or
results of operations.

2. DEFERRED CHARGES

Deferred charges consist of the following:

|                               |  |              |         |      |  |   |         |  
|------------------------------ |  | ------------ | ------- | ---- |  | - | ------- | -
|                               |  |             
|                               |  | December 31,
|                               |  |             
|                               |  | 2003         |         | 2002
|                               |  |              |         |     
|Deferred financing costs       |  | $            | 37,289  |      |  | $ | 37,037  |  
|Other                          |  |              | 4,424   |      |  |   | 3,532   |  
|                               |  |              |         |      |  |   |         |  
|                               |  |              | 41,713  |      |  |   | 40,569  |  
|Less: accumulated amortization |  |              | (29,428 | )    |  |   | (24,985 | )
|                               |  |              |         |      |  |   |         |  
|                               |  | $            | 12,285  |      |  | $ | 15,584  |  
|                               |  |              |         |      |  |   |         |  




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





3. INDEBTEDNESS

At December 31, 2003 and 2002, the
Companys indebtedness consisted of the following:

|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|--------------------------------- |  | -------------- |  | -------- | ------------- | -------- |  | ------------ |  | ---- | --------- |  |  | - | --------- | 
|                                  |  |                |  |          |               |          |  |             
|                                  |  |                |  |          |               |          |  | December 31,
|                                  |  |                |  | Interest |               | Maturity |  |             
|Description                       |  | Payment Terms  |  | Rate     |               | Date(1)  |  | 2003         |  | 2002
|                                  |  |                |  |          |               |          |  |              |  |     
|Unsecured Notes                   |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|Senior Notes                      |  | Int.           |  |          | 6.11% - 7.70% |          |  | 2006-2010    |  | $    | 285,000   |  |  | $ | 385,000   | 
|Medium Term Notes                 |  | Int.           |  |          | 6.69% - 8.12% | (2)      |  | 2004-2015    |  |      | 323,000   |  |  |   | 323,000   | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|                                  |  |                |  |          |               |          |  |              |  |      | 608,000   |  |  |   | 708,000   | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|Unsecured Lines of Credit         |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|Syndicated Line of Credit         |  | N/A            |  |          | LIBOR + 0.85% | (3)      |  | 2004         |  |      | 60,000    |  |  |   | 185,000   | 
|Cash Management Line              |  | N/A            |  |          | LIBOR + 0.75% |          |  | 2004         |  |      | 12,010    |  |  |   | 11,369    | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|                                  |  |                |  |          |               |          |  |              |  |      | 72,010    |  |  |   | 196,369   | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|Conventional Fixed Rate (Secured) |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|FNMA                              |  | Prin. and Int. |  |          | 6.975%        | (4)      |  | 2029         |  |      | 99,800    |  |  |   | 101,100   | 
|Other                             |  | Prin. and Int. |  |          | 5.5% - 7.69%  |          |  | 2007-2013    |  |      | 192,132   |  |  |   | 194,706   | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|                                  |  |                |  |          |               |          |  |              |  |      | 291,932   |  |  |   | 295,806   | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|Tax Exempt Floating Rate Bonds    |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|(Secured)                         |  | Int.           |  |          | 1.15%         | (5)      |  | 2025         |  |      | 214,380   |  |  |   | 214,380   | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 
|Total                             |  |                |  |          |               |          |  |              |  | $    | 1,186,322 |  |  | $ | 1,414,555 | 
|                                  |  |                |  |          |               |          |  |              |  |      |           |  |  |   |           | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All outstanding indebtedness can be prepaid at
    any time, subject to certain prepayment penalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(2) | Includes $100,000 of Mandatory Par Put Remarketed
    Securities (MOPPRS). The annual interest rate on
    these securities to March 2005 is 6.85%. The MOPPRS mature in
    March 2015, but are subject to mandatory tender for remarketing
    in March 2005. In March 2005, if the remarking dealer elects not
    to remarket the MOPPRS, the Company is required to redeem the
    MOPPRS at par. If the remarketing dealer elects to remarket the
    securities in March 2005, the interest rate on the MOPPRS will
    be established at a rate of 5.715% plus the Companys
    applicable credit spread for Company securities with similar
    maturities. The MOPPRS may be redeemed, at the Companys
    option, immediately prior to their remarketing in March 2005 at
    an optional redemption price equal to the outstanding principal
    balance plus a prepayment penalty (generally equivalent to the
    make-whole amount necessary to compensate for the amount by
    which the base rate of 5.715% exceeds the then-existing 10-year
    treasury rate).
|(3) | Represents stated rate. At December 31,
    2003, the weighted average interest rate was 1.96%. Subsequent
    to December 31, 2003, this line of credit was refinanced
    and its maturity was extended to 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(4) | Interest rate is fixed at 6.975%, inclusive of
    credit enhancement and other fees, to 2009 through an interest
    rate swap arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(5) | 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, 2003 before credit enhancements. At
    December 31, 2003, 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):

|           |  |   |           |    
|---------- |  | - | --------- | ---
|2004       |  | $ | 27,094    |    
|2005       |  |   | 204,402   | (2)
|2006       |  |   | 79,732    |    
|2007       |  |   | 112,178   |    
|2008       |  |   | 4,014     |    
|Thereafter |  |   | 686,892   | (2)
|           |  |   |           |    
|           |  | $ | 1,114,312 |    
|           |  |   |           |    






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes outstanding balances on lines of credit
    discussed below.                                                                                                                                                                                                                                                                                                                                                                                                                                               
|(2) | The MOPPRS mature in March 2015 (as reflected in
    the table above), but are subject to mandatory tender for
    remarketing in March 2005. In March 2005, if the remarking
    dealer elects not to remarket the MOPPRS, the Company is
    required to redeem the MOPPRS at par. The MOPPRS may be
    redeemed, at the Companys option, immediately prior to
    their remarketing in March 2005 at an optional redemption price
    equal to the outstanding principal balance plus a prepayment
    penalty.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





Unsecured lines of credit

At December 31, 2003, the Company utilized a
$320,000 three-year syndicated revolving line of credit, for its
short-term financing requirements. At December 31, 2003,
the stated interest rate for this line of credit was LIBOR plus
0.85% or prime minus 0.25%. This line of credit required the
payment of annual facility fees equal to 0.20% of the aggregate
loan commitment. The line of credit provided for the rate to be
adjusted up or down based on changes in the credit ratings on
the Companys senior unsecured debt. In July 2003, the
Companys unsecured debt rating was downgraded from Baa2 to
Baa3 by Moodys Investor Services, resulting in a split
unsecured debt rating (Standard & Poors rates the
Companys unsecured debt at BBB). Under the terms of the
credit agreement, the interest rate on the revolver remained at
LIBOR plus 0.85% as the interest rate was based on the higher of
the Companys unsecured debt ratings.

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).
The Revolver has a stated interest rate of LIBOR plus 0.90% or
the prime rate and was provided by a syndicate of nine banks led
by Wachovia Bank, N.A. Additionally, the Revolver requires the
payment of annual facility fees equal to 0.20% 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 lower of the
Companys unsecured debt 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.

Additionally, the Company has a $20,000 unsecured
line of credit with Wachovia Bank, N.A. (the Cash
Management Line). The Cash Management Line bears interest
at LIBOR plus 0.75% or prime minus .25% and matures in April
2004. Management expects to renew and extend the maturity of
this facility prior to April 2004. At December 31, 2003,
the Company had issued letters of credit to third parties
totaling $1,913 under this facility.

At December 31, 2002, the Company had in
place an additional $125,000 line of credit facility for general
corporate purposes. This line was not renewed upon its maturity
in April 2003.

Interest paid

Interest paid (including capitalized amounts of
$3,555, $13,223 and $22,124 for the years ended
December 31, 2003, 2002 and 2001, respectively), aggregated
$78,822, $79,115 and $82,383 for the years ended
December 31, 2003, 2002 and 2001, respectively.

Pledged assets

The aggregate net book value at December 31,
2003 of property pledged as collateral for indebtedness amounted
to approximately $503,613.

4. INVESTMENTS IN UNCONSOLIDATED REAL
ESTATE ENTITIES

At December 31, 2003, the Company holds
investments in three individual limited liability companies (the
Property LLCs) with an institutional investor. Each
Property LLC owns a newly developed apartment community. At
December 31, 2003, two of the apartment communities had
achieved stabilized occupancy and one apartment community was in
initial lease-up. The Company holds a 35% equity interest in the
Property LLCs. The




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





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. 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
sales 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 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
$6,740 at December 31, 2003. 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.

The operating results of the Company include its
proportionate 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                    |                                       | 2003         |         | 2002   
|                                      |                                       |              |         |        
|Real estate assets, net               |                                       | $            | 127,513 |         |  | $ | 198,854 |        
|Cash and other                        |                                       |              | 2,516   |         |  |   | 2,330   |        
|                                      |                                       |              |         |         |  |   |         |        
|                                      | Total assets                          |              | $       | 130,029 |  |   | $       | 201,184 | 
|                                      |                                       |              |         |         |  |   |         |        
|Mortgage notes payable                |                                       | $            | 33,763  |         |  | $ |        |        
|Construction notes payable to Company |                                       |              | 53,769  |         |  |   | 160,294 |        
|Other liabilities                     |                                       |              | 1,742   |         |  |   | 3,975   |        
|                                      |                                       |              |         |         |  |   |         |        
|                                      | Total liabilities                     |              |         | 89,274  |  |   |         | 164,269 | 
|Members equity                       |                                       |              | 40,755  |         |  |   | 36,915  |        
|                                      |                                       |              |         |         |  |   |         |        
|                                      | Total liabilities and members equity |              | $       | 130,029 |  |   | $       | 201,184 | 
|                                      |                                       |              |         |         |  |   |         |        
|Companys equity investment           |                                       | $            | 21,017  |         |  | $ | 21,991  |        
|                                      |                                       |              |         |         |  |   |         |        
|Companys share of notes payable      |                                       | $            | 30,636  |         |  | $ | 56,103  |        
|                                      |                                       |              |         |         |  |   |         |        

|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |     |     | 
|------------------------------------ | ------------------------------------------ | ----------------------- | ------ | ------ | ------ | ---- | ------ | ------ | ----- | - | ---- | --- | --- | 
|                                     |                                            |                        
|                                     |                                            | Year ended December 31,
|                                     |                                            |                        
|Income Statement Data                |                                            | 2003                    |        | 2002   |        | 2001
|                                     |                                            |                         |        |        |        |     
|Revenue                              |                                            |                         |        |        |        |      |        |        |       |   |      |    
|                                     | Rental                                     |                         | $      | 9,350  |        |      | $      | 3,174  |       |   | $    | 136 |    
|                                     | Other                                      |                         |        | 470    |        |      |        | 322    |       |   |      | 50  |    
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|                                     |                                            | Total revenues          |        |        | 9,820  |      |        |        | 3,496 |   |      |     | 186 | 
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|Expenses                             |                                            |                         |        |        |        |      |        |        |       |   |      |    
|                                     | Property operating and maintenance         |                         |        | 4,497  |        |      |        | 2,578  |       |   |      | 416 |    
|                                     | Depreciation                               |                         |        | 3,757  |        |      |        | 1,990  |       |   |      | 192 |    
|                                     | Interest                                   |                         |        | 3,061  |        |      |        | 1,601  |       |   |      | 110 |    
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|                                     |                                            | Total expenses          |        |        | 11,315 |      |        |        | 6,169 |   |      |     | 718 | 
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|Loss from continuing operations      |                                            |                         | (1,495 | )      |        |      | (2,673 | )      |       |   | (532 | )  
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|Discontinued operations              |                                            |                         |        |        |        |      |        |        |       |   |      |    
|                                     | Loss from discontinued operations          |                         |        | (274   | )      |      |        | (1,871 | )     |   |      |    |    
|                                     | Gain on property sale                      |                         |        | 26,179 |        |      |        |       |       |   |      |    |    
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|                                     | Income (loss) from discontinued operations |                         |        | 25,905 |        |      |        | (1,871 | )     |   |      |    |    
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|Net income (loss)                    |                                            | $                       | 24,410 |        |        | $    | (4,544 | )      |       | $ | (532 | )  
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    
|Companys share of net income (loss) |                                            | $                       | 7,791  |        |        | $    | (1,590 | )      |       | $ | (186 | )  
|                                     |                                            |                         |        |        |        |      |        |        |       |   |      |    

The Company has committed construction financing
to one of the Property LLCs totaling $56,696 ($53,769
funded at December 31, 2003). The loan earns interest at
LIBOR plus 1.75% and is secured by the apartment community.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





The loan matures in November 2004 and is expected
to be repaid from the proceeds of a permanent project financing.
As of December 31, 2003 and 2002, the institutional
investors share of these notes were $34,950 and $104,191,
respectively. In February 2003, one of the Property LLCs repaid
its outstanding construction note payable to the Company of
$24,071. The note was repaid through the proceeds from a
third-party non-recourse permanent mortgage note totaling
$17,000 and from member equity contributions. The mortgage note
bears interest at 4.28%, requires monthly principal and interest
payments based on a 30-year amortization schedule and matures in
March 2008. 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. In November 2003, a second Property LLC repaid its
outstanding construction note payable to the Company of $28,710
through the proceeds from a third-party non-recourse permanent
mortgage note totaling $17,000 and from member equity
contributions. The mortgage note bears interest at 4.04%,
requires interest only payments and matures in December 2008.

As part of the development and construction
services agreements entered into between the Company and the
Property LLCs, the Company guaranteed the maximum total amount
for certain construction cost categories subject to aggregate
limits. The Companys remaining maximum exposure for the
fourth Property LLC totals approximately $5,200. The Company
does not currently expect to be required to fund any guarantees
relating to this Property LLC. Additionally, under these
agreements, the Company was subject to project completion
requirements, as defined. At December 31, 2003, the Company
had met its remaining completion date requirements and will not
be subject to any additional costs.

5. REAL ESTATE ASSETS HELD FOR
SALE / DISCONTINUED OPERATIONS

The Company classifies real estate assets as held
for sale after the approval of its internal investment committee
and after the Company has commenced an active program to sell
the assets. At December 31 2003, the Company has nine
apartment communities containing 4,340 units and certain tracts
of land classified as held for sale. These real estate assets
are classified separately in the accompanying consolidated
balance sheet at $145,238, which represented the lower of cost
or 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, 2003, income from discontinued
operations included the results of operations of nine
communities, containing 4,340 units, classified as held for sale
at December 31, 2003 and the results of operations of four
communities sold in 2003 through their sale date. For the years
ended December 31, 2002 and 2001, income from discontinued
operations included the results of operations of all communities
classified as held for sale at December 31, 2003,
communities sold in 2003 and the results of operations of six
communities and one commercial property sold in 2002 through
their sale dates.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





The revenues and expenses of these communities
for the years ended December 31, 2003, 2002 and 2001 were
as follows:

|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |        |        | 
|---------------------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------- | --- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                 |                                                                                    | 2003           |     | 2002   |        | 2001
|                                                                 |                                                                                    |                |     |        |        |     
|Revenues                                                         |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 | Rental                                                                             |                | $   | 42,350 |        |      | $      | 59,585 |        |   | $      | 74,206 |       
|                                                                 | Other                                                                              |                |     | 1,935  |        |      |        | 2,531  |        |   |        | 3,138  |       
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 |                                                                                    | Total revenues |     |        | 44,285 |      |        |        | 62,116 |   |        |        | 77,344 | 
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Expenses                                                         |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 | Property operating and maintenance (exclusive of
    items shown separately below) |                |     | 17,362 |        |      |        | 23,906 |        |   |        | 27,126 |       
|                                                                 | Depreciation                                                                       |                |     | 6,276  |        |      |        | 11,167 |        |   |        | 12,799 |       
|                                                                 | Interest                                                                           |                |     | 5,955  |        |      |        | 9,776  |        |   |        | 14,277 |       
|                                                                 | Asset impairment charge                                                            |                |     | 14,118 |        |      |        |       |        |   |        |       |       
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 |                                                                                    | Total expenses |     |        | 43,711 |      |        |        | 44,849 |   |        |        | 54,202 | 
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Income from discontinued operations before
    minority interest |                                                                                    |                | 574 |        |        |      | 17,267 |        |        |   | 23,142 |       
|                                                                 | Minority interest                                                                  |                |     | 58     |        |      |        | (2,088 | )      |   |        | (2,763 | )     
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Income from discontinued operations                              |                                                                                    | $              | 632 |        |        | $    | 15,179 |        |        | $ | 20,379 |       
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       

During the third quarter of 2003, the Company
reclassified an impairment loss of $14,118 from continuing
operations to discontinued operations. The impairment loss,
originally recorded in the first quarter 2003, related to the
write-down of the cost of the Companys apartment community
located in Phoenix, Arizona to its estimated fair value. The
reclassification of the impairment loss to discontinued
operations reflected the designation of this community as held
for sale during the third quarter of 2003 and the sale of the
community in the fourth quarter of 2003.

For the year ended December 31, 2003, the
Company recognized net gains from discontinued operations of
$42,205 ($37,736 net of minority interest) on the sale of four
communities containing 1,844 units and a land parcel, reduced by
losses of $4,757 ($4,239 net of minority interest) resulting
from losses on the sale of certain land parcels and reserves to
write-down to fair value, less selling costs, one community and
certain other land parcels classified as held for sale. These
sales generated net proceeds of approximately $163,560. For the
year ended December 31, 2002, the Company recognized net
gains of $27,921 ($24,545 net of minority interest) from the
sale of six communities containing 2,125 units, one commercial
property and certain land parcels, offset by reserves of $11,351
($9,978 net of minority interest) to write down to fair market
value, less selling costs, certain land parcels classified as
held for sale. These sales generated net proceeds of
approximately $140,823.

Under prior accounting pronouncements, 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 sale of assets reported in continuing operations in the
consolidated statements of operations for the years ended
December 31, 2002 and 2001.

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 approximately $13,275. These gains
excluded losses of $4,861 related to these assets that were
written down to their estimated fair value, less selling costs,
at December 31, 2001. For the years ended December 31,
2002 and 2001, the consolidated statement of operations included
net income from these properties of $369 and $3,227,
respectively. For the year ended December 31, 2001, net
income reflected above includes depreciation expense of $844. No
depreciation expense was recorded on such assets in 2002.

In 2001, the Company sold six apartment
communities containing 2,799 units and various land parcels for
net proceeds of approximately $220,122. These sales resulted in
net gains of approximately $16,365. For the year ended




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





December 31, 2001, the aggregate net gain on
the sale of assets of $23,942 included the impact of estimated
net losses totaling $11,490 on the write down to fair value,
less selling costs, of assets designated as held for sale at
December 31, 2001 and excluded realized losses totaling
$19,067 related to assets written down to their estimated fair
value, less selling costs, at December 31, 2000.

6. SHAREHOLDERS EQUITY /
MINORITY INTEREST

Preferred Stock

At December 31, 2003 and 2002, the Company
had issued three series of cumulative redeemable preferred stock
with the following characteristics:

|            |  |             |       |            |  |                 |          |          |  |   |       |  |  |  |       |  
|----------- |  | ----------- | ----- | ---------- |  | --------------- | -------- | -------- |  | - | ----- |  |  |  | ----- | -
|            |  | Liquidation |       | Optional   |  | Redemption      |          | Stated  
|            |  | Preference  |       | Redemption |  | Price           |          | Dividend
|Description |  | (per share) |       | Date (1)   |  | (per share) (1) |          | Rate    
|            |  |             |       |            |  |                 |          |         
|Series A    |  | $           | 50.00 |            |  |                 | 10/01/26 |          |  | $ | 50.00 |  |  |  | 8.5   | %
|Series B    |  | $           | 25.00 |            |  |                 | 10/28/07 |          |  | $ | 25.00 |  |  |  | 7.625 | %
|Series C    |  | $           | 25.00 |            |  |                 | 02/09/03 |          |  | $ | 25.00 |  |  |  | 7.625 | %






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

On March 5, 2004, the Company redeemed its
7 5/8% 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 March 5, 2004. 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 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 Company will reflect the $1,716 of issuance
costs as a reduction of earnings in arriving at net income
available to common shareholders in the first quarter of 2004.

Computation of Earnings Per Common
Share

For the years ended December 31, 2003, 2002
and 2001, basic and diluted earnings per common share for income
(loss) from continuing operations available to common
shareholders, before cumulative effect of accounting change, has
been computed as follows:

|                                                                     |  |                              |         |               |  |           |            |     |  |   |       |  
|-------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | --------- | ---------- | --- |  | - | ----- | -
|                                                                     |  |                             
|                                                                     |  | Year ended December 31, 2003
|                                                                     |  |                             
|                                                                     |  | Income                       |         | Shares        |  | Per-Share
|                                                                     |  | (Numerator)                  |         | (Denominator) |  | Amount   
|                                                                     |  |                              |         |               |  |          
|Loss from continuing operations                                      |  | $                            | (19,973 | )             |  |           |            |     |  |   |       |  
|Less: Preferred stock dividends                                      |  |                              | (11,449 | )             |  |           |            |     |  |   |       |  
|                                                                     |  |                              |         |               |  |           |            |     |  |   |       |  
|Basic EPS                                                            |  |                              |         |               |  |           |            |     |  |   |       |  
|Loss from continuing operations available to
    common shareholders |  |                              | (31,422 | )             |  |           | 37,687,524 |     |  | $ | (0.83 | )
|                                                                     |  |                              |         |               |  |           |            |     |  |   |       |  
|Effect of dilutive securities                                        |  |                              |         |               |  |           |            |     |  |   |       |  
|Stock options                                                        |  |                              |        |               |  |           |           | (1) |  |   |       |  
|                                                                     |  |                              |         |               |  |           |            |     |  |   |       |  
|Diluted EPS                                                          |  |                              |         |               |  |           |            |     |  |   |       |  
|Loss from continuing operations available to
    common shareholders |  | $                            | (31,422 | )             |  |           | 37,687,524 |     |  | $ | (0.83 | )
|                                                                     |  |                              |         |               |  |           |            |     |  |   |       |  




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





|                                                                       |  |                              |         |               |  |           |            |  |  |   |      | 
|---------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | --------- | ---------- |  |  | - | ---- | 
|                                                                       |  |                             
|                                                                       |  | Year ended December 31, 2002
|                                                                       |  |                             
|                                                                       |  | Income                       |         | Shares        |  | Per-Share
|                                                                       |  | (Numerator)                  |         | (Denominator) |  | Amount   
|                                                                       |  |                              |         |               |  |          
|Income from continuing operations                                      |  | $                            | 31,000  |               |  |           |            |  |  |   |      | 
|Less: Preferred stock dividends                                        |  |                              | (11,449 | )             |  |           |            |  |  |   |      | 
|                                                                       |  |                              |         |               |  |           |            |  |  |   |      | 
|Basic EPS                                                              |  |                              |         |               |  |           |            |  |  |   |      | 
|Income from continuing operations available to
    common shareholders |  |                              | 19,551  |               |  |           | 36,939,144 |  |  | $ | 0.53 | 
|                                                                       |  |                              |         |               |  |           |            |  |  |   |      | 
|Effect of dilutive securities                                          |  |                              |         |               |  |           |            |  |  |   |      | 
|Stock options                                                          |  |                              |        |               |  |           | 14,818     |  |  |   |      | 
|                                                                       |  |                              |         |               |  |           |            |  |  |   |      | 
|Diluted EPS                                                            |  |                              |         |               |  |           |            |  |  |   |      | 
|Income from continuing operations available to
    common shareholders |  | $                            | 19,551  |               |  |           | 36,953,962 |  |  | $ | 0.53 | 
|                                                                       |  |                              |         |               |  |           |            |  |  |   |      | 

|                                                                                                                     |  |                              |         |               |  |           |            |  |  |   |      | 
|-------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | --------- | ---------- |  |  | - | ---- | 
|                                                                                                                     |  |                             
|                                                                                                                     |  | Year ended December 31, 2001
|                                                                                                                     |  |                             
|                                                                                                                     |  | Income                       |         | Shares        |  | Per-Share
|                                                                                                                     |  | (Numerator)                  |         | (Denominator) |  | Amount   
|                                                                                                                     |  |                              |         |               |  |          
|Income from continuing operations                                                                                    |  | $                            | 67,161  |               |  |           |            |  |  |   |      | 
|Less: Preferred stock dividends                                                                                      |  |                              | (11,768 | )             |  |           |            |  |  |   |      | 
|Less: Preferred stock redemption costs                                                                               |  |                              | (239    | )             |  |           |            |  |  |   |      | 
|Basic EPS                                                                                                            |  |                              |         |               |  |           |            |  |  |   |      | 
|Income from continuing operations available to
    common shareholders before cumulative effect of accounting change |  |                              | 55,154  |               |  |           | 38,052,673 |  |  | $ | 1.45 | 
|                                                                                                                     |  |                              |         |               |  |           |            |  |  |   |      | 
|Effect of dilutive securities                                                                                        |  |                              |         |               |  |           |            |  |  |   |      | 
|Stock options                                                                                                        |  |                              |        |               |  |           | 215,266    |  |  |   |      | 
|                                                                                                                     |  |                              |         |               |  |           |            |  |  |   |      | 
|Diluted EPS                                                                                                          |  |                              |         |               |  |           |            |  |  |   |      | 
|Income from continuing operations available to
    common shareholders before cumulative effect of accounting change |  | $                            | 55,154  |               |  |           | 38,267,939 |  |  | $ | 1.44 | 
|                                                                                                                     |  |                              |         |               |  |           |            |  |  |   |      | 






|    |                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | For the year ended December 31, 2003, the
    potential dilution from the Companys outstanding stock
    options of 11,052 shares was antidilutive to the loss from
    continuing operations per share calculation. As such, these
    amounts were excluded from weighted average shares in 2003.

In 2003, 2002 and 2001, stock options to purchase
4,734,812, 3,842,747 and 1,716,975 shares of common stock,
respectively, were excluded from the computation of diluted
earnings per share as these options were antidilutive.

Preferred Units

The Operating Partnership has outstanding
2,800,000, 8% Series D cumulative redeemable preferred
units (the Series D Preferred Units). The
Series D Preferred Units have a liquidation preference of
$25.00 per unit and are redeemable by the Operating Partnership
on or after September 3, 2004, at a redemption price of
$25.00 per unit. The Series D Preferred Units are
exchangeable into authorized, but unissued Series D
preferred stock of the Company, with identical terms and
preferences, on or after September 2, 2009, at the option
of the holders. Under certain circumstances, as defined in the
agreement, the Series D Preferred Units may be exchanged
prior September 2, 2009, at the option of the holders.
These Series D Preferred Units are reflected in the
accompanying consolidated balance sheets as preferred minority
interests at their liquidation preference of $70,000.



|   |                                                                                   
|-- | ----------------------------------------------------------------------------------
|7. | SEVERANCE, PROXY AND PROJECT ABANDONMENT,
    EMPLOYEE SEVERANCE AND OTHER 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




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





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.

As discussed above, 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 period from the date of the charges
through December 31, 2003:

|                                                    |  |   |        |  
|--------------------------------------------------- |  | - | ------ | -
|Aggregate severance charges                         |  | $ | 21,506 |  
|Payments for period                                 |  |   | (3,237 | )
|Interest accretion                                  |  |   | 902    |  
|                                                    |  |   |        |  
|Accrued severance charges at December 31,
    2003. |  | $ | 19,171 |  
|                                                    |  |   |        |  

Substantially all of these remaining amounts will
be paid over the remaining terms of the employment contracts (10
to 13 years) of the former chairman and vice chairman of
the board of directors.

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 are expected to be settled in 2004.
Through December 31, 2003, substantially all of the proxy
and related costs have been paid.

In the fourth quarter of 2001, the Company
recorded project abandonment, employee severance and other
charges totaling $17,450. These charges, precipitated by the
sharp decline in economic and market conditions, reflected
managements decision to focus its business and new
development strategy on fewer markets, to focus on its core
business of owning, developing and managing multifamily real
estate assets and to do so with a smaller workforce and lower
overhead expenses. The project abandonment charge of $8,122
represented reserves on certain predevelopment and transaction
pursuit costs in markets the Company would no longer pursue for
development opportunities and for certain projects that will no
longer be pursued due to economic and market conditions. The
employee severance charge of $3,560 was primarily for severance
costs related to approximately a 100 person senior management
and staff workforce reduction plan initiated and completed in
the fourth quarter of 2001. Other charges included a loss of
$2,831 related to the disposition of the Companys
corporate aircraft, a loss of $452 on the sale of the
Companys third party landscape business discussed more
fully below, write-downs of $1,000 related to the Companys
exit from the then-existing for-sale housing business in all
markets and the write-down to estimated market value of certain
internet and technology investments of $1,485. As of
December 31, 2003, substantially all of these charges have
been paid.

In the fourth quarter of 2001, the Company sold
substantially all of the net assets of Post Landscape Group,
Inc. (PLG) a subsidiary entity that provided
landscape maintenance, design and installation services to third
parties. As the business was sold to the former management team
and initially financed 100% by the Company, the transaction was
not reflected as a sale at December 31, 2001. As the
transaction resulted in a net loss, the net loss was recognized
in the fourth quarter of 2001 and included in the charge
discussed above. In the first quarter of 2002, the Company
received payments representing approximately 26% of the
outstanding note balance. As these payments constituted adequate
initial principal payments under the notes, the sale was
recognized in the first quarter of 2002. The impact of the sale
recognition was to record the note receivable (outstanding
balance of $2,750 at December 31, 2003) and to remove the
net assets and liabilities of the former PLG from the
Companys financial statements. No further gain or loss was
recognized in 2002.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





The Company also sold substantially all of the
net assets of RAM Partners, Inc. (RAM), a separate
subsidiary entity that managed apartment communities for third
parties, in the fourth quarter 2001. This business was sold to
the former management team of RAM and the sale was 100% financed
by the Company. Through the second quarter of 2002, the Company
had received payments under the notes representing approximately
10% of the original outstanding note balance. As these payments
constituted adequate initial principal payments under the notes,
the sale was recognized in the second quarter of 2002. The
impact of the sale recognition was to record the note receivable
(the note balance was fully repaid in 2003), record a net gain
of $510 and to remove the net assets and liabilities of the
former RAM from the Companys financial statements.

During the first quarter of 2002, the Company
transferred certain construction contracts of Post Construction
Services Inc., its third party construction business, to Oxford
Properties, LLC (Oxford Properties) in exchange for
Oxford Properties assumption of substantially all of Post
Construction Services liabilities related to the
transferred assets. In approving the transaction, the
Companys board of directors ascribed nominal value to the
assets being transferred. The assets consisted principally of
third party construction contracts for the construction of four
garden style apartment, condominium and townhouse communities as
well as related subcontracts, indemnities and guarantees. In
connection with the transfer of Post Construction Services
construction contracts, Oxford Properties had the right to
receive a deferred fee upon completion of one of the
construction projects in the amount of $500. Oxford Properties
had also agreed to employ 28 former Company and Post
Construction Services employees. As a result, the Company was
not responsible for costs that would have otherwise resulted
from winding up the third party construction business. The
Company recorded a charge of $500 in the fourth quarter of 2001
relating to its exit from the third party construction business.
Oxford Properties is an entity owned by former officers of the
Company and by the son of the Companys former chairman and
chief executive officer.

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, 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, 2003, the impact of these taxable REIT
subsidiaries income taxes and their related tax attributes
were not material to the accompanying consolidated financial
statements.

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)

(Dollars 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, 2003, 2002 and 2001
is detailed below.

|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |         |  
|------------------------------------------------------------- | ------------------------------------------------------- | ---------- | ------- | -------- | - | -------- | ------- | ------ | - | - | ------- | ------- | -
|                                                              |                                                         | 2003       |         | 2002     |   | 2001    
|                                                              |                                                         | (Estimate) |         | (Actual) |   | (Actual)
|                                                              |                                                         |            |         |          |   |         
|Net income                                                    |                                                         | $          | 14,156  |          |   | $        | 60,746  |        |   | $ | 86,927  |        
|Add net loss (income) of taxable REIT
    subsidiaries        |                                                         |            | 691     |          |   |          | (780    | )      |   |   | 9,491   |        
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |        
|Adjusted net income                                           |                                                         |            | 14,847  |          |   |          | 59,966  |        |   |   | 96,418  |        
|                                                              | Book/tax depreciation difference                        |            |         | (4,974   | ) |          |         | (6,431 | ) |   |         | (20,931 | )
|                                                              | Book/tax difference on gains from real estate
    sales |            |         | 4,346    |   |          |         | 12,802 |   |   |         | 35,763  |  
|                                                              | Other book/tax differences, net                         |            |         | 21,979   |   |          |         | (8,412 | ) |   |         | (8,057  | )
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |        
|Taxable income before allocation of taxable
    capital gains |                                                         |            | 36,198  |          |   |          | 57,925  |        |   |   | 103,193 |        
|Income taxable as capital gains                               |                                                         |            | (34,276 | )        |   |          | (39,207 | )      |   |   | (50,364 | )      
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |        
|Taxable ordinary income                                       |                                                         | $          | 1,922   |          |   | $        | 18,718  |        |   | $ | 52,829  |        
|                                                              |                                                         |            |         |          |   |          |         |        |   |   |         |        

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, 2003, 2002 and 2001:

|                                |  |        |      |      |  |        |        |   |  |        |      |   |  |  |        |  |  |   |      |  |  |  |        | 
|------------------------------- |  | ------ | ---- | ---- |  | ------ | ------ | - |  | ------ | ---- | - |  |  | ------ |  |  | - | ---- |  |  |  | ------ | 
|                                |  |        |      |      |  |       
|                                |  | 2003   |      | 2002 |  | 2001  
|                                |  |        |      |      |  |       
|                                |  | Amount |      | %    |  | Amount |        | % |  | Amount |      | %
|                                |  |        |      |      |  |        |        |   |  |        |      |  
|Ordinary income                 |  | $      | 0.16 |      |  |        | 7.4%   |   |  | $      | 0.93 |   |  |  | 29.9%  |  |  | $ | 1.58 |  |  |  | 51.1%  | 
|Capital gains                   |  |        | 0.36 |      |  |        | 16.8%  |   |  |        | 0.41 |   |  |  | 13.1%  |  |  |   | 0.55 |  |  |  | 17.8%  | 
|Unrecaptured Section 1250 gains |  |        | 0.31 |      |  |        | 14.5%  |   |  |        | 0.39 |   |  |  | 12.6%  |  |  |   | 0.64 |  |  |  | 20.5%  | 
|Return of capital               |  |        | 1.30 |      |  |        | 61.3%  |   |  |        | 1.39 |   |  |  | 44.4%  |  |  |   | 0.33 |  |  |  | 10.6%  | 
|                                |  |        |      |      |  |        |        |   |  |        |      |   |  |  |        |  |  |   |      |  |  |  |        | 
|                                |  | $      | 2.13 |      |  |        | 100.0% |   |  | $      | 3.12 |   |  |  | 100.0% |  |  | $ | 3.10 |  |  |  | 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, 2003, 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 higher than the net assets as reported
in the Companys consolidated financial statements by
$9,417.

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, 2003, 2002 and 2001.




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





Stock Option Plans

The Companys 1993 Employee Stock Plan (the
1993 Stock Plan), under which an aggregate of up to
6,000,000 shares of common stock were available for the grant of
stock options and restricted stock to employees and directors,
expired in July 2003. At December 31, 2003, stock options
outstanding under the 1993 Stock Plan totaled 3,897,812.

The 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 4,000,000 shares of common stock were reserved for
issuance. Of this amount, not more than 500,000 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, 2003, stock options outstanding under the 2003
Stock Plan totaled 837,000.

In 2003, 2002 and 2001, the Company granted stock
options to purchase 1,252,436, 18,323 and 415,529 shares of
Company common stock to Company officers and directors, of which
100,000 shares in 2003 were granted to the Companys
non-executive chairman of the board. For the year ended
December 31, 2003, general and administrative expenses
included compensation expense related to stock options of $244
($218, net of minority interest) 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:

|                        |  |      |              |      |  |      |              |  |  |  |              | 
|----------------------- |  | ---- | ------------ | ---- |  | ---- | ------------ |  |  |  | ------------ | 
|                        |  | 2003 |              | 2002 |  | 2001
|                        |  |      |              |      |  |     
|Dividend yield          |  |      | 6.4%         |      |  |      | 7.2%         |  |  |  | 8.4%         | 
|Expected volatility     |  |      | 17.1%        |      |  |      | 22.7%        |  |  |  | 15.1%        | 
|Risk-free interest rate |  |      | 2.8% to 3.2% |      |  |      | 2.7% to 5.3% |  |  |  | 3.7% to 5.3% | 
|Expected option life    |  |      | 5 years      |      |  |      | 5 to 7 years |  |  |  | 5 to 7 years | 

A summary of stock option activity under all
plans for the years ended December 31, 2003, 2002 and 2001, is
presented below.

|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|------------------------------------------------------------------ |  | ------ | --------- | -------------- |  | ------ | -- | -------------- |  | ------ | --------- | -------------- |  | - | -- |  |  | - | --------- | - |  | - | -- | 
|                                                                   |  |        |           |                |  |       
|                                                                   |  | 2003   |           | 2002           |  | 2001  
|                                                                   |  |        |           |                |  |       
|                                                                   |  |        |           | Weighted       |  |        |    | Weighted       |  |        |           | Weighted      
|                                                                   |  |        |           | Average        |  |        |    | Average        |  |        |           | Average       
|                                                                   |  | Shares |           | Exercise Price |  | Shares |    | Exercise Price |  | Shares |           | Exercise Price
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |               
|Outstanding at beginning of year                                   |  |        | 4,089,493 |                |  | $      | 35 |                |  |        | 4,228,218 |                |  | $ | 36 |  |  |   | 4,271,608 |   |  | $ | 35 | 
|Granted                                                            |  |        | 1,252,436 |                |  |        | 26 |                |  |        | 18,323    |                |  |   | 24 |  |  |   | 415,529   |   |  |   | 37 | 
|Exercised                                                          |  |        | (217,275  | )              |  |        | 28 |                |  |        | (15,000   | )              |  |   | 31 |  |  |   | (262,332  | ) |  |   | 30 | 
|Forfeited                                                          |  |        | (389,842  | )              |  |        | 32 |                |  |        | (142,048  | )              |  |   | 38 |  |  |   | (196,587  | ) |  |   | 38 | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|Outstanding at end of year                                         |  |        | 4,734,812 |                |  |        | 34 |                |  |        | 4,089,493 |                |  |   | 35 |  |  |   | 4,228,218 |   |  |   | 36 | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|Options exercisable at year-end                                    |  |        | 3,232,739 |                |  |        |    |                |  |        | 3,464,759 |                |  |   |    |  |  |   | 2,962,245 |   |  |   |    | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|Weighted-average fair value of options granted
    during the year |  | $      | 1.59      |                |  |        |    |                |  | $      | 2.13      |                |  |   |    |  |  | $ | 1.44      |   |  |   |    | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 

At December 31, 2003, the Company has
separated its outstanding options into two ranges based on
exercise prices. There were 1,512,057 options outstanding with
exercise prices ranging from $22.95 to $30.29. These options
have a weighted average exercise price of $26.49 and a weighted
average remaining contractual life of 8 years. Of these
outstanding options, 289,057 were exercisable at
December 31, 2003 at a weighted average exercise price of
$30.00. In addition, there were 3,222,755 options outstanding
with exercise prices ranging from $31.00 to $44.13. These
options have a weighted average exercise price of $36.90 and a
weighted average remaining contractual life of




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





5 years. Of these outstanding options,
2,943,682 were exercisable at December 31, 2003 at a
weighted average exercise price of $37.00.

In 2003, 2002 and 2001, the Company granted
174,509, 15,353 and 17,566 shares of restricted stock,
respectively, to Company officers and directors, of which 7,672
shares in 2003 were granted to the Companys non-executive
chairman of the board. The restricted shares granted in 2003
vest ratably over three to eight year periods. The restricted
shares granted in 2002 and 2001 vest ratably over three to five
year periods. For each year, the total value of the restricted
share grants of $4,555, $459 and $616, 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 $742, $265 and $171 in 2003, 2002 and 2001,
respectively.

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase
Plan (ESPP) to encourage stock ownership by eligible
directors and employees. To participate in the ESPP,
(i) directors must not be employed by the Company or the
Operating Partnership and 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. 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 $85
in 2003. 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 $513, $452 and $638 were made to this plan in
2003, 2002 and 2001, 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 office, equipment and other operating leases with terms
expiring in years 2004 through 2006. Future minimum lease
payments for non-cancelable land, office, equipment and other
leases at December 31, 2003, are as follows:

|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2004                |  | $ | 1,285   | 
|2005                |  |   | 1,246   | 
|2006                |  |   | 1,234   | 
|2007                |  |   | 1,257   | 
|2008                |  |   | 1,278   | 
|2009 and thereafter |  |   | 148,909 | 

The Company incurred $4,382, $5,223 and $5,998 of
rent expense for the years ended December 31, 2003, 2002
and 2001, respectively.




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##### Table of Contents



POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





Legal proceedings

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 alleges various breaches of
fiduciary duties by the board of directors of the Company and
seeks, among other relief, the disclosure of certain information
by the defendants. This complaint also seeks 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 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 alleges breaches of fiduciary duties, abuse of control and
corporate waste by the defendants. The plaintiff seeks monetary
damages and, as appropriate, injunctive relief. These lawsuits
are expected to be settled in 2004. 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 the proxy and related costs
charge.

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 2003, 2002 and 2001, the Company held
investments in Property LLCs accounted for under the
equity method of accounting (see note 4). In 2003, 2002 and
2001, 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
$2,913, $11,916 and $15,202, respectively, from these related
companies. Additionally in 2003, 2002 and 2001, the Company
earned interest under construction loans to the Project LLCs
totaling $3,186, $4,482 and $1,024, respectively.

The Company provides landscaping services for
executive officers, employees, directors and other related
parties. For the years ended December 31, 2003, 2002 and
2001, the Company received landscaping revenue of $742, $775 and
$705, respectively, for such services. Such revenue includes
reimbursement of direct and indirect expenses. Additionally, the
Company provides accounting and administrative services to
entities controlled by certain directors of the Company. Fees
under this arrangement aggregated $11 for the year ended
December 31, 2003 and $25 for each of the years ended
December 31, 2002 and 2001.

At December 31, 2003 and 2002, the Company
had outstanding loan balances to certain current and former
company executives totaling $6,075 and $7,600, 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, 2003 and 2002, the Company had outstanding
additional loans to certain company executives totaling $920 and
$1,140, 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 $160 was recorded as compensation expense.

13. DERIVATIVE FINANCIAL
INSTRUMENTS

At December 31, 2003 and 2002, the Company
had outstanding interest rate swap agreements with a notional
value of $129,000 with maturity dates ranging from 2005 to 2009.
For the years ended December 31, 2003, 2002 and 2001, the
company recorded unrealized net gains of $3,655, net of minority
interest, unrealized net losses of $8,958, net of minority
interest, and unrealized net losses of $4,565, net of minority
interest, respectively, on these cash flow hedges as increases
and decreases in accumulated other comprehensive income, a
shareholders equity account, in the accompanying
consolidated balance sheet. Within the next twelve months, the
Company expects to reclassify out of accumulated other
comprehensive income approximately $5,851.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





In 2003, the Company entered into two interest
rate cap arrangements with two financial institutions. The new
interest rate cap arrangements replaced three expiring interest
rate cap arrangements and were structured as cash flow hedges to
provide a fixed ceiling at 5% for the Companys variable
rate, tax exempt borrowings. 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, 2003, the difference of $1,314 ($1,195 net of
minority interest) between the amortized costs of the interest
rate cap arrangements of $2,720 and their fair value of $1,406
is included as an unrealized loss in accumulated other
comprehensive income, a shareholders equity account. The
$2,720 cost of the arrangements is being amortized as additional
expense over their five-year term in accordance with SFAS
No. 133, as amended.

Upon the adoption of SFAS No. 133 in 2001,
the Company recorded a net transition loss of $613, net of
minority interest, relating to the write down of the book value
of its interest rate cap agreements to their fair value. This
loss was reflected as a cumulative effect of accounting change
in the consolidated statement of operations for the year ended
December 31, 2001.

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 $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. The fair
value of fixed rate debt was approximately $928,313 (carrying
value of $877,706) and the fair value of floating rate debt
approximated its carrying value due to the adjustable nature of
the arrangements at December 31, 2002.

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. At December 31, 2003, the carrying
amounts of the interest rate swap arrangements represented net
liabilities totaling $12,832 ($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, 2003. 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 four segments based on the
various stages in the apartment community ownership lifecycle.
These segments are described below. All commercial and




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)





other ancillary service and support operations,
including the third party service businesses (see note 7), are
aggregated 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, 2003. The segment information for the years
ended December 31, 2002 and 2001 have been adjusted due to the
restatement impact of reclassifying the operating results of the
assets designated as held for sale in 2003 and 2002 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.                                      
|
| |  | Sold communities  communities which
    were sold in the current or prior year 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 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 income (loss) from continuing
operations is the most directly comparable GAAP measure to
net operating income.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars 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 NOI to income
(loss) from continuing operations for the years ended
December 31, 2003, 2002 and 2001. 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 at the segment level is not reported
internally.

|                                                                     |                       |      |         |         |  |      |         |         |  |   |         |         | 
|-------------------------------------------------------------------- | --------------------- | ---- | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                                                                     |                       | 2003 |         | 2002    |  | 2001
|                                                                     |                       |      |         |         |  |     
|Revenues                                                             |                       |      |         |         |  |      |         |         |  |   |         |        
|Fully stabilized communities                                         |                       | $    | 221,592 |         |  | $    | 229,477 |         |  | $ | 243,589 |        
|Communities stabilized during prior year                             |                       |      | 31,294  |         |  |      | 26,322  |         |  |   | 15,685  |        
|Development and lease-up communities                                 |                       |      | 16,539  |         |  |      | 9,064   |         |  |   | 6,911   |        
|Sold communities                                                     |                       |      |        |         |  |      | 745     |         |  |   | 19,659  |        
|Other                                                                |                       |      | 20,065  |         |  |      | 20,410  |         |  |   | 33,474  |        
|Interest income                                                      |                       |      | 894     |         |  |      | 1,288   |         |  |   | 1,771   |        
|                                                                     |                       |      |         |         |  |      |         |         |  |   |         |        
|                                                                     | Consolidated revenues |      | $       | 290,384 |  |      | $       | 287,306 |  |   | $       | 321,089 | 
|                                                                     |                       |      |         |         |  |      |         |         |  |   |         |        
|Contribution to Property Net Operating
    Income                    |                       |      |         |         |  |      |         |         |  |   |         |        
|Fully stabilized communities                                         |                       | $    | 141,419 |         |  | $    | 150,543 |         |  | $ | 163,866 |        
|Communities stabilized during prior year                             |                       |      | 19,913  |         |  |      | 16,037  |         |  |   | 9,070   |        
|Development and lease-up communities                                 |                       |      | 8,955   |         |  |      | 4,854   |         |  |   | 4,345   |        
|Sold communities                                                     |                       |      |        |         |  |      | 369     |         |  |   | 12,329  |        
|Other                                                                |                       |      | (2,538  | )       |  |      | (1,167  | )       |  |   | 1,627   |        
|                                                                     |                       |      |         |         |  |      |         |         |  |   |         |        
|Consolidated property net operating income                           |                       |      | 167,749 |         |  |      | 170,636 |         |  |   | 191,237 |        
|                                                                     |                       |      |         |         |  |      |         |         |  |   |         |        
|Interest income                                                      |                       |      | 894     |         |  |      | 1,288   |         |  |   | 1,771   |        
|Third party services                                                 |                       |      |        |         |  |      |        |         |  |   | 1,065   |        
|Minority interest in consolidated property
    partnerships          |                       |      | 2,024   |         |  |      | 2,055   |         |  |   | 2,098   |        
|Gains on property sales                                              |                       |      |        |         |  |      | 13,275  |         |  |   | 23,942  |        
|Depreciation                                                         |                       |      | (83,700 | )       |  |      | (76,760 | )       |  |   | (63,312 | )      
|Interest                                                             |                       |      | (64,905 | )       |  |      | (52,035 | )       |  |   | (43,653 | )      
|Amortization of deferred loan costs                                  |                       |      | (3,801  | )       |  |      | (2,327  | )       |  |   | (1,978  | )      
|General and administrative                                           |                       |      | (15,102 | )       |  |      | (14,431 | )       |  |   | (13,256 | )      
|Development costs and other                                          |                       |      | (2,138  | )       |  |      | (830    | )       |  |   | (88     | )      
|Severance charges                                                    |                       |      | (21,506 | )       |  |      |        |         |  |   |        |        
|Proxy and related costs                                              |                       |      | (5,231  | )       |  |      |        |         |  |   |        |        
|Project abandonment, employee severance and other
    charges        |                       |      |        |         |  |      |        |         |  |   | (17,450 | )      
|Equity in income (losses) of unconsolidated
    real estate entities |                       |      | 7,791   |         |  |      | (1,590  | )       |  |   | (186    | )      
|Minority interest of preferred unitholders                           |                       |      | (5,600  | )       |  |      | (5,600  | )       |  |   | (5,600  | )      
|Minority interest of common unitholders                              |                       |      | 3,552   |         |  |      | (2,681  | )       |  |   | (7,429  | )      
|                                                                     |                       |      |         |         |  |      |         |         |  |   |         |        
|Income (loss) from continuing operations                             |                       | $    | (19,973 | )       |  | $    | 31,000  |         |  | $ | 67,161  |        
|                                                                     |                       |      |         |         |  |      |         |         |  |   |         |        

16. SUPPLEMENTAL CASH FLOW
INFORMATION

Non-cash investing and financing activities for
the years ended December 31, 2003, 2002 and 2001 were as
follows:



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | In 2003, 2002 and 2001, holders of 1,161,918,
    289,463 and 62,523 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 capital allocated to the unitholders of the
    Operating Partnership on the dates of the offerings, the
    subsequent 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 $20,802, $5,656 and $5,194 for the years ended
    December 31, 2003, 2002 and 2001, respectively.




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POST PROPERTIES, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in thousands, except per share
data)







|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The Operating Partnership committed to distribute
    $19,043, $32,785 and $32,741 for the quarters ended
    December 31, 2003, 2002 and 2001, respectively. As a
    result, the Company declared dividends of $17,391, $29,018 and
    $28,748 for the quarters ended December 31, 2003, 2002 and
    2001, respectively. The remaining distributions from the
    Operating Partnership in the amount of $1,652, $3,767 and $3,993
    for the quarters ended December 31, 2003, 2002 and 2001,
    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, 2003 and 2002, as revised to
reflect the change discussed above, was as follows:

|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|---------------------------------------------------------------- |  | ---------------------------- | ------- | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | -
|                                                                 |  |                             
|                                                                 |  | Year ended December 31, 2003
|                                                                 |  |                             
|                                                                 |  | First                        |         | Second |  | Third |        | Fourth
|                                                                 |  |                              |         |        |  |       |        |       
|Revenues                                                         |  | $                            | 71,587  |        |  | $     | 72,392 |        |  | $ | 73,480 |   |  | $ | 72,925 |  
|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations                         |  |                              | (17,545 | )      |  |       | 1,280  |        |  |   | (1,744 | ) |  |   | (1,964 | )
|Income (loss) from discontinued operations                       |  |                              | (3,041  | )      |  |       | 26,409 |        |  |   | 92     |   |  |   | 10,669 |  
|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income (loss)                                                |  |                              | (20,586 | )      |  |       | 27,689 |        |  |   | (1,652 | ) |  |   | 8,705  |  
|Dividends to preferred shareholders                              |  |                              | (2,863  | )      |  |       | (2,862 | )      |  |   | (2,862 | ) |  |   | (2,862 | )
|                                                                 |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income (loss) available to common
    shareholders           |  | $                            | (23,449 | )      |  | $     | 24,827 |        |  | $ | (4,514 | ) |  | $ | 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   |  

|                                                          |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|--------------------------------------------------------- |  | ---------------------------- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | -
|                                                          |  |                             
|                                                          |  | Year ended December 31, 2002
|                                                          |  |                             
|                                                          |  | First                        |        | Second |  | Third |        | Fourth
|                                                          |  |                              |        |        |  |       |        |       
|Revenues                                                  |  | $                            | 71,480 |        |  | $     | 70,348 |        |  | $ | 73,246 |   |  | $ | 72,232 |  
|                                                          |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Income from continuing operations                         |  |                              | 18,555 |        |  |       | 5,641  |        |  |   | 4,640  |   |  |   | 2,164  |  
|Income (loss) from discontinued operations                |  |                              | (1,534 | )      |  |       | 19,421 |        |  |   | 1,513  |   |  |   | 10,346 |  
|                                                          |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income                                                |  |                              | 17,021 |        |  |       | 25,062 |        |  |   | 6,153  |   |  |   | 12,510 |  
|Dividends to preferred shareholders                       |  |                              | (2,863 | )      |  |       | (2,862 | )      |  |   | (2,862 | ) |  |   | (2,862 | )
|                                                          |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income available to common shareholders               |  | $                            | 14,158 |        |  | $     | 22,200 |        |  | $ | 3,291  |   |  | $ | 9,648  |  
|                                                          |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Earnings per common share: (1)                            |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income available to common
    shareholders  basic   |  |                              | 0.38   |        |  |       | 0.60   |        |  |   | 0.09   |   |  |   | 0.26   |  
|Net income available to common
    shareholders  diluted |  |                              | 0.38   |        |  |       | 0.60   |        |  |   | 0.09   |   |  |   | 0.26   |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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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REPORT OF INDEPENDENT AUDITORS

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

In our opinion, the consolidated financial
statements listed in the index appearing under
Item 15(a)(1) present fairly, in all material respects, the
financial position of Post Apartment Homes, L.P. and
subsidiaries at December 31, 2003 and 2002, and the results
of their operations and their cash flows for each of the three
years in the period ended December 31, 2003 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)(2)
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 financial statement schedule are the responsibility of the
Operating Partnerships management; our responsibility is
to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing
standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit 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.

As discussed in Note 1, on January 1, 2003,
the Operating Partnership elected to 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 by SFAS
No. 148, Accounting for Stock-Based
Compensation  Transition and Disclosure. Also
discussed in Note 1, the Operating Partnership adopted SFAS
No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 138, on January 1,
2001.

PricewaterhouseCoopers LLP (signed)

Atlanta, Georgia

March 11, 2004





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POST APARTMENT HOMES, L.P.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except per unit
data)


|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |           |           |         | 
|------------------------------------ | ------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------- | ---------------- | --------- | --------- | ------- | --------- | --------- | --------- | ------- | 
|                                     |                                       |                                                                                                                                
|                                     |                                       | December 31,                                                                                                                   
|                                     |                                       |                                                                                                                                
|                                     |                                       | 2003                                                                                                                            |                  | 2002     
|                                     |                                       |                                                                                                                                 |                  |          
|ASSETS                               |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     | Real estate assets                    |                                                                                                                                 |                  |           |           |         |           |           |          
|                                     |                                       | Land                                                                                                                            |                  | $         | 254,000   |         |           | $         | 273,058   |        
|                                     |                                       | Building and improvements                                                                                                       |                  |           | 1,883,582 |         |           |           | 1,976,809 |        
|                                     |                                       | Furniture, fixtures and equipment                                                                                               |                  |           | 214,002   |         |           |           | 246,634   |        
|                                     |                                       | Construction in progress                                                                                                        |                  |           | 12,946    |         |           |           | 92,945    |        
|                                     |                                       | Investments in and advances to unconsolidated
    real estate entities                                                          |                  |           | 74,786    |         |           |           | 182,285   |        
|                                     |                                       | Land held for future development                                                                                                |                  |           | 11,994    |         |           |           | 24,879    |        
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     |                                       |                                                                                                                                 | 2,451,310        |           |           |         | 2,796,610 |          
|                                     |                                       | Less: accumulated depreciation                                                                                                  |                  |           | (432,157  | )       |           |           | (426,136  | )      
|                                     |                                       | Assets held for sale net of accumulated
    depreciation of $74,614 and $17,829 at December 31, 2003
    and 2002, respectively |                  |           | 145,238   |         |           |           | 73,061    |        
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     |                                       | Total real estate assets                                                                                                        |                  |           | 2,164,391 |         |           |           | 2,443,535 |        
|                                     | Cash and cash equivalents             |                                                                                                                                 |                  | 1,334     |           |         |           | 6,390     |          
|                                     | Restricted cash                       |                                                                                                                                 |                  | 2,065     |           |         |           | 1,369     |          
|                                     | Deferred charges, net                 |                                                                                                                                 |                  | 12,285    |           |         |           | 15,584    |          
|                                     | Other assets                          |                                                                                                                                 |                  | 35,376    |           |         |           | 41,273    |          
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     |                                       | Total assets                                                                                                                    |                  | $         | 2,215,451 |         |           | $         | 2,508,151 |        
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          
|LIABILITIES AND PARTNERS
    EQUITY |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     | Indebtedness                          |                                                                                                                                 | $                | 1,186,322 |           |         | $         | 1,414,555 |          
|                                     | Accounts payable and accrued expenses |                                                                                                                                 |                  | 65,872    |           |         |           | 49,124    |          
|                                     | Accrued distribution payable          |                                                                                                                                 |                  | 19,509    |           |         |           | 33,252    |          
|                                     | Accrued interest payable              |                                                                                                                                 |                  | 6,923     |           |         |           | 8,994     |          
|                                     | Security deposits and prepaid rents   |                                                                                                                                 |                  | 7,890     |           |         |           | 8,250     |          
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     |                                       | Total liabilities                                                                                                               |                  |           | 1,286,516 |         |           |           | 1,514,175 |        
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     | Commitments and contingencies         |                                                                                                                                 |                  |           |           |         |           |           |          
|                                     | Partners equity                      |                                                                                                                                 |                  |           |           |         |           |           |          
|                                     |                                       | Preferred units                                                                                                                 |                  |           | 215,000   |         |           |           | 215,000   |        
|                                     |                                       | Common units                                                                                                                    |                  |           |           |         |           |           |           |        
|                                     |                                       |                                                                                                                                 | General partner  |           |           | 8,464   |           |           |           | 9,143   | 
|                                     |                                       |                                                                                                                                 | Limited partners |           |           | 719,618 |           |           |           | 786,682 | 
|                                     |                                       | Accumulated other comprehensive income                                                                                          |                  |           | (14,147   | )       |           |           | (16,849   | )      
|                                     |                                       | Total partners equity                                                                                                          |                  |           | 928,935   |         |           |           | 993,976   |        
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          
|                                     |                                       | Total liabilities and partners equity                                                                                          |                  | $         | 2,215,451 |         |           | $         | 2,508,151 |        
|                                     |                                       |                                                                                                                                 |                  |           |           |         |           |          

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




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POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF
OPERATIONS


(Dollars in thousands, except per unit
data)


|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |            |         | 
|---------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ---------------------------------------- | ------- | ---------- | ------- | ---- | ------ | ---------- | ------- | - | ------- | ---------- | ------- | 
|                                                                                                                                         |                                                                                                                |                                         
|                                                                                                                                         |                                                                                                                | Year Ended December 31,                 
|                                                                                                                                         |                                                                                                                |                                         
|                                                                                                                                         |                                                                                                                | 2003                                     |         | 2002       |         | 2001
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |     
|REVENUES                                                                                                                                 |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Rental                                                                                                         |                                          | $       | 279,325    |         |      | $      | 275,605    |         |   | $       | 293,836    |        
|                                                                                                                                         | Third party services                                                                                           |                                          |         |           |         |      |        |           |         |   |         | 14,088     |        
|                                                                                                                                         | Other                                                                                                          |                                          |         | 10,165     |         |      |        | 10,413     |         |   |         | 11,394     |        
|                                                                                                                                         | Interest                                                                                                       |                                          |         | 894        |         |      |        | 1,288      |         |   |         | 1,771      |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         |                                                                                                                | Total revenues                           |         |            | 290,384 |      |        |            | 287,306 |   |         |            | 321,089 | 
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|EXPENSES                                                                                                                                 |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Property operating and maintenance (exclusive of
    items shown separately below)                             |                                          |         | 121,741    |         |      |        | 115,382    |         |   |         | 113,993    |        
|                                                                                                                                         | Depreciation                                                                                                   |                                          |         | 83,700     |         |      |        | 76,760     |         |   |         | 63,312     |        
|                                                                                                                                         | Interest                                                                                                       |                                          |         | 64,905     |         |      |        | 52,035     |         |   |         | 43,653     |        
|                                                                                                                                         | Amortization of deferred loan costs                                                                            |                                          |         | 3,801      |         |      |        | 2,327      |         |   |         | 1,978      |        
|                                                                                                                                         | General and administrative                                                                                     |                                          |         | 15,102     |         |      |        | 14,431     |         |   |         | 13,256     |        
|                                                                                                                                         | Development and other                                                                                          |                                          |         | 2,138      |         |      |        | 830        |         |   |         | 88         |        
|                                                                                                                                         | Severance charges                                                                                              |                                          |         | 21,506     |         |      |        |           |         |   |         |           |        
|                                                                                                                                         | Proxy and related costs                                                                                        |                                          |         | 5,231      |         |      |        |           |         |   |         |           |        
|                                                                                                                                         | Project abandonment, employee severance and
    impairment charges                                             |                                          |         |           |         |      |        |           |         |   |         | 17,450     |        
|                                                                                                                                         | Minority interest in consolidated property
    partnerships                                                    |                                          |         | (2,024     | )       |      |        | (2,055     | )       |   |         | (2,098     | )      
|                                                                                                                                         | Third party services                                                                                           |                                          |         |           |         |      |        |           |         |   |         | 13,023     |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         |                                                                                                                | Total expenses                           |         |            | 316,100 |      |        |            | 259,710 |   |         |            | 264,655 | 
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|Income (loss) from continuing operations
    before equity in income (losses) of unconsolidated entities
    and gains on property sales |                                                                                                                |                                          | (25,716 | )          |         |      | 27,596 |            |         |   | 56,434  |           
|                                                                                                                                         | Equity in income (losses) of unconsolidated
    real estate entities                                           |                                          |         | 7,791      |         |      |        | (1,590     | )       |   |         | (186       | )      
|                                                                                                                                         | Gains on property sales                                                                                        |                                          |         |           |         |      |        | 13,275     |         |   |         | 23,942     |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         |                                                                                                                | Income (loss) from continuing operations |         |            | (17,925 | )    |        |            | 39,281  |   |         |            | 80,190  | 
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|Discontinued operations                                                                                                                  |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Income from discontinued operations                                                                            |                                          |         | 574        |         |      |        | 17,267     |         |   |         | 23,142     |        
|                                                                                                                                         | Gains on property sales                                                                                        |                                          |         | 37,448     |         |      |        | 16,570     |         |   |         |           |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         |                                                                                                                | Income from discontinued operations      |         |            | 38,022  |      |        |            | 33,837  |   |         |            | 23,142  | 
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|Income before cumulative effect of accounting
    change                                                                                 |                                                                                                                |                                          | 20,097  |            |         |      | 73,118 |            |         |   | 103,332 |           
|                                                                                                                                         | Cumulative effect of accounting change                                                                         |                                          |         |           |         |      |        |           |         |   |         | (695       | )      
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|Net income                                                                                                                               |                                                                                                                |                                          | 20,097  |            |         |      | 73,118 |            |         |   | 102,637 |           
|                                                                                                                                         | Distributions to preferred unitholders                                                                         |                                          |         | (17,049    | )       |      |        | (17,049    | )       |   |         | (17,368    | )      
|                                                                                                                                         | Redemption costs on preferred units                                                                            |                                          |         |           |         |      |        |           |         |   |         | (239       | )      
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|Net income available to common
    unitholders                                                                                           |                                                                                                                | $                                        | 3,048   |            |         | $    | 56,069 |            |         | $ | 85,030  |           
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|Per common unit
    data  basic                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Income (loss) from continuing operations
    (net of preferred distributions and redemption costs)             |                                          | $       | (0.83      | )       |      | $      | 0.53       |         |   | $       | 1.45       |        
|                                                                                                                                         | Income from discontinued operations                                                                            |                                          |         | 0.90       |         |      |        | 0.80       |         |   |         | 0.54       |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Income before cumulative effect of accounting
    change (net of preferred distributions and redemption costs) |                                          |         | 0.07       |         |      |        | 1.33       |         |   |         | 1.99       |        
|                                                                                                                                         | Cumulative effect of accounting change                                                                         |                                          |         |           |         |      |        |           |         |   |         | (0.02      | )      
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Net income available to common unitholders                                                                     |                                          | $       | 0.07       |         |      | $      | 1.33       |         |   | $       | 1.97       |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Weighted average common units outstanding                                                                      |                                          |         | 42,134,072 |         |      |        | 42,020,759 |         |   |         | 43,211,834 |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|Per common unit
    data  diluted                                                                                                       |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Income (loss) from continuing operations
    (net of preferred distributions and redemption costs)             |                                          | $       | (0.83      | )       |      | $      | 0.53       |         |   | $       | 1.44       |        
|                                                                                                                                         | Income from discontinued operations                                                                            |                                          |         | 0.90       |         |      |        | 0.80       |         |   |         | 0.53       |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Income before cumulative effect of accounting
    change (net of preferred distributions and redemption costs) |                                          |         | 0.07       |         |      |        | 1.33       |         |   |         | 1.98       |        
|                                                                                                                                         | Cumulative effect of accounting change                                                                         |                                          |         |           |         |      |        |           |         |   |         | (0.02      | )      
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Net income available to common unitholders                                                                     |                                          | $       | 0.07       |         |      | $      | 1.33       |         |   | $       | 1.96       |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Weighted average common units outstanding                                                                      |                                          |         | 42,134,072 |         |      |        | 42,035,577 |         |   |         | 43,427,100 |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           
|                                                                                                                                         | Common distributions declared                                                                                  |                                          | $       | 1.80       |         |      | $      | 3.12       |         |   | $       | 3.12       |        
|                                                                                                                                         |                                                                                                                |                                          |         |            |         |      |        |            |         |   |         |           

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




Post Properties, Inc.


83


Post Apartment Homes, L.P.




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##### Table of Contents



POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF PARTNERS
EQUITY


FOR THE YEARS ENDED DECEMBER 31, 2003, 2002
AND 2001


(Dollars in thousands, except per unit
data)


|                                        |                                                                                                                |                                            |         |              |        |             |        |               |     |       |         |          |        |   |         |   |         |   |           |          |         |  
|--------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------- | ------------ | ------ | ----------- | ------ | ------------- | --- | ----- | ------- | -------- | ------ | - | ------- | - | ------- | - | --------- | -------- | ------- | -
|                                        |                                                                                                                |                                            |         |              |        |             |        |              
|                                        |                                                                                                                |                                            |         | Common Units |        | Accumulated |        |              
|                                        |                                                                                                                |                                            |         |              |        | Other       |        |              
|                                        |                                                                                                                | Preferred                                  |         | General      |        | Limited     |        | Comprehensive |     |      
|                                        |                                                                                                                | Units                                      |         | Partner      |        | Partners    |        | Income        |     | Total
|                                        |                                                                                                                |                                            |         |              |        |             |        |               |     |      
|Partners Equity, December 31,
    2000 |                                                                                                                | $                                          | 220,000 |              |        | $           | 10,274 |               |     | $     | 986,427 |          |        | $ |        |   |         | $ | 1,216,701 |         
|                                        | Comprehensive income                                                                                           |                                            |         |              |        |             |        |               |     |       |         |          |        |   |         |   |         |   |           |          |        
|                                        |                                                                                                                | Net income                                 |         |              | 17,368 |             |        |               | 853 |       |         |          | 84,416 |   |         |   |        |   |           |          | 102,637 |  
|                                        |                                                                                                                | Cumulative effect of adoption of SFAS 133. |         |              |       |             |        |               |    |       |         |          |       |   |         |   | (1,472  | ) |           |          | (1,472  | )
|                                        |                                                                                                                | Net change in derivative value             |         |              |       |             |        |               |    |       |         |          |       |   |         |   | (5,173  | ) |           |          | (5,173  | )
|                                        |                                                                                                                |                                            |         |              |        |             |        |               |     |       |         |          |        |   |         |   |         |   |           |         
|                                        |                                                                                                                | Total comprehensive income                 |         |              |        |             |        |               |     |       |         |          |        |   |         |   |         |   |           |          | 95,992  |  
|                                        | Contributions from the Company related to
    employee stock purchase and stock option plans                   |                                            |         |             |        |             |        | 88            |     |       |         | 8,678    |        |   |         |  |         |   |           | 8,766    |        
|                                        | Preferred Unit repurchases                                                                                     |                                            |         | (5,000       | )      |             |        | (1            | )   |       |         | (99      | )      |   |         |  |         |   |           | (5,100   | )      
|                                        | Purchase of Common Units                                                                                       |                                            |         |             |        |             |        |              |     |       |         | (87,547  | )      |   |         |  |         |   |           | (87,547  | )      
|                                        | Distributions to preferred Unitholders                                                                         |                                            |         | (17,368      | )      |             |        |              |     |       |         |         |        |   |         |  |         |   |           | (17,368  | )      
|                                        | Distributions to common Unitholders                                                                            |                                            |         |             |        |             |        | (1,339        | )   |       |         | (132,606 | )      |   |         |  |         |   |           | (133,945 | )      
|                                        | Contributions from the Company related to shares
    issued for restricted stock, net of deferred compensation |                                            |         |             |        |             |        | 2             |     |       |         | 169      |        |   |         |  |         |   |           | 171      |        
|                                        |                                                                                                                |                                            |         |              |        |             |        |               |     |       |         |          |        |   |         |   |         |   |           |         
|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   |         
|                                        |                                                                                                                |                                            |         |              |        |             |        |               |     |       |         |          |        |   |         |   |         |   |           |         

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




Post Properties, Inc.


84


Post Apartment Homes, L.P.




---



##### Table of Contents



POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF CASH
FLOWS


(Dollars in thousand, except per unit
data)


|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |          |         |  
|-------------------------------------------------------- | ---------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------ | -------- | ------- | ---- | ----- | -------- | ------- | - | ------ | -------- | ------- | -
|                                                         |                                                                                          |                                                                     
|                                                         |                                                                                          | Year Ended December 31,                                             
|                                                         |                                                                                          |                                                                     
|                                                         |                                                                                          | 2003                                                                 |        | 2002     |         | 2001
|                                                         |                                                                                          |                                                                      |        |          |         |     
|Cash Flows From Operating Activities                     |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|                                                         | Net income                                                                               |                                                                      | $      | 20,097   |         |      | $     | 73,118   |         |   | $      | 102,637  |        
|                                                         | Adjustments to reconcile net income to net cash
    provided by operating activities:    |                                                                      |        |          |         |      |       |          |         |   |        |          |        
|                                                         |                                                                                          | Depreciation                                                         |        |          | 89,975  |      |       |          | 87,927  |   |        |          | 76,178  |  
|                                                         |                                                                                          | Amortization of deferred loan costs                                  |        |          | 3,801   |      |       |          | 2,327   |   |        |          | 1,978   |  
|                                                         |                                                                                          | Gains on property sales  discontinuing
    operations               |        |          | (37,448 | )    |       |          | (16,570 | ) |        |          |        |  
|                                                         |                                                                                          | Gains on property sales  continuing
    operations                  |        |          |        |      |       |          | (13,275 | ) |        |          | (23,942 | )
|                                                         |                                                                                          | Asset impairment charge                                              |        |          | 14,118  |      |       |          |        |   |        |          |        |  
|                                                         |                                                                                          | Equity in (income) losses of unconsolidated
    real estate entities |        |          | (7,791  | )    |       |          | 1,590   |   |        |          | 186     |  
|                                                         |                                                                                          | Equity-based compensation                                            |        |          | 1,071   |      |       |          |        |   |        |          |        |  
|                                                         |                                                                                          | Cumulative effect of accounting change                               |        |          |        |      |       |          |        |   |        |          | 695     |  
|                                                         | Changes in assets, (increase) decrease in:                                               |                                                                      |        |          |         |      |       |          |         |   |        |          |        
|                                                         |                                                                                          | Restricted cash                                                      |        |          | (696    | )    |       |          | (54     | ) |        |          | (43     | )
|                                                         |                                                                                          | Other assets                                                         |        |          | 4,676   |      |       |          | 8,098   |   |        |          | (1,626  | )
|                                                         |                                                                                          | Deferred charges                                                     |        |          | (2,210  | )    |       |          | (1,226  | ) |        |          | (841    | )
|                                                         | Changes in liabilities, increase
    (decrease) in:                                      |                                                                      |        |          |         |      |       |          |         |   |        |          |        
|                                                         |                                                                                          | Accrued interest payable                                             |        |          | (2,071  | )    |       |          | (666    | ) |        |          | (1,091  | )
|                                                         |                                                                                          | Accounts payable and accrued expenses                                |        |          | 8,387   |      |       |          | (20,740 | ) |        |          | 7,824   |  
|                                                         |                                                                                          | Security deposits and prepaid rents                                  |        |          | (360    | )    |       |          | (766    | ) |        |          | (391    | )
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|                                                         | Net cash provided by operating activities                                                |                                                                      |        | 91,549   |         |      |       | 119,763  |         |   |        | 161,564  |        
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|Cash Flows From Investing Activities                     |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|                                                         | Construction and acquisition of real estate
    assets, net of payables                  |                                                                      |        | (24,179  | )       |      |       | (150,792 | )       |   |        | (220,297 | )      
|                                                         | Net proceeds from property sales                                                         |                                                                      |        | 163,560  |         |      |       | 182,216  |         |   |        | 220,122  |        
|                                                         | Capitalized interest                                                                     |                                                                      |        | (3,555   | )       |      |       | (13,223  | )       |   |        | (22,124  | )      
|                                                         | Recurring capital expenditures                                                           |                                                                      |        | (9,473   | )       |      |       | (9,381   | )       |   |        | (10,441  | )      
|                                                         | Non-recurring capital expenditures                                                       |                                                                      |        | (5,152   | )       |      |       | (3,441   | )       |   |        | (2,535   | )      
|                                                         | Revenue generating capital expenditures                                                  |                                                                      |        | (1,240   | )       |      |       | (2,035   | )       |   |        | (4,226   | )      
|                                                         | Corporate additions and improvements                                                     |                                                                      |        | (799     | )       |      |       | (1,100   | )       |   |        | (3,021   | )      
|                                                         | Distributions from (investments in and advances
    to) unconsolidated entities          |                                                                      |        | 115,033  |         |      |       | (51,065  | )       |   |        | (8,691   | )      
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|                                                         | Net cash provided by (used in) investing
    activities                                  |                                                                      |        | 234,195  |         |      |       | (48,821  | )       |   |        | (51,213  | )      
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|Cash Flows From Financing Activities                     |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|                                                         | Lines of credit proceeds (repayments), net                                               |                                                                      |        | (124,358 | )       |      |       | 30,167   |         |   |        | 143,277  |        
|                                                         | Payments on notes payable                                                                |                                                                      |        | (103,875 | )       |      |       | (47,632  | )       |   |        | (70,066  | )      
|                                                         | Proceeds from notes payable                                                              |                                                                      |        |         |         |      |       | 95,500   |         |   |        | 50,000   |        
|                                                         | Payment of financing costs                                                               |                                                                      |        |         |         |      |       | (561     | )       |   |        | (300     | )      
|                                                         | Contributions from Company related to employee
    stock purchase and stock option plans |                                                                      |        | 4,139    |         |      |       | 1,254    |         |   |        | 8,766    |        
|                                                         | Purchase of Common Units                                                                 |                                                                      |        |         |         |      |       |         |         |   |        | (87,547  | )      
|                                                         | Purchase of Preferred Units                                                              |                                                                      |        |         |         |      |       |         |         |   |        | (5,100   | )      
|                                                         | Distributions to preferred unitholders                                                   |                                                                      |        | (17,049  | )       |      |       | (17,049  | )       |   |        | (17,368  | )      
|                                                         | Distributions to common unitholders                                                      |                                                                      |        | (89,657  | )       |      |       | (131,034 | )       |   |        | (134,669 | )      
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|                                                         | Net cash used in financing activities                                                    |                                                                      |        | (330,800 | )       |      |       | (69,355  | )       |   |        | (113,007 | )      
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|Net increase (decrease) in cash and cash
    equivalents |                                                                                          |                                                                      | (5,056 | )        |         |      | 1,587 |          |         |   | (2,656 | )       
|Cash and cash equivalents, beginning of period           |                                                                                          |                                                                      | 6,390  |          |         |      | 4,803 |          |         |   | 7,459  |         
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         
|Cash and cash equivalents, end of period                 |                                                                                          | $                                                                    | 1,334  |          |         | $    | 6,390 |          |         | $ | 4,803  |         
|                                                         |                                                                                          |                                                                      |        |          |         |      |       |          |         |   |        |         

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




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##### Table of Contents



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, 2003, the Company owned
91.3% of the common limited partnership interests (Common
Units) in the Operating Partnership and 63.6% of the
preferred limited partnership interests (Preferred
Units). The Companys weighted average common
ownership interest in the Operating Partnership was 89.5%, 87.9%
and 88.1% for the years ended December 31, 2003, 2002 and
2001 respectively. Common Units held by persons (including
certain Company directors) other than the Company represented a
8.7% 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, 2003, the Operating
Partnership owned 28,081 apartment units in 72 apartment
communities, including 666 apartment units in three communities
held in unconsolidated entities and including 468 apartment
units currently in lease-up in two apartment communities. At
December 31, 2003, approximately 53.5%, 18.6% and 7.9% (on
a unit basis) of the Operating Partnerships communities
were located in the Atlanta, Dallas and Tampa 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 the 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 2002 and 2001 consolidated
financial statements were reclassified for comparative purposes
with the 2003 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. 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.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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 period
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,
2003, 2002 and 2001 were 6.98%, 6.80% and 7.41%, respectively.
The weighted average borrowing costs used by the Operating
Partnership for interest capitalization generally increases as
the Operating Partnerships variable rate unsecured debt
decreases and decreases as the Operating Partnerships
variable rate unsecured debt increases. 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 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 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 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 internal 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 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. The income
(loss) 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
unencumbered assets to unsecured debt 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




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





presented for assets designated as held for sale
in 2002. Additionally, gains and losses on assets designated as
held for sale in 2002 are classified as part of discontinued
operations.

In years prior to 2002, real estate assets held
for sale were stated separately on the consolidated balance
sheet in a manner consistent with the approach discussed above.
However, the operating results and gains or losses on the sale
of such assets were included in continuing operations. As a
result of this presentation, income from continuing operations
and gains on property sales are not comparable between years.

Revenue recognition

Residential properties are leased under operating
leases with terms of generally one year or less. Rental income
is recognized when earned, which is not materially different
from revenue recognition on a straight-line basis.

Equity-based compensation

On January 1, 2003, the Operating
Partnership elected to voluntarily change its method of
accounting for equity-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. SFAS No. 148 also amended the disclosure
requirements in both annual and interim financial statements
about the method of accounting used for equity-based
compensation and the effect of the method on reported results.
In prior periods, the Operating Partnership accounted for
equity-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 will reflect as an expense each period the
estimated cost of equity-based compensation, calculated under
the Black-Scholes option pricing model for Company stock
options, for all equity-based compensation granted after
January 1, 2003. For equity-based compensation granted
prior to December 31, 2002, compensation expense was
generally not recognized for Company 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.

The following table reflects the effect on 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 each year.

|                                           |                                                                      |      |   |        |   |      |   |        |   |  |   |        |  
|------------------------------------------ | -------------------------------------------------------------------- | ---- | - | ------ | - | ---- | - | ------ | - |  | - | ------ | -
|                                           |                                                                      | 2003 |   | 2002   |   | 2001
|                                           |                                                                      |      |   |        |   |     
|Net income available to common unitholders |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | As reported                                                          |      | $ | 3,048  |   |      | $ | 56,069 |   |  | $ | 85,030 |  
|                                           | Equity-based compensation included in net income,
    as reported    |      |   | 1,071  |   |      |   | 265    |   |  |   | 171    |  
|                                           | Equity-based compensation determined under the
    fair value method |      |   | (1,216 | ) |      |   | (833   | ) |  |   | (1,458 | )
|                                           |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | Pro forma                                                            |      | $ | 2,903  |   |      | $ | 55,501 |   |  | $ | 83,743 |  
|                                           |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|Net income per common unit  basic         |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | As reported                                                          |      | $ | 0.07   |   |      | $ | 1.33   |   |  | $ | 1.97   |  
|                                           | Pro forma                                                            |      | $ | 0.07   |   |      | $ | 1.32   |   |  | $ | 1.94   |  
|Net income per common unit  diluted       |                                                                      |      |   |        |   |      |   |        |   |  |   |       
|                                           | As reported                                                          |      | $ | 0.07   |   |      | $ | 1.33   |   |  | $ | 1.96   |  
|                                           | Pro forma                                                            |      | $ | 0.07   |   |      | $ | 1.32   |   |  | $ | 1.93   |  

Accounting for derivative financial
instruments

Effective January 1, 2001, 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 by SFAS No. 138,
Accounting for Certain Derivative and Hedging
Activities.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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 generally
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 generally is 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
interest method over the terms of the related debt.

Per unit data

Basic earnings per Common Unit is computed by
dividing net income by the weighted average number of Common
Units outstanding during the period. Diluted earnings per Common
Unit is computed by dividing net income by the weighted average
number of Common Units outstanding during the period, including
the dilutive effect of the potential issuance of additional
Common Units if outstanding stock options were exercised and
converted into common stock of the Company.

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 2003 and 2002, the Financial Accounting
Standards Board issued several new accounting pronouncements and
the pronouncements with a potential impact on the Operating
Partnership are discussed herein.

SFAS No. 145, Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement
No. 13 and Technical Corrections was issued in May
2002. SFAS No. 145 rescinds SFAS No. 4,
Reporting Gains and Losses from Extinguishments of
Debt, which provided that gains and losses from early debt
retirements be treated as extraordinary items. Under SFAS
No. 145, gains and losses from early debt retirements will
only be treated as extraordinary items if they meet the criteria
for extraordinary items under APB No. 30. Since the
definition of an extraordinary item is more restrictive under
APB No. 30, SFAS No. 145 will generally cause the
Operating Partnership to treat gains or losses from early debt
retirements as part of income before extraordinary items. This
part of SFAS No. 145 was effective for fiscal years
beginning after May 15, 2002 and required the
reclassification of prior period extraordinary items not meeting
the APB No. 30 criteria. The Operating Partnership adopted
this requirement of SFAS No. 145 on January 1, 2003.
Upon implementation, the Operating Partnership reclassified $136
in 2002 and $88 in 2001 from extraordinary items to expenses
used in the determination income from continuing operations. The
remaining provisions of SFAS No. 145 were generally not
applicable to the Operating Partnership.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities was issued in
July 2002. This Statement addressed financial accounting and
reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue
No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).
SFAS 146 was effective for exit or disposal activities initiated
after December 31, 2002. The implementation of this
Statement did not have a significant effect on the Operating
Partnerships results of operations or its financial
position.

FASB Interpretation No. 45 (FIN
No. 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Guarantees of
Indebtedness of Others was issued in November 2002. FIN
No. 45 clarified disclosure requirements to be made by a
guarantor in its interim and annual financial statements
regarding its obligations under certain guarantees that it has
issued. Additionally, it clarified that a guarantor is required
to recognize, at the inception of a guarantee, a liability for
the fair value of the obligation undertaken in issuing the
guarantee. The disclosure requirements of FIN No. 45 were
effective for interim and annual financial statements issued
after December 15, 2002. The initial recognition and
measurement provisions of FIN No. 45 were applicable for
guarantees issued or modified after December 31, 2002. The
Operating Partnership implemented the disclosure requirements of
FIN No. 45 effective with these December 31, 2002
financial statements and implemented the recognition and
measurement provisions effective January 1, 2003. The
adoption of the recognition and measurement provisions of FIN
No. 45 did not have a significant impact on the Operating
Partnerships financial position or results of operations.

FASB Interpretation No. 46,
Consolidation of Variable Interest Entities, an
interpretation of ARB No. 51 was originally issued in
January 2003 and subsequently revised and restated in December
2003 through FASB Interpretation
No. 46  Revised (together these
pronouncements are referred to as FIN No. 46). FIN
No. 46 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 consolidation provisions of FIN No. 46
were generally applicable as of December 31, 2003 for all
variable interest entities created after January 31, 2003.
For special purpose entities, as defined, created prior to
February 1, 2003, the consolidation provisions of FIN
No. 46 were generally applicable as of December 31,
2003. For other variable interest entities created prior to
February 1, 2003 where the Operating Partnership is deemed
to be the primary beneficiary, consolidation of such entities
will be required for the interim period ending March 31,
2004. Information required to be disclosed in 2003 pursuant to
FIN No. 46 includes the nature, purpose, size and
activities of all variable interest entities where it is
reasonably possible that such entities will be required to be
consolidated by the Operating Partnership and the Operating
Partnerships maximum exposure to loss from these entities.
The Operating Partnership currently does not have any interests
in special purpose entities or other variable interest entities
and FIN No. 46 did not and will not have a significant
effect on its results of operations or financial position.

SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities
and Equity, was issued in May 2003. SFAS No. 150
established standards for how an issuer classifies and measures
certain liabilities and equity. This Statement was to be
effective for financial instruments entered into or modified
after May 31, 2003, and otherwise effective at the
beginning of the first quarterly period beginning after June 15,
2003. On October 29, 2003, the FASB deferred certain
provisions of SFAS No. 150, as they were to apply to
non-controlling interests, in which redemption is mandatory, in
finite-lived entities. The deferral of these provisions is
expected to remain in effect until these issues are incorporated
into future FASB accounting standards. The Operating Partnership
has not entered into any transactions involving financial
instruments impacted by the provisions, currently in effect, of
SFAS No. 150 and the implementation of SFAS No. 150 in
2003 had no effect on the Operating Partnerships financial
position or results of operations.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





2. DEFERRED CHARGES

Deferred charges consist of the following:

|                               |  |              |         |      |  |   |         |  
|------------------------------ |  | ------------ | ------- | ---- |  | - | ------- | -
|                               |  |             
|                               |  | December 31,
|                               |  |             
|                               |  | 2003         |         | 2002
|                               |  |              |         |     
|Deferred financing costs       |  | $            | 37,289  |      |  | $ | 37,037  |  
|Other                          |  |              | 4,424   |      |  |   | 3,532   |  
|                               |  |              |         |      |  |   |         |  
|                               |  |              | 41,713  |      |  |   | 40,569  |  
|Less: accumulated amortization |  |              | (29,428 | )    |  |   | (24,985 | )
|                               |  |              |         |      |  |   |         |  
|                               |  | $            | 12,285  |      |  | $ | 15,584  |  
|                               |  |              |         |      |  |   |         |  

3. INDEBTEDNESS

At December 31, 2003 and 2002, the Operating
Partnerships indebtedness consisted of the following:

|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|-------------------------------------------- |  | ------------- | -------------- | -------- |  | -------- | ------------- | ------------ |  | ---- | --------- |  |  | - | --------- |  |  | - | --------- | 
|                                             |  |               |                |          |  |          |               |             
|                                             |  |               |                |          |  |          |               | December 31,
|                                             |  |               |                | Interest |  | Maturity |               |             
|Description                                  |  | Payment Terms |                | Rate     |  | Date (1) |               | 2003         |  | 2002
|                                             |  |               |                |          |  |          |               |              |  |     
|Unsecured Notes                              |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Senior Notes                                 |  |               | Int.           |          |  |          | 6.11% - 7.70% |              |  |      | 2006-2010 |  |  | $ | 285,000   |  |  | $ | 385,000   | 
|Medium Term Notes                            |  |               | Int.           |          |  |          | 6.69% - 8.12% | (2)          |  |      | 2004-2015 |  |  |   | 323,000   |  |  |   | 323,000   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   | 608,000   |  |  |   | 708,000   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Unsecured Lines of Credit                    |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Syndicated Line of Credit                    |  |               | N/A            |          |  |          | LIBOR + 0.85% | (3)          |  |      | 2004      |  |  |   | 60,000    |  |  |   | 185,000   | 
|Cash Management Line                         |  |               | N/A            |          |  |          | LIBOR + 0.75% |              |  |      | 2004      |  |  |   | 12,010    |  |  |   | 11,369    | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   | 72,010    |  |  |   | 196,369   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Conventional Fixed Rate (Secured)            |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|FNMA                                         |  |               | Prin. and Int. |          |  |          | 6.975%        | (4)          |  |      | 2029      |  |  |   | 99,800    |  |  |   | 101,100   | 
|Other                                        |  |               | Prin. and Int. |          |  |          | 5.5% - 7.69%  |              |  |      | 2007-2013 |  |  |   | 192,132   |  |  |   | 194,706   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   | 291,932   |  |  |   | 295,806   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Tax Exempt Floating Rate Bonds
    (Secured) |  |               | Int.           |          |  |          | 1.15%         | (5)          |  |      | 2025      |  |  |   | 214,380   |  |  |   | 214,380   | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 
|Total                                        |  |               |                |          |  |          |               |              |  |      |           |  |  | $ | 1,186,322 |  |  | $ | 1,414,555 | 
|                                             |  |               |                |          |  |          |               |              |  |      |           |  |  |   |           |  |  |   |           | 



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | All outstanding indebtedness can be prepaid at
    any time, subject to certain prepayment penalties.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2) | Includes $100,000 of Mandatory Par Put Remarketed
    Securities (MOPPRS). The annual interest rate on
    these securities to March 2005 is 6.85%. The MOPPRS mature in
    March 2015, but are subject to mandatory tender for remarketing
    in March 2005. In March 2005, if the remarking dealer elects not
    to remarket the MOPPRS, the Operating Partnership is required to
    redeem the MOPPRS at par. If the remarketing dealer elects to
    remarket the securities in March 2005, the interest rate on the
    MOPPRS will be established at a rate of 5.715% plus the
    Operating Partnerships applicable credit spread for
    Operating Partnership securities with similar maturities. The
    MOPPRS may be redeemed, at the Operating Partnerships
    option, immediately prior to their remarketing in March 2005 at
    an optional redemption price equal to the outstanding principal
    balance plus a prepayment penalty (generally equivalent to the
    make-whole amount necessary to compensate for the amount by
    which the base rate of 5.715% exceeds the then-existing 10-year
    treasury rate).
|(3) | Represents stated rate. At December 31,
    2003, the weighted average interest rate was 1.96%. Subsequent
    to December 31, 2003, this line of credit was refinanced
    and its maturity was extended to 2007.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(4) | Interest rate is fixed at 6.975%, inclusive of
    credit enhancement and other fees, to 2009 through an interest
    rate swap arrangement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(5) | 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, 2003 before credit enhancements. At
    December 31, 2003, 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%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





Debt maturities

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

|           |  |   |           |  
|---------- |  | - | --------- | -
|2004       |  | $ | 27,094    |  
|2005       |  |   | 204,402(2 | )
|2006       |  |   | 79,732    |  
|2007       |  |   | 112,178   |  
|2008       |  |   | 4,014     |  
|Thereafter |  |   | 686,892(2 | )
|           |  |   |           |  
|           |  | $ | 1,114,312 |  
|           |  |   |           |  



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Excludes outstanding balances on lines of credit
    discussed below.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(2) | The MOPPRS mature in March 2015 (as reflected in
    the table above), but are subject to mandatory tender for
    remarketing in March 2005. In March 2005, if the remarking
    dealer elects not to remarket the MOPPRS, the Operating
    Partnership is required to redeem the MOPPRS at par. The MOPPRS
    may be redeemed, at the Operating Partnerships option,
    immediately prior to their remarketing in March 2005 at an
    optional redemption price equal to the outstanding principal
    balance plus a prepayment penalty.

Unsecured lines of credit

At December 31, 2003, the Operating
Partnership utilized a $320,000 three-year syndicated revolving
line of credit, for its short-term financing requirements. At
December 31, 2003, the stated interest rate for this line
of credit was LIBOR plus 0.85% or prime minus 0.25%. This line
of credit required the payment of annual facility fees equal to
0.20% of the aggregate loan commitment. The line of credit
provided for the rate to be adjusted up or down based on changes
in the credit ratings on the Operating Partnerships senior
unsecured debt. In July 2003, the Operating Partnerships
unsecured debt rating was downgraded from Baa2 to Baa3 by
Moodys Investor Services, resulting in a split unsecured
debt rating (Standard & Poors rates the Operating
Partnerships unsecured debt at BBB). Under the terms of
the credit agreement, the interest rate on the revolver remained
at LIBOR plus 0.85% as the interest rate was based on the higher
of the Operating Partnerships unsecured debt ratings.

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). The Revolver has a stated interest rate
of LIBOR plus 0.90% or the prime rate and was provided by a
syndicate of nine banks led by Wachovia Bank, N.A. Additionally,
the Revolver requires the payment of annual facility fees equal
to 0.20% 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 lower 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 amounts,
which in turn restrict the discretion of the Operating
Partnership 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.

Additionally, the Operating Partnership has a
$20,000 unsecured line of credit with Wachovia Bank of Georgia,
N.A. (the Cash Management Line). The Cash Management
Line bears interest at LIBOR plus 0.75% or prime minus .25% and
matures in April 2004. Management expects to renew and extend
the maturity of this facility prior




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





to April 2004. At December 31, 2003, the
Operating Partnership had issued letters of credit to third
parties totaling $1,913 under this facility.

At December 31, 2002, the Operating
Partnership had in place an additional $125,000 line of credit
facility for general corporate purposes. This line was not
renewed upon its maturity in April 2003.

Interest paid

Interest paid (including capitalized amounts of
$3,555, $13,223 and $22,124 for the years ended
December 31, 2003, 2002 and 2001, respectively), aggregated
$78,822, $79,115 and $82,383 for the years ended
December 31, 2003, 2002 and 2001, respectively.

Pledged assets

The aggregate net book value at December 31,
2003 of property pledged as collateral for indebtedness amounted
to approximately $503,613.

4. INVESTMENTS IN UNCONSOLIDATED REAL
ESTATE ENTITIES

At December 31, 2003, the Operating
Partnership holds investments in three individual limited
liability companies (the Property LLCs) with
an institutional investor. Each Property LLC owns a newly
developed apartment community. At December 31, 2003, two of
the apartment communities had achieved stabilized occupancy and
one apartment community was in initial lease-up. The Operating
Partnership holds a 35% equity interest in the Property
LLCs. 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. 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 sales 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.

The Operating Partnership accounts for its
investments in these Property LLCs 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 LLCs was approximately $6,740 at
December 31, 2003. 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 LLCs.




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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 proportionate share of net income
(loss) from the investments in the Property LLCs. A
summary of financial information for the Property LLCs in
the aggregate is as follows:

|                                                        |                                       |              |         |              |  |   |         |         | 
|------------------------------------------------------- | ------------------------------------- | ------------ | ------- | ------------ |  | - | ------- | ------- | 
|                                                        |                                       | December 31, |         | December 31,
|Balance Sheet Data                                      |                                       | 2003         |         | 2002        
|                                                        |                                       |              |         |             
|Real estate assets, net                                 |                                       | $            | 127,513 |              |  | $ | 198,854 |        
|Cash and other                                          |                                       |              | 2,516   |              |  |   | 2,330   |        
|                                                        |                                       |              |         |              |  |   |         |        
|                                                        | Total assets                          |              | $       | 130,029      |  |   | $       | 201,184 | 
|                                                        |                                       |              |         |              |  |   |         |        
|Mortgage notes payable                                  |                                       | $            | 33,763  |              |  | $ |        |        
|Construction notes payable to Operating
    Partnership |                                       |              | 53,769  |              |  |   | 160,294 |        
|Other liabilities                                       |                                       |              | 1,742   |              |  |   | 3,975   |        
|                                                        |                                       |              |         |              |  |   |         |        
|                                                        | Total liabilities                     |              |         | 89,274       |  |   |         | 164,269 | 
|Members equity                                         |                                       |              | 40,755  |              |  |   | 36,915  |        
|                                                        |                                       |              |         |              |  |   |         |        
|                                                        | Total liabilities and members equity |              | $       | 130,029      |  |   | $       | 201,184 | 
|                                                        |                                       |              |         |              |  |   |         |        
|Operating Partnerships equity investment               |                                       | $            | 21,017  |              |  | $ | 21,991  |        
|                                                        |                                       |              |         |              |  |   |         |        
|Operating Partnerships share of notes
    payable      |                                       | $            | 30,636  |              |  | $ | 56,103  |        
|                                                        |                                       |              |         |              |  |   |         |        

|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |     | 
|------------------------------------------------------ | ------------------------------------------ | ----------------------- | ------ | ------ | - | ---- | ------ | ------ | - | - | ---- | --- | 
|                                                       |                                            |                        
|                                                       |                                            | Year ended December 31,
|                                                       |                                            |                        
|Income Statement Data                                  |                                            | 2003                    |        | 2002   |   | 2001
|                                                       |                                            |                         |        |        |   |     
|Revenue                                                |                                            |                         |        |        |   |      |        |        |   |   |      |    
|                                                       | Rental                                     |                         | $      | 9,350  |   |      | $      | 3,174  |   |   | $    | 136 | 
|                                                       | Other                                      |                         |        | 470    |   |      |        | 322    |   |   |      | 50  | 
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|                                                       | Total revenues                             |                         |        | 9,820  |   |      |        | 3,496  |   |   |      | 186 | 
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|Expenses                                               |                                            |                         |        |        |   |      |        |        |   |   |      |    
|                                                       | Property operating and maintenance         |                         |        | 4,497  |   |      |        | 2,578  |   |   |      | 416 | 
|                                                       | Depreciation                               |                         |        | 3,757  |   |      |        | 1,990  |   |   |      | 192 | 
|                                                       | Interest                                   |                         |        | 3,061  |   |      |        | 1,601  |   |   |      | 110 | 
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|                                                       | Total expenses                             |                         |        | 11,315 |   |      |        | 6,169  |   |   |      | 718 | 
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|Loss from continuing operations                        |                                            |                         | (1,495 | )      |   |      | (2,673 | )      |   |   | (532 | )  
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|Discontinued operations                                |                                            |                         |        |        |   |      |        |        |   |   |      |    
|                                                       | Loss from discontinued operations          |                         |        | (274   | ) |      |        | (1,871 | ) |   |      |    | 
|                                                       | Gain on property sale                      |                         |        | 26,179 |   |      |        |       |   |   |      |    | 
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|                                                       | Income (loss) from discontinued operations |                         |        | 25,905 |   |      |        | (1,871 | ) |   |      |    | 
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|Net income (loss)                                      |                                            | $                       | 24,410 |        |   | $    | (4,544 | )      |   | $ | (532 | )  
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    
|Operating Partnerships share of net income
    (loss) |                                            | $                       | 7,791  |        |   | $    | (1,590 | )      |   | $ | (186 | )  
|                                                       |                                            |                         |        |        |   |      |        |        |   |   |      |    

The Operating Partnership has committed
construction financing to one of the Property LLCs
totaling $56,696 ($53,769 funded at December 31, 2003). The
loan earns interest at LIBOR plus 1.75% and is secured by the
apartment community. The loan matures in November 2004 and is
expected to be repaid from the proceeds of a permanent project
financing. As of December 31, 2003 and 2002, the
institutional investors share of these notes were $34,950
and $104,191, respectively. In February 2003, one of the
Property LLCs repaid its outstanding construction note
payable to the Operating Partnership of $24,071. The note was
repaid through the proceeds from a third-party non-recourse
permanent mortgage note totaling $17,000 and from member equity
contributions. The mortgage note bears interest at 4.28%,
requires monthly principal and interest payments based on a
30-year amortization schedule and matures in March 2008. 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. In November 2003, a second Property LLC repaid its
outstanding construction note payable to the Operating
Partnership of $28,710 through the proceeds from a third-party
non-recourse permanent mortgage note totaling $17,000 and from
member equity contributions. The mortgage note bears interest at
4.04%, requires interest only payments and matures in December
2008.

As part of the development and construction
services agreements entered into between the Operating
Partnership and the Property LLCs, the Operating
Partnership guaranteed the maximum total amount for certain
construction cost categories subject to aggregate limits. The
Operating Partnerships remaining maximum exposure for the
fourth Property LLC totals approximately $5,200. The Operating
Partnership does not currently expect to be required to fund any
guarantees relating to this Property LLC. Additionally, under
these agreements, the Operating Partnership was subject to
project completion requirements, as defined. At
December 31, 2003, the Operating Partnership had met its
remaining completion date requirements and will not be subject
to any additional costs.

5. REAL ESTATE ASSETS HELD FOR
SALE/DISCONTINUED OPERATIONS

The Operating Partnership classifies real estate
assets as held for sale after the approval of its internal
investment committee and after the Operating Partnership has
commenced an active program to sell the assets. At
December 31 2003, the Operating Partnership has nine
apartment communities containing 4,340 units and certain tracts
of land classified as held for sale. These real estate assets
are classified separately in the accompanying consolidated
balance sheet at $145,238, which represented the lower of cost
or 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, 2003, income from discontinued
operations included the results of operations of nine
communities, containing 4,340 units, classified as held for sale
at December 31, 2003 and the results of operations of four
communities sold in 2003 through their sale date. For the years
ended December 31, 2002 and 2001, income from discontinued
operations included the results of operations of all communities
classified as held for sale at December 31, 2003,
communities sold in 2003 and the results of operations of six
communities and one commercial property sold in 2002 through
their sale dates.

The revenues and expenses of these communities
for the years ended December 31, 2003, 2002 and 2001 were
as follows:

|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |        |        | 
|---------------------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------- | --- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------ | 
|                                                                 |                                                                                    | 2003           |     | 2002   |        | 2001
|                                                                 |                                                                                    |                |     |        |        |     
|Revenues                                                         |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 | Rental                                                                             |                | $   | 42,350 |        |      | $      | 59,585 |        |   | $      | 74,206 |       
|                                                                 | Other                                                                              |                |     | 1,935  |        |      |        | 2,531  |        |   |        | 3,138  |       
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 |                                                                                    | Total revenues |     |        | 44,285 |      |        |        | 62,116 |   |        |        | 77,344 | 
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Expenses                                                         |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 | Property operating and maintenance (exclusive of
    items shown separately below) |                |     | 17,362 |        |      |        | 23,906 |        |   |        | 27,126 |       
|                                                                 | Depreciation                                                                       |                |     | 6,276  |        |      |        | 11,167 |        |   |        | 12,799 |       
|                                                                 | Interest                                                                           |                |     | 5,955  |        |      |        | 9,776  |        |   |        | 14,277 |       
|                                                                 | Asset impairment charge                                                            |                |     | 14,118 |        |      |        |       |        |   |        |       |       
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|                                                                 |                                                                                    | Total expenses |     |        | 43,711 |      |        |        | 44,849 |   |        |        | 54,202 | 
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Income from discontinued operations before
    minority interest |                                                                                    |                | 574 |        |        |      | 17,267 |        |        |   | 23,142 |       
|                                                                 | Minority interest                                                                  |                |     | 58     |        |      |        | (2,088 | )      |   |        | (2,763 | )     
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       
|Income from discontinued operations                              |                                                                                    | $              | 632 |        |        | $    | 15,179 |        |        | $ | 20,379 |       
|                                                                 |                                                                                    |                |     |        |        |      |        |        |        |   |        |       

During the third quarter of 2003, the Operating
Partnership reclassified an impairment loss of $14,118 from
continuing operations to discontinued operations. The impairment
loss, originally recorded in the first quarter 2003,




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NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





related to the write-down of the cost of the
Operating Partnerships apartment community located in
Phoenix, Arizona to its estimated fair value. The
reclassification of the impairment loss to discontinued
operations reflected the designation of this community as held
for sale during the third quarter of 2003 and the final sale of
the community in the fourth quarter of 2003.

For the year ended December 31, 2003, the
Operating Partnership recognized net gains from discontinued
operations of $42,205 on the sale of four communities containing
1,844 units and a land parcel, reduced by losses of $4,757
resulting from losses on the sale of certain land parcels and
reserves to write-down to fair value, less selling costs, one
community and certain other land parcels classified as held for
sale. These sales generated net proceeds of approximately
$163,560. For the year ended December 31, 2002, the
Operating Partnership recognized net gains of $27,921 from the
sale of six communities containing 2,125 units, one commercial
property and certain land parcels, offset by reserves of $11,351
to write down to fair market value, less selling costs, certain
land parcels classified as held for sale. These sales generated
net proceeds of approximately $140,823.

Under prior accounting pronouncements, 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 sale of assets reported in continuing operations in the
consolidated statements of operations for the years ended
December 31, 2002 and 2001.

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 approximately
$13,275. These gains excluded losses of $4,861 related to these
assets that were written down to their estimated fair value,
less selling costs, at December 31, 2001. For the years
ended December 31, 2002 and 2001, the consolidated
statement of operations included net income from these
properties of $369 and $3,227, respectively. For the year ended
December 31, 2001, net income reflected above includes
depreciation expense of $844. No depreciation expense was
recorded on such assets in 2002.

In 2001, the Operating Partnership sold six
apartment communities containing 2,799 units and various land
parcels for net proceeds of approximately $220,122. These sales
resulted in net gains of approximately $16,365. For the year
ended December 31, 2001, the aggregate net gain on the sale
of assets of $23,942 included the impact of estimated net losses
totaling $11,490 on the write down to fair value, less selling
costs, of assets designated as held for sale at
December 31, 2001 and excluded realized losses totaling
$19,067 related to assets written down to their estimate fair
value, less selling costs, at December 31, 2000.

6. PARTNERS EQUITY

Common and Preferred Units

At December 31, 2003 and 2002, the Operating
Partnership had outstanding Common Units totaling 42,353,822 and
42,031,715, respectively.

At December 31, 2003, the Operating
Partnership had outstanding four 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 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.

The Operating Partnership has outstanding
2,000,000, 7.625% Series C cumulative redeemable preferred
partnership units (the Series C Preferred
Units). The Series C Preferred Units have a
liquidation preference of $25.00




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





per unit and are redeemable at the option of the
Operating Partnership on or after February 9, 2003, at a
redemption price of $25.00 per unit. The Series C Preferred
Units are owned by the Company. On March 5, 2004, the
Company redeemed its 7 5/8% series C Cumulative redeemable
preferred stock. Correspondingly, the Operating Partnership will
redeem 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 March 5,
2004. 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 will reflect the $1,716 of
issuance costs as a reduction of earnings in arriving at net
income available to common unitholders in the first quarter of
2004.

The Operating Partnership has outstanding
2,800,000, 8% Series D cumulative redeemable preferred
partnership units (the Series D Preferred
Units). The Series D Preferred Units have a
liquidation preference of $25.00 per unit and are redeemable by
the Operating Partnership on or after September 3, 2004, at
a redemption price of $25.00 per unit. The Series D
Preferred Units are exchangeable into authorized, but unissued
Series D Preferred Stock of the Company, with identical
terms and preferences, on or after September 2, 2009, at
the option of the holders. Under certain circumstances, as
defined in the agreement, the Series D Preferred Units may
be exchanged prior to September 2, 2009, at the option of
the holders.

Computation of Earnings per Common
Unit

For the years ended December 31, 2003, 2002
and 2001, 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, 2003
|                                                                    |  |                             
|                                                                    |  | Income                       |         | Units         |  | Per-Unit
|                                                                    |  | (Numerator)                  |         | (Denominator) |  | Amount  
|                                                                    |  |                              |         |               |  |         
|Loss from continuing operations                                     |  | $                            | (17,925 | )             |  |          |            |     |  |   |       |  
|Less: Preferred Unit distributions                                  |  |                              | (17,049 | )             |  |          |            |     |  |   |       |  
|                                                                    |  |                              |         |               |  |          |            |     |  |   |       |  
|Basic EPU                                                           |  |                              |         |               |  |          |            |     |  |   |       |  
|Loss from continuing operations available to
    common unitholders |  |                              | (34,974 | )             |  |          | 42,134,072 |     |  | $ | (0.83 | )
|                                                                    |  |                              |         |               |  |          |            |     |  |   |       |  
|Effect of dilutive securities                                       |  |                              |         |               |  |          |            |     |  |   |       |  
|Stock options                                                       |  |                              |        |               |  |          |           | (1) |  |   |       |  
|                                                                    |  |                              |         |               |  |          |            |     |  |   |       |  
|Diluted EPU                                                         |  |                              |         |               |  |          |            |     |  |   |       |  
|Loss from continuing operations available to
    common unitholders |  | $                            | (34,974 | )             |  |          | 42,134,072 |     |  | $ | (0.83 | )
|                                                                    |  |                              |         |               |  |          |            |     |  |   |       |  

|                                                                                                                    |  |                              |         |               |  |          |            |  |  |   |      | 
|------------------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | ------------- |  | -------- | ---------- |  |  | - | ---- | 
|                                                                                                                    |  |                             
|                                                                                                                    |  | Year ended December 31, 2002
|                                                                                                                    |  |                             
|                                                                                                                    |  | Income                       |         | Units         |  | Per-Unit
|                                                                                                                    |  | (Numerator)                  |         | (Denominator) |  | Amount  
|                                                                                                                    |  |                              |         |               |  |         
|Income from continuing operations                                                                                   |  | $                            | 39,281  |               |  |          |            |  |  |   |      | 
|Less: Preferred Unit distributions                                                                                  |  |                              | (17,049 | )             |  |          |            |  |  |   |      | 
|                                                                                                                    |  |                              |         |               |  |          |            |  |  |   |      | 
|Basic EPU                                                                                                           |  |                              |         |               |  |          |            |  |  |   |      | 
|Income from continuing operations available to
    common unitholders before cumulative effect of accounting change |  |                              | 22,232  |               |  |          | 42,020,759 |  |  | $ | 0.53 | 
|                                                                                                                    |  |                              |         |               |  |          |            |  |  |   |      | 
|Effect of dilutive securities                                                                                       |  |                              |         |               |  |          |            |  |  |   |      | 
|Stock options                                                                                                       |  |                              |        |               |  |          | 14,818     |  |  |   |      | 
|                                                                                                                    |  |                              |         |               |  |          |            |  |  |   |      | 
|Diluted EPU                                                                                                         |  |                              |         |               |  |          |            |  |  |   |      | 
|Income from continuing operations available to
    common unitholders before cumulative effect of accounting change |  | $                            | 22,232  |               |  |          | 42,035,577 |  |  | $ | 0.53 | 
|                                                                                                                    |  |                              |         |               |  |          |            |  |  |   |      | 




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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, 2001
|                                                                      |  |                             
|                                                                      |  | Income                       |         | Units         |  | Per-Unit
|                                                                      |  | (Numerator)                  |         | (Denominator) |  | Amount  
|                                                                      |  |                              |         |               |  |         
|Income from continuing operations                                     |  | $                            | 80,190  |               |  |          |            |  |  |   |      | 
|Less: Preferred unit distributions                                    |  |                              | (17,368 | )             |  |          |            |  |  |   |      | 
|Less: Preferred unit redemption costs                                 |  |                              | (239    | )             |  |          |            |  |  |   |      | 
|                                                                      |  |                              |         |               |  |          |            |  |  |   |      | 
|Basic EPU                                                             |  |                              |         |               |  |          |            |  |  |   |      | 
|Income from continuing operations available to
    common unitholders |  |                              | 62,583  |               |  |          | 43,211,834 |  |  | $ | 1.45 | 
|                                                                      |  |                              |         |               |  |          |            |  |  |   |      | 
|Effect of dilutive securities                                         |  |                              |         |               |  |          |            |  |  |   |      | 
|Stock options                                                         |  |                              |        |               |  |          | 215,266    |  |  |   |      | 
|                                                                      |  |                              |         |               |  |          |            |  |  |   |      | 
|Diluted EPU                                                           |  |                              |         |               |  |          |            |  |  |   |      | 
|Income from continuing operations available to
    common unitholders |  | $                            | 62,583  |               |  |          | 43,427,100 |  |  | $ | 1.44 | 
|                                                                      |  |                              |         |               |  |          |            |  |  |   |      | 






|   |                                                                                                                                                                                                                                                                                                    
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1) | For the year ended December 31, 2003, the
    potential dilution from the Companys outstanding stock
    options of 11,052 shares was antidilutive to the loss from
    continuing operations per share calculation. As such, these
    amounts were excluded from weighted average units in 2003.

In 2003, 2002 and 2001, stock options to purchase
4,734,812, 3,842,747 and 1,716,975 shares of common stock,
respectively, were excluded from the computation of diluted
earnings per unit as these options were antidilutive.



|   |                                                                                         
|-- | ----------------------------------------------------------------------------------------
|7. | SEVERANCE, PROXY AND PROJECT ABANDONMENT,
    EMPLOYEE SEVERANCE AND OTHER 
     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
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 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.

As discussed above, 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 period from the date of
the charges through December 31, 2003:

|                                                   |  |   |        |  
|-------------------------------------------------- |  | - | ------ | -
|Aggregate severance charges                        |  | $ | 21,506 |  
|Payments for period                                |  |   | (3,237 | )
|Interest accretion                                 |  |   | 902    |  
|                                                   |  |   |        |  
|Accrued severance charges at December 31,
    2003 |  | $ | 19,171 |  
|                                                   |  |   |        |  

Substantially all of these remaining amounts will
be paid over the remaining terms of the employment contracts (10
to 13 years) of the former chairman and vice chairman of
the board of directors.

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 Operating Partnership
during the proxy contest. These lawsuits are expected to be
settled in 2004. Through December 31, 2003, substantially
all of the proxy and related costs have been paid.




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##### Table of Contents



POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





In the fourth quarter of 2001, the Operating
Partnership recorded project abandonment, employee severance and
other charges totaling $17,450. These charges, precipitated by
the sharp decline in economic and market conditions, reflected
managements decision to focus its business and new
development strategy on fewer markets, to focus on its core
business of owning, developing and managing multifamily real
estate assets and to do so with a smaller workforce and lower
overhead expenses. The project abandonment charge of $8,122
represented reserves on certain predevelopment and transaction
pursuit costs in markets the Operating Partnership would no
longer pursue for development opportunities and for certain
projects that will no longer be pursued due to economic and
market conditions. The employee severance charge of $3,560 was
primarily for severance costs related to approximately a 100
person senior management and staff workforce reduction plan
initiated and completed in the fourth quarter of 2001. Other
charges included a loss of $2,831 related to the disposition of
the Operating Partnerships corporate aircraft, a loss of
$452 on the sale of the Operating Partnerships third party
landscape business discussed more fully below, write-downs of
$1,000 related to the Operating Partnerships exit from the
then-existing for-sale housing business in all markets and the
write-down to estimated market value of certain internet and
technology investments of $1,485. As of December 31, 2003,
substantially all of these charges have been paid.

In the fourth quarter of 2001, the Operating
Partnership sold substantially all of the net assets of Post
Landscape Group, Inc. (PLG) a subsidiary entity that
provided landscape maintenance, design and installation services
to third parties. As the business was sold to the former
management team and initially financed 100% by the Operating
Partnership, the transaction was not reflected as a sale at
December 31, 2001. As the transaction resulted in a net
loss, the net loss was recognized in the fourth quarter of 2001
and included in the charge discussed above. In the first quarter
of 2002, the Operating Partnership received payments
representing approximately 26% of the outstanding note balance.
As these payments constituted adequate initial principal
payments under the notes, the sale was recognized in the first
quarter of 2002. The impact of the sale recognition was to
record the note receivable (outstanding balance of $2,750 at
December 31, 2003) and to remove the net assets and
liabilities of the former PLG from the Operating
Partnerships financial statements. No further gain or loss
was recognized in 2002.

The Operating Partnership also sold substantially
all of the net assets of RAM Partners, Inc. (RAM), a
separate subsidiary entity that managed apartment communities
for third parties, in the fourth quarter 2001. This business was
sold to the former management team of RAM and the sale was 100%
financed by the Operating Partnership. Through the second
quarter of 2002, the Operating Partnership had received payments
under the notes representing approximately 10% of the original
outstanding note balance. As these payments constituted adequate
initial principal payments under the notes, the sale was
recognized in the second quarter of 2002. The impact of the sale
recognition was to record the note receivable (the note balance
was fully repaid in 2003), record a net gain of $510 and to
remove the net assets and liabilities of the former RAM from the
Operating Partnerships financial statements.

During the first quarter of 2002, the Operating
Partnership transferred certain construction contracts of Post
Construction Services Inc., its third party construction
business, to Oxford Properties, LLC (Oxford
Properties) in exchange for Oxford Properties
assumption of substantially all of Post Construction
Services liabilities related to the transferred assets. In
approving the transaction, the Companys board of directors
ascribed nominal value to the assets being transferred. The
assets consisted principally of third party construction
contracts for the construction of four garden style apartment,
condominium and townhouse communities as well as related
subcontracts, indemnities and guarantees. In connection with the
transfer of Post Construction Services construction
contracts, Oxford Properties had the right to receive a deferred
fee upon completion of one of the construction projects in the
amount of $500. Oxford Properties had also agreed to employ 28
former Company and Post Construction Services employees. As a
result, the Operating Partnership was not responsible for costs
that would have otherwise resulted from winding up the third
party construction business. The Operating Partnership recorded
a charge of $500 in the fourth quarter of 2001 relating to its
exit from the third party construction business. Oxford
Properties is an entity owned by former officers of the Company
and by the son of the Companys former chairman and chief
executive officer.

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




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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 Partners utilizes taxable
subsidiaries to perform such activities as asset management,
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,
2003, the impact of these taxable subsidiaries income
taxes and their related tax attributes were not material to the
accompanying consolidated financial statements

As of December 31, 2003, 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 higher that the net assets as reported
in the Operating Partnerships consolidated financial
statements by $9,417.



|   |                                
|-- | -------------------------------
|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 stock-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 share had
the fair value method of accounting under SFAS No. 123 been
applied for the years ended December 31, 2003, 2002 and
2001.

Stock Option Plans

The Companys 1993 Employee Stock Plan (the
1993 Stock Plan), under which an aggregate of up to
6,000,000 shares of common stock were available for the grant of
stock options and restricted stock to employees and directors,
expired in July 2003. At December 31, 2003, stock options
outstanding under the 1993 Stock Plan totaled 3,897,812.

The 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 4,000,000 shares of common stock were reserved for
issuance. Of this amount, not more than 500,000 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, 2003, stock options outstanding under the 2003
Stock Plan totaled 837,000.

In 2003, 2002 and 2001, the Company granted stock
options to purchase 1,252,436, 18,323 and 415,529 shares of
Company common stock to Company officers and directors, of which
100,000 shares in 2003 were granted to the Companys
non-executive chairman of the board. For the year ended
December 31, 2003, general and administrative expenses
included compensation expense related to stock options of $244
recognized under the fair value method.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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:

|                        |  |      |              |      |  |      |              |  |  |  |              | 
|----------------------- |  | ---- | ------------ | ---- |  | ---- | ------------ |  |  |  | ------------ | 
|                        |  | 2003 |              | 2002 |  | 2001
|                        |  |      |              |      |  |     
|Dividend yield          |  |      | 6.4%         |      |  |      | 7.2%         |  |  |  | 8.4%         | 
|Expected volatility     |  |      | 17.1%        |      |  |      | 22.7%        |  |  |  | 15.1%        | 
|Risk-free interest rate |  |      | 2.8% to 3.2% |      |  |      | 2.7% to 5.3% |  |  |  | 3.7% to 5.3% | 
|Expected option life    |  |      | 5 years      |      |  |      | 5 to 7 years |  |  |  | 5 to 7 years | 

A summary of stock option activity under all
plans for the years ended December 31, 2003, 2002 and 2001, is
presented below.

|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|------------------------------------------------------------------ |  | ------ | --------- | -------------- |  | ------ | -- | -------------- |  | ------ | --------- | -------------- |  | - | -- |  |  | - | --------- | - |  | - | -- | 
|                                                                   |  |        |           |                |  |       
|                                                                   |  | 2003   |           | 2002           |  | 2001  
|                                                                   |  |        |           |                |  |       
|                                                                   |  |        |           | Weighted       |  |        |    | Weighted       |  |        |           | Weighted      
|                                                                   |  |        |           | Average        |  |        |    | Average        |  |        |           | Average       
|                                                                   |  | Shares |           | Exercise Price |  | Shares |    | Exercise Price |  | Shares |           | Exercise Price
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |               
|Outstanding at beginning of year                                   |  |        | 4,089,493 |                |  | $      | 35 |                |  |        | 4,228,218 |                |  | $ | 36 |  |  |   | 4,271,608 |   |  | $ | 35 | 
|Granted                                                            |  |        | 1,252,436 |                |  |        | 26 |                |  |        | 18,323    |                |  |   | 24 |  |  |   | 415,529   |   |  |   | 37 | 
|Exercised                                                          |  |        | (217,275  | )              |  |        | 28 |                |  |        | (15,000   | )              |  |   | 31 |  |  |   | (262,332  | ) |  |   | 30 | 
|Forfeited                                                          |  |        | (389,842  | )              |  |        | 32 |                |  |        | (142,048  | )              |  |   | 38 |  |  |   | (196,587  | ) |  |   | 38 | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|Outstanding at end of year                                         |  |        | 4,734,812 |                |  |        | 34 |                |  |        | 4,089,493 |                |  |   | 35 |  |  |   | 4,228,218 |   |  |   | 36 | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|Options exercisable at year-end                                    |  |        | 3,232,739 |                |  |        |    |                |  |        | 3,464,759 |                |  |   |    |  |  |   | 2,962,245 |   |  |   |    | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 
|Weighted-average fair value of options granted
    during the year |  | $      | 1.59      |                |  |        |    |                |  | $      | 2.13      |                |  |   |    |  |  | $ | 1.44      |   |  |   |    | 
|                                                                   |  |        |           |                |  |        |    |                |  |        |           |                |  |   |    |  |  |   |           |   |  |   |    | 

At December 31, 2003, the Company has
separated its outstanding options into two ranges based on
exercise prices. There were 1,512,057 options outstanding with
exercise prices ranging from $22.95 to $30.29. These options
have a weighted average exercise price of $26.49 and a weighted
average remaining contractual life of 8 years. Of these
outstanding options, 289,057 were exercisable at
December 31, 2003 at a weighted average exercise price of
$30.00. In addition, there were 3,222,755 options outstanding
with exercise prices ranging from $31.00 to $44.13. These
options have a weighted average exercise price of $36.90 and a
weighted average remaining contractual life of 5 years. Of
these outstanding options, 2,943,682 were exercisable at
December 31, 2003 at a weighted average exercise price of
$37.00.

In 2003, 2002 and 2001, the Company granted
174,509, 15,353 and 17,566 shares of restricted stock,
respectively, to Company officers and directors, of which 7,672
shares in 2003 were granted to the Companys non-executive
chairman of the board. The restricted shares granted in 2003
vest ratably over three to eight year periods. The restricted
shares granted in 2002 and 2001 vest ratably over three to five
year periods. For each year, the total value of the restricted
share grants of $4,555, $459 and $616, respectively, was
initially reflected in partners equity as additional
paid-in capital reduced by non-amortized 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 $742,
$265 and $171 in 2003, 2002 and 2001, respectively.

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase
Plan (ESPP) to encourage stock ownership by eligible
directors and employees. To participate in the ESPP,
(i) directors must not be employed by the Company or the
Operating Partnership and 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. 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.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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 $85 in 2003. 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).

10. EMPLOYEE BENEFIT PLANS

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 $513, $452 and $638 were made to this plan in
2003, 2002 and 2001, 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 office, equipment and other operating leases
with terms expiring in years 2004 through 2006. Future minimum
lease payments for non-cancelable land, office, equipment and
other leases at December 31, 2003, are as follows:

|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2004                |  | $ | 1,285   | 
|2005                |  |   | 1,246   | 
|2006                |  |   | 1,234   | 
|2007                |  |   | 1,257   | 
|2008                |  |   | 1,278   | 
|2009 and thereafter |  |   | 148,909 | 

The Operating Partnership incurred $4,382, $5,223
and $5,998 of rent expense for the years ended December 31,
2003, 2002 and 2001, respectively.

Legal proceedings

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
alleges various breaches of fiduciary duties by the board of
directors of the Company and seeks, among other relief, the
disclosure of certain information by the defendants. This
complaint also seeks 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 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 alleges breaches of
fiduciary duties, abuse of control and corporate waste by the
defendants. The plaintiff seeks monetary damages and, as
appropriate, injunctive relief. These lawsuits are expected to
be settled in 2004. 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 the proxy and related costs charge.

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




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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 2003, 2002 and 2001, the Operating Partnership
held investments in Property LLCs accounted for under the
equity method of accounting (see note 4). In 2003, 2002 and
2001, 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 $2,913, $11,916 and $15,202, respectively, from
these related companies. Additionally in 2003, 2002 and 2001,
the Operating Partnership earned interest under the construction
loans to the Project LLCs totaling $3,186, $4,482 and
$1,024, respectively.

The Operating Partnership provides landscaping
services for executive officers, employees, directors and other
related parties. For the years ended December 31, 2003, 2002 and
2001, the Operating Partnership received landscaping revenue of
$742, $775 and $705, respectively, for such services. Such
revenue includes reimbursement of direct and indirect expenses.
Additionally, the Operating Partnership provides accounting and
administrative services to entities controlled by certain
directors of the Operating Partnership. Fees under this
arrangement aggregated $11 for the year ended December 31,
2003 and $25 for each of the years ended December 31, 2002
and 2001.

At December 31, 2003 and 2002, the Operating
Partnership had outstanding loan balances to certain current and
former Operating Partnership executives totaling $6,075 and
$7,600, 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, 2003 and 2002, the Operating
Partnership had outstanding additional loans to certain
Operating Partnership executives totaling $920 and $1,140,
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 $160 was recorded as compensation expense.

13. DERIVATIVE FINANCIAL
INSTRUMENTS

At December 31, 2003 and 2002, the Operating
Partnership had outstanding interest rate swap agreements with a
notional value of $129,000 with maturity dates ranging from 2005
to 2009. For the years ended December 31, 2003, 2002 and
2001, the Operating Partnership recorded unrealized net gains of
$4,017, unrealized net losses of $10,204 and unrealized net
losses of $6,645 respectively, on these cash flow hedges as
increases and decreases in accumulated other comprehensive
income, a partners equity account, in the accompanying
consolidated balance sheet. Within the next twelve months, the
Operating Partnership expects to reclassify out of accumulated
other comprehensive income approximately $5,851.

In 2003, the Operating Partnership entered into
two interest rate cap arrangements with two financial
institutions. The new interest rate cap arrangements replaced
three expiring interest rate cap arrangements and were
structured as cash flow hedges to provide a fixed ceiling at 5%
for the Operating Partnerships variable rate, tax exempt
borrowings. 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, 2003, the difference of $1,314 between the
amortized costs of the interest rate cap arrangements of $2,720
and their fair value of $1,406 is included as an unrealized loss
in accumulated other comprehensive income, a shareholders
equity account. The $2,720 cost of the arrangements is being
amortized as additional expense over their five-year term in
accordance with SFAS No. 133, as amended.

Upon the adoption of SFAS No. 133 in 2001,
the Operating Partnership recorded a net transition loss of $695
relating to the write down of the book value of its interest
rate cap agreements to their fair value. This loss was reflected
as a cumulative effect of accounting change in the consolidated
statement of operations for the year ended December 31,
2001.




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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 $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. The fair
value of fixed rate debt was approximately $928,313 (carrying
value of $877,706) and the fair value of floating rate debt
approximated its carrying value due to the adjustable nature of
the arrangements at December 31, 2002.

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. 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, 2003. 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.
Property rental operations are broken down into four segments
based on the various stages in the property ownership lifecycle.
These segments are described below. All other ancillary service
and support operations, including the third party service
businesses (see note 7), are aggregated 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, 2003. The segment
information for the years ended December 31, 2002 and 2001
have been adjusted due to the restatement impact of
reclassifying the operating results of the assets designated as
held for sale in 2003 and 2002 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.                                                                                                                                        




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)







| |   |                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.
|
| |  | Sold communities  communities which
    were sold in the current or prior year 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 income
(loss) from continuing operations 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 property NOI together
with a reconciliation of segment contribution to NOI to income
(loss) from continuing operations for the years ended
December 31, 2003, 2002 and 2001. Additionally,
substantially all of the Operating Partnerships assets
relate to the




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





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

|                                                                     |  |      |         |      |  |      |         |   |  |   |         |  
|-------------------------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- | - |  | - | ------- | -
|                                                                     |  | 2003 |         | 2002 |  | 2001
|                                                                     |  |      |         |      |  |     
|Revenues                                                             |  |      |         |      |  |      |         |   |  |   |         |  
|Fully stabilized communities                                         |  | $    | 221,592 |      |  | $    | 229,477 |   |  | $ | 243,589 |  
|Communities stabilized during prior year                             |  |      | 31,294  |      |  |      | 26,322  |   |  |   | 15,685  |  
|Development and lease-up communities                                 |  |      | 16,539  |      |  |      | 9,064   |   |  |   | 6,911   |  
|Sold communities                                                     |  |      |        |      |  |      | 745     |   |  |   | 19,659  |  
|Other                                                                |  |      | 20,065  |      |  |      | 20,410  |   |  |   | 33,474  |  
|Interest income                                                      |  |      | 894     |      |  |      | 1,288   |   |  |   | 1,771   |  
|                                                                     |  |      |         |      |  |      |         |   |  |   |         |  
|Consolidated revenues                                                |  | $    | 290,384 |      |  | $    | 287,306 |   |  | $ | 321,089 |  
|                                                                     |  |      |         |      |  |      |         |   |  |   |         |  
|Contribution to Property Net Operating
    Income                    |  |      |         |      |  |      |         |   |  |   |         |  
|Fully stabilized communities                                         |  | $    | 141,419 |      |  | $    | 150,543 |   |  | $ | 163,866 |  
|Communities stabilized during prior year                             |  |      | 19,913  |      |  |      | 16,037  |   |  |   | 9,070   |  
|Development and lease-up communities                                 |  |      | 8,955   |      |  |      | 4,854   |   |  |   | 4,345   |  
|Sold communities                                                     |  |      |        |      |  |      | 369     |   |  |   | 12,329  |  
|Other                                                                |  |      | (2,538  | )    |  |      | (1,167  | ) |  |   | 1,627   |  
|                                                                     |  |      |         |      |  |      |         |   |  |   |         |  
|Consolidated property net operating income                           |  |      | 167,749 |      |  |      | 170,636 |   |  |   | 191,237 |  
|                                                                     |  |      |         |      |  |      |         |   |  |   |         |  
|Interest income                                                      |  |      | 894     |      |  |      | 1,288   |   |  |   | 1,771   |  
|Third party services                                                 |  |      |        |      |  |      |        |   |  |   | 1,065   |  
|Minority interest in consolidated property
    partnerships          |  |      | 2,024   |      |  |      | 2,055   |   |  |   | 2,098   |  
|Gains on property sales                                              |  |      |        |      |  |      | 13,275  |   |  |   | 23,942  |  
|Depreciation                                                         |  |      | (83,700 | )    |  |      | (76,760 | ) |  |   | (63,312 | )
|Interest                                                             |  |      | (64,905 | )    |  |      | (52,035 | ) |  |   | (43,653 | )
|Amortization of deferred loan costs                                  |  |      | (3,801  | )    |  |      | (2,327  | ) |  |   | (1,978  | )
|General and administrative                                           |  |      | (15,102 | )    |  |      | (14,431 | ) |  |   | (13,256 | )
|Development costs and other                                          |  |      | (2,138  | )    |  |      | (830    | ) |  |   | (88     | )
|Severance charges                                                    |  |      | (21,506 | )    |  |      |        |   |  |   |        |  
|Proxy and related costs                                              |  |      | (5,231  | )    |  |      |        |   |  |   |        |  
|Project abandonment, employee severance and other
    charges        |  |      |        |      |  |      |        |   |  |   | (17,450 | )
|Equity in income (losses) of unconsolidated
    real estate entities |  |      | 7,791   |      |  |      | (1,590  | ) |  |   | (186    | )
|                                                                     |  |      |         |      |  |      |         |   |  |   |         |  
|Income (loss) from continuing operations                             |  | $    | (17,925 | )    |  | $    | 39,281  |   |  | $ | 80,190  |  
|                                                                     |  |      |         |      |  |      |         |   |  |   |         |  

16. SUPPLEMENTAL CASH FLOW
INFORMATION

Non-cash investing and financing activities for
the years ended December 31, 2003, 2002 and 2001 are as
follows:

The Operating Partnership committed to distribute
$19,043, $32,785 and $32,741 for the quarters ended
December 31, 2003, 2002 and 2001, 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




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POST APARTMENT HOMES, L.P.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in thousands, except per unit
data)





its quarterly reports on Form 10-Q.
Quarterly financial information for the years ended
December 31, 2003 and 2002, as revised to reflect the
change discussed above, was as follows:

|                                                                |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|--------------------------------------------------------------- |  | ---------------------------- | ------- | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | -
|                                                                |  |                             
|                                                                |  | Year ended December 31, 2003
|                                                                |  |                             
|                                                                |  | First                        |         | Second |  | Third |        | Fourth
|                                                                |  |                              |         |        |  |       |        |       
|Revenues                                                        |  | $                            | 71,587  |        |  | $     | 72,392 |        |  | $ | 73,480 |   |  | $ | 72,925 |  
|                                                                |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations                        |  |                              | (18,683 | )      |  |       | 2,516  |        |  |   | (801   | ) |  |   | (957   | )
|Income (loss) from discontinued operations                      |  |                              | (3,515  | )      |  |       | 29,656 |        |  |   | 102    |   |  |   | 11,779 |  
|                                                                |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income (loss)                                               |  |                              | (22,198 | )      |  |       | 32,172 |        |  |   | (699   | ) |  |   | 10,822 |  
|Distributions to preferred unitholders                          |  |                              | (4,263  | )      |  |       | (4,262 | )      |  |   | (4,262 | ) |  |   | (4,262 | )
|                                                                |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income (loss) available to common
    unitholders           |  | $                            | (26,461 | )      |  | $     | 27,910 |        |  | $ | (4,961 | ) |  | $ | 6,560  |  
|                                                                |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Earnings per Common Unit (1):                                   |  |                              |         |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income (loss) available to common
    unitholders  basic   |  | $                            | (0.63   | )      |  | $     | 0.66   |        |  | $ | (0.12  | ) |  | $ | 0.15   |  
|Net income (loss) available to common
    unitholders  diluted |  | $                            | (0.63   | )      |  | $     | 0.66   |        |  | $ | (0.12  | ) |  | $ | 0.15   |  

|                                                         |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|-------------------------------------------------------- |  | ---------------------------- | ------ | ------ |  | ----- | ------ | ------ |  | - | ------ | - |  | - | ------ | -
|                                                         |  |                             
|                                                         |  | Year ended December 31, 2002
|                                                         |  |                             
|                                                         |  | First                        |        | Second |  | Third |        | Fourth
|                                                         |  |                              |        |        |  |       |        |       
|Revenues                                                 |  | $                            | 71,480 |        |  | $     | 70,348 |        |  | $ | 73,246 |   |  | $ | 72,232 |  
|                                                         |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Income from continuing operations                        |  |                              | 22,094 |        |  |       | 7,445  |        |  |   | 6,285  |   |  |   | 3,457  |  
|Income (loss) from discontinued operations               |  |                              | (1,736 | )      |  |       | 22,116 |        |  |   | 1,723  |   |  |   | 11,734 |  
|                                                         |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income                                               |  |                              | 20,358 |        |  |       | 29,561 |        |  |   | 8,008  |   |  |   | 15,191 |  
|Distributions to preferred unitholders                   |  |                              | (4,263 | )      |  |       | (4,262 | )      |  |   | (4,262 | ) |  |   | (4,262 | )
|                                                         |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income available to common unitholders               |  | $                            | 16,095 |        |  | $     | 25,299 |        |  | $ | 3,746  |   |  | $ | 10,929 |  
|                                                         |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Earnings per Common Unit (1):                            |  |                              |        |        |  |       |        |        |  |   |        |   |  |   |        |  
|Net income available to common
    unitholders  basic   |  | $                            | 0.38   |        |  | $     | 0.60   |        |  | $ | 0.09   |   |  | $ | 0.26   |  
|Net income available to common
    unitholders  diluted |  | $                            | 0.38   |        |  | $     | 0.60   |        |  | $ | 0.09   |   |  | $ | 0.26   |  



|    |                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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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POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.


REAL ESTATE INVESTMENTS AND ACCUMULATED
DEPRECIATION


December 31, 2003


(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  |      |  | $            |  |          |  | $ | 8,832   |        |  | $ | 1,906  |     |  | $ | 8,832   |        |  | $ | 10,738  |       
|Post Briarcliff      |                               |             | Apartments |              |  |               |       |              |     |                            | 13,344 |      |  |              |  |          |  |   | 46,812  |        |  |   | 13,344 |     |  |   | 46,812  |        |  |   | 60,156  |       
|Post Brookhaven      |                               |             | Apartments |              |  |               |       |              |     |                            | 7,921  |      |  |              |  |          |  |   | 32,823  |        |  |   | 7,921  |     |  |   | 32,823  |        |  |   | 40,744  |       
|Post Canyon(6)       |                               |             | Apartments |              |  |               | 16,845 | (2)          |     |                            | 931    |      |  |              |  |          |  |   | 19,212  |        |  |   | 931    |     |  |   | 19,212  |        |  |   | 20,143  |       
|Post Chase(6)        |                               |             | Apartments |              |  |               | 15,000 | (2)          |     |                            | 1,438  |      |  |              |  |          |  |   | 17,092  |        |  |   | 1,438  |     |  |   | 17,092  |        |  |   | 18,530  |       
|Post Chastain        |                               |             | Apartments |              |  |               | 29,403 |              |     |                            | 6,352  |      |  |              |  |          |  |   | 41,166  |        |  |   | 6,779  |     |  |   | 40,739  |        |  |   | 47,518  |       
|Post Collier Hills   |                               |             | Apartments |              |  |               |       |              |     |                            | 6,487  |      |  |              |  |          |  |   | 25,564  |        |  |   | 7,183  |     |  |   | 24,868  |        |  |   | 32,051  |       
|Post Corners(6)      |                               |             | Apartments |              |  |               | 14,760 | (2)          |     |                            | 1,473  |      |  |              |  |          |  |   | 16,174  |        |  |   | 1,473  |     |  |   | 16,174  |        |  |   | 17,647  |       
|Post Court(6)        |                               |             | Apartments |              |  |               | 18,650 | (2)          |     |                            | 1,769  |      |  |              |  |          |  |   | 18,504  |        |  |   | 1,769  |     |  |   | 18,504  |        |  |   | 20,273  |       
|Post Crest           |                               |             | Apartments |              |  |               | 25,853 |              |     |                            | 4,733  |      |  |              |  |          |  |   | 25,172  |        |  |   | 4,763  |     |  |   | 25,142  |        |  |   | 29,905  |       
|Post Crossing        |                               |             | Apartments |              |  |               |       |              |     |                            | 3,951  |      |  |              |  |          |  |   | 20,018  |        |  |   | 3,951  |     |  |   | 20,018  |        |  |   | 23,969  |       
|Post Dunwoody        |                               |             | Apartments |              |  |               |       |              |     |                            | 4,917  |      |  |              |  |          |  |   | 29,322  |        |  |   | 4,961  |     |  |   | 29,278  |        |  |   | 34,239  |       
|Post Gardens         |                               |             | Apartments |              |  |               |       |              |     |                            | 5,859  |      |  |              |  |          |  |   | 34,162  |        |  |   | 5,931  |     |  |   | 34,090  |        |  |   | 40,021  |       
|Post Glen            |                               |             | Apartments |              |  |               | 19,800 |              |     |                            | 5,591  |      |  |              |  |          |  |   | 21,919  |        |  |   | 5,784  |     |  |   | 21,726  |        |  |   | 27,510  |       
|Post Lane(6)         |                               |             | Apartments |              |  |               |       |              |     |                            | 1,512  |      |  |              |  |          |  |   | 8,577   |        |  |   | 2,067  |     |  |   | 8,022   |        |  |   | 10,089  |       
|Post Lenox Park      |                               |             | Apartments |              |  |               | 10,855 |              |     |                            | 3,132  |      |  |              |  |          |  |   | 11,116  |        |  |   | 3,132  |     |  |   | 11,116  |        |  |   | 14,248  |       
|Post Lindbergh       |                               |             | Apartments |              |  |               |       |              |     |                            | 6,268  |      |  |              |  |          |  |   | 27,269  |        |  |   | 6,652  |     |  |   | 26,885  |        |  |   | 33,537  |       
|Post Mill(6)         |                               |             | Apartments |              |  |               | 25,330 |              |     |                            | 1,783  |      |  |              |  |          |  |   | 26,768  |        |  |   | 1,791  |     |  |   | 26,760  |        |  |   | 28,551  |       
|Post Oak             |                               |             | Apartments |              |  |               |       |              |     |                            | 2,027  |      |  |              |  |          |  |   | 8,612   |        |  |   | 2,027  |     |  |   | 8,612   |        |  |   | 10,639  |       
|Post Oglethorpe      |                               |             | Apartments |              |  |               |       |              |     |                            | 3,662  |      |  |              |  |          |  |   | 17,503  |        |  |   | 3,662  |     |  |   | 17,503  |        |  |   | 21,165  |       
|Post Parkside        |                               |             | Mixed Use  |              |  |               |       |              |     |                            | 3,402  |      |  |              |  |          |  |   | 20,217  |        |  |   | 3,465  |     |  |   | 20,154  |        |  |   | 23,619  |       
|Post Peachtree Hills |                               |             | Apartments |              |  |               |       |              |     |                            | 4,215  |      |  |              |  |          |  |   | 14,659  |        |  |   | 4,857  |     |  |   | 14,017  |        |  |   | 18,874  |       
|Post Renaissance(8)  |                               |             | Apartments |              |  |               |       |              |     |                            |       |      |  |              |  |          |  |   | 20,654  |        |  |   |       |     |  |   | 20,654  |        |  |   | 20,654  |       
|Post Ridge           |                               |             | Apartments |              |  |               |       |              |     |                            | 5,150  |      |  |              |  |          |  |   | 31,856  |        |  |   | 5,150  |     |  |   | 31,856  |        |  |   | 37,006  |       
|Post Spring          |                               |             | Apartments |              |  |               |       |              |     |                            | 2,105  |      |  |              |  |          |  |   | 38,317  |        |  |   | 2,105  |     |  |   | 38,317  |        |  |   | 40,422  |       
|Post Summit          |                               |             | Apartments |              |  |               |       |              |     |                            | 1,575  |      |  |              |  |          |  |   | 6,608   |        |  |   | 1,575  |     |  |   | 6,608   |        |  |   | 8,183   |       
|Post Valley          |                               |             | Apartments |              |  |               | 18,600 | (2)          |     |                            | 1,117  |      |  |              |  |          |  |   | 19,864  |        |  |   | 1,117  |     |  |   | 19,864  |        |  |   | 20,981  |       
|Post Vinings         |                               |             | Apartments |              |  |               |       |              |     |                            | 4,322  |      |  |              |  |          |  |   | 22,572  |        |  |   | 5,668  |     |  |   | 21,226  |        |  |   | 26,894  |       
|Post Village         |                               |             | Apartments |              |  |               |        |              |     |                            |        |      |  |              |   |          |  |   |         |        |  |   |        |     |  |   |         |        |  |   |         |       
|                     | The Arbors                    |             |            | Apartments   |  |               |        |             |     |                            |        | 373  |  |              |   |         |  |   |         | 17,750 |  |   |        | 373 |  |   |         | 17,750 |  |   |         | 18,123 | 
|                     | The Fountains and the Meadows |             |            | Apartments   |  |               |        | 26,000       | (2) |                            |        | 611  |  |              |   |         |  |   |         | 39,712 |  |   |        | 878 |  |   |         | 39,445 |  |   |         | 40,323 | 
|                     | The Gardens                   |             |            | Apartments   |  |               |        | 14,500       | (2) |                            |        | 187  |  |              |   |         |  |   |         | 29,047 |  |   |        | 637 |  |   |         | 28,597 |  |   |         | 29,234 | 
|                     | The Hills                     |             |            | Apartments   |  |               |        | 7,000        | (2) |                            |        | 91   |  |              |   |         |  |   |         | 13,036 |  |   |        | 307 |  |   |         | 12,820 |  |   |         | 13,127 | 
|Post Walk            |                               |             | Apartments |              |  |               | 19,300 | (2)          |     |                            | 2,954  |      |  |              |  |          |  |   | 18,753  |        |  |   | 2,954  |     |  |   | 18,753  |        |  |   | 21,707  |       
|Post Woods           |                               |             | Apartments |              |  |               | 26,030 |              |     |                            | 1,378  |      |  |              |  |          |  |   | 28,487  |        |  |   | 3,070  |     |  |   | 26,795  |        |  |   | 29,865  |       
|Post Stratford(8)    |                               |             | Apartments |              |  |               |       |              |     |                            | 328    |      |  |              |  |          |  |   | 24,400  |        |  |   | 620    |     |  |   | 24,108  |        |  |   | 24,728  |       
|Post Riverside       |                               |             | Mixed Use  |              |  |               |       |              |     |                            | 11,130 |      |  |              |  |          |  |   | 109,592 |        |  |   | 12,457 |     |  |   | 108,265 |        |  |   | 120,722 |       

[Additional columns below]

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

|                     |                               |              |        |              |  |          |               |               |  |  |               |       |  |  |            |            | 
|-------------------- | ----------------------------- | ------------ | ------ | ------------ |  | -------- | ------------- | ------------- |  |  | ------------- | ----- |  |  | ---------- | ---------- | 
|                     |                               | Accumulated  |        | Date of      |  | Date     |               | Depreciable  
|                     |                               | Depreciation |        | Construction |  | Acquired |               | Lives Years  
|                     |                               |              |        |              |  |          |               |              
|Georgia              |                               |              |        |              |  |          |               |               |  |  |               |       |  |  |            |           
|Post Ashford         |                               | $            | 4,176  |              |  |          | 04/86  06/87 |               |  |  | 06/87         |       |  |  | 5-40 Years |           
|Post Briarcliff      |                               |              | 9,154  |              |  |          | 12/96         |               |  |  | 09/96         |       |  |  | 5-40 Years |           
|Post Brookhaven      |                               |              | 14,439 |              |  |          | 07/89  12/92 |               |  |  | 03/89         |       |  |  | 5-40 Years |           
|Post Canyon(6)       |                               |              | 9,283  |              |  |          | 04/84  04/86 |               |  |  | 10/81         |       |  |  | 5-40 Years |           
|Post Chase(6)        |                               |              | 7,819  |              |  |          | 06/85  04/87 |               |  |  | 06/85         |       |  |  | 5-40 Years |           
|Post Chastain        |                               |              | 17,504 |              |  |          | 06/88  10/90 |               |  |  | 06/88         |       |  |  | 5-40 Years |           
|Post Collier Hills   |                               |              | 6,754  |              |  |          | 10/95         |               |  |  | 06/95         |       |  |  | 5-40 Years |           
|Post Corners(6)      |                               |              | 7,836  |              |  |          | 08/84  04/86 |               |  |  | 08/84         |       |  |  | 5-40 Years |           
|Post Court(6)        |                               |              | 8,155  |              |  |          | 06/86  04/88 |               |  |  | 12/85         |       |  |  | 5-40 Years |           
|Post Crest           |                               |              | 7,123  |              |  |          | 09/95         |               |  |  | 10/94         |       |  |  | 5-40 Years |           
|Post Crossing        |                               |              | 5,372  |              |  |          | 04/94  08/95 |               |  |  | 11/93         |       |  |  | 5-40 Years |           
|Post Dunwoody        |                               |              | 9,474  |              |  |          | 11/88         |               |  |  | 12/84 & 8/94  | (5)   |  |  | 5-40 Years |           
|Post Gardens         |                               |              | 7,407  |              |  |          | 07/96         |               |  |  | 05/96         |       |  |  | 5-40 Years |           
|Post Glen            |                               |              | 5,310  |              |  |          | 07/96         |               |  |  | 05/96         |       |  |  | 5-40 Years |           
|Post Lane(6)         |                               |              | 3,885  |              |  |          | 04/87  05/88 |               |  |  | 01/87         |       |  |  | 5-40 Years |           
|Post Lenox Park      |                               |              | 3,111  |              |  |          | 03/94  05/95 |               |  |  | 03/94         |       |  |  | 5-40 Years |           
|Post Lindbergh       |                               |              | 5,874  |              |  |          | 11/96         |               |  |  | 08/96         |       |  |  | 5-40 Years |           
|Post Mill(6)         |                               |              | 13,314 |              |  |          | 05/83  12/86 |               |  |  | 05/81         |       |  |  | 5-40 Years |           
|Post Oak             |                               |              | 3,218  |              |  |          | 09/92  12/93 |               |  |  | 09/92         |       |  |  | 5-40 Years |           
|Post Oglethorpe      |                               |              | 4,974  |              |  |          | 03/93  10/94 |               |  |  | 03/93         |       |  |  | 5-40 Years |           
|Post Parkside        |                               |              | 3,380  |              |  |          | 02/99         |               |  |  | 12/97         |       |  |  | 5-40 Years |           
|Post Peachtree Hills |                               |              | 4,576  |              |  |          | 02/92  09/94 |               |  |  | 02/92 & 09/92 | (5)   |  |  | 5-40 Years |           
|Post Renaissance(8)  |                               |              | 7,094  |              |  |          | 07/91  12/94 |               |  |  | 06/91 & 01/94 | (5)   |  |  | 5-40 Years |           
|Post Ridge           |                               |              | 6,530  |              |  |          | 10/96         |               |  |  | 07/96         |       |  |  | 5-40 Years |           
|Post Spring          |                               |              | 4,131  |              |  |          | 09/99         |               |  |  | 09/99         |       |  |  | 5-40 Years |           
|Post Summit          |                               |              | 3,092  |              |  |          | 01/90  12/90 |               |  |  | 01/90         |       |  |  | 5-40 Years |           
|Post Valley          |                               |              | 9,139  |              |  |          | 03/86  04/88 |               |  |  | 12/85         |       |  |  | 5-40 Years |           
|Post Vinings         |                               |              | 9,804  |              |  |          | 05/88  09/91 |               |  |  | 05/88         |       |  |  | 5-40 Years |           
|Post Village         |                               |              |        |              |  |          |               |               |  |  |               |       |  |  |            |           
|                     | The Arbors                    |              |        | 7,792        |  |          |               | 04/82  10/83 |  |  |               | 03/82 |  |  |            | 5-40 Years | 
|                     | The Fountains and the Meadows |              |        | 17,316       |  |          |               | 08/85  05/88 |  |  |               | 08/85 |  |  |            | 5-40 Years | 
|                     | The Gardens                   |              |        | 12,554       |  |          |               | 06/88  07/89 |  |  |               | 05/84 |  |  |            | 5-40 Years | 
|                     | The Hills                     |              |        | 5,628        |  |          |               | 05/84  04/86 |  |  |               | 04/83 |  |  |            | 5-40 Years | 
|Post Walk            |                               |              | 9,096  |              |  |          | 03/86  08/87 |               |  |  | 06/85         |       |  |  | 5-40 Years |           
|Post Woods           |                               |              | 13,325 |              |  |          | 03/76  09/83 |               |  |  | 06/76         |       |  |  | 5-40 Years |           
|Post Stratford(8)    |                               |              | 3,658  |              |  |          | 04/99         |               |  |  | 01/99         |       |  |  | 5-40 Years |           
|Post Riverside       |                               |              | 17,721 |              |  |          | 07/96         |               |  |  | 01/96         |       |  |  | 5-40 Years |           




Post Properties, Inc.


108


Post Apartment Homes, L.P.




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##### Table of Contents



POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.


REAL ESTATE INVESTMENTS AND ACCUMULATED
DEPRECIATION


December 31, 2003


(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  |              |  |               | 89,479 |              |  |                            | 2,885  |      |  |              | 41,482 |          |  |  | 120,360 |  |  |  | 8,382  |  |  |  | 156,345 |     |  |  | 164,727 | 
|Post American Beauty Mill              |  |             | Apartments |              |  |               |       |              |  |                            | 156    |      |  |              | 2,786  |          |  |  | 4,978   |  |  |  | 156    |  |  |  | 7,764   |     |  |  | 7,920   | 
|Post Block 588                         |  |             | Apartments |              |  |               |       |              |  |                            | 1,278  |      |  |              | 48     |          |  |  | 22,188  |  |  |  | 1,415  |  |  |  | 22,099  |     |  |  | 23,514  | 
|Post Coles Corner                     |  |             | Mixed Use  |              |  |               |       |              |  |                            | 1,886  |      |  |              | 18,006 |          |  |  | 1,780   |  |  |  | 2,086  |  |  |  | 19,586  |     |  |  | 21,672  | 
|Post Columbus Square                   |  |             | Mixed Use  |              |  |               |       |              |  |                            | 4,565  |      |  |              | 24,595 |          |  |  | 1,062   |  |  |  | 4,565  |  |  |  | 25,657  |     |  |  | 30,222  | 
|Heights of State- Thomas/Gallery       |  |             | Mixed Use  |              |  |               |       |              |  |                            | 5,455  |      |  |              | 15,559 |          |  |  | 29,509  |  |  |  | 5,812  |  |  |  | 44,711  |     |  |  | 50,523  | 
|Legacy at Town Center                  |  |             | Apartments |              |  |               |       |              |  |                            | 684    |      |  |              |       |          |  |  | 33,154  |  |  |  | 811    |  |  |  | 33,027  |     |  |  | 33,838  | 
|Post Midtown                           |  |             | Mixed Use  |              |  |               |       |              |  |                            | 4,408  |      |  |              | 1,412  |          |  |  | 74,762  |  |  |  | 4,305  |  |  |  | 76,277  |     |  |  | 80,582  | 
|Post Town Lake/Parks(6)                |  |             | Apartments |              |  |               |       |              |  |                            | 2,985  |      |  |              | 19,464 |          |  |  | 2,554   |  |  |  | 2,985  |  |  |  | 22,018  |     |  |  | 25,003  | 
|Post White Rock                        |  |             | Apartments |              |  |               |       |              |  |                            | 1,560  |      |  |              | 9,969  |          |  |  | 1,802   |  |  |  | 1,560  |  |  |  | 11,771  |     |  |  | 13,331  | 
|Post Windhaven(6)                      |  |             | Apartments |              |  |               |       |              |  |                            | 4,029  |      |  |              | 23,385 |          |  |  | 1,378   |  |  |  | 4,029  |  |  |  | 24,763  |     |  |  | 28,792  | 
|The Abbey of State-Thomas              |  |             | Apartments |              |  |               |       |              |  |                            | 575    |      |  |              | 6,276  |          |  |  | 1,695   |  |  |  | 575    |  |  |  | 7,971   |     |  |  | 8,546   | 
|The Meridian at State-Thomas           |  |             | Apartments |              |  |               |       |              |  |                            | 1,535  |      |  |              | 11,605 |          |  |  | 1,014   |  |  |  | 1,535  |  |  |  | 12,619  |     |  |  | 14,154  | 
|The Rice(8)                            |  |             | Mixed Use  |              |  |               |       |              |  |                            | 449    |      |  |              | 13,393 |          |  |  | 27,620  |  |  |  | 449    |  |  |  | 41,013  |     |  |  | 41,462  | 
|The Vineyard of Uptown                 |  |             | Apartments |              |  |               |       |              |  |                            | 1,133  |      |  |              | 8,560  |          |  |  | 319     |  |  |  | 1,133  |  |  |  | 8,879   |     |  |  | 10,012  | 
|The Vintage of Uptown                  |  |             | Apartments |              |  |               |       |              |  |                            | 2,614  |      |  |              | 12,188 |          |  |  | 536     |  |  |  | 2,614  |  |  |  | 12,724  |     |  |  | 15,338  | 
|The Worthington of State-Thomas        |  |             | Mixed Use  |              |  |               |       |              |  |                            | 3,744  |      |  |              | 34,700 |          |  |  | 1,696   |  |  |  | 3,744  |  |  |  | 36,396  |     |  |  | 40,140  | 
|Uptown Village                         |  |             | Apartments |              |  |               | 15,808 |              |  |                            | 3,955  |      |  |              | 22,120 |          |  |  | 16,566  |  |  |  | 6,195  |  |  |  | 36,446  |     |  |  | 42,641  | 
|Post Wilson Building(8)                |  |             | Mixed Use  |              |  |               |       |              |  |                            |       |      |  |              | 689    |          |  |  | 20,550  |  |  |  |       |  |  |  | 21,239  |     |  |  | 21,239  | 
|Florida                                |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |          |  |  |         |  |  |  |        |  |  |  |         |     |  |  |         | 
|Post Harbour Place                     |  |             | Mixed Use  |              |  |               |       |              |  |                            | 3,854  |      |  |              |       |          |  |  | 87,454  |  |  |  | 10,695 |  |  |  | 80,613  |     |  |  | 91,308  | 
|Post Hyde Park                         |  |             | Apartments |              |  |               |       |              |  |                            | 3,498  |      |  |              |       |          |  |  | 26,378  |  |  |  | 5,108  |  |  |  | 24,768  |     |  |  | 29,876  | 
|Post Lake(6)                           |  |             | Apartments |              |  |               | 28,500 | (2)          |  |                            | 6,113  |      |  |              |       |          |  |  | 34,548  |  |  |  | 6,724  |  |  |  | 33,937  |     |  |  | 40,661  | 
|Post Parkside (Orlando)                |  |             | Mixed Use  |              |  |               |       |              |  |                            | 2,493  |      |  |              |       |          |  |  | 30,454  |  |  |  | 2,493  |  |  |  | 30,454  |     |  |  | 32,947  | 
|Post Rocky Point                       |  |             | Apartments |              |  |               | 57,000 |              |  |                            | 10,510 |      |  |              |       |          |  |  | 60,814  |  |  |  | 10,567 |  |  |  | 60,757  |     |  |  | 71,324  | 
|Post Walk at Hyde Park                 |  |             | Apartments |              |  |               |       |              |  |                            | 1,943  |      |  |              |       |          |  |  | 11,028  |  |  |  | 1,974  |  |  |  | 10,997  |     |  |  | 12,971  | 
|Virginia                               |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |          |  |  |         |  |  |  |        |  |  |  |         |     |  |  |         | 
|Post Corners at Trinity Centre         |  |             | Apartments |              |  |               | 17,705 |              |  |                            | 4,404  |      |  |              |       |          |  |  | 23,914  |  |  |  | 4,493  |  |  |  | 23,825  |     |  |  | 28,318  | 
|Post Forest                            |  |             | Apartments |              |  |               |       |              |  |                            | 8,590  |      |  |              |       |          |  |  | 26,455  |  |  |  | 9,106  |  |  |  | 25,939  | (3) |  |  | 35,045  | 
|Washington D.C.                        |  |             |            |              |  |               |        |              |  |                            |        |      |  |              |        |          |  |  |         |  |  |  |        |  |  |  |         |     |  |  |         | 
|Post Pentagon Row(8)                   |  |             | Mixed Use  |              |  |               |       |              |  |                            | 2,359  |      |  |              | 7,659  |          |  |  | 83,195  |  |  |  | 3,470  |  |  |  | 89,743  |     |  |  | 93,213  | 

[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 |  |              | 29,596 |              |  |          | 10/97  7/99  |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post American Beauty Mill              |  |              | 939    |              |  |          | 10/97         |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post Block 588                         |  |              | 2,520  |              |  |          | 10/97         |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post Coles Corner                     |  |              | 4,623  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post Columbus Square                   |  |              | 4,171  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Heights of State- Thomas/Gallery       |  |              | 7,028  |              |  |          | 10/97         |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Legacy at Town Center                  |  |              | 3,280  |              |  |          | 03/99         |             |  |  | 03/99         |     |  |  | 5-40 Years | 
|Post Midtown                           |  |              | 8,369  |              |  |          | 10/97         |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post Town Lake/Parks(6)                |  |              | 4,792  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post White Rock                        |  |              | 2,561  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post Windhaven(6)                      |  |              | 4,622  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|The Abbey of State-Thomas              |  |              | 1,303  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|The Meridian at State-Thomas           |  |              | 2,456  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|The Rice(8)                            |  |              | 5,213  |              |  |          | 10/97         |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|The Vineyard of Uptown                 |  |              | 1,442  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|The Vintage of Uptown                  |  |              | 2,324  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|The Worthington of State-Thomas        |  |              | 6,670  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Uptown Village                         |  |              | 5,353  |              |  |          | N/A           |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Post Wilson Building(8)                |  |              | 1,827  |              |  |          | 10/97         |             |  |  | 10/97         |     |  |  | 5-40 Years | 
|Florida                                |  |              |        |              |  |          |               |             |  |  |               |     |  |  |            | 
|Post Harbour Place                     |  |              | 9,880  |              |  |          | 03/97         |             |  |  | 01/97         |     |  |  | 5-40 Years | 
|Post Hyde Park                         |  |              | 5,762  |              |  |          | 09/94         |             |  |  | 07/94         |     |  |  | 5-40 Years | 
|Post Lake(6)                           |  |              | 14,902 |              |  |          | 11/85  03/88 |             |  |  | 10/85         |     |  |  | 5-40 Years | 
|Post Parkside (Orlando)                |  |              | 4,050  |              |  |          | 03/99         |             |  |  | 03/99         |     |  |  | 5-40 Years | 
|Post Rocky Point                       |  |              | 13,566 |              |  |          | 04/94  11/96 |             |  |  | 02/94 & 09/96 | (5) |  |  | 5-40 Years | 
|Post Walk at Hyde Park                 |  |              | 3,371  |              |  |          | 10/95  10/97 |             |  |  | 09/95         |     |  |  | 5-40 Years | 
|Virginia                               |  |              |        |              |  |          |               |             |  |  |               |     |  |  |            | 
|Post Corners at Trinity Centre         |  |              | 5,749  |              |  |          | 06/94         |             |  |  | 06/94         |     |  |  | 5-40 Years | 
|Post Forest                            |  |              | 12,781 |              |  |          | 01/89  12/90 |             |  |  | 03/88         |     |  |  | 5-40 Years | 
|Washington D.C.                        |  |              |        |              |  |          |               |             |  |  |               |     |  |  |            | 
|Post Pentagon Row(8)                   |  |              | 4,216  |              |  |          | 06/99         |             |  |  | 02/99         |     |  |  | 5-40 Years | 




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POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.


REAL ESTATE INVESTMENTS AND ACCUMULATED
DEPRECIATION


December 31, 2003


(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)
|                            |       |             |            |              |  |               |   |              |  |                            |        |         |  |              |       |         
|New York                    |       |             |            |              |  |               |   |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |        |         |  |  |         |           |  |  |          |          
|Post Toscana                |       |             | Apartments |              |  |               |  |              |  |                            | 15,976 |         |  |              |      |          |  |  | 75,930  |           |  |  | 17,156 |         |  |  | 74,750  |           |  |  | 91,906   |          
|Post Luminaria              |       |             | Apartments |              |  |               |  |              |  |                            | 4,938  |         |  |              |      |          |  |  | 45,437  |           |  |  | 4,938  |         |  |  | 45,437  |           |  |  | 50,375   |          
|North Carolina              |       |             |            |              |  |               |   |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |        |         |  |  |         |           |  |  |          |          
|Uptown Place                |       |             | Mixed Use  |              |  |               |  |              |  |                            | 2,336  |         |  |              |      |          |  |  | 28,668  |           |  |  | 2,363  |         |  |  | 28,641  |           |  |  | 31,004   |          
|Gateway                     |       |             | Apartments |              |  |               |  |              |  |                            | 2,424  |         |  |              |      |          |  |  | 60,599  |           |  |  | 3,481  |         |  |  | 59,542  |           |  |  | 63,023   |          
|Post Park at Phillips Place |       |             | Mixed Use  |              |  |               |  |              |  |                            | 4,305  |         |  |              |      |          |  |  | 37,149  |           |  |  | 4,307  |         |  |  | 37,147  |           |  |  | 41,454   |          
|Tennessee                   |       |             |            |              |  |               |   |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |        |         |  |  |         |           |  |  |          |          
|Bennie Dillon               |       |             | Mixed Use  |              |  |               |  |              |  |                            |       |         |  |              |      |          |  |  | 9,923   |           |  |  |       |         |  |  | 9,923   |           |  |  | 9,923    |          
|Colorado                    |       |             |            |              |  |               |   |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |        |         |  |  |         |           |  |  |          |          
|Uptown Square               |       |             | Apartments |              |  |               |  |              |  |                            | 2,963  |         |  |              | 580   |          |  |  | 104,456 |           |  |  | 3,991  |         |  |  | 104,008 |           |  |  | 107,999  |          
|Miscellaneous Investments   |       |             |            |              |  |               |  |              |  |                            | 19,757 |         |  |              | 4,930 |          |  |  | 30,551  |           |  |  | 5,222  |         |  |  | 50,016  |           |  |  | 55,238(7 | )        
|                            |       |             |            |              |  |               |   |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |        |         |  |  |         |           |  |  |          |          
|                            | Total |             |            |              |  |               | $ | 506,312      |  |                            | $      | 264,353 |  |              | $     | 279,406  |  |  | $       | 2,052,617 |  |  | $      | 281,137 |  |  | $       | 2,315,239 |  |  | $        | 2,596,376 | 
|                            |       |             |            |              |  |               |   |              |  |                            |        |         |  |              |       |          |  |  |         |           |  |  |        |         |  |  |         |           |  |  |          |          

[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                |       |              | 1,082  |              |  |          | 01/02(4) |             |  |  | 01/02 |  |  |  | 5-40 Years | 
|Post Luminaria              |       |              | 3,049  |              |  |          | 03/01    |             |  |  | 03/01 |  |  |  | 5-40 Years | 
|North Carolina              |       |              |        |              |  |          |          |             |  |  |       |  |  |  |            | 
|Uptown Place                |       |              | 2,997  |              |  |          | 09/98    |             |  |  | 09/98 |  |  |  | 5-40 Years | 
|Gateway                     |       |              | 4,237  |              |  |          | 09/98    |             |  |  | 09/98 |  |  |  | 5-40 Years | 
|Post Park at Phillips Place |       |              | 9,249  |              |  |          | 01/96    |             |  |  | 11/95 |  |  |  | 5-40 Years | 
|Tennessee                   |       |              |        |              |  |          |          |             |  |  |       |  |  |  |            | 
|Bennie Dillon               |       |              | 1,115  |              |  |          | 07/98    |             |  |  | 07/98 |  |  |  | 5-40 Years | 
|Colorado                    |       |              |        |              |  |          |          |             |  |  |       |  |  |  |            | 
|Uptown Square               |       |              | 8,003  |              |  |          | 10/97    |             |  |  | 10/97 |  |  |  | 5-40 Years | 
|Miscellaneous Investments   |       |              | 14,655 |              |  |          |          |             |  |  |       |  |  |  | 5-40 Years | 
|                            |       |              |        |              |  |          |          |             |  |  |       |  |  |  |            | 
|                            | Total |              | $      | 506,771      |  |          |          |             |  |  |       |  |  |  |            |  | 
|                            |       |              |        |              |  |          |          |             |  |  |       |  |  |  |            | 



|    |                                                                                                                                                                                                                                                                                                                                                       
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The aggregate cost for Federal Income Tax
    purposes to the Company was approximately $2,169,475 at
    December 31, 2003, 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) | Balance includes an allowance for the possible
    loss of $3,700 which was taken in prior years.                                                                                                                                                                                                                                                     
|(4) | Property is in initial lease-up at
    December 31, 2003.                                                                                                                                                                                                                                                                                             
|(5) | Additional land was acquired for construction of
    an additional phase.                                                                                                                                                                                                                                                                             
|(6) | These properties were held for sale at
    December 31, 2003. 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 fair value,
    less costs to sell. Accordingly, the carrying value of Post
    Windhaven reflects a write-down of $3,344.
|(7) | Balance is net of reserves of $1,363 to write
    down certain land parcels held for sale to fair value.                                                                                                                                                                                                                                              
|(8) | The Company has a leasehold interest in the land
    underlying these communities.                                                                                                                                                                                                                                                                    




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

|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |   |  | 
|------------------------ | ---------------------------- | --------------------------------------------- | - | --------- | -------- | ---- | - | --------- | -------- | - | - | --------- | -------- | - |  | 
|                         |                              | 2003                                          |   | 2002      |          | 2001 |   |          
|                         |                              |                                               |   |           |          |      |   |          
|Real estate investments  |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at beginning of year |                                               | $ | 2,705,215 |          |      | $ | 2,777,980 |          |   | $ | 2,827,094 |          |   | 
|                         |                              | Improvements                                  |   |           | 25,360   |      |   |           | 121,110  |   |   |           | 211,881  |   |  | 
|                         |                              | Disposition of property                       |   |           | (134,199 | )    |   |           | (193,875 | ) |   |           | (260,995 | ) |  | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at end of year       |                                               | $ | 2,596,376 |          |      | $ | 2,705,215 |          |   | $ | 2,777,980 |          |   | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|Accumulated depreciation |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at beginning of year |                                               | $ | 443,965   |          |      | $ | 404,274   |          |   | $ | 357,180   |          |   | 
|                         |                              | Depreciation                                  |   |           | 89,975   |      |   |           | 87,927   |   |   |           | 76,111   |   |  | 
|                         |                              | Accumulated depreciation on disposed property |   |           | (27,169  | )    |   |           | (48,236  | ) |   |           | (29,017  | ) |  | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  
|                         | Balance at end of year       |                                               | $ | 506,771   | (a)      |      | $ | 443,965   | (a)      |   | $ | 404,274   |          |   | 
|                         |                              |                                               |   |           |          |      |   |           |          |   |   |           |          |  



|    |                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Accumulated depreciation on the balance sheet is
    net of accumulated depreciation on assets held for sale in the
    amounts of $74,614, $17,829 and $11,260 for the years ended
    December 31, 2003, 2002 and 2001, respectively.




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REPORT OF INDEPENDENT AUDITORS

To the Participants and Administrator of the

Post Properties, Inc. 1995 Non-Qualified Employee
Stock Purchase Plan


In our opinion, the accompanying statements of
net assets available for plan benefits and of changes in net
assets available for plan benefits present fairly, in all
material respects, the net assets of the Post Properties, Inc.
1995 Non-Qualified Employee Stock Purchase Plan at
December 31, 2003 and 2002 and the changes in net assets
available for plan benefits for the years then ended, in
conformity with accounting principles generally accepted in the
United States of America. These financial statements are the
responsibility of the Plans management; our responsibility
is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the
United States of America which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
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.

PricewaterhouseCoopers LLP

Atlanta, Georgia

March 5, 2004





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POST PROPERTIES, INC.

1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE
PLAN


STATEMENT OF NET ASSETS AVAILABLE FOR PLAN
BENEFITS


|                                           |                                                |                         |   |         |  |  |   |         | 
|------------------------------------------ | ---------------------------------------------- | ----------------------- | - | ------- |  |  | - | ------- | 
|                                           |                                                |                        
|                                           |                                                | Year Ended December 31,
|                                           |                                                |                        
|                                           |                                                | 2003                    |   | 2002   
|                                           |                                                |                         |   |        
|ASSETS                                     |                                                |                         |   |         |  |  |   |        
|                                           | Receivable from Post Apartment Homes,
    L.P. |                         | $ | 105,900 |  |  | $ | 176,895 | 
|                                           |                                                |                         |   |         |  |  |   |        
|NET ASSETS AVAILABLE FOR PLAN
    BENEFITS |                                                |                         |   |         |  |  |   |        
|                                           | Net assets available for plan benefits         |                         | $ | 105,900 |  |  | $ | 176,895 | 
|                                           |                                                |                         |   |         |  |  |   |        

The accompanying notes are an integral part of
this financial statement.




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POST PROPERTIES, INC.

1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE
PLAN


STATEMENT OF CHANGES IN NET ASSETS AVAILABLE
FOR PLAN BENEFITS


|                                                        |                                                         |                         |         |          |   |   |         |          |  
|------------------------------------------------------- | ------------------------------------------------------- | ----------------------- | ------- | -------- | - | - | ------- | -------- | -
|                                                        |                                                         |                        
|                                                        |                                                         | Year ended December 31,
|                                                        |                                                         |                        
|                                                        |                                                         | 2003                    |         | 2002    
|                                                        |                                                         |                         |         |         
|NET ASSETS AVAILABLE FOR PLAN BENEFITS,
    JANUARY 1   |                                                         | $                       | 176,895 |          |   | $ | 455,119 |         
|DEDUCTIONS:                                             |                                                         |                         |         |          |   |   |         |         
|                                                        | Purchase of participants shares                        |                         |         | (282,434 | ) |   |         | (649,485 | )
|                                                        | Payment for payroll taxes on behalf of
    participants |                         |         | (24,732  | ) |   |         | (27,488  | )
|                                                       
|ADDITIONS:                                              |                                                         |                         |         |          |   |   |         |         
|                                                        | Participant contributions                               |                         |         | 236,171  |   |   |         | 398,749  |  
|                                                        |                                                         |                         |         |          |   |   |         |         
|                                                       
|NET ASSETS AVAILABLE FOR PLAN BENEFITS,
    DECEMBER 31 |                                                         | $                       | 105,900 |          |   | $ | 176,895 |         
|                                                        |                                                         |                         |         |          |   |   |         |         

The accompanying notes are an integral part of
this financial statement.




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POST PROPERTIES, INC.

1995 NON-QUALIFIED EMPLOYEE STOCK PURCHASE
PLAN

NOTES TO FINANCIAL STATEMENTS


NOTE 1  SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES



|    |                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Post Properties, Inc. (the Company)
    established the 1995 Non-Qualified Employee Stock Purchase Plan
    (the Plan) to encourage stock ownership by eligible
    directors and employees.



|    |                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------
|(B) | The financial statements have been prepared on
    the accrual basis of accounting.                                                      
|   
|(C) | All expenses incurred in the administration of
    the Plan are paid by the Company and are excluded from these
    financial statements.

NOTE 2  THE PLAN

The Plan became effective as of January 1,
1995. Under the Plan, eligible participating employees and
directors of the Company can purchase Common Stock at a discount
(up to 15% as set by the Compensation Committee of the
Companys Board of Directors) from the Company through
salary withholding or cash contributions. The Plan is not
subject to the provisions of the Employee Retirement Income
Security Act of 1974, nor is it intended to qualify for special
tax treatment under Section 401(a) of the Internal Revenue
Code.

Directors who have been a member of the Board of
Directors for at least one full calendar month and full-time
employees who have been employed a full calendar month are
eligible to participate in the Plan. Eligible directors and
employees (the Participants) may contribute in cash
or as a specified dollar amount or percentage of their
compensation to the Plan. The minimum payroll deduction for a
Participant for each payroll period for purchases under the Plan
is $10.00. The maximum contribution which a Participant can make
for purchases under the Plan for any calendar year is $100,000.
All contributions to the Plan are held in the general assets of
Post Apartment Homes, L.P., the Companys operating
partnership.

Shares of the Companys Common Stock are
purchased by an investment firm semi-annually after the end of
each six-month period, as defined, and credited to each
Participants individual account. The purchase price of the
Common Stock purchased pursuant to the Plan is currently equal
to 85% of the closing price on either the first or last trading
day of each purchase period, whichever is lower.

All Common Stock of the Company purchased by
Participants pursuant to the Plan may be voted by the
Participants or as directed by the Participants.

The Plan does not discriminate, in scope, terms,
or operation, in favor of officers or directors of the Company
and is available, subject to the eligibility rules of the Plan,
to all employees of the Company on the same basis.

NOTE 3  FEDERAL INCOME
TAXES

The Plan is not subject to Federal income taxes.
The difference between the fair market value of the shares
acquired under the Plan, and the amount contributed by the
Participants is treated as ordinary income to the
Participants for Federal income tax purposes. Accordingly,
the Company withholds all applicable taxes from the employee
contributions. The fair market value of the shares is determined
as of the stock purchase date.




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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
|        |          |   |  |            
|        | 3.1(a)   |   |  |            |  | Articles of Incorporation of the Company                                                                                                  
|        | 3.2(b)   |   |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3.3(b)   |   |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3.4(b)   |   |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3.5(c)   |   |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3.6(d)   |   |  |            |  | Bylaws of the Company (as Amended and Restated as
    of November 5, 2003)                                                                
|        | 4.1(e)   |   |  |            |  | Indenture between the Company and SunTrust Bank,
    as Trustee                                                                           
|        | 4.2(e)   |   |  |            |  | Form of First Supplemental Indenture to the
    Indenture between the Company and SunTrust Bank, as Trustee                               
|        | 10.1(b)  |   |  |            |  | Second Amended and Restated Agreement of Limited
    Partnership of the Operating Partnership                                             
|        | 10.2(b)  |   |  |            |  | First Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10.3(b)  |   |  |            |  | Second Amendment to Second Amended and Restated
    Partnership Agreement                                                                 
|        | 10.4(f)  |   |  |            |  | Third Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10.5(f)  |   |  |            |  | Fourth Amendment to Second Amended and Restated
    Partnership Agreement                                                                 
|        | 10.6(c)  |   |  |            |  | Fifth Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10.7(g)  |   |  |            |  | Sixth Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10.8(h)* |   |  |            |  | Employee Stock Plan                                                                                                                       
|        | 10.9(b)* |   |  |            |  | Amendment to Employee Stock Plan                                                                                                          
|        | 10.10(b) | * |  |            |  | Amendment No. 2 to Employee Stock Plan                                                                                                    
|        | 10.11(b) | * |  |            |  | Amendment No. 3 to Employee Stock Plan                                                                                                    
|        | 10.12(b) | * |  |            |  | Amendment No. 4 to Employee Stock Plan                                                                                                    
|        | 10.13(i) |   |  |            |  | 2003 Incentive Stock Plan                                                                                                                 
|        | 10.14(h) | * |  |            |  | Noncompetition Agreement between the Company, the
    Operating Partnership and John A. Williams                                          
|        | 10.15(h) | * |  |            |  | Noncompetition Agreement between the Company, the
    Operating Partnership and John T. Glover                                            
|        | 10.16(f) | * |  |            |  | Amendment of Noncompetition Agreement between the
    Company, the Operating Partnership and John A. Williams
    dated as of June 1, 1998
|        | 10.17(f) | * |  |            |  | Amendment of Noncompetition Agreement between the
    Company, the Operating Partnership and John T. Glover dated as
    of June 1, 1998  
|        | 10.18(h) | * |  |            |  | Option and Transfer Agreement among the Operating
    Partnership, Post Services, John A. Williams and John T. Glover                     
|        | 10.19(h) |   |  |            |  | Promissory Note made by Post Services, Inc. in
    favor of RAM Partners, Inc.                                                            
|        | 10.20(b) |   |  |            |  | Form of Indemnification Agreement for officers
    and directors                                                                          
|        | 10.21(a) | * |  |            |  | Profit Sharing Plan of the Company                                                                                                        
|        | 10.22(b) | * |  |            |  | Amendment Number One to Profit Sharing Plan                                                                                               
|        | 10.23(b) | * |  |            |  | Amendment Number Two to Profit Sharing Plan                                                                                               
|        | 10.24(b) | * |  |            |  | Amendment Number Three to Profit Sharing Plan                                                                                             
|        | 10.25(b) | * |  |            |  | Amendment Number Four to Profit Sharing Plan                                                                                              
|        | 10.26(a) |   |  |            |  | Form of General Partner 1% Exchange Agreement                                                                                             
|        | 10.27(j) | * |  |            |  | 1995 Non-qualified Employee Stock Purchase Plan                                                                                           




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|        |          |   |  |             |  |                                                                                                                                                                                                                                                                                                             
|------- | -------- | - |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |          |   |  |            
|No.     |          |   |  | Description
|        |          |   |  |            
|        | 10.28(b) | * |  |            |  | Amendment to 1995 Non-qualified Employee Stock
    Purchase Plan                                                                                                                                                                                                                                            
|        | 10.29(n) | * |  |            |  | Dividend Reinvestment and Stock Purchase Plan                                                                                                                                                                                                                                                               
|        | 10.30    |   |  |            |  | Credit Agreement dated as of January 16,
    2004 among Post Apartment Homes, L.P., Wachovia Bank, N.A., and
    certain other lenders                                                                                                                                                                      
|        | 10.31(k) | * |  |            |  | Deferred Compensation Plan for Directors and
    Executive Committee Members                                                                                                                                                                                                                                
|        | 10.32(j) | * |  |            |  | Form of Change in Control Agreement (3.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10.33(l) | * |  |            |  | Form of Change in Control Agreement (2.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10.34(m) | * |  |            |  | Form of Change in Control Agreement (1.5X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10.35(m) |   |  |            |  | Form of Change in Control Agreement (1.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10.36(m) |   |  |            |  | Form of Amendment No. 1 to Change in Control
    Agreement and schedule of executive officers who have entered
    into such amendment                                                                                                                                                                      
|        | 10.37(m) |   |  |            |  | Version One Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                                                                                                                                                  
|        | 10.38(m) |   |  |            |  | Version Two Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                                                                                                                                                  
|        | 10.39(l) | * |  |            |  | Master Employment Agreement between the Company,
    the Operating Partnership, Post GP Holdings, Inc., Post
    Services, Inc. and John A. Williams dated as of March 25,
    2002                                                                                                                         
|        | 10.40(l) | * |  |            |  | 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                                                                                                                               
|        | 10.41(m) |   |  |            |  | Employment Agreement with David P. Stockert                                                                                                                                                                                                                                                                 
|        | 10.42(d) |   |  |            |  | Form of Amendment No. 1 to Employment
    Agreement with David P. Stockert                                                                                                                                                                                                                                  
|        | 10.43(m) |   |  |            |  | Employment Agreement with Thomas D. Senkbeil                                                                                                                                                                                                                                                                
|        | 10.44(m) |   |  |            |  | Amendment No. 1 to Employment Agreement with
    Thomas D. Senkbeil                                                                                                                                                                                                                                         
|        | 10.45    |   |  |            |  | Employment Agreement with Christopher J. Papa                                                                                                                                                                                                                                                               
|        | 10.46(d) |   |  |            |  | Form of Amendment No. 2 to Employment
    Agreement with Thomas D. Senkbeil                                                                                                                                                                                                                                 
|        | 10.47(d) |   |  |            |  | Restricted Stock Grant Certificate for
    Robert C. Goddard, III, dated July 17, 2003                                                                                                                                                                                                                      
|        | 10.48(d) |   |  |            |  | Non-Incentive Stock Option Certificate for
    Robert C. Goddard, III, dated July 17, 2003                                                                                                                                                                                                                  
|        | 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),
    and Form S-3 (No. 333-44722)                                                                                                                  
|        | 23.2     |   |  |            |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-3 (No. 333-36595),
    Form S-3 (No. 333-42884), and Form S-3 (No. 333-55994)                                                                                                                                               
|        | 23.3     |   |  |            |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-8 (No. 333-62243),
    Form S-8 (No. 333-70689), 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),
    and Form S-8 (No. 333-107093)
|        | 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                                                                                   




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|        |      |  |  |             |  |                                                                                                                                                
|------- | ---- |  |  | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |  |  |            
|No.     |      |  |  | Description
|        |      |  |  |            
|        | 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 Registration Statement
    on Form S-11 (SEC File No. 33-61936), as amended, of
    the Company.  
|(b) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2002.       
|(c) | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 1999.
|(d) | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 2003.
|(e) | Filed as an exhibit to the Registration Statement
    on Form S-3 (SEC File No. 333-42884), as amended, of
    the Company.  

|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(f) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1998.

|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(g) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2000.     
|(h) | Filed as an exhibit to the Registration Statement
    on Form S-11 (SEC File No. 33-71650), as amended, of
    the Company.

|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(i) | Filed as Appendix A to the 2003 proxy
    statement.                                                     
|(j) | Filed as an exhibit to the Registration Statement
    on Form S-8 (SEC File No. 33-86674) of the Company.

|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(k) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1999.

|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(l) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2001.

|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(m) | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    June 30, 2003.

|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(n) | Filed as part of the Registration Statement on
    Form S-3 (File No. 333-39461) of the Company.

(b) Reports on Form 8-K

On November 4, 2003, the Registrants
furnished a Form 8-K including the Registrants
earnings release and supplemental financial information package
relating to the quarterly period ended September 30, 2003.

On November 4, 2003, the Registrants
furnished a Form 8-K amending one page of the previously
filed supplemental financial information relating to the
quarterly period ended September 30, 2003 to correct an
inaccuracy on the page.




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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 12, 2004 |  | 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 12, 2004
|                                                
|/s/ DAVID P. STOCKERTDavid P. Stockert           |  | President, Chief Executive Officer and Director
    (Principal Executive Officer)      |  | March 12, 2004
|                                                
|/s/ CHRISTOPHER J. PAPAChristopher J. Papa       |  | Executive Vice President and Chief Financial
    Officer (Principal Financial Officer) |  | March 12, 2004
|                                                
|/s/ ARTHUR J. QUIRKArthur J. Quirk               |  | Senior Vice President and Chief Accounting
    Officer (Principal Accounting Officer)  |  | March 12, 2004
|                                                
|/s/ ROBERT L. ANDERSONRobert L. Anderson         |  | Director                                                                               |  | March 12, 2004
|                                                
|/s/ HERSCHEL M. BLOOMHerschel M. Bloom           |  | Director                                                                               |  | March 12, 2004
|                                                
|/s/ RUSSELL R. FRENCHRussell R. French           |  | Director                                                                               |  | March 12, 2004
|                                                
|/s/ JOHN T. GLOVERJohn T. Glover                 |  | Director                                                                               |  | March 12, 2004
|                                                
|/s/ NICHOLAS B. PAUMGARTENNicholas B. Paumgarten |  | Director                                                                               |  | March 12, 2004
|                                                
|/s/ CHARLES E. RICECharles E. Rice               |  | Director                                                                               |  | March 12, 2004
|                                                
|/s/ RONALD DE WAALRonald de Waal                 |  | Director                                                                               |  | March 12, 2004
|John A. Williams                                 |  | Director                                                                               |  |               




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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 12, 2004 |  | 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 12, 2004
|/s/ DAVID P. STOCKERTDavid P. Stockert           |  | President, Chief Executive Officer and Director
    (Principal Executive Officer)      |  | March 12, 2004
|/s/ CHRISTOPHER J. PAPAChristopher J. Papa       |  | Executive Vice President and Chief Financial
    Officer (Principal Financial Officer) |  | March 12, 2004
|/s/ ARTHUR J. QUIRKArthur J. Quirk               |  | Senior Vice President and Chief Accounting
    Officer (Principal Accounting Officer)  |  | March 12, 2004
|/s/ ROBERT L. ANDERSONRobert L. Anderson         |  | Director                                                                               |  | March 12, 2004
|/s/ HERSCHEL M. BLOOMHerschel M. Bloom           |  | Director                                                                               |  | March 12, 2004
|/s/ RUSSELL R. FRENCHRussell R. French           |  | Director                                                                               |  | March 12, 2004
|/s/ JOHN T. GLOVERJohn T. Glover                 |  | Director                                                                               |  | March 12, 2004
|/s/ NICHOLAS B. PAUMGARTENNicholas B. Paumgarten |  | Director                                                                               |  | March 12, 2004
|/s/ CHARLES E. RICECharles E. Rice               |  | Director                                                                               |  | March 12, 2004
|/s/ RONALD DE WAALRonald de Waal                 |  | Director                                                                               |  | March 12, 2004
|John A. Williams                                 |  | Director                                                                               |  |               




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Exhibits Index

|        |    |          |  |             |  |                                                                                                                                           
|------- | -- | -------- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |          |  |            
|No.     |    |          |  | Description
|        |    |          |  |            
|        | 3  | .1(a)    |  |            |  | Articles of Incorporation of the Company                                                                                                  
|        | 3  | .2(b)    |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3  | .3(b)    |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3  | .4(b)    |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3  | .5(c)    |  |            |  | Articles of Amendment to the Articles of
    Incorporation of the Company                                                                 
|        | 3  | .6(d)    |  |            |  | Bylaws of the Company (as Amended and Restated as
    of November 5, 2003)                                                                
|        | 4  | .1(e)    |  |            |  | Indenture between the Company and SunTrust Bank,
    as Trustee                                                                           
|        | 4  | .2(e)    |  |            |  | Form of First Supplemental Indenture to the
    Indenture between the Company and SunTrust Bank, as Trustee                               
|        | 10 | .1(b)    |  |            |  | Second Amended and Restated Agreement of Limited
    Partnership of the Operating Partnership                                             
|        | 10 | .2(b)    |  |            |  | First Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10 | .3(b)    |  |            |  | Second Amendment to Second Amended and Restated
    Partnership Agreement                                                                 
|        | 10 | .4(f)    |  |            |  | Third Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10 | .5(f)    |  |            |  | Fourth Amendment to Second Amended and Restated
    Partnership Agreement                                                                 
|        | 10 | .6(c)    |  |            |  | Fifth Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10 | .7(g)    |  |            |  | Sixth Amendment to Second Amended and Restated
    Partnership Agreement                                                                  
|        | 10 | .8(h)*   |  |            |  | Employee Stock Plan                                                                                                                       
|        | 10 | .9(b)*   |  |            |  | Amendment to Employee Stock Plan                                                                                                          
|        | 10 | .10(b)*  |  |            |  | Amendment No. 2 to Employee Stock Plan                                                                                                    
|        | 10 | .11(b)*  |  |            |  | Amendment No. 3 to Employee Stock Plan                                                                                                    
|        | 10 | .12(b)*  |  |            |  | Amendment No. 4 to Employee Stock Plan                                                                                                    
|        | 10 | .13(i)   |  |            |  | 2003 Incentive Stock Plan                                                                                                                 
|        | 10 | .14(h)*  |  |            |  | Noncompetition Agreement between the Company, the
    Operating Partnership and John A. Williams                                          
|        | 10 | .15(h)*  |  |            |  | Noncompetition Agreement between the Company, the
    Operating Partnership and John T. Glover                                            
|        | 10 | .16(f)*  |  |            |  | Amendment of Noncompetition Agreement between the
    Company, the Operating Partnership and John A. Williams dated as
    of June 1, 1998
|        | 10 | .17(f)*  |  |            |  | Amendment of Noncompetition Agreement between the
    Company, the Operating Partnership and John T. Glover dated as
    of June 1, 1998  
|        | 10 | .18 (h)* |  |            |  | Option and Transfer Agreement among the Operating
    Partnership, Post Services, John A. Williams and John T. Glover                     
|        | 10 | .19(h)   |  |            |  | Promissory Note made by Post Services, Inc. in
    favor of RAM Partners, Inc.                                                            
|        | 10 | .20(b)   |  |            |  | Form of Indemnification Agreement for officers
    and directors                                                                          
|        | 10 | .21(a)*  |  |            |  | Profit Sharing Plan of the Company                                                                                                        
|        | 10 | .22(b)*  |  |            |  | Amendment Number One to Profit Sharing Plan                                                                                               
|        | 10 | .23(b)*  |  |            |  | Amendment Number Two to Profit Sharing Plan                                                                                               
|        | 10 | .24(b)*  |  |            |  | Amendment Number Three to Profit Sharing Plan                                                                                             
|        | 10 | .25(b)*  |  |            |  | Amendment Number Four to Profit Sharing Plan                                                                                              
|        | 10 | .26(a)   |  |            |  | Form of General Partner 1% Exchange Agreement                                                                                             
|        | 10 | .27(j)*  |  |            |  | 1995 Non-qualified Employee Stock Purchase Plan                                                                                           
|        | 10 | .28(b)*  |  |            |  | Amendment to 1995 Non-qualified Employee Stock
    Purchase Plan                                                                          
|        | 10 | .29(n)*  |  |            |  | Dividend Reinvestment and Stock Purchase Plan                                                                                             




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##### Table of Contents



|        |    |         |  |             |  |                                                                                                                                                                                                                                                                                                             
|------- | -- | ------- |  | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |         |  |            
|No.     |    |         |  | Description
|        |    |         |  |            
|        | 10 | .30     |  |            |  | Credit Agreement dated as of January 16,
    2004 among Post Apartment Homes, L.P., Wachovia Bank, N.A., and
    certain other lenders                                                                                                                                                                      
|        | 10 | .31(k)* |  |            |  | Deferred Compensation Plan for Directors and
    Executive Committee Members                                                                                                                                                                                                                                
|        | 10 | .32(j)* |  |            |  | Form of Change in Control Agreement (3.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10 | .33(l)* |  |            |  | Form of Change in Control Agreement (2.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10 | .34(m)* |  |            |  | Form of Change in Control Agreement (1.5X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10 | .35(m)  |  |            |  | Form of Change in Control Agreement (1.0X) and
    schedule of executive officers who have entered into such
    agreement                                                                                                                                                                                  
|        | 10 | .36(m)  |  |            |  | Form of Amendment No. 1 to Change in Control
    Agreement and schedule of executive officers who have entered
    into such amendment                                                                                                                                                                      
|        | 10 | .37(m)  |  |            |  | Version One Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                                                                                                                                                  
|        | 10 | .38(m)  |  |            |  | Version Two Amendment No. 2 to Change in
    Control Agreement and schedule of executive officers who have
    entered into such amendment                                                                                                                                                                  
|        | 10 | .39(l)* |  |            |  | Master Employment Agreement between the Company,
    the Operating Partnership, Post G. P. Holdings, Inc., Post
    Services, Inc. and John A. Williams dated as of March 25,
    2002                                                                                                                      
|        | 10 | .40(l)* |  |            |  | Master Employment Agreement between the Company,
    the Operating Partnership, Post G. P. Holdings, Inc., Post
    Services, Inc. and John T. Glover dated as of March 22, 2002                                                                                                                            
|        | 10 | .41(m)  |  |            |  | Employment Agreement with David P. Stockert                                                                                                                                                                                                                                                                 
|        | 10 | .42(d)  |  |            |  | Form of Amendment No. 1 to Employment
    Agreement with David P. Stockert                                                                                                                                                                                                                                  
|        | 10 | .43(m)  |  |            |  | Employment Agreement with Thomas D. Senkbeil                                                                                                                                                                                                                                                                
|        | 10 | .44(m)  |  |            |  | Amendment No. 1 to Employment Agreement with
    Thomas D. Senkbeil                                                                                                                                                                                                                                         
|        | 10 | .45     |  |            |  | Employment Agreement with Christopher J. Papa                                                                                                                                                                                                                                                               
|        | 10 | .46(d)  |  |            |  | Form of Amendment No. 2 to Employment
    Agreement with Thomas D. Senkbeil                                                                                                                                                                                                                                 
|        | 10 | .47(d)  |  |            |  | Restricted Stock Grant Certificate for Robert C.
    Goddard, III, dated July 17, 2003                                                                                                                                                                                                                      
|        | 10 | .48(d)  |  |            |  | Non-Incentive Stock Option Certificate for Robert
    C. Goddard, III, dated July 17, 2003                                                                                                                                                                                                                  
|        | 21 | .1      |  |            |  | List of Subsidiaries                                                                                                                                                                                                                                                                                        
|        | 23 | .1      |  |            |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-3 (No. 333-81772),
    Form S-3 (No. 333-47399), Form S-3 (No. 333-80427),
    and Form S-3 (No. 333-44722)                                                                                                                 
|        | 23 | .2      |  |            |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-3 (No. 333-36595),
    Form S-3 (No. 333-42884), and Form S-3 (No. 333-55994)                                                                                                                                               
|        | 23 | .3      |  |            |  | Consent of PricewaterhouseCoopers LLP for
    Registration Statements on Form S-8 (No. 333-62243),
    Form S-8 (No. 333-70689), 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),
    and Form S-8 (No. 333-107093)
|        | 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                                                                                                                                                             




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##### Table of Contents





|    |                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------
|*   | Identifies each management contract or
    compensatory plan required to be filed.                                           
|(a) | Filed as an exhibit to the Registration Statement
    on Form S-11 (SEC File No. 33-61936), as amended, of
    the Company.  
|(b) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2002.       
|(c) | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 1999.
|(d) | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    September 30, 2003.
|(e) | Filed as an exhibit to the Registration Statement
    on Form S-3 (SEC File No. 333-42884), as amended, of
    the Company.  

|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(f) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1998.

|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(g) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2000.     
|(h) | Filed as an exhibit to the Registration Statement
    on Form S-11 (SEC File No. 33-71650), as amended, of
    the Company.

|    |                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------
|(i) | Filed as Appendix A to the 2003 proxy
    statement.                                                     
|(j) | Filed as an exhibit to the Registration Statement
    on Form S-8 (SEC File No. 33-86674) of the Company.

|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(k) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 1999.

|    |                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------
|(l) | Filed as an exhibit to the Annual Report on
    Form 10-K of the Registrants for the year ended
    December 31, 2001.

|    |                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------
|(m) | Filed as an exhibit to the Quarterly Report on
    Form 10-Q of the Registrants for the quarter ended
    June 30, 2003.

|    |                                                                                                 
|--- | ------------------------------------------------------------------------------------------------
|(n) | Filed as part of the Registration Statement on
    Form S-3 (File No. 333-39461) of the Company.




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