Q4 2004 Post Properties, Inc Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day, everyone and welcome to the Post Properties fourth quarter earnings conference call. This call is being recorded.

[Operator Instructions].

And now for opening remarks and introductions I'd like to turn the conference over to Senior Vice President of Communications, Miss Janie Maddox. Please go ahead.

JANIE MADDOX, SVP, COMMUNICATIONS, POST PROPERTIES INC.: Good morning and welcome to the Post Properties fourth quarter conference call. I am Janie Maddox Senior Vice President of Communications for Post Properties.

With me today are Dave Stockert, CEO and President, Tom Wilkes, President of Post Apartment Management and Tom Senkbeil, Chief Investment Officer and Chris Papa, Chief Financial Officer.

Before we begin the discussions on this call let me reference the appropriate Safe Harbor statement. Statements contained in this conference call regarding expected operating results and other events are forward-looking statements that involve risks and uncertainties.

Actual future events or results may differ materially from these statements. Such forward-looking statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and are made based on management's current expectations or beliefs as well as assumptions made by and information currently available to management.

A variety of factors could cause actual results to differ materially from those anticipated including future economic conditions, including interest rates, local real estate conditions, development and construction activities, our level of debt, the availability of financing, the timing amount and use of proceeds from our asset sales, uncertainties associated with the company's expansion into the condominium conversion and for-sale housing business, and other factors discussed in our filings with the Securities and Exchange Commission.

Including important risk factors regarding the company which are included under the caption "risk factors" in the company's current report on Form 8-K, dated October 6, 2004. Post Properties undertakes no obligation to update any information discussed on this conference call.

During this call we will discuss certain non-GAAP financial measures, reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures can be found in our earnings release and our supplemental financial data's both of which are available on our website at www.postproperties.com under corporate information and financial request investor information. This call is now live on our website and will also be recorded and available for playback on our website.

I'll now turn it over to Dave Stockert.

DAVE STOCKERT, CEO AND PRESIDENT, POST PROPERTIES INC.: Thank you, Janie, and good morning. A year ago we set out a new strategic plan for Post Properties with six key objectives. These six objectives include number one, shaping and balancing the portfolio while focusing in fewer markets where we can achieve critical mass, leverage our operations, and take full advantage of the brand.

Number two, reestablish our value creation infrastructure to pursue a mix of development, acquisitions, dispositions, and for-sale or condo activities.

Number three, continually reinvest in the Post brand and our customer service.

Number four, continually reinvest in our associates and in their career development.

Number five, constantly strive for operational excellence and number six, maintain a strong balance sheet and deliver financial results and investor returns.

We're making good on each of these objectives. As to shaping and balancing the portfolio, we have been and will continue to be very active in 2004 we sold more than 240 million of properties principally comprised of our oldest Atlanta and Dallas properties.

We expect to sell another of approximately 200 million of older assets in 2005, again concentrated in Atlanta and Dallas.

Although we don't ever expect to stop selling and recycling capital, once we complete our planned 2005 sales, we will have substantially met our goal to achieve a uniformly consistent portfolio quality in each of our markets.

During the past year we also focused on building our presence in Washington, DC. We acquired a very well located property in Tysons Corner. It has redevelopment potential and commenced high quality development in Alexandria. We recently commenced to process to seek an exchange of our Manhattan high rises for additional high quality Washington assets.

If completed we have the opportunity to make Washington, DC a strong number two market to Atlanta. Potentially recasting the way the portfolio is viewed. Combined with selling our single Nashville community, we would reduce our footprint to eight markets from ten, making us more efficient and concentrating our brand.

As to our value creation goals, Tom Senkbeil is building a strong team and reestablishing our investment pipeline. We are convinced that adding a focused for-sale or condo capability is important strategically since we believe the demographic and income shifts along with the increasing urbanization of our markets will perpetuate the trend toward multi-family ownership.

We believe that it is important that we be able to meet the needs of those customers who choose to own their residence. With respect to our brand, we improved our on-site presentation and customer service programs in 2004 and raised residence satisfaction scores in independent surveys for the fourth straight year.

We are also launching a brand extension Post Preferred Homes to market for-sale product. To invest in associates we hired a new head of career development in 2004 out of the Coca-Cola Company. She is infusing our learning and development group with a lot of new ideas.

Our efforts are showing up in associate satisfaction scores that are at three-year highs and associate turnover that is about half the industry average. In the area of operations, we have completed our evaluation and selection process for new web-based property operating and procurement software. We expect to implement this software in 2005, leading to improvements in operations and in our efficiency. Finally, with respect to our financial performance, we made a big push in 2004 to significantly strengthen the balance sheet and reduce our fixed and variable rate debt and preferred stock applications.

By settling the MOPPRS remarketing agreement in December we put that looming obligation behind us and positioned 2005 and beyond for earnings and cash flow growth. With acquisition cap rates, returns being what they are today, we expect to continue to apply 2005 sales proceeds primarily to paying down high cost debt so as to mitigate dilution and create capacity for future investment. In some we are executing a focused business plan that we believe sets a very promising course.

Market fundamentals continue to improve in the fourth quarter. In January leasing is off to a solid start. We entered 2005 with great confidence and enthusiasm for our business. I'll now turn the call over to Tom Wilkes to talk about the portfolio. Tom.

TOM WILKES, PRESIDENT, POST APARTMENT MANAGEMENT, POST PROPERTIES INC.: Thanks, Dave. In the prior quarter call we referenced that our effective rents increased sequentially for the first time in several years. As you can see on page 9 of this supplement, in the fourth quarter effective rents increased again on a sequential basis this time by 50 basis points.

And we're almost even with the effective rents in the fourth quarter of 2003. As we strive to maintain our occupancy in the 93% to 95% range for the recovering …