FFO Per Share Exceeds Wall Street's Mean Estimate by Four Cents
ROCHESTER, N.Y., Aug. 6 /PRNewswire-FirstCall/ -- Home Properties
(NYSE: HME) today released financial results for the second quarter
ending June 30, 2009. All results are reported on a diluted basis.
"Despite pressure on rental revenue, the Company's focus on cost
cutting contributed to Funds From Operations that was four cents
higher than both our own and analysts' expectations for the second
quarter," said Edward J. Pettinella, Home Properties President and
CEO. "Our ongoing focus on expenses will enable Home Properties to
outperform the sector as we did in the last recession." Earnings
per share ("EPS") for the quarter ended June 30, 2009 was $0.18,
compared to $0.26 for the quarter ended June 30, 2008. The $0.08
decrease in EPS is primarily attributable to a $2.9 million
decrease in income from continuing operations combined with a $0.8
million decrease in income from discontinued operations. EPS for
the six months ended June 30, 2009 was $0.52, compared to $1.05 for
the six months ended June 30, 2008. The year-over-year decrease of
$0.53 per share is primarily attributable to a $16.3 million
decrease in gain on disposition of property. The sale of seven
properties in the first quarter of 2008 produced a gain of $29.8
million. Three properties were sold in the first quarter of 2009
for a gain of $13.5 million. For the quarter ended June 30, 2009,
Funds From Operations ("FFO") was $37.9 million, or $0.84 per
share, compared to $40.2 million, or $0.89 per share, for the
quarter ended June 30, 2008. Second quarter 2009 FFO of $0.84 per
share was $0.04 above both the midpoint of the guidance range
provided by management and analysts' mean estimate, as reported by
Thomson, and equates to a 5.4% decrease from the prior year. FFO
for the six months ended June 30, 2009 was $1.63 per share,
compared to $1.66 in the year-ago period. 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 2009, same-property comparisons (for 104 "Core"
properties containing 35,360 apartment units owned since January 1,
2008) reflected a decrease in total revenues of 0.2% compared to
the same quarter a year ago. Net operating income ("NOI") decreased
by 1.4% from the second quarter of 2008. Property level operating
expenses increased by 1.7% for the quarter, primarily due to
increases in repairs and maintenance and personnel, which were
partially offset by a reduction in insurance, natural gas heating
costs and property management general and administrative costs.
Average physical occupancy for the Core properties was 95.1% during
the second quarter of 2009, compared to 95.0% during the second
quarter of 2008. Average monthly rental rates increased 0.6%
compared to the year-ago period. On a sequential basis, compared to
the 2009 first quarter results for the Core properties, base rental
revenue (excluding utility reimbursement) was up 0.7% in the second
quarter of 2009, expenses were down 9.8%, and net operating income
was up 3.8%. Average physical occupancy increased 0.7% to 95.1%,
and total revenue, including utility reimbursements, was 2.1%
lower. 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 represented
typical seasonality from lower natural gas and snow removal costs
realized between the first and second quarters. Physical occupancy
for the 1,029 net apartment units acquired/developed between
January 1, 2008 and June 30, 2009 (the "Recently Acquired
Communities") averaged 92.0% during the second quarter of 2009, at
average monthly rents of $1,174. Year-to-Date Operating Results For
the six months ended June 30, 2009, same-property comparisons for
the Core properties reflected an increase in total revenue of 0.7%
and expenses of 2.2%, resulting in a 0.4% decrease in net operating
income compared to the first six months of 2008. Property level
operating expenses increased primarily due to increases in repairs
and maintenance, personnel and real estate taxes, which were
partially offset by a reduction in advertising, property insurance
and property management general and administrative costs. Average
physical occupancy for the Core properties was 94.7% during the
first six months of 2009, down from 95.0% a year ago, with average
monthly base rents rising 1.2%. Acquisitions/Dispositions There
were no acquisitions during the second quarter of 2009, and there
are currently no plans to acquire properties for the remainder of
the year. Capital Markets Activities As of June 30, 2009, the
Company's ratio of debt-to-total market capitalization was 59.9%
(based on a June 30, 2009 stock price of $34.10 to determine equity
value), with $104 million outstanding on its $140 million revolving
credit facility and $6.5 million of unrestricted cash on hand.
Based on yesterday's closing stock price of $40.76, the price level
at which the Company's stock has been trading more recently, the
debt-to-total market capitalization would be 55.6%. Total debt of
$2.3 billion was outstanding, at rates of interest averaging 5.4%
and with staggered maturities averaging approximately six years.
Approximately 93% of total indebtedness is at fixed rates. Interest
coverage averaged 2.3 times during the quarter, and the fixed
charge ratio averaged 2.1 times for the quarter. The Company did
not repurchase any of its common shares during the second quarter.
As of June 30, 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. Outlook For 2009, the Company has
reconfirmed the $3.16 midpoint of its guidance while tightening the
range to $3.10 to $3.22 per share from $3.07 and $3.25. This
conservative guidance range reflects management's current
assessment of economic and market conditions for the balance of the
year. The quarterly breakdown for the balance of 2009 guidance on
FFO per share results is as follows: Third quarter $0.74 to $0.80;
fourth quarter $0.73 to $0.79. Dividend Declared On August 5, 2009,
Home Properties declared a regular cash dividend on the Company's
common shares of $0.67 per share for the quarter ended June 30,
2009. The cash dividend is payable on August 26, 2009 to
shareholders of record on August 17, 2009 and is equivalent to an
annualized rate of $2.68 per share. The current annual dividend
represents a 6.6% yield based on yesterday's closing price of
$40.76. Home Properties' common stock will begin trading
ex-dividend on August 13, 2009. 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.
Second Quarter 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
800-954-0647 (International 212-231-2901). An audio replay of the
call will be available through August 11, 2009, by dialing
800-633-8284 or 402-977-9140 and entering the passcode 21412430.
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 its Web site,
http://www.homeproperties.com/. Third Quarter 2009 Earnings Release
and Conference Call The third quarter financial results are
scheduled to be released after the stock market closes on Thursday,
November 5, 2009. A conference call, which will be simultaneously
webcast, is scheduled for Friday, November 6, at 11:00 AM Eastern
Time and is accessible following the above instructions. The
passcode for that replay will be 21412431. Third Quarter 2009
Conference/Event Schedule Home Properties is scheduled to
participate in BMO Capital Markets' 2009 North American Real Estate
Conference, September 9-11 at the Ritz-Carlton Hotel in Chicago and
in the Bank of America Merrill Lynch Conference in New York City
September 30 and October 1. The Company's President and Chief
Executive Officer, Edward Pettinella, will participate on a panel
at each conference. Details on how to access the presentation and
related materials are available at http://www.homeproperties.com/
in the "Investors" section. 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 109 communities
containing 37,539 apartment units. Of these, 36,389 units in 107
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 http://www.homeproperties.com/. Second
Avg. Quarter Physical 2Q 2Q 2009 vs. 2Q Results: Occupancy(a) 2009
2008 % Growth ----------- ----------- -- -------------- Average
Monthly Rent/ Base 2Q 2Q Occ Rental Total Total 2009 2008 Unit
Rates Revenue Expense NOI -- -- ---- ----- ------- ------- --- Core
Properties(b) 95.1% 95.0% $1,135 0.6% -0.2% 1.7% -1.4% Acquisition
Properties(c) 92.0% NA $1,174 NA NA NA NA ----- -- ------ -- -- --
-- TOTAL PORTFOLIO 95.0% NA $1,135 NA NA NA NA Year-To Avg. -Date
Physical YTD YTD '09 vs. YTD Results: Occupancy(a) '09 '08 % Growth
----------- ----------- -- -------------- Average Monthly Rent/
Base YTD YTD Occ Rental Total Total '09 '08 Unit Rates Revenue
Expense NOI -- -- ---- ----- ------- ------- --- Core Properties(b)
94.7% 95.0% $1,136 1.2% 0.7% 2.2% -0.4% Acquisition Properties(c)
91.4% NA $1,172 NA NA NA NA ----- -- ------ -- -- -- -- TOTAL
PORTFOLIO 94.6% NA $1,136 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 includes 104 properties with 35,360 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 Six Months Ended June 30
June 30 ------- ------- 2009 2008 2009 2008 ---- ---- ---- ----
$117,538 $114,034 $234,299 $226,971 Rental income Property other
income 8,980 9,946 21,424 21,658 Interest income 6 19 14 139 Other
income 90 86 368 278 -- -- --- --- Total revenues 126,614 124,085
256,105 249,046 ------- ------- ------- ------- Operating and
maintenance 51,612 49,691 108,775 103,806 General and
administrative 6,249 6,620 12,138 12,838 Interest 30,257 28,795
60,810 58,813 Depreciation and amortization 30,243 27,842 60,290
55,316 ------ ------ ------ ------ Total expenses 118,361 112,948
242,013 230,773 ------- ------- ------- ------- Income from
continuing operations 8,253 11,137 14,092 18,273 Discontinued
operations Income (loss) from operations 45 867 (4,244) 219 Gain
(loss) on disposition of property (16) (1) 13,493 29,848 ---- ---
------ ------ Discontinued operations 29 866 9,249 30,067 -- ---
----- ------ Net income 8,282 12,003 23,341 48,340 Net income
attributable to noncontrolling interest (2,262) (3,552) (6,419)
(14,237) ------- ------- ------- -------- Net income available to
common shareholders $6,020 $8,451 $16,922 $34,103 ====== ======
======= ======= Reconciliation from net income available to common
shareholders to Funds From Operations: Net income available to
common shareholders $6,020 $8,451 $16,922 $34,103 Real property
depreciation and amortization 29,629 28,207 59,050 56,158
Noncontrolling interest 2,262 3,552 6,419 14,237 (Gain) loss on
disposition of property, net of noncontrolling interest 16 1
(13,493) (29,848) Loss from early extinguishment of debt in
connection with sale of real estate - - 4,927 1,384 ------- -------
----- ----- FFO - basic and diluted (1) $37,927 $40,211 $73,825
$76,034 ======= ======= ======= ======= (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
Six Months Ended June 30 June 30 ------- ------- 2009 2008 2009
2008 ---- ---- ---- ---- $37,927 $40,211 $73,825 $76,034 FFO -
basic, diluted and ======= ======= ======= ======= Operating (2)
FFO - basic, diluted and Operating (2) $37,927 $40,211 $73,825
$76,034 Recurring non-revenue generating capital expenses (7,278)
(7,197) (14,605) (14,437) ------- ------- -------- -------- AFFO
(3) $30,649 $33,014 $59,220 $61,597 ======= ======= ======= =======
Weighted average shares/units outstanding: Shares - basic 32,868.8
31,642.0 32,777.0 31,927.9 Shares - diluted 32,919.4 32,111.8
32,811.4 32,342.1 Shares/units - basic(4) 45,227.0 44,960.3
45,211.3 45,306.7 Shares/units - diluted(4) 45,277.6 45,430.2
45,245.7 45,720.8 Per share/unit: Net income - basic $0.18 $0.27
$0.52 $1.07 Net income - diluted $0.18 $0.26 $0.52 $1.05 FFO -
basic $0.84 $0.89 $1.63 $1.68 FFO - diluted and Operating (2) $0.84
$0.89 $1.63 $1.66 AFFO and Operating AFFO (2) (3) $0.68 $0.73 $1.31
$1.35 Common Dividend paid $0.67 $0.66 $1.34 $1.32 (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. 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 31, 2009 2008 ---- ---- Land $511,404 $515,610
Construction in progress, including land 146,301 111,039 Buildings,
improvements and equipment 3,219,647 3,245,741 --------- ---------
3,877,352 3,872,390 Accumulated depreciation (684,663) (636,970)
--------- --------- Real estate, net 3,192,689 3,235,420 Cash and
cash equivalents 6,473 6,567 Cash in escrows 28,418 27,904 Accounts
receivable 11,568 14,078 Prepaid expenses 11,174 16,277 Deferred
charges 9,660 11,360 Other assets 3,667 5,488 ----- ----- Total
assets $3,263,649 $3,317,094 ========== ========== Mortgage notes
payable $2,067,698 $2,112,331 Exchangeable senior notes 135,138
134,169 Line of credit 104,000 71,000 Accounts payable 20,921
23,731 Accrued interest payable 10,770 10,845 Accrued expenses and
other liabilities 26,909 32,043 Security deposits 20,773 21,443
------ ------ Total liabilities 2,386,209 2,405,562 Stockholders'
equity 636,500 650,778 Noncontrolling interest 240,940 260,754
------- ------- Total equity 877,440 911,532 ------- ------- Total
liabilities and equity $3,263,649 $3,317,094 ========== ==========
Total shares/units outstanding: Common stock 33,040.3 32,431.3
Operating partnership units 12,336.3 12,821.2 -------- --------
45,376.6 45,252.5 ======== ======== DATASOURCE: Home Properties
CONTACT: David P. Gardner, Executive Vice President and Chief
Financial Officer, +1-585-246-4113; Charis W. Warshof, Vice
President, Investor Relations, +1-585-295-4237 Web Site:
http://www.homeproperties.com/
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