SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
August 5, 2005
HOME PROPERTIES, INC.
(Exact name of Registrant as specified in its Charter)
MARYLAND 1-13136 No. 16-1455126
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
850 Clinton Square, Rochester, New York 14604
www.homeproperties.com
(Address of principal executive offices and internet site)
(585) 546-4900
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
HOME PROPERTIES, INC.
CURRENT REPORT
ON FORM 8-K
Item 2.01. Completion of Acquisition and Disposition of Assets
--------------------------------------------------------------
Home Properties, Inc. (the "Company") conducts its business through Home
Properties, L.P., a New York limited partnership (the "Operating Partnership").
During 2004, the Operating Partnership purchased the following 10 apartment
communities (referred to herein as the "Acquisition Properties") in six
unrelated transactions. The aggregate purchase price of the six transactions
exceeded 10% of the total assets of the registrant. None of these six
acquisition transactions constitute a "significant subsidiary", and the
communities were not acquired from a related party.
Community Acquisition Date
--------- ----------------
Chatham Hill(1) January 30, 2004
Northwood Apartments(1) January 30, 2004
Fairmount Apartments(1) January 30, 2004
Kensington Apartments(1) January 30, 2004
The Apartments at Wellington Trace March 2, 2004
The Village at Marshfield March 17, 2004
Woodleaf Apartments March 19, 2004
The Hamptons(2) July 7, 2004
The Vinings at Hampton Village(2) July 7, 2004
Regency Club September 24, 2004
Nodar Properties. On January 30, 2004, the Operating Partnership acquired four
apartment communities totaling 534 units in New Jersey (noted with an (1) above)
from one seller pursuant to a single purchase agreement (referred to herein as
the "Nodar Properties"). The combined purchase price of the portfolio of $64.2
million was funded by $34 million of assumed mortgage debt, $18.3 from the
Company's line of credit, and the issuance of $11.9 million in Operating
Partnership Units ("OP Units") in the Operating Partnership. The mortgages have
variable and fixed interest rates of 3.78% and 7.03%, respectively, and mature
on July 1, 2008.
The Apartments at Wellington Trace. On March 2, 2004, the Operating Partnership
acquired The Apartments at Wellington Trace with a total of 240 units located in
Frederick, Maryland. Consideration for the $29.5 million purchase price was
funded by the Company's line of credit.
The Village at Marshfield. On March 17, 2004, the Operating Partnership acquired
The Village at Marshfield with a total of 276 units located in Marshfield,
Massachusetts. Consideration for the $27.0 million purchase price included $19.8
million of assumed mortgage debt and $7.2 million from the Company's line of
credit. The mortgage has a fixed interest rate of 7.85% and matures in 2042.
Woodleaf Apartments. On March 19, 2004, the Operating Partnership acquired
Woodleaf Apartments with a total of 228 units located in Silver Spring,
Maryland. Consideration for the $20.0 million purchase price included
$7.6 million of assumed mortgage debt and $12.4 million from the Company's line
of credit. The mortgage has a fixed interest rate of 5.9% and matures in 2027.
The Hamptons. On July 7, 2004, , the Operating Partnership acquired two
apartment communities totaling 836 units in North Lauderdale, Florida (noted
with an (2) above) from one seller pursuant to a single purchase agreement
(referred to herein as "The Hamptons"). Consideration for the $70.4 million
purchase price included $56 million in a variable rate Fannie Mae Discount
Mortgage Backed Security ("DMBS") and $14.4 from the Company's line of credit.
The DMBS has an initial interest rate of 2.4%, inclusive of the rate cap,
adjusts every 90 days and matures in 2014.
Regency Club Apartments. On September 24, 2004, the Operating Partnership
acquired Regency Club Apartments with a total of 372 units located in Jackson,
New Jersey. Consideration for the $36.4 million purchase price included $19.5
million of assumed mortgage debt and $16.9 from the Company's line of credit.
The mortgages have a weighted average interest rate of 6.03% and mature in 2012.
The Apartments at Wellington Trace, The Hamptons and Regency Club Apartments are
collectively referred to herein as the "Selected Acquisition Properties". These
acquisition properties make up 50% of the Acquisition Properties and were
selected for audit under Rule 3-14 of Regulation S-X.
In determining the price paid for the Acquisition Properties, the Company
considered the historical and expected cash flow from the properties, the nature
of the occupancy trends and terms of the leases in place, current operating
costs and taxes, the physical condition of the properties, the potential to
increase their cash flow and other factors. The Company also considered the
capitalization rates at which it believes apartment properties have recently
sold in the market, but determined the prices it was willing to pay for the
properties primarily based on the factors discussed above. No independent
appraisals were performed in connection with the acquisitions. The Company,
after investigation of the properties, is not aware of any material factors,
other than those enumerated above, that would cause the financial information
reported not to be necessarily indicative of future expected operating results.
In addition, the Company sold the following five apartment communities during
2004 (referred to herein as the "Sale Properties"). These dispositions were not
deemed to be "significant" and are reported herein for informational purposes
only. In addition, all of the Sale Properties were classified as discontinued
operations for the year ended December 31, 2004.
Community Disposition Date
--------- ----------------
Northgate Manor Apartments June 10, 2004
Maple Lane Apartments July 30, 2004
Apple Hill Apartments December 23, 2004
Parkview Gardens December 29, 2004
Golfview Apartments December 29, 2004
Northgate Manor Apartments - On June 10, 2004, the Company completed the sale of
Northgate Manor Apartments. The 224-unit community located in Rochester, New
York was sold for $9.3 million.
Maple Lane Apartments - On July 30, 2004, the Company completed the sale of
Maple Lane Apartments. The 396-unit community located in South Bend, Indiana was
sold for $17.5 million.
Apple Hill Apartments - On December 23, 2004, the Company completed the sale of
Apple Hill Apartments. The 498-unit community located in Hamden, Connecticut was
sold for $48.1 million.
Parkview Gardens - On December 29, 2004, the Company completed the sale of
Parkview Gardens. The 484-unit community located in Detroit, Michigan was sold
for $16 million.
Golfview Apartments - On December 29, 2004, the Company completed the sale of
Golfview Apartments. The 44-unit community located in Detroit, Michigan was sold
for $1.5 million.
Item 9.01. Financial Statements and Exhibits.
---------------------------------------------
a. Financial statements of businesses acquired:
(1) Unaudited statements of revenue and certain expenses for the Hamptons
and Regency Club Apartments for the period January 1, 2004 through the
latest interim period prior to the date of acquisition.
(2) Audited statements of revenue and certain expenses for the year ended
December 31, 2003 for each of the Selected Acquisition Properties.
None of the Acquisition Properties constitute a "significant subsidiary"
pursuant to the Regulation S-X rules. Audited statements of revenue and
certain expenses for the year ended December 31, 2003 and related unaudited
financial information for the period through the acquisition date or the
Company's appropriate quarterly reporting period are presented herein only
for the Selected Acquisition Properties, which represent a majority of the
Acquisition Properties.
b. Pro forma financial information:
(1) Pro forma condensed consolidated statement of operations of the
Company for the year ended December 31, 2004.
(2) Notes to the pro forma consolidated statement of operations of the
Company for the year ended December 31, 2004.
(3) Estimated twelve-month pro forma statement of taxable net operating
income and operating funds available.
c. Exhibits
Exhibit 23.0 Consent of PricewaterhouseCoopers LLP
Report of Independent Auditors
------------------------------
To the Board of Directors and Shareholders of
Home Properties, Inc.:
We have audited the accompanying Statement of Revenue and Certain Expenses of
The Apartments at Wellington Trace, Frederick, Maryland, (the "Property") for
the year ended December 31, 2003. This Statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
Statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the Statement is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the Form 8-K of Home Properties, Inc.) as described in Note 2 and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the revenue and certain expenses described in Note 2 of The Apartments
at Wellington Trace for the year ended December 31, 2003, in conformity with
accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 23, 2005
The Apartments at Wellington Trace
Statement of Revenue and Certain Expenses
(In thousands)
--------------
For the Year Ended
December 31, 2003
-----------------
Revenue:
Rental income $2,076
Other income 73
------
2,149
------
Expenses:
Operating and maintenance 906
Real estate taxes 180
------
1,086
------
Revenue in excess of expenses $1,063
======
The accompanying notes are an integral part of these financial statements.
The Apartments at Wellington Trace
Notes to Statement of Revenue and Certain Expenses
For the Year Ended December 31, 2003
--------------------------------------------------------------------------------
1. OPERATIONS OF PROPERTIES
The accompanying statement of revenue and certain expenses includes the
operations (see "Basis of Presentation" below) of The Apartments at
Wellington Trace, a residential property ("the Property") formerly owned
and managed by parties not related to Home Properties, Inc. (the
"Company").
On March 2, 2004, the Company, through its subsidiary Home Properties,
L.P., acquired the Property. The Property is a residential development
located in Frederick, Maryland.
Total consideration for the acquisition was $29.5 million, which was funded
through the use of the Company's line of credit.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying statement has been prepared on the accrual basis of
accounting.
The accompanying statement is not representative of the actual operations
of the Property for the periods presented. As required by the Securities
and Exchange Commission, Regulation S-X, Rule 3-14, certain expenses, which
may not be comparable to the proposed future operations of the Property
have been excluded. Expenses excluded relate to property management fees,
interest expense, depreciation and amortization expense, and other expenses
unrelated to the future operations of the Property. The Company is not
aware of any material factors relating to the Property that would cause the
reported financial information not to be necessarily indicative of future
operating results.
Real Estate
-----------
Expenditures for repairs and maintenance items are expensed as incurred.
Costs related to the acquisition and improvement of the Property and
related assets are capitalized.
Revenue Recognition
-------------------
Rental income attributable to residential leases is recorded when due from
residents. Leases are generally for terms of one year.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Other Income
------------
Other income is attributable to real estate service fees and is recorded
when due from residents. The real estate service fees include late charges,
lease breakage fees, application fees, pet charges and other amenities.
Real Estate Taxes
-----------------
Real estate taxes are expensed over the period in which the taxes relate.
Report of Independent Registered Public Accounting Firm
-------------------------------------------------------
To the Board of Directors and Shareholders of
Home Properties, Inc.:
We have audited the accompanying Combined Statement of Revenue and Certain
Expenses of The Hamptons, North Lauderdale, Florida, (the "Property") for the
year ended December 31, 2003. This Statement is the responsibility of the
Property's management. Our responsibility is to express an opinion on this
Statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Statement
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the Form 8-K of Home Properties, Inc.) as described in Note 2 and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the revenue and certain expenses described in Note 2 of The Hamptons
for the year ended December 31, 2003, in conformity with accounting principles
generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 23, 2005
The Hamptons
Combined Statement of Revenue and Certain Expenses
(In thousands)
-------------------------------------------------------------------------------
For the Six Months Ended
June 30,
For the Year Ended 2004
December 31, 2003 (unaudited)
----------------- -----------
Revenue:
Rental income $7,455 $3,774
Other income 507 261
------ ------
7,962 4,035
------ ------
Expenses:
Operating and maintenance 1,901 960
Real estate taxes 1,091 577
------ ------
2,992 1,537
------ ------
Revenue in excess of expenses $4,970 $2,498
====== ======
The accompanying notes are an integral part of these financial statements.
The Hamptons
Notes to the Combined Statements of Revenue and Certain Expenses
For the Year Ended December 31, 2003 and the Six Months Ended
June 30, 2004 (Unaudited)
-------------------------------------------------------------------------------
1. OPERATIONS OF PROPERTIES
The accompanying combined statements of revenue and certain expenses
includes the operations (see "Basis of Presentation" below) of the Hamptons
and the Vinings at Hampton Village, residential properties ("The Hamptons")
formerly owned and managed by parties not related to Home Properties, Inc.
(the "Company").
On July 7, 2004, the Company, through its subsidiary Home Properties, L.P.,
acquired The Hamptons. The Hamptons is a residential development located in
North Lauderdale, Florida.
Total consideration for the acquisition was $70.4 million, which was funded
through $56 million in a variable rate Fannie Mae Discount Mortgage Backed
Security ("DMBS") and $14.4 million from the Company's line of credit. The
DMBS has an initial interest rate of 2.4%, inclusive of the rate cap,
adjusts every 90 days and matures in July 2014.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying combined statements have been prepared on the accrual
basis of accounting.
The accompanying combined statements are not representative of the actual
operations of The Hamptons for the periods presented. As required by the
Securities and Exchange Commission, Regulation S-X, Rule 3-14, certain
expenses, which may not be comparable to the proposed future operations of
The Hamptons have been excluded. Expenses excluded relate to property
management fees, interest expense, depreciation and amortization expense,
and other expenses unrelated to the future operations of The Hamptons. The
Company is not aware of any material factors relating to The Hamptons that
would cause the reported financial information not to be necessarily
indicative of future operating results.
Real Estate
-----------
Expenditures for repairs and maintenance items are expensed as incurred.
Costs related to the acquisition and improvement of The Hamptons and
related assets are capitalized.
Revenue Recognition
-------------------
Rental income attributable to residential leases is recorded when due from
residents. Leases are generally for terms of one year.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Other Income
------------
Other income is attributable to real estate service fees and is recorded
when due from residents. The real estate service fees include late charges,
lease breakage fees, application fees, pet charges and other amenities.
Real Estate Taxes
-----------------
Real estate taxes are expensed over the period in which the taxes relate.
Interim Unaudited Statement of Revenue and Certain Expenses
-----------------------------------------------------------
The accompanying interim statement of revenue and certain expenses for the
six months ended June 30, 2004 is unaudited. However, in the opinion of the
Company, the interim statement includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results
for the interim period. The results for the period presented are not
necessarily indicative of the results for the full year.
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of
Home Properties, Inc.:
We have audited the accompanying Statement of Revenue and Certain Expenses of
The Regency Club Apartments, Jackson, New Jersey, (the "Property") for the year
ended December 31, 2003. This Statement is the responsibility of the Property's
management. Our responsibility is to express an opinion on this Statement based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Statement
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the Statement.
We believe that our audit provides a reasonable basis for our opinion.
The accompanying Statement was prepared for the purpose of complying with the
rules and regulations of the Securities and Exchange Commission (for inclusion
in the Form 8-K of Home Properties, Inc.) as described in Note 2 and is not
intended to be a complete presentation of the Property's revenue and expenses.
In our opinion, the Statement referred to above presents fairly, in all material
respects, the revenue and certain expenses described in Note 2 of The Regency
Club Apartments for the year ended December 31, 2003, in conformity with
accounting principles generally accepted in the United States of America.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 23, 2005
Regency Club Apartments
Statements of Revenue and Certain Expenses
(In thousands)
-------------------------------------------------------------------------------
For the Six Months Ended
For the Year Ended June 30, 2004
December 31, 2003 (unaudited)
----------------- -----------
Revenue:
Rental income $ 4,303 $ 2,223
Other income 78 30
------- ---------
4,381 2,253
------- ---------
Expenses:
Operating and maintenance 1,369 833
Real estate taxes 382 191
------- ---------
1,751 1,024
------- ---------
Revenue in excess of expenses $ 2,630 $ 1,229
======= =========
The accompanying notes are an integral part of these financial statements.
Regency Club Apartments
Notes to Statements of Revenue and Certain Expenses
For the Year Ended December 31, 2003 and for the Six Months Ended
June 30, 2004 (unaudited)
-------------------------------------------------------------------------------
1. OPERATIONS OF PROPERTIES
The accompanying statements of revenue and certain expenses includes the
operations (see "Basis of Presentation" below) of Regency Club Apartments,
a residential property ("the Property") formerly owned and managed by
parties not related to Home Properties of New York, Inc. (the "Company").
On September 24, 2004, the Company, through its subsidiary Home Properties,
L.P., acquired the Property. The Property is a residential development
located in Jackson, New Jersey.
Total consideration for the acquisition was $36.4 million, which was funded
through $19.5 million in assumed debt and $16.9 million from the Company's
line of credit. Of the $19.5 million of assumed debt, $18.0 million carries
an interest rate of 5.95%, maturing in October 2012. The remaining $1.5
million carries an interest rate of 7.03% and matures in June 2005.
2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying statements have been prepared on the accrual basis of
accounting.
The accompanying statements are not representative of the actual operations
of the Property for the periods presented. As required by the Securities
and Exchange Commission, Regulation S-X, Rule 3-14, certain expenses, which
may not be comparable to the proposed future operations of the Property
have been excluded. Expenses excluded relate to property management fees,
interest expense, depreciation and amortization expense, and other expenses
unrelated to the future operations of the Property. The Company is not
aware of any material factors relating to the Property that would cause the
reported financial information not to be necessarily indicative of future
operating results.
Real Estate
-----------
Expenditures for repairs and maintenance items are expensed as incurred.
Costs related to the acquisition and improvement of the Property and
related assets are capitalized.
Revenue Recognition
-------------------
Rental income attributable to residential leases is recorded when due from
residents. Leases are generally for terms of one year.
Use of Estimates in the Preparation of Financial Statements
-----------------------------------------------------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Other Income
------------
Other income is attributable to real estate service fees and is recorded
when due from residents. The real estate service fees include late charges,
lease breakage fees, application fees, pet charges and other amenities.
Real Estate Taxes
-----------------
Real estate taxes are expensed over the period in which the taxes relate.
Interim Unaudited Statement of Revenue and Certain Expenses
-----------------------------------------------------------
The accompanying interim statement of revenue and certain expenses for the
six months ended June 30, 2004 is unaudited. However, in the opinion of the
Company, the interim statement includes all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the results
for the interim period. The results for the period presented are not
necessarily indicative of the results for the full year.
HOME PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(Unaudited, in Thousands, Except Share and Per Share Data)
The unaudited Pro forma Consolidated Statement of Operations for the year ended
December 31, 2004 are presented as if the acquisition by the Company of the
Selected Acquisition Properties had occurred on January 1, 2004.
Such pro forma information is based upon the historical consolidated results of
operations of the Company for the year ended December 31, 2004, giving effect to
the transactions described above. In management's opinion, all adjustments
necessary to reflect the above transactions have been made. The Pro forma
Consolidated Statements of Operations should be read in conjunction with the
historical financial statements and notes thereto of the Company included in the
Home Properties, Inc. Form 10- K filed March 15, 2005 (which financial
statements reflect the impact of property sales as discontinued operations
pursuant to the provisions of SFAS 144 - "Accounting for the Impairment or
Disposal of Long-Lived Assets") for the year ended December 31, 2004.
The unaudited Pro Forma Consolidated Statement of Operations for the year ended
December 31, 2004 are not necessarily indicative of what the actual results of
operations would have been assuming the transactions had occurred as of the
beginning of the period presented, nor does it purport to represent the results
of operations for future periods.
Note that a Pro Forma Consolidated Statement of Operations for the three months
ended March 31, 2005 is not presented, as all of the Selected Acquisition
Properties were acquired prior to December 31, 2004, and therefore, are included
in the historical financial statements and notes thereto of the Company Form
10-Q filed May 10, 2005.
HOME PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(Unaudited, in Thousands, Except Share and Per Share Data)
For the Year Ended December 31, 2004
------------------------------------
Home Total
Properties, Pro Forma Pro Forma
Inc. Wellington The Regency Adjust- Adjust- Company
Historical (A) Trace Hamptons Club ments ments (B) Pro Forma
-------------- ----- -------- ---- ----- --------- ---------
Revenues:
---------
Rental Income $436,724 $346 $3,774 $2,905 $7,025 $443,749
Property other income 18,299 12 261 50 323 18,622
Interest and Dividends 480 - - - - 480
Other income 2,827 - - - - 2,827
---------- ---- ------ ------ ------ --------
Total revenues 458,330 358 4,035 2,955 7,348 465,678
---------- ---- ------ ------ ------ --------
Expenses:
Operating and maintenance 202,479 181 1,537 1,248 - 2,966 205,445
General and administrative 23,978 - - - 220 (C) 220 24,198
Interest 90,506 - - - 1,997 (D) 1,997 92,503
Depreciation and amortization 89,929 - - - 1,695 (E) 1,695 91,624
Impairment of assets held as General Partner 1,116 - - - - - 1,116
---------- ---- ------ ------ ------ --------
Total Expenses 408,008 181 1,537 1,248 3,912 6,878 414,886
---------- ---- ------ ------ ------ --------
Income (loss) from operations 50,322 177 2,498 1,707 (3,912) 470 50,792
Equity in earnings (losses) of
unconsolidated affiliates (538) - (538)
---------- ----------
Income before minority interest and
loss on sale of property and business 49,784 470 50,254
Minority interest 13,637 178(F) 13,815
---------- ----------
Income from continuing operations 36,147 292 36,439
Preferred dividends (7,593) - (7,593)
---------- ----------
Income applicable to common shareholders from
continuing operations $28,554 $ 292 $ 28,846
========== ==========
Basic earnings per share data:
Income applicable to common shareholders
from continuing operations $0.87 $0.88 (G)
========== ==========
Diluted earnings per share data:
Income applicable to common shareholders
from continuing operations $0.86 $0.87 (G)
========== ==========
Weighted average number of shares outstanding
Basic 32,911,945 32,911,945
========== ==========
Diluted 33,314,038 33,314,038
========== ==========
HOME PROPERTIES, INC.
NOTES TO PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2004
(Unaudited, in Thousands)
(A) Reflects the historical audited consolidated statement of operations for
the Company for the year ended December 31, 2004.
(B) Reflects the historical revenue and certain expenses of each of the
Selected Acquisition Properties for the period January 1, 2004 through the
earlier of the date of acquisition or December 31, 2004. Note that the Sale
Properties, as defined herein, are excluded from this adjustment as they
are included in income from discontinued operations in the historical
presentation which is not required in this pro forma presentation. In
addition to those adjustments previously described, (C), (D), (E) and (F)
below reflect other adjustments related to the Selected Acquisition
Properties.
(C) Reflects additional general and administrative expenses relating to adding
the selected acquisition properties to the Company portfolio (estimated as
3% of total revenues).
(D) Reflects the increase in interest expense related to the fair value of the
debt assumed from the seller or obtained in order to finance each of the
Selected Acquisition Properties. For certain of the Selected Acquisition
Properties, the Company used its existing line of credit to finance all or
a portion of the acquisition price. These are noted below with "LOC" after
the community name.
The approximated fair market value of debt assumed or obtained in
acquisition along with the respective effective interest rates is
summarized as follows:
Fair Market Value of
Acquisition Properties Debt Assumed Interest rate
Wellington Trace (LOC) $29,500,000 2.24%
The Hamptons (variable) $56,000,000 2.21%
The Hamptons (LOC) $14,400,000 2.34%
Regency Club $19,305,000 4.84%
Regency Club $ 1,481,000 3.19%
Regency Club (LOC) $16,900,000 2.88%
A 12.5 basis point increase in the interest rates would decrease net income
by approximately $146.
(E) Reflects depreciation and amortization related to each of the Selected
Acquisition Properties, as appropriate. The appliances and equipment have
an estimated useful life of ten years and the building has an estimated
useful life of forty years.
(F) Reflects the adjustment to minority interest expense based upon the impact
of the above pro forma adjustments on income before minority interest and
the issuance of OP Units as of January 1, 2004.
(G) Pro forma income per common share is based upon the weighted average number
of common shares assumed to be outstanding during 2004, as appropriate.
In accordance with SFAS 128, earnings per share from income applicable to common
shareholders from continuing operations is calculated as follows (in thousands):
December 31,2004
----------------
Income from continuing operations $ 36,439
Less: Preferred dividends 7,593
-----------
Basic and Diluted - Income from continuing operations applicable to common shareholders $ 28,846
===========
Basic weighted average number of shares outstanding 32,911,945
Effect of dilutive stock options 402,093
-----------
Diluted weighted average number of shares outstanding 33,314,038
===========
Basic earnings per share data:
Income applicable to common shareholders from continuing operations $0.88
Diluted earnings per share data:
Income applicable to common shareholders from continuing operations $0.87
HOME PROPERTIES, INC.
ESTIMATED TWELVE-MONTH PRO FORMA STATEMENT
OF TAXABLE NET OPERATING INCOME AND OPERATING FUNDS AVAILABLE
(UNAUDITED)
The following unaudited statement is a proforma estimate for a twelve-month
period of taxable income and funds available from operations of the Company. The
unaudited pro forma statement is based on the Company's historical operating
results for the twelve-month period ended March 31, 2005 adjusted as if the
acquisition by the Company of the Selected Acquisition Properties had occurred
on April 1, 2004.
This statement should be read in conjunction with (i) the historical financial
statements and notes thereto of the Company included in the Home Properties,
Inc. Form 10-K filed March 15, 2005 (which financial statements reflect the
impact of property sales as discontinued operations pursuant to the provisions
of SFAS 144 - "Accounting for the Impairment or Disposal of Long-Lived Assets")
for the year ended December 31, 2004 and (ii) the pro forma consolidated
financial statements of the Company included herein.
ESTIMATE OF TAXABLE NET OPERATING INCOME (IN THOUSANDS):
Historical earnings from operations, exclusive of depreciation and amortization (Note 1) $140,784
Selected Acquisition Properties as adjusted, exclusive of depreciation (Note 2) 2,164
----------
142,948
Estimated tax basis depreciation and amortization (Note 3)
HPNY ( 95,710)
Acquisition Properties ( 2,769)
----------
Pro Forma taxable operating income before dividends deduction 44,469
Estimated dividends deduction (Note 4) 88,338
----------
Pro Forma taxable operating income (loss) ($ 43,869)
==========
ESTIMATE OF PRO FORMA OPERATING FUNDS AVAILABLE (NOTE 5)
(IN THOUSANDS):
Pro Forma taxable operating income before dividends deduction $ 44,469
Add pro forma tax basis depreciation and amortization 98,479
----------
Estimate of pro forma operating funds available $142,948
==========
Note 1 - The historical earnings from operations represents the Company's income
from continuing operations as adjusted for depreciation and amortization
for the year ended December 31, 2004 as reflected in the historical
financial statements.
Note 2 - The historical earnings from operations represents the pro forma
results of the properties acquired since January 1, 2004 for the year ended
December 31, 2004.
Note 3 - The tax basis depreciation of the Company is based upon the original
purchase price allocated to the buildings, equipment and personal property,
depreciated on a straight-line basis over a 27.5- and 5-year life,
respectively.
Note 4 - Estimated dividends deduction includes the Series F preferred dividend
of $5,400 plus the estimated dividend rate of $2.52 per common share.
Common shares outstanding, on a pro forma basis, are 32,911,945.
Note 5 - Operating funds available 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.
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: August 5, 2005
By: /s/ Edward J. Pettinella
-------------------------------------
Edward J. Pettinella
President and Chief Executive Officer
Date: August 5, 2005
By: /s/ David P. Gardner
-------------------------------------
David P. Gardner
Executive Vice President and
Chief Financial Officer
EXHIBIT 23.0
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
--------------------------------------------------------
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (Nos. 333-37229, 333-46243, 333-52601,333-58799,333-64069,
333-75253, 333-92023, 333-93761, 333-94815, 333-44928, 333-46738, 333-54160,
333-61948, 333-74180, 333-02672, 333-52601, 333-100759, 333-115572) of Home
Properties Inc. of our reports dated (1) May 23, 2005 relating to the statement
of revenue and certain expenses of The Apartments at Wellington Trace, (2) May
23, 2005 relating to the combined statement of revenue and certain expenses of
The Hamptons and (3) May 23, 2005 relating to the statement of revenue and
certain expenses of The Regency Club Apartments, which appear in the Current
Report on Form 8-K of Home Properties Inc. dated August 5, 2005.
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
Boston, MA
August 5, 2005