hme8k4q2007earnings.htm

FOR IMMEDIATE RELEASE

HOME PROPERTIES REPORTS

FOURTH QUARTER AND YEAR-END 2007 RESULTS

ROCHESTER, NY, FEBRUARY 21, 2008 – Home Properties (NYSE:HME) today released financial results for the fourth quarter and year ended December 31, 2007. All results are reported on a diluted basis.

“Home Properties’ Funds From Operations per share for 2007 was the highest in the Company’s history, reflecting the success of major initiatives completed during the year, including the utility cost recovery programs,” said Edward J. Pettinella, President and CEO. “Despite a weaker economic environment in 2008, results will be positively affected by our defensive geographic footprint and Class B property type as well as by the full implementation of Web-based property management and centralized rent pricing systems.”

Earnings per share ("EPS") for the quarter ended December 31, 2007 was $0.48, compared to $2.33 for the quarter ended December 31, 2006. The reduction in earnings is due primarily to a net $66.3 million (after the allocation of minority interest) decrease in gain on disposition of property, or $1.94 per share. EPS for the year ended December 31, 2007 was $1.73, compared to $3.15 for the year ended December 31, 2006. The year-over-year decrease of $1.42 per share is mainly attributable to a $1.47 per share impact of reduced property gains on sale of real estate for the year.

For the quarter ended December 31, 2007, Funds From Operations ("FFO") was $36.7 million, or $0.79 per share, compared to $36.4 million, or $0.77 per share, for the quarter ended December 31, 2006. For the year ended December 31, 2007, FFO was $151.1 million, or $3.20 per share, compared to $147.1 million, or $3.07 per share, for the year ended December 31, 2006. Excluding the non-cash charge of $0.04 in the 2007 first quarter related to costs associated with the initial offering of the Series F preferred shares which were redeemed, Operating FFO for 2007 was $3.24, a 5.6% increase over 2006. A reconciliation of GAAP net income to FFO is included in the financial data accompanying this news release.

Fourth Quarter Operating Results

For the fourth quarter of 2007, same-property comparisons (for 108 “Core” properties containing 32,600 apartment units owned since January 1, 2006) reflected an increase in total revenues of 3.7% compared to the same quarter a year ago. Net operating income (“NOI”) increased by 3.1% from the fourth quarter of 2006. Property level operating expenses increased by 4.5% for the quarter, primarily due to increases in personnel costs, property insurance, and snow removal costs, offset in part by a reduction in natural gas heating costs.

Home Properties Reports Fourth Quarter and Year-End 2007 Results

For Immediate Release: February 21, 2008

Page 2 of 8

Average physical occupancy for the Core properties was 94.6% during the fourth quarter of 2007 compared to 94.4% during the fourth quarter of 2006. Average monthly rental rates, including utility recoveries, increased 3.9% compared to the year-ago period.

On a sequential basis, compared to the 2007 third quarter results for the Core properties, total revenues were up 1.5% in the fourth quarter of 2007, expenses were up 9.4%, and net operating income was down 3.6%. Average physical occupancy decreased 0.4% to 94.6%; however, average monthly rental rates including utility recoveries were 2.3% higher and rental income including utility recoveries posted a 1.8% increase. The sequential expense growth can be attributed to typical seasonality of higher natural gas heating and snow removal costs incurred in the fourth quarter.

Occupancies for the 4,896 net apartment units acquired/developed between January 1, 2006 and December 31, 2007 (the “Recently Acquired Communities”) averaged 94.4% during the fourth quarter of 2007, at average monthly rents of $1,111.

Year-to-Date Operating Results

For the year ended December 31, 2007, same-property comparisons for the Core properties reflected an increase in total revenues of 4.0%, resulting in a 5.0% increase in net operating income compared to 2006. Property level operating expenses increased by 2.8%, primarily due to increases in personnel costs, property insurance, real estate taxes, and snow removal costs, offset in part by a reduction in repairs and maintenance expense.

Average physical occupancy for the Core properties was 94.8% during 2007, compared to 94.7% a year ago, with rent, including utility recoveries, rising 4.3%.

Acquisitions

The Company previously announced the acquisition during the 2007 fourth quarter of Dunfield Townhomes, a 312-unit property located in White Marsh, MD, for $32.2 million.

For the full year 2007, Home Properties acquired a total of five communities with 1,541 units for total consideration of $161.5 million. The weighted average expected first year capitalization rate (“cap rate”) for the acquired communities was 5.9%.

Dispositions

During the fourth quarter of 2007, the Company closed on two separate sale transactions, with a total of 309 units, for $38.9 million. A gain on sale of approximately $14.5 million, before the allocation of minority interest, was recorded in the fourth quarter related to these sales. The weighted average cap rate for these dispositions was 6.1%.

For the full year 2007, Home Properties sold five communities with 1,084 units for total consideration of $129.5 million. The weighted average cap rate for the sold communities was 5.9%. Subsequent to the end of the quarter, the Company closed on two separate transactions for the sale of six properties with a total of 503 units for $57.1 million. A gain on sale of

Home Properties Reports Fourth Quarter and Year-End 2007 Results

For Immediate Release: February 21, 2008

Page 3 of 8

approximately $25 million (before allocation of minority interest) will be recorded in the first quarter of 2008. The weighted average cap rate for these dispositions was 6.2%.

Capital Markets Activities

As of December 31, 2007, the Company’s ratio of debt-to-total market capitalization was 51.3% (based on a 12/31/2007 stock price of $44.85 to determine equity value), with $2.5 million outstanding on its $140 million revolving credit facility and $6.1 million of unrestricted cash on hand. Mortgage debt of $1.99 billion was outstanding, at rates of interest averaging 5.7% and with staggered maturities averaging approximately six and one-half years and exchangeable senior notes outstanding of $200 million. Approximately 98.6% of total indebtedness is at fixed rates. Interest coverage averaged 2.2 times during the quarter (2.3 for the year); and the fixed charge ratio averaged 2.1 times for the quarter (2.2 for the year).

During the fourth quarter of 2007, the Company repurchased 817,000 of its common shares for $36.5 million, or a weighted average price of $44.73 per share. For the year, the total shares repurchased were 1,243,700 shares for $58.3 million, or $46.86 per share. As of December 31, 2007, the Company has Board authorization to buy back up to approximately 1.4 million additional shares of its common stock or Operating Partnership Units.

Outlook

For 2008, the Company expects FFO per share between $3.31 and $3.47 per share, which will produce FFO per share growth of 3.4% to 8.4% when compared to 2007 results. This guidance range reflects management’s current assessment of economic and market conditions. The assumptions for the 2008 projections are included with the published supplemental information.

The quarterly breakdown for the 2008 guidance on FFO per share results is as follows: First quarter $0.75 to $0.79; second quarter $0.84 to $0.88; third quarter $0.86 to $0.90; fourth quarter $0.86 to $0.90.

Earnings Conference Call

The Company will conduct a conference call and simultaneous webcast tomorrow at 11:00 AM Eastern Time to review and comment on the information reported in this release. To listen to the call, please dial 800-266-2145 (International 212-676-5362). A replay of the call will be available through February 29, 2008, by dialing 800-633-8284 or 402-977-9140 and entering 21354474. The Company webcast, which includes a slide presentation, will be available, live at 11:00 AM and archived by 1:00 PM, through the "Investors" section of our Web site, homeproperties.com, on the Investor Relations home page.

The Company produces supplemental information that provides details regarding property operations, other income, acquisitions, sales, market geographic breakdown, debt and new development. The supplemental information is available via the Company's Web site, e-mail or facsimile upon request.

Home Properties Reports Fourth Quarter and Year-End 2007 Results

For Immediate Release: February 21, 2008

Page 4 of 8

First Quarter 2008 Event

Home Properties is scheduled to participate in a roundtable presentation and question and answer session at the Citi 2008 Global Property CEO Conference in Palm Beach, Florida, at 8:25 AM EST on Monday, March 3, 2008. Citi will offer audio coverage of the event, accessible by dialing 719-234-7878 and entering the passcode, "394890." A replay will be available a few hours after the session ends. The Company's presentation materials will be available in the Investors section of Home Properties’ Web site at homeproperties.com under News & Events – Webcasts & Presentations.

This press release contains forward-looking statements. Although the Company believes expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Factors that may cause actual results to differ include general economic and local real estate conditions, the weather and other conditions that might affect operating expenses, the timely completion of repositioning and new development activities within anticipated budgets, the actual pace of future acquisitions and dispositions, and continued access to capital to fund growth.

Home Properties is a publicly traded apartment real estate investment trust that owns, operates, develops, acquires and rehabilitates apartment communities primarily in selected Northeast, Mid-Atlantic and Southeast Florida markets. Currently, Home Properties operates 119 communities containing 38,143 apartment units. Of these, 36,993 units in 117 communities are owned directly by the Company; 868 units are partially owned and managed by the Company as general partner, and 282 units are managed for other owners. For more information, visit Home Properties’ Web site at homeproperties.com.

Tables to follow.

Home Properties Reports Fourth Quarter and Year-End 2007 Results

For Immediate Release: February 21, 2008

Page 5 of 8

	Avg. Physical
Fourth Quarter Results:	Occupancy(a)				4Q '07		4Q '07 vs. 4Q '06 % Growth
					Average
					Monthly
	4Q		4Q		Rent /		Rental			Total			Total
	'07		'06		Occ Unit		Rates			Revenue			Expense			NOI
Core Properties(b)	94.6	%	94.4	%	$	1,114		2.5	%		3.7	%		4.5	%		3.1	%
Acquisition Properties(c)	94.4	%	NA		$	1,111	NA			NA			NA			NA
TOTAL PORTFOLIO	94.6	%	94.4	%	$	1,113	NA			NA			NA			NA


	Avg. Physical
Year-To-Date Results:	Occupancy(a)				YTD '07		YTD '07 vs. YTD '06 % Growth
					Average
					Monthly
	YTD		YTD		Rent /		Rental			Total			Total
	'07		'06		Occ Unit		Rates			Revenue			Expense			NOI
Core Properties(b)	94.8	%	94.7	%	$	1,101		2.5	%		4.0	%		2.8	%		5.0	%
Acquisition Properties(c)	94.2	%	NA		$	1,110	NA			NA			NA			NA
TOTAL PORTFOLIO	94.7	%	94.7	%	$	1,101	NA			NA			NA			NA

(a)	Average physical occupancy is defined as total possible rental income, net of vacancy, as a percentage of total possible rental income. Total possible rental income is determined by valuing occupied units at contract rates and vacant units at market rents.

(b)	Core Properties consist of 108 properties with 32,600 apartment units owned throughout 2006 and 2007.

(c)	Acquisition Properties consist of 15 properties with 4,896 apartment units acquired/developed subsequent to January 1, 2006.

Home Properties Reports Fourth Quarter and Year-End 2007 Results

For Immediate Release: February 21, 2008

Page 6 of 8

HOME PROPERTIES, INC.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data – Unaudited)

	Three Months Ended						Year Ended
	31-Dec						31-Dec
	2007			2006			2007			2006
Rental income	$	117,987		$	106,109		$	464,324		$	408,119
Property other income		9,639			7,418			37,777			26,877
Interest income		277			998			1,963			1,761
Other income		62			755			1,124			3,468
Total revenues		127,965			115,280			505,188			440,225
Operating and maintenance		54,749			48,190			211,126			184,860
General and administrative		5,783			5,923			23,413			22,626
Interest		30,506			27,294			119,383			104,735
Depreciation and amortization		28,350			25,124			110,329			92,902
Total expenses		119,388			106,531			464,251			405,123
Income from operations		8,577			8,749			40,937			35,102
Minority interest in Operating Partnership		(2,478	)		(2,122	)		(10,824	)		(8,847	)
Income from continuing operations		6,099			6,627			30,113			26,255
Discontinued operations
Income (loss) from operations, net of minority interest		(472	)		(2,281	)		1,354			5,482
Gain on disposition of property, net of minority interest		10,330			76,587			30,077			78,748
Discontinued operations		9,858			74,306			31,431			84,230
Net Income		15,957			80,933			61,544			110,485
Preferred dividends		-			(1,350	)		(1,290	)		(5,400	)
Redemption of preferred stock		-			-			(1,902	)		-
Net income available to common shareholders	$	15,957		$	79,583		$	58,352		$	105,085
Reconciliation from net income available to common shareholders to Funds From Operations:
Net income available to common shareholders	$	15,957		$	79,583		$	58,352		$	105,085
Real property depreciation and amortization		27,914			25,404			110,536			99,421
Minority interest		2,478			2,122			10,824			8,847
Minority interest – income (loss) from discontinued operations		(192	)		(918	)		542			2,714
Gain on disposition of property, net of minority interest		(10,330	)		(76,587	)		(30,077	)		(78,748	)
Loss from early extinguishment of debt in connection with sale of real estate		890			6,800			890			9,770
FFO - basic (1)	$	36,717		$	36,404		$	151,067		$	147,089

(1)

Pursuant to the revised definition of Funds From Operations adopted by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT"), FFO is defined as net income (computed in accordance with accounting principles generally accepted in the United States of America ("GAAP")) excluding gains or losses from disposition of property, minority interest and extraordinary items plus depreciation from real property. Because of the limitations of the FFO definition as published by NAREIT as set forth above, the Company has made certain interpretations in applying the definition. The Company believes all adjustments not specifically provided for are consistent with the definition. Other similarly titled measures may not be calculated in the same manner.

Home Properties Reports Fourth Quarter and Year-End 2007 Results

For Immediate Release: February 21, 2008

Page 7 of 8

HOME PROPERTIES, INC.

SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data – Unaudited)

	Three Months Ended						Year Ended
	31-Dec						31-Dec
	2007			2006			2007			2006
FFO – basic	$	36,717		$	36,404		$	151,067		$	147,089
Preferred dividends - convertible preferred stock (2)		-			-			-			-
FFO – diluted	$	36,717		$	36,404		$	151,067		$	147,089

FFO – basic	$	36,717		$	36,404		$	151,067		$	147,089
Preferred dividends - convertible preferred stock (2)		-			-			-			-
Redemption of Series F Preferred stock		-			-			1,902			-
FFO - operating (4)	$	36,717		$	36,404		$	152,969		$	147,089

FFO – basic	$	36,717		$	36,404		$	151,067		$	147,089
Preferred dividends - convertible preferred stock (2)		-			-			-			-
Recurring non-revenue generating capital expenses		(7,157	)		(5,077	)		(28,638	)		(21,559	)
AFFO (5)	$	29,560		$	31,327		$	122,429		$	125,530

FFO – operating	$	36,717		$	36,404		$	152,969		$	147,089
Recurring non-revenue generating capital expenses		(7,157	)		(5,077	)		(28,638	)		(21,559	)
AFFO - operating	$	29,560		$	31,327		$	124,331		$	125,530
Weighted average shares/units outstanding:
Shares – basic		32,873.7			33,254.5			33,130.1			32,697.8
Shares – diluted		33,346.3			34,091.4			33,794.5			33,337.6
Shares/units – basic (3)		46,268.4			46,620.4			46,520.7			47,262.7
Shares/units – diluted (3)		46,741.0			47,457.3			47,185.2			47,902.4
Per share/unit:
Net income – basic	$	0.49		$	2.39		$	1.76		$	3.21
Net income – diluted	$	0.48		$	2.33		$	1.73		$	3.15
FFO – basic	$	0.79		$	0.78		$	3.25		$	3.11
FFO – diluted	$	0.79		$	0.77		$	3.20		$	3.07
Operating FFO – diluted, before preferred stock redemption (4)	$	0.79		$	0.77		$	3.24		$	3.07
AFFO (5)	$	0.63		$	0.66		$	2.59		$	2.62
Operating AFFO – before preferred stock redemption (4) (5)	$	0.63		$	0.66		$	2.63		$	2.62
Common Dividend paid	$	0.66		$	0.65		$	2.61		$	2.57

(2)	There was no convertible preferred stock outstanding during the periods presented.

(3)	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.

(4)	Operating FFO is defined as FFO as computed in accordance with NAREIT definition, adjusted for the addback of real estate impairment charges and preferred stock redemption costs. This is presented for a consistent comparison of how NAREIT defined FFO in 2003.

(5)

Adjusted Funds From Operations ("AFFO") is defined as gross FFO less an annual reserve for anticipated recurring, non-revenue generating capitalized costs of $760 and $525 per apartment unit in 2007 and 2006, respectively. The resulting sum is divided by the weighted average shares/units on a diluted basis to arrive at AFFO per share/unit.

Home Properties Reports Fourth Quarter and Year-End 2007 Results

For Immediate Release: February 21, 2008

Page 8 of 8

HOME PROPERTIES, INC.

SUMMARY CONSOLIDATED BALANCE SHEETS

(in thousands - Unaudited)

	December 31,
	2007			2006
Land	$	510,120		$	493,017
Construction in progress, including land		54,069			1,409
Buildings, improvements and equipment		3,115,966			2,957,336
		3,680,155			3,451,762
Accumulated depreciation		(543,917	)		(450,129	)
Real estate, net		3,136,238			3,001,633

Cash and cash equivalents		6,109			118,212
Cash in escrows		31,005			74,069
Accounts receivable		11,109			9,287
Prepaid expenses		15,560			15,059
Deferred charges		12,371			13,619
Other assets		4,031			8,539
Total assets	$	3,216,423		$	3,240,418
Mortgage notes payable	$	1,986,789		$	1,924,313
Exchangeable senior notes		200,000			200,000
Line of credit		2,500			-
Accounts payable		18,616			20,797
Accrued interest payable		10,984			10,473
Accrued expenses and other liabilities		27,586			24,697
Security deposits		22,826			21,979
Total liabilities		2,269,301			2,202,259

Minority interest		279,061			282,542
Stockholders’ equity		668,061			755,617
Total liabilities and stockholders’ equity	$	3,216,423		$	3,240,418

Total shares/units outstanding:
Common stock		32,600.6			33,103.2
Operating partnership units		13,446.9			13,290.4
		46,047.5			46,393.6

# # #

For further information:

David P. Gardner, Executive Vice President and Chief Financial Officer, (585) 246-4113

Charis W. Warshof, Vice President, Investor Relations, (585) 295-4237

MARYLAND	1-13136	16-1455126
(State or other jurisdiction	(Commission	(IRS Employer
of incorporation)	File Number)	Identification Number)

¨	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))

Dated:	February 22, 2008	HOME PROPERTIES, INC.
		(Registrant)




		By:	/s/ David P. Gardner
			David P. Gardner
			Executive Vice President and
			Chief Financial Officer