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 June 30, 2007

OR

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

For the transition period from            to

Commission file numbers 1-12080 and 0-28226

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

(Exact name of registrant as specified in its charter)

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

4401 Northside Parkway, Suite 800, Atlanta, Georgia 30327
(Address of principal executive offices — zip code)

(404) 846-5000
(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:

43,679,048 shares of common stock outstanding as of August 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 June 30, 2007 and December 31, 2006			1
Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006			2
Consolidated Statement of Shareholders’ Equity and Accumulated Earnings for the six months ended June 30, 2007			3
Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006			4
Notes to Consolidated Financial Statements			5
POST APARTMENT HOMES, L.P.
Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006			20
Consolidated Statements of Operations for the three and six months ended June 30, 2007 and 2006			21
Consolidated Statement of Partners’ Equity for the six months ended June 30, 2007			22
Consolidated Statements of Cash Flows for the six months ended June 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			40
Item 3 Quantitative and Qualitative Disclosures about Market Risk			58
Item 4 Controls and Procedures			58
Part II OTHER INFORMATION
Item 1 Legal Proceedings			59
Item 1A Risk Factors			59
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			59
Item 3 Defaults Upon Senior Securities			59
Item 4 Submission of Matters to a Vote of Security Holders			60
Item 5 Other Information			60
Item 6 Exhibits			61
Signatures			62
Exhibit Index			64
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.

		June 30,				December 31,
		2007				2006
		(Unaudited)
Assets
Real estate assets
Land		$	270,406			$	278,448
Building and improvements			1,838,702				1,821,123
Furniture, fixtures and equipment			205,243				204,318
Construction in progress			70,895				135,428
Land held for future development			117,465				92,800
			2,502,711				2,532,117
Less: accumulated depreciation			(560,927	)			(547,477	)
For-sale condominiums			52,046				28,295
Assets held for sale, net of accumulated depreciation of $0 and $4,035 at June 30, 2007 and December 31, 2006, respectively			7,086				15,645
Total real estate assets			2,000,916				2,028,580
Investments in and advances to unconsolidated real estate entities			31,223				32,794
Cash and cash equivalents			5,463				3,663
Restricted cash			4,647				5,203
Deferred charges, net			11,258				12,400
Other assets			38,630				34,007
Total assets		$	2,092,137			$	2,116,647
Liabilities and shareholders’ equity
Indebtedness		$	938,998			$	1,033,779
Accounts payable and accrued expenses			93,462				75,403
Dividend and distribution payable			21,831				19,886
Accrued interest payable			4,828				4,885
Security deposits and prepaid rents			9,876				9,915
Total liabilities			1,068,995				1,143,868
Minority interest of common unitholders in Operating Partnership			12,809				14,057
Minority interests in consolidated real estate entities			3,110				2,268
Total minority interests			15,919				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:
43,662 and 43,603 shares issued, 43,661 and 43,486 shares outstanding at June 30, 2007 and December 31, 2006, respectively			437				436
Additional paid-in-capital			868,967				869,587
Accumulated earnings			142,889				97,567
Accumulated other comprehensive income (loss)			(2,379	)			(3,490	)
			1,009,943				964,129
Less common stock in treasury, at cost, 66 and 175 shares at June 30, 2007 and December 31, 2006, respectively			(2,720	)			(7,675	)
Total shareholders’ equity			1,007,223				956,454
Total liabilities and shareholders’ equity		$	2,092,137			$	2,116,647

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

POST PROPERTIES, INC.

(Unaudited)

		Three months ended								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Revenues
Rental		$	73,885			$	69,753			$	147,347			$	137,995
Other property revenues			4,296				4,428				8,264				8,325
Other			128				86				245				151
Total revenues			78,309				74,267				155,856				146,471
Expenses
Property operating and maintenance (exclusive of items shown separately below)			36,649				33,751				72,531				67,054
Depreciation			17,059				16,747				34,103				33,135
General and administrative			5,959				4,632				11,407				9,058
Investment and development			1,933				1,618				3,461				3,168
Total expenses			61,600				56,748				121,502				112,415
Operating income			16,709				17,519				34,354				34,056
Interest income			213				331				463				582
Interest expense			(13,199	)			(13,469	)			(26,743	)			(27,016	)
Amortization of deferred financing costs			(829	)			(833	)			(1,641	)			(1,769	)
Gains on sales of real estate assets, net			62,716				8,569				66,400				8,411
Equity in income of unconsolidated real estate entities			310				412				814				724
Other income (expense)			(261	)			272				(522	)			1,694
Minority interest in consolidated property partnerships			(811	)			(63	)			(831	)			(92	)
Minority interest of common unitholders			(911	)			(235	)			(996	)			(282	)
Income from continuing operations			63,937				12,503				71,298				16,308
Discontinued operations
Income from discontinued property operations, net of minority interest			—				1,490				220				2,095
Gains (losses) on sales of real estate assets, net of minority interest			—				(9	)			16,890				382
Income from discontinued operations			—				1,481				17,110				2,477
Net income			63,937				13,984				88,408				18,785
Dividends to preferred shareholders			(1,910	)			(1,910	)			(3,819	)			(3,819	)
Net income available to common shareholders		$	62,027			$	12,074			$	84,589			$	14,966
Per common share data — Basic
Income from continuing operations (net of preferred dividends)		$	1.43			$	0.25			$	1.55			$	0.29
Income from discontinued operations			—				0.03				0.39				0.06
Net income available to common shareholders		$	1.43			$	0.28			$	1.95			$	0.35
Weighted average common shares outstanding — basic			43,463				42,817				43,416				42,351
Per common share data — Diluted
Income from continuing operations (net of preferred dividends)		$	1.40			$	0.24			$	1.53			$	0.29
Income from discontinued operations			—			$	0.03				0.39				0.06
Net income available to common shareholders		$	1.40			$	0.28			$	1.91			$	0.35
Weighted average common shares outstanding — diluted			44,278				43,518				44,192				43,089

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

POST PROPERTIES, INC.

(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			—				—				—				88,408				—				—				88,408
Net change in derivatives, net of minority interest			—				—				—				—				1,111				—				1,111
Total comprehensive income																											89,519
Proceeds from employee stock purchase, stock option and other plans			—				1				(1,265	)			—				—				5,347				4,083
Adjustment for minority interest of unitholders in Operating Partnership upon conversion of units into common shares and at dates of capital transactions			—				—				(1,311	)			—				—				3,302				1,991
Stock-based compensation, net of minority interest			—				—				1,956				—				—				—				1,956
Treasury stock acquisitions			—				—				—				—				—				(3,694	)			(3,694	)
Dividends to preferred shareholders			—				—				—				(3,819	)			—				—				(3,819	)
Dividends to common shareholders ($0.90 per share)			—				—				—				(39,267	)			—				—				(39,267	)
Shareholders’ Equity and Accumulated Earnings, June 30, 2007		$	29			$	437			$	868,967			$	142,889			$	(2,379	)		$	(2,720	)		$	1,007,223

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

POST PROPERTIES, INC.

(Unaudited)

		Six months ended
		June 30,
		2007				2006
Cash Flows From Operating Activities
Net income		$	88,408			$	18,785
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			34,103				34,488
Amortization of deferred financing costs			1,641				1,769
Minority interest of common unitholders in Operating Partnership			996				282
Minority interest in discontinued operations			266				56
Minority interest in consolidated entities			831				92
Gains on sales of real estate assets			(83,553	)			(8,802	)
Other expense (income)			562				(1,101	)
Equity in income of unconsolidated entities			(814	)			(724	)
Distributions of earnings of unconsolidated entities			1,238				1,114
Deferred compensation			277				377
Stock-based compensation			1,985				1,334
Changes in assets, (increase) decrease in:
Other assets			(3,641	)			(1,417	)
Deferred charges			(15	)			(45	)
Changes in liabilities, increase (decrease) in:
Accrued interest payable			(57	)			23
Accounts payable and accrued expenses			2,153				4,998
Security deposits and prepaid rents			517				721
Net cash provided by operating activities			44,897				51,950
Cash Flows From Investing Activities
Construction, development and acquisition of real estate assets, net of payables			(55,254	)			(136,460	)
Net proceeds from sales of real estate assets			150,988				23,007
Capitalized interest			(5,795	)			(4,138	)
Annually recurring capital expenditures			(6,080	)			(5,914	)
Periodically recurring capital expenditures			(3,867	)			(2,322	)
Community rehabilitation and other revenue generating capital expenditures			(7,206	)			(2,837	)
Corporate additions and improvements			(1,608	)			(983	)
Distributions from unconsolidated entities			22,506				5,967
Note receivable collections and other investments			230				—
Net cash provided by (used in) investing activities			93,914				(123,680	)
Cash Flows From Financing Activities
Payments on indebtedness			(27,969	)			(52,365	)
Proceeds from indebtedness			—				190,000
Lines of credit repayments, net			(67,632	)			(63,446	)
Payments of financing costs			(246	)			(3,627	)
Treasury stock acquisitions			(3,694	)			—
Proceeds from employee stock purchase and stock options plans			3,806				39,033
Capital contributions of minority interests			430				9,055
Distributions to common unitholders			(608	)			(1,045	)
Dividends paid to preferred shareholders			(1,909	)			(3,819	)
Dividends paid to common shareholders			(39,189	)			(37,923	)
Net cash provided by (used in) financing activities			(137,011	)			75,863
Net increase in cash and cash equivalents			1,800				4,133
Cash and cash equivalents, beginning of period			3,663				6,410
Cash and cash equivalents, end of period		$	5,463			$	10,543

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

POST PROPERTIES, INC.

(Unaudited, in thousands, 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 July 31, 2007, the Company owned 22,209 apartment units in 62 apartment communities, including 1,351 apartment units in four communities held in unconsolidated entities and 1,477 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 three communities initially consisting of 470 units (including 121 units in one community held in an unconsolidated entity) into for-sale condominium homes through a taxable REIT subsidiary. At June 30, 2007, approximately 44.0%, 19.0%, 12.2% and 9.8% (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 June 30, 2007, the Company had outstanding 43,661 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 June 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 98.0% for the three months ended and 98.5% and 97.8% for the six months ended June 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 six months ended June 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 thousands, 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 June 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 thousands, 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 Company also acquired an adjacent land site for future residential development.
		In March 2006, the Company acquired two apartment communities, containing 308 units, in Austin, Texas for approximately $46,400, including closing costs. Through June 30, 2007, the Company spent approximately $1,139 to improve these communities. 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 June 30, 2007, the Company had certain parcels of land classified as held for sale. These land parcels are reflected in the accompanying consolidated balance sheet at $7,086, which represents the lower of their cost or fair value less costs to sell. At June 30, 2007, the Company also had portions of two communities being converted to condominiums, originally containing 349 units, and certain completed condominium units at a newly developed community totaling $52,046 classified as for-sale condominiums on the accompanying consolidated balance sheet.
		In the three months ended June 30, 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 the three and six months ended June 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 the three and six months ended June 30, 2007, gains on sales of real estate assets in continuing operations included gains of $1,740 and $3,938, respectively, on the sale of land sites, including one site with an associated corporate facility previously used in the Company’s landscape and maintenance operations.
		For the three and six months ended June 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 new 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 six months ended June 30, 2007 and 2006 was as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Condominium revenues		$	25,222			$	18,463			$	31,091			$	18,463
Condominium costs and expenses			(19,546	)			(9,894	)			(23,929	)			(10,052	)
Gains on sales of condominiums, net		$	5,676			$	8,569			$	7,162			$	8,411

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 six months ended June 30, 2007, income from discontinued operations included the results of operations of one condominium conversion community through its sell out date in February 2007 and the results of operations of one apartment community through its sale date in March 2007. For the three and six months ended June 30, 2006, income from discontinued operations included the results of operations of the condominium conversion community and apartment community sold in 2007 and three apartment communities sold in the third and fourth quarters of 2006.

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

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

		Three months ended								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Revenues
Rental		$	—			$	3,784			$	463			$	7,549
Other property revenues			—				428				27				804
Total revenues			—				4,212				490				8,353
Expenses
Property operating and maintenance (exclusive of items shown separately below)			—				1,496				211				3,046
Depreciation			—				286				—				1,353
Interest			—				908				56				1,812
Total expenses			—				2,690				267				6,211
Income from discontinued property operations before minority interest			—				1,522				223				2,142
Minority interest			—				(32	)			(3	)			(47	)
Income from discontinued property operations		$	—			$	1,490			$	220			$	2,095

For the six months ended June 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. There were no sales of apartment communities for the six months ended June 30, 2006.

For the three and six months ended June 30, 2007 and 2006, gains on sales of real estate assets included in discontinued operations also included net gains from condominium sales at one condominium conversion community 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 six months ended June 30, 2007 and 2006 was as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Condominium revenues		$	—			$	3,522			$	560			$	6,518
Condominium costs and expenses			—				(3,532	)			(381	)			(6,127	)
Gains on condominium sales, before minority interest			—				(10	)			179				391
Minority interest			—				1				(3	)			(9	)
Gains (losses) on condominium sales, net of minority interest		$	—			$	(9	)		$	176			$	382

3.		INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
		Apartment and Condominium Conversion Communities
		At June 30, 2007, the Company holds investments in four individual limited liability companies (the “Property LLCs”) with institutional investors. Three of the Property LLCs own apartment communities. The fourth Property LLC is completing the sell-out of a condominium conversion community, initially consisting of 121 units. At June 30, 2007, the Property LLC converting its units into condominiums had one unit remaining to sell. The Company holds a 35% equity interest in two Property LLCs, each owning one apartment community and the Property LLC completing the condominium conversion and sale process. The Company holds a 25% interest in the remaining Property LLC owning two apartment communities.
		In May 2007, 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. 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 June 30, 2007, the Company’s investment in the 25% owned Property LLC reflects a credit investment of $9,850 resulting from distributions of

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

		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 June 30, 2007, the Company’s investment in the 35% owned Property LLCs totaled $14,573. The excess of the Company’s investment over its equity in the underlying net assets of the 35% owned Property LLCs was approximately $5,276 at June 30, 2007. The excess investment related to Property LLCs holding apartment communities is being amortized as a reduction to earnings on a straight-line basis over the lives of the related assets. The 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 is as follows:

		June 30,				December 31,
Balance Sheet Data		2007				2006
Real estate assets, net of accumulated depreciation of $12,551 and $11,039, respectively		$	211,429			$	93,614
Assets held for sale, net			—				3,027
Cash and other			6,155				4,067
Total assets		$	217,584			$	100,708
Mortgage notes payable		$	152,719			$	66,998
Other liabilities			2,614				1,107
Total liabilities			155,333				68,105
Members’ equity			62,251				32,603
Total liabilities and members’ equity		$	217,584			$	100,708
Company’s net equity investment in Property LLCs		$	4,723			$	16,883

		Three months ended								Six months ended
		June 30,								June 30,
Income Statement Data		2007				2006				2007				2006
Revenues
Rental		$	4,142			$	2,859			$	6,955			$	5,648
Other property revenues			326				244				516				478
Total revenues			4,468				3,103				7,471				6,126
Expenses
Property operating and maintenance			1,520				928				2,532				1,913
Depreciation and amortization			1,281				661				1,942				1,320
Interest			1,331				688				2,019				1,376
Total expenses			4,132				2,277				6,493				4,609
Income from continuing operations			336				826				978				1,517
Discontinued operations
Income (loss) from discontinued operations			10				(120	)			31				(283	)
Gains (losses) on sales of real estate assets, net			(83	)			502				775				899
Income from discontinued operations			(73	)			382				806				616
Net income		$	263			$	1,208			$	1,784			$	2,133
Company’s share of net income		$	310			$	412			$	814			$	724

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

For the three and six months ended June 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 six months ended June 30, 2007 and 2006 is as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Condominium revenues		$	220			$	5,138			$	4,332			$	9,224
Condominium costs and expenses			(303	)			(4,636	)			(3,557	)			(8,325	)
Gains (losses) on condominium sales, net		$	(83	)		$	502			$	775			$	899

		At June 30, 2007, mortgage notes payable include a $49,998 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. An additional 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% and mature in 2017.
		Land Entities
		At June 30, 2007, the Company holds a 50% equity interest in a limited liability company whose sole investment consists of a partnership interest in an entity (the “Land Partnership”) which holds land for future development. At June 30, 2007, the Land Partnership had total assets of $32,240, principally land and pre-development costs, total liabilities of $15,016 (including a secured note payable of $12,000 to the Company) and total equity of $17,224 (including the Company’s equity investment of $4,650). In July 2007, the Land Partnership commenced construction of a mixed-use development, consisting of for-sale condominiums and class A office space, financed through additional equity contributions totaling approximately $17,115 and through borrowings under a $187,128 construction loan facility bearing interest at LIBOR plus 1.35%.
4.		INDEBTEDNESS
		At June 30, 2007 and December 31, 2006, the Company’s indebtedness consisted of the following:

		Payment				Maturity				June 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				35,000				95,000
Cash Management Line		N/A		LIBOR + 0.575	%		2010				6,281				13,913
											41,281				108,913
Fixed Rate Secured Notes
FNMA		Prin. and Int.		6.15	%(2)		2029				95,600				95,600
Other		Prin. and Int.		4.27% — 7.69	%(2)		2007-2013				257,222				259,371
											352,822				354,971
Tax-Exempt Floating Rate
Secured Bonds		Int.		3.73	%(3)		2025				9,895				9,895
Total										$	938,998			$	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		$	86,041
2008			5,230
2009			76,618
2010			230,009	(1)
2011			141,831
Thereafter			399,269
		$	938,998

		Debt retirements
		Upon their maturity in June 2007, the Company repaid $25,000 of 6.11% senior unsecured notes from available borrowings under its unsecured line of credit.
		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 June 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 June 30, 2007, the Company had issued letters of credit to third parties totaling $2,078 under this facility.
		Additionally, at June 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.

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 six months ended June 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								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Income from continuing operations available to common shareholders (numerator):
Income from continuing operations		$	63,937			$	12,503			$	71,298			$	16,308
Less: Preferred stock dividends			(1,910	)			(1,910	)			(3,819	)			(3,819	)
Income from continuing operations available to common shareholders		$	62,027			$	10,593			$	67,479			$	12,489
Common shares (denominator):
Weighted average shares outstanding — basic			43,463				42,817				43,416				42,351
Dilutive shares from stock options and awards			815				701				776				738
Weighted average shares outstanding — diluted			44,278				43,518				44,192				43,089

		For the three and six months ended June 30, 2007 and 2006, stock options to purchase 213 and 307 shares of common stock, respectively, and 183 and 280, respectively, were excluded from the computation of diluted earnings per common share as these stock options and awards were antidilutive.
6.		DERIVATIVE FINANCIAL INSTRUMENTS
		At June 30, 2007, the Company had an outstanding interest rate swap agreement with a notional value of approximately $95,510 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 June 30, 2007, the fair value of the interest rate swap agreement represented a liability of $27, 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 $281 and $281 for the three months ended and $562 and $554 for the six months ended June 30, 2007 and 2006, respectively.
		At June 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 June 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 six months ended June 30, 2007. At June 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 income (loss), a

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

		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 six months ended June 30, 2007 and 2006 is as follows:

		Three months ended								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Net income		$	63,937			$	13,984			$	88,408			$	18,785
Change in derivatives, net of minority interest (1)			1,044				931				1,111				1,217
Comprehensive income		$	64,981			$	14,915			$	89,519			$	20,002

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 six months ended June 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 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 six months ended June 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								Six months ended
		June 30,								June 30,
		2007				2006				2007				2006
Revenues
Fully stabilized communities		$	62,883			$	60,184			$	124,786			$	118,938
Development, rehabilitation and lease-up communities			3,513				2,403				6,338				4,966
Condominium conversion and other communities			2,760				4,362				6,784				9,070
Acquired communities			2,939				1,102				5,780				1,457
Other property segments			6,086				6,130				11,923				11,889
Other			128				86				245				151
Consolidated revenues		$	78,309			$	74,267			$	155,856			$	146,471
Contribution to Property Net Operating Income
Fully stabilized communities		$	38,679			$	37,126			$	76,984			$	73,230
Development, rehabilitation and lease-up communities			1,271				1,303				2,169				2,777
Condominium conversion and other communities			1,505				2,545				3,855				5,441
Acquired communities			1,802				468				3,430				664
Other property segments, including corporate management expenses			(1,725	)			(1,012	)			(3,358	)			(2,846	)
Consolidated property net operating income			41,532				40,430				83,080				79,266
Interest income			213				331				463				582
Other revenues			128				86				245				151
Minority interest in consolidated property partnerships			(811	)			(63	)			(831	)			(92	)
Depreciation			(17,059	)			(16,747	)			(34,103	)			(33,135	)
Interest expense			(13,199	)			(13,469	)			(26,743	)			(27,016	)
Amortization of deferred financing costs			(829	)			(833	)			(1,641	)			(1,769	)
General and administrative			(5,959	)			(4,632	)			(11,407	)			(9,058	)
Investment and development			(1,933	)			(1,618	)			(3,461	)			(3,168	)
Gains on sales of real estate assets, net			62,716				8,569				66,400				8,411
Equity in income of unconsolidated real estate entities			310				412				814				724
Other income (expense)			(261	)			272				(522	)			1,694
Minority interest of common unitholders			(911	)			(235	)			(996	)			(282	)
Income from continuing operations			63,937				12,503				71,298				16,308
Income from discontinued operations			—				1,481				17,110				2,477
Net income		$	63,937			$	13,984			$	88,408			$	18,785

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 severance charges for the six months ended June 30, 2007 and 2006:

		Six months ended
		June 30,
		2007				2006
Accrued severance charges, beginning of period		$	12,832			$	14,325
Severance charges			283				—
Payments for period			(1,518	)			(1,495	)
Interest accretion			370				424
Accrued severance charges, end of period		$	11,967			$	13,254

9.		SUPPLEMENTAL CASH FLOW INFORMATION
		Interest paid (including capitalized amounts of $5,795 and $4,138 for the six months ended June 30, 2007 and 2006, respectively), aggregated $32,651 and $32,600 for the six months ended June 30, 2007 and 2006, respectively.
		For the six months ended June 30, 2007 and 2006, the Company and the Company’s taxable REIT subsidiaries made income tax payments to federal and state taxing authorities totaling $1,062 and $401, respectively.
		Non-cash investing and financing activities for the six months ended June 30, 2007 and 2006 were as follows:
		For the six months ended June 30, 2007 and 2006, the Company amortized approximately $562 ($554 net of minority interest) and $554 ($542 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 six months ended June 30, 2007 the Company’s derivative financial instruments, accounted for as cash flow hedges, increased in value causing a decrease in accounts payable and accrued expenses and a corresponding decrease in shareholder’s equity of $566 ($558, net of minority interest). For the six months ended June 30, 2006, the Company’s derivative financial instruments accounted for as cash flow hedges increased in value causing a decrease in accounts payable and accrued expenses and a corresponding increase in shareholder’s equity of $690 ($675 net of minority interest).
		For the six months ended June 30, 2007 and 2006, Common Units in the Operating Partnership totaling 73 and 688, 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 $1,991 and $12,835 for the six months ended June 30, 2007 and 2006, respectively.
		The Operating Partnership committed to distribute $21,831 and $19,764 for the three months ended June 30, 2007 and 2006, respectively. As a result, the Company declared dividends of $19,647 and $19,441 for the three months ended June 30, 2007 and 2006, respectively. The remaining distributions from the Operating Partnership in the amount of $274 and $323 for the three months ended June 30, 2007 and 2006, respectively, are distributed to minority interest unitholders in the Operating Partnership.
		For the six months ended June 30, 2007 and 2006, the Company issued common shares for director compensation, totaling $277 and $377, respectively. These stock issuances were non-cash transactions.
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 six months ended June 30, 2006.

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

		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 June 30, 2007, stock options outstanding under the 2003 Stock Plan and the Company’s previous stock plan totaled 2,473.
		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:

		Six months ended
		June 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 six months ended June 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 $379 ($374 net of minority interest) and $286 ($280 net of minority interest) for the three months ended and $758 ($747 net of minority interest) and $507 ($496 net of minority interest) for the six months ended June 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.

     A summary of stock option activity under all plans for the six months ended June 30, 2007 and 2006 is presented below:

		Six months ended
		June 30,
		2007								2006
						Weighted Average								Weighted Average
		Shares				Exercise Price				Shares				Exercise Price
Options outstanding, beginning of period			2,375			$	33				3,534			$	34
Granted			199				48				291				40
Exercised			(94	)			36				(1,079	)			36
Forfeited			(7	)			41				—				—
Options outstanding, end of period			2,473				34				2,746				33
Options exercisable, end of period			1,648				33				1,671				34
Weighted-average fair value of options granted during the period		$	7.22							$	4.80