ROCHESTER, N.Y., Aug. 5 /PRNewswire-FirstCall/ -- Home Properties today released financial results for the second quarter ending June 30, 2010. All results are reported on a diluted basis.
"The first to second quarter 2010 sequential change in rental rate growth and net operating income (NOI) growth was positive for the first time since the second quarter of 2009, contributing to second quarter 2010 Funds From Operations per share that were three cents higher than analysts' estimates," said Edward J. Pettinella, Home Properties President and CEO. "Sequential NOI growth of 7.0% reflects continued operating efficiencies. Even without substantive economic recovery, we are pleased with our operating results, fueled by strong geographic markets and a stable business model."
Earnings per share ("EPS") for the quarter ended June 30, 2010 was $0.14, compared to $0.18 for the quarter ended June 30, 2009. The $0.04 decrease in EPS is primarily attributable to a $1.0 million decrease in income from continuing operations. EPS for the six months ended June 30, 2010 was $0.21, compared to $0.52 for the six months ended June 30, 2009. The year-over-year decrease of $0.31 per share is primarily attributable to a $13.5 million decrease in gain on disposition of three properties sold in the first quarter of 2009. There were no dispositions in the first half of 2010.
For the quarter ended June 30, 2010, Funds From Operations ("FFO") was $37.0 million, or $0.76 per share, compared to $37.9 million, or $0.84 per share, for the quarter ended June 30, 2009. Second quarter 2010 FFO of $0.76 per share was $0.03 above analysts' mean estimate, as reported by Thomson, and $0.05 above the midpoint of the guidance range provided by management. Included in the $0.76 per share 2010 FFO is $0.01 in costs related to the acquisition of three properties, which are now recorded as other expense rather than included in the cost basis of the acquisition, as was the prior accounting treatment. FFO for the six months ended June 30, 2010 was $1.47 per share, compared to $1.63 in the year-ago period. Year-to-date 2010 FFO includes $0.05 in costs related to record severe storms that occurred in the first quarter as well as $0.01 in acquisition costs. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this news release.
Second Quarter Operating Results
For the second quarter of 2010, same-property comparisons (for 105 "Core" properties containing 35,798 apartment units owned since January 1, 2009) reflected a decrease in total revenues of 0.2% compared to the same quarter a year ago. Net operating income ("NOI") increased by 1.3% from the second quarter of 2009. Property level operating expenses decreased by 2.4% compared to the prior year quarter, primarily due to decreases in electricity, natural gas heating costs, repairs and maintenance, and personnel costs, which were partially offset by increases in real estate taxes and property general and administrative expense.
Average physical occupancy for the Core properties was 95.5% during the second quarter of 2010, up from 95.0% during the second quarter of 2009. Average monthly rental rates of $1,129 represent a 1.0% decrease compared to the year-ago period.
On a sequential basis, compared to the 2010 first quarter results for the Core properties, rental income increased 1.0% in the second quarter of 2010, total revenues decreased 1.7%, expenses were down 12.7%, and net operating income increased 7.0%. Average physical occupancy increased 0.7% to 95.5%. The total revenue decrease in the second quarter compared to the first quarter was due to the typical seasonality from lower heating cost reimbursements. The expense decrease between the first and second quarters represented seasonality from lower natural gas and snow removal costs in addition to higher first quarter costs related to record severe storms.
Physical occupancy for the 931 apartment units acquired/developed between January 1, 2009 and June 30, 2010 averaged 50.4% during the second quarter of 2010, at average monthly rents of $1,312. Of the 931 apartment units, 600 units relate to communities acquired during the second quarter of 2010 with average occupancy of 90.2% and average monthly rents of $879. The remaining 331 units are newly developed apartments that commenced leasing in 2010. The initial lease-up activity at 1200 East West Highway and the Courts at Huntington Station has reached 24.9% with average monthly rents of $1,915. See additional information below in the acquisitions/dispositions and development sections.
Year-to-Date Operating Results
For the six months ended June 30, 2010, same-property comparisons for the Core properties reflected a decrease in total revenues of 0.4% and a decrease in total expenses of 0.6%, resulting in a 0.2% decrease in net operating income compared to the first six months of 2009. Property level operating expenses decreased primarily due to decreases in electricity, natural gas heating costs, and repairs and maintenance, which were partially offset by an increase in property insurance, real estate taxes, and snow removal costs.
Average physical occupancy for the Core properties was 95.2% during the first six months of 2010, up from 94.6% a year ago, with average monthly rental rates of $1,128, a decrease of 1.2% over the prior year, reflecting the tougher economic environment and resulting pressures on rental rates experienced in 2010 as compared to 2009.
Acquisitions/Dispositions There were no dispositions during the first half of 2010.
As previously reported, during the quarter the Company purchased three properties with a total of 600 units in the Baltimore region for a combined $56.2 million. Acquisition costs of $0.62 million were included in other expenses in the second quarter of 2010.
In addition, on July 29, 2010, the Company acquired The Greens at Columbia, a 168-unit apartment community located in Columbia, Maryland for a total $25.6 million. The property is currently 94.0% occupied at monthly rents averaging $1,316. Consideration for the purchase included the assumption of a $9.6 million fixed-rate mortgage at 4.93% maturing in August 2014, with the balance paid in cash. The projected weighted average first year capitalization rate is 6.1% after allocating 3% of rental revenues for management and overhead expenses and before normalized capital expenditures. The property, built in 1986 and 1987, includes fourteen, three-story, brick, garden style buildings.
Also, on August 5, 2010, the Company acquired Village at Potomac Falls, a 247-unit apartment community located in Sterling, Virginia for a total purchase price of $38.5 million, which was paid in cash. The property is currently 96.6% occupied at monthly rents averaging $1,368. The expected weighted average first year capitalization rate is 5.6%. The garden style property, completed in 1999, consists of 10 three- and four-story buildings.
Acquisition costs of approximately $0.5 million for the two properties described above will be included in other expenses in the 2010 third quarter.
Year-to-date, the Company has purchased a total of five properties with 1,015 units for a combined price of $120.3 million.
Development
The Company has two projects currently under construction, 1200 East West Highway and The Courts at Huntington Station. At 1200 East West Highway in Silver Spring, Maryland, construction is substantially complete, and move-ins began in mid-March. As of August 5, 2010, 173 of the 247 units, or 70%, are leased. The Courts at Huntington Station is in Alexandria, Virginia, and construction of the 202 units in Phase One is expected to be completed during the third quarter of 2010. As of August 5, 2010, 99 of the 202 units, or 49%, are leased. Construction on Phase Two (219 units) has commenced and is scheduled to be complete in the second quarter of 2011, reaching stabilized occupancy a year later.
Capital Markets Activities
As of June 30, 2010, the Company's ratio of debt-to-total market capitalization was 50.9% (based on a June 30, 2010 stock price of $45.07 to determine equity value), with $9 million outstanding on its $175 million revolving credit facility and $8 million of unrestricted cash on hand. Total debt of $2.3 billion was outstanding, at rates of interest averaging 5.5% and with staggered maturities averaging approximately six years. Approximately 89% of total indebtedness is at fixed rates. Interest coverage for the quarter averaged 2.3 times, and the fixed charge ratio averaged 2.1 times.
The Company did not repurchase any of its common stock during the second quarter. As of June 30, 2010, 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 second quarter, the Company completed its At-the-Market (ATM) equity offering program, which resulted in the sale of a total of 3,178,700 common shares at an average price of $47.19 generating net proceeds of approximately $147.0 million. In the second quarter, the Company issued 865,500 shares of the total shares sold at an average price of $49.41 per share.
Outlook
For 2010, the Company has increased the midpoint of its prior guidance to $2.99 while tightening the range of FFO per share to $2.95 to $3.03 from $2.81 to $2.99. This guidance range reflects management's current assessment of economic and market conditions.
The quarterly breakdown for the balance of 2010 guidance on FFO per share results is as follows: Third quarter $0.73 to $0.77; fourth quarter $0.75 to $0.79.
Dividend Declared
The Company announced a regular cash dividend on the Company's common stock of $0.58 per share for the quarter ended June 30, 2010. The dividend is payable on August 26, 2010 to stockholders of record on August 16, 2010 and is equivalent to an annualized rate of $2.32 per share. The current annual dividend represents a 4.6% yield based on yesterday's closing price of $50.33. Home Properties' common stock will begin trading ex-dividend on August 12, 2010.
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 website through the "Investors" section, e-mail or facsimile upon request.
Second Quarter 2010 Earnings Conference Call
The Company will conduct a conference call and simultaneous webcast tomorrow at 11:00 AM ET 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 August 11, 2010, by dialing 800-633-8284 or 402-977-9140 and entering the passcode 21442492. 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 website homeproperties.com.
Third Quarter 2010 Conference/Event Schedule
Home Properties is scheduled to participate in the Barclays Capital 2010 Global Financial Services Conference on September 14 at the Sheraton New York in New York City, the BMO Capital Markets' 2010 North American Real Estate Conference September 15-17 at The Peninsula Hotel in Chicago, and in the Bank of America Merrill Lynch Global Real Estate Conference at the Grand Hyatt Hotel in New York City September 28.
In addition, Home Properties is hosting an investor meeting and property tour in Washington, D.C. on September 22, 2010. For all conference/events, any audio presentation, webcast and related materials will be available in the "Investors" section of Home Properties' website.
Third Quarter 2010 Earnings Release and Conference Call
The third quarter financial results are scheduled to be released after the stock market closes on Thursday, November 4, 2010. A conference call, which will be simultaneously webcast, is scheduled for Friday, November 5, 2010 at 11:00 AM ET and is accessible following the above instructions. The passcode for that replay will be 21442493.
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 and Mid-Atlantic markets. Currently, Home Properties operates 113 communities containing 38,019 apartment units. Of these, 37,151 units in 112 communities are owned directly by the Company and 868 units are partially owned and managed by the Company as general partner. For more information, visit Home Properties' website at homeproperties.com.
HOME PROPERTIES, INC. SUMMARY OF OCCUPANCY AND PROPERTY OPERATING RESULTS Avg. Physical Second Quarter 2Q 2Q 2010 vs. 2Q Results: Occupancy(a) 2010 2009 % Growth -------- ------------ ---- -------------- Average Monthly Base Rent / Rental Total Total 2Q 2Q Occ 2010 2009 Unit Rates Revenue Expense NOI ----- ----- ---- ----- ------- ------- --- Core Properties(b) 95.5% 95.0% $1,129 (1.0%) (0.2%) (2.4%) 1.3% Acquisition Properties(c) 50.4% NA $1,312 NA NA NA NA ---- --- ------ --- --- --- --- TOTAL PORTFOLIO 94.6% NA $1,131 NA NA NA NA Avg. Physical Year-To- Date YTD YTD 2010 vs. YTD Results: Occupancy(a) 2010 2009 % Growth -------- ------------ ---- ----------------- Average Monthly Base YTD YTD Rent / Rental Total Total Occ 2010 2009 Unit Rates Revenue Expense NOI ---- ---- ---- ----- ------- ------- --- Core Properties(b) 95.2% 94.6% $1,128 (1.2%) (0.4%) (0.6%) (0.2%) Acquisition Properties(c) 48.4% NA $1,326 NA NA NA NA ---- --- ------ --- --- --- --- TOTAL PORTFOLIO 94.7% NA $1,128 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 105 properties with 35,798 apartment units owned throughout 2009 and 2010. (c) Acquisition Properties consist of 5 properties with 931 apartment units acquired/developed subsequent to January 1, 2009. HOME PROPERTIES, INC. SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data - Unaudited) Three Months Ended Six Months Ended June 30 June 30 ------- ------- 2010 2009 2010 2009 ---- ---- ---- ---- Rental income $116,624 $116,125 $230,939 $231,500 Property other income 9,350 8,895 21,971 21,089 Interest income 7 6 11 14 Other income 23 90 77 368 --- --- --- --- Total revenues 126,004 125,116 252,998 252,971 ------- ------- ------- ------- Operating and maintenance 50,632 50,968 107,689 107,399 General and administrative 7,110 6,249 12,668 12,138 Interest 29,927 30,257 60,361 60,810 Depreciation and amortization 30,964 29,848 61,359 59,502 Other expenses 623 - 623 - --- --- --- --- Total expenses 119,256 117,322 242,700 239,849 ------- ------- ------- ------- Income from continuing operations 6,748 7,794 10,298 13,122 Discontinued operations Income (loss) from discontinued operations 33 504 5 (3,274) Gain (loss) on disposition of property (2) (16) (13) 13,493 --- --- --- ------ Discontinued operations 31 488 (8) 10,219 --- --- --- ------ Net income 6,779 8,282 10,290 23,341 Net income attributable to noncontrolling interest (1,611) (2,262) (2,485) (6,419) ------ ------ ------ ------ Net income attributable to common stockholders $5,168 $6,020 $7,805 $16,922 ====== ====== ====== ======= Reconciliation from net income attributable to common stockholders to Funds From Operations: Net income available to common stockholders $5,168 $6,020 $7,805 $16,922 Real property depreciation and amortization 30,245 29,629 59,968 59,050 Noncontrolling interest 1,611 2,262 2,485 6,419 (Gain) loss on disposition of property 2 16 13 (13,493) Loss from early extinguishment of debt in connection with sale of real estate - - - 4,927 --- --- --- ----- FFO - basic and diluted (1) $37,026 $37,927 $70,271 $73,825 ======= ======= ======= ======= (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, 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 Six Months Ended Ended June 30 June 30 ------- ------- 2010 2009 2010 2009 ---- ---- ---- ---- FFO - basic, diluted and Operating FFO (2) $37,026 $37,927 $70,271 $73,825 ======= ======= ======= ======= FFO - basic, diluted and Operating FFO $37,026 $37,927 $70,271 $73,825 Recurring non- revenue generating capital expenses (7,284) (7,278) (14,448) (14,605) Addback of non- cash interest expense 518 490 1,026 970 --- --- ----- --- AFFO (3) and Operating AFFO (2) (3) $30,260 $31,139 $56,849 $60,190 ======= ======= ======= ======= Weighted average shares/units outstanding: Shares - basic 36,795.3 32,868.8 35,894.1 32,777.0 Shares - diluted 37,247.2 32,919.4 36,304.3 32,811.4 Shares/units - basic (4) 48,283.2 45,227.0 47,350.3 45,211.3 Shares/units - diluted (4) 48,735.0 45,277.6 47,860.5 45,245.7 Per share/unit: Net income - basic $0.14 $0.18 $0.22 $0.52 Net income - diluted $0.14 $0.18 $0.21 $0.52 FFO - basic $0.77 $0.84 $1.48 $1.63 FFO - diluted (2) and Operating FFO $0.76 $0.84 $1.47 $1.63 AFFO (3) and Operating AFFO (2) (3) $0.62 $0.69 $1.19 $1.33 Common Dividend paid $0.58 $0.67 $1.16 $1.34 (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 per apartment unit in 2010 and 2009. Non-cash interest expense of the exchangeable senior notes in accordance with ASC 470-20 (formerly APB14-1) has been added back for 2010 and 2009. 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) June 30, December 2010 31, 2009 --------- -------- Land $526,478 $508,087 Construction in progress 177,622 184,617 Buildings, improvements and equipment 3,332,582 3,223,275 --------- --------- 4,036,682 3,915,979 Accumulated depreciation (793,652) (733,142) -------- -------- Real estate, net 3,243,030 3,182,837 Cash and cash equivalents 8,455 8,809 Cash in escrows 31,463 27,278 Accounts receivable 13,396 14,137 Prepaid expenses 11,280 16,783 Deferred charges 12,578 13,931 Other assets 6,385 4,259 ----- ----- Total assets $3,326,587 $3,268,034 ========== ========== Mortgage notes payable $2,136,742 $2,112,645 Exchangeable senior notes 137,162 136,136 Line of credit 9,000 53,500 Accounts payable 20,121 19,695 Accrued interest payable 10,680 10,661 Accrued expenses and other liabilities 29,526 27,989 Security deposits 19,507 19,334 ------ ------ Total liabilities 2,362,738 2,379,960 Common stockholders' equity 734,847 661,112 Noncontrolling interest 229,002 226,962 ------- ------- Total equity 963,849 888,074 ------- ------- Total liabilities and equity $3,326,587 $3,268,034 ========== ========== Total shares/ units outstanding: Common stock 37,481.4 34,655.4 Operating partnership units 11,532.8 11,734.6 -------- -------- 49,014.2 46,390.0 ======== ========
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/
