Post Properties Tightens Its Belt

ATLANTA-One of the nation’s best-performing REITs is scaling down development, exiting some low-performing markets and focusing on fewer and smaller projects.

In a conference call, chairman/CEO John Williams said, “Basically, we are stabilizing or shrinking the company going forward.” He expects a real estate downturn and is readying the company to weather it. “We will be smaller and more nimble as we look toward a change in the real estate cycle,” Williams says.

The REIT anticipates its fully-diluted FFO per share for the third quarter will be about 94 cents, lower than analysts’ projections of $1.01. Fourth-quarter results will also likely be lower, in the range of 95 cents to 98 cents per share.

For the year, its FFO will be about $3.70 to $3.76 per share, compared to the 1999 figure of $3.69. The company also expects some impact in 2001.

Post attributed the disappointing results to an increasae in the short-term interest rates and a slowdown in leaseup in some markets, notably, Phoenix, Charlotte and Florida.

“Our margins are being squeezed,” says Williams As a result, Post plans to reduce its annual development costs from $350 million to $400 million to “a more conservative” $200 million to $250 million range. The current pipeline is at $600 million, about two-thirds of which is funded.

Post plans to begin an aggressive sales campaign to shed some of its assets, hoping to raise funds for internal development activities, reducing debt and repurchasing shares up to a previously announced $100 million.

The company expects to record a charge of $6 million to $7.5 million (13 cents to 17 cents per share) for writeoffs related to pre-development expenses on projects it will abandon. Post’s FFO growth rate for the next 18 months to 24 months will be about 4% to 6%, Williams notes. Over the last seven years, Post has been running at an 11% rate.

Atlanta is one of Post’s healthiest markets, Williams says. However, the area also has some of the company’s oldest properties. Metro Atlanta is “targeted for more asset sales than any other location,” Post’s chairman says.

Dallas is another market in which Post will sell assets. “We will not continue to invest in Phoenix, Nashville or Houston, and we are looking at Florida,” Williams says. But markets Post likes are Atlanta, Washington, D.C., southern California and New York.

Post is also pulling back from its planned large-scale participation in major Atlanta projects, Atlantic Station and the MARTA Lindbergh site. Both are complicated by neighborhood resistance, “uncertain and too far down the road in the pipeline” of about 18 months to 24 months.

Williams stressed Post’s balance sheet is strong and stabilized properties are performing well. The company is discontinuing its dividend reinvestment plan for individual investors.