##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from           to
 Commission
file numbers 1-12080 and 0-28226
 
 POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
  Georgia
    
    58-1550675Georgia
    
    58-2053632(State or other jurisdiction
    
    (I.R.S. Employerof incorporation or organization)
    
    Identification No.)
 4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327
 (404) 846-5000
  Post Properties, Inc.
    
    Yes
    
    þ
    
    No
    
    oPost Apartment Homes, L.P.
    
    Yes
    
    þ
    
    No
    
    o
  Post Properties, Inc.
    
    Yes
    
    þ
    
    No
    
    oPost Apartment Homes, L.P.
    
    Yes
    
    þ
    
    No
    
    o
  Post Properties, Inc.
    
    Yes
    
    o
    
    No
    
    þPost Apartment Homes, L.P.
    
    Yes
    
    o
    
    No
    
    þ




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POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.
 INDEX
 PagePart I FINANCIAL INFORMATIONItem 1 Financial StatementsPOST PROPERTIES, INC.Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    1Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004
    
    
    2Consolidated Statement of Shareholders Equity and Accumulated Earnings for the nine months ended September 30, 2005
    
    
    3Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004
    
    
    4Notes to Consolidated Financial Statements
    
    
    5POST APARTMENT HOMES, L.P.Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    18Consolidated Statements of Operations for the three and nine months ended September 30, 2005 and 2004
    
    
    19Consolidated Statement of Partners Equity for the nine months ended September 30, 2005
    
    
    20Consolidated Statements of Cash Flows for the nine months ended September 30, 2005 and 2004
    
    
    21Notes to Consolidated Financial Statements
    
    
    22Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    35Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    50Item 4 Controls and Procedures
    
    
    50Part II OTHER INFORMATION
    
    
    51Item 1 Legal Proceedings
    
    
    51Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    52Item 3 Defaults Upon Senior Securities
    
    
    52Item 4 Submission of Matters to a Vote of Security Holders
    
    
    52Item 5 Other Information
    
    
    52Item 6 Exhibits
    
    
    53Signatures
    
    
    54Exhibit Index
    
    
    56EX-31.1 SECTION 302, CERTIFICATION OF THE CEOEX-31.2 SECTION 302, CERTIFICATION OF THE CFOEX-32.1 SECTION 906, CERTIFICATION OF THE CEOEX-32.2 SECTION 906, CERTIFICATION OF THE CFO




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##### Table of Contents



POST PROPERTIES, INC.
 
 CONSOLIDATED BALANCE SHEETS  (In thousands, except per share data)
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)AssetsReal estate assetsLand
    
    $
    270,166
    
    
    $
    266,520Building and improvements
    
    
    1,825,584
    
    
    
    1,887,514Furniture, fixtures and equipment
    
    
    210,179
    
    
    
    214,954Construction in progress
    
    
    38,550
    
    
    
    19,527Land held for future development
    
    
    56,512
    
    
    
    18,9102,400,991
    
    
    
    2,407,425Less: accumulated depreciation
    
    
    (508,386
    )
    
    
    (498,367
    )Assets held for sale, net of accumulated depreciation of $0 and
$26,332 at September 30, 2005 and December 31, 2004, respectively
    
    
    9,221
    
    
    
    68,661Total real estate assets
    
    
    1,901,826
    
    
    
    1,977,719Investments in and advances to unconsolidated real estate entities
    
    
    31,047
    
    
    
    21,320Cash and cash equivalents
    
    
    3,335
    
    
    
    123Restricted cash
    
    
    4,277
    
    
    
    1,844Deferred charges, net
    
    
    11,572
    
    
    
    15,574Other assets
    
    
    33,215
    
    
    
    37,262Total assets
    
    $
    1,985,272
    
    
    $
    2,053,842Liabilities and shareholders equityIndebtedness, including $0 and $34,060 of debt secured by assets
held for sale at September 30, 2005 and December 31, 2004, respectively
    
    $
    957,985
    
    
    $
    1,129,478Accounts payable and accrued expenses
    
    
    69,184
    
    
    
    58,837Dividend and distribution payable
    
    
    19,190
    
    
    
    19,203Accrued interest payable
    
    
    11,780
    
    
    
    7,677Security deposits and prepaid rents
    
    
    9,701
    
    
    
    7,236Total liabilities
    
    
    1,067,840
    
    
    
    1,222,431Minority interest of common unitholders in Operating Partnership
    
    
    36,080
    
    
    
    43,341Commitments and contingenciesShareholders equityPreferred stock, $.01 par value, 20,000 authorized:8 1/2 % Series A Cumulative Redeemable Shares, liquidation preference
$50 per share, 900 shares issued and outstanding
    
    
    9
    
    
    
    97 5/8 % Series B Cumulative Redeemable Shares, liquidation preference
$25 per share, 2,000 shares issued and outstanding
    
    
    20
    
    
    
    20Common stock, $.01 par value, 100,000 authorized:40,831 and 40,164 shares issued, 40,780 and 40,164 shares outstanding
at September 30, 2005 and December 31, 2004, respectively
    
    
    408
    
    
    
    401Additional paid-in capital
    
    
    791,101
    
    
    
    775,221Accumulated earnings
    
    
    101,265
    
    
    
    25,075Accumulated other comprehensive loss
    
    
    (4,160
    )
    
    
    (8,668
    )Deferred compensation
    
    
    (3,876
    )
    
    
    (3,988
    )884,767
    
    
    
    788,070Less common stock in treasury, at cost, 92 and 0 shares
at September 30, 2005 and December 31, 2004, respectively
    
    
    (3,415
    )
    
    
    Total shareholders equity
    
    
    881,352
    
    
    
    788,070Total liabilities and shareholders equity
    
    $
    1,985,272
    
    
    $
    2,053,842
 The accompanying notes are an integral part of these consolidated financial statements.
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##### Table of Contents



POST PROPERTIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenuesRental
    
    $
    71,242
    
    
    $
    68,003
    
    
    $
    207,714
    
    
    $
    198,782Other property revenues
    
    
    4,765
    
    
    
    4,095
    
    
    
    12,863
    
    
    
    11,741Other
    
    
    64
    
    
    
    814
    
    
    
    196
    
    
    
    936Total revenues
    
    
    76,071
    
    
    
    72,912
    
    
    
    220,773
    
    
    
    211,459ExpensesProperty operating and maintenance (exclusive of items
shown separately below)
    
    
    34,074
    
    
    
    33,143
    
    
    
    99,840
    
    
    
    94,236Depreciation
    
    
    18,950
    
    
    
    20,371
    
    
    
    57,896
    
    
    
    59,683General and administrative
    
    
    5,421
    
    
    
    6,018
    
    
    
    16,150
    
    
    
    16,137Development costs and other
    
    
    1,042
    
    
    
    284
    
    
    
    2,879
    
    
    
    1,200Total expenses
    
    
    59,487
    
    
    
    59,816
    
    
    
    176,765
    
    
    
    171,256Operating Income
    
    
    16,584
    
    
    
    13,096
    
    
    
    44,008
    
    
    
    40,203Interest income
    
    
    230
    
    
    
    246
    
    
    
    583
    
    
    
    639Interest expense
    
    
    (14,455
    )
    
    
    (16,316
    )
    
    
    (45,340
    )
    
    
    (47,678
    )Amortization of deferred financing costs
    
    
    (991
    )
    
    
    (1,065
    )
    
    
    (3,707
    )
    
    
    (3,273
    )Equity in income of unconsolidated real estate entities
    
    
    593
    
    
    
    420
    
    
    
    1,294
    
    
    
    843Gain on sale of technology investment
    
    
    
    
    
    
    
    
    
    
    5,267
    
    
    
    Minority interest in consolidated property partnerships
    
    
    34
    
    
    
    106
    
    
    
    212
    
    
    
    538Minority interest of preferred unitholders
    
    
    
    
    
    
    (980
    )
    
    
    
    
    
    
    (3,780
    )Minority interest of common unitholders
    
    
    (12
    )
    
    
    499
    
    
    
    188
    
    
    
    1,463Income (loss) from continuing operations
    
    
    1,983
    
    
    
    (3,994
    )
    
    
    2,505
    
    
    
    (11,045
    )Discontinued operationsIncome from discontinued operations,
net of minority interest
    
    
    272
    
    
    
    2,201
    
    
    
    4,909
    
    
    
    11,582Gains on sales of real estate assets, net of minority
interest and provision for income taxes
    
    
    72,734
    
    
    
    
    
    
    
    131,991
    
    
    
    106,039Loss in early extinguishment of indebtedness associated
with property sales, net of minority interest
    
    
    (1,748
    )
    
    
    
    
    
    
    (3,043
    )
    
    
    (3,849
    )Income from discontinued operations
    
    
    71,258
    
    
    
    2,201
    
    
    
    133,857
    
    
    
    113,772Net income (loss)
    
    
    73,241
    
    
    
    (1,793
    )
    
    
    136,362
    
    
    
    102,727Dividends to preferred shareholders
    
    
    (1,909
    )
    
    
    (1,909
    )
    
    
    (5,728
    )
    
    
    (6,416
    )Redemption costs on preferred stock and units
    
    
    
    
    
    
    (1,810
    )
    
    
    
    
    
    
    (3,526
    )Net income (loss) available to common shareholders
    
    $
    71,332
    
    
    $
    (5,512
    )
    
    $
    130,634
    
    
    $
    92,785Per common share data  BasicIncome (loss) from continuing operations (net of
preferred dividends and redemption costs)
    
    $
    
    
    
    $
    (0.19
    )
    
    $
    (0.08
    )
    
    $
    (0.53
    )Income from discontinued operations
    
    
    1.77
    
    
    
    0.06
    
    
    
    3.33
    
    
    
    2.87Net income (loss) available to common shareholders
    
    $
    1.77
    
    
    $
    (0.14
    )
    
    $
    3.25
    
    
    $
    2.34Weighted
average common shares outstanding  basic
    
    
    40,372
    
    
    
    39,892
    
    
    
    40,157
    
    
    
    39,694Per common share data  DilutedIncome (loss) from continuing operations (net of
preferred dividends and redemption costs)
    
    $
    
    
    
    $
    (0.19
    )
    
    $
    (0.08
    )
    
    $
    (0.53
    )Income from discontinued operations
    
    
    1.75
    
    
    
    0.06
    
    
    
    3.33
    
    
    
    2.87Net income (loss) available to common shareholders
    
    $
    1.75
    
    
    $
    (0.14
    )
    
    $
    3.25
    
    
    $
    2.34Weighted
average common shares outstanding  diluted
    
    
    40,813
    
    
    
    39,892
    
    
    
    40,157
    
    
    
    39,694Dividends declared
    
    $
    0.45
    
    
    $
    0.45
    
    
    $
    1.35
    
    
    $
    1.35
 The accompanying notes are an integral part of these consolidated financial statements.
 -2-




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POST PROPERTIES, INC.
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY AND
ACCUMULATED EARNINGS  (In thousands, except per share data)
 AccumulatedAdditional
    
    
    
    
    
    
    OtherPreferred
    
    
    Common
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Deferred
    
    
    TreasuryStock
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Compensation
    
    
    Stock
    
    
    TotalShareholders Equity and Accumulated Earnings,
December 31, 2004
    
    $
    29
    
    
    $
    401
    
    
    $
    775,221
    
    
    $
    25,075
    
    
    $
    (8,668
    )
    
    $
    (3,988
    )
    
    $
    
    
    
    $
    788,070Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,362
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    136,362Net change in derivative value, net of
minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,508
    
    
    
    
    
    
    
    
    
    
    
    4,508Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    140,870Proceeds from employee stock purchase and
stock option plans
    
    
    
    
    
    
    2
    
    
    
    6,729
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,570
    
    
    
    23,301Adjustment for minority interest of
unitholders in Operating Partnership upon
conversion of units into common shares and at
dates of capital transactions
    
    
    
    
    
    
    5
    
    
    
    7,317
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,878
    
    
    
    12,200Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    528
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    528Restricted stock issuances, net of forfeitures
    
    
    
    
    
    
    
    
    
    
    1,306
    
    
    
    
    
    
    
    
    
    
    
    (909
    )
    
    
    (397
    )
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,021
    
    
    
    
    
    
    
    1,021Treasury stock acquisitions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,466
    )
    
    
    (24,466
    )Dividends to preferred shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,728
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,728
    )Dividends to common shareholders
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,444
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,444
    )Shareholders Equity and Accumulated Earnings,
September 30, 2005
    
    $
    29
    
    
    $
    408
    
    
    $
    791,101
    
    
    $
    101,265
    
    
    $
    (4,160
    )
    
    $
    (3,876
    )
    
    $
    (3,415
    )
    
    $
    881,352
 The accompanying notes are an integral part of these consolidated financial statements.
 -3-




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POST PROPERTIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands, except per share data)
 Nine months endedSeptember 30,2005
    
    
    2004Cash Flows From Operating ActivitiesNet income
    
    $
    136,362
    
    
    $
    102,727Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    57,896
    
    
    
    64,227Amortization of deferred financing costs
    
    
    3,707
    
    
    
    3,273Minority interest of preferred unitholders in Operating Partnership
    
    
    
    
    
    
    3,780Minority interest of common unitholders in Operating Partnership
    
    
    (188
    )
    
    
    (1,463
    )Minority interest in discontinued operations
    
    
    7,775
    
    
    
    7,922Gains on sales of real estate assets  discontinued operations
    
    
    (139,658
    )
    
    
    (113,739
    )Gain on sale of technology investment
    
    
    (5,267
    )
    
    
    Asset impairment charge
    
    
    
    
    
    
    626Equity in income of unconsolidated entities, net of distributions
    
    
    310
    
    
    
    562Stock-based compensation
    
    
    1,693
    
    
    
    1,280Loss on early extinguishment of debt
    
    
    3,220
    
    
    
    4,128Changes in assets, (increase) decrease in:Restricted cash
    
    
    (2,433
    )
    
    
    338Other assets
    
    
    2,906
    
    
    
    (706
    )Deferred charges
    
    
    (253
    )
    
    
    (304
    )Changes in liabilities, increase (decrease) in:Accrued interest payable
    
    
    4,103
    
    
    
    5,229Accounts payable and accrued expenses
    
    
    11,010
    
    
    
    10,428Security deposits and prepaid rents
    
    
    2,465
    
    
    
    (784
    )Net cash provided by operating activities
    
    
    83,648
    
    
    
    87,524Cash Flows From Investing ActivitiesConstruction and acquisition of real estate assets, net of payables
    
    
    (102,781
    )
    
    
    (38,789
    )Net proceeds from sales of real estate assets
    
    
    193,306
    
    
    
    138,637Proceeds from sale of technology investment
    
    
    5,267
    
    
    
    Recurring capital expenditures
    
    
    (7,172
    )
    
    
    (7,613
    )Non-recurring capital expenditures
    
    
    (2,636
    )
    
    
    (3,604
    )Revenue generating capital expenditures
    
    
    
    
    
    
    (26
    )Corporate additions and improvements
    
    
    (1,155
    )
    
    
    (553
    )Distributions from (investments in and advances to) unconsolidated entities
    
    
    (10,154
    )
    
    
    52,286Net cash provided by investing activities
    
    
    74,675
    
    
    
    140,338Cash Flows From Financing ActivitiesPayments on indebtedness
    
    
    (216,779
    )
    
    
    (26,704
    )Proceeds from indebtedness
    
    
    100,000
    
    
    
    35,000Payments of financing costs
    
    
    (1,176
    )
    
    
    (4,262
    )Lines of credit proceeds (repayments), net
    
    
    26,846
    
    
    
    (39,809
    )Treasury stock acquisitions
    
    
    (24,466
    )
    
    
    (2,268
    )Redemption of preferred stock
    
    
    
    
    
    
    (50,000
    )Redemption of preferred units
    
    
    
    
    
    
    (70,000
    )Proceeds from employee stock purchase and stock option plans
    
    
    23,301
    
    
    
    3,591Capital contributions (distributions) of minority interests
    
    
    283
    
    
    
    (3,806
    )Distributions to preferred unitholders
    
    
    
    
    
    
    (4,246
    )Distributions to common unitholders
    
    
    (3,266
    )
    
    
    (4,094
    )Dividends paid to preferred shareholders
    
    
    (5,728
    )
    
    
    (6,416
    )Dividends paid to common shareholders
    
    
    (54,126
    )
    
    
    (53,180
    )Net cash used in financing activities
    
    
    (155,111
    )
    
    
    (226,194
    )Net increase in cash and cash equivalents
    
    
    3,212
    
    
    
    1,668Cash and cash equivalents, beginning of period
    
    
    123
    
    
    
    1,334Cash and cash equivalents, end of period
    
    $
    3,335
    
    
    $
    3,002
 The accompanying notes are an integral part of these consolidated financial statements.
 -4-




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##### Table of Contents



POST PROPERTIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
    
    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIESOrganizationPost 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 September 30, 2005, the Company owned 21,791 apartment units in
58 apartment communities, including 545 apartment units in two apartment communities held in
unconsolidated entities and including 205 apartment units currently under development in one
community. The Company is also developing 145 for-sale condominium units and is converting 248
apartment units in two communities (including one in an unconsolidated entity, containing 121
units) into for-sale condominium units through a taxable REIT subsidiary. At September 30,
2005, approximately 46.1%, 18.2%, 9.7% and 9.1% (on a unit basis) of the Companys operating
communities were located in Atlanta, Dallas, Tampa and the greater Washington, D.C. metropolitan
areas, respectively.The Company has elected to qualify and operate as a self-administrated and self-managed real
estate investment trust (REIT) for federal income tax purposes. A REIT is a legal entity which
holds real estate interests and through payments of dividends to shareholders, in practical
effect, is not subject to federal income taxes at the corporate level, except to the extent that
taxable income is earned through its taxable REIT subsidiaries (see note 11).As of September 30, 2005, the Company had outstanding 40,780 shares of common stock and owned
the same number of units of common limited partnership interests (Common Units) in the
Operating Partnership, representing a 95.6% ownership interest in the Operating Partnership.
Common Units held by persons other than the Company totaled 1,865 as of September 30, 2005 and
represented a 4.4% 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 94.9% and
94.0% for the three months and 94.5% and 93.5% for the nine months ended September 30, 2005 and
2004, respectively.Basis of PresentationThe accompanying unaudited financial statements have been prepared by the Companys management
in accordance with generally accepted accounting principles for interim financial information
and applicable rules and regulations of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and disclosures required by generally accepted
accounting principles for complete financial statements. In the opinion of management, all
adjustments (consisting only of normally recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the three and nine months ended
September 30, 2005 are not necessarily indicative of the results that may be expected for the
full year. These financial statements should be read in conjunction with the Companys audited
financial statements and notes thereto included in its Annual Report on Form 10-K for the year
ended December 31, 2004. Certain 2004 amounts have been reclassified to conform to the current
years financial statement presentation.Revenue RecognitionSales and the associated gains or losses of real estate assets and for-sale condominiums are
recognized in accordance with the provisions of SFAS No. 66, Accounting for Sales of Real
Estate. For condominium conversion projects, sales and the associated gains for individual
condominium units are recognized upon the closing of the sale transactions, as all conditions
for full profit recognition have been met. In accordance with SFAS No. 144, Accounting for the
Impairment and Disposal of Long-Lived Assets, gains on sales of condominium units at
condominium conversion projects are included in discontinued operations.Stock-based CompensationEffective January 1, 2003, the Company accounts for stock-based compensation under the fair
value method prescribed by SFAS No. 123, Accounting for Stock-Based Compensation. In adopting
SFAS No. 123, the Company used the prospective method prescribed in SFAS No. 148, Accounting
for Stock-Based Compensation  Transition and Disclosure for all options issues after January
1, 2003.
 -5-




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POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss) available to common shareholdersAs reported
    
    $
    71,332
    
    
    $
    (5,512
    )
    
    $
    130,634
    
    
    $
    92,785Stock-based compensation included in net
income as reported, net of minority interest
    
    
    637
    
    
    
    392
    
    
    
    1,600
    
    
    
    1,197Stock-based compensation determined under the
fair value method for all awards, net of
minority interest
    
    
    (643
    )
    
    
    (407
    )
    
    
    (1,611
    )
    
    
    (1,246
    )Pro forma
    
    $
    71,326
    
    
    $
    (5,527
    )
    
    $
    130,623
    
    
    $
    92,736Net income (loss) per common share  basicAs reported
    
    $
    1.77
    
    
    $
    (0.14
    )
    
    $
    3.25
    
    
    $
    2.34Pro forma
    
    $
    1.77
    
    
    $
    (0.14
    )
    
    $
    3.25
    
    
    $
    2.34Net income (loss) per common share  dilutedAs reported
    
    $
    1.75
    
    
    $
    (0.14
    )
    
    $
    3.25
    
    
    $
    2.34Pro forma
    
    $
    1.75
    
    
    $
    (0.14
    )
    
    $
    3.25
    
    
    $
    2.34
  Long-term Ground Leases
  -6-




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##### Table of Contents



POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    INDEBTEDNESSAt September 30, 2005 and December 31, 2004, the Companys indebtedness consisted of the
following:
 Payment
    
    
    
    
    
    Maturity
    
    September 30,
    
    
    December 31,Description
    
    Terms
    
    Interest Rate
    
    
    Date
    
    2005
    
    
    2004Unsecured NotesSenior Notes
    
    Int.
    
    
    5.125% - 7.70
    %
    
    2006-2012
    
    $
    485,000
    
    
    $
    385,000Medium Term Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212,043485,000
    
    
    
    597,043Unsecured Lines of Credit & OtherSyndicated Line of Credit
    
    N/A
    
    LIBOR + 0.75
    %(1)
    
    2007
    
    
    65,000
    
    
    
    40,000Cash Management Line
    
    N/A
    
    LIBOR + 0.75
    %
    
    2007
    
    
    12,594
    
    
    
    10,74877,594
    
    
    
    50,748Conventional Fixed Rate (Secured)FNMA
    
    Prin. and Int.
    
    
    6.975
    %(2)
    
    2029
    
    
    97,100
    
    
    
    98,500Other
    
    Prin. and Int.
    
    
    4.27% - 7.69
    %
    
    2007-2013
    
    
    269,796
    
    
    
    273,132366,896
    
    
    
    371,632Tax-Exempt Floating Rate Bonds (Secured)
    
    Int.
    
    
    2.74
    %(3)
    
    2025
    
    
    28,495
    
    
    
    110,055Total
    
    
    
    
    
    
    
    
    
    $
    957,985
    
    
    $
    1,129,478
 
 (1)
    
    Represents stated rate. At September 30, 2005, the weighted average interest rate was
4.15%.(2)
    
    Interest rate is fixed at 6.975%, inclusive of credit enhancement and other fees, to
2009 through an interest rate swap arrangement.(3)
    
    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 the rate at
September 30, 2005 before credit enhancements. The Company has outstanding interest rate
cap arrangements that limit the Companys exposure to increases in the base interest rate
to 5%. At September 30, 2005 and December 31, 2004, approximately $0 and $34,060,
respectively, of this debt was secured by assets held for sale. In June 2005, the
Company executed an amendment to its master reimbursement agreement with FNMA, which
agreement, among other things, sets forth the Companys payment obligations under its
variable-rate, tax-exempt bond indebtedness. The amendment deferred the commencement of
principal repayments under the bonds by five years from the originally scheduled
commencement date. The original maturity date for the bonds remains unchanged and the
amortization schedule of the bonds was changed commensurate with the five-year deferral
of the start of principal amortization. Debt maturities
  Remainder of 2005
    
    $
    1,1552006
    
    
    81,2692007
    
    
    235,787
    (1)2008
    
    
    4,5572009
    
    
    75,901Thereafter
    
    
    559,316$
    957,985
 
 (1)
    
    Includes outstanding balances on lines of credit
totaling $77,594. Debt issuances and retirements
     -7-




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##### Table of Contents



POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  Unsecured Lines of Credit
   3.
    
    INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIESThe Company holds investments in three individual limited liability companies (the Property
LLCs) with an institutional investor. Two of the Property LLCs own single apartment
communities. The third Property LLC has converted its apartment community, containing 121
units, into for-sale condominiums. The Company holds a 35% equity interest in the Property
LLCs.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 $6,266 at September 30, 2005. This excess investment
related to the two Property LLCs holding apartment communities is being amortized as a reduction
to earnings on a straight-line basis over the lives of the related assets. The excess
investment of $742 at September 30, 2005 related to the Property LLC holding the condominium
conversion community will be recognized as additional cost of sales as the underlying
condominiums are sold. The Company provides real estate services (development, construction and
property management) to the Property LLCs for which it earns fees.The operating results of the Company include its share of net income from the investments in the
Property LLCs. A summary of financial information for the Property LLCs in the aggregate is as
follows:
 September 30,
    
    
    December 31,Balance Sheet Data
    
    2005
    
    
    2004Real estate assets, net of accumulated depreciation of $7,708 and $9,712, respectively
    
    $
    96,613
    
    
    $
    124,072Assets held for sale, net (1)
    
    
    21,205
    
    
    
    Cash and other
    
    
    1,686
    
    
    
    2,797Total assets
    
    $
    119,504
    
    
    $
    126,869Mortgage notes payable
    
    $
    66,999
    
    
    $
    83,468Mortgage notes payable to Company
    
    
    10,275
    
    
    
    Other liabilities
    
    
    830
    
    
    
    1,296Total liabilities
    
    
    78,104
    
    
    
    84,764Members equity
    
    
    41,400
    
    
    
    42,105Total liabilities and members equity
    
    $
    119,504
    
    
    $
    126,869Companys equity investment
    
    $
    20,772
    
    
    $
    21,320
 
 (1)
    
    Includes one community, originally containing 121
units, being converted into condominiums through a taxable
REIT subsidiary. -8-




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##### Table of Contents



POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,Income Statement Data
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004RevenueRental
    
    $
    2,720
    
    
    $
    2,690
    
    
    $
    8,081
    
    
    $
    7,868Other property revenues
    
    
    230
    
    
    
    213
    
    
    
    645
    
    
    
    600Total revenues
    
    
    2,950
    
    
    
    2,903
    
    
    
    8,726
    
    
    
    8,468ExpensesProperty operating and maintenance
    
    
    877
    
    
    
    806
    
    
    
    2,676
    
    
    
    2,643Depreciation and amortization
    
    
    656
    
    
    
    650
    
    
    
    1,964
    
    
    
    1,927Interest
    
    
    688
    
    
    
    688
    
    
    
    2,064
    
    
    
    1,970Total expenses
    
    
    2,221
    
    
    
    2,144
    
    
    
    6,704
    
    
    
    6,540Income from continuing operations
    
    
    729
    
    
    
    759
    
    
    
    2,022
    
    
    
    1,928Discontinued OperationsLoss from discontinued operations
    
    
    (23
    )
    
    
    (75
    )
    
    
    (119
    )
    
    
    (239
    )Gains on sales of real estate assets
    
    
    994
    
    
    
    
    
    
    
    1,849
    
    
    
    Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (273
    )
    
    
    Income (loss) from discontinued operations
    
    
    971
    
    
    
    (75
    )
    
    
    1,457
    
    
    
    (239
    )Net income
    
    $
    1,700
    
    
    $
    684
    
    
    $
    3,479
    
    
    $
    1,689Companys share of net income
    
    $
    593
    
    
    $
    420
    
    
    $
    1,294
    
    
    $
    843
  Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005Condominium revenues, net
    
    $
    4,383
    
    
    $
    8,566Condominium costs and expenses
    
    
    (3,389
    )
    
    
    (6,717
    )Gains on condominium sales
    
    $
    994
    
    
    $
    1,849
   4.
    
    REAL ESTATE ACQUISITION AND DISPOSITION ACTIVITYAcquisition ActivityIn June 2005, the Company acquired a 319-unit apartment community located in suburban Charlotte,
NC for approximately $38,240, including closing costs and the reimbursement of a fee to
terminate a loan commitment paid for by the seller. Additionally, the Company plans to spend up
to approximately $1,100 to improve the community. The purchase price of this community was
allocated to the assets acquired based on their estimated fair values.Disposition ActivityThe Company classifies real estate assets as held for sale after the approval of its investment
committee and after the Company has commenced an active program to sell the assets. At
September 30, 2005, the Company had one apartment community, originally containing 127 units,
that is being converted into condominiums and certain tracts of land classified as held for
sale. These real estate assets are reflected in the accompanying consolidated balance sheet at
$9,221, which represents the lower of their depreciated cost or fair value less costs to sell.
 -9-




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##### Table of Contents



POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenuesRental
    
    $
    1,381
    
    
    $
    7,200
    
    
    $
    13,220
    
    
    $
    34,704Other property revenues
    
    
    185
    
    
    
    668
    
    
    
    1,242
    
    
    
    3,070Total revenues
    
    
    1,566
    
    
    
    7,868
    
    
    
    14,462
    
    
    
    37,774ExpensesProperty operating and maintenance
(exclusive of items shown separately below)
    
    
    1,042
    
    
    
    3,360
    
    
    
    7,130
    
    
    
    16,332Depreciation
    
    
    
    
    
    
    1,491
    
    
    
    
    
    
    
    4,544Interest
    
    
    247
    
    
    
    1,057
    
    
    
    2,123
    
    
    
    4,394Minority interest in consolidated property partnerships
    
    
    
    
    
    
    (61
    )
    
    
    14
    
    
    
    (205
    )Asset impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    626Total expenses
    
    
    1,289
    
    
    
    5,847
    
    
    
    9,267
    
    
    
    25,691Income from discontinued operations
before minority interest
    
    
    277
    
    
    
    2,021
    
    
    
    5,195
    
    
    
    12,083Minority interest
    
    
    (5
    )
    
    
    180
    
    
    
    (286
    )
    
    
    (501
    )Income from discontinued operations
    
    $
    272
    
    
    $
    2,201
    
    
    $
    4,909
    
    
    $
    11,582
   Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005Condominium revenues, net
    
    $
    10,900
    
    
    $
    46,270Condominium costs and expenses
    
    
    8,526
    
    
    
    30,384Gains on condominium sales,
before minority interest and
income taxes
    
    
    2,374
    
    
    
    15,886Minority interest
    
    
    (88
    )
    
    
    (836
    )Provision for income taxes
    
    
    (270
    )
    
    
    (653
    )Gains on condominium sales,
net of minority interest and
provision for income taxes
    
    $
    2,016
    
    
    $
    14,397
  -10-




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##### Table of Contents



POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 5.
    
    SHAREHOLDERS EQUITYCommon Stock PurchasesIn the three and nine months ended September 30, 2005, the Company repurchased approximately 88
and 749 shares, respectively, of its common stock at an aggregate cost of $3,183 and $24,466,
respectively, under 10b5-1 stock repurchase plans, the latest of which will expire on November
30, 2005. Subsequent to September 30, 2005, the Company repurchased 282 shares at an aggregate
cost of $9,934. These shares were purchased under a board of directors approved plan which
provides for aggregate common or preferred stock repurchases of up to $200,000 through December
31, 2006.Computation of Earnings Per Common ShareFor the three and nine months ended September 30, 2005 and 2004, a reconciliation of the
numerator and denominator used in the computation of basic and diluted income from continuing
operations per common share is as follows:
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Income (loss) from continuing operations available
to common shareholders (numerator):Income (loss) from continuing operations
    
    $
    1,983
    
    
    $
    (3,994
    )
    
    $
    2,505
    
    
    $
    (11,045
    )Less: Preferred stock dividends
    
    
    (1,909
    )
    
    
    (1,909
    )
    
    
    (5,728
    )
    
    
    (6,416
    )Less: Preferred stock and unit redemption costs
    
    
    
    
    
    
    (1,810
    )
    
    
    
    
    
    
    (3,526
    )Income (loss) from continuing operations
available to common shareholders
    
    $
    74
    
    
    $
    (7,713
    )
    
    $
    (3,223
    )
    
    $
    (20,987
    )Common shares (denominator):Weighted average shares outstanding  basic
    
    
    40,372
    
    
    
    39,892
    
    
    
    40,157
    
    
    
    39,694Incremental shares from assumed conversion of
stock options (1)
    
    
    441
    
    
    
    
    
    
    
    
    
    
    
    Weighted average shares outstanding  diluted (1).
    
    
    40,813
    
    
    
    39,892
    
    
    
    40,157
    
    
    
    39,694
 
 (1)
    
    The potential dilution from the Companys outstanding stock options of 98 shares
for the three months ended September 30, 2004, and 293 and 67 shares, respectively,
for the nine months ended September 30, 2005 and 2004, were antidilutive to the loss
from continuing operations per share calculation. As such, the amounts were excluded
from weighted average shares for the period.  -11-




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##### Table of Contents



POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Deferred Compensation Plan
  6.
    
    DERIVATIVE FINANCIAL INSTRUMENTSAt September 30, 2005, the Company had an outstanding interest rate swap agreement with a
notional value of approximately $97,400 with a maturity date in 2009. The interest rate swap
agreement is included on the accompanying consolidated balance sheet at fair value. The Company
records the changes in the fair value of this cash flow hedge as a change in accumulated other
comprehensive loss, a shareholders equity account, in the accompanying consolidated balance
sheet.At September 30, 2005, the Company had an outstanding interest rate cap agreement with a
financial institution with a notional value of $28,495. The interest rate cap agreement is a
cash flow hedge that provides a fixed interest ceiling at 5% for the Companys variable rate,
tax-exempt borrowings aggregating $28,495 at September 30, 2005. The Company is required to
maintain the interest rate exposure protection under the terms of the financing arrangements.
The interest rate cap arrangement is included on the accompanying balance sheet at fair value.
At September 30, 2005, the difference between the amortized costs of the interest rate cap
arrangement and its fair value of $10 is included in accumulated other comprehensive loss, a
shareholders equity account. The original cost of approximately $362 of the arrangements is
being amortized as additional expense over its five-year term.In May and August 2005, in connection with the sale of three communities discussed in note 4
above, the Company sold its interest in interest rate cap agreements with notional values of
$81,560 for aggregate proceeds of $17 and realized losses of $547 ($518 net of minority
interest) and $955 ($902 net of minority interest) in the three and nine months ended September
30, 2005, respectively, that were included in the loss on early extinguishment of indebtedness
on the accompanying statement of operations. The unrealized loss on these interest rate cap
agreements was previously reflected in accumulated other comprehensive income, a shareholders
equity account. These interest rate cap agreements were sold as the underlying hedged
indebtedness was assumed by the purchaser in connection with the sale of the related assets.A summary of comprehensive income for the three and nine months ended September 30, 2005 and
2004 is as follows:
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    73,241
    
    
    $
    (1,793
    )
    
    $
    136,362
    
    
    $
    102,727Change in derivative values, net of minority interest
    
    
    2,680
    
    
    
    (1,472
    )
    
    
    4,508
    
    
    
    2,211Comprehensive income (loss)
    
    $
    75,921
    
    
    $
    (3,265
    )
    
    $
    140,870
    
    
    $
    104,938
 7.
    
    SEGMENT INFORMATIONSegment DescriptionIn 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 apartment community 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 properties and other ancillary
service and support operations are aggregated in the line item other in the accompanying
segment information. The segment information presented below reflects the segment categories
based on the lifecycle status of each community as of January 1, 2004. The segment information
for the three and nine months ended September 30, 2004 has been adjusted due to the restatement
impact of reclassifying the operating results of the assets designated as held for sale in 2004
and 2005 to discontinued operations under SFAS No. 144 (see note 4).
 -12-




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##### Table of Contents



POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
    
    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 2004  communities which reached stabilized occupancy in
the prior year.
    
    Development and lease-up communities  those development 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. The Company has no communities in the
development or lease-up stage for the periods presented.
    
    Acquired communities  those communities acquired in the current or prior year.
 Segment Performance Measure
  -13-




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##### Table of Contents



POST PROPERTIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Segment Information
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenuesFully stabilized communities
    
    $
    65,255
    
    
    $
    62,839
    
    
    $
    191,183
    
    
    $
    187,021Communities stabilized during 2004
    
    
    1,814
    
    
    
    1,719
    
    
    
    5,335
    
    
    
    5,308Acquired communities
    
    
    3,154
    
    
    
    2,157
    
    
    
    7,654
    
    
    
    2,362Other property segments
    
    
    5,784
    
    
    
    5,383
    
    
    
    16,405
    
    
    
    15,832Other
    
    
    64
    
    
    
    814
    
    
    
    196
    
    
    
    936Consolidated revenues
    
    $
    76,071
    
    
    $
    72,912
    
    
    $
    220,773
    
    
    $
    211,459Contribution to NOIFully stabilized communities
    
    $
    39,698
    
    
    $
    38,186
    
    
    $
    116,055
    
    
    $
    114,190Communities stabilized during 2004
    
    
    1,292
    
    
    
    1,169
    
    
    
    3,700
    
    
    
    3,778Acquired communities
    
    
    2,113
    
    
    
    1,544
    
    
    
    5,146
    
    
    
    1,692Other
    
    
    (1,170
    )
    
    
    (1,944
    )
    
    
    (4,164
    )
    
    
    (3,373
    )Consolidated property net operating income
    
    
    41,933
    
    
    
    38,955
    
    
    
    120,737
    
    
    
    116,287Interest income
    
    
    230
    
    
    
    246
    
    
    
    583
    
    
    
    639Other revenue
    
    
    64
    
    
    
    814
    
    
    
    196
    
    
    
    936Minority interest in consolidated property partnerships
    
    
    34
    
    
    
    106
    
    
    
    212
    
    
    
    538Depreciation
    
    
    (18,950
    )
    
    
    (20,371
    )
    
    
    (57,896
    )
    
    
    (59,683
    )Interest expense
    
    
    (14,455
    )
    
    
    (16,316
    )
    
    
    (45,340
    )
    
    
    (47,678
    )Amortization of deferred financing costs
    
    
    (991
    )
    
    
    (1,065
    )
    
    
    (3,707
    )
    
    
    (3,273
    )General and administrative
    
    
    (5,421
    )
    
    
    (6,018
    )
    
    
    (16,150
    )
    
    
    (16,137
    )Development costs and other
    
    
    (1,042
    )
    
    
    (284
    )
    
    
    (2,879
    )
    
    
    (1,200
    )Equity in income of unconsolidated real estate entities
    
    
    593
    
    
    
    420
    
    
    
    1,294
    
    
    
    843Gain on sale of technology investment
    
    
    
    
    
    
    
    
    
    
    5,267
    
    
    
    Minority interest of preferred unitholders
    
    
    
    
    
    
    (980
    )
    
    
    
    
    
    
    (3,780
    )Minority interest of common unitholders
    
    
    (12
    )
    
    
    499
    
    
    
    188
    
    
    
    1,463Income (loss) from continuing operations
    
    
    1,983
    
    
    
    (3,994
    )
    
    
    2,505
    
    
    
    (11,045
    )Income from discontinued operations
    
    
    71,258
    
    
    
    2,201
    
    
    
    133,857
    
    
    
    113,772Net income (loss)
    
    $
    73,241
    
    
    $
    (1,793
    )
    
    $
    136,362
    
    
    $
    102,727
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##### Table of Contents



POST PROPERTIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    SEVERANCE COSTSIn prior years, the Company recorded severance charges associated with the departure of certain
executive officers of the Company. Under certain of these arrangements, the Company is required
to make certain payments and provide specified benefits through 2013 and 2016, respectively.
The following table summarizes the activity relating to aggregate severance charges for the nine
months ended September 30, 2005 and 2004:
 Nine months endedSeptember 30,2005
    
    
    2004Accrued severance charges, beginning of period
    
    $
    15,317
    
    
    $
    19,171Payments for period
    
    
    (2,095
    )
    
    
    (2,333
    )Interest accretion
    
    
    679
    
    
    
    753Accrued severance charges, end of period
    
    $
    13,901
    
    
    $
    17,591
 9.
    
    SUPPLEMENTAL CASH FLOW INFORMATIONInterest paid (including capitalized amounts of $1,553 and $787 for the nine months ended
September 30, 2005 and 2004, respectively), aggregated $45,288 and $47,540 for the nine months
ended September 30, 2005 and 2004, respectively.Non-cash investing and financing activities for the nine months ended September 30, 2005 and
2004 were as follows:During the nine months ended September 30, 2005, the Company sold three apartment communities
subject to $81,560 of mortgage indebtedness assumed by the purchasers. This mortgage debt
assumed by the purchasers was excluded from the cash flow statement as a non-cash transaction
(see note 4).During the nine months ended September 30, 2005, the Companys derivative financial instruments
(see note 6) increased in value causing a decrease in accounts payable and accrued expenses and
a corresponding increase in shareholders equity of $4,508, net of minority interest. During
the nine months ended September 30, 2004, the Companys derivative financial instruments
increased in value causing a decrease in accounts payable and accrued expenses and a
corresponding increase in shareholders equity of $2,211, net of minority interest.During the nine months ended September 30, 2005 and 2004, holders of 635 and 1,167 units,
respectively, in the Operating Partnership exercised their option to convert their units to
shares of common stock of the Company on a one-for-one basis. These conversions and adjustments
for the impact of the common stock issued under the Companys employee stock purchase and stock
option plans and other capital transactions resulted in adjustments to minority interest. The
net effect of the conversions and adjustments was a reclassification decreasing minority
interest and increasing shareholders equity in the amounts of $12,200 and $20,248 for the nine
months ended September 30, 2005 and 2004, respectively.The Operating Partnership committed to distribute $19,190 and $19,090 for the quarters ended
September 30, 2005 and 2004, respectively. As a result, the Company declared dividends of
$18,396 and $17,965 for the quarters ended September 30, 2005 and 2004, respectively. The
remaining distributions from the Operating Partnership in the amount of $794 and $1,125 for the
quarters ended September 30, 2005 and 2004, respectively, were distributed to minority interest
unitholders in the Operating Partnership.In June 2004, the Company acquired an apartment community for cash and the assumption of
mortgage indebtedness with an estimated fair value of $49,694. Also, in June 2004, the Company
sold certain apartment communities subject to $104,325 of mortgage indebtedness assumed by the
purchasers. These transactions involving mortgage indebtedness were excluded from the statement
of cash flows as non-cash transactions (see note 4).
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POST PROPERTIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    STOCK-BASED COMPENSATION PLANIn the three and nine months ended September 30, 2005, the Company granted approximately 6 and
37 shares, respectively, of restricted stock to Company officers, directors and employees of
which approximately 6 shares were granted to the Companys non-executive Chairman of the Board.
The restricted shares generally vest ratably over periods not exceeding three years. The total
value of the restricted share grants of $1,306 for the nine months ended September 30, 2005 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 three year vesting period.Additionally, in the three and nine months ended September 30, 2005, the Company granted stock
options to purchase approximately 5 and 259 shares, respectively, of Company common stock to
Company officers and directors, of which 50 stock options were granted to the Companys
non-executive Chairman of the Board. As discussed in note 1, the Company expenses the estimated
fair value of stock options over their three year vesting periods.11.
    
    INCOME TAXESThe Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended (the Code). To qualify as a REIT, the Company must distribute annually at least 90%
of its adjusted taxable income, as defined in the Code, to its shareholders and satisfy certain
other organizational and operating requirements. It is managements current intention to adhere
to these requirements and maintain the Companys REIT status. As a REIT, the Company generally
will not be subject to federal income tax at the corporate level on the taxable income it
distributes to its shareholders. If the Company fails to qualify as a REIT in any taxable year,
it will be subject to federal income taxes at regular corporate rates (including any applicable
alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable
years. The Company may be subject to certain state and local taxes on its income and property,
and to federal income taxes and excise taxes on its undistributed taxable income.The Company utilizes taxable REIT subsidiaries to perform such non-REIT activities as asset and
property management, for-sale housing (condominiums) conversions and sales, leasing and
landscaping services for third parties. These taxable REIT subsidiaries are subject to federal,
state and local income taxes. For the nine months ended September 30, 2005, the Company
estimated it would utilize approximately $7,000 of income tax net operating loss carry-forwards
to offset its federal taxable income generated by its taxable REIT subsidiaries (primarily as a
result of condominium sale gains). Through September 30, 2005, the Company estimated that its
taxable REIT subsidiaries would be subject to federal alternative minimum taxes and applicable
state income taxes and has recorded an income tax provisions of approximately $270 and $653 in
the three and nine months ended September 30, 2005, respectively. At September 30, 2005, the
Companys taxable REIT subsidiaries had consolidated federal income tax net operating loss
carry-forwards totaling approximately $2,000. These tax loss carry-forwards begin to expire in
2019. At September 30, 2005, management had established a valuation allowance against the
deferred tax asset associated with these net operating loss carry-forwards due to the historical
operating losses of these subsidiaries. The tax benefits associated with such net operating
loss carry-forwards may be recognized in future periods, if the taxable REIT subsidiaries
generate sufficient taxable income to utilize such amounts or if the Company determines that it
is more likely than not that the related deferred tax assets are realizable.12.
    
    LEGAL PROCEEDINGSOn May 13, 2004, an alleged Company shareholder filed a purported pro se derivative and direct
action in the Superior Court of Fulton County, Georgia, against the Company, certain members of
the Companys board of directors, and certain of its executive officers. The case was removed to
the United States District Court for the Northern District of Georgia on May 21, 2004. The
complaint alleged, among other things, breaches of fiduciary duties, fraud, corporate waste,
withholding certain documents from shareholder inspection and certain securities laws claims.
The complaint requested various types of relief, such as injunctive relief and damages and
demanded production of certain Company records. Because the Company believed the allegations
were wholly without merit, the Company moved to dismiss the litigation. On April 20, 2005, the
court entered an order dismissing all claims without prejudice, save a claim seeking production
of certain Company records, upon which the Court declined to rule, concluding it lacked
jurisdiction to do so, and ordered the claim remanded to the Superior Court of Fulton County.
Since that time, the Company has moved for its attorney fees in the United States District
Court, arguing that the plaintiff frivolously pursued the litigation, and the plaintiff has
moved for entry of judgment in Superior Court, which the Company has vigorously contested.
 -16-




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POST PROPERTIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 On May 5, 2003, the Company received notice that a shareholder derivative and purported class
action lawsuit was filed against members of the board of directors of the Company and the
Company as a nominal defendant. This complaint was filed in the Superior Court of Fulton County,
Atlanta, Georgia on May 2, 2003 and alleged various breaches of fiduciary duties by the board of
directors of the Company and sought, among other relief, the disclosure of certain information
by the defendants. This complaint also sought to compel the defendants to undertake various
actions to facilitate a sale of the Company. On May 7, 2003, the plaintiff made a request for
voluntary expedited discovery. On May 13, 2003, the Company received notice that a similar
shareholder derivative and purported class action lawsuit was filed against certain members of
the board of directors of the Company and against the Company as a nominal defendant. The
complaint was filed in the Superior Court of Fulton County, Atlanta, Georgia on May 12, 2003 and
alleged breaches of fiduciary duties, abuse of control and corporate waste by the defendants.
The plaintiff sought monetary damages and, as appropriate, injunctive relief. These lawsuits
were settled, and in October 2004, the Superior Court of Fulton County entered an order
approving the settlement and related orders dismissing the litigation. The estimated legal and
settlement costs, not covered by insurance, associated with the expected resolution of the
lawsuits were recorded in the second quarter of 2003 as a component of a proxy contest and
related costs charge. An alleged Company shareholder, who had filed a separate purported
derivative and direct action against the Company and certain of its officers and directors
(which is described in the paragraph above), has appealed from the Superior Courts orders
approving the settlement, overruling the shareholders objection to the settlement denying the
shareholders motion to intervene, and dismissing the litigation with prejudice. The Company is
contesting the alleged shareholders appeal vigorously.The Company is involved in various other legal proceedings incidental to its business from time
to time, most of which are expected to be covered by liability or other insurance. Management of
the Company believes that any resolution of pending proceedings or liability to the Company
which may arise as a result of these proceedings will not have a material adverse effect on the
Companys results of operations or financial position.13.
    
    SALE OF TECHNOLOGY INVESTMENTIn February 2005, the Company sold its investment in Rent.com, a privately-held internet leasing
company, and recognized a gain of $5,267.
 -17-




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POST APARTMENT HOMES, L.P.
 
 CONSOLIDATED BALANCE SHEETS  (In thousands)
 September 30,
    
    
    December 31,2005
    
    
    2004(Unaudited)AssetsReal estate assetsLand
    
    $
    270,166
    
    
    $
    266,520Building and improvements
    
    
    1,825,584
    
    
    
    1,887,514Furniture, fixtures and equipment
    
    
    210,179
    
    
    
    214,954Construction in progress
    
    
    38,550
    
    
    
    19,527Land held for future development
    
    
    56,512
    
    
    
    18,9102,400,991
    
    
    
    2,407,425Less: accumulated depreciation
    
    
    (508,386
    )
    
    
    (498,367
    )Assets held for sale, net of accumulated depreciation of $0 and
$26,332 at September 30, 2005 and December 31, 2004, respectively
    
    
    9,221
    
    
    
    68,661Total real estate assets
    
    
    1,901,826
    
    
    
    1,977,719Investments in and advances to unconsolidated entities
    
    
    31,047
    
    
    
    21,320Cash and cash equivalents
    
    
    3,335
    
    
    
    123Restricted cash
    
    
    4,277
    
    
    
    1,844Deferred charges, net
    
    
    11,572
    
    
    
    15,574Other assets
    
    
    33,215
    
    
    
    37,262Total assets
    
    $
    1,985,272
    
    
    $
    2,053,842Liabilities and partners equityIndebtedness, including $0 and $34,060 of debt secured by assets
held for sale at September 30, 2005 and December 31, 2004, respectively
    
    $
    957,985
    
    
    $
    1,129,478Accounts payable and accrued expenses
    
    
    69,184
    
    
    
    58,837Distribution payable
    
    
    19,190
    
    
    
    19,203Accrued interest payable
    
    
    11,780
    
    
    
    7,677Security deposits and prepaid rents
    
    
    9,701
    
    
    
    7,236Total liabilities
    
    
    1,067,840
    
    
    
    1,222,431Commitments and contingenciesPartners equityPreferred units
    
    
    95,000
    
    
    
    95,000Common unitsGeneral partner
    
    
    9,768
    
    
    
    8,673Limited partners
    
    
    818,103
    
    
    
    737,940Accumulated other comprehensive loss
    
    
    (5,439
    )
    
    
    (10,202
    )Total partners equity
    
    
    917,432
    
    
    
    831,411Total liabilities and partners equity
    
    $
    1,985,272
    
    
    $
    2,053,842
 The accompanying notes are an integral part of these consolidated financial statements.
 -18-




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##### Table of Contents



POST APARTMENT HOMES, L.P.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS  (In thousands, except per unit data)
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenuesRental
    
    $
    71,242
    
    
    $
    68,003
    
    
    $
    207,714
    
    
    $
    198,782Other property revenues
    
    
    4,765
    
    
    
    4,095
    
    
    
    12,863
    
    
    
    11,741Other
    
    
    64
    
    
    
    814
    
    
    
    196
    
    
    
    936Total revenues
    
    
    76,071
    
    
    
    72,912
    
    
    
    220,773
    
    
    
    211,459ExpensesProperty operating and maintenance (exclusive of items
shown separately below)
    
    
    34,074
    
    
    
    33,143
    
    
    
    99,840
    
    
    
    94,236Depreciation
    
    
    18,950
    
    
    
    20,371
    
    
    
    57,896
    
    
    
    59,683General and administrative
    
    
    5,421
    
    
    
    6,018
    
    
    
    16,150
    
    
    
    16,137Development costs and other
    
    
    1,042
    
    
    
    284
    
    
    
    2,879
    
    
    
    1,200Total expenses
    
    
    59,487
    
    
    
    59,816
    
    
    
    176,765
    
    
    
    171,256Operating Income
    
    
    16,584
    
    
    
    13,096
    
    
    
    44,008
    
    
    
    40,203Interest income
    
    
    230
    
    
    
    246
    
    
    
    583
    
    
    
    639Interest expense
    
    
    (14,455
    )
    
    
    (16,316
    )
    
    
    (45,340
    )
    
    
    (47,678
    )Amortization of deferred financing costs
    
    
    (991
    )
    
    
    (1,065
    )
    
    
    (3,707
    )
    
    
    (3,273
    )Equity in income of unconsolidated real estate entities
    
    
    593
    
    
    
    420
    
    
    
    1,294
    
    
    
    843Gain on sale of technology investment
    
    
    
    
    
    
    
    
    
    
    5,267
    
    
    
    Minority interest in consolidated property partnerships
    
    
    34
    
    
    
    106
    
    
    
    212
    
    
    
    538Income (loss) from continuing operations
    
    
    1,995
    
    
    
    (3,513
    )
    
    
    2,317
    
    
    
    (8,728
    )Discontinued operationsIncome from discontinued operations
    
    
    277
    
    
    
    2,021
    
    
    
    5,195
    
    
    
    12,083Gains on sales of real estate assets, net of provision
for income taxes
    
    
    76,819
    
    
    
    
    
    
    
    139,658
    
    
    
    113,739Loss on early extinguishment of indebtedness associated
with property sales
    
    
    (1,846
    )
    
    
    
    
    
    
    (3,220
    )
    
    
    (4,128
    )Income from discontinued operations
    
    
    75,250
    
    
    
    2,021
    
    
    
    141,633
    
    
    
    121,694Net income (loss)
    
    
    77,245
    
    
    
    (1,492
    )
    
    
    143,950
    
    
    
    112,966Distributions to preferred unitholders
    
    
    (1,909
    )
    
    
    (2,889
    )
    
    
    (5,728
    )
    
    
    (10,196
    )Redemption costs on preferred units
    
    
    
    
    
    
    (1,810
    )
    
    
    
    
    
    
    (3,526
    )Net income (loss) available to common unitholders
    
    $
    75,336
    
    
    $
    (6,191
    )
    
    $
    138,222
    
    
    $
    99,244Per common unit data  BasicIncome (loss) from continuing operations (net of
preferred distributions and redemption costs)
    
    $
    
    
    
    $
    (0.19
    )
    
    $
    (0.08
    )
    
    $
    (0.53
    )Income from discontinued operations
    
    
    1.77
    
    
    
    0.05
    
    
    
    3.33
    
    
    
    2.87Net income (loss) available to common unitholders
    
    $
    1.77
    
    
    $
    (0.15
    )
    
    $
    3.25
    
    
    $
    2.34Weighted average common units outstanding  basic
    
    
    42,536
    
    
    
    42,433
    
    
    
    42,492
    
    
    
    42,457Per common unit data  DilutedIncome (loss) from continuing operations (net of
preferred distributions and redemption costs)
    
    $
    
    
    
    $
    (0.19
    )
    
    $
    (0.08
    )
    
    $
    (0.53
    )Income from discontinued operations
    
    
    1.75
    
    
    
    0.05
    
    
    
    3.33
    
    
    
    2.87Net income (loss) available to common unitholders
    
    $
    1.75
    
    
    $
    (0.15
    )
    
    $
    3.25
    
    
    $
    2.34Weighted average common units outstanding  diluted
    
    
    42,977
    
    
    
    42,433
    
    
    
    42,492
    
    
    
    42,457Distributions declared
    
    $
    0.45
    
    
    $
    0.45
    
    
    $
    1.35
    
    
    $
    1.35
 The accompanying notes are an integral part of these consolidated financial statements.
 -19-




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POST APARTMENT HOMES, L.P.
 
 CONSOLIDATED STATEMENTS OF PARTNERS EQUITY  (In thousands)
 AccumulatedCommon Units
    
    
    OtherPreferred
    
    
    General
    
    
    Limited
    
    
    ComprehensiveUnits
    
    
    Partner
    
    
    Partners
    
    
    Income (Loss)
    
    
    TotalPartners Equity, December 31, 2004
    
    $
    95,000
    
    
    $
    8,673
    
    
    $
    737,940
    
    
    $
    (10,202
    )
    
    $
    831,411Comprehensive incomeNet income
    
    
    1,909
    
    
    
    1,420
    
    
    
    140,621
    
    
    
    
    
    
    
    143,950Net change in derivative value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,763
    
    
    
    4,763Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,713Contributions from the Company related
to employee stock purchase and stock
option plans
    
    
    
    
    
    
    233
    
    
    
    23,068
    
    
    
    
    
    
    
    23,301Purchase of common units
    
    
    
    
    
    
    
    
    
    
    (24,466
    )
    
    
    
    
    
    
    (24,466
    )Stock-based compensation
    
    
    
    
    
    
    6
    
    
    
    551
    
    
    
    
    
    
    
    557Distributions to preferred unitholders
    
    
    (1,909
    )
    
    
    
    
    
    
    (3,819
    )
    
    
    
    
    
    
    (5,728
    )Distributions to common unitholders
    
    
    
    
    
    
    (574
    )
    
    
    (56,803
    )
    
    
    
    
    
    
    (57,377
    )Contributions from the Company related
to shares issued for restricted stock,
net of deferred compensation
    
    
    
    
    
    
    10
    
    
    
    1,011
    
    
    
    
    
    
    
    1,021Partners Equity, September 30, 2005
    
    $
    95,000
    
    
    $
    9,768
    
    
    $
    818,103
    
    
    $
    (5,439
    )
    
    $
    917,432
 The accompanying notes are an integral part of these consolidated financial statements.
 -20-




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##### Table of Contents



POST APARTMENT HOMES, L.P.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS  (In thousands, except per unit data)
 Nine months endedSeptember 30,2005
    
    
    2004Cash Flows From Operating ActivitiesNet income
    
    $
    143,950
    
    
    $
    112,966Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    57,896
    
    
    
    64,227Amortization of deferred financing costs
    
    
    3,707
    
    
    
    3,273Gains sales of real estate assets  discontinued operations
    
    
    (139,658
    )
    
    
    (113,739
    )Asset impairment charge
    
    
    
    
    
    
    626Gain on sale of technology investment
    
    
    (5,267
    )
    
    
    Equity in income of unconsolidated entities, net of distributions of
accumulated earnings
    
    
    310
    
    
    
    562Equity-based compensation
    
    
    1,693
    
    
    
    1,280Loss on early extinguishment of debt
    
    
    3,220
    
    
    
    4,128Changes in assets, (increase) decrease in:Restricted cash
    
    
    (2,433
    )
    
    
    338Other assets
    
    
    2,906
    
    
    
    (706
    )Deferred charges
    
    
    (253
    )
    
    
    (304
    )Changes in liabilities, increase (decrease) in:Accrued interest payable
    
    
    4,103
    
    
    
    5,229Accounts payable and accrued expenses
    
    
    11,009
    
    
    
    10,428Security deposits and prepaid rents
    
    
    2,465
    
    
    
    (784
    )Net cash provided by operating activities
    
    
    83,648
    
    
    
    87,524Cash Flows From Investing ActivitiesConstruction and acquisition of real estate assets, net of payables
    
    
    (102,781
    )
    
    
    (38,789
    )Net proceeds from sales of real estate assets
    
    
    193,306
    
    
    
    138,637Proceeds from sale of technology investment
    
    
    5,267
    
    
    
    Recurring capital expenditures
    
    
    (7,172
    )
    
    
    (7,613
    )Non-recurring capital expenditures
    
    
    (2,636
    )
    
    
    (3,604
    )Revenue generating capital expenditures
    
    
    
    
    
    
    (26
    )Corporate additions and improvements
    
    
    (1,155
    )
    
    
    (553
    )Distribution from (investments in and advances to) unconsolidated entities
    
    
    (10,154
    )
    
    
    52,286Net cash provided by investing activities
    
    
    74,675
    
    
    
    140,338Cash Flows From Financing ActivitiesPayments on notes payable
    
    
    (216,779
    )
    
    
    (26,704
    )Proceeds from notes payable
    
    
    100,000
    
    
    
    35,000Payments of financing costs
    
    
    (1,176
    )
    
    
    (4,262
    )Lines of credit proceeds (repayments), net
    
    
    26,846
    
    
    
    (39,809
    )Redemption of preferred units
    
    
    
    
    
    
    (120,000
    )Redemption of common units
    
    
    (24,466
    )
    
    
    (2,268
    )Contributions from the Company related to employee stock purchase
and stock option plans
    
    
    23,301
    
    
    
    3,591Capital contributions (distributions) of minority interests
    
    
    283
    
    
    
    (3,806
    )Distributions to preferred unitholders
    
    
    (5,728
    )
    
    
    (10,662
    )Distributions to common unitholders
    
    
    (57,392
    )
    
    
    (57,274
    )Net cash used in financing activities
    
    
    (155,111
    )
    
    
    (226,194
    )Net increase in cash and cash equivalents
    
    
    3,212
    
    
    
    1,668Cash and cash equivalents, beginning of period
    
    
    123
    
    
    
    1,334Cash and cash equivalents, end of period
    
    $
    3,335
    
    
    $
    3,002
 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
 1.
    
    ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIESOrganizationPost 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 September 30, 2005, the Company owned 95.6% of the common limited partnership interests
(Common Units) in the Operating Partnership and 100.0% of the preferred limited partnership
interests (Preferred Units). The Companys weighted average common ownership interest in the
Operating Partnership was 94.9% and 94.0% for the three months ended and 94.5% and 93.5% for the
nine months ended September 30, 2005 and 2004, respectively. At September 30, 2005, Common
Units held by persons other than the Company represented a 4.4% 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 September 30, 2005, the Operating Partnership owned 21,791 apartment units in 58 apartment
communities, including 545 apartment units in two apartment communities held in unconsolidated
entities and including 205 apartment units currently under development in on community. The
Operating Partnership is also developing 145 for-sale condominium units and is converting 248
apartment units in two communities (including one in an unconsolidated entity, containing 121
units) into for-sale condominium units through a taxable REIT subsidiary. At September 30,
2005, approximately 46.1%, 18.2%, 9.7% and 9.1% (on a unit basis) of the Operating Partnerships
communities were located in the Atlanta, Dallas, Tampa and greater Washington, D.C. metropolitan
areas, respectively.Under the provisions of the limited partnership agreement, as amended, Operating Partnership net
profits, net losses and cash flow (after allocations to preferred ownership interests) are
allocated to the partners in proportion to their common ownership interests. Cash distributions
from the Operating Partnership shall be, at a minimum, sufficient to enable the Company to
satisfy its annual dividend requirements to maintain its REIT status under the Code.Basis of PresentationThe accompanying unaudited financial statements have been prepared by the Operating
Partnerships management in accordance with generally accepted accounting principles for interim
financial information and applicable rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and disclosures required by
generally accepted accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting only of normally recurring adjustments) considered
necessary for a fair presentation have been included. The results of operations for the three
and nine months ended September 30, 2005 are not necessarily indicative of the results that may
be expected for the full year. These financial statements should be read in conjunction with
the Operating Partnerships audited financial statements and notes thereto included in its
Annual Report on Form 10-K for the year ended December 31, 2004. Certain 2004 amounts have been
reclassified to conform to the current years financial statement presentation.Revenue RecognitionSales and the associated gains or losses of real estate assets and for-sale condominiums are
recognized in accordance with the provisions of SFAS No. 66, Accounting for Sales of Real
Estate. For condominium conversion projects, sales and the associated gains for individual
condominium units are recognized upon the closing of the sale transactions, as all conditions
for full profit recognition have been met. In accordance with SFAS No. 144, Accounting for the
Impairment and Disposal of Long-Lived Assets, gains on sales of condominium units at
condominium conversion projects are included in discontinued operations.
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##### Table of Contents



POST
APARTMENT HOMES, L.P.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Equity-based CompensationEffective January 1, 2003, the Operating Partnership accounts for stock-based compensation under
the fair value method prescribed by SFAS No. 123, Accounting for Stock-Based Compensation. In
adopting SFAS No. 123, the Operating Partnership used the prospective method prescribed in SFAS
No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure for all options
issued after January 1, 2003.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 to all
stock awards for each period.
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss) available to common unitholdersAs reported
    
    $
    75,336
    
    
    $
    (6,191
    )
    
    $
    138,222
    
    
    $
    99,244Stock-based compensation included in net income as reported
    
    
    671
    
    
    
    415
    
    
    
    1,693
    
    
    
    1,280Stock-based compensation determined under the fair value
method for all awards
    
    
    (677
    )
    
    
    (432
    )
    
    
    (1,704
    )
    
    
    (1,333
    )Pro forma
    
    $
    75,330
    
    
    $
    (6,208
    )
    
    $
    138,211
    
    
    $
    99,191Net income (loss) per common unit  basicAs reported
    
    $
    1.77
    
    
    $
    (0.15
    )
    
    $
    3.25
    
    
    $
    2.34Pro forma
    
    $
    1.77
    
    
    $
    (0.15
    )
    
    $
    3.25
    
    
    $
    2.34Net income (loss) per common unit  dilutedAs reported
    
    $
    1.75
    
    
    $
    (0.15
    )
    
    $
    3.25
    
    
    $
    2.34Pro forma
    
    $
    1.75
    
    
    $
    (0.15
    )
    
    $
    3.25
    
    
    $
    2.34
 SFAS No. 123R, Share-Based Payment, was issued in December 2004. SFAS No. 123R revises
SFAS No. 123, Accounting for Stock-Based Compensation and requires companies to expense the
fair value of employee stock options and other forms of stock-based compensation. SFAS No. 123R
also supersedes the provisions of APB No. 25. The provisions of SFAS No. 123R will be effective
for the Operating Partnership as of January 1, 2006. The Operating Partnership plans to adopt
the provisions of SFAS No. 123R in the first quarter of 2006 and is currently evaluating the
alternative methods of adoption. Since the Operating Partnership elected to apply the
provisions of SFAS No. 123 on January 1, 2003, the adoption of SFAS No. 123R is not expected to
have a significant impact on the Operating Partnerships financial position or results of
operations.Long-term Ground LeasesThe Operating Partnership is party to six long-term ground leases associated with land
underlying certain of the Operating Partnerships operating communities. The ground leases
generally provide for future increases in minimum lease payments tied to an inflation index or
contain stated rent increases that generally compensate for the impact of inflation. Beginning
in 2005, the Operating Partnership recognizes ground lease expense on the straight-line method
over the life of the ground lease for all ground leases with stated rent increases. The
recognition of ground lease expense as incurred has historically not been materially different
than recognizing ground lease expense on a straight-line basis.
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##### Table of Contents



POST
APARTMENT HOMES, L.P.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 2.
    
    INDEBTEDNESSAt September 30, 2005 and December 31, 2004, the Operating Partnerships indebtedness consisted
of the following:
 Payment
    
    
    
    
    
    Maturity
    
    September 30,
    
    
    December 31,Description
    
    Terms
    
    Interest Rate
    
    
    Date
    
    2005
    
    
    2004Unsecured NotesSenior Notes
    
    Int.
    
    
    5.125% - 7.70
    %
    
    2006-2012
    
    $
    485,000
    
    
    $
    385,000Medium Term Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212,043485,000
    
    
    
    597,043Unsecured Lines of Credit & OtherSyndicated Line of Credit
    
    N/A
    
    LIBOR + 0.75
    %(1)
    
    2007
    
    
    65,000
    
    
    
    40,000Cash Management Line
    
    N/A
    
    LIBOR + 0.75
    %
    
    2007
    
    
    12,594
    
    
    
    10,74877,594
    
    
    
    50,748Conventional Fixed Rate (Secured)FNMA
    
    Prin. and Int.
    
    
    6.975
    %(2)
    
    2029
    
    
    97,100
    
    
    
    98,500Other
    
    Prin. and Int.
    
    
    4.27% - 7.69
    %
    
    2007-2013
    
    
    269,796
    
    
    
    273,132366,896
    
    
    
    371,632Tax-Exempt Floating Rate
Bonds (Secured)
    
    Int.
    
    
    2.74
    %(3)
    
    2025
    
    
    28,495
    
    
    
    110,055Total
    
    
    
    
    
    
    
    
    
    $
    957,985
    
    
    $
    1,129,478
 
 (1)
    
    Represents stated rate. At September 30, 2005, the weighted average interest rate was
4.15%.(2)
    
    Interest rate is fixed at 6.975%, inclusive of credit enhancement and other fees, to
2009 through an interest rate swap arrangement.(3)
    
    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 the rate at
September 30, 2005 before credit enhancements. 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%. At September 30, 2005 and December 31, 2004,
approximately $0 and $34,060, respectively, of this debt was secured by assets held for
sale. In June 2005, the Operating Partnership executed an amendment to its master
reimbursement agreement with FNMA, which agreement, among other things, sets forth the
Operating Partnerships payment obligations under its variable-rate, tax-exempt bond
indebtedness. The amendment deferred the commencement of principal repayments under the
bonds by five years from the originally scheduled commencement date. The original
maturity date for the bonds remains unchanged and the amortization schedule of the bonds
was changed commensurate with the five-year deferral of the start of principal
amortization. Debt maturitiesThe aggregate maturities of the Operating Partnerships indebtedness are as follows:
 Remainder of 2005
    
    $
    1,1552006
    
    
    81,2692007
    
    
    235,787
    (1)2008
    
    
    4,5572009
    
    
    75,901Thereafter
    
    
    559,316$
    957,985
 
 (1)
    
    Includes outstanding balances on lines of credit
totaling $77,594. Debt issuances and retirementsUpon their maturity in February 2005, the Operating Partnership repaid $25,000 of its 7.28%
medium term, unsecured notes, from available borrowings under its unsecured lines of credit. In
March 2005, the Operating Partnership repaid the $100,000 outstanding principal balance under
its 6.85% Mandatory Par Put Remarketed Securities (MOPPRS) debt arrangement from available
borrowings under its unsecured lines of credit.In May 2005, the Operating Partnership issued $100,000 of senior unsecured notes. The notes
bear interest at 5.45% and mature in June 2012. The net proceeds from the unsecured notes were
used to reduce amounts outstanding under the Operating Partnerships unsecured lines of credit.
Upon their maturity in June 2005, the Operating Partnership repaid $62,043 of its 8.125% medium
term, unsecured notes, from available borrowings under its unsecured lines of credit. Upon
their maturity in September 2005, the Operating Partnership repaid $25,000 of its 6.78% medium
term, unsecured notes, from available borrowings under its unsecured lines of credit.In May 2005, the Operating Partnership sold two apartment communities subject to the assumption
of $34,060 of tax-exempt mortgage indebtedness (see note 4). As a result of this debt
assumption, the Operating Partnership recorded a loss on early extinguishment of debt of $1,374
related to the write-off of deferred loan costs of $966 relating to such assumed indebtedness
and the realization of a $408 loss in connection with the termination of related interest rate
cap agreements that were used as cash flow hedges of the assumed debt.
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##### Table of Contents



POST
APARTMENT HOMES, L.P.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 In August 2005, the Operating Partnership sold one apartment community subject to the assumption
of $47,500 of tax-exempt mortgage indebtedness (see note 4). As a result of this debt
assumption, the Operating Partnership recorded a loss on early extinguishment of debt of $1,846 related to the write-off of deferred loan costs of $1,299
relating to such assumed indebtedness and the realization of a $547 loss in connection with the
termination of related interest rate cap agreements that were used as cash flow hedges of the
assumed debt.Unsecured Lines of CreditThe Operating Partnership utilizes a $350,000 syndicated unsecured revolving line of credit (the
Revolver) that matures in January 2007 for its short-term financing needs. The Revolver has a
current stated interest rate of LIBOR plus 0.75% or the prime rate and was provided by a
syndicate of nine banks led by Wachovia Bank, N.A. Additionally, the Revolver requires the
payment of annual facility fees currently equal to 0.15% of the aggregate loan commitment. The
Revolver provides for the interest rate and facility fee rate to be adjusted up or down based on
changes in the credit ratings on the Operating Partnerships senior unsecured debt. The rates
under the Revolver are based on the higher of the Operating Partnerships unsecured debt ratings
in instances where the Operating Partnership has split unsecured debt ratings. The Revolver
also includes a money market competitive bid option for short-term funds up to $175,000 at rates
generally below the stated line rate. The credit agreement for the Revolver contains customary
representations, covenants and events of default, including fixed charge coverage and maximum
leverage ratios as well as covenants which restrict the ability of the Operating Partnership to
make distributions, in excess of stated 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. At September 30, 2005, the Operating
Partnership had issued letters of credit to third parties totaling $2,778 under this facility.Additionally, the Operating Partnership has a $20,000 unsecured line of credit with Wachovia
Bank, N.A. (the Cash Management Line). The Cash Management line matures in January 2007 and
carries pricing and terms, including debt covenants, substantially consistent with those of the
Revolver.
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##### Table of Contents



POST
APARTMENT HOMES, L.P.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 3.
    
    INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIESThe Operating Partnership holds investments in three individual limited liability companies (the
Property LLCs) with an institutional investor. Two of the Property LLCs own single apartment
communities. The third Property LLC has converted its apartment community, containing 121
units, into for-sale condominiums. The Operating Partnership holds a 35% equity interest in the
Property LLCs.The Operating Partnership accounts for its investments in these Property LLCs using the equity
method of accounting. The excess of the Operating Partnerships investment over its equity in
the underlying net assets of the Property LLCs was approximately $6,266 at September 30, 2005.
This excess investment related to the two Property LLCs holding apartment communities is being
amortized as a reduction to earnings on a straight-line basis over the lives of the related
assets. The excess investment of $742 at September 30, 2005 related to the Property LLC holding
the condominium conversion community will be recognized as additional cost of sales as the
underlying condominiums are sold. The Operating Partnership provides real estate services
(development, construction and property management) to the Property LLCs for which it earns
fees.The operating results of the Operating Partnership include its share of net income from the
investments in the Property LLCs. A summary of financial information for the Property LLCs in
the aggregate is as follows:
 September 30,
    
    
    December 31,Balance Sheet Data
    
    2005
    
    
    2004Real estate assets, net of accumulated depreciation of
$7,708 and $9,712, respectively
    
    $
    96,613
    
    
    $
    124,072Assets held for sale, net (1)
    
    
    21,205
    
    
    
    Cash and other
    
    
    1,686
    
    
    
    2,797Total assets
    
    $
    119,504
    
    
    $
    126,869Mortgage notes payable
    
    $
    66,999
    
    
    $
    83,468Mortgage notes payable to Operating Partnership
    
    
    10,275
    
    
    
    Other liabilities
    
    
    830
    
    
    
    1,296Total liabilities
    
    
    78,104
    
    
    
    84,764Members equity
    
    
    41,400
    
    
    
    42,105Total liabilities and members equity
    
    $
    119,504
    
    
    $
    126,869Operating Partnerships equity investment
    
    $
    20,772
    
    
    $
    21,320
 
 (1)
    
    Includes one community, originally containing 121
units, being converted into condominiums through a taxable
REIT subsidiary. Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,Income Statement Data
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004RevenueRental
    
    $
    2,720
    
    
    $
    2,690
    
    
    $
    8,081
    
    
    $
    7,868Other property revenues
    
    
    230
    
    
    
    213
    
    
    
    645
    
    
    
    600Total revenues
    
    
    2,950
    
    
    
    2,903
    
    
    
    8,726
    
    
    
    8,468ExpensesProperty operating and maintenance
    
    
    877
    
    
    
    806
    
    
    
    2,676
    
    
    
    2,643Depreciation and amortization
    
    
    656
    
    
    
    650
    
    
    
    1,964
    
    
    
    1,927Interest
    
    
    688
    
    
    
    688
    
    
    
    2,064
    
    
    
    1,970Total expenses
    
    
    2,221
    
    
    
    2,144
    
    
    
    6,704
    
    
    
    6,540Income from continuing operations
    
    
    729
    
    
    
    759
    
    
    
    2,022
    
    
    
    1,928Discontinued OperationsLoss from discontinued operations
    
    
    (23
    )
    
    
    (75
    )
    
    
    (119
    )
    
    
    (239
    )Gains on sales of real estate assets
    
    
    994
    
    
    
    
    
    
    
    1,849
    
    
    
    Loss on early extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    (273
    )
    
    
    Income (loss) from discontinued operations
    
    
    971
    
    
    
    (75
    )
    
    
    1,457
    
    
    
    (239
    )Net income
    
    $
    1,700
    
    
    $
    684
    
    
    $
    3,479
    
    
    $
    1,689Operating Partnerships share of net income
    
    $
    593
    
    
    $
    420
    
    
    $
    1,294
    
    
    $
    843
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POST
APARTMENT HOMES, L.P.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 For the three and nine months ended September 30, 2005, gains on sales of real estate
assets represent net gains of $994 and $1,849, respectively, from condominium sales at the
condominium conversion community held by one of the Property LLCs. A summary of revenues and
costs and expenses of condominium activities for the three and nine months ended September 30,
2005 was as follows:
 Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005Condominium revenues, net
    
    $
    4,383
    
    
    $
    8,566Condominium costs and expenses
    
    
    (3,389
    )
    
    
    (6,717
    )Gains on condominium sales
    
    $
    994
    
    
    $
    1,849
 At September 30, 2005, mortgage notes payable include a $49,999 mortgage note that bears
interest at 4.13%, requires monthly interest payments and annual principal payment of $1 through
2009. Thereafter, the note requires monthly principal and interest payments based on a 25-year
amortization schedule and matures in April 2034. The note is callable by the lender in May 2009
and on each successive fifth year anniversary of the note thereafter. The note is prepayable
without penalty in May 2008. The additional mortgage note payable totaling $17,000 bears
interest at a rate of 4.04% and matures in 2008.In March 2005, one of the Property LLCs elected to convert its apartment community into for-sale
condominiums. As a result of its decision to sell the community through the condominium
conversion process, the Property LLC prepaid its third party mortgage note payable of $16,392
through secured borrowings from the Operating Partnership. The Property LLC incurred debt
prepayment costs and expenses associated with the write-off of unamortized deferred financing
costs totaling $273 in March 2005. The mortgage note payable to the Operating Partnership has a
fixed rate component ($16,392) bearing interest at 4.28% and a variable rate component bearing
interest at LIBOR plus 1.90%. This note is repayable from the proceeds of condominium sales and
matures in February 2008.4.
    
    REAL ESTATE ACQUISITION AND DISPOSITION ACTIVITYAcquisition ActivityIn June 2005, the Operating Partnership acquired a 319-unit apartment community located in
suburban Charlotte, NC for approximately $38,240, including closing costs and the reimbursement
of a fee to terminate a loan commitment paid for by the seller. Additionally, the Operating
Partnership plans to spend up to approximately $1,100 to improve the community. The purchase
price of this community was allocated to the assets acquired based on their estimated fair
values.Disposition ActivityThe Operating Partnership classifies real estate assets as held for sale after the approval of
its investment committee and after the Operating Partnership has commenced an active program to
sell the assets. At September 30, 2005, the Operating Partnership had one apartment community,
originally containing 127 units, that is being converted into condominiums and certain tracts of
land classified as held for sale. These real estate assets are reflected in the accompanying
consolidated balance sheet at $9,221, which represents the lower of their depreciated cost or
fair value less costs to sell.Under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, the
operating results of real estate assets designated as held for sale are included in discontinued
operations in the consolidated statement of operations for all periods presented. Additionally,
gains or losses on the sale of these assets are included in discontinued operations. For the
three and nine months ended September 30, 2005, income from discontinued operations included the
results of operations of one condominium conversion community classified as held for sale at
September 30, 2005 as well as the operations of six communities sold in 2005 through their sale
dates and one condominium conversion community through its sell-out date. For the three and
nine months ended September 30, 2004, income from discontinued operations included the results
of operations of the community classified as held for sale at September 30, 2005, six apartment
communities sold in 2005, one condominium conversion community through its sell-out date in 2005
and eight apartment communities sold in 2004 through the earlier of September 30, 2004 or their
sale dates.
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##### Table of Contents



POST
APARTMENT HOMES, L.P.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 The revenues and expenses of these communities for the three and nine months ended September 30,
2005 and 2004 were as follows:
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenuesRental
    
    $
    1,381
    
    
    $
    7,200
    
    
    $
    13,220
    
    
    $
    34,704Other property revenues
    
    
    185
    
    
    
    668
    
    
    
    1,242
    
    
    
    3,070Total revenues
    
    
    1,566
    
    
    
    7,868
    
    
    
    14,462
    
    
    
    37,774ExpensesProperty operating and maintenance
(exclusive of items shown separately below)
    
    
    1,042
    
    
    
    3,360
    
    
    
    7,130
    
    
    
    16,332Depreciation
    
    
    
    
    
    
    1,491
    
    
    
    
    
    
    
    4,544Interest
    
    
    247
    
    
    
    1,057
    
    
    
    2,123
    
    
    
    4,394Minority interest in consolidated property partnerships
    
    
    
    
    
    
    (61
    )
    
    
    14
    
    
    
    (205
    )Asset impairment charge
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    626Total expenses
    
    
    1,289
    
    
    
    5,847
    
    
    
    9,267
    
    
    
    25,691Income from discontinued operations
    
    $
    277
    
    
    $
    2,021
    
    
    $
    5,195
    
    
    $
    12,083
 For the three months ended September 30, 2005, the Operating Partnership recognized net
gains in discontinued operations of $74,715 from the sale of one community, containing 1,738
units. The sales generated net proceeds of approximately $131,349, including $47,500 of
tax-exempt secured indebtedness assumed by the purchasers. For the nine months ended September
30, 2005, the Operating Partnership recognized net gains in discontinued operations of $124,425
from the sale of six communities, containing 3,047 units. The sales generated net proceeds of
approximately $229,249, including $81,560 of tax-exempt secured indebtedness assumed by the
purchasers.In addition, for the three and nine months ended September 30, 2005, gains on sales of real
estate assets included the net gains of $2,374 ($2,104 net of provision for income taxes) and
$15,886 ($15,233 net of provision for income taxes), respectively, from condominium sales at the
Operating Partnerships condominium conversion communities. A summary of revenues and costs and
expenses of condominium activities for the three and nine months ended September 30, 2005 was as
follows:
 Three months ended
    
    
    Nine months endedSeptember 30, 2005
    
    
    September 30, 2005Condominium revenues, net
    
    $
    10,900
    
    
    $
    46,270Condominium costs and expenses
    
    
    8,526
    
    
    
    30,384Gains on condominium sales,
before provision for income
taxes
    
    
    2,374
    
    
    
    15,886Provision for income taxes
    
    
    (270
    )
    
    
    (653
    )Gains on condominium sales,
net of provision for income
taxes
    
    $
    2,104
    
    
    $
    15,233
 For the nine months ended September 30, 2004, the Operating Partnership recognized net
gains from discontinued operations of $113,739 from the sale of eight communities containing
3,880 units and certain land parcels. These sales generated net proceeds of approximately
$242,962, including debt assumed by the purchasers of $104,325.5.
    
    PARTNERS EQUITYCommon Unit PurchasesIn the three and nine months ended September 30, 2005, the Company repurchased approximately 88
and 749 shares, respectively, of its common stock at an aggregate cost of $3,183 and $24,466,
respectively, under a 10b5-1 stock purchase plans, the latest of which will expire on November
30, 2005. These shares were purchased under a board of directors approved plan which provides
for aggregate common or preferred stock repurchases of up to $200,000 through December 31, 2006.
Correspondingly, the Operating Partnership repurchased the same number of common units at an
aggregate cost of $3,183 and $24,466, respectively.
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POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Computations of Earnings Per Common Unit
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Income (loss) from continuing operations available to common unitholders
(numerator):Income (loss) from continuing operations
    
    $
    1,995
    
    
    $
    (3,513
    )
    
    $
    2,317
    
    
    $
    (8,728
    )Less: Preferred unit distributions
    
    
    (1,909
    )
    
    
    (2,889
    )
    
    
    (5,728
    )
    
    
    (10,196
    )Less: Preferred unit redemption costs
    
    
    
    
    
    
    (1,810
    )
    
    
    
    
    
    
    (3,526
    )Income (loss) from continuing operations available to common unitholders
    
    $
    86
    
    
    $
    (8,212
    )
    
    $
    (3,411
    )
    
    $
    (22,450
    )Common units (denominator):Weighted average units outstanding  basic
    
    
    42,536
    
    
    
    42,433
    
    
    
    42,492
    
    
    
    42,457Incremental units from assumed conversion of stock options (1)
    
    
    441
    
    
    
    
    
    
    
    
    
    
    
    Weighted average units outstanding  diluted (1)
    
    
    42,977
    
    
    
    42,433
    
    
    
    42,492
    
    
    
    42,457
 
 (1)
    
    The potential dilution from the Companys outstanding stock options of 98 shares for
the three months ended September 30, 2004, and 293 and 67 shares, respectively, for the
nine months ended September 30, 2005 and 2004, were antidilutive to the loss from
continuing operations per share calculation. As such, the amounts were excluded from
weighted average shares for the period. 6.
    
    DERIVATIVE FINANCIAL INSTRUMENTSAt September 30, 2005, the Operating Partnership had an outstanding interest rate swap agreement
with a notional value of approximately $97,400 with a maturity date in 2009. The interest rate
swap agreement is included on the accompanying consolidated balance sheet at fair value. The
Operating Partnership records the changes in the fair value of this cash flow hedge as a change
in accumulated other comprehensive loss, a partners equity account, in the accompanying
consolidated balance sheet.At September 30, 2005, the Operating Partnership had an outstanding interest rate cap agreement
with a financial institution with a notional value of $28,495. The interest rate cap agreement
is a cash flow hedge that provides a fixed interest ceiling at 5% for the Operating
Partnerships variable rate, tax-exempt borrowings aggregating $28,495 at September 30, 2005.
The Operating Partnership is required to maintain the interest rate exposure protection under
the terms of the financing arrangements. The interest rate cap arrangement is included on the
accompanying balance sheet at fair value. At September 30, 2005, the difference between the
amortized costs of the interest rate cap arrangement and its fair value of $10 is included in
accumulated other comprehensive loss, a partners equity account. The original cost of
approximately $362 of the arrangements is being amortized as additional expense over its
five-year term.In May and August 2005, in connection with the sale of three communities discussed in note 4
above, the Operating Partnership sold its interest in interest rate cap agreements with notional
values of $81,560 for aggregate proceeds of $17 and realized losses of $547 and $955 in the
three and nine months ended September 30, 2005, respectively, that were included in the loss on
early extinguishment of indebtedness on the accompanying statement of operations. The
unrealized loss on these interest rate cap agreements was previously reflected in accumulated
other comprehensive income, a partners equity account. These interest rate cap agreements were
sold as the underlying hedged indebtedness was assumed by the purchaser in connection with the
sale of the related assets.A summary of comprehensive income for the three and nine months ended September 30, 2005 and
2004 is as follows:
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss)
    
    $
    77,245
    
    
    $
    (1,492
    )
    
    $
    143,950
    
    
    $
    112,966Change in derivative values
    
    
    2,823
    
    
    
    (1,587
    )
    
    
    4,763
    
    
    
    2,363Comprehensive income
    
    $
    80,068
    
    
    $
    (3,079
    )
    
    $
    148,713
    
    
    $
    115,329
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POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 7.
    
    SEGMENT INFORMATIONSegment DescriptionIn 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 apartment community 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
properties and other ancillary service and support operations are aggregated in the line item
other in the accompanying segment information. The segment information presented below
reflects the segment categories based on the lifecycle status of each community as of January 1,
2004. The segment information for the three and nine months ended September 30, 2004 has been
adjusted due to the restatement impact of reclassifying the operating results of the assets
designated as held for sale in 2004 and 2005 to discontinued operations under SFAS No. 144 (see
note 4).
 
    
    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 2004  communities which reached stabilized occupancy in
the prior year.
    
    Development and lease-up communities  those development 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. The Operating Partnership has no
communities in the development or lease-up stage for the periods presented.
    
    Acquired communities  those communities acquired in the current or prior year.
 Segment Performance Measure
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POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Segment Information
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004RevenuesFully stabilized communities
    
    $
    65,255
    
    
    $
    62,839
    
    
    $
    191,183
    
    
    $
    187,021Communities stabilized during 2004
    
    
    1,814
    
    
    
    1,719
    
    
    
    5,335
    
    
    
    5,308Acquired communities
    
    
    3,154
    
    
    
    2,157
    
    
    
    7,654
    
    
    
    2,362Other property segments
    
    
    5,784
    
    
    
    5,383
    
    
    
    16,405
    
    
    
    15,832Other
    
    
    64
    
    
    
    814
    
    
    
    196
    
    
    
    936Consolidated revenues
    
    $
    76,071
    
    
    $
    72,912
    
    
    $
    220,773
    
    
    $
    211,459Contribution to NOIFully stabilized communities
    
    $
    39,698
    
    
    $
    38,186
    
    
    $
    116,055
    
    
    $
    114,190Communities stabilized during 2004
    
    
    1,292
    
    
    
    1,169
    
    
    
    3,700
    
    
    
    3,778Acquired communities
    
    
    2,113
    
    
    
    1,544
    
    
    
    5,146
    
    
    
    1,692Other
    
    
    (1,170
    )
    
    
    (1,944
    )
    
    
    (4,164
    )
    
    
    (3,373
    )Consolidated property net operating income
    
    
    41,933
    
    
    
    38,955
    
    
    
    120,737
    
    
    
    116,287Interest income
    
    
    230
    
    
    
    246
    
    
    
    583
    
    
    
    639Other revenue
    
    
    64
    
    
    
    814
    
    
    
    196
    
    
    
    936Minority interest in consolidated property partnerships
    
    
    34
    
    
    
    106
    
    
    
    212
    
    
    
    538Depreciation
    
    
    (18,950
    )
    
    
    (20,371
    )
    
    
    (57,896
    )
    
    
    (59,683
    )Interest expense
    
    
    (14,455
    )
    
    
    (16,316
    )
    
    
    (45,340
    )
    
    
    (47,678
    )Amortization of deferred financing costs
    
    
    (991
    )
    
    
    (1,065
    )
    
    
    (3,707
    )
    
    
    (3,273
    )General and administrative
    
    
    (5,421
    )
    
    
    (6,018
    )
    
    
    (16,150
    )
    
    
    (16,137
    )Development costs and other
    
    
    (1,042
    )
    
    
    (284
    )
    
    
    (2,879
    )
    
    
    (1,200
    )Equity in income of unconsolidated real estate entities
    
    
    593
    
    
    
    420
    
    
    
    1,294
    
    
    
    843Gain on sale of technology investment
    
    
    
    
    
    
    
    
    
    
    5,267
    
    
    
    Income (loss) from continuing operations
    
    
    1,995
    
    
    
    (3,513
    )
    
    
    2,317
    
    
    
    (8,728
    )Income from discontinued operations
    
    
    75,250
    
    
    
    2,021
    
    
    
    141,633
    
    
    
    121,694Net income (loss)
    
    $
    77,245
    
    
    $
    (1,492
    )
    
    $
    143,950
    
    
    $
    112,966
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POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 8.
    
    SEVERANCE COSTSIn prior years, the Operating Partnership recorded severance charges associated with the
departure of certain executive officers of the Operating Partnership. Under certain of these
arrangements, the Operating Partnership is required to make certain payments and provide
specified benefits through 2013 and 2016, respectively. The following table summarizes the
activity relating to aggregate severance charges for the nine months ended September 30, 2005
and 2004:
 Nine months endedSeptember 30,2005
    
    
    2004Accrued severance charges, beginning of period
    
    $
    15,317
    
    
    $
    19,171Payments for period
    
    
    (2,095
    )
    
    
    (2,333
    )Interest accretion
    
    
    679
    
    
    
    753Accrued severance charges, end of period
    
    $
    13,901
    
    
    $
    17,591
 9.
    
    SUPPLEMENTAL CASH FLOW INFORMATIONInterest paid (including capitalized amounts of $1,553 and $787 for the nine months ended
September 30, 2005 and 2004, respectively), aggregated $45,288 and $47,540 for the nine months
ended September 30, 2005 and 2004, respectively.Non-cash investing and financing activities for the nine months ended September 30, 2005 and
2004 were as follows:During the nine months ended September 30, 2005, the Operating Partnership sold three apartment
communities subject to $81,560 of mortgage indebtedness assumed by the purchasers. This
mortgage debt assumed by the purchasers was excluded from the cash flow statement as a non-cash
transaction (see note 4).During the nine months ended September 30, 2005, the Operating Partnerships derivative
financial instruments (see note 6) increased in value causing a decrease in accounts payable and
accrued expenses and a corresponding increase in partners equity of $4,763. During the nine
months ended September 30, 2004, the Operating Partnerships derivative financial instruments
increased in value causing a decrease in accounts payable and accrued expenses and a
corresponding increase in partners equity of $2,363.The Operating Partnership committed to distribute $19,190 and $19,090 for the quarters ended
September 30, 2005 and 2004, respectively. These distributions were not reflected in the
statement of cash flows as of September 30, 2005 and 2004.In June 2004, the Operating Partnership acquired an apartment community for cash and the
assumption of mortgage indebtedness with an estimated fair value of $49,694. Also, in June
2004, the Operating Partnership sold certain apartment communities subject to $104,325 of
mortgage indebtedness assumed by the purchasers. These transactions involving mortgage
indebtedness were excluded from the statement of cash flows as non-cash transactions.
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POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 10.
    
    STOCK-BASED COMPENSATION PLANIn the three and nine months ended September 30, 2005, the Company granted approximately 6 and
37 shares, respectively, of restricted stock to Company officers, directors and employees of
which approximately 6 shares were granted to the Companys non-executive Chairman of the Board.
The restricted shares generally vest ratably over periods not exceeding three years. The total
value of the restricted share grants of $1,306 for the nine months ended September 30, 2005 was
initially reflected in partners equity reduced by non-amortized deferred compensation expenses.
Such deferred compensation is amortized ratably into compensation expense over the three year
vesting period.Additionally, in the three and nine months ended September 30, 2005, the Company granted stock
options to purchase approximately 5 and 259 shares, respectively, of Company common stock to
Company officers and directors, of which 50 stock options were granted to the Companys
non-executive Chairman of the Board. As discussed in note 1, the Company expenses the estimated
fair value of stock options over their three year vesting periods.11.
    
    INCOME TAXESIncome or losses of the Operating Partnership are allocated to the partners of the Operating
Partnership for inclusion in their respective income tax returns. Accordingly, no provisions or
benefit for income taxes has been made in the accompanying financial statements, except to the
extent that taxable income was earned through the Operating Partnerships taxable REIT
subsidiaries as described below. 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 income, as defined in the Code, to its shareholders and satisfy certain other
requirements. The Operating Partnership intends to make sufficient cash distributions to the
Company to enable it to meet its annual REIT distribution requirements.The Operating Partnership utilizes taxable REIT subsidiaries to perform such non-REIT activities
as asset and property management, for-sale housing (condominiums) conversions and sales, leasing
and landscaping services for third parties. These taxable REIT subsidiaries are subject to
federal, state and local income taxes. For the nine months ended September 30, 2005, the
Operating Partnership estimated it would utilize approximately $7,000 of income tax net
operating loss carry-forwards to offset its federal taxable income generated by its taxable REIT
subsidiaries (primarily as a result of condominium sale gains). Through September 30, 2005, the
Operating Partnership estimated that its taxable REIT subsidiaries would be subject to federal
alternative minimum taxes and applicable state income taxes and has recorded an income tax
provision of approximately $270 and $653 in the three and nine months ended September 30, 2005,
respectively. At September 30, 2005, the Operating Partnerships taxable REIT subsidiaries had
consolidated federal income tax net operating loss carry-forwards totaling approximately $2,000.
These tax loss carry-forwards begin to expire in 2019. At September 30, 2005, management had
established a valuation allowance against the deferred tax asset associated with these net
operating loss carry-forwards due to the historical operating losses of these subsidiaries. The
tax benefits associated with such net operating loss carry-forwards may be recognized in future
periods, if the taxable REIT subsidiaries generate sufficient taxable income to utilize such
amounts or if the Operating Partnership determines that it is more likely than not that the
related deferred tax assets are realizable.12.
    
    LEGAL PROCEEDINGSOn May 13, 2004, an alleged Company shareholder filed a purported pro se derivative and direct
action in the Superior Court of Fulton County, Georgia, against the Company, certain members of
the Companys board of directors, and certain of its executive officers. The case was removed to
the United States District Court for the Northern District of Georgia on May 21, 2004. The
complaint alleged, among other things, breaches of fiduciary duties, fraud, corporate waste,
withholding certain documents from shareholder inspection and certain securities laws claims.
The complaint requested various types of relief, such as injunctive relief and damages and
demanded production of certain Company records. Because the Company believed the allegations
were wholly without merit, the Company moved to dismiss the litigation. On April 20, 2005, the
court entered an order dismissing all claims without prejudice, save a claim seeking production
of certain Company records, upon which the Court declined to rule, concluding it lacked
jurisdiction to do so, and ordered the claim remanded to the Superior Court of Fulton County.
Since that time, the Company has moved for its attorney fees in the United States District
Court, arguing that the plaintiff frivolously pursued the litigation, and the plaintiff has
moved for entry of judgment in Superior Court, which the Company has vigorously contested.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
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POST APARTMENT HOMES, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 Superior Court of Fulton County, Atlanta, Georgia on May 2, 2003 and alleged various breaches of
fiduciary duties by the board of directors of the Company and sought, among other relief, the
disclosure of certain information by the defendants. This complaint also sought to compel the
defendants to undertake various actions to facilitate a sale of the Company. On May 7, 2003, the
plaintiff made a request for voluntary expedited discovery. On May 13, 2003, the Company
received notice that a similar shareholder derivative and purported class action lawsuit was
filed against certain members of the board of directors of the Company and against the Company
as a nominal defendant. The complaint was filed in the Superior Court of Fulton County, Atlanta,
Georgia on May 12, 2003 and alleged breaches of fiduciary duties, abuse of control and corporate
waste by the defendants. The plaintiff sought monetary damages and, as appropriate, injunctive
relief. These lawsuits were settled, and in October 2004, the Superior Court of Fulton County
entered an order approving the settlement and related orders dismissing the litigation. The
estimated legal and settlement costs, not covered by insurance, associated with the expected
resolution of the lawsuits were recorded in the second quarter of 2003 as a component of a proxy
contest and related costs charge. An alleged Company shareholder, who had filed a separate
purported derivative and direct action against the Company and certain of its officers and
directors (which is described in the paragraph above), has appealed from the Superior Courts
orders approving the settlement, overruling the shareholders objection to the settlement
denying the shareholders motion to intervene, and dismissing the litigation with prejudice. The
Company is contesting the alleged shareholders appeal vigorously.The Company is involved in various other legal proceedings incidental to its business from time
to time, most of which are expected to be covered by liability or other insurance. Management of
the Company believes that any resolution of pending proceedings or liability to the Company
which may arise as a result of these proceedings will not have a material adverse effect on the
Companys results of operations or financial position.13.
    
    SALE OF TECHNOLOGY INVESTMENTIn February 2005, the Operating Partnership sold its investment in Rent.com, a privately-held
internet leasing company, and recognized a gain of $5,267.
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Company Overview
       -35-




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MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 TM
   Disclosure Regarding Forward-Looking Statements
  
    
    The success of the Companys business strategies described on pages 2-3 of the
Companys Annual Report on Form 10-K for the year ended December 31, 2004;
    
    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 multifamily rental and for-sale housing and for its apartment communities and
competing for-sale housing in markets where the Company is completing condominium
conversions or developing new condominiums;
    
    The uncertainties associated with the Companys real estate development,
including actual costs exceeding the Companys budgets or development periods exceeding
expectations;
    
    Uncertainties associated with the timing and amount of apartment community
sales and the resulting gains/losses associated with such sales;
    
    Uncertainties associated with the Companys expansion into the condominium
conversion and for-sale housing business;
    
    Conditions affecting ownership of residential real estate and general
conditions in the multi-family residential real estate market;
 -36-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
    
    The effects of changes in accounting policies and other regulatory matters
detailed in the Companys filings with the Securities and Exchange Commission and
uncertainties of litigation;
    
    The Companys ability to continue to qualify as a REIT under the Internal
Revenue Code; and
    
    Other factors, including the risk factors discussed on pages 7 through 14 of
the Companys Annual Report on Form 10-K for the year ended December 31, 2004.
  Critical Accounting Policies
    Results of Operations
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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  All Operating Communities
  Three months ended
    
    
    
    
    
    
    Nine months endedSeptember 30,
    
    
    
    
    
    
    September 30,2005
    
    
    2004
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    % ChangeRental and other property revenuesFully stabilized communities (1)
    
    $
    65,255
    
    
    $
    62,839
    
    
    
    3.8
    %
    
    $
    191,183
    
    
    $
    187,021
    
    
    
    2.2
    %Communities stabilized in 2004
    
    
    1,814
    
    
    
    1,719
    
    
    
    5.5
    %
    
    
    5,335
    
    
    
    5,308
    
    
    
    0.5
    %Acquired communities (2)
    
    
    3,154
    
    
    
    2,157
    
    
    
    46.2
    %
    
    
    7,654
    
    
    
    2,362
    
    
    
    222.40
    %Other property segments (3)
    
    
    5,784
    
    
    
    5,383
    
    
    
    7.4
    %
    
    
    16,405
    
    
    
    15,832
    
    
    
    3.6
    %76,007
    
    
    
    72,098
    
    
    
    5.4
    %
    
    
    220,577
    
    
    
    210,523
    
    
    
    4.8
    %Property operating and maintenance
expenses (exclusive of
depreciation and amortization)Fully stabilized communities (1)
    
    
    25,557
    
    
    
    24,653
    
    
    
    3.7
    %
    
    
    75,128
    
    
    
    72,831
    
    
    
    3.2
    %Communities stabilized in 2004
    
    
    522
    
    
    
    550
    
    
    
    (5.1
    )%
    
    
    1,635
    
    
    
    1,530
    
    
    
    6.9
    %Acquired communities (2)
    
    
    1,041
    
    
    
    613
    
    
    
    69.8
    %
    
    
    2,508
    
    
    
    670
    
    
    
    274.3
    %Other expense (4)
    
    
    6,954
    
    
    
    7,327
    
    
    
    (5.1
    )%
    
    
    20,569
    
    
    
    19,205
    
    
    
    7.1
    %34,074
    
    
    
    33,143
    
    
    
    2.8
    %
    
    
    99,840
    
    
    
    94,236
    
    
    
    5.9
    %Property net operating income(5)
    
    $
    41,933
    
    
    $
    38,955
    
    
    
    7.6
    %
    
    $
    120,737
    
    
    $
    116,287
    
    
    
    3.8
    %Capital Expenditures(6)(7)Recurring capital expenditures:Carpet
    
    
    938
    
    
    
    781
    
    
    
    20.1
    %
    
    
    2,384
    
    
    
    1,945
    
    
    
    22.6
    %Other
    
    
    1,319
    
    
    
    1,217
    
    
    
    8.4
    %
    
    
    4,051
    
    
    
    4,033
    
    
    
    0.4
    %Total
    
    $
    2,257
    
    
    $
    1,998
    
    
    
    13.0
    %
    
    $
    6,435
    
    
    $
    5,978
    
    
    
    7.6
    %Non-recurring capital expenditures
    
    $
    604
    
    
    $
    711
    
    
    
    (15.0
    )%
    
    $
    2,591
    
    
    $
    2,829
    
    
    
    (8.4
    )%Average apartment units in service
    
    
    21,041
    
    
    
    20,722
    
    
    
    1.5
    %
    
    
    20,868
    
    
    
    20,389
    
    
    
    2.3
    %
 
 (1)
    
    Communities which reached stabilization prior to January 1, 2004.(2)
    
    Communities acquired subsequent to January 1, 2004.(3)
    
    Other property segment revenues include revenue from commercial properties,
from furnished apartment rentals above the unfurnished rental rates and any
property revenue not directly related to property operations. Other property
segment revenues exclude other corporate revenues of $64 and $814 for the three
months ended and $196 and $936 for the nine months ended September 30, 2005 and
2004, respectively.(4)
    
    Other expenses includes certain indirect central office operating expenses
related to management, grounds maintenance, and costs associated with commercial
properties and furnished apartment rentals. -38-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 (5)
    
    A reconciliation of property net operating income to GAAP net income is
detailed below. Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Total same store NOI
    
    $
    39,698
    
    
    $
    38,186
    
    
    $
    116,055
    
    
    $
    114,190Property NOI from other operating segments
    
    
    2,235
    
    
    
    769
    
    
    
    4,682
    
    
    
    2,097Consolidated property NOI
    
    
    41,933
    
    
    
    38,955
    
    
    
    120,737
    
    
    
    116,287Add (subtract):Other revenues
    
    
    64
    
    
    
    814
    
    
    
    196
    
    
    
    936Interest income
    
    
    230
    
    
    
    246
    
    
    
    583
    
    
    
    639Minority interest in consolidated property partnerships
    
    
    34
    
    
    
    106
    
    
    
    212
    
    
    
    538Depreciation
    
    
    (18,950
    )
    
    
    (20,371
    )
    
    
    (57,896
    )
    
    
    (59,683
    )Interest expense
    
    
    (14,455
    )
    
    
    (16,316
    )
    
    
    (45,340
    )
    
    
    (47,678
    )Amortization of deferred financing costs
    
    
    (991
    )
    
    
    (1,065
    )
    
    
    (3,707
    )
    
    
    (3,273
    )General and administrative
    
    
    (5,421
    )
    
    
    (6,018
    )
    
    
    (16,150
    )
    
    
    (16,137
    )Development costs and other expenses
    
    
    (1,042
    )
    
    
    (284
    )
    
    
    (2,879
    )
    
    
    (1,200
    )Equity in income of unconsolidated entities
    
    
    593
    
    
    
    420
    
    
    
    1,294
    
    
    
    843Gain on sale of technology investment
    
    
    
    
    
    
    
    
    
    
    5,267
    
    
    
    Minority interest of preferred unitholders
    
    
    
    
    
    
    (980
    )
    
    
    
    
    
    
    (3,780
    )Minority interest of common unitholders
    
    
    (12
    )
    
    
    499
    
    
    
    188
    
    
    
    1,463Income (loss) from continuing operations
    
    
    1,983
    
    
    
    (3,994
    )
    
    
    2,505
    
    
    
    (11,045
    )Income from discontinued operations
    
    
    71,258
    
    
    
    2,201
    
    
    
    133,857
    
    
    
    113,772Net income (loss)
    
    $
    73,241
    
    
    $
    (1,793
    )
    
    $
    136,362
    
    
    $
    102,727
 
 (6)
    
    In addition to those expenses which relate to property operations, the
Company incurs recurring and non-recurring expenditures relating to acquiring and
developing new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset, all of which are
capitalized. Recurring capital expenditures are those that are generally expected
to be incurred on an annual basis. Non-recurring capital expenditures are those
that generally occur less frequently than on an annual basis.(7)
    
    A reconciliation of property capital expenditures from continuing operations
to total recurring and non-recurring capital expenditures as presented in the
consolidated statements of cash flows under GAAP is detailed below. Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Recurring capital expendituresContinuing operations
    
    $
    2,257
    
    
    $
    1,998
    
    
    $
    6,435
    
    
    $
    5,978Discontinued operations
    
    
    93
    
    
    
    422
    
    
    
    737
    
    
    
    1,635Total recurring capital expenditures per statements of cash flows
    
    $
    2,350
    
    
    $
    2,420
    
    
    $
    7,172
    
    
    $
    7,613Non-recurring capital expendituresContinuing operations
    
    $
    604
    
    
    $
    711
    
    
    $
    2,591
    
    
    $
    2,829Discontinued operations
    
    
    3
    
    
    
    347
    
    
    
    45
    
    
    
    775Total non-recurring capital expenditures per statements of cash flows
    
    $
    607
    
    
    $
    1,058
    
    
    $
    2,636
    
    
    $
    3,604
 -39-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Stabilized Communities
  Three months
    
    
    
    
    
    
    Nine monthsended
    
    
    
    
    
    
    endedSeptember 30,
    
    
    
    
    
    
    September 30,2005
    
    
    2004
    
    
    % Change
    
    
    2005
    
    
    2004
    
    
    % ChangeRental and other revenues
    
    $
    65,255
    
    
    $
    62,839
    
    
    
    3.8
    %
    
    $
    191,183
    
    
    $
    187,021
    
    
    
    2.2
    %Property operating and maintenance expenses (excluding depreciation and amortization)
    
    
    25,557
    
    
    
    24,653
    
    
    
    3.7
    %
    
    
    75,128
    
    
    
    72,831
    
    
    
    3.2
    %Same store net operating income (1)
    
    $
    39,698
    
    
    $
    38,186
    
    
    
    4.0
    %
    
    $
    116,055
    
    
    $
    114,190
    
    
    
    1.6
    %Capital expenditures (2)RecurringCarpet
    
    $
    836
    
    
    $
    721
    
    
    
    16.0
    %
    
    $
    2,095
    
    
    $
    1,884
    
    
    
    11.2
    %Other
    
    
    1,232
    
    
    
    1,195
    
    
    
    3.1
    %
    
    
    3,870
    
    
    
    3,981
    
    
    
    (2.8
    )%Total recurring
    
    
    2,068
    
    
    
    1,916
    
    
    
    7.9
    %
    
    
    5,965
    
    
    
    5,865
    
    
    
    1.7
    %Non-recurring
    
    
    532
    
    
    
    655
    
    
    
    (18.8
    )%
    
    
    1,865
    
    
    
    2,616
    
    
    
    (28.7
    )%Total capital expenditures (A)
    
    $
    2,600
    
    
    $
    2,571
    
    
    
    1.1
    %
    
    $
    7,830
    
    
    $
    8,481
    
    
    
    (7.7
    )%Total capital expenditures per unit (A÷20,024 units)
    
    $
    130
    
    
    $
    128
    
    
    
    1.6
    %
    
    $
    391
    
    
    $
    424
    
    
    
    (7.8
    )%Average economic occupancy (3)
    
    
    95.1
    %
    
    
    94.4
    %
    
    
    0.7
    %
    
    
    94.1
    %
    
    
    93.6
    %
    
    
    0.5
    %Average monthly rental rate per unit (4)
    
    $
    1,059
    
    
    $
    1,035
    
    
    
    2.3
    %
    
    $
    1,051
    
    
    $
    1,034
    
    
    
    1.6
    %
 
 (1)
    
    Net operating income of stabilized communities is a supplemental non-GAAP financial
measure. See note 7 to the consolidated financial statements for a reconciliation of net
operating income for stabilized communities to GAAP net income.(2)
    
    A reconciliation of these segment components of property capital expenditures to total
recurring and non-recurring capital expenditures as presented in the consolidated
statements of cash flows prepared under GAAP is detailed below. Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Recurring capital expenditures by operating segment
Same store
    
    $
    2,068
    
    
    $
    1,916
    
    
    $
    5,965
    
    
    $
    5,865Partially stabilized
    
    
    4
    
    
    
    3
    
    
    
    10
    
    
    
    15Construction and lease-up
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other segments
    
    
    278
    
    
    
    501
    
    
    
    1,197
    
    
    
    1,733Total recurring capital expenditures per statements of cash flows
    
    $
    2,350
    
    
    $
    2,420
    
    
    $
    7,172
    
    
    $
    7,613Non-recurring capital expenditures by operating segment
Same store
    
    $
    532
    
    
    $
    655
    
    
    $
    1,865
    
    
    $
    2,616Partially stabilized
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Construction and lease-up
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other segments
    
    
    75
    
    
    
    403
    
    
    
    771
    
    
    
    988Total non-recurring capital expenditures per statements of cash flows
    
    $
    607
    
    
    $
    1,058
    
    
    $
    2,636
    
    
    $
    3,604
 
 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 economic occupancy is defined as gross potential rent less vacancy losses, model
expenses and bad debt expenses divided by gross potential rent for the period, expressed
as a percentage. Gross potential rent is defined as the sum of the gross actual rental
rates for leased units and the anticipated rental rates for unoccupied units. The
calculation of average economic occupancy does not include a deduction for net concessions
and employee discounts. Average economic occupancy including these amounts would have
been 94.6% and 93.8% for the three months ended and 93.5% and 93.2% for the nine months
ended September 30, 2005 and 2004, respectively. For the three months ended September 30,
2005 and 2004, net concessions were $236 and $243, respectively, and employee discounts
were $108 and $111, respectively. For the nine months ended September 30, 2005 and 2004,
net concessions were $848 and $442, respectively, and employee discounts were $325 and
$341, respectively.(4)
    
    Average monthly rental rate is defined as the average of the gross actual rental rates
for leased units and the average of the anticipated rental rates for unoccupied units,
divided by total units. -40-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Comparison of Three Months Ended September 30, 2005 to Three Months Ended September 30, 2004
         -41-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Stabilized Communities
   Comparison of Nine Months Ended September 30, 2005 to Nine Months Ended September 30, 2004
    -42-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
        Stabilized Communities
  -43-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Discontinued Operations
   Outlook
    -44-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    Liquidity and Capital Resources
        -45-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
      Long-term Debt Issuances and Retirements
     -46-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
   Stock Repurchase Program
   Capitalization of Fixed Assets and Community Improvements
    -47-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004New community development and acquisition activity(1)
    
    $
    11,477
    
    
    $
    37,249
    
    
    $
    104,874
    
    
    $
    37,542Non-recurring capital expendituresRevenue generating additions and improvements (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26Other community additions and improvements (3)
    
    
    607
    
    
    
    1,058
    
    
    
    2,636
    
    
    
    3,604Recurring capital expendituresCarpet replacements and other community additions
and improvements (4)
    
    
    2,350
    
    
    
    2,420
    
    
    
    7,172
    
    
    
    7,613Corporate additions and improvements
    
    
    177
    
    
    
    265
    
    
    
    1,155
    
    
    
    553$
    14,611
    
    
    $
    40,992
    
    
    $
    115,837
    
    
    $
    49,338Other DataCapitalized interest
    
    $
    770
    
    
    $
    287
    
    
    $
    1,553
    
    
    $
    787Capitalized development costs and fees (5)
    
    $
    316
    
    
    $
    249
    
    
    $
    882
    
    
    $
    748
 
 (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. Current Development Activity
  Estimated
    
    
    Amount
    
    
    
    
    
    
    
    
    
    
    EstimatedConstruction
    
    
    Spent
    
    
    Quarter of
    
    
    Quarter of
    
    
    Quarter ofNumber of
    
    
    Cost
    
    
    as of
    
    
    Construction
    
    
    First Units
    
    
    StabilizedMetropolitan Area
    
    Units
    
    
    ($ in millions)
    
    
    09/30/2005
    
    
    Start
    
    
    Available
    
    
    Occupancy (1)Construction/Lease-up
CommunitiesWashington D.C.Post CarlyleTM 
Apartment and Condominiums (2)
    
    
    350
    
    
    $
    98
    
    
    $
    39
    
    
    
    4Q 2004
    
    
    
    2Q 2006
    
    
    
    2Q 2007Construction/Lease-Up Communities
    
    
    350
    
    
    $
    98
    
    
    $
    39
 
 (1)
    
    The Company defines stabilized occupancy as the earlier to occur of (i) the
attainment of 95% physical occupancy on the first day of any month or (ii) one year
after completion of construction.(2)
    
    The condominium component of the project, consisting of 145 units, is being developed
in a majority owned joint venture with a Washington D.C. based developer. As of October
25, 2005, the Company has 71 units under contract for sale upon completion and delivery
of the units. The first condominium units at this project are expected to be delivered
in late 2006. There can be no assurance that condominium units under contract will
close. Inflation
  -48-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Funds from Operations
     Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income (loss) available to common shareholders
    
    $
    71,332
    
    
    $
    (5,512
    )
    
    $
    130,634
    
    
    $
    92,785Minority interest of common unitholders  continuing operations
    
    
    12
    
    
    
    (499
    )
    
    
    (188
    )
    
    
    (1,463
    )Minority interest in discontinued operations (1)
    
    
    3,992
    
    
    
    (180
    )
    
    
    7,775
    
    
    
    7,922Depreciation on wholly-owned real estate assets, net (2)
    
    
    18,199
    
    
    
    21,035
    
    
    
    55,584
    
    
    
    61,180Depreciation on real estate assets held in unconsolidated entities
    
    
    224
    
    
    
    332
    
    
    
    745
    
    
    
    993Gains on sales of real estate assets, net of provision for income taxes  discontinued operations
    
    
    (76,819
    )
    
    
    
    
    
    
    (139,658
    )
    
    
    (113,739
    )Incremental gains on condominium sales, net of provision for income taxes (3)
    
    
    1,497
    
    
    
    
    
    
    
    7,827
    
    
    
    Gains on sales of real estate assets  unconsolidated entities
    
    
    (246
    )
    
    
    
    
    
    
    (445
    )
    
    
    Incremental gains on condominium sales  unconsolidated entities (3)
    
    
    258
    
    
    
    
    
    
    
    291
    
    
    
    Funds from operations available to common shareholders
and unitholders(4)
    
    $
    18,449
    
    
    $
    15,176
    
    
    $
    62,565
    
    
    $
    47,678Cash flow provided by (used in):Operating activities
    
    $
    33,000
    
    
    $
    29,024
    
    
    $
    83,648
    
    
    $
    87,524Investing activities
    
    $
    84,291
    
    
    $
    (4,871
    )
    
    $
    74,675
    
    
    $
    140,338Financing activities
    
    $
    (118,125
    )
    
    $
    (76,442
    )
    
    $
    (155,111
    )
    
    $
    (226,194
    )Weighted average shares outstanding  basic
    
    
    40,372
    
    
    
    39,892
    
    
    
    40,157
    
    
    
    39,694Weighted average shares and units outstanding  basic
    
    
    42,536
    
    
    
    42,433
    
    
    
    42,492
    
    
    
    42,457Weighted average shares outstanding  diluted (5)
    
    
    40,813
    
    
    
    39,990
    
    
    
    40,451
    
    
    
    39,761Weighted average shares and units outstanding  diluted (5)
    
    
    42,977
    
    
    
    42,531
    
    
    
    42,785
    
    
    
    42,524
 
 (1)
    
    Represents the minority interest in earnings and gains (losses) on properties held for sale
and sold reported as discontinued operations for the periods presented.(2)
    
    Depreciation on wholly-owned real estate assets is net of the minority interest portion of
depreciation in consolidated entities.(3)
    
    The Company recognizes incremental gains on condominium sales in FFO, net of provision for
income taxes to the extent that net sales proceeds from the sale of condominium units exceeds
the greater of their fair value or net book value as of the date the property is acquired by
its taxable REIT subsidiary.(4)
    
    Funds from operations for the three and nine months ended September 30, 2005 include a loss
of $1,846 and $3,220, respectively from the early extinguishment of debt associated with asset
sales, and for the nine months ended September 30, 2005. FFO includes a gain of $5,267 on the
sale of a technology investment. Funds from operations for the nine months ended September
30, 2004 include a $626 impairment charge. Funds from operations for the three and nine
months ended September 30, 2004 include a reduction for preferred stock and unit redemption
costs of $1,810 and $3,526, respectively.(5)
    
    Diluted weighted average shares and units for the three months ended September 30, 2005 and
2004 include 441 and 98 shares and units, respectively. Diluted weighted average shares and
units for the nine months ended September 30, 2005 and 2004 include 293 and 67 shares and
units, respectively. Such diluted securities were antidilutive to the income (loss)
computations in the three months ended September 30, 2004 and the nine months ended September
30, 2005 and 2004 under generally accepted accounting principles. -49-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   
    
    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 appropriately 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.
   ExpectedAverage
    
    
    Average
    
    
    SettlementInterest Rate Derivatives
    
    Notional Amount
    
    
    Pay Rate/Cap Rate
    
    
    Receive Rate
    
    
    Date
    
    
    Fair ValueAsset (Liab.)Interest Rate Swap
Variable to fixed
    
    $104,000 amortizing
    
    
    
    
    
    1 month LIBOR
    
    
    7/31/09
    
    
    $
    (5,097
    )to $90,270Interest Rate Cap
    
    $
    28,495
    
    
    
    
    
    
    
    
    
    
    
    2/01/08
    
    
    
    10$
    (5,087
    )
   
 ITEM 4. CONTROLS AND PROCEDURES
   -50-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
    -51-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 (a)
    
    through (b)  None(c)
    
    The following table summarizes the Companys purchases of its equity securities
in the three months ended September 30, 2005 (in thousands, except per share amounts).
 ApproximateTotal Number of
    
    
    Dollar Value ofShares Purchased
    
    
    Shares that Mayas Part of Publicly
    
    
    Yet Be PurchasedTotal Number of
    
    
    Average Price
    
    
    Announced Plans
    
    
    Under the PlansPeriod
    
    Shares Purchased
    
    
    Paid Per Share
    
    
    or Programs
    
    
    or Programs(1)July 1, 2005 to
July 31, 2005
    
    
    38
    
    
    $
    36.08
    
    
    
    38
    
    
    $
    177,360August 1, 2005 to
August 31, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    177,360September 1, 2005 to
September 30, 2005
    
    
    50
    
    
    
    36.38
    
    
    
    50
    
    
    $
    175,534Total
    
    
    88
    
    
    $
    36.25
    
    
    
    88
    
    
    $
    175,534
 
 (1)
    
    In the fourth quarter of 2004, the Companys board of directors
approved a stock repurchase program under which the Company may
repurchase up to $200,000 of common or preferred stock through
December 31, 2006. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 ITEM 5. OTHER INFORMATION
  -52-




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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 ITEM 6. EXHIBITS
  (a)
    
    Exhibits3.1(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, as further
amended effective May 27, 2004.4.1(e)
    
    Indenture between the Company and SunTrust Bank, as Trustee.4.2(e)
    
    First Supplemental Indenture to the Indenture between the Company and SunTrust Bank,
as Trustee.10.1(f)
    
    Deferred Compensation Plan for Directors and Employees as Amended and Restated
effective as of January 1, 2005.11.1(g)
    
    Statement Regarding Computation of Per Share Earnings.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, as 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, as 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.
 
 (a)
    
    Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No.
33-61936), as amended, of the Company and incorporated herein by reference.(b)
    
    Filed as an exhibit to the Annual Report on Form 10-K of the Registrants for the
year ended December 31, 2002 and incorporated herein by reference.(c)
    
    Filed as an exhibit of the Quarterly Report on Form 10-Q of the Registrants for the
quarter ended September 30, 1999 and incorporated herein by reference.(d)
    
    Filed as Appendix A to the 2004 proxy statement and incorporated herein by reference.(e)
    
    Filed as an exhibit to the Registration Statement on Form S-3 (SEC File No.
333-42884), as amended, of the Company and incorporated herein by reference.(f)
    
    Filed as an exhibit to the Current Report on Form 8-K of the Registrants filed
August 15, 2005 and incorporated herein by reference.(g)
    
    The information required by this exhibit is included in note 5 to the consolidated
financial statements and incorporated herein by reference. -53-




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##### Table of Contents



SIGNATURES
  POST PROPERTIES, INC.November 9, 2005
    By
    /s/ David P. StockertDavid P. StockertPresident and Chief Executive Officer November 9, 2005

    By
    /s/ Christopher J. PapaChristopher J. PapaExecutive Vice President and Chief Financial Officer November 9, 2005
    By
    /s/ Arthur J. QuirkArthur J. QuirkSenior Vice President and Chief Accounting Officer -54-




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##### Table of Contents



SIGNATURES
  POST APARTMENT HOMES, L.P.By:
    Post GP Holdings, Inc., its sole general partner November 9, 2005
    By
    /s/ David P. StockertDavid P. StockertPresident and Chief Executive Officer November 9, 2005
    By
    /s/ Christopher J. PapaChristopher J. PapaExecutive Vice President and Chief Financial Officer November 9, 2005
    By
    /s/ Arthur J. QuirkArthur J. QuirkSenior Vice President and Chief Accounting Officer -55-




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##### Table of Contents



EXHIBIT INDEX
 (a)
    
    Exhibits3.1(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, as further
amended effective May 27, 2004.4.1(e)
    
    Indenture between the Company and SunTrust Bank, as Trustee.4.2(e)
    
    First Supplemental Indenture to the Indenture between the Company and SunTrust Bank,
as Trustee.10.1(f)
    
    Deferred Compensation Plan for Directors and Employees as Amended and Restated
effective as of January 1, 2005.11.1(g)
    
    Statement Regarding Computation of Per Share Earnings.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, as 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, as 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.
 
 (a)
    
    Filed as an exhibit to the Registration Statement on Form S-11 (SEC File No.
33-61936), as amended, of the Company and incorporated herein by reference.(b)
    
    Filed as an exhibit to the Annual Report on Form 10-K of the Registrants for the
year ended December 31, 2002 and incorporated herein by reference.(c)
    
    Filed as an exhibit of the Quarterly Report on Form 10-Q of the Registrants for the
quarter ended September 30, 1999 and incorporated herein by reference.(d)
    
    Filed as Appendix A to the 2004 proxy statement and incorporated herein by reference.(e)
    
    Filed as an exhibit to the Registration Statement on Form S-3 (SEC File No.
333-42884), as amended, of the Company and incorporated herein by reference.(f)
    
    Filed as an exhibit to the Current Report on Form 8-K of the Registrants filed
August 15, 2005 and incorporated herein by reference.(g)
    
    The information required by this exhibit is included in note 5 to the consolidated
financial statements and incorporated herein by reference. -56-