High-End REIT in Lowdown Brawl

Post Properties ( PPS) has always been more than a quiet, boring real estateinvestment trust.

After all, the company's upscale branding strategy relies on beingnoticed and recognized. But these days, Post is scoring a pile of extraattention via a nasty civil war. Post and the ambitious man whofounded it are firing loud shots at one another as they head toward abattle for control at Thursday's annual meeting.

Post's current leadership, recently endorsed by the nation's largestproxy advisory firm, is viewed as the heavy favorite. But company founderJohn Williams -- new to the underdog role -- has already shown that he canfight like a pit bull. He's clamped down on Post's management and, somebelieve, won't rest until he regains his grip on the fancy apartmentempire he started more than three decades ago.

"I don't think he has a chance of winning," said one Wall Streetexpert. "But I don't think he'll go away when the proxy fight's over,either. His whole problem is not the value of Post's shares; it's the factthat he doesn't control the company anymore. John Williams cannot let go."

The retired CEO, stripped of his chairmanship a decade early, adamantlyclaims otherwise. He has, in fact, promised to reject any executiveposition at the company and even give up his current board seat if hisefforts prevail.

But in both campaigns, promises have taken a back seat to attacks. Eachparty blames the other for harming the company and overlooking the bestinterests of its shareholders. In the end, neither side has managed to lookparticularly strong or noble.

"On a quarterly basis, the REIT world is kind of sleepy," admitted oneindustry expert. "This gives us something good to watch. It's fun."

Secret Weapons

The drama officially began when Williams shattered the industry calmwith a rare proxy fight, launched seven weeks ago.

His biggest weapon -- now central to his attack -- began as a secret one. Sometime last fall, Boston-based General Investment and Development, or GID, came sniffing around the real estate company with plans to buy it out. Williams claims he was the only Post director who took the offerseriously. The rest, he says, sought to quietly pass an anti-takeoverclause that would protect their jobs.

Williams angrily fought down the measure during a meeting in January.The victory would be among his last as chairman. The following month,Post yanked Williams' title and made him a regular member of the board. Italso set out to formally block his involvement in the day-to-day operationsof the company.

Williams came charging back, launching a legal battle before droppingit in favor of the current proxy fight. Meanwhile, Post went on to quietlyconfirm that it had received -- and rejected -- a formal buyout offer fromGID in its regulatory filings. It also continued to chip away at its oldleadership, shedding both its CFO and an executive vice president withlittle explanation to shareholders.

But the company sent neither executive away empty-handed. Like Williamshimself -- who voluntarily stepped down as CEO eight months before he gotbooted as chairman -- both executives picked up seven-figure severancepackages for going away.

"If their performance was so unsatisfactory, why did they receivegenerous severance packages?" Williams demanded of Post leaders. "Is thisalso fair to associates of Post, who have been forced to take a 2% cap onsalary increases?"

But in the end, some say, Williams' words backfired.

The $6 Million Man

Until recently, Edward Lowenthal was best known as one of the mostdistinguished executives in the real estate world. These days, he's alsocalled the "$6 million man."

He has Williams to thank for that starring role.

Accused of trying to regain control of his old company, Williams hunteddown the most impressive outsider he could find. And he promised him plentyto become Post's next CEO.

If Williams wins his fight, Lowenthal will collect a $750,000 base salary that's twice the current CEO's. He will at least double his salary with a guaranteed bonus plan that currently doesn't exist. He will receive 500,000 stock options that are already in the money. He will pick up100,000 shares of restricted stock. He'll get a company car and a furnishedapartment in Atlanta. And he'll be reimbursed for travel expenses if hedecides to commute from his current home in New Jersey.

All told, Post has stressed, Lowenthal stands to collect more than $6million if he successfully replaces the company's current $375,000-a-yearCEO.

"For all his talk about good corporate governance, Mr. Williams alreadyhas committed a huge amount of your company's money to the person he pickedas CEO if his nominees are elected at the upcoming shareholders meeting,"Post stated last week. "Keep in mind that it is Post Properties -- not Mr.Williams -- which would be obligated to pay the enormous contractualamounts."

Williams is instead on the hook for a smaller sum. In order to snagLowenthal ahead of the proxy showdown, Williams promised the executive$300,000 -- plus expenses -- even if his attempt to replace half the boardultimately fails.

The Long Journey

Of course, Williams is known as a big spender.

The Post brand, launched 32 years ago on the outskirts of Atlanta, is now synonymous with luxurious apartment living all across the Southeast.The company offers both suburban and trendy urban apartments that featurespecial touches such as high ceilings, direct-access garages and lushlandscaping complete with the blooming tulips that also decorate thecompany's logo.

Post intentionally set out to entice affluent tenants, primarily in thegrowing cities of Atlanta and Dallas, who were willing and able to satisfyexpensive tastes. But the same strategy that propelled the company tostardom has now come back to haunt it. Neither Atlanta nor Dallas is thebooming city it was just a few years ago. Rather, both cities have beenhard hit by the sagging economy and the worst apartment slumpin recent history. Some of the same residents who could cheerfully writeout big rent checks are now typing up new resumes instead. And others,tempted by record-low mortgage rates, have decided to take the plunge andbuy the homes they could have afforded all along.

This reversal has taken a toll on Post, its stock and its dividend. The company has been selling prize apartment complexes instead of aggressively building more of them. It has watched its stock tumble below $25 --with only a slight rebound to $26.30 -- for the first time in nearly five years.And it has become so strapped for extra cash that last year it finallycut its dividend so it could stop selling assets and borrowing money to payit.

This storm, brewing when doctors told Williams he needed heart surgerytwo years ago, erupted since Williams retired. And these days, Post lookssicker than its founder.

Williams, for one, believes a buyer could cure the company. But WallStreet isn't holding its breath for another deal. On the basis of their sellrecommendations, analysts believe the recent $26-a-share offer from GID -- dismissed by Post as too low -- may be as good as the company gets for awhile.

And at least one analyst doubts the GID offer was even genuine. Hebelieves Williams intentionally sought out a lowball offer so that, whenmanagement refused it, he would have a weapon for his fight. The analyst isconvinced that Williams is only hurting the company -- and himself -- bytrying to hang on.

But Williams has no plans to back down. If anything, he and hissupporters are more determined -- and confident -- than ever.

"Based on the meetings and phone conversations Mr. Williams and theslate are having with investors," his publicist said last week, "they havebeen increasingly encouraged by the reception the message is receiving."

Still, the fight has left Post and its founder -- particularly the latter -- with signs of damage.

"Maybe he wanted to leave on a high note," one expert pondered. "Buthe's the man who built that company, and he should be proud.

"His legacy was already intact."

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