Home Properties Reports Second Quarter 2015 Results

ROCHESTER, N.Y., July 30, 2015 /PRNewswire/ -- Home Properties, Inc. HME today reported financial results for the quarter ended June 30, 2015. All per share results are reported on a diluted basis.

Results for the Quarter

Earnings per share ("EPS") increased 20.2% to $0.47 from $0.39 in the second quarter of 2014.
Funds from Operations ("FFO") per share increased 11.2% to $1.16 from $1.04 in the prior year period.
Operating Funds from Operations ("OFFO") per share increased 9.6% to $1.21 from $1.11 in the prior year period.

Results for the Six Months

Earnings per share ("EPS") increased 22.3% to $1.45 from $1.18 in the first six months of 2014.
Funds from Operations ("FFO") per share increased 10.0% to $2.25 from $2.04 in the prior year period.
Operating Funds from Operations ("OFFO") per share increased 9.4% to $2.30 from $2.10 in the prior year period.

Same-Property Operating Results⁽¹⁾

	Second Quarter 2015 Compared to	Second Quarter 2015 Compared to
	Second Quarter 2014	First Quarter 2015
Rental Income	3.6% increase	1.9% increase
Total Revenues	3.5% increase	0.8% increase
Property Level
Operating Expenses	1.2% decrease	9.8% decrease
Net Operating Income ("NOI")	6.2% increase	7.3% increase
Average Physical	95.9%, or a	95.9%, or a
Occupancy⁽²⁾	50 basis point increase	90 basis point increase
Average Monthly Rental Rates	3.0% increase to $1,371	1.0% increase to $1,371


⁽¹⁾	For 113 core properties containing 38,569 apartment units owned since January 1, 2014.
⁽²⁾	The number of occupied apartment units divided by total apartment units.

Acquisitions and Dispositions

There were no acquisitions or dispositions of apartment communities during the quarter.

Development

Construction continues at The Courts at Spring Mill Station, the Company's last remaining development project. The first of two buildings in this Conshohocken, Pennsylvania community became ready for occupancy in the fourth quarter of 2014, and the second building is nearing completion. Approximately 51% of the units are currently leased.

Capital Markets

On June 30, 2015 the Company repaid a mortgage for approximately $28 million at a fixed rate of 5.75%.

As of June 30, 2015:

The Company had approximately $7.8 million of cash on hand and an additional $128 million of available capacity on its corporate credit facility.
Unencumbered assets represented 57.5% of total undepreciated assets, up from 56.7% at December 31, 2014.
The Company's ratio of debt-to-total market capitalization was 32.9%.
Total debt of $2.4 billion was outstanding at a weighted average interest rate of 4.1% and staggered maturities averaging 3.0 years.
Approximately 82% of total indebtedness was at fixed rates.
Interest coverage for the quarter was 4.3 times and the fixed charge ratio was 4.1 times.

Guidance

The Company announced on June 22, 2015 that it had entered into definitive agreements to be acquired by an affiliate of Lone Star Funds and to contribute a portfolio of up to six properties to an affiliate of UDR, Inc. As a result of these pending transactions, the Company is not providing an outlook for the remainder of 2015 nor updating or affirming its previously issued guidance for the full-year 2015.

Supplemental Information

The Company produces supplemental information that includes details regarding property operations, other income, acquisitions, dispositions, geographic market breakdown, debt and new development. The supplemental information is available via the Company's website through the "Investors" section or e-mail upon request.

Second Quarter Earnings Conference Call

Due to the proposed acquisition of the Company, no quarterly earnings call will be conducted.

Forward-Looking Statements

This 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 are described under the heading "Risk Factors" in the Company's Annual Report on Form 10-K and in other filings with the Securities and Exchange Commission and include the ability of the Company to obtain required stockholder approval required to consummate the proposed merger of Home Properties; the ability of the Home Properties, L.P. to obtain the required unitholder approval to consummate the proposed partnership merger; the satisfaction or waiver of other conditions in the merger agreement; the outcome of any legal proceedings that may be instituted against the Company and others related to the merger agreement; the ability of third parties to fulfill their obligations relating to the proposed transactions, including providing financing under current financial market conditions; the risk that the Company merger, the partnership merger or the other transactions contemplated by the merger agreement may not be completed in the time frame expected by the parties or at all, general economic and local real estate conditions, weather and other conditions that might affect operating expenses, the timely completion of repositioning activities within anticipated budgets, the actual pace of future acquisitions and dispositions, and continued access to capital to fund growth. The Company assumes no obligation to update or supplement forward-looking statements because of subsequent events.

About Home Properties

Home Properties is a publicly traded multifamily real estate investment trust that owns, operates, acquires and repositions apartment communities in suburbs of major metropolitan areas, primarily along the East Coast of the United States. An S&P 400 Company, Home Properties owns and operates 121 communities containing 41,994 apartment units. For more information, please visit the Company's website at www.homeproperties.com.

HOME PROPERTIES, INC. SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands – Unaudited)

	Three Months Ended		Six Months Ended
	June 30		June 30
	2015	2014	2015	2014
Revenues:
Rental income	$ 163,112	$ 152,431	$ 323,992	$ 302,266
Property other income	13,542	12,973	28,989	28,294
Other income	230	179	547	321
Total revenues	176,884	165,583	353,528	330,881
Expenses:
Operating and maintenance	61,006	59,468	128,313	125,039
General and administrative	7,399	7,126	15,942	16,384
Interest	25,130	24,717	50,614	49,570
Depreciation and amortization	48,314	44,569	96,179	88,346
Other expenses	3,385	274	3,762	282
Impairment and other charges	(500)	3,842	(319)	3,842
Total expenses	144,734	139,996	294,491	283,463
Income from continuing operations, before gain on disposition of real estate	32,150	25,587	59,037	47,418
Gain on disposition of land	-	-	70	-
Gain on disposition of property	-	-	40,346	-
Income from continuing operations	32,150	25,587	99,453	47,418
Discontinued operations:
Income from discontinued operations	-	876	-	1,710
Gain on disposition of property	-	-	-	31,306
Discontinued operations	-	876	-	33,016
Net income	32,150	26,463	99,453	80,434
Net income attributable to noncontrolling interest	(4,719)	(3,994)	(14,664)	(12,174)
Net income attributable to common stockholders	$ 27,431	$ 22,469	$ 84,789	$ 68,260
Reconciliation from net income attributable to common stockholders to Funds From Operations:
Net income attributable to common stockholders	$ 27,431	$ 22,469	$ 84,789	$ 68,260
Real property depreciation and amortization	47,703	44,587	94,975	88,676
Noncontrolling interest	4,719	3,994	14,664	12,174
Gain on disposition of property	-	-	(40,346)	(31,306)
FFO - basic and diluted, as defined by NAREIT	79,853	71,050	154,082	137,804
Loss from early extinguishment of debt in connection with sale of real estate	-	-	-	802
FFO - basic and diluted ⁽¹⁾	$ 79,853	$ 71,050	$ 154,082	$ 138,606

⁽¹⁾

Pursuant to guidance provided by 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, impairment write-downs of depreciable real estate, noncontrolling interest and extraordinary items plus depreciation from real property. The Company adds back debt extinguishment costs and other one-time costs incurred as a result of repaying property-specific debt triggered upon sale of a 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. Similarly titled measures disclosed by other companies may not be calculated in the same manner.

HOME PROPERTIES, INC. SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share/unit – Unaudited)

	Three Months Ended		Six Months Ended
	June 30		June 30
	2015	2014	2015	2014
FFO – basic and diluted	$ 79,853	$ 71,050	$ 154,082	$ 138,606
Merger costs incurred and included in other expenses	3,428	-	3,428	-
Acquisition costs of closed deals included in other expenses	(43)	274	334	282
Gain on land sale	-	-	(70)	-
Impairment and other charges	-	3,842	3	3,842
Operating FFO ⁽²⁾	$ 83,238	$ 75,166	$ 157,777	$ 142,730
FFO – basic and diluted	$ 79,853	$ 71,050	$ 154,082	$ 138,606
Recurring non-revenue generating capital expenses	(9,129)	(9,094)	(18,324)	(18,225)
AFFO⁽³⁾	$ 70,724	$ 61,956	$ 135,758	$ 120,381
Operating FFO	$ 83,238	$ 75,166	$ 157,777	$ 142,730
Recurring non-revenue generating capital expenses	(9,129)	(9,094)	(18,324)	(18,225)
Operating AFFO^{(2) (3)}	$ 74,109	$ 66,072	$ 139,453	$ 124,505
Weighted average shares/units outstanding:
Shares – basic	58,048.7	57,247.9	57,960.5	57,162.3
Shares – diluted	58,684.7	57,795.1	58,561.9	57,660.2
Shares/units – basic ⁽⁴⁾	68,061.8	67,452.0	68,000.7	67,379.1
Shares/units – diluted ⁽⁴⁾	68,697.8	67,999.3	68,602.2	67,877.0
Per share/unit:
Net income – basic	$0.47	$0.39	$1.46	$1.19
Net income – diluted	$0.47	$0.39	$1.45	$1.18
FFO – basic	$1.17	$1.05	$2.27	$2.06
FFO – diluted	$1.16	$1.04	$2.25	$2.04
Operating FFO⁽²⁾	$1.21	$1.11	$2.30	$2.10
AFFO ⁽³⁾	$1.03	$0.91	$1.98	$1.77
Operating AFFO^{(2) (3)}	$1.08	$0.97	$2.03	$1.83
Common dividend paid	$0.76	$0.73	$1.52	$1.46


⁽²⁾	Operating FFO is defined as FFO adjusted for the addback of acquisition costs on closed deals, land impairment costs, gain on land sale and incurred merger costs.

⁽³⁾	Adjusted Funds From Operations ("AFFO") is defined as FFO less an annual reserve for anticipated recurring, non-revenue generating capitalized costs of $900 per apartment unit. 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, 2015	December 31, 2014
Assets
Real estate:
Land	$ 803,156	$ 815,565
Land held for sale	36,804	13,114
Construction in progress	57,620	118,595
Buildings, improvements and equipment	4,924,425	4,817,453
	5,822,005	5,764,727
Less: accumulated depreciation	(1,429,699)	(1,371,227)
Real estate, net	4,392,306	4,393,500
Cash and cash equivalents	7,807	11,131
Cash in escrows	28,245	24,118
Accounts receivable, net	19,144	19,556
Prepaid expenses	11,985	23,484
Deferred charges, net	8,029	9,250
Other assets	9,291	7,496
Total assets	$ 4,476,807	$ 4,488,535
Liabilities and Equity
Mortgage notes payable	$ 1,561,337	$ 1,637,175
Unsecured notes payable	550,000	550,000
Unsecured line of credit	318,500	269,000
Accounts payable	26,215	25,835
Accrued interest payable	8,564	7,732
Accrued expenses and other liabilities	42,501	38,732
Security deposits	19,766	18,631
Total liabilities	2,526,883	2,547,105

Common stockholders' equity	1,664,388	1,653,218
Noncontrolling interest	285,536	288,212
Total equity	1,949,924	1,941,430
Total liabilities and equity	$ 4,476,807	$ 4,488,535

Total shares/units outstanding:
Common stock	57,995.3	57,704.0
Operating partnership units	10,012.1	10,114.4
	68,007.4	67,818.4

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SOURCE Home Properties, Inc.

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