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, 2008

OR

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.)

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, non-accelerated filers or smaller reporting company. See definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

     Post Properties, Inc.

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o		Smaller reporting companyo
				(Do not check if a smaller reporting company)

     Post Apartment Homes, L.P.

Large accelerated filer o		Accelerated filer o		Non-accelerated filer þ		Smaller reporting companyo
				(Do not check if a smaller reporting company)

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:

44,184,986 shares of common stock outstanding as of October 31, 2008.

 

 

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, 2008 and December 31, 2007			1
Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007			2
Consolidated Statement of Shareholders’ Equity and Accumulated Earnings for the nine months ended September 30, 2008			3
Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007			4
Notes to Consolidated Financial Statements			5
POST APARTMENT HOMES, L.P.
Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007			21
Consolidated Statements of Operations for the three and nine months ended September 30, 2008 and 2007			22
Consolidated Statement of Partners’ Equity for the nine months ended September 30, 2008			23
Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and 2007			24
Notes to Consolidated Financial Statements			25
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations			41
Item 3 Quantitative and Qualitative Disclosures about Market Risk			64
Item 4 Controls and Procedures			64
Item 4T Controls and Procedures			65
Part II OTHER INFORMATION
Item 1 Legal Proceedings			65
Item 1A Risk Factors			66
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds			66
Item 3 Defaults Upon Senior Securities			66
Item 4 Submission of Matters to a Vote of Security Holders			66
Item 5 Other Information			66
Item 6 Exhibits			67
Signatures			68
Exhibit Index			70
EX-31.1
EX-31.2
EX-32.1
EX-32.2

POST PROPERTIES, INC.

		September 30,				December 31,
		2008				2007
		(Unaudited)
Assets
Real estate assets
Land		$	235,757			$	276,680
Building and improvements			1,677,522				1,840,563
Furniture, fixtures and equipment			195,929				204,433
Construction in progress			139,154				134,125
Land held for future development			123,902				154,617
			2,372,264				2,610,418
Less: accumulated depreciation			(514,029	)			(562,226	)
For-sale condominiums			20,167				38,844
Assets held for sale, net of accumulated depreciation of $86,383 and $4,031 at September 30, 2008 and December 31, 2007, respectively			244,659				24,576
Total real estate assets			2,123,061				2,111,612
Investments in and advances to unconsolidated real estate entities			40,874				23,036
Cash and cash equivalents			4,343				11,557
Restricted cash			11,716				5,642
Deferred charges, net			9,489				10,538
Other assets			38,649				105,756
Total assets		$	2,228,132			$	2,268,141
Liabilities and shareholders’ equity
Indebtedness, including $62,908 and $0 secured by assets held for sale as of September 30, 2008 and December 31, 2007, respectively		$	1,043,418			$	1,059,066
Accounts payable and accrued expenses			110,581				100,215
Dividend and distribution payable			19,990				19,933
Accrued interest payable			13,474				4,388
Security deposits and prepaid rents			16,903				11,708
Total liabilities			1,204,366				1,195,310
Minority interest of common unitholders in Operating Partnership			6,034				10,354
Minority interests in consolidated real estate entities			9,542				3,972
Total minority interests			15,576				14,326
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:
44,131 and 43,825 shares issued, 44,129 and 43,825 shares outstanding at September 30, 2008 and December 31, 2007, respectively			441				438
Additional paid-in-capital			884,331				874,928
Accumulated earnings			129,405				189,985
Accumulated other comprehensive income (loss)			(2,601	)			(3,962	)
			1,011,605				1,061,418
Less common stock in treasury, at cost, 87 and 72 shares at September 30, 2008 and December 31, 2007, respectively			(3,415	)			(2,913	)
Total shareholders’ equity			1,008,190				1,058,505
Total liabilities and shareholders’ equity		$	2,228,132			$	2,268,141

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

POST PROPERTIES, INC.

(Unaudited)

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Revenues
Rental		$	63,700			$	62,460			$	188,174			$	183,998
Other property revenues			3,882				3,779				11,263				10,829
Other			261				171				735				416
Total revenues			67,843				66,410				200,172				195,243
Expenses
Total property operating and maintenance (exclusive of items shown separately below)			32,545				32,169				98,557				95,785
Depreciation			14,979				14,522				43,628				43,248
General and administrative			4,461				4,761				15,265				16,168
Investment, development and other			1,834				2,007				4,648				5,512
Strategic review costs			—				—				8,161				—
Impairment, severance and other costs			5,002				—				34,302				—
Total expenses			58,821				53,459				204,561				160,713
Operating income (loss)			9,022				12,951				(4,389	)			34,530
Interest income			96				189				367				652
Interest expense			(11,471	)			(10,658	)			(31,739	)			(32,566	)
Amortization of deferred financing costs			(869	)			(828	)			(2,579	)			(2,469	)
Gains on sales of real estate assets, net			476				5,061				2,227				71,506
Equity in income of unconsolidated real estate entities			260				402				1,081				1,216
Other income (expense), net			534				(262	)			426				(784	)
Minority interest in consolidated property partnerships			52				(452	)			113				(1,146	)
Minority interest of common unitholders			14				(41	)			298				(923	)
Income (loss) from continuing operations			(1,886	)			6,362				(34,195	)			70,016
Discontinued operations
Income from discontinued property operations, net of minority interest			5,612				4,380				13,254				12,244
Gains on sales of real estate assets, net of minority interest			23,350				307				25,640				17,197
Income from discontinued operations			28,962				4,687				38,894				29,441
Net income			27,076				11,049				4,699				99,457
Dividends to preferred shareholders			(1,909	)			(1,909	)			(5,728	)			(5,728	)
Net income (loss) available to common shareholders		$	25,167			$	9,140			$	(1,029	)		$	93,729
Per common share data — Basic
Income (loss) from continuing operations (net of preferred dividends)		$	(0.09	)		$	0.10			$	(0.91	)		$	1.48
Income from discontinued operations			0.66				0.11				0.88				0.68
Net income (loss) available to common shareholders		$	0.57			$	0.21			$	(0.02	)		$	2.16
Weighted average common shares outstanding — basic			44,047				43,524				43,976				43,452
Per common share data — Diluted
Income (loss) from continuing operations (net of preferred dividends)		$	(0.09	)		$	0.10			$	(0.91	)		$	1.46
Income from discontinued operations			0.66			$	0.11				0.88				0.67
Net income (loss) available to common shareholders		$	0.57			$	0.21			$	(0.02	)		$	2.12
Weighted average common shares outstanding — diluted			44,047				44,101				43,976				44,166

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, 2007		$	29			$	438			$	874,928			$	189,985			$	(3,962	)		$	(2,913	)		$	1,058,505
Comprehensive income
Net income			—				—				—				4,699				—				—				4,699
Net change in derivatives, net of minority interest			—				—				—				—				1,376				—				1,376
Total comprehensive income																											6,075
Proceeds from employee stock purchase, stock option and other plans			—				1				2,402				—				—				(984	)			1,419
Adjustment for minority interest of unitholders in Operating Partnership upon conversion of units into common shares and at dates of capital transactions			—				2				3,478				—				(15	)			482				3,947
Stock-based compensation, net of minority interest			—				—				3,523				—				—				—				3,523
Dividends to preferred shareholders			—				—				—				(5,728	)			—				—				(5,728	)
Dividends to common shareholders ($1.35 per share)			—				—				—				(59,551	)			—				—				(59,551	)
Shareholders’ Equity and Accumulated Earnings, September 30, 2008		$	29			$	441			$	884,331			$	129,405			$	(2,601	)		$	(3,415	)		$	1,008,190

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

POST PROPERTIES, INC.

(Unaudited)

		Nine months ended
		September 30,
		2008				2007
Cash Flows From Operating Activities
Net income		$	4,699			$	99,457
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation			47,251				50,889
Amortization of deferred financing costs			2,579				2,469
Minority interest of common unitholders in Operating Partnership			(298	)			923
Minority interest in discontinued operations			290				446
Minority interest in consolidated entities			362				1,416
Gains on sales of real estate assets			(28,059	)			(88,969	)
Other expense			689				842
Asset impairment charges			28,947				—
Equity in income of unconsolidated entities			(1,081	)			(1,216	)
Distributions of earnings of unconsolidated entities			2,059				1,838
Deferred compensation			552				394
Stock-based compensation			3,549				3,072
Changes in assets, increase in:
Other assets			(2,219	)			(3,891	)
Deferred charges			(182	)			(139	)
Changes in liabilities, increase (decrease) in:
Accrued interest payable			9,086				7,882
Accounts payable and accrued expenses			11,973				2,141
Security deposits and prepaid rents			(879	)			660
Net cash provided by operating activities			79,318				78,214
Cash Flows From Investing Activities
Construction and acquisition of real estate assets, net of payables			(104,972	)			(227,402	)
Net proceeds from sales of real estate assets			151,661				182,231
Capitalized interest			(9,546	)			(8,659	)
Annually recurring capital expenditures			(8,592	)			(8,815	)
Periodically recurring capital expenditures			(5,114	)			(5,623	)
Community rehabilitation and other revenue generating capital expenditures			(12,554	)			(10,646	)
Corporate additions and improvements			(613	)			(1,932	)
Distributions from (investments in and advances to) unconsolidated entities			(11,727	)			25,788
Note receivable collections and other investments			1,624				837
Net cash provided by (used in) investing activities			167				(54,221	)
Cash Flows From Financing Activities
Lines of credit proceeds (repayments), net			(131,393	)			149,734
Proceeds from indebtedness			120,000				—
Payments on indebtedness			(3,865	)			(112,159	)
Payments of financing costs and other			(5,052	)			(257	)
Treasury stock acquisitions			—				(3,694	)
Proceeds from employee stock purchase and stock options plans			867				4,470
Capital contributions (distributions) of minority interests			(1,631	)			429
Distributions to common unitholders			(483	)			(882	)
Dividends paid to preferred shareholders			(5,728	)			(3,819	)
Dividends paid to common shareholders			(59,414	)			(58,835	)
Net cash used in financing activities			(86,699	)			(25,013	)
Net increase in cash and cash equivalents			(7,214	)			(1,020	)
Cash and cash equivalents, beginning of period			11,557				3,663
Cash and cash equivalents, end of period		$	4,343			$	2,643

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

POST PROPERTIES. INC.

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

1.		ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
		Organization
		Post Properties, Inc. and its subsidiaries develop, own and manage upscale multifamily communities in selected markets in the United States. As used in this report, the term “Company” includes Post Properties, Inc. and its subsidiaries, including Post Apartment Homes, L.P. (the “Operating Partnership”), unless the context indicates otherwise. The Company, through its wholly-owned subsidiaries is the general partner and owns a majority interest in the Operating Partnership which, through its subsidiaries, conducts substantially all of the on-going operations of the Company. At September 30, 2008, the Company owned 21,890 apartment units in 60 apartment communities, including 1,747 apartment units in five communities held in unconsolidated entities and 1,736 apartment units in five communities currently under construction and/or in lease-up. The Company is also developing and selling 506 for-sale condominium homes in four communities (including 129 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, 2008, approximately 40.9%, 20.3%, 12.1% and 10.1% (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, 2008, the Company had outstanding 44,129 shares of common stock and owned the same number of units of common limited partnership interests (“Common Units”) in the Operating Partnership, representing a 99.3% common ownership interest in the Operating Partnership. Common Units held by persons other than the Company totaled 293 at September 30, 2008 and represented a 0.7% common minority interest in the Operating Partnership. Each Common Unit may be redeemed by the holder thereof for either one share of Company common stock or cash equal to the fair market value thereof at the time of redemption, at the option of the Company. The Company’s weighted average common ownership interest in the Operating Partnership was 99.3% and 98.6% for the three months ended and 99.3% and 98.6% for the nine months ended September 30, 2008 and 2007, respectively.
		Conclusion of Strategic Process
		On January 23, 2008, the Company announced that its Board of Directors had authorized management, working with financial and legal advisors, to initiate a formal process to pursue a possible business combination or other sale transaction and to seek proposals from potentially interested parties. The Board ended the process on June 25, 2008 due to the increasingly difficult market environment and a lack of definitive proposals. For the nine months ended September 30, 2008, the Company incurred approximately $8,161 of strategic review costs related to this process.
		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, 2008 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, as amended, for the year ended December 31, 2007 (the “Form 10-K”).
		The accompanying 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, variable interest entities (“VIEs”) are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. The primary beneficiary is required to consolidate a 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. For entities in which the

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

Company has less than a controlling financial interest or entities where it is not deemed to be the primary beneficiary under FIN 46R, the entities are accounted for using the equity method of accounting (under the provisions of Emerging Issues Task Force (“EITF”) No. 04-5). Accordingly, the Company’s share of the net earnings or losses of these entities 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.

Revenue Recognition

Residential properties are leased under operating leases with terms of generally one year or less. Rental revenues from residential leases are recognized on the straight-line method over the approximate life of the leases, which is generally one year. The recognition of rental revenues from residential leases when earned has historically not been materially different from rental revenues recognized on a straight-line basis.

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 Impairment or 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 and the guidance provided by EITF 06-8. 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 and the guidance provided by EITF 06-8. 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 project costs for each condominium unit under a binding real estate contract. As of September 30, 2008, all newly developed condominium projects are accounted for under the Completed Contract Method.

Recently Issued and Adopted Accounting Pronouncements

SFAS No. 157, “Fair Value Measurements,” was issued in September 2006. The Company adopted SFAS No. 157 on January 1, 2008. 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 and defines it as the price that would be received to sell an asset or paid to transfer a liability in a transaction between willing market participants. Additional disclosures focusing on the methods used to determine fair value are also required using the following hierarchy:

	•		Level 1 — Quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.
	•		Level 2 — Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly.
	•		Level 3 — Unobservable inputs for the assets or liability.

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

The Company applies SFAS No. 157 in relation to the valuation of its derivative instrument at fair value (see note 6) and the Company’s impairment valuation analysis related to real estate assets (see note 8). The following table presents the Company’s real estate assets and derivative liabilities reported at fair market value and the related level in the fair value hierarchy as defined by SFAS No. 157 used to measure those assets and liabilities at September 30, 2008:

		Fair value measurements as of September 30, 2008
Assets (Liabilities)		Total				Level 1				Level 2				Level 3
Real estate assets, land held for development and sale		$	44,773			$	—			$	—			$	44,773
Interest rate swap agreement			(1,526	)			—				(1,526	)			—

		SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — including an amendment of FASB Statement No. 115,” was issued in February 2007. SFAS No. 159 gives the Company the irrevocable option to carry most financial assets and liabilities at fair value, with changes in fair value recognized in earnings. The Company adopted SFAS No. 159 on January 1, 2008, and the adoption did not have a material impact on the Company’s financial position and results of operations. The Company did not elect to record any of its financial assets and liabilities at fair value in 2008 that were not recorded as such under existing accounting pronouncements.
		SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” was issued in December 2007. SFAS No. 160 requires all entities to report noncontrolling (minority) interests in subsidiaries as equity in the consolidated financial statements. SFAS No. 160 is effective for the Company on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 160 on the Company’s financial position and results of operations.
		SFAS No. 141R, “Business Combinations,” was issued in December 2007. SFAS No. 141R will replace SFAS No. 141 on the date it becomes effective. SFAS No. 141R will require 1) acquirers to recognize all of the assets acquired and liabilities assumed in a business combination at fair value, 2) that the acquisition date be used to determine fair value for all assets acquired and all liabilities assumed, and 3) enhanced disclosures for the acquirer surrounding the financial effects of the business combination. The provisions of SFAS 141R will lead to the expensing of acquisition related transaction costs and the potential recognition of acquisition related contingencies. SFAS No. 141R is effective for the Company on January 1, 2009. The Company is currently evaluating the potential impact of SFAS No. 141R on the Company’s financial position and results of operations.
2.		REAL ESTATE ACTIVITY
		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, 2008, the Company had seven apartment communities, containing 2,365 units, and certain parcels of land classified as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheet at $244,659, which represents the lower of their depreciated cost or fair value less costs to sell. At September 30, 2008, the Company also had portions of two communities being converted to condominiums and certain completed condominium units at newly developed condominium communities totaling $20,167 classified as for-sale condominiums on the accompanying consolidated balance sheet.
		For the three and nine months ended September 30, 2008 and 2007, income from continuing operations 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, 2008 and 2007 was as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Condominium revenues		$	8,633			$	30,501			$	26,981			$	61,592
Condominium costs and expenses			(8,157	)			(25,440	)			(24,754	)			(49,324	)
Gains on sales of condominiums, net		$	476			$	5,061			$	2,227			$	12,268

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

For the nine months ended September 30, 2007, gains on sales of real estate assets in continuing operations also included a gain of $55,300 related to the Company’s transfer of 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. The gain was calculated as the difference between the proceeds received from the independent third party for its 75% interest in the unconsolidated entity and the Company’s 75% proportionate share of the net book value of operating communities transferred to the unconsolidated entity. 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. Additionally, for the nine months ended September 30, 2007, gains on sales of real estate assets in continuing operations included gains of $3,938 on the sales of land sites in Atlanta, Georgia and Dallas, Texas.

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, 2008, income from discontinued operations included the results of operations of seven apartment communities classified as held for sale at September 30, 2008 and two apartment communities through their sale dates in 2008. For the three and nine months ended September 30, 2007, income from discontinued operations included the results of operations of the seven apartment communities classified as held for sale at September 30, 2008, the two apartment communities sold in 2008, a condominium conversion community through its sell out date in February 2007 and three apartment communities sold in 2007 through their respective sale dates.

The revenues and expenses of these communities for the three and nine months ended September 30, 2008 and 2007 were as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Revenues
Rental		$	10,896			$	13,256			$	33,398			$	39,528
Other property revenues			415				641				1,290				1,882
Total revenues			11,311				13,897				34,688				41,410
Expenses
Total property operating and maintenance (exclusive of items shown separately below)			3,640				4,493				11,540				13,619
Depreciation			—				2,264				3,623				7,641
Interest			1,776				2,565				5,697				7,456
Minority interest in consolidated property partnerships			241				133				475				271
Total expenses			5,657				9,455				21,335				28,987
Income from discontinued property operations before minority interest			5,654				4,442				13,353				12,423
Minority interest			(42	)			(62	)			(99	)			(179	)
Income from discontinued property operations		$	5,612			$	4,380			$	13,254			$	12,244

For the three and nine months ended September 30, 2008, the Company recognized net gains in discontinued operations of $23,520 ($23,350 net of minority interest) and $25,831 ($25,640 net of minority interest), respectively, from the sales of two communities, containing 143 and 250 units. These sales generated net proceeds of approximately $37,846 and $57,279 for the three and nine months ended September 30, 2008, respectively. 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. The sale generated net proceeds of $23,741.

Subsequent to September 30, 2008, the Company sold one community, containing 494 units, for gross proceeds of approximately $52,750. As a result of this sale, the Company will record a gain of approximately $37 million in the fourth quarter. Net proceeds from the sale were primarily invested in cash equivalents.

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

For the three and nine months ended September 30, 2007, the Company recorded additional condominium gains of $311 resulting from the reduction of unused warranty accruals from condominium communities sold out in the prior year. For the nine months ended September 30, 2007, 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 February 2007. A summary of revenues and costs and expenses of condominium activities included in discontinued operations was as follows:

		Three months ended				Nine months ended
		September 30, 2007				September 30, 2007
Condominium revenues		$	—			$	560
Condominium costs and expenses			311				(70	)
Gains on condominium sales, before minority interest			311				490
Minority interest			(4	)			(7	)
Gains on condominium sales, net of minority interest		$	307			$	483

3.		INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
		At September 30, 2008, the Company holds investments in various individual limited liability companies (the “Property LLCs”) with institutional investors that own apartment communities. The Company holds a 25% to 35% equity interest in these Property LLCs. The Company and its joint venture partner also hold an approximate pro-rata 48% interest in a Property LLC that is in the process of constructing a mixed-use development, consisting of 129 luxury condominium units, sponsored by the Company and its partner, and Class A office space, sponsored by two additional independent investors. The Company also has a 50% interest in another Property LLC that holds land for future development. In 2007, another 35% owned Property LLC completed the sell-out of a condominium conversion community, initially consisting of 121 units.
		In 2007, the Company’s investment in the 25% owned Property LLC resulted from the transfer of three previously owned apartment communities to the Property LLC co-owned with an institutional investor. The assets, liabilities and members’ equity of this Property LLC were recorded at fair value based on agreed-upon amounts contributed to the Property LLC. At September 30, 2008 and December 31, 2007, the Company’s investment in the 25% owned Property LLC reflects a credit investment of $14,048 and $13,688, respectively, 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, 2008 and December 31, 2007, the Company’s investment in these Property LLCs totaled $40,874 and $23,036, respectively, 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 $6,073 at September 30, 2008. The excess investment related to Property LLCs owning 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 (development, construction and property 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		2008				2007
Real estate assets, net of accumulated depreciation of $19,942 and $15,204, respectively		$	381,298			$	325,705
Cash and other			18,498				7,254
Total assets		$	399,796			$	332,959
Mortgage/construction notes payable		$	279,886			$	214,549
Other liabilities			9,085				5,541
Total liabilities			288,971				220,090
Members’ equity			110,825				112,869
Total liabilities and members’ equity		$	399,796			$	332,959
Company’s equity investment in Property LLCs		$	26,826			$	9,348

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

		Three months ended								Nine months ended
		September 30,								September 30,
Income Statement Data		2008				2007				2008				2007
Revenues
Rental		$	6,872			$	5,450			$	20,359			$	12,406
Other property revenues			449				372				1,332				851
Other			11				45				47				82
Total revenues			7,332				5,867				21,738				13,339
Expenses
Property operating and maintenance			3,011				2,279				8,646				4,837
Depreciation and amortization			1,753				1,920				5,989				3,861
Interest			2,802				1,921				7,801				3,941
Total expenses			7,566				6,120				22,436				12,639
Income (loss) from continuing operations			(234	)			(253	)			(698	)			700
Discontinued operations
Income from discontinued operations			3				4				1				34
Gains on sales of real estate assets, net			—				41				—				817
Income from discontinued operations			3				45				1				851
Net income (loss)		$	(231	)		$	(208	)		$	(697	)		$	1,551
Company’s share of net income		$	260			$	402			$	1,081			$	1,216

For the three and nine months ended September 30, 2007, gains (losses) on real estate assets represent net gains (losses) from condominium sales at the condominium conversion community held by a Property LLC that completed its sell out in 2007.

At September 30, 2008, mortgage/construction notes payable includes a $50,500 mortgage note that bears interest at 5.82%, requires monthly interest only payments and matures in 2013. The note is prepayable without penalty in September 2011. Another mortgage note payable totaling $29,272 bears interest at 5.83%, requires monthly interest only payments and matures in 2013. The note is prepayable without penalty in September 2011. These mortgage notes refinanced existing mortgage indebtedness that carried interest rates of 4.13% and 4.04%, respectively.

Three additional mortgage notes were entered into in conjunction with the formation of the 25% owned Property LLC in 2007. Two notes total $85,723, bear interest at 5.63%, require interest only payments and mature in 2017. The third mortgage note totals $41,000, bears interest at 5.71%, requires interest only payments, and matures in 2017.

In 2007, the Property LLC constructing the mixed-use development and a related Property LLC holding land for future development entered into a construction loan facility with an aggregate capacity of $187,128. At September 30, 2008, the construction loan had an outstanding balance of $73,390, bears interest at LIBOR plus 1.35% and matures in 2011. Under the terms of the construction loan facility, the Company and its equity partner have jointly and severally guaranteed approximately $25,313 of the construction loan held at the unconsolidated Property LLC attributable to the condominium portion of the project as well as certain debt service payments of the condominium portion of the loan held at the unconsolidated Property LLC not to exceed approximately $6,153. Finally, all of the equity owners of the project at the unconsolidated Property LLC, including the Company, have jointly and severally guaranteed the completion of the first building of the project.

In periods prior to the third quarter of 2008, the Company held a 50% interest in an unconsolidated limited liability company (the “LLC”), which now holds the approximate pro-rata 48% interest in the Property LLC constructing condominiums as part of a mixed-use development with other investors as discussed above. In the third quarter of 2008, the Company invested additional equity of $15,500 in the LLC, for which it received a preferred equity interest and which resulted in the Company obtaining a controlling financial interest in the LLC. As such, the Company consolidated the LLC at September 30, 2008. As stated above, the LLC’s principal asset is its $30,141 investment in the Property LLC, which is included in investments in and advances to unconsolidated entities on the Company’s consolidated balance sheet. In conjunction with the Company’s additional equity investment in the LLC, the LLC entered into a licensing and branding arrangement with a third party. This arrangement provides for the payment of a guaranteed licensing fee on the sale of the condominium units. The payment of the licensing fee will be paid from the proceeds of condominium sales at the LLC.

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

4.		INDEBTEDNESS
		At September 30, 2008 and December 31, 2007, the Company’s indebtedness consisted of the following:

		Payment								Maturity		September 30,				December 31,
Description		Terms		Interest Rate						Date		2008				2007
Senior Unsecured Notes		Int.			5.13% - 7.70%	(1)				2010-2013		$	535,000			$	535,000
Unsecured Lines of Credit
Syndicated Line of Credit		N/A		LIBOR + 0.575%		(2)				2010			100,000				245,000
Cash Management Line		N/A		LIBOR + 0.575%						2010			25,882				12,275
													125,882				257,275
Secured Notes
FNMA		Prin. and Int.		Remarketed rate		(3)				2029			92,275				94,000
Other		Prin. and Int.			4.27% - 6.50%	(4)				2009-2015			290,261				172,791
													382,536				266,791
Total												$	1,043,418			$	1,059,066

     Debt maturities

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

Remainder of 2008		$	965
2009			76,618
2010			314,510	(1)
2011			141,431
2012			103,296
Thereafter			406,598
		$	1,043,418

Debt issuances

In January 2008, the Company closed a $120,000 secured, fixed rate mortgage note payable. The note bears interest at 4.88%, requires interest only payments and matures in 2015. The note contains an automatic one year extension under which the interest rate converts to a variable rate, as defined.

In October 2008, the Company closed six cross-collateralized secured mortgage notes payable. The mortgage notes have an aggregate principle amount of $184,683, require fixed, interest-only payments at 6.09% and mature in 2014. The mortgage notes are prepayable without penalty beginning after October 2012. Net financing proceeds were used primarily to pay down the Company’s revolving lines of credit, with the remainder invested in cash equivalents.

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

		Unsecured Lines of Credit
		At September 30, 2008, the Company utilizes a $600,000 syndicated unsecured revolving line of credit (the “Syndicated Line”) that matures in April 2010 for its short-term financing needs. The Syndicated Line may be extended for an additional year through April 2011. 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 17 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, 2008, the Company had issued letters of credit to third parties totaling $3,692 under this facility.
		Additionally, at September 30, 2008, 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.
5.		SHAREHOLDERS’ EQUITY
		Computation of Earnings (Loss) Per Common Share
		For the three and nine months ended September 30, 2008 and 2007, a reconciliation of the numerator and denominator used in the computation of basic and diluted income (loss) from continuing operations per common share is as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Income (loss) from continuing operations available to common shareholders (numerator):
Income (loss) from continuing operations		$	(1,886	)		$	6,362			$	(34,195	)		$	70,016
Less: Preferred stock dividends			(1,909	)			(1,909	)			(5,728	)			(5,728	)
Income (loss) from continuing operations available to common shareholders		$	(3,795	)		$	4,453			$	(39,923	)		$	64,288
Common shares (denominator):
Weighted average shares outstanding — basic			44,047				43,524				43,976				43,452
Dilutive shares from stock options and awards (1)			—				577				—				714
Weighted average shares outstanding — diluted (1)			44,047				44,101				43,976				44,166

For the three and nine months ended September 30, 2008 and 2007, stock options to purchase 2,412 and 216 shares of common stock, respectively, and 2,412 and 194, respectively, were excluded from the computation of diluted earnings (loss) per common share as these stock options and awards were antidilutive.

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

6.		DERIVATIVE FINANCIAL INSTRUMENTS
		The Company adopted the provisions of SFAS No. 157 on January 1, 2008. To comply with the provisions of SFAS No. 157, the Company’s fair value measurement of its derivative instrument at September 30, 2008 uses Level 2 observable inputs that incorporate credit valuation adjustments to appropriately reflect both its risk of nonperformance and the counterparty’s risk of nonperformance.
		At September 30, 2008, the Company had an outstanding interest rate swap agreement with a notional value of approximately $92,145 with a maturity date in 2009. The interest rate swap agreement is included on the accompanying consolidated balance sheet at fair value, representing a liability of $1,526. During the third quarter of 2008, the interest rate swap arrangement, previously 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 for the three months ended September 30, 2008 of $663 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 expense the cumulative unrecognized loss on the interest rate swap of $2,189, previously included in shareholders’ equity, over the remaining life of the swap through 2009. Total amortization expense related to this swap was $508 for the three and nine months ended September 30, 2008.
		In prior years, 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). 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 original life of the swap through 2009. Total amortization expense related to this swap was $281 and $280, respectively, for the three months ended and $843 and $842, respectively, for the nine months ended September 30, 2008 and 2007.
		On February 1, 2008, a $28,495 interest rate cap arrangement expired on its maturity date with no change in value from December 31, 2007.
		A summary of comprehensive income (loss) for the three and nine months ended September 30, 2008 and 2007 is as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Net income (loss)		$	27,076			$	11,049			$	4,699			$	99,457
Change in derivatives, net of minority interest (1)			(389	)			(887	)			1,376				224
Comprehensive income (loss)		$	26,687			$	10,162			$	6,075			$	99,681

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, 2007. The segment information for the three and nine months ended September 30, 2007 has been adjusted due to the restatement impact of reclassifying the operating results of the assets designated as held for sale or sold subsequent to September 30, 2007 to discontinued operations under SFAS No. 144 (see note 2).

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

	•		Fully stabilized communities — those apartment communities which have been stabilized (the earlier of the point at which a property reaches 95% occupancy or one year after completion of construction) for both the current and prior year.
	•		Communities stabilized during 2007 — communities which reached stabilized occupancy in the 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 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 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.

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

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 (loss) for the three and nine months ended September 30, 2008 and 2007. 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,
		2008				2007				2008				2007
Revenues
Fully stabilized communities		$	52,037			$	51,588			$	154,555			$	151,377
Communities stabilized during 2007			2,749				2,261				7,967				5,094
Development, rehabilitation and lease-up communities			5,067				4,103				13,905				11,901
Condominium conversion and other communities			160				1,625				549				8,409
Acquired communities			1,363				830				4,040				830
Other property segments			6,206				5,832				18,421				17,216
Other			261				171				735				416
Consolidated revenues		$	67,843			$	66,410			$	200,172			$	195,243
Contribution to Property Net Operating Income
Fully stabilized communities		$	31,189			$	30,812			$	92,103			$	91,069
Communities stabilized during 2007			1,716				1,290				4,767				2,084
Development, rehabilitation and lease-up communities			2,038				2,082				5,563				5,992
Condominium conversion and other communities			96				851				333				4,706
Acquired communities			781				473				2,165				473
Other property segments, including corporate management expenses			(783	)			(1,438	)			(4,051	)			(5,282	)
Consolidated property net operating income			35,037				34,070				100,880				99,042
Interest income			96				189				367				652
Other revenues			261				171				735				416
Minority interest in consolidated property partnerships			52				(452	)			113				(1,146	)
Depreciation			(14,979	)			(14,522	)			(43,628	)			(43,248	)
Interest expense			(11,471	)			(10,658	)			(31,739	)			(32,566	)
Amortization of deferred financing costs			(869	)			(828	)			(2,579	)			(2,469	)
General and administrative			(4,461	)			(4,761	)			(15,265	)			(16,168	)
Investment and development			(1,834	)			(2,007	)			(4,648	)			(5,512	)
Strategic review costs			—				—				(8,161	)			—
Impairment, severance and other charges			(5,002	)			—				(34,302	)			—
Gains on sales of real estate assets, net			476				5,061				2,227				71,506
Equity in income of unconsolidated real estate entities			260				402				1,081				1,216
Other income (expense), net			534				(262	)			426				(784	)
Minority interest of common unitholders			14				(41	)			298				(923	)
Income (loss) from continuing operations			(1,886	)			6,362				(34,195	)			70,016
Income from discontinued operations			28,962				4,687				38,894				29,441
Net income		$	27,076			$	11,049			$	4,699			$	99,457

8.		IMPAIRMENT, SEVERANCE AND OTHER COSTS
		After an evaluation of its development pipeline in light of difficult market conditions, the Company recorded impairment charges of approximately $28,947 in the second quarter of 2008. The impairment charges relate to the substantial cessation of current development activities associated with four land parcels in pre-development which were written down to their estimated fair market values, as well as the write-off of capitalized pursuit costs associated with certain abandoned projects. Fair market value for the assets recorded at fair value as of September 30, 2008 was determined using Level 3 unobservable inputs, such as estimated cash flows, market capitalization rates and market internal rates of return.

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

Additionally, in the second quarter of 2008, the Company initiated a management and staff workforce reduction resulting the elimination of 40 employment positions and in severance charges of approximately $2,238 and $2,591 for the three and nine months ended September 30, 2008, respectively. The impairment and severance charges reflected management’s decision to reduce the size of its workforce and lower overhead expenses in response in part to its decision to reduce the number of markets in which the Company operates, to sell additional operating assets and to focus its development strategy on fewer projects in the near term. The Company may also record additional severance charges in the fourth quarter of 2008 or in future periods, depending on market conditions and the Company’s business plans.

For the three and nine months ended September 30, 2008, the Company recorded estimated casualty losses of approximately $2,764 related to damage sustained at its Houston, Texas properties as a result of Hurricane Ike. The Company currently estimates that these losses will be below its insured wind storm deductible.

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 such executive officers for the nine months ended September 30, 2008 and 2007:

		Nine months ended
		September 30,
		2008				2007
Accrued severance charges, beginning of period		$	11,215			$	12,832
Severance charges			353				283
Payments for period			(2,557	)			(2,129	)
Interest accretion			549				555
Accrued severance charges, end of period		$	9,560			$	11,541

9.		SUPPLEMENTAL CASH FLOW INFORMATION
		Interest paid (including capitalized amounts of $9,546 and $8,659 for the nine months ended September 30, 2008 and 2007, respectively), aggregated $37,896 and $40,799 for the nine months ended September 30, 2008 and 2007, respectively.
		For the nine months ended September 30, 2008 and 2007, the Company and the Company’s taxable REIT subsidiaries made income tax payments to federal and state taxing authorities totaling $1,700 and $1,575, respectively.
		Non-cash investing and financing activities for the nine months ended September 30, 2008 and 2007 were as follows:
		For the nine months ended September 30, 2008 and 2007, the Company amortized approximately $1,351 ($1,341 net of minority interest) and $842 ($832 net of minority interest), respectively, of accumulated other comprehensive non-cash losses into earnings related to interest rate swap derivative financial instruments (see note 6). Other than the amortization discussed herein, for the nine months ended September 30, 2008, the Company’s derivative financial instruments, accounted for as cash flow hedges, increased in value by $663 ($658, net of minority interest), causing a decrease in accounts payable and accrued expenses and a corresponding increase in the Company’s other income, as this cash flow hedge became ineffective during the quarter. Other than the amortization discussed herein, for the nine months ended September 30, 2008, 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 shareholders’ equity of $35, net of minority interest. 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, 2008 and 2007, Common Units in the Operating Partnership totaling 177 and 96, 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 $3,947 and $2,053 for the nine months ended September 30, 2008 and 2007, respectively.
		The Operating Partnership committed to distribute $19,990 and $21,840 for the three months ended September 30, 2008 and 2007, respectively. As a result, the Company declared dividends of $19,858 and $21,566 for the three months ended September 30, 2008 and 2007, respectively. The remaining distributions from the Operating Partnership in the amount of $132 and $274 for the three months ended September 30, 2008 and 2007, respectively, are distributed to minority interest unitholders in the Operating Partnership.

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

		For the nine months ended September 30, 2008 and 2007, the Company issued common shares for director compensation, totaling $552 and $394, respectively. These stock issuances were non-cash transactions.
10.		STOCK-BASED COMPENSATION PLANS
		Incentive Stock Plans
		Incentive stock awards are granted under the Company’s 2003 Incentive Stock Plan, as amended and restated in October 2008 (the “2003 Stock Plan”). As of December 31, 2007, prior to the amendment of the plan, there were 1,869 shares available for issuance under the 2003 Stock Plan. The plan was amended in October 2008 to increase the number of shares of the Company’s common stock reserved for issuance and available for grant by 1,600 shares, so that 3,469 shares of common stock were reserved for issuance as of January 1, 2008. Of this amount, stock grants count against the total shares available under the 2003 Stock Plan as 2.7 shares for every one share issued on and after January 1, 2008, while options (and stock appreciation rights (“SAR”) settled in shares) count against the total shares available as one share for every one share issued on the exercise of an option (or SAR) on and after January 1, 2008. 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, 2008, stock options outstanding under the 2003 Stock Plan and the Company’s previous stock plan totaled 2,412.
		Compensation costs for stock options have been estimated on the grant date using the Black-Scholes option-pricing method. The Company did not grant any stock options for the nine months ended September 30, 2008. For options granted during the nine months ended September 30, 2007, the weighted average assumptions used in the Black-Scholes option-pricing model were dividend yield of 3.8%, expected volatility of 18.1%, risk-free interest rate of 4.8% and expected option term of 5.0 years.
		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, 2008 and 2007, the Company granted stock options to purchase zero and 199 shares of Company common stock, respectively, to Company officers and directors, of which zero and 28 shares, respectively, were granted to the Company’s non-executive chairman of the board. The Company recorded compensation expense related to stock options of $376 ($373 net of minority interest) and $404 ($398 net of minority interest) for the three months ended and $1,042 ($1,033 net of minority interest) and $1,162 ($1,145 net of minority interest) for the nine months ended September 30, 2008 and 2007, 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 nine months ended September 30, 2008 and 2007 is presented below:

		Nine months ended
		September 30,
		2008								2007
						Weighted Average								Weighted Average
		Shares				Exercise Price				Shares				Exercise Price
Options outstanding, beginning of period			2,455			$	34				2,375			$	33
Granted			—				—				199				48
Exercised			(39	)			37				(108	)			36
Forfeited			(4	)			32				(8	)			41
Options outstanding, end of period			2,412				34				2,458				34
Options exercisable, end of period			2,164				33				1,774				33
Weighted-average fair value of options granted during the period		$	—							$	7.22