Dividend Reduced ROCHESTER, N.Y., Feb. 18 /PRNewswire-FirstCall/ --
Home Properties (NYSE: HME) today released financial results for
the fourth quarter and year ended December 31, 2009. All results
are reported on a diluted basis. "Home Properties' sector-leading
2009 net operating income ("NOI") growth reflects the consistency
and strength of the Company's geographic markets, middle-market
apartment strategy and operations focus," said Edward J.
Pettinella, Home Properties President and CEO. "Based on our
projections and those of the other publicly-traded apartment
companies, we expect to repeat our number one performance in
same-store NOI growth in 2010." Earnings per share ("EPS") for the
quarter ended December 31, 2009 was $0.36, compared to $0.78 for
the quarter ended December 31, 2008. The $0.42 decrease in EPS is
primarily attributable to a gain on early extinguishment of debt of
$0.25 per share offset by a real estate impairment charge on assets
held as general partner of $0.09 per share, both recorded in the
fourth quarter 2008, combined with a decrease of $0.24 per share in
gain on disposition of property between 2009 and 2008. EPS for the
year ended December 31, 2009 was $1.04, compared to $2.04 for the
year ended December 31, 2008. The year-over-year decrease of $1.00
per share is primarily attributable to the fourth quarter 2008 gain
on early extinguishment of debt and real estate impairment charge,
combined with a decrease in gain on disposition of property between
years. For the quarter ended December 31, 2009, Funds From
Operations ("FFO") was $35.4 million, or $0.77 per share, compared
to $43.0 million, or $0.95 per share, for the quarter ended
December 31, 2008. Fourth quarter 2009 FFO of $0.77 per share was
$0.01 above the midpoint of the guidance range provided by
management and met the analysts' mean estimate, as reported by
Thomson. FFO for the year ended December 31, 2009 was $3.22 per
share, compared to $3.45 in the year-ago period. Excluding two
unusual non-recurring items recorded in the 2008 fourth quarter for
gain on early extinguishment of debt after fees and other accruals,
and an impairment charge, FFO per share would have been $0.81 for
the 2008 fourth quarter and $3.32 for the full year 2008. Compared
to the adjusted FFO per share for 2008, 2009 results represent a
decrease of 4.4% for the quarter and 2.9% for the full year. A
reconciliation of GAAP net income to FFO is included in the
financial data accompanying this news release. Fourth Quarter
Operating Results For the fourth quarter of 2009, same-property
comparisons (for 102 "Core" properties containing 34,768 apartment
units owned since January 1, 2008) reflected a decrease in total
revenues of 1.6% compared to the same quarter a year ago. Net
operating income ("NOI") increased by 1.1% from the fourth quarter
of 2008. Property level operating expenses decreased by 5.2%
compared to the prior year quarter, primarily due to decreases in
natural gas heating costs, repairs and maintenance, personnel costs
and property insurance, which were partially offset by an increase
in snow removal costs. Average physical occupancy for the Core
properties was 95.1% during the fourth quarter of 2009, compared to
94.9% during the fourth quarter of 2008. Average monthly rental
rates of $1,130 represent a 1.4% decrease compared to the year-ago
period. On a sequential basis, compared to the 2009 third quarter
results for the Core properties, total revenues increased 0.7% in
the fourth quarter of 2009, expenses were up 2.4% and net operating
income decreased 0.5%. Average physical occupancy at 95.1% was
identical to third quarter 2009 occupancy. Physical occupancy for
the 1,029 net apartment units acquired/developed between January 1,
2008 and December 31, 2009 (the "Recently Acquired Communities")
averaged 93.9% during the fourth quarter of 2009, at average
monthly rents of $1,138. Year-to-Date Operating Results For the
year ended December 31, 2009, same-property comparisons for the
Core properties reflected a decrease in total revenue of 0.1% and
expenses of 0.2%, resulting in net operating income that was
essentially flat compared to 2008. Property level operating
expenses decreased for the year, primarily due to decreases in
natural gas heating costs, property insurance and property
management G&A costs, which were partially offset by increases
in personnel costs, real estate taxes and snow removal costs.
Average physical occupancy for the Core properties was 94.9% during
2009, down from 95.0% a year ago, with average monthly base rents
rising 0.1%. Dispositions During the fourth quarter of 2009, the
Company closed on two separate sale transactions, with a total of
592 units, for $40.5 million, producing $39.3 million in net
proceeds after closing costs. A gain on sale of $10.8 million was
recorded in the fourth quarter related to these sales. The details
for a 432-unit property located in Philadelphia sold earlier in the
quarter were presented in the third quarter earnings news release.
The most recent sale, closed December 16, 2009, was a 160-unit
property also located in Philadelphia, which sold for $10.5 million
at an expected first year cap rate of 7.6%. Development The Company
has two projects currently under construction, 1200 East West
Highway and The Courts at Huntington Station. 1200 East West
Highway is in Silver Spring, Maryland and construction is expected
to be completed in April 2010. It is a 14-story high rise with 247
apartments and 10,600 square feet of retail or nonresidential space
that is expected to have initial occupancy in March 2010.
Stabilization is anticipated after a one-year lease-up period. The
Courts at Huntington Station is in Alexandria, Virginia and
construction of the 202 units in Phase I is expected to be complete
by the end of May 2010. Initial occupancy is expected in April 2010
and the lease-up period is projected to last eleven months.
Construction on Phase II (219 units) has commenced and is scheduled
to be complete in the second quarter of 2011, reaching stabilized
occupancy a year later. The Company owns no raw land and has no
real estate development investments in which the cost is in excess
of fair market value. Therefore, the Company has not had to record
any development pipeline impairment charges. The Company does not
plan to acquire new entitled or raw land for development in 2010.
Capital Markets Activities As of December 31, 2009, the Company's
ratio of debt-to-total market capitalization was 51.1% (based on a
December 31, 2009 stock price of $47.71 to determine equity value),
with $53.5 million outstanding on its $175 million revolving credit
facility and $8.8 million of unrestricted cash on hand. Total debt
of $2.3 billion was outstanding, at rates of interest averaging
5.6% and with staggered maturities averaging approximately six
years. Approximately 89% of total indebtedness is at fixed rates.
Interest coverage for the year averaged 2.2 times and the fixed
charge ratio averaged 2.1 times. In the 2009 fourth quarter, the
Company closed on approximately $151 million in new secured loans,
generating $34 million in net proceeds after the payoff of maturing
loans. An additional $51 million of maturing debt was paid off,
adding four properties to the unencumbered pool. The Company has
reduced 2010 maturities from $305 million as of September 30, 2009
to only $146 million at December 31, 2009 by refinancing loans
prior to maturity. The Company did not repurchase any of its common
shares during the fourth quarter. As of December 31, 2009, the
Company has Board authorization to buy back up to approximately 2.3
million additional shares of its common stock or Operating
Partnership Units, although it has no current plans to do so.
During the fourth quarter of 2009, the Company initiated an
At-The-Market ("ATM") equity offering program through which it may
sell up to 3.7 million common shares, not to exceed $150 million of
gross proceeds. During the fourth quarter, 871,600 shares were
issued at an average price of $45.70 generating net proceeds of $39
million. In January 2010, the settlement of pending trades at
December 31, 2009 resulted in an additional 169,600 shares issued
at an average price of $48.37 generating net proceeds of $8
million. As of December 31, 2009, up to 2,658,800 shares remain
available for issuance under this program. Outlook For 2010, the
Company expects FFO per share between $2.75 and $2.99 per share,
which will produce FFO per share growth of negative 14.6% to
negative 7.1% when compared to 2009 results. This guidance range
reflects management's current assessment of economic and market
conditions. The assumptions for the 2010 projections are included
with the published supplemental information. Pettinella commented,
"Like our peers in the industry, we continue to feel the effects of
the current economic environment, but despite what we view as a
challenging 2010, our outlook for same-unit NOI performance is the
best among our peers. The impact of relatively favorable operating
results is muted in our 2010 FFO projections due to the earnings
dilution from lower than expected development yields, as well as
dilution from the ATM equity offering program and higher interest
expense from the September 2009 renewal of the line of credit. If
the economy improves as projected, our outlook for 2011 is
cautiously optimistic. Beyond that, we believe 2012 through 2014
could result in some of the best results in our history." The
quarterly breakdown for the 2010 guidance on FFO per share results
is as follows: First quarter $0.65 to $0.71; second quarter $0.68
to $0.74; third quarter $0.72 to $0.78; fourth quarter $0.70 to
$0.76. Dividend Declared The Company announced a regular cash
dividend on the Company's common shares of $0.58 per share for the
quarter ended December 31, 2009. The dividend is payable on March
5, 2010 to shareholders of record on March 1, 2010, and is
equivalent to an annualized rate of $2.32 per share. The current
annual dividend represents a 5.0% yield based on yesterday's
closing price of $46.41. Home Properties' common stock will begin
trading ex-dividend on February 25, 2010. The quarterly dividend of
$0.58 is a decrease of 13.4% from the Company's prior quarterly
dividend of $0.67 per share. "The Board's decision to reduce the
dividend reflects the expectation that FFO will continue to be
under pressure in 2010, before rental rate pricing improves in 2011
or beyond," said Pettinella. "Unlike many Real Estate Investment
Trusts ("REITs") which cut or suspended their dividends in 2009, we
were cautiously optimistic that we could weather the great
recession without adjusting the dividend based on our
sector-leading NOI last year. However, now that we expect the
economic recovery to occur later and be more prolonged than
originally anticipated, in addition to the increased common shares
from the At the Market (ATM) equity offering program, we believe it
is prudent to adjust our dividend payout level closer to the
apartment REIT average." The Company said it would provide more
information about the dividend decision on the conference call
tomorrow. Supplemental Information The Company produces
supplemental information that includes details regarding property
operations, other income, acquisitions, sales, market geographic
breakdown, debt and new development. The supplemental information
is available via the Company's Web site through the "Investor"
section, e-mail or facsimile upon request. Fourth Quarter and Year
End 2009 Earnings Conference Call The Company will conduct a
conference call and simultaneous webcast tomorrow at 11:00 AM
Eastern Time to review and comment on the information reported in
this release. To listen to the call, please dial 800-758-5606
(International 212-231-2906). An audio replay of the call will be
available through February 25, 2010, by dialing 800-633-8284 or
402-977-9140 and entering the passcode 21442490. The Company
webcast, which includes audio and a slide presentation, will be
available, live at 11:00 AM and archived by 1:00 PM, through the
"Investors" section home page of the Web site,
http://www.homeproperties.com/. First Quarter 2010 Earnings Release
and Conference Call The first quarter financial results are
scheduled to be released after the stock market closes on Thursday,
May 6, 2010. A conference call, which will be simultaneously
webcast, is scheduled for Friday, May 7, 2010 at 11:15 AM Eastern
Time and is accessible following the above instructions. The
passcode for that replay will be 21442491. First Quarter 2010
Conference/Event Schedule Home Properties' President and CEO,
Edward J. Pettinella, is scheduled to participate in a roundtable
presentation and question and answer session at the Citi 2010
Global Property CEO Conference in Palm Beach, Florida, on
Wednesday, March 3, 2010 at 9:45 AM. The live presentation and
related materials will be available in the "Investors" section of
Home Properties' Web site. This press release contains
forward-looking statements. Although the Company believes
expectations reflected in such forward-looking statements are based
on 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 and new
development activities within anticipated budgets, the actual pace
of future acquisitions and dispositions, and continued access to
capital to fund growth. Home Properties is a publicly traded
apartment real estate investment trust that owns, operates,
develops, acquires and rehabilitates apartment communities
primarily in selected Northeast, Mid-Atlantic and Southeast Florida
markets. Currently, Home Properties operates 107 communities
containing 36,948 apartment units. Of these, 35,798 units in 105
communities are owned directly by the Company; 868 units are
partially owned and managed by the Company as general partner, and
282 units are managed for other owners. For more information, visit
Home Properties' Web site at homeproperties.com. Tables to follow.
HOME PROPERTIES, INC. SUMMARY OF OCCUPANCY AND PROPERTY OPERATING
RESULTS Fourth Quarter Avg. Physical 4Q 4Q 2009 vs. 4Q Results:
Occupancy(a) 2009 2008 % Growth -------------- ------------ ----
------------------------ Average Monthly Rent Per Base 4Q 4Q Occ
Rental Total Total 2009 2008 Unit Rates Revenue Expense NOI ----
----- ---- ----- ------- ------- --- Core Properties(b) 95.1% 94.9%
$1,130 (1.4%) (1.6%) 5.2% 1.1% Acquisition Properties(c) 93.9% NA
$1,138 NA NA NA NA ---- --- ------ --- --- --- --- TOTAL PORTFOLIO
95.0% NA $1,130 NA NA NA NA Year-To-Date Avg. Physical YTD YTD 2009
vs. YTD Results: Occupancy(a) 2009 2008 % Growth ------------
------------ ---- -------------------------- Average Monthly Rent
Per Base YTD YTD Occ Rental Total Total 2009 2008 Unit Rates
Revenue Expense NOI ---- ---- ---- ----- ------- ------- --- Core
Properties(b) 94.9% 95.0% $1,137 0.1% (0.1%) 0.2% 0.0% Acquisition
Properties(c) 92.5% NA $1,162 NA NA NA NA ---- --- ------ --- ---
--- --- TOTAL PORTFOLIO 94.8% NA $1,137 NA NA NA NA (a) Average
physical occupancy is defined as total possible rental income, net
of vacancy expense, as a percentage of total possible rental
income. Total possible rental income is determined by valuing
occupied units at contract rates and vacant units at market rents.
(b) Core Properties consist of 102 properties with 34,768 apartment
units owned throughout 2008 and 2009. (c) Acquisition Properties
consist of 3 properties with 1,029 apartment units
acquired/developed subsequent to January 1, 2008. HOME PROPERTIES,
INC. SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands,
except per share data - Unaudited) Three Months Ended Year Ended
December 31 December 31 ---------------------- -----------------
2009 2008 2009 2008 ---- ---- ---- ---- Rental income $114,976
$114,665 $462,086 $452,142 Property other income 10,494 11,091
40,764 41,336 Interest income 41 6 59 165 Other income 301 92 700
400 --- --- --- --- Total revenues 125,812 125,854 503,609 494,043
------- ------- ------- ------- Operating and maintenance 52,563
54,723 211,265 207,517 General and administrative 6,237 6,703
24,476 25,488 Interest 31,232 30,581 122,814 119,330 Depreciation
and amortization 30,256 28,844 119,689 111,310 Impairment of real
estate assets - 4,000 - 4,000 --- ----- --- ----- Total expenses
120,288 124,851 478,244 467,645 ------- ------- ------- -------
Income from operations before gain on early extinguishment of debt
5,524 1,003 25,365 26,398 Gain on early extinguishment of debt -
11,304 - 11,304 --- ------ --- ------ Income from continuing
operations 5,524 12,307 25,365 37,702 Discontinued operations
Income (loss) from discontinued operations 149 1,189 (2,601) 3,943
Gain on disposition of property 10,844 21,711 24,314 51,560 ------
------ ------ ------ Discontinued operations 10,993 22,900 21,713
55,503 ------ ------ ------ ------ Net income 16,517 35,207 47,078
93,205 Net income attributable to noncontrolling interest (4,284)
(10,068) (12,659) (27,124) ------ ------- ------- ------- Net
income attributable to common shareholders $12,233 $25,139 $34,419
$66,081 ======= ======= ======= ======= Reconciliation from net
income attributable to common shareholders to Funds From
Operations: Net income attributable to common shareholders $12,233
$25,139 $34,419 $66,081 Real property depreciation and amortization
29,718 29,435 118,480 114,260 Noncontrolling interest 4,284 10,068
12,659 27,124 Gain on disposition of property (10,844) (21,711)
(24,314) (51,560) Loss from early extinguishment of debt in
connection with sale of real estate - 30 4,927 1,413 --- --- -----
----- FFO -basic and diluted (1) $35,391 $42,961 $146,171 $157,318
======= ======= ======== ======== (1) Pursuant to the revised
definition of Funds From Operations 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
disposition of property, noncontrolling interest and extraordinary
items plus depreciation from real property. In 2009 and 2008, the
Company added back debt extinguishment costs which were incurred as
a result of repaying property-specific debt triggered upon sale as
a gain or loss on sale of the property. 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. Other similarly
titled measures may not be calculated in the same manner. HOME
PROPERTIES, INC. SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except per share data - Unaudited) Three Months Ended
Year Ended December 31 December 31 -----------------
----------------- 2009 2008 2009 2008 ---- ---- ---- ---- FFO -
basic and diluted $35,391 $42,961 $146,171 $157,318 ======= =======
======== ======== FFO - basic and diluted $35,391 $42,961 $146,171
$157,318 Impairment of real property - 4,000 - 4,000 --- ----- ---
----- FFO - operating (2) $35,391 $46,961 $146,171 $161,318 =======
======= ======== ======== FFO - basic and diluted $35,391 $42,961
$146,171 $157,318 Recurring non-revenue generating capital expenses
(7,187) (7,246) (29,069) (28,885) Addback of non-cash interest
expense 504 531 1,968 2,463 Addback of non-cash adjustment to gain
on early extinguishment of debt - 2,580 - 2,580 --- ----- --- -----
AFFO (3) $28,708 $38,826 $119,070 $133,476 ======= ======= ========
======== FFO - operating $35,391 $46,961 $146,171 $161,318
Recurring non-revenue generating capital expenses (7,187) (7,246)
(29,069) (28,885) Addback of non-cash interest expense 504 531
1,968 2,463 Addback of non-cash adjustment to gain on early
extinguishment of debt - 2,580 - 2,580 --- ----- --- ----- AFFO -
operating $28,708 $42,826 $119,070 $137,476 ======= =======
======== ======== Weighted average shares/units outstanding: Shares
- basic 33,621.9 32,228.6 33,040.8 31,991.8 Shares - diluted
33,965.9 32,356.2 33,172.1 32,332.7 Shares/units - basic (4)
45,423.7 45,144.2 45,274.4 45,200.4 Shares/units - diluted (4)
45,767.7 45,271.8 45,405.7 45,541.3 Per share/unit: Net income -
basic $0.36 $0.78 $1.04 $2.07 Net income - diluted $0.36 $0.78
$1.04 $2.04 FFO - basic $0.78 $0.95 $3.23 $3.48 FFO - diluted $0.77
$0.95 $3.22 $3.45 Operating FFO - diluted (2) $0.77 $1.04 $3.22
$3.54 AFFO (3) $0.63 $0.86 $2.62 $2.93 Operating AFFO (2) (3) $0.63
$0.95 $2.62 $3.02 Common Dividend paid $0.67 $0.67 $2.68 $2.65 (2)
Operating FFO is defined as FFO as computed in accordance with
NAREIT definition, adjusted for the addback of real estate
impairment charges. (3) Adjusted Funds From Operations ("AFFO") is
defined as gross FFO less an annual reserve for anticipated
recurring, non-revenue generating capitalized costs of $800 and
$780 per apartment unit in 2009 and 2008, respectively. Non-cash
interest expense and non-cash adjustments to gain on early
extinguishment of debt have been added back for 2009 and 2008. The
resulting sum is divided by the weighted average shares/units on a
diluted basis to arrive at AFFO per share/unit. (4) Basic includes
common stock outstanding plus operating partnership units in Home
Properties, L.P., which can be converted into shares of common
stock. Diluted includes additional common stock equivalents. HOME
PROPERTIES, INC. SUMMARY CONSOLIDATED BALANCE SHEETS (in thousands
- Unaudited) December 31, 2009 December 31, 2008 -----------------
----------------- Land $508,087 $515,610 Construction in progress
184,617 111,039 Buildings, improvements and equipment 3,223,275
3,245,741 --------- --------- 3,915,979 3,872,390 Accumulated
depreciation (733,142) (636,970) -------- -------- Real estate, net
3,182,837 3,235,420 Cash and cash equivalents 8,809 6,567 Cash in
escrows 27,278 27,904 Accounts receivable 14,137 14,078 Prepaid
expenses 16,783 16,277 Deferred charges 13,931 11,360 Other assets
4,259 5,488 ----- ----- Total assets $3,268,034 $3,317,094
========== ========== Mortgage notes payable $2,112,645 $2,112,331
Exchangeable senior notes 136,136 134,169 Line of credit 53,500
71,000 Accounts payable 19,695 23,731 Accrued interest payable
10,661 10,845 Accrued expenses and other liabilities 27,989 32,043
Security deposits 19,334 21,443 Total liabilities 2,379,960
2,405,562 Common stockholders' equity 661,112 650,778
Noncontrolling interest 226,962 260,754 ------- ------- Total
equity 888,074 911,532 ------- ------- Total liabilities and equity
$3,268,034 $3,317,094 ========== ========== Total shares/units
outstanding: Common stock 34,655.4 32,431.3 Operating partnership
units 11,734.6 12,821.2 -------- -------- 46,390.0 45,252.5
======== ======== DATASOURCE: Home Properties CONTACT: David P.
Gardner, Executive Vice President and Chief Financial Officer,
+1-585-246-4113, or Charis W. Warshof, Vice President, Investor
Relations, +1-585-295-4237 Web Site: http://www.homeproperties.com/
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