UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

~~[X]~~ x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~SECURITIES~~For ~~EXCHANGE~~the ~~ACT~~quarterly OFperiod ~~1934~~ended June 30, 2015

For the quarterly period ended June 30, 2009

~~[ ]~~¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

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.

~~Securities~~Post ~~Exchange~~Properties, ~~Act~~Inc. ofYes ~~1934~~x ~~during~~No ~~the~~¨ ~~preceding~~Post 12Apartment ~~months~~Homes, ~~(or~~L.P. ~~for~~Yes ~~such~~x ~~shorter~~No ~~period that the registrant was required to~~ ¨

~~file~~Indicate ~~such~~by ~~reports),~~check ~~and~~mark ~~(2)~~ whether the registrants have ~~been~~submitted ~~subject~~electronically and posted on their corporate Web site, if any, every Interactive Data File required to ~~such~~be ~~filing~~submitted ~~requirements~~and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period as the ~~past~~registrant 90was ~~days~~required to submit and post such files).

Post Properties, Inc. Yes ~~[X]~~x No [¨ ] Post Apartment Homes, L.P. Yes ~~[X]~~x No ~~[ ]~~¨

Indicate by check mark whether the registrants ~~have~~are ~~submitted~~large ~~electronically~~accelerated ~~and~~filers, ~~posted~~accelerated onfilers, ~~their~~non-accelerated filers or ~~corporate~~smaller ~~Web~~reporting ~~site,~~company. ifSee ~~any~~definition of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

~~every~~Post ~~Interactive~~Properties, ~~Data~~Inc. ~~File~~Large ~~required~~Accelerated toFiler bex ~~submitted~~Accelerated ~~and~~Filer ~~posted~~¨ ~~pursuant~~Non-Accelerated toFiler ~~Rule~~¨ ~~405~~(Do ofnot ~~Regulation~~check Sif a smaller reporting company) Smaller Reporting Company ¨ Post Apartment Homes, L.P. Large Accelerated Filer ¨ Accelerated Filer ¨ Non-TAccelerated ~~during the~~Filer ~~preceding~~x 12(Do not check if a smaller reporting company) Smaller Reporting Company ¨

months (or for such shorter period as the registrant was required to submit and post such files).

Post Properties, Inc. Yes [ ] No [ ] Post Apartment Homes, L.P. Yes [ ] No [ ]

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 [X] Accelerated Filer [ ] Non-Accelerated Filer [ ] (Do not check if a smaller reporting company) Smaller Reporting Company [ ] Post Apartment Homes, Large Accelerated Filer [ ] Accelerated Filer [ ] L.P. Non-Accelerated Filer [X] (Do not check if a smaller reporting company) 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 [¨ ] No ~~[X]~~x Post Apartment Homes, L.P. Yes [¨ ] No ~~[X]~~x

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:

4454,~~383~~601,~~068~~361 shares of common stock outstanding as of July 31, ~~2009~~2015.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2015, of Post Properties, Inc. and Post Apartment Homes, L.P. Unless stated otherwise or the context otherwise requires, references to “Post Properties” or the “Company” mean Post Properties, Inc. and its controlled and consolidated subsidiaries. References to “Post Apartment Homes” or the “Operating Partnership” mean Post Apartment Homes, L.P. and its controlled and consolidated subsidiaries. The terms “the Company,” “we,” “our” and “us” refer to the Company or the Company and the Operating Partnership collectively, as the text requires.

The Company is a real estate investment trust (“REIT”) and the general partner of the Operating Partnership. As of June 30, 2015, the Company owned an approximate 99.8% interest in the Operating Partnership. The remaining 0.2% interests are owned by persons other than the Company.

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

•

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

•

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

•

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

•

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

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

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

There are a few differences in the disclosures for the Company and the Operating Partnership which are reflected and presented as such in the notes to the consolidated financial statements to this Form 10-Q. Noncontrolling interests and the presentation of equity are the main areas of difference between the consolidated financial statements of the Company and the Operating Partnership. The Company’s consolidated statement of operations reflects a reduction to income for the noncontrolling interests held by the Operating Partnership’s unitholders other than the Company (0.2% at June 30, 2015). This quarterly report on Form 10-Q presents the following separate financial information for both the Company and the Operating Partnership:

•

Consolidated financial statements;

•

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

•

Computation of earnings per share for the Company

•

Computation of earnings per unit for the Operating Partnership

POST PROPERTIES, INC.

POST APARTMENT HOMES, L.P.

INDEX

Part I	FINANCIAL INFORMATION		Page
		Page
	Item 1	Financial Statements
Part I	FINANCIAL INFORMATION
	POST PROPERTIES, INC.
	Item 1 Financial Statements
	Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008		1
	POST PROPERTIES, INC.
	Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008		2
	Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	1
	Consolidated Statements of Equity and Accumulated Earnings for the six months ended June 30, 2009 and 2008		3
	Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014	2
	Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008		4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014	3
	Notes to Consolidated Financial Statements		5
	Consolidated Statements of Equity and Accumulated Earnings for the six months ended June 30, 2015 and 2014	4
	POST APARTMENT HOMES, L.P.
	Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014	5
	Consolidated Balance Sheets as of June 30, 2009 and December 31, 2008		22
	POST APARTMENT HOMES, L.P.
	Consolidated Statements of Operations for the three and six months ended June 30, 2009 and 2008		23
	Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014	6
	Consolidated Statements of Equity for the six months ended June 30, 2009 and 2008		24
	Consolidated Statements of Operations for the three and six months ended June 30, 2015 and 2014	7
	Consolidated Statements of Cash Flows for the six months ended June 30, 2009 and 2008		25
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2015 and 2014	8
	Notes to Consolidated Financial Statements		26
	Consolidated Statements of Equity for the six months ended June 30, 2015 and 2014	9
	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
	Consolidated Statements of Cash Flows for the six months ended June 30, 2015 and 2014	10
	Item 3	Quantitative and Qualitative Disclosures about Market Risk	67
	POST PROPERTIES, INC. & POST APARTMENT HOMES, L.P.
	Item 4	Controls and Procedures	67
	Notes to Consolidated Financial Statements	11
Part II	OTHER INFORMATION
	Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Item 1	Legal Proceedings	68
	Item 3 Quantitative and Qualitative Disclosures about Market Risk	46
	Item 1A	Risk Factors	68
	Item 4 Controls and Procedures	47
	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	68
Part II	OTHER INFORMATION
	Item 3	Defaults Upon Senior Securities	68
	Item 1 Legal Proceedings	47
	Item 4	Submission of Matters to a Vote of Security Holders	69
	Item 1A Risk Factors	47
	Item 5	Other Information	69
	Item 2 Unregistered Sales of Equity Securities and Use of Proceeds	48
	Item 6	Exhibits	70
	Item 3 Defaults Upon Senior Securities	48
	Signatures		71
	Item 4 Mine Safety Disclosures	48
	Exhibit Index		73
	Item 5 Other Information	48
	Item 6 Exhibits	49
	Signatures	50
	Exhibit Index	52

POST PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

	June 30,2009			December 31,2008
	June 30,				December 31,
	(Unaudited)
	2015				2014
Assets
	(Unaudited)
Real estate assets
Assets
Land	$	268,541		$	258,593
Real estate assets
Building and improvements		1,874,469			1,802,496
Land	$	319,401			$	317,077
Furniture, fixtures and equipment		217,297			205,221
Building and improvements		2,357,576				2,323,626
Construction in progress		123,072			138,496
Furniture, fixtures and equipment		314,552				304,534
Land held for future investment		82,039			81,555
Construction in progress		109,292				86,971
		2,565,418			2,486,361
Land held for future investment		29,795				33,197
Less: accumulated depreciation		(587,116)			(553,814)
		3,130,616				3,065,405
Condominiums, for-sale and under construction		90,911			65,507
Less: accumulated depreciation		(979,505	)			(937,310	)
Assets held for sale, net of accumulated depreciation of $28,441 and$42,379 at June 30, 2009 and December 31, 2008		63,364			85,097
Assets held for sale, net of accumulated depreciation of $207 at December 31, 2014		—				672
Total real estate assets		2,~~132~~151,~~577~~111			~~2,083,151~~	2,128,767
Investments in and advances to unconsolidated real estate entities		83,~~706~~957			~~39,300~~	4,059
Cash and cash equivalents		3119,~~694~~057			~~75,472~~	140,512
Restricted cash		103,~~614~~885			~~10,164~~	3,572
Deferred charges, net		9,582			10,278
Deferred financing costs, net		7,924				5,117
Other assets		3228,~~328~~098			~~34,290~~	29,771
Total assets	$	2,~~197~~314,~~501~~032		$	~~2,252,655~~$	2,311,798
Liabilities and shareholders' equity
Liabilities, redeemable common units and equity
Indebtedness	$	1891,~~086,790~~004		$	~~1,112,913~~$	892,459
Accounts payable and accrued expenses		97,949			93,175
Accounts payable, accrued expenses and other		78,039				70,616
Investments in unconsolidated real estate entities		5416,~~334~~437			~~15,985~~	16,624
Dividend and distribution payable		8,914			8,888
Dividends and distributions payable		24,074				21,852
Accrued interest payable		54,~~137~~003			~~5,493~~	4,229
Security deposits and prepaid rents		1513,~~779~~684			~~15,941~~	12,972
Total liabilities		1,~~268~~027,~~903~~241			~~1,252,395~~	1,018,752
Redeemable common units		46,~~094~~555			~~4,410~~	7,086
Commitments and contingencies
Equity
Company shareholders' equity
Preferred stock, $.01 par value, 20,000 authorized:
Preferred stock, $.01 par value, 20,000 authorized:
8 1/2% Series A Cumulative Redeemable Shares, liquidation preference $50 per share, 868 shares issued and outstanding		9				9
8 1/2% Series A Cumulative Redeemable Shares, liquidation preference		9			9
Common stock, $.01 par value, 100,000 authorized:
$50 per share, 900 shares issued and outstanding
54,632 and 54,632 shares issued and 54,592 and 54,509 shares outstanding at June 30, 2015 and December 31, 2014, respectively		546				546
7 5/8% Series B Cumulative Redeemable Shares, liquidation preference
Additional paid-in-capital		1,117,450				1,114,851
$25 per share, 2,000 shares issued and outstanding		20			20
Accumulated earnings		176,979				185,001
Common stock, $.01 par value, 100,000 authorized:
Accumulated other comprehensive income (loss)		(4,468	)			(3,675	)
44,353 and 44,222 shares issued and 44,353 and 44,222 sharesoutstanding at June 30, 2009 and December 31, 2008, respectively		443			442
		1,290,516				1,296,732
Additional paid-in-capital		888,639			886,643
Less common stock in treasury, at cost, 125 and 207 shares at June 30, 2015 and December 31, 2014, respectively		(10,280	)			(10,772	)
Accumulated earnings		37,269			105,300
Total equity		1,280,236				1,285,960
Accumulated other comprehensive income (loss)		-			(1,819)
Total liabilities, redeemable common units and equity	$	2,314,032			$	2,311,798
		926,380			990,595
Less common stock in treasury, at cost, 85 and 80 sharesat June 30, 2009 and December 31, 2008, respectively		(3,010)			(2,965)
Total Company shareholders' equity		923,370			987,630
Noncontrolling interests - consolidated real estate entities		1,134			8,220
Total equity		924,504			995,850
Total liabilities and equity	$	2,197,501		$	2,252,655

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

- 1 -

POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)

	Three months endedJune 30,						Six months endedJune 30,
	Three months ended								Six months ended
	2009			2008			2009			2008
	June 30,								June 30,
Revenues
	2015				2014				2015			2014
Rental	$	64,808		$	66,208		$	130,192		$	132,364
Revenues
Other property revenues		4,033			4,108			7,601			7,425
Rental	$	89,368			$	89,414			$	177,029		$	177,442
Other		277			235			503			474
Other property revenues		5,789				5,389				11,246			10,654
Total revenues		69,118			70,551			138,296			140,263
Other		274				223				587			442
Expenses
Total revenues		95,431				95,026				188,862			188,538
Total property operating and maintenance (exclusive of itemsshown separately below)		32,658			35,195			65,356			69,591
Expenses
Depreciation		18,009			15,213			35,601			30,310
Property operating and maintenance (exclusive of items shown separately below)		41,512				41,795				81,635			82,391
General and administrative		3,964			4,351			8,373			9,485
Depreciation		21,418				20,829				42,675			42,596
Investment and development		793			1,274			1,790			2,664
General and administrative		4,353				3,966				9,367			8,094
Other investment costs		646			244			1,299			499
Investment and development		275				794				510			1,605
Strategic review costs		-			2,091			-			8,161
Other investment costs		154				210				288			483
Impairment, severance and other costs		9,658			29,300			9,658			29,300
Other expenses		—				502				—			1,409
Total expenses		6567,~~728~~712			~~87,668~~	68,096		~~122,077~~		134,475	~~150,010~~		136,578
Operating income (loss)		3,390			(17,117)			16,219			(9,747)
Operating income		27,719				26,930				54,387			51,960
Interest income		2343			61	4		~~138~~		124	~~271~~		16
Interest expense		(127,~~241)~~753	)		~~(11,004)~~	(10,433	)	~~(26,419)~~		(15,846	~~(22,035~~)		(21,677	)
Amortization of deferred financing costs		(~~682)~~433	)		~~(859)~~	(620	)	~~(1,616)~~		(882	~~(1,710~~)		(1,265	)
Net gains (losses) on condominium sales activities		232			(368)			(28)			1,751
Equity in income of unconsolidated real estate entities, net		568				501				965			986
Equity in income (loss) of unconsolidated real estate entities		(74,656)			420			(74,546)			821
Gains on sales of real estate assets, net		(298	)			36,092				1,475			36,902
Other income (expense), net		50(195	)		66	(196	)	~~1,109~~		(390	~~(108~~)		(391	)
Net gain (loss) on early extinguishment of indebtedness		(79)			-			819			-
Net loss on extinguishment of indebtedness		—				(4,287	)			(197	)		(4,287	)
Loss from continuing operations		(83,963)			(28,801)			(84,324)			(30,757)
Net income		19,651				47,991				39,636			62,244
Discontinued operations
Noncontrolling interests - consolidated real estate entities		—				(154	)			—			(138	)
Income from discontinued property operations		2,026			3,232			4,635			6,036
Noncontrolling interests - Operating Partnership		(41	)			(118	)			(83	)		(151	)
Gains on sales of real estate assets		24,742			-			24,742			2,311
Net income available to the Company		19,610				47,719				39,553			61,955
Income from discontinued operations		26,768			3,232			29,377			8,347
Dividends to preferred shareholders		(922	)			(922	)			(1,844	)		(1,844	)
Net loss		(57,195)			(25,569)			(54,947)			(22,410)
Net income available to common shareholders	$	18,688			$	46,797			$	37,709		$	60,111
Noncontrolling interests - consolidated real estate entities		8,150			293			8,226			(173)
Per common share data - Basic
Noncontrolling interests - Operating Partnership		250			213			248			206
Net income available to common shareholders	$	0.34			$	0.86			$	0.69		$	1.11
Net loss attributable to the Company		(48,795)			(25,063)			(46,473)			(22,377)
Weighted average common shares outstanding - basic		54,455				54,223				54,452			54,199
Dividends to preferred shareholders		(1,910)			(1,910)			(3,819)			(3,819)
Per common share data - Diluted
Net loss attributable to common shareholders	$	(50,705)		$	(26,973)		$	(50,292)		$	(26,196)
Net income available to common shareholders	$	0.34			$	0.86			$	0.69		$	1.10
Per common share data - Basic
Weighted average common shares outstanding - diluted		54,469				54,335				54,467			54,314
Loss from continuing operations(net of preferred dividends)	$	(1.75)		$	(0.68)		$	(1.80)		$	(0.78)
Income from discontinued operations		0.61			0.07			0.66			0.19
Net loss attributable to common shareholders	$	(1.14)		$	(0.61)		$	(1.13)		$	(0.59)
Weighted average common shares outstanding - basic		44,118			44,011			44,116			43,939
Per common share data - Diluted
Loss from continuing operations(net of preferred dividends)	$	(1.75)		$	(0.68)		$	(1.80)		$	(0.78)
Income from discontinued operations		0.61			0.07			0.66			0.19
Net loss attributable to common shareholders	$	(1.14)		$	(0.61)		$	(1.13)		$	(0.59)
Weighted average common shares outstanding - diluted		44,118			44,011			44,116			43,939

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

- 2 -

POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF ~~EQUITY~~COMPREHENSIVE ~~AND~~INCOME

~~ACCUMULATED~~(In ~~EARNINGS~~thousands)

(In thousands, except per share data)

(Unaudited)

2009	PreferredStock			CommonStock			AdditionalPaid-inCapital			AccumulatedEarnings		AccumulatedOtherComprehensiveIncome (Loss)			TreasuryStock		TotalCompanyEquity		NoncontrollingInterests -ConsolidatedReal Estate Entities		TotalEquity		RedeemableCommonUnits
	Three months ended								Six months ended
																							(see note 5)
	June 30,								June 30,
Equity and Accumulated Earnings, December 31, 2008	$	29		$	442		$	886,643		$	105,300	$	(1,819)		$	(2,965)	$	987,630	$	8,220	$	995,850	$	4,410
	2015				2014				2015			2014
Comprehensive income
Net income	$	19,651			$	47,991			$	39,636		$	62,244
Net income (loss)		-			-			-			(46,473)		-			-		(46,473)		(8,226)		(54,699)		(248)
Net change in derivative financial instruments		753				(1,507	)			(795	)		(1,487	)
Net change in derivative value		-			-			-			-		1,819			-		1,819		-		1,819		10
Total comprehensive income		20,404				46,484				38,841			60,757
Total comprehensive income (loss)																		(44,654)		(8,226)		(52,880)		(238)
Comprehensive income attributable to noncontrolling interests:
Proceeds from employee stock purchase, stockoption and other plans		-			1			369			-		-			(45)		325		-		325		-
Consolidated real estate entities		—				(154	)			—			(138	)
Stock-based compensation		-			-			1,627			-		-			-		1,627		-		1,627		9
Operating Partnership		(42	)			(114	)			(81	)		(147	)
Dividends to preferred shareholders		-			-			-			(3,819)		-			-		(3,819)		-		(3,819)		-
Total Company comprehensive income	$	20,362			$	46,216			$	38,760		$	60,472
Dividends to common shareholders and distributions tounitholders ($0.40 per share and unit)		-			-			-			(17,739)		-			-		(17,739)		-		(17,739)		(87)
Consolidation of equity method investment (see note 3)		-			-			-			-		-			-		-		1,560		1,560		-
Distributions to noncontrolling interests - consolidatedreal estate entities		-			-			-			-		-			-		-		(420)		(420)		-
Equity and Accumulated Earnings, June 30, 2009	$	29		$	443		$	888,639		$	37,269	$	-		$	(3,010)	$	923,370	$	1,134	$	924,504	$	4,094
2008
Equity and Accumulated Earnings, December 31, 2007	$	29		$	438		$	874,928		$	183,831	$	(3,962)		$	(2,913)	$	1,052,351	$	3,972	$	1,056,323	$	16,508
Comprehensive income
Net income (loss)		-			-			-			(22,377)		-			-		(22,377)		173		(22,204)		(206)
Net change in derivative value		-			-			-			-		593			-		593		-		593		4
Total comprehensive income																		(21,784)		173		(21,611)		(202)
Proceeds from employee stock purchase,stock option and other plans		-			1			1,816			-		-			(914)		903		-		903		-
Adjustment for noncontrolling interest of unitholders inOperating Partnership upon conversion of units intocommon shares and at dates of capital transactions		-			2			3,397					(16)			482		3,865		-		3,865		(3,865)
Stock-based compensation		-			-			2,297			-		-			-		2,297		-		2,297		18
Dividends to preferred shareholders		-			-			-			(3,819)		-			-		(3,819)		-		(3,819)		-
Dividends to common shareholders and distributionsto unitholders ($0.90 per share and unit)		-			-			-			(39,688)		-			-		(39,688)		-		(39,688)		(271)
Distributions to noncontrolling interests - consolidatedreal estate entities		-			-			-					-			-		-		(1,224)		(1,224)		-
Adjustment to redemption value of noncontrollinginterests - Operating Partnership		-			-			-			3,474		-			-		3,474		-		3,474		(3,474)
Equity and Accumulated Earnings, June 30, 2008	$	29		$	441		$	882,438		$	121,421	$	(3,385)		$	(3,345)	$	997,599	$	2,921	$	1,000,520	$	8,714

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

- 3 -

POST PROPERTIES, INC.

CONSOLIDATED STATEMENTS OF ~~CASH~~EQUITY ~~FLOWS~~AND ACCUMULATED EARNINGS

(In thousands, except per share data)

(Unaudited)

	Six months endedJune 30,
												Accumulated									Noncontrolling
	2009		2008
						Additional						Other						Total			Interests -
Cash Flows From Operating Activities
	Preferred			Common		Paid-in			Accumulated			Comprehensive			Treasury			Company			Consolidated			Total
Net loss	$	(54,947)	$	(22,410)
	Stock			Stock		Capital			Earnings			Income (Loss)			Stock			Equity			Real Estate Entities			Equity
Adjustments to reconcile net income to net cash provided by operating activities:
2015
Depreciation		35,601		32,272
Equity & Accum. Earnings, December 31, 2014	$	9		$	546	$	1,114,851		$	185,001		$	(3,675	)	$	(10,772	)	$	1,285,960		$	—		$	1,285,960
Amortization of deferred financing costs		1,616		1,710
Comprehensive income		—			—		—			39,553			(793	)		—			38,760			—			38,760
Gains on sales of real estate assets, net		(24,714)		(4,062)
Employee stock purchase, stock option and other plan issuances		—			—		(26	)		(390	)		—			492			76			—			76
Other expense (income), net		(215)		563
Stock-based compensation		—			—		2,625			—			—			—			2,625			—			2,625
Asset impairment charges		9,658		28,947
Dividends to preferred shareholders		—			—		—			(1,844	)		—			—			(1,844	)		—			(1,844	)
Equity in (income) loss of unconsolidated entities		74,546		(821)
Dividends to common shareholders ($0.84 per share)		—			—		—			(45,858	)		—			—			(45,858	)		—			(45,858	)
Distributions of earnings of unconsolidated entities		896		1,429
Adjustment to redemption value of redeemable common units		—			—		—			517			—			—			517			—			517
Deferred compensation		44		278
Equity & Accum. Earnings, June 30, 2015	$	9		$	546	$	1,117,450		$	176,979		$	(4,468	)	$	(10,280	)	$	1,280,236		$	—		$	1,280,236
Stock-based compensation		1,636		2,315
2014
Net gain on early extinguishment of debt		(819)		-
Equity & Accum. Earnings, December 31, 2013	$	9		$	546	$	1,111,861		$	66,138		$	(3,419	)	$	(22,188	)	$	1,152,947		$	(216	)	$	1,152,731
Changes in assets, increase in:
Comprehensive income		—			—		—			61,955			(1,483	)		—			60,472			138			60,610
Other assets		(59)		(3,860)
Employee stock purchase, stock option and other plan issuances		—			—		(55	)		(2,649	)		—			5,652			2,948			—			2,948
Deferred charges		(205)		(178)
Adjustment for ownership interest of redeemable common units		—			—		(7	)		—			—			—			(7	)		—			(7	)
Changes in liabilities, increase (decrease) in:
Stock-based compensation		—			—		1,934			—			—			—			1,934			—			1,934
Accrued interest payable		(356)		402
Dividends to preferred shareholders		—			—		—			(1,844	)		—			—			(1,844	)		—			(1,844	)
Accounts payable and accrued expenses		(722)		(1,667)
Dividends to common shareholders ($0.76 per share)		—			—		—			(41,313	)		—			—			(41,313	)		—			(41,313	)
Security deposits and prepaid rents		(612)		(130)
Distributions to noncontrolling interests - consolidated real estate entities		—			—		—			—			—			—			—			(68	)		(68	)
Net cash provided by operating activities		41,348		34,788
Adjustment to redemption value of redeemable common units		—			—		—			(1,057	)		—			—			(1,057	)		—			(1,057	)
Cash Flows From Investing Activities
Equity & Accum. Earnings, June 30, 2014	$	9		$	546	$	1,113,733		$	81,230		$	(4,902	)	$	(16,536	)	$	1,174,080		$	(146	)	$	1,173,934
Construction and acquisition of real estate assets, net of payables		(75,460)		(69,689)
Net proceeds from sales of real estate assets		55,235		104,906
Capitalized interest		(6,597)		(6,671)
Annually recurring capital expenditures		(6,307)		(5,640)
Periodically recurring capital expenditures		(18,537)		(3,331)
Community rehabilitation and other revenue generating capital expenditures		(3,503)		(7,951)
Corporate additions and improvements		(126)		(421)
Investments in and advances to unconsolidated entities		(5,104)		(262)
Note receivable collections and other investments		1,017		1,529
Net cash provided by (used in) investing activities		(59,382)		12,470
Cash Flows From Financing Activities
Lines of credit repayments, net		(20,951)		(113,004)
Proceeds from indebtedness		288,517		120,000
Payments on indebtedness		(295,840)		(2,542)
Payments of financing costs and other		(3,709)		(952)
Proceeds from employee stock purchase and stock options plans		279		624
Distributions to noncontrolling interests - real estate entities		(420)		(1,224)
Distributions to noncontrolling interests - common unitholders		(87)		(351)
Dividends paid to preferred shareholders		(3,819)		(3,819)
Dividends paid to common shareholders		(17,714)		(39,559)
Net cash used in financing activities		(53,744)		(40,827)
Net increase (decrease) in cash and cash equivalents		(71,778)		6,431
Cash and cash equivalents, beginning of period		75,472		11,557
Cash and cash equivalents, end of period	$	3,694	$	17,988

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

- 4 -

POST PROPERTIES, INC.

~~NOTES~~CONSOLIDATED TOSTATEMENTS ~~CONSOLIDATED~~OF ~~FINANCIAL~~CASH ~~STATEMENTS~~FLOWS

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

~~1. ORGANIZATION~~(Unaudited) ~~AND SIGNIFICANT ACCOUNTING POLICIES~~

Organization


	Six months ended
	June 30,
	2015			2014
Cash Flows From Operating Activities
Net income	$	39,636		$	62,244
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		42,675			42,596
Amortization of deferred financing costs		882			1,265
Net gains on sales of real estate assets		(1,475	)		(36,902	)
Other, net		495			205
Equity in income of unconsolidated entities, net		(965	)		(986	)
Distributions of earnings of unconsolidated entities		1,055			1,082
Stock-based compensation		2,631			1,939
Net loss on extinguishment of indebtedness		197			4,287
Changes in assets, decrease (increase) in:
Other assets		(1,073	)		(1,472	)
Changes in liabilities, increase (decrease) in:
Accrued interest payable		(226	)		(588	)
Accounts payable and accrued expenses		3,489			5,866
Prepaid rents and other		554			(1,814	)

Net cash provided by operating activities		87,875			77,722

Cash Flows From Investing Activities
Development and construction of real estate assets		(46,326	)		(34,440	)
Proceeds from sales of real estate assets		4,529			73,264
Capitalized interest		(2,219	)		(1,601	)
Property capital expenditures		(12,309	)		(14,272	)
Corporate additions and improvements		(542	)		(1,687	)
Investments in unconsolidated entities		(220	)		—
Other investing activities		(313	)		(458	)

Net cash provided by (used in) investing activities		(57,400	)		20,806

Cash Flows From Financing Activities
Lines of credit proceeds		—			80,213
Lines of credit repayments		—			(80,213	)
Payments on indebtedness		(1,455	)		(121,974	)
Payments of financing costs and other		(4,008	)		(4,291	)
Proceeds from employee stock purchase and stock options plans		345			2,278
Acquisition of treasury stock and other		(1,389	)		—
Distributions to noncontrolling interests - real estate entities		—			(68	)
Distributions to noncontrolling interests - common unitholders		(96	)		(93	)
Dividends paid to preferred shareholders		(1,844	)		(1,844	)
Dividends paid to common shareholders		(43,641	)		(37,445	)
Other financing activities		158			—

Net cash used in financing activities		(51,930	)		(163,437	)

Net decrease in cash and cash equivalents		(21,455	)		(64,909	)
Cash and cash equivalents, beginning of period		140,512			82,110

Cash and cash equivalents, end of period	$	119,057		$	17,201

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,~~accompanying ~~through~~notes ~~its~~are 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 June 30, 2009, the Company owned 20,662 apartment units in 57 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 362 for-sale condominium homes in three communities (including 129 units in one community held in an ~~unconsolidated~~integral ~~entity)~~part ~~and is converting apartment homes in two communities initially consisting~~ of ~~349~~these ~~units~~consolidated ~~into~~financial ~~for-sale condominium homes through a taxable REIT subsidiary~~statements. At June 30, 2009, approximately 37.2%, 21.5%, 12.9% and 10.7% (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~~5 Company has elected to qualify and operate as a self-administrated and self-managed real estate investment trust (“REIT”) for federal income tax purposes. A REIT is a legal entity which holds real estate interests and is generally not subject to federal income tax on the income it distributes to its shareholders.

At June 30, 2009, the Company had outstanding 44,353 shares of common stock and owned the same number of units of common limited partnership interests (“Common Units”) in the Operating Partnership, representing a 99.5% common ownership interest in the Operating Partnership. Common Units held by persons other than the Company totaled 219 at June 30, 2009 and represented a 0.5% common noncontrolling 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, but outside the control, of the Operating Partnership. The Company’s weighted average common ownership interest in the Operating Partnership was 99.5% and 99.3% for the three months ended and 99.5% and 99.2% for the six months ended June 30, 2009 and 2008, respectively.

Basis of Presentation

The accompanying unaudited financial statements have been prepared by the Company's management in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normally recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, 2008 (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, “Consolidation of Variable Interest Entities” (“FIN 46R”). 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 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 noncontrolling interest of unitholders in the operations of the Operating Partnership is calculated based on the weighted average unit ownership during the period.

- 5 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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, 2009, all newly developed condominium projects are accounted for under the Completed Contract Method.

Real Estate Assets, Depreciation and Impairment

Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components and related land improvements – 20-40 years; furniture, fixtures and equipment – 5-10 years).

The Company continually evaluates the recoverability of the carrying value of its real estate assets using the methodology prescribed in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under SFAS No. 144, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value.

The Company periodically classifies real estate assets as held for sale. An asset is classified as held for sale after the approval of the Company’s board of directors and after an active program to sell the asset has commenced. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying consolidated balance sheets. Upon a

- 6 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

decision to no longer market an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated. The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations. Income from discontinued operations includes the revenues and expenses, including depreciation and allocated interest expense, associated with the assets. Interest expense is allocated to assets held for sale based on actual interest costs for assets with secured mortgage debt. Interest expense is allocated to unencumbered assets based on the ratio of unsecured debt to unencumbered assets multiplied by the weighted average interest rate on the Operating Partnership’s unsecured debt for the period and further multiplied by the book value of the assets held for sale and/or sold. This classification of operating results as discontinued operations applies retroactively for all periods presented. Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations.

For condominium conversion projects, a complete community conversion is treated as discontinued operations in the same manner as discussed above for apartment community sales. For partial conversions of communities, the operating results, condominium revenues and associated gains are reflected in continuing operations (see discussion under “revenue recognition” above) and the net book value of the assets being converted into condominiums are reflected separately from held for sale assets on the consolidated balance sheet in the caption titled, “Condominiums, For-sale and Under Construction.” In either case, subsequent to the classification of the assets as held for sale, no further depreciation expense is recorded.

In addition, for-sale condominium assets under development are evaluated for impairment using the methodology for assets held for future investment (using projected future undiscounted cash flows). However, once construction of these assets is completed and units are ready for their intended use, for-sale condominium assets are evaluated for impairment using the methodology for assets held for sale (using discounted projected future cash flows).

Recently Issued and Adopted Accounting Pronouncements

SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – An Amendment of ARB No. 51,” was issued in December 2007. SFAS No. 160 requires all entities to report noncontrolling interests (previously referred to as minority interests) in subsidiaries as equity in the consolidated financial statements. The Company adopted the accounting and disclosure requirements of SFAS No. 160 on January 1, 2009 and has amended the presentation for its noncontrolling interests in the Operating Partnership and in consolidated real estate entities retrospectively on its consolidated balance sheets, consolidated statements of operations and consolidated statements of equity and accumulated earnings.

FASB Staff Position EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities,” (“FSP EITF 03-6-1”) was issued in June 2008. FSP EITF 03-6-1 was effective January 1, 2009. FSP EITF 03-6-1 requires that unvested share based payment awards that contain non-forfeitable rights to dividends or dividend equivalents be treated as participating securities for purposes of the computation of net income available to common stockholders. The Company adopted FSP EITF 03-6-1 retrospectively, effective January 1, 2009. In accordance with FSP EITF 03-6-1, prior period earnings per share amounts have been adjusted accordingly. The adoption of FSP EITF 03-6-1 did not have a material impact on the Company’s financial position, results of operations or earnings per share.

SFAS No. 141R, “Business Combinations,” was issued in December 2007 and replaced SFAS No. 141. SFAS No. 141R requires (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 also requires the expensing of acquisition related transaction costs and the potential recognition of acquisition related contingencies. The Company adopted SFAS No. 141R on January 1, 2009, and it did not have an impact on the Company’s financial position or results of operations.

SFAS No. 165, “Subsequent Events,” was issued in June 2009. SFAS No. 165 further clarifies the period subsequent to the balance sheet date in which companies should disclose certain financial statement events or transactions. It also further clarifies the circumstances under which a company should consider recognition of those events or transactions occurring after the balance sheet date as well as provides guidance regarding the required disclosures. The Company adopted SFAS No. 165 as of June 30, 2009. The adoption of SFAS No. 165 did not have a material impact on the Company’s financial statements or results of operations (see note 13).

FASB Staff Position No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” (“FSP FAS 107-1”) was issued in April 2009. FSP FAS 107-1 requires that companies disclose information about the fair value of their financial instruments in both interim and annual periods. The Company adopted FSP FAS 107-1 and APB 28-1 as of

- 7 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

June 30, 2009 and has included the required fair value disclosures in its notes to the consolidated financial statements (see note 6).

SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” was issued in June 2009. SFAS No. 167 addresses the impact that the elimination of the qualifying special purpose entity (“QSPE”) concept has on FIN 46(R) and will require companies to evaluate all entities, even those previously considered to be QSPEs, as potential variable interest entities (“VIEs”). SFAS No. 167 also addresses the timely accounting and disclosure requirements of companies’ variable interests by (1) requiring ongoing reassessments of whether or not the company is the primary beneficiary, (2) adding an additional reconsideration requirement, (3) eliminating the quantitative approach previously used to determine the primary beneficiary of a VIE and (4) amending certain guidance for determining which entities are VIEs. SFAS No. 167 is effective for the Company on January 1, 2010. The Company is currently evaluating the potential impact of SFAS No. 167 on the Company’s financial position and results of operations.

In June 2009, the Financial Accounting Standards Board (“FASB”) completed its codification project. The “FASB Accounting Standards Codification” (the “Codification”) is effective as of July 1, 2009 and will be the single source of authoritative generally accepted accounting principles in the United States. Upon adoption, companies will no longer refer to the authoritative guidance dictating its accounting methodologies under the previous hierarchy of FASB Statements, FASB Interpretations, etc. Instead, companies will cite the Codification references, which are organized by topic. The Codification is effective for periods beginning on or after July 1, 2009.

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 June 30, 2009, the Company had two apartment communities, containing 798 units, and certain parcels of land classified as held for sale. These real estate assets are reflected in the accompanying consolidated balance sheet at $63,364, which represents the lower of their depreciated cost or fair value less costs to sell. At June 30, 2009, the Company also had portions of two communities being converted to condominiums and certain completed condominium units at developed condominium communities totaling $8,796 classified as for-sale condominiums on the accompanying consolidated balance sheet.

For the three and six months ended June 30, 2009 and 2008, income from continuing operations included net gains from condominium sales activities at developed and condominium conversion projects representing portions of existing communities. In addition, the condominium gains are net of certain expensed sales and marketing costs associated with condominium communities under development and in pre-sale and such costs are included in condominium expenses in the table below. A summary of revenues and costs and expenses of condominium activities included in continuing operations for the three and six months ended June 30, 2009 and 2008 was as follows:

	Three months endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Condominium revenues	$	6,176	$	10,051	$	8,222	$	18,348
Condominium costs and expenses		(5,944)		(10,419)		(8,250)		(16,597)
Gains (losses) on sales of condominiums	$	232	$	(368)	$	(28)	$	1,751

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 six months ended June 30, 2009, income from discontinued operations included the results of operations of two apartment communities classified as held for sale at June 30, 2009 and one apartment community through its sale date in 2009. For the three and six months ended June 30, 2008, income from discontinued operations included the results of operations of the two apartment communities classified as held for sale at June 30, 2009, the apartment community sold in 2009 and four apartment communities sold in 2008 through their respective sale dates.

- 8 -

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 and six months ended June 30, 2009 and 2008 were as follows:

	Three months endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Revenues
Rental	$	3,228	$	7,275	$	7,463	$	14,613
Other property revenues		196		447		454		831
Total revenues		3,424		7,722		7,917		15,444
Expenses
Total property operating and maintenance (exclusive of itemsshown separately below)		1,087		2,567		2,559		5,292
Depreciation		-		871		-		1,962
Interest		311		1,052		723		2,154
Total expenses		1,398		4,490		3,282		9,408
Income from discontinued property operations	$	2,026	$	3,232	$	4,635	$	6,036

For the three and six months ended June 30, 2009, the Company recognized net gains in discontinued operations of $24,742 from the sale of one community, containing 530 units. This sale generated net proceeds of approximately $47,013. For the six months ended June 30, 2008, the Company recognized net gains in discontinued operations of $2,311 from the sale of one community, containing 143 units. This sale generated net proceeds of approximately $19,433.

3. INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES

At June 30, 2009, the Company holds investments in various individual limited liability companies (the “Apartment LLCs”) with institutional investors that own apartment communities. The Company holds a 25% to 35% equity interest in these Apartment LLCs. The Company and its joint venture partner also hold an approximate pro-rata 49% interest in a limited liability company (the “Mixed-Use 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’s investment in the 25% owned Apartment LLCs at June 30, 2009 and December 31, 2008 reflects a credit investment of $14,514 and $14,263, respectively. These credit balances resulted from distribution of financing proceeds in excess of the Company’s historical cost upon the formation of the Apartment LLC and are reflected in consolidated liabilities on the Company’s consolidated balance sheet.

At June 30, 2009, the Company holds a majority interest in a limited liability company (the “Condominium LLC”), which holds the approximate pro-rata 49% interest in the Mixed-Use LLC, which is constructing condominiums as part of a mixed-use development with other investors as discussed above. As such, the Company consolidated the Condominium LLC. At June 30, 2009, the Company’s consolidated investment in the Mixed-Use LLC reflects a credit investment of $39,820. The credit investment results from the recognition of a $74,733 non-cash impairment charge, or $68,219 net of the noncontrolling joint venture interest in the entity, recorded for the three and six months ended June 30, 2009 related to the condominium portion of the project. The impairment charge to write-down the asset to estimated fair value resulted from a determination that the estimated undiscounted cash flows related to the condominium asset under construction were not sufficient to recover the carrying value of the asset. The impairment charge was reflective of deteriorating market conditions for luxury condominiums in the Atlanta market, including weakening economic conditions, price discounting for competitive products and more restrictive mortgage lending conditions in 2009. Upon the completion of the condominium portion of the mixed-use development, the condominium asset will be distributed to the Condominium LLC. The Condominium LLC has entered into a licensing and branding arrangement with a third party. This arrangement provides for the payment of a guaranteed licensing fee upon the earlier of the sale of the condominium units as they occur or September 2012. The licensing fee will be paid from the proceeds of condominium sales at the Condominium LLC.

The Company accounts for its investments in the Apartment and Mixed-Use LLCs using the equity method of accounting. At June 30, 2009 and December 31, 2008, the Company’s investment in these Apartment and Mixed-Use LLCs totaled $8,706 and $39,300, respectively, excluding the credit investments discussed above. The excess of the Company's investment over its equity in the underlying net assets of certain Apartment LLCs was approximately $4,980 at June 30, 2009. The excess investment related to the Apartment LLCs is being amortized as a reduction to earnings on a straight-line basis over the lives of

- 9 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

the related assets. The Company provides real estate services (development, construction and property management) to the Apartment and Mixed-Use LLCs for which it earns fees.

The operating results of the Company include its allocable share of net income from the investments in the Apartment and Mixed-Use LLCs. A summary of financial information for the Property LLCs in the aggregate was as follows:

Balance Sheet Data	June 30,2009		December 31,2008
Real estate assets, net of accumulated depreciation of $24,726 and $21,528, respectively	$	351,420	$	398,167
Cash and other		7,421		6,768
Total assets	$	358,841	$	404,935
Mortgage/construction notes payable	$	301,785	$	289,013
Other liabilities		22,444		6,979
Total liabilities		324,229		295,992
Members’ equity		34,612		108,943
Total liabilities and members’ equity	$	358,841	$	404,935
Company’s equity investment in Property LLCs (1)	$	(45,628)	$	23,315
	Three months endedJune 30,				Six months endedJune 30,
Income Statement Data	2009		2008		2009		2008
Revenues
Rental	$	6,642	$	6,794	$	13,306	$	13,487
Other property revenues		496		482		961		883
Other		3		13		3		36
Total revenues		7,141		7,289		14,270		14,406
Expenses
Property operating and maintenance		2,976		2,882		5,829		5,635
Depreciation and amortization		1,651		2,104		3,292		4,236
Impairment charge (2)		71,679		-		71,679		-
Interest		2,986		2,500		5,939		4,999
Total expenses		79,292		7,486		86,739		14,870
Income (loss) from continuing operations		(72,151)		(197)		(72,469)		(464)
Discontinued operations
Income (loss) from discontinued operations		-		-		-		(2)
Income from discontinued operations		-		-		-		(2)
Net income (loss)	$	(72,151)	$	(197)	$	(72,469)	$	(466)
Company’s share of net income	$	(74,656)	$	420	$	(74,546)	$	821
(1) At June 30, 2009 and December 31, 2008, the Company’s equity investment is shown net of its credit investments of $54,334 and $15,985, respectively. At December 31, 2008, the credit investment included $1,722 related to the Land LLC discussed below. (2) The impairment charge recognized at the unconsolidated entity level excludes the write-off of the Company’s costs in excess of its invested capital.

At June 30, 2009, mortgage/construction notes payable includes five mortgage notes and a construction loan facility. The first $50,500 mortgage note bears interest at 5.82%, requires monthly interest only payments and matures in 2013. The note is prepayable without penalty in September 2011. The second mortgage note payable totals $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. The third and fourth mortgage notes total $85,723, bear interest at 5.63%, require interest only payments and mature in 2017. The fifth mortgage note totals $41,000, bears interest at 5.71%, requires interest only payments, and matures in 2017.

- 10 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

and its equity partner in the Condominium LLC have jointly and severally guaranteed approximately $25,313 of the construction loan held at the unconsolidated Mixed-Use 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 Mixed-Use LLC not to exceed approximately $6,153. Finally, all of the equity owners of the project at the unconsolidated Mixed-Use LLC, including the Company, have jointly and severally guaranteed the completion of the first mixed-use building of the project.

In April 2009, the Company made aggregate additional investments and advances of $1,527 to the previously unconsolidated Land LLC that holds land adjacent to the condominium project discussed above for future investment, whereby the Company obtained a majority interest in the Land LLC. As a result, the Company consolidated the Land LLC in the second quarter of 2009. The consolidation of the Land LLC resulted in the consolidation of a portion of the construction loan discussed above totaling $8,153 at June 30, 2009 (see note 4). Subsequently, consistent with the impairment analysis performed for the adjacent condominium development discussed above, the Company determined that the land held for future development of a second phase condominium tower on this site was not economically viable due to limitations on the potential future use of this site and the continued worsening of conditions in the U.S. economy and the housing markets, specifically in the Atlanta upper-end single family and condominium markets. As a result, the Company concluded that the carrying value of the land held for future investment was not recoverable, and in the second quarter of 2009, the Company recorded a non-cash impairment charge of $9,658, or $8,098 net of the noncontrolling joint venture interest in the entity, to write-off the carrying value of the land held for investment.

4. INDEBTEDNESS

At June 30, 2009 and December 31, 2008, the Company's indebtedness consisted of the following:

Description	PaymentTerms	Interest Rate	MaturityDate	June 30,2009		December 31,2008
Senior Unsecured Notes	Int.	5.13% - 7.70% (1)	2010-2013	$	360,142	$	535,000
Unsecured Lines of Credit
Syndicated Line of Credit	N/A	LIBOR + 0.80% (2)	2010		15,000		40,000
Cash Management Line	N/A	LIBOR + 0.80%	2010		14,913		10,864
					29,913		50,864
Secured Notes
FNMA	Prin. and Int.	Remarketed rate	2029		-		92,275
Other	Prin. and Int.	4.88% - 6.11% (3)	2011-2019		688,582		434,774
					688,582		527,049
Secured Variable Rate Construction Note	Int.	LIBOR + 1.35%	2011		8,153		-
Total				$	1,086,790	$	1,112,913

(1) Of the Company’s senior unsecured notes, there are no scheduled maturities in 2009. Notes for approximately $100,505 bearing interest at 7.7% mature in 2010. The remaining notes mature between 2011 and 2013.

(2) Represents stated rate. At June 30, 2009, the weighted average interest rate was 1.1%.

(3) Of the Company’s secured notes, there are no scheduled maturities in 2009 or 2010. All of the notes mature between 2011 and 2019.

Debt Maturities

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

Remainder of 2009	$	770
2010		132,032	(1)
2011		59,637
2012		104,381
2013		206,515
Thereafter		583,455
	$	1,086,790

(1) Includes outstanding balances on lines of credit totaling $29,913.

- 11 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Debt Issuances

In January 2009, the Company closed five, cross-collateralized secured mortgage loans. The mortgage loans have an aggregate principal amount of approximately $202,162, require interest-only payments for the first two years and then principal and interest payments for the remaining term of the loans based on a 30-year amortization schedule. The loans bear interest at a fixed rate of 5.99% and mature in 2019. In April 2009, certain documents related to these loans were modified to facilitate the securitization of such loans under a Federal Home Loan Mortgage Corporation multifamily loan securitization program. Such amendments did not change the basic economic terms of the loans; however, in connection with such amendments the Company received modification fees in an aggregate amount of approximately $2,022 plus reimbursement of certain costs incurred in connection with such modifications. The modification fees received will be amortized over the remaining term of the loans.

In March 2009, the Company refinanced a maturing $33,954 mortgage loan using the proceeds of a new $34,800 mortgage loan. The new mortgage loan requires monthly interest-only payments for the first two years and then requires monthly principal and interest payments for the remaining term of the loan based on a 30-year amortization schedule. The loan bears interest at a fixed rate of 5.61% and matures in 2019.

In April 2009, the Company closed a $51,555 mortgage loan. The mortgage loan requires interest-only payments for the first two years and then principal and interest payments for the remaining term of the loan based on a 30-year amortization schedule. The loan bears interest at a fixed rate of 5.84% through its initial maturity in 2018, at which time the loan is automatically extended for one year to 2019 and bears a variable interest rate based on a 250 basis point spread over the Freddie Mac Reference Bills® Securities rate.

Debt Retirements

In February 2009, the Company made a public tender offer for any and all of its $185,000, 7.7% senior unsecured notes due December 2010 and its $100,000, 5.125% senior unsecured notes due October 2011. Upon expiration of the tender offer, the Company repurchased $84,495 of its 7.7% senior notes due December 2010 at par and $90,363 face amount of its 5.125% senior notes due October 2011 at $85,845. This note repurchase resulted in a net gain on extinguishment of $3,445.

In March 2009, the Company fully redeemed its $92,275 weekly remarketed, variable rate taxable mortgage bonds. The Company also settled and terminated a related interest rate swap arrangement (see note 6) in conjunction with the debt extinguishment. The bond retirement and swap termination resulted in a net extinguishment loss of $2,626.

Unsecured Lines of Credit

At June 30, 2009, 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 at the Company’s option through April 2011. The Syndicated Line currently has a stated interest rate of LIBOR plus 0.80% or the prime rate and was provided by a syndicate of 16 banks led by Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. Additionally, the Syndicated Line requires the payment of annual facility fees currently equal to 0.175% 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 (see below). The rates under the Syndicated Line are based on the higher of the Company’s unsecured debt ratings in instances where the Company has split unsecured debt ratings. The Syndicated Line also includes a competitive bid option for short-term funds up to 50% of the loan commitment at rates generally below the stated line rate. The credit agreement for the Syndicated Line contains customary restrictions, representations, covenants and events of default, including fixed charge coverage and maximum leverage ratios. The Syndicated Line also restricts the amount of capital the Company can invest in specific categories of assets, such as improved land, properties under construction, condominium properties, non-multifamily properties, debt or equity securities, notes receivable and unconsolidated affiliates. At June 30, 2009, the Company had issued letters of credit to third parties totaling $3,654 under this facility.

In March 2009, Standard & Poor’s rating service lowered the Company’s corporate credit rating to BBB- from BBB and at the same time revised its outlook to stable. This change resulted in the interest rate spread increase to 80.0 basis points over LIBOR from 57.5 basis points on the Company’s revolving lines of credit and the facility fee increased to 17.5 basis points from 15.0 basis points.

- 12 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Additionally, at June 30, 2009, the Company had a $30,000 unsecured line of credit with Wells Fargo 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.

Debt Compliance

The Company’s Syndicated Line and senior unsecured notes contain customary restrictions, representations and events of default and require the Company to meet certain financial covenants. Debt service and fixed charge coverage covenants require the Company to maintain coverages of a minimum of 1.5 to 1.0, as defined in applicable debt arrangements. Leverage covenants generally require the Company to maintain calculated covenants above/below minimum/maximum thresholds. The primary leverage ratios under these arrangements include total debt to total asset value (maximum of 60%), total secured debt to total asset value (maximum of 35% or 40%, respectively) and unencumbered assets to unsecured debt (minimum of 1.5 to 1.0 or 1.6 to 1.0, respectively), as defined in the applicable debt arrangements. Management believes the Company was in compliance with these financial covenants at June 30, 2009.

5. EQUITY AND NONCONTROLLING INTERESTS

Computation of Earnings (Loss) Per Common Share

For the three and six months ended June 30, 2009 and 2008, a reconciliation of the numerator and denominator used in the computation of basic and diluted loss from continuing operations per common share is as follows:

	Three months endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Loss from continuing operations attributable tocommon shareholders (numerator):
Loss from continuing operations	$	(83,963)	$	(28,801)	$	(84,324)	$	(30,757)
Noncontrolling interests - consolidated real estate entities		8,150		293		8,226		(173)
Noncontrolling interests - Operating Partnership -continuing operations		381		232		392		271
Preferred stock dividends		(1,910)		(1,910)		(3,819)		(3,819)
Unvested restricted stock (allocation of earnings)		202		56		177		48
Loss from continuing operations attributable tocommon shareholders	$	(77,140)	$	(30,130)	$	(79,348)	$	(34,430)
Common shares (denominator):
Weighted average shares outstanding - basic		44,118		44,011		44,116		43,939
Dilutive shares from stock options (1)		-		-		-		-
Weighted average shares outstanding - diluted (1)		44,118		44,011		44,116		43,939
(1) The potential dilution from the Company’s outstanding stock options to purchase 0 and 268 shares, for the three months ended June 30, 2009 and 2008, respectively, and 0 and 322 shares, for the six months ended June 30, 2009 and 2008, respectively, were antidilutive to the loss from continuing operations per share calculation. As such, these amounts were excluded from weighted average shares for the periods.

Stock options to purchase 2,527 shares of common stock for the three months and six ended June 30, 2009 and 2,414 shares of common stock for the three and six months ended June 30, 2008 were excluded from the computation of diluted earnings (loss) per common share as these stock options were antidilutive.

Noncontrolling Interests

The Company adopted SFAS No. 160 on January 1, 2009. SFAS No. 160, in conjunction with other existing GAAP, established criterion used to evaluate the characteristics of noncontrolling interests in consolidated entities to determine whether noncontrolling interests are classified and accounted for as permanent equity or “temporary” equity (presented between liabilities and permanent equity on the consolidated balance sheet). In conjunction with the issuance of SFAS No. 160, EITF Topic No. D-98, “Classification and Measurement of Redeemable Securities,” (“EITF D-98”) was revised to clarify the treatment of noncontrolling interests with redemption provisions. If a noncontrolling interest has a redemption feature that permits the issuer to settle in either cash or common shares at the option of the issuer but the equity settlement feature is

- 13 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

deemed to be outside of the control of the issuer, then those noncontrolling interests are classified as “temporary” equity. The Company currently has two types of noncontrolling interests, (1) noncontrolling interests related to the common unitholders of its Operating Partnership and (2) noncontrolling interests related to its consolidated real estate entities. The Company determined that the noncontrolling interests related to the common unitholders of the Operating Partnership met the criterion to be classified and accounted for as “temporary” equity (reflected outside of total equity as “Redeemable Common Units”). The Company further determined that the noncontrolling interests in its consolidated real estate entities met the criterion to be classified and accounted for as a component of permanent equity.

For the three and six months ended June 30, 2009 and 2008, income from continuing operations, income from discontinued operations and net income available to the Company were comprised of the following amounts, net of its noncontrolling interests:

	Three months endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Loss from continuing operations	$	(75,432)	$	(28,276)	$	(75,706)	$	(30,659)
Income from discontinued operations		26,637		3,213		29,233		8,282
Net loss attributable to the Company	$	(48,795)	$	(25,063)	$	(46,473)	$	(22,377)

6. FAIR VALUE MEASURES AND OTHER FINANCIAL INSTRUMENTS

The Company applies SFAS No. 157, “Fair Value Measurements,” in relation to the valuation of real estate assets recorded at fair value, to its impairment valuation analysis of real estate assets (see note 8) and to its disclosure of the fair value of financial instruments, principally indebtedness (see note 4). The disclosure of estimated fair value of real estate assets and long-term indebtedness was determined by management using available market information and appropriate valuation methodologies available to management at June 30, 2009. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, there can be no assurance that the estimates presented below, using Level 2 and 3 inputs, are indicative of the amounts the Company could realize on disposition of the real estate assets or indebtedness. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts.

At June 30, 2009, certain parcels of land held for sale were carried at their estimated fair value of $14,850 on the Company’s consolidated balance sheet, using Level 3 inputs consisting primarily of comparable appraisals and land sale activity. There was no change in the estimated fair value of these land parcels measured under SFAS No. 157 for the three and six months ended June 30, 2009. In the three and six months ended June 30, 2009, the Company recognized impairment charges (see notes 3 and 8) to write-off a parcel of land held for future investment to its estimated fair value of zero and to write-down its investment in an unconsolidated entity constructing condominiums to its estimated fair value, resulting in a credit investment of $39,820. The estimated fair value of the land and condominiums was determined using Level 3 inputs, consisting primarily of independent appraisals and discounted cash flow models.

At June 30, 2009, the estimated fair value of fixed rate debt was approximately $1,039,672 (carrying value of $1,048,724) and the estimated fair value of the Company’s variable rate debt, including the Company’s lines of credit, was approximately $36,329 (carrying value of $38,066).

In March 2009, the Company early terminated its only interest rate swap through a terminating payment of $1,554 to the swap counter-party. The swap was terminated in conjunction with the early extinguishment of the indebtedness being hedged by the swap. In 2008, this interest rate swap became ineffective under generally accepted accounting principles. As a result, the gross change in the market value of the interest rate swap arrangement from January 1, 2009 through the swap termination date in March 2009 of $874 was recognized in other income in the consolidated statement of operations. Additionally, the Company was required to amortize into expense the cumulative unrecognized loss on the interest rate swap over the remaining life of the swap. Total amortization expense related to this swap was $658 from January 1, 2009 through the swap termination date in

- 14 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

March 2009. The remaining unamortized loss on the swap of $1,161 was recognized as a loss on the termination of the swap and was included in the net gain (loss) from early debt extinguishment on the consolidated statement of operations for the six months ended June 30, 2009.

A summary of comprehensive income for the three and six months ended June 30, 2009 and 2008 was as follows:

	Three months endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Net loss	$	(57,195)	$	(25,569)	$	(54,947)	$	(22,410)
Change in derivatives (1)		-		1,780		1,829		597
Total comprehensive income (loss)		(57,195)		(23,789)		(53,118)		(21,813)
Less:
Comprehensive income attributable to noncontrolling interests		8,400		491		8,464		29
Total Company comprehensive income	$	(48,795)	$	(23,298)	$	(44,654)	$	(21,784)
(1) For the six months ended June 30, 2009, the change in derivatives balance includes an adjustment of $658 for amortized swap costs as well as an adjustment for $1,161 to write-off the remaining unamortized balance in equity, both included in net income. For the three and six months ended June 30, 2008, the change in derivatives balance includes an adjustment of $281 and $562 for amortized swap costs included in net income.

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, 2008. The segment information for the three and six months ended June 30, 2008 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 June 30, 2008 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.

• Communities stabilized during 2008 – 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.

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

- 15 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

Segment Information

The following table reflects each segment’s contribution to consolidated revenues and NOI together with a reconciliation of segment contribution to property NOI to consolidated net income for the three and six months ended June 30, 2009 and 2008. 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 endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Revenues
Fully stabilized communities	$	57,292	$	59,297	$	114,985	$	117,907
Communities stabilized during 2008		2,698		2,384		5,352		4,504
Development, rehabilitation and lease-up communities		3,495		2,160		6,240		4,334
Condominium conversion and other communities		38		188		107		389
Other property segments		5,318		6,287		11,109		12,655
Other		277		235		503		474
Consolidated revenues	$	69,118	$	70,551	$	138,296	$	140,263
Contribution to Property Net Operating Income
Fully stabilized communities	$	34,590	$	34,519	$	69,214	$	69,139
Communities stabilized during 2008		1,531		1,191		2,967		1,998
Development, rehabilitation and lease-up communities		668		469		1,232		1,393
Condominium conversion and other communities		24		116		68		237
Other property segments, including corporate management expenses		(630)		(1,174)		(1,044)		(2,569)
Consolidated property net operating income		36,183		35,121		72,437		70,198
Interest income		23		61		138		271
Other revenues		277		235		503		474
Depreciation		(18,009)		(15,213)		(35,601)		(30,310)
Interest expense		(12,241)		(11,004)		(26,419)		(22,035)
Amortization of deferred financing costs		(682)		(859)		(1,616)		(1,710)
General and administrative		(3,964)		(4,351)		(8,373)		(9,485)
Investment and development		(793)		(1,274)		(1,790)		(2,664)
Other investment costs		(646)		(244)		(1,299)		(499)
Strategic review costs		-		(2,091)		-		(8,161)
Impairment, severance and other charges		(9,658)		(29,300)		(9,658)		(29,300)
Gains (losses) on sales of real estate assets, net		232		(368)		(28)		1,751
Equity in income (loss) of unconsolidated real estate entities		(74,656)		420		(74,546)		821
Other income (expense), net		50		66		1,109		(108)
Net gain (loss) on early extinguishment of indebtedness		(79)		-		819		-
Loss from continuing operations		(83,963)		(28,801)		(84,324)		(30,757)
Income from discontinued operations		26,768		3,232		29,377		8,347
Net loss	$	(57,195)	$	(25,569)	$	(54,947)	$	(22,410)

- 16 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

8. IMPAIRMENT, SEVERANCE AND OTHER CHARGES

For the three and six months ended June 30, 2009, the Company recorded aggregate impairment charges of $76,317 (net of $8,074 of noncontrolling interests) to write-down the carrying value of its investment in an unconsolidated condominium development and a parcel of adjacent land. These impairment charges are more fully discussed in note 3.

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 six months ended June 30, 2009 and 2008:

	Six months endedJune 30,
	2009		2008
Accrued severance charges, beginning of period	$	9,405	$	11,215
Severance charges		-		353
Payments for period		(1,184)		(1,633)
Interest accretion		279		366
Accrued severance charges, end of period	$	8,500	$	10,301

The Company recorded impairment charges of approximately $28,947 in the three and six months ended June 30, 2008. The impairment charges related 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. Additionally, in the second quarter of 2008, the Company recorded severance charges of approximately $353 related to a management and staff workforce reduction that was initiated in the second quarter. 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.

In 2008, the Company announced that its Board of Directors had initiated a formal process to pursue a possible business combination or other sale transaction. The process ended in the second quarter of 2008 without a business combination or other sale transaction. For the three and six months ended June 30, 2008, the Company incurred approximately $2,091 and $8,161, respectively, of strategic review costs related to this process.

9. SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid (including capitalized amounts of $6,597 and $6,671 for the six months ended June 30, 2009 and 2008, respectively), aggregated $34,095 and $30,458 for the six months ended June 30, 2009 and 2008, respectively.

For the six months ended June 30, 2009 and 2008, the Company and the Company’s taxable REIT subsidiaries made income tax payments to federal and state taxing authorities totaling $1,028 and $1,700, respectively.

Non-cash investing and financing activities for the six months ended June 30, 2009 and 2008 were as follows:

In the three months ended June 30, 2009, the Company became the majority owner of and consolidated a previously unconsolidated entity (see note 3). This consolidation resulted in increases in land held for future investment and other assets of $9,658, cash of $248, indebtedness of $8,153, accounts payable and accrued expenses of $192 and noncontrolling interests of $1,560. This was a non-cash transaction.

For the six months ended June 30, 2009 and 2008, the Company amortized approximately $658 and $562, respectively, of accumulated other comprehensive non-cash losses into earnings related to an interest rate swap derivative financial instrument (see note 6). For the six months ended June 30, 2009, the Company recognized a loss equal to the remaining unamortized balance of accumulated other comprehensive income (an equity account) of $1,161 related to a terminated interest rate swap derivative financial instrument. The Company also recognized other income during the first quarter of $874 to record an increase in the value of the ineffective interest rate swap derivative financial instrument prior to its termination (see note 6). This increase in value also caused a decrease in accounts payable and accrued expenses during the first half of 2009. Other than the amortization discussed herein, for the six months ended June 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 equity of $35.

- 17 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

For the six months ended June 30, 2009 and 2008, Common Units in the Operating Partnership totaling zero and 177, 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 noncontrolling interest for the impact of the Company’s employee stock purchase and stock options plans, decreased noncontrolling interest and increased Company shareholders’ equity in the amounts of $3,865 for the six months ended June 30, 2008.

The Company and the Operating Partnership pay dividends and distributions a quarter in arrears. At June 30, 2009 and 2008, the Operating Partnership committed to distribute and had accrued $8,914 and $19,982, respectively. As a result, the Company declared and accrued dividends of $8,870 and $19,850 at June 30, 2009 and 2008, respectively. The remaining distributions from the Operating Partnership in the amount of $44 and $132 were accrued at June 30, 2009 and 2008, respectively, for the noncontrolling interests in the Operating Partnership.

For the six months ended June 30, 2009 and 2008, the Company issued common shares for director compensation, totaling $44 and $278, respectively. These 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”). At June 30, 2009 stock options outstanding under the 2003 Stock Plan and the Company’s previous stock plan totaled 2,527.

Compensation costs for stock options have been estimated on the grant date using the Black-Scholes option-pricing method. For options granted during the six months ended June 30, 2009, the weighted average assumptions used in the Black-Scholes option-pricing model were dividend yield of 6.5%, expected volatility of 35.4%, risk-free interest rate of 2.2% and expected option term of 5.9 years. The Company did not grant any stock options for the six months ended June 30, 2008.

The Company’s assumptions were derived from the methodologies discussed herein. The expected dividend yield reflects the Company’s current historical yield, which is expected to approximate the future yield. Expected volatility was based on the historical volatility of the Company’s common stock. The risk-free interest rate for the expected life of the options was based on the implied yields on the U.S. Treasury yield curve. The weighted average expected option term was based on the Company’s historical data for prior period stock option exercise and forfeiture activity.

For the six months ended June 30, 2009 and 2008, the Company granted stock options to purchase 346 and zero shares of Company common stock, respectively, to Company officers and directors. The Company recorded compensation expense related to stock options of $160 and $309 for the three months ended and $365 and $666 for the six months ended June 30, 2009 and 2008, respectively, under the fair value method. Upon the exercise of stock options, the Company issues shares of common stock from treasury shares or, to the extent treasury shares are not available, from authorized common shares.

A summary of stock option activity under all plans for the six months ended June 30, 2009 and 2008 is presented below:

	Six months endedJune 30,
	2009				2008
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Options outstanding, beginning of period		2,382	$	34		2,455	$	34
Granted		346		12		-		-
Exercised		-		-		(39)		37
Forfeited		(201)		36		(2)		39
Options outstanding, end of period		2,527		31		2,414		34
Options exercisable, end of period		2,121		33		2,037		33
Weighted-average fair value of options granted during the period	$	2.09			$	-

At June 30, 2009, there was $832 of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of 2.3 years. The total intrinsic value of stock options exercised during the six months ended June 30, 2009 and 2008 was $0 and $194, respectively. The aggregate intrinsic values of stock options outstanding, exercisable and expected to vest at June 30, 2009 was $422, $0 and $405, respectively. The weighted average

- 18 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

remaining contractual lives of stock options outstanding, exercisable and expected to vest at June 30, 2009 were 4.7, 3.9 and 4.7 years, respectively. Stock options expected to vest at June 30, 2009 totaled 2,510 at a weighted average exercise price of approximately $30.84.

At June 30, 2009, the Company had separated its outstanding options into two ranges based on exercise prices. There were 1,269 options outstanding with exercise prices ranging from $12.22 to $28.99. These options have a weighted average exercise price of $22.73 and a weighted average remaining contractual life of 5.4 years. Of these outstanding options, 923 were exercisable at June 30, 2009 at a weighted average exercise price of $26.66. In addition, there were 1,258 options outstanding with exercise prices ranging from $31.00 to $48.00. These options had a weighted average exercise price of $38.87 and a weighted average remaining contractual life of 4.1 years. Of these outstanding options, 1,198 were exercisable at June 30, 2009 at a weighted average exercise price of $38.43.

For the six months ended June 30, 2009 and 2008, the Company granted 106 and 78 shares of restricted stock, respectively, to Company officers and directors. 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 six months ended June 30, 2009 and 2008 was $12.19 and $42.25, respectively, per share. The total value of the restricted share grants for the six months ended June 30, 2009 and 2008 was $1,288 and $3,308, respectively. The compensation cost is amortized ratably into compensation expense over the applicable vesting periods. Total compensation expense relating to the restricted stock was $610 and $822 for the three months ended and $1,195 and $1,574 for the six months ended June 30, 2009 and 2008, respectively.

A summary of the activity related to the Company’s restricted stock for the six months ended June 30, 2009 and 2008 is presented below:

	Six months endedJune 30,
	2009			2008
	Shares	Weighted Average Grant-DateFair Value		Shares	Weighted Average Grant-DateFair Value
Unvested share, beginning or period	128	$	33	119	$	35
Granted	106		12	78		42
Vested	-		-	(8)		36
Forfeited	(1)		43	-		-
Unvested shares, end of period	233		23	189		38

At June 30, 2009, there was $3,904 of unrecognized compensation cost related to restricted stock. This cost is expected to be recognized over a weighted average period of 2.2 years. The total intrinsic value of restricted shares vested for the six months ended June 30, 2009 and 2008 was $2 and $292, respectively.

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan (the “ESPP”) approved by Company shareholders in 2005. The maximum number of shares issuable under the ESPP 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 $38 and $0 for the three months ended and $75 and $75 for the six months ended June 30, 2009 and 2008, respectively.

11. INCOME TAXES

The Company has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (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.

- 19 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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 2005 through 2007. Net income tax loss carryforwards and other tax attributes generated in years prior to 2005 are also subject to challenge in any examination of the 2005 to 2007 tax years. In the fourth quarter of 2008, the Company received notice that its TRSs’ federal income tax return for the 2005 was selected for Internal Revenue Service examination. At this stage, it is not possible to predict or determine the outcome of the examination, nor is it possible to estimate the amount or whether any adjustments will be required to that tax return.

As of June 30, 2009, 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 2009. 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 six months ended June 30, 2009 and at June 30, 2009 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 and six months ended June 30, 2009, the TRS recorded no net income tax expense (benefit) as the provision for estimated income taxes payable is expected to be offset by deferred tax benefits resulting from current period temporary differences.

At December 31, 2008, management had established valuation allowances of approximately $24,121 against net deferred tax assets due primarily to historical losses at the TRSs in prior years 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, 2008 are included in the footnotes to the Company’s audited financial statements included in the Form 10-K. Other than the increase in net deferred tax assets and valuation allowances of approximately $29,800 resulting from impairment charges of $76,317 recorded at the TRSs in the three and six months ended June 30, 2009, there were no material changes to the components of deferred tax assets, deferred tax asset valuation allowances and deferred liabilities at June 30, 2009.

12. LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

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, 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 was completed by both parties on April 30, 2008, with the exception of the Company’s discovery related to ERC’s untimely $9 million damages allegation, which the Court has stayed pending resolution of certain motions. The parties filed cross-motions for summary judgment on December 17, 2008, oppositions to summary judgment on February 20, 2009, and replies in support of summary judgment on March 17, 2009. On February 20, 2009, the Department of Justice filed an amicus brief on behalf of ERC, and the Company filed a response. In addition, the Company has filed various additional pretrial motions, including two motions in limine and three motions to strike. The plaintiff has filed one motion to strike. The Court has not set a hearing or rendered its decision on the pending motions, including summary judgment. 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.

- 20 -

POST PROPERTIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

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.

As announced in 2008, the Company is underway with an initiative to engage third-party engineers and consultants to inspect and evaluate each of its communities that have stucco exteriors or exterior insulation finishing systems (“EIFS”) for potential water penetration and other related issues. At this time, the Company has determined that varying levels of remediation and improvements may be required to be performed at approximately 30 properties in its portfolio. The Company currently estimates that the aggregate cost of this initiative will be approximately $45,000 to complete the scope of the remediation and improvements, although the scope and cost will vary considerably among individual properties. The Company currently expects that a substantial majority of the costs related to these remediation efforts will be recorded as annually and periodically recurring capital expenditures. In addition and as a result of this project, the Company currently estimates that the net book value of certain building components totaling approximately $6,500 to $7,000 will be retired and, as such, are being depreciated on an accelerated basis over the remaining estimated useful life of those assets, which is expected to be not later than 2009. The work has been completed at five properties, is currently underway at approximately eleven properties and is expected to be completed at all the properties by 2010. The work may include, but not be limited to, remediation, improvements and replacements of exterior stucco and EIFS siding, windows and doors, roofing and gutters, exterior sealants and coatings. From the inception of this initiative through June 30, 2009, the Company has recorded accelerated depreciation of approximately $3,903 and has capitalized approximately $14,885 related to this project. There can be no assurance that the scope of work or the Company’s preliminary estimates of costs will not change in future periods.

13. SUBSEQUENT EVENTS

The Company evaluated the accounting and disclosure requirements for subsequent events reporting through the issuance date of the financial statements. In July 2009, the Company closed the sales of two apartment communities, containing 798 units, for aggregate gross sales proceeds of $102,300. The Company expects to recognize gains on these asset sales of approximately $54,500 in the third quarter of 2009.

- 21 -

POST APARTMENT HOMES, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands)

	June 30, 2009			December 31, 2008
	June 30,				December 31,
	(Unaudited)
	2015				2014
Assets
	(Unaudited)
Real estate assets
Assets
Land	$	268,541		$	258,593
Real estate assets
Building and improvements		1,874,469			1,802,496
Land	$	319,401			$	317,077
Furniture, fixtures and equipment		217,297			205,221
Building and improvements		2,357,576				2,323,626
Construction in progress		123,072			138,496
Furniture, fixtures and equipment		314,552				304,534
Land held for future investment		82,039			81,555
Construction in progress		109,292				86,971
		2,565,418			2,486,361
Land held for future investment		29,795				33,197
Less: accumulated depreciation		(587,116)			(553,814)
		3,130,616				3,065,405
Condominiums, for-sale and under construction		90,911			65,507
Less: accumulated depreciation		(979,505	)			(937,310	)
Assets held for sale, net of accumulated depreciation of $28,441 and$42,379 at June 30, 2009 and December 31, 2008		63,364			85,097
Assets held for sale, net of accumulated depreciation of $207 at December 31, 2014		—				672
Total real estate assets		2,~~132~~151,~~577~~111			~~2,083,151~~	2,128,767
Investments in and advances to unconsolidated real estate entities		83,~~706~~957			~~39,300~~	4,059
Cash and cash equivalents		3119,~~694~~057			~~75,472~~	140,512
Restricted cash		103,~~614~~885			~~10,164~~	3,572
Deferred charges, net		9,582			10,278
Deferred financing costs, net		7,924				5,117
Other assets		3228,~~328~~098			~~34,290~~	29,771
Total assets	$	2,~~197~~314,~~501~~032		$	~~2,252,655~~$	2,311,798
Liabilities and partners’ equity
Liabilities, redeemable common units and equity
Indebtedness	$	1891,~~086,790~~004		$	~~1,112,913~~$	892,459
Accounts payable and accrued expenses		97,949			93,175
Accounts payable, accrued expenses and other		78,039				70,616
Investments in unconsolidated real estate entities		5416,~~334~~437			~~15,985~~	16,624
Distribution payable		8,914			8,888
Distributions payable		24,074				21,852
Accrued interest payable		54,~~137~~003			~~5,493~~	4,229
Security deposits and prepaid rents		1513,~~779~~684			~~15,941~~	12,972
Total liabilities		1,~~268~~027,~~903~~241			~~1,252,395~~	1,018,752
Redeemable common units		46,~~094~~555			~~4,410~~	7,086
Commitments and contingencies
Equity
Operating Partnership equity
Preferred units		43,392				43,392
Preferred units		95,000			95,000
Common units
Common units
General partner		14,002				14,057
General partner		9,878			10,540
Limited partner		1,227,310				1,232,186
Limited partner		818,492			883,909
Accumulated other comprehensive income (loss)		(4,468	)			(3,675	)
Accumulated other comprehensive income (loss)		-			(1,819)
Total equity		1,280,236				1,285,960
Total Operating Partnership equity		923,370			987,630
Total liabilities, redeemable common units and equity	$	2,314,032			$	2,311,798
Noncontrolling interests - consolidated real estate entities		1,134			8,220
Total equity		924,504			995,850
Total liabilities and equity	$	2,197,501		$	2,252,655

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

-6 ~~22 -~~

POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per unit data)

(Unaudited)

	Three months endedJune 30,						Six months endedJune 30,
	Three months ended								Six months ended
	2009			2008			2009			2008
	June 30,								June 30,
Revenues
	2015				2014				2015			2014
Rental	$	64,808		$	66,208		$	130,192		$	132,364
Revenues
Other property revenues		4,033			4,108			7,601			7,425
Rental	$	89,368			$	89,414			$	177,029		$	177,442
Other		277			235			503			474
Other property revenues		5,789				5,389				11,246			10,654
Total revenues		69,118			70,551			138,296			140,263
Other		274				223				587			442
Expenses
Total revenues		95,431				95,026				188,862			188,538
Total property operating and maintenance (exclusive of itemsshown separately below)		32,658			35,195			65,356			69,591
Expenses
Depreciation		18,009			15,213			35,601			30,310
Property operating and maintenance (exclusive of items shown separately below)		41,512				41,795				81,635			82,391
General and administrative		3,964			4,351			8,373			9,485
Depreciation		21,418				20,829				42,675			42,596
Investment and development		793			1,274			1,790			2,664
General and administrative		4,353				3,966				9,367			8,094
Other investment costs		646			244			1,299			499
Investment and development		275				794				510			1,605
Strategic review costs		-			2,091			-			8,161
Other investment costs		154				210				288			483
Impairment, severance and other costs		9,658			29,300			9,658			29,300
Other expenses		—				502				—			1,409
Total expenses		6567,~~728~~712			~~87,668~~	68,096		~~122,077~~		134,475	~~150,010~~		136,578
Operating income (loss)		3,390			(17,117)			16,219			(9,747)
Operating income		27,719				26,930				54,387			51,960
Interest income		2343			61	4		~~138~~		124	~~271~~		16
Interest expense		(127,~~241)~~753	)		~~(11,004)~~	(10,433	)	~~(26,419)~~		(15,846	~~(22,035~~)		(21,677	)
Amortization of deferred financing costs		(~~682)~~433	)		~~(859)~~	(620	)	~~(1,616)~~		(882	~~(1,710~~)		(1,265	)
Net gains (losses) on condominium sales activities		232			(368)			(28)			1,751
Equity in income of unconsolidated real estate entities, net		568				501				965			986
Equity in income (loss) of unconsolidated real estate entities		(74,656)			420			(74,546)			821
Gains on sales of real estate assets, net		(298	)			36,092				1,475			36,902
Other income (expense), net		50(195	)		66	(196	)	~~1,109~~		(390	~~(108~~)		(391	)
Net gain (loss) on early extinguishment of indebtedness		(79)			-			819			-
Net loss on extinguishment of indebtedness		—				(4,287	)			(197	)		(4,287	)
Loss from continuing operations		(83,963)			(28,801)			(84,324)			(30,757)
Net income		19,651				47,991				39,636			62,244
Discontinued operations
Noncontrolling interests - consolidated real estate entities		—				(154	)			—			(138	)
Income from discontinued property operations		2,026			3,232			4,635			6,036
Net income available to the Operating Partnership		19,651				47,837				39,636			62,106
Gains on sales of real estate assets		24,742			-			24,742			2,311
Distributions to preferred unitholders		(922	)			(922	)			(1,844	)		(1,844	)
Income from discontinued operations		26,768			3,232			29,377			8,347
Net income available to common unitholders	$	18,729			$	46,915			$	37,792		$	60,262
Net loss		(57,195)			(25,569)			(54,947)			(22,410)
Per common unit data - Basic
Noncontrolling interests - consolidated real estate entities		8,150			293			8,226			(173)
Net income available to common unitholders	$	0.34			$	0.86			$	0.69		$	1.11
Net income available to the Operating Partnership		(49,045)			(25,276)			(46,721)			(22,583)
Weighted average common units outstanding - basic		54,576				54,358				54,573			54,334
Distributions to preferred unitholders		(1,910)			(1,910)			(3,819)			(3,819)
Per common unit data - Diluted
Net income available to common unitholders	$	~~(50,955)~~0.34		$	~~(27,186)~~$	0.86	$	~~(50,540)~~	$	$0.69	~~(26,402)~~	$	1.10
Per common unit data - Basic
Weighted average common units outstanding - diluted		54,590				54,470				54,588			54,449
Loss from continuing operations(net of preferred distributions)	$	(1.75)		$	(0.69)		$	(1.80)		$	(0.78)
Income from discontinued operations		0.61			0.07			0.66			0.19
Net income (loss) available to common unitholders	$	(1.14)		$	(0.61)		$	(1.13)		$	(0.59)
Weighted average common units outstanding - basic		44,337			44,305			44,335			44,287
Per common unit data - Diluted
Loss from continuing operations(net of preferred distributions)	$	(1.75)		$	(0.69)		$	(1.80)		$	(0.78)
Income from discontinued operations		0.61			0.07			0.66			0.19
Net income (loss) available to common unitholders	$	(1.14)		$	(0.61)		$	(1.13)		$	(0.59)
Weighted average common units outstanding - diluted		44,337			44,305			44,335			44,287

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

-7 ~~23 -~~

POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF ~~EQUITY~~COMPREHENSIVE INCOME

(In thousands)

(Unaudited)

2009	PreferredUnits		Common Units						AccumulatedOtherComprehensiveIncome (Loss)		TotalOperatingPartnershipEquity			NoncontrollingInterests -ConsolidatedReal Estate Entities		TotalEquity		RedeemableCommonUnits
	Three months ended							Six months ended
			GeneralPartner			LimitedPartners
	June 30,							June 30,
Equity, December 31, 2008	$	95,000	$	10,540		$	883,909		$	(1,819)	$	987,630		$	8,220	$	995,850	$	4,410
	2015			2014				2015			2014
Comprehensive income
Net income	$	19,651		$	47,991			$	39,636		$	62,244
Net income (loss)		3,819		(503)			(49,789)			-		(46,473)			(8,226)		(54,699)		(248)
Net change in derivative financial instruments		753			(1,507	)			(795	)		(1,487	)
Net change in derivative value		-		-			-			1,819		1,819			-		1,819		10
Total comprehensive income		20,404			46,484				38,841			60,757
Total comprehensive income (loss)												(44,654)			(8,226)		(52,880)		(238)
Comprehensive income attributable to noncontrolling interests:
Contributions from the Company related to employeestock purchase, stock option and other plans		-		3			322			-		325					325		-
Consolidated real estate entities		—			(154	)			—			(138	)
Equity-based compensation		-		16			1,611			-		1,627					1,627		9
Total Operating Partnership comprehensive income	$	20,404		$	46,330			$	38,841		$	60,619
Purchase of common units		-		-			-					-					-		-
Distributions to preferred unitholders		(3,819)		-			-			-		(3,819)					(3,819)		-
Distributions to common unitholders ($0.40 per unit)		-		(178)			(17,561)			-		(17,739)					(17,739)		(87)
Consolidation of equity method investment (see note 3)		-		-			-			-		-			1,560		1,560		-
Distributions to noncontrolling interests - consolidatedreal estate entities		-		-			-			-		-			(420)		(420)		-
Equity, June 30, 2009	$	95,000	$	9,878		$	818,492		$	-	$	923,370		$	1,134	$	924,504	$	4,094
2008
Equity, December 31, 2007	$	95,000	$	11,329		$	949,984		$	(3,962)	$	1,052,351		$	3,972	$	1,056,323	$	16,508
Comprehensive income
Net income (loss)		3,819		(262)			(25,934)			-		(22,377)			173		(22,204)		(206)
Net change in derivative value		-		-			-			(1,172)		593			-		593		4
Total comprehensive income												(21,784)			173		(21,611)		(202)
Contributions from the Company related to employeestock purchase, stock option and other plans		-		9			894			-		903			-		903		-
Adjustment for noncontrolling interest of unitholders in Operating Partnership upon conversion of units into common shares and at dates of capital transactions		-		-			3,881			(16)		3,865			-		3,865		(3,865)
Equity-based compensation		-		23			2,274			-		2,297			-		2,297		18
Distributions to preferred unitholders		(3,819)		-			-			-		(3,819)			-		(3,819)		-
Distributions to common unitholders ($0.90 per unit)		-		(400)			(39,288)			-		(39,688)			-		(39,688)		(271)
real estate entities		-		-						-		-			(1,224)		(1,224)		-
Adjustment to redemption value of noncontrollinginterests - Operating Partnership		-		-			3,474			-		3,474			-		3,474		(3,474)
Equity, June 30, 2008	$	95,000	$	10,699		$	895,285		$	(5,150)	$	997,599		$	2,921	$	1,000,520	$	8,714

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

-8 ~~24 -~~

POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF ~~CASH~~EQUITY ~~FLOWS~~

(In thousands, except per unit data)

(Unaudited)

	Six months endedJune 30,
											Accumulated			Total			Noncontrolling
	2009			2008
					Common Units						Other			Operating			Interests -
Cash Flows From Operating Activities
	Preferred				General			Limited			Comprehensive			Partnership			Consolidated			Total
Net loss	$	(54,947)		$	(22,410)
	Units				Partner			Partner			Income (Loss)			Equity			Real Estate Entities			Equity
Adjustments to reconcile net income to net cash provided by operating activities:
2015
Depreciation		35,601			32,272
Equity, December 31, 2014	$	43,392			$	14,057		$	1,232,186		$	(3,675	)	$	1,285,960		$	—		$	1,285,960
Amortization of deferred financing costs		1,616			1,710
Comprehensive income		1,844				378			37,331			(793	)		38,760			—			38,760
Gains on sales of real estate assets, net		(24,714)			(4,062)
Contributions from the Company related to employee stock purchase, stock option and other plans		—				1			75			—			76			—			76
Other expense (income), net		(215)			563
Adjustment for ownership interest of redeemable common units		—				—			—			—			—			—			—
Asset impairment charges		9,658			28,947
Equity-based compensation		—				26			2,599			—			2,625			—			2,625
Equity in (income) loss of unconsolidated entities		74,546			(821)
Distributions to preferred unitholders		(1,844	)			—			—			—			(1,844	)		—			(1,844	)
Distributions of earnings of unconsolidated entities		896			1,429
Distributions to common unitholders ($0.84 per unit)		—				(460	)		(45,398	)		—			(45,858	)		—			(45,858	)
Deferred compensation		44			278
Adjustment to redemption value of redeemable common units		—				—			517			—			517			—			517
Equity-based compensation		1,636			2,315
Equity, June 30, 2015	$	43,392			$	14,002		$	1,227,310		$	(4,468	)	$	1,280,236		$	—		$	1,280,236
Net gain on early extinguishment of debt		(819)			-
2014
Changes in assets, increase in:
Equity, December 31, 2013	$	43,392			$	12,715		$	1,100,259		$	(3,419	)	$	1,152,947		$	(216	)	$	1,152,731
Other assets		(59)			(3,860)
Comprehensive income		1,844				603			59,508			(1,483	)		60,472			138			60,610
Deferred charges		(205)			(178)
Contributions from the Company related to employee stock purchase, stock option and other plans		—				29			2,919			—			2,948			—			2,948
Changes in liabilities, increase (decrease) in:
Adjustment for ownership interest of redeemable common units		—				—			(7	)		—			(7	)		—			(7	)
Accrued interest payable		(356)			402
Equity-based compensation		—				19			1,915			—			1,934			—			1,934
Accounts payable and accrued expenses		(722)			(1,667)
Distributions to preferred unitholders		(1,844	)			—			—			—			(1,844	)		—			(1,844	)
Security deposits and prepaid rents		(612)			(130)
Distributions to common unitholders ($0.76 per unit)		—				(414	)		(40,899	)		—			(41,313	)		—			(41,313	)
Net cash provided by operating activities		41,348			34,788
Distributions to noncontrolling interests - consolidated real estate entities		—				—			—			—			—			(68	)		(68	)
Cash Flows From Investing Activities
Adjustment to redemption value of redeemable common units		—				—			(1,057	)		—			(1,057	)		—			(1,057	)
Construction and acquisition of real estate assets, net of payables		(75,460)			(69,689)
Equity, June 30, 2014	$	43,392			$	12,952		$	1,122,638		$	(4,902	)	$	1,174,080		$	(146	)	$	1,173,934
Net proceeds from sales of real estate assets		55,235			104,906
Capitalized interest		(6,597)			(6,671)
Annually recurring capital expenditures		(6,307)			(5,640)
Periodically recurring capital expenditures		(18,537)			(3,331)
Community rehabilitation and other revenue generating capital expenditures		(3,503)			(7,951)
Corporate additions and improvements		(126)			(421)
Investments in and advances to unconsolidated entities		(5,104)			(262)
Note receivable collections and other investments		1,017			1,529
Net cash provided by (used in) investing activities		(59,382)			12,470
Cash Flows From Financing Activities
Lines of credit repayments, net		(20,951)			(113,004)
Proceeds from indebtedness		288,517			120,000
Payments on indebtedness		(295,840)			(2,542)
Payments of financing costs and other		(3,709)			(952)
Contributions from the Company related to employee stockpurchase and stock option plans		279			624
Distributions to noncontrolling interests - real estate entities		(420)			(1,224)
Distributions to common unitholders		(17,714)			(39,559)
Distributions to noncontrolling interests - non-Company common unitholders		(87)			(351)
Distributions to preferred unitholders		(3,819)			(3,819)
Net cash used in financing activities		(53,744)			(40,827)
Net increase (decrease) in cash and cash equivalents		(71,778)			6,431
Cash and cash equivalents, beginning of period		75,472			11,557
Cash and cash equivalents, end of period	$	3,694		$	17,988

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

-9 ~~25 -~~

POST APARTMENT HOMES, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six months ended
	June 30,
	2015			2014
Cash Flows From Operating Activities
Net income	$	39,636		$	62,244
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		42,675			42,596
Amortization of deferred financing costs		882			1,265
Net gains on sales of real estate assets		(1,475	)		(36,902	)
Other, net		495			205
Equity in income of unconsolidated entities, net		(965	)		(986	)
Distributions of earnings of unconsolidated entities		1,055			1,082
Equity-based compensation		2,631			1,939
Net loss on extinguishment of indebtedness		197			4,287
Changes in assets, decrease (increase) in:
Other assets		(1,073	)		(1,472	)
Changes in liabilities, increase (decrease) in:
Accrued interest payable		(226	)		(588	)
Accounts payable and accrued expenses		3,489			5,866
Prepaid rents and other		554			(1,814	)

Net cash provided by operating activities		87,875			77,722

Cash Flows From Investing Activities
Development and construction of real estate assets		(46,326	)		(34,440	)
Proceeds from sales of real estate assets		4,529			73,264
Capitalized interest		(2,219	)		(1,601	)
Property capital expenditures		(12,309	)		(14,272	)
Corporate additions and improvements		(542	)		(1,687	)
Investments in unconsolidated entities		(220	)		—
Other investing activities		(313	)		(458	)

Net cash provided by (used in) investing activities		(57,400	)		20,806

Cash Flows From Financing Activities
Lines of credit proceeds		—			80,213
Lines of credit repayments		—			(80,213	)
Payments on indebtedness		(1,455	)		(121,974	)
Payments of financing costs and other		(4,008	)		(4,291	)
Contributions from the Company related to employee stock purchase and stock option plans		345			2,278
Redemption of common units and other		(1,389	)		—
Distributions to noncontrolling interests - real estate entities		—			(68	)
Distributions to noncontrolling interests - non-Company common unitholders		(96	)		(93	)
Distributions to preferred unitholders		(1,844	)		(1,844	)
Distributions to common unitholders		(43,641	)		(37,445	)
Other financing activities		158			—

Net cash used in financing activities		(51,930	)		(163,437	)

Net decrease in cash and cash equivalents		(21,455	)		(64,909	)
Cash and cash equivalents, beginning of period		140,512			82,110

Cash and cash equivalents, end of period	$	119,057		$	17,201

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

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

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 ~~Apartment Homes~~Properties, LInc.P. (the “~~Operating Partnership~~Company”), ~~a Georgia limited partnership,~~ and its subsidiaries develop, own and manage upscale multi-family apartment communities in selected markets in the United States. ~~Post~~The ~~Properties, Inc. (the “~~Company”) through its wholly-owned subsidiaries is the sole general partner, a limited partner and owns a majority interest in Post Apartment Homes, L.P. (the “Operating Partnership”), a Georgia limited partnership. The Operating Partnership, through its operating divisions and subsidiaries conducts substantially all of the on-going operations of ~~Post~~the ~~Properties~~Company, ~~Inc.,~~ a publicly traded ~~company~~ corporation which operates as a self-administered and self-managed real estate investment trust (“REIT”). As used herein, the term “Company” includes Post Properties, Inc. and its subsidiaries, including Post Apartment Homes, L.P., unless the context indicates otherwise.

AtThe ~~June 30, 2009, the~~ Company ~~owned~~has ~~99.5%~~elected ofto ~~the common~~qualify ~~limited partnership interests (“Common Units”) in the Operating Partnership~~ and ~~100%~~operate ofas ~~the preferred limited partnership interests (“Preferred Units”). The Company’s weighted average common ownership interest in the~~a ~~Operating~~self-administrated ~~Partnership was 99.5%~~ and ~~99.3%~~self-managed REIT for ~~the~~federal ~~three~~income ~~months~~tax ~~ended~~purposes. ~~and~~A ~~99.5%~~REIT ~~and~~is ~~99.2%~~a ~~for~~legal ~~the~~entity ~~six~~which ~~months~~holds ~~ended~~real ~~June 30,~~estate ~~2009~~interests and ~~2008,~~is ~~respectively.~~generally ~~Common~~not ~~Units~~subject ~~held~~to byfederal ~~persons~~income ~~other~~tax ~~than~~on the ~~Company~~income ~~totaled~~it ~~219~~distributes atto ~~June 30,~~its ~~2009 and represented a 0~~shareholders.5% ~~ownership~~The ~~interest in the~~ Operating Partnership. ~~Each~~is ~~Common~~governed ~~Unit~~under ~~may be redeemed by~~ the ~~holder~~provisions ~~thereof for either one share~~ of ~~Company~~a ~~common~~limited ~~stock~~partnership oragreement, ~~cash~~as ~~equal~~amended. toUnder the ~~fair~~provisions ~~market~~of ~~value thereof at~~ the ~~time~~limited ofpartnership ~~such redemptions~~agreement, at ~~the~~as ~~option~~amended, ~~but outside the control, of the~~ Operating Partnership. ~~The~~net ~~Operating~~profits, ~~Partnership~~net ~~presently~~losses ~~anticipates~~and ~~that~~cash itflow ~~will~~(after ~~cause~~allocations ~~shares of common stock~~ to preferred beownership ~~issued~~interests) inare ~~connection~~allocated ~~with~~to ~~each~~the ~~such~~partners ~~redemption rather than paying cash (as has been done~~ in ~~all~~proportion ~~redemptions~~ to ~~date).~~their ~~With each redemption of outstanding Common Units for Company~~ common ~~stock,~~ownership ~~the~~interests. ~~Company’s~~Cash ~~percentage~~distributions ~~ownership~~from ~~interest in~~ the Operating Partnership ~~will~~shall ~~increase. In addition~~be, ~~whenever~~at ~~the~~a ~~Company~~minimum, ~~issues~~sufficient ~~shares of~~to ~~common~~enable ~~stock,~~ the Company ~~will~~to ~~contribute~~satisfy ~~any~~its ~~net~~annual ~~proceeds~~dividend requirements ~~therefrom~~ to ~~the~~maintain ~~Operating~~its ~~Partnership~~REIT ~~and~~status under the ~~Operating~~Internal ~~Partnership~~Revenue ~~will~~Code ~~issue an equivalent number~~ of ~~Common~~1986, ~~Units~~as ~~to the Company~~amended.

At June 30, ~~2009~~2015, the Company ~~owned~~had ~~20,662~~interests in 23,365 apartment units in 5759 ~~apartment~~ communities, including 1,~~747~~471 apartment units in ~~five~~four communities held in unconsolidated entities and 1,~~736~~834 apartment units in five communities currently under ~~construction and/or in lease-up~~development. The Company is also developing and selling 362 for-sale condominium homes in three 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 June 30, ~~2009~~2015, approximately 3729.21%, 21.59%, 1213.95% and 10.79% (on a unit basis) of the Company’s operating communities were located in the Atlanta, Georgia, Dallas, Texas, the greater Washington, D.C. and Tampa, Florida metropolitan areas, respectively.

~~Under~~At June 30, 2015, the ~~provisions~~Company had outstanding 54,592 shares of common stock and owned the same number of units of common limited partnership ~~agreement,~~interests (“Common asUnits”) ~~amended~~in the Operating Partnership, representing a 99.8% ownership interest in the Operating Partnership. ~~net~~Common ~~profits,~~Units ~~net~~held ~~losses~~by persons other than the Company totaled 121 at June 30, 2015 and ~~cash~~represented ~~flow~~a ~~(after~~0.2% ~~allocations~~common noncontrolling 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 ~~preferred~~the ~~ownership~~fair ~~interests)~~market ~~are~~value thereof at the time of redemption, at the option, but ~~allocated~~outside tothe control, of the ~~partners~~Operating Partnership. The Operating Partnership presently anticipates that it will cause shares of common stock to be issued in ~~proportion~~connection with each such redemption rather than paying cash (as has been done in all redemptions to ~~their~~date). With each redemption of outstanding Common Units for Company common ~~ownership~~stock, ~~interests.~~the ~~Cash~~Company’s ~~distributions~~percentage ~~from~~ownership interest in the Operating Partnership ~~shall~~will beincrease. In addition, atwhenever athe ~~minimum,~~Company ~~sufficient~~issues toshares ~~enable~~of common stock, the Company will contribute any net proceeds therefrom to ~~satisfy~~the ~~its~~Operating ~~annual~~Partnership ~~dividend~~and ~~requirements~~the Operating Partnership will issue an equivalent number of Common Units to ~~maintain~~the ~~its~~Company. ~~REIT status~~The ~~under~~Company’s weighted average common ownership interest in the ~~Code~~Operating Partnership was 99.8% for three and six month ended June 30, 2015 and 2014.

Basis of ~~Presentation~~presentation

The accompanying unaudited financial statements have been prepared by the ~~Operating Partnership~~Company’s management in accordance with generally accepted accounting principles for interim financial information and applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normally recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, ~~2009~~2015 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 ~~Operating Partnership~~Company’s audited financial statements and notes thereto included in its Annual Report on Form 10-K for the year ended December 31, ~~2008 (the “Form 10-K”)~~2014.

The accompanying consolidated financial statements include the consolidated accounts of the Company, the Operating Partnership and their wholly owned subsidiaries. The ~~Operating~~Company ~~Partnership~~ 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~~ASC ~~Accounting~~Topic ~~Standards Board Interpretation No. 46R~~810, “Consolidation ~~of Variable Interest Entities” (“FIN 46R”)~~. ~~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 Operating Partnership’s and its other partners’ rights, obligations and economic interests in such entities.

-11 ~~26 -~~

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Under ASC Topic 810, 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 ASC Topic 810 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 ~~Operating~~Company ~~Partnership~~ has less than a controlling financial interest or entities where it is not deemed to be the primary ~~beneficiary~~ ~~under FIN 46R~~beneficiary, 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 ~~Operating Partnership~~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 Company’s noncontrolling interest of common unitholders (also referred to as “Redeemable Common Units”) in the operations of the Operating Partnership is calculated based on the weighted average unit ownership during the period.

Revenue ~~Recognition~~recognition

Under the terms of residential leases, the residents of the ~~Operating Partnership~~Company’s residential communities are obligated to reimburse the Company ~~Operating Partnership~~ for certain utility usage, water and electricity (at selected properties), where the ~~Operating~~Company ~~Partnership~~ 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~~Cost ~~and~~capitalization 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 Operating Partnership 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 Operating Partnership 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~~communities ~~developed~~under ~~condominiums~~development or construction, the ~~Operating~~Company ~~Partnership~~capitalizes ~~accounts~~interest, ~~for~~real ~~each~~estate ~~project~~taxes, ~~under~~and ~~either~~certain internal personnel and associated costs related to the ~~Completed~~development ~~Contract~~and ~~Method~~construction activity. Interest is capitalized to projects under development or construction based upon the ~~“Percentage of~~weighted ~~Completion~~average ~~Method,”~~cumulative ~~based~~project oncosts afor ~~specific~~each ~~evaluation~~month ofmultiplied by the ~~factors~~Company’s ~~specified~~weighted inaverage borrowing ~~SFAS~~costs, Noexpressed as a percentage. 66 ~~and~~Weighted average borrowing costs include the ~~guidance~~costs ~~provided~~of bythe ~~EITF~~Company’s ~~06-8.~~fixed ~~The~~rate ~~factors~~secured ~~used~~and tounsecured ~~determine~~borrowings and the ~~appropriate~~variable ~~accounting~~rate ~~method~~unsecured ~~are~~borrowings ~~the~~under ~~legal~~its ~~commitment~~line of ~~the~~credit ~~purchaser~~facilities. The inweighted ~~the~~average ~~real~~borrowing ~~estate~~costs, ~~contract~~expressed as a percentage, ~~whether~~were ~~the~~4.3% ~~construction~~and of4.6% for the ~~project~~six ismonths ~~beyond~~ended aJune 30, ~~preliminary~~2015 ~~phase~~and 2014, ~~sufficient~~respectively. ~~units~~Aggregate ~~have~~interest ~~been~~costs ~~contracted~~capitalized to ~~ensure~~projects ~~the~~under ~~project~~development ~~will~~or ~~not~~construction ~~revert~~were to$1,237 aand $755 ~~rental~~for ~~project~~the three months and $2,219 and $1,601 for the ~~aggregate~~six ~~project~~months ~~sale~~ended ~~proceeds~~June 30, 2015 and ~~costs~~2014, ~~can~~respectively. ~~be reasonably~~Internal ~~estimated~~development and construction personnel and associated costs are capitalized to projects under development or construction based upon the ~~buyer~~effort ~~has~~associated ~~made~~with ansuch ~~adequate~~projects. ~~initial~~Aggregate internal development and ~~continuing~~construction ~~cash~~personnel ~~investment~~and associated costs capitalized to projects under ~~the~~development ~~contract~~or inconstruction ~~accordance~~were ~~with~~$1,213 ~~SFAS~~and ~~No. 66~~$512 for the three months and $2,348 and $1,001 for the ~~guidance~~six ~~provided~~months byended ~~EITF~~June 30, ~~06-8~~2015 and 2014, respectively. ~~Under~~The ~~the~~Company ~~Percentage~~treats ofeach ~~Completion~~unit ~~Method~~in an apartment community separately for cost accumulation, ~~revenues~~capitalization and expense recognition purposes. Prior to the completion of rental ~~associated~~units, ~~gains~~interest and other construction costs are ~~recognized~~capitalized ~~over~~and reflected on the ~~project~~balance sheet as construction ~~period~~in ~~generally~~progress. ~~based~~The onCompany ceases the ~~percentage~~capitalization of ~~total~~such ~~project~~ costs ~~incurred~~as tothe ~~estimated~~residential ~~total~~units ~~project~~in ~~costs~~a community become substantially complete and available for ~~each~~occupancy ~~condominium~~or ~~unit~~sale. ~~under~~This results in a ~~binding~~proration ~~real~~of ~~estate~~costs ~~contract~~between amounts that are capitalized and expensed as the residential units in apartment development communities become available for occupancy. AsIn ~~of March 31~~addition, ~~2009~~prior to the completion of rental units, the Company expenses as incurred substantially all ~~newly~~operating ~~developed~~expenses ~~condominium~~(including ~~projects~~pre-opening ~~are~~marketing ~~accounted~~as ~~for~~well ~~under~~as ~~the~~property ~~Completed~~management ~~Contract~~and ~~Method~~leasing personnel expenses) of such rental communities.

Real ~~Estate~~estate ~~Assets~~assets, ~~Depreciation~~ depreciation and ~~Impairment~~impairment

Real estate assets are stated at the lower of depreciated cost or fair value, if deemed impaired. Major replacements and betterments are capitalized and depreciated over their estimated useful lives. Depreciation is computed on a straight-line basis over the useful lives of the properties (buildings and components ~~and~~– ~~related~~40 years; other building and land improvements – 20~~-40~~ years; furniture, fixtures and equipment – 5-10 years).

~~The~~12 Operating Partnership continually evaluates the recoverability of the carrying value of its real estate assets using the methodology prescribed in SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets.” Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under SFAS No. 144, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding

- 27 -

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Company continually evaluates the recoverability of the carrying value of its real estate assets using ~~period~~the methodology prescribed in ASC Topic 360, “Property, Plant and Equipment.” Factors considered by management in evaluating impairment of its existing real estate assets held for investment include significant declines in property operating profits, annually recurring property operating losses and other significant adverse changes in general market conditions that are considered permanent in nature. Under ASC Topic 360, a real estate asset held for investment is not considered impaired if the undiscounted, estimated future cash flows of an asset (both the annual estimated cash flow from future operations and the estimated cash flow from the theoretical sale of the asset) over its estimated holding period are in excess of the asset’s net book value at the balance sheet date. If any real estate asset held for investment is considered impaired, a loss is provided to reduce the carrying value of the asset to its estimated fair value.

The ~~Operating~~Company ~~Partnership~~ periodically classifies real estate assets as held for sale. An asset is classified as held for sale after the approval of the Company’s board of directors and after an active program to sell the asset has commenced. Upon the classification of a real estate asset as held for sale, the carrying value of the asset is reduced to the lower of its net book value or its estimated fair value, less costs to sell the asset. Subsequent to the classification of assets as held for sale, no further depreciation expense is recorded. Real estate assets held for sale are stated separately on the accompanying consolidated balance sheets. Upon a decision to no longer market an asset for sale, the asset is classified as an operating asset and depreciation expense is reinstated. The operating results of real estate assets held for sale and sold are reported as discontinued operations in the accompanying statements of operations. Income from discontinued operations includes the revenues and expenses, including depreciation and allocated interest expense, associated with the assets. Interest expense is allocated to assets held for sale based on actual interest costs for assets with secured mortgage debt. Interest expense is allocated to unencumbered assets based on the ratio of unsecured debt to unencumbered assets multiplied by the weighted average interest rate on the Operating Partnership’s unsecured debt for the period and further multiplied by the book value of the assets held for sale and/or sold. This classification of operating results as discontinued operations applies retroactively for all periods presented. Additionally, gains and losses on assets designated as held for sale are classified as part of discontinued operations.

~~For~~Derivative ~~condominium~~financial ~~conversion~~instruments projects, a complete community conversion is treated as discontinued operations in the same manner as discussed above for apartment community sales. For partial conversions of communities, the operating results, condominium revenues and associated gains are reflected in continuing operations (see discussion under “revenue recognition” above) and the net book value of the assets being converted into condominiums are reflected separately from held for sale assets on the consolidated balance sheet in the caption titled, “Condominiums, For-sale and Under Construction.” In either case, subsequent to the classification of the assets as held for sale, no further depreciation expense is recorded.

InThe ~~addition,~~Company ~~for-sale~~accounts ~~condominium~~for ~~assets~~derivative financial instruments at fair value under ~~development~~the ~~are~~provisions ~~evaluated~~of ~~for~~ASC ~~impairment~~Topic ~~using~~815, ~~the~~“Derivatives ~~methodology~~and ~~for~~Hedging.” ~~assets~~The ~~held~~Company ~~for~~measures ~~future~~derivative ~~investment~~financial ~~(using~~instruments ~~projected~~subject ~~future~~to ~~undiscounted~~master ~~cash~~netting ~~flows)~~agreements on a net basis. ~~However~~The Company uses derivative financial instruments, ~~once~~primarily ~~construction~~interest ofrate ~~these~~swap ~~assets~~arrangements isto ~~completed~~manage ~~and~~or ~~units~~hedge its exposure to interest rate changes. Under ASC Topic 815, derivative instruments qualifying as hedges of specific cash flows are recorded on the ~~ready~~balance ~~for~~sheet ~~their~~at ~~intended~~fair ~~use~~value with an offsetting increase or decrease to accumulated other comprehensive income, ~~for-sale~~an ~~condominium~~equity ~~assets~~account, until the hedged transactions are ~~evaluated~~recognized ~~for~~in ~~impairment~~earnings. ~~using~~Quarterly, the ~~methodology~~Company ~~for~~evaluates ~~assets~~the ~~held~~effectiveness ~~for~~of ~~sale~~its cash ~~(using~~flow ~~discounted~~hedges. ~~projected~~Any ~~future~~ineffective portion of cash ~~flows)~~flow hedges is recognized immediately in earnings.

~~Recently~~Fair ~~Issued~~value ~~and~~measurements ~~Adopted Accounting Pronouncements~~

~~SFAS~~The ~~No. 160,~~Company ~~“Noncontrolling Interests~~applies inthe ~~Consolidated~~guidance ~~Financial~~in ~~Statements~~ASC –Topic An820, ~~Amendment~~“Fair ofValue ~~ARB~~Measurements ~~No. 51~~and Disclosures,” ~~was issued in December 2007. SFAS No. 160 requires all entities~~ to ~~report~~the ~~noncontrolling~~valuation ~~interests~~of ~~(previously~~real ~~referred~~estate toassets asrecorded ~~minority~~at ~~interests) in~~fair ~~subsidiaries~~value, asif ~~equity~~any, into ~~the~~its ~~consolidated~~impairment ~~financial~~valuation ~~statements.~~analysis ~~The~~of ~~Operating~~real ~~Partnership~~estate ~~adopted~~assets, ~~the~~to ~~accounting~~its ~~and~~ disclosure ~~requirements~~ of ~~SFAS No. 160 on January 1, 2009 and has amended~~ the ~~presentation~~fair ~~for~~value ~~its~~of ~~noncontrolling interests~~financial ininstruments, ~~the~~principally ~~Operating~~indebtedness ~~Partnership~~ and into ~~consolidated~~its ~~real~~derivative ~~estate~~financial ~~entities~~instruments. ~~retrospectively~~Fair onvalue ~~its~~disclosures ~~consolidated~~required ~~balance~~under ~~sheets,~~ASC Topic ~~consolidated~~820 ~~statements~~are ofsummarized ~~operations~~in ~~and~~note ~~consolidated~~8 ~~statements~~utilizing ofthe ~~equity~~following ~~and~~hierarchy: ~~accumulated earnings.~~

~~FASB~~• ~~Staff~~Level ~~Position EITF 03-6-~~1, ~~“Determining~~– ~~Whether~~Quoted ~~Instruments~~prices ~~Granted~~ in ~~Share-Based~~active ~~Payment~~markets ~~Transactions~~for ~~Are~~identical ~~Participating~~assets ~~Securities,” (“FSP~~or ~~EITF~~liabilities ~~03-6-1”) was issued in June 2008. FSP EITF 03-6-1 was effective January 1, 2009. FSP EITF 03-6-1 requires~~ that ~~unvested~~are ~~share~~accessible ~~based~~at ~~payment awards that contain non-forfeitable rights to dividends or dividend equivalents be treated as participating securities for purposes of~~ the ~~computation~~measurement ~~of net income available to common stockholders~~date. The Operating Partnership adopted FSP EITF 03-6-1 retrospectively, effective January 1, 2009. In accordance with FSP EITF 03-6-1, prior period earnings per share amounts have been adjusted accordingly. The adoption of FSP EITF 03-6-1 did not have a material impact on the Operating Partnership’s financial position, results of operations or earnings per share.

~~SFAS~~• ~~No. 141R,~~Level ~~“Business~~2 ~~Combinations,”~~– ~~was~~Inputs ~~issued~~other inthan ~~December~~quoted ~~2007~~prices ~~and replaced SFAS No. 141. SFAS No. 141R requires (1) acquirers to recognize all of the assets acquired and liabilities assumed in a business combination at fair value, (2)~~ that ~~the~~are ~~acquisition~~observable ~~date be used to determine fair value~~ for ~~all assets acquired and all liabilities assumed, and (3) enhanced disclosures for~~ the ~~acquirer~~asset ~~surrounding~~or the financial effects of the business combination. The provisions of SFAS 141R also requires the expensing of acquisition related transaction costs and the potential recognition of acquisition related contingencies. The Operating Partnership adopted SFAS No. 141R on January 1liability, ~~2009,~~either ~~and~~directly ~~it did not have an impact on the Operating Partnership’s financial position~~ or ~~results of operations~~indirectly.

~~SFAS~~• ~~No. 165,~~Level ~~“Subsequent~~3 ~~Events,”~~– ~~was~~Unobservable ~~issued~~inputs infor ~~June 2009. SFAS No. 165 further clarifies~~ the ~~period~~assets ~~subsequent to the balance sheet date in which companies should disclose certain financial statement events~~ or ~~transactions~~liability. ~~It also further~~

-Recently 28issued -accounting pronouncements

In May 2014, Accounting Standards Update No. 2014-09 (“ASU 2014-09”), “Revenue from Contracts with Customers,” was issued. This new guidance establishes a single comprehensive revenue recognition model under U.S. GAAP and provides for enhanced disclosures. Under this new guidance, the amount of revenue recognized for certain transactions could differ from amounts recognized under existing accounting guidance and could also result in recognition in different reporting periods. Also, the provisions of ASU 2014-09 exclude revenue recognition regarding lease contracts. In July 2015, ASU 2014-09 was amended to defer the effective date by one year. The new guidance is effective for annual reporting periods beginning after December 15, 2017; however, early adoption is permitted for annual reporting periods beginning after December 15, 2016. The Company expects to adopt ASU 2014-09 as of January 1, 2018 and is currently evaluating the impact that this new guidance may have on its results of operations.

In February 2015, Accounting Standards Update No. 2015-02 (“ASU 2015-02”), “Consolidation,” was issued. The new guidance primarily amends current consolidation accounting guidance with respect to the evaluation criteria for determining whether certain limited partnerships or similar legal entities and certain variable interest entities are subject to consolidated reporting. The new guidance is effective for reporting periods beginning after December 15, 2015. The Company expects to adopt ASU 2015-02 as of January 1, 2016 and is currently evaluating the impact this new standard may have on its financial position and results of operations.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In April 2015, Accounting Standards Update No. 2015-03 (“ASU 2015-03”), ~~clarifies~~“Interest-Imputation ~~the~~of ~~circumstances~~Interest”, ~~under~~was ~~which~~issued. aThe ~~company~~new ~~should~~guidance ~~consider~~requires ~~recognition~~debt ofissuance ~~those~~costs ~~events~~to orbe ~~transactions~~reported ~~occurring~~as ~~after~~direct deductions from the ~~balance~~face ~~sheet~~value ~~date~~of asthe ~~well~~related debt instrument in the preparation of consolidated balance sheets. Currently, such debt issuance costs are reported as ~~provides~~deferred ~~guidance~~assets ~~regarding~~on the ~~required~~consolidated ~~disclosures~~balance sheet. ~~The~~Further, ~~Operating~~the ~~Partnership~~amortization ~~adopted~~of ~~SFAS~~debt ~~No. 165~~issuance costs will be reported as interest expense in the consolidated statement of ~~June 30~~operations, ~~2009~~under ASU 2015-03. ~~The~~Currently, ~~adoption~~amortization expense of ~~SFAS~~debt ~~No. 165~~issuance ~~did~~costs ~~not~~is ~~have~~reported as a ~~material~~separate ~~impact~~line onitem in the ~~Operating~~consolidated ~~Partnership’s~~statement ~~financial~~of operations. The new guidance is effective for reporting periods beginning after December 31, 2015. The Company ~~statements~~expects orto ~~results~~adopt ofASU ~~operations~~2015-03 ~~(see~~as ~~note~~of ~~13)~~January 1, 2016.

~~FASB~~Supplemental ~~Staff~~cash ~~Position~~flow ~~No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments,” (“FSP FAS 107-1”) was issued in April 2009. FSP FAS 107-1 requires that companies disclose~~ information about the fair value of their financial instruments in both interim and annual periods. The Operating Partnership adopted FSP FAS 107-1 and APB 28-1 as of June 30, 2009 and has included the required fair value disclosures in its notes to the consolidated financial statements (see note 6).

~~SFAS~~Supplemental ~~No. 167,~~cash ~~“Amendments~~flow toinformation ~~FASB~~for ~~Interpretation~~the ~~No. 46(R),”~~six ~~was~~months ~~issued~~ended in June ~~2009. SFAS No.~~ ~~167 addresses the impact that the elimination of the qualifying special purpose entity (“QSPE”) concept has on FIN 46(R) and will require companies to evaluate all entities~~30, ~~even~~2015 ~~those previously considered to be QSPEs, as potential variable interest entities (“VIEs”). SFAS No. 167 also addresses the timely accounting~~ and ~~disclosure~~2014 ~~requirements of companies’ variable interests by (1) requiring ongoing reassessments of whether or not the company~~ is ~~the~~as ~~primary~~follows: beneficiary, (2) adding an additional reconsideration requirement, (3) eliminating the quantitative approach previously used to determine the primary beneficiary of a VIE and (4) amending certain guidance for determining which entities are VIEs. SFAS No. 167 is effective for the Operating Partnership on January 1, 2010. The Operating Partnership is currently evaluating the potential impact of SFAS No. 167 on the Operating Partnership’s financial position and results of operations.


	Six months ended June 30,
	2015		2014
Interest paid, net of interest capitalized	$	16,072	$	22,265
Interest paid, including interest capitalized		18,291		23,866
Income tax payments, net		1,124		1,039
Non-cash investing and financing activities:
Dividends and distributions payable		24,074		21,805
Construction and property capital expenditure cost accruals, increase (decrease)		4,497		(2,350	)
Adjustments to equity related to redeemable common units and other, net increase (decrease)		517		(1,064	)
Common stock 401k matching contribution		—		658

2.	REAL ESTATE ACTIVITY

Dispositions

The ~~Operating~~Company ~~Partnership~~ classifies real estate assets as held for sale after the approval of ~~the~~its ~~Company’s~~ board of directors and after the ~~Operating~~Company ~~Partnership~~had ~~has~~ commenced an active program to sell the assets. AtThe ~~June 30,~~Company ~~2009, the Operating Partnership~~ had ~~two~~no ~~apartment~~assets ~~communities, containing 798 units, and certain parcels of land~~ classified as held for sale. ~~These real estate assets are reflected in the accompanying consolidated balance sheet~~ at ~~$63,364, which represents the lower of their depreciated cost or fair value less costs to sell. At~~ June 30, 2009, the Operating Partnership also had portions of two communities being converted to condominiums and certain completed condominium units at developed condominium communities totaling $8,796 classified as for-sale condominiums on the accompanying consolidated balance sheet2015.

~~For~~In the first quarter of 2014, the Company classified three ~~and~~apartment ~~six~~communities, ~~months~~containing ~~ended~~645 ~~June 30~~units, ~~2009~~as held for sale, including two communities, containing 337 units, in New York, New York and ~~2008~~an additional community, ~~income~~containing ~~from~~308 ~~continuing~~units, ~~operations~~in ~~included~~Houston, ~~net~~Texas. ~~gains~~In ~~from~~May ~~condominium~~2014, ~~sales~~the ~~activities~~apartment ~~at developed~~community ~~and~~located ~~condominium~~in ~~conversion~~Houston, ~~projects~~Texas ~~representing~~was ~~portions~~sold for gross proceeds of ~~existing~~approximately ~~communities~~$71,750. InThe ~~addition~~Company recognized a gain of $36,092 on the ~~condominium~~sale ~~gains~~of ~~are~~this ~~net~~community. This disposition activity was part of ~~certain~~the ~~expensed~~Company’s ~~sales~~investment ~~and~~strategy ~~marketing~~of ~~costs~~recycling ~~associated~~investment ~~with~~capital ~~condominium~~to ~~communities~~fund ~~under~~investment and development ~~and~~of inapartment communities. The Company ~~pre-sale~~determined that these communities did not meet the criteria for discontinued operations reporting and, ~~such~~accordingly, ~~costs~~their ~~are~~operating results were included in ~~condominium~~continuing ~~expenses~~operations through their sale dates in 2014. The two communities located in New York, New York were sold, and the ~~table~~Company ~~below.~~recognized Agains ~~summary~~on sales, in the third quarter of ~~revenues~~2014. ~~and~~The ~~costs~~net income and ~~expenses~~net income attributable to the Company, including gains on sales of ~~condominium~~real ~~activities~~estate ~~included~~assets inrelated ~~continuing~~to ~~operations~~these three communities, for the three and six months ended June 30, ~~2009~~2014 ~~and~~were ~~2008 was~~ as follows:

	Three months endedJune 30,					Six months endedJune 30,
	Three months ended			Six months ended
	2009		2008			2009		2008
	June 30, 2014			June 30, 2014
Condominium revenues	$	6,176	$	10,051		$	8,222	$	18,348
Net income	$	37,356		$	37,493
Condominium costs and expenses		(5,944)		(10,419)			(8,250)		(16,597)
Net income, net of noncontrolling interest	$	37,202		$	37,355
Gains (losses) on sales of condominiums	$	232	$	(368)		$	(28)	$	1,751

~~Under~~14 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

- 29 -

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~three~~For ~~and~~the six months ended June 30, ~~2009~~2015, ~~income~~the ~~from~~Company ~~discontinued~~recognized ~~operations~~a ~~included~~gain ~~the results~~ of ~~operations~~$1,773 ofon ~~two~~the ~~apartment~~sale ~~communities~~of ~~classified~~its asremaining ~~held~~condominium ~~for~~retail ~~sale~~space at ~~June 30,~~its ~~2009~~former ~~and~~condominium ~~one apartment~~ community ~~through its sale date~~ in ~~2009~~Austin, Texas. ~~For~~In ~~the~~2015, ~~three~~gains ~~and~~on ~~six~~sales ~~months~~of ~~ended~~real ~~June 30,~~estate ~~2008,~~assets ~~income from discontinued operations~~ included ~~the~~state ~~results~~tax expense of ~~operations~~$298 ofrelated ~~the~~to ~~two~~an ~~apartment communities~~asset ~~classified~~sale. asFor ~~held~~the ~~for~~six ~~sale~~months atended June 30, ~~2009~~2014, ~~the~~gains ~~apartment~~on condominium ~~community~~sales ~~sold~~activities inwere ~~2009~~$810, ~~and~~resulting ~~four~~from ~~apartment~~the ~~communities~~sale ~~sold~~of inthe ~~2008~~final ~~through~~residential ~~their~~condominium ~~respective~~unit ~~sale~~at ~~dates~~a former condominium community in Atlanta, Georgia.

The revenues and expenses of these communities for the three and six months ended June 30, 2009 and 2008 were as follows:

	Three months endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Revenues
Rental	$	3,228	$	7,275	$	7,463	$	14,613
Other property revenues		196		447		454		831
Total revenues		3,424		7,722		7,917		15,444
Expenses
Total property operating and maintenance (exclusive of itemsshown separately below)		1,087		2,567		2,559		5,292
Depreciation		-		871		-		1,962
Interest		311		1,052		723		2,154
Total expenses		1,398		4,490		3,282		9,408
Income from discontinued property operations	$	2,026	$	3,232	$	4,635	$	6,036

For the three and six months ended June 30, 2009, the Operating Partnership recognized net gains in discontinued operations of $24,742 from the sale of one community, containing 530 units. This sale generated net proceeds of approximately $47,013. For the six months ended June 30, 2008, the Operating Partnership recognized net gains in discontinued operations of $2,311 from the sale of one community, containing 143 units. This sale generated net proceeds of approximately $19,433.

3.	INVESTMENTS IN UNCONSOLIDATED REAL ESTATE ENTITIES

At June 30, ~~2009~~2015, the ~~Operating~~Company ~~Partnership~~held ~~holds~~ investments in ~~various~~two individual limited liability companies (the “Apartment LLCs”) with institutional investors that own four apartment communities., ~~The Operating~~including ~~Partnership~~three ~~holds~~communities alocated ~~25% to 35% equity interest~~ in ~~these~~Atlanta, ~~Apartment~~Georgia ~~LLCs. The Operating Partnership~~ and ~~its~~one ~~joint~~community ~~venture~~located ~~partner also hold an approximate pro-rata 49% interest~~ in aWashington, ~~limited~~D.C. ~~liability~~The ~~company~~Company ~~(the~~has ~~“Mixed-Use LLC”) that is in the process of constructing~~ a ~~mixed-use~~25% ~~development, consisting of 129 luxury condominium units, sponsored by the Operating Partnership~~ and ~~its~~35% ~~partner,~~equity ~~and~~interest ~~Class A~~in ~~office~~these ~~space,~~Apartment ~~sponsored by two additional independent investors~~LLCs.

The ~~Operating~~Company ~~Partnership~~accounts for its investments in the Apartment LLCs using the equity method of accounting. At June 30, 2015 and December 31, 2014, the Company’s investment in the 35% owned Apartment LLC totaled $3,957 and $4,059, respectively, excluding the credit investments discussed below. The Company’s investment in the 25% owned Apartment ~~LLCs~~LLC at June 30, ~~2009~~2015 and December 31, ~~2008~~2014 reflects a credit investment of $1416,~~514~~437 and $1416,~~263~~624, respectively. These credit balances resulted from distribution of financing proceeds in excess of the ~~Operating Partnership~~Company’s historical cost upon the formation of the Apartment LLC and are reflected in consolidated liabilities on the ~~Operating Partnership~~Company’s consolidated balance sheet. The operating results of the Company include its allocable share of net income from the investments in the Apartment LLCs. The Company provides property and asset management services to the Apartment LLCs for which it earns fees.

AtA ~~June 30,~~summary 2009, the Operating Partnership holds a majority interest in a limited liability company (the “Condominium LLC”), which holds the approximate pro-rata 49% interest in the Mixed-Use LLC, which is constructing condominiums as part of afinancial ~~mixed-use~~information development with other investors as discussed above. As such, the Operating Partnership consolidated the Condominium LLC. At June 30, 2009, the Operating Partnership’s consolidated investment in the Mixed-Use LLC reflects a credit investment of $39,820. The credit investment results from the recognition of a $74,733 non-cash impairment charge, or $68,219 net of the noncontrolling joint venture interest in the entity, recorded for the ~~three~~Apartment ~~and~~LLCs six months ended June 30, 2009 related to the condominium portion of the project. The impairment charge to write-down the asset to estimated fair value resulted from a determination that the estimated undiscounted cash flows related to the condominium asset under construction were not sufficient to recover the carrying value of the asset. The impairment charge was reflective of deteriorating market conditions for luxury condominiums in the ~~Atlanta market, including weakening economic conditions, price discounting for competitive~~aggregate ~~products~~is and more restrictive mortgage lending conditions in 2009. Upon the completion of the condominium portion of the mixed-use development, the condominium asset will be distributed to the Condominium LLC. The Condominium LLC has entered into a licensing and branding arrangement with a third party. This arrangement provides for the payment of a guaranteed licensing fee upon the earlier of the sale of the condominium units as ~~they~~follows: ~~occur or September 2012. The licensing fee will be paid from the proceeds of condominium sales at the Condominium LLC.~~

- 30 -


Apartment LLCs - Balance Sheet Data	June 30, 2015			December 31, 2014
Real estate assets, net of accumulated depreciation of $52,012 and $49,153 at June 30, 2015 and December 31, 2014, respectively	$	207,785		$	208,493
Cash and other		7,261			5,490

Total assets	$	215,046		$	213,983

Mortgage notes payable	$	177,723		$	177,723
Other liabilities		4,721			3,445

Total liabilities		182,444			181,168
Members’ equity		32,602			32,815

Total liabilities and members’ equity	$	215,046		$	213,983

Company’s equity investment in Apartment LLCs (1)	$	(12,480	)	$	(12,565	)

1)	At June 30, 2015 and December 31, 2014, the Company’s equity investment includes its credit investments of $16,437 and $16,624, respectively, discussed above.


	Three months ended				Six months ended
	June 30,				June 30,
Apartment LLCs - Income Statement Data	2015		2014		2015		2014
Revenues
Rental	$	6,856	$	6,635	$	13,640	$	13,120
Other property revenues		538		489		993		928

Total revenues		7,394		7,124		14,633		14,048

Expenses
Property operating and maintenance		3,049		2,830		6,156		5,581
Depreciation and amortization		1,464		1,387		2,912		2,763
Interest		2,258		2,258		4,496		4,496

Total expenses		6,771		6,475		13,564		12,840

Net income	$	623	$	649	$	1,069	$	1,208

Company’s share of net income in Apartment LLCs	$	568	$	501	$	965	$	986

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~The Operating Partnership accounts for its investments in the Apartment and Mixed-Use LLCs using the equity method of accounting.~~ At June 30, ~~2009 and December 31~~2015, ~~2008,~~mortgage ~~the~~notes ~~Operating~~payable ~~Partnership’s~~included ~~investment~~four inmortgage ~~these~~notes. ~~Apartment~~The ~~and~~first ~~Mixed-Use LLCs totaled~~ $851,~~706~~000 ~~and~~mortgage ~~$39,300,~~note bears ~~respectively,~~interest ~~excluding~~at ~~the credit investments discussed above~~3.50%, ~~The~~requires ~~excess~~monthly ofinterest ~~the~~only ~~Operating~~payments ~~Partnership's~~and ~~investment~~matures ~~over its equity~~ in ~~the~~2019. ~~underlying~~The ~~net~~second ~~assets~~and ofthird ~~certain~~mortgage ~~Apartment~~notes ~~LLCs~~total ~~was approximately~~ $685,~~389 at June 30~~724, ~~2009.~~bear ~~The~~interest ~~excess~~at ~~investment~~5.63%, ~~related~~require tointerest ~~the~~only ~~Apartment~~payments ~~LLCs~~and ismature ~~being~~in ~~amortized as~~2017. aThe ~~reduction~~fourth tomortgage ~~earnings~~note ontotals $41,000, abears ~~straight-line~~interest ~~basis~~at ~~over the lives of the related assets~~5.71%, ~~The~~requires ~~Operating~~interest ~~Partnership~~only ~~provides real estate services (development~~payments, ~~construction~~ and ~~property~~matures ~~management)~~in toJanuary ~~the~~2018 ~~Apartment~~with ~~and~~a ~~Mixed~~one-~~Use~~year ~~LLCs~~automatic ~~for~~extension ~~which~~at ~~it earns~~a ~~fees~~variable interest rate.

The operating results of the Operating Partnership include its allocable share of net income from the investments in the Apartment and Mixed-Use LLCs. A summary of financial information for the Property LLCs in the aggregate was as follows:

Balance Sheet Data	June 30, 2009		December 31, 2008
Real estate assets, net of accumulated depreciationof $24,726 and $21,528, respectively	$	351,420	$	398,167
Cash and other		7,421		6,768
Total assets	$	358,841	$	404,935
Mortgage/construction notes payable	$	301,785	$	289,013
Other liabilities		22,444		6,979
Total liabilities		324,229		295,992
Members’ equity		34,612		108,943
Total liabilities and members’ equity	$	358,841	$	404,935
Operating Partnership’s equity investment in Property LLCs (1)	$	(45,628)	$	23,315
	Three months endedJune 30,				Six months endedJune 30,
Income Statement Data	2009		2008		2009		2008
Revenues
Rental	$	6,642	$	6,794	$	13,306	$	13,487
Other property revenues		496		482		961		883
Other		3		13		3		36
Total revenues		7,141		7,289		14,270		14,406
Expenses
Property operating and maintenance		2,976		2,882		5,829		5,635
Depreciation and amortization		1,651		2,104		3,292		4,236
Impairment charge (2)		71,679		-		71,679		-
Interest		2,986		2,500		5,939		4,999
Total expenses		79,292		7,486		86,739		14,870
Income (loss) from continuing operations		(72,151)		(197)		(72,469)		(464)
Discontinued operations
Income (loss) from discontinued operations		-		-		-		(2)
Income from discontinued operations		-		-		-		(2)
Net income (loss)	$	(72,151)	$	(197)	$	(72,469)	$	(466)
Operating Partnership’s share of net income	$	(74,656)	$	420	$	(74,546)	$	821
(1) At June 30, 2009 and December 31, 2008, the Operating Partnership’s equity investment is shown net of its credit investments of $54,334 and $15,985, respectively. At December 31, 2008, the credit investment included $1,722 related to the Land LLC discussed below. (2) The impairment charge recognized at the unconsolidated entity level excludes the write-off of the Operating Partnership’s costs in excess of its invested capital.

- 31 -

POST APARTMENT HOMES, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The Mixed-Use LLC and a related limited liability company (the “Land LLC”) holding land for future investment (see below) entered into a construction loan facility with an aggregate capacity of $187,128. At June 30, 2009, the construction loan had an outstanding balance of $103,442, bears interest at LIBOR plus 1.35% and matures in 2011. As discussed below, a portion of the construction loan is included in consolidated indebtedness. Under the terms of the construction loan facility, the Operating Partnership and its equity partner in the Condominium LLC have jointly and severally guaranteed approximately $25,313 of the construction loan held at the unconsolidated Mixed-Use 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 Mixed-Use LLC not to exceed approximately $6,153. Finally, all of the equity owners of the project at the unconsolidated Mixed-Use LLC, including the Operating Partnership, have jointly and severally guaranteed the completion of the first mixed-use building of the project.

In April 2009, the Operating Partnership made aggregate additional investments and advances of $1,527 to the previously unconsolidated Land LLC that holds land adjacent to the condominium project discussed above for future investment, whereby the Operating Partnership obtained a majority interest in the Land LLC. As a result, the Operating Partnership consolidated the Land LLC in the second quarter of 2009. The consolidation of the Land LLC resulted in the consolidation of a portion of the construction loan discussed above totaling $8,153 at June 30, 2009 (see note 4). Subsequently, consistent with the impairment analysis performed for the adjacent condominium development discussed above, the Operating Partnership determined that the land held for future development of a second phase condominium tower on this site was not economically viable due to limitations on the potential future use of this site and the continued worsening of conditions in the U.S. economy and the housing markets, specifically in the Atlanta upper-end single family and condominium markets. As a result, the Operating Partnership concluded that the carrying value of the land held for future investment was not recoverable, and in the second quarter of 2009, the Operating Partnership recorded a non-cash impairment charge of $9,658, or $8,098 net of the noncontrolling joint venture interest in the entity, to write-off the carrying value of the land held for investment.

4.	INDEBTEDNESS

At June 30, ~~2009~~2015 and December 31, ~~2008~~2014, the ~~Operating Partnership~~Company’s indebtedness consisted of the following:

Description	PaymentTerms	Interest Rate	Maturity Date	~~Maturity~~June ~~Date~~30,2015		~~June 30,2009~~		December 31,2014	~~December 31, 2008~~
Senior Unsecured Notes	Int.	53.13375% -7 4.7075%	2017 - 2022(1)	~~2010-2013~~$	400,000	$	~~360,142~~	$	$400,000	~~535,000~~
Unsecured Lines of Credit
Unsecured Bank Term Loan	Int.	LIBOR + 1.15%(2)	2020		300,000				300,000
Syndicated Line of Credit	N/A	LIBOR + 0.80%	(2)	2010			15,000			40,000
Secured Mortgage Notes	Prin. and Int.	5.99%	2019		191,004				192,459
Cash Management Line	N/A	LIBOR + 0.80%		2010			14,913			10,864
Total				$	891,004			$	892,459
							29,913			50,864
Secured Notes
FNMA	Prin. and Int.	Remarketed rate		2029			-			92,275
Other	Prin. and Int.	4.88% - 6.11%	(3)	2011-2019			688,582			434,774
							688,582			527,049
Secured Variable Rate Construction Note	Int.	LIBOR + 1.35%		2011			8,153			-
Total						$	1,086,790		$	1,112,913

(1) OfThe ~~the~~outstanding ~~Operating Partnership’s senior~~ unsecured notes, ~~there are no scheduled maturities in 2009. Notes for approximately $100,505 bearing interest at 7.7%~~ mature in ~~2010.~~2017 ~~The remaining notes mature between 2011~~ and ~~2013~~2022.

(2) Represents stated rate at June 30, 2015. As discussed below, the Company has entered into interest rate swap arrangements that effectively fix the interest rate under this facility through January 2018. At June 30, ~~2009~~2015, the ~~weighted~~effective ~~average~~blended interest rate under the Amended Term Loan was 12.169%.

~~(3)~~Debt ~~Of the Operating Partnership’s secured notes, there are no scheduled~~ maturities ~~in 2009 or 2010. All of the notes mature between 2011 and 2019.~~

-The 32aggregate -maturities of the Company’s indebtedness are as follows:


Remainder of 2015	$	1,467
2016		3,071
2017		153,296
2018		3,502
2019		179,668
Thereafter		550,000

	$	891,004

Debt issuances and retirements

There were no issuances or retirements of indebtedness for the three or six months ended June 30, 2015. In May 2014, the Company prepaid $120,000 of secured mortgage indebtedness. In conjunction with the prepayment, the Company recognized an extinguishment loss of $4,287 for the three and six months ended June 30, 2014 related to prepayment premiums and the write-off of unamortized deferred loan costs.

Unsecured lines of credit

At June 30, 2015, the Company had a $300,000 syndicated unsecured revolving line of credit (the “Syndicated Line”) that was amended in January 2015. At June 30, 2015, the Syndicated Line had a stated interest rate of LIBOR plus 1.05%, was provided by a syndicate of nine financial institutions and required the payment of annual facility fees of 0.20% of the aggregate loan commitments. The Syndicated Line matures in 2019 and may be extended for an additional year at the Company’s option, subject to the satisfaction of certain conditions. 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 components of the interest rate and the facility fee rate that are based on the Company’s credit ratings range from 0.875% to 1.55% and from 0.125% to 0.30%, respectively. The Syndicated Line also includes a competitive bid option for borrowings up to 50% of the loan commitments, which may result in interest rates for such borrowings below the stated interest rates for the Syndicated Line, depending on market conditions. The credit agreement for the Syndicated Line contains customary restrictions, representations, covenants and events of default, including minimum fixed charge coverage, minimum unsecured interest 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, non-multifamily properties, debt or equity securities, notes receivable and unconsolidated affiliates. At June 30, 2015, letters of credit to third parties totaling $122 had been issued for the account of the Company under this facility.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~Debt~~Additionally, ~~Maturities~~at June 30, 2015, the Company had a $30,000 unsecured line of credit (the “Cash Management Line”) that was also amended in January 2015. The Cash Management Line matures in 2019, includes a one-year extension option, and carries pricing and terms, including financial covenants, substantially consistent with the Syndicated Line discussed above.

~~The~~In ~~aggregate~~connection ~~maturities~~with the refinancing of the ~~Operating~~Syndicated ~~Partnership’s~~Line, ~~indebtedness~~the ~~are~~Cash asManagement ~~follows:~~Line and the Term Loan (discussed below), the Company incurred fees and expenses of $4,008 and recognized an extinguishment loss of $197 related to the write-off of a portion of unamortized deferred loan costs for the six months ended June 30, 2015.

Remainder of 2009	$	770
2010		132,032	(1)
2011		59,637
2012		104,381
2013		206,515
Thereafter		583,455
	$	1,086,790

Unsecured term loan

At June 30, 2015, the Company had outstanding a $300,000 unsecured bank term loan facility (1“Term Loan”) ~~Includes~~that ~~outstanding~~was ~~balances~~amended in January 2015. The Term Loan carries a stated interest rate of LIBOR plus 1.15%, was provided by a syndicate of eight financial institutions and matures in 2020. The Term Loan provides for the stated interest rate to be adjusted up or down based on ~~lines~~changes in the credit ratings on the Company’s senior unsecured debt. The component of the interest rate based on the Company’s credit ratings ~~totaling~~ranges ~~$29~~from 0.90% to 1.85%. The Term Loan carries other terms,~~913~~ including financial covenants, substantially consistent with the Syndicated Line discussed above.

~~Debt~~As ~~Issuances~~discussed in note 8, the Company entered into interest rate swap arrangements to serve as cash flow hedges of amounts outstanding under the Term Loan. The interest rate swap arrangements effectively fix the LIBOR component of the interest rate paid under the Term Loan at a blended rate of approximately 1.54%. As a result, the effective blended interest rate on the Term Loan is 2.69% (subject to adjustment based on subsequent changes in the Company’s credit ratings) through January 2018, the termination date of the interest rate swaps.

InDebt ~~January~~compliance 2009, the Operating Partnership closed five, cross-collateralized secured mortgage loans. The mortgage loans have an aggregate principal amount of approximately $202,162, require interest-only payments for the first two years and ~~then~~other principal and interest payments for the remaining term of the loans based on a 30-year amortization schedule. The loans bear interest at a fixed rate of 5.99% and mature in 2019. In April 2009, certain documents related to these loans were modified to facilitate the securitization of such loans under a Federal Home Loan Mortgage Corporation multifamily loan securitization program. Such amendments did not change the basic economic terms of the loans; however, in connection with such amendments the Operating Partnership received modification fees in an aggregate amount of approximately $2,022 plus reimbursement of certain costs incurred in connection with such modifications. The modification fees received will be amortized over the remaining term of the loans.

InThe ~~March~~Company’s ~~2009~~Syndicated Line, ~~the~~Cash ~~Operating~~Management ~~Partnership~~Line, ~~refinanced~~Term aLoan ~~maturing~~and ~~$33~~senior unsecured notes contain customary restrictions,~~954~~ ~~mortgage~~representations, ~~loan~~covenants ~~using~~and events of default and require the ~~proceeds~~Company to meet certain financial covenants. Debt service and fixed charge coverage covenants require the Company to maintain coverages of a ~~new~~minimum ~~$34~~of 1.5 to 1.0,~~800~~ ~~mortgage~~as ~~loan~~defined in applicable debt arrangements. ~~The~~Additionally, ~~new~~the ~~mortgage~~Company’s ~~loan~~ratio ~~requires~~of ~~monthly~~unencumbered ~~interest~~adjusted property-~~only payments~~level ~~for~~net ~~the~~operating ~~first~~income ~~two~~to ~~years~~unsecured ~~and~~interest expense ~~then~~may ~~requires~~not ~~monthly~~be ~~principal~~less ~~and~~than ~~interest~~2.0 ~~payments~~to ~~for~~1.0, as defined in the ~~remaining~~applicable ~~term~~debt ofarrangements. Leverage covenants generally require the ~~loan~~Company ~~based~~to onmaintain acalculated ~~30-year~~covenants ~~amortization~~above/below ~~schedule~~minimum/maximum thresholds. The ~~loan~~primary ~~bears~~leverage ~~interest~~ratios atunder these aarrangements ~~fixed~~include ~~rate~~total debt to total asset value (maximum of ~~5.61~~60%), total secured debt to total asset value (maximum of 40%) and ~~matures~~unencumbered assets to unsecured debt (minimum of 1.5 to 1.0), as defined in ~~2019~~the applicable debt arrangements. The Company believes it met these financial covenants at June 30, 2015.

In April 2009, the Operating Partnership closed a $51,555 mortgage loan. The mortgage loan requires interest-only payments for the first two years and then principal and interest payments for the remaining term of the loan based on a 30-year amortization schedule. The loan bears interest at a fixed rate of 5.84% through its initial maturity in 2018, at which time the loan is automatically extended for one year to 2019 and bears a variable interest rate based on a 250 basis point spread over the Freddie Mac Reference Bills® Securities rate.

Debt Retirements

In February 2009, the Operating Partnership made a public tender offer for any and all of its $185,000, 7.7% senior unsecured notes due December 2010 and its $100,000, 5.125% senior unsecured notes due October 2011. Upon expiration of the tender offer, the Operating Partnership repurchased $84,495 of its 7.7% senior notes due December 2010 at par and $90,363 face amount of its 5.125% senior notes due October 2011 at $85,845. This note repurchase resulted in a net gain on extinguishment of $3,445.

In March 2009, the Operating Partnership fully redeemed its $92,275 weekly remarketed, variable rate taxable mortgage bonds. The Operating Partnership also settled and terminated a related interest rate swap arrangement (see note 6) in conjunction with the debt extinguishment. The bond retirement and swap termination resulted in a net extinguishment loss of $2,626.

Unsecured Lines of Credit

At June 30, 2009, the Operating Partnership 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 at the Operating Partnership’s option through April 2011. The Syndicated Line currently has a stated interest rate of LIBOR plus 0.80% or the prime rate and was provided by a syndicate of 16 banks led by Wells Fargo Bank, N.A. and JPMorgan Chase Bank, N.A. Additionally, the Syndicated Line requires the payment of annual facility fees currently equal to 0.175% 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 Operating Partnership’s senior unsecured debt (see below).

- 33 -

POST APARTMENT HOMES, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

The rates under the Syndicated Line are based on the higher of the Operating Partnership’s unsecured debt ratings in instances where the Operating Partnership 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 Operating Partnership can invest in specific categories of assets, such as improved land, properties under construction, condominium properties, non-multifamily properties, debt or equity securities, notes receivable and unconsolidated affiliates. At June 30, 2009, the Operating Partnership had issued letters of credit to third parties totaling $3,654 under this facility.

In March 2009, Standard & Poor’s rating service lowered the Operating Partnership’s corporate credit rating to BBB- from BBB and at the same time revised its outlook to stable. This change resulted in the interest rate spread increase to 80.0 basis points over LIBOR from 57.5 basis points on the Operating Partnership’s revolving lines of credit and the facility fee increased to 17.5 basis points from 15.0 basis points.

Additionally, at June 30, 2009, the Operating Partnership had a $30,000 unsecured line of credit with Wells Fargo 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.

Debt Compliance

The Operating Partnership’s Syndicated Line and senior unsecured notes contain customary restrictions, representations and events of default and require the Operating Partnership to meet certain financial covenants. Debt service and fixed charge coverage covenants require the Operating Partnership to maintain coverages of a minimum of 1.5 to 1.0, as defined in applicable debt arrangements. Leverage covenants generally require the Operating Partnership to maintain calculated covenants above/below minimum/maximum thresholds. The primary leverage ratios under these arrangements include total debt to total asset value (maximum of 60%), total secured debt to total asset value (maximum of 35% or 40%, respectively) and unencumbered assets to unsecured debt (minimum of 1.5 to 1.0 or 1.6 to 1.0, respectively), as defined in the applicable debt arrangements. Management believes the Operating Partnership was in compliance with these financial covenants at June 30, 2009.

5.	EQUITY AND NONCONTROLLING INTERESTS

~~Computations of Earnings (Loss) Per~~ Common ~~Unit~~stock

~~For~~In December 2014, the Company’s ~~three~~board of directors adopted a stock and ~~six~~unsecured ~~months~~note ~~ended~~repurchase ~~June 30,~~program ~~2009~~under which the Company and ~~2008,~~the ~~a reconciliation~~Operating Partnership may repurchase up to $200,000 of ~~the~~common ~~numerator~~and preferred stock and ~~denominator~~unsecured ~~used~~notes through December 2017. There were no shares of common stock repurchased in the ~~computation~~three ofor ~~basic~~six ~~and~~months ~~diluted~~ended ~~loss~~June 30, ~~from~~2015 ~~continuing~~or ~~operations~~in ~~per~~2014 ~~common~~under ~~unit~~this isprogram asor ~~follows:~~a previous stock repurchase program.

		Three months endedJune 30,				Six months endedJune 30,
		2009		2008		2009		2008
Loss from continuing operations attributable tocommon unitholders (numerator):
Loss from continuing operations		$	(83,963)	$	(28,801)	$	(84,324)	$	(30,757)
Noncontrolling interests - consolidated real estate entities			8,150		293		8,226		(173)
Preferred unit distributions			(1,910)		(1,910)		(3,819)		(3,819)
Unvested restricted stock (allocation of earnings)			202		56		177		48
Loss from continuing operations attributable tocommon unitholders		$	(77,521)	$	(30,362)	$	(79,740)	$	(34,701)
Common units (denominator):
Weighted average units outstanding - basic			44,337		44,305		44,335		44,287
Dilutive units from stock options (1)			-		-		-		-
Weighted average units outstanding - diluted (1)			44,337		44,305		44,335		44,287
(1)	The potential dilution from the Company’s outstanding stock options to purchase 0 and 268 shares, for the three months ended June 30, 2009 and 2008, respectively, and 0 and 322 shares, for the six months ended June 30, 2009 and 2008, respectively, were antidilutive to the loss from continuing operations per unit calculation. As such, these amounts were excluded from weighted average units for the periods.

Noncontrolling interests

-In 34accordance -with ASC Topic 810, the Company and the Operating Partnership determined that the noncontrolling interests related to the common units of the Operating Partnership, held by persons other than the Company, met the criterion to be classified and accounted for as “temporary” equity (reflected outside of total equity as “Redeemable Common Units”). At June 30, 2015, and December 31, 2014, the aggregate redemption value of the noncontrolling interests in the Operating Partnership was $6,555 and $7,086, respectively, representing their fair value at the respective dates. In prior periods, the Company had noncontrolling interests in consolidated real estate entities that met the criterion to be classified and accounted for as a component of permanent equity.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~Stock~~A ~~options~~roll-forward ~~to purchase 2,527 shares~~ of ~~common~~activity ~~stock~~relating ~~for~~to the ~~three~~Company’s ~~and~~Redeemable ~~six~~Common ~~months~~Units ~~ended June 30, 2009 and 2,414 shares of common stock~~ for the ~~three and~~ six months ended June 30, ~~2008~~2015 ~~were~~and ~~excluded~~2014 ~~from~~was ~~the computation of diluted earnings (loss) per common unit~~ as ~~these~~follows: ~~stock options were antidilutive.~~

Noncontrolling Interests


	Six months ended June 30,
	2015			2014
Redeemable common units, beginning of period	$	7,086		$	6,121
Comprehensive income		81			147
Adjustment for ownership interest of redeemable common units		—			7
Stock-based compensation		6			5
Distributions to common unitholders		(101	)		(102	)
Adjustment to redemption value of redeemable common units		(517	)		1,057

Redeemable common units, end of period	$	6,555		$	7,235

~~The Operating Partnership adopted SFAS No~~6. ~~160~~ onCOMPANY ~~January 1,~~EARNINGS ~~2009.~~PER SFAS No. 160, in conjunction with other existing GAAP, established criterion used to evaluate the characteristics of noncontrolling interests in consolidated entities to determine whether noncontrolling interests are classified and accounted for as permanent equity or “temporary” equity (presented between liabilities and permanent equity on the consolidated balance sheet). In conjunction with the issuance of SFAS No. 160, EITF Topic No. D-98, “Classification and Measurement of Redeemable Securities,” (“EITF D-98”) was revised to clarify the treatment of noncontrolling interests with redemption provisions. If a noncontrolling interest has a redemption feature that permits the issuer to settle in either cash or common shares at the option of the issuer but the equity settlement feature is deemed to be outside of the control of the issuer, then those noncontrolling interests are classified as “temporary” equity. The Operating Partnership currently has two types of noncontrolling interests, (1) noncontrolling interests related to its non-Company common unitholders and (2) noncontrolling interests related to its consolidated real estate entities. The Operating Partnership determined that the noncontrolling interests related to its non-Company common unitholders met the criterion to be classified and accounted for as “temporary” equity (reflected outside of total equity as “Redeemable Common Units”). The Operating Partnership further determined that the noncontrolling interests in its consolidated real estate entities met the criterion to be classified and accounted for as a component of permanent equity. SHARE

For the three and six months ended June 30, ~~2009~~2015 and ~~2008~~2014, ~~income~~a ~~from~~reconciliation ~~continuing~~of ~~operations, income~~the ~~from~~numerator ~~discontinued operations~~ and ~~net~~denominator ~~income~~used ~~available~~in to the ~~Operating~~computation ~~Partnership were comprised~~ of basic ~~the~~and ~~following~~diluted ~~amounts,~~ net ofincome ~~its~~per ~~noncontrolling~~share ~~interests~~was as follows:

	Three months endedJune 30,						~~Six months endedJune 30,~~		Six months endedJune 30,
	2009			2008			2009			2008
	2015				2014				2015			2014
Loss from continuing operations	$	(75,813)		$	(28,508)		$	(76,098)		$	(30,930)
Net income available to common shareholders (numerator):
Income from discontinued operations		26,768			3,232			29,377			8,347
Net income	$	19,651			$	47,991			$	39,636		$	62,244
Net income available to the Operating Partnership	$	(49,045)		$	(25,276)		$	(46,721)		$	(22,583)
Noncontrolling interests - consolidated real estate entities		—				(154	)			—			(138	)
Noncontrolling interests - Operating Partnership		(41	)			(118	)			(83	)		(151	)
Preferred stock dividends		(922	)			(922	)			(1,844	)		(1,844	)
Unvested restricted stock (allocation of earnings)		(46	)			(110	)			(86	)		(132	)
Net income available to common shareholders, adjusted	$	18,642			$	46,687			$	37,623		$	59,979
Common shares (denominator):
Weighted average shares outstanding - basic		54,455				54,223				54,452			54,199
Dilutive shares from stock options		14				112				15			115
Weighted average shares outstanding - diluted		54,469				54,335				54,467			54,314
Per-share amount:
Basic	$	0.34			$	0.86			$	0.69		$	1.11
Diluted	$	0.34			$	0.86			$	0.69		$	1.10

6.Stock ~~FAIR~~options ~~VALUE~~to ~~MEASURES~~purchase ~~AND~~32 ~~OTHER~~and ~~FINANCIAL~~62 ~~INSTRUMENTS~~shares of common stock for the three months and 28 and 63 shares of common stock for the six months ended June 30, 2015 and 2014, respectively, were excluded from the computation of diluted income from continuing operations per common share as these stock options were antidilutive.

~~The~~18 Operating Partnership applies SFAS No. 157, “Fair Value Measurements,” in relation to the valuation of real estate assets recorded at fair value, to its impairment valuation analysis of real estate assets (see note 8) and to its disclosure of the fair value of financial instruments, principally indebtedness (see note 4). The disclosure of estimated fair value of real estate assets and long-term indebtedness was determined by management using available market information and appropriate valuation methodologies available to management at June 30, 2009. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, there can be no assurance that the estimates presented below, using Level 2 and 3 inputs, are indicative of the amounts the Operating Partnership could realize on disposition of the real estate assets or indebtedness. The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated fair value amounts.

At June 30, 2009, certain parcels of land held for sale were carried at their estimated fair value of $14,850 on the Operating Partnership’s consolidated balance sheet, using Level 3 inputs consisting primarily of comparable appraisals and land sale activity. There was no change in the estimated fair value of these land parcels measured under SFAS No. 157 for the three and six months ended June 30, 2009. In the three and six months ended June 30, 2009, the Operating Partnership recognized impairment charges (see notes 3 and 8) to write-off a parcel of land held for future investment to its estimated fair value of zero and to write-down its investment in an unconsolidated entity constructing condominiums to its estimated fair value, resulting in a credit investment of $39,820. The estimated fair value of the land and condominiums was determined using Level 3 inputs, consisting primarily of independent appraisals and discounted cash flow models.

At June 30, 2009, the estimated fair value of fixed rate debt was approximately $1,039,672 (carrying value of $1,048,724) and the estimated fair value of the Operating Partnership’s variable rate debt, including the Operating Partnership’s lines of credit, was approximately $36,329 (carrying value of $38,066).

- 35 -

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~In March 2009, the Operating Partnership early terminated its only interest rate swap through a terminating payment of $1,554 to the swap counter-party~~7. ~~The~~OPERATING ~~swap~~PARTNERSHIP ~~was~~EARNINGS ~~terminated~~PER in conjunction with the early extinguishment of the indebtedness being hedged by the swap. In 2008, this interest rate swap became ineffective under generally accepted accounting principles. As a result, the gross change in the market value of the interest rate swap arrangement from January 1, 2009 through the swap termination date in March 2009 of $874 was recognized in other income in the consolidated statement of operations. Additionally, the Operating Partnership was required to amortize into expense the cumulative unrecognized loss on the interest rate swap over the remaining life of the swap. Total amortization expense related to this swap was $658 from January 1, 2009 through the swap termination date in March 2009. The remaining unamortized loss on the swap of $1,161 was recognized as a loss on the termination of the swap and was included in the net gain (loss) from early debt extinguishment on the consolidated statement of operations for the six months ended June 30, 2009. UNIT

AFor ~~summary of comprehensive income for~~ the three and six months ended June 30, ~~2009~~2015 and ~~2008~~2014, a reconciliation of the numerator and denominator used in the computation of basic and diluted net income per unit was as follows:

	Three months endedJune 30,		~~Three months endedJune 30,~~					Six months endedJune 30,
			2009			2008		2009			2008
	2015				2014			2015				2014
Net loss			$	(57,195)		$	(25,569)	$	(54,947)		$	(22,410)
Net income available to common unitholders (numerator):
Change in derivatives (1)				-			1,780		1,829			597
Net income	$	19,651			$	47,991		$	39,636			$	62,244
Total comprehensive income (loss)				(57,195)			(23,789)		(53,118)			(21,813)
Noncontrolling interests - consolidated real estate entities		—				(154	)		—				(138	)
Less:
Preferred unit distributions		(922	)			(922	)		(1,844	)			(1,844	)
Comprehensive income attributable to noncontrolling interests				8,150			293		8,226			(173)
Unvested restricted stock (allocation of earnings)		(46	)			(110	)		(86	)			(132	)
Total Operating Partnership comprehensive income			$	(49,045)		$	(23,496)	$	(44,892)		$	(21,986)
Net income available to common unitholders, adjusted	$	18,683			$	46,805		$	37,706			$	60,130
(1)	For the six months ended June 30, 2009, the change in derivatives balance includes an adjustment of $658 for amortized swap costs as well as an adjustment for $1,161 to write-off the remaining unamortized balance in equity, both included in net income. For the three and six months ended June 30, 2008, the change in derivatives balance includes an adjustment of $281 and $562 for amortized swap costs included in net income.
Common units (denominator):
Weighted average units outstanding - basic		54,576				54,358			54,573				54,334
Dilutive units from stock options		14				112			15				115
Weighted average units outstanding - diluted		54,590				54,470			54,588				54,449
Per-unit amount:
Basic	$	0.34			$	0.86		$	0.69			$	1.11
Diluted	$	0.34			$	0.86		$	0.69			$	1.10

7.Stock ~~SEGMENT~~options ~~INFORMATION~~to purchase 32 and 62 shares of common stock for the three months and 28 and 63 shares of common stock for the six months ended June 30, 2015 and 2014, respectively, were excluded from the computation of diluted income from continuing operations per common unit as these stock options were antidilutive.

~~Segment Description~~8. FAIR VALUE MEASURES AND OTHER FINANCIAL INSTRUMENTS

InFrom ~~accordance~~time ~~with~~to ~~SFAS~~time, Nothe Company records certain assets and liabilities at fair value. ~~131,~~ ~~“Disclosure~~Real ~~About~~estate assets may be stated at fair value if they become impaired in a given period and may be stated at fair value if they are held for sale and the ~~Segments~~fair value of ansuch ~~Enterprise~~assets ~~and~~is ~~Related~~below ~~Information~~historical cost. Additionally,” the ~~Operating~~Company ~~Partnership~~records ~~presents~~derivative ~~segment~~financial ~~information~~instruments ~~based~~at onfair ~~the~~value. ~~way~~The ~~that~~Company also ~~management~~uses ~~organizes~~fair ~~the~~value ~~segments~~metrics ~~within~~to evaluate the ~~enterprise~~carrying ~~for~~values ~~making~~of ~~operating~~its ~~decisions~~real estate assets and ~~assessing~~for ~~performance~~the disclosure of certain financial instruments. ~~The~~Fair ~~segment~~value measurements were determined by management using available market information and appropriate valuation methodologies available to management at June 30, 2015. Considerable judgment is ~~prepared~~necessary onto interpret market data and estimate fair value. Accordingly, there can be no assurance that the ~~same~~estimates ~~basis~~discussed asherein, using Level 2 and 3 inputs, are indicative of the ~~internally~~amounts ~~reported~~the ~~information~~Company ~~used~~could byrealize on disposition of the ~~Operating~~real ~~Partnership’s~~estate ~~chief~~assets ~~operating~~or ~~decision~~other ~~makers~~financial toinstruments. ~~manage~~The use of different market assumptions and/or estimation methodologies could have a material effect on the estimated ~~business~~fair value amounts.

~~The Operating~~Real ~~Partnership’s~~estate chief operating decision makers focus on the Operating Partnership’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, 2008. The segment information for the three and six months ended June 30, 2008 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 June 30, 2008 to discontinued operations under SFAS No. 144 (see note 2).~~

•The ~~Fully~~Company ~~stabilized~~periodically ~~communities~~reviews –its ~~those~~real ~~apartment~~estate ~~communities~~assets, ~~which~~including ~~have~~operating ~~been~~assets, ~~stabilized~~construction ~~(the~~in ~~earlier~~progress ofand ~~the~~land ~~point~~held atfor ~~which~~future ainvestment, ~~property~~for impairment ~~reaches~~purposes ~~95%~~using ~~occupancy~~Level or3 ~~one~~inputs, ~~year~~primarily ~~after~~comparable ~~completion~~sales ofand ~~construction)~~market ~~for~~data, ~~both~~independent valuations and discounted cash flow models. For the ~~current~~three and ~~prior~~six ~~year~~months ended June 30, 2015 and 2014, the Company did not recognize any impairment charges related to its real estate assets.

•Derivatives ~~Communities~~and ~~stabilized~~other ~~during~~financial ~~2008~~instruments ~~– communities which reached stabilized occupancy in the prior year.~~

-The 36Company manages its exposure to interest rate changes through the use of derivative financial instruments, primarily interest rate swap arrangements. At June 30, 2015, the Company had outstanding three interest rate swap arrangements with substantially similar terms and conditions. These arrangements have an aggregate notional amount of $230,000 and require the Company to pay a blended fixed rate of approximately 1.55% (with the counterparties paying the Company the floating one-month LIBOR rate). Additionally, the Company had outstanding a fourth interest rate swap arrangement with a notional amount of $70,000 and it requires the Company to pay a fixed rate of approximately 1.50% (with the counterparty paying the

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

• Company ~~Development~~the floating one-month LIBOR rate) (together, ~~rehabilitation~~the ~~and~~“Interest ~~lease-up~~Rate ~~communities~~Swaps”). –The ~~those~~Interest ~~apartment~~Rate ~~communities~~Swaps serve as cash flow hedges of amounts outstanding under ~~development,~~the ~~rehabilitation~~Company’s variable rate Term Loan (see note 4) and ~~lease-up~~provide ~~during~~for an effective blended fixed rate for the ~~period~~corresponding amount of Term Loan borrowings of approximately 2.69% (subject to an adjustment based on subsequent changes in the Company’s credit ratings) at June 30, 2015. The Interest Rate Swaps terminate in January 2018.

•The ~~Condominium~~Interest ~~conversion~~Rate Swaps are measured and ~~other~~accounted ~~communities~~for –at ~~those~~fair ~~portions~~value on a recurring basis. The Interest Rate Swaps outstanding at June 30, 2015 and December 31, 2014 were valued as net liabilities of ~~existing~~$4,480 ~~apartment~~and ~~communities~~$3,685, ~~being~~respectively, ~~converted~~primarily ~~into~~using ~~condominiums~~level 2 inputs, as substantially all of the fair value was determined using widely accepted discounted cash flow valuation techniques along with observable market-based inputs for similar types of arrangements. The Company reflects both the respective counterparty’s nonperformance risks and ~~other~~its ~~communities~~own nonperformance ~~converted~~risks in its fair value measurements using unobservable inputs. However, the impact of such risks was not considered material to ~~joint~~the ~~venture~~overall ~~ownership~~fair ~~that~~value measurements of the derivatives. These liabilities are ~~reflected~~included in ~~continuing~~accounts payable, ~~operations~~accrued expenses and other liabilities on the consolidated balance sheets. Under ASC Topic 815, a corresponding amount is included in accumulated other comprehensive income (loss), an equity account, until the hedged transactions are recognized in earnings. The following table summarizes the effect of these Interest Rate Swaps (designated as cash flow hedges) on the Company’s consolidated statements of operations and comprehensive income for the three and six months ended June 30, 2015 and 2014:

Segment Performance Measure


	Three months ended June 30,						Six months ended June 30,
Interest Rate Swap / Cash Flow Hedging Instruments	2015			2014			2015			2014
Loss recognized in other comprehensive income	$	(273	)	$	(2,553	)	$	(2,844	)	$	(3,563	)

Loss reclassified from accumulated other comprehensive income (loss) into interest expense	$	(1,026	)	$	(1,046	)	$	(2,049	)	$	(2,076	)

~~Management~~The ~~uses~~amounts ~~contribution~~reported toin ~~consolidated~~accumulated ~~property~~other ~~net~~comprehensive ~~operating~~ income ~~(“NOI”)~~ as ~~the performance measure for its operating segments. The Operating Partnership uses net operating income, including net operating income~~ of ~~stabilized communities~~June 30, as2015 anwill ~~operating~~be ~~measure.~~reclassified ~~Net~~to ~~operating~~interest expense ~~income is defined~~ as ~~rental~~interest ~~and~~payments ~~other~~are ~~property~~made ~~revenue~~under from real estate operations less total property and maintenance expenses from real estate operations (excluding depreciation and amortization). The Operating Partnership 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~~hedged ~~operations, rather than factoring in depreciation and amortization, financing costs and general and administrative expenses generally incurred at the corporate level~~indebtedness. ~~This~~Over ~~measure is particularly useful, in~~ the ~~opinion~~next ~~of the Operating Partnership~~year, ~~in evaluating~~ the ~~performance~~Company ofestimates ~~operating segment groupings and individual properties. Additionally, the Operating Partnership believes~~ that ~~net operating income~~$3,456 aswill ~~defined,~~be isreclassified afrom ~~widely~~accumulated ~~accepted measure~~comprehensive of comparative operating performance in the real estate investment community. The Operating Partnership believes that the line on the Operating Partnership’s consolidated statement of operations entitled “net income” ~~is the most directly comparable GAAP measure~~ to ~~net~~interest ~~operating income~~expense.

As part of the Company’s on-going 37procedures, the Company monitors the credit worthiness of its financial institution counterparties and its exposure to any single entity, which it believes minimizes credit risk concentration. The Company believes the likelihood of realized losses from counterparty non-performance is remote. The Interest Rate Swaps are cross defaulted with the Company’s Term Loan and Syndicated Line (see note 4) and contain certain provisions consistent with these types of arrangements. If the Company was required to terminate the Interest Rate Swaps and settle the obligations thereunder as of June 30, 2015, the termination payment by the Company would have been approximately $4,484.

Other financial instruments

Cash equivalents, rents and accounts receivables, accounts payable, accrued expenses and other liabilities are carried at amounts which reasonably approximate their fair values because of the short-term nature of these instruments. At June 30, 2015, the fair value of fixed rate debt was approximately $604,328 (carrying value of $591,004) and the fair value of variable rate debt, including the Company’s lines of credit, was approximately $300,000 (carrying value of $300,000). At December 31, 2014, the fair value of fixed rate debt was approximately $620,641 (carrying value of $592,459) and the fair value of variable rate debt, including the Company’s lines of credit, was approximately $304,983 (carrying value of $300,000). Long-term indebtedness was valued using Level 2 inputs, primarily market prices of comparable debt instruments.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~Segment~~9. ~~Information~~SEGMENT INFORMATION

~~The~~Segment ~~following~~description table reflects each segment’s contribution to consolidated revenues and NOI together with a reconciliation of segment contribution to property NOI to consolidated net income for the three and six months ended June 30, 2009 and 2008. Additionally, substantially all of the Operating Partnership’s assets relate to the Operating Partnership’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 endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Revenues
Fully stabilized communities	$	57,292	$	59,297	$	114,985	$	117,907
Communities stabilized during 2008		2,698		2,384		5,352		4,504
Development, rehabilitation and lease-up communities		3,495		2,160		6,240		4,334
Condominium conversion and other communities		38		188		107		389
Other property segments		5,318		6,287		11,109		12,655
Other		277		235		503		474
Consolidated revenues	$	69,118	$	70,551	$	138,296	$	140,263
Contribution to Property Net Operating Income
Fully stabilized communities	$	34,590	$	34,519	$	69,214	$	69,139
Communities stabilized during 2008		1,531		1,191		2,967		1,998
Development, rehabilitation and lease-up communities		668		469		1,232		1,393
Condominium conversion and other communities		24		116		68		237
Other property segments, including corporate management expenses		(630)		(1,174)		(1,044)		(2,569)
Consolidated property net operating income		36,183		35,121		72,437		70,198
Interest income		23		61		138		271
Other revenues		277		235		503		474
Depreciation		(18,009)		(15,213)		(35,601)		(30,310)
Interest expense		(12,241)		(11,004)		(26,419)		(22,035)
Amortization of deferred financing costs		(682)		(859)		(1,616)		(1,710)
General and administrative		(3,964)		(4,351)		(8,373)		(9,485)
Investment and development		(793)		(1,274)		(1,790)		(2,664)
Other investment costs		(646)		(244)		(1,299)		(499)
Strategic review costs		-		(2,091)		-		(8,161)
Impairment, severance and other charges		(9,658)		(29,300)		(9,658)		(29,300)
Gains (losses) on sales of real estate assets, net		232		(368)		(28)		1,751
Equity in income (loss) of unconsolidated real estate entities		(74,656)		420		(74,546)		821
Other income (expense), net		50		66		1,109		(108)
Net gain (loss) on early extinguishment of indebtedness		(79)		-		819		-
Loss from continuing operations		(83,963)		(28,801)		(84,324)		(30,757)
Income from discontinued operations		26,768		3,232		29,377		8,347
Net loss	$	(57,195)	$	(25,569)	$	(54,947)	$	(22,410)

In accordance with ASC Topic 280, “Segment Reporting,” 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 38chief -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 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 property segments” 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, 2014.

•

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 2015 and 2014.

•

Newly stabilized communities – those apartment communities which reached stabilized occupancy in 2014.

•

Lease-up communities – those apartment communities that are under development and lease-up but were not stabilized by the beginning of 2015, including communities that stabilized in 2015.

•

Held for sale and sold communities – those apartment and mixed-use communities classified as held for sale or sold in 2015 and those communities sold in 2014 (see note 2).

Segment performance measure

Management uses contribution to consolidated property net operating income (“NOI”) as the performance measure for its operating segments. The Company uses NOI, including NOI of stabilized communities, as an operating measure. NOI 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 NOI 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 NOI, 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 (loss)” is the most directly comparable GAAP measure to NOI.

Segment information

The following table reflects each segment’s contribution to consolidated revenues and NOI together with a reconciliation of segment contribution to property NOI to consolidated net income for the three and six months ended June 30, 2015 and 2014. 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.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

8. IMPAIRMENT, SEVERANCE AND OTHER CHARGES


	Three months ended						Six months ended
	June 30,						June 30,
	2015			2014			2015			2014
Revenues
Fully stabilized communities	$	84,401		$	82,109		$	167,098		$	162,899
Newly stabilized communities		4,260			2,419			8,419			4,277
Lease-up communities		1,096			213			2,118			233
Held for sale and sold communities		—			4,820			—			10,689
Other property segments		5,400			5,242			10,640			9,998
Other		274			223			587			442

Consolidated revenues	$	95,431		$	95,026		$	188,862		$	188,538

Contribution to Property Net Operating Income
Fully stabilized communities	$	50,981		$	49,547		$	101,312		$	99,293
Newly stabilized communities		2,683			1,211			5,290			1,985
Lease-up communities		376			(168	)		902			(268	)
Held for sale and sold communities		—			2,574			—			5,346
Other property segments, including corporate management expenses		(395	)		(156	)		(864	)		(651	)

Consolidated property net operating income		53,645			53,008			106,640			105,705

Interest income		43			4			124			16
Other revenues		274			223			587			442
Depreciation		(21,418	)		(20,829	)		(42,675	)		(42,596	)
Interest expense		(7,753	)		(10,433	)		(15,846	)		(21,677	)
Amortization of deferred financing costs		(433	)		(620	)		(882	)		(1,265	)
General and administrative		(4,353	)		(3,966	)		(9,367	)		(8,094	)
Investment and development		(275	)		(794	)		(510	)		(1,605	)
Other investment costs		(154	)		(210	)		(288	)		(483	)
Other expenses		—			(502	)		—			(1,409	)
Equity in income of unconsolidated real estate entities, net		568			501			965			986
Gains on sales of real estate assets, net		(298	)		36,092			1,475			36,902
Other income (expense), net		(195	)		(196	)		(390	)		(391	)
Net loss on extinguishment of indebtedness		—			(4,287	)		(197	)		(4,287	)

Net income	$	19,651		$	47,991		$	39,636		$	62,244

~~For~~10. ~~the three and six months ended June 30, 2009, the Operating Partnership recorded aggregate impairment charges of $76,317 (net of $8,074 of noncontrolling interests) to write~~STOCK-~~down~~BASED ~~the~~COMPENSATION ~~carrying value of its investment in an unconsolidated condominium development and a parcel of adjacent land. These impairment charges are more fully discussed in note 3.~~ PLANS

InAs ~~prior years,~~ the ~~Operating~~primary ~~Partnership~~operating ~~recorded~~subsidiary ~~severance~~of ~~charges associated with~~ the ~~departure~~Company, ~~of certain executive officers of~~ the Operating Partnership. ~~Under~~participates ~~certain~~in ofand ~~these~~bears ~~arrangements,~~ the ~~Operating~~compensation ~~Partnership~~expenses ~~is required to~~associated ~~make~~with ~~certain~~the ~~payments~~Company’s ~~and~~stock-based ~~provide~~compensation ~~specified benefits through 2013 and 2016~~plans. The ~~following~~information ~~table~~discussed ~~summarizes~~below ~~the activity~~ relating to ~~aggregate~~the ~~net~~Company’s ~~severance~~stock-based ~~charges~~compensation ~~for~~plans ~~such~~is ~~executive~~also ~~officers~~applicable for the ~~six~~Operating ~~months~~Partnership. ~~ended June 30, 2009 and 2008:~~

	Six months endedJune 30,
	2009		2008
Accrued severance charges, beginning of period	$	9,405	$	11,215
Severance charges		-		353
Payments for period		(1,184)		(1,633)
Interest accretion		279		366
Accrued severance charges, end of period	$	8,500	$	10,301

Incentive stock plans

~~The~~Incentive ~~Operating~~stock ~~Partnership~~awards ~~recorded~~are ~~impairment~~granted under ~~charges~~the ofCompany’s ~~approximately~~2003 ~~$28,947~~Incentive inStock ~~the~~Plan, ~~three~~as amended and ~~six~~ ~~months~~restated ~~ended~~in ~~June 30,~~October 2008. ~~The~~(the ~~impairment~~“2003 ~~charges~~Stock ~~related~~Plan”). toUnder the ~~substantial~~2003 ~~cessation~~Stock ofPlan, ~~current~~an ~~development~~aggregate ~~activities~~of ~~associated~~3,469 ~~with~~shares ~~four~~of ~~land~~common ~~parcels~~stock inwere ~~pre-development~~reserved ~~which~~for ~~were~~issuance. ~~written~~Of ~~down~~this toamount, ~~their~~stock grants ~~estimated~~count ~~fair~~against ~~market~~the ~~values,~~total ~~as well~~shares asavailable under the ~~write-off~~2003 ofStock ~~capitalized~~Plan ~~pursuit~~as ~~costs~~2.7 ~~associated~~shares ~~with~~for ~~certain~~every ~~abandoned~~one ~~projects.~~share ~~Additionally~~issued, while options (and stock appreciation rights (“SAR”) settled in shares) count against the ~~second~~total ~~quarter~~shares ofavailable ~~2008,~~as ~~the~~one share ~~Operating~~for ~~Partnership~~every ~~recorded~~one ~~severance~~share ~~charges~~issued ofon ~~approximately~~the ~~$353~~exercise ~~related~~of toan aoption ~~management~~(or ~~and~~SAR). ~~staff workforce~~The ~~reduction~~exercise ~~that~~price ~~was~~of ~~initiated~~each inoption granted under the ~~second~~2003 ~~quarter.~~Stock ~~The~~Plan ~~impairment~~may ~~and~~not ~~severance~~be ~~charges~~less ~~reflected~~than ~~management~~the market price of the Company’s ~~decision~~common tostock ~~reduce~~on the ~~size~~date of ~~its~~the ~~workforce~~option grant and all ~~lower~~options ~~overhead~~may ~~expenses~~have ina ~~response~~maximum inlife ~~part~~of toten ~~its~~years. ~~decision~~Participants receiving restricted stock grants are generally eligible to ~~reduce~~vote ~~the number~~such ofshares ~~markets~~and inreceive ~~which~~dividends ~~the~~on ~~Operating~~such ~~Partnership~~shares. ~~operates,~~Substantially all stock option and restricted stock grants are subject to ~~sell~~annual ~~additional~~vesting ~~operating~~provisions ~~assets~~(generally ~~and~~three to ~~focus~~five ~~its~~years) ~~development~~as ~~strategy~~determined onby ~~fewer~~the ~~projects~~compensation incommittee overseeing the ~~near~~2003 ~~term~~Stock Plan.

In22 2008, the Company announced that its Board of Directors had initiated a formal process to pursue a possible business combination or other sale transaction. The process ended in the second quarter of 2008 without a business combination or other sale transaction. For the three and six months ended June 30, 2008, the Operating Partnership incurred approximately $2,091 and $8,161, respectively, of strategic review costs related to this process.

9. SUPPLEMENTAL CASH FLOW INFORMATION

For the six months ended June 30, 2009 and 2008, the Operating Partnership and the Operating Partnership’s taxable REIT subsidiaries made income tax payments to federal and state taxing authorities totaling $1,028 and $1,700, respectively.

Non-cash investing and financing activities for the six months ended June 30, 2009 and 2008 were as follows:

In the three months ended June 30, 2009, the Operating Partnership became the majority owner of and consolidated a previously unconsolidated entity (see note 3). This consolidation resulted in increases in land held for future investment and other assets of $9,658, cash of $248, indebtedness of $8,153, accounts payable and accrued expenses of $192 and noncontrolling interests of $1,560. This was a non-cash transaction.

For the six months ended June 30, 2009 and 2008, the Operating Partnership amortized approximately $658 and $562, respectively, of accumulated other comprehensive non-cash losses into earnings related to an interest rate swap derivative financial instrument (see note 6). For the six months ended June 30, 2009, the Operating Partnership recognized a loss equal to the remaining unamortized balance of accumulated other comprehensive income (an equity account) of $1,161 related to a terminated interest rate swap derivative financial instrument. The Operating Partnership also recognized other income during the first quarter of $874 to record an increase in the value of the ineffective interest rate swap derivative financial instrument prior to its termination (see note 6). This increase in value also caused a decrease in accounts payable and accrued expenses during the first half of 2009. Other than the amortization discussed herein, for the six months ended June 30, 2008, the Operating Partnership’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 equity of $35.

- 39 -

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~The~~Compensation ~~Operating~~costs ~~Partnership~~for ~~pays~~stock ~~distributions~~options ahave ~~quarter~~been inestimated ~~arrears.~~on Atthe ~~June 30,~~grant ~~2009~~date ~~and~~using ~~2008,~~ the ~~Operating~~Black-Scholes option-pricing ~~Partnership~~method. ~~committed~~The toweighted ~~distribute~~average ~~and~~assumptions ~~had~~used ~~accrued~~in ~~$8,914~~the ~~and~~Black-Scholes ~~$19,982,~~option-pricing ~~respectively.~~model are as follows:

For the six months ended June 30, 2009 and 2008, the Company issued common shares for director compensation, totaling $44 and $278, respectively. These were non-cash transactions. The Operating Partnership bears the compensation costs associated with the Company’s compensation plans. As such, the Operating Partnership issued common units to the Company in amounts equal to the above.


	Six months ended
	June 30,
	2015	2014
Dividend yield	2.7%	2.8%
Expected volatility	42.8%	43.0%
Risk-free interest rate	1.4%	1.8%
Expected option term (years)	6.0 years	6.0 years

10The Company’s assumptions were derived from the methodologies discussed herein. ~~EQUITY~~The expected dividend yield reflects the Company’s current historical yield, which was expected to approximate the future yield at the date of grant. Expected volatility was based on the historical volatility of the Company’s common stock. The risk-~~BASED~~free ~~COMPENSATION~~interest ~~PLANS~~rate for the expected life of the options was based on the implied yields on the U.S. Treasury yield curve at the date of grant. The weighted average expected option term was based on the Company’s historical data for prior period stock option exercise and forfeiture activity.

~~Equity Compensation~~Restricted ~~Plans~~stock

AsCompensation cost ~~the~~for ~~primary~~restricted ~~operating~~stock ~~subsidiary~~is ofamortized ~~the~~ratably ~~Company,~~into compensation expense over the ~~Operating~~applicable ~~Partnership~~vesting ~~participates~~periods. inTotal compensation expense related to restricted stock was $766 and ~~bears~~$818 for the ~~compensation~~ ~~expenses~~three ~~associated~~months ~~with~~and $2,233 and $1,588 for the ~~Company’s~~six ~~stock-based~~months ended ~~compensation~~June 30, ~~plans~~2015 and 2014, respectively. ~~The~~At ~~information~~June 30, ~~discussed~~2015, ~~below~~there ~~relating~~was to$4,866 ~~the~~of ~~Company’s~~unrecognized compensation cost related to restricted stock~~-based~~. ~~compensation~~This ~~plans~~cost is ~~also~~expected ~~applicable~~to ~~for~~be ~~the~~recognized ~~Operating~~over ~~Partnership~~a weighted average period of 2.0 years.

~~Incentive~~A ~~Stock~~summary ~~Plans~~of the activity related to the Company’s restricted stock for the six months ended June 30, 2015 and 2014 is as follows:


	Six months ended June 30,
	2015					2014
	Shares			Weighted-Avg. Grant-Date Fair Value		Shares			Weighted-Avg. Grant-Date Fair Value
Unvested shares, beginning of period		76		$	49		75		$	48
Granted (1)		68			60		55			47
Vested		(8	)		54		(1	)		12

Unvested shares, end of period		136			54		129			48

~~Compensation~~1) ~~costs~~The ~~for~~total ~~stock~~value ~~options~~of ~~have been estimated on~~ the ~~grant~~restricted ~~date~~share ~~using~~grants ~~the~~for ~~Black-Scholes option-pricing method. For options granted during~~ the six months ended June 30, ~~2009,~~2015 ~~the~~and ~~weighted~~2014 ~~average~~was ~~assumptions used in the Black-Scholes option-pricing model were dividend yield of 6.5%, expected volatility of 35.~~$4%,123 ~~risk-free interest rate of 2.2%~~ and ~~expected option term of 5.9 years. The Company did not grant any stock options for the six months ended June 30~~$2,566, ~~2008~~respectively.

~~The Company’s~~Stock 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~~Compensation ~~the~~cost ~~six~~for ~~months ended June 30, 2009 and 2008, the Company granted~~ stock options tois amortized ~~purchase~~ratably ~~346~~into ~~and~~compensation ~~zero~~expense ~~shares~~over ofthe ~~Company~~applicable ~~common~~vesting ~~stock, respectively, to Company officers and directors~~periods. The Company recorded compensation expense related to stock options of $~~160~~110 and $~~309~~134 for the three months ~~ended~~ and $~~365~~288 and $~~666~~273 for the six months ended June 30, ~~2009~~ 2015 and ~~2008~~2014, respectively, recognized under the fair value method. ~~Upon~~At ~~the~~June 30, ~~exercise~~2015, ofthere ~~stock~~was ~~options,~~$727 ~~the~~of ~~Company~~unrecognized ~~issues~~compensation ~~shares~~cost ofrelated ~~common~~to unvested stock ~~from~~options. ~~treasury~~This ~~shares~~cost ~~or,~~is expected to ~~the extent~~be ~~treasury~~recognized ~~shares~~over ~~are~~a ~~not~~weighted ~~available,~~average ~~from~~period ~~authorized~~of ~~common shares~~2.1 years.

A23 ~~summary of stock option activity under all plans for the six months ended June 30, 2009 and 2008 is presented below:~~

	Six months endedJune 30,
	2009				2008
	Shares		Weighted AverageExercise Price		Shares		Weighted AverageExercise Price
Options outstanding, beginning of period		2,382	$	34		2,455	$	34
Granted		346		12		-		-
Exercised		-		-		(39)		37
Forfeited		(201)		36		(2)		39
Options outstanding, end of period		2,527		31		2,414		34
Options exercisable, end of period		2,121		33		2,037		33
Weighted-average fair value of options granted during the period	$	2.09			$	-

- 40 -

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~4.7~~A ~~years,~~summary ~~respectively.~~of ~~Stock~~stock ~~options~~option ~~expected~~activity tounder ~~vest~~all atplans ~~June 30,~~for ~~2009~~the ~~totaled~~six ~~2,510~~months atended aJune 30, ~~weighted~~2015 ~~average~~and ~~exercise~~2014 ~~price~~is presented ofbelow: ~~approximately $30.84.~~


	Six months ended June 30,
	2015					2014
				Exercise					Exercise
	Shares			Price		Shares			Price
Options outstanding, beginning of period		148		$	46		539		$	36
Granted		28			60		35			47
Exercised		(38	)		48		(201	)		34

Options outstanding, end of period (1)		138			49		373			38

Options exercisable, end of period (1)		77			45		311			36

Options vested and expected to vest, end of period (1)		135			49		371			38

Weighted average fair value of options granted during the period	$	19.49				$	15.21

~~For~~1) ~~the~~At ~~six months ended~~ June 30, ~~2009 and 2008~~2015, the ~~Company~~aggregate ~~granted~~intrinsic ~~106~~value ~~and 78 shares~~ of ~~restricted~~ stock, ~~respectively~~options outstanding, toexercisable ~~Company officers~~ and ~~directors.~~vested/expected ~~The~~to ~~restricted share grants generally~~ vest ~~ratably~~was ~~over three to five year periods. The weighted average grant date fair value for the restricted shares for the six months ended June 30~~$935, ~~2009 and 2008 was~~ $~~12.19~~725 and $~~42.25~~925, respectively~~, per share~~. ~~The~~At ~~total~~that ~~value~~same ofdate, the ~~restricted~~ ~~share~~weighted ~~grants~~average ~~for~~remaining ~~the~~contractual ~~six~~lives ~~months~~of ~~ended~~stock ~~June 30~~options outstanding, ~~2009~~exercisable and ~~2008~~vested/expected ~~was~~to ~~$1,288~~vest ~~and~~was ~~$3,308, respectively~~7.0 ~~The~~years, ~~compensation cost is amortized ratably into compensation expense over the applicable vesting periods~~5.6 ~~Total~~years ~~compensation expense relating to the restricted stock was $610~~ and ~~$822~~7.0 ~~for the three months ended and $1~~years,~~195~~ ~~and $1,574 for the six months ended June 30, 2009 and 2008,~~ respectively.

AUpon ~~summary~~the exercise of stock options, the ~~activity~~Company ~~related~~issues shares of common stock from treasury shares or, to the ~~Company’s~~extent ~~restricted~~treasury shares are not available, from authorized common shares. The total intrinsic value of stock options exercised for the six months ended June 30, ~~2009~~2015 and ~~2008~~2014 iswas ~~presented~~$548 ~~below:~~and $3,160, respectively.

	Six months endedJune 30,
	2009			2008
	Shares	Weighted AverageGrant-DateFair Value		Shares	Weighted AverageGrant-DateFair Value
Unvested share, beginning or period	128	$	33	119	$	35
Granted	106		12	78		42
Vested	-		-	(8)		36
Forfeited	(1)		43	-		-
Unvested shares, end of period	233		23	189		38

At June 30, 2015, the Company segregated its outstanding options into two ranges, based on exercise prices, as follows:


Option Ranges	Options Outstanding						Options Exercisable
			Weighted Avg.		Weighted Avg.				Weighted Avg.
	Shares		Exercise Price		Life (Years)		Shares		Exercise Price
$37.04 - $46.93		80	$	44		6.3		56	$	43
$48.00 - $60.40		58		55		8.0		21		50

Total		138		49		7.0		77		45

Employee ~~Stock~~stock ~~Purchase~~purchase ~~Plan~~plan

The Company maintains an Employee Stock Purchase Plan (the “ESPP”) approved by Company shareholders in ~~2005~~2014. The maximum number of shares issuable under the ESPP is ~~300~~250. 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 $3856 and $039 for the three months ~~ended~~ and $75110 and $7578 for the six months ended June 30, ~~2009~~2015 and ~~2008~~ 2014, respectively.

11.

INCOME TAXES

~~Income~~The orCompany ~~losses~~has ofelected ~~the~~to ~~Operating~~be ~~Partnership~~taxed ~~are~~as ~~allocated~~a toREIT under the ~~partners~~Internal Revenue Code of 1986, as amended (the ~~Operating~~“Code”). To qualify as a ~~Partnership~~REIT, ~~for~~the ~~inclusion~~Company inmust ~~their~~distribute ~~respective~~annually at least 90% of its adjusted taxable income, ~~tax~~as ~~returns.~~defined ~~Accordingly~~in the Code, noto ~~provisions~~its orshareholders ~~benefit~~and ~~for~~satisfy ~~income~~certain ~~taxes~~other ~~has~~organizational ~~been~~and ~~made~~operating inrequirements. It is management’s current intention to adhere to these requirements and maintain the ~~accompanying~~Company’s ~~financial~~REIT ~~statements~~status. ~~The~~As a REIT, the Company ~~has~~generally ~~elected~~will tonot be ~~taxed~~subject asto afederal ~~REIT~~income ~~under~~tax at the ~~Internal~~corporate ~~Revenue Code~~level ofon ~~1986,~~the astaxable ~~amended~~income ~~(the~~it ~~“Code”).~~distributes Into ~~order~~its ~~for~~shareholders. Should the Company fail to qualify as a REIT in any tax year, it ~~must~~may ~~distribute~~be ~~90%~~subject ofto ~~its~~federal ~~REIT~~income ~~taxable~~taxes ~~income,~~at asregular ~~defined~~corporate inrates ~~the~~(including ~~Code,~~any toapplicable ~~its~~alternative ~~shareholders~~minimum tax) and ~~satisfy~~may ~~certain~~not ~~other~~be ~~organizational~~able ~~and~~to ~~operating requirements~~qualify as a REIT for four subsequent taxable years. The Company ~~Operating~~may ~~Partnership~~be ~~intends~~subject to ~~make~~certain ~~sufficient~~state ~~cash~~and ~~distributions~~local totaxes ~~the~~on ~~Company~~its toincome ~~enable~~and itproperty, and to ~~meet~~federal ~~its~~income ~~annual~~taxes ~~REIT~~and ~~distribution~~excise ~~requirements~~taxes on its undistributed taxable income.

In24 the preparation of income tax returns in federal and state jurisdictions, the Operating Partnership 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

- 41 -

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

~~its income tax returns.~~ The Operating Partnership ~~and~~files ~~its subsidiaries’ (including the TRSs) income~~ tax returns ~~are~~as ~~subject~~a tolimited ~~examination~~partnership byunder ~~federal and~~the ~~state~~Code. ~~tax~~As ~~jurisdictions~~a ~~for~~partnership, ~~years 2005 through 2007. Net~~ the income ~~tax loss carryforwards~~ and ~~other~~losses ~~tax~~of ~~attributes~~the ~~generated~~Operating inPartnership ~~years~~are ~~prior~~allocated to ~~2005~~its ~~are~~partners, ~~also~~including ~~subject~~the toCompany, ~~challenge~~for inclusion in ~~any~~their ~~examination~~respective ofincome ~~the 2005 to 2007~~ tax ~~years~~returns. ~~In the fourth quarter of 2008~~Accordingly, ~~the~~no ~~Operating~~provision ~~Partnership~~or ~~received~~benefit ~~notice~~for ~~that~~income ~~its~~taxes ~~TRSs’~~has ~~federal~~been ~~income~~included ~~tax~~in ~~return for~~ the ~~2005~~accompanying Operating ~~was~~Partnership ~~selected~~financial ~~for Internal Revenue Service examination~~statements. AtThe ~~this~~Operating ~~stage,~~Partnership itintends ~~is not possible~~ to ~~predict~~make orsufficient ~~determine~~cash ~~the~~distributions ~~outcome~~to of the ~~examination,~~ ~~nor~~Company isto enable it ~~possible~~ to ~~estimate~~meet ~~the~~its ~~amount~~annual orREIT ~~whether~~distribution ~~any adjustments will be required to that tax return~~requirements.

AsIn the preparation of ~~June 30~~income tax returns in federal and state jurisdictions, ~~2009~~ the Company, the Operating Partnership’s and its taxable REIT subsidiaries ~~(“TRSs”)~~assert certain ~~had unrecognized~~ tax ~~benefits~~positions ofbased ~~approximately~~on ~~$797~~their ~~which~~understanding ~~primarily~~and ~~related~~interpretation toof ~~uncertainty regarding~~ the ~~sustainability~~income oftax ~~certain~~law. ~~deductions~~The ~~taken~~taxing onauthorities ~~prior~~may ~~year income~~challenge ~~tax~~such ~~returns~~positions ofand the ~~TRS~~resolution ~~with~~of ~~respect~~such tomatters ~~the~~could ~~amortization~~result ofin ~~certain~~the ~~intangible~~payment ~~assets.~~and ~~The~~recognition ~~Operating~~of ~~Partnership~~additional ~~does~~income ~~not~~tax expense. ~~expect~~Management ~~any~~believes ~~significant~~it ~~change~~has inused ~~this~~reasonable ~~unrecognized~~judgments ~~tax~~and ~~benefit~~conclusions in the ~~remainder~~preparation of ~~2009.~~its Toincome ~~the~~tax ~~extent~~returns. ~~these~~The ~~unrecognized tax~~Company ~~benefits~~and ~~are~~its ~~ultimately recognized~~subsidiaries, ~~they~~including ~~may affect~~ the ~~effective~~Company’s ~~tax~~taxable ~~rate~~REIT insubsidiaries a(“TRSs”), ~~future~~income ~~period.~~tax returns ~~The~~are ~~Operating~~subject ~~Partnership’s policy is~~ to ~~recognize~~examination ~~interest~~by federal and ~~penalties,~~state iftax ~~any,~~jurisdictions ~~related~~for toyears ~~unrecognized~~2011 ~~tax~~through ~~benefits~~2013. asNet income tax ~~expense. Accrued~~loss ~~interest~~carryforwards and ~~penalties~~other ~~for~~tax ~~the~~attributes ~~six~~generated ~~months~~in ~~ended~~years ~~June 30,~~prior ~~2009~~to ~~and~~2011 atare ~~June 30,~~also ~~2009~~subject ~~were not material~~ to ~~the~~challenge ~~Operating~~in ~~Partnership’s~~any ~~results~~examination of the ~~operations,~~2011 ~~cash~~to ~~flows~~2013 ortax ~~financial position~~years.

The ~~Operating~~Company ~~Partnership~~ 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 ~~the three and six months ended June 30, 2009, the TRS recorded no net~~ income tax ~~expense~~attributes ~~(benefit)~~associated aswith the ~~provision~~TRSs ~~for~~are ~~estimated~~not ~~income taxes~~material ~~payable is expected~~ to bethe ~~offset~~Company’s byconsolidated ~~deferred~~financial ~~tax~~position ~~benefits~~or ~~resulting~~results ~~from~~of ~~current period temporary differences~~operations.

At December 31, 2008, management had established valuation allowances of approximately $24,121 against net deferred tax assets due primarily to historical losses at the TRSs in prior years and the variability of the income of these subsidiaries12. ~~The~~OTHER 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 Operating Partnership determines that it is more likely than not that the related deferred tax assets are realizable. EXPENSES

AOther ~~summary~~expenses offor the ~~components~~three ofand ~~the~~six ~~TRS~~months ~~deferred~~ended ~~tax~~June 30, ~~assets~~2014 ~~and~~included ~~liabilities~~expenses ~~at December 31,~~of ~~2008~~approximately ~~are~~$502 ~~included~~and in$659, ~~the~~respectively, ~~footnotes~~ related to the ~~Operating~~upgrade ~~Partnership~~of the Company’s ~~audited~~operating and financial ~~statements~~software ~~included~~systems. inFor the ~~Form~~six ~~10-K.~~months ~~Other~~ended ~~than~~June 30, ~~the~~2014, ~~increase~~other inexpenses ~~net~~also ~~deferred~~included ~~tax~~casualty ~~assets~~losses ~~and valuation allowances~~ of ~~approximately~~ $~~29,800 resulting~~750 ~~from~~primarily ~~impairment~~related ~~charges~~to ofextreme ~~$76,317~~winter ~~recorded~~weather atconditions ~~the~~in ~~TRSs~~many inof the Company’s ~~three~~markets, and ~~six~~due ~~months~~to ~~ended~~fire ~~June 30,~~damage ~~2009,~~at ~~there~~one ~~were~~of ~~no material changes to~~ the ~~components~~Company’s ~~of deferred tax assets~~Atlanta, ~~deferred~~Georgia ~~tax asset valuation allowances and deferred liabilities at June 30, 2009~~communities.

1213. LEGAL PROCEEDINGS, COMMITMENTS AND CONTINGENCIES

In ~~November~~September ~~2006~~2010, the ~~Equal~~United ~~Rights~~States ~~Center~~Department of Justice (the “~~ERC~~DOJ”) filed a lawsuit against the Company ~~and the Operating Partnership~~ in the United States District Court for the Northern District of ~~Columbia~~Georgia. ~~This~~The suit alleges various violations of the Fair Housing Act (“FHA”) and the Americans with Disabilities Act (“ADA”) at properties designed, constructed or operated by the Company ~~and the Operating Partnership~~ in the District of Columbia, Virginia, ~~Colorado,~~ Florida, Georgia, New York, North Carolina and Texas. The plaintiff seeks ~~compensatory~~statutory ~~and punitive~~ damages, anand ~~award~~a ofcivil ~~attorneys’~~penalty ~~fees~~in ~~and~~unspecified ~~costs of suit~~amounts, as well as ~~preliminary~~ ~~and permanent~~ injunctive relief that includes retrofitting ~~multi-family units~~ apartments and public use areas to comply with the FHA and the ADA and prohibiting construction or sale of noncompliant units or complexes. OnThe ~~April 18,~~Company ~~2007, ERC~~ filed a motion ~~for a preliminary injunction~~ to ~~prohibit~~transfer the ~~Company~~case ~~and~~to the ~~Operating~~United ~~Partnership~~States ~~from~~District ~~selling~~Court ~~any~~for ~~alleged~~the ~~noncompliant~~District ~~apartment~~of ~~communities~~Columbia, orwhere a ~~condominium~~previous ~~units~~civil ~~while~~case ~~the~~involving ~~litigation~~alleged isviolations ~~ongoing.~~of ~~On July 25, 2007~~ the ~~court entered~~FHA anand ~~order~~ADA ~~denying~~by ~~ERC’s motion for~~ the ~~preliminary~~Company ~~injunction. Discovery~~ was ~~completed~~filed byand ~~both~~ultimately ~~parties~~dismissed. onOn ~~April~~October 3029, ~~2008~~2010, ~~with~~ the ~~exception~~United ofStates ~~the~~District ~~Company~~Court ~~and~~for the ~~Operating~~Northern ~~Partnership’s~~District ~~discovery~~of ~~related~~Georgia toissued ~~ERC’s untimely~~an $9opinion ~~million~~finding ~~damages allegation, which~~ that the ~~Court~~complaint ~~has~~shows ~~stayed~~that ~~pending~~the ~~resolution~~DOJ’s ofclaims ~~certain~~are ~~motions.~~essentially ~~The~~the ~~parties~~same ~~filed~~as ~~cross-motions~~the ~~for~~previous ~~summary~~civil ~~judgment~~case, ~~on December 17~~and, ~~2008~~therefore, ~~oppositions~~granted tothe ~~summary~~Company’s ~~judgment~~motion onand ~~February 20,~~transferred ~~2009,~~the ~~and replies~~DOJ’s incase ~~support~~to ofthe ~~summary~~United ~~judgment~~States onDistrict ~~March 17,~~Court ~~2009~~for the District of Columbia. OnDiscovery ~~February 20,~~has ~~2009~~closed, and the ~~Department~~Court ofhas ~~Justice~~denied motions filed anby ~~amicus~~the ~~brief~~parties onrelating ~~behalf~~to ofadditional ~~ERC,~~discovery and ~~the~~expert ~~Company~~witnesses. ~~and~~Each ~~the~~party ~~Operating Partnership~~ filed aMotions ~~response.~~for InSummary ~~addition~~Judgment, ~~the~~which ~~Company~~were ~~and the~~briefed ~~Operating~~in ~~Partnership~~April ~~have~~2014. ~~filed~~In ~~various~~March ~~additional~~2015, ~~pretrial~~the ~~motions,~~Court denied ~~including~~both ~~two~~Motions ~~motions~~for inSummary ~~limine~~Judgment and ~~three~~requested ~~motions~~supplemental tobriefing, ~~strike.~~which ~~The~~both ~~plaintiff~~sides ~~has~~submitted ~~filed~~in ~~one~~June ~~motion to strike~~2015. ~~The~~Until ~~Court~~such ~~has~~time ~~not~~as ~~set~~the acourt ~~hearing~~issues orrulings ~~rendered~~on ~~its~~the ~~decision~~application onof the ~~pending~~ ~~motions,~~law ~~including~~to ~~summary~~the ~~judgment.~~facts Atof this ~~stage in the proceeding~~case, it is not possible to predict or determine the outcome of the ~~lawsuit~~legal proceeding, nor is it possible to estimate the amount of loss, if any, that would be associated with an adverse decision.

The ~~Operating~~Company ~~Partnership~~ is involved in various other legal proceedings incidental to ~~its~~their business from time to time, ~~most~~some of which are expected to be covered by liability or other insurance. Management of the ~~Operating~~Company ~~Partnership~~ believes that any resolution of pending proceedings or liability to the Company which may arise as a result of these various other legal proceedings will not have a material effect on the Company’s results of operations, cash flows or financial position.

-25 ~~42 -~~

POST APARTMENT HOMES, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

resolution of pending proceedings or liability to the Operating Partnership which may arise as a result of these various other legal proceedings will not have a material adverse effect on the Operating Partnership’s results of operations or financial position.

As announced in 2008, the Operating Partnership is underway with an initiative to engage third-party engineers and consultants to inspect and evaluate each of its communities that have stucco exteriors or exterior insulation finishing systems (“EIFS”) for potential water penetration and other related issues. At this time, the Operating Partnership has determined that varying levels of remediation and improvements may be required to be performed at approximately 30 properties in its portfolio. The Operating Partnership currently estimates that the aggregate cost of this initiative will be approximately $45,000 to complete the scope of the remediation and improvements, although the scope and cost will vary considerably among individual properties. The Operating Partnership currently expects that a substantial majority of the costs related to these remediation efforts will be recorded as annually and periodically recurring capital expenditures. In addition and as a result of this project, the Operating Partnership currently estimates that the net book value of certain building components totaling approximately $6,500 to $7,000 will be retired and, as such, are being depreciated on an accelerated basis over the remaining estimated useful life of those assets, which is expected to be not later than 2009. The work has been completed at five properties, is currently underway at approximately eleven properties and is expected to be completed at all the properties by 2010. The work may include, but not be limited to, remediation, improvements and replacements of exterior stucco and EIFS siding, windows and doors, roofing and gutters, exterior sealants and coatings. From the inception of this initiative through June 30, 2009, the Operating Partnership has recorded accelerated depreciation of approximately $3,903 and has capitalized approximately $14,885 related to this project. There can be no assurance that the scope of work or the Operating Partnership’s preliminary estimates of costs will not change in future periods.

13. SUBSEQUENT EVENTS

The Operating Partnership evaluated the accounting and disclosure requirements for subsequent events reporting through the issuance date of the financial statements. In July 2009, the Operating Partnership closed the sales of two apartment communities, containing 798 units, for aggregate gross sales proceeds of $102,300. The Operating Partnership expects to recognize gains on these asset sales of approximately $54,500 in the third quarter of 2009.

- 43 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~AND~~Company overview ~~RESULTS OF OPERATIONS~~

Post Properties, Inc. (Inthe ~~thousands~~“Company”) and its subsidiaries develop, ~~except~~own and manage upscale multi-family apartment ~~unit~~communities ~~data~~in selected markets in the United States. The Company through its wholly-owned subsidiaries is the sole general partner, a limited partner and owns a majority interest in Post Apartment Homes, L.P. (the “Operating Partnership”), a Georgia limited partnership. The Operating Partnership, through its operating divisions and subsidiaries conducts substantially all of the on-going operations of the Company, a publicly traded corporation which operates as a self-administered and self-managed real estate investment trust (“REIT”). As used herein, the term “Company” includes Post Properties, Inc. and its subsidiaries, including Post Apartment Homes, L.P., unless the context indicates otherwise.

The Company ~~Overview~~has elected to qualify and operate as a self-administrated and self-managed 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. The Operating Partnership is governed under the provisions of a limited partnership agreement, as amended. Under the provisions of the limited partnership agreement, as amended, Operating Partnership net profits, net losses and cash flow (after allocations to preferred ownership interests) are allocated to the partners in proportion to their common ownership interests. Cash distributions from the Operating Partnership shall be, at a minimum, sufficient to enable the Company to satisfy its annual dividend requirements to maintain its REIT status under the Code.

Post Properties, Inc. and its subsidiaries develop, own and manage upscale multi-family 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 June 30, ~~2009~~2015, the Company ~~owned~~had 20interests in 23,~~662~~365 apartment units in 5759 ~~apartment~~ communities, including 1,~~747~~471 apartment units in ~~five~~four communities held in unconsolidated entities and 1,~~736~~834 apartment units in five communities currently under ~~construction and/or in lease-up~~development. The Company is also developing and selling 362 for-sale condominium homes in three 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 June 30, ~~2009~~2015, approximately 3729.21%, 21.59%, 12 13.95% and 10.79% (on a unit basis) of the Company’s operating communities were located in the Atlanta, Georgia, Dallas, Texas, the greater Washington, D.C. and Tampa, Florida metropolitan areas, respectively.

~~The~~At ~~Company~~June 30, ~~has~~2015, ~~elected~~the toCompany owned ~~qualify~~approximately ~~and~~99.8% ~~operate~~of asthe acommon ~~self-administrated~~limited ~~and~~partnership ~~self-managed~~interests ~~real estate investment trust~~ (“~~REIT~~Common Units”) ~~for~~in ~~federal~~the ~~income~~Operating ~~tax purposes~~Partnership. ACommon ~~REIT~~Units isheld aby ~~legal~~persons ~~entity which~~other ~~holds~~than ~~real~~the ~~estate~~Company ~~interests~~represented ~~and~~a is0.2% ~~generally~~common ~~not~~noncontrolling ~~subject~~interest toin ~~federal income tax on~~ the ~~income it distributes to its shareholders~~Operating Partnership.

~~At June 30,~~The ~~2009,~~discussion ~~the~~below ~~Company~~is ~~owned~~combined ~~approximately~~for ~~99.5% of~~ the ~~common~~Company ~~limited~~and ~~partnership~~the ~~interests~~Operating ~~(“Common~~Partnership ~~Units”)~~as intheir ~~the~~results ~~Operating~~of ~~Partnership.~~operations ~~Common~~and ~~Units~~financial ~~held~~conditions byare substantially ~~persons~~the ~~other~~same ~~than~~except for the ~~Company~~effect ~~represented~~of athe 0.52% weighted average common ~~minority~~ noncontrolling interest in the Operating Partnership.

Operations Overview

AsThe afollowing ~~result~~discussion ofprovides ~~events~~an inoverview ~~the~~of ~~global capital markets and~~ the ~~U.S. economy, including a severe tightening in the credit markets, increasing unemployment and declining consumer confidence, the~~ Company observed a significant decline in economic growth in the U.S. that is expected to continue for the remainder 2009. Historically, weaker economic conditions and declining job growth in the U.S. and in the Company’s ~~markets has led to deteriorating~~operations, and ~~negative,~~ ~~revenue~~should ~~and~~be ~~NOI~~read ~~growth~~ in ~~the~~conjunction ~~multi-family~~with ~~market. Further,~~ the ~~multi-family~~more ~~market is being adversely impacted by a substantial decline in the overall U.S. housing market, attributable in part to continued concerns relating to the impact~~full ofdiscussion ~~rising mortgage delinquencies and foreclosures, tighter credit markets and a rising “shadow” supply~~ of ~~for-sale multi-family product entering~~ the ~~rental market. Based on the above factors, the~~ Company is forecasting a decline in same store community revenues and NOI for the second half of 2009 as more fully discussed in the “Outlook” section below. If the recession in the U.S. economy worsens or continues beyond 2009, the Company’s operating results ~~would be adversely affected. In addition~~, ~~the~~liquidity ~~overall tightening of the credit markets~~ and ~~current conditions in the global~~ capital ~~markets~~resources and ~~the~~risk ~~U.S.~~factors ~~economy~~reflected ~~could~~elsewhere ~~also~~in ~~make~~this itForm increasingly difficult for the Company to actively pursue sales of assets and will continue to adversely impact the Company’s ability to obtain joint venture or other financing for development projects while these conditions persist10-Q.

Consistent with the factors described above, the Company’s operating results experienced a decrease in the year over year rate of growth in same store operating revenues of 2.5% for the six months endedProperty ~~June 30,~~Operations 2009, compared to an increase of 1.4% for the full year of 2008. However, as a result of favorable variances in property operating expenses, growth in same store net operating income (“NOI”) was slightly positive at 0.1% for the first half of 2009, compared to the first half of 2008. The decrease in the year over year rate of growth in same store revenues accelerated from a decline of 1.6% in the first quarter of 2009 to 3.4% in the second quarter of 2009. The revenue decreases were largely due to declining rental rates, which on a year over year basis decreased 1.1% in the first quarter of 2009 and 1.6% in the second quarter of 2009. The Company expects same store revenues will continue to decline in the second half of 2009, compared to the first half of the year, largely due to a continued downward trend in rental rates, consistent with the current market and economic conditions described above.

InFavorable ~~2008,~~market ~~the~~fundamentals ~~Company~~and ~~reduced~~demographics, ~~its~~a ~~headcount~~steadily ~~approximately~~improving ~~15%,~~economy ~~including~~and anjobs ~~approximately~~market, ~~25%~~and ~~reduction~~a instill ~~headcount~~weak infirst-time ~~corporate~~homeowner ~~office~~market have ~~positions,~~contributed ~~through~~to aimproved ~~combination~~multi-family ofhousing ~~asset~~demand ~~sales~~and, ~~out-sourcing~~ consequently, ~~attrition~~positive revenue and ~~elimination~~net ofoperating ~~positions.~~income ~~The~~(“NOI”) in the Company’s ~~also~~markets ~~implemented~~since a2010. ~~salary~~Year-over-year ~~freeze~~same ~~for~~store ~~associates~~revenues ~~with~~and ~~base~~NOI ~~salaries~~increased ~~greater~~by ~~than~~2.6% and 2.0%, or $504,199 ~~substantially~~and ~~reduced~~$2,019, ~~bonuses~~respectively, ~~including~~in ~~eliminating~~the ~~any~~first ~~incentive~~half ~~bonus~~of 2015, as compared to the first half of 2014. The Company’s operating results for ~~2008~~the first half of 2015 and its outlook for the remainder of 2015 are more fully discussed in the “Results of Operations” and “Outlook” sections below. The Company’s ~~President~~outlook for the remainder of 2015 is based on the expectation that economic and ~~CEO~~employment conditions will continue to steadily improve. However, ~~reduced~~there continues ~~long-term~~to ~~incentive~~be ~~awards~~risk ~~for~~and ~~executive~~uncertainty ~~officers~~in ~~for~~the ~~2008~~economy and ~~reduced~~the ~~targeted~~jobs ~~long-term~~market. ~~incentives~~If ~~for~~the ~~2009~~economic recovery was to stall or U.S. Ineconomic ~~addition~~conditions were to worsen, atthe ~~his~~Company’s ~~request~~operating results would be adversely affected. Furthermore, ~~compensation~~development of new multi-family rental units has continued to increase, which has increased the competitive supply of rental units in the markets in which the Company operates. This new supply contributed to a moderation in the rate of rental income and NOI growth in recent years and this trend is expected to persist in 2015.

-26 ~~44 -~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~paid~~Development toActivity the Chairman of the Company’s Board of Directors was substantially reduced for 2008 and waived entirely for 2009. There can be no assurance that the Company will not recognize additional severance charges in future periods.

AtIn ~~June 30~~2015, ~~2009,~~ the Company ~~was~~initiated ~~marketing~~construction ~~for~~of ~~sale two~~Post ~~apartment~~Millennium ~~communities,~~Midtown™ ~~totaling~~in ~~798~~Atlanta, ~~units~~Georgia, ~~including~~consisting ~~one~~of ~~community~~356 ~~located~~apartment inunits ~~Atlanta,~~and ~~Georgia~~total ~~and~~budgeted ~~one~~costs ~~community~~of $90,600. ~~located~~In addition, in 2015, the ~~northern~~Company ~~Virginia~~initiated ~~submarket~~a modest expansion of ~~greater~~its ~~Washington~~Post Parkside™ at Wade, ~~D.C.~~Phase AII ~~third~~apartment community, ~~containing~~in ~~530~~Raleigh, ~~units~~North Carolina, ~~was~~consisting ~~sold~~of in15 ~~April 2009~~townhome ~~for~~rental aunits ~~gross~~at ~~sales~~a ~~price~~budgeted cost of ~~approximately~~ $474,~~400~~500. In ~~July 2009~~2014, the Company ~~two~~initiated ~~communities~~construction ~~held~~of ~~for~~three ~~sale~~apartment communities (Post Parkside™ at ~~June 30~~Wade, ~~2009~~Phase ~~were~~II, ~~sold~~Post Galleria™ and ~~generated~~Post ~~aggregate~~South ~~gross~~Lamar™, ~~proceeds~~Phase II) containing 1,123 apartment units and 5,800 square feet of ~~approximately~~retail space. Total budgeted development and construction costs for these projects were $~~102~~199,300. ~~Those~~An ~~proceeds~~additional community, The High Rise at Post Alexander™, containing 340 apartment units and total budgeted costs of $75,500 began delivering and leasing units in the second quarter of 2015. The remaining units at this community are expected to be ~~utilized~~substantially completed in ~~a manner~~2015. ~~consistent~~These ~~with~~communities ~~the~~are ~~Company’s~~summarized ~~liquidity~~in ~~and~~the ~~balance~~“Liquidity ~~sheet~~and ~~strategy~~Capital ~~discussed~~Resources” section below under the sub-caption “Current Communities Under Development.”

In ~~2008~~2014 and into 2015, the Company ~~made~~completed the ~~decision to defer further substantive activities on all of its pre~~lease-~~development~~up ~~projects and to abandon the pursuit~~ of ~~certain~~four ~~other~~communities: ~~development~~Post ~~projects~~510™, inPost ~~light~~Parkside™ at ~~of difficult market conditions. Additionally~~Wade, ~~during~~Phase ~~2008~~I, ~~management~~Post ~~evaluated~~Lake® ~~its~~at ~~current expectations~~Baldwin ~~regarding~~Park, ~~the~~Phase ~~timing~~III and ~~projected~~Post ~~undiscounted~~Soho ~~future~~Square™. ~~cash~~These ~~flows~~communities ~~from~~contain ~~land~~1,280 ~~held~~apartment ~~for~~units ~~future~~and ~~development~~25,464 ~~(including~~square ~~the~~feet ~~Company’s expectations~~ of ~~possible~~retail ~~future~~space. ~~uses,~~In ~~capitalization rates~~addition, ~~investors’~~as discussed ~~return expectations~~above, ~~rental~~ ~~rates~~The ~~and~~High ~~operating~~Rise ~~cash~~at ~~flows)~~Post ~~and~~Alexander™ ~~reduced~~began ~~its~~leasing ~~expectations~~apartment ~~regarding~~units in the ~~estimated~~second ~~fair~~quarter ~~values~~ of ~~its land holdings~~2015. AsFor ~~a result,~~ the ~~Company~~newly ~~recorded~~stabilized ~~non-cash~~and ~~impairment charges in 2008 to write~~lease-~~down~~up acommunities, ~~substantial~~operating ~~portion~~results ofincluded ~~its~~increased ~~land~~revenues ~~held for sale~~ and ~~land~~net ~~held~~operating ~~for~~income ~~future investment (including the Company’s interest in a joint venture that holds land for future investment) to estimated fair market value. After considering the impact~~ of ~~these impairment charges~~$2, ~~which on a~~724 ~~cumulative~~and ~~basis~~$2,016 ~~represented~~for ~~an approximately 47% reduction to~~ the ~~original~~three ~~aggregate~~months ~~carrying~~ended ~~values~~and of$6,027 ~~its~~and ~~land assets~~$4,475 ~~the Company’s land held~~ for ~~future~~the ~~investment~~six ~~and~~months ~~sale~~ended ~~totaled approximately $98,912 at~~ June 30, ~~2009~~2015 and 2014, respectively.

AtThe ~~present,~~square ~~management~~footage amounts ~~believes~~discussed ~~that~~above ~~the~~are ~~timing~~approximate ofand ~~future~~actual ~~development~~amounts ~~starts~~may ~~will~~vary. ~~depend~~The ~~largely~~Company oncurrently ~~the~~expects ~~stabilization~~to ofutilize ~~capital~~available ~~market conditions and the U.S. economy~~cash, ~~which~~available itborrowing ~~believes~~capacity ~~will~~under ~~influence~~its ~~conditions~~unsecured inbank ~~employment~~credit ~~and~~facilities, ~~the~~or ~~local~~other ~~real~~indebtedness, ~~estate markets~~and, ~~the~~from ~~Company’s~~time ~~ability~~ to ~~generate~~ time, asset sales ~~proceeds and its ability~~ to ~~attract potential construction loan financing and joint venture equity to~~ fund future ~~development.~~estimated ~~Until~~construction such time as substantive development activities re-commence or certain land positions are sold, the Company expects that operating results will be adversely impacted by costs of carrying land held for future investment or saleexpenditures.

~~Based~~In onaddition, the ~~factors~~Company ~~discussed~~may ~~above,~~commence ~~there~~development ~~can~~activities beat nocertain ~~assurance~~of ~~that~~its existing and new land ~~held~~sites ~~for~~over ~~investment~~the next two years. Management believes, however, that the timing of such development starts will bedepend ~~developed in~~largely on a continued favorable outlook for multi-family apartment rentals, capital market conditions and the ~~future~~U.S. economy. Until such time as additional development activities commence or atcertain ~~all.~~land ~~Should~~positions are sold, the Company ~~further~~expects ~~change~~that ~~its~~operating ~~expectations~~results ~~regarding~~will ~~the~~be ~~timing~~adversely ~~and~~impacted ~~projected~~by ~~undiscounted~~costs of carrying land held for future ~~cash~~investment ~~flows~~or ~~expected~~sale. ~~from~~There can be no assurance that land held for investment will be developed in the future ~~investment,~~or at all. Although the Company ~~may~~does benot ~~required~~believe tothat ~~recognize~~any ~~additional~~ impairment ~~losses~~exists inat ~~future~~June 30, ~~periods.~~2015, ~~Should~~should the Company change its ~~current~~expectations ~~estimates~~regarding of the ~~fair~~timing ~~value~~and projected ofundiscounted ~~assets~~future cash flows expected from land held for ~~sale~~future toinvestment, ~~below~~or ~~their~~the ~~carrying~~estimated ~~values~~fair value of its assets, the Company ~~may~~could ~~also~~ be required to recognize ~~additional~~ impairment losses in future periods.

AsFinancing ofActivity June 30, 2009, the Company’s aggregate pipeline of development projects under construction (apartments and condominiums) and in lease-up (before the impact of impairment charges described below) totaled approximately $487,000. As of the same date, approximately $133,000 of estimated construction costs remained to be funded, including construction payables, by the Company (or approximately $89,000, excluding committed construction loan financing). In addition, the Company is underway with an initiative to remediate communities with stucco exteriors or exterior insulation finishing systems (“EIFS”). The Company currently estimates that the aggregate cost of this initiative will be approximately $45,000, of which approximately $14,884 has been incurred through June 30, 2009. The Company expects to fund future estimated construction and remediation expenditures primarily by utilizing available cash and cash equivalents and borrowing capacity under its unsecured revolving lines of credit. See “Liquidity and Capital Resources” below where discussed further.

In ~~early~~the ~~2005,~~first ~~the~~quarter ~~Company~~of ~~entered~~2015, the Company ~~for-sale~~refinanced ~~condominium~~its ~~housing~~$330,000 ~~market~~unsecured ~~and~~lines ~~has~~of ~~since~~credit ~~converted~~and ~~five~~$300,000 ~~apartment~~unsecured ~~communities~~term ~~totaling~~loan ~~731 units into for-sale condominium homes~~facilities, ~~completed~~resulting ~~the~~in ~~construction~~reduced ofinterest ~~two~~rates ~~condominium~~and ~~communities~~extended ~~totaling~~maturity ~~230~~rates. ~~units~~These refinancings, ~~and~~coupled iswith in the ~~process~~prepayment of ~~developing~~secured ~~two~~indebtedness ~~luxury condominium projects: The Ritz-Carlton Residences~~totaling $202,627 ~~Atlanta,~~in ~~Buckhead~~2014 ~~(the “Atlanta~~using ~~Condominium~~proceeds ~~Project”),~~from ~~consisting~~apartment ofcommunity ~~129 units~~sales, ~~and~~resulted ~~The~~in ~~Four~~reduced ~~Seasons~~gross ~~Residences~~interest ~~in Austin~~expense, ~~Texas~~compared ~~(the~~to ~~“Austin Condominium Project”)~~2014, ~~consisting~~ of ~~148 units~~$2,198 ~~which~~for ~~are~~the ~~both~~three ~~currently~~months ~~expected~~ended toJune 30, ~~begin~~2015 ~~delivering completed~~and ~~units~~$5,213 infor the ~~first~~six ~~quarter~~months ofended ~~2010~~June 30, 2015.

The ~~Company’s~~following ~~expansion~~discussion ~~into~~should ~~for-sale~~be ~~condominium~~read ~~housing~~in ~~exposes~~conjunction with the ~~Company~~selected ~~to additional~~financial ~~risks~~data and ~~challenges,~~with ~~including~~all ~~potential~~of ~~future~~the ~~losses~~accompanying orconsolidated ~~impairments,~~financial ~~which~~statements appearing ~~could~~elsewhere ~~have~~in anthis ~~adverse~~report. ~~impact~~This ondiscussion is combined for the Company’s ~~business,~~and the Operating Partnership as their results of operations and financial condition. ~~See~~are ~~“Risk~~substantially ~~Factors” in~~ the ~~Company’s Form~~same ~~10-K~~except for the ~~year~~effect ~~ended~~of ~~December 31,~~the ~~2008~~0.2% (weighted average common minority interest in the ~~“Form~~Operating ~~10-K”)~~Partnership. ~~for~~See athe ~~discussion~~summary offinancial ~~these~~information ~~and~~in ~~other~~the ~~Company~~section ~~risk~~below ~~factors~~titled, “Results of Operations.”

-Disclosure 45Regarding Forward-Looking Statements

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Of followed by or that include the ~~above-described~~words ~~condominium~~“believes,” ~~conversions~~“expects,” “anticipates,” “plans,” “estimates,” “should,” or similar expressions. Examples of such statements in this report include expectations regarding economic and ~~completed~~apartment ~~condominium~~market ~~developments~~conditions, athe ~~total~~Company’s anticipated operating results in 2015, expectations regarding future impairment charges, anticipated construction and development activities (including projected costs, timing and anticipated potential sources of 51financing of future development activities), expectations regarding cash flows from operating activities, expected costs of development, anticipated investment, interest and other expenses, expectations regarding the use of proceeds from outstanding borrowings and effective interest rates under the Company’s unsecured term loan and revolving credit facilities, expectations regarding compensation costs for stock-based compensation, expectations regarding the delivery of apartment units at ~~three~~lease-up communities, ~~remained~~the ~~unsold~~Company’s expected debt levels, expectations regarding the availability of additional capital, unsecured and secured ~~not~~financing, ~~under~~the ~~contract~~anticipated dividend level in 2015 and expectations regarding the source of funds for ~~sale~~payment of the dividend, asexpectations regarding the Company’s ability to execute its 2015 business plan and to meet short-term and long-term liquidity requirements, including capital expenditures, development and construction expenditures, land and apartment community sales and acquisitions, dividends and distributions on its common and preferred equity and debt service requirements and long-term liquidity requirements including maturities of ~~July 28~~long-term debt and acquisition and development activities, ~~2009~~the Company’s expectations regarding asset acquisitions and sales in 2015, ~~with~~the aCompany’s ~~carrying~~expectations regarding ~~value~~the use of ~~less~~joint ~~than~~venture ~~$10~~arrangements,~~000.~~ ~~There~~expectations ~~can~~regarding beat-the-market nocommon ~~assurance~~equity ~~that~~programs ~~units~~and the use of proceeds thereof, expectations regarding share repurchases, expectations regarding the DOJ matter and the outcome of and insurance coverage for other legal proceedings, and expectations regarding the Company’s ability to maintain its REIT status under ~~contract~~the Internal Revenue Code. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on beliefs and assumptions of the Company’s management, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding the market for ~~sale~~the ~~will~~Company’s ~~actually~~apartment ~~close~~communities, demand for apartments in the markets in which it operates, competitive conditions and general economic conditions. These assumptions could prove inaccurate. The forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond the Company’s ability to control or predict. Such factors include, but are not limited to, the following:

• The ~~aggregate~~success ~~projected capital cost~~ of the ~~Atlanta~~Company’s ~~Condominium~~business ~~Project~~strategies ~~and~~described ~~the~~on ~~Austin~~pages ~~Condominium~~2 ~~Project is approximately $250,000, of which approximately $86,500 of costs remained~~ to be3 ~~incurred as~~ of ~~June 30, 2009. Additionally, of~~ the ~~total projected investment, approximately $74,700 was deemed impaired and written down as an impairment charge during the second quarter of 2009, as described further below, which the~~ Company’s ~~currently~~Form projects will result in an aggregate net carrying value of approximately $175,000 for these two condominium developments when complete. There can be no assurances, however, that actual costs will not exceed these estimates or that additional impairment charges will not be recorded in subsequent periods as described further below. As of July 28, 2009, the Company had 67 units under contract at the Austin Condominium Project and had no units under contract at the Atlanta Condominium Project. There can be no assurance that units under contract for sale will actually close. 10-K;

~~Beginning~~• inConditions ~~2007~~affecting ~~and~~ownership ~~continuing presently, the Company has observed a substantial decline in the condominium and single family housing markets due to increasing supplies~~ of such assets, weak consumer confidence, tighter credit markets for home purchasers, which the Company believes has negatively impacted the ability of prospective condominium buyers to qualify for mortgage financing, and a significant slow down in the residential ~~housing~~real ~~market~~estate ~~in the U.S. In response, the Company implemented price reductions in 2008~~ and ~~during~~general ~~the~~conditions ~~first half of 2009~~ in an effort to reduce its unsold condominium inventory at its completed and active for-sale projects. These reduced pricing programs have generally resulted in lower condominium profits compared to prior years. There can be no assurance of the ~~amount or pace of future for~~multi-~~sale~~family ~~condominium~~residential ~~sales~~real ~~and~~estate closings. However, the Company does expect that condominium closings will likely continue to be slow for the remainder of 2009. As discussed in Note 1 to the consolidated financial statements contained herein, the Company uses the relative sales value method to allocate costs and recognize profits from condominium projects, which requires the Company to estimate its total condominium costs and profits each period. Thus, price reductions for condominium units have adversely impacted profits realized from sales of condominiums to date and will continue to do so in future periods. market;

~~Since~~• ~~the~~Uncertainties ~~beginning~~associated ofwith ~~2009,~~ the Company has observed a continued worsening of conditions in the U.S. economy and the housing markets, generally, and in the Atlanta upper-end single family and condominium markets, specifically, including the price discounting of competitive products in the Atlanta/Buckhead market. In addition, the government-sponsored mortgage agencies have imposed tighter restrictions on mortgage lending to condominium projects which the Company believes may adversely impact sales at its two luxury condominium developments. As such, management revised its current expectations regarding the timing and projected future cash flows from its condominium projects under development, and as a result, recorded non-cash impairment charges of approximately $76,317 (net of noncontrolling interests of $8,074) for the three and six months ended June 30, 2009 to write-down the carrying value of its investment in the Atlanta Condominium Project joint venture development and adjacent land. The estimated fair value of the condominium project was derived from the present value of the Company’s ~~estimated future~~real ~~cash~~estate ~~flows~~development ~~using a 23% discount rate. The Company’s cash flow assumptions reflect reduced list prices for the condominium units~~ and ~~also assume an extended sell out period, consistent with current market conditions.~~ construction;

~~The~~• ~~Company~~Uncertainties ~~also~~associated ~~evaluated~~with the ~~Austin~~timing Condominium Project for impairment as of June 30, 2009, but concluded that the project was not deemed impaired under generally accepted accounting principles as of that date, because the projected future undiscounted cash flows exceeded the carrying value of the asset. Notwithstanding, had the Company applied the same 23% discount rate to calculate the present value of the estimated future cash flows, the Company estimated that fair value of the Austin Condominium Project would have been approximately $35,000 less than its carrying value as of June 30, 2009. As a result, if current cash flow assumptions were to remain unchanged, the Company’s analysis indicates that it would likely be required to record an impairment charge for this asset when it becomes substantially complete and ~~considered~~amount ~~“held for sale” in or around the first quarter~~ of ~~2010.~~apartment ~~Additionally,~~community if the Company’s projections of future undiscounted cash flows were to indicate in future quarters that the carrying value of the asset was not deemed recoverable prior to substantial completion, it is possible that the Company would be required to record an impairment charge in an earlier future period. There can be no assurance that the Company’s cash flow projections will not change in future periods, that the estimated fair value of the Austin Condominium Project will not change in the future as a consequence, or that any impairment of this asset will actually be realized. sales;

In• ~~general,~~Exposure ~~should~~to ~~the~~economic ~~Company further adjust its estimates regarding costs~~ and ~~profits~~other ~~expected~~competitive tofactors bedue ~~realized from its condominium projects in future periods, or change its estimates regarding future cash flows or fair value, the Company may recognize additional losses in subsequent periods~~ to ~~reduce~~market ~~estimated profits previously recorded or may recognize additional impairment losses if the carrying value of these assets is not deemed recoverable.~~ concentration;

- 46 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The following discussion should be read in conjunction with the selected financial data and with all of the accompanying consolidated financial statements appearing elsewhere in this report. This discussion is combined for the Company and the Operating Partnership as their results of operations and financial condition are substantially the same except for the effect of the 0.5% weighted average common minority interest in the Operating Partnership. See the summary financial information in the section below titled, “Results of Operations.”

Disclosure Regarding Forward-Looking Statements

Certain statements made in this report, and other written or oral statements made by or on behalf of the Company, may constitute “forward-looking statements” within the meaning of the federal securities laws. In addition, the Company, or the executive officers on the Company’s behalf, may from time to time make forward-looking statements in reports and other documents the Company files with the SEC or in connection with oral statements made to the press, potential investors or others. Statements regarding future events and developments and the Company’s future performance, as well as management’s expectations, beliefs, plans, estimates or projections relating to the future, are forward-looking statements within the meaning of these laws. Forward-looking statements include statements preceded by, followed by or that include the words "believes," "expects," "anticipates," "plans," "estimates," or similar expressions. Examples of such statements in this report include the Company’s anticipated performance for the remainder of 2009 (including the Company’s assumptions for such performance and expected levels of costs and expenses to be incurred in the remainder of 2009), anticipated apartment community sales (including the estimated proceeds, estimated gains on sales and the use of proceeds from such sales), anticipated conversion of apartment communities into condominium homes, development of new for-sale condominium housing and the related sales of the for-sale condominium homes, including expectations regarding demand for for-sale housing and the Company’s inability to sell for-sale products at attractive pricing levels, anticipated future acquisition and development activities (including projected costs, timing and anticipated potential sources of financing of future development activities), anticipated costs, timing and expense to remediate and improve apartment communities with stucco and EIFS exteriors, expectations regarding the timing and projected future cash flows from land held for future development and estimated fair values of land holdings, expected costs of interest expense, anticipated refinancing and other new financing needs, the anticipated dividend level in 2009, the Company’s ability to meet new construction, development and other long-term liquidity requirements, the Company’s ability to execute future asset sales, expectations regarding the outcome of legal proceedings, and expectations regarding the Company’s ability to maintain its REIT status under the Internal Revenue Code of 1986, as amended (the “Code”). Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on beliefs and assumptions of the Company’s management, which in turn are based on currently available information. Important assumptions relating to the forward-looking statements include, among others, assumptions regarding the market for the Company’s apartment communities, demand for apartments in the markets in which it operates, competitive conditions and general economic conditions. These assumptions could prove inaccurate. The forward-looking statements also involve risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statement. Many of these factors are beyond the Company’s ability to control or predict. Such factors include, but are not limited to, the following:

• The success of the Company’s business strategies described on pages 2 to 3 of the Form 10-K for the year ended December 31, 2008 (the “Form 10-K”) and those discussed under “Conclusion of Strategic Process and Strategies to Enhance Shareholder Value” in the Management Discussion and Analysis of Financial Condition and Results of Operations of the Form 10-K;

•

Future local and national economic conditions, including changes in job growth, interest rates, the availability of mortgage and other financing and related factors;

•

The Company’s ability to generate sufficient cash flows to make required payments associated with its debt financing;

•

The effects of the Company’s leverage on its risk of default and debt service requirements;

•

The impact of a downgrade in the credit rating of the Company’s securities;

•

The effects of a default by the Company or its subsidiaries on an obligation to repay outstanding indebtedness, including cross-defaults and cross-acceleration under other indebtedness or the responsibility for recourse guarantees;

•

The effects of covenants of the Company’s or its subsidiaries’ mortgage indebtedness on operational flexibility and default risks;

•

Uncertainties associated with the global capital markets, including the continued availability of traditional sources of capital and liquidity and related factors;

• AThe ~~downgrade~~Company’s inability ~~the~~to ~~credit~~maintain ~~rating~~its ofcurrent ~~the~~dividend ~~Company’s securities~~level;

• ~~Demand~~The ~~for~~impact ~~apartments~~of inany additional charges the Company’s ~~markets~~may ~~and~~be required to record in the ~~effect~~future onrelated ~~occupancy~~to ~~and~~any ~~rental~~impairment ~~rates~~in the carrying value of its assets;

• The impact of competition on the Company’s business, including competition for residents in the Company’s apartment communities and ~~buyers of the Company’s for-sale condominium homes and~~ development locations;

• The ~~uncertainties associated with the~~ Company’s ~~real~~ability ~~estate~~to ~~development,~~compete ~~including~~for ~~actual~~limited ~~costs~~investment ~~exceeding the Company’s budgets or development periods exceeding expectations~~opportunities;

•28 ~~Uncertainties associated with the timing and amount of apartment community sales, the market for such sales and the resulting gains/losses associated with such sales;~~

• The Company’s ability to enter into new joint ventures and the availability of equity financing from traditional real estate investors to fund development activities;

- 47 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

• The ~~Company’s~~effects ~~ability~~of toany ~~obtain~~decision ~~construction~~by ~~loan~~the ~~financing~~government to ~~fund~~eliminate ~~development~~Fannie ~~activities~~Mae or Freddie Mac or reduce government support for apartment mortgage loans;

• ~~Uncertainties~~The ~~associated~~effect ~~with~~of ~~the~~changes ~~Company’s~~in ~~condominium~~interest ~~conversion~~rates and ~~for-sale housing business, including~~ the ~~timing~~effectiveness ~~and~~of ~~volume~~interest ofrate ~~condominium~~hedging ~~sales~~contracts;

• ~~Uncertainties~~The ~~associated~~success ~~with loss~~ of ~~personnel in connection with~~ the Company’s ~~reduction~~acquired ofapartment ~~corporate and property development and management overhead~~communities;

• ~~Conditions~~The ~~affecting~~Company’s ~~ownership~~ability ofto ~~residential~~succeed ~~real estate and general conditions~~ in ~~the~~new ~~multi-family residential real estate market~~markets;

•

The costs associated with compliance with laws requiring access to the Company’s properties by persons with disabilities, including the impact of the Company’s ongoing litigation with the U.S. Department of Justice (“DOJ”) regarding the Americans with Disabilities Act and the Fair Housing Act as well as the impact of other litigation;

•

Any breach of the Company’s privacy or information security systems;

•

The effects of losses from natural catastrophes in excess of insurance coverage;

•

Uncertainties associated with environmental and other regulatory matters;

• The ~~impact~~costs ofassociated ~~the Company’s ongoing litigation~~ with ~~the~~moisture ~~Equal~~infiltration ~~Rights Center regarding the Americans with Disabilities Act~~ and ~~the~~resulting ~~Fair~~mold Housing Act (including any award of compensatory or punitive damages or injunctive relief requiring the Company to retrofit apartments or public use areas or prohibiting the sale of apartment communities or condominium units) as well as the impact of other litigationremediation;

• ~~The~~Uncertainties ~~effects~~associated ofwith ~~changes~~increased incosts ~~accounting~~to ~~policies~~own and ~~other~~maintain ~~regulatory matters detailed in~~ the Company’s ~~filings~~apartment ~~with the Securities and Exchange Commission and uncertainties of litigation~~communities;

• ~~The~~Ongoing ~~costs~~risks ofand ~~remediating~~uncertainties ~~damage~~associated towith the Company’s ~~communities~~previous ~~that~~investment ~~have~~in ~~stucco or exterior insulation finishing systems~~ for-sale ~~potential~~condominium ~~water~~housing, ~~penetration~~including warranty and ~~other~~ related ~~issues~~obligations;

• The Company’s ability to ~~continue~~control tojoint ~~qualify~~ventures, asproperties ain ~~REIT~~which ~~under~~it ~~the~~has ~~Code;~~joint ownership and corporations and limited partnership in which it has partial interests;

• ~~Other~~The ~~factors,~~Company’s ~~including~~ability ~~the~~to ~~risk~~renew ~~factors~~leases ~~discussed~~or inrelet ~~Item~~units 1Aas ofleases ~~the Form 10-K.~~expire;

•

The Company’s ability to continue to qualify as a REIT under the Internal Revenue Code;

•

The Operating Partnership’s ability to continue to be treated as a partnership under the Internal Revenue Code;

•

The effects of changes in accounting policies and other regulatory matters detailed in the Company’s filings with the Securities and Exchange Commission;

•

Increased costs arising from health care reform; and

•

Other factors, including the risk factors discussed in Item 1A of the Company’s Form 10-K.

Management believes these forward-looking statements are reasonable; however, undue reliance should not be placed on any forward-looking statements, which are based on current expectations. Further, forward-looking statements speak only as of the date they are made, and management undertakes no obligation to update publicly any of them in light of new information or future events.

Critical ~~Accounting~~accounting ~~Policies~~policies and ~~New~~new ~~Accounting~~accounting ~~Pronouncements~~pronouncements

In the preparation of financial statements and in the determination of Company operating performance, the Company utilizes certain significant accounting ~~polices~~ policies. The Company’s significant accounting policies are included in the notes to the Company’s consolidated financial statements included in the Company’s ~~Annual Report on~~ Form 10-K ~~for the year ended December 31, 2008~~. The Company’s critical accounting policies are those that ~~require~~ require application of management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. For a complete description of the Company’s critical accounting policies, please refer to pages 3229 ~~through~~to 3431 of the Company’s Form 10-K. ~~Other~~There ~~than discussed below, there~~ were no significant changes to the Company’s critical accounting policies and estimates ~~during~~ for the ~~six~~three and six months ended June 30, ~~2009~~2015. The discussion below details the Company’s critical accounting ~~policy~~policies related to asset impairments ~~and~~as ~~addresses~~well as the ~~implementation and~~ impact of ~~recently~~the ~~issued~~new ~~and adopted~~ accounting pronouncements ~~with~~relating anto ~~impact~~revenue onrecognition, ~~the~~consolidated reporting ~~Company~~and ~~for~~ the ~~six~~presentation ~~months~~of ~~ended~~debt ~~June 30,~~issuance ~~2009~~costs orand ~~that~~interest ~~may have an impact on future reported results~~expense.

The Company continually evaluates the recoverability of the carrying value of its real estate assets using the methodology summarized in its accounting policies (see note 1 to the consolidated financial statements). Under current accounting literature, the evaluation of the recoverability of the Company’s real estate assets requires the judgment of Company management in the determination of the ~~value of the~~ future cash flows expected from the assets and the estimated holding period for the assets. The Company uses market capitalization rates to determine the estimated residual value of its operating real estate assets and, generally, takes a long-term view of the holding period of its assets unless specific facts and circumstances warrant shorter holding periods (expected sales, departures from certain geographic markets, etc.). The Company considers a real estate asset held for investment as impaired if the undiscounted, estimated future cash flows of the asset (both the annual estimated cash flow from future operations and the estimated cash flow from the asset’s eventual sale) over its expected holding period are less than the asset’s net book value. For real estate assets held for sale, ~~the Company recognizes impairment losses~~ if ~~an asset’s net book value is in excess of its estimated fair value~~any, ~~less costs to sell. At June 30, 2009, management believed it had applied reasonable estimates and judgments in determining~~ the ~~proper~~ ~~classification of its real estate assets. Should external or internal circumstances change requiring the need to shorten the holding periods or adjust the estimated future cash flows of certain of the~~ Company’s ~~assets,~~recognizes ~~the Company could be required to record future impairment charges.~~

In29 addition, for-sale condominium assets under development are evaluated for impairment using the methodology for assets held for future investment (using projected future undiscounted cash flows). However, once construction of these assets is completed and units are ready for their intended use, for-sale condominium assets are evaluated for impairment using the methodology for assets held for sale (using discounted projected future cash flows). The Company and its affiliates currently

- 48 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~own~~impairment ~~interests~~losses inif ~~two~~an ~~luxury~~asset’s ~~condominium~~net ~~assets~~book ~~with~~value ais ~~total~~in ~~projected~~excess ~~cost~~ of ~~approximately~~its ~~$250,000.~~estimated ~~Initial~~fair ~~condominium~~value, ~~units~~less incosts ~~these~~to ~~projects~~sell. ~~are currently~~At ~~expected~~June 30, to2015, ~~completed~~management ~~and~~believed ~~delivered~~it ~~for~~had ~~their~~applied ~~intended~~reasonable ~~use~~estimates and ~~starting~~judgments in determining the ~~first~~proper ~~quarter~~classification of ~~2010~~its real estate assets and determined that no impairment existed. See notes 1 and 8 to the ~~“Operations~~consolidated ~~Overview”~~financial ~~section~~statements for a further discussion of ~~this~~the ~~Management~~Company’s ~~Discussion~~methodologies ~~and~~for determining ~~Analysis~~the fair value of ~~Financial~~the ~~Conditions~~Company’s ~~and~~real ~~Results~~estate ~~of Operations~~assets. ~~and~~Should ~~note~~external 3or internal circumstances change requiring the need to shorten the ~~consolidated~~holding ~~financial~~periods ~~statements~~or ~~for~~adjust athe ~~discussion~~estimated future cash flows of ~~impairment~~certain ~~analyses~~of ~~and~~the ~~charges~~Company’s assets, ~~related~~the toCompany ~~these~~could ~~condominium~~be ~~assets~~required into ~~the~~record ~~second~~impairment ~~quarter~~charges ofin ~~2009~~the future.

~~SFAS~~In May 2014, Accounting Standards Update No. ~~160~~2014-09 (“ASU 2014-09”), “~~Noncontrolling~~Revenue ~~Interests~~from inContracts ~~Consolidated~~with ~~Financial~~Customers,” ~~Statements~~was –issued. AnThis ~~Amendment~~new ofguidance ~~ARB~~establishes ~~No. 51,”~~a ~~was~~single ~~issued~~comprehensive inrevenue ~~December~~recognition ~~2007~~model under U.S. ~~SFAS~~GAAP Noand provides for enhanced disclosures. ~~160~~ ~~requires~~Under ~~all~~this new guidance, the amount ~~entities~~of torevenue ~~report~~recognized ~~noncontrolling~~for ~~interests~~certain ~~(previously~~transactions ~~referred~~could todiffer asfrom ~~minority~~amounts ~~interests)~~recognized inunder ~~subsidiaries~~existing asaccounting ~~permanent~~guidance orand ~~temporary~~could ~~equity~~also result in recognition in different reporting periods. Also, the ~~consolidated~~provisions ~~financial~~of ~~statements~~ASU 2014-09 exclude revenue recognition regarding lease contracts. ~~The~~In ~~Company~~July ~~adopted~~2015, ~~SFAS~~ASU No2014-09 was amended to defer the effective date by one year. The new guidance is effective for annual reporting periods beginning after December ~~160~~15, on2017; ~~January~~however, adoption is permitted for annual reporting periods beginning after December 115, ~~2009~~2016. The ~~adoption~~ ofCompany ~~SFAS~~expects ~~No.~~to adopt ASU 2014-09 as of January ~~160~~1, ~~did~~2018 ~~not~~and ~~have~~is acurrently ~~material~~evaluating the impact onthat ~~the~~this ~~Company’s~~new ~~financial~~guidance ~~position~~may orhave on its results of operations.

~~FASB~~In ~~Staff Position~~February ~~EITF 03-6-1~~2015, ~~“Determining~~Accounting ~~Whether~~Standards ~~Instruments~~Update ~~Granted in Share~~No. 2015-~~Based~~02 ~~Payment Transactions Are Participating Securities,”~~ (“~~FSP~~ASU ~~EITF 03~~2015-~~6-1~~02”), “Consolidation,” was issued. inThe ~~June~~new ~~2008.~~guidance ~~FSP~~primarily amends ~~EITF~~current ~~03-6-1~~consolidation ~~was~~accounting ~~effective~~guidance ~~January 1,~~with ~~2009. FSP~~respect ~~EITF~~to ~~03-6-1~~the ~~requires~~evaluation ~~that~~criteria ~~unvested~~for ~~share~~determining ~~based~~whether ~~payment~~certain ~~awards~~limited ~~that~~partnerships ~~contain~~or ~~non-forfeitable~~similar ~~rights~~legal toentities ~~dividends~~and orcertain ~~dividend~~variable ~~equivalents~~interest beentities ~~treated~~are assubject ~~participating~~to ~~securities~~consolidated ~~for~~reporting. ~~purposes~~The new ofguidance ~~the~~is ~~computation~~effective offor ~~net~~reporting ~~income~~periods ~~available~~beginning toafter ~~common shareholders~~December 15, 2015. The Company ~~adopted~~expects ~~FSP~~to ~~EITF~~adopt 03ASU 2015-~~6-1~~02 ~~retrospectively,~~as ~~effective~~of January 1, ~~2009.~~2016 Inand ~~accordance~~is ~~with~~currently ~~FSP~~evaluating ~~EITF~~the ~~03-6-1,~~impact ~~prior~~this ~~period~~new ~~earnings~~standard ~~per~~may ~~share amounts~~ have ~~been adjusted accordingly. The adoption of FSP EITF 03-6-1 did not have a material impact~~ on ~~the~~its ~~Company’s~~ financial position, and results of operations ~~or earnings per share~~.

~~SFAS~~In April 2015, Accounting Standards Update No. ~~141R,~~ 2015-03 (“~~Business~~ASU ~~Combinations~~2015-03”), “Interest-Imputation of Interest”, was issued. inThe ~~December~~new ~~2007.~~guidance ~~SFAS~~requires ~~No. 141R~~debt ~~replaced~~issuance ~~SFAS~~costs ~~No. 141.~~to ~~SFAS~~be ~~No. 141R~~reported ~~requires~~as ~~(1) acquirers~~direct todeductions ~~recognize~~from ~~all~~the face value of the ~~assets~~related ~~acquired~~debt ~~and~~instrument ~~liabilities assumed~~ in athe ~~business~~preparation ~~combination, (2) that~~of ~~the~~consolidated ~~acquisition~~balance ~~date~~sheets. beCurrently, ~~used~~such todebt ~~determine~~issuance ~~fair~~costs are ~~value~~reported ~~for~~as ~~all~~deferred assets ~~acquired~~on ~~and~~the ~~all~~consolidated ~~liabilities~~balance ~~assumed~~sheet. Further, ~~and~~the ~~(3) enhanced~~amortization ~~disclosures~~of ~~for~~debt ~~the~~issuance ~~acquirer~~costs ~~surrounding~~will ~~the~~be ~~financial~~reported ~~effects~~as ofinterest ~~the~~expense ~~business~~in ~~combination.~~the ~~The~~consolidated ~~provisions~~ statement of ~~SFAS~~operations, ~~141R~~under ~~also~~ASU ~~requires~~2015-03. ~~the~~Currently, ~~expensing~~amortization expense of ~~acquisition~~debt ~~related~~issuance ~~transaction~~ costs ~~and~~is ~~the~~reported ~~potential~~as ~~recognition~~a ofseparate ~~acquisition~~line ~~related~~item ~~contingencies.~~in ~~The~~the ~~Company~~consolidated ~~adopted~~statement ~~SFAS~~of Nooperations. ~~141R~~ onThe ~~January 1,~~new ~~2009.~~guidance ~~The~~is ~~adoption~~effective offor ~~SFAS~~reporting ~~No. 141R did~~periods ~~not~~beginning ~~have~~after aDecember 31, ~~material~~2015. ~~impact~~The onCompany ~~the~~expects ~~Company’s~~to ~~financial~~adopt ~~position~~ASU or2015-03 ~~results~~as of January 1, ~~operations~~2016.

~~SFAS~~Results No. 165, “Subsequent Events,” was issued in June 2009. SFAS No. 165 further clarifies the period subsequent to the balance sheet date in which companies should disclose certain financial statement events or transactions. It also further clarifies the circumstances under which a company should consider recognition of those events or transactions occurring after the balance sheet date as well as provides guidance regarding the required disclosures. The Company adopted SFAS No. 165 as of June 30, 2009. The adoption of SFAS No. 165 did not have a material impact on the Company’s financial statements or results of operations.

~~FASB~~The following ~~Staff~~discussion ~~Position~~of ~~No.~~results ~~FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value~~ of ~~Financial~~operations ~~Instruments,”~~should ~~(“FSP~~be ~~FAS~~read ~~107-1”) was issued~~ in ~~April~~conjunction ~~2009.~~with ~~FSP FAS 107-1 requires that companies disclose information about~~ the ~~fair~~consolidated ~~value~~statements of ~~their~~operations ~~financial instruments in both interim~~ and ~~annual~~the ~~periods.~~community ~~The~~operations/segment ~~Company~~performance ~~adopted~~information ~~FSP FAS 107-1 as of June 30, 2009 and has~~ included ~~the required fair value disclosures in its notes to the consolidated financial statements~~below.

~~SFAS~~The ~~No. 167,~~Company’s ~~“Amendments~~revenues toand ~~FASB~~earnings ~~Interpretation~~from ~~No. 46(R),”~~continuing ~~was~~operations ~~issued~~are ingenerated ~~June 2009.~~primarily ~~SFAS~~from ~~No. 167 addresses~~ the ~~impact~~operation ~~that the elimination~~ of ~~the~~its ~~qualifying~~apartment ~~special~~communities. ~~purpose~~For ~~entity~~purposes ~~(“QSPE”)~~of evaluating ~~concept~~comparative ~~has~~operating ~~on FIN 46(R) and will require companies to evaluate all entities~~performance, ~~even~~the ~~those~~Company ~~previously~~categorizes ~~considered~~its tooperating beapartment ~~QSPEs, as~~communities ~~potential~~based ~~variable~~on ~~interest entities (“VIEs”). SFAS No. 167 also addresses~~ the ~~timely~~period ~~accounting~~each ~~and~~community ~~disclosure~~reaches ~~requirements~~stabilized ofoccupancy. ~~companies’~~The ~~variable~~Company ~~interests~~generally byconsiders ~~(1) requiring~~a ~~ongoing~~community ~~reassessments~~to ofhave ~~whether~~achieved ~~or not the~~stabilized ~~company~~occupancy ison the ~~primary~~earlier ~~beneficiary,~~to ~~(2) adding~~occur anof ~~additional reconsideration requirement,~~ (31) ~~eliminating~~attainment ~~the~~of ~~quantitative~~95% ~~approach~~physical ~~previously~~occupancy ~~used~~on ~~to determine~~ the ~~primary~~first ~~beneficiary~~day of aany ~~VIE~~month ~~and~~or (42) ~~amending~~one ~~certain~~year ~~guidance~~after ~~for determining~~completion ~~which entities are VIEs. SFAS No. 167 is effective for the Company on January 1, 2010. The Company is currently evaluating the potential impact~~ of ~~SFAS No~~construction. ~~167~~ ~~on the Company’s financial position and results of operations.~~

InFor ~~June 2009,~~ the ~~Financial~~three ~~Accounting~~and ~~Standards~~six ~~Board~~months ~~(“FASB”)~~ended ~~completed~~June 30, ~~its~~2015, ~~codification project. The “FASB Accounting Standards Codification” (~~the ~~“Codification”)~~Company’s isportfolio ~~effective~~of asoperating ofapartment ~~July 1~~communities, ~~2009~~excluding ~~and~~four ~~will~~communities beheld ~~the~~in unconsolidated ~~single~~entities, ~~source~~consisted of ~~authoritative~~the ~~generally~~following: ~~accepted~~(1) 50 ~~accounting~~communities ~~principles~~that inwere ~~the~~completed ~~United~~and ~~States.~~stabilized ~~Upon~~for ~~adoption,~~all ~~companies~~of ~~will no longer refer to~~ the ~~authoritative~~current ~~guidance~~and ~~dictating~~prior ~~its~~year, ~~accounting~~(2) two ~~methodologies~~communities ~~under~~and ~~the~~portions ~~previous hierarchy~~ of ~~FASB~~one ~~Statements,~~community ~~FASB~~which ~~Interpretations,~~reached ~~etc.~~stabilized ~~Instead,~~occupancy ~~companies~~in ~~will cite the Codification references~~2014, and ~~which~~(3) one ~~are~~community ~~organized~~and byportions ~~topic. The~~of ~~Codification~~one iscommunity ~~effective~~in ~~for~~lease-up, ~~periods~~one ~~beginning~~of onwhich orreached ~~after~~stabilized ~~July 1,~~occupancy ~~2009~~in 2015.

The Company has adopted an accounting policy related to communities in the lease-up 49stage whereby substantially all operating expenses (including pre-opening marketing and management and leasing personnel expenses) are expensed as incurred. During the lease-up phase, the sum of interest expense on completed units and other operating expenses (including pre-opening marketing and management and leasing personnel expenses) will initially exceed rental revenues, resulting in a “lease-up deficit,” which continues until such time as rental revenues exceed such expenses. Lease-up deficits were $172 and $448 for the three months ended June 30, 2015 and 2014, respectively, and $172 and $949 for the six months ended June 30, 2015 and 2014, respectively. The Company expects to incur lease-up deficits for the full year of 2015 at lease-up communities, as the Company delivers completed apartment units at newly constructed communities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

Results of Operations

The following discussion of results of operations should be read in conjunction with the consolidated statements of operations, the accompanying selected financial data and the community operations/segment performance information included below.

The Company’s revenues and earnings from continuing operations are generated primarily from the operation of its apartment communities. For purposes of evaluating comparative operating performance, the Company categorizes its operating apartment communities based on the period each community reaches stabilized occupancy. The Company generally considers a community to have achieved stabilized occupancy on the earlier to occur of (1) attainment of 95% physical occupancy on the first day of any month or (2) one year after completion of construction.

At June 30, 2009, the Company’s portfolio of operating apartment communities, excluding five communities held in unconsolidated entities, consisted of the following: (1) 41 communities that were completed and stabilized for all of the current and prior year, (2) two communities and an additional phase of one community that achieved full stabilization during 2008, (3) portions of two communities that are being converted into condominiums that are reflected in continuing operations, and (4) seven communities under construction, under rehabilitation programs or in lease-up. These operating segments exclude the operations of two apartment communities classified as discontinued operations.

In order to evaluate the operating performance of its communities for the comparative years listed below, the Company has presented financial information which summarizes the rental and other revenues, property operating and maintenance expenses (excluding depreciation and amortization) and net operating income on a comparative basis for all of its operating communities and for its stabilized operating communities. Net operating income is a supplemental non-GAAP financial measure. 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. Net operating income is reconciled to GAAP net income in the financial information accompanying the tables. 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. This measure is particularly useful, in the opinion of the Company, in evaluating the performance of geographic operations, 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.

-All operating 50communities -

The operating performance and capital expenditures from continuing operations for all of the Company’s apartment communities and other commercial properties summarized by segment for the three and six months ended June 30, 2015 and 2014 were as follows:


	Three months ended										Six months ended
	June 30,										June 30,
	2015		2014		$ Change			% Change			2015		2014		$ Change			% Change
Rental and other property revenues
Fully stabilized communities (1)	$	84,401	$	82,109	$	2,292			2.8	%	$	167,098	$	162,899	$	4,199			2.6	%
Newly stabilized communities (2)		4,260		2,419		1,841			76.1	%		8,419		4,277		4,142			96.8	%
Lease-up communities (3)		1,096		213		883			414.6	%		2,118		233		1,885			809.0	%
Held for sale and sold communities (4)		—		4,820		(4,820	)		(100.0	)%		—		10,689		(10,689	)		(100.0	)%
Other property segments (5)		5,400		5,242		158			3.0	%		10,640		9,998		642			6.4	%

		95,157		94,803		354			0.4	%		188,275		188,096		179			0.1	%

Property operating and maintenance expenses (excluding depreciation and amortization)
Fully stabilized communities (1)		33,420		32,562		858			2.6	%		65,786		63,606		2,180			3.4	%
Newly stabilized communities (2)		1,577		1,208		369			30.5	%		3,129		2,292		837			36.5	%
Lease-up communities (3)		720		381		339			89.0	%		1,216		501		715			142.7	%
Held for sale and sold communities (4)		—		2,246		(2,246	)		(100.0	)%		—		5,343		(5,343	)		(100.0	)%
Other property segments, including corporate management expenses (6)		5,795		5,398		397			7.4	%		11,504		10,649		855			8.0	%

		41,512		41,795		(283	)		(0.7	)%		81,635		82,391		(756	)		(0.9	)%

Property net operating income (7)	$	53,645	$	53,008	$	637			1.2	%	$	106,640	$	105,705	$	935			0.9	%

Capital expenditures (8)
Annually recurring	$	3,871	$	3,795	$	76			2.0	%	$	6,139	$	6,216	$	(77	)		(1.2	)%

Periodically recurring	$	1,824	$	2,087	$	(263	)		(12.6	)%	$	2,522	$	4,608	$	(2,086	)		(45.3	)%

Average apartment units in service		20,108		20,194		(86	)		(0.4	)%		20,084		20,192		(108	)		(0.5	)%

1)	Communities which reached stabilization prior to January 1, 2014.

2)	Communities which reached stabilized occupancy in 2014.

3)	Communities in lease-up but were not stabilized by the beginning of 2015, including communities stabilized in 2015.

4)	Communities classified as held for sale and sold (and not reported as discontinued operations under ASC Topic 360).

Other property segment revenues include revenues from commercial properties, revenues from furnished apartment rentals above the unfurnished rental rates and any property revenue not directly related to property operations. Other property segment revenues exclude other corporate revenues of $274 and $223 for the three months and $587 and $442 for the six months ended June 30, 2015 and 2014, respectively.

6)	Other expenses include expenses associated with commercial properties, furnished apartment rentals and corporate property management expenses. Corporate property management expenses were $3,198 and $2,934 for the three months and $6,296 and $5,824 ended June 30, 2015 and 2014, respectively.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~All~~7) ~~Operating~~A ~~Communities~~reconciliation of property net operating income to GAAP net income is detailed below.

The operating performance and capital expenditures from continuing operations for all of the Company's apartment communities, condominium conversion communities included in continuing operations, and other commercial properties summarized by segment for the three and six months ended June 30, 2009 and 2008 is summarized as follows:


	Three months ended						Six months ended
	June 30,						June 30,
	2015			2014			2015			2014
Fully stabilized community NOI	$	50,981		$	49,547		$	101,312		$	99,293
Property NOI from other operating segments		2,664			3,461			5,328			6,412

Consolidated property NOI		53,645			53,008			106,640			105,705

Add (subtract):
Interest income		43			4			124			16
Other revenues		274			223			587			442
Depreciation		(21,418	)		(20,829	)		(42,675	)		(42,596	)
Interest expense		(7,753	)		(10,433	)		(15,846	)		(21,677	)
Amortization of deferred financing costs		(433	)		(620	)		(882	)		(1,265	)
General and administrative		(4,353	)		(3,966	)		(9,367	)		(8,094	)
Investment and development		(275	)		(794	)		(510	)		(1,605	)
Other investment costs		(154	)		(210	)		(288	)		(483	)
Other expenses		—			(502	)		—			(1,409	)
Equity in income of unconsolidated real estate entities, net		568			501			965			986
Gains on sales of real estate assets, net		(298	)		36,092			1,475			36,902
Other income (expense), net		(195	)		(196	)		(390	)		(391	)
Net loss on extinguishment of indebtedness		—			(4,287	)		(197	)		(4,287	)

Net income	$	19,651		$	47,991		$	39,636		$	62,244

	Three months endedJune 30,					Six months endedJune 30,
	2009		2008		% Change	2009		2008		% Change
Rental and other property revenues
Fully stabilized communities (1)	$	57,292	$	59,297	(3.4)%	$	114,985	$	117,907	(2.5)%
Communities stabilized during 2008 (2)		2,698		2,384	13.2%		5,352		4,504	18.8%
Development, rehabilitation andlease-up communities		3,495		2,160	61.8%		6,240		4,334	44.0%
Condominium conversion and other communities (3)		38		188	(79.8)%		107		389	(72.5)%
Other property segments (4)		5,318		6,287	(15.4)%		11,109		12,655	(12.2)%
		68,841		70,316	(2.1)%		137,793		139,789	(1.4)%
Property operating and maintenanceexpenses (excluding depreciationand amortization)
Fully stabilized communities (1)		22,702		24,778	(8.4)%		45,771		48,768	(6.1)%
Communities stabilized during 2008 (2)		1,167		1,193	(2.2)%		2,385		2,506	(4.8)%
Development, rehabilitation andlease-up communities		2,827		1,691	67.2%		5,008		2,941	70.3%
Condominium conversion and other communities (3)		14		72	(80.6)%		39		152	(74.3)%
Other property segments, including corporatemanagement expenses (5)		5,948		7,461	(20.3)%		12,153		15,224	(20.2)%
		32,658		35,195	(7.2)%		65,356		69,591	(6.1)%
Property net operating income (6)	$	36,183	$	35,121	3.0%	$	72,437	$	70,198	3.2%
Capital expenditures (7)(8)
Annually recurring:
Carpet	$	694	$	705	(1.6)%	$	1,287	$	1,292	(0.4)%
Other		2,879		2,332	23.5%		4,800		3,697	29.8%
Total	$	3,573	$	3,037	17.6%	$	6,087	$	4,989	22.0%
Periodically recurring	$	9,340	$	1,699	449.7%	$	18,494	$	3,205	477.0%
Average apartment units in service		16,906		16,339	3.5%		16,869		16,318	3.4%

In addition to those expenses which relate to property operations, the Company incurs annually recurring and periodically recurring capital expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset, all of which are capitalized. Annually recurring capital expenditures are those that are generally expected to be incurred on an annual basis. Periodically recurring capital expenditures are those that generally occur less frequently than on an annual basis.

~~(1)~~Fully ~~Communities~~stabilized ~~which reached stabilization prior to January 1, 2008.~~communities

~~(2)~~The ~~Communities~~Company defines fully stabilized communities as those which have reached stabilization prior to the beginning of the previous year. For the 2015 to 2014 comparison, fully stabilized communities are defined as those communities which reached stabilization prior to January 1, 2014. This portfolio consisted of 50 communities with 18,780 units, including 12 communities with 5,065 units (27.0%) located in ~~2008~~Atlanta, Georgia, 15 communities with 4,725 units (25.2%) located in Dallas, Texas, 6 communities with 2,645 units (14.1%) located in the greater Washington D.C. metropolitan area, 4 communities with 2,111 units (11.2%) located in Tampa, Florida, 5 communities with 1,748 units (9.3%) located in Charlotte, North Carolina and 8 communities with 2,486 units (13.2%) located in other markets. The operating performance of these communities was as follows:

~~(3)~~32 ~~Portions of existing apartment communities being converted into condominiums that are reflected in continuing operations under SFAS No. 144.~~

(4) Other property segment revenues include revenues from commercial properties, revenues from furnished apartment rentals above the unfurnished rental rates and any property revenue not directly related to property operations. Other property segment revenues exclude other corporate revenues of $277 and $235 for the three months and $503 and $474 for the six months ended June 30, 2009 and 2008, respectively.

(5) Other expenses include expenses associated with commercial properties, furnished apartment rentals and certain indirect central office operating expenses related to management and grounds maintenance.

(6) A reconciliation of property net operating income to GAAP net income is detailed below.

- 51 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

			Three months endedJune 30,					Six months endedJune 30,
	Three months ended											Six months ended
			2009			2008		2009			2008
	June 30,											June 30,
	Total same store NOI		$	34,590		$	34,519	$	69,214		$	69,139
	2015				2014			% Change				2015			2014			% Change
	Property NOI from other operating segments			1,593			602		3,223			1,059
Rental and other revenues	$	84,401			$	82,109			2.8	%		$	167,098		$	162,899			2.6	%
	Consolidated property NOI			36,183			35,121		72,437			70,198
Property operating and maintenance expenses(excluding depreciation and amortization)		33,420				32,562			2.6	%			65,786			63,606			3.4	%
	Add (subtract):
Same store net operating income (1)	$	50,981			$	49,547			2.9	%		$	101,312		$	99,293			2.0	%
	Interest income			23			61		138			271
Capital expenditures (2)
	Other revenues			277			235		503			474
Annually recurring	$	3,744			$	3,617			3.5	%		$	5,960		$	5,879			1.4	%
	Depreciation			(18,009)			(15,213)		(35,601)			(30,310)
Periodically recurring		1,534				986			55.6	%			2,089			2,310			(9.6	)%
	Interest expense			(12,241)			(11,004)		(26,419)			(22,035)
Total capital expenditures (A)	$	5,278			$	4,603			14.7	%		$	8,049		$	8,189			(1.7	)%
	Amortization of deferred financing costs			(682)			(859)		(1,616)			(1,710)
Total capital expenditures per unit
	General and administrative			(3,964)			(4,351)		(8,373)			(9,485)
(A ÷ 18,780 units)	$	281			$	245			14.7	%		$	429		$	436			(1.6	)%
	Investment and development			(793)			(1,274)		(1,790)			(2,664)
Average monthly rental rate per unit (3)	$	1,448			$	1,417			2.2	%		$	1,444		$	1,411			2.3	%
	Other investment costs			(646)			(244)		(1,299)			(499)
Average economic occupancy (4)		96.0	%			95.9	%		0.1	%			95.5	%		95.6	%		(0.1	)%
	Strategic review costs			-			(2,091)		-			(8,161)
Physical occupancy, end of period (4)		95.5	%			95.9	%		(0.4	)%			95.5	%		95.9	%		(0.4	)%
	Impairment, severance and other charges			(9,658)			(29,300)		(9,658)			(29,300)
Gross turnover (5)		56.1	%			63.8	%		(7.7	)%			50.5	%		56.5	%		(6.0	)%
	Gains (losses) on sales of real estate assets, net			232			(368)		(28)			1,751
Percentage rent increase - new leases (6)		2.0	%			2.0	%		0.0	%			2.0	%		2.1	%		(0.1	)%
	Equity in income (loss) of unconsolidatedreal estate entities			(74,656)			420		(74,546)			821
Percentage rent increase - renewed leases (6)		4.7	%			4.9	%		(0.2	)%			4.8	%		4.7	%		0.1	%
	Other income (expense), net			50			66		1,109			(108)
	Net gain (loss) on early extinguishment of indebtedness			(79)			-		819			-
	Loss from continuing operations			(83,963)			(28,801)		(84,324)			(30,757)
	Income from discontinued operations			26,768			3,232		29,377			8,347
	Net loss		$	(57,195)		$	(25,569)	$	(54,947)		$	(22,410)
(7)	In addition to those expenses which relate to property operations, the Company incurs annually recurring and periodically recurring expenditures relating to acquiring new assets, materially enhancing the value of an existing asset, or substantially extending the useful life of an existing asset, all of which are capitalized. Recurring capital expenditures are those that are generally expected to be incurred on an annual basis. Periodically recurring capital expenditures are those that generally occur less frequently than on an annual basis.
(8)	A reconciliation of property capital expenditures from continuing operations to total annually recurring and periodically recurring capital expenditures as presented in the consolidated statements of cash flows under GAAP is detailed below.
			Three months ended June 30,					Six months endedJune 30,
			2009			2008		2009			2008
	Annually recurring capital expenditures
	Continuing operations		$	3,573		$	3,037	$	6,087		$	4,989
	Discontinued operations			100			345		220			651
	Total annually recurring capital expendituresper statements of cash flows		$	3,673		$	3,382	$	6,307		$	5,640
	Periodically recurring capital expenditures
	Continuing operations		$	9,340		$	1,699	$	18,494		$	3,205
	Discontinued operations			32			39		43			126
	Total periodically recurring capital expendituresper statements of cash flows		$	9,372		$	1,738	$	18,537		$	3,331

~~Fully~~1) ~~Stabilized~~Net ~~Communities~~operating income of stabilized communities is a supplemental non-GAAP financial measure. See page 32 for a reconciliation of net operating income for stabilized communities to GAAP net income.

~~The~~2) ~~Company~~A ~~defines~~reconciliation ~~fully~~of ~~stabilized~~these ~~communities~~segment ascomponents ~~those~~of ~~which~~property ~~have~~capital ~~reached~~expenditures ~~stabilization prior~~ to ~~the~~total ~~beginning~~annually ofrecurring ~~the previous year, adjusted by communities sold~~ and ~~classified~~periodically asrecurring ~~held for sale~~ and ~~communities~~total ~~under~~capital ~~rehabilitation.~~expenditures ~~For the 2009 to 2008 comparison, fully stabilized communities are defined~~ as ~~those~~presented ~~communities which reached stabilization prior to January 1, 2008. This portfolio consisted of 41 communities with 14,921 units, including ten communities with 4,242 units (28.4%) located~~ in Atlanta, Georgia, eleven communities with 3,429 units (23.0%) located in Dallas, Texas, three communities with 1,877 units (12.6%) located in Tampa, Florida, five communities with 1,905 units (12.8%) located in the ~~greater~~consolidated ~~Washington~~statements ~~D.C.~~of ~~metropolitan~~cash ~~area,~~flows ~~four~~prepared ~~communities~~under ~~with~~GAAP ~~1,388~~is ~~units~~detailed (9below.~~3%) located in Charlotte, North Carolina and eight~~

- 52 -


	Three months ended				Six months ended
	June 30,				June 30,
	2015		2014		2015			2014
Annually recurring capital expenditures by operating segment
Fully stabilized communities	$	3,744	$	3,617	$	5,960		$	5,879
Newly stabilized communities		4		2		7			9
Lease-up communities		2		1		3			4
Held for sale and sold communities		—		56		—			141
Commercial and other segments		121		119		169			183

Total annually recurring capital expenditures	$	3,871	$	3,795	$	6,139		$	6,216

Periodically recurring capital expenditures by operating segment
Fully stabilized communities	$	1,534	$	986	$	2,089		$	2,310
Newly stabilized communities		—		9		—			10
Lease-up communities		—		—		—			—
Held for sale and sold communities		—		182		—			439
Commercial and other segments		290		910		433			1,849

Total periodically recurring capital expenditures	$	1,824	$	2,087	$	2,522		$	4,608

Total revenue generating capital expenditures	$	2,314	$	2,052	$	3,946		$	3,338

Increase in capital expenditure accruals	$	226	$	445	$	(298	)	$	110

Total property capital expenditures per statements of cash flows	$	8,235	$	8,379	$	12,309		$	14,272

The Company uses same store annually recurring and periodically recurring capital expenditures as cash flow measures. Same store annually recurring and periodically recurring capital expenditures are supplemental non-GAAP financial measures. The Company believes that same store annually recurring and periodically recurring capital expenditures are important indicators of the costs incurred by the Company in maintaining same store communities. The corresponding GAAP measures include information with respect to the Company’s other operating segments consisting of newly stabilized communities, lease-up communities, acquired communities, held for sale and/or sold communities and commercial properties in addition to same store information. Therefore, the Company believes that its presentation of same store annually recurring and periodically recurring capital expenditures is necessary to demonstrate same store replacement costs over time. The Company believes that the most directly comparable GAAP measure to same store annually recurring and periodically recurring capital expenditures is the line on the Company’s consolidated statements of cash flows entitled “total property capital expenditures.”

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~communities~~3) ~~with~~Average ~~2,080~~monthly ~~units~~rental ~~(13.9%) located~~rate inis ~~other~~defined ~~markets.~~as ~~The~~the ~~operating~~gross ~~performance~~actual ofrental ~~these~~rates ~~communities~~for isleased ~~summarized~~units asand ~~follows:~~the anticipated rental rates for unoccupied units, divided by total units.

	Three months endedJune 30,					Six months endedJune 30,
	2009		2008		% Change	2009		2008		% Change
Rental and other revenues	$	57,292	$	59,297	(3.4)%	$	114,985	$	117,907	(2.5)%
Property operating and maintenance expenses(excluding depreciation and amortization)		22,702		24,778	(8.4)%		45,771		48,768	(6.1)%
Same store net operating income (1)	$	34,590	$	34,519	0.2%	$	69,214	$	69,139	0.1%
Capital expenditures (2)
Annually recurring:
Carpet	$	679	$	682	(0.4)%	$	1,251	$	1,242	0.7%
Other		2,500		1,861	34.3%		4,125		2,948	39.9%
Total annually recurring		3,179		2,543	25.0%		5,376		4,190	28.3%
Periodically recurring		8,759		1,579	454.7%		15,176		2,869	429.0%
Total capital expenditures (A)	$	11,938	$	4,122	189.6%	$	20,552	$	7,059	191.1%
Total capital expenditures per unit(A ÷ 14,921 units)	$	800	$	276	189.9%	$	1,377	$	473	191.1%
Average economic occupancy (3)		93.4%		93.7%	(0.3)%		93.6%		93.9%	(0.3)%
Average monthly rental rate per unit (4)		$1,287		$1,328	(3.1)%	$	1,298	$	1,326	(2.1)%

Average economic occupancy is defined as gross potential rent plus other rental fees less vacancy losses, model expenses and bad debt expenses divided by gross potential rent for the period, expressed as a percentage. Gross potential rent is defined as the sum of the gross actual rental rates for leased units and the anticipated rental rates for unoccupied units. The calculation of average economic occupancy does not include a deduction for net concessions and employee discounts. Average economic occupancy, including these amounts, would have been 95.6% and 95.2% for the three months and 95.0% and 94.9% for the six months ended June 30, 2015 and 2014, respectively. For the three months ended June 30, 2015 and 2014, net concessions were $228 and $384, respectively, and employee discounts were $155 and $165, respectively. For the six months ended June 30, 2015 and 2014, net concessions were $486 and $846, respectively, and employee discounts were $314 and $325, respectively. Physical occupancy is defined as the number of units occupied divided by the total apartment units, expressed as a percentage.

(15) ~~Net~~Gross ~~operating~~turnover ~~income~~represents ofthe ~~stabilized~~percentage ~~communities~~of isleases aexpiring ~~supplemental~~during ~~non-GAAP~~the ~~financial~~period ~~measure.~~that ~~See~~are ~~page~~not 52renewed ~~for~~by athe ~~reconciliation~~existing ~~of net operating income for stabilized communities to GAAP net income~~resident(s).

(26) APercentage ~~reconciliation~~change ofis ~~these~~calculated ~~segment~~using ~~components~~the ofrespective ~~property~~new ~~capital~~or ~~expenditures~~renewed torental ~~total~~rate ~~annually~~as ~~recurring~~of ~~and~~the ~~periodically~~date ~~recurring~~of ~~capital~~a ~~expenditures~~new lease, as ~~presented~~compared with the previous rental rate on that same unit. Accordingly, these percentage changes may differ from the change in the ~~consolidated~~average ~~statements~~monthly rental rate per unit due to the timing of ~~cash~~move-ins ~~flows~~and/or ~~prepared~~the ~~under~~term ~~GAAP~~of isthe ~~detailed~~respective ~~below~~leases.

	Three months endedJune 30,				Six months endedJune 30,
	2009		2008		2009		2008
Annually recurring capital expenditures by operating segment
Fully stabilized	$	3,179	$	2,543	$	5,376	$	4,190
Communities stabilized during 2008		221		309		401		444
Development, rehabilitation and lease-up		135		108		205		212
Other segments		138		422		325		794
Total annually recurring capital expenditures perstatements of cash flows (1)	$	3,673	$	3,382	$	6,307	$	5,640
Periodically recurring capital expenditures by operating segment
Fully stabilized	$	8,759	$	1,579	$	15,176	$	2,869
Communities stabilized during 2008		5		3		6		48
Development, rehabilitation and lease-up		145		22		2,132		45
Other segments		463		134		1,223		369
Total periodically recurring capital expenditures perstatements of cash flows (1)	$	9,372	$	1,738	$	18,537	$	3,331

Comparison of three months ended June 30, 2015 to three months ended June 30, 2014

The ~~Company~~Operating ~~uses~~Partnership ~~same~~reported ~~store~~net ~~annually~~income ~~recurring~~available ~~and~~to ~~periodically~~common ~~recurring capital~~unitholders ~~expenditures~~of as$18,729 ~~cash~~for ~~flow~~the ~~measures.~~three ~~Same~~months ~~store~~ended ~~annually~~June 30, ~~recurring~~2015, ~~and~~compared ~~periodically~~to ~~recurring~~$46,915 ~~capital~~for the ~~expenditures~~three ~~are~~months ~~supplemental~~ended ~~non-GAAP~~June 30, ~~financial measures~~2014. The Company ~~believes~~reported ~~that~~net ~~same~~income ~~store~~available ~~annually~~to ~~recurring~~common ~~and~~shareholders ~~periodically recurring capital expenditures are important indicators~~ of ~~the~~$18,688 ~~costs~~for ~~incurred by~~ the ~~Company~~three inmonths ~~maintaining~~ended ~~same~~June 30, ~~store~~2015, ~~communities.~~compared ~~The~~to ~~corresponding~~$46,797 ~~GAAP~~for ~~measures include information with respect to~~ the ~~Company’s~~three ~~other~~months ~~operating~~ended ~~segments consisting of communities stabilized in the prior year~~June 30, ~~condominium~~2014. ~~conversion~~As ~~communities~~discussed below, ~~lease-up~~the ~~communities,~~decrease ~~and sold communities~~ in ~~addition~~income tobetween ~~same~~periods ~~store~~primarily ~~information.~~reflects ~~Therefore,~~ the ~~Company~~gain ~~believes~~on ~~that~~sale ~~its~~of ~~presentation~~an ofapartment ~~same~~community ~~store annually~~in ~~recurring~~2014 and ~~periodically~~the ~~recurring~~decrease ~~capital~~in ~~expenditures~~net isoperating ~~necessary~~income tofrom ~~demonstrate~~communities ~~same~~sold ~~store~~in ~~replacement~~2014, ~~costs~~partially ~~over~~offset ~~time.~~by ~~The~~reduced ~~Company~~interest ~~believes~~expense, ~~that~~reduced ~~the~~debt extinguishment ~~most~~losses ~~directly comparable GAAP measure to same store annually recurring~~ and ~~periodically~~ ~~recurring~~the ~~capital~~incremental ~~expenditures~~improvement ~~are~~in the ~~lines~~operating onperformance of the Company’s ~~consolidated~~fully ~~statements~~stabilized, ofnewly ~~cash~~stabilized ~~flows entitled “annually recurring capital expenditures”~~ and ~~“periodically~~lease-up ~~recurring~~communities ~~capital~~in ~~expenditures~~2015.”

~~(3)~~Rental ~~Average~~and ~~economic~~other ~~occupancy~~revenues isfrom ~~defined~~property asoperations ~~gross~~increased ~~potential~~$354 ~~rent~~or ~~less~~0.4% ~~vacancy~~from ~~losses,~~2014 ~~model~~to ~~expenses~~2015 ~~and~~primarily ~~bad~~due ~~debt~~to ~~expenses~~increased ~~divided~~revenues byfrom ~~gross~~the ~~potential~~Company’s ~~rent~~fully stabilized ~~for~~communities ~~the~~of ~~period~~$2,292 ~~expressed~~or as2.8%, aincreased ~~percentage.~~revenues ~~Gross~~of ~~potential~~$1,841 ~~rent~~from isnewly ~~defined~~stabilized ascommunities ~~the~~and ~~sum~~increased revenues of ~~the~~$883 ~~gross~~from ~~actual~~lease-up ~~rental~~communities, ~~rates~~offset ~~for~~by ~~leased~~decreased ~~units~~revenues ~~and~~of $4,820 from the ~~anticipated~~sales ~~rental~~of ~~rates~~three ~~for~~communities ~~unoccupied~~in ~~units~~2014. The ~~calculation~~revenue ofincrease ~~average~~from ~~economic~~fully ~~occupancy~~stabilized ~~does~~communities ~~not~~is ~~include~~discussed ain ~~deduction~~more ~~for~~detail ~~net~~below. ~~concessions~~The ~~and~~revenue ~~employee~~increase ~~discounts.~~from ~~Average~~newly ~~economic~~stabilized ~~occupancy~~communities ~~including~~reflects ~~these~~the ~~amounts~~stabilization ~~would~~of ~~have~~two ~~been~~communities ~~92.3%~~ and ~~92.4%~~portions ~~for~~of ~~the~~one ~~three~~community ~~months~~in ~~ended~~2014. ~~and~~The ~~92.2%~~revenue increase ~~and~~from ~~92.6%~~lease-up ~~for~~communities primarily reflects the ~~six~~lease-up ~~months~~of ~~ended~~one ~~June~~community ~~30,~~in ~~2009~~2014 and ~~2008,~~into ~~respectively~~2015. ~~For~~The ~~the~~revenue ~~three~~decrease ~~months~~from ~~ended~~held ~~June~~for ~~30,~~sale ~~2009~~ and ~~2008,~~sold ~~net~~communities ~~concessions~~primarily ~~were~~reflects ~~$456~~the ~~and~~sale ~~$558,~~of ~~respectively,~~one ~~and~~community ~~employee~~in ~~discounts~~May ~~were~~2014 ~~$197~~ and ~~$207,~~two ~~respectively.~~communities ~~For~~in September ~~the~~2014. ~~six~~

Property operating and maintenance expenses (exclusive of depreciation and amortization) decreased $283 or 0.7% from 2014 to 2015 primarily due to decreased expenses of $2,246 from the sales of three communities (discussed above) in 2014, partially offset by increases from fully stabilized communities of $858 or 2.6%, increases of $369 from newly stabilized communities, increases of $339 from lease-up 53communities, and increases of $397 from other property segments. The increased expense from fully stabilized communities is discussed in more detail below. The expense increase from newly stabilized communities reflects the stabilization of two communities and portions of one community in 2014. The expense increase from lease-up communities primarily reflects the operating expenses associated with the lease-up of one development community in 2014 and into 2015 and the initial operating expenses associated with another community that began initial leasing activities in the second quarter of 2015. The expense increase from other property segments primarily reflects modest increases in commercial property expenses as well as modest increases in corporate property management expenses.

For the three months ended June 30, 2015, there were no sales of wholly owned apartment communities. In 2015, gains on sales of real estate assets included state tax expense of $298 related to an asset sale. In the three months ended June 30, 2014, the Company closed the sale of one apartment community and recognized a gain in continuing operations of $36,092. The Company may continue to be a seller of apartment communities in future periods depending on market conditions and consistent with its investment strategy of recycling investment capital to fund investment and development activities and to provide additional cash liquidity, as discussed in the “Liquidity and Capital Resources” section below. The timing and amount of future gain recognition will fluctuate based on the size and individual age of apartment communities sold.

Depreciation expense increased $589 or 2.8% from 2014 to 2015 primarily due to increased depreciation of $243 related to the completion of apartment units at one lease-up community in 2014 and $351 related to newly stabilized communities.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~months~~General ~~ended~~and ~~June~~administrative ~~30,~~expenses ~~2009~~increased ~~and~~$387 ~~2008,~~or 9.8% from 2014 to 2015 primarily due to increased net compensation ~~concessions~~costs ~~were~~primarily ~~$1,166~~due ~~and~~to ~~$1,081,~~somewhat ~~respectively,~~higher annual incentive plan expenses in 2015 resulting from the timing of expense recognition between years and ~~employee~~due ~~discounts~~to increased technology costs related to system upgrades completed in 2014. The increased costs were ~~$393~~partially ~~and~~offset ~~$413,~~by ~~respectively~~decreased long-term incentive plan expenses between years due to the accelerated vesting of annual awards in the first quarter of 2015 for certain officers who reached retirement age under the plan.

(Investment and development expenses decreased $519 or 65.4)% ~~Average~~from ~~monthly~~2014 ~~rental~~to ~~rate~~2015 isprimarily ~~defined~~due asto ~~the~~increased ~~average~~capitalization of ~~the~~development ~~gross~~personnel ~~actual~~and associated ~~rental~~costs ~~rates~~to ~~for~~development ~~leased~~projects ~~units~~of $701 between years. This increase was due to increased capitalization at four communities commenced in 2014 and 2015, partially offset by the ~~average~~reduction of ~~the~~development ~~anticipated~~capitalization ~~rental~~at ~~rates~~four ~~for~~communities that ~~unoccupied~~were ~~units~~completed in 2014. Additionally, ~~divided~~development personnel and other costs increased by ~~total~~$182 ~~units~~between years. The Company expects to continue to complete portions of its existing development pipeline in 2015 and also expects to commence new developments later in 2015. The Company expects that the capitalization of development costs and expenses will be moderately higher in 2015, which will result in decreased net investment and development expenses in 2015.

~~Comparison~~Other ofinvestment ~~Three~~costs ~~Months~~decreased ~~Ended~~$56 ~~June 30,~~or ~~2009~~26.7% from 2014 to ~~Three~~2015. ~~Months~~Other ~~Ended~~investment ~~June 30~~costs primarily include land carry expenses, such as property taxes and ~~2008~~assessments. The decrease primarily reflects reduced land carry expenses related to land placed under development in 2014 and 2015.

~~The~~Other ~~Operating~~expenses ~~Partnership reported a net loss attributable to common unitholders~~ of ~~$50,955 for the three months ended~~ ~~June 30, 2009 compared to a net loss of~~ $~~27,186~~502 ~~for~~in ~~the~~2014 ~~three~~related ~~months ended June 30, 2008. The Company reported a net loss attributable~~ to ~~common~~consulting ~~shareholders~~expenses ofassociated ~~$50,705~~with ~~for~~ the ~~three~~strategic ~~months~~initiative ~~ended June 30, 2009 compared~~ to aupgrade ~~net loss of $26,973 for~~ the ~~three~~Company’s ~~months~~operating ended June 30, 2008. As discussed below, the decrease between periods primarily reflects the increase in non-cash impairment charges of $76,317 in 2009 compared to non-cash impairment charges of $28,947, strategic review costs of $2,091 and ~~severance~~financial ~~charges~~software ~~of $353 in 2008, offset by increased gains on the sale of an apartment community of $24,742 between years~~systems.

~~Rental~~Interest ~~and~~expense ~~other revenues from property operations~~ decreased $12,~~475~~680 or 225.17% from ~~2008~~2014 to ~~2009~~2015 primarily due to decreased ~~revenues~~interest ~~from~~costs ~~the~~of ~~Company’s~~$1,737 ~~fully~~resulting ~~stabilized~~from ~~communities~~the prepayment of $2202,~~005~~627 orof mortgage ~~3.4%~~indebtedness ~~and~~in ~~decreased revenues~~2014, ofusing ~~$930~~available orcash ~~31.3%~~and ~~from~~net ~~the~~proceeds ~~Company’s~~from ~~furnished~~ apartment ~~rental~~community ~~business~~sales, ~~offset~~decreased byinterest ~~increased~~costs ~~revenues~~ of $~~314~~461 oron ~~13.2%~~unsecured ~~from~~bank ~~communities~~line ~~that~~of ~~achieved~~credit ~~full~~and ~~stabilization~~term inloan ~~2008~~facilities ~~and~~resulting ~~increased revenue~~ from ~~development,~~the ~~rehabilitation~~January ~~and lease-up~~2015 ~~communities~~refinancing of ~~$1,335~~these facilities orat ~~61.8%.~~lower ~~The~~rates ~~revenue~~and ~~decrease~~increased ~~from~~interest ~~fully~~capitalization ~~stabilized~~to ~~communities~~development isprojects ~~discussed~~of ~~more~~$482 ~~fully~~in ~~below~~2015. ~~The~~Increased ~~revenue~~interest ~~decrease~~capitalization ~~from~~on the ~~furnished~~Company’s ~~apartment~~development ~~rental~~projects ~~business~~primarily ~~was~~related ~~due~~ to ~~slower~~increased ~~leasing~~capitalization ~~activity~~at ~~resulting~~five ~~from weak~~communities ~~economic~~under ~~conditions~~construction ~~and~~that ~~lower~~commenced ~~corporate~~in ~~travel~~2013, 2014 and ~~expense~~2015, ~~spending~~partially inoffset ~~2009.~~by ~~The~~decreased ~~revenue~~interest ~~increase~~capitalization ~~from~~on four communities ~~that~~substantially ~~achieved~~completed ~~full~~in ~~stabilization~~2014. inThe ~~2008~~Company ~~reflects~~expects ~~two~~interest ~~communities~~expense ~~and~~for anthe ~~additional~~full ~~phase~~year of ~~one~~2015 ~~community~~to ~~that~~be ~~were~~lower ~~fully~~than ~~stabilized~~in ~~for~~2014 ~~2009~~due ~~compared~~ to ~~the~~decreased ~~communities~~interest ~~being~~costs inresulting ~~lease~~from upthe ~~and~~early ~~under~~retirement ~~rehabilitation~~of ~~for~~certain ~~2008.~~mortgage ~~The~~indebtedness ~~revenue~~associated ~~increase~~with ~~from~~apartment ~~development,~~communities ~~rehabilitation~~sold ~~and~~in ~~lease-up~~2014, ~~communities~~the ~~primarily~~January ~~reflects~~2015 ~~the~~refinancing ~~lease-up~~ of ~~two~~the ~~communities~~Company’s ~~offset~~unsecured ~~somewhat~~credit byfacilities ~~decreased~~at lower ~~revenues~~interest ~~from~~rates, ~~two~~and ~~communities~~increased ~~under~~interest ~~rehabilitation~~capitalization inon ~~2008~~increased development and ~~into~~construction ~~2009~~activities between years.

~~Property~~Annually ~~operating~~recurring and ~~maintenance expenses (exclusive of~~ ~~depreciation~~periodically ~~and~~recurring ~~amortization)~~capital expenditures decreased $~~2,537~~187 or 73.2% from ~~2008~~2014 to ~~2009~~2015. ~~primarily~~The ~~due~~decrease toin ~~decreases~~periodically ~~from~~recurring ~~fully~~capital ~~stabilized~~expenditures ~~communities~~ of $~~2,076~~263 orprimarily ~~8.4%,~~reflects ~~and~~reduced ~~decreased~~tenant ~~other~~improvements ~~segment~~at ~~expenses,~~an ~~including~~office ~~corporate~~ property ~~management~~and ~~expenses,~~reduced ofexpenditures ~~$1,513~~at orthe ~~20.3%~~communities sold in 2014, partially offset ~~primarily~~ by increased ~~expenses~~net ~~from~~structural ~~development,~~and ~~rehabilitation~~exterior ~~and~~remediation ~~lease-up~~projects ~~communities~~due to the timing of ~~$1,136~~expenditures orat 67five communities between years.~~2%.~~ ~~The~~For ~~expense~~the ~~decrease~~full ~~from~~year ~~stabilized~~2015, ~~communities~~the isCompany ~~discussed~~expects ~~below.~~periodically ~~The~~recurring capital ~~decrease~~expenditures into ~~other~~be ~~segment~~modestly ~~expenses, including~~higher ~~corporate~~than ~~property~~2014 ~~management~~primarily ~~expenses,~~due ~~reflects~~to the ~~impact~~timing of ~~workforce~~exterior ~~and~~remediation ~~expense~~projects ~~reductions~~between ~~completed~~years. The increase in ~~the~~annually ~~second~~recurring ~~half~~capital expenditures of ~~2008~~$76 asprimarily ~~well~~reflects asa ~~reduced~~general ~~short-term~~increase ~~rental~~in ~~expenses~~expenditures ~~from~~due to the ~~furnished~~timing ~~apartment~~of ~~rental~~expenditures ~~business~~between ~~resulting~~years, ~~from~~ partially offset by reduced ~~leasing~~expenditures ~~activity~~at asthree ~~discussed~~communities ~~above~~sold in 2014. ~~The~~For ~~expense~~the ~~increase~~full ~~from~~year ~~development~~2015, ~~rehabilitation~~the ~~and~~Company ~~lease-up~~expects ~~communities~~annually ~~reflects~~recurring ~~the~~capital ~~lease-up~~expenditures ofto ~~two~~be ~~communities~~moderately ~~and~~higher ~~the~~than ~~opening~~2014 ofprimarily due ~~leasing~~to ~~offices~~targeted equipment and structural upgrades at ~~three~~one ~~additional~~community ~~development~~and ~~communities beginning~~modest ~~the~~increases ~~lease-up~~throughout ~~process~~the portfolio in ~~2009~~2015.

~~For~~Fully ~~the~~stabilized three months ended June 30, 2009, gains on real estate assets in discontinued operations included a gain of $24,742 from the sale of one apartment community containing 530 apartment units. For the three months ended June 30, 2008, there were no sales of apartment communities~~. Subsequent to quarter end in July 2009, the~~ Company sold two apartment communities, containing 798 apartment units, at an approximate aggregate gain of $54,500. Other than these communities, the Company had no additional apartment communities being marketed for sale as of June 30, 2009. However, the Company may continue to be a seller of apartment communities in future periods depending on market conditions and consistent with its investment strategy of recycling investment capital to fund investment and development activities and to provide additional cash liquidity, as discussed in the “Liquidity and Capital Resources” section below. The timing and amount of future gain recognition will fluctuate based on the size and individual age of apartment communities sold.

~~For~~Rental ~~the~~and ~~three~~other ~~months~~revenues ~~ended~~increased ~~June 30~~$2,292 ~~2009~~or ~~and~~2.8% ~~2008,~~from ~~gains~~2014 ~~(losses)~~to on2015. ~~sales~~This ofincrease ~~real~~primarily ~~estate~~resulted ~~assets~~ from ~~condominium~~a ~~sales~~2.2% ~~activities~~increase in the average monthly ~~continuing~~rental ~~operations~~rate ~~were~~per ~~$232~~apartment ~~and~~unit ~~$(368),~~between ~~respectively~~periods. The ~~decrease~~increase in ~~aggregate~~average ~~condominium~~rental ~~gains~~rates ~~between~~resulted ~~periods~~in ~~primarily~~a ~~reflects~~revenue ~~the~~increase ~~sales~~ of 26approximately ~~units~~$1,723 atbetween ~~condominium~~periods. ~~communities~~Average ineconomic ~~2009~~occupancy ~~compared~~was togenerally 33consistent inbetween ~~2008~~years. ~~Additionally,~~The ~~the~~occupancy ~~decrease in~~change ~~condominium profits~~ between periods ~~reflects~~resulted ~~lower revenue and profit margin expectations~~ in ~~2009,~~increased ~~including~~vacancy ~~the~~losses ~~negative impact~~ of ~~lowering~~$58 ~~sales~~in ~~prices~~2015. ~~and~~The ~~profit~~remaining ~~expectations~~increase ~~throughout~~in ~~2008~~rental and ~~through~~other ~~2009.~~property ~~Lower~~ revenues ~~and~~of ~~profit~~$627 ~~margins were~~was ~~driven~~ primarily bydue ~~the~~to ~~slowing~~increased ~~residential~~leasing ~~housing~~fees ~~market that began in 2008, resulting from tighter credit markets, an over-supply of condominium units~~ and ~~declining~~lower ~~general~~net ~~economic~~concessions ~~conditions,~~between asyears. ~~well~~Average asrental ~~the sellout of the Company’s~~rate ~~condominium~~increases ~~community~~were inprimarily ~~Washington,~~due ~~D.C. in the fourth quarter of 2008. The Company expects gains (losses) on condominium sales activities~~ to ~~continue~~increasing atrental ademand ~~slow~~resulting ~~pace~~from ~~for the second half of 2009 as the backlog of condominiums under contract continues to be low as well as difficult credit market conditions and~~ a ~~weak~~gradually ~~U.S.~~improving economy, infavorable andemographics ~~already~~and ~~slow~~favorable ~~for-sale housing~~ market fundamentals. See the “~~Operations Overview” and “~~Outlook” ~~sections~~section below for aan additional discussion of ~~expected~~revenue ~~condominium~~trends ~~sale~~for ~~closings at the Company’s condominium communities~~2015.

-35 ~~54 -~~

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~Depreciation~~Property ~~expense~~operating and maintenance expenses (exclusive of depreciation and amortization) increased $~~2,796~~858 or 18 2.46% from ~~2008~~2014 to ~~2009,~~2015. This increase was primarily due to increased ~~depreciation~~ ofproperty ~~$1,287~~tax ~~related~~expenses toof ~~development~~$671 ~~and~~or ~~lease-up~~5.2%, ~~communities~~increased asutility ~~apartment~~expenses ~~units~~of ~~were~~$311 ~~placed~~or in8.5%, ~~service~~increased inother ~~2008~~expenses ~~and~~of ~~into~~$240 ~~2009~~or 12.2% and increased ~~depreciation~~personnel expenses of $162 or 0.9%,~~467~~ somewhat ~~related~~offset toby ~~fully~~reduced ~~stabilized~~maintenance ~~communities~~expenses of $377 or 6.5%. The ~~depreciation~~increase ~~expense~~in ~~increase~~property ~~at fully~~tax ~~stabilized~~expenses ~~communities~~primarily ~~was~~reflects increased expense accruals in 2015 due to anhigher ~~acceleration~~expected ofreal ~~depreciation~~estate ~~expense~~valuations ~~resulting~~by ~~from~~tax aauthorities ~~revision~~ in most of the Company’s ~~estimated~~markets, ~~useful~~partially ~~lives~~offset ~~for~~by ~~certain~~favorable ~~assets~~prior ~~expected~~year totax besettlements ~~retired~~of $418. The increase in ~~2009~~utility asexpenses aprimarily ~~result~~due to sales tax refunds in 2014 of $305 in the Company’s ~~exterior~~Texas ~~remediation~~markets. ~~project~~The increase in other expenses primarily reflects increased information technology costs in 2015. Personnel expenses increased primarily due to annual salary increases. Maintenance expenses decreased primarily due to reduced exterior paint expenses and the general timing of expenses between years. See the “Outlook” section below for a discussion of expense trends for 2015.

~~General~~Comparison ~~and administrative expenses decreased $387, or 8.9%, from 2008 to 2009 primarily as a result~~ of ~~reduced~~six ~~personnel~~months ~~and long-term~~ended incentive compensation costs resulting from a smaller workforce and general reductions in incentive compensation awards in 2009. The reduced expenses were partially offset by higher legal expenses of $172. Higher legal expenses primarily reflected the timing of annual meeting related work between years (the 2008 annual meeting work was incurred in the second half of 2008). Beginning in the fourth quarter of 2008June 30, ~~the~~2015 ~~Company began allocating personnel and other costs, primarily related~~ to ~~accounting,~~ ~~information~~six ~~technology~~months ~~and~~ended ~~human resources that support property management and investment operations~~June 30, ~~from~~2014 ~~general and administrative expenses to property management and investment and development expenses. Prior period results have been adjusted to reflect the current period presentation.~~

~~Investment~~The ~~and~~Operating ~~development~~Partnership ~~expenses~~reported ~~decreased~~net ~~$481~~income oravailable ~~37.8%~~to ~~from~~common ~~2008~~unitholders ~~and~~of ~~2009. In 2009~~$37,792 for the ~~Company’s~~six ~~development~~months ~~personnel~~ended ~~and~~June 30, ~~other~~2015, ~~costs~~compared ~~decreased~~to $~~855~~60,262 ~~over~~for ~~2008~~the six months ended June 30, as2014. ~~the~~The Company ~~began~~reported tonet ~~reduce~~income ~~headcount~~available ~~and~~to ~~associated~~common ~~costs~~shareholders inof ~~late~~$37,709 ~~2008~~for ~~and~~the ~~into~~six ~~2009~~months asended aJune 30, ~~result~~2015, ofcompared ato ~~decision~~$60,111 for tothe ~~cease~~six ~~new~~months ~~development~~ended ~~starts~~June 30, 2014. ~~The decrease~~As indiscussed ~~expenses~~below, ~~was~~the ~~offset~~decrease byin ~~$374~~income ofbetween ~~decreased~~periods ~~capitalization~~primarily ofreflects ~~development~~a ~~personnel~~gain ~~due~~on tothe ~~reduced~~sale ~~net~~of ~~development~~an ~~activity~~apartment community in ~~2009~~2014 asand ~~development~~the ~~communities~~decrease ~~are~~in ~~completed.~~net Asoperating aincome ~~result~~from ofcommunities ~~cost~~sold ~~reduction efforts~~ in ~~2008~~2014, partially ~~the~~offset ~~Company~~by ~~expects net~~reduced ~~investment~~interest ~~and~~expense, ~~development~~reduced ~~expenses~~debt toextinguishment belosses ~~somewhat~~and ~~lower~~the ~~for~~incremental improvement in the ~~full~~operating ~~year~~performance of ~~2009~~fully stabilized, ~~compared~~newly tostabilized ~~2008~~and lease-up communities in 2015.

~~Other~~Rental ~~investment~~and ~~costs~~other revenues from property operations increased $179 or 0.1% from 2014 to 2015 primarily due to increased revenues from the Company’s fully stabilized communities of $~~402~~4,199 or ~~164~~2.86%, increased revenues of $4,142 from ~~2008~~newly stabilized communities and ~~2009.~~increased ~~Other~~revenues ~~investment~~of ~~costs~~$1,885 ~~primarily~~from ~~include~~lease-up ~~land~~communities, ~~carry~~partially ~~expenses~~offset by decreased revenues of $10,689 ~~such~~from asheld ~~property~~for ~~taxes~~sale and ~~assessments~~sold communities. The revenue increase from fully stabilized communities is discussed in ~~2009~~more detail below. The revenue increase from newly stabilized communities reflects athe ~~full~~stabilization ~~quarter~~of two communities and portions of ~~expense~~one community in ~~2009~~2014. ~~for~~The revenue ~~certain~~increase ~~land~~from ~~parcels~~lease-up nocommunities ~~longer~~primarily ~~considered probable~~reflects the lease-up of ~~future~~one ~~development~~community asin 2014 and into 2015. The revenue decrease from held for sale and sold communities primarily reflects the sale of ~~mid-year~~one ~~2008~~community in early May 2014 and two communities in September 2014.

~~Impairment,~~Property ~~severance~~operating and ~~other~~maintenance ~~charges~~expenses in(exclusive ~~2009~~of ~~included~~depreciation aand ~~non-cash~~amortization) ~~write-off~~decreased of $~~9,658~~756 ~~for~~or ~~certain condominium land held for future investment~~0.9% ~~The~~from ~~gross~~2014 to ~~non-cash~~2015 ~~impairment~~primarily ~~charge~~due ~~includes the amount allocable~~ to ~~the~~decreased ~~noncontrolling~~expenses ~~interest,~~of or $15,~~560,~~343 infrom the ~~consolidated~~sale ~~entity holding the land. In addition, the Company recognized its share~~ of athree ~~non-cash~~communities ~~impairment~~(described ~~charge~~above) ~~recognized~~in at2014, ~~the~~partially ~~Atlanta~~offset ~~Condominium~~by ~~Project~~increased ~~held~~expenses infrom anfully ~~unconsolidated~~stabilized ~~entity.~~communities ~~The~~of ~~gross non-cash impairment charge totaling~~ $742,~~733,~~180 ~~including~~or ~~the~~3.4%, ~~write-off~~increases of ~~the~~$837 ~~Company’s~~from ~~cost~~newly ~~in excess~~stabilized ofcommunities, ~~its~~increases ~~invested~~of ~~capital,~~$715 isfrom ~~included~~lease-up incommunities ~~equity~~and inincreases ~~earnings~~ of ~~unconsolidated~~$855 ~~entities~~from ~~and~~other ~~includes~~property ~~the~~segments. ~~amount~~The ~~allocable~~increased toexpense ~~the~~from ~~noncontrolling~~fully ~~interest,~~stabilized orcommunities ~~$6,514,~~is discussed in ~~the~~more ~~consolidated~~detail ~~entity~~below. ~~holding~~The ~~the~~expense ~~equity~~increase ~~investment.~~from ~~See~~newly ~~the “Operations~~stabilized ~~Overview”~~communities ~~section~~reflects ~~above~~the ~~for~~stabilization ~~a further discussion~~ of ~~the~~two ~~non-cash~~communities ~~impairment~~and ~~charges.~~portions ~~Impairment,~~of ~~severance~~one ~~and~~community ~~other charges~~ in ~~2008~~2014. ~~included~~The ~~non-cash~~expense ~~impairment~~increase ~~charges~~from oflease-up ~~approximately~~communities ~~$28,947~~primarily ~~attributable~~reflects to the ~~cessation~~operating ofexpenses ~~current development activities~~ associated with ~~four pre-development projects which were written down to their estimated fair market values, as well as~~ the ~~write~~lease-~~off~~up of ~~capitalized~~one ~~pursuit~~development ~~costs~~community ~~associated with certain abandoned projects. Impairment,~~in ~~severance~~2014 and ~~other~~into ~~charges~~2015. inThe ~~2008~~expense ~~also~~increase ~~included~~from ~~severance~~other ~~charges~~property ofsegments ~~$353~~primarily ~~associated~~reflects ~~with~~modest ~~the~~increases ~~elimination of certain employment positions~~ in ~~the~~commercial ~~second~~property ~~quarter~~expenses ofas ~~2008.~~well ~~The~~as ~~Company~~modest ~~may~~increases ~~record additional impairment and severance charges~~ in ~~future periods~~corporate ~~depending~~property onmanagement ~~market conditions~~expenses.

~~Strategic~~For ~~review~~the ~~costs~~six months ended June 30, 2015, the Company recognized a gain of $1,773 on the sale of its remaining condominium retail space at its former condominium community in ~~2008~~Austin, Texas. In 2015, gains on sales of real estate assets also included state tax expense of $2298 related to an asset sale. The Company has no further investment in residential or retail condominium properties at June 30,~~091~~ 2015. There were no sales of wholly owned apartment communities in 2015. In the six months ended June 30, 2014, the Company closed the sale of one apartment community and recognized a ~~result~~gain in continuing operations of $36,092. For the six months ended June 30, 2014, the Company also recognized gains on condominium sales activities of $810 resulting from the sale of the final residential condominium unit at the Company’s ~~formal~~former ~~process~~condominium tocommunity in Atlanta, ~~pursue~~Georgia. The Company may continue to be a ~~possible~~seller ~~business~~of ~~combination~~apartment orcommunities ~~sale~~in ~~transaction.~~future ~~These~~periods ~~costs~~depending ~~generally~~on ~~consisted~~market conditions and consistent with its investment strategy of ~~legal~~recycling investment capital to fund investment and development activities and to provide additional cash liquidity, ~~financial~~as discussed in the “Liquidity and ~~other~~Capital ~~costs~~Resources” section below. The ~~Company’s~~timing ~~Board~~and amount of ~~Directors~~future ~~ended~~gain recognition will fluctuate based on the ~~process~~size inand ~~June~~individual ~~2008~~age ~~without~~of aapartment ~~transaction.~~communities sold.

~~Interest~~36 expense included in continuing operations increased $1,237 or 11.2% from 2008 to 2009 primarily due to increased interest costs associated with slightly higher average debt levels in 2009, offset somewhat by slightly higher interest capitalization in 2009. Higher debt levels related to a strategic decision to increase the Company’s cash liquidity to be used to fund the completion of development projects under construction and to fund near-term debt maturities. Increased interest capitalization on the Company’s development projects of $202 between periods primarily related to increased construction in progress of condominiums and apartments between years. Interest expense included in discontinued operations decreased from $1,052 in 2008 to $311 in 2009 primarily due to interest expense associated with three communities classified as held for sale or sold in 2009 compared to seven communities classified as held for sale or sold in 2008. The Company expects interest expense in 2009 to be higher than in 2008 due to moderately lower interest capitalization on the pre-development projects discussed above and the completion of projects under development in 2009.

Equity in income of unconsolidated real estate entities decreased $75,076 from 2008 to 2009. The decrease was due to the recognition of a non-cash impairment charge at an unconsolidated entity constructing luxury condominium homes as discussed

- 55 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~above.~~Depreciation ~~Other~~expense ~~than~~increased ~~the~~$79 ~~impairment~~or ~~charge,~~0.2% ~~the~~from ~~remaining~~2014 ~~decrease~~to ~~between~~2015, ~~periods was~~ primarily due to ~~the~~ increased ~~interest~~depreciation ~~expense~~of at$591 related ~~two~~to the completion of ~~the unconsolidated~~apartment ~~entities~~units ~~that~~at ~~refinanced~~one ~~debt~~lease-up community in ~~the~~2014 ~~second~~and ~~half~~$831 related to newly stabilized communities, somewhat offset by decreased depreciation of ~~2008~~$1,239 atrelated ~~both~~to ~~higher~~the ~~principal~~cessation ~~amounts~~of ~~and~~depreciation ~~higher~~on ~~interest~~three ~~rates~~communities classified as held for sale as of March 2014.

~~Annually~~General ~~recurring~~ and ~~periodically~~administrative ~~recurring~~expenses ~~capital expenditures from continuing operations~~ increased $81,~~177~~273 or ~~172~~15.7% from ~~2008~~2014 to ~~2009.~~2015 ~~The~~primarily ~~increase~~due into ~~annually~~increased net ~~recurring~~compensation ~~capital~~costs ~~expenditures of $536 reflects an increase of $1,003~~ primarily ~~related~~due to ~~roofing~~increased ~~expenditures~~long-term atincentive ~~three~~plan ~~communities~~expense inresulting ~~2009,~~from ~~offset~~the ~~somewhat~~accelerated byvesting ~~decreased~~of ~~breezeway~~annual ~~and~~awards ~~HVAC~~for ~~expenditures~~certain ~~between~~officers ~~years.~~who ~~The~~reached ~~increase~~the inretirement ~~periodically~~age ~~recurring~~under ~~capital expenditures of $7,641 primarily reflects increased capital expenditures related to~~ the Company’s ~~exterior~~incentive ~~remediation~~compensation ~~program~~plans ~~at several communities of approximately $8,157 in 2009~~ and due to increased ~~costs~~awards ~~associated~~for ~~with~~other ~~non-revenue~~officers ~~generating~~between ~~capital~~years. ~~expenditures~~General atand ~~two~~administrative ~~communities~~expenses ~~incurred~~also ~~in conjunction~~increased ~~with~~due ~~the~~to ~~Company’s~~somewhat ~~rehabilitation~~higher ofannual ~~the~~incentive ~~communities~~plan expenses in ~~2008~~2015 ~~and~~primarily ~~2009~~due ~~(approximately $140), offset somewhat by reduced capital expenditures relating~~ to the ~~Company’s~~timing ~~“resident~~of ~~design~~expense ~~center~~recognition ~~program”~~between ofyears ~~$232~~and asdue ~~well as~~to ~~reduced~~increased ~~structural~~information ~~expenditures~~technology ofcosts ~~$712~~related ~~primarily~~to atsystem ~~one~~upgrades ~~Texas~~in ~~community between periods~~2014.

~~Fully~~Investment ~~Stabilized~~and ~~Communities~~development expenses decreased $1,095 or 68.2% from 2014 to 2015 primarily due to increased capitalization of development personnel and associated costs to development projects of $1,347. The increase was due to increased capitalization at four communities, commenced in 2014 and 2015, partially offset by decreased capitalization at four development communities that were completed in 2014. Additionally, development personnel and other costs increased by $252. The Company expects to continue to complete portions of its existing development pipeline and commence additional developments in 2015. The Company expects that the capitalization of development costs and expenses will be moderately higher in 2015, which will result in decreased net investment and development expenses in 2015.

~~Rental~~Other ~~and~~investment ~~other~~costs ~~revenues~~ decreased $~~2,005~~195 or 340.4% from ~~2008~~2014 to ~~2009~~2015. ~~This~~Other ~~decrease~~investment ~~resulted~~costs ~~from~~primarily ainclude ~~3.1%~~land ~~decrease~~carry in the average monthly rental rate per apartment unit and a small decline in the average economic occupancy of the portfolio from 93.7% to 93.4%. The decrease in average rental rates resulted in a revenue decrease of approximately $1expenses,~~854~~ ~~between~~such ~~periods.~~as ~~The~~property ~~occupancy~~taxes ~~decrease resulted~~and ~~in higher vacancy losses of $73~~assessments. The ~~remaining~~ decrease ~~in property revenues of $78 was due~~ primarily toreflects ~~slightly~~reduced ~~increased~~land ~~bad~~carry ~~debt~~expenses ~~write-offs~~related and lower lease fees. Overall, the revenue performance of the operating portfolio in 2009 reflected deteriorating market conditions (see “Operations Overview” and “Outlook” where discussed further). Average occupancy levels declined modestly between years as the Company endeavored to ~~adjust~~land ~~downward~~placed ~~rental~~under ~~rates~~development ~~to maintain average occupancy levels. The Company expects the declining rental rate environment that began~~ in ~~the~~2014 ~~fourth quarter of 2008 to continue~~ and ~~possibly accelerate in the second half of 2009~~2015. Weak economic conditions in the U.S., and the significant decline being experienced in employment in the U.S. and in the Company’s markets, is expected to continue to result in declines in rental rates in the second half of 2009 as the Company seeks to maintain occupancy levels relatively consistent with 2008. See the “Outlook” section below for an additional discussion of trends for 2009.

~~Property~~Other ~~operating and maintenance~~ expenses ~~(exclusive~~ of ~~depreciation and amortization) decreased~~ $21,~~076~~409 orin ~~8.4%~~2014 ~~from~~included ~~2008 to 2009. This decrease was primarily due to decreased insurance~~ expenses of $~~229~~659 orrelated ~~19.0%,~~to ~~decreased~~the ~~maintenance~~upgrade ~~expenses~~ of ~~$656~~the orCompany’s ~~19.5%,~~operating ~~decreased advertising~~and ~~expenses~~financial ofsoftware ~~$160~~systems ~~or 16.0%, decreased personnel costs of $242 or 4.4%,~~ and ~~decreased~~estimated ~~property~~casualty ~~tax~~losses ~~expense~~ of $~~181~~750 orrelated ~~2.2%. Insurance expenses decreased due~~ to ~~reduced~~extreme ~~property~~weather ~~insurance~~conditions ~~rate achieved~~ in ~~the~~many ~~May 2008 annual program renewal. Maintenance expenses decreased due to lower exterior painting and lower grounds expenses primarily due to the timing~~ of ~~such expenses between periods. Advertising expenses decreased primarily due to~~ the ~~reduction~~Company’s inmarkets, ~~print advertising as well as reduction in promotion programs in 2009. Personnel expenses decreased primarily due to some personnel reductions~~ and ~~modest to flat salary increases between periods. Property tax expenses decreased~~ due ~~primarily~~ to afire ~~favorable~~damage ~~prior~~at ~~year tax settlement relating to~~ one of the Company’s ~~Texas~~Atlanta, Georgia communities.

~~Comparison~~Interest expense decreased $5,831 or 26.9% from 2014 to 2015 primarily due to decreased interest costs of ~~Six~~$4,440 ~~Months~~resulting ~~Ended~~from ~~June 30~~the prepayment of $202,627 ~~2009~~of mortgage indebtedness in 2014, using available cash and net proceeds from an apartment community sale, decreased interest costs of $773 on unsecured bank line of credit and term loan facilities resulting from the January 2015 refinancing of these facilities at lower rates and increased interest capitalization to ~~Six~~development ~~Months~~projects ~~Ended~~of ~~June 30~~$618 in 2015. Increased interest capitalization on the Company’s development projects primarily related to increased capitalization at five communities under construction that commenced in 2013, 2014 and 2015, partially offset by decreased interest capitalization on four communities substantially completed in ~~2008~~2014. The Company expects interest expense for the full year of 2015 to be lower than in 2014 due to decreased interest costs resulting from the early retirement of certain mortgage indebtedness associated with apartment communities sold in 2014, the January 2015 refinancing of the Company’s unsecured credit facilities at lower interest rates, and increased interest capitalization on increased development and construction activities between years.

~~The~~Annually ~~Operating~~recurring ~~Partnership~~and ~~reported~~periodically arecurring ~~net~~capital ~~loss~~expenditures ~~attributable~~decreased $2,163 or 20.0% from 2014 to ~~common~~2015. ~~unitholders~~The decrease in periodically recurring capital expenditures of $502,~~540~~086 ~~for~~primarily ~~the~~reflects ~~six~~reduced ~~months~~tenant ~~ended June 30,~~improvements ~~2009~~at ~~compared~~an tooffice ~~$26~~property,~~402~~ ~~for~~reduced ~~the~~structural ~~six~~and ~~months~~exterior ~~ended~~remediation ~~June 30~~improvements at three communities, ~~2008.~~reduced ~~The~~expenditures ~~Company~~at ~~reported~~three acommunities ~~net~~sold ~~loss~~in ~~attributable~~2014 toas ~~common~~well ~~shareholders~~as the recovery in 2015 of prior year capital expenditures totaling $~~50,292~~545 ~~for~~through vendor litigation related to the ~~six~~replacement ~~months~~of ~~ended~~sprinkler ~~June 30,~~systems ~~2009~~at ~~compared~~one tocommunity. ~~$26,196~~These ~~for~~reduced expenditures were partially offset by the ~~six~~timing ~~months~~of increased structural and ~~ended~~exterior ~~June 30,~~remediation ~~2008~~improvement projects at four communities in 2015. AsFor ~~discussed~~the ~~below~~full year 2015, the ~~decrease~~Company ~~between~~expects ~~periods~~periodically recurring capital expenditures to be modestly higher than 2014 primarily ~~reflects~~due to the ~~increase~~timing of structural and exterior remediation projects between years. The decrease in ~~non-cash~~annually ~~impairment~~recurring ~~charges~~capital expenditures of $~~76,317~~77 inprimarily ~~2009~~reflects ~~compared~~reduced toexpenditures ~~non-cash~~at ~~impairment~~three ~~charges~~communities ofsold ~~$29,947,~~in ~~strategic~~2014 ~~review~~and ~~costs~~the general timing of ~~$8,161~~expenditures ~~and~~between years. For the full year ~~severance~~2015, ~~charges~~the ofCompany ~~$353~~expects annually recurring capital expenditures to be moderately higher than in ~~2008~~2014 ~~offset~~primarily bydue ~~increased~~to ~~gains~~targeted onequipment ~~the~~and ~~sales~~structural ofupgrades ~~apartment~~at ~~communities~~one ofcommunity ~~$22,431~~and ~~between~~modest ~~years~~increases throughout the portfolio in 2015.

~~Rental~~37 and other revenues from property operations decreased $1,996 or 1.4% from 2008 to 2009 primarily due to decreased revenues from the Company’s fully stabilized communities of $2,922 or 2.5% and decreased revenues of $1,576 from the Company’s furnished apartment rental business, offset by increased revenues of $848 or 18.8% from communities that achieved full stabilization in 2008 and increased revenue from development, rehabilitation and lease-up communities of $1,906 or 44.0%. The revenue decrease from fully stabilized communities is discussed more fully below. The revenue decrease from furnished apartment rental business was due to slower leasing activity resulting from weak economic conditions and lower corporate travel and expense spending in 2009. The revenue increase from communities that achieved full stabilization in 2008 reflects two communities and an additional phase of one community that were fully stabilized for 2009 compared to the communities being in lease up and under rehabilitation for 2008. The revenue increase from development, rehabilitation and

- 56 -

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

~~lease-up~~Fully ~~communities~~stabilized ~~primarily reflects the lease-up of two~~ communities ~~offset somewhat by decreased revenues from two communities under rehabilitation in 2008 and into 2009.~~

~~Property~~Rental ~~operating~~ and ~~maintenance~~other ~~expenses~~revenues ~~(exclusive~~increased ~~of depreciation and amortization) decreased~~ $4,~~235~~199 or 62.16% from ~~2008~~ 2014 to ~~2009~~2015. ~~primarily~~This ~~due~~increase toprimarily ~~decreases~~resulted from ~~fully~~a ~~stabilized communities of $~~2~~,997 or 6~~.13%, ~~and~~increase ~~decreased~~in ~~other~~the ~~segment~~average ~~expenses,~~monthly ~~including~~rental ~~corporate~~rate per ~~property~~apartment ~~management~~unit ~~expenses,~~between ~~of $3,071 or 20~~periods.~~2%,~~ ~~offset~~The ~~primarily~~increase byin ~~increased~~average ~~expenses~~rental ~~from development,~~rates ~~rehabilitation~~resulted ~~and~~in ~~lease-up~~a ~~communities~~revenue

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Filing Compare · POST APARTMENT HOMES LP