When Post Properties Inc. recently moved its headquarters a couple of miles south to its Riverside by Post development, it did more than change its address.
The company left suburban Cobb County, Ga., for the city of Atlanta, and the relocation was more than symbolic for the 27-year-old company. It mirrored a strategy the REIT recently implemented that concentrates on the development of apartment communities on in-town locations and shies away from building garden apartments in the suburbs.
For Post, a company founded in 1971 by Chairman and CEO John A. Williams, the shift away from suburban garden apartments is monumental. For years, the company made money by developing apartment communities in the suburbs and eschewing city development. Its Post brand became well-known across the Southeast.
Led by Williams and President John T. Glover, Post owns more than 32,000 apartment homes, including about 5,800 under development. With its October 1997 acquisition of Dallas-based Columbus Realty Trust, Post has expanded beyond its Southeast base and now has projects under way in Houston, Dallas, Denver and Phoenix. It also has two developments with 700 units in the Washington suburb of Fairfax, Va.
Post has succeeded, in part, because Williams was the first to recognize the importance of creating a brand name for his company's apartments. "We were actually doing it before some of the hotel chains," he says of branding. "It was a strategy from 1971 forward, so we understand the pluses and minuses of a branding strategy."
The company also has been quick to react to trends. The first trend that affected Post came about in the early 1970s when women became a key apartment constituent. Female renters were committed to the environment, Williams says, so Post responded by starting its landscaping program that today practically is one of the company's trademarks.
The next shift came in the early '80s, Williams says, when "people were very concerned about living in a secure environment." That's when Post went to gated entrances and in-home security systems.
It was about 1988 or '89 when Post started to see another trend emerge, one that would change the way the company did business. "We saw this huge desire by people to live closer in and avoid some of the commute time and some of the problems associated with urban sprawl," Williams says.
He readily admits that Post helped create some of the urban sprawl it now distances itself from. "We did garden apartments about as well as they could be done," Williams says.
For Post, drawing in the reins wasn't as difficult as it would be for some apartment developers who built up to 50 miles from downtown Atlanta. "We were always more middle of the road. We stayed reasonably close-in," he says, "but really it was almost 10 years ago before we built our first apartment community within the city limits of Atlanta. So we have made a very substantial change in our development hilosophy, and in effect, it sort of remade the company."
Evidence of Post's new development strategy can be found not only in Atlanta but in Charlotte, N.C., Nashville, Tenn., and as far away as Houston and Denver. In Houston, Post is converting the Rice Hotel into a rental community, and in Denver the company has broken ground on a major residential community that involves the redevelopment of a vacant hospital site near downtown. The Denver project shows how the REIT is using its Columbus acquisition as a base for expansion in the West. "These buildings have facades and locations that are irreplaceable," Williams says. "What we're doing is converting them to a housing use. We're creating what I call a 'grand-style of living' in very unique and protected types of locations."
The latest example of Post's commitment to what it calls "live-work-walk" communities is Riverside, a mixed-use development near the Chattahoochee River. The project comprises a nine-story, 225,069 sq. ft. office building, 203 apartments (withunder way on 334 more) and several upscale retail sites below the homes. The brick office building and Princeton-style apartment homes surrounding a town square beckon back to an earlier time. Post has hired Atlanta's Carter & Associates-Oncor to market and lease the office building. "The great thing about [Riverside], people acknowledge the apartments, but 100% of the retail's leased, and we're about 80% with leases out on almost the balance of the (office) space," Williams says. "So, the project is doing wonderfully well." (Would Williams reside at Riverside if he were a renter? "Abso-damn-lutely," he says).
Post's strategy of creating in-town live-work-walk communities is being lauded by residents and analysts.
"We had a resident who came by the office to tell us how delighted he is to be living at Riverside and how pleased he is to see us doing this sort of developmentin other locations. For all of us at Post, it has been stimulating and exciting," Glover says. "We know that what we are doing is sound, not only in improving the quality of life for residents, but also in making a positive contribution to the way in which our communities handle growth. There is a real need - even a hunger - for bringing living and working spaces closer together."
Interstate/Johnson Lane agrees, having issued a strong-buy rating for the REIT. "Post is at the forefront of building mixed-use residential and retail developments such as Post Park at Phillips Plaza in Charlotte and Riverside by Post," the most-recent report by Interstate/Johnson Lane says. Post's strong-buy rating still stands, says Interstate/Johnson's Jessica C. Tully because of its "excellent developments."
Developing in-town locations is proving to be more difficult than cranking out garden apartments in the suburbs, but it's definitely worth while, Williams says. "To go out to the suburbs in Atlanta and go build a garden apartment doesn't take a lot of special skills," he says, "but to build something like Riverside or a development like we have at Lindbergh or the Post Park development in Charlotte or the Dallas Uptown developments, that requires a very high level of expertise and development know-how."
Not only is developing in-town more difficult, it's more exciting, he adds. "We're giving people a product they want. As a public company today, we have to make decisions that are different than when we were a private company," he says. "We're investing capital for 10 to 15 years, and many of the people we compete against, to be honest with you, are still thinking like they're private developers, and they're still acting like - I call them - gun-slingers."
Post is not out for a quick profit like some of the gun-slingers, Williams says. "Our profit has to come over a 15-year period. That's essentially the time period that we used to look at our ROIs and our return horizon," he says. "We think that given some of these locations that we're building in that we have excellent prospects of having continued growth and profitability over a long period of time."
The REIT has proven a profitable one. In 1997, Post increased by 10% its per share funds from operation. In the first quarter of this year, the per share FFO jumped 15.5% to 82 cents as occupancy at the REIT's 64 mature communities hit 96.3%. "We're on track to have an outstanding year," Williams says. "As a matter of fact, we ended the second quarter with occupancy levels that are essentially the highest since we became public."
Post's financial performance has led to a good response from the capital markets, Glover says. "I believe our reputation in the capital markets is based on a track record of managing our financial affairs conservatively and successfully for more than 27 years," he says. "We are surely one of a small handful of companies which came through the cycles of the last 27 years without a blemish. I think that record should certainly be - as it has been - reflected in the availability and pricing of capital to the company."
A former partner with King & Spalding, one of Atlanta's most-revered law firms, Glover joined Post in 1984. "Over the previous decade, I had worked closely with John and had come to have a great admiration and respect for him, and we became close friends," Glover says. "So the opportunity to join him as a partner was irresistible."
Nine years after Glover came on board, Post held its initial public offering; today it stands as one of the 30 largest REITs - and one of the five largest apartment REITs - in the country, according to ASSETrac's ranking of Top 50 REITs based on equity market capitalization.
Looking ahead, Williams says Post will continue to grow, although it might not make it out toright away. "We're working the West Coast awfully hard. We might have gotten there too late" he says. "There's a lot of development out there, and prices have gone up. It's very tough to make any money out on the West Coast right now."
Post's growth philosophy, Williams adds, is unique. "There is a theory by analysts and the buy-side people that apartments are commodities. If you believe that, then essentially as a buyer or an analyst the only thing you're concerned about is operating efficiencies and scale and those things," he says. "We have always felt entirely different. We actually think that apartments aren't commodities. What we try to do is stay away from the commodity end of the business. What we're trying to do is create these wonderful, unique and special assets that will create value over time. That's essentially our goal."
Post's next unique project might be in its own back yard. Williams says his company has a site overlooking Piedmont Park in midtown Atlanta that's ideal for a Post property. "We don't even have plans, but we actually have people who are ready to send us deposits for first choice," he says. "To have units that will look over the park, and then look at downtown Atlanta. It will be great."