hme10q3q2009.htm
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the quarterly period ended
|
SEPTEMBER 30,
2009
|
or
¨
|
TRANSITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from
|
to
|
Commission
File Number:
|
1-13136
|
HOME PROPERTIES,
INC.
|
(exact
name of registrant as specified in its charter)
|
MARYLAND
|
|
16-1455126
|
(State
or other jurisdiction of incorporation or organization)
|
|
(I.R.S.
Employer Identification No.)
|
850 Clinton Square, Rochester, New
York
|
|
14604
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(585) 546-4900
|
(Registrant’s
telephone number, including area code)
|
N/A
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
|
(The
Registrant is not yet required to submit Interactive Data)
|
Yes
|
¨
|
|
No
|
¨
|
Indicate
by checkmark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer x
|
Accelerated
filer ¨
|
|
|
Non-accelerated
filer ¨ (Do
not check if a smaller reporting company)
|
Smaller
reporting company ¨
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date.
Common Stock
|
|
Outstanding at October 30,
2009
|
$.01
par value
|
|
33,551,052
|
HOME
PROPERTIES, INC.
TABLE OF
CONTENTS
|
|
PAGE
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Financial
Statements (Unaudited)
|
|
|
Consolidated
Balance Sheets –
September 30, 2009 and December
31, 2008
|
3
|
|
Consolidated
Statements of Operations –
Three months ended September
30, 2009 and 2008
|
4
|
|
Consolidated
Statements of Operations –
Nine months ended September 30,
2009 and 2008
|
5
|
|
Consolidated
Statements of Equity –
Nine months ended September 30,
2009 and year ended December 31, 2008
|
6
|
|
Consolidated
Statements of Cash Flows –
Nine months ended September 30,
2009 and 2008
|
7
|
|
Notes
to Consolidated Financial Statements
|
8-18
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
19-31
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
32
|
Item
4.
|
Controls
and Procedures
|
32
|
PART
II.
|
OTHER
INFORMATION
|
|
Item
1A.
|
Risk
Factors
|
33
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
33
|
Item
6.
|
Exhibits
|
33
|
|
Signatures
|
34
|
PART I –
FINANCIAL INFORMATION
ITEM
1. FINANCIAL STATEMENTS
HOME
PROPERTIES, INC.
CONSOLIDATED
BALANCE SHEETS
SEPTEMBER
30, 2009 AND DECEMBER 31, 2008
(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
|
|
2009
|
|
|
2008
|
|
ASSETS
|
|
|
|
|
|
|
Real
estate:
|
|
|
|
|
|
|
Land
|
|
$ |
511,404 |
|
|
$ |
515,610 |
|
Construction
in progress
|
|
|
164,697 |
|
|
|
111,039 |
|
Buildings,
improvements and equipment
|
|
|
3,238,440 |
|
|
|
3,245,741 |
|
|
|
|
3,914,541 |
|
|
|
3,872,390 |
|
Less: accumulated
depreciation
|
|
|
(714,815 |
) |
|
|
(636,970 |
) |
Real estate, net
|
|
|
3,199,726 |
|
|
|
3,235,420 |
|
Cash
and cash equivalents
|
|
|
6,879 |
|
|
|
6,567 |
|
Cash
in escrows
|
|
|
26,793 |
|
|
|
27,904 |
|
Accounts
receivable
|
|
|
11,707 |
|
|
|
14,078 |
|
Prepaid
expenses
|
|
|
19,756 |
|
|
|
16,277 |
|
Deferred
charges
|
|
|
13,086 |
|
|
|
11,360 |
|
Other
assets
|
|
|
4,156 |
|
|
|
5,488 |
|
Total assets
|
|
$ |
3,282,103 |
|
|
$ |
3,317,094 |
|
LIABILITIES
AND EQUITY
|
|
|
|
|
|
|
|
|
Mortgage
notes payable
|
|
$ |
2,138,524 |
|
|
$ |
2,112,331 |
|
Exchangeable
senior notes
|
|
|
135,632 |
|
|
|
134,169 |
|
Line
of credit
|
|
|
71,500 |
|
|
|
71,000 |
|
Accounts
payable
|
|
|
19,223 |
|
|
|
23,731 |
|
Accrued
interest payable
|
|
|
12,668 |
|
|
|
10,845 |
|
Accrued
expenses and other liabilities
|
|
|
27,419 |
|
|
|
32,043 |
|
Security
deposits
|
|
|
20,291 |
|
|
|
21,443 |
|
Total liabilities
|
|
|
2,425,257 |
|
|
|
2,405,562 |
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Common
stock, $0.01 par value; 80,000,000 shares authorized; 33,488,760
and 32,431,304 shares issued and outstanding at September 30,
2009 and December 31, 2008, respectively
|
|
|
335 |
|
|
|
324 |
|
Excess
stock, $0.01 par value; 10,000,000 shares authorized; no shares issued or
outstanding
|
|
|
- |
|
|
|
- |
|
Additional
paid-in capital
|
|
|
880,605 |
|
|
|
857,415 |
|
Distributions
in excess of accumulated earnings
|
|
|
(251,058 |
) |
|
|
(206,961 |
) |
Total common stockholders'
equity
|
|
|
629,882 |
|
|
|
650,778 |
|
Noncontrolling
interest
|
|
|
226,964 |
|
|
|
260,754 |
|
Total
equity
|
|
|
856,846 |
|
|
|
911,532 |
|
Total liabilities and
equity
|
|
$ |
3,282,103 |
|
|
$ |
3,317,094 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE
THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
|
|
2009
|
|
|
2008
|
|
Revenues:
|
|
|
|
|
|
|
Rental
income
|
|
$ |
116,996 |
|
|
$ |
114,791 |
|
Property
other income
|
|
|
9,288 |
|
|
|
8,982 |
|
Interest
income
|
|
|
4 |
|
|
|
20 |
|
Other
income
|
|
|
29 |
|
|
|
30 |
|
Total
revenues
|
|
|
126,317 |
|
|
|
123,823 |
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating
and maintenance
|
|
|
51,959 |
|
|
|
50,998 |
|
General
and administrative
|
|
|
6,102 |
|
|
|
5,948 |
|
Interest
|
|
|
30,772 |
|
|
|
29,936 |
|
Depreciation
and amortization
|
|
|
30,319 |
|
|
|
28,292 |
|
Total
expenses
|
|
|
119,152 |
|
|
|
115,174 |
|
Income
from continuing operations
|
|
|
7,165 |
|
|
|
8,649 |
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
Income
from discontinued operations
|
|
|
77 |
|
|
|
1,008 |
|
Loss
on disposition of property
|
|
|
(22 |
) |
|
|
- |
|
Discontinued
operations
|
|
|
55 |
|
|
|
1,008 |
|
Net
income
|
|
|
7,220 |
|
|
|
9,657 |
|
Net
income attributable to noncontrolling interest
|
|
|
(1,956 |
) |
|
|
(2,818 |
) |
Net
income attributable to common shareholders
|
|
$ |
5,264 |
|
|
$ |
6,839 |
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
Discontinued
operations
|
|
|
- |
|
|
|
0.02 |
|
Net
income attributable to common shareholders
|
|
$ |
0.16 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
Discontinued
operations
|
|
|
- |
|
|
|
0.02 |
|
Net
income attributable to common shareholders
|
|
$ |
0.16 |
|
|
$ |
0.21 |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
32,972,794 |
|
|
|
31,884,119 |
|
Diluted
|
|
|
33,091,764 |
|
|
|
32,395,032 |
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
|
$ |
0.67 |
|
|
$ |
0.66 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
|
|
2009
|
|
|
2008
|
|
Revenues:
|
|
|
|
|
|
|
Rental
income
|
|
$ |
351,296 |
|
|
$ |
341,762 |
|
Property
other income
|
|
|
30,711 |
|
|
|
30,640 |
|
Interest
income
|
|
|
18 |
|
|
|
159 |
|
Other
income
|
|
|
397 |
|
|
|
308 |
|
Total
revenues
|
|
|
382,422 |
|
|
|
372,869 |
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating
and maintenance
|
|
|
160,734 |
|
|
|
154,805 |
|
General
and administrative
|
|
|
18,240 |
|
|
|
18,786 |
|
Interest
|
|
|
91,582 |
|
|
|
88,749 |
|
Depreciation
and amortization
|
|
|
90,609 |
|
|
|
83,607 |
|
Total
expenses
|
|
|
361,165 |
|
|
|
345,947 |
|
Income
from continuing operations
|
|
|
21,257 |
|
|
|
26,922 |
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
Income
(loss) from discontinued operations
|
|
|
(4,167 |
) |
|
|
1,227 |
|
Gain
on disposition of property
|
|
|
13,471 |
|
|
|
29,848 |
|
Discontinued
operations
|
|
|
9,304 |
|
|
|
31,075 |
|
Net
income
|
|
|
30,561 |
|
|
|
57,997 |
|
Net
income attributable to noncontrolling interest
|
|
|
(8,375 |
) |
|
|
(17,055 |
) |
Net
income attributable to common shareholders
|
|
$ |
22,186 |
|
|
$ |
40,942 |
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.47 |
|
|
$ |
0.59 |
|
Discontinued
operations
|
|
|
0.21 |
|
|
|
0.69 |
|
Net
income attributable to common shareholders
|
|
$ |
0.68 |
|
|
$ |
1.28 |
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.47 |
|
|
$ |
0.59 |
|
Discontinued
operations
|
|
|
0.20 |
|
|
|
0.68 |
|
Net
income attributable to common shareholders
|
|
$ |
0.67 |
|
|
$ |
1.27 |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
32,841,779 |
|
|
|
31,914,710 |
|
Diluted
|
|
|
32,905,711 |
|
|
|
32,357,364 |
|
|
|
|
|
|
|
|
|
|
Dividends
declared per share
|
|
$ |
2.01 |
|
|
$ |
1.98 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
CONSOLIDATED
STATEMENTS OF EQUITY
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND THE YEAR ENDED DECEMBER 31,
2008
(IN
THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
Distributions
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
in
Excess of
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Interests
|
|
|
Totals
|
|
Balance,
December 31, 2007
|
|
|
32,600,614 |
|
|
$ |
326 |
|
|
$ |
853,358 |
|
|
$ |
(185,623 |
) |
|
$ |
279,061 |
|
|
$ |
947,122 |
|
Cumulative
effect of change in accounting principle
|
|
|
- |
|
|
|
- |
|
|
|
9,688 |
|
|
|
(2,066 |
) |
|
|
3,138 |
|
|
|
10,760 |
|
Balance,
January 1, 2008
|
|
|
32,600,614 |
|
|
|
326 |
|
|
|
863,046 |
|
|
|
(187,689 |
) |
|
|
282,199 |
|
|
|
957,882 |
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
66,081 |
|
|
|
27,124 |
|
|
|
93,205 |
|
Issuance
of common stock, net
|
|
|
370,714 |
|
|
|
3 |
|
|
|
16,824 |
|
|
|
- |
|
|
|
- |
|
|
|
16,827 |
|
Repurchase
of common stock
|
|
|
(1,165,783 |
) |
|
|
(11 |
) |
|
|
(53,919 |
) |
|
|
- |
|
|
|
- |
|
|
|
(53,930 |
) |
Repurchase
of convertible debt
|
|
|
- |
|
|
|
- |
|
|
|
88 |
|
|
|
(88 |
) |
|
|
- |
|
|
|
- |
|
Conversion
of UPREIT Units for common stock
|
|
|
625,759 |
|
|
|
6 |
|
|
|
30,222 |
|
|
|
- |
|
|
|
(12,435 |
) |
|
|
17,793 |
|
Adjustment
of noncontrolling interest
|
|
|
- |
|
|
|
- |
|
|
|
1,154 |
|
|
|
- |
|
|
|
(1,154 |
) |
|
|
- |
|
Dividends
and distributions paid ($2.65 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(85,265 |
) |
|
|
(34,980 |
) |
|
|
(120,245 |
) |
Balance,
December 31, 2008
|
|
|
32,431,304 |
|
|
|
324 |
|
|
|
857,415 |
|
|
|
(206,961 |
) |
|
|
260,754 |
|
|
|
911,532 |
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,186
|
|
|
|
8,375 |
|
|
|
30,561 |
|
Issuance
of common stock, net
|
|
|
205,120 |
|
|
|
2 |
|
|
|
8,124 |
|
|
|
- |
|
|
|
- |
|
|
|
8,126 |
|
Repurchase
of common stock
|
|
|
(73,287 |
) |
|
|
- |
|
|
|
(2,249 |
) |
|
|
- |
|
|
|
- |
|
|
|
(2,249 |
) |
Conversion
of UPREIT Units for common stock
|
|
|
925,623 |
|
|
|
9 |
|
|
|
18,270 |
|
|
|
- |
|
|
|
(18,279 |
) |
|
|
- |
|
Adjustment
of noncontrolling interest
|
|
|
- |
|
|
|
- |
|
|
|
(955 |
) |
|
|
- |
|
|
|
955 |
|
|
|
- |
|
Dividends
and distributions paid ($2.01 per share)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(66,283 |
) |
|
|
(24,841 |
) |
|
|
(91,124 |
) |
Balance,
September 30, 2009
|
|
|
33,488,760 |
|
|
$ |
335 |
|
|
$ |
880,605 |
|
|
$ |
(251,058 |
) |
|
$ |
226,964 |
|
|
$ |
856,846 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008
(IN
THOUSANDS)
(UNAUDITED)
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$ |
30,561 |
|
|
$ |
57,997 |
|
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
92,747 |
|
|
|
84,508 |
|
Amortization
of debt discount
|
|
|
1,463 |
|
|
|
1,976 |
|
Gain on disposition of
property
|
|
|
(13,471 |
) |
|
|
(29,848 |
) |
Issuance of restricted stock,
compensation cost of stock options
and deferred
compensation
|
|
|
5,890 |
|
|
|
4,491 |
|
Changes in assets and
liabilities:
|
|
|
|
|
|
|
|
|
Cash in escrows
|
|
|
1,418 |
|
|
|
2,239 |
|
Other assets
|
|
|
(981 |
) |
|
|
(6,073 |
) |
Accounts
payable and accrued liabilities
|
|
|
(4,303 |
) |
|
|
6,907 |
|
Total
adjustments
|
|
|
82,763 |
|
|
|
64,200 |
|
Net
cash provided by operating activities
|
|
|
113,324 |
|
|
|
122,197 |
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of land for development
|
|
|
- |
|
|
|
(15,951 |
) |
Additions
to properties
|
|
|
(57,749 |
) |
|
|
(72,052 |
) |
Additions
to construction in progress
|
|
|
(53,661 |
) |
|
|
(22,406 |
) |
Proceeds
from sale of properties, net
|
|
|
66,878 |
|
|
|
63,044 |
|
Withdrawals
from (additions to) cash in escrows, net
|
|
|
(272 |
) |
|
|
924 |
|
Net
cash used in investing activities
|
|
|
(44,804 |
) |
|
|
(46,441 |
) |
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from sale of common
stock, net
|
|
|
2,236 |
|
|
|
9,446 |
|
Repurchase of common
stock
|
|
|
(2,249 |
) |
|
|
(53,206 |
) |
Proceeds
from mortgage notes payable
|
|
|
115,493 |
|
|
|
101,479 |
|
Payments of mortgage notes
payable
|
|
|
(88,665 |
) |
|
|
(108,818 |
) |
Proceeds from line of
credit
|
|
|
362,000 |
|
|
|
312,000 |
|
Payments on line of
credit
|
|
|
(361,500 |
) |
|
|
(246,000 |
) |
Payments of deferred loan
costs
|
|
|
(4,390 |
) |
|
|
(1,377 |
) |
Additions to cash in escrows,
net
|
|
|
(9 |
) |
|
|
(40 |
) |
Dividends and distributions
paid
|
|
|
(91,124 |
) |
|
|
(89,935 |
) |
Net
cash used in financing activities
|
|
|
(68,208 |
) |
|
|
(76,451 |
) |
Net
increase (decrease) in cash and cash equivalents
|
|
|
312 |
|
|
|
(695 |
) |
Cash
and cash equivalents:
|
|
|
|
|
|
|
|
|
Beginning of
year
|
|
|
6,567 |
|
|
|
6,109 |
|
End of period
|
|
$ |
6,879 |
|
|
$ |
5,414 |
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash investing and
financing activities:
|
|
|
|
|
|
|
|
|
Increase
in real estate associated with the purchase of UPREIT
Units
|
|
$ |
- |
|
|
$ |
14,126 |
|
Exchange
of UPREIT Units for common shares
|
|
|
18,279 |
|
|
|
8,733 |
|
Additions
to properties included in accounts payable
|
|
|
2,181 |
|
|
|
5,454 |
|
Mortgage
note premium write-off
|
|
|
615 |
|
|
|
4,451 |
|
The
accompanying notes are an integral part of these consolidated financial
statements.
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
1.
|
Unaudited Interim
Financial Statements
|
The
interim consolidated financial statements of Home Properties, Inc. (the
"Company") have been prepared in accordance with accounting principles generally
accepted in the United States of America ("U.S. GAAP") for interim financial
information and the applicable rules and regulations of the Securities and
Exchange Commission ("SEC"). Accordingly, certain disclosures that
would accompany annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of America are
omitted. The year-end balance sheet data was derived from audited
financial statements, which were revised in the current period to reflect the
retroactive application of recently adopted accounting standards (see Note 3),
but does not include all disclosures required by accounting principles generally
accepted in the United States of America. In the opinion of
management, all adjustments, consisting solely of normal recurring adjustments,
necessary for the fair statement of the consolidated financial statements for
the interim periods have been included. The current period's results
of operations are not necessarily indicative of results which ultimately may be
achieved for the year. The interim consolidated financial statements
and notes thereto should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Form 10-K for the year
ended December 31, 2008.
2.
|
Organization and Basis
of Presentation
|
The
Company was formed in November 1993, as a Maryland corporation and is engaged
primarily in the ownership, management, acquisition, rehabilitation and
development of residential apartment communities in select Northeast,
Mid-Atlantic and Southeast Florida regions of the United States. The
Company conducts its business through Home Properties, L.P. (the "Operating
Partnership"), a New York limited partnership. As of September 30,
2009, the Company operated 109 apartment communities with 37,539
apartments. Of this total, the Company owned 107 communities,
consisting of 36,389 apartments, managed as general partner one partnership that
owned 868 apartments, and fee managed one community, consisting of 282
apartments, for a third party.
The
Company elected to be taxed as a Real Estate Investment Trust ("REIT") under the
Internal Revenue Code, as amended, for all periods presented. A corporate REIT
is a legal entity which holds real estate interests and must meet a number of
organizational and operational requirements, including a requirement that it
currently distribute at least 90% of its adjusted taxable income to
stockholders. As a REIT, the Company generally will not be subject to corporate
level tax on taxable income it distributes currently to its stockholders.
Management believes that all such conditions for the avoidance of income taxes
have been met for the periods presented.
The
accompanying consolidated financial statements include the accounts of the
Company and its ownership of 73.8% of the limited partnership units in the
Operating Partnership ("UPREIT Units") at September 30, 2009 (71.7% at
December 31, 2008). The remaining 26.2% is reflected as
noncontrolling interest in these consolidated financial statements at September
30, 2009 (28.3% at December 31, 2008). The Company owns a 1.0%
general partner interest in the Operating Partnership and the remainder
indirectly as a limited partner through its wholly owned subsidiary, Home
Properties I, LLC, which owns 100% of Home Properties Trust, which is the
limited partner. Home Properties Trust was formed in September
1997, as a Maryland real estate trust and as a qualified REIT subsidiary ("QRS")
and owns the Company's share of the limited partner interests in the Operating
Partnership. For financing purposes, the Company has formed a limited
liability company (the "LLC") and a partnership (the "Financing Partnership"),
which beneficially own certain apartment communities encumbered by mortgage
indebtedness. The LLC is wholly owned by the Operating
Partnership. The Financing Partnership is owned 99.9% by the
Operating Partnership and 0.1% by the QRS.
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
2. Organization and Basis of
Presentation (continued)
The
accompanying consolidated financial statements include the accounts of Home
Properties Resident Services, Inc. ("HPRS" or the "Management
Company"). The Management Company is a wholly owned subsidiary of
the Company. In addition, the Company consolidates one
affordable housing limited partnership in accordance with Financial Accounting
Standards Board ("FASB") authoritative guidance for the consolidation of
variable interest entities. All significant
inter-company balances and transactions have been eliminated in these
consolidated financial statements.
3.
|
Recently Adopted and
Recently Issued Accounting
Standards
|
In July
2009, the FASB issued the FASB Accounting Standards Codification ("ASC")
105-10 ("ASC
105-10" or the "Codification"). ASC 105-10 establishes the exclusive
authoritative reference for U.S. GAAP for use in financial statements, except
for SEC rules and interpretive releases, which are also authoritative GAAP for
SEC registrants. The Codification supersedes all existing non-SEC
accounting and reporting standards. We have included references to
the Codification, as appropriate, in these consolidated financial
statements. The Codification does not change GAAP and did not have an
effect on our financial position and results of operations.
Retrospective
Application of Changes in Accounting Principles
On
January 1, 2009, the Company adopted FASB authoritative guidance for debt with
conversion and other options, ("ASC 470-20"); noncontrolling interests in
consolidated financial statements ("ASC 810-10"); and determining whether
instruments granted in share-based payment transactions are participating
securities ("ASC 260-10").
ASC
470-20 requires the liability and equity components of convertible debt
instruments that may be settled in cash upon conversion (including partial cash
settlement) to be separately accounted for in a manner that reflects the
issuer's nonconvertible debt borrowing rate on the date of issue. The
difference between the principal amount of the debt and the amount of proceeds
allocated to the liability component is reported as a debt discount and
subsequently amortized to earnings over the instrument’s expected life using the
effective interest method. The adoption of this authoritative
guidance affects the accounting for the Company’s 4.125% exchangeable senior
notes ("Senior Notes") which were issued in October 2006 with an initial
principal amount of $200,000. The initial debt component of the
$200,000 Senior Notes was $186,050, based on the fair value of similar
nonconvertible debt. The aggregate initial debt discount of $13,950
was recorded in additional paid-in capital. The Company is amortizing
the discount using the effective interest method over the period the debt is
expected to remain outstanding (through the first optional redemption date of
November 1, 2011) as additional non-cash interest expense. During the
fourth quarter of 2008, the Company repurchased $60,000 principal amount of the
Senior Notes for $45,360. The gain on early extinguishment of debt
originally recorded in the fourth quarter of 2008 of $13,884 has been adjusted
for the impact of this authoritative guidance, which requires a revaluation of
the extinguished debt and equity components at the date of extinguishment and
resulted in a restated gain on early extinguishment of debt of
$11,303.
The
following tables provide additional information about the Senior
Notes:
Consolidated
Balance Sheet:
|
|
September 30, 2009
|
|
|
December 31, 2008
|
|
Principal
amount of liability component
|
|
$ |
140,000 |
|
|
$ |
140,000 |
|
Unamortized
discount
|
|
|
(4,368 |
) |
|
|
(5,831 |
) |
Carrying
amount of liability component
|
|
$ |
135,632 |
|
|
$ |
134,169 |
|
Carrying
amount of equity component
|
|
$ |
13,950 |
|
|
$ |
13,950 |
|
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
3. Recently Adopted and
Recently Issued Accounting Standards (continued)
Consolidated
Statements of Operations:
|
|
Three Months Ended September
30,
|
|
|
Nine Months Ended September
30,
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Coupon
interest
|
|
$ |
1,444 |
|
|
$ |
2,062 |
|
|
$ |
4,331 |
|
|
$ |
6,187 |
|
Amortization
- issuance costs
|
|
|
137 |
|
|
|
195 |
|
|
|
410 |
|
|
|
586 |
|
Discount
amortization – ASC 470-20
|
|
|
494 |
|
|
|
667 |
|
|
|
1,463 |
|
|
|
1,976 |
|
Total
interest expense – Senior Notes
|
|
$ |
2,075 |
|
|
$ |
2,924 |
|
|
$ |
6,204 |
|
|
$ |
8,749 |
|
Effective
interest rate
|
|
|
5.75 |
% |
|
|
5.75 |
% |
|
|
5.75 |
% |
|
|
5.75 |
% |
Conversion
price per share, as adjusted
|
|
$ |
72.92 |
|
|
$ |
73.17 |
|
|
$ |
72.92 |
|
|
$ |
73.17 |
|
ASC
810-10 establishes accounting and reporting standards that require the ownership
interests in subsidiaries held by parties other than the parent be clearly
identified, labeled, and presented in the consolidated balance sheet within
equity, but separate from the parent’s equity; the amount of consolidated net
income attributable to the parent and to the noncontrolling interests be clearly
identified and presented on the face of the consolidated statement of income;
changes in a parent’s ownership interest while the parent retains its
controlling financial interest in its subsidiary be accounted for consistently;
and that entities provide sufficient disclosures that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners.
The
following tables set forth the effect of the retroactive application of ASC
470-20 and ASC 810-10 on certain previously reported line items.
Consolidated
Balance Sheet:
|
|
December 31, 2008
|
|
|
|
Originally
Reported
|
|
|
As
Adjusted
|
|
|
Effect
of Change
|
|
|
Impact
of ASC 470-20
|
|
|
Impact
of ASC 810-10
|
|
Deferred
charges
|
|
$ |
11,473 |
|
|
$ |
11,360 |
|
|
$ |
(113 |
) |
|
$ |
(113 |
) |
|
$ |
- |
|
Total
assets
|
|
|
3,317,207 |
|
|
|
3,317,094 |
|
|
|
(113 |
) |
|
|
(113 |
) |
|
|
- |
|
Exchangeable
senior notes
|
|
|
140,000 |
|
|
|
134,169 |
|
|
|
(5,831 |
) |
|
|
(5,831 |
) |
|
|
- |
|
Total
liabilities
|
|
|
2,411,393 |
|
|
|
2,405,562 |
|
|
|
(5,831 |
) |
|
|
(5,831 |
) |
|
|
- |
|
Minority
interest
|
|
|
259,136 |
|
|
|
- |
|
|
|
(259,136 |
) |
|
|
- |
|
|
|
(259,136 |
) |
Additional
paid-in capital
|
|
|
847,576 |
|
|
|
857,415 |
|
|
|
9,839 |
|
|
|
9,839 |
|
|
|
- |
|
Distributions
in excess of accumulated earnings
|
|
|
(201,222 |
) |
|
|
(206,961 |
) |
|
|
(5,739 |
) |
|
|
(5,739 |
) |
|
|
- |
|
Total
stockholders' equity
|
|
|
646,678 |
|
|
|
650,778 |
|
|
|
4,100 |
|
|
|
4,100 |
|
|
|
- |
|
Noncontrolling
interest
|
|
|
- |
|
|
|
260,754 |
|
|
|
260,754 |
|
|
|
1,618 |
|
|
|
259,136 |
|
Total
equity
|
|
|
646,678 |
|
|
|
911,532 |
|
|
|
264,854 |
|
|
|
5,718 |
|
|
|
259,136 |
|
Total
liabilities and stockholders' equity
|
|
|
3,317,207 |
|
|
|
3,317,094 |
|
|
|
(113 |
) |
|
|
(113 |
) |
|
|
- |
|
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
3. Recently Adopted and
Recently Issued Accounting Standards (continued)
Consolidated
Statement of Operations:
|
|
Three Months Ended September 30,
2008
|
|
|
|
Originally
Reported ¹
|
|
|
As
Adjusted
|
|
|
Effect
of Change
|
|
|
Impact
of
ASC
470-20
|
|
|
Impact
of
ASC
810-10
|
|
Interest
|
|
$ |
29,284 |
|
|
$ |
29,936 |
|
|
$ |
652 |
|
|
$ |
652 |
|
|
$ |
- |
|
Total
expense
|
|
|
114,522 |
|
|
|
115,174 |
|
|
|
652 |
|
|
|
652 |
|
|
|
- |
|
Income
from operations
|
|
|
9,301 |
|
|
|
8,649 |
|
|
|
(652 |
) |
|
|
(652 |
) |
|
|
- |
|
Minority
interest in operating partnership
|
|
|
(2,715 |
) |
|
|
- |
|
|
|
2,715 |
|
|
|
190 |
|
|
|
2,525 |
|
Income
from continuing operations
|
|
|
6,586 |
|
|
|
8,649 |
|
|
|
2,063 |
|
|
|
(462 |
) |
|
|
2,525 |
|
Income
from discontinued operations
|
|
|
715 |
|
|
|
1,008 |
|
|
|
293 |
|
|
|
- |
|
|
|
293 |
|
Discontinued
operations
|
|
|
715 |
|
|
|
1,008 |
|
|
|
293 |
|
|
|
- |
|
|
|
293 |
|
Net
income
|
|
|
7,301 |
|
|
|
9,657 |
|
|
|
2,356 |
|
|
|
(462 |
) |
|
|
2,818 |
|
Net
income attributable to noncontrolling interest
|
|
|
- |
|
|
|
(2,818 |
) |
|
|
(2,818 |
) |
|
|
- |
|
|
|
(2,818 |
) |
Net
income attributable to common shareholders
|
|
|
7,301 |
|
|
|
6,839 |
|
|
|
(462 |
) |
|
|
(462 |
) |
|
|
- |
|
Basic
earnings per share
|
|
|
0.23 |
|
|
|
0.21 |
|
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
- |
|
Diluted
earnings per share
|
|
|
0.23 |
|
|
|
0.21 |
|
|
|
(0.02 |
) |
|
|
(0.02 |
) |
|
|
- |
|
|
¹
|
Adjusted
for discontinued operations as discussed in Note
10.
|
Consolidated
Statement of Operations:
|
|
Nine Months Ended September 30,
2008
|
|
|
|
Originally
Reported ¹
|
|
|
As
Adjusted
|
|
|
Effect
of Change
|
|
|
Impact
of
ASC
470-20
|
|
|
Impact
of
ASC
810-10
|
|
Interest
|
|
$ |
86,817 |
|
|
$ |
88,749 |
|
|
$ |
1,932 |
|
|
$ |
1,932 |
|
|
$ |
- |
|
Total
expense
|
|
|
334,015 |
|
|
|
345,947 |
|
|
|
1,932 |
|
|
|
1,932 |
|
|
|
- |
|
Income
from operations
|
|
|
28,854 |
|
|
|
26,922 |
|
|
|
(1,932 |
) |
|
|
(1,932 |
) |
|
|
- |
|
Minority
interest in operating partnership
|
|
|
(8,484 |
) |
|
|
- |
|
|
|
8,484 |
|
|
|
568 |
|
|
|
7,916 |
|
Income
from continuing operations
|
|
|
20,370 |
|
|
|
26,922 |
|
|
|
6,552 |
|
|
|
(1,364 |
) |
|
|
7,916 |
|
Income
from discontinued operations
|
|
|
866 |
|
|
|
1,227 |
|
|
|
361 |
|
|
|
- |
|
|
|
361 |
|
Gain
on disposition of property
|
|
|
21,070 |
|
|
|
29,848 |
|
|
|
8,778 |
|
|
|
- |
|
|
|
8,778 |
|
Discontinued
operations
|
|
|
21,936 |
|
|
|
31,075 |
|
|
|
9,139 |
|
|
|
- |
|
|
|
9,139 |
|
Net
income
|
|
|
42,306 |
|
|
|
57,997 |
|
|
|
15,691 |
|
|
|
(1,364 |
) |
|
|
17,055 |
|
Net
income attributable to noncontrolling interest
|
|
|
- |
|
|
|
(17,055 |
) |
|
|
(17,055 |
) |
|
|
- |
|
|
|
(17,055 |
) |
Net
income attributable to common shareholders
|
|
|
42,306 |
|
|
|
40,942 |
|
|
|
(1,364 |
) |
|
|
(1,364 |
) |
|
|
- |
|
Basic
earnings per share
|
|
|
1.33 |
|
|
|
1.28 |
|
|
|
(0.05 |
) |
|
|
(0.05 |
) |
|
|
- |
|
Diluted
earnings per share
|
|
|
1.31 |
|
|
|
1.27 |
|
|
|
(0.04 |
) |
|
|
(0.04 |
) |
|
|
- |
|
|
¹
|
Adjusted
for discontinued operations as discussed in Note
10.
|
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
3. Recently Adopted and
Recently Issued Accounting Standards (continued)
Consolidated
Statement of Equity:
|
|
December 31, 2008
|
|
|
|
|
Originally
Reported
|
|
|
As
Adjusted
|
|
|
Effect
of Change
|
|
|
Impact
of ASC 470-20
|
|
|
Impact
of
ASC
810-10
|
Additional
paid-in-capital
|
|
$ |
847,576 |
|
|
$ |
857,415 |
|
|
$ |
9,839 |
|
|
$ |
9,839 |
|
|
$ |
- |
|
Distributions
in excess of accumulated earnings
|
|
|
(201,222 |
) |
|
|
(206,961 |
) |
|
|
(5,739 |
) |
|
|
(5,739 |
) |
|
|
- |
|
Noncontrolling
interest
|
|
|
- |
|
|
|
260,754 |
|
|
|
260,754 |
|
|
|
1,618 |
|
|
|
259,136 |
|
The
impact of ASC 470-20 on the January 1, 2008 balances of additional paid-in
capital, distributions in excess of accumulated earnings and noncontrolling
interest have been reflected as a cumulative effect of change in accounting
principle on our consolidated statements of equity.
Consolidated
Statement of Cash Flows:
|
|
Nine Months Ended September 30,
2008
|
|
|
|
|
Originally
Reported
|
|
|
As
Adjusted
|
|
|
Effect
of Change
|
|
|
Impact
of ASC 470-20
|
|
|
Impact
of ASC 810-10
|
Net
income
|
|
$ |
42,306 |
|
|
$ |
57,997 |
|
|
$ |
15,691 |
|
|
$ |
(1,364 |
) |
|
$ |
17,055 |
|
Income
allocated to minority interest
|
|
|
17,623 |
|
|
|
- |
|
|
|
(17,623 |
) |
|
|
(568 |
) |
|
|
(17,055 |
) |
Depreciation
and amortization
|
|
|
84,552 |
|
|
|
84,508 |
|
|
|
(44 |
) |
|
|
(44 |
) |
|
|
- |
|
Amortization
of debt discount
|
|
|
- |
|
|
|
1,976 |
|
|
|
1,976 |
|
|
|
1,976 |
|
|
|
- |
|
Net
cash provided by operating activities
|
|
|
122,197 |
|
|
|
122,197 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
ASC
260-10 provides that unvested share-based payment awards that contain
non-forfeitable rights to dividends are participating securities and shall be
included in the computation of earnings per share pursuant to the two-class
method. The two-class method of computing earnings per share is an
earnings allocation formula that determines earnings per share for common stock
and any participating securities according to dividends declared (whether paid
or unpaid) and participation rights in undistributed earnings. The
Company determined that its restricted stock granted under its stock plans are
considered participating securities since the share-based awards contain a
non-forfeitable right to dividends irrespective of whether the awards ultimately
vest. Prior to the adoption of this authoritative guidance, the
Company’s restricted stock was included in the calculation of diluted earnings
per share using the treasury stock method. ASC 260-10 became
effective on January 1, 2009 and required all prior period earnings per
share data presented to be adjusted retroactively. The adoption of
this authoritative guidance did not have a material effect on our computation of
earnings per share.
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
3.
|
Recently Adopted and
Recently Issued Accounting Standards
(continued)
|
Recently
Adopted Accounting Principles
On
January 1, 2009, the Company adopted the revised authoritative guidance for
business combinations ("ASC 805-10"), which establishes principles and
requirements for how the acquirer recognizes and measures in its financial
statements the identifiable assets acquired, liabilities assumed, any
noncontrolling interests in the acquiree and goodwill acquired in a business
combination. Additionally, the revised authoritative guidance
requires acquisition-related costs to be expensed in the period in which the
costs are incurred and the services received instead of including such costs as
part of the acquisition price. This statement is effective for
business combinations for which the acquisition date is on or after January 1,
2009. The Company’s adoption of the revised authoritative guidance
did not have any impact on its financial position and results of
operations.
On
January 1, 2009, the Company adopted the authoritative guidance for fair value
measurements ("ASC 820-10") for all non-financial assets and non-financial
liabilities except for those that are recognized or disclosed at fair value in
the financial statements on a recurring basis. The authoritative
guidance defines fair value, establishes a framework for measuring fair value in
generally accepted accounting principles, and expands disclosures about fair
value measurements. This guidance applies to accounting
pronouncements that require or permit fair value measurements; the FASB having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this guidance does not
require any new fair value measurements for the Company. The
Company’s adoption of the authoritative guidance for non-financial assets and
non-financial liabilities did not have any impact on its financial position and
results of operations.
On April
1, 2009, the Company adopted the authoritative guidance for interim disclosures
about fair value of financial instruments ("ASC 825-10"). The new
authoritative guidance amends existing guidance to require disclosures about
fair value of financial instruments for interim reporting periods of publicly
traded companies in addition to the annual financial
statements. Prior period presentation is not required for comparative
purposes at initial adoption. The Company’s adoption of this
authoritative guidance did not have any impact on its financial position and
results of operations as this requires only additional disclosures.
On April
1, 2009, the Company adopted the authoritative guidance for subsequent events
("ASC 855-10"). This guidance is intended to establish general
standards of accounting for and disclosures of events that occur after the
balance sheet date but before financial statements are issued or are available
to be issued. It requires the disclosure of the date through which an
entity has evaluated subsequent events and the basis for selecting that date,
that is, whether that date represents the date the financial statements were
issued or were available to be issued. The Company’s adoption of this
authoritative guidance did not have a material impact on its financial position
and results of operations.
Recently
Issued Accounting Principles
In June
2009, the FASB issued amended guidance related to the consolidation of variable
interest entities ("SFAS 167"). These amendments require an
enterprise to perform an analysis to determine whether the enterprise’s variable
interest or interests give it a controlling financial interest in a variable
interest entity. This analysis identifies the primary beneficiary of
a variable interest entity as the enterprise that has both of the following
characteristics: a) the power to direct the activities of a variable interest
entity that most significantly impact the entity’s economic performance, and b)
the obligation to absorb losses of the entity that could potentially be
significant to the variable interest entity or the right to receive benefits
from the entity that could potentially be significant to the variable interest
entity. Additionally, the amendments require ongoing reassessments of
whether an enterprise is the primary beneficiary of a variable interest
entity. This guidance will be effective for the Company on January 1,
2010, with earlier application prohibited. The Company is currently
assessing the potential impact that the adoption of this guidance will have on
its financial position and results of operations.
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
4.
|
Earnings Per Common
Share
|
Basic
earnings per share ("EPS") is computed as net income attributable to common
shareholders divided by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that
could occur from common shares issuable through stock-based compensation
including stock options (using the treasury stock method) and the conversion of
any exchangeable senior notes. The exchange of an UPREIT Unit for
common stock will have no effect on diluted EPS as Unitholders and stockholders
effectively share equally in the net income of the Operating
Partnership. Income from continuing operations and discontinued
operations is the same for both the basic and diluted calculation.
The
reconciliation of the basic and diluted earnings per share for the three and
nine months ended September 30, 2009 and 2008 follows:
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
7,165 |
|
|
$ |
8,649 |
|
|
$ |
21,257 |
|
|
$ |
26,922 |
|
Less:
Income from continuing operations attributable to noncontrolling
interest
|
|
|
(1,941 |
) |
|
|
(2,524 |
) |
|
|
(5,807 |
) |
|
|
(7,918 |
) |
Income
from continuing operations attributable to common
shareholders
|
|
$ |
5,224 |
|
|
$ |
6,125 |
|
|
$ |
15,450 |
|
|
$ |
19,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations
|
|
$ |
55 |
|
|
$ |
1,008 |
|
|
$ |
9,304 |
|
|
$ |
31,075 |
|
Less:
Discontinued operations attributable to noncontrolling
interest
|
|
|
(15 |
) |
|
|
(294 |
) |
|
|
(2,568 |
) |
|
|
(9,137 |
) |
Discontinued
operations attributable to common shareholders
|
|
$ |
40 |
|
|
$ |
714 |
|
|
$ |
6,736 |
|
|
$ |
21,938 |
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average number of common shares outstanding
|
|
|
32,972,794 |
|
|
|
31,884,119 |
|
|
|
32,841,779 |
|
|
|
31,914,710 |
|
Effect
of dilutive stock options
|
|
|
79,439 |
|
|
|
442,781 |
|
|
|
45,632 |
|
|
|
398,204 |
|
Effect
of phantom and restricted shares
|
|
|
39,531 |
|
|
|
68,132 |
|
|
|
18,300 |
|
|
|
44,450 |
|
Diluted
weighted average number of common shares outstanding
|
|
|
33,091,764 |
|
|
|
32,395,032 |
|
|
|
32,905,711 |
|
|
|
32,357,364 |
|
Earnings
per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
$ |
0.47 |
|
|
$ |
0.59 |
|
Discontinued
operations
|
|
|
- |
|
|
|
0.02 |
|
|
|
0.21 |
|
|
|
0.69 |
|
Net
income attributable to common shareholders
|
|
$ |
0.16 |
|
|
$ |
0.21 |
|
|
$ |
0.68 |
|
|
$ |
1.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from continuing operations
|
|
$ |
0.16 |
|
|
$ |
0.19 |
|
|
$ |
0.47 |
|
|
$ |
0.59 |
|
Discontinued
operations
|
|
|
- |
|
|
|
0.02 |
|
|
|
0.20 |
|
|
|
0.68 |
|
Net
income attributable to common shareholders
|
|
$ |
0.16 |
|
|
$ |
0.21 |
|
|
$ |
0.67 |
|
|
$ |
1.27 |
|
Unexercised
stock options to purchase 2,147,816 and 1,016,901 shares of the Company's common
stock for the three months ended September 30, 2009 and 2008, respectively, and
3,119,409 and 1,464,291 shares of the Company's common stock for the nine months
ended September 30, 2009 and 2008, respectively, were not included in the
computations of diluted EPS because the effects would be
antidilutive. Also, in conjunction with the issuance of the Senior
Notes, there were 332,721 and 484,550 potential shares issuable under certain
circumstances, of which all are considered antidilutive as of September 30, 2009
and 2008, respectively.
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
5.
|
Variable Interest
Entities
|
The
Company is the general partner in one variable interest entity ("VIE")
syndicated using low income housing tax credits under Section 42 of the Internal
Revenue Code. As general partner, the Company manages the day-to-day
operations of the partnership for a management fee. In addition, the
Company has an operating deficit guarantee and tax credit guarantee to the
limited partners of that partnership (as discussed in Note 11). The
Company is responsible for funding operating deficits to the extent there are
any and can receive operating incentive awards when cash flows reach certain
levels. The effect on the Consolidated Balance Sheet of including
this VIE as of September 30, 2009 includes total assets of $11,781, total
liabilities of $16,945 and partners’ deficit of $5,164,
respectively. Of the $16,945 in total liabilities, $16,068 represents
non-recourse mortgage debt.
6. Interest
Capitalized
Capitalized
interest associated with communities under development or rehabilitation totaled
$2,336 and $1,483 for the three months ended September 30, 2009 and 2008,
respectively; and $6,206 and $3,845 for the nine months ended September 30,
2009 and 2008, respectively.
On
September 1, 2009 the Company entered into a $175,000 revolving line of credit
agreement for a two-year term expiring August 31, 2011 with an optional one-year
extension. The credit facility succeeds the $140,000 credit facility
that matured on September 1, 2009. The Company had $71,500
outstanding under the credit facility on September 30,
2009. Borrowings under the line of credit bear interest at rates
ranging from 2.50% to 3.25% over the one-month LIBOR rate, increasing at higher
levels of outstanding indebtedness, with a LIBOR floor of 1.50%. The
one-month LIBOR was .25% at September 30, 2009.
The
credit agreement relating to this line of credit requires the Company to
maintain certain financial covenants. The Company was in compliance
with these financial covenants for the nine months ended September 30,
2009.
The
Company’s line of credit agreement provides the ability to issue up to $20,000
in letters of credit. While the issuance of letters of credit does
not increase borrowings outstanding under the line of credit, it does reduce the
amount available. At September 30, 2009, the Company had outstanding
letters of credit of $7,496. As of September 30, 2009, the amount
available on the credit facility was $96,004 (net of $7,496 which was restricted
to support letters of credit and net of $71,500 in outstanding
borrowings).
8.
|
Fair Value of
Financial Instruments
|
The
valuation of financial instruments requires the Company to make estimates and
judgments that affect the fair value of the instruments. The Company
determines the fair value of the mortgage notes payable and line of credit
facility using a discounted future cash flow technique that incorporates a
market interest yield curve with adjustments for duration, loan to value, and
risk profile (level 2 inputs). In determining the market interest
yield curve, the Company considered its BBB credit rating. The
Company bases the fair value of its Senior Notes using quoted prices (a level 1
input).
At
September 30, 2009 and December 31, 2008, the fair value of the Company’s
total debt, including the Senior Notes and line of credit, amounted to a
liability of $2,390,618 and $2,257,917, respectively, compared to its carrying
amount of $2,345,656 and $2,317,500.
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
The
Company is engaged in the ownership and management of market rate apartment
communities. Each apartment community is considered a separate
operating segment. Each segment on a stand alone basis is less than
10% of the revenues, net operating income, and assets of the combined reported
operating segments and meets all of the aggregation criteria under authoritative
guidance. The operating segments are aggregated as Core and Non-core
properties.
Non-segment
revenue to reconcile to total revenue consists of interest income and other
income. Non-segment assets to reconcile to total assets include cash
and cash equivalents, cash in escrows, accounts receivable, prepaid expenses,
deferred charges and other assets.
Core
properties consist of all apartment communities which have been owned more than
one full calendar year. Therefore, the Core properties represent
communities owned as of January 1, 2008. Non-core properties consist
of apartment communities acquired or developed during 2008 and 2009, such that
full year comparable operating results are not available.
The
Company assesses and measures segment operating results based on a performance
measure referred to as net operating income. Net operating income is
defined as total revenues less operating and maintenance
expenses. The accounting policies of the segments are the same as
those described in Notes 1 and 2 of the Company’s Form 10-K for the year
ended December 31, 2008.
The
revenues and net operating income for each of the operating segments are
summarized for the three and nine months ended September 30, 2009 and 2008 as
follows:
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments
owned
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
properties
|
|
$ |
121,619 |
|
|
$ |
121,902 |
|
|
$ |
368,204 |
|
|
$ |
366,741 |
|
Non-core
properties
|
|
|
4,665 |
|
|
|
1,871 |
|
|
|
13,803 |
|
|
|
5,661 |
|
Reconciling
items
|
|
|
33 |
|
|
|
50 |
|
|
|
415 |
|
|
|
467 |
|
Total
revenues
|
|
$ |
126,317 |
|
|
$ |
123,823 |
|
|
$ |
382,422 |
|
|
$ |
372,869 |
|
Net operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Apartments
owned
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core
properties
|
|
$ |
72,006 |
|
|
$ |
72,373 |
|
|
$ |
214,581 |
|
|
$ |
215,451 |
|
Non-core
properties
|
|
|
2,319 |
|
|
|
402 |
|
|
|
6,692 |
|
|
|
2,146 |
|
Reconciling
items
|
|
|
33 |
|
|
|
50 |
|
|
|
415 |
|
|
|
467 |
|
Net
operating income, including reconciling items
|
|
|
74,358 |
|
|
|
72,825 |
|
|
|
221,688 |
|
|
|
218,064 |
|
General
and administrative expenses
|
|
|
(6,102 |
) |
|
|
(5,948 |
) |
|
|
(18,240 |
) |
|
|
(18,786 |
) |
Interest
expense
|
|
|
(30,772 |
) |
|
|
(29,936 |
) |
|
|
(91,582 |
) |
|
|
(88,749 |
) |
Depreciation
and amortization
|
|
|
(30,319 |
) |
|
|
(28,292 |
) |
|
|
(90,609 |
) |
|
|
(83,607 |
) |
Income
from continuing operations
|
|
$ |
7,165 |
|
|
$ |
8,649 |
|
|
$ |
21,257 |
|
|
$ |
26,922 |
|
The
assets for each of the reportable segments are summarized as follows as of
September 30, 2009 and December 31, 2008:
Assets
|
|
2009
|
|
|
2008
|
|
Apartments
owned
|
|
|
|
|
|
|
Core
properties
|
|
$ |
2,889,289 |
|
|
$ |
2,923,265 |
|
Non-core
properties
|
|
|
310,437 |
|
|
|
312,155 |
|
Reconciling
items
|
|
|
82,377 |
|
|
|
81,674 |
|
Total assets
|
|
$ |
3,282,103 |
|
|
$ |
3,317,094 |
|
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
10. Disposition of Property and
Discontinued Operations
The
Company reports its property dispositions as discontinued operations as
prescribed by the authoritative guidance. Pursuant to the definition
of a component of an entity, assuming no significant continuing involvement by
the former owner after the sale, the sale of an apartment community is
considered a discontinued operation. In addition, apartment
communities classified as held for sale are also considered discontinued
operations. The Company generally considers assets to be held for
sale when all significant contingencies surrounding the closing have been
resolved, which often corresponds with the actual closing date.
Included
in discontinued operations for the three and nine months ended September 30,
2009 are the operating results of three apartment communities sold in one
transaction during the nine months ended September 30, 2009 (the "2009 Disposed
Communities"). Included in discontinued operations for the three and
nine months ended September 30, 2008 are the operating results of fifteen
apartment communities sold in six separate transactions during the year ended
December 31, 2008 ("2008 Disposed Communities") and the 2009 Disposed
Communities. For purposes of the discontinued operations
presentation, the Company only includes interest expense and losses from early
extinguishment of debt associated with specific mortgage indebtedness of the
properties that are sold or held for sale.
The
operating results of discontinued operations are summarized for the three and
nine months ended September 30, 2009 and 2008 as follows:
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$ |
10 |
|
|
$ |
4,249 |
|
|
$ |
741 |
|
|
$ |
13,295 |
|
Property
other income
|
|
|
8 |
|
|
|
422 |
|
|
|
50 |
|
|
|
1,316 |
|
Total
revenues
|
|
|
18 |
|
|
|
4,671 |
|
|
|
791 |
|
|
|
14,611 |
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
and maintenance
|
|
|
(59 |
) |
|
|
2,007 |
|
|
|
461 |
|
|
|
6,848 |
|
Interest
expense, including prepayment penalties
|
|
|
- |
|
|
|
661 |
|
|
|
4,497 |
|
|
|
3,485 |
|
Depreciation
and amortization
|
|
|
- |
|
|
|
995 |
|
|
|
- |
|
|
|
3,051 |
|
Total
expenses
|
|
|
(59 |
) |
|
|
3,663 |
|
|
|
4,958 |
|
|
|
13,384 |
|
Income
(loss) from discontinued operations
|
|
$ |
77 |
|
|
$ |
1,008 |
|
|
$ |
(4,167 |
) |
|
$ |
1,227 |
|
HOME
PROPERTIES, INC.
NOTES TO
THE CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
11.
|
Commitments and
Contingencies
|
The
Company is not a party to any legal proceedings which are expected to have a
material adverse effect on the Company's liquidity, financial position or
results of operations. The Company is subject to a variety of legal
actions for personal injury or property damage arising in the ordinary course of
its business, most of which are covered by liability insurance. Various claims of
employment and resident discrimination are also periodically brought, most of
which also are covered by insurance. While the resolution of these
matters cannot be predicted with certainty, management believes that the final
outcome of such legal proceedings and claims will not have a material adverse
effect on the Company's liquidity, financial position or results of
operations.
In
connection with various UPREIT transactions, the Company has agreed to maintain
certain levels of nonrecourse debt for a period of 5 to 10 years associated with
the contributed properties acquired. In addition, the Company is
restricted in its ability to sell certain contributed properties (29% by number
of apartment communities of the owned portfolio) for a period of 7 to 15 years
except through a tax deferred like-kind exchange. The remaining terms
on the sale restrictions range from 1 to 6.25 years.
As of
September 30, 2009, the Company, through its general partnership interest in an
affordable property limited partnership, has guaranteed low income housing tax
credits to limited partners for a remaining period of seven years totaling
approximately $3,000. As of September 30, 2009, there were no known
conditions that would make such payments necessary relating to these
guarantees. In addition, the Company, as general partner in this
partnership, is obligated to advance funds to meet partnership operating
deficits.
On
October 1, 2009, the Company sold a property located in the Philadelphia region
with a total of 432 units for approximately $30,000. A gain on sale
of approximately $7,300 will be recorded in the fourth quarter of 2009
related to this sale.
On
October 28, 2009, the Board of Directors approved a dividend of $0.67 per share
on the Company’s common stock for the quarter ended September 30,
2009. This is the equivalent of an annual distribution of $2.68 per
share. The dividend is payable November 24, 2009 to shareholders of
record on November 12, 2009.
Subsequent
events have been evaluated through November 6, 2009, the date these financial
statements were filed with the SEC.
HOME
PROPERTIES, INC.
ITEM
2. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
(UNAUDITED)
The
following discussion should be read in conjunction with the accompanying
consolidated financial statements and notes thereto.
Forward-Looking
Statements
This
discussion contains forward-looking statements. Historical results
and percentage relationships set forth in the consolidated financial statements,
including trends which might appear, should not be taken as indicative of future
operations. The Company considers portions of the information to be
"forward-looking statements" within the meaning of Section 27A of the Securities
Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
both as amended, with respect to the Company's expectations for future
periods. Some examples of forward-looking statements include
statements related to acquisitions (including any related pro forma financial
information), future capital expenditures, potential development and
redevelopment opportunities, projected costs and rental rates for development
and redevelopment projects, financing sources and availability, and the effects
of environmental and other regulations. Although the Company believes
that the expectations reflected in those forward-looking statements are based
upon reasonable assumptions, it can give no assurance that its expectations will
be achieved. Factors that may cause actual results to differ include
general economic and local real estate conditions, the weather and other
conditions that might affect operating expenses, the timely completion of
repositioning activities and development within anticipated budgets, the actual
pace of future development, acquisitions and sales, and continued access to
capital to fund growth. For this purpose, any statements contained in
this Form 10-Q that are not statements of historical fact should be considered
to be forward-looking statements. Some of the words used to identify
forward-looking statements include "believes", "anticipates", "plans",
"expects", "seeks", "estimates", and any other similar
expressions. Readers should exercise caution in interpreting and
relying on forward-looking statements since they involve known and unknown
risks, uncertainties and other factors which are, in some cases, beyond the
Company's control and could materially affect the Company's actual results,
performance or achievements.
Liquidity and Capital
Resources
The
Company's principal liquidity demands are expected to be distributions to the
common stockholders and holders of UPREIT Units, capital improvements and
repairs and maintenance for the properties, acquisition and development of
additional properties, debt repayments and stock repurchases. The
Company may also acquire equity ownership in other public or private companies
that own and manage portfolios of apartment communities. Management
does not anticipate the acquisition of any communities in 2009.
The
Company intends to meet its short-term liquidity requirements through net cash
flows provided by operating activities and its existing bank line of credit,
described below. The Company considers its ability to generate cash
to be adequate to meet all operating requirements, including availability to pay
dividends to its stockholders and make distributions to its Unitholders in
accordance with the provisions of the Internal Revenue Code, as amended,
applicable to REITs.
As of
September 30, 2009, the Company had an unsecured line of credit agreement with
M&T Bank, as administrative agent and lead bank, of $175 million which
expires August 31, 2011, with an optional one-year extension. The
Company had $71.5 million outstanding under the credit facility on September 30,
2009. The Company’s line of credit agreement provides the ability to
issue up to $20 million in letters of credit. While the issuance of
letters of credit does not increase the borrowings outstanding under the line of
credit, it does reduce the amount available. At September 30, 2009,
the Company had outstanding letters of credit of $7.5 million. As of
September 30, 2009, the amount available on the credit facility was $96 million
(net of $7.5 million which was restricted to support letters of credit and net
of $71.5 million in outstanding borrowings). Borrowings under the
line of credit bear interest at rates ranging from 2.50% to 3.25% over the
one-month LIBOR rate, increasing at higher levels of outstanding indebtedness,
with a LIBOR floor of 1.50%. The one-month LIBOR was .25% at
September 30, 2009.
Accordingly,
increases in interest rates will increase the Company's interest expense and as
a result will affect the Company's results of operations and financial
condition.
To the
extent that the Company does not satisfy its long-term liquidity requirements
through net cash flows provided by operating activities and its unsecured credit
facility, it intends to satisfy such requirements through property debt
financing, proceeds from the sale of properties, the issuance of UPREIT Units,
proceeds from its Dividend Reinvestment and Direct Stock Purchase Plan ("DRIP"),
or the issuance of additional debt and equity securities. As of
September 30, 2009, the Company owned 21 properties with 6,019 apartment units
which were unencumbered by debt.
In
response to the constrictions in the credit market at the end of 2008 and
beginning of 2009, the Company pursued certain initiatives in 2009 as
follows: 1) The Company replaced the previous $140 million unsecured
line of credit which matured September 1, 2009 with a larger facility of
$175 million. The new facility has a two-year term with a one-year
extension. 2) During 2008, the Company increased the level of the
value of unencumbered properties in relationship to the total property portfolio
from 16% to 19%. This higher level adds flexibility allowing the
Company to place secured financing on unencumbered assets as
required. It is anticipated that the level of unencumbered assets
will remain at approximately 19% at year end 2009. 3) The Company
benefits from its multifamily focus as the Government Sponsored Enterprises
("GSEs") Fannie Mae and Freddie Mac are still very active lending to apartment
owners. Underwriting has become more stringent, but the Company
believes it will be able to refinance its debt maturities during this cycle of
reduced liquidity. 4) The Company had only $19 million of secured
loans maturing in 2009, all of which have been either paid off or refinanced as
of October 31, 2009. For 2010 and 2011, the principal amount of loans
due rises to $331 million and $300 million, respectively. As of
October 31, 2009, the Company has either closed or is in the process of
refinancing $202 million of the 2010 and 2011 maturities with the GSEs by
year-end 2009. An additional $22 million is anticipated to close late
first quarter or early second quarter 2010, earlier than the maturity
date.
Management
included in its operating plan strategic disposition of assets totaling
approximately $110 million in 2009, of which $97.8 million were closed
during the first ten months of 2009. Additional dispositions in 2009
are not expected to occur.
The
Company considers the issuance of UPREIT Units for property acquisitions to be a
potential source of capital. During 2008 and the first three quarters of 2009,
the Company did not issue any UPREIT Units as consideration for acquired
properties.
The
Company's DRIP provides the stockholders of the Company an opportunity to
automatically invest their cash dividends in additional shares of common
stock. In addition, eligible participants may make monthly payments
or other voluntary cash investments in shares of common stock. The
maximum monthly investment permitted without prior Company approval is currently
$10,000. The Company meets share demand under the DRIP through share
purchases by the transfer agent in the open market or through new share
issuances. Management monitors the relationship between the Company's
stock price and its estimated net asset value ("NAV"). During times
when the difference between these two values is small, resulting in little
dilution of NAV by common stock issuances, the Company can choose to issue new
shares. At times when the gap between NAV and stock price is greater,
the Company has the flexibility to satisfy the demand for DRIP shares with stock
purchased by the transfer agent in the open market. In addition, the
Company can issue waivers to DRIP participants to provide for investments in
excess of the $10,000 maximum monthly investment. No such waivers
were granted during the nine months ended September 30, 2009 or the year ended
December 31, 2008.
In
October 2006, the Company issued $200 million of exchangeable senior notes
("Senior Notes") with a coupon rate of 4.125%, which generated net proceeds of
$195.8 million. The net proceeds were used to repurchase 933,000
shares of common stock for a total of $58 million, pay down $70 million on the
line of credit, with the balance used for redemption of preferred shares and
property acquisitions. During the fourth quarter of 2008, the Company
repurchased $60 million of the Senior Notes for $45.4 million. The
exchange terms and conditions are more fully described under "Contractual
Obligations and Other Commitments," below.
On April
4, 2007, the Company filed a Form S-3 universal shelf registration statement
with the SEC that registers the issuance, from time to time, of common stock,
preferred stock or debt securities. The Company may offer and sell
securities issued pursuant to the universal shelf registration statement after a
prospectus supplement, describing the type of security and amount being offered,
is filed with the SEC.
In 1997,
the Company's Board of Directors (the "Board") approved a stock repurchase
program under which the Company may repurchase shares of its common stock or
UPREIT Units ("Company Program"). The shares/units may be repurchased
through open market or privately negotiated transactions at the discretion of
Company management. The Board's action did not establish a target
stock price or a specific timetable for repurchase. At
December 31, 2007, there was approval remaining to purchase 1,362,748
shares. During 2008, the Company repurchased 1,071,588 shares of its
outstanding common stock at a cost of $50 million at a weighted average price of
$46.66 per share. On May 1, 2008, the Board approved a
2,000,000-share increase in the stock repurchase program, resulting in a
remaining authorization level of 2,291,160 shares as of December 31,
2008. There were no repurchases under the Company Program during the
first nine months of 2009. The Company will continue to monitor stock
prices, the NAV, and acquisition/development alternatives to determine the
current best use of capital between the two major uses of capital – stock
buybacks and acquisitions/development. At the present time, the
Company has no intention of buying any stock back during the balance of 2009 or
early in 2010.
As of
September 30, 2009, the weighted average rate of interest on the Company’s total
indebtedness of $2.3 billion was 5.6% with staggered maturities averaging
approximately six years. Approximately 93% of total indebtedness was
at fixed rates. This limits the exposure to changes in interest
rates, minimizing the effect of interest rate fluctuations on the Company's
results of operations and cash flows.
In 2000,
the Company obtained an investment grade rating from Fitch, Inc. The
rating in effect at September 30, 2009 (no change from initial rating) is a
corporate credit rating of "BBB" (Triple B). Ratings are
reviewed from time to time by the issuing agency and may change at any
time.
The
Company’s cash provided by operating activities was $113 million for the nine
months ended September 30, 2009 compared to $122 million for the same period in
2008. The change is primarily due to timing differences in cash
disbursements between periods for accounts payable and other
assets. Accounts payable disbursements for the nine months ended
September 30, 2009 exceeded disbursements for 2008 by $11
million. This is largely due to the timing of cut-off dates for
processing operational payments. There was an increase in cash
between periods of $5 million in other assets. During the nine months
ended September 30, 2008, cash was used to make deposits on pending acquisitions
which closed in the fourth quarter of 2008. This did not recur in
2009.
Cash used
in investing activities was $45 million for the nine months ended September 30,
2009 compared to $46 million for the same period in 2008. The
proceeds from sale of properties were similar in both periods at $67 million and
$63 million, respectively. During the nine months ended September 30,
2009, $111 million cash was used on additions to property and new construction
as compared to the nine months ended September 30, 2008 where $94 million was
spent on additions to property and new construction, plus $16 million on the
purchase of land for development.
Cash used
in financing activities was $68 million for the nine months ended September 30,
2009 compared to $76 million for the same period in 2008. The $8
million decrease in cash used between periods is primarily due to $65 million
less cash provided by the line of credit in 2009 as compared to 2008, partially
offset by $51 million less cash used for stock buybacks and $34 million higher
net mortgage proceeds in the 2009 period as compared to the 2008
period.
Variable Interest
Entities
The
Company is the general partner in one variable interest entity ("VIE")
syndicated using low income housing tax credits under Section 42 of the Internal
Revenue Code. As general partner, the Company manages the day-to-day
operations of the partnership for a management fee. In addition, the
Company has an operating deficit guarantee and tax credit guarantee to the
limited partner of that partnership. The Company is responsible to
fund operating deficits to the extent there are any and can receive operating
incentive awards if cash flows reach certain levels. The effect on
the consolidated balance sheet of including this VIE as of September 30, 2009
includes total assets of $11.8 million, total liabilities of $17.0 million
and partners’ deficit of $5.2 million. Of the $17.0 million in total
liabilities, $16.1 million represents non-recourse
mortgage debt. The VIE is included in the Consolidated Statement
of Operations for the three and nine months ended September 30, 2009 and
2008.
The
Company, through its general partnership interest in the VIE, has guaranteed the
low income housing tax credits to the limited partners for a remaining period of
seven years totaling approximately $3 million. Such
guarantee
requires the Company to operate the property in compliance with Internal Revenue
Code Section 42 for a total of 15 years. The Company believes the
property’s operations conform to the applicable requirements as set forth
above. In addition, as the general partner in this partnership, the
Company is obligated to advance funds to meet partnership operating
deficits.
Acquisitions and
Dispositions
On
January 30, 2009, the Company sold three apartment communities with a total of
741 units for $67.8 million. A gain on sale of approximately
$13.5 million was recorded in the first quarter related to this
sale. The weighted average first year capitalization rate projected
on this disposition was 7.6%.
On
October 1, 2009, the Company sold a property located in the Philadelphia region
with a total of 432 units for approximately $30 million. A gain on
sale of approximately $7.3 million will be recorded in the fourth quarter
of 2009 related to this sale. The weighted average first year
capitalization rate projected on this disposition was 8.4%.
Contractual Obligations and
Other Commitments
The
primary obligations of the Company relate to its borrowings under the line of
credit, Senior Notes and mortgage notes payable. The Company’s line
of credit matures in August 2011 and had $71.5 million outstanding at September
30, 2009. The $2.1 billion in mortgage notes payable have varying
maturities ranging from 2 months to 25 years. The weighted
average interest rate of the Company's secured debt was 5.64% at September 30,
2009. The weighted average rate of interest on the Company’s total
indebtedness of $2.3 billion at September 30, 2009 was 5.62%.
In
October 2006, the Company issued $200 million of Senior Notes with a coupon rate
of 4.125%. The notes are exchangeable into cash equal to the
principal amount of the notes and, at the Company's option, cash or common stock
for the exchange value, to the extent that the market price of common stock
exceeds the initial exchange price of $73.34 per share, subject to
adjustment. The exchange price is adjusted for payments of dividends
in excess of the reference dividend set in the indenture of $0.64 per
share. The adjusted exchange price at September 30, 2009 was $72.92
per share. Upon an exchange of the notes, the Company will settle any
amounts up to the principal amount of the notes in cash and the remaining
exchange value, if any, will be settled, at the Company's option, in cash,
common stock or a combination of both. The notes are not redeemable
at the option of the Company for five years, except to preserve the status of
the Company as a REIT. Holders of the notes may require the Company
to repurchase the notes upon the occurrence of certain designated
events. In addition, prior to November 1, 2026, the holders may
require the Company to repurchase the notes on November 1, 2011, 2016 and
2021. The notes will mature on November 1, 2026, unless previously
redeemed, repurchased or exchanged in accordance with their terms prior to that
date. During October and November 2008, the Company repurchased and
retired $60 million principal amount of its Senior Notes for $45.4 million, in
several privately-negotiated transactions which amounted to a 24.4% discount
from the principal amount. An adjusted gain on debt extinguishment of
$11.3 million was recorded in the fourth quarter of 2008, as compared
to the originally reported gain of $13.9 million. The adjustment is
as a result of recently adopted accounting standards as more fully described in
Note 3 to the Consolidated Financial Statements.
The
Company leases its corporate office space from an affiliate and the office space
for its regional offices from non-affiliated third parties. The rent
for the corporate office space is a gross rent that includes real estate taxes
and common area maintenance. The regional office leases are net
leases which require an annual base rent plus a pro-rata portion of real estate
taxes. In July 2009, the Company extended the lease on its corporate
office space through October 2019, plus two five-year renewal
options. The new lease term commenced on October 1,
2009.
Capital Improvements
(dollars in thousands, except unit and per unit data)
Effective
January 1, 2009, the Company updated its estimate of the amount of recurring,
non-revenue enhancing capital expenditures incurred on an annual basis for a
standard garden style apartment. The Company now estimates that the
amount of these capital expenditures is $800 per apartment unit compared to $780
per apartment unit in the prior year. This new amount better reflects
current actual costs since the last update.
The
Company’s policy is to capitalize costs related to the acquisition, development,
rehabilitation, construction and improvement of properties. Capital
improvements are costs that increase the value and extend the useful life of an
asset. Ordinary repair and maintenance costs that do not extend the
useful life of the asset are expensed as incurred. Costs incurred on
a lease turnover due to normal wear and tear by the resident are expensed on the
turn. Recurring capital improvements typically include: appliances,
carpeting and flooring, HVAC equipment, kitchen/bath cabinets, new roofs, site
improvements and various exterior building
improvements. Non-recurring, revenue generating capital improvements
include, among other items: community centers, new windows, and
kitchen/bath apartment upgrades. Revenue generating capital
improvements will directly result in increased rental earnings or expense
savings. The Company capitalizes interest and certain internal
personnel costs related to the communities under rehabilitation and
construction.
The
Company estimates that on an annual basis $800 and $780 per unit is spent on
recurring capital expenditures in 2009 and 2008, respectively. During
the three months ended September 30, 2009 and 2008, approximately $200 and $195
per unit, respectively, was estimated to be spent on recurring capital
expenditures. For the nine months ended September 30, 2009 and 2008,
approximately $600 and $585 per unit, respectively, was estimated to be spent on
recurring capital expenditures. The table below summarizes the actual
total capital improvements incurred by major categories for the three and nine
months ended September 30, 2009 and 2008 and an estimate of the breakdown of
total capital improvements by major categories between recurring and
non-recurring, revenue generating capital improvements for the three and nine
months ended September 30, 2009 as follows:
|
|
For
the three months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Recurring
|
|
|
Per
|
|
|
Recurring
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
|
Cap Ex
|
|
|
Unit(a)
|
|
|
Cap Ex
|
|
|
Unit(a)
|
|
|
Improvements
|
|
|
Unit(a)
|
|
|
Improvements
|
|
|
Unit(a)
|
|
New
buildings
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
34 |
|
|
$ |
1 |
|
|
$ |
34 |
|
|
$ |
1 |
|
|
$ |
547 |
|
|
$ |
15 |
|
Major
building improvements
|
|
|
1,139 |
|
|
|
32 |
|
|
|
2,152 |
|
|
|
59 |
|
|
|
3,291 |
|
|
|
91 |
|
|
|
4,086 |
|
|
|
116 |
|
Roof
replacements
|
|
|
298 |
|
|
|
8 |
|
|
|
358 |
|
|
|
10 |
|
|
|
656 |
|
|
|
18 |
|
|
|
1,084 |
|
|
|
31 |
|
Site
improvements
|
|
|
398 |
|
|
|
11 |
|
|
|
1,682 |
|
|
|
47 |
|
|
|
2,080 |
|
|
|
58 |
|
|
|
3,360 |
|
|
|
95 |
|
Apartment
upgrades
|
|
|
1,379 |
|
|
|
38 |
|
|
|
4,352 |
|
|
|
120 |
|
|
|
5,731 |
|
|
|
158 |
|
|
|
10,923 |
|
|
|
309 |
|
Appliances
|
|
|
1,204 |
|
|
|
33 |
|
|
|
- |
|
|
|
- |
|
|
|
1,204 |
|
|
|
33 |
|
|
|
1,795 |
|
|
|
51 |
|
Carpeting/flooring
|
|
|
1,999 |
|
|
|
55 |
|
|
|
939 |
|
|
|
26 |
|
|
|
2,938 |
|
|
|
81 |
|
|
|
3,709 |
|
|
|
105 |
|
HVAC/mechanicals
|
|
|
642 |
|
|
|
18 |
|
|
|
1,619 |
|
|
|
45 |
|
|
|
2,261 |
|
|
|
63 |
|
|
|
2,892 |
|
|
|
82 |
|
Miscellaneous
|
|
|
175 |
|
|
|
5 |
|
|
|
- |
|
|
|
- |
|
|
|
175 |
|
|
|
5 |
|
|
|
478 |
|
|
|
14 |
|
Totals
|
|
$ |
7,234 |
|
|
$ |
200 |
|
|
$ |
11,136 |
|
|
$ |
308 |
|
|
$ |
18,370 |
|
|
$ |
508 |
|
|
$ |
28,874 |
|
|
$ |
818 |
|
(a) Calculated
using the weighted average number of units owned, including 35,360 core units,
and 2008 acquisition units of 813 for the three months ended September 30, 2009;
and 35,360 core units for the three months ended September 30,
2008.
|
|
For
the nine months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Recurring
|
|
|
Per
|
|
|
Recurring
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
|
Cap Ex
|
|
|
Unit(b)
|
|
|
Cap Ex
|
|
|
Unit(b)
|
|
|
Improvements
|
|
|
Unit(b)
|
|
|
Improvements
|
|
|
Unit(b)
|
|
New
buildings
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
630 |
|
|
$ |
17 |
|
|
$ |
630 |
|
|
$ |
17 |
|
|
$ |
1,767 |
|
|
$ |
50 |
|
Major
building improvements
|
|
|
3,418 |
|
|
|
94 |
|
|
|
6,193 |
|
|
|
172 |
|
|
|
9,611 |
|
|
|
266 |
|
|
|
10,917 |
|
|
|
309 |
|
Roof
replacements
|
|
|
895 |
|
|
|
25 |
|
|
|
1,198 |
|
|
|
33 |
|
|
|
2,093 |
|
|
|
58 |
|
|
|
3,133 |
|
|
|
89 |
|
Site
improvements
|
|
|
1,194 |
|
|
|
33 |
|
|
|
2,577 |
|
|
|
71 |
|
|
|
3,771 |
|
|
|
104 |
|
|
|
6,024 |
|
|
|
170 |
|
Apartment
upgrades
|
|
|
4,367 |
|
|
|
121 |
|
|
|
13,149 |
|
|
|
363 |
|
|
|
17,516 |
|
|
|
484 |
|
|
|
23,510 |
|
|
|
665 |
|
Appliances
|
|
|
3,371 |
|
|
|
93 |
|
|
|
34 |
|
|
|
1 |
|
|
|
3,405 |
|
|
|
94 |
|
|
|
4,210 |
|
|
|
119 |
|
Carpeting/flooring
|
|
|
5,996 |
|
|
|
166 |
|
|
|
2,047 |
|
|
|
56 |
|
|
|
8,043 |
|
|
|
222 |
|
|
|
8,727 |
|
|
|
247 |
|
HVAC/mechanicals
|
|
|
1,926 |
|
|
|
53 |
|
|
|
4,301 |
|
|
|
119 |
|
|
|
6,227 |
|
|
|
172 |
|
|
|
8,145 |
|
|
|
230 |
|
Miscellaneous
|
|
|
537 |
|
|
|
15 |
|
|
|
908 |
|
|
|
25 |
|
|
|
1,445 |
|
|
|
40 |
|
|
|
1,919 |
|
|
|
54 |
|
Totals
|
|
$ |
21,704 |
|
|
$ |
600 |
|
|
$ |
31,037 |
|
|
$ |
857 |
|
|
$ |
52,741 |
|
|
$ |
1,457 |
|
|
$ |
68,352 |
|
|
$ |
1,933 |
|
(b) Calculated
using the weighted average number of units owned, including 35,360 core units,
and 2008 acquisition units of 813 for the nine months ended September 30, 2009;
and 35,360 core units for the nine months ended September 30,
2008.
The
schedule below summarizes the breakdown of total capital improvements between
core and non-core as follows:
|
|
For
the three months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Recurring
|
|
|
Per
|
|
|
Recurring
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
|
Cap Ex
|
|
|
Unit(c)
|
|
|
Cap Ex
|
|
|
Unit(c)
|
|
|
Improvements
|
|
|
Unit(c)
|
|
|
Improvements
|
|
|
Unit(c)
|
|
Core
Communities
|
|
$ |
7,072 |
|
|
$ |
200 |
|
|
$ |
10,128 |
|
|
$ |
286 |
|
|
$ |
17,200 |
|
|
$ |
486 |
|
|
$ |
28,874 |
|
|
$ |
818 |
|
2008
Acquisition Communities
|
|
|
162 |
|
|
|
200 |
|
|
|
1,008 |
|
|
|
1,240 |
|
|
|
1,170 |
|
|
|
1,440 |
|
|
|
- |
|
|
|
- |
|
Sub-total
|
|
|
7,234 |
|
|
|
200 |
|
|
|
11,136 |
|
|
|
308 |
|
|
|
18,370 |
|
|
|
508 |
|
|
|
28,874 |
|
|
|
818 |
|
2009
Disposed Communities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
683 |
|
|
|
922 |
|
2008
Disposed Communities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
230 |
|
|
|
366 |
|
Corporate
office expenditures(1)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
464 |
|
|
|
- |
|
|
|
738 |
|
|
|
- |
|
Totals
|
|
$ |
7,234 |
|
|
$ |
200 |
|
|
$ |
11,136 |
|
|
$ |
308 |
|
|
$ |
18,834 |
|
|
$ |
508 |
|
|
$ |
30,525 |
|
|
$ |
811 |
|
(1) No
distinction is made between recurring and non-recurring expenditures for
corporate office. Corporate office expenditures include principally
computer hardware, software, office furniture, fixtures and leasehold
improvements.
(c) Calculated
using the weighted average number of units owned, including 35,360 core units,
and 2008 acquisition units of 813 for the three months ended September 30, 2009;
and 35,360 core units, 2009 disposed units of 741 and 2008 disposed units of 629
for the three months ended September 30, 2008.
|
|
For
the nine months ended September 30,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
Non-
|
|
|
|
|
|
Total
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
Recurring
|
|
|
Per
|
|
|
Recurring
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
Capital
|
|
|
Per
|
|
|
|
Cap Ex
|
|
|
Unit(d)
|
|
|
Cap Ex
|
|
|
Unit(d)
|
|
|
Improvements
|
|
|
Unit(d)
|
|
|
Improvements
|
|
|
Unit(d)
|
|
Core
Communities
|
|
$ |
21,216 |
|
|
$ |
600 |
|
|
$ |
29,087 |
|
|
$ |
823 |
|
|
$ |
50,303 |
|
|
$ |
1,423 |
|
|
$ |
68,352 |
|
|
$ |
1,933 |
|
2008
Acquisition Communities
|
|
|
488 |
|
|
|
600 |
|
|
|
1,950 |
|
|
|
2,399 |
|
|
|
2,438 |
|
|
|
2,999 |
|
|
|
- |
|
|
|
- |
|
Sub-total
|
|
|
21,704 |
|
|
|
600 |
|
|
|
31,037 |
|
|
|
857 |
|
|
|
52,741 |
|
|
|
1,457 |
|
|
|
68,352 |
|
|
|
1,933 |
|
2009
Disposed Communities
|
|
|
49 |
|
|
|
600 |
|
|
|
126 |
|
|
|
1,549 |
|
|
|
175 |
|
|
|
2,149 |
|
|
|
1,677 |
|
|
|
2,263 |
|
2008
Disposed Communities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
973 |
|
|
|
1,380 |
|
Corporate
office expenditures(1)
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,226 |
|
|
|
- |
|
|
|
2,926 |
|
|
|
- |
|
Totals
|
|
$ |
21,753 |
|
|
$ |
600 |
|
|
$ |
31,163 |
|
|
$ |
860 |
|
|
$ |
54,142 |
|
|
$ |
1,460 |
|
|
$ |
73,928 |
|
|
$ |
1,929 |
|
(1)
|
No
distinction is made between recurring and non-recurring expenditures for
corporate office. Corporate office expenditures include
principally computer hardware, software, office furniture, fixtures and
leasehold improvements.
|
(d)
|
Calculated
using the weighted average number of units owned, including 35,360 core
units, 2008 acquisition units of 813 and 2009 disposed units of 81 for the
nine months ended September 30, 2009; and 35,360 core units, 2009 disposed
units of 741 and 2008 disposed units of 705 for the nine months ended
September 30, 2008.
|
Results of Operations
(dollars in thousands, except unit and per unit data)
Net
operating income ("NOI") may fall within the definition of "non-GAAP financial
measure" set forth in Item 10(e) of Regulation S-K and, as a result, the Company
may be required to include in this report a statement disclosing the reasons why
management believes that presentation of this measure provides useful
information to investors. The Company believes that NOI is helpful to
investors as a supplemental measure of the operating performance of a real
estate company because it is a direct measure of the actual operating results of
the Company's apartment communities. In addition, the apartment
communities are valued and sold in the market by using a multiple of
NOI. The Company also uses this measure to compare its performance to
that of its peer group.
Summary
of Core Properties
The
Company had 104 apartment communities with 35,360 units which were owned during
the three and nine months ended September 30, 2009 and 2008 (the "Core
Properties"). The Company has acquired/developed an additional three
apartment communities with 1,029 units during 2009 and 2008 (the "Acquisition
Communities"). During 2009, the Company disposed of three apartment
communities with a total of 741 units, which had partial results for 2009 and
full year results for 2008 (the "2009 Disposed Communities"). During
2008, the Company disposed of fifteen apartment communities with a total of
1,227 units, which had partial results for 2008 (the "2008 Disposed
Communities"). The results of these disposed properties have been
classified as discontinued operations and are not included in the table
below.
The
inclusion of the Acquisition Communities generally accounted for the significant
changes in operating results for the three and nine months ended September 30,
2009. In addition, the reported income from operations include the
results of one investment where the Company is the managing general partner that
has been determined to be a VIE and consolidated with the Company.
A summary
of the net operating income for Core Properties is as follows:
|
|
__________________Three
Months_______________
|
|
|
________________Nine
Months______________
|
|
|
|
2009
|
|
|
2008
|
|
|
$ Change
|
|
|
% Change
|
|
|
2009
|
|
|
2008
|
|
|
$ Change
|
|
|
% Change
|
|
Rent
|
|
$ |
112,592 |
|
|
$ |
113,066 |
|
|
$ |
(
474 |
) |
|
|
(0.4 |
%) |
|
$ |
338,153 |
|
|
$ |
336,687 |
|
|
$ |
1,466 |
|
|
|
0.4 |
% |
Utility
recovery revenue
|
|
|
3,468 |
|
|
|
3,444 |
|
|
|
24 |
|
|
|
0.7 |
% |
|
|
14,395 |
|
|
|
14,637 |
|
|
|
(242 |
) |
|
|
(1.7 |
%) |
Rent
including recoveries
|
|
|
116,060 |
|
|
|
116,510 |
|
|
|
(450 |
) |
|
|
(0.4 |
%) |
|
|
352,548 |
|
|
|
351,324 |
|
|
|
1,224 |
|
|
|
0.3 |
% |
Property
other income
|
|
|
5,559 |
|
|
|
5,392 |
|
|
|
167 |
|
|
|
3.1 |
% |
|
|
15,656 |
|
|
|
15,417 |
|
|
|
239 |
|
|
|
1.6 |
% |
Total
revenue
|
|
|
121,619 |
|
|
|
121,902 |
|
|
|
(283 |
) |
|
|
(0.2 |
%) |
|
|
368,204 |
|
|
|
366,741 |
|
|
|
1,463 |
|
|
|
0.4 |
% |
Operating
and maintenance
|
|
|
(49,613 |
) |
|
|
(49,529 |
) |
|
|
(84 |
) |
|
|
(0.2 |
%) |
|
|
(153,623 |
) |
|
|
(151,290 |
) |
|
|
(2,333 |
) |
|
|
(1.5 |
%) |
Net
operating income
|
|
$ |
72,006 |
|
|
$ |
72,373 |
|
|
$ |
( 367 |
) |
|
|
(0.5 |
%) |
|
$ |
214,581 |
|
|
$ |
215,451 |
|
|
$ |
( 870 |
) |
|
|
(0.4 |
%) |
A summary
of the net operating income for the Company as a whole is as
follows:
|
|
__________________Three
Months_______________
|
|
|
________________Nine
Months______________
|
|
|
|
2009
|
|
|
2008
|
|
|
$ Change
|
|
|
% Change
|
|
|
2009
|
|
|
2008
|
|
|
$ Change
|
|
|
% Change
|
|
Rent
|
|
$ |
116,996 |
|
|
$ |
114,791 |
|
|
$ |
2,205 |
|
|
|
1.9 |
% |
|
$ |
351,296 |
|
|
$ |
341,762 |
|
|
$ |
9,534 |
|
|
|
2.8 |
% |
Utility
recovery revenue
|
|
|
3,555 |
|
|
|
3,451 |
|
|
|
104 |
|
|
|
3.0 |
% |
|
|
14,652 |
|
|
|
14,661 |
|
|
|
(9 |
) |
|
|
(0.1 |
%) |
Rent
including recoveries
|
|
|
120,551 |
|
|
|
118,242 |
|
|
|
2,309 |
|
|
|
2.0 |
% |
|
|
365,948 |
|
|
|
356,423 |
|
|
|
9,525 |
|
|
|
2.7 |
% |
Property
other income
|
|
|
5,733 |
|
|
|
5,531 |
|
|
|
202 |
|
|
|
3.7 |
% |
|
|
16,059 |
|
|
|
15,979 |
|
|
|
80 |
|
|
|
0.5 |
% |
Total
revenue
|
|
|
126,284 |
|
|
|
123,773 |
|
|
|
2,511 |
|
|
|
2.0 |
% |
|
|
382,007 |
|
|
|
372,402 |
|
|
|
9,605 |
|
|
|
2.6 |
% |
Operating
and maintenance
|
|
|
(51,959 |
) |
|
|
(50,998 |
) |
|
|
(961 |
) |
|
|
(1.9 |
%) |
|
|
(160,734 |
) |
|
|
(154,805 |
) |
|
|
(5,929 |
) |
|
|
(3.8 |
%) |
Net
operating income
|
|
$ |
74,325 |
|
|
$ |
72,775 |
|
|
$ |
1,550 |
|
|
|
2.1 |
% |
|
$ |
221,273 |
|
|
$ |
217,597 |
|
|
$ |
3,676 |
|
|
|
1.7 |
% |
Comparison
of three months ended September 30, 2009 to the same period in 2008
Of the
$2,205 increase in rental income, $2,591 is attributable to the Acquired
Communities, $88 is attributable to the consolidation of the VIE, offset by a
$474 decrease from the Core Properties, as the result of a decrease of 0.5% in
weighted average rental rates partially offset by a 0.1% increase in economic
occupancy from 93.6% to 93.7%. Economic occupancy is defined as total
possible rental income, net of vacancy and bad debt expense as a percentage of
total possible rental income. Total possible rental income is
determined by valuing occupied units at contract rents and vacant units at
market rents. Of the $104 increase in utility recovery revenue, $80
is attributable to the Acquired Communities, and $24 is attributable to the Core
Properties.
The
remaining property other income, which consists primarily of income from
operation of laundry facilities, late charges, administrative fees, garage and
carport rentals, revenue from corporate apartments, cable revenue, pet charges,
and miscellaneous charges to residents increased by $202. Of this
increase, $35 is attributable to the Acquired Communities, and $167 is
attributable to the Core Properties resulting primarily from increases in cable
revenue.
Of the
$961 increase in operating and maintenance expenses, $1,124 is attributable to
the Acquired Communities and $84 is attributable to the Core Properties;
partially offset by a $247 decrease that is attributable to the consolidation of
the VIE reflecting a decrease in repairs and maintenance expenses from
2008. The increase in Core Properties is primarily due to increases
in personnel and real estate taxes, partially offset by decreases in natural gas
heating costs, repairs and maintenance expense, property insurance expense and
property management G&A.
Natural
gas heating costs were down $273, or 15.1% from a year ago due to a combination
of lower commodity rates and decreased consumption. For the third
quarter 2009 our natural gas weighted average cost was $7.86 per decatherm,
compared to $9.05 per decatherm for the 2008 period, a 13.1%
decrease.
Repairs
& maintenance decreased $374, or 4.2%, primarily due to the 2009 period
including $214 in recoveries from insurance claims compared to no recoveries in
2008. Without the impacts of the insurance recoveries, the recurring
repairs & maintenance expenses decreased $160, or 1.8%, which reflects cost
savings realized through the rebidding of selected service contracts resulting
in reduced rates in this more competitive economic environment.
Personnel
costs increased $726, or 6.6%, primarily due to a reduction in expense of $242
in 2008 as a result of health insurance reserve adjustments. Without
the impacts of the insurance reserve adjustment, personnel costs increased $484,
or 4.4%.
Property
insurance decreased by $649, or 22.5%, including a net reduction in expense from
decreasing the reserve in 2009 by $106 compared to a reserve increase adjustment
in 2008 of $81. The remaining decrease before the reserve adjustments
was $462, or 16.0%, which primarily reflects a timing variance of the aggregate
retention amount for the twelve month policy period ending October 31,
2009. Losses during the first few months of the policy period
starting November 1, 2008 resulted in higher expenses as a large part of the
self insurance retention of the policy ended up being front
loaded. The second and third quarters of 2009 resulted in lower
expense, as loss occurrences were subject to a much smaller
deductible.
Real
estate taxes increased $686, or 6.0%, primarily due to 2008 including $249 in
tax reassessments and refunds compared to none in 2009. After removing the
effects of refunds and reassessments, real estate taxes were up $437, or
3.9%.
General
and administrative expenses increased in 2009 by $154, or
2.6%. General and administrative expenses as a percentage of total
revenues were 4.9% for 2009 as compared to 4.7% for 2008. The
incentive bonus is down $421, or 64.6%, as compared to 2008, which reflects the
decrease in the Company’s operating performance as compared to the prior
year. Stock based compensation expenses were up $706 in 2009 as
compared to 2008, due in part to the change in estimated forfeitures from the
2004 grant year and the impact of the prescribed changes in vesting period
determination that took effect in 2006. In addition the company
recorded $148 in nonrecurring severance costs in the 2009 period.
Interest
expense increased by $836, or 2.8% in 2009 primarily as a result of interest
expense on the new debt of the Acquisition Communities, partially offset by
higher capitalized interest in connection with increased development levels in
2009 as compared to 2008, and lower interest on the Senior Notes as a result of
the $60,000 face value extinguishment in the fourth quarter 2008.
Depreciation
and amortization expense increased $2,027, or 7.2% due to the depreciation on
the Acquisition Communities and the capital additions to the Core
Properties.
Included
in discontinued operations for the three months ended September 30, 2009 are the
residual operating results of the 2009 Disposed Communities. Included
in discontinued operations for the three months ended September 30, 2008 are the
operating results of the 2009 and 2008 Disposed Communities. For
purposes of the discontinued operations presentation, the Company only includes
interest expense and losses from early extinguishment of debt associated with
specific mortgage indebtedness of the properties that are sold or held for
sale.
Comparison
of nine months ended September 30, 2009 to the same period in 2008
Of the
$9,534 increase in rental income, $8,011 is attributable to the Acquired
Communities, $57 is attributable to the consolidation of the VIE and $1,466 is
from the Core Properties, as the result of an increase of 0.6% in weighted
average rental rates, partially offset by a 0.2% decrease in economic occupancy
from 93.8% to 93.6%. Of the $9 decrease in utility recovery revenue,
an increase of $233 is attributable to the Acquired Communities, offset by a
$242 decrease to the Core Properties. The lower utility recovery
revenue in 2009 is due primarily to warmer than normal temperatures compared to
cooler temperatures in the spring of 2008, leading to decreased energy
consumption and lower heat billed through to residents.
The
remaining property other income, which consists primarily of income from
operation of laundry facilities, late charges, administrative fees, garage and
carport rentals, revenue from corporate apartments, cable revenue, pet charges,
and miscellaneous charges to residents increased by $80. Of this
increase, a $159 decrease is attributable to the Acquired Communities, which
realized $473 of nonrecurring commercial revenues in the 2008 period; offset by
a $239 increase in Core Properties resulting primarily from increases in
laundry, pet charges, and remarketing fees.
Interest
income decreased $141 due to a lower level of invested excess cash on hand and
lower interest rates as compared to the prior year.
Other
income, which primarily reflects management and other real estate service fees
recognized by the Company, increased by $89. This is due to an
increase in post closing consultation fees recognized between periods in
connection with property dispositions.
Of the
$5,929 increase in operating and maintenance expenses, $3,383 is attributable to
the Acquired Communities and $213 is attributable to the consolidation of the
VIE reflecting a nonrecurring property tax refund of $389 that occurred in 2008
offset by a reduction in repairs and maintenance expenses in
2009. The balance, a $2,333 increase is attributable to the Core
Properties and is primarily due to increases in repairs & maintenance,
personnel and real estate taxes, partially offset by decreases in advertising,
property insurance expense, and property management general & administrative
costs.
Repairs
& maintenance increased $634, or 2.9%, primarily due to the 2008 period
including $861 in recoveries from insurance claims compared to $417 in the
current period. Without the impacts of the insurance recoveries, the
recurring repairs & maintenance expenses increased only $190, or
0.9%.
Personnel
expense increased $2,047, or 6.1% primarily due to an increase to workers
compensation self-insurance reserves in the 2009 period of $639, compared to a
reserve decrease of $242 in the 2008 period, making the increase before reserve
adjustments $1,166, or 3.5%.
Property
insurance decreased by $2,026, or 23.8%, due to the current period including a
reserve reduction of $745, compared to an $81 reserve adjustment in
2008. In the 2009 period the Company also realized the benefit of
$483 in subrogation counterclaims settled for several prior property
losses. The remaining decrease before the reserve and counterclaim
settlement adjustments was $1,200, or 14.1%, which primarily reflects a decrease
in the property insurance cost due to a lower deductible in the 2009
period.
Real
estate taxes were up $1,724, or 5.1%, including the benefit of $635 in tax
reassessment refunds in 2009 compared to $249 in 2008. After removing
the effects of refunds, real estate taxes were up $2,110, or 6.3%.
Property
management general and administrative costs decreased $644, or 5.7%, primarily
due to staff reductions and lower performance-based compensation.
General
and administrative expenses decreased in 2009 by $546, or
2.9%. General and administrative expenses as a percentage of total
revenues were 4.8% for 2009 as compared to 4.9% for 2008. The
incentive bonus is down $1,756, or 67.6%, as compared to 2008, which reflects
the decrease in the Company’s operating performance as compared to the prior
year. Stock based compensation expenses were up $1,160 in 2009 as
compared to 2008, due in part to the change in estimated forfeitures from the
2004 grant year and the impact of the prescribed changes in vesting period
determination that took effect in 2006. In addition, the Company
recorded $606 in nonrecurring severance costs in the 2009 period.
Interest
expense increased by $2,833, or 3.2% in 2009 primarily as a result of interest
expense on the new debt of the Acquisition Communities, partially offset by
higher capitalized interest in connection with increased development levels in
2009 as compared to 2008, and lower interest on the Senior Notes as a result of
the $60,000 face value extinguishment in the fourth quarter 2008.
Depreciation
and amortization expense increased $7,002, or 8.4%, due to the depreciation on
the Acquisition Communities and the capital additions to the Core
Properties.
Included
in discontinued operations for the nine months ended September 30, 2009 are the
operating results of the 2009 Disposed Communities. Included in
discontinued operations for the nine months ended September 30, 2008 are the
operating results of the 2009 and 2008 Disposed Communities. For
purposes of the discontinued operations presentation, the Company only includes
interest expense and losses from early extinguishment of debt associated with
specific mortgage indebtedness of the properties that are sold or held for
sale.
Funds From
Operations
Pursuant
to the revised definition of Funds From Operations ("FFO") adopted by the Board
of Governors of the National Association of Real Estate Investment Trusts
("NAREIT"), FFO is defined as net income (computed in accordance with accounting
principles generally accepted in the United States of America ("GAAP"))
excluding gains or losses from sales of property, noncontrolling interest,
extraordinary items and cumulative effect of change in accounting principle plus
depreciation from real property including adjustments for unconsolidated
partnerships and joint ventures less dividends from non-convertible preferred
shares. Because of the limitations of the FFO definition as published
by NAREIT as set forth above, the Company has made certain interpretations in
applying the definition. The Company believes all adjustments not
specifically provided for are consistent with the definition.
In
addition to presenting FFO in accordance with the NAREIT definition, we also
disclose FFO after a specific and defined supplemental adjustment to exclude
losses from early extinguishments of debt associated with the sales of real
estate. The adjustment to exclude losses from early extinguishments
of debt results when the sale of real estate encumbered by debt requires us to
pay the extinguishment costs prior to the debt's stated maturity and to
write-off unamortized loan costs at the date of the
extinguishment. Such costs are excluded from the gains on sales of
real estate reported in accordance with GAAP. However, we view the
losses from early extinguishments of debt associated with the sales of real
estate as an incremental cost of the sale transactions because we extinguished
the debt in connection with the consummation of the sale transactions and we had
no intent to extinguish the debt absent such transactions. We believe
that this supplemental adjustment more appropriately reflects the results of our
operations exclusive of the impact of our sale transactions.
Although
our FFO as adjusted clearly differs from NAREIT's definition of FFO, and may not
be comparable to that of other REITs and real estate companies, we believe it
provides a meaningful supplemental measure of our operating performance because
we believe that, by excluding the effects of the losses from early
extinguishments of debt associated with the sales of real estate, management and
investors are presented with an indicator of our operating performance that more
closely achieves the objectives of the real estate industry in presenting
FFO.
Neither
FFO nor FFO as adjusted should be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of our
performance. Neither FFO nor FFO as adjusted represents cash
generated from operating activities determined in accordance with GAAP, and
neither is a measure of liquidity or an indicator of our ability to make cash
distributions. We believe that to further understand our performance,
FFO and FFO as adjusted should be compared with our reported net income and
considered in addition to cash flows in accordance with GAAP, as presented in
our consolidated financial statements.
FFO and
FFO as adjusted fall within the definition of "non-GAAP financial measure" set
forth in Item 10(e) of Regulation S-K and as a result the Company is required to
include in this report a statement disclosing the reasons why management
believes that presentation of these measures provide useful information to
investors. Management believes that in order to facilitate a clear
understanding of the combined historical operating results of the Company, FFO
and FFO as adjusted should be considered in conjunction with net income as
presented in the consolidated financial statements included elsewhere
herein. Management believes that by excluding gains or losses related
to dispositions of property and excluding real estate depreciation (which can
vary among owners of similar assets in similar condition based on historical
cost accounting and useful life estimates), FFO and FFO as adjusted can help one
compare the operating performance of a company's real estate between periods or
as compared to different companies. In addition, FFO as adjusted by
the Company ties the losses on early extinguishment of debt to the real estate
which was sold triggering the extinguishment. The Company also uses these
measures to compare its performance to that of its peer group. FFO
and FFO as adjusted does not represent cash generated from operating activities
in accordance with generally accepted accounting principles and is not
necessarily indicative of cash available to fund cash needs. Neither
FFO nor FFO as adjusted should be considered as an alternative to net income as
an indication of the Company's performance or to cash flow as a measure of
liquidity.
The
calculation of FFO and reconciliation to GAAP net income available to common
shareholders for the three and nine months ended September 30, 2009 and 2008 are
presented below (in thousands):
|
|
Three Months
|
|
|
Nine Months
|
|
|
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
Net
income attributable to common shareholders
|
|
$ |
5,264 |
|
|
$ |
6,839 |
|
|
$ |
22,186 |
|
|
$ |
40,942 |
|
Real
property depreciation and amortization
|
|
|
29,712 |
|
|
|
28,666 |
|
|
|
88,763 |
|
|
|
84,824 |
|
Noncontrolling
interest
|
|
|
1,956 |
|
|
|
2,818 |
|
|
|
8,375 |
|
|
|
17,055 |
|
Loss
(gain) on disposition of property
|
|
|
22 |
|
|
|
- |
|
|
|
(13,471 |
) |
|
|
(29,848 |
) |
FFO
– Basic and Diluted, as defined by NAREIT
|
|
|
36,954 |
|
|
|
38,323 |
|
|
|
105,853 |
|
|
|
112,973 |
|
Loss
from early extinguishment of debt in connection with sale of real
estate
|
|
|
- |
|
|
|
- |
|
|
|
4,927 |
|
|
|
1,384 |
|
FFO
– Basic and Diluted, as adjusted by the Company
|
|
$ |
36,954 |
|
|
$ |
38,323 |
|
|
$ |
110,780 |
|
|
$ |
114,357 |
|
Weighted
average common shares/units outstanding (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
45,243.0 |
|
|
|
45,049.0 |
|
|
|
45,220.8 |
|
|
|
45,221.7 |
|
Diluted
|
|
|
45,361.9 |
|
|
|
45,559.9 |
|
|
|
45,284.7 |
|
|
|
45,664.3 |
|
(1)
|
Basic
includes common stock outstanding plus UPREIT Units which can be converted
into shares of common stock. Diluted includes additional common
stock equivalents.
|
All REITs
may not be using the same definition for FFO. Accordingly, the above
presentation may not be comparable to other similarly titled measures of FFO of
other REITs.
Covenants
The
credit agreement relating to the Company’s line of credit provides for the
Company to maintain certain financial covenants. The Company was in compliance
with these financial covenants for all periods presented. The line of
credit has not been used for long-term financing but adds a certain amount of
flexibility, especially in meeting the Company's acquisition
goals. Many times it is easier to temporarily finance an acquisition
or stock repurchases by short-term use of the line of credit, with long-term
secured financing or other sources of capital replenishing the line of credit
availability.
Economic
Conditions
Substantially
all of the leases at the Company’s apartment communities are for a term of one
year or less, which enables the Company to seek increased rents upon renewal of
existing leases or commencement of new leases. In response to the
current economic climate, the Company may also elect to hold or slightly reduce
rents in order to remain competitive and retain occupancy in certain
markets. These short-term leases minimize the potential adverse
effect of inflation or deflation on rental income, although residents may leave
without penalty at the end of their lease terms and may do so if rents are
increased significantly.
Historically,
real estate has been subject to a wide range of cyclical economic conditions,
which affect various real estate sectors and geographic regions with differing
intensities and at different times. Starting in 2001 and continuing
into 2004 many regions of the United States had experienced varying degrees of
economic recession and certain recessionary trends, such as a temporary
reduction in occupancy and reduced pricing power limiting the ability to
aggressively raise rents. Starting in the second half of 2004 and
continuing into 2007, the Company saw a reversal of these recessionary
trends. However, throughout 2008 and continuing into 2009, the
sub-prime issue put significant pressure on the mortgage lending
industry. This led to problems in the financial system which
developed into the worst recession since the Great Depression. The
credit markets tightened, consumer confidence plunged and unemployment
soared. The Company has continued to receive favorable financing at
market rates of interest. Its physical occupancy at 95% in 2008 and
2009 was the highest it has been since 2000 and financial performance continued
strong. However, a recessionary economy and increasing job losses
typically slow household formations which could affect occupancy and decrease
the Company's ability to raise rents. In light of this, the Company
will continue to review our business strategy throughout the
year. However, we believe that given our B property type and the
geographic regions in which we are located, the Company's financial performance
will be affected less negatively than its peers.
Declaration of
Dividend
On
October 28, 2009, the Board of Directors approved a dividend of $0.67 per share
on the Company’s common stock for the quarter ended September 30,
2009. This is the equivalent of an annual distribution of $2.68 per
share. The dividend is payable November 24, 2009 to shareholders of
record on November 12, 2009.
Contingency
The
Company is not a party to any legal proceedings which are expected to have a
material adverse effect on the Company's liquidity, financial position or
results of operations. The Company is subject to a variety of legal
actions for personal injury or property damage arising in the ordinary course of
its business, most of which are covered by liability and property
insurance. Various claims of employment and resident discrimination
are also periodically brought, most of which also are covered by
insurance. While the resolution of these matters cannot be predicted
with certainty, management believes that the final outcome of such legal
proceedings and claims will not have a material adverse effect on the Company's
liquidity, financial position or results of operations.
Recently Adopted and
Recently Issued Accounting Standards
Disclosure
of recently adopted and recently issued accounting standards is incorporated
herein by reference to the discussion under Part I, Item 1, Notes to
Consolidated Financial Statements, Note 3.
HOME
PROPERTIES, INC.
ITEM
3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The
Company's primary market risk exposure is interest rate risk. At
September 30, 2009 and December 31, 2008, approximately 93% and 95%,
respectively, of the Company's debt bore interest at fixed rates. At
September 30, 2009 and December 31, 2008, approximately 87% and 89%,
respectively, of the Company's debt was secured and bore interest at fixed
rates. The secured fixed rate debt had weighted average maturities of
approximately 5 years for both periods and a weighted average interest rate of
5.78% and 5.77% at September 30, 2009 and December 31, 2008,
respectively. The remainder of the Company's secured debt bore
interest at variable rates with a weighted average maturity of approximately 10
and 13 years as of September 30, 2009 and December 31, 2008, respectively, and a
weighted average interest rate of 2.56% and 2.02%, at September 30, 2009 and
December 31, 2008, respectively. The Company does not intend to
utilize a significant amount of permanent variable rate debt to acquire
properties in the future. The Company may use its line of credit in
connection with a property acquisition or stock repurchase with the intention to
refinance at a later date. The Company believes that increases in
interest expense as a result of inflation would not significantly impact the
Company's distributable cash flow.
At
September 30, 2009 and December 31, 2008, the fair value of the Company's
fixed and variable rate secured debt amounted to a liability of $2.19 billion
and $2.08 billion, respectively, compared to its carrying amount of
$2.14 billion and $2.11 billion, respectively. The Company
estimates that a 100 basis point increase in market interest rates at September
30, 2009 would have changed the fair value of the Company's fixed and variable
rate secured debt to a liability of $2.11 billion. At September
30, 2009 and December 31, 2008, the fair value of the Company’s total debt,
including the Senior Notes and line of credit, amounted to a liability of $2.39
billion and $2.26 billion, respectively, compared to its carrying amount of
$2.35 billion and $2.32 billion, respectively.
The
Company intends to continuously monitor and actively manage interest costs on
its variable rate debt portfolio and may enter into swap or cap rate positions
based upon market fluctuations. In addition, the Company believes
that it has the ability to obtain funds through additional debt and/or equity
offerings and/or the issuance of UPREIT Units. Accordingly, the cost
of obtaining such interest rate protection agreements in relation to the
Company's access to capital markets will continue to be
evaluated. The Company has not, and does not plan to, enter into any
derivative financial instruments for trading or speculative
purposes. As of September 30, 2009, the Company had no other material
exposure to market risk.
ITEM
4. CONTROLS
AND PROCEDURES
Evaluation of Disclosure
Controls and Procedures
The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the reports filed or submitted by
the Company under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission’s rules and forms, and that such information is accumulated
and communicated to the officers who certify the Company’s financial reports and
to the other members of senior management and the Board of
Directors.
The
principal executive officer and principal financial officer evaluated, as of
September 30, 2009, the effectiveness of the disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15-d-15(e) under the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) and have determined that such
disclosure controls and procedures are effective.
There
have been no changes in the internal controls over financial reporting
identified in connection with that evaluation, or that occurred during the third
quarter of the year ended December 31, 2009 that has materially affected, or is
reasonably likely to materially affect, the Company’s internal control over
financial reporting.
HOME
PROPERTIES, INC.
PART II -
OTHER INFORMATION
ITEM
1A. RISK
FACTORS
Refer to
the Risk Factors disclosure in the Company’s Form 10-K for the year ended
December 31, 2008. There have been no material changes in these risk factors
during the nine months ended September 30, 2009 and through the date of this
report.
ITEM
2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES; USE OF PROCEEDS FROM REGISTERED
SECURITIES
|
In 1997,
the Company's Board of Directors approved a stock repurchase program under which
the Company may repurchase shares of its outstanding common stock and UPREIT
Units ("Company Program"). The shares/units may be repurchased
through open market or privately negotiated transactions at the discretion of
Company management. The Board's action does not establish a specific
target stock price or a specific timetable for share repurchase. In
addition, participants in the Company’s Stock Benefit Plan can use common stock
of the Company that they already own to pay all or a portion of the exercise
price payable to the Company upon the exercise of an option. In such
event, the common stock used to pay the exercise price is returned to authorized
but unissued status, and for purposes of this table is deemed to have been
repurchased by the Company. At December 31, 2008, the Company had
authorization to repurchase 2,291,160 shares of common stock and UPREIT Units
under the Company Program. During the first six months of 2009, the
Company did not repurchase any shares under the Company Program. The
following table summarizes the total number of shares/units repurchased by the
Company during the three months ended September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
Maximum
|
|
|
|
Total
|
|
|
Average
|
|
|
Total
shares/units
|
|
|
shares/units
|
|
|
|
shares/units
|
|
|
price
per
|
|
|
purchased
as part of
|
|
|
available
under
|
|
Period
|
|
purchased(1)
|
|
|
share/unit
|
|
|
Company Program
|
|
|
Company Program
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
July 1, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
2,291,160 |
|
July
2009
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,291,160 |
|
August
2009
|
|
|
5,155 |
|
|
$ |
40.07 |
|
|
|
- |
|
|
|
2,291,160 |
|
September
2009
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,291,160 |
|
Total
Third Quarter 2009
|
|
|
5,155 |
|
|
$ |
40.07 |
|
|
|
- |
|
|
|
2,291,160 |
|
(1)
|
During
the three months ended September 30, 2009, and as permitted by the
Company's stock option plans, 5,155 shares of common stock already owned
by option holders were used by those holders to pay the exercise price
associated with their option exercise. These shares were
returned to the status of authorized but unissued
shares.
|
|
|
Exhibit
10.1
|
Amendment
No. 102 to Second Amended and Restated Agreement of Limited
Partnership
|
Exhibit
31.1
|
Section
302 Certification of Chief Executive Officer*
|
Exhibit
31.2
|
Section
302 Certification of Chief Financial Officer*
|
Exhibit
32.1
|
Section
906 Certification of Chief Executive Officer**
|
Exhibit
32.2
|
Section
906 Certification of Chief Financial
Officer**
|
*Filed
herewith
**Furnished
herewith
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
HOME PROPERTIES, INC.
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
November 6,
2009
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ Edward J.
Pettinella
|
|
|
Edward
J. Pettinella
|
|
|
President
and Chief Executive Officer
|
|
|
|
|
|
|
|
Date:
|
November 6,
2009
|
|
|
|
|
|
|
|
|
|
|
By:
|
/s/ David P.
Gardner
|
|
|
David
P. Gardner
|
|
|
Executive
Vice President and
|
|
|
Chief
Financial Officer
|