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 March 31, 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

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, 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 company o
				(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 company o
				(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:

44,111,921 shares of common stock outstanding as of May 1, 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 March 31, 2008 and December 31, 2007		1
Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007		2
Consolidated Statement of Shareholders’ Equity and Accumulated Earnings for the three months ended March 31, 2008		3
Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007		4
Notes to Consolidated Financial Statements		5
POST APARTMENT HOMES, L.P.
Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007		19
Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007		20
Consolidated Statement of Partners’ Equity for the three months ended March 31, 2008		21
Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007		22
Notes to Consolidated Financial Statements		23
Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations		37
Item 3 Quantitative and Qualitative Disclosures about Market Risk		53
Item 4 Controls and Procedures		53
Item 4T Controls and Procedures		54
Part II OTHER INFORMATION
Item 1 Legal Proceedings		54
Item 1A Risk Factors		54
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds		55
Item 3 Defaults Upon Senior Securities		55
Item 4 Submission of Matters to a Vote of Security Holders		55
Item 5 Other Information		55
Item 6 Exhibits		56
Signatures		57
Exhibit Index		59
EX-31.1 SECTION 302 CERTIFICATION OF CEO
EX-31.2 SECTION 302 CERTIFICATION OF CFO
EX-32.1 SECTION 906 CERTIFICATION OF CEO
EX-32.2 SECTION 906 CERTIFICATION OF CFO

POST PROPERTIES, INC.

		March 31,				December 31,
		2008				2007
		(Unaudited)
Assets
Real estate assets
Land		$	272,168			$	276,680
Building and improvements			1,819,259				1,840,563
Furniture, fixtures and equipment			201,484				204,433
Construction in progress			149,550				134,125
Land held for future development			159,736				154,617
			2,602,197				2,610,418
Less: accumulated depreciation			(553,589	)			(562,226	)
For-sale condominiums			33,912				38,844
Assets held for sale, net of accumulated depreciation of $24,333 and $4,031 at March 31, 2008 and December 31, 2007, respectively			36,464				24,576
Total real estate assets			2,118,984				2,111,612
Investments in and advances to unconsolidated real estate entities			22,958				23,036
Cash and cash equivalents			15,879				11,557
Restricted cash			8,759				5,642
Deferred charges, net			10,802				10,538
Other assets			35,038				105,756
Total assets		$	2,212,420			$	2,268,141
Liabilities and shareholders’ equity
Indebtedness		$	1,015,645			$	1,059,066
Accounts payable and accrued expenses			93,446				100,215
Dividend and distribution payable			19,982				19,933
Accrued interest payable			13,386				4,388
Security deposits and prepaid rents			15,038				11,708
Total liabilities			1,157,497				1,195,310
Minority interest of common unitholders in Operating Partnership			6,710				10,354
Minority interests in consolidated real estate entities			4,284				3,972
Total minority interests			10,994				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:
44,096 and 43,825 shares issued, 44,096 and 43,825 shares outstanding at March 31, 2008 and December 31, 2007, respectively			441				438
Additional paid-in-capital			880,767				874,928
Accumulated earnings			170,919				189,985
Accumulated other comprehensive income (loss)			(5,151	)			(3,962	)
			1,047,005				1,061,418
Less common stock in treasury, at cost, 76 and 72 shares at March 31, 2008 and December 31, 2007, respectively			(3,076	)			(2,913	)
Total shareholders’ equity			1,043,929				1,058,505
Total liabilities and shareholders’ equity		$	2,212,420			$	2,268,141

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

POST PROPERTIES, INC.

(In thousands, except per share data)
(Unaudited)

		Three months ended
		March 31,
		2008				2007
Revenues
Rental		$	71,130			$	69,229
Other property revenues			3,558				3,672
Other			239				117
Total revenues			74,927				73,018
Expenses
Property operating and maintenance (exclusive of items shown separately below)			35,613				34,120
Depreciation			15,961				16,255
General and administrative			5,848				5,448
Investment, development and other			1,458				1,550
Strategic review costs			6,070				—
Total expenses			64,950				57,373
Operating income			9,977				15,645
Interest income			210				250
Interest expense			(11,703	)			(12,741	)
Amortization of deferred financing costs			(851	)			(812	)
Gains on sales of real estate assets, net			2,119				3,706
Equity in income of unconsolidated real estate entities			401				504
Other income (expense)			(174	)			(261	)
Minority interest in consolidated property partnerships			(466	)			(20	)
Minority interest of common unitholders			22				(67	)
Income (loss) from continuing operations			(465	)			6,204
Discontinued operations
Income from discontinued property operations, net of minority interest			861				1,377
Gains on sales of real estate assets, net of minority interest			2,290				16,890
Income from discontinued operations			3,151				18,267
Net income			2,686				24,471
Dividends to preferred shareholders			(1,909	)			(1,909	)
Net income available to common shareholders		$	777			$	22,562
Per common share data — Basic
Income (loss) from continuing operations (net of preferred dividends)		$	(0.05	)		$	0.10
Income from discontinued operations			0.07				0.42
Net income available to common shareholders		$	0.02			$	0.52
Weighted average common shares outstanding — basic			43,875				43,367
Per common share data — Diluted
Income (loss) from continuing operations (net of preferred dividends)		$	(0.05	)		$	0.10
Income from discontinued operations			0.07			$	0.41
Net income available to common shareholders		$	0.02			$	0.51
Weighted average common shares outstanding — diluted			43,875				44,101

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

POST PROPERTIES, INC.

ACCUMULATED EARNINGS
(In thousands, except per share data)
(Unaudited)

																		Accumulated
										Additional								Other
		Preferred				Common				Paid-in				Accumulated				Comprehensive				Treasury
		Stock				Stock				Capital				Earnings				Income (Loss)				Stock				Total
Shareholders’ Equity and Accumulated Earnings, December 31, 2007		$	29			$	438			$	874,928			$	189,985			$	(3,962	)		$	(2,913	)		$	1,058,505
Comprehensive income
Net income			—				—				—				2,686				—				—				2,686
Net change in derivatives, net of minority interest			—				—				—				—				(1,172	)			—				(1,172	)
Total comprehensive income																											1,514
Proceeds from employee stock purchase, stock option and other plans			—				1				1,618				—				—				(643	)			976
Adjustment for minority interest of unitholders in Operating Partnership upon conversion of units into common shares and at dates of capital transactions			—				2				3,047				—				(17	)			480				3,512
Stock-based compensation, net of minority interest			—				—				1,174				—				—				—				1,174
Dividends to preferred shareholders			—				—				—				(1,909	)			—				—				(1,909	)
Dividends to common shareholders ($0.45 per share)			—				—				—				(19,843	)			—				—				(19,843	)
Shareholders’ Equity and Accumulated Earnings, March 31, 2008		$	29			$	441			$	880,767			$	170,919			$	(5,151	)		$	(3,076	)		$	1,043,929

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

POST PROPERTIES, INC.

(In thousands, except per share data)
(Unaudited)

		Three months ended
		March 31,
		2008				2007
Cash Flows From Operating Activities
Net income		$	2,686			$	24,471
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			16,188				17,044
Amortization of deferred financing costs			851				812
Minority interest of common unitholders in Operating Partnership			(22	)			67
Minority interest in discontinued operations			29				284
Minority interest in consolidated entities			466				20
Gains on sales of real estate assets			(4,430	)			(20,859	)
Other expense (income)			281				281
Equity in income of unconsolidated entities			(401	)			(504	)
Distributions of earnings of unconsolidated entities			686				796
Deferred compensation			133				136
Stock-based compensation			1,185				926
Changes in assets, (increase) decrease in:
Other assets			(357	)			780
Deferred charges			(93	)			(14	)
Changes in liabilities, increase (decrease) in:
Accrued interest payable			8,998				8,923
Accounts payable and accrued expenses			(6,598	)			(6,878	)
Security deposits and prepaid rents			213				295
Net cash provided by operating activities			19,815				26,580
Cash Flows From Investing Activities
Construction and acquisition of real estate assets, net of payables			(34,216	)			(26,479	)
Net proceeds from sales of real estate assets			95,131				34,665
Capitalized interest			(3,383	)			(3,107	)
Annually recurring capital expenditures			(2,258	)			(2,616	)
Periodically recurring capital expenditures			(1,593	)			(2,305	)
Community rehabilitation and other revenue generating capital expenditures			(3,508	)			(4,667	)
Corporate additions and improvements			(231	)			(1,261	)
Distributions from (investments in and advances to) unconsolidated entities			(15	)			995
Note receivable collections and other investments			499				(21	)
Net cash provided by (used in) investing activities			50,426				(4,796	)
Cash Flows From Financing Activities
Lines of credit proceeds (repayments), net			(162,623	)			1,230
Proceeds from indebtedness			120,000				—
Payments on indebtedness			(1,233	)			(1,025	)
Payments of financing costs			(910	)			(164	)
Treasury stock acquisitions			—				(3,694	)
Proceeds from employee stock purchase and stock options plans			843				2,783
Capital contributions (distributions) of minority interests			(154	)			200
Distributions to common unitholders			(212	)			(317	)
Dividends paid to preferred shareholders			(1,909	)			—
Dividends paid to common shareholders			(19,721	)			(19,573	)
Net cash used in financing activities			(65,919	)			(20,560	)
Net increase in cash and cash equivalents			4,322				1,224
Cash and cash equivalents, beginning of period			11,557				3,663
Cash and cash equivalents, end of period		$	15,879			$	4,887

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

POST PROPERTIES. INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(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 March 31, 2008, the Company owned 22,437 apartment units in 62 apartment communities, including 1,747 apartment units in five communities held in unconsolidated entities and 2,266 apartment units in seven communities (and the expansion of one community) currently under construction and/or in lease-up. The Company is also developing and selling 535 for-sale condominium homes in four communities (including 137 units in one community held in an unconsolidated entity) and is converting apartment homes in two communities initially consisting of 349 units into for-sale condominium homes through a taxable REIT subsidiary. At March 31, 2008, approximately 41.6%, 18.6%, 12.4% and 10.3% (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 March 31, 2008, the Company had outstanding 44,096 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 309 at March 31, 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 99.1% and 98.5% for the three months ended and March 31, 2008 and 2007, respectively.
		Possible business combination
		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 process commenced immediately after the announcement and is continuing. There can be no assurance that the process will result in any transaction leading into a business combination or other sale transaction. For the three months ended March 31, 2008, the Company incurred approximately $6,070 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 months ended March 31, 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 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 March 31, 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. 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. The Company adopted SFAS No. 157 on January 1, 2008, specifically related to the valuation of the Company’s derivative instrument at fair value and the Company’s impairment valuation analysis related to real estate assets. The valuations were made using observable market data for similar instruments and assets. The adoption of SFAS No. 157 did not have a material impact on the Company’s financial position and results of operations.

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. SFAS No. 159 is effective for the Company on January 1, 2008. 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.

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

		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, 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 March 31, 2008, the Company had two apartment communities, containing 744 units, and certain parcels of land classified as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheet at $36,464, which represents the lower of their depreciated cost or fair value less costs to sell. At March 31, 2008, the Company also had portions of two communities being converted to condominiums, originally containing 349 units, and certain completed condominium units at newly developed condominium communities totaling $33,912 classified as for-sale condominiums on the accompanying consolidated balance sheet.
		For the three months ended March 31, 2008 and 2007, income from 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 months ended March 31, 2008 and 2007 was as follows:

		Three months ended
		March 31,
		2008				2007
Condominium revenues		$	8,297			$	5,869
Condominium costs and expenses			(6,178	)			(4,361	)
Gains on sales of condominiums, net		$	2,119			$	1,508

For the three months ended March 31, 2007, gains on sales of real estate assets in continuing operations also included a $2,198 gain on the sale of a land site and an associated corporate facility previously used in the Company’s landscape and maintenance operations.

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 months ended March 31, 2008, income from discontinued operations included the results of operations of two apartment communities classified as held for sale during the first quarter of 2008 and one apartment community through its sale date in January 2008. For the three months ended March 31, 2007, income from discontinued operations included the results of operations of the two apartment communities classified as held for sale at March 31, 2008, the apartment community 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.

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

The revenues and expenses of these communities for the three months ended March 31, 2008 and 2007 were as follows:

		Three months ended
		March 31,
		2008				2007
Revenues
Rental		$	2,364			$	4,695
Other property revenues			143				323
Total revenues			2,507				5,018
Expenses
Property operating and maintenance (exclusive of items shown separately below)			981				1,973
Depreciation			227				788
Interest			430				859
Total expenses			1,638				3,620
Income from discontinued property operations before minority interest			869				1,398
Minority interest			(8	)			(21	)
Income from discontinued property operations		$	861			$	1,377

For the three months ended March 31, 2008, the Company recognized net gains in discontinued operations of $2,311 ($2,290 net of minority interest) from the sale of one community, containing 143 units. This sale generated net proceeds of approximately $19,433. For the three months ended March 31, 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.

For the three months ended March 31, 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 for the three months ended March 31, 2007 was as follows:

Condominium revenues		$	560
Condominium costs and expenses			(381	)
Gains on condominium sales, before minority interest			179
Minority interest			(3	)
Gains on condominium sales, net of minority interest		$	176

3.		INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES
		At March 31, 2008, 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 commenced construction in 2007 of a mixed-use development, consisting of for-sale condominiums and Class A office space. The Company holds a 35% equity interest in two Property LLCs, each owning one apartment community. The Company holds a 25% interest in one Property LLC owning three apartment communities, and a 50% interest in the condominium portion of the Property LLC developing the mixed-use project. In 2007, another 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 March 31, 2008, the Company’s investment in the 25% owned Property LLC reflects a credit investment of $13,784 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.

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

The Company accounts for its investments in these Property LLCs using the equity method of accounting. At March 31, 2008, the Company’s investment in these Property LLCs totaled $22,958, excluding the credit investment discussed above. The excess of the Company’s investment over its equity in the underlying net assets of certain Property LLCs was approximately $5,907 at March 31, 2008. 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 excess investment related to the Property LLC constructing condominiums will be recognized as additional costs as the condominiums are sold. The Company provides real estate services (development, construction and property management) to the Property LLCs for which it earns fees.

The operating results of the Company include its 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:

		March 31,				December 31,
Balance Sheet Data		2008				2007
Real estate assets, net of accumulated depreciation of $17,048 and $15,204, respectively		$	343,990			$	325,705
Cash and other			7,385				7,254
Total assets		$	351,375			$	332,959
Mortgage/construction notes payable		$	228,474			$	214,549
Other liabilities			11,914				5,541
Total liabilities			240,388				220,090
Members’ equity			110,987				112,869
Total liabilities and members’ equity		$	351,375			$	332,959
Company’s equity investment in Property LLCs (1)		$	9,174			$	9,348
			.

		Three months ended
		March 31,
Income Statement Data		2008				2007
Revenues
Rental		$	6,693			$	2,814
Other property revenues			400				169
Other			22				19
Total revenues			7,115				3,002
Expenses
Property operating and maintenance			2,753				1,012
Depreciation and amortization			2,131				661
Interest			2,500				688
Total expenses			7,384				2,361
Income (loss) from continuing operations			(269	)			641
Discontinued operations
Income (loss) from discontinued operations			—				22
Gains on sales of real estate assets, net			—				858
Income from discontinued operations			—				880
Net income		$	(269	)		$	1,521
Company’s share of net income		$	401			$	504

For the three months ended March 31, 2007, gains on real estate assets represent net gains from condominium sales at the condominium conversion community held by a Property LLC that completed its sell out in 2007. A summary of revenues and costs and expenses of condominium activities for the three months ended March 31, 2007 was as follows:

Condominium revenues		$	4,112
Condominium costs and expenses			(3,254	)
Gains on condominium sales, net		$	858

At March 31, 2008, mortgage/construction notes payable include a $49,997 mortgage note that bears interest at 4.13%, requires monthly interest payments and annual principal payments of $1 through 2009. Thereafter, the note requires monthly principal

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

		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 May 2008. Another mortgage note payable totaling $17,000 bears interest at a fixed rate of 4.04% requires interest only payments and matures in 2008. The Property LLC intends to refinance the mortgage note on or before their maturity with new mortgage indebtedness. Three additional mortgage notes were entered into in conjunction with the formation of the 25% owned Property LLC in 2007. Two notes total $85,724, 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 entered into a construction loan facility with an aggregate capacity of $187,128. At March 31, 2008, the construction loan had an outstanding balance of $34,753, bears interest at LIBOR plus 1.35% and matures in 2011. Under the terms of the construction loan facility, the Company and its 50% equity partner have jointly and severally guaranteed approximately $25,313 of the construction loan attributable to the condominium portion of the project. Additionally, the Company and its 50% equity partner have jointly and severally guaranteed certain debt service payments of the condominium portion of the loan not to exceed approximately $6,153, and all of the equity owners of the project, including the Company, have guaranteed the completion of the first building at the project.
4.		INDEBTEDNESS
		At March 31, 2008 and December 31, 2007, the Company’s indebtedness consisted of the following:

		Payment								Maturity				March 31,				December 31,
Description		Terms				Interest Rate				Date				2008				2007
Senior Unsecured Notes		Int.					5.13% - 7.70	%			2010-2013			$	535,000			$	535,000
Unsecured Lines of Credit
Syndicated Line of Credit		N/A				LIBOR + 0.575		%(1)			2010				70,000				245,000
Cash Management Line		N/A				LIBOR + 0.575		%			2010				24,652				12,275
															94,652				257,275
Fixed Rate Secured Notes
FNMA		Prin. and Int.					6.15	%(2)			2029				94,000				94,000
Other		Prin. and Int.					4.27% - 6.50	%			2009-2015				291,993				172,791
															385,993				266,791
Total														$	1,015,645			$	1,059,066

Debt maturities

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

Remainder of 2008		$	4,432
2009			76,618
2010			283,280	(1)
2011			141,431
2012			103,296
Thereafter			406,588
		$	1,015,645

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

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.

Unsecured Lines of Credit

At March 31, 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 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 March 31, 2008, the Company had issued letters of credit to third parties totaling $2,100 under this facility.

Additionally, at March 31, 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 Per Common Share

For the three months ended March 31, 2008 and 2007, 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
		March 31,
		2008				2007
Income from continuing operations available to common shareholders (numerator):
Income (loss) from continuing operations		$	(465	)		$	6,204
Less: Preferred stock dividends			(1,909	)			(1,909	)
Income (loss) from continuing operations available to common shareholders		$	(2,374	)		$	4,295
Common shares (denominator):
Weighted average shares outstanding — basic			43,875				43,367
Dilutive shares from stock options and awards (1)			—				734
Weighted average shares outstanding — diluted (1)			43,875				44,101

For the three months ended March 31, 2008 and 2007, stock options to purchase 2,423 and 148 shares of common stock, respectively, were excluded from the computation of diluted earnings 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 March 31, 2008 incorporates credit valuation adjustments to appropriately reflect both its risk of nonperformance and the counterparty’s risk of nonperformance.
		At March 31, 2008, the Company had an outstanding interest rate swap agreement with a notional value of approximately $93,890 with a maturity date in 2009. The swap arrangement is a variable to fixed rate swap at a fixed rate of 5.21% and the swap was designated as a cash flow hedge of the Company’s FNMA variable rate debt. The interest rate swap agreement is included on the accompanying consolidated balance sheet at fair value. At March 31, 2008, the fair value of the interest rate swap agreement represented a liability of $3,688, 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 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 life of the swap through 2009. Total amortization expense related to this swap was $281 for the three months ended March 31, 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 for the three months ended March 31, 2008 and 2007 is as follows:

		Three months ended
		March 31,
		2008				2007
Net income		$	2,686			$	24,471
Change in derivatives, net of minority interest (1)			(1,172	)			67
Comprehensive income		$	1,514			$	24,538

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 months ended March 31, 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 March 31, 2007 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.

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

	•		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 for the three months ended March 31, 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
		March 31,
		2008				2007
Revenues
Fully stabilized communities		$	59,916			$	58,128
Communities stabilized during 2007			2,553				1,121
Development, rehabilitation and lease-up communities			4,295				3,825
Condominium conversion and other communities			201				4,023
Acquired communities			1,356				—
Other property segments			6,367				5,804
Other			239				117
Consolidated revenues		$	74,927			$	73,018
Contribution to Property Net Operating Income
Fully stabilized communities		$	36,567			$	35,902
Communities stabilized during 2007			1,431				176
Development, rehabilitation and lease-up communities			1,793				2,000
Condominium conversion and other communities			122				2,349
Acquired communities			665				—
Other property segments, including corporate management expenses			(1,503	)			(1,646	)
Consolidated property net operating income			39,075				38,781
Interest income			210				250
Other revenues			239				117
Minority interest in consolidated property partnerships			(466	)			(20	)
Depreciation			(15,961	)			(16,255	)
Interest expense			(11,703	)			(12,741	)
Amortization of deferred financing costs			(851	)			(812	)
General and administrative			(5,848	)			(5,448	)
Investment and development			(1,458	)			(1,550	)
Strategic review costs			(6,070	)			—
Gains on sales of real estate assets, net			2,119				3,706
Equity in income of unconsolidated real estate entities			401				504
Other income (expense)			(174	)			(261	)
Minority interest of common unitholders			22				(67	)
Income (loss) from continuing operations			(465	)			6,204
Income from discontinued operations			3,151				18,267
Net income		$	2,686			$	24,471

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

8.		SEVERANCE COSTS
		In prior years, the Company recorded severance charges associated with the departure of certain executive officers of the Company. Under certain of these arrangements, the Company is required to make certain payments and provide specified benefits through 2013 and 2016. The following table summarizes the activity relating to aggregate net severance charges for the three months ended March 31, 2008 and 2007:

		Three months ended
		March 31,
		2008				2007
Accrued severance charges, beginning of period		$	11,215			$	12,832
Severance charges			353				—
Payments for period			(540	)			(440	)
Interest accretion			183				185
Accrued severance charges, end of period		$	11,211			$	12,577

9.		SUPPLEMENTAL CASH FLOW INFORMATION
		Interest paid (including capitalized amounts of $3,383 and $3,107 for the three months ended March 31, 2008 and 2007, respectively), aggregated $6,518 and $7,784 for the three months ended March 31, 2008 and 2007, respectively.
		For the three months ended March 31, 2008 and 2007, the Company and the Company’s taxable REIT subsidiaries made income tax payments to federal and state taxing authorities totaling $971 and $143, respectively.
		Non-cash investing and financing activities for the three months ended March 31, 2008 and 2007 were as follows:
		For the three months ended March 31, 2008 and 2007, the Company amortized approximately $281 ($278 net of minority interest) and $281 ($277 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 three months ended March 31, 2008 the Company’s derivative financial instruments, accounted for as cash flow hedges, decreased in value causing an increase in accounts payable and accrued expenses and a corresponding increase in shareholder’s equity of $1,450, net of minority interest. For the three months ended March 31, 2007, the Company’s derivative financial instruments accounted for as cash flow hedges decreased in value causing an increase in accounts payable and accrued expenses and a corresponding decrease in shareholder’s equity of $209, net of minority interest.
		For the three months ended March 31, 2008 and 2007, Common Units in the Operating Partnership totaling 161 and 57, 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 $3,512 and $1,256 for the three months ended March 31, 2008 and 2007, respectively.
		The Operating Partnership committed to distribute $19,982 and $21,815 for the three months ended March 31, 2008 and 2007, respectively. As a result, the Company declared dividends of $19,843 and $21,523 for the three months ended March 31, 2008 and 2007, respectively. The remaining distributions from the Operating Partnership in the amount of $139 and $292 for the three months ended March 31, 2008 and 2007, respectively, are distributed to minority interest unitholders in the Operating Partnership.
		For the three months ended March 31, 2008 and 2007, the Company issued common shares for director compensation, totaling $133 and $136, 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.

POST PROPERTIES. INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, in thousands, except per share or unit 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 March 31, 2008, stock options outstanding under the 2003 Stock Plan and the Company’s previous stock plan totaled 2,423.

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 three months ended March 31, 2008. For options granted during the three months ended March 31, 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 three months ended March 31, 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 $357 ($354 net of minority interest) and $379 ($373 net of minority interest) for the three months ended March 31, 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 three months ended March 31, 2008 and 2007 is presented below:

		Three months ended
		March 31,
		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			(32	)			39				(64	)			35
Forfeited			—				—				(1	)			38
Options outstanding, end of period			2,423				34				2,509				34
Options exercisable, end of period			2,008				33				1,642				33
Weighted-average fair value of options granted during the period		$	—							$	7.22

At March 31, 2008, there was $1,310 of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 0.9 years. The total intrinsic value of stock options exercised during the three months ended March 31, 2008 and 2007 was $146 and $789, respectively. The aggregate intrinsic values of stock options outstanding, exercisable and expected to vest at March 31, 2008 were $13,736, $11,616 and $13,532, respectively. The weighted average remaining contractual lives of stock options outstanding, exercisable and expected to vest at March 31, 2008 were 5.1, 4.7 and 5.1 years, respectively. Stock options expected to vest at March 31, 2008 totaled 2,393 at a weighted average exercise price of approximately $33.96.

At March 31, 2008, the Company had separated its outstanding options into two ranges based on exercise prices. There were 1,386 options outstanding with exercise prices ranging from $23.90 to $36.13. These options have a weighted average exercise price of $29.17 and a weighted average remaining contractual life of 4.9 years. Of these outstanding options, 1,213 were exercisable at March 31, 2008 at a weighted average exercise price of $29.57. In addition, there were 1,036 options outstanding with exercise prices ranging from $36.47 to $48.00. These options had a weighted average exercise price of $40.37 and a

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

weighted average remaining contractual life of 5.3 years. Of these outstanding options, 794 were exercisable at March 31, 2008 at a weighted average exercise price of $39.08.

For the three months ended March 31, 2008 and 2007, the Company granted 78 and 47 shares of restricted stock, respectively, to Company officers and directors, of which 9 and 4 shares, respectively, were granted to the Company’s non-executive chairman of the board. The restricted share grants generally vest ratably over three to five year periods. The weighted average grant date fair value for the restricted shares for the three months ended March 31, 2008 and 2007 was $42.25 and $47.98, respectively, per share. The total value of the restricted share grants for the three months ended March 31, 2008 and 2007 was $3,308 and $2,240, respectively. The compensation cost is amortized ratably into compensation expense over the applicable vesting periods. Total compensation expense relating to the restricted stock was $752 ($746 net of minority interest) and $486 ($478 net of minority interest) for the three months ended March 31, 2008 and 2007, respectively.

A summary of the activity related to the Company’s restricted stock for the three months ended March 31, 2008 and 2007 is presented below:

		Three months ended
		March 31,
		2008								2007
						Weighted Average								Weighted Average
						Grant-Date								Grant-Date
		Shares				Fair Value				Shares				Fair Value
Unvested shares, beginning or period			119			$	35				125			$	31
Granted			78				42				47				48
Vested			—				—				—				—
Forfeited			—				—				—				—
Unvested shares, end of period			197				38				172				35

		At March 31, 2008, there was $6,034 of unrecognized compensation cost related to restricted stock. This cost is expected to be recognized over a weighted average period of 2.4 years. The total intrinsic value of restricted shares vested for the three months ended March 31, 2008 and 2007 was $7 and $20, respectively.
		Employee Stock Purchase Plan
		The Company maintains an Employee Stock Purchase Plan (the “2005 ESPP”) under a plan approved by Company shareholders in 2005, and the maximum number of shares issuable is 300. The purchase price of shares of common stock under the ESPP is equal to 85% of the lesser of the closing price per share of common stock on the first or last day of the trading period, as defined. The Company records the aggregate cost of the ESPP (generally the 15% discount on the share purchases) as a period expense. Total compensation expense relating to the ESPP was $76 and $62 for the three months ended March 31, 2008 and 2007, respectively.
11.		INCOME TAXES
		The Company has elected to be taxed as a REIT under the Code. To qualify as a REIT, the Company must distribute annually at least 90% of its adjusted taxable income, as defined in the Code, to its shareholders and satisfy certain other organizational and operating requirements. It is management’s current intention to adhere to these requirements and maintain the Company’s REIT status. As a REIT, the Company generally will not be subject to federal income tax at the corporate level on the taxable income it distributes to its shareholders. Should the Company fail to qualify as a REIT in any tax year, it may be subject to federal income taxes at regular corporate rates (including any applicable alternative minimum tax) and may not be able to qualify as a REIT for four subsequent taxable years. The Company may be subject to certain state and local taxes on its income and property, and to federal income taxes and excise taxes on its undistributed taxable income.
		In the preparation of income tax returns in federal and state jurisdictions, the Company and its taxable REIT subsidiaries assert certain tax positions based on their understanding and interpretation of the income tax law. The taxing authorities may challenge such positions and the resolution of such matters could result in the payment and recognition of additional income tax expense. Management believes it has used reasonable judgments and conclusions in the preparation of its income tax returns. The Company and its subsidiaries’ (including the TRSs) income tax returns are subject to examination by federal and state tax jurisdictions for years 2004 through 2006. Net income tax loss carryforwards and other tax attributes generated in years prior to 2004 are also subject to challenge in any examination of the 2004 to 2006 tax years.

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

		As of March 31, 2008, the Company’s taxable REIT subsidiaries (“TRSs”) had unrecognized tax benefits of approximately $797 which primarily related to uncertainty regarding the sustainability of certain deductions taken on prior year income tax returns of the TRS with respect to the amortization of certain intangible assets. The Company does not expect any significant change in this unrecognized tax benefit in the remainder of 2008. To the extent these unrecognized tax benefits are ultimately recognized, they may affect the effective tax rate in a future period. The Company’s policy is to recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense. Accrued interest and penalties for the three months ended March 31, 2008 and at March 31, 2008 were not material to the Company’s results of operations, cash flows or financial position.
		The Company utilizes TRSs principally to perform such non-REIT activities as asset and property management, for-sale housing (condominiums) conversions and sales and other services. These TRSs are subject to federal and state income taxes. For the three months ended March 31, 2008, the TRS recorded no net income tax expense (benefit) as the provision for estimated income taxes payable is expected to be fully offset by deferred tax benefits resulting from reductions of valuation allowances recorded in prior years.
		At December 31, 2007, management had established valuation allowances of approximately $3,157 against net deferred tax assets due primarily to historical losses at the TRSs in years prior to 2007 and the variability of the income of these subsidiaries. The tax benefits associated with such unused valuation allowances may be recognized in future periods, if the taxable REIT subsidiaries generate sufficient taxable income to utilize such amounts or if the Company determines that it is more likely than not that the related deferred tax assets are realizable.
		A summary of the components of the TRS deferred tax assets and liabilities at December 31, 2007 are included in the footnotes to the Company’s audited financial statements included in the Company’s Form 10-K, as amended. Other than the activity discussed above relating to the three months ended March 31, 2008, there were no material changes to the components of deferred tax assets and liabilities at March 31, 2008.
12.		LEGAL PROCEEDINGS
		In November 2006, the Equal Rights Center (“ERC”) filed a lawsuit against the Company and the Operating Partnership in the United States District Court for the District of Columbia. This suit alleges various violations of the Fair Housing Act (“FHA”) and the Americans with Disabilities Act (“ADA”) at properties designed, constructed or operated by the Company and the Operating Partnership in the District of Columbia, Virginia, Colorado, Florida, Georgia, New York, North Carolina and Texas. The plaintiff seeks compensatory and punitive damages in unspecified amounts, an award of attorneys’ fees and costs of suit, as well as preliminary and permanent injunctive relief that includes retrofitting multi-family units and public use areas to comply with the FHA and the ADA and prohibiting construction or sale of noncompliant units or complexes. On April 18, 2007, ERC filed a motion for a preliminary injunction to prohibit the Company and the Operating Partnership from selling any alleged noncompliant apartment communities or condominium units while the litigation is ongoing. On July 25, 2007 the court entered an order denying ERC’s motion for the preliminary injunction. Discovery is being conducted by both parties. On October 29, 2007, the court granted, in part, ERC’s motion to amend the scheduling order and expand the time permitted for discovery and filing of dispositive motions. As a result, the cutoff for fact discovery was extended to February 29, 2008 with the end of all briefing on dispositive motions set for August 11, 2008. On January 29, 2008, the Operating Partnership and ERC agreed to an extension of discovery dates to accommodate further depositions and inspections. Under the agreement, which was approved by the court on February 7, 2008, fact discovery was to be completed by April 30, 2008, expert discovery was to be completed by August 29, 2008, and summary judgment briefing would be completed by November 10, 2008. No trial date has been set. The parties have agreed to certain additional limited deposition and property inspection discovery, which will occur after April 30, 2008. In addition, on April 23, 2008, the Company and Operating Partnership filed a Motion to Compel Production of Documents and Deposition Testimony against ERC. The parties are in the process of submitting a joint motion to extend certain deadlines, which, if approved, will extend the deadline for the completion of expert discovery until October 28, 2008 and the completion of summary judgment briefing until January 20, 2009. As a result, it is possible that the dates set forth in the Court’s current scheduling order will be further extended. At this stage in the proceeding, it is not possible to predict or determine the outcome of the lawsuit, nor is it possible to estimate the amount of loss that would be associated with an adverse decision.
		The Company is involved in various other legal proceedings incidental to its business from time to time, most of which are expected to be covered by liability or other insurance. Management of the Company believes that any resolution of pending proceedings or liability to the Company which may arise as a result of these various other legal proceedings will not have a material adverse effect on the Company’s results of operations or financial position.

POST APARTMENT HOMES, L.P.

		March 31,				December 31,
		2008				2007
		(Unaudited)
Assets
Real estate assets
Land		$	272,168			$	276,680
Building and improvements			1,819,259				1,840,563
Furniture, fixtures and equipment			201,484				204,433
Construction in progress			149,550				134,125
Land held for future development			159,736				154,617
			2,602,197				2,610,418
Less: accumulated depreciation			(553,589	)			(562,226	)
For-sale condominiums			33,912				38,844
Assets held for sale, net of accumulated depreciation of $24,333 and $4,031 at March 31, 2008 and December 31, 2007, respectively			36,464				24,576
Total real estate assets			2,118,984				2,111,612
Investments in and advances to unconsolidated real estate entities			22,958				23,036
Cash and cash equivalents			15,879				11,557
Restricted cash			8,759				5,642
Deferred charges, net			10,802				10,538
Other assets			35,038				105,756
Total assets		$	2,212,420			$	2,268,141
Liabilities and partners’ equity
Indebtedness		$	1,015,645			$	1,059,066
Accounts payable and accrued expenses			93,446				100,215
Distribution payable			19,982				19,933
Accrued interest payable			13,386				4,388
Security deposits and prepaid rents			15,038				11,708
Total liabilities			1,157,497				1,195,310
Minority interests in consolidated real estate entities			4,284				3,972
Commitments and contingencies
Partners’ equity
Preferred units			95,000				95,000
Common units
General partner			11,159				11,329
Limited partner			949,668				966,535
Accumulated other comprehensive income (loss)			(5,188	)			(4,005	)
Total partners’ equity			1,050,639				1,068,859
Total liabilities and partners’ equity		$	2,212,420			$	2,268,141

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

POST APARTMENT HOMES, L.P.

(Unaudited)

		Three months ended
		March 31,
		2008				2007
Revenues
Rental		$	71,130			$	69,229
Other property revenues			3,558				3,672
Other			239				117
Total revenues			74,927				73,018
Expenses
Property operating and maintenance (exclusive of items shown separately below)			35,613				34,120
Depreciation			15,961				16,255
General and administrative			5,848				5,448
Investment, development and other			1,458				1,550
Strategic review costs			6,070				—
Total expenses			64,950				57,373
Operating income			9,977				15,645
Interest income			210				250
Interest expense			(11,703	)			(12,741	)
Amortization of deferred financing costs			(851	)			(812	)
Gains on sales of real estate assets, net			2,119				3,706
Equity in income of unconsolidated real estate entities			401				504
Other income (expense)			(174	)			(261	)
Minority interest in consolidated property partnerships			(466	)			(20	)
Income (loss) from continuing operations			(487	)			6,271
Discontinued operations
Income from discontinued property operations			869				1,398
Gains on sales of real estate assets			2,311				17,153
Income from discontinued operations			3,180				18,551
Net income			2,693				24,822
Distributions to preferred unitholders			(1,909	)			(1,909	)
Net income available to common unitholders		$	784			$	22,913
Per common unit data — Basic
Income (loss) from continuing operations (net of preferred distributions)		$	(0.05	)		$	0.10
Income from discontinued operations			0.07				0.42
Net income available to common unitholders		$	0.02			$	0.52
Weighted average common units outstanding — basic			44,278				44,041
Per common unit data — Diluted
Income (loss) from continuing operations (net of preferred distributions)		$	(0.05	)		$	0.10
Income from discontinued operations			0.07				0.41
Net income available to common unitholders		$	0.02			$	0.51
Weighted average common units outstanding — diluted			44,278				44,776

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

POST APARTMENT HOMES, L.P.

(Unaudited)

														Accumulated
						Common Units								Other
		Preferred				General				Limited				Comprehensive
		Units				Partner				Partners				Income (Loss)				Total
Partners’ Equity, December 31, 2007		$	95,000			$	11,329			$	966,535			$	(4,005	)		$	1,068,859
Comprehensive income
Net income			1,909				8				776				—				2,693
Net change in derivative value			—				—				—				(1,183	)			(1,183	)
Total comprehensive income																			1,510
Contributions from the Company related to employee stock purchase, stock option and other plans			—				10				966				—				976
Equity-based compensation			—				12				1,173				—				1,185
Distributions to preferred unitholders			(1,909	)			—				—				—				(1,909	)
Distributions to common unitholders ($0.45 per unit)			—				(200	)			(19,782	)			—				(19,982	)
Partners’ Equity, March 31, 2008		$	95,000			$	11,159			$	949,668			$	(5,188	)		$	1,050,639