10-K 1 pps-10k_20151231.htm 10-K pps-10k_20151231.htm

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-K

x

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

SECURITIES EXCHANGE ACT OF 1934

For fiscal year ended December 31, 2015

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 number 1-12080

Commission file number 0-28226

POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.

(Exact name of registrants as specified in their charters)

 

Georgia

 

58-1550675

Georgia

 

58-2053632

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327

(Address of principal executive office – zip code)

(404) 846-5000

(Registrant’s telephone number, including area code)

 

 

Securities registered pursuant to section 12(b) of the Act:

 

Title of each class

 

Name of Each Exchange

on Which Registered

Common Stock, $.01 par value

 

New York Stock Exchange

8 ½% Series A Cumulative

Redeemable Preferred Shares, $.01 par value

 

New York Stock Exchange

 

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

 

Title of each class

 

Name of Each Exchange

on Which Registered

None

 

None

 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Post Properties, Inc.        Yes  x         No  o

 

Post Apartment Homes, L.P.        Yes  x         No  o

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Post Properties, Inc.        Yes  o         No  x

 

Post Apartment Homes, L.P.        Yes  o        No  x

 

Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

 

Post Properties, Inc.        Yes  x         No  o

 

Post Apartment Homes, L.P.        Yes  x         No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

 

Post Properties, Inc.        Yes  x         No  o

 

Post Apartment Homes, L.P.        Yes  x         No  o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

 

Post Properties, Inc.

Large Accelerated Filer

x

Accelerated Filer  o

 

 

 

 

Non-Accelerated Filer

o

(Do not check if a smaller reporting company)

 

Smaller Reporting Company

o

Post Apartment Homes, L.P.

Large Accelerated Filer

o

Accelerated Filer  o

 

 

 

 

Non-Accelerated Filer

x

(Do not check if a smaller reporting company)

 

Smaller Reporting Company

o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

Post Properties, Inc.        Yes  o         No  x

 

Post Apartment Homes, L.P.        Yes  o        No  x

 

The aggregate market value of the shares of common stock held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on June 30, 2015 was approximately $2,908,729,756.  As of February 15, 2016, there were 53,645,986 shares of common stock, $.01 par value, outstanding.

 

 

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Parts II and III of this report are incorporated by reference from the Post Properties, Inc. 2016 Proxy Statement in connection with its Annual Meeting of Shareholders.

 


EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 2015, of Post Properties, Inc. and Post Apartment Homes, L.P.   Unless stated otherwise or the context otherwise requires, references to “Post Properties” or the “Company” mean Post Properties, Inc. and its controlled and consolidated subsidiaries.  References to “Post Apartment Homes” or the “Operating Partnership” mean Post Apartment Homes, L.P. and its controlled and consolidated subsidiaries.  The terms “the Company,” “we,” “our” and “us” refer to the Company or the Company and the Operating Partnership collectively, as the text requires.

The Company is a real estate investment trust (“REIT”) and the general partner of the Operating Partnership.  As of December 31, 2015, the Company owned an approximate 99.8% interest in the Operating Partnership.  The remaining 0.2% interests are owned by persons other than the Company.

 

Management believes that combining the two annual reports on Form 10-K for the Company and the Operating Partnership provides the following benefits:

 

 

·

Combined reports better reflect how management and the analyst community view the business as a single operating unit;

 

·

Combined reports enhance investors’ understanding of the Company and the Operating Partnership by enabling them to view the business and its results as a whole and in the same manner as management;

 

·

Combined reports are more efficiently prepared by the Company and the Operating Partnership and result in time and cost efficiencies; and

 

·

Combined reports are more efficiently reviewed by investors and analysts by reducing the amount of duplicate disclosures.

Management operates the Company and the Operating Partnership as one business.  The management of the Company is comprised of the same members as the management of the general partner of the Operating Partnership.  These individuals are officers of the Company and employees of the Operating Partnership.

The Company believes it is important to understand the few differences between the Company and the Operating Partnership in the context of how these two entities operate as a consolidated company.  The Company is a REIT, and its only material asset is its ownership of entities that, in turn, own the partnership interests of the Operating Partnership.  As a result, the Company does not conduct business itself, other than owning 100% of the entity that acts as the sole general partner of the Operating Partnership, issuing public equity from time to time and guaranteeing certain debt of the Operating Partnership.  The Operating Partnership holds all of the assets and indebtedness of the Company and retains the ownership interests in the Company’s joint ventures.  Except for net proceeds from public equity issuances by the Company, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates all remaining capital required by the Company’s business.  These sources include the Operating Partnership’s operations and its direct or indirect incurrence of indebtedness.

 

There are a few differences in the disclosures for the Company and the Operating Partnership which are reflected and presented as such in the consolidated footnotes to the financial statements to this Form 10-K.  Noncontrolling interests and the presentation of equity are the main areas of difference between the consolidated financial statements of the Company and the Operating Partnership.  The Company’s consolidated statement of operations reflects a reduction to income for the noncontrolling interests held by the Operating Partnership’s unitholders other than the Company (0.2% at December 31, 2015).  This annual report on Form 10-K presents the following separate financial information for both the Company and the Operating Partnership:

 

 

·

Consolidated financial statements;

 

·

The following information in the notes to the consolidated financial statements:

 

o

Computation of earnings (loss) per share for the Company

 

o

Computation of earnings (loss) per unit for the Operating Partnership

 

o

Quarterly financial information (unaudited) for the Company

 

o

Quarterly financial information (unaudited) for the Operating Partnership

 

 


TABLE OF CONTENTS

 

Item

No.

 

 

Page

No.

 

 

 

 

 

PART I

 

 

 

 

 

 

 

1.

 

Business

 

1

 

 

 

 

 

1A.

 

Risk Factors

 

7

 

 

 

 

 

1B.

 

Unresolved Staff Comments

 

17

 

 

 

 

 

2.

 

Properties

 

17

 

 

 

 

 

3.

 

Legal Proceedings

 

20

 

 

 

 

 

4.

 

Mine Safety Disclosures

 

20

 

 

 

 

 

X.

 

Executive Officers of the Registrant

 

21

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

22

 

 

 

 

 

6.

 

Selected Financial Data

 

24

 

 

 

 

 

7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

26

 

 

 

 

 

7A.

 

Quantitative and Qualitative Disclosures about Market Risk

 

53

 

 

 

 

 

8.

 

Financial Statements and Supplementary Data

 

54

 

 

 

 

 

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

54

 

 

 

 

 

9A.

 

Controls and Procedures

 

54

 

 

 

 

 

9B.

 

Other Information

 

54

 

 

 

 

 

 

PART III

 

 

 

 

 

 

 

10.

 

Directors, Executive Officers and Corporate Governance

 

55

 

 

 

 

 

11.

 

Executive Compensation

 

55

 

 

 

 

 

12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

55

 

 

 

 

 

13.

 

Certain Relationships and Related Transactions, and Director Independence

 

55

 

 

 

 

 

14.

 

Principal Accountant Fees and Services

 

55

 

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

15.

 

Exhibits and Financial Statement Schedules

 

56

 

 

 


PART I

 

 

ITEM 1.

BUSINESS

The Company

Post Properties, Inc. and its subsidiaries develop, own and manage upscale multi-family apartment communities in selected markets in the United States.  As used in this report, the term “Company” includes Post Properties, Inc. and its subsidiaries, including Post Apartment Homes, L.P. (the “Operating Partnership”), unless the context indicates otherwise.  The Company, through its wholly-owned subsidiaries, is the general partner and owns a majority interest in the Operating Partnership which, through its subsidiaries, conducts substantially all of the on-going operations of the Company.  At December 31, 2015, approximately 30.2%, 21.6%, 13.3% and 10.7% (on a unit basis) of the Company’s operating communities were located in the Atlanta, Georgia, Dallas, Texas, the greater Washington, D.C. and Tampa, Florida metropolitan areas, respectively.  At December 31, 2015, the Company had interests in 24,162 apartment units in 61 communities, including 1,471 apartment units in four communities held in unconsolidated entities and 2,630 apartment units in seven communities currently under development or in lease-up.  The Company is a fully integrated organization with multi-family development, operations and asset management expertise.  The Company has approximately 619 employees.

The Company is a self-administrated and self-managed equity real estate investment trust (a “REIT”).  A REIT is a legal entity which holds real estate interests and is generally not subject to federal income tax on the income it distributes to its shareholders.

The Company’s and the Operating Partnership’s executive offices are located at 4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327 and their telephone number is (404) 846-5000.  Post Properties, Inc., a Georgia corporation, was incorporated on January 25, 1984, and is the successor by merger to the original Post Properties, Inc., a Georgia corporation, which was formed in 1971.  The Operating Partnership is a Georgia limited partnership that was formed in July 1993 for the purpose of consolidating the operating and development businesses of the Company and the Post® apartment portfolio described herein.

The Operating Partnership

The Operating Partnership, through the operating divisions and subsidiaries described below, is the entity through which all of the Company’s operations are conducted.  At December 31, 2015, the Company, through wholly-owned subsidiaries, controlled the Operating Partnership as the sole general partner and as the holder of 99.8% of the common units in the Operating Partnership (the “Common Units”) and 100% of the preferred units (the “Perpetual Preferred Units”).  The other limited partners of the Operating Partnership who hold Common Units are those persons who, at the time of the Company’s initial public offering, elected to hold all or a portion of their interests in the form of Common Units rather than receiving shares of common stock.  Holders of Common Units may cause the Operating Partnership to redeem any of their Common Units for, at the option of the Operating Partnership, either one share of common stock or cash equal to the fair market value thereof at the time of such redemption.  The Operating Partnership presently anticipates that it will cause shares of common stock to be issued in connection with each such redemption (as has been done in all redemptions to date) rather than paying cash.  With each redemption of outstanding Common Units for common stock, the Company’s percentage ownership interest in the Operating Partnership will increase.  In addition, whenever the Company issues shares of common or preferred stock, the Company will contribute any net proceeds to the Operating Partnership, and the Operating Partnership will issue an equivalent number of Common Units or Perpetual Preferred Units, as appropriate, to the Company.

As the sole shareholder of the Operating Partnership’s sole general partner, the Company has the exclusive power under the limited partnership agreement of the Operating Partnership to manage and conduct the business of the Operating Partnership.  The board of directors of the Company manages the affairs of the Operating Partnership by directing the affairs of the Company.  In general, the Operating Partnership cannot be terminated, except in connection with a sale of all or substantially all of the assets of the Company, until January 2044 without the approval of each limited partner who received Common Units of the Operating Partnership in connection with the Company’s initial public offering.  The Company’s indirect limited and general partner interests in the Operating Partnership entitle it to share in cash distributions from, and in the profits and losses of, the Operating Partnership in proportion to the Company’s percentage interest in the Operating Partnership and indirectly entitle the Company to vote on all matters requiring a vote of the Operating Partnership.

At December 31, 2015, the Operating Partnership wholly-owned a separate corporate subsidiary, Post Asset Management, Inc. (“PAM”).  Through PAM and its subsidiaries and through its predecessor, Post Services, Inc. and its subsidiaries, the Operating Partnership provides other services to third parties and, in prior years, sold for-sale condominium homes.  PAM is a “taxable REIT subsidiary” as defined in the Internal Revenue Code of 1986, as amended.  The Operating Partnership owns 100% of the common stock of PAM.

Post Properties, Inc.

Post Apartment Homes, L.P.

 

1


Business Strategy

The Company’s business strategy is centered upon developing, owning and operating consistently high-quality, well-appointed apartment communities in large, rapidly-growing cities in the Sunbelt and Mid-Atlantic regions of the United States.  The Company is focused on locating its apartment communities near established employment centers, as well as retail, restaurant and entertainment amenities, in places that appeal to its discerning residents.  The Company is also focused on delivering a high level of customer service, for which the Post® brand has been known for more than 40 years, and values the continuous growth and internal advancement of its associates.  The Company strives to make effective use of technology to enhance efficiency and the experience of its residents, and to operate in ways that make the cities where it does business better places to live.

 

The Company is focused on creating value for its shareholders by developing new communities, optimizing their financial performance over time, and then periodically selling mature communities in order to provide capital for reinvestment and to drive returns on equity.  The Company believes that a strong balance sheet, with low leverage, is essential to mitigating risk through business cycles and in providing capacity for opportunistic investing when it is appropriate to do so.

 

Key elements of the Company’s business strategy, as may be adjusted from time to time in response to current conditions in the capital markets and the U.S. economy, are as follows:

Investment, Disposition and Acquisition Strategy

The Company’s investment, disposition and acquisition strategy is aimed to achieve a real estate portfolio that has uniformly high quality, low average age properties and cash flow diversification.

The Company is focusing on a limited number of rapidly-growing major U.S. cities and has regional investment and development personnel to pursue acquisitions, development, rehabilitations and dispositions of apartment communities that are consistent with its market strategy. The Company has operations in ten markets as of December 31, 2015.

Key elements of the Company’s investment and acquisition strategy include instilling a disciplined team approach to development and acquisition decisions and selecting sites and properties in infill suburban and urban locations in strong primary markets that serve the higher-end multi-family consumer. The Company plans to develop, construct and continually maintain and improve its apartment communities consistent with quality standards management believes are synonymous with the Post® brand. New acquisitions will be limited to properties that meet, or that are expected to be repositioned and improved to meet, its quality and location requirements.

Post® Brand Name Strategy

The Post® brand name has been cultivated for more than 40 years, and its promotion has been integral to the Company’s success. Company management believes that the Post® brand name is synonymous with quality upscale apartment communities that are situated in desirable locations and that provide a high level of resident service. The Company’s service offering includes, among other things, attractive landscaping and numerous amenities, including controlled access, high-speed internet, on-site business centers, on-site courtesy officers, pools and fitness centers at a number of its communities.

Key elements in implementing the Company’s brand name strategy include extensively utilizing the trademarked brand name and coordinating its advertising programs to increase brand name recognition. The Company regularly invests in internet-based marketing and customer service programs designed to maintain high levels of resident satisfaction in order to enhance what it believes is a valuable asset.

Service and Associate Development Strategy

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

Operating Strategy

The Company’s operating strategy includes striving to be an innovator and a leader in anticipating customer needs while achieving operating consistency across its properties. The Company also continues to execute on opportunities to improve processes and technology that drive efficiency in its business.

Post Properties, Inc.

Post Apartment Homes, L.P.

 

2


Financing and Liquidity Strategy

The Company’s financing and liquidity strategy is to maintain a strong balance sheet and to maintain its investment grade credit rating. The Company currently plans to achieve its objectives by generally limiting total effective leverage (debt and preferred equity) as a percentage of undepreciated real estate assets to not more than 40%, generally limiting variable rate indebtedness as a percentage of total indebtedness to not more than 25% and maintaining adequate liquidity through available cash and its unsecured lines of credit.  At December 31, 2015, the Company’s total effective leverage (debt and preferred equity) as a percentage of undepreciated real estate assets, and its total variable rate indebtedness as a percentage of total indebtedness were below these percentages.

Operating Divisions

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

Post Apartment Management

Post Apartment Management is responsible for the day-to-day operations of all Post® communities including community leasing and property management.  Post Apartment Management also conducts short-term corporate apartment leasing activities and is the largest division in the Company, based on the number of employees.

Post Construction and Post Property Services

Post Construction and Post Property Services are responsible for overseeing all construction and physical asset maintenance activities of the Company for all Post® communities.

Post Investment Group

Post Investment Group is responsible for all development, acquisition, rehabilitation, disposition and asset management activities of the Company.  For development, this includes site selection, zoning and regulatory approvals and project design.  This division is also responsible for apartment community acquisitions as well as property dispositions and strategic joint ventures that the Company undertakes as part of its investment strategy.  The division recommends and executes major value added renovations and redevelopments of existing communities.

Post Corporate Services

Post Corporate Services provides executive direction and control to the Company’s other divisions and subsidiaries and has responsibility for the creation and implementation of all Company financing, capital and risk management strategies.  All accounting, management reporting, compliance, information systems, human resources, personnel recruiting, training, legal, security, and insurance services required by the Company and all of its affiliates are centralized in Post Corporate Services.

Operating Segments

The Company’s primary operating segments are described below.  In addition to these segments, all commercial properties and other ancillary service and support operations are reviewed and managed separately and in the aggregate by Company management.

 

 

·

Fully stabilized (same store) 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.

 

·

Newly stabilized communities - communities which reached stabilized occupancy in the prior year.

 

·

Lease-up communities - those communities that are under development, rehabilitation and in lease-up but were not stabilized by the beginning of the current year, including communities that stabilized during the current year.

 

·

Acquired communities - those communities acquired in the current or prior year.

 

·

Held for sale and sold communities - those apartment and mixed-use communities classified as held for sale or sold.

A summary of segment operating results for 2015, 2014 and 2013 is included in note 15 to the Company’s consolidated financial statements.  Additionally, segment operating performance for such years is discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this annual report on Form 10-K.

Post Properties, Inc.

Post Apartment Homes, L.P.

 

3


Summary of Investment and Disposition Activity

During the five-year period from January 1, 2011 through December 31, 2015, the Company and its affiliates have developed and completed 2,386 apartment units in five apartment communities and additional phases in four communities and sold five apartment communities containing an aggregate of 1,263 apartment units (including a joint venture interest in one apartment community consisting of 276 units in 2012).  During the same period, the Company acquired three apartment communities containing 887 units. The Company and its affiliates have sold apartment communities after holding them for investment periods that generally range up to twenty years after acquisition or development.  The following table shows a summary of the Company’s development and sales activity during these periods. 

 

 

2015

 

 

2014

 

 

2013

 

 

2012

 

 

2011

 

 

Units developed and completed

 

340

 

 

 

883

 

 

 

1,163

 

 

 

 

 

 

 

 

Units acquired

 

 

 

 

 

 

 

 

300

 

 

 

360

 

 

 

227

 

 

Units sold

 

 

 

 

 

(645

)

 

 

(342

)

 

 

(278

)

(4)

 

 

 

Total units completed and owned by the Company and

   its affiliates at year-end

 

 

21,872

 

(1)

 

21,531

 

(2)

 

21,293

 

(3)

 

20,172

 

(5)

 

20,090

 

(6)

Total revenues from continuing operations (in thousands)

 

$

384,006

 

 

$

377,812

 

 

$

362,737

 

 

$

330,334

 

 

$

301,003

 

 

 

(1)

Excludes 2,290 units currently under development at December 31, 2015. Includes a net increase of one apartment unit to reflect the conversion from a commercial space.

(2)

Excludes 1,463 units under development at December 31, 2014.

(3)

Excludes 1,223 units under development (including 410 units in lease-up) at December 31, 2013.

(4)

Includes a net decrease of two apartment units to reflect the conversion of two apartment units into commercial space.

(5)

Excludes 2,046 units under development (including 662 units in lease-up) at December 31, 2012.

(6)

Excludes 1,568 units under development at December 31, 2011.

Current Development Activity

At December 31, 2015, the Company had 2,630 apartment units in seven communities under construction or in lease-up.  These communities are summarized in the table below ($ in millions except cost per square foot data).

 

 

 

 

 

 

 

 

 

Estimated

 

 

 

 

 

 

 

 

 

 

Estimated

 

 

Costs

 

 

Quarter

 

Estimated

 

 

 

 

 

 

 

 

Number

 

 

Average

 

 

Estimated

 

 

Estimated

 

 

Total

 

 

Incurred

 

 

of First

 

Quarter of

 

 

 

 

 

 

 

 

of

 

 

Unit Size

 

 

Retail

 

 

Total

 

 

Cost Per

 

 

as of

 

 

Units

 

Stabilized

 

Percent

 

Community

 

Location

 

Units

 

 

Sq. Ft. (1)

 

 

Sq. Ft. (1)

 

 

Cost (2)

 

 

Sq. Ft. (3)

 

 

12/31/2015

 

 

Available

 

Occup. (4)

 

Leased (5)

 

Under construction

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Post Parkside™ at Wade, II

 

Raleigh, NC

 

 

406

 

 

 

910

 

 

 

-

 

 

$

57.5

 

 

$

156

 

 

$

30.0

 

 

2Q 2016

 

3Q 2017

 

N/A

 

Post Afton Oaks™

 

Houston, TX

 

 

388

 

 

 

867

 

 

 

-

 

 

 

80.7

 

 

 

240

 

 

 

46.9

 

 

3Q 2016

 

4Q 2017

 

N/A

 

Post South Lamar™, II

 

Austin, TX

 

 

344

 

 

 

734

 

 

 

5,800

 

 

 

65.6

 

 

 

254

 

 

 

23.1

 

 

1Q 2017

 

2Q 2018

 

N/A

 

Post Millennium Midtown™

 

Atlanta, GA

 

 

356

 

 

 

864

 

 

 

-

 

 

 

90.6

 

 

 

295

 

 

 

14.0

 

 

2Q 2017

 

3Q 2018

 

N/A

 

Post River North™ (6)

 

Denver, CO

 

 

358

 

 

 

818

 

 

 

-

 

 

 

88.2

 

 

 

301

 

 

 

21.4

 

 

2Q 2017

 

3Q 2018

 

N/A

 

Post Centennial Park™

 

Atlanta, GA

 

 

438

 

 

 

808

 

 

 

-

 

 

 

96.0

 

 

 

271

 

 

 

15.9

 

 

1Q 2018

 

2Q 2019

 

N/A

 

Total

 

 

 

 

2,290

 

 

 

 

 

 

 

5,800

 

 

$

478.6

 

 

 

 

 

 

$

151.3

 

 

 

 

 

 

 

 

 

Substantially complete, in lease-up

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The High Rise at

     Post Alexander™

 

Atlanta, GA

 

 

340

 

 

 

830

 

 

 

-

 

 

$

74.8

 

 

$

265

 

 

$

74.0

 

 

2Q 2015

 

4Q 2016

 

 

55.3%

 

 

(1)

Square footage amounts are approximate.  Actual square footage may vary.

(2)

To the extent that developments contain a retail component, total estimated cost includes estimated first generation tenant improvements and leasing commissions.

(3)

The estimated total cost per square foot is calculated using net rentable residential and retail square feet, where applicable. Square footage amounts used are approximate. Actual amounts may vary.

(4)

The Company defines stabilized occupancy as the earlier to occur of (i) the attainment of 95% physical occupancy or (ii) one year after completion of construction.

(5)

Represents unit status as of February 15, 2016.

(6)

The Company owns a 92.5% interest in an entity which is developing Post River North™. Total estimated cost represents aggregate costs of the joint venture and excludes any future promoted interest to the developer.

Competition

All of the Company’s apartment communities are located in developed markets that include other upscale apartments owned by numerous public and private companies.  Some of these companies may have substantially greater resources and greater access to capital than the Company, allowing them to grow at rates greater than the Company.  The number of competitive upscale apartment communities and companies in a particular market could have a material effect on the Company’s ability to lease apartment units at its

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apartment communities, including any newly developed or acquired communities, and on the rents charged.  In addition, other forms of residential properties, including single family housing, condominiums and town homes, provide housing alternatives to potential residents of upscale apartment communities.

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

Americans with Disabilities Act and Fair Housing Act

The Company’s multi-family housing communities and any newly acquired multi-family housing communities must comply with Title III of the Americans with Disabilities Act (the “ADA”) to the extent that such properties are “public accommodations” and/or “commercial facilities” as defined by the ADA.  Compliance with the ADA requirements could require removal of structural barriers to handicapped access in certain public areas of the Company’s multi-family housing communities where such removal is readily achievable.  The ADA does not, however, consider residential properties, such as multi-family housing communities, to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as the leasing office, are open to the public.  The Company must also comply with the Fair Housing Act (the “FHA”), which requires that apartment communities first occupied after March 13, 1991 be accessible to persons with disabilities.

Noncompliance with the FHA and ADA could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation.  Compliance with the FHA could require removal of structural barriers to handicapped access in a community, including the interiors of multi-family housing units covered under the FHA. In addition to the ADA and FHA, state and local laws exist that impact the Company’s multi-family housing communities with respect to access thereto by persons with disabilities.  Further, legislation or regulations adopted in the future, as well as interpretations of the ADA and FHA by courts, may impose additional burdens or restrictions on the Company with respect to improved access by persons with disabilities.  The ADA, FHA, or other existing or new legislation may require the Company to modify its existing properties.  These laws may also restrict renovations by requiring improved access to such buildings or may require the Company to add other structural features that increase its construction costs.

In recent years, there has been heightened scrutiny of the multi-family housing industry for compliance with the requirements of the FHA and ADA.  In September 2010, the United States Department of Justice (the “DOJ”) filed a lawsuit against the Company in the United States District Court for the Northern District of Georgia.  The suit alleges various violations of the Fair Housing Act (“FHA”) and the Americans with Disabilities Act (“ADA”) at properties designed, constructed or operated by the Company in the District of Columbia, Virginia, Florida, Georgia, New York, North Carolina and Texas.  The plaintiff seeks statutory damages and a civil penalty in unspecified amounts, as well as injunctive relief that includes retrofitting apartments and public use areas to comply with the FHA and the ADA and prohibiting construction or sale of noncompliant units or complexes.  The Company filed a motion to transfer the case to the United States District Court for the District of Columbia, where a previous civil case involving alleged violations of the FHA and ADA by the Company was filed and ultimately dismissed.  On October 29, 2010, the United States District Court for the Northern District of Georgia issued an opinion finding that the complaint shows that the DOJ’s claims are essentially the same as the previous civil case, and, therefore, granted the Company’s motion and transferred the DOJ’s case to the United States District Court for the District of Columbia. Discovery has closed, and the Court has denied motions filed by the parties relating to additional discovery and expert witnesses.  Each party filed Motions for Summary Judgment, which were briefed in April 2014. In March 2015, the Court denied both Motions for Summary Judgment and requested supplemental briefing, which both sides submitted in June 2015. In October 2015, the Court requested additional briefing due in December 2015 to resolve legal issues before trial. Substantive briefing on these legal issues was completed on February 9, 2016. The parties now await a hearing with the Court to discuss the issues and potentially to set the case for trial. Until such time as the Court issues rulings on the application of the law to the facts of this case, it is not possible to predict or determine the outcome of the legal proceeding, nor is it possible to estimate the amount of loss, if any, that would be associated with an adverse decision.

The cost associated with ongoing litigation or compliance could be substantial and could adversely affect the Company’s business, results of operations, cash flows and financial condition. In addition, in connection with certain property dispositions or formations of strategic joint ventures, the Company may be required to provide indemnification against liabilities associated with the above litigation.

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Environmental Regulations

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

The Company has instituted a policy that requires an environmental investigation of each property that it considers for purchase or that it owns and plans to develop.  The environmental investigation is conducted by a qualified third-party environmental consultant in accordance with recognized industry standards.  The environmental investigation report is reviewed by the Company and counsel prior to purchase and/or development of any property.  If the environmental investigation identifies evidence of potentially significant environmental contamination that merits additional investigation, sampling of the property is performed by the environmental consultant.

If necessary, remediation or mitigation of contamination, including removal of contaminated soil and/or underground storage tanks, placement of impervious barriers, or creation of land use or deed restrictions, is undertaken either prior to development or at another appropriate time.  When performing remediation activities, the Company is subject to a variety of environmental requirements.  In some cases, the Company obtains state approval of the selected remediation and mitigation measures by entering into voluntary environmental cleanup programs administered by state agencies.

In developing properties and constructing apartment communities, the Company utilizes independent environmental consultants to determine whether there are any flood plains, wetlands or other environmentally sensitive areas, such as particular species habitats, that are part of the property to be developed.  If flood plains are identified, development and construction work is planned so that flood plain areas are preserved or alternative flood plain capacity is created in conformance with federal and local flood plain management requirements.  If wetlands or other environmentally sensitive areas are identified, the Company plans and conducts its development and construction activities and obtains the necessary permits and authorizations in compliance with applicable legal standards.  In some cases, however, the presence of wetlands and/or other environmentally sensitive areas could preclude, severely limit, or otherwise alter the proposed site development and construction activities.

Storm water discharge from a construction site is subject to the storm water permit requirements mandated under the Clean Water Act.  In most jurisdictions, the state administers the permit programs.  The Company currently anticipates that it will be able to obtain and materially comply with any storm water permits required for new development. Other aspects of construction projects, such as site dewatering and waste removal, are also subject to environmental requirements. The Company is in material compliance with applicable environmental requirements and has obtained and is in material compliance with the construction site storm water permits and other permits required for its existing development activities.

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

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

The Company has not been notified by any governmental authority of any material noncompliance, claim or liability in connection with environmental conditions  or matters associated with any of its apartment communities or other properties.  The Company has not been notified of a material claim for personal injury or property damage by a private party relating to any of its apartment

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communities or other properties in connection with environmental conditions or matters. The Company is not aware of any environmental conditions or matters with respect to any of its apartment communities or other properties that could be expected to give rise to any material noncompliance claim or liability.

It is possible, however, that the environmental investigations of the Company’s properties might not have revealed all potential environmental liabilities associated with the Company’s real property and its apartment communities or the Company might have underestimated any potential environmental issues identified in the investigations or otherwise known to be associated with the Company’s real property and its apartment communities.  It is also possible that future environmental laws, ordinances, or regulations or new interpretations of existing environmental laws, ordinances, or regulations will impose material environmental liabilities on the Company; the current environmental conditions of properties that the Company owns or operates will be affected adversely by hazardous substances associated with other nearby properties or the actions of third parties unrelated to the Company; or our residents and/or commercial tenants may engage in activities prohibited by their leases or otherwise expose the Company to liability under applicable environmental laws, ordinances or regulations.  The costs of defending any future environmental claims, performing any future environmental remediation, satisfying any such environmental liabilities or responding to any changed environmental conditions could materially adversely affect the Company’s financial conditions and results of operations.

Where You Can Find More Information

The Company makes its annual report on Form l0-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to such reports filed pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, available (free of charge) on or through its Internet website, located at http://www.postproperties.com, as soon as reasonably practicable after they are filed with or furnished to the SEC. The information on the Company’s website is not incorporated by reference into this Form 10-K.

 

ITEM 1A.

RISK FACTORS

(In thousands, except per share amounts)

The following risk factors apply to the Company and the Operating Partnership. All indebtedness described in the risk factors has been incurred by the Operating Partnership or one of its subsidiaries.

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

Market and economic conditions in the various metropolitan areas of the United States where the Company operates, particularly Atlanta, Georgia, Dallas, Texas, Tampa, Florida and the greater Washington, D.C. area where a substantial majority of the Company’s apartment communities are located, may significantly affect occupancy levels and rental rates and therefore profitability.  A lack of economic growth, especially in such areas, may have a disproportionate impact on the Company.  In general, factors that may adversely affect market and economic conditions include the following:

 

 

·

the economic climate, which may be adversely impacted by a reduction in jobs, industry slowdowns and other factors;

 

·

local conditions, such as oversupply of, or reduced demand for, apartment homes;

 

·

declines in household formation;

 

·

favorable residential mortgage rates;

 

·

rent control or stabilization laws, or other laws regulating rental housing, which could prevent the Company from raising rents to offset increases in operating costs; and

 

·

competition from other available apartments and other housing alternatives and changes in market rental rates.

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

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Development and construction risks could impact the Company’s profitability.

From time to time, the Company develops and constructs apartment communities.  The Company is currently developing a second phase of its Post Parkside™ at Wade apartment community in Raleigh, North Carolina, its Post Afton Oaks™ community in Houston, Texas, a second phase of its Post South Lamar™ apartment community in Austin, Texas, its Post Millenium Midtown™ apartment community in Atlanta, Georgia, its Post River North™ apartment community in Denver, Colorado and its Post Centennial Park™ apartment community in Atlanta, Georgia. Development activities may be conducted through wholly-owned affiliated companies or through joint ventures with unaffiliated parties. The Company may also make improvements to acquired or existing properties.  The Company’s development and construction activities may be exposed to the following risks:

 

 

·

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

 

·

the Company may incur construction costs for a property that exceed original estimates due to increased materials, labor or other costs or unforeseen environmental conditions, which could make completion of the property uneconomical, and the Company may not be able to increase rents to compensate for the increase in construction costs;

 

·

the Company may abandon development opportunities that it has already begun to explore, and it may fail to recover expenses already incurred in connection with exploring those opportunities, causing potential impairment losses to be incurred;

 

·

the Company has at times been and may continue to be unable to complete construction and lease-up of a community on schedule and meet financial goals for development projects;

 

·

because occupancy rates and rents at a newly developed community may fluctuate depending on a number of factors, including market and economic conditions, the Company may be unable to meet its profitability goals for that community;

 

·

land costs and construction costs have been volatile in the Company’s markets and may continue to be volatile in the future and, in some cases, the costs of upgrading acquired communities have, and may continue to, exceed original estimates and the Company may be unable to charge rents that would compensate for these increases in costs; and

 

·

uncertainties associated with warranty and related obligations for the Company’s for-sale condominium homes previously sold.

Possible difficulty of selling apartment communities could limit the Company’s operational and financial flexibility.

Purchasers may not be willing to pay acceptable prices for apartment communities that the Company wishes to sell. A weak market may limit the Company’s ability to change its portfolio promptly in response to changing economic conditions. Furthermore, general uncertainty in the real estate markets may result in conditions where the pricing of certain real estate assets may be difficult due to uncertainty with respect to capitalization rates and valuations, among other things, which may add to the difficulty of potential buyers to obtain financing to acquire such properties on favorable terms or cause potential buyers to not complete acquisitions of such properties.  Also, if the Company is unable to sell apartment communities or if it can only sell apartment communities at prices lower than are generally acceptable, then the Company may have to take on additional leverage in order to provide adequate capital to execute its development and construction and acquisitions strategy. Furthermore, a portion of the proceeds from the Company’s overall property sales in the future may be held in escrow accounts in order for some sales to qualify as like-kind exchanges under Section 1031 of the Internal Revenue Code of 1986, as amended (the “Code”) so that any related capital gain can be deferred for federal income tax purposes. As a result, the Company may not have immediate access to all of the cash flow generated from property sales.

The Company is subject to increased exposure to economic and other competitive factors due to the concentration of its investments in certain markets.

At December 31, 2015, approximately 30.2%, 21.6%, 13.3% and 10.7% (on a unit basis) of the Company’s operating communities were located in the Atlanta, Georgia, Dallas, Texas, greater Washington, D.C. and Tampa, Florida metropolitan areas, respectively.  Although the Company’s strategy in recent years has focused on reducing its concentration in Atlanta, Georgia and building critical mass in other core markets, it is currently subject to increased exposure to economic and other competitive factors specific to its markets within these geographic areas.

Economic slowdowns in the U.S. and declines in the condominium and single family housing markets may negatively affect the Company’s financial condition and results of operations.

There was a significant decline in economic growth, both in the U.S. and globally, that began in 2008 and continued through 2009. Although the real estate development industry and the U.S. economy has improved since 2010, there can be no assurance that market

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conditions will remain or improve further in the near future. Negative trends may materially and adversely affect the Company’s revenues from its apartment communities. The Company’s apartment communities compete with lower cost apartments in most markets. The Company’s ability to lease its units in these communities at favorable rates, or at all, is dependent upon the overall level of spending, which is affected by, among other things, employment levels, recession, personal debt levels, conditions in the housing market, stock market volatility and uncertainty about the future. The Company may be disproportionately vulnerable to reduced spending arising from any economic downturn as compared to owners of lower cost apartment communities. The rental of excess for-sale condominiums and single family homes in an already competitive multi-family market may also reduce the Company’s ability to lease its apartment units and depress rental rates in certain markets.

Failure to generate sufficient cash flows could affect the Company’s debt financing and create refinancing risk.

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

 

 

·

the national and local economies;

 

·

local real estate market conditions, such as an oversupply of apartment homes or competing for-sale condominium and single family housing;

 

·

the perceptions by prospective residents or buyers of the safety, convenience and attractiveness of the Company’s communities and the neighborhoods in which they are located;

 

·

the Company’s ability to provide adequate management, maintenance and insurance for its apartment communities; and

 

·

rental expenses for its apartment communities, including real estate taxes, insurance and utilities.

Expenses associated with the Company’s investment in apartment communities, such as debt service, real estate taxes, insurance and maintenance costs, are generally not reduced when circumstances cause a reduction in cash flows from operations from that community.  If a community is mortgaged to secure payment of debt and the Company is unable to make the mortgage payments, the Company could sustain a loss as a result of foreclosure on the community or the exercise of other remedies by the mortgagor.  The Company is likely to need to refinance at least a portion of its outstanding debt as it matures. There is a risk that the Company may not be able to refinance existing debt or that the terms of any refinancing will not be as favorable as the terms of the existing debt.  As of December 31, 2015, the Company had consolidated outstanding mortgage indebtedness of $189,537, senior unsecured notes of $400,000, unsecured term loan indebtedness of $300,000 and no outstanding borrowings on its unsecured revolving lines of credit.  None of the Company’s indebtedness matures in 2016.

The Company could become more highly leveraged, which could result in an increased risk of default and in an increase in its debt service requirements.

The Company’s currently stated goal is to generally maintain total effective leverage (debt and preferred equity) as a percentage of undepreciated real estate assets to not more than 40%, to generally limit variable rate indebtedness as a percentage of total indebtedness to not more than 25% and to maintain adequate liquidity through the Company’s available cash and unsecured lines of credit. At December 31, 2015, the Company’s total effective leverage (debt and preferred equity) as a percentage of undepreciated real estate assets and the Company’s total variable rate indebtedness as a percentage of total indebtedness were below these percentages. If management adjusts the Company’s stated leverage goal in the future, the Company could become more highly leveraged, resulting in an increase in debt service that could adversely affect funds from operations, adversely affect the Company’s ability to make expected distributions to its shareholders and the Operating Partnership’s ability to make expected distributions to its limited partners and result in an increased risk of default on the obligations of the Company and the Operating Partnership.

In addition, the Company’s ability to incur debt is limited by covenants in bank and other credit agreements and in the Company’s outstanding senior unsecured notes.  The Company manages its debt to be in line with its stated leverage goal and to be in compliance with its debt covenants, but the Company may increase the amount of outstanding debt at any time without a concurrent improvement in the Company’s ability to service the additional debt.  Accordingly, the Company could become more leveraged, resulting in an increased risk of default of its debt covenants or on its debt obligations and in an increase in debt service requirements.  Any covenant breach or significant increase in the Company’s leverage could materially adversely affect the Company’s financial condition and ability to access debt and equity capital markets in the future.

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A downgrade in the credit rating of the Company’s securities could materially adversely affect the Company’s business and financial condition.

The Company’s senior unsecured debt is rated investment grade by Standard & Poor’s Corporation and Moody’s Investors Service.  In determining the Company’s credit ratings, the rating agencies consider a number of both quantitative and qualitative factors.  These factors include earnings, fixed charges such as interest, cash flows, total debt outstanding, total secured debt, off balance sheet obligations and other commitments, total capitalization and various ratios calculated from these factors.  The rating agencies also consider predictability of cash flows, business strategy and diversity, property development risks, industry conditions and contingencies.  Therefore, deterioration in the Company’s operating performance could also cause the Company’s investment grade rating to come under pressure.  Standard & Poor’s Ratings Service corporate credit rating on the Company is BBB with a stable outlook. The Company’s corporate credit rating at Moody’s Investor Service is currently Baa2 with a stable outlook.  There can be no assurance that the Company will be able to maintain its credit ratings or that the Company’s credit ratings will not be lowered or withdrawn in their entirety.  A negative change in the Company’s ratings outlook or any downgrade in the Company’s current investment-grade credit ratings by the Company’s rating agencies could adversely affect the Company’s cost and/or access to sources of liquidity and capital.  Additionally, a downgrade could, among other things, significantly increase the costs of borrowing under the Company’s unsecured credit lines and bank term loan, adversely impact the Company’s ability to obtain unsecured debt or refinance its unsecured credit facilities on competitive terms in the future, or require the Company to take certain actions to support its obligations, any of which would adversely affect the Company’s business and financial condition.

If the Company or its subsidiaries defaults on an obligation to repay outstanding indebtedness when due, the default could trigger a cross-default or cross-acceleration under other indebtedness.

If the Company or one of its subsidiaries defaults on its obligations to repay outstanding indebtedness, the default could cause a cross-default or cross-acceleration under other indebtedness and off-balance sheet derivative obligations.  A default under the agreements governing the Company’s or its subsidiaries’ indebtedness, including a default under mortgage indebtedness, revolving lines of credit, bank term loan, the indenture for the Company’s outstanding senior notes or other instruments, or derivative financial instruments that is not waived by the required lenders or holders of outstanding notes, could trigger cross-default or cross-acceleration provisions under one or more agreements governing the Company’s indebtedness and off-balance sheet derivative obligations, which could cause an immediate default or allow the lenders or counterparties to declare all funds borrowed thereunder to be due and payable.

Covenants of the Company’s or its subsidiaries’ mortgage indebtedness place restrictions on the Company, which reduce operational flexibility and create default risks.

Mortgages on the Company’s or its subsidiaries’ properties may contain customary negative covenants that, among other things, limit the property owner’s ability, without the prior consent of the lender, to further mortgage the property and to reduce or change insurance coverage. If the Company or its subsidiaries were to breach any debt covenants and did not cure the breach within any applicable cure period, its lenders could require the Company to repay the debt immediately.  In addition, if a property is mortgaged to secure debt, and the Company is unable to meet the mortgage payments, the holder of the mortgage could foreclose on the property, resulting in loss of income and asset value. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness could materially adversely affect the Company’s financial condition and results of operations.

Debt financing may not be available and equity issuances could be dilutive to the Company’s shareholders.

The Company’s ability to execute its business strategy depends on its access to an appropriate blend of debt financing, including unsecured lines of credit and other forms of secured and unsecured debt, and equity financing, including common and preferred equity.

Debt financing may not be available in sufficient amounts, or on favorable terms or at all. Uncertainty in the credit markets may negatively impact the Company’s ability to borrow and refinance existing borrowings at acceptable rates or at all.  In addition, if the Company issues additional equity securities through its at-the-market offering program or in one or more registered offerings to finance developments and acquisitions instead of incurring debt, the interests of existing shareholders could be diluted.

The Company may not be able to maintain its current dividend level.

The Company pays regular quarterly dividends to holders of shares of its common stock. Commencing with the dividend declared in February 2016, the Company established a quarterly dividend payment rate to common shareholders of $0.47 per share. To the extent the Company continues to pay dividends at the current dividend rate, it expects to use cash flows from operations reduced by annual

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operating capital expenditures to fund the dividend payments to common and preferred shareholders in 2016. The Company expects to use cash and cash equivalents and, if its net cash flows from operations are not sufficient to meet its anticipated dividend payment rate, line of credit borrowings to fund dividend payments in 2016.

The Company’s board of directors reviews the dividend quarterly. The Company’s dividends can be paid as a combination of cash and stock in order to satisfy the annual distribution requirements applicable to REITs. To the extent that management considers it advisable to distribute gains from any asset sales to shareholders in the form of a special dividend, the Company may pay a portion of such dividend in the form of stock to preserve liquidity.

 

Future dividend payments by the Company will be paid at the discretion of the board of directors. In evaluating whether to pay any dividends and the level and form of such dividends, the Company anticipates that the board of directors will consider, among other factors, the following:

 

 

·

funds from our operations, the Company’s financial condition and capital requirements in light of the current economic climate and the resulting impact on the Company’s business;

 

·

the annual distribution requirements under the REIT provisions of the Code;

 

·

the impact of the payment of any special dividend, including any additional shares issued in connection with a special dividend paid in the form of stock;

 

·

the impact of any additional shares issued in connection with the Company’s at-the-market common equity program; and

 

·

other factors that the board of directors deems relevant.

There can be no assurance that the current dividend level will be maintained in future periods.

The Company’s real estate assets may be subject to impairment charges.

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

There can be no assurance that the Company will not take additional charges in the future related to the impairment of the Company’s assets. The Company’s management believes it has applied reasonable estimates and judgments in determining the proper classification of its real estate assets. However, these estimates require the use of estimated market values, which are currently difficult to assess. Should external or internal circumstances change requiring the need to shorten the holding periods or adjust the estimated future cash flows of certain of its assets, the Company could be required to record additional impairment charges. Any future impairment could have a material adverse effect on the Company’s results of operations and funds from operations in the period in which the charge is taken.

Increased competition and increased affordability of residential homes could limit the Company’s ability to retain its residents, lease apartment homes or increase or maintain rents.

The Company’s apartment communities compete with numerous housing alternatives in attracting residents, including other apartment communities and single-family rental homes, as well as owner occupied single and multi-family homes. Competitive housing in a particular area and increased affordability of owner occupied single and multi-family homes caused by lower housing prices, mortgage interest rates and government programs to promote home ownership could adversely affect the Company’s ability to retain its residents, lease apartment homes and increase or maintain rents.

Limited investment opportunities could adversely affect the Company’s growth.

The Company expects that other real estate investors will compete to acquire existing properties and to develop new properties. These competitors include insurance companies, pension and investment funds, developer partnerships, investment companies and other multi-family REITs. This competition could increase prices for properties of the type that the Company would likely pursue, and

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competitors may have greater resources than the Company. As a result, the Company may not be able to make attractive investments on favorable terms and promptly deploy proceeds from property sales, which could adversely affect its growth.

The Company could be negatively impacted by the condition of Fannie Mae or Freddie Mac and by changes in government support for multi-family housing.

Fannie Mae and Freddie Mac are a major source of financing for multi-family real estate in the United States.  The Company utilizes loan programs sponsored by these entities as a key source of capital to finance its growth and its operations.  In September 2008, the U.S. government assumed control of Fannie Mae and Freddie Mac and placed both companies into a government conservatorship under the Federal Housing Finance Agency. In December 2009, the U.S. Treasury increased its financial support for these conservatorships. In February 2011, the Obama administration released its blueprint for winding down Fannie Mae and Freddie Mac and for reforming the system of housing finance.  Since that time, members of Congress have introduced and Congressional committees have considered a substantial number of bills that include comprehensive or incremental approaches to winding down Fannie Mae and Freddie Mac or changing their purposes, businesses, or operations. A decision by the U.S. government to eliminate or downscale Fannie Mae or Freddie Mac or to reduce government support for multi-family housing more generally may adversely affect interest rates, capital availability, development of multi-family communities and the value of multi-family residential real estate and, as a result, may adversely affect the Company and its growth and operations.

Changing interest rates could increase interest costs and could affect the market price of the Company’s securities.

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

Interest rate hedging contracts may be ineffective and may result in material charges.

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

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

Acquired apartment communities may not achieve anticipated results.

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

 

 

·

an acquired community may fail to achieve expected occupancy and rental rates and may fail to perform as expected;

 

·

the Company may not be able to successfully integrate acquired properties and operations; and

 

·

the Company’s estimates of the costs of repositioning or redeveloping the acquired property may prove inaccurate, causing the Company to fail to meet its profitability goals.

Failure to succeed in new markets may limit the Company’s growth.

The Company may from time to time commence development activity or make acquisitions outside of its existing market areas if appropriate opportunities arise. The Company’s historical experience in its existing markets does not ensure that it will be able to

Post Properties, Inc.

Post Apartment Homes, L.P.

 

12


operate successfully in new markets. The Company may be exposed to a variety of risks if it chooses to enter new markets. These risks include, among others:

 

 

·

an inability to evaluate accurately local apartment market conditions and local economies;

 

·

an inability to obtain land for development or to identify appropriate acquisition opportunities;

 

·

an inability to hire and retain key personnel; and

 

·

lack of familiarity with local governmental and permitting procedures.

Compliance or failure to comply with laws requiring access to the Company’s properties by persons with disabilities could result in substantial cost.

The Company’s multi-family housing communities and any newly acquired multi-family housing communities must comply with Title III of the Americans with Disabilities Act, or the ADA, to the extent that such properties are “public accommodations” and/or “commercial facilities” as defined by the ADA.  Compliance with the ADA requirements could require removal of structural barriers to handicapped access in certain public areas of the Company’s multi-family housing communities where such removal is readily achievable.  The ADA does not, however, consider residential properties, such as multi-family housing communities to be public accommodations or commercial facilities, except to the extent portions of such facilities, such as the leasing office, are open to the public.

The Company must also comply with the Fair Housing Act, or the FHA, which requires that multi-family housing communities first occupied after March 13, 1991 be accessible to persons of disabilities.  Noncompliance with the FHA and ADA could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation.  Compliance with the FHA could require removal of structural barriers to handicapped access in a community, including the interiors of apartment units covered under the FHA.  In addition to the ADA and FHA, state and local laws exist that impact the Company’s multi-family housing communities with respect to access thereto by persons with disabilities.  Further, legislation or regulations adopted in the future may impose additional burdens or restrictions on the Company with respect to improved access by persons with disabilities.  The ADA, FHA, or other existing or new legislation may require the Company to modify its existing properties.  These laws may also restrict renovations by requiring improved access to such buildings or may require the Company to add other structural features that increase its construction costs.

Within the past few years, there has been heightened scrutiny of the multi-family housing industry for compliance with the requirements of the FHA and ADA.  In September 2010, the United States Department of Justice (the “DOJ”) filed a lawsuit against the Company in the United States District Court for the Northern District of Georgia.  The suit alleges various violations of the Fair Housing Act (“FHA”) and the Americans with Disabilities Act (“ADA”) at properties designed, constructed or operated by the Company in the District of Columbia, Virginia, Florida, Georgia, New York, North Carolina and Texas.  The plaintiff seeks statutory damages and a civil penalty in unspecified amounts, as well as injunctive relief that includes retrofitting apartments and public use areas to comply with the FHA and the ADA and prohibiting construction or sale of noncompliant units or complexes.  The Company filed a motion to transfer the case to the United States District Court for the District of Columbia, where a previous civil case involving alleged violations of the FHA and ADA by the Company was filed and ultimately dismissed.  On October 29, 2010, the United States District Court for the Northern District of Georgia issued an opinion finding that the complaint shows that the DOJ’s claims are essentially the same as the previous civil case, and, therefore, granted the Company’s motion and transferred the DOJ’s case to the United States District Court for the District of Columbia. Discovery has closed, and the Court has denied motions filed by the parties relating to additional discovery and expert witnesses.  Each party filed Motions for Summary Judgment, which were briefed in April 2014. In March 2015, the Court denied both Motions for Summary Judgment and requested supplemental briefing, which both sides submitted in June 2015. In October 2015, the Court requested additional briefing due in December 2015 to resolve legal issues before trial. Substantive briefing on these legal issues was completed on February 9, 2016. The parties now await a hearing with the Court to discuss the issues and potentially to set the case for trial. Until such time as the Court issues rulings on the application of the law to the facts of this case, it is not possible to predict or determine the outcome of the legal proceeding, nor is it possible to estimate the amount of loss, if any, that would be associated with an adverse decision.

The cost associated with ongoing litigation or compliance could be substantial and could adversely affect the Company’s business, results of operations and financial condition.  In addition, in connection with certain property dispositions or formations of strategic joint ventures, the Company may be required to provide indemnification against liabilities associated with above litigation.

Post Properties, Inc.

Post Apartment Homes, L.P.

 

13


A breach of the Company’s privacy or information security systems could materially adversely affect the Company’s business and financial condition.

Privacy and information security risks have generally increased in recent years because of the proliferation of new technologies and the increased sophistication and activities of perpetrators of cyber attacks.  As a result, privacy and information security and the continued development and enhancement of the controls and processes designed to protect the Company’s systems, computers, software, data and networks from attack, damage or unauthorized access remain a priority for the Company.

The Company’s business requires it to use and store customer and employee personal identifying information.  This may include names, addresses, phone numbers, email addresses, contact preferences, tax identification numbers, and payment account information.  The collection and use of personal identifiable information is governed by federal and state laws and regulations.  Privacy and information security laws continue to evolve and may be inconsistent from one jurisdiction to another.  Compliance with all such laws and regulations may increase the Company’s operating costs and adversely impact the Company’s ability to market the Company’s properties and services.

The Company devotes significant resources to network security to protect the Company’s systems and data.  The Company’s security measures include user names and passwords to access Company information technology systems.  The Company also uses encryption and authentication technologies to secure the transmission and storage of data.  These security measures, however, cannot provide absolute security.  They may be compromised as a result of third-party security breaches, employee error, malfeasance, faulty password management, or other irregularity, and result in persons obtaining unauthorized access to company data or accounts, including personally identifiable information of tenants and employees.  As cyber threats continue to evolve, the Company may be required to expend additional resources to continue to enhance the Company’s information security measures and/or to investigate and remediate any information security vulnerabilities.  Regardless, the Company may experience a breach of the Company’s systems and may be unable to protect sensitive data.  Moreover, if a computer security breach affects the company’s systems or results in the unauthorized release of personal identifying information, the Company’s reputation and brand could be materially damaged and materially adversely affect the Company’s business.  The Company also may be exposed to a risk of loss or litigation and possible liability, which could result in a material adverse effect on the Company’s business, results of operations and financial condition.

Losses from natural catastrophes may exceed insurance coverage.

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

Potential liability for environmental contamination could result in substantial costs.

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

Costs associated with moisture infiltration and resulting mold remediation may be costly.

As a general matter, concern about indoor exposure to mold has been increasing as such exposure has been alleged to have a variety of adverse effects on health. As a result, there have been a number of lawsuits in the Company’s industry against owners and managers

Post Properties, Inc.

Post Apartment Homes, L.P.

 

14


of apartment communities relating to moisture infiltration and resulting mold. Mold growth may be attributed to the use of exterior insulation finishing systems. The Company has implemented guidelines and procedures to address moisture infiltration and resulting mold issues if and when they arise. The terms of the Company’s property and general liability policies generally exclude certain mold-related claims. Should an uninsured loss arise against the Company, it would be required to use its funds to resolve the issue, including litigation costs. The Company makes no assurance that liabilities resulting from moisture infiltration and the presence of or exposure to mold will not have a future adverse impact on its business, results of operations and financial condition.

The Company may experience increased costs to own and maintain its properties.

The Company may experience increased costs associated with capital improvements and routine property maintenance, such as repairs to the foundation, exterior walls, and rooftops of its properties, as its properties advance through their life-cycles. In addition, the Company has recently experienced increases in the amount of real property taxes it must pay on its properties and its expenses related to property taxes may further increase as property tax rates change and as its properties are assessed or reassessed by tax authorities. Any increases in the Company’s expenses to own and maintain its properties would consequently reduce the Company’s cash flow.

The Company’s previous investment in for-sale condominium housing exposes the Company to continuing risks and challenges.

The Company has no further investment in condominium assets and does not expect to further engage in the for-sale condominium business in future periods. However, the Company will continue to be exposed to additional risks and challenges related to warranty claims and related obligations, which could have an adverse impact on the Company’s business, results of operations and financial condition.

The Company’s joint ventures and joint ownership of properties and partial interests in corporations and limited partnerships could limit the Company’s ability to control such properties and partial interests.

Instead of purchasing certain apartment communities directly, the Company has invested and may continue to invest as a co-venturer.  The Company has also chosen to sell partial interests in certain apartment communities to co-venturers and may continue this strategy in the future.  Joint venturers often have shared control over the operations of the joint venture assets.  Therefore, it is possible that the co-venturer in an investment might become bankrupt, or have economic or business interests or goals that are inconsistent with the Company’s business interests or goals, or be in a position to take action contrary to the Company’s instructions, requests, policies or objectives.  Consequently, a co-venturer’s actions might subject property owned by the joint venture to additional risk.  Although the Company seeks to maintain sufficient influence of any joint venture to achieve its objectives, the Company may be unable to take action without the Company’s joint venture partners’ approval, or joint venture partners could take actions binding on the joint venture without the Company’s consent.  Additionally, should a joint venture partner become bankrupt, the Company could become liable for such partner’s share of joint venture liabilities.

The Company may be unable to renew leases or relet units as leases expire.

When the Company’s residents decide not to renew their leases upon expiration, the Company may not be able to relet their units.  Even if the residents do renew or the Company can relet the units, the terms of renewal or reletting may be less favorable than current lease terms.  Because the majority of the Company’s leases are for apartments, they are generally for no more than one year.  If the Company is unable to promptly renew the leases or relet the units, or if the rental rates upon renewal or reletting are significantly lower than expected rates, then the Company’s results of operations and financial condition will be adversely affected.  Consequently, the Company’s cash flow and ability to service debt and make distributions to security holders would be reduced.

The Company may fail to qualify as a REIT for federal income tax purposes.

The Company’s qualification as a REIT for federal income tax purposes depends upon its ability to meet on a continuing basis, through actual annual operating results, distribution levels and diversity of stock ownership, the various qualification tests and organizational requirements imposed upon REITs under the Code. The Company believes that it has qualified for taxation as a REIT for federal income tax purposes commencing with its taxable year ended December 31, 1993, and plans to continue to meet the requirements to qualify as a REIT in the future. Many of these requirements, however, are highly technical and complex. Therefore, the Company may not have qualified or may not continue to qualify in the future as a REIT. The determination that the Company qualifies as a REIT for federal income tax purposes requires an analysis of various factual matters that may not be totally within the Company’s control. Even a technical or inadvertent mistake could jeopardize the Company’s REIT status. Furthermore, Congress and

Post Properties, Inc.

Post Apartment Homes, L.P.

 

15


the Internal Revenue Service (“IRS”) has and may continue to make changes to the tax laws and regulations, and the courts might issue new decisions that make it more difficult, or impossible, for the Company to remain qualified as a REIT. The Company does not believe, however, that any new, pending or proposed tax law changes would jeopardize its REIT status.

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

The Operating Partnership may fail to be treated as a partnership for federal income tax purposes.

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

Changes in market conditions and volatility of share prices could adversely affect the market price of the Company’s common stock.

The stock markets, including the New York Stock Exchange, on which the Company lists its common shares, have experienced significant price and volume fluctuations. As a result, the market price of the Company’s common stock could be similarly volatile, and investors in the Company’s common stock may experience a decrease in the value of their shares, including decreases due to economic or market factors and unrelated to the Company’s operating performance or prospects.  Furthermore, the Company is subject to research coverage by securities and industry analysts. If one or more of present or future analysts who cover the Company were to downgrade its common stock or publish inaccurate or unfavorable research about its business, the Company’s stock price would likely decline.

The Company’s shareholders may not be able to effect a change of control.

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

Preferred shares. The Company’s articles of incorporation provide that the Company has the authority to issue up to 20,000 shares of preferred stock, of which 868 were outstanding as of December 31, 2015. The board of directors has the authority, without the approval of the shareholders, to issue additional shares of preferred stock and to establish the preferences and rights of such shares. The issuance of preferred stock could have the effect of delaying or preventing a change of control of the Company, even if a change of control were in the shareholders’ interest.

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

Ownership Limit. One of the requirements for maintenance of the Company’s qualification as a REIT for federal income tax purposes is that no more than 50% in value of its outstanding capital stock may be owned by five or fewer individuals, including entities specified in the Internal Revenue Code, during the last half of any taxable year. To facilitate maintenance of its qualification as a REIT for federal income tax purposes, the ownership limit under the Company’s articles of incorporation prohibits ownership, directly or by virtue of the attribution provisions of the Internal Revenue Code, by any person or persons acting as a group of more than 6.0% of the

Post Properties, Inc.

Post Apartment Homes, L.P.

 

16


issued and outstanding shares of the Company’s common stock, subject to certain exceptions, including an exception for shares of common stock held by the Company’s former chairman and former vice chairman and certain investors for which the Company has waived the ownership limit. Together, these limitations are referred to as the “ownership limit.” Further, the Company’s articles of incorporation include provisions allowing it to stop transfers of its shares and to redeem its shares that are intended to assist the Company in complying with these requirements.

The Company may experience increased costs arising from health care reform.

Minimum employee health care coverage mandated by state or federal legislation, such as the federal healthcare reform legislation that became law in March 2010 could increase the Company’s employee health benefit costs or require it to alter the benefits it provides to employees. The legislation imposes implementation effective dates extending through 2020, and many of the changes require additional guidance from government agencies or federal regulations.  Therefore, due to the phased-in nature of the implementation and the lack of interpretive guidance, in some cases, it is difficult to determine at this time what impact the health care reform legislation will have on the Company’s financial results.  If the Company’s employee health benefit costs increase, its results of operations, financial position and cash flows could be materially adversely affected.

 

 

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None.

 

 

ITEM 2.

PROPERTIES

At December 31, 2015, the Company owned 57 completed Post® multi-family apartment communities, including a second phase of one community in lease-up and four communities held in unconsolidated entities.  These communities are summarized below by metropolitan area.

 

Metropolitan Area

 

Communities

 

# of Units

 

% of Total

Atlanta, GA

 

15

 

6,607

 

30.2%

Dallas, TX

 

15

 

4,726

 

21.6%

Greater Washington, D.C.

 

7

 

2,914

 

13.3%

Tampa, FL

 

5

 

2,342

 

10.7%

Charlotte, NC

 

5

 

1,748

 

8.0%

Orlando, FL

 

3

 

1,308

 

6.0%

Houston, TX

 

2

 

895

 

4.1%

Austin, TX

 

4

 

935

 

4.3%

Raleigh, NC

 

1

 

397

 

1.8%

 

 

57

 

21,872

 

100.0%

 

Thirty-seven of the communities have equal to or in excess of 300 apartment units, with the largest community having a total of 1,334 apartment units.  The average age of the communities is approximately 14.8 years.  The average economic occupancy rate was 96.1% and 95.8% for 2015 and 2014, respectively, and the average monthly rental rate per apartment unit was $1,453 and $1,421, respectively, for the 50 communities stabilized for 2015 and 2014.  See “Selected Financial Information.”

At December 31, 2015, the Company had 2,630 apartment units in seven communities currently under construction or in lease-up. A second phase of one community in lease-up, totaling 340 apartment units, is included in the table above and in the community information on pages 18 and 19.

Post Properties, Inc.

Post Apartment Homes, L.P.

 

17


Community Information

 

 

 

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

Completed/

 

 

 

 

 

December 2015

 

 

2015

Market /

 

Year of

 

 

 

 

 

Average

 

 

Average

Submarket /

 

Substantial

 

No. of

 

 

Rental Rates

 

 

Economic

Community

 

Renovations

 

Units

 

 

Per Unit

 

 

Occ. (1)

Atlanta

 

 

 

 

 

 

 

 

 

 

 

 

Buckhead / Brookhaven

 

 

 

 

 

 

 

 

 

 

 

 

Post Alexander™

 

2008

 

307

 

 

$

1,800

 

 

96.9%

The High Rise at Post Alexander™ (5)

 

2015

 

340

 

 

 

1,916

 

 

N/A

Post Brookhaven®

 

1990-1992 (3)

 

735

 

 

 

1,279

 

 

97.6%

Post Chastain®

 

1990/2008

 

558

 

 

 

1,369

 

 

96.8%

Post Collier Hills® (2)

 

1997

 

396

 

 

 

1,286

 

 

95.8%

Post Gardens®

 

1998

 

397

 

 

 

1,383

 

 

96.2%

Post Glen®

 

1997

 

314

 

 

 

1,454

 

 

97.3%

Post Lindbergh® (2)

 

1998

 

396

 

 

 

1,342

 

 

95.1%

Post Peachtree Hills®

 

1992-1994/2009 (3)

 

300

 

 

 

1,493

 

 

97.0%

Post StratfordTM (4)

 

2000

 

250

 

 

 

1,431

 

 

95.5%

Dunwoody

 

 

 

 

 

 

 

 

 

 

 

 

Post Crossing®

 

1995

 

354

 

 

 

1,297

 

 

98.0%

Emory Area

 

 

 

 

 

 

 

 

 

 

 

 

Post BriarcliffTM

 

1999

 

688

 

 

 

1,378

 

 

96.1%

Midtown

 

 

 

 

 

 

 

 

 

 

 

 

Post ParksideTM

 

2000

 

188

 

 

 

1,619

 

 

96.9%

Northwest Atlanta

 

 

 

 

 

 

 

 

 

 

 

 

Post Crest® (2)

 

1996

 

410

 

 

 

1,209

 

 

97.8%

Post Riverside®

 

1998

 

522

 

 

 

1,681

 

 

97.0%

Post SpringTM

 

2000

 

452

 

 

 

1,150

 

 

97.1%

Subtotal/Average – Atlanta (5)

 

 

 

 

6,607

 

 

 

1,417

 

 

96.8%

Dallas

 

 

 

 

 

 

 

 

 

 

 

 

North Dallas

 

 

 

 

 

 

 

 

 

 

 

 

Post Addison CircleTM

 

1998-2000 (3)

 

 

1,334

 

 

 

1,169

 

 

96.5%

Post EastsideTM

 

2008

 

435

 

 

 

1,267

 

 

95.8%

Post Legacy

 

2000

 

384

 

 

 

1,179

 

 

96.2%

Post Sierra at Frisco Bridges™

 

2009

 

268

 

 

 

1,195

 

 

96.4%

Uptown Dallas

 

 

 

 

 

 

 

 

 

 

 

 

Post AbbeyTM

 

1996

 

34

 

 

 

2,147

 

 

96.0%

Post Cole’s CornerTM

 

1998

 

186

 

 

 

1,240

 

 

97.0%

Post GalleryTM

 

1999

 

34

 

 

 

3,065

 

 

94.6%

Post HeightsTM

 

1998-1999/2009 (3)

 

368

 

 

 

1,402

 

 

96.7%

Post Katy Trail™

 

2010

 

227

 

 

 

1,669

 

 

96.2%

Post MeridianTM

 

1991

 

133

 

 

 

1,513

 

 

94.0%

Post SquareTM

 

1996

 

217

 

 

 

1,411

 

 

95.6%

Post Uptown VillageTM

 

1995-2000 (3)

 

496

 

 

 

1,178

 

 

97.7%

Post VineyardTM

 

1996

 

116

 

 

 

1,209

 

 

98.0%

Post VintageTM

 

1993

 

160

 

 

 

1,273

 

 

97.7%

Post WorthingtonTM

 

1993/2008

 

334

 

 

 

1,460

 

 

96.5%

Subtotal/Average – Dallas

 

 

 

 

4,726

 

 

 

1,293

 

 

96.5%

Austin

 

 

 

 

 

 

 

 

 

 

 

 

Post Barton Creek™

 

1998

 

 

160

 

 

 

1,828

 

 

95.1%

Post Park Mesa™

 

1992

 

 

148

 

 

 

1,577

 

 

94.4%

Post South Lamar™

 

2013

 

 

298

 

 

 

1,581

 

 

92.6%

Post West Austin™

 

2009

 

329

 

 

 

1,476

 

 

95.4%

Subtotal/Average – Austin

 

 

 

 

935

 

 

 

1,586

 

 

94.3%

 

 

 

 

 

 

 

 

 

 

 

 

 

Post Properties, Inc.

Post Apartment Homes, L.P.

 

18


Community Information

  

 

 

Year

 

 

 

 

 

 

 

 

 

 

 

 

Completed/

 

 

 

 

 

December 2015

 

 

2015

Market /

 

Year of

 

 

 

 

 

Average

 

 

Average

Submarket /

 

Substantial

 

No. of

 

 

Rental Rates

 

 

Economic

Community

 

Renovations

 

Units

 

 

Per Unit

 

 

Occ. (1)

Houston

 

 

 

 

 

 

 

 

 

 

 

 

Post Midtown Square®

 

1999/2013 (3)

 

653

 

 

$

1,491

 

 

93.5%

Post 510™

 

2014

 

242

 

 

 

1,582

 

 

93.5%

Subtotal/Average – Houston

 

 

 

 

895

 

 

 

1,516

 

 

93.5%

Tampa

 

 

 

 

 

 

 

 

 

 

 

 

Post Bay at Rocky Point™

 

1997

 

150

 

 

 

1,521

 

 

97.2%

Post Harbour PlaceTM

 

1999-2002 (3)

 

578

 

 

 

1,600

 

 

97.0%

Post Hyde Park®

 

1996-2008 (3)

 

467

 

 

 

1,575

 

 

97.2%

Post Rocky Point®

 

1996-1998 (3)

 

916

 

 

 

1,375

 

 

96.7%

Post Soho Square™

 

2014

 

231

 

 

 

1,774

 

 

98.3%

Subtotal/Average – Tampa

 

 

 

 

2,342

 

 

 

1,519

 

 

97.1%

Orlando

 

 

 

 

 

 

 

 

 

 

 

 

Post Lake® at Baldwin Park

 

2004-2007 (3)

 

350

 

 

 

1,539

 

 

98.0%

Post Lake® at Baldwin Park - Phase III

 

2013

 

410

 

 

 

1,581

 

 

95.6%

Post Lakeside™

 

2013

 

300

 

 

 

1,409

 

 

96.4%

Post ParksideTM

 

1999

 

248

 

 

 

1,558

 

 

97.2%

Subtotal/Average – Orlando

 

 

 

 

1,308

 

 

 

1,526

 

 

96.7%

Charlotte

 

 

 

 

 

 

 

 

 

 

 

 

Post Ballantyne

 

2004

 

323

 

 

 

1,266

 

 

96.3%

Post Gateway PlaceTM

 

2000

 

436

 

 

 

1,160

 

 

95.3%

Post Park at Phillips Place®

 

1998

 

402

 

 

 

1,447

 

 

94.6%

Post South End™

 

2009

 

360

 

 

 

1,410

 

 

96.1%

Post Uptown PlaceTM

 

2000

 

227

 

 

 

1,226

 

 

96.1%

Subtotal/Average – Charlotte

 

 

 

 

1,748

 

 

 

1,306

 

 

95.6%

Raleigh

 

 

 

 

 

 

 

 

 

 

 

 

Post Parkside™ at Wade

 

2013

 

397

 

 

 

1,078

 

 

93.8%

Washington D.C.

 

 

 

 

 

 

 

 

 

 

 

 

Maryland

 

 

 

 

 

 

 

 

 

 

 

 

Post Fallsgrove

 

2003

 

361

 

 

 

1,672

 

 

96.4%

Post Park®

 

2010

 

396

 

 

 

1,653

 

 

95.4%

Virginia

 

 

 

 

 

 

 

 

 

 

 

 

Post Carlyle Square™

 

2006/2013 (3)

 

549

 

 

 

2,253

 

 

93.6%

Post Corners at Trinity Centre

 

1996

 

336

 

 

 

1,553

 

 

96.4%

Post Pentagon Row TM

 

2001

 

504

 

 

 

2,189

 

 

95.0%

Post Tysons Corner TM

 

1990

 

499

 

 

 

1,706

 

 

96.6%

Washington D.C.

 

 

 

 

 

 

 

 

 

 

 

 

Post Massachusetts Avenue TM (2)

 

2002

 

269

 

 

 

3,297

 

 

95.5%

Subtotal/Average – Washington, D.C.

 

 

 

 

2,914

 

 

 

2,011

 

 

95.3%

Total

 

 

 

 

21,872

 

 

$

1,483

 

 

96.1%

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Average economic occupancy is defined as gross potential rent less vacancy losses, model expenses and bad debt divided by gross potential rent for the period, expressed as a percentage.

(2)

These communities are owned in unconsolidated entities.

(3)

These dates represent the respective completion dates for multiple phases of a community.

(4)

The Company has a leasehold interest in the land underlying this community.

(5)

This community was in lease-up during 2015; therefore, the average economic occupancy information is not included above. As such, the respective market average economic occupancy and market average rental rate totals exclude this community.

 

 


Post Properties, Inc.

Post Apartment Homes, L.P.

 

19


ITEM 3.

LEGAL PROCEEDINGS

In September 2010, the United States Department of Justice (the “DOJ”) filed a lawsuit against the Company in the United States District Court for the Northern District of Georgia.  The suit alleges various violations of the Fair Housing Act (“FHA”) and the Americans with Disabilities Act (“ADA”) at properties designed, constructed or operated by the Company in the District of Columbia, Virginia, Florida, Georgia, New York, North Carolina and Texas.  The plaintiff seeks statutory damages and a civil penalty in unspecified amounts, as well as injunctive relief that includes retrofitting apartments and public use areas to comply with the FHA and the ADA and prohibiting construction or sale of noncompliant units or complexes.  The Company filed a motion to transfer the case to the United States District Court for the District of Columbia, where a previous civil case involving alleged violations of the FHA and ADA by the Company was filed and ultimately dismissed.  On October 29, 2010, the United States District Court for the Northern District of Georgia issued an opinion finding that the complaint shows that the DOJ’s claims are essentially the same as the previous civil case, and, therefore, granted the Company’s motion and transferred the DOJ’s case to the United States District Court for the District of Columbia. Discovery has closed, and the Court has denied motions filed by the parties relating to additional discovery and expert witnesses.  Each party filed Motions for Summary Judgment, which were briefed in April 2014. In March 2015, the Court denied both Motions for Summary Judgment and requested supplemental briefing, which both sides submitted in June 2015. In October 2015, the Court requested additional briefing due in December 2015 to resolve legal issues before trial. Substantive briefing on these legal issues was completed on February 9, 2016. The parties now await a hearing with the Court to discuss the issues and potentially to set the case for trial. Until such time as the Court issues rulings on the application of the law to the facts of this case, it is not possible to predict or determine the outcome of the legal proceeding, nor is it possible to estimate the amount of loss, if any, that would be associated with an adverse decision.

The Company is involved in various other legal proceedings incidental to their business from time to time, some 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 various other legal proceedings will not have a material effect on the Company’s results of operations, cash flows or financial position.

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable

 

 


Post Properties, Inc.

Post Apartment Homes, L.P.

 

20


ITEM X.

EXECUTIVE OFFICERS OF THE REGISTRANT

The persons who are executive officers of the Company and its affiliates and their positions as of February 15, 2016 are as follows:

 

NAME

 

POSITIONS AND OFFICES HELD

David P. Stockert

 

President and Chief Executive Officer

Christopher J. Papa

 

Executive Vice President and Chief Financial Officer

Sherry W. Cohen

 

Executive Vice President and Corporate Secretary

David C. Ward

 

Executive Vice President and Chief Investment Officer

Charles A. Konas

 

Executive Vice President, Construction and Property Services

S. Jamie Teabo

 

Executive Vice President, Property Management