UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from     to     

POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices — zip code)

(Registrant’s telephone number, including area code)

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 registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Post Properties, Inc.	Yes þ	No o
Post Apartment Homes, L.P.	Yes þ	No o

Indicate by check mark whether the registrants are large accelerated filers, accelerated filers, or non-accelerated filers. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Post Properties, Inc.		Large Accelerated Filer þ		Accelerated Filer o		Non-Accelerated Filer o
Post Apartment Homes, L.P.		Large Accelerated Filer o		Accelerated Filer o		Non-Accelerated Filer þ

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the
Exchange Act).

Post Properties, Inc.		Yes o		No þ
Post Apartment Homes, L.P.		Yes o		No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date:

43,707,277 shares of common stock outstanding as of November 1, 2007.

 

 

POST PROPERTIES, INC.
POST APARTMENT HOMES, L.P.

INDEX

				Page
Part I		FINANCIAL INFORMATION
		Item 1      Financial Statements
		POST PROPERTIES, INC.
		Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006		1
		Consolidated Statements of Operations for the three and nine months ended September 30, 2007 and 2006		2
		Consolidated Statement of Shareholders’ Equity and Accumulated Earnings for the nine months ended September 30, 2007		3
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006		4
		Notes to Consolidated Financial Statements		5
		POST APARTMENT HOMES, L.P.
		Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006		20
		Consolidated Statements of Operations for the three and nine months ended September 30, 2007 and 2006		21
		Consolidated Statement of Partners’ Equity for the nine months ended September 30, 2007		22
		Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006		23
		Notes to Consolidated Financial Statements		24
		Item 2       Management’s Discussion and Analysis of Financial Condition and Results of Operations		39
		Item 3       Quantitative and Qualitative Disclosures about Market Risk		57
		Item 4       Controls and Procedures		57
Part II		OTHER INFORMATION
		Item 1       Legal Proceedings		58
		Item 1A    Risk Factors		58
		Item 2       Unregistered Sales of Equity Securities and Use of Proceeds		58
		Item 3       Defaults Upon Senior Securities		58
		Item 4       Submission of Matters to a Vote of Security Holders		58
		Item 5       Other Information		58
		Item 6       Exhibits		59
		Signatures		60
		Exhibit Index		62
EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
EX-32.2 SECTION 906 CERTIFICATION OF THE CFO

POST PROPERTIES, INC.

		September 30,				December 31,
		2007				2006
		(Unaudited)
Assets
Real estate assets
Land		$	275,235			$	278,448
Building and improvements			1,859,323				1,821,123
Furniture, fixtures and equipment			203,167				204,318
Construction in progress			81,377				135,428
Land held for future development			186,698				92,800
			2,605,800				2,532,117
Less: accumulated depreciation			(555,440	)			(547,477	)
For-sale condominiums			44,513				28,295
Assets held for sale, net of accumulated depreciation of $21,744 and $4,035 at September 30, 2007 and December 31, 2006, respectively			45,807				15,645
Total real estate assets			2,140,680				2,028,580
Investments in and advances to unconsolidated real estate entities			22,707				32,794
Cash and cash equivalents			2,643				3,663
Restricted cash			3,595				5,203
Deferred charges, net			10,489				12,400
Other assets			39,210				34,007
Total assets		$	2,219,324			$	2,116,647
Liabilities and shareholders’ equity
Indebtedness, including $9,895 and $0 of debt secured by assets held for sale at September 30, 2007 and December 31, 2006, respectively		$	1,070,994			$	1,033,779
Accounts payable and accrued expenses			90,944				75,403
Dividend and distribution payable			21,840				19,886
Accrued interest payable			12,767				4,885
Security deposits and prepaid rents			8,967				9,915
Total liabilities			1,205,512				1,143,868
Minority interest of common unitholders in Operating Partnership			12,580				14,057
Minority interests in consolidated real estate entities			3,496				2,268
Total minority interests			16,076				16,325
Commitments and contingencies
Shareholders’ equity
Preferred stock, $.01 par value, 20,000 authorized:
8 1/2% Series A Cumulative Redeemable Shares, liquidation preference $50 per share, 900 shares issued and outstanding			9				9
7 5/8% Series B Cumulative Redeemable Shares, liquidation preference $25 per share, 2,000 shares issued and outstanding			20				20
Common stock, $.01 par value, 100,000 authorized:
43,685 and 43,440 shares issued, 43,681 and 43,440 shares outstanding at September 30, 2007 and December 31, 2006, respectively			437				436
Additional paid-in-capital			871,156				869,587
Accumulated earnings			132,373				97,567
Accumulated other comprehensive income (loss)			(3,266	)			(3,490	)
			1,000,729				964,129
Less common stock in treasury, at cost, 72 and 175 shares at September 30, 2007 and December 31, 2006, respectively			(2,993	)			(7,675	)
Total shareholders’ equity			997,736				956,454
Total liabilities and shareholders’ equity		$	2,219,324			$	2,116,647

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

POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Revenues
Rental		$	73,595			$	70,217			$	216,834			$	204,355
Other property revenues			4,245				4,443				12,186				12,460
Other			171				49				416				200
Total revenues			78,011				74,709				229,436				217,015
Expenses
Property operating and maintenance (exclusive of items shown separately below)			35,714				34,825				106,395				100,081
Depreciation			16,638				16,554				49,910				48,874
General and administrative			4,761				4,406				16,168				13,464
Investment and development			2,006				1,332				5,512				4,500
Total expenses			59,119				57,117				177,985				166,919
Operating income			18,892				17,592				51,451				50,096
Interest income			189				400				652				982
Interest expense			(12,831	)			(13,465	)			(38,850	)			(39,732	)
Amortization of deferred financing costs			(828	)			(882	)			(2,469	)			(2,651	)
Gains on sales of real estate assets, net			5,061				2,114				71,506				10,525
Equity in income of unconsolidated real estate entities			402				527				1,216				1,251
Other income (expense)			(262	)			898				(784	)			2,592
Minority interest in consolidated property partnerships			(585	)			(85	)			(1,416	)			(177	)
Minority interest of common unitholders			(91	)			(80	)			(1,072	)			(344	)
Income from continuing operations			9,947				7,019				80,234				22,542
Discontinued operations
Income from discontinued property operations, net of minority interest			795				1,400				2,026				4,280
Gains on sales of real estate assets, net of minority interest			307				27,503				17,197				27,885
Loss on early extinguishment of indebtedness, net of minority interest			—				(121	)			—				(121	)
Income from discontinued operations			1,102				28,782				19,223				32,044
Net income			11,049				35,801				99,457				54,586
Dividends to preferred shareholders			(1,909	)			(1,909	)			(5,728	)			(5,728	)
Net income available to common shareholders		$	9,140			$	33,892			$	93,729			$	48,858
Per common share data — Basic
Income from continuing operations (net of preferred dividends)		$	0.18			$	0.12			$	1.71			$	0.39
Income from discontinued operations			0.03				0.67				0.44				0.75
Net income available to common shareholders		$	0.21			$	0.79			$	2.16			$	1.15
Weighted average common shares outstanding — basic			43,524				43,137				43,452				42,616
Per common share data — Diluted
Income from continuing operations (net of preferred dividends)		$	0.18			$	0.12			$	1.69			$	0.39
Income from discontinued operations			0.02			$	0.65				0.44				0.74
Net income available to common shareholders		$	0.21			$	0.77			$	2.12			$	1.13
Weighted average common shares outstanding — diluted			44,101				43,955				44,166				43,387

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

POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND ACCUMULATED EARNINGS
(In thousands, except per share data)
(Unaudited)

																		Accumulated
										Additional								Other
		Preferred				Common				Paid-in				Accumulated				Comprehensive				Treasury
		Stock				Stock				Capital				Earnings				Income (Loss)				Stock				Total
Shareholders’ Equity and Accumulated Earnings, December 31, 2006		$	29			$	436			$	869,587			$	97,567			$	(3,490	)		$	(7,675	)		$	956,454
Comprehensive income
Net income			—				—				—				99,457				—				—				99,457
Net change in derivatives, net of minority interest			—				—				—				—				224				—				224
Total comprehensive income																											99,681
Proceeds from employee stock purchase, stock option and other plans			—				1				(211	)			—				—				5,074				4,864
Adjustment for minority interest of unitholders in Operating Partnership upon conversion of units into common shares and at dates of capital transactions			—				—				(1,249	)			—				—				3,302				2,053
Stock-based compensation, net of minority interest			—				—				3,029				—				—				—				3,029
Treasury stock acquisitions			—				—				—				—				—				(3,694	)			(3,694	)
Dividends to preferred shareholders			—				—				—				(5,728	)			—				—				(5,728	)
Dividends to common shareholders ($1.35 per share)			—				—				—				(58,923	)			—				—				(58,923	)
Shareholders’ Equity and Accumulated Earnings, September 30, 2007		$	29			$	437			$	871,156			$	132,373			$	(3,266	)		$	(2,993	)		$	997,736

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

POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)
(Unaudited)

		Nine months ended
		September 30,
		2007				2006
Cash Flows From Operating Activities
Net income		$	99,457			$	54,586
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			50,889				51,740
Amortization of deferred financing costs			2,469				2,651
Minority interest of common unitholders in Operating Partnership			1,072				344
Minority interest in discontinued operations			297				658
Minority interest in consolidated entities			1,416				177
Gains on sales of real estate assets			(88,969	)			(38,983	)
Other expense (income)			842				(1,719	)
Equity in income of unconsolidated entities			(1,216	)			(1,251	)
Distributions of earnings of unconsolidated entities			1,838				1,775
Deferred compensation			394				465
Stock-based compensation			3,072				2,129
Loss on early extinguishment of debt			—				123
Changes in assets, (increase) decrease in:
Other assets			(3,891	)			(2,532	)
Deferred charges			(139	)			(114	)
Changes in liabilities, increase (decrease) in:
Accrued interest payable			7,882				9,370
Accounts payable and accrued expenses			2,141				2,538
Security deposits and prepaid rents			660				488
Net cash provided by operating activities			78,214				82,445
Cash Flows From Investing Activities
Construction and acquisition of real estate assets, net of payables			(227,402	)			(185,053	)
Net proceeds from sales of real estate assets			182,231				111,471
Proceeds from sale of other investments			—				898
Capitalized interest			(8,659	)			(7,061	)
Annually recurring capital expenditures			(8,815	)			(9,143	)
Periodically recurring capital expenditures			(5,623	)			(4,446	)
Community rehabilitation and other revenue generating capital expenditures			(10,646	)			(6,490	)
Corporate additions and improvements			(1,932	)			(2,923	)
Distributions from unconsolidated entities			25,788				(3,384	)
Note receivable collections and other investments			837				1,234
Net cash used in investing activities			(54,221	)			(104,897	)
Cash Flows From Financing Activities
Payments on indebtedness			(112,159	)			(55,142	)
Proceeds from indebtedness			—				190,000
Lines of credit proceeds, net			149,734				(92,426	)
Payments of financing costs			(257	)			(3,960	)
Treasury stock acquisitions			(3,694	)			—
Proceeds from employee stock purchase and stock options plans			4,470				46,679
Capital contributions of minority interests			429				(1,183	)
Distributions to common unitholders			(882	)			(1,366	)
Dividends paid to preferred shareholders			(3,819	)			(3,819	)
Dividends paid to common shareholders			(58,835	)			(57,355	)
Net cash provided by (used in) financing activities			(25,013	)			21,428
Net decrease in cash and cash equivalents			(1,020	)			(1,024	)
Cash and cash equivalents, beginning of period			3,663				6,410
Cash and cash equivalents, end of period		$	2,643			$	5,386

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

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousansd, except per share and apartment unit data)

1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

     Organization

		Post Properties, Inc. and its subsidiaries develop, own and manage upscale multifamily apartment communities in selected markets in the United States. As used herein, the term “Company” includes Post Properties, Inc. and its subsidiaries, including Post Apartment Homes, L.P. (the “Operating Partnership”), unless the context indicates otherwise. The Company, through its wholly-owned subsidiaries is the general partner and owns a majority interest in the Operating Partnership which, through its subsidiaries, conducts substantially all of the on-going operations of the Company. At October 31, 2007, the Company owned 22,478 apartment units in 63 apartment communities, including 1,351 apartment units in four communities held in unconsolidated entities and 1,746 apartment units in five communities (and the expansion of one community) currently under construction and/or in lease-up. The Company is also developing 367 for-sale condominium homes (including 137 units in one community held in an unconsolidated entity) and is converting apartment homes in two communities initially consisting of 349 units into for-sale condominium homes through a taxable REIT subsidiary. At September 30, 2007, approximately 43.2%, 18.7%, 12.0% and 9.6% (on a unit basis) of the Company’s operating communities were located in the Atlanta, Dallas, the greater Washington D.C. and Tampa metropolitan areas, respectively.
		The Company has elected to qualify and operate as a self-administrated and self-managed real estate investment trust (“REIT”) for federal income tax purposes. A REIT is a legal entity which holds real estate interests and is generally not subject to federal income tax on the income it distributes to its shareholders.
		At September 30, 2007, the Company had outstanding 43,681 shares of common stock and owned the same number of units of common limited partnership interests (“Common Units”) in the Operating Partnership, representing a 98.6% common ownership interest in the Operating Partnership. Common Units held by persons other than the Company totaled 609 at September 30, 2007 and represented a 1.4% common minority interest in the Operating Partnership. Each Common Unit may be redeemed by the holder thereof for either one share of Company common stock or cash equal to the fair market value thereof at the time of redemption, at the option of the Company. The Company’s weighted average common ownership interest in the Operating Partnership was 98.6% and 98.4% for the three months ended and 98.6% and 98.0% for the nine months ended September 30, 2007 and 2006, respectively.
		Basis of Presentation
		The accompanying unaudited financial statements have been prepared by the Company’s management in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normally recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and nine months ended September 30, 2007 are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2006.
		The accompanying unaudited consolidated financial statements include the consolidated accounts of the Company, the Operating Partnership and their wholly owned subsidiaries. The Company also consolidates other entities in which it has a controlling financial interest or entities where it is determined to be the primary beneficiary under Financial Accounting Standards Board Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities.” Under FIN 46R, the primary beneficiary is required to consolidate a variable interest entity (“VIE”) for financial reporting purposes. The application of FIN 46R requires management to make significant estimates and judgments about the Company’s and its other partners’ rights, obligations and economic interests in such entities. Accordingly, the Company’s share of the net earnings or losses of entities accounted for using the equity method is included in consolidated net income. All significant inter-company accounts and transactions have been eliminated in consolidation. The minority interest of unitholders in the operations of the Operating Partnership is calculated based on the weighted average unit ownership during the period.
		Certain 2006 amounts have been reclassified to conform to the current year’s financial statement presentation.

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousansd, except per share and apartment unit data)

		Revenue Recognition
		Residential properties are leased under operating leases with terms of generally one year. Rental revenues from residential leases are recognized on the straight-line method over the approximate life of the leases, which is generally one year. Under the terms of residential leases, the residents of the Company’s residential communities are obligated to reimburse the Company for certain utility usage, water and electricity (at selected properties), where the Company is the primary obligor to the public utility entity. These utility reimbursements from residents are reflected as other property revenues in the consolidated statements of operations.
		Sales and the associated gains or losses of real estate assets and for-sale condominiums are recognized in accordance with the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 66, “Accounting for Sales of Real Estate.” For condominium conversion projects, revenues from individual condominium unit sales are recognized upon the closing of the sale transactions (the “Completed Contract Method”), as all conditions for full profit recognition have been met at that time and the conversion construction periods are typically very short. Under SFAS No. 66, the Company uses the relative sales value method to allocate costs and recognize profits from condominium conversion sales. In accordance with SFAS No. 144, “Accounting for the Impairment and Disposal of Long-Lived Assets,” gains on sales of condominium units at complete community condominium conversion projects are included in discontinued operations. For condominium conversion projects relating to a portion of an existing apartment community, the Company also recognizes revenues and the associated gains under the Completed Contract Method, as discussed herein. Since a portion of an operating community does not meet the requirements of a component of an entity under SFAS No. 144, the revenues and gains on sales of condominium units at partial condominium communities are included in continuing operations.
		For newly developed condominiums, the Company accounts for each project under either the Completed Contract Method or the “Percentage of Completion Method,” based on a specific evaluation of the factors specified in SFAS No. 66. The factors used to determine the appropriate accounting method are the legal commitment of the purchaser in the real estate contract, whether the construction of the project is beyond a preliminary phase, sufficient units have been contracted to ensure the project will not revert to a rental project, the aggregate project sale proceeds and costs can be reasonably estimated and the buyer has made an adequate initial and continuing cash investment under the contract in accordance with SFAS No. 66. Under the Percentage of Completion Method, revenues and the associated gains are recognized over the project construction period generally based on the percentage of total project costs incurred to estimated total projects costs for each condominium unit under a binding real estate contract. As of September 30, 2007, no condominium projects are accounted for under the Percentage of Completion Method.
		In November 2006 the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No. 06-8 (“EITF No. 06-8”), “Applicability of the Assessment of a Buyer’s Continuing Investment under FASB Statement No. 66 for Sales of Condominiums.” EITF No. 06-8 provided additional guidance on whether the seller of a condominium unit is required to evaluate the buyer’s continuing investment under SFAS No. 66 in order to recognize profit from the sale under the percentage of completion method. The EITF concluded that both the buyer’s initial and continuing investment must meet the criteria in SFAS No. 66 in order for condominium sale profits to be recognized under the percentage of completion method. Sales of condominiums not meeting the continuing investment test must be accounted for under the deposit method (a method consistent with the Company’s above stated Completed Contract Method). EITF No. 06-8 is effective January 1, 2008. As discussed above, the Company accounts for condominium sales using similar criteria to those stated in EITF No. 06-8. As a result, the Company does not expect that the adoption of EITF No. 06-8 will have a material impact on the Company’s financial position or results of operations.
		Recently Issued and Adopted Accounting Pronouncements
		FASB Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109,” was issued in July 2006. FIN 48 clarifies guidance on the recognition and measurement of uncertain tax positions and establishes a more likely than not standard for the evaluation of whether such tax positions can be recognized in the Company’s financial statements. Previously recognized tax positions that do not meet the more likely than not criteria were required to be adjusted on the implementation date. Additionally, FIN 48 requires additional disclosure regarding the nature and amount of uncertain tax positions, if any. The Company adopted FIN 48 on January 1, 2007, and the adoption did not have a material impact on the Company’s financial position and results of operations (see note 11).
		SFAS No. 157, “Fair Value Measurements,” was issued in September 2006. SFAS No. 157 provides a definition of fair value and establishes a framework for measuring fair value. SFAS No. 157 clarified the definition of fair value in an effort to eliminate inconsistencies in the application of fair value under generally accepted accounting principles. Additional disclosure focusing on the methods used to determine fair value is also required. SFAS No. 157 is effective for financial statements issued for fiscal

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousansd, except per share and apartment unit data)

years beginning after November 15, 2007 and should be applied prospectively. The Company does not expect that the adoption of SFAS No. 157 will have a material impact on the Company’s financial position and results of operations.

2. REAL ESTATE ACQUISITION AND DISPOSITION ACTIVITY

		Acquisitions
		In July 2007, the Company acquired an apartment community, containing 350 units, in Orlando, Florida for approximately $75,500, including closing costs. Additionally, the Company plans to spend approximately $1,250 to improve the community. The purchase price of these communities was allocated to the assets acquired based on their estimated fair values.
		Dispositions
		The Company classifies real estate assets as held for sale after the approval of its board of directors and after the Company has commenced an active program to sell the assets. At September 30, 2007, the Company had three apartment communities, containing 768 units, and certain parcels of land classified as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheet at $45,807, which represents the lower of their depreciated cost or fair value less costs to sell. At September 30, 2007, the Company also had portions of two communities being converted to condominiums, originally containing 349 units, and certain completed condominium units at newly developed condominium communities totaling $44,513 classified as for-sale condominiums on the accompanying consolidated balance sheet.
		In May 2007, the Company transferred two operating apartment communities to a newly formed unconsolidated entity in which the Company retained a 25% non-controlling interest, for aggregate proceeds of approximately $89,351. This transaction resulted in a gain on sale of real estate in continuing operations totaling approximately $55,300 for nine months ended September 30, 2007. Additionally, the unconsolidated entity obtained mortgage financing secured by the apartment communities totaling approximately $85,723, of which approximately $21,431 was distributed to the Company. For nine months ended September 30, 2007, gains on sales of real estate assets in continuing operations also included gains of $3,938 on the sale of land sites. For the nine months ended September 30, 2006, gains on sales of real estate assets in continuing operations included a gain of $503 on the sale of a land site.
		For the three and nine months ended September 30, 2007 and 2006, income from operations also included net gains from condominium sales activities at newly developed and condominium conversion projects representing portions of existing communities. In addition to the condominium gains included in continuing operations, the Company expensed certain sales and marketing costs associated with pre-sale condominium communities and condominium communities under development and such costs are included in condominium expenses in the table below. A summary of revenues and costs and expenses of condominium activities included in continuing operations for the three and nine months ended September 30, 2007 and 2006 was as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Condominium revenues		$	30,501			$	6,778			$	61,592			$	25,241
Condominium costs and expenses			(25,440	)			(5,167	)			(49,324	)			(15,219	)
Gains (losses) on sales of condominiums, net		$	5,061			$	1,611			$	12,268			$	10,022

Under SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” the operating results of real estate assets designated as held for sale are included in discontinued operations in the consolidated statement of operations for all periods presented. Additionally, all gains and losses on the sale of these assets are included in discontinued operations. For the three and nine months ended September 30, 2007, income from discontinued operations included the results of operations of three apartment communities classified as held for sale during the third quarter of 2007, one apartment community through its sale date in March 2007 and one condominium conversion community through its sell out date in February 2007. For the three and nine months ended September 30, 2006, income from discontinued operations included the results of operations of the three apartment communities classified as held for sale at September 30, 2007, the apartment community and the condominium conversion community sold in 2007 and three apartment communities sold in 2006 through their sale dates.

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousansd, except per share and apartment unit data)

The revenues and expenses of these communities for the three and nine months ended September 30, 2007 and 2006 were as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Revenues
Rental		$	2,120			$	4,805			$	6,691			$	16,211
Other property revenues			175				490				525				1,602
Total revenues			2,295				5,295				7,216				17,813
Expenses
Property operating and maintenance (exclusive of items shown separately below)			948				2,223				3,009				7,067
Depreciation			148				698				979				2,866
Interest			392				951				1,172				3,512
Total expenses			1,488				3,872				5,160				13,445
Income from discontinued property operations before minority interest			807				1,423				2,056				4,368
Minority interest			(12	)			(23	)			(30	)			(88	)
Income from discontinued property operations		$	795			$	1,400			$	2,026			$	4,280

		For the nine months ended September 30, 2007, the Company recognized net gains in discontinued operations of $16,974 ($16,714 net of minority interest) from the sale of one community, containing 182 units. This sale generated net proceeds of approximately $23,741. For the three and nine months ended September 30, 2006, the Company recognized net gains in discontinued operations of $28,120 ($27,555 net of minority interest) from the sale of one community, containing 696 units. The sale generated net proceeds of $116,876, including $40,000 of secured debt assumed by the purchaser.
		For the three months ended September 30, 2007, the Company recorded additional condominium gains of $311 resulting from the adjustment of unused warranty accruals from condominium communities sold out in prior years. For nine months ended September 30, 2007 and for the three and nine months ended September 30, 2006, gains on sales of real estate assets included in discontinued operations also included net gains from condominium sales at one condominium conversion community that sold out in the first quarter of 2007. A summary of revenues and costs and expenses of condominium activities included in discontinued operations for the three and nine months ended September 30, 2007 and 2006 was as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Condominium revenues		$	—			$	504			$	560			$	7,022
Condominium costs and expenses			311				(558	)			(70	)			(6,685	)
Gains (losses) on condominium sales, before minority interest			311				(54	)			490				337
Minority interest			(4	)			2				(7	)			(7	)
Gains (losses) on condominium sales, net of minority interest		$	307			$	(52	)		$	483			$	330

3. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES

		Apartment and Condominium Conversion Communities
		At September 30, 2007, the Company holds investments in five individual limited liability companies (the “Property LLCs”) with institutional investors. Three of the Property LLCs own apartment communities. A fourth Property LLC completed the sell-out of a condominium conversion community, initially consisting of 121 units, during the third quarter of 2007, and the fifth Property LLC commenced construction during the third quarter of 2007 of a mixed-use development, consisting of for-sale condominiums and Class A office space. The Company holds a 35% equity interest in two Property LLCs, each owning one apartment community, and the Property LLC that completed the condominium conversion and sale process. The Company holds a 25% interest in one Property LLC owning two apartment communities, and a 50% interest in the condominium portion of the Property LLC developing the mixed-use project.

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

		The Company’s investment in the 25% owned Property LLC resulted from the transfer of two previously owned apartment communities to the Property LLC co-owned with an institutional investor in May 2007. The assets, liabilities and members’ equity of the Property LLC were recorded at fair value based on agreed-upon amounts contributed to the venture. At September 30, 2007, the Company’s investment in the 25% owned Property LLC reflects a credit investment of $9,951 resulting primarily from distributions of financing proceeds in excess of the Company’s historical cost investment. The credit investment is reflected in consolidated liabilities on the Company’s consolidated balance sheet.
		The Company accounts for its investments in these Property LLCs using the equity method of accounting. At September 30, 2007, the Company’s investment in these Property LLCs totaled $22,707, excluding the credit investment discussed above. The excess of the Company’s investment over its equity in the underlying net assets of certain Property LLCs was approximately $5,234 at September 30, 2007. This excess investment is being amortized as a reduction of earnings on a straight-line basis over the lives of the related assets. The Company provides real estate services (property and asset management) to the Property LLCs for which it earns fees.
		The operating results of the Company include its allocable share of net income from the investments in the Property LLCs. A summary of financial information for the Property LLCs in the aggregate was as follows:

		September 30,				December 31,
Balance Sheet Data		2007				2006
Real estate assets, net of accumulated depreciation of $13,841 and $11,039, respectively		$	255,900			$	93,614
Assets held for sale, net			—				3,027
Cash and other			5,628				4,067
Total assets		$	261,528			$	100,708
Mortgage/construction notes payable		$	161,274			$	66,998
Other liabilities			5,303				1,107
Total liabilities			166,577				68,105
Members’ equity			94,951				32,603
Total liabilities and members’ equity		$	261,528			$	100,708
Company’s equity investment in Property LLCs		$	12,756			$	16,883

		Three months ended								Nine months ended
		September 30,								September 30,
Income Statement Data		2007				2006				2007				2006
Revenues
Rental		$	5,450			$	2,859			$	12,406			$	5,648
Other property revenues			372				212				851				422
Other			45				32				82				56
Total revenues			5,867				3,103				13,339				6,126
Expenses
Property operating and maintenance			2,279				928				4,837				1,913
Depreciation and amortization			1,920				661				3,861				1,320
Interest			1,921				688				3,941				1,376
Total expenses			6,120				2,277				12,639				4,609
Income from continuing operations			(253	)			826				700				1,517
Discontinued operations
Income (loss) from discontinued operations			4				(120	)			34				(283	)
Gains on sales of real estate assets, net			41				502				817				899
Income from discontinued operations			45				382				851				616
Net income		$	(208	)		$	1,208			$	1,551			$	2,133
Company’s share of net income		$	402			$	527			$	1,216			$	1,251

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

For the three and nine months ended September 30, 2007 and 2006, gains on real estate assets represent net gains from condominium sales at the condominium conversion community held by one of the Property LLCs. A summary of revenues and costs and expenses of condominium activities for the three and nine months ended September 30, 2007 and 2006 was as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Condominium revenues		$	260			$	5,138			$	4,592			$	9,224
Condominium costs and expenses			(219	)			(4,636	)			(3,775	)			(8,325	)
Gains on condominium sales, net		$	41			$	502			$	817			$	899

		At September 30, 2007, mortgage/construction notes payable include a $49,997 mortgage note that bears interest at 4.13%, requires monthly interest payments and annual principal payments of $1 through 2009. Thereafter, the note requires monthly principal and interest payments based on a 25-year amortization schedule and matures in 2034. The note is callable by the lender in 2009 and on each successive fifth year anniversary of the note thereafter. The note is prepayable without penalty in 2008. Another mortgage note payable totaling $17,000 bears interest at a fixed rate of 4.04% requires interest only payments and matures in 2008. Two additional mortgage notes entered into in conjunction with the formation of the 25% owned Property LLC in May 2007 totaling $85,723 bear interest at 5.63%, require interest only payments and mature in 2017. In July 2007, the Property LLC constructing the mixed-use development entered into a construction loan facility with an aggregate capacity of $187,128. At September 30, 2007, the construction loan had an outstanding balance of $8,554, bears interest at LIBOR plus 1.35% and matures in 2011.
4.		INDEBTEDNESS
		At September 30, 2007 and December 31, 2006, the Company’s indebtedness consisted of the following:

		Payment								Maturity				September 30,				December 31,
Description		Terms				Interest Rate				Date				2007				2006
Senior Unsecured Notes		Int.					5.13% - 7.70%				2007-2013			$	535,000			$	560,000
Unsecured Lines of Credit
Syndicated Line of Credit			N/A			LIBOR + 0.575%(1)					2010				240,000				95,000
Cash Management Line			N/A			LIBOR + 0.575%					2010				18,647				13,913
															258,647				108,913
Fixed Rate Secured Notes
FNMA		Prin. and Int.					6.15%(2)				2029				94,000				95,600
Other		Prin. and Int.					4.27% - 6.50%				2007-2013				173,452				259,371
															267,452				354,971
Tax-Exempt Floating Rate
Secured Bonds		Int.					3.86%(3)				2025				9,895				9,895
Total														$	1,070,994			$	1,033,779

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

		Debt maturities
		The aggregate maturities of the Company’s indebtedness are as follows:

Remainder of 2007		$	671
2008			5,230
2009			76,618
2010			447,375	(1)
2011			141,831
Thereafter			399,269
		$	1,070,994

		Debt retirements
		In July 2007, the Company repaid $83,132 of secured mortgage notes with interest rates ranging from 6.29% to 7.69%, from borrowings under its unsecured line of credit. These mortgage notes were scheduled to mature in October 2007.
		Unsecured Lines of Credit
		At September 30, 2007, the Company utilizes a $450,000 syndicated unsecured revolving line of credit (the “Syndicated Line”) that matures in April 2010 for its short-term financing needs. The Syndicated Line currently has a stated interest rate of LIBOR plus 0.575% or the prime rate and was provided by a syndicate of 11 banks led by Wachovia Bank, N.A. and JP Morgan Securities, Inc. Additionally, the Syndicated Line requires the payment of annual facility fees currently equal to 0.15% of the aggregate loan commitment. The Syndicated Line provides for the interest rate and facility fee rate to be adjusted up or down based on changes in the credit ratings on the Company’s senior unsecured debt. The rates under the Syndicated Line are based on the higher of the Company’s unsecured debt ratings in instances where the Company has split unsecured debt ratings. The Syndicated Line also includes a competitive bid option for short-term funds up to 50% of the loan commitment at rates generally below the stated line rate. The credit agreement for the Syndicated Line contains customary restrictions, representations, covenants and events of default, including fixed charge coverage and maximum leverage ratios. The Syndicated Line also restricts the amount of capital the Company can invest in specific categories of assets, such as improved land, properties under construction, condominium properties, non-multifamily properties, debt or equity securities, notes receivable and unconsolidated affiliates. At September 30, 2007, the Company had issued letters of credit to third parties totaling $1,350 under this facility.
		Additionally, at September 30, 2007, the Company had a $30,000 unsecured line of credit with Wachovia Bank, N.A. (the “Cash Management Line”). The Cash Management Line matures in April 2010 and carries pricing and terms, including debt covenants, substantially consistent with the Syndicated Line.
		In November 2007, the Company amended its Syndicated Line to increase the borrowing capacity to $600,000. The pricing terms and the maturity date of the Syndicated Line remained unchanged. The amended Syndicated Line continues to contain customary representations, covenants and events of default, certain of which were modified in conjunction with the expansion of the credit facility.

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

5.		SHAREHOLDERS’ EQUITY
		Computation of Earnings Per Common Share
		For the three and nine months ended September 30, 2007 and 2006, a reconciliation of the numerator and denominator used in the computation of basic and diluted income from continuing operations per common share is as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Income from continuing operations available to common shareholders (numerator):
Income from continuing operations		$	9,947			$	7,019			$	80,234			$	22,542
Less: Preferred stock dividends			(1,909	)			(1,909	)			(5,728	)			(5,728	)
Income from continuing operations available to common shareholders		$	8,038			$	5,110			$	74,506			$	16,814
Common shares (denominator):
Weighted average shares outstanding — basic			43,524				43,137				43,452				42,616
Dilutive shares from stock options and awards			577				818				714				771
Weighted average shares outstanding — diluted			44,101				43,955				44,166				43,387

		For the three and nine months ended September 30, 2007, stock options to purchase 216 and 194 shares of common stock, respectively, were excluded from the computation of diluted earnings per common share as these stock options and awards were antidilutive. For the three and nine months ended September 30, 2006, there were no antidilutive securities.
6.		DERIVATIVE FINANCIAL INSTRUMENTS
		At September 30, 2007, the Company had an outstanding interest rate swap agreement with a notional value of approximately $93,890 with a maturity date in 2009. The swap arrangement is a variable to fixed rate swap at a fixed rate of 5.21% and the swap was designated as a cash flow hedge of the Company’s FNMA variable rate debt. This swap was entered into following the termination of a prior swap arrangement that became ineffective under generally accepted accounting principles (SFAS No. 133, “Accounting for Derivative Investments and Hedging Activities,” as amended) in the first quarter of 2006. The interest rate swap agreement is included on the accompanying consolidated balance sheet at fair value. At September 30, 2007, the fair value of the interest rate swap agreement represented a liability of $1,227, and the liability was included in consolidated liabilities in the accompanying consolidated balance sheet. The change in the value of this cash flow hedge was recorded as a change in accumulated other comprehensive income (loss), a shareholders’ equity account, in the accompanying consolidated balance sheet.
		In early 2006, a previous interest rate swap arrangement, accounted for as a cash flow hedge, became ineffective under generally accepted accounting principles (SFAS No. 133, as amended). As a result, the gross increase in the market value of the interest rate swap arrangement of $1,655 through the April 2006 termination of the swap was recognized in other income in the consolidated statement of operations. In addition, under SFAS No. 133, as amended, the Company is required to amortize into interest expense the cumulative unrecognized loss on the terminated interest rate swap arrangement of $4,021, included in shareholders’ equity, over the remaining life of the swap through 2009. Total amortization expense related to this swap was $280 and $281 for the three months ended and $842 and $834 for the nine months ended September 30, 2007 and 2006, respectively.
		At September 30, 2007, the Company had outstanding an interest rate cap agreement with a financial institution with a notional value of $28,495. Through mid-December 2006, this interest rate cap agreement was a cash flow hedge that provided a fixed interest ceiling at 5% for the Company’s variable rate, tax-exempt borrowings. As a result of the repayment of tax-exempt indebtedness in December 2006, the portion of this interest rate cap arrangement with a notional amount of $18,600 associated with this indebtedness became ineffective for accounting purposes. The Company is required to maintain the interest rate exposure protection under the terms of the financing arrangements for outstanding tax-exempt borrowings of $9,895 at September 30, 2007. The interest rate cap arrangement is included on the accompanying balance sheet at fair value. The change in fair value of the ineffective portion of the arrangement is included in the statement of operations. Such amount was not material in the three and nine months ended September 30, 2007. At September 30, 2007, the difference between the amortized costs of the cash flow hedge associated with the $9,895 tax-exempt borrowings and its $0 fair value is included in accumulated other comprehensive

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

		income (loss), a shareholders’ equity account. The original cost of $126 of the remaining cash flow hedge is being amortized to expense over the five-year term.
		A summary of comprehensive income for the three and nine months ended September 30, 2007 and 2006 is as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Net income		$	11,049			$	35,801			$	99,457			$	54,586
Change in derivatives, net of minority interest (1)			(887	)			(1,045	)			224				172
Comprehensive income		$	10,162			$	34,756			$	99,681			$	54,758

7.		SEGMENT INFORMATION
		Segment Description
		In accordance with SFAS No. 131, “Disclosure About the Segments of an Enterprise and Related Information,” the Company presents segment information based on the way that management organizes the segments within the enterprise for making operating decisions and assessing performance. The segment information is prepared on the same basis as the internally reported information used by the Company’s chief operating decision makers to manage the business.
		The Company’s chief operating decision makers focus on the Company’s primary sources of income from apartment community rental operations. Apartment community rental operations are generally broken down into four segments based on the various stages in the apartment community ownership lifecycle. These segments are described below. All commercial properties and other ancillary service and support operations are combined in the line item “other” in the accompanying segment information. The segment information presented below reflects the segment categories based on the lifecycle status of each community as of January 1, 2006. The segment information for the three and nine months ended September 30, 2006 has been adjusted due to the restatement impact of reclassifying the operating results of the assets designated as held for sale or sold in 2007 and 2006 to discontinued operations under SFAS No. 144 (see note 2).

	•		Fully stabilized communities – those apartment communities which have been stabilized (the earlier of the point at which a property reaches 95% occupancy or one year after completion of construction) for both the current and prior year.
	•		Development, rehabilitation and lease-up communities – those apartment communities under development, rehabilitation and lease-up during the period.
	•		Condominium conversion and other communities – those portions of existing apartment communities being converted into condominiums and other communities converted, or expected to be converted, to joint venture ownership that are reflected in continuing operations.
	•		Acquired communities – those communities acquired in the current or prior year.

		Segment Performance Measure
		Management uses contribution to consolidated property net operating income (“NOI”) as the performance measure for its operating segments. The Company uses net operating income, including net operating income of stabilized communities, as an operating measure. Net operating income is defined as rental and other property revenue from real estate operations less total property and maintenance expenses from real estate operations (excluding depreciation and amortization). The Company believes that net operating income is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of the core operations, rather than factoring in depreciation and amortization, financing costs and general and administrative expenses generally incurred at the corporate level. This measure is particularly useful, in the opinion of the Company, in evaluating the performance of operating segment groupings and individual properties. Additionally, the Company believes that net operating income, as defined, is a widely accepted measure of comparative operating performance in

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

		the real estate investment community. The Company believes that the line on the Company’s consolidated statement of operations entitled “net income” is the most directly comparable GAAP measure to net operating income.
		Segment Information
		The following table reflects each segment’s contribution to consolidated revenues and NOI together with a reconciliation of segment contribution to property NOI to consolidated net income for the three and nine months ended September 30, 2007 and 2006. Additionally, substantially all of the Company’s assets relate to the Company’s property rental operations. Asset cost, depreciation and amortization by segment are not presented because such information at the segment level is not reported internally.

		Three months ended								Nine months ended
		September 30,								September 30,
		2007				2006				2007				2006
Revenues
Fully stabilized communities		$	62,262			$	59,473			$	182,717			$	174,338
Development, rehabilitation and lease-up communities			4,142				2,202				10,480				7,168
Condominium conversion and other communities			1,625				4,174				8,409				13,243
Acquired communities			3,753				2,694				9,533				4,151
Other property segments			6,058				6,117				17,881				17,915
Other			171				49				416				200
Consolidated revenues		$	78,011			$	74,709			$	229,436			$	217,015
Contribution to Property Net Operating Income
Fully stabilized communities		$	38,166			$	36,488			$	112,635			$	107,410
Development, rehabilitation and lease-up communities			2,116				821				4,285				3,598
Condominium conversion and other communities			851				2,234				4,706				7,674
Acquired communities			2,217				1,559				5,647				2,223
Other property segments, including corporate management expenses			(1,224	)			(1,267	)			(4,648	)			(4,171	)
Consolidated property net operating income			42,126				39,835				122,625				116,734
Interest income			189				400				652				982
Other revenues			171				49				416				200
Minority interest in consolidated property partnerships			(585	)			(85	)			(1,416	)			(177	)
Depreciation			(16,638	)			(16,554	)			(49,910	)			(48,874	)
Interest expense			(12,831	)			(13,465	)			(38,850	)			(39,732	)
Amortization of deferred financing costs			(828	)			(882	)			(2,469	)			(2,651	)
General and administrative			(4,761	)			(4,406	)			(16,168	)			(13,464	)
Investment and development			(2,006	)			(1,332	)			(5,512	)			(4,500	)
Gains on sales of real estate assets, net			5,061				2,114				71,506				10,525
Equity in income of unconsolidated real estate entities			402				527				1,216				1,251
Other income (expense)			(262	)			898				(784	)			2,592
Minority interest of common unitholders			(91	)			(80	)			(1,072	)			(344	)
Income from continuing operations			9,947				7,019				80,234				22,542
Income from discontinued operations			1,102				28,782				19,223				32,044
Net income		$	11,049			$	35,801			$	99,457			$	54,586

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

8.		SEVERANCE COSTS
		In prior years, the Company recorded severance charges associated with the departure of certain executive officers of the Company. Under certain of these arrangements, the Company is required to make certain payments and provide specified benefits through 2013 and 2016. The following table summarizes the activity relating to aggregate net severance charges for the nine months ended September 30, 2007 and 2006:

		Nine months ended
		September 30,
		2007				2006
Accrued severance charges, beginning of period		$	12,832			$	14,325
Severance charges			283				—
Payments for period			(2,129	)			(2,372	)
Interest accretion			555				636
Accrued severance charges, end of period		$	11,541			$	12,589

9.		SUPPLEMENTAL CASH FLOW INFORMATION
		Interest paid (including capitalized amounts of $8,659 and $7,061 for the nine months ended September 30, 2007 and 2006, respectively), aggregated $40,799 and $40,315 for the nine months ended September 30, 2007 and 2006, respectively.
		For the nine months ended September 30, 2007 and 2006, the Company and the Company’s taxable REIT subsidiaries made income tax payments to federal and state taxing authorities totaling $1,575 and $405, respectively.
		Non-cash investing and financing activities for the nine months ended September 30, 2007 and 2006 were as follows:
		For the nine months ended September 30, 2007 and 2006, the Company amortized approximately $842 ($832 net of minority interest) and $834 ($817 net of minority interest), respectively, of accumulated other comprehensive non-cash losses into earnings related to an interest rate swap derivative financial instrument (see note 6). Other than the amortization discussed herein, for the nine months ended September 30, 2007 the Company’s derivative financial instruments, accounted for as cash flow hedges, decreased in value causing a decrease in accounts payable and accrued expenses and a corresponding decrease in shareholder’s equity of $616 ($607, net of minority interest). For the nine months ended September 30, 2006, the Company’s derivative financial instruments accounted for as cash flow hedges decreased in value causing an increase in accounts payable and accrued expenses and a corresponding decrease in shareholder’s equity of $660 ($647 net of minority interest).
		For the nine months ended September 30, 2007 and 2006, Common Units in the Operating Partnership totaling 96 and 697, respectively, were converted into Company common shares on a one-for-one basis. The net effect of the conversion of Common Units of the Operating Partnership to common             shares of the Company and the adjustments to minority interest for the impact of the Company’s employee stock purchase and stock options plans, decreased minority interest and increased shareholders’ equity in the amounts of $2,053 and $13,065 for the nine months ended September 30, 2007 and 2006, respectively.
		The Operating Partnership committed to distribute $21,840 and $21,774 for the three months ended September 30, 2007 and 2006, respectively. As a result, the Company declared dividends of $21,566 and $21,456 for the three months ended September 30, 2007 and 2006, respectively. The remaining distributions from the Operating Partnership in the amount of $274 and $318 for the three months ended September 30, 2007 and 2006, respectively, are distributed to minority interest unitholders in the Operating Partnership.
		For the nine months ended September 30, 2007 and 2006, the Company issued common shares for director compensation, totaling $394 and $355, respectively. These stock issuances were non-cash transactions.
		During the nine months ended September 30, 2006, the Company sold an apartment community subject to $40,000 of mortgage debt assumed by the purchaser. This mortgage debt assumed by the purchaser was excluded from the cash flow statements as a non-cash transaction. During the nine months ended September 20, 2006, the Company acquired an apartment community for cash and the assumption of mortgage indebtedness totaling $41,394. The mortgage debt assumed by the Company was excluded from the statement of cash flow as a non-cash transaction.

POST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share and apartment unit data)

10.		STOCK-BASED COMPENSATION PLANS
		Stock Compensation Plans
		Effective January 1, 2006, the Company accounts for stock-based compensation using the fair value method prescribed in SFAS No. 123R (see note 1). Other than the required modification under SFAS No. 123R to use an estimated forfeiture rate for award terminations and forfeitures, the adoption of SFAS 123R did not have a material impact on the Company’s accounting for stock-based compensation. The cumulative impact of this modification on awards granted prior to January 1, 2006 was $172 and the amount was reflected as a reduction of compensation expense for the nine months ended September 30, 2006.
		Incentive Stock Plans
		Incentive stock awards are granted under the Company’s 2003 Incentive Stock Plan (the “2003 Stock Plan”). Under the 2003 Stock Plan, an aggregate of 4,000 shares of common stock were reserved for issuance. Of this amount, not more than 500 shares of common stock are available for grants of restricted stock. The exercise price of each option granted under the 2003 Stock Plan may not be less than the market price of the Company’s common stock on the date of the option grant and all options may have a maximum life of ten years. Participants receiving restricted stock grants are generally eligible to vote such shares and receive dividends on such shares. Substantially all stock option and restricted stock grants are subject to annual vesting provisions (generally three to five years) as determined by the compensation committee overseeing the 2003 Stock Plan. At September 30, 2007, stock options outstanding under the 2003 Stock Plan and the Company’s previous stock plan totaled 2,458.
		Compensation costs for stock options have been estimated on the grant date using the Black-Scholes option-pricing method. The weighted average assumptions used in the Black-Scholes option-pricing model were as follows:

		Nine months ended
		September 30,
		2007				2006
Dividend yield			3.8	%			4.5	%
Expected volatility			18.1	%			17.5	%
Risk-free interest rate			4.8	%			4.3	%
Expected option term (years)			5.0				5.0

		The Company’s assumptions were derived from the methodologies discussed herein. The expected dividend yield reflects the Company’s current historical yield, which is expected to approximate the future yield. Expected volatility was based on the historical volatility of the Company’s common stock. The risk-free interest rate for the expected life of the options was based on the implied yields on the U.S. Treasury yield curve. The weighted average expected option term was based on the Company’s historical data for prior period stock option exercise and forfeiture activity.
		For the nine months ended September 30, 2007 and 2006, the Company granted stock options to purchase 199 and 291 shares of Company common stock, respectively, to Company officers and directors, of which 28 and 50 shares, respectively, were granted to the Company’s non-executive chairman of the board. The Company recorded compensation expense related to stock options of $404 ($398 net of minority interest) and $300 ($295 net of minority interest) for the three months ended and $1,162 ($1,145 net of minority interest) and $807 ($791 net of minority interest) for the nine months ended September 30, 2007 and 2006, respectively, under the fair value method. Upon the exercise of stock options, the Company issues shares of common stock from treasury shares or, to the extent treasury shares are not available, from authorized common shares.