10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13136 HOME PROPERTIES OF NEW YORK, INC. (Exact name of registrant as specified in its charter) MARYLAND -------- (State or other jurisdiction of incorporation or organization) 16-1455126 (IRS Employer Identification Number) 850 Clinton Square, Rochester, New York 14604 (Address of principal executive offices) (Zip Code) (716) 546-4900 (Registrant's telephone number, including area code) N/A (Former name, former address and former year, if changed since last report) Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO -------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class of Common Stock $.01 par value Outstanding at July 31, 2000 20,835,028 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HOME PROPERTIES OF NEW YORK, INC. CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 AND DECEMBER 31, 1999 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2000 1999 ---- ---- ASSETS (Unaudited) (Note 1) Real estate: Land $220,424 $194,468 Buildings, improvements and equipment 1,466,149 1,286,285 ---------- ---------- 1,686,573 1,480,753 Less: accumulated depreciation (126,095) (101,904) ----------- ---------- Real estate, net 1,560,478 1,378,849 Cash and cash equivalents 45,026 4,742 Cash in escrows 34,728 28,281 Accounts receivable 7,632 6,842 Prepaid expenses 6,400 9,423 Deposits 959 897 Investment in and advances to affiliates 65,917 63,450 Deferred charges 3,133 2,610 Other assets 10,012 8,523 ------------- -------------- Total assets $1,734,285 $1,503,617 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes payable $747,955 $618,901 Line of Credit - 50,800 Accounts payable 11,852 11,765 Accrued interest payable 4,557 3,839 Accrued expenses and other liabilities 6,113 6,391 Security deposits 17,264 14,918 ------------ ----------- Total liabilities 787,741 706,614 ----------- ---------- Minority interest 365,226 299,880 ----------- ---------- 8.36% Series B convertible cumulative preferred stock, liquidation preference of $25.00 per share; 2,000,000 shares issued and outstanding, net of issuance costs 48,733 48,733 ------------ ----------- Stockholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized: 9.0% Series A convertible cumulative preferred stock, liquidation preference of $21.00 per share; 1,666,667 shares 35,000 35,000 issued and outstanding 8.75% Series C convertible cumulative preferred stock, liquidation preference of $100 per share; 600,000 shares issued and outstanding 59,500 - 8.775% Series D convertible cumulative preferred stock, liquidation preference of $100 per share; 250,000 shares issued and outstanding 25,000 - Common stock, $.01 par value; 80,000,000 shares authorized; 20,687,609 and 19,598,464 shares issued and outstanding at June 30, 2000 and December 31, 1999, respectively 206 196 Excess stock, $.01 par value; 10,000,000 shares authorized; no shares issued - - Additional paid-in capital 468,161 461,345 Distributions in excess of accumulated earnings (45,487) ( 38,294) Officer and director notes for stock purchases ( 9,795) ( 9,857) -------------- -------------- Total stockholders' equity 532,585 448,390 ------------- ------------ Total liabilities and stockholders' equity $1,734,285 $1,503,617 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2000 1999 ---- ---- Revenues: Rental income $141,736 $89,374 Property other income 5,081 2,689 Interest and dividend income 3,635 3,812 Other income 76 1,548 ------------ ----------- Total revenues 150,528 97,423 ------------ ----------- Expenses: Operating and maintenance 61,613 40,963 General and administrative 6,320 4,327 Interest 27,390 15,676 Depreciation and amortization 24,607 15,860 Loss on available-for-sale securities - 2,123 ------------ ----------- Total expenses 119,930 78,949 ------------ ----------- Income before gain (loss) on disposition of property and minority interest 30,598 18,474 Gain (loss) on disposition of property (462) 457 ------------ ----------- Income before minority interest 30,136 18,931 Minority interest 11,561 6,729 ------------ ------------ Net income 18,575 12,202 Preferred dividends (4,462) - ----------- ------------ Net income available to common shareholders $14,113 $12,202 ============ ============= Per share data: Net income - Basic $ .70 $.67 ===== ==== - Diluted $ .70 $.67 ===== ==== Weighted average number of shares outstanding - Basic 20,117,984 18,159,499 ========== ========== - Diluted 20,247,104 18,252,321 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2000 1999 ---- ---- Revenues: Rental income $73,891 $45,431 Property other income 2,788 1,386 Interest and dividend income 2,008 1,917 Other income (loss) (523) 906 -------------- -------------- Total revenues 78,164 49,640 ----------- ----------- Expenses: Operating and maintenance 30,658 19,963 General and administrative 3,198 2,171 Interest 14,485 7,960 Depreciation and amortization 12,867 8,319 Loss on available-for-sale securities - 2,123 ----------- ------------ Total expenses 61,208 40,536 ----------- ----------- Income before gain (loss) on disposition of property and minority interest 16,956 9,104 Gain (loss) on disposition of property (462) 473 ------------- ------------ Income before minority interest 16,494 9,577 Minority interest 6,401 3,386 ------------ ------------ Net income 10,093 6,191 Preferred dividends ( 2,534) - ------------ ------------ Net income available to common shareholders $7,559 $ 6,191 =========== =========== Per share data: Net income - Basic $ .37 $.34 ===== ==== - Diluted $ .37 $.33 ===== ==== Weighted average number of shares outstanding - Basic 20,407,253 18,444,084 ========== ========== - Diluted 20,558,159 18,548,646 ========== ==========
The accompanying notes are an integral part of these condensed consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999 (UNAUDITED, IN THOUSANDS)
2000 1999 ---- ---- Cash flows from operating activities: Net income $18,575 $12,202 ------- ------- Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of HP Management and Conifer Realty 1,070 ( 370) Income allocated to minority interest 11,561 6,729 Depreciation and amortization 24,877 16,286 Unrealized loss on available-for-sale securities - ( 1,607) (Gain) loss on disposition of property 462 ( 457) Changes in assets and liabilities: Other assets 1,582 15,520 Accounts payable and accrued liabilities 2,874 ( 2,611) --------- --------- Total adjustments 42,426 33,490 -------- -------- Net cash provided by operating activities 61,001 45,692 -------- ------- Cash flows used in investing activities: Purchase of properties, net of mortgage notes assumed and UPREIT Units issued ( 40,014) ( 12,063) Additions to properties ( 33,108) ( 21,057) Deposits on property ( 62) ( 4,193) Advances to affiliates ( 17,064) ( 13,889) Payments on advances to affiliates 13,527 18,895 Other 4,844 1,099 ---------- --------- Net cash used in investing activities ( 71,877) ( 31,208) -------- -------- Cash flows from financing activities: Proceeds from the sale of preferred stock, net 82,751 - Proceeds from sale of common stock 25,858 33,049 Purchase of treasury stock - ( 2,578) Proceeds from mortgage notes payable 45,400 - Payments of mortgage notes payable ( 4,055) ( 2,128) Proceeds from line of credit 23,500 - Payments on line of credit (74,300) - Additions to deferred loan costs ( 796) ( 108) Additions to and payments received from cash escrows ( 6,447) ( 944) Dividends and distributions paid (40,751) (27,033) -------- ------- Net cash provided by (used in) financing activities 51,160 258 -------- -------- Net increase in cash and cash equivalents 40,284 14,742 Cash and cash equivalents: Beginning of period 4,742 33,446 -------- -------- End of period $45,026 $48,188 ======= ======= Supplemental disclosure of cash flow information: Cash paid for interest $26,400 $ 14,600 ======= ======== HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. Unaudited Interim Financial Statements The interim condensed consolidated financial statements of Home Properties of New York, Inc. (the "Company") are prepared pursuant to the requirements for reporting on Form 10-Q. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with generally accepted accounting principles are omitted. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the consolidated financial statements for the interim periods have been included. The current period's results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K/A, as filed with the Securities and Exchange Commission on May 22, 2000. 2. Organization and Basis of Presentation Organization Home Properties of New York, Inc. (the " Company " ) was formed in November 1993, as a Maryland corporation and is engaged primarily in the ownership, management, acquisition, rehabilitation and development of residential apartment communities in the Northeastern, Mid-Atlantic and Midwestern United States. As of June 30, 2000, the Company operated 304 apartment communities with 47,399 apartments. Of this total, the Company owned 135 communities, consisting of 36,685 apartments, managed as general partner 8,145 apartments and fee managed 2,569 apartments for affiliates and third parties. The Company also fee manages 1.7 million square feet of office and retail properties. Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its 61.7% (65.2% at June 30, 1999) partnership interest in the Operating Partnership. The remaining 38.3% (34.8% at June 30, 1999) is reflected as Minority Interest in these consolidated financial statements. For financing purposes, the Company has formed a limited liability company (the "LLC") and a partnership (the "Financing Partnership") which beneficially own certain apartment communities encumbered by mortgage indebtedness. The LLC is wholly owned by the Operating Partnership. The Financing Partnership is owned 99.9% by the Operating Partnership and .1% by Home Properties Trust, a wholly owned qualified REIT subsidiary (QRS) of Home Properties of New York, Inc. All significant intercompany balances and transactions have been eliminated in these consolidated financial statements. 3. Earnings Per Common Share Basic earnings per share ("EPS") is computed as net income available to common shareholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur from common shares issuable through stock-based compensation including stock options and the conversion of any cumulative convertible preferred stock. The exchange of an Operating Partnership Unit for common stock will have no effect on diluted EPS as unitholders and stockholders effectively share equally in the net income of the Operating Partnership. Net income available to common shareholders is the same for both the basic and diluted calculation. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONT'D (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 3. Earnings Per Common Share Cont'd The reconciliation of the basic weighted average shares outstanding and diluted weighted average shares outstanding for the six and three months ended June 30, 2000 and 1999 is as follows:
Six Months Three Months 2000 1999 2000 1999 ---- ---- ---- ---- Basic weighted average number of shares outstanding 20,117,984 18,159,499 20,407,253 18,444,084 Effect of dilutive stock options 129,120 92,822 150,906 104,562 ---------- ---------- ---------- ---------- Diluted weighted average number of shares outstanding 20,247,104 18,252,321 20,558,159 18,548,646 ========== ========== ========== ==========
Unexercised stock options to purchase 21,600 and 162,500 shares of the Company's common stock were not included in the computations of diluted EPS because the options' exercise prices were greater than the average market price of the company's stock during the six month period ended June 30, 2000 and 1999, respectively. For the six month period ended June 30, 2000, the 1,666,667 shares of the 9% Series A convertible cumulative preferred stock ("Series A Preferred"), the 2,000,000 shares of 8.36% Series B convertible cumulative preferred stock ("Series B Preferred"), the 600,000 shares of 8.75% Series C convertible cumulative preferred stock ("Series C Preferred") and the 250,000 shares of 8.775% Series D convertible cumulative preferred stock ("Series D Preferred") on an as-converted basis has an antidilutive effect and is not included in the computation of diluted EPS. 4. Other Income Other income (loss) for the six and three months ended June 30, 2000 and 1999 is summarized as follows:
Six Months Three Months 2000 1999 2000 1999 ---- ---- ---- ---- Management fees $866 $734 $427 $360 Development fees 240 391 ( 71) 329 Other 41 53 16 25 Management Companies (1,071) 370 ( 895) 192 ------- ----- ------ ----- $ 76 $1,548 ($523) $906 ====== ====== ====== ====
Certain property management, leasing and development activities are performed by Home Properties Management, Inc. and Conifer Realty Corporation (the "Management Companies"). The Operating Partnership owns non-voting common stock in the Management Companies which entitles the Operating Partnership to receive 95% of the economic interest in the Management Companies. The Company's share of income from the Management Companies for the six and three months ended June 30, 2000 and 1999 is summarized as follows:
Six Months Three Months 2000 1999 2000 1999 ---- ---- ---- ---- Management fees $1,686 $1,853 $818 $931 Development fees 2,109 2,645 747 1,343 Miscellaneous 43 38 34 3 General and administrative ( 3,760) (3,472) (1,905) (1,718) Interest expense ( 916) ( 442) ( 488) ( 240) Other expenses ( 289) ( 233) ( 148) ( 117) -------- -------- -------- -------- Net income (loss) ($1,127) $389 ( $942) $202 -------- ---- ------- ---- Company's share ($1,071) $370 ( $895) $192 ======== ==== ======= ====
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONT'D (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 5. Segment Reporting The Company is engaged in one primary business segment - the ownership and management of market rate apartment communities (segregated as Core and Non-core properties). Company management views each apartment community as a separate component of the operating segment. Non-segment revenue to reconcile total revenue consists of unconsolidated management and development fees and interest income. Non-segment assets to reconcile to total assets include cash and cash equivalents, cash in escrows, accounts receivable, prepaid expenses, deposits, investments in and advances to affiliates, deferred charges and other assets. Core properties consist of all apartment communities which have been owned more than one full calendar year. Therefore, the 2000 Core represents communities owned as of December 31, 1998. Non-core properties consist of apartment communities acquired during 1999 and 2000, such that full year comparable operating results are not available. The accounting policies of the segments are the same as those described in Note 1. The Company assesses and measures segment operating results based on a performance measure referred to as Funds from Operations ("FFO"). The National Association of Real Estate Investment Trusts defines FFO as net income (loss), before gains (losses) from the sale of property, extraordinary items, plus real estate depreciation including adjustments for unconsolidated partnerships and joint ventures. FFO is not a measure of operating results or cash flows from operating activities as measured by generally accepted accounting principles and it is not indicative of cash available to fund cash needs and should not be considered an alternative to cash flows as a measure of liquidity. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 5. Segment Reporting (Continued) ---------------------------- The revenues, profit (loss), and assets for the reportable segment are summarized as follows for the six and three months ended June 30, 2000, and 1999.
Six Months Three Months ---------- ------------ 2000 1999 2000 1999 ---- ---- ---- ---- Revenues Apartments owned Core properties $95,490 $90,037 $ 48,353 $45,301 Non-core properties 51,327 2,026 28,326 1,516 Reconciling items 3,711 5,360 1,485 2,823 ---------- --------- ---------- ---------- Total Revenue $150,528 $97,423 $ 78,164 $ 49,640 ======== ======= ======== ======== Profit (loss) Funds from operations: Apartments owned Core properties 53,893 49,971 28,343 25,991 Non-core properties 31,311 1,129 17,678 863 Reconciling items 3,711 5,360 1,485 2,823 --------- ------- -------- -------- Segment contribution to FFO 88,915 56,460 47,506 29,677 General & administrative expenses ( 6,320) ( 4,327) ( 3,198) ( 2,171) Interest expense (27,390) (15,676) ( 14,485) ( 7,960) Unconsolidated depreciation 241 221 98 153 Non-real estate depreciation/amort. ( 251) ( 136) ( 133) ( 72) ---------- --------- ---------- ----------- Funds from Operations 55,195 36,542 29,788 19,627 Depreciation - apartments owned (24,356) (15,724) (12,734) ( 8,247) Loss on available-for-sale securities - ( 2,123) - ( 2,123) Unconsolidated depreciation ( 241) ( 221) ( 98) ( 153) Gain (Loss) on disposition of properties ( 462) 457 ( 462) 473 Minority interest in earnings (11,561) ( 6,729) ( 6,401) ( 3,386) -------- --------- -------- -------- Net Income $18,575 $12,202 $10,093 $ 6,191 ======= ======= ======= ======= Assets - As of June 30, 2000 and 1999 ------ Apartments owned $1,560,478 $911,617 Reconciling items 173,807 140,471 ------------ ------------ Total Assets $1,734,285 $1,052,088 ========== ==========
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 6. Pro Forma Financial Information
Pro Forma Combined Statement of Operations For the Six Months Ended June 30, 2000 ------------------------------------------ Home Properties Pro Forma Company Historical Adjustment Pro Forma ---------- ---------- --------- Revenue: Rental income $141,736 $ 6,273 $148,009 Property other income 5,081 224 5,305 Interest and dividend income 3,635 - 3,635 Other income 76 - 76 ------------ ------------ --------- Total Revenues 150,528 6,497 157,025 -------- -------- -------- Expenses: Operating and Maintenance 61,613 2,494 64,107 General and administrative 6,320 195 6,515 Interest 27,390 1,942 29,332 Depreciation and amortization 24,607 1,079 25,686 --------- -------- -------- Total Expenses 119,930 5,710 125,640 -------- ------- -------- Income before loss on disposition of property and minority interest 30,598 $ 787 31,385 ======= Loss on disposition of property 462 462 ---------- ---------- Income before minority interest 30,136 30,923 Minority Interest 11,561 12,388 -------- ------- Net income 18,575 18,535 Preferred dividends (4,462) (4,462) ---------- -------- Net income available to common shareholders $14,113 $14,073 ======= ======= Net income per common share - Basic $0.70 ===== - Diluted $0.70 ===== Weighted average number of shares outstanding - Basic 20,117,984 ========== - Diluted 20,247,104 ==========
The pro forma information was prepared as if the transactions related to the acquisition of the Old Friends Apartments (on February 1, 2000, 51 units for $2,000), the Gateside Portfolio (on March 15, 2000, 2,113 units for $135,200), the Detroit Communities (on March 22, 2000, 360 units for $14,400) and Elmwood Terrace Apartments (on June 30, 2000, 504 units for $20,600) had occurred on January 1, 2000. Adjustments to the pro forma combined statements of operations for the six months ended June 30, 2000, consist principally of providing net property operating activity and recording interest, depreciation and amortization from January 1, 2000 to the acquisition date. HOME PROPERTIES OF NEW YORK, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion is based primarily on the consolidated financial statements of Home Properties of New York, Inc. as of June 30, 2000 and 1999 and for the six and three month periods then ended. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto. Forward-Looking Statements This discussion 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, other conditions that might affect operating expenses, the timely completion of repositioning and current development activities within anticipated budgets, the actual pace of future acquisitions and developments and continued access to capital to fund growth. Liquidity and Capital Resources The Company's principal liquidity demands are expected to be distributions to the common and preferred stockholders and Operating Partnership unitholders, capital improvements and repairs and maintenance for the properties, acquisition of additional properties, property development and debt repayments. The Company intends to meet its short-term liquidity requirements through net cash flows provided by operating activities and its unsecured line of credit. The Company considers its ability to generate cash to be adequate to meet all operating requirements and make distributions to its stockholders in accordance with the provisions of the Internal Revenue Code, as amended, applicable to REITs. As of June 30, 2000 the Company had an unsecured line of credit from M & T Bank of $100 million with no balance outstanding. Borrowings under the line of credit bear interest at the Company's option, at either 1.25% over the one-month LIBOR rate or at a money market rate as quoted on a daily basis by the lending institution. Accordingly, increases in interest rates will increase the Company's interest expense and as a result will effect the Company's results of operations and financial condition. The unsecured credit facility expires on September 4, 2000. To the extent that the Company does not satisfy its long-term liquidity requirements through net cash flows provided by operating activities and its credit facility, it intends to satisfy such requirements through the issuance of UPREIT units, proceeds from the Dividend Reinvestment Plan ("DRIP"), long term secured or unsecured indebtedness, or the issuance of additional equity securities. As of June 30, 2000, the Company owned twenty-four properties with 4,055 apartment units, which were unencumbered by debt. In May, 1998, the Company's Form S-3 Registration Statement was declared effective relating to the issuance of up to $414 million of shares of common stock or other securities. During 1998, $125.6 million of common shares were issued from this and a previous shelf registration in various public and private offerings. There was no activity during 1999. During the first six months of 2000, $60 million of preferred shares and $7.3 million of warrants were issued from this shelf registration in various private offerings. The available balance on the shelf at June 30, 2000 is $266.4 million. On September 30, 1999, the Company completed the sale of $50 million of Series B preferred in a private transaction with GE Capital. On December 22, 1999, the Class A limited partnership interests held by the State of Michigan Retirement Systems (originally issued in December, 1996 for $35 million) were converted to Series A Preferred. On May 21, 2000, the Company completed the sale of $40 million of Series C Preferred through a private transaction with affiliates of Prudential Real Estate Investors and Teachers Insurance and Annuity of America. In addition, the Company issued warrants to purchase 160,000 common shares at a price of $30.25 per share, expiring in five years. On June 5, 2000, the Company completed the sale of $25 million of Series D Preferred through a private transaction with The Equitable Life Assurance Society of the United States. On June 19, 2000, the Company completed the sale of $20 million of Series C Preferred through a private transaction with affiliates of AEW Capital Management and the Pacific Life Insurance Company. The Company also issued 80,000 additional warrants to purchase common shares at a price of $30.25 per share, expiring in five years. The issuance of UPREIT Units for property acquisitions continues to be a significant source of capital. During 1999, 8,147 apartment units in four separate transactions were acquired for a total cost of $389 million using UPREIT Units valued at approximately $149 million, with the balance paid in cash or assumed debt. During the first six months of 2000, 3,028 apartment units in three separate transactions were acquired for a total cost of $173 million using UPREIT Units valued at approximately $51 million, with the balance paid in cash or assumed debt. During 1999, over $49 million of common stock was issued under the Company's DRIP. An additional $25.2 million has been raised through the DRIP program during the first six months of 2000. The Company's Board of Directors approved a stock repurchase program under which the Company may repurchase up to one million shares of its outstanding common stock. The Board's action did not establish a target price or a specific timetable for repurchase. During 1999, the Company repurchased 125,300 shares at a cost of $3.0 million. No additional shares were repurchased during the first six months of 2000. As of June 30, 2000, the weighted average rate of interest on mortgage debt is 7.4% and the weighted average maturity is approximately 11 years. Approximately 99% of the debt is fixed rate. This limits the exposure to changes in interest rates, minimizing the effect on results of operations and financial condition. The following table sets forth information regarding the mortgage indebtedness at June 30, 2000.
Principal Interest Balance as of Rate % as of Maturity June 30, 2000 Communities Location June 30, 2000 Date (000's) ----------- -------- ------------- ---- ------- Fixed Rate: Philadelphia (2 properties) Philadelphia, PA 8.0000 10/01/00 $25,168 Philadelphia (2 properties) Philadelphia, PA 8.5000 11/01/01 4,655 Royal Gardens Piscataway, NJ 7.6600 08/01/02 11,238 The Colony Mount Prospect, IL 7.6000 08/01/02 16,037 New York (4 properties) Upstate, NY 7.7500 11/01/02 19,023 Broadlawn Bryn Mawr, PA 8.1700 08/01/03 11,907 Elmwood Terrace Frederick, MD 8.2500 11/01/03 4,665 Racquet Club Levittown, PA 7.6250 11/01/03 11,876 Curren Terrace Norristown, PA 8.3550 11/01/03 9,372 Rolling Park Baltimore, MD 7.8750 11/01/03 2,771 Sherry Lake Conshohocken, PA 7.8750 01/01/04 6,359 Glen Manor Glenolden, PA 8.1250 05/01/04 3,617 Colonies Steger, IL 8.8750 05/01/04 12,185 Springcreek/Mendon Dansville, NY 7.6300 08/01/04 * 3,062 William Henry Malvern, PA 7.6400 10/01/05 14,274 Idylwood Cheektowaga, NY 8.6250 11/01/05 9,172 Carriage Hill Dearborn, MI 7.3600 01/01/06 3,802 Carriage Park Dearborn, MI 7.4800 01/01/06 5,478 Cherry Hill Village Dearborn, MI 7.9900 01/01/06 4,452 Castle Club Morrisville, PA 9.5500 03/01/05 3,735 Mid-Island Bay-Shore, NY 7.5000 05/01/06 * 6,675 Newcastle Rochester, NY 7.9000 07/31/06 * 6,000 Country Village Bel Air, MD 8.3850 08/01/06 6,572 Raintree Tonawanda, NY 8.5000 11/01/06 6,240 Woodgate Spencerport, NY 7.8650 01/01/07 3,387 Strawberry Hill Baltimore, MD 8.2550 05/01/07 2,044 Seminary Towers Alexandria, VA 8.3100 07/01/07 5.041 Pavilion Rockville, MD 7.4500 01/01/08 3,905 Maple Lane South Bend, IN 7.2050 01/01/08 5,929 Valley Park South Bethlehem, PA 6.9300 01/01/08 9,909 Hamlet Court Rochester, NY 7.1100 02/01/08 1,751 Candlewood Apartments Mishawaka, IN 7.0200 02/01/08 7,713 Detroit (10 properties) Detroit, MI 7.5100 06/01/08 48,129 Canterbury Baltimore, MD 7.6700 06/01/08 2,179 Sherwood Gardens Levittown, PA 6.9800 07/01/08 3,044 Golf Club West Chester, PA 6.5850 12/01/08 17,010 Mansion House Bryn Mawr, PA 7.5000 01/01/09 686 Philadelphia (4 properties) Philadelphia, PA 8.0000 07/28/09 15,750 Old Friends Baltimore, MD 6.7300 08/01/09 2,398 Multi-Property (7) Various 7.5750 05/01/10 45,400 Conifer Village Baldwinsville, NY 7.2000 06/01/10 2,445 Ridgeway Lansdowne, PA 8.3750 11/01/10 1,139 Multi-Property (3) Various 7.2500 01/01/11 32,978 Multi-Property (7) Various 6.1600 01/01/11 58,881 Timbercroft Owings Mills, MD 8.5000 05/01/11 925 Timbercroft Owings Mills, MD 8.0000 02/01/12 1,242 Village Square Glen Burnie, MD 7.0000 11/01/12 1,027 Baltimore (2 properties) Baltimore, MD 6.9900 05/01/13 19,917 Multi-Property (22) Various 6.4750 08/31/13 100,000 Deerfield Woods Dearborn, MI 7.0000 01/01/14 3,443 Springwells Dearborn, MI 8.0000 07/01/15 11,463 Pines of Perinton Fairport, NY 8.5000 05/01/18 8,572 Canterbury Baltimore, MD 8.2500 06/01/18 6,736 Pavilion Rockville, MD 8.0000 11/01/18 8,822 Bonnie Ridge Baltimore, MD 6.6000 12/15/18 19,240 Timbercroft Owings Mills, MD 8.3750 06/01/19 5,775 Canterbury Baltimore, MD 7.5000 09/01/19 3,681 Fairways at Village Green Tonawanda, NY 8.2300 10/01/19 4,307 Raintree Island Tonawanda, NY 8.5000 04/30/20 1,150 Chestnut Crossing Newark, DE 9.3400 07/01/20 9,895 Macomb Manor Dearborn, MI 8.6300 06/01/21 4,058 Village Square Glen Burnie, MD 8.1250 08/01/21 6,548 Doub Meadow Hagerstown, MD 7.5000 10/01/21 2,891 Canterbury Baltimore, MD 7.5000 11/01/21 2,564 Shakespeare Park Randallstown, MD 7.5000 01/01/24 2,614 Gateway Village Jessup, MD 8.0000 05/01/30 6,383 Owings Run Owings Mills, MD 8.0000 10/01/35 17,625 Owings Run Owings Mills, MD 8.0000 06/01/36 14,689 ------ 741,620 ------- Variable Rate: Maple Lane South Bend, IN 5.050 07/27/07 6,335 ------ $747,955 ========
* The interest rate on these mortgages will convert to a variable rate on various dates between 2000 and 2003 and continue until maturity. Results of Operations Comparison of six months ended June 30, 2000 to the same period in 1999 The Company had 95 apartment communities with 23,530 units which were owned during both of the six and three month periods being presented (the "Core Properties"). The Company has acquired an additional 40 apartment communities with 13,155 units during 1999 and 2000 (the "Acquired Communities"). The inclusion of these Acquired Communities generally accounted for the significant changes in operating results for the six and three months ended June 30, 2000. A summary of the Core Property net operating income is as follows:
Six Months Three Months ---------- ------------ 2000 1999 % Chg 2000 1999 % Chg ---- ---- ----- ---- ---- ----- Rent $92,109,000 $87,368,000 5.4% $46,575,000 $43,919,000 6.0% Property other income 3,381,000 2,669,000 26.7% 1,778,000 1,382,000 28.7% ------------- ----------- ------- ------------- ------------ ----- Total income 95,490,000 90,037,000 6.1% 48,353,000 45,301,000 6.7% Operating and Maintenance ( 41,597,000) (40,066,000) (3.8%) (20,010,000) (19,310,000) (3.6%) ----------- ----------- ------ ------------ ------------ ------ Net operating income $53,893,000 $49,971,000 7.8% $28,343,000 $25,991,000 9.0% =========== =========== ==== =========== =========== ====
Of the $52,362,000 increase in rental income, $47,621,000 is attributable to the Acquired Communities. The balance of this increase, which is from the Core Properties, was the result of an increase of 5.7% in weighted average rental rates, less a decrease in occupancy from 94.7 to 94.5%. Of the $2,392,000 increase in property other income, $1,680,000 is attributable to the Acquired Communities, with $712,000 representing a 26.7% increase for the Core Properties. This increase reflects increased laundry, furniture/corporate/cable rental activity, application fees, late charges and interest income on escrow deposits. Interest and dividend income decreased $177,000, with interest income from increased levels of financing to affiliates more than offset by a reduction of $714,000 in dividend income from an investment in available-for-sale securities. Other income decreased by $1,472,000 due primarily to a decreased level of development activity. The decreased development fees are attributable to reserves recorded for advances, construction overruns and a reduction in the success rate of receiving tax credit allocations for New York State development projects. Of the $20,650,000 increase in operating and maintenance expenses, $19,119,000 is attributable to the Acquired Communities. The balance for the Core Properties represents a 3.8% increase over 1999. The major areas of increase in the Core Properties occurred in repairs and maintenance, personnel and real estate taxes, offset by a savings in advertising and snow removal costs. General and administrative expense increased in 2000 by $1,993,000, or 46%. General and administrative expenses as a percentage of total revenues was 4.2% for 2000 and 4.4% for 1999. During the second quarter of 2000, the Company sold, at a loss of $462,000, a 150-unit community located in Pittsburgh, Pennsylvania. Comparison of three months ended June 30, 2000 to the same period in 1999 Of the $28,460,000 increase in rental income, $25,804,000 is attributable to the Acquired Communities. The balance of this increase, which is from the Core Properties, was the result of an increase of 5.6% in weighted average rental rates, plus an increase in occupancy from 94.6% to 94.9%. Of the $1,402,000 increase in property other income, $1,006,000 is attributable to the Acquired Communities, with $396,000 representing a 28.7% increase for the Core Properties. This increase reflects increased laundry, furniture/corporate/cable revenue, application fees, late charges and interest income on escrow deposits. Interest and dividend income increased $91,000, primarily attributable to an increase in construction loans and advances made to affiliated tax credit development partnerships, offset by a reduction of $319,000 in dividend income from an investment in available-for-sale securities. Of the $10,695,000 increase in operating and maintenance expenses, $9,995,000 is attributable to the Acquired Communities. The balance for the Core Properties represents a 3.6% increase over 1999. The major areas of increase occurred in repairs and maintenance, personnel, and property insurance, offset in part by reductions in advertising expenses and snow removal costs. Funds From Operations Management considers funds from operations ("FFO") to be an appropriate measure of performance of an equity REIT. Effective January 1, 2000 the National Association of Real Estate Investment Trusts ("NAREIT") clarified the White Paper definition of FFO as income (loss) before gains (losses) from the sale of property and extraordinary items, before minority interest in the Operating Partnership, plus real estate depreciation. Management believes that in order to facilitate a clear understanding of the combined historical operating results of the Company, FFO should be considered in conjunction with net income as presented in the consolidated financial statements included elsewhere herein. FFO 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. FFO should not be considered as an alternative to net income as an indication of the Company's performance or to cash flow as a measure of liquidity. For the six months ended June 30, 1999, the Company's previously reported FFO excluded a nonrecurring loss on available-for-sale securities of $2,123 in conformance with the NAREIT definition of FFO calculations then in place ("Original Definition"). The Company has adopted NAREIT's new FFO calculation, pursuant to NAREIT's White Paper dated October 1999, which modifies the FFO calculation to include certain nonrecurring charges ("Clarified Definition"). Although both FFO calculations are presented in the table below, the Company believes the comparison of FFO using the Original Definition represents the best guide to investors of comparable operations and growth between years. The calculation of FFO for the previous six quarters are presented below:
June 30 March 31 Dec. 31 Sept. 30 June 30 March 31 2000 2000 1999 1999 1999 1999 ---- ---- ---- ---- ---- ---- Net income available to common Shareholders $7,559 $6,554 $7,931 $5,010 $6,191 $6,011 Preferred dividends 2,534 1,928 1,141 - - - Minority interest 6,401 5,160 6,524 4,137 3,386 3,343 Extraordinary item - - - 96 - - Non-recurring acquisition - expense - - - 6,225 - Depreciation from real property 12,734 11,622 11,717 9,574 8,247 7,477 Depreciation from real property from unconsolidated entities 98 143 90 147 153 84 Loss from sale of property 462 - - - 1,650 * - -------- -------- -------- ------- ------- ------- FFO (original definition) 29,788 $25,407 $27,403 $25,189 $19,627 $16,915 Non-recurring acquisition expense - - - (6,225) - - Loss on available-for-sale securities - - - - ( 2,123) - ------------ ------------ ------------- ------------ --------- ------- FFO (clarified definition) $29,788 $25,407 $27,403 $18,964 $17,504 $16,915 ======= ======= ======== ======= ======= ======= Weighted average common shares/units outstanding: Basic 35,846.3 34,123.2 35,116.1 34,485.9 28,530.2 27,810.1 ======== ======== ======== ======== ======== ======== Diluted 40,249.9 37,586.7 36,904.1 34,630.9 28,634.8 27,898.4 ======== ======== ======== ======== ======== ========
* Includes the loss from disposition of property investment separately disclosed as loss on available-for-sale securities. All REITs may not be using the strict White Paper definition for new FFO. Accordingly, the above presentation may not be comparable to other similarly titled measures of FFO of other REITs. Impact of the Year 2000 on System Processing The Year 2000 ("Y2K") problem concerned the inability of information systems to properly recognize and process date-sensitive information beyond January 1, 2000. As a result, the Y2K problem could have affected any system that uses date data, including mainframes, PCs, and embedded microprocessors that control security systems, call processing systems, building climate systems, elevators, office equipment and fire alarms. Since January 1, 2000 and the critical leap year date, the Company has not experienced any disruption to its business operations as a result of Y2K compliance problems. One software application displayed the wrong date in a non-critical field. The date display is purely cosmetic and an updated version was installed during the first quarter of 2000. The Company will continue to monitor the operation of its computers and microprocessor controlled systems for any Y2K related problems. Recent Accounting Pronouncements The Company is evaluating the time period over which it recognizes revenue relating to development fees earned relative to its affordable housing activities in connection with Staff Accounting Bulletin 101. An adjustment, if any, is not expected to have a material effect on reported results of operations or financial position. Inflation Substantially all of the leases at the communities are for a term of one year or less, which enables the Company to seek increased rents upon renewal of existing leases or commencement of new leases. These short-term leases minimize the potential adverse effect of inflation on rental income, although residents may leave without penalty at the end of their lease terms and may do so if rents are increased significantly. Declaration of Dividend On August 1, 2000, the Board of Directors approved a dividend of $.53 per share for the period from April 1, 2000 to June 30, 2000. This is the equivalent of an annual distribution of $2.12 per share. The dividend is payable August 24, 2000 to shareholders of record on August 14, 2000. PART II - OTHER INFORMATION HOME PROPERTIES OF NEW YORK, INC. Item 6. Exhibits and Reports or Form 8-K (a) Exhibits: 10.1 Amendment No. Thirty-Three to the Second Amended and Restated Limited Partnership Agreement. 10.2 Amendment No. Thirty-Five to the Second Amended and Restated Limited Partnership Agreement. 10.3 Amendment Nos. Thirty-Four and Thirty-Six to the Second Amended and Restated Limited Partnership Agreement. 27 Financial Data Schedule (b) Reports on Form 8-K: - Form 8K was filed on May 22, 2000, date of report May 19, 2000 with respect to Items 5 and 7 disclosures regarding the Registrant's entering into a Purchase Agreement for the issuance of 200,000 shares of Series C Cumulative Convertible Preferred Stock. - Form 8K was filed on June 12, 2000, date of report June 2, 2000, with respect to Items 5 and 7 disclosures regarding the Registrant's entering into a Purchase Agreement for the issuance of 250,000 shares of Series D Cumulative Convertible Preferred Stock. - Form 8K was filed on June 30, 2000, date of report June 13, 2000, with respect to Items 5 and 7 disclosures regarding the Registrant's entering into a Purchase Agreement for the issuance of 200,000 shares of Series C Cumulative Convertible Preferred Stock. 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 OF NEW YORK, INC. --------------------------------- (Registrant) Date: August 10, 2000 ------------------------------- By: /s/ David P. Gardner ---------------------------------- David P. Gardner Vice President Chief Financial Officer and Treasurer Date: August 10, 2000 ----------------------------- By: /s/ David P. Gardner ---------------------------------- David P. Gardner Vice President Chief Financial Officer and Treasurer