FFO Per Share Exceeds Wall Street's Mean Estimate by Three Cents
ROCHESTER, N.Y., Nov. 5 /PRNewswire-FirstCall/ -- Home Properties
(NYSE: HME) today released financial results for the third quarter
ending September 30, 2009. All results are reported on a diluted
basis. "Home Properties exceeded both internal and street
expectations for Funds From Operations in the third quarter,
reflecting the stability of our solid geographic markets and
middle-market apartment properties, even in a challenging operating
environment," said Edward J. Pettinella, President and CEO. "Our
number one ranking in same-unit net operating income growth in the
apartment sector results from a continued focus on managing rents
to optimize occupancy and revenue, while also controlling costs and
refining operations to ensure excellent future results despite
continued weakness in the economy." Earnings per share ("EPS") for
the quarter ended September 30, 2009 was $0.16, compared to $0.21
for the quarter ended September 30, 2008. The $0.05 decrease in EPS
is primarily attributable to a generally weaker operating
environment. EPS for the nine months ended September 30, 2009 was
$0.67, compared to $1.27 for the nine months ended September 30,
2008. The year-over-year decrease of $0.60 per share is primarily
attributable to a $21.8 million decrease in income from
discontinued operations, of which $16.4 million was due to a
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. The $5.4 million balance of the $21.8
million decrease in income from discontinued operations included
$4.7 million attributable to prepayment penalties incurred as a
result of the sale of the 2009 properties. For the quarter ended
September 30, 2009, Funds From Operations ("FFO") was $37.0
million, or $0.81 per share, compared to $38.3 million, or $0.84
per share, for the quarter ended September 30, 2008. Third quarter
2009 FFO of $0.81 per share was $0.04 above the midpoint of the
guidance range provided by management and $0.03 above analysts'
mean estimate, as reported by Thomson, and equates to a 3.2%
decrease from the prior year. FFO for the nine months ended
September 30, 2009 was $2.45 per share, compared to $2.50 in the
year-ago period. A reconciliation of GAAP net income to FFO is
included in the financial data accompanying this news release.
Third Quarter Operating Results For the third 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 0.5% from the
third quarter of 2008. Property level operating expenses increased
by 0.2% for the quarter, primarily due to increases in personnel
costs and real estate taxes, which were partially offset by a
reduction in natural gas heating costs, repairs and maintenance,
property insurance and property management G&A costs. Average
physical occupancy for the Core properties was 95.1% during the
third quarter of 2009, compared to 95.0% during the third quarter
of 2008. Average monthly rental rates decreased 0.5% compared to
the year-ago period to $1,132. On a sequential basis, compared to
the 2009 second quarter results for the Core properties, total
revenue was down 0.3% in the third quarter of 2009, expenses were
up 0.6%, and net operating income was down 0.9%. Average physical
occupancy remained steady at 95.1%. Physical occupancy for the
1,029 net apartment units acquired/developed between January 1,
2008 and September 30, 2009 (the "Recently Acquired Communities")
averaged 93.3% during the third quarter of 2009, at average monthly
rents of $1,166. Year-to-Date Operating Results For the nine months
ended September 30, 2009, same-property comparisons for the Core
properties reflected an increase in total revenue of 0.4% and
expenses of 1.5%, resulting in a 0.4% decrease in net operating
income compared to the first nine 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 G&A costs. Average physical occupancy
for the Core properties was 94.9% during the first nine months of
2009, down from 95.0% a year ago, with average monthly base rents
rising 0.6%. Dispositions Subsequent to the end of the quarter, on
October 1, 2009, the Company sold a property located in the
Philadelphia region with a total of 432 units for $30.0 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 cap rate projected on this disposition is 8.4% (after a
3% management fee but before allowance for capital expenditures).
Capital Markets Activities As of September 30, 2009, the Company's
ratio of debt-to-total market capitalization was 54.6% (based on a
September 30, 2009 stock price of $43.09 to determine equity
value), with $71.5 million outstanding on its $175.0 million
revolving credit facility and $6.9 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 93.0% of total indebtedness
is at fixed rates. Interest coverage averaged 2.2 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 third quarter. As of September 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 increased its guidance based only on higher third
quarter results compared to the prior range of guidance and now
expects FFO per share to be between $3.18 and $3.24 per share
versus the previous range of $3.10 to $3.22. This guidance range
reflects management's current assessment of economic and market
conditions for the balance of the year. The guidance for the
balance of 2009 is reaffirmed without change, with the fourth
quarter range expected to be $0.73 to $0.79 per share. 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. Third 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 November 12, 2009, by dialing
800-633-8284 or 402-977-9140 and entering the passcode 21412431.
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/. Fourth Quarter and Year End 2009
Earnings Release and Conference Call The fourth quarter and year
end financial results are scheduled to be released after the stock
market closes on Thursday, February 18, 2010. A conference call,
which will be simultaneously webcast, is scheduled for Friday,
February 19, 2010 at 11:00 AM Eastern Time and is accessible
following the above instructions. The passcode for that replay will
be 21442490. Fourth Quarter 2009 Conference/Event Schedule Home
Properties' President and CEO, Edward J. Pettinella, is scheduled
to participate in the NAREIT Annual Conference November 11-13,
2009. He is also scheduled to give presentations at the FBR Capital
Markets 2009 Fall Investor Conference on December 2 and at the
Wells Fargo 13th Annual Global Real Estate Securities Conference on
December 9. Both presentations will be webcast live. Details on how
to access presentation and related materials will be 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 108 communities
containing 37,107 apartment units. Of these, 35,957 units in 106
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/. Tables
to follow. HOME PROPERTIES, INC. SUMMARY OF OCCUPANCY AND PROPERTY
OPERATING RESULTS Third Quarter Avg. Physical Results: Occupancy(a)
3Q 2009 3Q 2009 vs. 3Q 2008 % Growth ------------- ------------
------- -------------------------------- Average Monthly Rent/ Base
3Q 3Q Occ Rental Total Total 2009 2008 Unit Rates Revenue Expense
NOI ---- ---- -------- ------ ------- ------- --- Core
Properties(b) 95.1% 95.0% $1,132 (0.5%) (0.2%) 0.2% (0.5%)
Acquisition Properties(c) 93.3% NA $1,166 NA NA NA NA ---- ----
-------- ------ ------- ------- --- TOTAL PORTFOLIO 95.1% NA $1,132
NA NA NA NA Year-To-Date Avg. Physical Results: Occupancy(a) YTD
'09 YTD '09 vs. YTD '08 % Growth ------------- ------------ -------
-------------------------------- Average Monthly Base Rent / Rental
Total Total YTD '09 YTD '08 Occ Unit Rates Revenue Expense NOI
------- ------- -------- ------ ------- ------- --- Core
Properties(b) 94.9% 95.0% $1,135 0.6% 0.4% 1.5% (0.4%) Acquisition
Properties(c) 92.1% NA $1,170 NA NA NA NA ---- ---- -------- ------
------- ------- --- TOTAL PORTFOLIO 94.8% NA $1,135 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 Nine Months
Ended September 30 September 30 ------------ ------------ 2009 2008
2009 2008 ---- ---- ---- ---- Rental income $116,996 $114,791
$351,296 $341,762 Property other income 9,288 8,982 30,711 30,640
Interest income 4 20 18 159 Other income 29 30 397 308 -- -- ---
--- Total revenues 126,317 123,823 382,422 372,869 ------- -------
------- ------- Operating and maintenance 51,959 50,998 160,734
154,805 General and administrative 6,102 5,948 18,240 18,786
Interest 30,772 29,936 91,582 88,749 Depreciation and amortization
30,319 28,292 90,609 83,607 ------ ------ ------ ------ Total
expenses 119,152 115,174 361,165 345,947 ------- ------- -------
------- Income from continuing operations 7,165 8,649 21,257 26,922
Discontinued operations Income (loss) from discontinued operations
77 1,008 (4,167) 1,227 Gain (loss) on disposition of property (22)
- 13,471 29,848 ---- --- ------ ------ Discontinued operations 55
1,008 9,304 31,075 -- ----- ----- ------ Net income 7,220 9,657
30,561 57,997 Net income attributable to noncontrolling interest
(1,956) (2,818) (8,375) (17,055) ------- ------- ------- --------
Net income attributable to common shareholders $5,264 $6,839
$22,186 $40,942 ====== ====== ======= ======= Reconciliation from
net income attributable to common shareholders to Funds From
Operations: Net income available 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 (Gain) loss on disposition of property 22 - (13,471)
(29,848) Loss from early extinguishment of debt in connection with
sale of real estate - - 4,927 1,384 ------- ------- -------
-------- FFO - basic and diluted (1) $36,954 $38,323 $110,780
$114,357 ======= ======= ======== ======== (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
Nine Months Ended September 30 September 30 ------------
------------ 2009 2008 2009 2008 ---- ---- ---- ---- FFO - basic,
diluted and Operating (2) $36,954 $38,323 $110,780 $114,357 =======
======= ======== ======== FFO - basic, diluted and Operating (2)
$36,954 $38,323 $110,780 $114,357 Recurring non-revenue generating
capital expenses (7,278) (7,202) (21,882) (21,638) ------- -------
-------- -------- AFFO (3) $29,676 $31,121 $88,898 $92,719 =======
======= ======= ======= Weighted average shares/units outstanding:
Shares - basic 32,972.8 31,884.1 32,841.8 31,914.7 Shares - diluted
33,091.8 32,395.0 32,905.7 32,357.4 Shares/units - basic (4)
45,243.0 45,049.0 45,220.8 45,221.7 Shares/units - diluted (4)
45,361.9 45,559.9 45,284.7 45,664.3 Per share/unit: Net income -
basic $0.16 $0.21 $0.68 $1.28 Net income - diluted $0.16 $0.21
$0.67 $1.27 FFO - basic $0.82 $0.85 $2.45 $2.53 FFO - diluted and
Operating (2) $0.81 $0.84 $2.45 $2.50 AFFO and Operating AFFO
(2)(3) $0.65 $0.68 $1.96 $2.03 Common Dividend paid $0.67 $0.66
$2.01 $1.98 (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) September 30, December 31, 2009 2008
--------- --------- 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 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
========== ========== 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 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 ========== ========== Total shares/units
outstanding: Common stock 33,488.8 32,431.3 Operating partnership
units 11,895.5 12,821.2 -------- -------- 45,384.3 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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