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Evaluating Post Properties’ Less-Than-Aggressive Property Development Strategy

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Development for consistent returns

Post Properties (PPS) believes in generating consistent earnings growth through property development and redevelopment. Other major apartment REITs such as Equity Residential (EQR), Essex Property Trust (ESS), and AvalonBay Communities (AVB) also have active property development and redevelopment projects. The iShares US Real Estate ETF (IYR) invests 0.39% of its total portfolio in Post Properties.

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Post Properties’ development initiatives

During the last five years, Post Properties has developed and completed 2,442 apartment units in five apartment communities. It has apartments in additional phases in three of its communities.

In 2013, the company developed 1,163 apartment units, whereas in 2014, it developed 883 units. Post Properties believes that its development program is likely to create significant long-term value for the company and its shareholders.

Properties under construction

As of the end of fiscal 2014, Post Properties had five under construction or in lease-up communities. These communities consisted of 1,705 apartment units. The estimated total cost of properties under construction was $309.2 million.

The company started construction on three apartment communities in 2014. These were Post Parkside, Post Galleria, and Post South Lamar. These three communities consist of 1,123 apartment units, representing 5,800 square feet of retail space. In addition to these communities, the company also started construction on another community, Post Alexander-Phase II, in 2013.

Post River North

In 3Q15, Post Properties announced the development of Post River North, a mid-rise luxury apartment community in Denver, Colorado. This community will consist of 358 apartment units, with an average unit size of 818 square feet. The project is likely to incur a total development cost of $88.2 million. According to the company’s estimates, the project is likely to produce an estimated stabilized yield on cost of around 6%.

In addition to these developments, the company is likely to develop its existing land parcels over the next few years, which it expects will further boost its property portfolio.

Continue to the next part of this series for a discussion of Post Properties’ property acquisitions and dispositions.

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