-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, J0ljPKL9wyGk0JhWAlACEb1ormu2Fv36dJbVdSSZKCHVXyiYmZW0EVlBiGs3webx B8TjI6wQA93juRir9TiydA== 0000923118-99-000003.txt : 19990322 0000923118-99-000003.hdr.sgml : 19990322 ACCESSION NUMBER: 0000923118-99-000003 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990319 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME PROPERTIES OF NEW YORK INC CENTRAL INDEX KEY: 0000923118 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 161455126 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13136 FILM NUMBER: 99569071 BUSINESS ADDRESS: STREET 1: 850 CLINTON SQ CITY: ROCHESTER STATE: NY ZIP: 14604 BUSINESS PHONE: 7162464105 MAIL ADDRESS: STREET 1: 850 CLINTON SQUARE CITY: ROCHESTER STATE: NY ZIP: 14604 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998 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 16-1455126 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 850 CLINTON SQUARE ROCHESTER, NEW YORK 14604 (Address of principal executive offices) Registrant's telephone number, including area code: (716) 546-4900 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on TITLE OF EACH CLASS WHICH REGISTERED Common Stock, $.01 par value New York Stock Exchange 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. X The aggregate market value of the shares of common stock held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on March 15, 1999 was approximately $426,957,923. As of March 15, 1999, there were 18,108,175 shares of common stock, $.01 par value outstanding. DOCUMENTS INCORPORATED BY REFERENCE The proxy statement to be issued in connection with the Company's 1999 Annual Meeting of Stockholders is incorporated by reference into Items 11, 12 and 13 of Part III of this Report. HOME PROPERTIES OF NEW YORK, INC. TABLE OF CONTENTS PART I. Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item X. Executive Officers and Key Employees PART II. Item 5. Market of the Registrant's Common Equity and Related Shareholder Matters Item 6. Selected Financial and Operating Information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III. Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K PART I ITEM 1. BUSINESS THE COMPANY Home Properties of New York, Inc. ("Home Properties" or the "Company") is a self-administered and self-managed real estate investment trust ("REIT") that owns, manages, acquires and develops apartment communities in the Northeastern, Mid-Atlantic and Midwestern United States. It was formed to continue and expand the operations of Home Leasing Corporation ("Home Leasing"). The Company completed an initial public offering of 5,408,000 shares of common stock (the "IPO") on August 4, 1994. The Company conducts its business through Home Properties of New York, L.P. (the "Operating Partnership"), a New York limited partnership in which the Company held a 64% partnership interest as of December 31, 1998 (56.1% at December 31, 1997) and two management companies (the "Management Companies") - Home Properties Management, Inc. ("HP Management") and Conifer Realty Corporation ("Conifer Realty"), both of which are Maryland corporations. Home Properties, through its affiliates described above, as of December 31, 1998, operated 259 communities with 34,229 apartment units. Of these, 23,936 units in 97 communities are owned outright (the "Owned Properties"), 7,482 units in 123 communities are managed and partially owned by the Company as general partner, and 2,811 units in 39 communities are managed for other owners (collectively, the "Managed Properties"). The Management Companies are also involved in the development and redevelopment of government-assisted apartment communities and certain other development activities. The Owned Properties and the Managed Properties (collectively, the "Properties") are concentrated in the following market areas: APARTMENTS OWNED AND MANAGED AT 12/31/98
APTS. APTS. MANAGED AS APTS. APT. MARKET AREA OWNED GENERAL PARTNER FEE MANAGED TOTALS Detroit, MI 4,294 0 1,020 5,314 Eastern PA 3,169 0 0 3,169 Rochester, NY 2,975 1,359 668 5,002 Northern NJ 2,913 0 0 2,913 Buffalo, NY 2,519 156 0 2,675 Baltimore, MD 1,733 0 56 1,789 Downstate NY 1,605 235 0 1,840 Syracuse, NY 1,564 1,274 260 3,098 Chicago, IL 672 0 0 672 Portland, ME 596 0 0 596 Northern VA 548 0 0 548 Hamden, CT 498 0 0 498 South Bend, IN 310 168 0 478 Western PA 298 2,036 225 2,559 Northern/Central OH 242 1,124 0 1,366 Other NYS Areas 0 1,130 582 1,712 Total 23,936 7,482 2,811 34,229
Subsequent to December 31, 1998 and as of March 17, 1999, the Company has acquired 264 additional units consisting of 198 units in Leesburg, Virginia and 66 units in Yeadon, Pennsylvania and transferred 256 units in Plainfield, New Jersey to an affiliated partnership in anticipation of completing a Low Income Housing Tax Credit transaction. The Company's mission is to provide investors with dependable financial returns that exceed those of comparable investments. While pursuing this mission, the Company remains committed to improving the quality of life for its residents, enhancing the broader communities in which the Company operates, providing employees with opportunities for growth and accomplishment. The Company's business strategy includes: (i) aggressively managing and improving its communities to achieve increased net operating income; (ii) acquiring additional apartment communities with attractive returns at prices significantly below replacement costs; (iii) selectively developing and rehabilitating government-assisted apartment communities to maximize development fee income while increasing the number of communities under management; and (iv) maintaining a conservative capital structure with efficient access to the capital markets. STRUCTURE The Company was formed in November, 1993 as a Maryland corporation and is the general partner of the Operating Partnership. On December 31, 1998, it owned a 64% interest in the Operating Partnership - one percent as general partner and the remainder as a limited partner through its wholly owned subsidiary, Home Properties Trust. The other limited partner interests (the "Units") in the Operating Partnership are owned by the officers of the Company and certain individuals who acquired Units in the Operating Partnership as partial consideration for their interests in entities owning apartment communities purchased by the Operating Partnership. In addition, on December 30, 1996, the State of Michigan Retirement Systems acquired 1,666,667 Class A Interests in the Operating Partnership (at December 31, 1998 this represented a 6% interest). The Operating Partnership is a New York limited partnership formed in December, 1993. Holders of Units in the Operating Partnership may redeem a Unit for one share of the Company's common stock or cash equal to the fair market value at the time of the redemption, at the option of the Company. The Company currently anticipates that it will issue shares of common stock rather than pay cash in connection with such redemptions. Management expects that it will continue to utilize Units as partial consideration for a significant portion of its acquisition properties. Both of the Management Companies were formed to comply with the technical requirements of federal income tax laws. Both are Maryland corporations. HP Management was formed in January, 1994 and Conifer Realty was formed in December, 1995. As of December 31, 1998, the Operating Partnership held 95% of the economic interest in both Management Companies, with Nelson and Norman Leenhouts (the "Leenhoutses") holding the remaining five percent interest in HP Management and the Leenhoutses and Richard J. Crossed, holding the remaining five percent interest in Conifer Realty. The Management Companies manage, for a fee, certain of the residential, commercial and development activities of the Company and provide construction, development and redevelopment services for the Company. In September 1997, Home Properties Trust ("QRS") was formed as a Maryland real estate trust and as a qualified REIT subsidiary, with 100% of its shares being owned by the Company. The QRS has been admitted as a limited partner of the Operating Partnership and the Company transferred all but one percent of its interest in the Operating Partnership to the QRS. The Company currently has approximately 1,600 employees and its executive offices are located at 850 Clinton Square, Rochester, New York 14604. Its telephone number is (716) 546-4900. OPERATING STRATEGIES The Company will continue to focus on enhancing the investment returns of its Properties by: (i) acquiring apartment communities at prices below new construction costs and repositioning those properties for long-term growth; (ii) reinforcing its decentralized company orientation by encouraging employees' personal improvement and by providing extensive training; (iii) enhancing the quality of living for the Company's residents by improving the quality of service and physical amenities available at each community every year; (iv) readily adopting new technology so that the time spent on administration can be decreased and the time spent attracting and serving residents can be increased; (v) continuing to utilize its written "Pledge" of customer satisfaction that is the foundation on which the Company is building its name-brand recognition; and (vi) engaging in aggressive cost controls and taking advantage of volume discounts, thus benefiting from economies of scale while constantly improving the level of customer service. ACQUISITION AND DEVELOPMENT STRATEGIES The Company's strategy is to make acquisitions in geographic regions that have similar climates, easy access to the Company's headquarters, enough apartments available for acquisition to achieve a critical mass and minimal investment ownership by other apartment REITs. Targeted markets also possess other characteristics similar to the Company's existing markets, including a limited amount of new construction, acquisition opportunities below replacement costs, a mature housing stock and a stable or growing job market. The Company expects that its growth will be focused in select metropolitan areas within the Northeast, Mid-Atlantic and Midwest United States, with a gradual entrance into new geographic regions that possess the above characteristics. It expects to pursue acquisition of individual properties as well as larger portfolios. It may also consider strategic investments in other apartment companies. In addition, the Company intends to continue to develop and re-develop apartment communities utilizing various government programs. These activities are expected to generate development fees, ongoing management and incentive management fees and participation in residual value for the Company. They also increase the Company's volume purchasing ability, provide a pipeline for future acquisitions and re-development opportunities and position the Company to build market rate communities when and if market factors warrant. FINANCING AND CAPITAL STRATEGIES The Company intends to adhere to the following financing policies: (i) maintaining a ratio of debt-to-total market capitalization (total debt of the Company as a percentage of the market value of outstanding common stock and Units plus total debt) of approximately 50% or less; (ii) utilizing primarily fixed rate debt; (iii) varying debt maturities to avoid significant exposure to interest rate changes upon refinancing; and (iv) maintaining a line of credit so that it can respond quickly to acquisition opportunities. On December 31, 1998, the Company's debt was approximately $419 million and the debt-to-total market capitalization ratio was 37% based on the year-end closing price of the Company's stock at $25.75. The weighted average interest rate on the Company's mortgage debt as of December 31, 1998 was 7.2% and the weighted average maturity was approximately 10 years. Debt maturities are staggered. As of December 31, 1998, the Company had an unsecured line of credit facility from Chase Manhattan Bank of $50 million and a $50 million supplemental unsecured facility with M&T Bank. These facilities are available for acquisition and other corporate purposes and bear an interest rate at 1.25% over the one-month LIBOR rate or at a money market rate as quoted on a daily basis by the lending institutions, at the Company's option. As of December 31, 1998, there were no outstandings on the line of credit and the Company had approximately $33 million of cash on hand. The Company also intends to continue to structure creative equity transactions to raise capital with limited transaction costs. During 1998, the Company issued approximately $122 million of common shares under its shelf registration statement, including approximately $49 million (net of underwriter's discount) in its first public offering since going public. Approximately $72 million was also raised in 1998 under the Company's Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Stock Purchase Plan currently provides a 3% discount from the current market price for purchases up to $5,000 by existing shareholders. In its discretion, the Company can permit investments in excess of $5,000 under the Stock Purchase Plan at discounts between 0% and 3%. The Stock Purchase Plan has provided a steady source of capital to fund the Company's continued growth. Officers and Directors of the Company also purchased approximately $10 million of newly issued shares pursuant to the Company's Director, Officer and Employee Stock Purchase and Loan Plan approved by the Company's shareholders at the 1998 Annual Meeting and through the exercise of stock options. In addition, management expects to continue to fund a significant portion of its continued growth by taking advantage of its UPREIT structure and using Units as currency in acquisition transactions. The Company utilized approximately $71 million worth of Units as partial consideration in acquisition transactions during 1998. COMPETITION The Company competes with other multifamily developers and other real estate companies in seeking properties for acquisition, potential residents and land for development. The Company's Properties are primarily in developed areas where there are other properties of the same type which directly compete for residents. The Company, however, believes that its focus on service and resident satisfaction and its focus on attracting senior residents will enable it to maintain its historic occupancy levels. The Company also believes that the moderate level of new construction of multifamily properties in its markets in 1998 will not have a material adverse effect on its turnover rates or ability to increase rents and minimize operating expenses. To date, the Company has faced limited competition in acquiring properties from other REIT's or other operators from outside the region. However, other apartment REITs are becoming more interested in the Company's markets and the Company may encounter competition from others as it seeks attractive properties in a broader geographic area. Given the perceived depth of available opportunities, management does not believe that increased competition will pose a significant problem. MARKET ENVIRONMENT The markets in which Home Properties operates can be characterized as stable, with modest levels of job growth. Occupancies are relatively high, and new apartment construction activity is low relative to the existing multifamily rental housing stock. After considering the obsolescence of older communities and the conversion of rental housing to condominiums or co-ops, the Company views the net increase in the multifamily rental housing stock in the Company's markets as representing only a fraction of the estimated number of new units needed to satisfy increased demand. New construction in the Company's markets for the past two decades has been limited, with most of the existing housing stock built before 1980. In 1998, Home Properties' markets represented 15.7% of the total U.S. households, but only 7.7% of the country's estimated net new supply of multifamily housing units. An analysis of future multifamily supply compared to projected multifamily demand can indicate whether a particular market is tightening, softening or in equilibrium. The second to last column in the following table reflects current estimated net new multifamily supply as a percentage of new multifamily demand for the Company's markets and the United States. Net new multifamily supply as a percent of new multifamily demand for 1998 in the Home Properties' markets was approximately 45%, compared to a national average of 72%. The last column in this table shows the net new multifamily supply as percent of existing multifamily housing stock. In the Company's markets, net new supply only represents 0.5% of the existing multifamily housing stock. This compares to the national average net new multifamily supply estimates at 1.2% of the multifamily housing stock. The information on the following table was compiled by the Company from the sources indicated on the table. The methodology used includes estimates and, while the Company feels that the estimates are reasonable, there can be no assurance that the estimates are accurate. There can also be no assurance that the historical information included on the table will be consistent with future trends.
Home Properties Market Demographics ESTI- ESTI- MATED MATED NET NEW NET NEW DECEM- MULTI- MULTI- BER ESTI- FAMILY FAMILY JOB DECEM- ESTI- MATED SUPPLY SUPPLY GROWTH BER MATED ESTI- ESTI- 1998 AS A AS A 1998 TRAIL- JOB DECEM- 1990 1990 1998 MATED MATED NEW % OF % OF NUM- ING GROWTH BER 1998 % OF % OF NEW 1998 1998 MULTI- 1998 1998 MARKET BER 12 TRAIL- UNEM- 1998 MULTI- ALL MULTI- SUPPLY MULTI- NET NEW FAMILY NEW MULTI- (PROFORMA % OF OF MTHS ING 12 PLOY. MEDIAN FAMILY HOUSING FAMILY OF FAMILY MULTI- HOUSE- MULTI- FAMILY HOME PROPERTIES HOUSE- PER- MNTHS RATE HOME HOUSING BUILT HOUSE- MULTI- OBSO- FAMILY HOLD FAMILY HOUSING OWNED UNITS IN HOLDS CENT ACTUAL VALUE STOCK BEFORE HOLDS FAMILY LESCENCE SUPPLY DEMAND DEMAND STOCK MARKET) CHANGE 1980 DETROIT, MI MSA 1,684,597 1.9% 41,100 2.9% $93,457 284,897 88.6% 14.8% 3,557 1,424 2,132 4,061 52.5% 0.7% (17.9%) ROCHESTER, NY MSA (12.4%) 410,135 0.2% 1,200 3.6% $95,840 58,611 87.8% 13.0% 505 293 212 104 203.8% 0.4% NORTHERN NEW JERSEY (12.2%) (A) 1,997,302 1.7% 45,400 3.6% $210,791 398,520 85.2% 18.0% 2,082 1,993 90 5,449 1.6% 0.0% EASTERN PENNSYLVANIA 2,050,599 0.9% 23,900 3.6% $125,189 343,249 87.9% 14.5% 1,936 1,716 220 2,319 9.5% 0.1% (13.2%) (B) BUFFALO, NY MSA 462,256 0.1% 400 4.5% $84,665 53,782 92.7% 10.1% 903 269 635 27 2365.8% 1.2% (10.5%) BALTIMORE, MD MSA 932,954 1.0% 12,400 3.9% $119,828 185,894 81.5% 17.7% 2,652 929 1,723 1,467 117.5% 0.9% (7.2%) SYRACUSE, NY MSA 276,672 1.3% 4,600 3.6% $83,010 45,558 86.6% 14.9% 87 228 -140 458 -30.7% -0.3% (6.5%) DOWNSTATE NEW YORK (6.7%) (C) 1,599,843 2.2% 41,300 2.6% $238,986 247,101 89.5% 14.0% 1,634 1,236 398 3,869 10.3% 0.2% CHICAGO, IL MSA 2,792,254 1.1% 43,200 4.0% $145,993 850,689 88.2% 27.1% 5,916 4,253 1,662 7,814 21.3% 0.2% (2.8%) PORTLAND, ME MSA 92,429 -1.3% -1,900 1.8% $140,999 17,294 79.8% 15.3% 246 86 160 -194 -82.2% 0.9% (2.5%) DC-VA-MD-WV MSA (2.3%) 1,722,683 2.8% 69,700 2.5% $184,525 568,125 75.7% 29.4% 11,141 2,841 8,300 13,648 60.8% 1.5% MERIDEN, CT MSA 196,461 0.1% 300 2.8% $181,305 43,622 84.5% 18.9% 502 218 283 38 749.3% 0.6% (2.1%) SOUTH BEND, IN MSA (1.3%) 98,048 1.4% 1,900 2.7% $68,346 13,385 87.6% 11.9% 276 67 209 151 138.0% 1.6% PITTSBURGH, PA MSA 958,513 -0.1% -700 4.0% $69,338 135,482 90.9% 12.4% 1,364 677 687 -58 - 0.5% (1.2%) 1183.6% COLUMBUS, OH 564,868 1.6% 13,700 2.3% $96,853 119,180 81.0% 18.6% 2,204 596 1,608 1,696 94.8% 1.3% (1.0%) HOME PROPERTIES 15,839,614 1.4% 296,500 3.2% $129,275 3,361,598 86.2% 16.9% 35,006 16,808 18,198 40,669 44.7% 0.5% MARKETS United States 100,657,536 2.3% 2,853,000 4.0% $100,583 19,851,980 79.3% 17.2% 334,495 99,260 235,235 326,498 72.0% 1.2%
(A) NORTHERN NEW JERSEY IS DEFINED FOR THIS REPORT AS MIDDLESEX-SOMERSET-HUNTERDON MSA, BERGEN-PASSAIC MSA, MONMOUNTH-OCEAN MSA, & NEWARK MSA. (B) EASTERN PENNSYLVANIA IS DEFINED FOR THIS REPORT AS PHILADELPHIA, PA MSA & ALLENTOWN-BETHLETHEM-EASTON MSA. (C) DOWNSTATE NEW YORK IS DEFINED FOR THIS REPORT AS THE HUDSON VALLEY REGION OF DUTCHESS CO. MSA, ORANGE CO. MSA, PUTNAM CO. MSA AND ULSTER COUNTIES; LONG ISLAND, NY(NASSAU-SUFFOLK MSA); WESTCHESTER COUNTY MSA; & ROCKLAND COUNTY MSA SOURCES: BUREAU OF LABOR STATISTICS (BLS); CLARITAS, INC.; US CENSUS BUREAU - MANUFACTURING & CONSTRUCTION DIV.; NEW YORK STATE DEPARTMENT OF LABOR, DIV. OF RESEARCH AND STATISTICS. DATA INCLUDED IS DATA AVAILABLE AS OF FEBRUARY 3, 1999 AND IN SOME CASES MAY BE PRELIMINARY. BLS IS THE PRINCIPAL FACT-FINDING AGENCY FOR THE FEDERAL GOVERNMENT IN THE BROAD FIELD OF LABOR ECONOMICS AND STATISTICS, AND HAS A DUAL ROLE AS THE STATISTICAL ARM OF THE US DEPT OF LABOR AND AS AN INDEPENDENT NATIONAL STATISTICAL AGENCY. CLARITAS, INC. IS A LEADING PROVIDER OF PRECISION MARKETING SOLUTIONS AND RELATED PRODUCTS/SERVICES, INCLUDING LOCAL AREA DEMOGRAPHICS, MARKETING SOFTWARE, MARKET SEGMENTATION SYSTEMS, AND CUSTOM MODELING. US CENSUS BUREAU'S PARENT FEDERAL AGENCY IS THE US DEPT OF COMMERCE, WHICH PROMOTES AMERICAN BUSINESS AND TRADE, INCLUDING GATHERING AND DISSEMINATING STATISTICAL DATA, AND MEASURING ECONOMIC GROWTH. METHODOLOGY 1998 Net New Multifamily Supply = Multifamily permits (1998 figures US Census Bureau, Mfg. & Constr. Div., 5+ permits only) adjusted by an estimated % of permits resulting in a construction start (95%) less estimated multifamily obsolescence (0.5% of 1998 multifamily housing stock). 1998 NEW MULTIFAMILY DEMAND = Trailing 12-months job growth (Nonfarm, not seasonally adjusted payroll employment figures 12/97 & 12/98) multiplied by an estimated tow-thirds of new household formations resulting from new jobs and the % of multifamily households in each market (based on the 1990 census figures). 1998 MULTIFAMILY HOUSING STOCK = 1998 total housing stock multiplied by the % of multifamily housing stock in each MSA market (based on 1990 US Census figures). REGULATION Many laws and governmental regulations are applicable to the Properties and changes in the laws and regulations, or their interpretation by agencies and the courts, occur frequently. Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. In addition, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment communities first occupied after March 13, 1990 to be accessible to the handicapped. Non-compliance with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants. Management believes that the Owned Properties are substantially in compliance with present ADA and FHAA requirements. Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in its property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner's ability to rent or sell the property or use the property as collateral. Independent environmental consultants have conducted "Phase I" environmental audits (which involve visual inspection but not soil or groundwater analysis) on substantially all of the Owned Properties. Phase I audit reports did not reveal any environmental liability that would have a material adverse effect on the Company. In addition, the Company is not aware of any environmental liability that management believes would have a material adverse effect on the Company. There is no assurance that Phase I reports would reveal all environmental liabilities or that environmental conditions not known to the Company may exist now or in the future which would result in liability to the Company for remediation or fines, either under existing laws and regulations or future changes to such requirements. Under the Federal Fair Housing Act and state fair housing laws, discrimination on the basis of certain protected classes is prohibited. Violation of these laws can result in significant damage awards to victims. The Company has a strong policy against any kind of discriminatory behavior and trains its employees to avoid discrimination or the appearance of discrimination. There is no assurance, however, that an employee will not violate the Company's policy against discrimination and thus violate fair housing laws. This could subject the Company to legal actions and the possible imposition of damage awards. ITEM 2. PROPERTIES As of December 31, 1998, the Owned Properties consisted of 97 multifamily residential properties containing 23,936 apartment units and a 35,000 square foot ancillary shopping center located adjacent to a multifamily property. At the time of the IPO, Home Properties owned 11 communities containing 3,065 units and simultaneously with the closing of the IPO acquired an additional four communities containing 926 units.From that time to December 31, 1998, the Company therefore experienced a net increase of approximately 600% in the number of apartment units it owned. In addition, during the first quarter of 1999, the Operating Partnership has acquired two additional properties, representing an increase of 264 Units, and transferred a 256 unit apartment community to an affiliated partnership in anticipation of completing a Low Income Housing Tax Credit transaction. The Owned Properties are located in established markets and are well maintained and well leased. Average economic occupancy at the Owned Properties held throughout 1997 and 1998 was 94.1% for 1998. The Owned Properties are generally two and three story garden style apartment buildings in landscaped settings and a majority are of brick or other masonry construction. The Company believes that its strategic focus on appealing to mature residents and the quality of the services it provides to such residents result in low turnover. The turnover at the Owned Properties as of December 31, 1998 was approximately 39% for 1998, which is significantly below the national average for garden apartments. Resident leases are generally for one year terms and security deposits equal to one month's rent are generally required. Certain of the Owned Properties secure mortgage loans. See Note 4 to the Consolidated Financial Statements contained herein. The table on the following pages illustrates certain of the important characteristics of the Owned Properties as of December 31, 1998. 1998 ACQUISITION COMMUNITIES
1998 1997 (3) (4) (4) Avg Avg (2) 1998 1998 1997 Mo Mo 12/31/98 Current Aver- 1998 % % Res Ave Ave Rent Rent Total Number Age age Mature dent age age Rate Rate Cost of In Year Apt Size Resi- Turn- % Occu- % Occu- per per ($000) Apts Years Acq (Sq Ft) dents over pancy pancy Apt Apt Regional Area CT - Hamden Apple Hill Apartments 498 27 1998 789 33% NA 96.3% NA $713 NA $24,945 IL - Chicago Colonies Apartments 672 25 1998 656 7% NA 77.4% NA 576 NA 24,408 IN - South Bend Candlewood Apartments 310 12 1998 1,000 10% NA 95.5% NA 620 NA 13,735 MD -Baltimore Carriage House Apartments 50 33 1998 786 4% NA 92.3% NA 502 NA 1,163 MD -Baltimore Country Village Apartments 344 28 1998 868 37% NA 92.6% NA 587 NA 13,579 MD -Baltimore Morningside Heights Apartments 1,050 26 1998 870 18% NA 90.9% NA 565 NA 36,429 MD - Baltimore Rolling Park Apartments 144 26 1998 1,125 7% NA 96.0% NA 575 NA 5,802 MD -Baltimore Strawberry Hill Apartments 145 34 1998 780 6% NA 90.6% NA 531 NA 3,551 ME -Portland Mill Co.Gardens 96 48 1998 550 40% NA 97.7% NA 475 NA 2,081 ME -Portland Redbank Village 500 55 1998 836 36% NA 98.0% NA 516 NA 16,180 MI - Detroit Carriage Hill Apartments 168 33 1998 783 51% NA 98.9% NA 654 NA 6,870 MI -Detroit Carriage Park Apartments 256 32 1998 777 14% NA 97.9% NA 615 NA 9,655 MI -Detroit Cherry Hill Club Apartments 164 27 1998 878 44% NA 96.2% NA 535 NA 5,094 MI - Detroit Cherry Hill Village Apartments 224 33 1998 742 13% NA 98.9% NA 592 NA 8,005 NJ - Northern East Hill Gardens 33 41 1998 695 48% NA 94.9% NA 779 NA 1,883 NJ - Northern Lakeview Apartments 106 30 1998 492 27% NA 98.8% NA 732 NA 5,299 NJ -Northern Leland Gardens{ (7)} 256 26 1998 575 8% NA NA NA NA NA NA NJ - Northern Oak Manor Apartments 77 43 1998 775 37% NA 97.9% NA 992 NA 4,912 NJ - Northern Pleasant View Gardens Apartments 1,142 31 1998 745 31% NA 96.3% NA 702 NA 53,795 NJ - Northern Pleasure Bay Apartments 270 28 1998 667 32% NA 97.7% NA 606 NA 7,864 NJ - Northern Towers, The 137 37 1998 916 60% NA 98.5% NA 913 NA 6,849 NJ - Northern Wayne Village 275 34 1998 725 34% NA 97.7% NA 771 NA 14,981 NJ - Northern Windsor Realty 67 46 1998 675 28% NA 97.9% NA 720 NA 3,818 NY - Downstate Mountainside Apartments 227 26 1998 759 36% NA 98.6% NA 764 NA 8,590 NY - Downstate Patricia Apartments 100 25 1998 770 25% NA 99.2% NA 796 NA 4,818 NY - Downstate Coventry Village 94 24 1998 718 38% NA 93.2% NA 863 NA 3,236 NY - Rochester Pines of Perinton 508 22 1998 818 24% NA 99.2% NA 489 NA 8,957 OH - Central Weston Gardens 242 26 1998 804 11% NA 91.3% NA 444 NA 6,022 PA - Eastern Beechwood Gardens 160 32 1998 775 39% NA 95.8% NA 578 NA 4,180 PA - Eastern Cedar Glen Apartments 110 32 1998 726 56% NA 97.6% NA 433 NA 2,977 PA - Eastern Racquet Club East 467 27 1998 850 26% NA 96.0% NA 742 NA 25,244 Apartments PA - Eastern Sherry Lake Apartments 298 33 1998 811 15% NA 97.3% NA 785 NA 18,168 PA - Western Payne Hill Gardens 150 18 1998 793 13% NA 88.0% NA 578 NA 4,716 VA - Northern Braddock Lee Apartments 254 44 1998 758 20% NA 97.1% NA 744 NA 12,929 VA - Northern Park Shirlington Apartments 294 44 1998 758 22% NA 97.0% NA 776 NA 14,795 1998 TOTAL/ WEIGHTED AVERAGE 9,888 30 786 25% NA 94.5% NA $639 NA $385,530
(1) "Core Communities" represents the 6,552 apartment units owned consistently throughout 1997 and 1998. (2} "% Mature Residents" is the percentage of residents aged 55 years or older as of December 31, 1998. (3) "% Resident Turnover" reflects, on an annual basis, the number of moveouts divided by the total number of apartment units. (4) "Average % Occupancy" is the average economic occupancy for the 12 months ended December 31, 1997 and 1998. For communities acquired during 1997 and 1998, this is the average occupancy from the date of acquisition. (5) Village Green and Fairways at Village Green are consolidated figures in 1998. (6) The Lansdowne Group consolidated figures are reflected in the Marshall House line. (7) Subsequently sold to affiliate for tax credit rehabilitation.
1998 1997 (3) (4) (4) Avg Avg (2) 1998 1998 1997 Mo Mo Current Aver- 1998 % Res Ave Ave Rent Rent 12/31/98 Number Age age % Mature dent age age Rate Rate Total of In Year Apt Size Resi- Turn- % Occu- % Occu- per per Cost Apts Years Acq (Sq Ft) dents over pancy pancy Apt Apt ($000) 1997 ACQUISITION COMMUNITIES Regional Area MI - Detroit Canterbury Square 336 27 1997 789 14% 16% 98.5% 99.3% $632 $608 $13,766 MI - Detroit Charter Square 494 28 1997 914 21% 35% 96.3% 96.9% 693 668 22,838 MI - Detroit Fordham Green 146 23 1997 869 24% 24% 97.0% 92.9% 701 660 6,459 MI - Detroit Golfview Manor 44 40 1997 662 14% 16% 96.8% 99.2% 468 426 687 MI - Detroit Greentrees Apartments 288 28 1997 863 23% 21% 95.1% 96.0% 541 528 10,122 MI - Detroit Kingsley Apartments 328 29 1997 792 32% 36% 94.0% 94.2% 602 564 13,632 MI - Detroit Oak Park Manor 298 44 1997 887 10% 27% 98.6% 97.9% 594 568 10,626 MI - Detroit Parkview Gardens 483 45 1997 731 3% 13% 95.9% 95.8% 505 445 8,754 MI - Detroit Scotsdale Apartments 376 24 1997 790 21% 44% 95.6% 97.3% 575 559 14,150 MI - Detroit Southpointe Square 224 28 1997 776 21% 24% 95.7% 98.8% 542 528 5,778 MI - Detroit Stephenson House 128 32 1997 668 13% 38% 98.2% 97.4% 552 534 3,212 MI - Detroit Woodland Gardens 337 33 1997 719 9% 53% 96.0% 97.1% 622 600 12,888 NJ - Northern Royal Gardens 550 31 1997 800 12% 30% 92.9% 96.2% 744 724 23,790 NY - Buffalo Emerson Square 96 29 1997 650 40% 46% 89.4% 78.6% 521 484 3,223 NY - Buffalo Fairways Apartments 32 38 1997 900 23% 22% 75.8% 39.1% 587 509 1,255 NY - Buffalo Paradise Lane at Raintree 324 27 1997 676 11% 50% 78.0% 79.6% 534 498 10,722 NY - Downstate Lake Grove 368 29 1997 879 15% 33% 96.2% 96.0% 820 774 22,633 NY - Downstate Mid-Island Estates 232 34 1997 690 32% 28% 95.3% 97.2% 788 758 11,137 NY - Rochester 1600 East Avenue 164 40 1997 800 97% 48% 80.2% 83.4% 1,252 1,205 11,101 NY - Rochester Hill Court South 95 35 1997 730 41% 27% 94.8% 95.8% 565 554 2,900 NY - Rochester Ivy Ridge Apartments 135 35 1997 740 46% 28% 91.4% 83.2% 560 547 4,059 NY - Rochester Woodgate Place 120 26 1997 1,100 10% 53% 97.2% 93.9% 662 637 4,915 PA - Eastern Chesterfield Apartments 247 26 1997 812 17% 36% 94.2% 94.2% 632 616 10,169 PA - Eastern Curren Terrace 318 28 1997 782 6% 42% 96.9% 96.0% 665 662 14,409 PA - Eastern Executive House 100 34 1997 696 54% 49% 90.4% 90.2% 648 637 4,751 PA -Eastern Glen Manor 174 23 1997 667 19% 32% 97.5% 99.0% 570 557 5,791 PA - Eastern Lansdowne Group-Karen Court 49 36 1997 844 * * * * * * 2,007 PA - Eastern Lansdowne Group- Landon Court 44 29 1997 873 * * * * * * 1,823 PA - Eastern Lansdowne Group- Marshall House*{(6)} 63 70 1997 653 44% 31% 95.5% 91.7% 611 605 2,127 PA -Eastern Lansdowne Group- Patricia Court 66 31 1997 838 * * * * * * 2,723 PA - Eastern New Orleans Park 308 28 1997 693 15% 40% 97.3% 96.2% 573 559 12,175 PA - Eastern Springwood Apartments 77 25 1997 755 40% 48% 92.3% 87.9% 557 543 2,366 PA - Eastern Valley View Apartments 176 26 1997 769 21% 59% 92.2% 88.1% 591 574 7,364 PA - Eastern Village Square 128 26 1997 795 11% 48% 91.4% 94.7% 600 582 4,762 PA - Western Cloverleaf Village 148 41 1997 716 32% 55% 85.8% 97.8% 489 484 3,667 1997 TOTAL/ WEIGHTED AVERAGE 7,496 31 786 21% 35% 94.0% 94.5% $635 $610 $292,781
(1) "Core Communities" represents the 6,552 apartment units owned consistently throughout 1997 and 1998. (2) "% Mature Residents" is the percentage of residents aged 55 years or older as of December 31, 1998. (3) "% Resident Turnover" reflects, on an annual basis, the number of moveouts divided by the total number of apartment units. (4) "Average % Occupancy" is the average economic occupancy for the 12 months ended December 31, 1997 and 1998. For communities acquired during 1997 and 1998, this is the average occupancy from the date of acquisition. (5) Village Green and Fairways at Village Green are consolidated figures in 1998. (6) The Lansdowne Group consolidated figures are reflected in the Marshall House line. (7) Subsequently sold to affiliate for tax credit rehabilitation.
CORE COMMUNITIES COMMUNITIES WHOLLY OWNED AND MANAGED BY HOME PROPERTIES 1998 1997 (3) (4) (4) Avg Avg (2) 1998 1998 1997 Mo Mo Aver- 1998 % Res Ave Ave Rent Rent 12/31/98 Number Age age % Mature dent age age Rate Rate Total of In Year Apt Size Resi- Turn- % Occu- % Occu- per per Cost Apts Years Acq (Sq Ft) dents over pancy pancy Apt Apt ($000) Regional Area Core Communities (1) NY - Buffalo Garden Village 315 27 1994 850 79% 25% 97.8% 98.1% $601 $584 $10,278 NY - Buffalo Idylwood 720 29 1995 700 10% 61% 95.5% 95.6% 560 539 22,002 NY - Buffalo Raintree Island 504 27 1985 704 35% 39% 95.1% 94.9% 587 576 16,467 NY - Buffalo Williamstowne Village 528 27 1985 708 100% 19% 92.7% 96.8% 609 592 17,739 NY - Downstate Carriage Hill 140 26 1996 845 18% 52% 93.5% 93.1% 768 734 5,538 NY - Downstate Cornwall Park 75 32 1996 1,320 10% 53% 88.7% 87.1% 954 827 5,681 NY - Downstate Lakeshore Villas 152 24 1996 956 9% 43% 96.3% 95.3% 618 605 5,944 NY - Downstate Sunset Gardens 217 28 1996 662 22% 52% 93.7% 92.9% 574 559 6,350 NY - Rochester 1600 Elmwood 210 39 1983 891 9% 50% 95.6% 95.9% 748 742 10,863 NY - Rochester Brook Hill 192 27 1994 999 22% 56% 89.7% 96.3% 785 745 9,840 NY - Rochester Finger Lakes Manor 153 28 1983 924 48% 44% 95.6% 96.6% 684 669 7,240 NY - Rochester Hamlet Court 98 28 1996 696 70% 39% 93.2% 93.3% 613 595 2,953 NY - Rochester Newcastle Apartments 197 24 1982 873 34% 51% 92.1% 91.0% 677 659 10,093 NY - Rochester Northgate Manor 224 36 1994 800 33% 40% 92.5% 93.9% 596 579 9,106 NY - Rochester Perinton Manor 224 29 1982 928 51% 32% 95.6% 96.1% 716 698 11,155 NY - Rochester Riverton Knolls 240 25 1983 911 8% 69% 93.2% 97.0% 714 689 12,044 NY - Rochester Spanish Gardens 220 25 1994 1,030 32% 33% 93.9% 94.8% 608 593 11,364 NY - Rochester Springcreek 82 26 1984 913 70% 32% 98.7% 96.5% 540 531 2,986 NY - Rochester The Meadows 113 28 1984 890 38% 29% 95.9% 94.4% 601 593 4,952 NY - Syracuse Candlewood Gardens 126 28 1996 855 37% 41% 97.9% 96.7% 475 456 3,202 NY - Syracuse Conifer Village 199 20 1994 499 95% 14% 100.0% 100.0% 566 566 9,146 NY - Syracuse Fairview Heights 210 35 1985 798 6% 88% 94.0% 92.1% 714 704 9,793 NY - Syracuse Harborside Manor 281 26 1995 823 10% 48% 92.8% 94.1% 562 547 8,169 NY - Syracuse Pearl Street 60 28 1995 855 10% 53% 95.1% 94.7% 464 453 1,378 NY - Syracuse Village Green (incl. Fairways){(5)} 448 11 1994 908 23% 44% 90.0% 90.7% 594 574 17,318 NY - Syracuse Westminster Place 240 27 1996 913 7% 48% 95.3% 93.0% 541 546 7,138 PA - Eastern Valley Park South 384 26 1996 987 13% 42% 94.0% 92.9% 724 708 19,378 CORE COMMUNITIES 6,552 27 830 34% 44% 94.1% 94.7% $627 $609 $258,117 TOTAL/ WEIGHTED AVG OWNED PORTFOLIO 23,936 30 798 26% 39% 94.2% 94.5% $641 $603 $936,428 TOTAL/ WEIGHTED AVG
(1) "Core Communities" represents the 6,552 apartment units owned consistently throughout 1997 and 1998. (2) "% Mature Residents" is the percentage of residents aged 55 years or older as of December 31, 1998. (3) "% Resident Turnover" reflects, on an annual basis, the number of moveouts divided by the total number of apartment units. (4) "Average % Occupancy" is the average economic occupancy for the 12 months ended December 31, 1997 and 1998. For communities acquired during 1997 and 1998, this is the average occupancy from the date of acquisition. (5) Village Green and Fairways at Village Green are consolidated figures in 1998. (6) The Lansdowne Group consolidated figures are reflected in the Marshall House line. (7) Subsequently sold to affiliate for tax credit rehabilitation. PROPERTY DEVELOPMENT Management believes that new construction of market rate multifamily apartments is not economically feasible in most of its markets. Therefore, Home Properties' development and redevelopment activities are expected to be focused on government-assisted multifamily housing. In 1996, the Operating Partnership acquired substantially all of the assets of C.O.F., Inc. (formerly Conifer Realty, Inc.) and Conifer Development, Inc. (collectively, "Conifer"), a developer and manager of government- assisted multifamily housing. Through these predecessors, the Company has been developing affordable housing for over 20 years. Management anticipates that this experience, coupled with the financial and property management strengths of the Company, will enable the Company to remain a regional leader in the affordable housing arena. Management also believes that the Company's expertise in the full continuum of government-assisted and market rate housing provides the Company with the flexibility to react to changing economic conditions through all phases of economic cycles. Through affiliated partnerships, in 1998 the Company commenced development or redevelopment of 762 units in five communities, completed two communities with 136 units and continued progress on 868 units being rehabilitated. Management is optimistic about prospects for continued growth due to possible changes in the regulatory programs and the Company's broadened geographic reach. Healthy changes in government-assisted housing programs also appear to be underway. Legislative increases to the allocations for Low-Income Housing Tax Credit Program (LIHTC) and tax exempt bond financing have been proposed. Direct rental subsidies under the Section 8 housing program are being scaled back, which in some instances may put pressure on owners of Section 8 housing units. Management feels that this may afford opportunities for the Company as these properties are refinanced or repositioned. LOW INCOME HOUSING TAX CREDIT PROGRAM. Since its inception in 1986, the LIHTC program has been responsible for the creation or rehabilitation of more than 1 million rental units for low or moderate income Americans. Under this program, states are authorized to allocate federal tax credits as an incentive for developers to build rental housing for low income households. Each state has received an allocation of tax credits from the Internal Revenue Service in an amount equal to $1.25 per state resident. This amount has not been adjusted for over a decade. However, legislation has been introduced to increase the housing credit allocations by 40% to $1.75 per capita. It is expected that the cap increase, if adopted, will generate the construction of an additional 30,000 units of affordable housing each year. Although REITs do not pay income taxes at the corporate level, the Company benefits from the credits by structuring transactions where the Operating Partnership serves as the managing general partner and limited partners contribute substantial equity in exchange for the tax credits. Most of the economic benefits of management and ownership remain with the Company, including: * Substantial developer fee income * Receipt of a majority of the project cash flow after debt service as "incentive management fees" * Reasonable property management fees * Participation in future equity build-up * Control of the real estate as the managing general partner TAX EXEMPT BOND FINANCING. The increased competition for tax credits has led developers to the tax exempt bond market for financing. Projects can be financed with tax exempt bonds if they meet a threshold of having at least 20% of the units rented to households at 50% or less of the area median income, or 40% of the units at 60% or less of the area median income. The bond program provides a reduced level of tax credits, automatically, without the need to go through the competitive allocation process for tax credits. While this program has historically not been as competitive, the recent increasing popularity has resulted in most states running out of their available tax exempt bond allocations. Legislation has also been introduced to significantly increase the volume cap levels for tax-exempt bonds. HUD SECTION 8 PROGRAM. Within a decade, it is expected that virtually all of HUD's roughly three million Section 8 project and tenant-based contracts will expire. Many of the affected properties will need to be recycled into other programs or repositioned to compete as market rate communities. The Company's financial strength and expertise in this area could lead to attractive investment opportunities as these properties are sold or restructured. Currently, the Company holds only two Section 8 communities in its owned portfolio, Conifer Village (199 units) and Pines of Perinton (508 units). In both cases, the rental subsidy contracts extend for several more years. PROPERTY MANAGEMENT As of December 31, 1998, the Managed Properties consist of: (i) 7,482 apartment units where Home Properties is the general partner of the entity that owns the property; (ii) 2,811 apartment units managed for others; (iii) commercial properties which contain approximately 1.7 million square feet of gross leasable area; (iv) a master planned community known as Gananda; (v) a 140-lot Planned Unit Development known as College Greene; (vi) a 202-lot Planned Unit Development known as Riverton; and (vii) 153 acres of vacant land in Old Brookside, the development of which, if it occurs, will be managed by HP Management. Management fees are based on a percentage of rental revenues or costs and, in certain cases, revenues from sales. The Company may pursue the management of additional properties not owned by the Company, but will only do so when such additional properties can be effectively and efficiently managed in conjunction with other properties owned or managed by Home Properties. The commercial properties consist of: (i) approximately 1,025,000 square feet of office space; (ii) approximately 400,000 square feet of retail space; (iii) approximately 75,000 square feet of industrial space; and (iv) approximately 164,000 square feet of warehouse space. SUPPLEMENTAL PROPERTY INFORMATION At December 31, 1998, none of the Properties have an individual net book value equal to or greater than ten percent of the total assets of the Company or would have accounted for ten percent or more of the Company's aggregate gross revenues for 1998. ITEM 3. LEGAL PROCEEDINGS The Company is a party to a variety of legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse effect on the Company. Most of such proceedings are covered by liability insurance. To management's knowledge, no material litigation is threatened against the Company. ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS None. ITEM X. EXECUTIVE OFFICERS AND KEY EMPLOYEES The following table sets forth the six executive officers and certain of the key employees of the Company, together with their respective ages (as of February 28, 1999), positions and offices.
NAME AGE POSITION Norman P. Leenhouts 63 Chairman, Co-Chief Executive Officer and Director of Home Properties, Chairman and Director of HP Management and Director of Conifer Realty Nelson B. Leenhouts 63 President, Co-Chief Executive Officer and Director of Home Properties, President, Chief Executive Officer and Director of HP Management and Director and Vice President of Conifer Realty. Richard J. Crossed 59 Executive Vice President and Director of Home Properties and President, Chief Executive Officer and Director of Conifer Realty Amy L. Tait 40 Executive Vice President and Director of Home Properties and Director of HP Management David P. Gardner 43 Vice President, Chief Financial Officer and Treasurer of Home Properties, Conifer Realty and HP Management Ann M. McCormick 42 Vice President, General Counsel and Secretary of Home Properties and HP Management and General Counsel and Secretary of Conifer Realty William E. Beach 52 Vice President, Commercial Property Management of Home Properties and HP Management A. Terence Butwid 54 Vice President, Development of Home Properties, Executive Vice President of Conifer Realty and Vice President of HP Management Lavonne R. Childs 36 Vice President, Residential Property Management of Home Properties Scott A. Doyle 38 Vice President, Residential Property Management of Home Properties Kathleen M. Dunham 53 Vice President, Residential Property Management of Home Properties and Conifer Realty Johanna A. Falk 34 Vice President, Information Systems of Home Properties John H. Fennessey 60 Vice President, Development of Home Properties, Conifer Realty and HP Management Rhonda Finehout 48 Vice President, Residential Property Management of Home Properties and Conifer Realty Timothy A. Florczak 43 Vice President, Residential Property Management of Home Properties Thomas L. Fountain 40 Vice President, Commercial Property Management of Home Properties, Conifer Realty and HP Management Timothy Fournier 38 Vice President, Development of Home Properties, Executive Vice President of Conifer Realty and Vice President of HP Management Gerald B. Korn 52 Vice President, Mortgage Finance of Home Properties Laurie Leenhouts 42 Vice President, Residential Property Marketing of Home Properties and HP Management Leslie J. Lewiston 33 Vice President, Residential Property Management of Home Properties Robert J. Luken 34 Vice President and Controller of Home Properties, Conifer Realty and HP Management Paul O'Leary 47 Vice President, Acquisitions and Due Diligence of Home Properties John Oster 49 Vice President, Development of Home Properties, Conifer Realty and HP Management James B. Quinn, Jr. 43 Vice President, Residential Property Management of Home Properties Sharon Sanfratello 44 Vice President, Residential Property Management of Home Properties John E. Smith 47 Vice President, Acquisitions of Home Properties Eric Stevens 43 Vice President, Residential Property Management of Home Properties and Conifer Realty Richard J. Struzzi 45 Vice President, Development of Home Properties and HP Management Robert C. Tait 41 Vice President, Commercial Property Management of Home Properties and HP Management
Information regarding Richard Crossed, Nelson and Norman Leenhouts and Amy Tait is set forth below under "Board of Directors" in Item 10. DAVID P. GARDNER has served as Vice President and Chief Financial Officer of the Company, HP Management and Conifer Realty since their inception. Mr. Gardner joined Home Leasing Corporation in 1984 as Vice President and Controller. In 1989, he was named Treasurer of Home Leasing and Chief Financial Officer in December, 1993. From 1977 until joining Home Leasing, Mr. Gardner was an accountant at Cortland L. Brovitz & Co. Mr. Gardner is a graduate of the Rochester Institute of Technology and is a Certified Public Accountant. ANN M. MCCORMICK has served as Vice President, General Counsel and Secretary of the Company and HP Management since their inception. She has also served as Secretary and General Counsel of Conifer Realty since 1998. Mrs. McCormick joined Home Leasing in 1987 and was named Vice President, Secretary and General Counsel in 1991. Prior to joining Home Leasing, she was an associate with the law firm of Nixon, Hargrave, Devans & Doyle. Mrs. McCormick is a graduate of Colgate University and holds a Juris Doctor from Cornell University. WILLIAM E. BEACH has served as Vice President of the Company and HP Management since their inception. He joined Home Leasing in 1972 as a Vice President. Mr. Beach is a graduate of Syracuse University and is a Certified Property Manager (CPM) as designated by the Institute of Real Estate Management. C. TERENCE BUTWID has served as Vice President of the Company and Executive Vice President of Conifer Realty since 1996. He also served as Vice President of HP Management since 1998. He joined Conifer in 1990 as a Vice President. Prior to joining Conifer, Mr. Butwid was employed by Chase Lincoln First Bank as Vice President and Manager of Corporate Banking National Accounts. He was also President of Ontario Capital Management. Mr. Butwid is a graduate of Bowling Greene State University. He has an MBA from American University and graduated from The National School of Credit and Financial Management at Dartmouth College. LAVONNE R. CHILDS has served as Vice President of the Company since 1997. She joined Home Properties in December of 1996 as a Regional Property Manager. Mrs. Childs has been in property management for 15 years. Prior to joining Home Properties, she worked with Walden Residential, United Dominion Realty Trust and Winthrop Management. SCOTT A. DOYLE has served as Vice President of the Company since 1997. He joined Home Properties in 1996 as a Regional Property Manager. Mr. Doyle has been in property management for 14 years. Prior to joining Home Properties he worked with CMH Properties, Inc., Rivercrest Realty Associates and Arcadia Management Company. Mr. Doyle is a graduate of S.U.N.Y. at Plattsburgh, New York. KATHLEEN M. DUNHAM has served as Vice President of the Company and Conifer Realty since 1996. She joined Conifer in 1978 and was named Vice President in 1990. Ms. Dunham is a Certified Property Manager (CPM) as designated by the Institute of Real Estate Management. JOHANNA A. FALK has served as a Vice President of the Company since 1997. She joined the Company in 1995 as an investor relations specialist. Prior to joining the Company, Mrs. Falk was employed as a marketing manager at Bausch & Lomb Incorporated and Champion Products, Inc. and as a financial analyst at Kidder Peabody. She is a graduate of Cornell University and holds a Masters Degree in Business Administration from the Wharton School of The University of Pennsylvania. JOHN H. FENNESSEY has served as Vice President of the Company and Conifer Realty since 1996. He has also been a Vice President of HP Management since 1998. He joined Conifer in 1975 as a founder and Vice President, responsible for the operation of Conifer's Syracuse office. Prior to joining Conifer, he was a Project Director with the New York State Urban Development Corporation. Mr. Fennessey is a graduate of Harpur College and holds a Masters Degree in regional planning from the Maxwell School, Syracuse University. He is a Charter Member of the American Institute of Certified Planners (AICP). RHONDA FINEHOUT has served as a Vice President of the Company and Conifer Realty since 1998. She joined the Company in 1996 as a regional property manager with responsibilities in market rate, rural development, low income housing tax credit and fee managed properties. Ms. Finehout is a graduate of the State University of New York at Oswego. TIMOTHY A. FLORCZAK has served as a Vice President of the Company since its inception. He joined Home Leasing in 1985 as a Vice President. Prior to joining Home Leasing, Mr. Florczak was Vice President of Accounting of Marc Equity Corporation. Mr. Florczak is a graduate of the State University of New York at Buffalo. THOMAS L. FOUNTAIN, JR. has served as a Vice President of the Company and Conifer Realty since 1996 and as a Vice President of HP Management since 1997. He joined Conifer in 1994 as the Director of Commercial Properties. Prior to joining Conifer, Mr. Fountain was the Leasing Manager for Faber Management Services, Inc. and Vice President of Asset Management for Realty Diversified Services, Inc. Mr. Fountain is a graduate of West Virginia University. TIMOTHY FOURNIER has served as Vice President of Home Properties and Executive Vice President of Conifer Realty since 1996. He has also been a Vice President of HP Management since 1998. He joined Conifer in 1986 as Vice President of Finance. Prior to joining Conifer, Mr. Fournier was an accountant at Coopers & Lybrand. Mr. Fournier is a graduate of New Hampshire College and is a Certified Public Accountant. GERALD B. KORN has served as a Vice President and been employed at the Company since 1998. From 1984 until 1998, he was employed by Rochester Community Savings Bank in various capacities, including as a Senior Vice President in charge of the bank's national commercial real estate portfolio. Prior to 1984, Mr. Korn was employed for 11 years as a FDIC Bank Examiner. Mr. Korn graduated from Rochester Institute of Technology with high honors. LAURIE LEENHOUTS has served as a Vice President of the Company since its inception and has been a Vice President of HP Management since 1998. She joined Home Leasing in 1987 and has served as a Vice President since 1992. Ms. Leenhouts is a graduate of the University of Rochester. She is the daughter of Norman Leenhouts. LESLIE LEWISTON has served as a Vice President of the Company since 1998. She joined the Company in 1997 as a Regional Manager and prior to that had 12 years property management experience. Ms. Lewiston is a Magna Cum Laude graduate of Pomona College. ROBERT J. LUKEN has served as Controller of the Company since 1996 and as a Vice President since 1997. He has also served as a Vice President and Controller of Conifer Realty and HP Management since 1998. Prior to joining the Company, he was the Controller of Bell Corp. of Rochester and an Audit Supervisor for Coopers & Lybrand. Mr. Luken is a graduate of St. John Fisher College and is a Certified Public Accountant. PAUL O'LEARY has served as a Vice President of the Company since its inception. He joined Home Leasing in 1974 and has served as Vice President of Home Leasing since 1978. Mr. O'Leary is a graduate of Syracuse University and is a Certified Property Manager (CPM) as designated by the Institute of Real Estate Management. JOHN OSTER has served as Vice President of the Company and Conifer Realty since 1996. He has also been a Vice President of HP Management since 1998. He joined Conifer as a Vice President in 1988. Before joining Conifer, Mr. Oster was Director of Operations for the New York State Division of Housing and Community Renewal. He is a graduate of Hamilton College. JAMES B. QUINN, JR. has served as Vice President of the Company since 1998. He joined the Company in 1997 as the regional leader for the Philadelphia region. Prior to joining the Company, Mr. Quinn was Vice President of Millcreek Realty Group. Mr. Quinn is a graduate of Drexel University. SHARON SANFRATELLO has served as a Vice President of the Company since 1998. She joined Home Properties in 1993 as a property manager. Mrs. Sanfratello has been in property management for 18 years. Prior to joining Home Properties, Mrs. Sanfratello worked for Beacon Residential. JOHN E. SMITH joined Home Properties as Vice President of Acquisitions in 1997. Prior to joining the Company, Mr. Smith was general manager for Direct Response Marketing, Inc. and Executive Vice President for The Equity Network, Inc. Mr. Smith has been a commercial real estate broker for the past 20 years, a Certified Commercial Investment Member (CCIM) since 1982, a New York State Certified Instructor and has taught real estate courses in four states. ERIC STEVENS has served as a Vice President of the Company and Conifer Realty since 1998. He joined the Company in 1996 in connection with the merger with Conifer. At Conifer, he was a property manager for 13 years in the affordable housing area, including working with the Low Income Housing Tax Credit Program, New York State Housing Finance Agency, New York State Division of Housing and Community Renewal and the U.S. Department of Housing and Urban Development. Mr. Stevens is on the Board of Directors of the Housing Council in Monroe County, Inc. Mr. Stevens is a graduate of Babson College. RICHARD J. STRUZZI has served as a Vice President of the Company and HP Management since their inception. He joined Home Leasing in 1983 as a Vice President. Mr. Struzzi is a graduate of the State University of New York at Potsdam and holds a Masters Degree in Public School Administration from St. Lawrence University. He is the son-in-law of Nelson Leenhouts. ROBERT C. TAIT has served as a Vice President of the Company and HP Management since their inception. He joined Home Leasing in 1989 and served as a Vice President of Home Leasing since 1992. Prior to joining Home Leasing, he was a manufacturing/industrial engineer with Moscom Corp. Mr. Tait is a graduate of Princeton University, holds a Masters Degree in Business Administration from Boston University and holds the Real Property Administrator Degree from the Building Owners and Managers International Institute. Married to Amy L. Tait, he is the son-in-law of Norman Leenhouts. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS The Common Stock has been traded on the New York Stock Exchange ("NYSE") under the symbol "HME" since July 28, 1994. The following table sets forth for the previous two years the quarterly high and low sales prices per share reported on the NYSE, as well as all distributions paid. HIGH LOW DISTRIBUTION 1997 First Quarter $25-1/4 $22 $.43 Second Quarter $23-1/2 $20-1/4 $.43 Third Quarter $26 $21-9/16 $.43 Fourth Quarter $28-5/16 $25-5/8 $.45 1998 First Quarter $28-1/16 $24-15/16 $.45 Second Quarter $27-7/8 $24-7/8 $.45 Third Quarter $27-3/16 $21-3/16 $.45 Fourth Quarter $26-15/16 $24-1/4 $.48 As of March 17, 1999, the Company had approximately 3,400 shareholders. It has historically paid distributions on a quarterly basis in the months of February, May, August and November. The Credit Agreements relating to each of the Company's two $50 million lines of credit provide that the Company may not pay any distribution if a distribution, when added to other distributions paid during the three immediately preceding fiscal quarters, exceeds the greater of: (i) 90% of funds from operations and 110% of cash available for distribution; and (ii) the amounts required to maintain the Company's status as a REIT. Item 6. SELECTED FINANCIAL DATA The following table sets forth selected financial and operating data on a historical basis for the Company and the Original Properties and should be read in conjunction with the financial statements appearing elsewhere in this Form 10-K.
ORIG. COMPANY PROPERTIES* --------------------------------------------------- -------- 8/4/94 1/1/94 Through Through 1998 1997 1996 1995 12/31/94 8/3/94 (in thousands, except share, per share and property data) Revenues: Rental Income $137,557 $64,002 $42,214 $31,705 $10,995 $11,526 Other Income 11,686 5,695 3,456 2,596 948 494 Property management income (1) - - - - - 834 TOTAL REVENUES 149,243 69,697 45,670 34,301 11,943 12,854 Expenses: Operating and maintenance 63,136 31,317 21,859 15,911 5,267 6,329 Property management (1) - - - - - 625 General & administrative 6,685 2,255 1,482 1,200 400 407 Interest 23,980 11,967 9,208 6,432 1,444 3,126 Depreciation & amortization 23,191 11,200 8,077 6,258 2,191 1,584 TOTAL EXPENSES 116,992 56,739 40,626 29,801 9,302 12,071 Income before loss on disposition of property, minority interest and extraordinary item 32,251 12,958 5,044 4,500 2,641 783 Loss on disposition of property - 1,283 - - - - Income before minority interest and extraordinary item 32,251 11,675 5,044 4,500 2,641 783 Minority interest 12,603 4,248 897 455 256 - Income before extraordinary item 19,648 7,427 4,147 4,045 2,385 783 Extraordinary item, prepayment penalties, net of allocation to minority interest (960) (1,037) - (1,249) (2,498) - Net income (loss) $18,688 $6,390 $4,147 $2,796 $(113) $783 Net income (loss) per common share: Basic $1.34 $.86 $.74 $.52 ($.02) N/A Diluted $1.33 $.84 $.74 $.52 ($.02) N/A Cash dividends declared per common share $1.83 $1.74 $1.69 $1.66 $.26 N/A Balance Sheet Data: Real estate, before accumulated depreciation $940,788 $525,128 $261,773 $198,203 $162,991 $77,371 Total assets 1,012,235 543,823 248,631 181,462 148,709 60,014 Total debt 418,942 218,846 105,176 91,119 52,816 57,952 Stockholders' equity/Owners' (deficit) 361,956 151,432 83,030 75,780 81,941 (2,741) Other Data: Funds from Operations (2) $56,260 $24,345 $13,384 $11,025 $4,822 $2,348 Cash available for distribution (3) $49,044 $21,142 $11,022 $9,348 $4,369 $1,885 Net cash provided by (used in) operating activities $60,548 $27,285 $14,241 $9,811 $3,151 $2,527 Net cash provided by (used in) investing activities ($297,788) ($102,460) ($25,641) ($21,348) ($71,110) ($1,168) Net cash provided by (used in) financing activities $266,877 $77,461 $12,111 $10,714 $68,315 ($1,689) Weighted average number of shares outstanding: Basic 13,898,221 7,415,888 5,601,027 5,408,474 5,408,230 N/A Diluted 14,022,329 7,558,167 5,633,004 5,408,474 5,408,230 N/A Total communities owned at end of period 96** 63 28 20 19 12 Total apartment units owned at end of period 23,680** 14,048 7,176 5,650 4,744 3,065
*The Original Properties is not a legal entity but rather a combination of twelve entities which were wholly owned by the predecessor corporation and its affiliates prior to the Company's initial public offering on August 4, 1994. **Excludes 256 units at Leland Gardens in New Jersey owned at December 31, 1998 in an affiliated entity in contemplation of rehabilitating under the Low Income Housing Tax Credit Program. In January, 1999, a 99% limited partnership interest was transferred to the ultimate tax credit partner. Item 6. SELECTED FINANCIAL DATA (CONTINUED) (1) Property management income and expense represents the management activities of Home Leasing Corporation prior to the formation of HP Management. (2) Management considers Funds from Operations to be an appropriate measure of the performance of an equity REIT. Effective January 1, 1996, the Company has adopted NAREIT's revised White Paper definition of calculating funds from operations (New FFO). All prior periods presented have been restated to conform to New FFO. "Funds from Operations" is generally defined by NAREIT 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. Funds from Operations does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. Funds from Operations 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. Funds from Operations does not actually represent the cash made available to investors in the periods presented. Funds from Operations is calculated as follows:
8/4/94 1/1/94 THROUGH THROUGH 1998 1997 1996 1995 12/31/94 8/3/94 Net income (loss) $18,688 $6,390 $4,147 $2,796 ($113) $783 Depreciation - real property* 23,715 11,387 8,332 6,525 2,181 1,565 Non-recurring interest amortization 294 - - - - - Loss on disposition of property - 1,283 8 - - - Minority interest 12,603 4,248 897 455 256 - Extraordinary item (prepayment penalties) 960 1,037 - 1,249 2,498 - Funds from Operations 56,260 $24,345 $13,384 $11,025 $4,822 $2,348 Weighted average shares/units: Basic 22,871.7 11,373.9 6,813.2 6,015.1 5,983.6 N/A Diluted 22,995.8 11,516.1 6,845.1 6,015.1 5,983.6 N/A
*Includes amounts passed through from unconsolidated investments. The FFO presentation above may not be comparable to other similarly titled measures of FFO of other REITs. Quarterly information on Funds from Operations for the two most recent years is as follows:
1998 1st 2nd 3rd 4th Total Funds from Operations before minority interest $ 9,181 $ 12,813 $ 16,380 $ 17,886 $ 56,260 Weighted Average Shares/Units: Basic 17,303.6 21,312.3 25,603.7 27,129.4 22,871.7 Diluted 17,501.1 21,500.9 25,746.9 27,245.7 22,995.8 1997 Funds from Operations before minority interest $4,150 $5,143 $6,136 $8,916 $24,345 Weighted Average Shares/Units: Basic 9,254.7 10,139.1 10,827.1 15,215.1 11,373.9 Diluted 9,397.6 10,229.5 10,950.1 15,417.7 11,516.1
Item 6. SELECTED FINANCIAL DATA NOTES (CONTINUED) (3) Cash Available for Distribution is defined as Funds from Operations less an annual reserve for anticipated recurring, non-revenue generating capitalized costs of $375 ($350 for 1996-1997 and $300 for 1994-1995) per apartment unit, $94 per manufactured home site and $.25 per square foot for the 35,000 square foot ancillary convenient shopping area at Wedgewood. It is the Company's policy to fund its investing activities and financing activities with the proceeds of its Line of Credit or new debt or by the issuance of additional Units in the Operating Partnership. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW The following discussion is based primarily on the Consolidated Financial Statements of Home Properties of New York, Inc.. This should be read in conjunction with the financial statements appearing elsewhere in this report. Certain capitalized terms, as used herein, are defined in the Notes to the Consolidated Financial Statements. The Company is engaged primarily in the ownership, management, acquisition and development of residential apartment communities in the Northeastern, Mid-Atlantic and Midwestern United States. As of December 31, 1998, the Company operated 259 apartment communities with 34,229 apartments. Of this total, the Company owned 97 communities, consisting of 23,936 apartments, managed as general partner 123 partnerships that owned 7,482 apartments and fee managed 2,811 apartments for affiliates and third parties. The Company also fee manages 1.7 million square feet of office and retail properties. This annual report 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 activities, the actual pace of acquisitions, and continued access to capital to fund growth. RESULTS OF OPERATIONS COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31, 1997. The Company owned 27 communities with 6,552 apartment units throughout 1997 and 1998 where comparable operating results are available for the years presented (the "1998 Core Properties"). For the year ending December 31, 1998, the 1998 Core Properties showed an increase in rental revenues of 2.3% and a net operating income increase of 6.9% over the 1997 year-end period. Property level operating expenses decreased 1.9%. Average economic occupancy for the 1998 Core Properties decreased from 94.7% to 94.1%, with average monthly rental rates increasing 2.9% to $627. A summary of the 1998 Core Property net operating income is as follows:
1998 1997 % CHANGE Rent $46,587,000 $45,542,000 2.3% Property Other Income 1,613,000 1,428,000 13.0% Total Income 48,200,000 46,970,000 2.6% Operating and Maintenance (22,491,000) (22,919,000) 1.9% Net Operating Income $25,709,000 $24,051,000 6.9%
During 1998, the Company acquired a total of 9,632 apartment units in 34 newly acquired communities (the "1998 Communities"). In addition, the Company experienced full year results for the 7,496 apartment units in 35 newly acquired apartment communities (the "1997 Communities") acquired during 1997. The inclusion of these acquired communities generally accounted for the significant changes in operating results for the year ended December 31, 1998. The 1998 Communities exclude 256 units at Leland Gardens in New Jersey owned at December 31, 1998 in an affiliated entity in contemplation of rehabilitating under the Low Income Housing Tax Credit Program. In January, 1999, a 99% limited partnership interest was transferred to the ultimate tax credit partner. The Company also disposed of two communities during 1997 with 624 apartment units and a 202-site manufactured home community, all of which had partial results in 1997 (the "1997 Disposed Communities"). For the year ended December 31, 1998, operating income (income before loss on disposition of property, minority interest and extraordinary item) increased by $19,293,000 when compared to the year ended December 31, 1997. The increase was primarily attributable to the following factors: an increase in rental income of $73,555,000 and an increase in other income of $5,991,000. These changes were partially offset by an increase in operating and maintenance expense of $31,819,000, an increase in general and administrative expense of $4,430,000, an increase in interest expense of $12,013,000 and an increase in depreciation and amortization of $11,991,000. Of the $73,555,000 increase in rental income, $38,127,000 is attributable to the 1997 Communities and $37,316,000 is attributable to the 1998 Communities, offset in part by a $2,933,000 reduction attributable to the 1997 Disposed Communities. The balance is a 2.3% increase from the 1998 Core Properties due primarily to an increase of 2.9% in weighted average rental rates, offset by a decrease in occupancy from 94.7% to 94.1%. Property other income, which consists primarily of income from operation of laundry facilities, administrative fees, garage and carport rentals and miscellaneous charges to residents, increased in 1998 by $1,392,000. Of this increase, $643,000 is attributable to the 1997 Communities, $1,026,000 is attributable to the 1998 Communities and $185,000 represents a 13.0% increase from the 1998 Core Properties. In addition, $452,000 represents the decrease in the net results for limited partnerships accounted for on the equity method. Interest income increased in 1998 by $2,906,000, primarily attributable to an increase in construction loans and advances made to affiliated tax credit development partnerships. Other income increased in 1998 by $1,693,000, including $1,093,000 from increased management fees from residential properties and $329,000 from increased development fee income recognized directly by the Company from communities developed under the federal government's Low Income Housing Tax Credit Program where the Company is the general partner. The increased management fee activity resulted from full year results on 1,020 units managed in Detroit (acquired October, 1997) and 1,337 units in 46 Rural Development properties added in May of 1998. Of the $31,819,000 increase in operating and maintenance expenses, $18,469,000 is attributable to the 1997 Communities, $15,236,000 is attributable to the 1998 Communities and a reduction of $1,458,000 is attributable to the 1997 Disposed Communities. The balance for the 1998 Core Properties, a $428,000 reduction in operating expenses, is primarily due to lower gas rates and relatively mild winter weather. Core Property operating expenses, excluding utility expenses, increased approximately 2.0%. The operating expense ratio (the ratio of operating and maintenance expense compared to rental and property other income) for the 1998 Core Properties was 46.7% and 48.8% for 1998 and 1997, respectively. This 2.1% reduction is a direct result of lower than normal utility expenses. In general, the Company's operating expense ratio is higher than that experienced in other parts of the country due to relatively high real estate taxes in its markets and the Company's practice, typical in its markets, of including heating expenses in base rent. General and administrative expenses increased in 1998 by $4,430,000, or 196% from $2,255,000 in 1997 to $6,685,000 in 1998. A higher bonus in 1998 compared to 1997 ($1,210,000 versus $287,000) resulted from our incentive compensation plan which rewards exceptional FFO growth per share, contributing 40% of the 196% increase in total G&A. As the Company expands geographically, travel and lodging expenses have increased, along with expenses associated with new and expanding regional offices. In addition, personnel costs have increased to handle the growing owned portfolio, which increased in size by 70% as of December 31, 1998 compared to a year ago. The growth of management fee income recognized directly by the Company, along with its affect on G&A, makes it difficult to compare G&A to historical numbers. If the management fee income is netted against G&A expense, the percentage of remaining G&A compared to adjusted revenue is 3.5% and 2.7% for 1998 and 1997, respectively. Interest expense increased in 1998 by $12,013,000 as a result of the acquisition of the 1998 Communities and full year interest expense for the 1997 Communities. The 1997 Communities, costing in excess of $266,000,000, were acquired with $87,000,000 of assumed debt in addition to the use of UPREIT Units. The 1998 Communities, costing in excess of $376,000,000, were acquired with $82,000,000 of assumed debt, in addition to the use of UPREIT Units. Amortization relating to interest rate reduction agreements of $335,000 was included in interest expense during 1998 and 1997. In addition, amortization from deferred charges relating to the financing of properties totaling $457,000 and $276,000 was included in interest expense for 1998 and 1997, respectively. Finally, $294,000 of unamortized fees related to a standby loan facility, which allowed the Company to enter into a non-contingent contract for a 17 property portfolio acquisition, were written off during the third quarter, as the facility was only partially used and quickly repaid. The December 31, 1998 balance sheet reflects an unrealized loss on available-for-sale securities of $1,607,000. This reduction to Other Assets and Stockholders Equity represents a markdown from $11,649,000 to $10,042,000 relative to a strategic investment in the common stock of Associated Estates Realty Corporation (NYSE:AEC) of 850,000 shares, representing approximately 4% of the outstanding shares of AEC. COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31, 1996. The Company owned 22 communities with 5,384 apartment units throughout 1996 and 1997 where comparable operating results are available for the years presented (the "1997 Core Properties"), including 464 units in three communities acquired January 1, 1996. For the year ending December 31, 1997, the 1997 Core Properties showed an increase in rental revenues of 4.4% and a net operating income increase of 8.4% over the 1996 year-end period. Property level operating expense increases were held to 0.7%. Average economic occupancy for the 1997 Core Properties increased to 95.3% from 94.1%, with average monthly rental rates increasing 3.1% to $600. A summary of the 1997 Core Property net operating income is as follows:
1997 1996 % CHANGE Rent $37,099,000 $35,540,000 4.4% Property Other Income 1,235,000 1,135,000 8.8% Total Income 38,334,000 36,675,000 4.5% Operating and Maintenance (18,663,000) (18,527,000) (0.7%) Net Operating Income $19,671,000 $18,148,000 8.4%
During 1997, the Company acquired a total of 7,496 apartment units in 35 newly acquired communities (the "1997 Communities"). In addition, the Company experienced full year results for the 1,168 apartment units in six newly acquired apartment communities (the "1996 Communities") acquired after January 1, 1996. The inclusion of these acquired communities generally accounted for the significant changes in operating results for the year ended December 31, 1997. The 1997 Disposed Communities consist of two communities with 624 apartment units and a 202-site manufactured home community, all of which had partial results in 1997 and full year results during 1996. Of the two apartment communities, a 604 unit community was sold September 23, 1997 and a 20 unit community was sold on December 15, 1997. The manufactured home community was sold on December 19, 1997. The loss on disposition of these properties totaled $1,283,000. For the year ended December 31, 1997, operating income (income before loss on disposition of property, minority interest and extraordinary item) increased by $7,914,000 when compared to the year ended December 31, 1996. The increase was primarily attributable to the following factors: an increase in rental income of $21,788,000 and an increase in other income of $2,239,000. These changes were partially offset by an increase in operating and maintenance expense of $9,458,000, an increase in general and administrative expense of $773,000, an increase in interest expense of $2,759,000 and an increase in depreciation and amortization of $3,123,000. Of the $21,788,000 increase in rental income, $5,430,000 is attributable to the 1996 Communities and $15,528,000 is attributable to the 1997 Communities, offset in part by a $729,000 reduction attributable to the 1997 Disposed Communities. The balance is a 4.4% increase from the 1997 Core Properties due primarily to an increase of 3.1% in weighted average rental rates, plus an increase in occupancy from 94.1% to 95.3%. Property other income, which consists primarily of income from operation of laundry facilities, administrative fees, garage and carport rentals and miscellaneous charges to residents, increased in 1997 by $1,197,000. Of this increase, $121,000 is attributable to the 1996 Communities, $560,000 is attributable to the 1997 Communities and $100,000 represents an 8.8% increase from the 1997 Core Properties. In addition, $416,000 represents the increase in the net results for limited partnerships accounted for on the equity method. Interest income and Other income combined, increased in 1997 by $1,042,000. The change was primarily attributable to an increase in interest income of $1,553,000 on construction loans and advances made to affiliated tax credit development partnerships. Partially offsetting this are decreases in the following: development fee income recognized directly by the Company of $349,000 from communities developed under the federal government's Low Income Housing Tax Credit Program where the Company is a general partner, $112,000 from decreased management fees from residential properties and $50,000 from the decrease of the net results from the Management Companies. Of the $9,458,000 increase in operating and maintenance expenses, $2,706,000 is attributable to the 1996 Communities, $6,917,000 is attributable to the 1997 Communities and a reduction of $301,000 is attributable to the 1997 Disposed Communities. The balance for the 1997 Core Properties, or $136,000, represents a 0.7% increase over 1996. The major areas of increase in the 1997 Core Properties occurred in personnel and real estate taxes. Helping to offset this expense increase were reductions to insurance and advertising expenses. The operating expense ratio (the ratio of operating and maintenance expense compared to rental and property other income) for the 1997 Core Properties was 48.7% and 50.5% for 1997 and 1996, respectively. This 1.8% reduction reflects cost reductions through operating efficiencies and economies of scale inherent in the management of a larger portfolio of communities. In general, the Company's operating expense ratio is higher than that experienced in other parts of the country due to relatively high real estate taxes in its markets and the Company's practice, typical in its markets, of including heating expenses in base rent. General and administrative expenses increased in 1997 by $773,000, or 52% from $1,482,000 in 1996 to $2,255,000 in 1997. As the Company expands geographically, travel and lodging expenses have increased, along with expenses associated with new and expanding regional offices. In addition, personnel costs have increased to handle the growing owned portfolio, which increased in size by 96% as of December 31, 1997 compared to a year ago. General and administrative expenses as a percentage of total revenues remained constant at a level of 3.2% for both 1997 and 1996. Interest expense increased in 1997 by $2,759,000 as a result of the acquisition of the 1997 Communities and full year interest expense for the 1996 Communities. The 1996 Communities, costing in excess of $41,000,000, were acquired substantially with assumed or new debt. The 1997 Communities, costing in excess of $266,000,000, were acquired with $87,000,000 of assumed debt, in addition to the use of UPREIT Units. Amortization relating to interest rate reduction agreements of $335,000 was included in interest expense during 1997 and 1996. In addition, amortization from deferred charges relating to the financing of properties totaling $276,000 and $277,000 was included in interest expense for 1997 and 1996, respectively. LIQUIDITY AND CAPITAL RESOURCES The Company's principal liquidity demands are expected to be distributions to 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 may also engage in transactions whereby it acquires equity ownership in other public or private companies that own portfolios of apartment communities. Those transactions may be part of a strategy to acquire all of the equity ownership in those other companies. The Company intends to meet its short-term liquidity requirements through net cash flows provided by operating activities and the line of credit. The Company considers its ability to generate cash to continue 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. To the extent that the Company does not satisfy its long-term liquidity requirements through net cash flows provided by operating activities and the line of credit described below, it intends to satisfy such requirements through the issuance of UPREIT Units, proceeds from the Dividend Reinvestment Plan, property debt financing, or issuing additional common shares or shares of the Company's preferred stock. As of December 31, 1998, the Company owned twenty-three properties, with 3,709 apartment units, which were unencumbered by debt. As of February 28, 1997, the Company's Form S-3 Registration Statement was declared effective relating to the issuance of up to $100 million of shares of common stock or other securities. During 1997, $40,750,000 of common shares were issued under this shelf registration including $15,000,000 sold directly to two institutional investors and $25,750,000 placed with an investment banking firm which was immediately resold to the public. During the first four months of 1998, $9,500,000 of common shares were sold to an investment banking firm who included the shares in a unit investment trust and $36,000,000 were issued to one institutional investor. The remaining balance on the shelf, $13,750,000, was added to a new $400 million shelf declared effective in May, 1998. During the balance of the year, $27,400,000 of common shares were sold to an investment banking firm who included the shares in a unit investment trust and $52,700,000 ($49 million net of underwriter's discount) was issued in the Company's first public offering of stock since the IPO. The available balance on the shelf at December 31, 1998 is $333,650,000. The issuance of UPREIT Units for property acquisitions continues to be a significant source of capital. During 1998, 4,512 apartment units in eight separate transactions were acquired for a total cost of $176,000,000, using UPREIT Units valued at approximately $71,000,000 with the balance paid in cash or assumed debt. During 1997, 5,636 apartment units in four separate transactions were acquired for a total cost of $195,000,000, using UPREIT Units valued in excess of $106,000,000 with the balance paid in cash or assumed debt. In May, 1997, 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. In June, 1997, the Company repurchased 20,000 shares at a cost of $426,000, reflecting a stock price which Company management felt was an attractive investment opportunity. The Company repurchased an additional 59,600 shares in September, 1998 at a cost of $1,437,000. In November, 1995, the Company established a Dividend Reinvestment Plan. The Plan provides the stockholders of the Company an opportunity to automatically invest their cash dividends at a discount of 3% from the market price. In addition, eligible participants may make monthly payments or other voluntary cash investments in shares of common stock, typically purchased at discounts of up to 3%. During 1998, over $72,000,000 of common stock was issued under this plan, approximately twice the level of the previous year. As of December 31, 1998, the Company had an unsecured line of credit from Chase Manhattan Bank of $50,000,000 and a $50,000,000 supplemental unsecured revolving credit facility with M&T Bank, both with no outstanding balances. Borrowings under the facilities 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 institutions. The lines of credit expire on September 4, 1999, with a one year extension at the Company's option. As of December 31, 1998, the weighted average rate of interest on the Company's mortgage debt is 7.2% and the weighted average maturity of such indebtedness is approximately ten years. All of the debt was at fixed rates of interest, with maturities staggered. This limits the exposure to changes in interest rates, minimizing the effect of interest rate fluctuations on results of operations and financial condition. The Company's net cash provided by operating activities increased from $27,285,000 for the year ended December 31, 1997 to $60,548,000 for the year ended December 31, 1998. The increase was principally due to the acquisition of the 1997 and 1998 Communities. Net cash used in investing activities increased from $102,460,000 in 1997 to $297,788,000 in 1998, resulting from a higher level of acquisitions in 1998 (9,632 apartment units) than in 1997 (6,872 apartment units, net of sales). The Company's net cash provided by financing activities increased from $77,461,000 in 1997 to $266,877,000 in 1998. The major source of financing in 1997 was $100,400,000 of proceeds from sales of shares of common stock and net debt proceeds which were used to fund property acquisitions and additions. In 1998, proceeds from the sale of common stock and net debt proceeds totaling $316,045,000 were used to fund property acquisitions and additions. CAPITAL IMPROVEMENTS Total capital improvement expenditures increased from $15,962,000 in 1997 to $42,896,000 in 1998. Of the $42,896,000 expenditures, $8,795,000 is attributable to the 1998 Communities and $21,167,000 is attributable to the 1997 Communities. The balance of $12,934,000 is allocated between the 1998 Core Properties of $10,579,000 and $2,355,000 for corporate office expenditures. Recurring, non-revenue enhancing capital replacements typically include carpeting and tile, appliances, HVAC equipment, new roofs, site improvements and various exterior building improvements. Funding for these capital replacements are provided by cash flows from operating activities. The Company estimates that during 1998, approximately $375 per unit was spent on capital replacements to maintain the condition of its properties. Of the $10,579,000 incurred for the 1998 Core Properties referred to above, $8,080,000 was incurred to fund non- recurring, revenue enhancing upgrades, including the following: construction of one new community center; the installation of new windows and other energy conservation measures; and the modernization of kitchens and bathrooms. Management believes that these upgrades contributed significantly towards achieving 6.9% average growth in net operating income at the 1998 Core Properties. Of the combined $29,962,000 incurred on 1998 and 1997 acquisition properties referenced above, over $25,000,000 in substantial rehabilitations was incurred as part of management's acquisition and repositioning strategies. The pace of capital replacements was accelerated to improve the overall competitive condition of the properties. Funding for these capital improvements was provided by the line of credit and equity proceeds. During 1999, management expects that the communities will benefit further from improvements completed in 1998 and plans to continue to fund similar non-recurring, revenue enhancing upgrades in addition to normal capital replacements. IMPACT OF THE YEAR-2000 ON SYSTEM PROCESSING THE YEAR 2000 ("Y2K") PROBLEM CONCERNS THE INABILITY OF INFORMATION SYSTEMS TO PROPERLY RECOGNIZE AND PROCESS DATE-SENSITIVE INFORMATION BEYOND JANUARY 1, 2000. AS A RESULT, THE Y2K PROBLEM CAN AFFECT 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 EVEN FIRE ALARMS. ALL REFERENCES TO PERCENT COMPLETE BELOW ARE AS OF 3/15/99. The Company's State of Readiness The Company began addressing the Y2K issue in September 1997. As such it divided its review into two segments: business critical and mission critical systems. Business critical systems are those with the potential to affect the financial and operational infrastructure of the Company. Mission critical are those systems with a potential to affect the delivery of electricity and natural gas to our residents, commercial tenants and employees and the safety of residents, commercial tenants and employees. Recognizing that the mission critical systems rely heavily on public service vendors, the Company's focus to date has been on business critical systems under the assumption that market forces and regulatory agencies would encourage and monitor the compliance of the telecommunications, utilities and emergency service industries. The Company has set up systems to monitor the progress of mission critical service providers and will develop contingency plans, possibly in coordination with industry organizations, as needed, to minimize the possibility that the Y2K problem would disrupt the lives of its residents, commercial tenants and employees. The Company relies exclusively on micro computers (PC's). PC's exist in the corporate office, regional offices and at the communities. The Company is 95% complete with its review and modification of corporate office systems towards Y2K compliance. Outstanding projects include: upgrading the voicemail system and installing Y2K compliant modules of non-critical property management software. Specifically, the software vendors have advised the Company that the property management, accounts payable and general ledger software and payroll software is compliant. The Company will continue a dialog with all software service providers so that any additional upgrades can be completed as necessary. The Company is 50% complete with its review and modification of regional office systems and 30% complete with its review and modification of community based systems. The Company has one and one-half full-time employees dedicated to upgrading regional offices and community based systems. Additional information systems employees will assist as needed. Employee participation in this effort is slightly greater than originally anticipated resulting in additions to our dedicated staff. The Company anticipates its regional office systems will be tested for compliance by July 1999 and that its community based systems will be tested for compliance by September 1999. Both of the testing targets have been extended in recognition of the Company's need for more resources than originally anticipated. Once all hardware and software components are believed to be Y2K ready, the Company plans to periodically match its systems' inventory against hardware and software component manufacturer upgrade releases to assure that its systems have the most current Y2K upgrades (including any properties acquired). The ability of the Company to successfully transact monetary exchanges is key to continued successful operation. For this reason, all financial institutions which the Company has a relationship will be identified and queried for Y2K readiness status during the second quarter of 1999. This evaluation has been delayed as it was felt that a delay would result in a more accurate picture of the bank's status. The Company's significant relationships are with regional and national financial institutions which are also subject to the oversight of various federal regulatory agencies for their Y2K compliance. Delivery of goods and services (i.e., building and elevator access, security systems, HVAC, life safety, etc.) to the Company's communities and offices must continue to be provided without interruption. The Company expects to have surveyed all critical suppliers by June to determine their Y2K readiness status. CONTINGENCY PLANS Testing will begin in August 1999 to determine the Company's business critical system readiness. Based on testing results, contingency plans may be put in place. This target date has been changed as management is more comfortable that the time required to develop contingency plans will be less than originally planned. RISKS Since the Company's major source of income is rental payments under term leases at communities located in different municipalities, the failure of business critical systems at any one community is not expected to have a material adverse effect on the Company's financial condition, results of operations and liquidity. Given the complexity and general uncertainty of the Y2K issues in the gas, electric, telecommunications, banking and related industries, even the most comprehensive program, however, cannot assure that unforeseen problems will not occur. The Company therefore is unable at this time to determine whether any unforeseen impacts could have a material effect on the Company's financial condition. The Company believes that upon the full implementation of our upgraded business system and assuming Y2K compliance of our public service vendors, the possibility of significant interruptions of normal operations should not be material. COSTS The total cost of the Company's Y2K activities, which is estimated at $675,000, is not expected to have a material effect on the Company's financial position. Approximately $375,000 has been expended as of March 15, 1999. The remaining expenditures to be incurred will be funded from operations. A majority of these costs are an acceleration of the amounts the Company would anticipate incurring to upgrade business systems, regardless of the Y2K problem, considering the evolution of technology and the requirements for running newly acquired and improved system applications. ENVIRONMENTAL ISSUES Phase I environmental audits have been completed on substantially all of the Owned Properties. There are no recorded amounts resulting from environmental liabilities as there are no known contingencies with respect thereto. Furthermore, no condition is known to exist that would give rise to a liability for site restoration or other costs that may be incurred with respect to the sale or disposal of a property. RECENT ACCOUNTING PRONOUNCEMENTS The Company is not aware of any pronouncements which would have a material impact. 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. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See Note 4 - Mortgage Notes Payable in the Consolidated Financial Statements of the Company concerning interest rate risk. See Management's Discussion and Analysis of Financial Condition and Results of Operations concerning market risk on available-for-sale securities. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA The financial statements and supplementary data are listed under Item 14(a) and filed as part of this report on the pages indicated. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT DIRECTORS The Board of Directors (the "Board") currently consists of eleven members. The terms for all of the directors of Home Properties expire at the 1999 Shareholders' Meeting. The information sets forth, as of February 28, 1999, for each director of the Company such director's name, experience during the last five years, other directorships held, age and the year such director was first elected as director of the Company. Year First NAME OF DIRECTOR AGE ELECTED DIRECTOR Burton S. August, Sr. 83 1994 William Balderston, III 71 1994 Richard J. Crossed 59 1996 Alan L. Gosule 58 1996 Leonard F. Helbig, III 53 1994 Roger W. Kober 65 1994 Nelson B. Leenhouts 63 1993 Norman Leenhouts 63 1993 Clifford W. Smith, Jr. 52 1994 Paul L. Smith 63 1994 Amy L. Tait 40 1993 BURTON S. AUGUST, SR. has been a director of the Company since August, 1994. Mr. August is currently a director of Monro Muffler Brake, Inc., a publicly traded company where Mr. August served as Vice President from 1969 until he retired in 1980. Mr. August is also a trustee emeritus of Rochester Institute of Technology, a trustee of Strong Museum and a trustee of the Otetiana Council Boy Scouts of America. WILLIAM BALDERSTON, III has been a director of the Company since August, 1994. From 1991 to the end of 1992, he was an Executive Vice President of The Chase Manhattan Bank, N.A. From 1986 to 1991, he was President and Chief Executive Officer of Chase Lincoln First Bank, N.A., which was merged into The Chase Manhattan Bank, N.A. He is a director of Bausch & Lomb Incorporated and Rochester Gas and Electric Corporation, as well as a Trustee of the University of Rochester. Mr. Balderston is a graduate of Dartmouth College. RICHARD J. CROSSED has served as an Executive Vice President and as a director of the Company and as a director, President and Chief Executive Officer of Conifer Realty since January 1, 1996. He is also Executive Vice President of HP Management. He served as President and Chief Executive Officer of Conifer from 1985. Prior to becoming President of Conifer, he served as Director of Development for Conifer. Mr. Crossed is a director of St. Joseph's Villa and is active in many housing organizations. He has served on the New York State Housing Turnkey Task Force and New York State Low-Income Housing Tax Credit Task Force. Mr. Crossed is a graduate of Bellarmine College. ALAN L. GOSULE, has been a director of the Company since December, 1996. Mr. Gosule has been a partner in the law firm of Roger & Wells LLP, New York, New York, since August, 1991 and prior to that time was a partner in the law firm of Gaston & Snow. He serves as Chairman of the Rogers & Wells LLP Tax Department and Real Estate Securities practice group. Mr. Gosule is a graduate of Boston University and its Law School and received a LL.M. from Georgetown University. Mr. Gosule also serves on the Boards of Directors of 15 funds of the Northstar Mutual Funds, the Simpson Housing Limited Partnership, F.C. Putnam Investment Management Company and CORE Cap, Inc.. Rogers & Wells LLP acted as counsel to Coopers & Lybrand, LLP in its capacity as advisor to the State Treasurer of the State of Michigan in connection with its investment of retirement funds in the Operating Partnership and Mr. Gosule was the nominee of the State Treasurer under the terms of the investment agreements relating to the transaction. LEONARD F. HELBIG, III has been a director of the Company since August, 1994. Mr. Helbig has served as Executive Managing Director of the Asset Services and Financial Services Groups and a Director of Cushman & Wakefield since 1984. He joined Cushman & Wakefield in 1980 and is also a member of that firm's Executive and National Management Committees. Mr. Helbig is a member of the Urban Land Institute, the Pension Real Estate Association and the International Council of Shopping Centers. Mr. Helbig is a graduate of LaSalle University and holds the MAI designation of the American Institute of Real Estate Appraisers. ROGER W. KOBER has been a director of the Company since August, 1994. Mr. Kober is currently a director of Rochester Gas and Electric Corporation where he was employed from 1965 until his retirement on January 1, 1998. From March, 1996 until January 1, 1998 Mr. Kober served as Chairman and Chief Executive Officer of Rochester Gas and Electric Corporation. He is also a member of the Board of Trustees of Rochester Institute of Technology. Mr. Kober is a graduate of Clarkson College and holds a Masters Degree in Engineering from Rochester Institute of Technology. NELSON B. LEENHOUTS has served as President, Co-Chief Executive Officer and a director of the Company since its inception in 1993. He has also served as President and Chief Executive Officer of HP Management since its formation and has been a director of Conifer Realty since its formation. He has been a Vice President of Conifer Realty since 1998. Nelson Leenhouts was the founder, and a co-owner, together with Norman Leenhouts, of Home Leasing, and served as President of Home Leasing from 1967. He is a director of Hauser Corporation. Nelson Leenhouts is a graduate of the University of Rochester. He is the twin brother of Norman Leenhouts. NORMAN P. LEENHOUTS has served as Chairman of the Board of Directors, Co-Chief Executive Officer and a director of the Company since its inception in 1993. He has also served as Chairman of the Board of HP Management and as a director of Conifer Realty since their formation. Norman Leenhouts is a co- owner, together with Nelson Leenhouts, of Home Leasing and served as Chairman of Home Leasing from 1971. He is a director of Hauser Corporation and Rochester Downtown Development Corporation. He is a graduate of the University of Rochester and is a certified public accountant. He is the twin brother of Nelson Leenhouts. CLIFFORD W. SMITH, JR. has been a director of the Company since August, 1994. Mr. Smith has been the Clarey Professor of Finance of the William E. Simon Graduate School of Business Administration of the University of Rochester since 1988. He has written numerous books, monographs, articles and papers on a variety of financial, capital markets, risk management and accounting topics and has held a variety of editorial positions on a number of journals. Mr. Smith is a graduate of Emory University and holds a Doctor of Economics from the University of North Carolina at Chapel Hill. PAUL L. SMITH has been a director of the Company since August, 1994. Mr. Smith was a director, Senior Vice President and the Chief Financial Officer of the Eastman Kodak Company from 1983 until he retired in 1993. He is currently a member of the Board of Trustees of the George Eastman House, Geva Theatre and Ohio Wesleyan University. Mr. Smith also serves on the Boards of Directors of Performance Technologies, Inc. and Canandaigua Brands, Inc. Mr. Smith is a graduate of Ohio Wesleyan University and holds an MBA Degree in finance from Northwestern University. AMY L. TAIT has served as Executive Vice President and a director of the Company since its inception in 1993. She has also served as a director of HP Management since its formation. Mrs. Tait joined Home Leasing in 1983 and has had several positions, including Senior and Executive Vice President and Chief Operating Officer. She currently serves on the M & T Bank Advisory Board and the boards of the United Way of Rochester and Geva Theatre. Mrs. Tait is a graduate of Princeton University and holds a Masters Degree in Business Administration from the William E. Simon Graduate School of Business Administration of the University of Rochester. She is the daughter of Norman Leenhouts. See Item X in Part I hereof for information regarding executive officers of the Company. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES ACT OF 1934. Section 16(a) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") requires the Company's executive officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Officers, directors and greater than 10% shareholders are required to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 1998, all Section 16(a) filing requirements applicable to its executive officers, directors and greater than 10% beneficial owners were satisfied. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of the Stockholders of the Company to be held on May 4, 1999 under "Executive Compensation", which proxy statement will be filed within 120 days after the end of the Company's fiscal year. ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be held on May 4, 1999 under "Security Ownership of Certain Beneficial Owners and Management", which proxy statement will be filed within 120 days after the end of the Company's fiscal year. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this Item is incorporated herein by reference to the Company's proxy statement to be issued in connection with the Annual Meeting of Stockholders of the Company to be held on May 4, 1999 under "Certain Relationships and Transactions", which proxy statement will be filed within 120 days after the end of the Company's fiscal year. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1 and 2. Financial Statements and Schedules The financial statements and schedules listed below are filed as part of this annual report on the pages indicated. HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED FINANCIAL STATEMENTS PAGE Report of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3 Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996 F-5 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 1998, 1997 and 1996 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 F-7 Notes to Consolidated Financial Statements F-8 Report of Independent Accountants on Financial Statement Schedule F-26 Schedule III: Real Estate and Accumulated Depreciation F-27 (a) 3. Exhibits 2.1 Agreement among Home Properties of New York, Inc. and Philip J. Solondz, Daniel Solondz and Julia Weinstein relating to Royal Gardens I, together with Amendment No. 1. 2.2 Agreement among Home Properties of New York, Inc. and Philip Solondz and Daniel Solondz relating to Royal Gardens II, together with Amendment No. 1. 2.3 Purchase and Sale Agreement dated July 25, 1997 by and between Home Properties of New York, L.P. and Louis S. and Molly S. Wolk Foundation. 2.4 Purchase and Sale Agreement dated April 30, 1997 between Home Properties of New York, L.P. and Briggs Wedgewood Associates, L.P. 2.5 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties of New York, L.P. and Chesfield Partnership. 2.6 Agreement and Plan of Merger dated July 31, 1997 between Home Properties of New York, L.P. and Valspring Partnership. 2.7 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties of New York, L.P. and Exmark Partnership. 2.8 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties of New York, L.P. and New Orleans East Limited Partnership. 2.9 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties of New York, L.P. and Glenvwk Partnership. 2.10 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties of New York, L.P. and PK Partnership. 2.11 First Amendment to Agreement and Plan of Merger, dated September 1, 1997 between Home Properties of New York, L.P. and PK Partnership and its partners. 2.12 First Amendment to Agreement and Plan of Merger, dated September 1, 1997 between Home Properties of New York, L.P. and NOP Corp. and Norpark Partnership. 2.13 Contribution Agreement dated July 31, 1997 between Home Properties of New York, L.P. and Lamar Partnership. 2.14 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties of New York, L.P. and Curren Partnership. 2.15 Contribution Agreement, dated October __, 1997 between Home Properties of New York, L.P. and Berger/Lewiston Associates Limited Partnership; Stephenson-Madison Heights Company Limited Partnership; Kingsley-Moravian Company Limited Partnership; Woodland Garden Apartments Limited Partnership; B&L Realty Investments Limited Partnership; Southpointe Square Apartments Limited Partnership; Greentrees Apartments limited Partnership; Big Beaver-Rochester Properties Limited Partnership; Century Realty Investment Company Limited Partnership. 2.16 Agreement among Home Properties of New York, L.P. and Erie Partners, L.L.C. relating to Woodgate Place Apartments, together with Amendment No. 1 2.17 Agreement among Home Properties of New York, L.P. and Mid-Island Limited Partnership relating to Mid-Island Estates, together with Amendment No. 1. 2.18 Purchase and Sale Agreement among Home Properties of New York, L.P. and Anthony M. Palumbo and Daniel Palumbo. 2.19 Purchase and Sale Agreements dated June 17, 1997 among Home Properties of New York, L.P. and various individuals relating to Hill Court Apartments South and Hudson Arms Apartments, together with a letter amendment dated September 24, 1997. 2.20 Contract of Sale, dated October 20,1997 between Home Properties of New York, L.P. and Hudson Palisades Associates relating to Cloverleaf Apartments. 2.21 Contribution Agreement, dated November 17, 1997 among Home Properties of New York, L.P. and various trusts relating to Scotsdale Apartments. 2.22 Contribution Agreement, dated November 7, 1997 among Home Properties of New York, L.P. and Donald Schefmeyer and Stephen W. Hall relating to Candlewood Apartments, together with Amendment No. One dated December 3, 1997. 2.23 Purchase and Sale Agreement dated November 26, 1997 among Home Properties of New York, L.P. and Cedar Glen Associates. 2.24 Contribution Agreement dated March 2, 1998 among Home Properties of New York, L.P., Braddock Lee Limited Partnership and Tower Construction Group, LLC. 2.25 Contribution Agreement dated March 2, 1998 among Home Properties of New York, L.P., Park Shirlington Limited Partnership and Tower Construction Group, LLC. 2.26 Contract of Sale between Lake Grove Associates Corp. and Home Properties of New York, L.P., dated December 12, 1996, relating to the Lake Grove Apartments. 2.27 Form of Contribution Agreement among Home Properties of New York, L.P. and Strawberry Hill Apartment Company LLLP, Country Village Limited Partnership, Morningside Six, LLLP, Morningside North Limited Partnership and Morningside Heights Apartment Company Limited Partnership with schedule setting forth material details in which documents differ from form. 2.28 Form of Purchase and Sale Agreement with schedule setting forth material details in which documents differ from form. 3.1 Articles of Amendment and Restatement of the Articles of Incorporation of Home Properties of New York, Inc. 3.2 Articles of Amendment of the Articles of Incorporation of Home Properties of New York, Inc. 3.3 Amended and Restated By-Laws of Home Properties of New York, Inc. (Revised 12/30/96). 4.1 Form of certificate representing Shares of Common Stock. 4.2 Agreement of Home Properties of New York, Inc. to file instruments defining the rights of holders of long-term debt of it or its subsidiaries with the Commission upon request. 4.3 Credit Agreement between Manufacturers and Traders Trust Company, Home Properties of New York, L.P. and Home Properties of New York, Inc. 4.4 Amendment Agreement between Manufacturers and Traders Trust Company, Home Properties of New York, L.P. and Home Properties of New York, Inc. amending the Credit Agreement. 4.5 Mortgage Spreader, Consolidation and Modification Agreement between Manufacturers and Traders Trust Company and Home Properties of New York, L.P., together with form of Mortgage, Assignment of Leases and Rents and Security Agreement incorporated therein by reference. 4.6 Mortgage Note made by Home Properties of New York, L.P. payable to Manufacturers and Traders Trust Company in the principal amount of $12,298,000. 4.7 Spreader, Consolidation, Modification and Extension Agreement between Home Properties of New York, L.P. and John Hancock Mutual Life Insurance Company, dated as of October 26, 1995, relating to indebtedness in the principal amount of $20,500,000. 4.8 Amended and Restated Stock Benefit Plan of Home Properties of New York, Inc. 4.9 Amended and Restated Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan 4.10 Amendment No. One to Amended and Restated Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan. 4.11 Amendment No. Two to Amended and Restated Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan. 4.12 Amended and Restated Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan. 4.13 Amendment No. Three to Amended and Restated Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan. 4.14 Directors' Stock Grant Plan. 4.15 Director, Officer and Employee Stock Purchase and Loan Program. 10.1 Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. 10.2 Amendments No. One through Eight to the Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. 10.3 Articles of Incorporation of Home Properties Management, Inc. 10.4 By-Laws of Home Properties Management, Inc. 10.5 Articles of Incorporation of Conifer Realty Corporation. 10.6 By-Laws of Conifer Realty Corporation. 10.7 Home Properties Trust Declaration of Trust, dated September 19, 1997. 10.8 Employment Agreement between Home Properties of New York, L.P. and Norman P. Leenhouts. 10.9 Amendments No. One, Two and Three to the Employment Agreement between Home Properties of New York, L.P. and Norman P. Leenhouts. 10.10 Employment Agreement between Home Properties of New York, L.P. and Nelson B. Leenhouts. 10.11 Amendments No. One, Two and Three to the Employment Agreement between Home Properties of New York, L.P. and Nelson B. Leenhouts. 10.12 Employment Agreement between Home Properties of New York, L.P. and Richard J. Crossed. 10.13 Amendments No. One and Two to the Employment Agreement between Home Properties of New York, L.P. and Richard J. Crossed. 10.14 Indemnification Agreement between Home Properties of New York, Inc. and certain officers and directors. 10.15 Indemnification Agreement between Home Properties of New York, Inc. and Richard J. Crossed. 10.16 Indemnification Agreement between Home Properties of New York, Inc. and Alan L. Gosule. 10.17 Registration Rights Agreement among Home Properties of New York, Inc., Home Leasing Corporation, Leenhouts Ventures, Norman P. Leenhouts, Nelson B. Leenhouts, Amy L. Tait, David P. Gardner, Ann M. McCormick, William E. Beach, Paul O'Leary, Richard J. Struzzi, Robert C. Tait, Timothy A. Florczak and Laurie Tones. 10.18 Lockup Agreements by Home Properties of New York, Inc. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John F. Fennessey. 10.19 Contribution Agreement between Home Properties of New York, L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.20 Amendment to Contribution Agreement between Home Properties of New York, L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.21 Agreement of Operating Sublease, dated October 1, 1986, among KAM, Inc., Morris Massry and Raintree Island Associates, as amended by Letter Agreement Supplementing Operating Sublease dated October 1, 1986. 10.22 Second Amended and Restated Incentive Compensation Plan of Home Properties of New York, Inc. 10.23 Indemnification and Pledge Agreement between Home Properties of New York, L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.24 Form of Term Promissory Note payable to Home Properties of New York, Inc. by officers and directors in association with the Executive and Director Stock Purchase and Loan Program. 10.25 Form of Pledge Security Agreement executed by officers and directors in connection with Executive and Director Stock Purchase and Loan Program. 10.26 Schedule of Participants, loan amounts and shares issued in connection with the Executive and Director Stock Purchase and Loan Program. 10.27 Subordination Agreement between Home Properties of New York, Inc. and The Chase Manhattan Bank relating to the Executive and Director Stock Purchase and Loan Program. 10.28 Partnership Interest Purchase Agreement, dated as of December 23, 1996 among Home Properties of New York, Inc., Home Properties of New York, L.P. and State of Michigan Retirement Systems. 10.29 Registration Rights Agreement, dated as of December 23, 1996 between Home Properties of New York, Inc. and State of Michigan Retirement Systems. 10.30 Lock-Up Agreement, dated December 23, 1996 between Home Properties of New York, Inc. and State of Michigan Retirement Systems. 10.31 Agreement, dated as of April 13, 1998, between Home Properties of New York, Inc. and the Treasurer of the State of Michigan. 10.32 Credit Agreement, dated as of September 4, 1997, among Home Properties of New York, L.P. and The Chase Manhattan Bank, as Administrative Agent, Chase Securities Inc., as Arranger, Manufacturers and Traders Trust Company, as Co-Agent. 10.33 Amendment No. One, to Credit Agreement dated as of September 4, 1997, among Home Properties of New York, L.P., a New York limited partnership, the Lenders party hereto, The Chase Manhattan Bank, as Administrative Agent, and Manufacturers and Traders Trust Company, as Co-Agent. 10.34 Promissory Note, dated September 4, 1997 from Home Properties of New York, L.P. to The Chase Manhattan Bank. 10.35 Promissory Note, dated September 4, 1997 from Home Properties of New York, L.P. to Manufacturers and Traders Trust Company. 10.36 Amendment No. Nine to the Second Amended and Restated Agreement of Limited Partnership to the Operating Partnership. 10.37 Credit Agreement dated as of July 6, 1998 among Home Properties of New York, L.P. and Manufacturers and Traders Trust Company. 10.38 Agreement and Amendment No. One to Credit Facility Agreement, dated December 11, 1998 between Home Properties of New York, Inc. and Manufacturers and Traders Trust Company. 10.39 Master Credit Facility Agreement by and among Home Properties of New York, Inc., Home Properties of New York, L.P., Home Properties WMF I LLC and Home Properties of New York, L.P. and P-K Partnership doing business as Patricia Court and Karen Court and WMF Washington Mortgage Corp., dated as of August 28, 1998. 10.40 First Amendment to Master Credit Facility Agreement, dated as of December 11, 1998 among Home Properties of New York, Inc., Home Properties of New York, L.P., Home Properties WMF I LLC and Home Properties of New York, L.P. and P-K Partnership doing business as Patricia Court and Karen Court and WMF Washington Mortgage Corp. and Fannie Mae. 10.41 Amendments No. Ten through Seventeen to the Second Amended and Restated Limited Partnership Agreement. 21 List of Subsidiaries of Home Properties of New York, Inc. 23 Consent of PricewaterhouseCoopers LLP. 27 Financial Data Schedule. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Home Properties of New York, Inc. certifies that it has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HOME PROPERTIES OF NEW YORK, INC. By: /S/ NORMAN P. LEENHOUTS Norman P. Leenhouts Chairman of the Board, Co-Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Home Properties of New York, Inc. and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /S/ NORMAN P. LEENHOUTS Director, Chairman of the March 17, 1999 Norman P. Leenhouts Board of Directors and Co-Chief Executive Officer (Co-Principal Executive Officer) /S/ NELSON B. LEENHOUTS Director, President March 17, 1999 Nelson B. Leenhouts and Co-Chief Executive Officer (Co-Principal Executive Officer) /S/ RICHARD J. CROSSED Director, Executive Vice March 17, 1999 Richard J. Crossed President /S/ AMY L. TAIT Director, Executive Vice March 17, 1999 Amy L. Tait President /S/ DAVID P. GARDNER Vice President, Chief Financial March 17, 1999 David P. Gardner Officer and Treasurer (Principal Financial and Accounting Officer) SIGNATURE TITLE DATE /S/ BURTON S. AUGUST, SR. Director March 17, 1999 Burton S. August, Sr. /S/ WILLIAM BALDERSTON, III Director March 17, 1999 William Balderston, III /S/ ALAN L. GOSUL Director March 17, 1999 Alan L. Gosule /S/ LEONARD F. HELBIG, III Director March 17, 1999 Leonard F. Helbig, III /S/ ROGER W. KOBER Director March 17, 1999 Roger W. Kober /S/ CLIFFORD W. SMITH, JR. Director March 17, 1999 Clifford W. Smith, Jr. /S/ PAUL L. SMITH Director March 17, 1999 Paul L. Smith HOME PROPERTIES OF NEW YORK, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE PAGE Report of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 1998 and 1997 F-3 Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and 1996 F-4 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1998, 1997 and 1996 F-5 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 1998, 1997 and 1996 F-6 Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996 F-7 Notes to Consolidated Financial Statements F-8 Report of Independent Accountants on Financial Statement Schedule F-26 Schedule III: Real Estate and Accumulated Depreciation F-27 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Home Properties of New York, Inc. In our opinion, the accompanying consolidated financial statements listed in item 14(a)(1) and (2) of this Form 10-K present fairly, in all material respects, the financial position of Home Properties of New York, Inc. (the "Company") at December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Rochester, New York January 30, 1999 HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1998 and 1997 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1998 1997 ASSETS Real estate: Land $ 119,221 $ 62,640 Buildings, improvements and equipment 821,567 462,488 940,788 525,128 Less: accumulated depreciation ( 65,627) (46,531) Real estate, net 875,161 478,597 Cash and cash equivalents 33,446 3,809 Cash in escrows 17,431 10,211 Accounts receivable 6,269 3,531 Prepaid expenses 6,155 5,305 Deposit 175 605 Investment in and advances to affiliates 54,229 35,585 Deferred charges 2,749 1,637 Other assets 16,620 4,543 Total assets $1,012,235 $543,823 LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes payable $ 418,942 $210,096 Line of Credit - 8,750 Accounts payable 8,300 5,082 Accrued interest payable 1,962 1,077 Accrued expenses and other liabilities 4,962 4,374 Security deposits 11,404 6,165 Total liabilities 445,570 235,544 Minority interest 204,709 156,847 Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued - - Common stock, $.01 par value; 50,000,000 shares authorized; 17,635,000 and 9,317,556 shares issued and outstanding at December 31, 1998 and 1997, respectively 177 93 Excess stock, $.01 par value; 10,000,000 shares authorized; no shares issued - - Additional paid-in capital 401,814 176,021 Distributions in excess of accumulated earnings ( 26,622) (19,700) Unrealized loss on available-for-sale securities ( 1,607) - Treasury stock, at cost, 79,600 and 20,000 shares at December 31, 1998 and 1997, respectively ( 1,863) ( 426) Officer and director notes for stock purchases ( 9,943) ( 4,556) Total stockholders' equity 361,956 151,432 Total liabilities and stockholders' equity $1,012,235 $543,823
The accompanying notes are an integral part of these consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1998 1997 1996 Revenues: Rental income $137,557 $64,002 $42,214 Property other income 3,614 2,222 1,025 Interest income 5,102 2,196 643 Other income 2,970 1,277 1,788 Total Revenues 149,243 69,697 45,670 Expenses: Operating and maintenance 63,136 31,317 21,859 General and administrative 6,685 2,255 1,482 Interest 23,980 11,967 9,208 Depreciation and amortization 23,191 11,200 8,077 Total Expenses 116,992 56,739 40,626 Income before loss on disposition of property, minority interest and extraordinary item 32,251 12,958 5,044 Loss on disposition of property - 1,283 - Income before minority interest and extraordinary item 32,251 11,675 5,044 Minority interest 12,603 4,248 897 Income before extraordinary item 19,648 7,427 4,147 Extraordinary item, prepayment penalties, net of $595 in 1998 and $737 in 1997 allocated to minority interest (960) (1,037) - Net Income $18,688 $ 6,390 $ 4,147 Basic earnings per share data: Income before extraordinary item $ 1.41 $ 1.00 $ .74 Extraordinary item ($ .07) ($ .14) - Net income $ 1.34 $ .86 $ .74 Diluted earnings per share data: Income before extraordinary item $ 1.40 $ .98 $ .74 Extraordinary item ($ .07) ($ .14) - Net income $ 1.33 $ .84 $ .74 Weighted average number of shares outstanding: Basic 13,898,221 7,415,888 5,601,027 Diluted 14,022,329 7,558,167 5,633,004
The accompanying notes are an integral part of these consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Officer/ Distributions Director Additional in Excess of Accumulated Notes for Common Stock Paid-In Accumulated Comprehensive Treasury Stock Shares Amount Capital Earnings Income Stock Purchase Balance, January 1, 1996 5,408,817 $54 $83,413 ($ 7,687) $ - $ - $ - Issuance of common stock, net 735,681 7 14,679 (2,061) Net income 4,147 Dividends paid ($1.69 per share) __ ( 9,522) _____ _____ Balance, December 31, 1996 6,144,498 61 98,092 ( 13,062) - - (2,061) Issuance of common stock, net 3,148,750 31 77,087 (2,272) Interest on notes for stock purchase ( 223) Net income 6,390 Conversion of UPREIT Units for stock 44,308 1 842 Purchase of treasury stock (20,000) ( 426) Dividends paid ($1.74 per share) ( 13,028) ______ _____ Balance, December 31, 1997 9,317,556 93 176,021 ( 19,700) - ( 426) (4,556) Issuance of common stock, net 8,301,072 83 205,483 (5,236) Interest on notes for stock purchase ( 151) Net income 18,688 Unrealized loss on available-for-sale securities (1,607) Conversion of UPREIT Units for stock 75,972 1 800 Purchase of treasury stock (59,600) (1,437) Adjustment of minority interest 19,510 Dividends paid ($1.83 per share) _________ _____ ________ _(25,610) - _______ _______ 17,635,000 $177 $401,814 ($26,622) ($1,607) ($1,863) ($9,943)
The accompanying notes are an integral part of these consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
1998 1997 1996 Net Income $18,688 $6,390 $4,147 Comprehensive income: Unrealized loss on available-for-sale securities (1,607) - - Net comprehensive income $17,081 $6,390 $4,147
The accompanying notes are an integral part of these consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996 (IN THOUSANDS)
1998 1997 1996 Cash flows from operating activities: Net income $ 18,688 $ 6,390 $ 4,147 Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of affiliates 146 ( 285) 81 Income allocated to minority interest 12,603 4,248 897 Extraordinary item allocated to minority interest ( 595) ( 737) - Depreciation and amortization 24,405 11,938 8,667 Unrealized loss on available-for-sale securities 1,607 - - Loss on disposition of property - 1,283 - Changes in assets and liabilities: Other assets ( 6,236) ( 4,555) ( 1,422) Accounts payable and accrued liabilities 9,930 9,003 1,871 Total adjustments 41,860 20,895 10,094 Net cash provided by operating activities 60,548 27,285 14,241 Cash flows used in investing activities: Purchase of properties, net of mortgage notes assumed and UPREIT Units issued (225,490) (71,876) (14,026) Additions to properties ( 42,896) ( 15,962) ( 8,843) Deposits on property 430 ( 605) ( 1,900) Advances to affiliates ( 54,105) ( 41,121) (15,379) Payments on advances to affiliates 35,922 13,791 14,507 Proceeds from sale of properties - 13,313 - Purchase of available-for-sale securities (11,649) - - Net cash used in investing activities (297,788) (102,460) (25,641) Cash flows from financing activities: Proceeds from sale of common stock 200,179 74,625 12,625 Purchase of treasury stock ( 1,437) ( 426) - Proceeds from mortgage notes payable 187,481 72,175 4,530 Payments of mortgage notes payable ( 60,536) ( 54,388) (21,822) Proceeds from line of credit 156,800 153,650 34,030 Payments on line of credit (165,550) (144,900) (38,530) Additions to deferred loan costs ( 2,329) ( 762) ( 243) Additions to cash escrows ( 7,220) ( 4,574) ( 1,883) Dividends and distributions paid ( 40,511) ( 17,939) (11,537) Capital contribution to minority interest _____ - - 34,941 Net cash provided by financing activities 266,877 77,461 12,111 Net increase in cash 29,637 2,286 711 Cash and cash equivalents: Beginning of year 3,809 1,523 812 End of year $ 33,446 $ 3,809 $ 1,523
The accompanying notes are an integral part of these consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1 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 and development of apartment communities in the Northeastern, Mid-Atlantic and Midwestern United States. The Company conducts its business through Home Properties of New York, L.P. (the "Operating Partnership"), a New York limited partnership. As of December 31, 1998, the Company operated 259 apartment communities with 34,229 apartments. Of this total, the Company owned 97 communities, consisting of 23,936 apartments, managed as general partner 123 partnerships that owned 7,482 apartments and fee managed 2,811 apartments for affiliates and third parties. The Company also fee managed 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 64.0% (56.1% at December 31, 1997) general partnership interest in the Operating Partnership. The remaining 36.0% (43.9% at December 31, 1997) is reflected as Minority Interest in these consolidated financial statements. Investments in which the Company does not have control are presented on the equity method. All significant intercompany balances and transactions have been eliminated in these consolidated financial statements. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES REAL ESTATE Real estate is recorded at the lower of cost or net realizable value. Costs related to the acquisition, development, construction and improvement of properties are capitalized. Interest costs are capitalized until construction is substantially complete. When retired or otherwise disposed of, the related cost and accumulated depreciation are cleared from the respective accounts and the net difference, less any amount realized from disposition, is reflected in income. There was $189, $0 and $63 of interest capitalized in 1998, 1997 and 1996, respectively. Ordinary repairs and maintenance are expensed as incurred. The Company quarterly reviews its properties to determine if its carrying costs will be recovered from future operating cash flows. In cases where the Company does not expect to recover its carrying costs, the Company recognizes an impairment loss. No such losses have been recognized to date. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) DEPRECIATION Properties are depreciated using a straight-line method over the estimated useful lives of the assets as follows: buildings, improvements and equipment - 5-40 years; and tenant improvements - life of related lease. Depreciation expense charged to operations was $23,067, $11,104 and $7,979 for the years ended December 31, 1998, 1997 and 1996, respectively. CASH AND CASH EQUIVALENTS For purposes of the consolidated statements of cash flows, cash and cash equivalents include all cash and highly liquid investments purchased with original maturities of three months or less. The Company estimates that the fair value of cash equivalents approximates the carrying value due to the relatively short maturity of these instruments. CASH IN ESCROWS Cash in escrows consists of cash restricted under the terms of various loan agreements to be used for the payment of property taxes and insurance as well as required replacement reserves and tenant security deposits for residential properties. DEFERRED CHARGES Costs relating to the financing of properties and interest rate reduction agreements are deferred and amortized over the life of the related agreement. The straight-line method, which approximates the effective interest method, is used to amortize all financing costs. The range of the terms of the agreements are from 1-32 years. Accumulated amortization was $2,592 and $1,791 as of December 31, 1998 and 1997, respectively. AVAILABLE-FOR-SALE SECURITIES Available-for-sale securities are recorded at fair market value based upon quoted prices, with the unrealized gain (loss) recorded as a component of stockholders' equity. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ADVERTISING Advertising expenses are charged to operations during the year in which they were incurred. Advertising expenses incurred and charged to operations were approximately $2,891, $1,291 and $1,256 for the years ended December 31, 1998, 1997 and 1996, respectively. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) REVENUE RECOGNITION The Operating Partnership leases its residential properties under leases with terms generally one year or less. Rental income is recognized when earned. Property other income, which consists primarily of income from operation of laundry facilities, administrative fees, garage and carport rentals and miscellaneous charges to residents, is recognized when earned. The Operating Partnership receives development and other fee income from properties in the development phase. This fee income is recognized on the percentage of completion method. INCOME TAXES The Company has elected to be taxed as a real estate investment trust ( " REIT " ) under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 1994. As a result, the Company generally will not be subject to Federal or State income taxation at the corporate level to the extent it distributes annually at least 95% of its REIT taxable income to its shareholders and satisfies certain other requirements. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements for the years ended December 31, 1998, 1997 and 1996. Stockholders are taxed on dividends and must report such dividends as either ordinary income, capital gains, or as return of capital. EARNINGS PER SHARE Basic Earnings Per Share ("EPS") is computed as net income 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. 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. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) EARNINGS PER SHARE (CONTINUED) Income before extraordinary item, extraordinary item and net income are the same for both the basic and diluted calculation. The reconciliation of the basic weighted average shares outstanding and diluted weighted average shares outstanding for the years ended December 31, 1998, 1997 and 1996 is as follows:
1998 1997 1996 Basic weighted average number of shares outstanding 13,898,221 7,415,888 5,601,027 Effect of dilutive stock options 124,108 142,279 31,977 Diluted weighted average number of shares outstanding 14,022,329 7,558,167 5,633,004
Unexercised stock options to purchase 138,500, 116,500, and 52,146 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 years ended December 31, 1998, 1997 and 1996, respectively. ACCOUNT RECLASSIFICATIONS Certain account balances at December 31, 1997 and December 31, 1996 were reclassified to conform to account classifications used by the Company at December 31, 1998. These changes had no effect on reported results of operations or financial position. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) INVESTMENT IN AND ADVANCES TO AFFILIATES The Company has investments in and advances to approximately 130 limited partnerships where the Company acts as managing general partner. In addition, there are investments in other affiliated entities. The following is summarized financial information for the investment in and advances to affiliates as of and for the years ended December 31, 1998 and 1997:
1998 1997 Balance Sheets: Real estate, net $225,128 $141,625 Other assets 29,796 23,319 Total assets $254,924 $164,944 Mortgage notes payable $165,838 $113,380 Advances from general partner 39,437 27,577 Other liabilities 32,324 11,946 Partners' equity 17,325 12,041 Total liabilities and partners' equity $254,924 $164,944 1998 1997 1996 Operations: Gross revenues $38,958 $26,536 $22,495 Operating expenses (21,078) (13,817) (11,628) Mortgage interest expense (8,036) (6,699) (5,417) Depreciation and amortization (10,725) (7,359) (6,325) Net loss $(881) $(1,339) $(875) Company's share (included in property other income) $(259) $193 $(223)
Reconciliation of interests in the underlying net assets to the Company's carrying value of property investments in and advances to affiliates:
1998 1997 Partners' equity, as above $17,325 $12,041 Equity of other partners 12,383 9,982 Company's share of investments in limited partnerships 4,942 2,059 Advances to limited partnerships, as above 39,437 27,577 Company's investment in and advances to limited partnerships 44,379 29,636 Company's investment in Management Companies (see Note 9) 388 607 Company's advances to Management Companies 9,462 5,342 Carrying value of investments in and advances to affiliates $54,229 $35,585
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) MORTGAGE NOTES PAYABLE Mortgage notes, collateralized by certain properties, are as follows:
DECEMBER 31 Current Fixed Maturity 1998 1997 INTEREST RATE DATE Various $ - $ 41,864 N/A N/A Unsecured note payable 3 38 2.50 1999 Perinton & Riverton 11,872 11,983 6.75 * 2000 Philadelphia (2 properties) 4,839 4,949 8.50 2001 New York (4 properties) 19,537 19,867 7.75 2002 Royal Gardens 11,649 11,919 7.66 2002 Racquet Club 12,136 - 7.63 2003 Rolling Park 2,866 - 7.88 2003 Curren Terrace 9,597 9,731 8.36 2003 Sherry Lake 6,623 - 7.88 2004 Glen Manor 3,701 3,752 8.13 2004 Colonies 12,535 - 8.88 2004 Springcreek & Meadows 3,162 3,200 7.63 * 2004 Idylwood 9,305 9,390 8.63 2005 Carriage Hill - MI 3,914 - 7.36 2006 Carriage Park 5,637 - 7.48 2006 Cherry Hill 4,527 - 7.99 2006 Mid-Island Estates 6,675 6,675 7.50 * 2006 Newcastle 6,150 6,150 6.00 * 2006 Country Village 6,670 - 8.39 2006 Raintree Island 6,400 6,495 8.50 2006 Woodgate Place 3,440 3,473 7.87 2007 Strawberry Hill 2,073 - 8.26 2007 Detroit Portfolio (10 properties) 49,293 50,000 7.51 2008 Hamlet Court 1,792 1,812 7.11 * 2008 Candlewood - IN 7,909 - 7.02 2008 Valley Park South 10,079 10,175 6.93 2008 Conifer Village 2,765 2,910 7.20 2010 Multi-Property (7) 58,881 - 6.16 2011 Baltimore (2 properties) 20,419 - 6.99 2013 Multi-Property (22) 100,000 - 6.48 2013 Pines of Perinton 8,875 - 8.50 2018 Fairways at Village Green 4,436 4,513 8.23 2019 Raintree Island 1,182 1,200 8.50 2020 Total/Average $418,942 $210,096 7.17
*The interest rate on these mortgages will convert to a variable rate on various dates between 1999 and 2003 and continue until maturity. Principal payments on the mortgage notes payable for years subsequent to December 31, 1998 are as follows: 1999 $ 4,269 2000 16,088 2001 9,101 2002 33,191 2003 26,766 Thereafter 329,527 $418,942 HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 4 MORTGAGE NOTES PAYABLE (CONTINUED) The Company determines the fair value of the mortgage notes payable based on the discounted future cash flows at a discount rate that approximates the Company's current effective borrowing rate for comparable loans. Based on this analysis, the Company has determined that the fair value of the mortgage notes payable approximates $430,000 at December 31, 1998. The Company has incurred prepayment penalties on debt restructurings which are accounted for as extraordinary items in the statement of operations. Prepayment penalties were approximately $1,555 and $1,774 for the years ended December 31, 1998 and 1997, respectively. The 1998 paydowns totaled $54,879 from 14 debt instruments which were financed by three new borrowings in excess of $179,000. The 1997 paydowns totaled $34,626 from one debt instrument which was financed by one new borrowing of $50,000. 5 LINE OF CREDIT As of December 31, 1998, the Company had an unsecured line of credit from Chase Manhattan Bank of $50,000 and a $50,000 supplemental unsecured revolving credit facility with M&T Bank, both with no outstanding balances. The lines of credit expire on September 4, 1999, with a one year extension at the Company's option. Borrowings bear interest at 1.25% over the one-month LIBOR rate or at a money market rate as quoted on a daily basis by the lending institutions. 6 MINORITY INTEREST The changes in minority interest for the two years ended December 31:
1998 1997 Balance, beginning of year $156,847 $ 52,730 Issuance of UPREIT Units associated with property acquisitions 71,067 106,359 Adjustment from minority interest to stockholders' equity ( 19,510) - Exchange of Units for Shares ( 801) ( 843) Net income 12,008 3,511 Distributions (14,902) ( 4,910) Balance, end of year $204,709 $156,847
7 STOCKHOLDERS' EQUITY DIVIDEND REINVESTMENT PLAN In November, 1995, the Company adopted the Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan (the "DRIP" ). The DRIP provides the stockholders of the Company an opportunity to automatically invest their cash dividends at a discount of 3% from the market price. In addition, eligible participants may make monthly or other voluntary cash investments, also typically at a discount of 3% from the market price, in shares of common stock. A total of $72 million, $34 million and $12 million, net of officer and director notes, was raised through this program during 1998, 1997 and 1996, respectively. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 7 STOCKHOLDERS' EQUITY (CONTINUED) OFFICER AND DIRECTOR NOTES FOR STOCK PURCHASES On August 12, 1996, eighteen officers and the six independent directors purchased an aggregate of 208,543 shares of common stock through the DRIP at the price of $19.79. The purchases were financed 50% from a bank loan and 50% by a recourse loan from the Company. The Company loans bear interest at 7% per annum and mature in August, 2016. The Company loans are subordinate to the above-referenced bank loans, and are collateralized by pledges of the 208,543 common shares. The loans are expected to be repaid from the regular quarterly dividends paid on the shares of common stock pledged, after the corresponding bank loans are paid in full. On November 10, 1997, twenty-one officers and five of the independent directors purchased an aggregate of 169,682 shares of common stock through the DRIP at the price of $26.66. The purchases were financed 50% from a bank loan and 50% by a recourse loan from the Company. The Company loans bear interest at 6.7% per annum and mature in November, 2017. The Company loans are subordinate to the above-referenced bank loans, and are collateralized by pledges of the 169,682 common shares. The loans are expected to be repaid from the regular quarterly dividends paid on the shares of common stock pledged, after the corresponding bank loans are paid in full. STOCK PURCHASE AND LOAN PLAN In May, 1998, the Company adopted the Director, Officer and Employee Stock Purchase and Loan Plan (the "Stock Purchase Plan"). The program provides for the sale and issuance, from time to time as determined by the Board of Directors, of up to 500,000 shares of the Company's Common Stock to the directors, officers and key employees of the Company for consideration of not less than 97% of the market price of the Common Stock. The Stock Purchase Plan also allows the Company to loan the participants up to 100% of the purchase price (50% for non-employee directors). On August 12, 1998, thirty officers/key employees and the six independent directors purchased an aggregate of 238,239 shares of common stock through the Stock Purchase Plan at the price of $24.11. The purchases for the officers/key employees were financed 100% by a recourse loan from the Company (50% for non-employee directors). The loans bear interest at 7.13% per annum and mature on the earlier of the maturity of the 1996 and 1997 phases of the loan program or August, 2018. The loans are collateralized by pledges of the common stock and are expected to be repaid from the regular quarterly dividends paid on the shares. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 7 STOCKHOLDERS' EQUITY (CONTINUED) DIVIDENDS Stockholders are taxed on dividends and must report such dividends as either ordinary income, capital gains, or as return of capital. The appropriate amount of each per common share is as follows:
ORDINARY INCOME RETURN OF CAPITAL 1996 51.1% 48.9% 1997 50.1% 49.9% 1998 79.4% 20.6%
OPERATING PARTNERSHIP UNITS/INTERESTS Units in the Operating Partnership ("UPREIT Units") are exchangeable on a one-for-one basis into common shares. On December 30, 1996, $35 million was raised in a private placement through the sale of a Class A Limited Partnership Interest to a state pension fund. The interest, which can be converted into 1,666,667 shares of common stock, will receive a preferred return equal to the greater of: (a) 9.25% on the original investment during the first two years declining to 9.0% for an additional five years, or (b) the actual dividends paid to common shareholders on 1,666,667 shares. The current dividend of $.48 per quarter (effective with the November, 1998 dividend) is equivalent to an annualized dividend rate of $1.92 per share, which exceeds the 9.0% preferred return. Any unconverted interest can be redeemed without premium by the Company after ten years. Proceeds of the transaction were used to fund acquisitions and reduce debt. At December 31, 1998, 17,635,000 common shares and 9,929,461 UPREIT Units/interests were outstanding, for a total of 27,564,461. 8 SEGMENT REPORTING Effective January 1, 1998, the Company has adopted the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" (SFAS 131). The Company has engaged in two primary business segments - the ownership and management of market rate apartment communities and the management and development of government assisted housing. Company management views each apartment community as a separate component of the operating segment. The Company's two reportable segments are managed separately as each requires different operating strategies and management expertise. There are no material intersegment sales or transfers. 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, cash in escrows, accounts receivable, prepaid expenses, deposits, investments in and advances to affiliates, deferred charges and other assets. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 8 SEGMENT REPORTING (CONTINUED) 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. THE REVENUES, PROFIT (LOSS), AND ASSETS FOR EACH OF THE REPORTABLE SEGMENTS ARE SUMMARIZED AS FOLLOWS FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996.
1998 1997 1996 REVENUES Apartments owned $141,171 $66,224 $43,239 Management & development fees 10,908 7,335 6,558 Reconciling items ( 2,836) ( 3,862) ( 4,127) Total Revenue $149,243 $69,697 $45,670 PROFIT (LOSS) Funds from operations: Apartments owned $78,035 $34,907 $21,380 Management & development fees 2,970 1,277 1,788 Reconciling items 5,102 2,196 643 Segment contribution to FFO 86,107 38,380 23,811 General & administrative expenses ( 6,685) ( 2,255) (1,482) Interest expense (23,980) (11,967) (9,208) Unconsolidated depreciation 733 324 390 Non-recurring amortization 294 - - Non-real estate depreciation/amort. ( 209) ( 137) ( 135) Unconsolidated loss on disposition - - 8 Funds from Operations 56,260 24,345 13,384 Depreciation - apartments owned (22,982) (11,063) (7,942) Unconsolidated depreciation ( 733) ( 324) ( 390) Non-recurring amortization ( 294) - - Unconsolidated loss on disposition of property - - ( 8) Loss on disposition of properties - ( 1,283) - Minority interest in earnings (12,603) ( 4,248) ( 897) Extraordinary items, net of minority interest ( 960) ( 1,037) - Net Income $18,688 $6,390 $4,147 ASSETS Apartments owned $875,161 $478,597 $221,536 Apartments managed 388 607 514 Reconciling items 136,686 64,619 26,581 Total Assets $1,012,235 $543,823 $248,631 REAL ESTATE CAPITAL EXPENDITURES New property acquisitions $376,735 $266,799 $54,727 Apartment improvements 42,896 15,962 8,843 Total Real Estate Capital Expenditures $419,631 $282,761 $63,570
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 9 MANAGEMENT COMPANIES Certain property management, leasing and development activities are performed by Home Properties Management, Inc. and Conifer Realty Corp. (the "Management Companies"). The Management Companies issued non-voting common stock to the Operating Partnership in exchange for management contracts for residential, commercial, and development managed properties and certain other assets. This exchange entitles the Operating Partnership to receive 99% of the economic interest of each Management Company. The remaining 1% economic interest and voting stock were issued to certain inside directors of the Company. On December 31, 1998, additional shares representing a 4% economic interest were sold and issued to the same inside directors. Therefore, effective January 1, 1999, the Operating Partnership is entitled to receive 95% of the economic interest of each Management Company. The Management Companies receive development, construction and other fee income from properties in the development phase. This fee income is recognized on the percentage of completion method. The Management Companies are accounted for under the equity method. The Management Companies provide property management and administrative services to certain real estate and other entities. In consideration for these services, the Management Companies receive monthly management fees generally based on a percentage of revenues or costs incurred. Management fees are recognized as revenue when they are earned. The Company's share of income from the Management Companies was $113, $92 and $142 for the years ended December 31, 1998, 1997 and 1996, respectively. Summarized combined financial information of the Management Companies at and for the years ended December 31, 1998, 1997 and 1996 is as follows:
1998 1997 1996 Management fees $3,471 $3,141 $2,942 Development and construction management fees 4,581 3,010 1,971 General and administrative (6,953) ( 5,561) ( 4,448) Other expenses ( 985) ( 497) ( 322) Net income $ 114 $ 93 $ 143 Total assets $11,288 $6,037 $3,279 Total liabilities $10,848 $5,428 $2,762
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 10 TRANSACTIONS WITH AFFILIATES The Company and the Management Companies recognized management and development fee revenue, interest income and other miscellaneous income from affiliated entities of $13,492, $8,427 and $6,170 for the years ended December 31, 1998, 1997 and 1996, respectively. The Company leases its corporate office space from an affiliate. The lease requires an annual base rent of $336 through June, 2000 and $355 from July, 2000 through the August, 2003 lease expiration. The lease also requires the Company to pay a pro rata portion of property improvements, real estate taxes and common area maintenance. Rental expense was $619, $387 and $349 for the years ended December 31, 1998, 1997 and 1996, respectively. From time to time, the Company advances funds as needed to the Management Companies which total $9,462 and $5,342 at December 31, 1998 and 1997, respectively, and bear interest at 1% over prime. 11 COMMITMENTS AND CONTINGENCIES GROUND LEASE The Company has a non-cancelable operating ground lease for one of its properties. The lease expires May 1, 2020, with options to extend the term of the lease for two successive terms of twenty-five years each. The lease provides for contingent rental payments based on certain variable factors. The lease also requires the lessee to pay real estate taxes, insurance and certain other operating expenses applicable to the leased property. Ground lease expense was $186, $180 and $174 including contingent rents of $116, $110 and $104 for the years ended December 31, 1998, 1997 and 1996, respectively. At December 31, 1998, future minimum rental payments required under the lease are $70 per year until the lease expires. 401(K) SAVINGS PLAN The Company participates in a contributory savings plan. Under the plan, the Company will match 75% of the first 4% of participant contributions. The matching expense under this plan was $208, $161 and $108 for the years ended December 31, 1998, 1997 and 1996, respectively. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 11 COMMITMENTS AND CONTINGENCIES (CONTINUED) INCENTIVE COMPENSATION PLAN Effective January 1, 1996, the Incentive Compensation Plan provides that eligible officers and key employees may earn a cash bonus based on increases in funds from operations ("FFO") per share/unit (computed based on the basic shares/units outstanding). No cash bonuses will be payable under the Incentive Compensation Plan unless the increase in FFO per share, after giving effect to the bonuses, is equal to or greater than 2%. The Incentive Compensation Plan was amended in 1998 by establishing a floor of 5% in per share/unit FFO growth. The bonus expense charged to operations (including Management Companies) was $1,997, $1,193 and $495 for the years ended December 31, 1998, 1997 and 1996, respectively. CONTINGENCIES The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company's liquidity, financial position or results of operations. In connection with a 1996 transaction, the Company is obligated to pay additional consideration in UPREIT Units if development fee income exceeds target levels over the first five years. Management does not anticipate the issuance of these UPREIT Units to have a material adverse effect on the Company's liquidity, financial position or results of operations. In connection with various UPREIT transactions, the Company has agreed to maintain certain levels of nonrecourse debt associated with the contributed properties acquired. In addition, the Company is restricted in its ability to sell certain contributed properties (42% of the owned portfolio) for a period of time unless in a tax deferred Internal Revenue Code Section 1031 like-kind exchange. DEBT COVENANTS The line of credit loan agreements contain restrictions which, among other things, require maintenance of certain financial ratios and limit the payment of dividends. At December 31, 1998, the Company was in compliance with these covenants. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 11 COMMITMENTS AND CONTINGENCIES (CONTINUED) GUARANTEES The Company has guaranteed a total of $711 of debt associated with four entities where the Company is the general partner. In addition, the Company has guaranteed the Low Income Housing Tax Credit to limited partners in forty-six partnerships totalling approximately $37,000. As of December 31, 1998, there were no known conditions that would make such payments necessary. The Company guarantees the successful construction of properties developed under the federal government's Low Income Housing Tax Credit Program. The outstanding guarantee at December 31, 1998 is approximately $48,300. Any expenditures on behalf of the Company to meet this guarantee have not been required. In addition, the Company, acting as general partner in certain partnerships, is obligated to advance funds to meet partnership operating deficits. EXECUTIVE RETENTION PLAN Effective February 2, 1999, the Executive Retention Plan provides for severance benefits and other compensation to be received by certain employees in the event of a change in control of the Company and a subsequent termination of their employment without cause or voluntarily with good cause. 12 STOCK BENEFIT PLAN The Company has adopted the 1994 Stock Benefit Plan as Amended (the " Plan " ). Plan participants include officers, non-employee directors, and key employees of the Company. The Company has reserved 946,000 shares for issuance to officers and employees and 154,000 shares for issuance to non- employee directors. Options granted to officers and employees of the Company vest 20% for each year of service until 100% vested on the fifth anniversary. Certain officers' options (264,000) and directors' options (103,000) vest immediately upon grant. The exercise price per share for stock options may not be less than 100% of the fair market value of a share of common stock on the date the stock option is granted (110% of the fair market value in the case of incentive stock options granted to employees who hold more than 10% of the voting power of the Company's common stock). During 1996, 144,000 of the total options granted had an exercise price greater than the fair market value of the stock at the date of the grant. The weighted average fair value of these options was $0.78. Options granted to directors and employees who hold more than 10% of the voting power of the Company expire after five years from the date of grant. All other options expire after ten years from the date of grant. The Plan also allows for the grant of stock appreciation rights and restricted stock awards, however, there were none granted at December 31, 1998. At December 31, 1998, 0 and 46,446 common shares were available for future grant of options or awards under the Plan for officers and employees and non-employee directors, respectively. The Board of Directors anticipates amending the Plan in the future to provide for the issuance of additional options to purchase shares. This amendment does not require stockholder approval because the Plan, under New York Stock Exchange rules, is "broadly based". HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 12 STOCK BENEFIT PLAN (CONTINUED) Details of stock option activity during 1998, 1997 and 1996 are as follows:
Number Option Price OF SHARES PER SHARE Options outstanding at January 1, 1996 445,532 $17.875-$19.00 (258,527 shares exercisable) Granted, 1996 255,146 19.00-20.50 Cancelled, 1996 ( 2,900) 19.00 Options outstanding at December 31, 1996 697,778 17.875-20.50 (411,053 shares exercisable) Granted, 1997 141,823 22.75-26.50 Exercised, 1997 ( 3,499) 19.00 Cancelled, 1997 ( 600) 19.00 Options outstanding at December 31, 1997 835,502 17.875-26.50 (507,809 shares exercisable) Granted, 1998 217,100 25.125-27.06 Exercised, 1998 (240,739) 17.875-20.50 Cancelled, 1998 (11,000) 19.00-26.50 Options outstanding at December 31, 1998 800,863 $17.875-$27.06 (395,441 shares exercisable)
The following table summarizes information about options outstanding at December 31, 1998:
Weighted Average Weighted Weighted Remaining Average Average Year Number Contractual Fair Value Number Exercise GRANTED OUTSTANDING LIFE OF OPTIONS EXERCISABLE PRICE 1994 288,373 5 N/A 242,927 $19.000 1995 15,000 1 $1.39 15,000 17.875 1996 146,767 7 $1.01 65,549 19.554 1997 139,323 8 $1.59 47,465 24.555 1998 211,400 9 $1.39 24,500 27.060 Totals 800,863 7 395,441 $20.215
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 12 STOCK BENEFIT PLAN (CONTINUED) The Company has adopted the disclosure only provisions of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plan. Had compensation for the Company's stock option plan been determined based on the fair value at the date of grant for awards in 1998, 1997 and 1996, the Company's proforma net income and proforma basic earnings per share would have been $18,563, $6,299 and $4,031 and $1.34, $.85 and $.72, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 1998, 1997 and 1996: dividend yield of 9.315%; expected volatility of 18.97%; forfeiture rate of 5%; and expected lives of 7.5 years for options with a lifetime of ten years, and five years for options with a lifetime of five years. The interest rate used in the option-pricing model is based on a risk free interest rate ranging from 5.25% to 6.87%. 13 PROPERTY ACQUISITIONS For the years ended December 31, 1998, 1997 and 1996, the Company has acquired the communities listed below:
Cost of Market Date Year Number Cost of Acquisition COMMUNITY AREA ACQUIRED CONSTRUCTED OF UNITS ACQUIS. PER UNIT Conifer Court Syracuse 1/1/96 1963 20 703 35 Hamlet Court Rochester 1/1/96 1971 98 2,702 28 Westminster Syracuse 1/1/96 1972 240 6,623 28 Village Green (Fairways) Syracuse 3/5/96 1986 200 5,246 26 Carriage Hill Hudson Valley 7/16/96 1973 140 4,396 31 Cornwall Park Hudson Valley 7/16/96 1967 75 3,386 45 Lakeshore Villa Hudson Valley 7/16/96 1975 152 4,421 29 Sunset Gardens Hudson Valley 7/16/96 1968-71 217 5,357 25 Valley Park South Bethlehem 11/22/96 1971-73 384 18,914 49 Lake Grove Long Island 2/3/97 1969 368 19,312 53 Royal Gardens Northern NJ 5/28/97 1967 550 19,567 34 Woodgate Place Rochester 6/30/97 1972 120 4,277 36 Mid-Island Estates Long Island 7/1/97 1961-66 232 10,756 46 1600 East Avenue Rochester 9/18/97 1958 164 9,520 58 11 Property Portfolio Philadelphia 9/23/97 1928-82 1,750 63,714 36 3 Property Portfolio Buffalo 10/15/97 1960-72 452 11,307 25 12 Property Portfolio Detroit 10/29/97 1953-75 3,106 105,055 34 Hill Court South/Ivy Ridge Rochester 10/31/97 1963 230 6,647 29 Cloverleaf Pittsburgh 11/4/97 1957 148 3,038 21 Scotsdale Detroit 11/26/97 1974 376 13,606 36 Candlewood South Bend 2/9/98 1986 310 13,506 44 Cedar Glen Philadelphia 3/2/98 1966 110 2,733 25 2 Property Portfolio Northern, VA 3/13/98 1954 548 26,848 49 Apple Hill Hamden, CN 3/27/98 1971 498 23,833 48 4 Property Portfolio Baltimore 4/30/98 1964-80 1,589 53,363 34 Colonies Chicago 6/24/98 1973 672 23,027 34 Racquet Club Philadelphia 7/7/98 1971 467 24,975 53 16 Property Portfolio Various 7/8/98 1943-80 3,746 148,509 40 Sherry Lake Philadelphia 7/23/98 1965 298 18,000 60 Coventry Village Long Island 7/31/98 1974 94 3,112 33 Rolling Park Baltimore 9/15/98 1972 144 5,753 40 3 Property Portfolio Detroit 9/29/98 1965-66 648 24,213 37 Pines of Perinton Rochester 9/30/98 1976 508 8,863 17
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 13 PROPERTY ACQUISITIONS (CONTINUED) PROFORMA FINANCIAL INFORMATION (UNAUDITED) The following unaudited proforma information was prepared as if the 1998 transactions related to the acquisitions of 34 apartment communities in thirteen separate transactions had occurred on January 1, 1997. The proforma financial information is based upon the historical consolidated financial statements and is not necessarily indicative of the consolidated results which actually would have occurred if the transactions had been consummated at the beginning of 1997, nor does it purport to represent the results of operations for future periods.
For the years ended December 31, 1998 1997 Total revenues $182,627 $140,688 Income before extraordinary item 21,062 12,142 Net income 20,158 11,223 Per share data: Income before extraordinary item: Basic $1.52 $1.64 Diluted $1.45 $1.51 Net income: Basic $1.50 $1.61 Diluted $1.44 $1.48 Weighted average numbers of shares outstanding: 13,898,221 7,415,888 Basic Diluted 14,022,329 7,558,167
14 SUPPLEMENTAL CASH FLOW DISCLOSURES For the years ended December 31, 1998, 1997 and 1996 are as follows:
1998 1997 1996 Cash paid for interest $23,284 $ 10,880 $ 8,441 Mortgage loans assumed associated with property acquisitions 81,094 87,134 35,849 Issuance of UPREIT Units associated with property and other acquisitions 77,425 106,359 10,168 Notes issued in exchange for officer and director stock purchases 5,444 2,495 2,061
HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued) 15 QUARTERLY FINANCIAL STATEMENT INFORMATION (UNAUDITED) Quarterly financial information for the years ended December 31, 1998 and 1997 are as follows:
1998 ---------------------------------- FIRST SECOND THIRD FOURTH Revenues $26,773 $32,312 $43,158 $47,000 Income before minority interest and extraordinary item 4,947 7,971 10,023 9,310 Minority interest 2,172 3,297 3,726 3,408 Extraordinary item, net of minority interest N/A (290) (156) (514) Net income 2,775 4,384 6,141 5,388 Basic earnings per share: Income before extraordinary item .29 .37 .39 .34 Extraordinary item N/A (.02) (.01) (.03) Net income .29 .35 .38 .31 Diluted earnings per share: Income before extraordinary item .28 .37 .39 .34 Extraordinary item N/A (.02) (.01) (.03) Net income .28 .35 .38 .31
1997 ------------------------------------ FIRST SECOND THIRD FOURTH Revenues $13,842 $14,464 $16,801 $24,590 Income before minority interest and extraordinary item 1,841 2,678 1,251 5,905 Minority interest 572 802 423 2,451 Extraordinary item, net of minority interest N/A N/A N/A (1,037) Net income 1,269 1,876 828 2,417 Basic earnings per share: Income before extraordinary item .20 .27 .11 .39 Extraordinary item N/A N/A N/A (.12) Net income .20 .27 .11 .27 Diluted earnings per share: Income before extraordinary item .19 .26 .11 .38 Extraordinary item N/A N/A N/A (.11) Net income .19 .26 .11 .27
Full year per share data does not equal the sum of the quarterly data due to the combination of seasonality and a growing number of shares outstanding. REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Home Properties of New York, Inc. In our opinion, the accompanying financial statement schedule is fairly stated in all material respects in relation to the basic financial statements, taken as a whole, of Home Properties of New York, Inc. as of and for the three years ended December 31, 1998, which are covered by our report dated January 30, 1999 presented previously in this document. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. This information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Rochester, New York January 30, 1999
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (IN THOUSANDS) Total Initial Costs Total Cost, Cost Capital- Cost, Net of Buildings, ized Buildings, Accumu- Accumu- Improve- Subsequent Improve- lated lated Year of Encum- ments & Adjust- to Acqui- ments & Total Depre- Depre- Acqui- brances Land Equipment ments(a) sition Land Equipment (b) ciation ciation sition Apple Hill Apartments 13,935 3,486 20,347 1,112 3,486 21,459 24,945 486 24,459 1998 Beechwood Gardens 560 3,442 178 560 3,620 4,180 66 4,114 1998 Braddock Lee Apartments 7,000 3,810 8,657 462 3,810 9,119 12,929 268 12,661 1998 Brook Hill Apartments 4,860 330 7,920 1,590 330 9,510 9,840 1,314 8,526 1994 Candlewood Apartments 387 2,592 223 387 2,815 3,202 271 2,931 1996 Candlewood Apartments-Indiana 7,909 1,550 11,956 229 1,550 12,185 13,735 305 13,430 1998 Canterbury Square 6,699 2,352 10,790 624 2,352 11,414 13,766 468 13,298 1997 Carriage Hill Apartments 570 3,826 1,142 570 4,968 5,538 386 5,152 1996 Carriage Hill Apartments-Michigan 3,914 840 5,975 55 840 6,030 6,870 53 6,817 1998 Carriage House Apartments 694 250 860 53 250 913 1,163 20 1,143 1998 Carriage Park Apartments 5,637 1,280 8,184 191 1,280 8,375 9,655 75 9,580 1998 Cedar Glen Apartments 715 2,018 244 715 2,262 2,977 67 2,910 1998 Charter Square 11,321 3,952 18,245 641 3,952 18,886 22,838 776 22,062 1997 Cherry Hill Club Apartments 2,375 492 4,111 491 492 4,602 5,094 75 5,019 1998 Cherry Hill Village 4,527 1,120 6,827 58 1,120 6,885 8,005 61 7,944 1998 Chesterfield Apartments 5,327 1,482 8,206 481 1,482 8,687 10,169 333 9,836 1997 Cloverleaf Village 370 2,668 629 370 3,297 3,667 141 3,526 1997 Colonies Apartments 12,535 1,680 21,350 1,378 1,680 22,728 24,408 352 24,056 1998 Conifer Village Apartments 2,765 358 8,555 233 358 8,788 9,146 1,163 7,983 1994 Cornwall Park Townhouses 439 2,947 2,295 439 5,242 5,681 371 5,310 1996 Country Village Apartments 6,670 2,236 11,149 194 2,236 11,343 13,579 234 13,345 1998 Coventry Village 784 2,328 124 784 2,452 3,236 33 3,203 1998 Curren Terrace 9,597 1,908 10,956 1,545 1,908 12,501 14,409 459 13,950 1997 East Hill Apartments 231 1,560 92 231 1,652 1,883 29 1,854 1998 Emerson Square 384 2,018 821 384 2,839 3,223 128 3,095 1997 Executive House 2,034 600 3,420 731 600 4,151 4,751 165 4,586 1997 Fairview Heights & Fairview Manor 4,585 580 5,305 2,828 1,080 580 9,213 9,793 3,247 6,546 1985 Fairway Apartments 128 673 454 128 1,127 1,255 49 1,206 1997 Finger Lakes Manor Apartments 3,430 200 4,536 1,882 622 200 7,040 7,240 2,223 5,017 1983 Fordham Green 3,140 876 5,280 303 876 5,583 6,459 201 6,258 1997 Garden Village Apartments 4,575 354 8,546 1,378 354 9,924 10,278 1,596 8,682 1994 Glen Manor 3,701 1,044 4,494 253 1,044 4,747 5,791 165 5,626 1997 Golfview Manor 330 110 541 36 110 577 687 26 661 1997 Greentrees Apartments 4,979 1,152 8,607 363 1,152 8,970 10,122 327 9,795 1997 Hamlet Court Apartments 1,792 351 2,351 251 351 2,602 2,953 248 2,705 1996 Harborside Manor 4,068 250 6,113 1,806 250 7,919 8,169 1,075 7,094 1995
HOME PROPERTIES OF NEW YORK, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (IN THOUSANDS) Initial Costs Total Total Cost Capital- Cost, Cost, Buildings, ized Buildings, Net of Improve- Subse- Improve- Accumu- Accumu- ments & quent to ments & Lated Lated Year of Encum- Equip- Adjust- Acqui- Equip- Total Depre- Depre- Acqui- brances Land ment ments(a) sition Land ment (b) ciation ciation sition Hill Court South 333 2,428 139 333 2,567 2,900 108 2,792 1997 Idylwood Apartments 9,305 700 16,927 4,375 700 21,302 22,002 2,613 19,389 1995 Ivy Ridge Apartments 438 3,449 172 438 3,621 4,059 155 3,904 1997 Kingsley Apartments 6,788 1,640 11,670 322 1,640 11,992 13,632 492 13,140 1997 Lake Grove 7,360 11,952 3,321 7,360 15,273 22,633 909 21,724 1997 Lakeshore Villa Apartments 573 3,848 1,523 573 5,371 5,944 373 5,571 1996 Lakeview Apartments 2,940 636 4,552 111 636 4,663 5,299 82 5,217 1998 Lansdowne Group - Karen Court 1,084 294 1,654 59 294 1,713 2,007 75 1,932 1997 Lansdowne Group - Landon Court 1,084 264 1,444 115 264 1,559 1,823 66 1,757 1997 Lansdowne Group - Marshall House 1,084 378 1,617 132 378 1,749 2,127 78 2,049 1997 Lansdowne Group - Patricia Court 1,083 396 2,229 98 396 2,327 2,723 101 2,622 1997 Meadows Apartments 1,960 208 2,776 1,216 752 208 4,744 4,952 1,471 3,481 1984 Mid-Island Estates 6,675 4,176 6,580 381 4,176 6,961 11,137 378 10,759 1997 Mill Company 1,210 384 1,671 26 384 1,697 2,081 31 2,050 1998 Morningside Apartments 19,725 6,750 28,699 980 6,750 29,679 36,429 623 35,806 1998 Mountainside Apartments 1,362 7,083 145 1,362 7,228 8,590 113 8,477 1998 New Orleans Park 6,165 1,848 8,886 1,441 1,848 10,327 12,175 387 11,788 1997 Newcastle Apartments 6,150 197 4,007 3,684 2,205 197 9,896 10,093 3,319 6,774 1982 Northgate Manor Apartments 4,500 290 6,987 1,829 291 8,815 9,106 1,295 7,811 1994 Oak Manor Apartments 2,900 616 4,111 185 616 4,296 4,912 75 4,837 1998 Oak Park Manor 5,294 1,192 9,187 247 1,192 9,434 10,626 390 10,236 1997 Paradise Lane at Raintree 972 7,132 2,618 972 9,750 10,722 423 10,299 1997 Park Shirlington Apartments 8,425 4,410 9,971 414 4,410 10,385 14,795 307 14,488 1998 Parkview Gardens 1,207 7,200 347 1,207 7,547 8,754 334 8,420 1997 Patricia Apartments 600 4,196 22 600 4,218 4,818 64 4,754 1998 Payne Hill Apartments 525 4,085 106 525 4,191 4,716 60 4,656 1998 Pearl Street 49 1,189 140 49 1,329 1,378 161 1,217 1995 Perinton Manor Apartments 6,209 224 6,120 3,629 1,182 224 10,931 11,155 3,750 7,405 1982 Pines of Perinton 8,875 1,524 7,339 94 1,524 7,433 8,957 - 8,957 1998 Pleasant View Apartments 31,915 5,710 47,816 269 5,710 48,085 53,795 840 52,955 1998 Pleasure Bay Apartments 4,640 1,620 6,234 10 1,620 6,244 7,864 99 7,765 1998 Racquet Club Apartments 12,136 1,868 23,107 269 1,868 23,376 25,244 353 24,891 1998 Raintree Island Apartments 7,582 - 6,654 3,217 6,596 - 16,467 16,467 4,243 12,224 1985 Redbank Village 8,450 2,000 14,030 150 2,000 14,180 16,180 253 15,927 1998
HOME PROPERTIES OF NEW YORK, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (IN THOUSANDS) Initial Costs Total Cost, Total Cost Capital- Buildings, Cost, Buildings, ized Improve- Net of Improve- Subse- ments & Accumu- Accumu- ments & quent TO EQUIP- Lated Lated Year of ENCUM- EQUIP- ADJUST- ACQUI- MENT TOTAL DEPRE- DEPRE- ACQUI- BRANCES LAND MENT MENTS(A) SITION LAND (B) CIATION CIATION SITION Riverton Knolls Apartments 5,663 240 6,640 2,523 2,641 240 11,804 12,044 4,025 8,019 1983 Rolling Park Apartments 2,866 720 5,033 49 720 5,082 5,802 40 5,762 1998 Royal Gardens 11,649 5,500 14,067 4,223 5,500 18,290 23,790 810 22,980 1997 1600 East Avenue 1,000 8,520 1,581 1,000 10,101 11,101 422 10,679 1997 1600 Elmwood Ave. Apartments 5,337 303 5,698 3,339 1,523 299 10,564 10,863 4,130 6,733 1983 Scotsdale Apartments 7,875 1,692 11,914 544 1,692 12,458 14,150 415 13,735 1997 Sherry Lake Apartments 6,623 2,384 15,616 168 2,384 15,784 18,168 199 17,969 1998 Southpointe Square 2,810 896 4,609 273 896 4,882 5,778 210 5,568 1997 Spanish Gardens Apartments 373 9,263 1,728 398 10,966 11,364 1,521 9,843 1994 Springcreek Apartments 1,202 128 1,702 745 411 128 2,858 2,986 901 2,085 1984 Springwood Apartments 1,481 462 1,770 134 462 1,904 2,366 86 2,280 1997 Stephenson House 1,553 640 2,407 165 640 2,572 3,212 110 3,102 1997 Strawberry Hill Apartments 2,073 725 2,694 132 725 2,826 3,551 62 3,489 1998 Sunset Gardens Apartments 696 4,661 993 696 5,654 6,350 454 5,896 1996 The Towers 3,990 685 6,088 76 685 6,164 6,849 108 6,741 1998 Valley Park South Apartments 10,079 2,459 16,454 465 2,459 16,919 19,378 1,118 18,260 1996 Valley View Apartments 3,358 1,056 4,959 1,349 1,056 6,308 7,364 227 7,137 1997 Village Green Apartments 9,201 1,043 13,283 2,992 1,103 16,215 17,318 1,894 15,424 1994-1996 Village Square Apartments 2,630 768 3,581 413 768 3,994 4,762 149 4,613 1997 Wayne Village 8,285 1,925 12,895 161 1,925 13,056 14,981 227 14,754 1998 Wedgewood Shopping Center 100 504 15 240 100 759 859 292 567 1986 Westminster Apartments 3,107 860 5,763 515 860 6,278 7,138 620 6,518 1996 Weston Gardens 2,960 847 4,736 439 847 5,175 6,022 86 5,936 1998 Williamstowne Vlg. 9,800 390 9,748 5,115 2,486 390 17,349 17,739 5,168 12,571 1985 Apartments Windsor Realty 2,000 402 3,300 116 402 3,416 3,818 60 3,758 1998 Woodgate Place 3,440 480 3,797 638 480 4,435 4,915 207 4,708 1997 Woodland Gardens 6,379 2,022 10,479 387 2,022 10,866 12,888 448 12,440 1997 Other Assets _______ 907 - 125 2,469 2,388 1,113 3,501 361 3,140 418,939 117,658 714,364 28,318 80,448 119,221 821,567 940,788 65,627 875,161
(A) REPRESENTS THE EXCESS OF FAIR VALUE OVER THE HISTORICAL COST OF PARTNERSHIP INTERESTS AS A RESULT OF THE APPLICATION OF PURCHASE ACCOUNTING FOR THE ACQUISITION OF NON-CONTROLLED INTERESTS. (B) THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES WAS APPROXIMATELY $768,000. HOME PROPERTIES OF NEW YORK, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1998 (IN THOUSANDS) Depreciation and amortization of the Company's investments in buildings and improvements reflected in the consolidated statements of operations are calculated over the estimated useful lives of the assets as follows: Buildings and improvements 5-40 years Tenant improvements Life of related lease The changes in total real estate assets for the three years ended December 31, 1998, are as follows:
1998 1997 1996 Balance, beginning of year $525,128 $261,773 $198,203 New property acquisition 376,735 266,799 54,727 Additions 42,896 15,962 8,843 Disposals and retirements (3,971) (19,406) - Balance, end of year $940,788 $525,128 $261,773
The changes in accumulated depreciation for the three years ended December 31, 1998, are as follows:
1998 1997 1996 Balance, beginning of year $46,531 $40,237 $32,258 Depreciation for the year 23,067 11,104 7,979 Disposals and retirements (3,971) (4,810) - Balance, end of year $65,627 $46,531 $40,237
HOME PROPERTIES OF NEW YORK, INC. FORM 10-K For Fiscal Year Ended December 31, 1998 Exhibit Index
Exhibit Exhibit Location Number 2.1 Agreement among Home Properties of New Incorporated by reference to the Form 8- York, Inc. and Philip J. Solondz, Daniel K filed by Home Properties of New York, Solondz and Julia Weinstein relating to Inc. dated 6/6/97 (the Royal Gardens I, together with Amendment "6/6/97 8-K") No. 1 2.2 Agreement among Home Properties of New Incorporated by reference to the 6/6/97 York, Inc. and Philip Solondz and Daniel 8-K Solondz relating to Royal Gardens II, together with Amendment No. 1 2.3 Purchase and Sale Agreement dated July 25, Incorporated by reference to the Form 8- 1997 by and between Home Properties of New K filed by Home Properties of New York, York, L.P. and Louis S. and Molly S. Wolk Inc., dated 9/26/97 (the "9/26/97 8-K"). Foundation. 2.4 Purchase and Sale Agreement dated April 30, Incorporated by reference to the 9/26/97 1997 between Home Properties of New York, 8-K. L.P. and Briggs Wedgewood Associates, L.P. 2.5 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97 31, 1997 between Home Properties of New 8-K. York, L.P. and Chesfield Partnerhsip. 2.6 Agreement and Plan of Merger dated July 31, Incorporated by reference to the 9/26/97 1997 between Home Properties of New York, 8-K. L.P. and Valspring Partnership. 2.7 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97 31, 1997 between Home Properties of New 8-K York, L.P. and Exmark Partnerhsip. 2.8 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97 31, 1997 between Home Properties of New 8-K. York, L.P. and New Orleans East Limited Partnership. 2.9 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97 31, 1997 between Home Properties of New 8-K. York, L.P. and Glenvwk Partnership. 2.10 Agreement and Plan of Merger, dated July Incorporated by reference to the 9/26/97 31, 1997 between Home Properties of New 8-K. York, L.P. and PK Partnership. 2.11 First Amendment to Agreement and Plan of Incorporated by reference to the 9/26/97 Merger, dated September 1, 1997 between 8-K. Home Propertiesof New York, L.P. and PK Partnerhsip and its partners. 2.12 First Amendment to Agreement and Plan of Incorporated by reference to the 9/26/97 Merger, dated September 1, 1997 between 8-K. Home Properties of New York, L.P. and NOP Corp. and Norpark Partnership. 2.13 Contribution Agreement dated July 31, 1997 Incorporated by reference to the 9/26/97 between Home Properties of New York, L.P. 8-K. and Lamar Partnership. 2.14 Agreement and Plan of Merger, dated July Incorporated by reference to the Form 8- 31, 1997 between Home Properties of New K filed by Home Properties of New York, York, L.P. and Curren Partnership. Inc., dated 10/3/97. 2.15 Contribution Agreement, dated October __, Incorporated by reference to the Form 8- 1997 between Home Properties of New York, K filed by Home Properties of New York, L.P. andBerger/Lewiston Associates Limited Inc. dated 10/7/97. Partnership; Stephenson-Madison Heights Company LimitedPartnership; Kingsley- Moravian Company Limited Partnership; Woodland Garden Apartments Limited Partnership; B&L Realty Investments Limited Partnership; Southpointe Square Apartments Limited Partnership; Greentrees Apartments limited Partnership; Big Beaver-Rochester Properties Limited Partnership; Century Realty Investment Company Limited Partnership. 2.16 Agreement among Home Properties of New Incorporated by reference to the the York, L.P. and Erie Partners, L.L.C. Form 8-K filed by Home Properties of New relating to Woodgate PlaceApartments, York, Inc., dated 10/31/97 (the together with Amendment No. 1 "10/31/97 8-K"). 2.17 Agreement among Home Properties of New Incorporated by reference to the York, L.P. and Mid-Island Limited 10/31/97 8-K. Partnership relating to Mid-Island Estates, together with Amendment No. 1. 2.18 Purchase and Sale Agreement among Home Incorporated by reference to the Properties of New York, L.P. and Anthony M. 10/31/97 8-K. Palumbo and Daniel Palumbo. 2.19 Purchase and Sale Agreements dated June 17, Incorporated by reference to the Form 8- 1997 among Home Properties of New York, K filed by Home Properties of New York, L.P. and various individuals relating to Inc., dated 2/20/98 (the "2/20/98 8-K"). Hill Court Apartments South and Hudson Arms Apartments, together with a letter amendment dated September 24, 1997. 2.20 Contract of Sale, dated October 20,1997 Incorporated by reference to the 2/20/98 between Home Properties of New York, L.P. 8-K. and Hudson Palisades Associates relating to Cloverleaf Apartments. 2.21 Contribution Agreement, dated November 17, Incorporated by reference to the 2/20/98 1997 among Home Properties of New York, 8-K. L.P. and various trusts relating to Scotsdale Apartments. 2.22 Contribution Agreement, dated November 7, Incorporated by reference to the 2/20/98 1997among Home Properties of New York, L.P. 8-K and Donald H. Schefmeyer and Stephen W. Hall relating to Candlewood Apartments, together with Amendment No. One dated December 3, 1997. 2.23 Purchase and Sale Agreement dated November Incorporated by reference to the Form 8- 26, 1997 among Home Properties of New York, K filed by Home Properties of New York, L.P. and Cedar Glen Associates. Inc. on 3/24/98 (the "3/24/98 8-K"). 2.24 Contribution Agreement dated March 2, 1998 Incorporated by reference to the 3/24/98 among Home Properties of New York, L.P., 8-K. Braddock Lee Limited Partnership and Tower Construction Group, LLC. 2.25 Contribution Agreement dated March 2, 1998 Incorporated by reference to the 3/24/98 among Home Properties of New York, L.P., 8-K. Park Shirlington Limted Partnership and Tower Construction Group, LLC. 2.26 Contract of Sale between Lake Grove Incorporated by reference to the Form Associates Corp. and Home Properties of New 10-K filed by Home Properties of New York, L.P., dated December 17, 1996, York, Inc. for the year ended 12/31/96 relating to the Lake Grove Apartments. (the "12/31/96 10-K"). 2.27 Form of Contribution Agreement among Home Incorporated by reference to the Form 8- Properties of New York, L.P. and Strawberry K filed by Home Properties of New York, Hill Apartment Company LLLP, Country Inc. on 5/22/98 (the "5/22/98 Village Limited Partnership, Morningside 8-K). Six, LLLP, Morningside North Limited Partnership and Morningside Heights Apartment Company Limited Partnership with schedule setting forth material details in which documents differ from form. 2.28 Form of Purchase and Sale Agreement with Incorporated by reference to the 5/22/98 schedule setting forth material details in 8-K. which documents differ from form. 3.1 Articles of Amendment and Restatement of Incorporated by reference to Home Articles of Incorporation of Home Properties of New York, Inc. Properties of New York, Inc. Registration Statement on Form S-11, File No. 33-78862 (the "S-11 Registration Statement"). 3.2 Articles of Amendment of the Articles of Incorporated by reference to to Home Incorporation of Home Properties of New Properties of New York, Inc. York, Inc. Registration Statement on Form S-3, File . No. 333-52601 filed May 14, 1998 (the "5/14/98 S-3"). 3.3 Amended and Restated By-Laws of Home Incorporated by reference to the Form 8- Properties of New York, Inc. (Revised K filed by Home Properties of New York, 12/30/96). Inc. dated December 23, 1996 (the "12/23/96 8- K"). 4.1 Form of certificate representing Shares of Incorporated by reference to the Form Common Stock. 10- K filed by Home Properties of New York, Inc. for the period ended 12/31/94 (the "12/31/94 10-K"). 4.2 Agreement of Home Properties of New York, Incorporated by reference to the Inc. to file instruments defining the 12/31/94 10-K. rights of holders of long-term debt of it or its subsidiaries with the Commission upon request. 4.3 Credit Agreement between Manufacturers Incorporated by reference to the Form Traders Trust Company, Home Properties of 10-Q filed by Home Properties of New New York, L.P. and Home Properties of New York, Inc. for the quarterly period York, Inc. ended 6/30/94 (the "6/30/94 10-Q"). 4.4 Amendment Agreement between Manufacturers Incorporated by reference t the 12/31/94 and Traders Trust Company, Home Properties 10-K. of New York, L.P. and Home Properties of New York, Inc. amending the Credit Agreement. 4.5 Mortgage Spreader, Consolidation and Incorporated by reference to the 6/30/94 Modification Agreement between 10-Q. Manufacturers and Traders Trust Company and Home Properties of New York, L.P., together with form of Mortgage, Assignment of Leases and Rents and Security Agreement incorporated therein by reference. 4.6 Mortgage Note made by Home Properties Incorporated by reference to the 6/30/94 of New York, L.P. payable to Manufacturers 10-Q. and Traders Trust Company in the principal amount of $12,298,000. 4.7 Spreader, Consolidation, Modification and Incorporated by reference to the Form Extension Agreement between Home Properties 10-K filed by Home Properties of New of New YorkL.P. and John Hancock Mutual York, Inc. for the period ended 12/31/95 Life Insurance Company, (the "12/31/95 10-K"). dated as of October 26, 1995, relating to indebtedness in the principal amount of $20,500,000. 4.8 Amended and Restated Stock Benefit Plan of Incorporated by reference to the 6/6/97 Home Properties of New York, Inc. 8-K. 4.9 Amended and Restated Dividend Incorporated by reference to the Form 8- Reinvestment, Stock Purchase, Resident K filed by Home Properties of New York, Stock Purchase and Employee Inc., dated 12/23/97. Stock Purchase Plan. 4.10 Amendment No. One to Amended and Restated Incorporated by reference to the Home Dividend Reinvestment, Stock Purchase, Properties of New York, Inc. Resident Stock Purchase and Employee Stock Registration Statement on Form S-3, File Purchase Plan. No. 333-49781, filed on 4/9/98 (the "4/9/98 S-3"). 4.11 Amendment No. Two to Amended and Restated Incorporated by reference to the Home Dividend Reinvestment, Stock Purchase, Properties of New York, Inc. Resident Stock Purchase and Employee Stock Registration Statement on Form S-3, File Purchase Plan No. 333-58799, filed on 7/9/98 (the "7/9/98 S-3"). 4.12 Amended and Restated Dividend Reinvestment, Incorporated by reference to the Home Stock Purchase, Resident Stock Purchase and Properties of New York, Inc. Form 10-Q Employee Stock Purchase Plan for the Quarter ended 6/30/98 (the "6/30/98 10-Q"). 4.13 Amendment No. Three to Amended and Restated Incorporated by reference to the the Dividend Reinvestment, Stock Purchase, Home Properties of New York, Inc. Resident Stock Purchase and Employee Stock Registration Statement on Form S-3, Purchase Plan Registration No. 333-67733, filed on 11/23/98(the "11/23/98 S-3"). 4.14 Directors' Stock Grant Plan Incorporated by reference to the 5/22/98 8-K. 4.15 Director, Officer and Employee Stock Incorporated by reference to the 5/22/98 Purchase and Loan Plan 8-K. 10.1 Second Amended and Restated Agreement of Incorporated by reference to the 9/26/97 Limited Partnership of Home Properties of 8-K. New York, L.P. 10.2 Amendments No. One through Eight to the Incorporated by reference to the Form Second Amended and Restated Agreement of 10-K of Home Properties of New York, LimitedPartnership of Home Properties of Inc. for the period ended 12/31/97 (the New York, L.P. "12/31/97 10-K"). 10.3 Articles of Incorporation of Home Incorporated by reference to . to S-11 Properties Management, Inc Registration Statement. 10.4 By-Laws of Home Properties Management, Inc Incorporated by reference to S-11 . Registration Statement. 10.5 Articles of Incorporation of Conifer Realty Incorporated by reference to the Corporation 12/31/95 10-K. 10.6 By-Laws of Conifer Realty Corporation. Incorporated by reference to 12/31/95 10-K. 10.7 Home Properties Trust Declaration of Trust, Incorporated by reference to the 9/26/97 dated September 19, 1997 8-K. 10.8 Employment Agreement between Home Incorporated by reference to 6/30/94 10- Properties of New York, L.P. and Norman Q. P.Leenhouts. 10.9 Amendments No. One, Two and Three to the Filed herewith Employment Agreement between Home Properties of New York, L.P. and Norman P. Leenhouts 10.10 Employment Agreement between Home Incorporated by reference to the 6/30/94 Properties of New York, L.P. and Nelson B. 10-Q. Leenhouts 10.11 Amendments No. One, Two and Three to the Filed herewith Employment Agreement between Home Properties of New York, L.P. and Nelson B. Leenhouts. 10.12 Employment Agreement between Home Incorporated by reference to 12/31/95 Properties of New York, L.P. and Richard J. 10-K. Crossed. 10.13 Amendments No. One and Two to the Filed herewith Employment Agreement between Home Properties of New York, L.P. and Richard J. Crossed. 10.14 Indemnification Agreement between Home Incorporated by reference to the 6/30/94 Properties of New York, Inc. and certain 10-Q. officers and directors. 10.15 Indemnification Agreement between Home Incorporated by reference to 12/31/95 Properties of New York, Inc. and Richard 10-K. J. Crossed. 10.l6 Indemnification Agreement between Home Incorporated by reference to 12/31/96 Properties of New York, Inc. and Alan L. 10-K. Gosule. 10.17 Registration Rights Agreement among Home Incorporated by reference to the 6/30/94 Properties of New York, Inc., Home Leasing 10-Q. Corporation, Leenhouts Ventures, Norman P. Leenhouts, Nelson B. Leenhouts, Amy L. Tait, David P. Gardner, Ann M. McCormick, William Beach, Paul O'Leary, Richard J. Struzzi, Robert C. Tait, Timothy A. Florczak and Laurie Tones. 10.18 Lockup Agreements by Home Properties of New Incorporated by reference to 12/31/95 York, Inc. and Conifer Realty, Inc., 10- K. Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John F. Fennessey. 10.19 Contribution Agreement between Home Incorporated by reference to the Form 8- Properties of New York, L.P. and Conifer K filed by Home Properties ofNew York, Realty, Inc., Conifer Development, Inc., dated September 14, 1995. Inc.,.Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.20 Amendment to Contribution Agreement between Incorporated by reference to the Form 8- Home Properties of New York, L.P. and K filed by Home Properties of New York, Conifer Realty, Inc., Conifer Development, Inc., dated January 9, 1996. Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey 10.21 Agreement of Operating Sublease, dated Incorporated by reference to S-11 October1, 1986, among KAM, Inc., Morris Registration Statement. Massry and Raintree Island Associates, as amended by Letter Agreement Supplementing Operating Sublease dated October 1, 1986. 10.22 Second Amended and Restated Incentive Incorporated by reference to 12/31/95 Compensation Plan of Home Properties of New 10-K. York, Inc. 10.23 Indemnification and Pledge Agreement Incorporated by reference to 12/31/95 between Home Properties of New York, L.P. 10- K. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.24 Form of Term Promissory Note payable to Incorporated by reference to 12/31/96 Home Properties of New York, Inc. by 10-K. officers and directors in association with the Executive and Director Stock Purchase and Loan Program. 10.25 Form of Pledge Security Agreement executed Incorporated by reference to 12/31/96 by officers and directors in connection 10-K. with Executive and Director Stock Purchase and Loan Program. 10.26 Schedule of Participants, loan amounts and Incorporated by reference to 12/31/96 shares issued in connection with the 10-K. Executive and Director Stock Purchase and Loan Program. 10.27 Subordination Agreement between Home Incorporated by reference to 12/31/96 Properties of New York, Inc. and The Chase 10-K. Manhattan Bank relating to the Executive and Director Stock Purchase and Loan Program. 10.28 Partnership Interest Purchase Agreement, Incorporated by reference to 12/23/96 8- dated as of December 23, 1996 among Home K. Properties of New York, Inc., Home Properties of New York, L.P. and State of Michigan Retirement Systems. 10.29 Registration Rights Agreement, dated as of Incorporated by reference to 12/23/96 December 23, 1996 between Home Properties 8-K. of New York, Inc. and State of Michigan Retirement Systems. 10.30 Lock-Up Agreement, dated December 23, 1996 Incorporated by reference to 12/23/96 8- between Home Properties of New York, Inc. K. and State of Michigan Retirement Systems. 10.31 Agreement dated as of April 13, 1998 Incorporated by reference to the Home between Home Properties of New York, Inc. Properties of New York, Inc. Form 8-K and the Treasurer of the State of Michigan filed 4/15/98 (the "4/15/98 8-K") 10.32 Credit Agreement dated as of September 4, Incorporated by reference to the 9/26/97 1997 among Home Properties of New York, 8-K. L.P. and The Chase Manhattan Bank, as Administrative Agent, Chase Securities Inc., as Arranger, Manufacturers and TradersTrust Company, as Co-Agent. 10.33 Amendment No. One, to Credit Agreement, Incorporated by reference to the dated as of September 4, 1997, among Home 9/26/97 8-K. Properties of New York, L.P., a New York limited partnership, the Lenders hereto, The Chase Manhattan Bank, as Administrative Agent, and Manufacturers and Traders Trust Company,as Co-Agent. 10.34 Promissory Note, dated September 4, 1997 Incorporated by reference to the from Home Properties of New York, L.P. to 9/26/97 8-K. The Chase Manhattan Bank. 10.35 Promissory Note, dated September 4, 1997 Incorporated by reference to the 9/26/97 from Home Properties of New York, L.P. to 8-K. Manufacturers and Traders Trust Company. 10.36 Amendment No. Nine to the Second Amended Incorporated by reference to the 5/14/98 and Restated Agreement of Limited S-3. Partnership of the Operating Partnership 10.37 Credit Agreement dated as of July 6, 1998 Incorporated by reference to the 6/30/98 among Home Properties of New York, L.P. and 10-Q. Manufacturers and Traders Trust Company. 10.38 Agreement and Amendment No. 1 to a Credit Filed herewith. Facility Agreement, dated December 11, 1998 between Home Properties of New York, Inc. and Manufacturers and Traders Trust Company. 10.39 Master Credit Facility Agreement by and Incorporated by reference to the Home among Home Properties of New York, Inc., Properties of New York, Inc. Form 10-Q Home Properties of New York, L.P., Home for the quarter ended 9/30/98 (the Properties WMF I LLC and Home Properties of "9/30/98 Form 10-Q"). New York, L. P. and P-K Partnership doing business as Patricia Court and Karen Court and WMF Washington Mortgage Corp., dated as of August 28, 1998. 10.40 First Amendment to Master Credit Facility Filed herewith. Agreement, dated as of December 11, 1998 among Home Properties of New York, Inc., Home Properties of New York, L.P., Home Properties WMF I LLC and Home Properties of New York, L.P. and P-K Partnership doing business as Patricia Court and Karen Court and WMF Washington Mortgage Corp. and Fannie Mae. 10.41 Amendments Nos. Ten through Seventeen to Filed herewith. the Second Amended and Restated Limited Partnership Agreement. 21 List of Subsidiaries of Home Properties Filed herewith. of New York, Inc. 23 Consent of PricewaterhouseCoopers LLP Filed herewith. 27 Financial Data Schedule Filed herewith.
EX-10 2 EXHIBIT 10.9 AMENDMENT NO. ONE TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Norman P. Leenhouts ("Employee") entered into an Employment Agreement, dated August 4, 1994 (the "Agreement"); WHEREAS, the Agreement provided for incentive compensation pursuant to the Company's original incentive compensation plan; and WHEREAS, the Company has changed its incentive compensation plan and the Company and the Employee have agreed that incentive compensation should be paid to the Employee pursuant to the Company's current compensation plan rather than as originally described in the Agreement. NOW THEREFORE, the parties hereto agree as follows: 1. The first paragraph of Section 3.2 of the Agreement shall be amended and restated in its entirety to read as follows: "Employee shall receive incentive compensation pursuant to the Company's Incentive Compensation Plan as such plan may be amended from time to time. Initially, the Employee shall have the factor of 10% applied to his base salary for purposes of determining his share of the bonus pool under the Incentive Compensation Plan. One-half of the bonus shall be non- discretionary and the other half shall be payable to the Employee in the discretion of the Management Committee of the Board of Directors of Home Properties of New York, Inc. The above is subject to modification upon the agreement of the Employee and the Management Committee without further need to modify this Agreement." 2. The above amendment shall apply to the bonus payable in 1998 and thereafter, but the parties acknowledge that the Employee has voluntary received his bonus pursuant to the Company's then current incentive compensation plan rather than as provided in the Agreement since 1996. 3. As amended above, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of January 1, 1998. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /S/ ANN M. MCCORMICK ----------------------------- Ann M. McCormick Vice President and Secretary /S/ NORMAN LEENHOUTS ------------------------------ Norman Leenhouts AMENDMENT NO. TWO TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Norman P. Leenhouts ("Employee") entered into an Employment Agreement, dated August 4, 1994, which was subsequently amended by Amended No. One dated as of January 1, 1998 (the "Agreement"); WHEREAS, the Agreement provided for a certain base salary; and WHEREAS, the Company and the Employee have agreed to a different base salary than that provided for in the Agreement. NOW THEREFORE, the parties hereto agree as follows: Section 3.1 of the Agreement shall be amended and restated in its entirety to read as follows: "Effective August 1, 1998 and until further modified by the agreement of the Company and the Employee, the Employee's annual base salary (the "Base Salary") shall be $225,000. The Base Salary shall be paid pursuant to the Company's standard payroll policies and shall be subject to such withholding or deductions as may be mutually agreed between the Company and Employee or required by law." As amended above and by Amendment No. One, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of August 5, 1998. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /s/ Ann M. McCormick --------------------------------------------- Ann M. McCormick Vice President and Secretary /s/ Norman Leenhouts ----------------------------------------------------- Norman Leenhouts AMENDMENT NO. THREE TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Norman P. Leenhouts ("Employee") entered into an Employment Agreement, dated August 4, 1994, which was subsequently amended by Amendment No. One dated as of January 1, 1998 and by Amendment No. Two dated as of August 5, 1998 (the "Agreement"); WHEREAS, the Agreement provided for certain benefits upon the termination of the Agreement; and WHEREAS, the Company has adopted an Executive Retention Plan and the Company and the Employee have agreed that benefits should be paid to the Employee pursuant to the Executive Retention Plan rather than as originally described in the Agreement in the event of a change of control and subsequent termination of the Agreement. NOW THEREFORE, the parties hereto agree as follows: The following paragraph 4.6 shall be added to the Agreement after paragraph 4.5: "4.6 TERMINATION FOLLOWING A CHANGE OF CONTROL. Notwithstanding anything to the contrary contained above, in the event of a "Change of Control" as defined in the Company's Executive Retention Plan and a subsequent termination of this Agreement, the benefits to be paid to the Employee upon such a termination shall be as provided in the Executive Retention Plan, as the same may be modified from time to time and not as provided above." As amended above and by Amendment No. One and Two, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of February 2, 1999. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /s/ Ann M. McCormick ---------------------------- Ann M. McCormick Vice President and Secretary /s/ Norman Leenhouts -------------------------------- Norman Leenhouts EX-10 3 EXHIBIT 10.11 AMENDMENT NO. ONE TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Nelson B. Leenhouts ("Employee") entered into an Employment Agreement, dated August 4, 1994 (the "Agreement"); WHEREAS, the Agreement provided for incentive compensation pursuant to the Company's original incentive compensation plan; and WHEREAS, the Company has changed its incentive compensation plan and the Company and the Employee have agreed that incentive compensation should be paid to the Employee pursuant to the Company's current compensation plan rather than as originally described in the Agreement. NOW THEREFORE, the parties hereto agree as follows: 1. The first paragraph of Section 3.2 of the Agreement shall be amended and restated in its entirety to read as follows: "Employee shall receive incentive compensation pursuant to the Company's Incentive Compensation Plan as such plan may be amended from time to time. Initially, the Employee shall have the factor of 10% applied to his base salary for purposes of determining his share of the bonus pool under the Incentive Compensation Plan. One-half of the bonus shall be non- discretionary and the other half shall be payable to the Employee in the discretion of the Management Committee of the Board of Directors of Home Properties of New York, Inc. The above is subject to modification upon the agreement of the Employee and the Management Committee without further need to modify this Agreement." 2. The above amendment shall apply to the bonus payable in 1998 and thereafter, but the parties acknowledge that the Employee has voluntary received his bonus pursuant to the Company's then current incentive compensation plan rather than as provided in the Agreement since 1996. 3. As amended above, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of January 1, 1998. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /s/ Ann M. McCormick ----------------------------------- Ann M. McCormick Vice President and Secretary /s/ Nelson B. Leenhouts ------------------------------------------ Nelson B. Leenhouts AMENDMENT NO. TWO TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Nelson B. Leenhouts ("Employee") entered into an Employment Agreement, dated August 4, 1994, which was subsequently amended by Amended No. One dated as of January 1, 1998 (the "Agreement"); WHEREAS, the Agreement provided for a certain base salary; and WHEREAS, the Company and the Employee have agreed to a different base salary than that provided for in the Agreement. NOW THEREFORE, the parties hereto agree as follows: Section 3.1 of the Agreement shall be amended and restated in its entirety to read as follows: "Effective August 1, 1998 and until further modified by the agreement of the Company and the Employee, the Employee's annual base salary (the "Base Salary") shall be $225,000. The Base Salary shall be paid pursuant to the Company's standard payroll policies and shall be subject to such withholding or deductions as may be mutually agreed between the Company and Employee or required by law." As amended above and by Amendment No. One, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of August 5, 1998. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /s/ Ann M. McCormick -------------------------------- Ann M. McCormick Vice President and Secretary /s/ Nelson B. Leenhouts -------------------------------------- Nelson B. Leenhouts AMENDMENT NO. THREE TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Nelson B. Leenhouts ("Employee") entered into an Employment Agreement, dated August 4, 1994, which was subsequently amended by Amendment No. One dated as of January 1, 1998 and by Amendment No. Two dated as of August 5, 1998 (the "Agreement"); WHEREAS, the Agreement provided for certain benefits upon the termination of the Agreement; and WHEREAS, the Company has adopted an Executive Retention Plan and the Company and the Employee have agreed that benefits should be paid to the Employee pursuant to the Executive Retention Plan rather than as originally described in the Agreement in the event of a change of control and subsequent termination of the Agreement. NOW THEREFORE, the parties hereto agree as follows: The following paragraph 4.6 shall be added to the Agreement after paragraph 4.5: "4.6 TERMINATION FOLLOWING A CHANGE OF CONTROL. Notwithstanding anything to the contrary contained above, in the event of a "Change of Control" as defined in the Company's Executive Retention Plan and a subsequent termination of this Agreement, the benefits to be paid to the Employee upon such a termination shall be as provided in the Executive Retention Plan, as the same may be modified from time to time and not as provided above." As amended above and by Amendment No. One and Two, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of February 2, 1999. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /s/ Ann M. McCormick ------------------------------- Ann M. McCormick Vice President and Secretary /s/ Nelson B. Leenhouts ------------------------------------- Nelson B. Leenhouts EX-10 4 EXHIBIT 10.13 AMENDMENT NO. ONE TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Richard J. Crossed ("Employee") entered into an Employment Agreement, dated January 1, 1996 (the "Agreement"); WHEREAS, the Agreement provided for a certain base salary; and WHEREAS, the Company and the Employee have agreed to a different base salary than that provided for in the Agreement. NOW THEREFORE, the parties hereto agree as follows: 1. Section 3.1 of the Agreement shall be amended and restated in its entirety to read as follows: "Effective August 1, 1998 and until further modified by the agreement of the Company and the Employee, the Employee's annual base salary (the "Base Salary") shall be $225,000. The Base Salary shall be paid pursuant to the Company's standard payroll policies and shall be subject to such withholding or deductions as may be mutually agreed between the Company and Employee or required by law." 2. As amended above, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of August 5, 1998. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /s/ Ann M. McCormick ----------------------------------- Ann M. McCormick Vice President and Secretary /s/ Richard J. Crossed ----------------------------------------- - -- Richard J. Crossed AMENDMENT NO. TWO TO EMPLOYMENT AGREEMENT WHEREAS, Home Properties of New York, L.P. (the "Company") and Richard J. Crossed ("Employee") entered into an Employment Agreement, dated January 1, 1996, which was subsequently amended by Amendment No. One dated as of August 5, 1998 (the "Agreement"); WHEREAS, the Agreement provided for certain benefits upon the termination of the Agreement; and WHEREAS, the Company has adopted an Executive Retention Plan and the Company and the Employee have agreed that benefits should be paid to the Employee pursuant to the Executive Retention Plan rather than as originally described in the Agreement in the event of a change of control and subsequent termination of the Agreement. NOW THEREFORE, the parties hereto agree as follows: The following paragraph 4.6 shall be added to the Agreement after paragraph 4.5: "4.6 TERMINATION FOLLOWING A CHANGE OF CONTROL. Notwithstanding anything to the contrary contained above, in the event of a "Change of Control" as defined in the Company's Executive Retention Plan and a subsequent termination of this Agreement, the benefits to be paid to the Employee upon such a termination shall be as provided in the Executive Retention Plan, as the same may be modified from time to time and not as provided above." As amended above and by Amendment No. One, the Agreement remains in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of February 2, 1999. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. By: /s/ Ann M. McCormick ----------------------------- Ann M. McCormick Vice President and Secretary /s/ Richard J. Crossed ----------------------------------- Richard J. Crossed EX-10 5 EXHIBIT 10.38 AGREEMENT AND AMENDMENT NO. 1 TO A CREDIT FACILITY AGREEMENT This Agreement and Amendment No. 1 ("Amendment 1") to an existing Credit Facility Agreement is made December 11, 1998, by and between HOME PROPERTIES OF NEW YORK, L.P. ("Borrower"), HOME PROPERTIES OF NEW YORK, INC. ("Guarantor") and MANUFACTURERS AND TRADERS TRUST COMPANY ("Bank"). RECITALS A. On or about July 6, 1998, Bank and Borrower entered into a Credit Facility Agreement ("Agreement"). B. Pursuant to the terms of the Agreement, Guarantor executed and delivered to Bank a continuing guaranty of payment of all obligations of Borrower to Bank, whenever arising, under the Agreement and under all other Loan Documents ("Guaranty"). C. Borrower has requested that Bank amend Section 6.02(b) of the Agreement as specified below, which Bank is willing to do, on the terms and conditions specified below. NOW THEREFORE, in consideration of any prior extension of credit by Bank to Borrower, and/or in consideration of Bank having entered into the Agreement with Borrower, and/or in consideration of the mutual promises set forth below, Borrower, Guarantor and Bank hereby agree as follows: 1. Unless otherwise defined in this Amendment 1, capitalized terms used in this Amendment 1 have the definitions given to them in the Agreement. 2. On the date this Amendment 1 is executed by Borrower, Guarantor and Bank ("Amendment Date"), Section 6.02(b) of the Agreement shall be deemed amended by deleting the number "15%" in the second line of Section 6.02(b) and replacing it with the number "20%". 3. Except as amended above, all terms and conditions of the Agreement remain the same. 4. Guarantor hereby consents to the amendment to Section 6.02(b) of the Agreement, as specified in "2" above. Guarantor acknowledges to Bank that the Guaranty constitutes Guarantor's valid and binding obligation, enforceable against Guarantor by Bank according to its terms, without offset against or defense thereto of any nature or kind. 5. Borrower acknowledges to Bank that the Agreement, as amended by this Amendment 1, and the Note and all other Loan Documents executed by Borrower, each constitute Borrower's valid and binding obligation, enforceable against Borrower by Bank according to its respective terms, without offset against or defense thereto of any nature or kind. 6. Borrower represents and warrants to Bank that as of the Amendment Date, all Representations and Warranties contained in Article III of the Agreement are true and correct, that Borrower is in compliance with all the Affirmative Covenants contained in Article V of the Agreement, that Borrower has not violated any of the Negative Covenants contained in Article VI of the Agreement and that no Event of Default has occurred under Article VII of the Agreement. 7. Borrower shall pay all Bank's attorneys' fees plus expenses and disbursements incurred and to be incurred in connection with the preparation, negotiation and execution of this Amendment 1. 8. This Amendment 1 is governed by New York law and may not be amended or terminated orally. Any litigation involving this Amendment 1 and/or the Agreement, and/or the Note, and/or any other Loan Document shall, at Bank's sole option, be triable only in a court located in Monroe County or Erie County, New York. BORROWER, GUARANTOR AND BANK WAIVE THE RIGHT TO A JURY TRIAL IN ANY LITIGATION IN WHICH BORROWER AND/OR GUARANTOR, AND BANK ARE PARTIES. No other Person is a third party beneficiary of this jury trial waiver. IN WITNESS WHEREOF, Borrower, Guarantor and Bank have executed and unconditionally delivered this Amendment 1 to the others on December 11, 1998. HOME PROPERTIES OF NEW YORK, L.P. By:Home Properties of New York, Inc., General Partner By: /S/ AMY L. TAIT ----------------------------- Amy L. Tait Executive Vice President HOME PROPERITES OF NEW YORK, INC. By:/S/ AMY L. TAIT ---------------------------- Amy L. Tait Executive Vice President MANUFACTURERS AND TRADERS TRUST COMPANY By: /s/ Lisa Plescia ------------------------- Lisa Plescia Vice President STATE OF NEW YORK) COUNTY OF MONROE ) SS: On December 11, 1998, before me personally appeared AMY L. TAIT, to me known, who, being duly sworn, did depose and say that she is the Executive Vice President of Home Properties of New York, Inc. ("General Partner"), which is the sole General Partner of HOME PROPERTIES OF NEW YORK, L.P. ("Borrower"), the limited partnership which executed this Agreement and she acknowledged to me that she executed this Agreement at the direction of the Board of Directors of the General Partner, and on behalf of Borrower, as the sole General Partner of the Borrower. /s/ Ann M. McCormick ------------------------ Notary Public STATE OF NEW YORK) COUNTY OF MONROE ) SS: On December 11, 1998, before me, the subscriber, personally appeared AMY L. TAIT, to me known, who, being by me duly sworn, did depose and say that she resides in Rochester, New York, that she is the Executive Vice President of HOME PROPERTIES OF NEW YORK, INC., the corporation described in, and which executed the within Instrument, and that she signed her name thereto by order of the Board of Directors. /s/ Ann M. McCormick ---------------------- Notary Public STATE OF NEW YORK) COUNTY OF MONROE ) SS: On December 14, 1998, before me, the subscriber, personally appeared LISA PLESCIA, to me known, who, being by me duly sworn, did depose and say that she resides in Rochester, New York, that she is a Vice President of MANUFACTURERS AND TRADERS TRUST COMPANY, the corporation described in, and which executed the within Instrument, and that she signed her name thereto by order of the Board of Directors. /s/ Debra K. Pagan ----------------------- Notary Public EX-10 6 EXHIBIT 10.40 FIRST AMENDMENT TO MASTER CREDIT FACILITY AGREEMENT THIS FIRST AMENDMENT TO MASTER CREDIT FACILITY AGREEMENT (the "FIRST AMENDMENT") is made as of the 11th day of December, 1998, by and among (i) (a) HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation (the "REIT"), (b) HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership (the "OPERATING PARTNERSHIP"), (c) HOME PROPERTIES WMF I, LLC, a New York limited liability company (the "BORROWER") and (d) HOME PROPERTIES OF NEW YORK, L.P. AND P-K PARTNERSHIP DOING BUSINESS AS PATRICIA COURT AND KAREN COURT, a Pennsylvania general partnership (the "SUBSIDIARY OWNER"), (ii) WMF WASHINGTON MORTGAGE CORP., a Delaware corporation, formerly known as Washington Mortgage Financial Group, Ltd. ("WMF") and (iii) FANNIE MAE, a federally-chartered and stockholder-owned corporation organized and existing under the Federal National Mortgage Association Charter Act, 12 U.S.C.
1716 ET SEQ. RECITALS A. The parties to this First Amendment are parties to that certain Master Credit Facility Agreement, dated as of August 28, 1998 (as amended from time to time, the "MASTER AGREEMENT"). B. All of the WMF's right, title and interest in the Master Agreement and the Loan Documents executed in connection with the Master Agreement or the transactions contemplated by the Master Agreement have been assigned to Fannie Mae pursuant to that certain Assignment of Master Credit Facility Agreement and Other Loan Documents, dated as of August 28, 1998 (the "ASSIGNMENT"). Fannie Mae has not assumed any of the obligations of WMF under the Master Agreement or the Loan Documents as a result of the Assignment. Fannie Mae has designated WMF as the servicer of the Advances contemplated by the Master Agreement. C. The parties are executing this First Amendment pursuant to the Master Agreement to reflect, among other things, an increase in the Base Facility Credit Commitment pursuant to Article VIII of the Master Agreement. NOW, THEREFORE, the parties hereto, in consideration of the mutual promises and agreements contained in this First Amendment and the Master Agreement, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, hereby agree as follows: 1. EXPANSION. Pursuant to a Credit Facility Expansion Request submitted by Borrower, the definition of "Base Facility Credit Commitment" is hereby replaced in its entirety by the following new definition: "BASE FACILITY CREDIT COMMITMENT" means an amount equal to $158,881,000, or such greater amount, not to exceed $200,000,000, as the Borrower may elect in accordance with, and subject to, the provisions of Article VIII. 2. MATURITY DATE OF BASE FACILITY ADVANCES. Section 2.02(a)(3) of the Master Agreement is hereby replaced in its entirety by the following new provision: SECTION 2.02(a)(3) MATURITY DATE OF BASE FACILITY ADVANCES. The maturity date of the Initial Advance shall be the Base Facility Termination Date. The maturity date of any Base Facility Advance that is a Future Advance shall be the Base Facility Termination Date or such other date as the Borrower and WMF may agree upon, as reflected in the Base Facility Note evidencing such Base Facility Advance. 3. FUTURE ADVANCE. Borrower hereby requests, and Lender hereby agrees to make, on or about the date of this First Amendment, a Future Advance in the amount of $58,881,000. In connection with the Future Advance, Borrower has amended all of the existing Security Instruments (except for the Security Instruments encumbering existing Mortgaged Properties located in New York), has added seven Additional Mortgaged Properties to the Collateral Pool by granting Security Instruments encumbering the Additional Mortgaged Properties to WMF, and has executed certain additional documents, and taken certain additional actions, in connection therewith. To reflect the foregoing, Exhibit A to the Master Agreement is hereby replaced in its entirety by the Exhibit A attached to this Agreement. 4. PAYMENTS UNDER THE NOTES AFTER ACCELERATION. Solely for purposes of calculating the amount of the payment for each Note under Section 3(B) of Schedule B to each Note, the Defeasance Deposit for each Note shall be calculated by assuming that the "Mortgage Payment" means the amount of each regularly scheduled monthly payment of interest due and payable under such Note only (and not any other Note) during the period beginning on the first day of the second calendar month after the Defeasance Closing Date and ending on the last day of the Defeasance Period, and the amount that would constitute the unpaid principal balance of such Note on the last day of the Defeasance Period if all prior Mortgage Payments were paid on their due dates. The foregoing is intended to have the effect of requiring a payment under Section 3(B) of Schedule B to each accelerated Note which corresponds to the principal amount of, and mortgage payments under, such Note only rather than the aggregate principal amount of, and mortgage payments under, all Notes. 5. CAPITALIZED TERMS. All capitalized terms used in this First Amendment which are not specifically defined herein shall have the respective meanings set forth in the Master Agreement. 6. FULL FORCE AND EFFECT. Except as expressly modified by this First Amendment, all terms and conditions of the Master Agreement shall continue in full force and effect. 7. COUNTERPARTS. This First Amendment may be executed in counterparts by the parties hereto, and each such counterpart shall be considered an original and all such counterparts shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation By: /S/ Ann M. McCormick ------------------------ Ann M. McCormick Vice President HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership By: Home Properties of New York, Inc., a Maryland corporation, its sole General Partner By: /s/ Ann M. McCormick ------------------------ Ann M. McCormick Vice President [Signatures continued on following page] [Signatures continued from preceding page] HOME PROPERTIES WMF I, LLC, a New York limited liability company By: Home Properties of New York, L.P., a New York limited partnership, its sole Member By: Home Properties of New York, Inc., a Maryland corporation, its sole General Partner By: /s/ Ann M. McCormick ------------------------ Ann M. McCormick Vice President HOME PROPERTIES OF NEW YORK, L.P. AND P-K PARTNERSHIP DOING BUSINESS AS PATRICIA COURT AND KAREN COURT, a Pennsylvania general partnership By: Home Properties of New York, L.P., a New York limited partnership, a General Partner By: Home Properties of New York, Inc., a Maryland corporation, its sole General Partner By: /s/ Ann M. McCormick ------------------------- Ann M. McCormick Vice President [Signatures continued on following page] [Signatures continued from preceding page] WMF WASHINGTON MORTGAGE CORP., A DELAWARE CORPORATION, FORMERLY KNOWN AS WASHINGTON MORTGAGE FINANCIAL GROUP, LTD. By: /s/ G. Scott Carter -------------------------- G. Scott Carter Vice President [Signatures continued on following page] [Signatures continued from preceding page] FANNIE MAE By: /s/ James T. Parks ---------------------- Name: James T. Parks Title: Vice President EX-10 7 EXHIBIT 10.41 Home Properties of New York, L.P. Amendment No. Ten to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective May 28, 1998 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect the exercise of purchase rights by certain partners, and the increase in the number of Units currently held by the General Partner and Home Properties Trust. GENERAL PARTNER Home Properties of New York, Inc. /s/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary Home Properties of New York, L.P. Amendment No. Eleven to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective July 7, 1998 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect the exercise of purchase rights by certain partners, the assignment by certain partners of some of their Units, the issuance of Units to the former owners of Racquet Club East in Middletown, Pennsylvania and the increase in the number of Units currently held by the General Partner and Home Properties Trust. GENERAL PARTNER Home Properties of New York, Inc. /S/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary Home Properties of New York, L.P. Amendment No. Twelve to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective July 23, 1998 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect the issuance of Units to the former owners of the property known as Sherry Lake Apartments located in Pennsylvania, the exercise of purchase rights by certain partners and the increase in the number of Units currently held by the General Partner and Home Properties Trust. GENERAL PARTNER Home Properties of New York, Inc. /s/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary Home Properties of New York, L.P. Amendment No. Thirteen to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective September 15, 1998 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect the issuance of Units to certain of the former owners of the property known as Rolling Park Apartments located in Maryland, the exercise of purchase rights by certain partners and the increase in the number of Units currently held by the General Partner and Home Properties Trust. GENERAL PARTNER Home Properties of New York, Inc. /s/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. McCormick - ------------------------------- Ann M. McCormick Secretary Home Properties of New York, L.P. Amendment No. Fourteen to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective September 29, 1998 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect: (i) the issuance of Units to the former owners of the properties known as Carriage Hill, Carriage Park and Cherry Hill Apartments located in Michigan and Pines of Perinton located in Rochester, New York; (ii) the issuance of additional Contingent Units to C.O.F., Inc.; (iii) the exercise of purchase and assignment rights by certain partners; and (iv) the increase in the number of Units currently held by the General Partner and Home Properties Trust. GENERAL PARTNER Home Properties of New York, Inc. /s/ Ann M. McCormick _________________________________ Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. Mccormick ___________________________________ Ann M. McCormick Secretary Home Properties of New York, L.P. Amendment No. Fifteen to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective November 17, 1998 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect: (i) the issuance of Units to the former owners of the member interests in Dunedin L.L.C.; (ii) the exercise of purchase and assignment rights by certain partners; and (iii) the increase in the number of Units currently held by the General Partner and Home Properties Trust. GENERAL PARTNER Home Properties of New York, Inc. /s/ Ann M. McCormick _________________________________ Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. McCormick ___________________________________ Ann M. McCormick Secretary Home Properties of New York, L.P. Amendment No. Sixteen to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective December 31, 1998 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect various changes. GENERAL PARTNER Home Properties of New York, Inc. /s/ Ann M. McCormick _________________________________ Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. McCormick ___________________________________ Ann M. McCormick Secretary Home Properties of New York, L.P. Amendment No. Seventeen to Second Amended and Restated Agreement of Limited Partnership The Second Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective February 16, 1999 to substitute the "Schedule A" attached hereto for the "Schedule A" currently attached to the Partnership Agreement. "Schedule A" is hereby amended to reflect various changes. GENERAL PARTNER Home Properties of New York, Inc. /s/ Ann M. McCormick - ----------------------------------------------- Ann M. McCormick Secretary LIMITED PARTNERS LISTED ON ATTACHED SCHEDULE A By: Home Properties of New York, Inc. as attorney in fact /s/ Ann M. McCormick - ----------------------------------------------- Ann M. McCormick Secretary
SCHEDULE A HOME PROPERTIES OF NEW YORK, L.P. PARTNERS, UNITS AND PERCENTAGE INTERESTS GENERAL PARTNER Number of Percentage NAME AND IDENTIFYING NUMBER BUSINESS OR RESIDENCE ADDRESS UNITS HELD INTEREST Home Properties of New York, Inc. 850 Clinton Square 278,260.379 1.00000% Rochester, New York 14604 LIMITED PARTNERS Number of Percentage NAME AND IDENTIFYING NUMBER BUSINESS OR RESIDENCE ADDRESS UNITS HELD INTEREST Home Properties Trust 850 Clinton Square 17,620,195.520 63.32269% Rochester, New York 14604 Home Leasing Corporation 850 Clinton Square 429,376 1.54307% Rochester, New York 14604 Leenhouts Ventures 850 Clinton Square 8,010 0.02879% Rochester, New York 14604 Norman P. Leenhouts 850 Clinton Square 467 0.00168% Rochester, New York 14604 Nelson B. Leenhouts 850 Clinton Square 219 0.00079% Rochester, New York 14604 Arlene Z. Leenhouts 850 Clinton Square 50,000 0.17969% Rochester, New York 14604 Nancy E. Leenhouts 850 Clinton Square 50,000 0.17969% Rochester, New York 14604 Amy L. Tait 850 Clinton Square 11,195 0.04023% Rochester, New York 14604 Amy L. Tait and 850 Clinton Square 2,548 0.00916% Robert C. Tait Rochester, New York 14604 Ann M. McCormick 850 Clinton Square 565 0.00203% Rochester, New York 14604 Ann M. McCormick and 850 Clinton Square 1,737 0.00624% Patrick M. McCormick Rochester, New York 14604 David P. Gardner 850 Clinton Square 3,506 0.01260% Rochester, New York 14604 William E. Beach 850 Clinton Square 2,433 0.00874% Rochester, New York 14604 William E. Beach and 850 Clinton Square 3,046 0.01095% Richelle A. Beach Rochester, New York 14604 Paul O'Leary 850 Clinton Square 3,207 0.01153% Rochester, New York 14604 Richard J. Struzzi 850 Clinton Square 2,363 0.00849% Rochester, New York 14604 Robert C. Tait 850 Clinton Square 70 0.00025% Rochester, New York 14604 Timothy A. Florczak 850 Clinton Square 600 0.00216% Rochester, New York 14604 Laurie Leenhouts 850 Clinton Square 6,033 0.02168% Rochester, New York 14604 Peter L. Cappuccilli, Sr. 605 Genesee Street 6,250 0.02246% Syracuse, New York 13204 Rocco M. Cappuccilli 605 Genesee Street 6,250 0.02246% Syracuse, New York 13204 J. Neil Boger 27 Arlington Drive 1,225 0.00440% Pittsford, New York 14534 Joyce P. Caldarone 162 Anchor Drive 1,225 0.00440% Vero Beach, Florida 32963 Linda Wells Davey 17 Green Valley Road 1,225 0.00440% Pittsford, New York 14534 Richard J. Dorschel 32 Whitestone Lane 1,225 0.00440% Rochester, New York 14618 Elizabeth Hatch Dunn P.O. Box 14261 2,450 0.00880% North Palm Beach, Florida 33408 William T. Uhlen, Jr. 5556 Vardon Drive 2,450 0.00880% Canandaigua, NY 14424 Jeremy A. Klainer 295 San Gabriel Drive 612 0.00220% Rochester, New York 14610 J. Robert Maney 506 Panorama Trail 2,450 0.00880% Rochester, New York 14625 John A. McAlpin and Mary E. McAlpin 6270 Bopple Hill Road 1,225 0.00440% Trustees or their successors in trust Naples, New York 14512-9771 under the McAlpin Living Trust, dated January 19, 1999 and any amendments thereto George E. Mercier 99 Ridgeland Road 1,225 0.00440% Rochester, New York 14623 Harold S. Mercier Trust c/o Star Bank N.A. Trustee 1,225 0.00440% P.O. Box 1118, ML 7193 Cincinnati, OH 45201 Michelle Mercier 99 Ridgeland Road 1,225 0.00440% Rochester, New York 14623 Jack E. Post 4898 East Lake Road 1,225 0.00440% Rushville, New York 14544 Robert T. Silkett 3 Dartmouth Court 1,225 0.00440% Pittsford, New York 14534 Carolyn M. Steklof 144 Dunrovin Lane 1,225 0.00440% Rochester, New York 14618 Conifer Development, Inc. 850 Clinton Square 20,738 0.07453% Rochester, New York 14604 C.O.F. Inc. 850 Clinton Square 311,401 1.11910% Rochester, New York 14604 Richard J. Crossed 850 Clinton Square 68,021 0.24445% Rochester, New York 14604 Crossed Family Partnership 850 Clinton Square 7,200 0.02588% Rochester, New York 14604 Lawrence R. Brattain 1200 Edgewater Drive 500 0.00180% Apartment 907 Lakewood, OH 44107 C. Terence Butwid 850 Clinton Square 4,076 0.01465% Rochester, New York 14604 Kathleen M. Dunham 850 Clinton Square 200 0.00072% Rochester, New York 14604 Peter J. Obourn 850 Clinton Square 30,700 0.11033% Rochester, New York 14604 John H. Fennessey 850 Clinton Square 30,700 0.11033% Rochester, New York 14604 Timothy D. Fournier 850 Clinton Square 5,600 0.02013% Rochester, New York 14604 Barbara Lopa 850 Clinton Square 100 0.00036% Rochester, New York 14604 John Oster 850 Clinton Square 3,176 0.01141% Rochester, New York 14604 Eric Stevens 850 Clinton Square 100 0.00036% Rochester, New York 14604 Tamarack II Associates 850 Clinton Square 2,027 0.00728% Rochester, New York 14604 Burton S. August 11 Woodbury Place 4,246 0.01526% Rochester, New York 14618 Charles J. August 355 Ambassador Drive 4,246 0.01526% Rochester, New York 14610 Robert W. August 35 Woodstone Rise 1,158 0.00416% Pittsford, New York 14534 John H. Cline 35 Vick Park A 2,316 0.00832% Rochester, New York 14607 Ralph DeStephano, Sr. 1249-1/2 Long Pond Road 2,316 0.00832% Rochester, New York 14626 Howard Weinstein, Trustee U/T/A 70 Woodland Road 2,316 0.00832% dated June 2, 1994 Short Hills, New Jersey 07078 Gerald A. Fillmore 3800 Delano Road 2,316 0.00832% F/B/O Living Trust of G.A.F. Oxford, Michigan 48371 Esther Lowenthal 1400 East Avenue 2,316 0.00832% Rochester, New York 14610 Richard J. Katz, Jr. 136 Spyglass Lane 2,316 0.00832% Jupiter, Florida 33477 Anwer Masood, MD 1445 Portland Avenue 2,316 0.00832% Rochester, New York 14621 Elizabeth W. Pine 3 Mile Post Lane 1,448 0.00520% Pittsford, New York 14534 Hazel E. Reveal Marital Trust c/o J. Harrison 1,340 0.00482% #321001860 Chase P.O. Box 1412 Rochester, New York 14603 Ernest Reveal Family Trust c/o J. Harrison 976 0.00351% #321001810 Chase P.O. Box 1412 Rochester, New York 14603 Gregory J. Riley, MD 9 Beach Flint Way 2,256 0.00811% Victor, New York 14564 Thomas P. Riley 346 Beach Avenue 2,316 0.00832% Rochester, New York 14612 Tamarack Associates c/o Mr. Timothy D. Fournier 2,316 0.00832% 850 Clinton Square Rochester, New York 14604 William G. vonberg 8 Old Landmark Drive 2,316 0.00832% Rochester, New York 14618 Stephen C. Whitney 9 Devonwood Lane 869 0.00312% Pittsford, New York 14534 Mr. and Mrs. Frank Zamiara 136 Mendon-Ionia Road 2,316 0.00832% Mendon, New York 14506 The Joseph A. Cicci Revocable Trust 109 Wyoming Street 60,000 0.21563% Syracuse, New York 13204 Philip J. Solondz P.O. Box 641 236,678 0.85056% 500 Morris Avenue, Suite A104 Springfield, NJ 07081-0641 Gaby Solondz 1997 Trust dated 9/1/97 28 Fordham Road 25,000 0.08984% Livingston, NJ 07039 Daniel Solondz 968 Stuyvesant Avenue 261,678 0.94041% Union, New Jersey 07063 Julia Weinstein 308 E. 72nd St., Apt. 3D 56,051 0.20143% New York, New York 10021 CLASS A LIMITED PARTNERSHIP INTERESTS State Treasurer of the State of Michigan, 430 West Allegan 1,666,667 5.98960% Custodian of Michigan Public School Lansing, Michigan 48922 Employees' Retirement System, Michigan State Policy Retirement System and Michigan Judges' Retirement System ___________________________________________________________ Henry A. Quinn 603 Benson House 145,383 0.52247% Rosemont, PA 19010 James J. Grifferty 57 Woods Lane 23,515 0.08451% Scarsdale, NY 10583 Jack C. Dixon 16 Lands End Drive 3,589 0.01290% Greensboro, NC 27408-3841 Priscilla M. Elder 230 Sundial Court 5,788 0.02080% Vero Beach, FL 32963-3469 John J. Ficca, Jr. 415 Lancaster Avenue - Unit 8 11,393 0.04094% Haverton, PA 19041 LaVonne B. Graese Trust 5193 Fairway Oaks Drive 49,321 0.17725% Windermere, FL 34786 Thomas F. Keaveney 1420 Regatta Drive 8,016 0.02881% Wilmington, NC 28405 Charles T. Hopkins 104 Wood Spring Road 6,202 0.02229% Box 443 Gwynedd Valley, PA 19437 Janet T. Klion 25 Bailiwick Road 7,608 0.02734% Greenwich, CT 06831 Louis E. Levy 26 Farmstead Road 15,586 0.05601% Short Hills, NJ 07078 John T. Shanahan 123 Rotary Drive 16,442 0.05909% Summit, NJ 07901 Burton M. Mirsky 21 Woodcrest Drive 4,216 0.01515% Morristown, NJ 07960 Denis J. Taura 90 Montadale Drive 8,892 0.03196% Princeton, NJ 08540 William Simon KPMG Peat Marwick 12,212 0.04389% 725 South Figueroa Street Los Angeles, CA 90017 David M. Seiden 29 Hampton Road 314 0.00113% Scarsdale, NY 10583 Edward W. Trott KPMG Peat Marwick 4,176 0.01501% 767 Fifth Avenue New York, NY 10153 Michael Meltzer 6362 Innsdale Drive 887 0.00319% Los Angeles, CA 90068 Eugene G. Schorr KPMG Peat Marwick 444 0.00160% 345 Park Avenue New York, NY 10154 John J. Chopack 202 Hedgemere Drive 444 0.00160% Devon, PA 19333 Alfred W. Fiore 27 Copper Beach Road 444 0.00160% Greenwich, CT 06830 Dallas E. Smith 78083 Foxbrook Lane 222 0.00080% Palm Desert, CA 92211-1229 John M. Guinan 4 Denford Drive 778 0.00280% Newtown Square, PA 19073 Martin F. Mertz 256 S. Bald Hill Road 7,551 0.02714% New Canaan, CT 06840 Ingunn T. McGregor Two Cherry Lane 8,335 0.02995% Old Greenwich, CT 06870-1902 Sam Yellen 22433 Oxnard Street 9,938 0.03571% Woodland, CA 91367 RJL Marital Trust I c/o William E. Logan 2,835 0.01019% 3613 Sarah Drive Wantagle, NY 11793 John D. Collins 2141 Ponus Ridge Road 6,227 0.02238% New Canaan, CT 06840 Michael A. Conway 15 Berndale Drive 6,227 0.02238% Westport, CT 06880 John F. Barna 11 Hummingbird Lane 5,977 0.02148% Darien, CT 06820 Charles T. Collins 684 Fernfield Circle 5,942 0.02135% Wayne, PA 19087 Peter B. Baker 300 Park Street 4,871 0.01751% Haworth, NJ 07641 Thomas J. Carroll 111 West 67th Street 8,305 0.02985% Apartment 35E New York, NY 10023 Lillian D. Walsh 29986 Maple View Drive 2,835 0.01019% Rainier, OR 97048 Joseph H. Fisher 345 W. Mountain Road 10,600 0.03809% West Simsbury, CT 06092 James L. Goble 10260 Strait Lane 11,228 0.04035% Dallas, TX 75229 Harold I. Steinberg Revocable 1221 Ranleigh Road 2,855 0.01026% Inter Vivos Trust under agreement McLean, VA 22101 dated 5/24/91 William J. Cozine 5 Manchester Court 6,663 0.02395% Morristown, NJ 07960 Andrew J. Capelli 35 Starlight Road 3,344 0.01202% Staten Island, NY 10301 Howard J. Krongard 9 Cornell Way 8,387 0.03014% Upper Montclair, NJ 07043 Jerome Lowengrub 7 Lee Terrace 7,311 0.02627% Short Hills, NJ 07078 Nancy Lowengrub, custodian for 3 Shoreham Drive, West 100 0.00036% Robin Lowengrub Dix Hills, NY 11746 Michael C. Lowengrub Custodian for 3 Shoreham Drive West 200 0.00072% Robin Lowengrub Dix Hills, NY 11746-6510 Michael C. Lowengrub Custodian for 3 Shoreham Drive West 300 0.00108% Jason Lowengrub Dix Hills, NY 11746-6510 Freedom House Foundation P.O. Box 67 100 0.00036% Glen Gardner, NJ 08826-0367 Kelly Lowengrub Custodian for 30 Randall Shea Drive 200 0.00072% Kaycee Lowengrub Swansea, MA 02777-2912 Kelly Lowengrub Custodian for 30 Randall Shea Drive 200 0.00072% Kate Lowengrub Swansea, MA 02777-2912 Kelly Lowengrub Custodian for 30 Randall Shea Drive 100 0.00036% Kristopher Lowengrub Swansea, MA 02777-2912 Kelly Lowengrub 30 Randall Shea Drive 200 0.00072% Swansea, MA 02777-2912 Kenneth Lowengrub 30 Randall Shea Drive 200 0.00072% Swansea, MA 02777-2912 United Jewish Appeal of MetroWest 901 Route 10 100 0.00036% Whippany, NJ 07981-1156 Lavoy Robison 1001 Green Oaks Drive 2,469 0.00887% Littleton, CO 80121 William F. VanFossan 8576 Woodbriar Drive 1,571 0.00565% Sarasota, FL 34238 Katharine E. Van Riper 57 Foremost Mountain Road 9,311 0.03346% Montville, NJ 07045 Sandra H. Levy 26 Farmstead Road 3,000 0.01078% Short Hills, NJ 07078 Roderick C. McGeary 1911 Waverly Street 3,710 0.01333% Palo Alto, CA 94301 Stanley L. Seiden #300 Three Islands Boulevard 57 0.00020% The Anchor Bay Club Hallandale, FL 33009 Shaileen & Timothy Tracy 111 Lampwick Lane 1,100 0.00395% Fairfield, CT 06430 Robert D. Huth 44 W. Lancaster Avenue 571 0.00205% Ardmore, PA 19003 Michael C. Plansky 156 Beach Avenue 802 0.00288% Larchmont, NY 10538 Frank A. Farnesi 6 Woodford Lane 1,496 0.00538% Malvern, PA 19355 Harris R. Chorney 43 Mountain Brook Road 705 0.00253% West Hartford, CT 06117 Kenneth Daly 1359 Shadowoak Drive 1,104 0.00397% Malvern, PA 19355 Thomas L. Holton 12861 Marsh Landing 8,136 0.02924% Palm Beach Gardens, FL 33418 Richard Isserman 165 W. 66th Street 4,428 0.01591% Apartment 21B New York, New York 10023 Patrick W. Kenny 33 Fulton Place 642 0.00231% West Hartford, CT 06107 Frank Kilkenny 42 Highland Circle 5,884 0.02115% Bronxville, NY 10708 S. Thomas Moser KPMG Peat Marwick 3,079 0.01107% 2800 Two First Union Center Charlotte, NC 28282 James T. & Dorothy Powers 9870 Huntcliff Trace 4,158 0.01494% Atlanta, GA 30350 Michael G. Regan 14 Brenner Place 10,984 0.03947% Demarest, NJ 07627 Edward F. Smith 1031 Lawrence Avenue 2,194 0.00788% Westfield, NJ 07090 Timothy P. Tracy Pension Trust 111 Lampwick Lane 1,552 0.00558% Fairfield, CT 06430 Robert E. & Barbara T. Buce 16846 Glynn Drive 1,282 0.00461% Pacific Palisades, CA 90272 Donald P. Kern 24 Brynwood Lane 1,821 0.00654% Greenwich, CT 06831 F. David Fowler 9450 New Bridge Drive 1,821 0.00654% Potomac, MD 20854 L. Glenn Perry 123 Harbor Drive, No. 103 5,392 0.01938% Stamford, CT 06902 Herbert E. Morse 18 Porters Cove Road 897 0.00322% Hingham, MA 02043 Eileen M. Walsh 3045 Grand Concourse 449 0.00161% Apartment F-4 Bronx, NY 10468 Thomas J. Yoho 12 Indian Rock Lane 1,572 0.00565% Greenwich, CT 06830 Vincent J. Cannella Living Trust 14657 Amberleigh Hill Court 4,635 0.01666% St. Louis, MO 63017 Dorothy L. Shanahan 123 Rotary Drive 3,711 0.01334% Summit, NJ 07901 Joan L. Kern Brynwood Lane 2,388 0.00858% Greenwich, CT 06831 Carol T. Fish 38 Cedar Knoll Road 5,436 0.01954% Cockeysville, MD 21030 Archibald T. Fort 2418 Stanwick Road 1,020 0.00367% Phoenix, MD 21131 Ralph W. Clermont 2311 Clifton Forge Drive 1,324 0.00476% St. Louis, MO 63131 Barbara G. Collins 2141 Ponus Ridge 1,324 0.00476% New Canaan, CT 06840 Mary Jane & Jay Patchen 9406 Mary Tucker Cove 1,324 0.00476% Memphis, TN 38133 Thomas J. Coffey 5 Brampton Road 662 0.00238% Malvern, PA 19355 Marie A. Farnesi 6 Woodford Lane 662 0.00238% Malvern, PA 19355 M. Candace Guinan 4 Denford Drive 773 0.00278% Newtown Square, PA 19073 Bernard J. Milano 134 MacIntyre Lane 662 0.00238% Allendale, NJ 07401 Veronica A. Conway 15 Berndale Drive 3,571 0.01283% Westport, CT 06880 Mildred M. Cozine 5 Manchester Court 1,986 0.00714% Morristown, NJ 07960 John & Doris Ficca 415 Lancaster Avenue, Unit 8 2,295 0.00825% Haverford, PA 19041 William A. Hasler 102 Golden Gate Avenue 923 0.00332% Belvedere, CA 94920 Thomas J. Murphy 208 N. Edmonds Avenue 923 0.00332% Havertown, PA 19083 Anthony J. Del Tufo 29 Fox Glen Drive 462 0.00166% Stamford, CT 06903 Bruce R. Lesser 640 Six Sentry Parkway 462 0.00166% Blue Bell, PA 19422 Doris E. Ficca 415 Lancaster Avenue, Unit 8 776 0.00279% Haverford, PA 19041 Nadine L. Barna 11 Hummingbird Lane 4,042 0.01453% Darien, CT 06820 Patricia A. Collins 684 Fernfield Circle 388 0.00139% Wayne, PA 19087 Maxine S. Holton 12861 Marsh Landing 6,418 0.02306% Palm Beach Gardens, FL 33418 John A. Flack 89 Perkins Road 642 0.00231% Greenwich, CT 06830 ___________________________________________________________ Berger/Lewiston Associates 21790 Coolidge Highway 1,076,594 3.86902% Limited Partnership Oak Park, MI 48237 Stephenson-Madison Heights Company 21790 Coolidge Highway 104,541 0.37569% Limited Partnership Oak Park, MI 48237 Kingsley-Moravian Company 21790 Coolidge Highway 376,288 1.35229% Limited Partnership Oak Park, MI 48237 Woodland Garden Apartments 21790 Coolidge Highway 319,860 1.14950% Limited Partnership Oak Park, MI 48237 B&L Realty Investments 21790 Coolidge Highway 33,560 0.12061% Limited Partnership Oak Park, MI 48237 Southpointe Square Apartments 21790 Coolidge Highway 155,623 0.55927% Limited Partnership Oak Park, MI 48237 Greentrees Apartments 21790 Coolidge Highway 275,905 0.99154% Limited Partnership Oak Park, MI 48237 Big Beaver-Rochester Properties 21790 Coolidge Highway 528,348 1.89875% Limited Partnership Oak Park, MI 48237 Century Realty Investment Company 21790 Coolidge Highway 99,195 0.35648% Limited Partnership Oak Park, MI 48237 ___________________________________________________________ John M. DiProsa 32 Sydenham Road 6,150 0.02210% Rochester, NY 14609 Claude S. Fedele 12 Beckenham Lane 23,765 0.08541% Fairport, NY 14450 Gabriel W. Gruttadaro 6 Powder Mill Drive 11,150 0.04007% Pittsford, NY 14534 Anthony M. Julian 204 Angelus Drive 11,150 0.04007% Rochester, NY 14622 Joanne M. Lobozzo 756 Rock Beach Road 165,188 0.59365% Rochester, NY 14617 Geraldine B. Lynch 92 Eagle Ridge Circle 3,922 0.01409% Rochester, NY 14617 Michael E. McCusker and Elaine R. 7974 Oak Brook Circle 31,687 0.11388% McCusker, Trustees under the Michael E. Pittsford, NY 14534 and Elaine R. McCusker Living Trust dated August 30, 1994 Jack P. Schifano 916 Highland Trails Avenue 3,961 0.01423% Henderson, NV 89015 ___________________________________________________________ Donald H. Schefmeyer 63262 Orange Road 101,782 0.36578% South Bend, IN 46614 Stephen W. Hall P.O. Box 370068 92,889 0.33382% Las Vegas, NV 89137-0068 ___________________________________________________________ Tower Capital, LLC 11501 Huff Court 279,782 1.00547% N. Bethesda, MD 20895 Beverly B. Bernstein P.O. Box 25370 72,304 0.25984% Washington, DC 20007 Park Shirlington Apartments c/o 11501 Huff Court 72,304 0.25984% Limited Partnership N. Bethesda, MD 20895 Leona Libby Feldman 575 Greensward Lane 4,388 0.01577% Delray Beach, FL 33445 Braddock Lee Apartments c/o 11501 Huff Court 47,282 0.16992% Limited Partnership N. Bethesda, MD 20895 Sarah Selsky 1801 East Jefferson Street 42,779 0.15374% Apartment 608 Rockville, MD 20852 Lauren Libby Pearce 537 Hilarie Road 21,938 0.07884% St. Davids, PA 19807 Amy S. Rubenstein 2814 Dumbarton Street, NW 11,627 0.04178% Washington, DC 20007 Beth Dana Rubenstein 451 29th Street 13,689 0.04919% San Francisco, CA 94131 Barton S. Rubenstein 4003 Underwood Street 13,689 0.04919% Chevy Chase, MD 20815 Lee G. Rubenstein 4915 Linnean Avenue, NW 2,808 0.01009% Washington, DC 20008 Trust U/W Daryl R. Rubenstein c/o David Osnos 2,062 0.00741% F/B/O Amy Sara Rubenstein 1050 Connecticut Avenue, NW Washington, DC 20036 Steven M. Reich 1976 Trust c/o Stephen A. Bodzin Trustee 59,313 0.21316% 1156 15th Street, NW Suite 329 Washington, DC 20005 WHC Associates, LLC 7201 Wisconsin Avenue 83,364 0.29959% Suite 650 Bethesda, MD 20814 ___________________________________________________________ Merrill Bank 200 Bradley Place 19,783 0.07110% Apartment 305 Palm Beach, FL 33480 Ariel Golden Behr 151 W. 88th Street 1,469 0.00528% New York, NY 10027 Doris Berliner 7 Slade Avenue 2,637 0.00948% Apartment 108 Baltimore, MD 21208 Phillip Chmar 7 Slade Avenue 3,830 0.01376% Apartment 713 Baltimore, MD 21208 Louis K. Coleman 2508 Guilford Avenue 7,152 0.02570% Baltimore, MD 21218 Mark Dopkin 6303 Lincoln Avenue 371 0.00133% Baltimore, MD 21209 Paul Goldberg 7111 Park Heights Avenue, 509 0.00183% Apartment 712 Baltimore, MD 21215 Joseph Goldman 5250 Linnean Avenue, NW 3,661 0.01316% Washington, D.C. 20015 Dr. Milton L. Goldman 3240 Patterson Street, N.W. 8,363 0.03005% Washington, D.C. 20015-1661 Estate of Emmanuel Greenwald c/o David Askin, Personal 1,243 0.00447% Representative American Express Tax & Business Services 200 St. Paul Place Suite 2300 Baltimore, MD 21202 Samuel and Esther Hanik 5800 Nicholson Lane 16,582 0.05959% Apartment 1-903 Rockville, MD 20852 Muriel Hettleman 1 Slade Avenue 6,906 0.02482% Apartment 203 Baltimore, MD 21208 Charles Heyman 3409 Old Post Drive 1,406 0.00505% Baltimore, MD 21208 Samuel Hillman Marital Trust NationsBank 9,758 0.03507% c/o Anne Weisner P.O. Box 830151 Dallas, TX 75283 Samuel Hillman Residuary Trust NationsBank 9,758 0.03507% c/o Anne Weisner P.O. Box 830151 Dallas, TX 75283 Marvin A. Jolson 7812 Ridge Terrace 1,018 0.00366% Baltimore, MD 21208 Isadore Kaplan Revocable Trust 7111 Park Heights Avenue 9,324 0.03351% Apartment 110 Baltimore, MD 21215 Hilda Kaplan, Trustee u/r/d/t/d 10/18/99 7111 Park Heights Avenue 6,500 0.02336% Apartment 110 Baltimore, MD 21215 Milton Klein 1 Slade Avenue 7,305 0.02625% Apartment 706 Baltimore, MD 21208 Dr. Lee Kress 417 Barby Lane 7,152 0.02570% Cherry Hill, NJ 08003 Richard & Cheryl Kress 15 W. Aylesbery Road 7,152 0.02570% Suite 700 Timonium, MD 21093 William Kress Marital Trust c/o Richard Kress Trustee 60,305 0.21672% 15 W. Aylesbery Road Suite 700 Timonium, MD 21093 Elmer W. Leibensperger 1900 Dumont Court 859 0.00309% Timonium, MD 21093 Merrill & Natalie S. Levy 5906 Eastcliff Drive 2,637 0.00948% Baltimore, MD 21209 Gertrude Myerberg 2227 Ibis Isle Road East 14,611 0.05251% Palm Beach, FL 33480 Bertha Pollack 7420 Westlake Terrace, #1209 2,486 0.00893% Bethesda, MD 20817 Lawrence E. Putnam Family Trust 3241 Worthington Street, NW 5,424 0.01949% Washington, DC 20015 Stephen F. Rosenberg 3 Greenwood Place 367 0.00132% Suite 307 Baltimore, MD 21208 Carol Golden P.O. Box 9691 2,486 0.00893% Jerusalem, Israel 91090 Z. Valeere Sass, Trustee 758 Regency Lakes Drive, E501 2,637 0.00948% Boca Raton, FL 33433 Isidore Schnaper 11 Slade Avenue 10,421 0.03745% Apartment 304 Baltimore, MD 21208 M. Gerald Sellman Revocable Trust 2 Yearling Way 18,347 0.06593% Agreement dated November 30, 1998 Lutherville, MD 21093 Dr. Albert Shapiro 100 Sunrise Avenue 13,196 0.04742% Palm Beach, FL 33480 Earle K. Shawe Shawe & Rosenthal 85,085 0.30577% 20 S. Charles Street Baltimore, MD 21201 Rhoda E. Silverman, Trustee R. Silverman Rev. Trust 1,469 0.00528% 3211 Worthington Street, NW Washington, DC 20015 Herbert J. Siegel 2923 Caves Road 417,947 1.50200% Owings Mills, MD 21117 Siegel Family, LLLP c/o Herbert J. Siegel 31,995 0.11498% 20 Pleasant Ridge Drive, Suite A Owings Mills, MD 21117 Dr. Edgar Sweren 15 Caveswood Lane 1,018 0.00366% Owings Mills, MD 21117 Dr. Myra Jody Whitehouse 1 Staffordshire Road 2,085 0.00749% Cherry Hill, NJ 08003 Ms. Terry Whitehouse 3706 Taylor Street 2,085 0.00749% Chevy Chase, MD 20815 ___________________________________________________________ Harold M. Davis 2180 Twinbrook Road 229,754 0.82568% Berwyn, PA 19312 Nicholas V. Martell 1551 Harmoneyville Road 229,754 0.82568% Pottstown, PA 19465 R.C.E. Developers, Inc. P.O. Box 2002 4,642 0.01668% Ambler, PA 19002 ___________________________________________________________ Frances Berkowitz 29 East 64th Street 1,358 0.00488% Apartment 7D New York, New York 10021 Richard A. Eisner 1107 Fifth Avenue 10,180 0.03658% New York, New York 10128 Norman Fieber 62 Fox Ridge Road 10,180 0.03658% Stamford, CT 06903 Sylvia Fieber 62 Fox Ridge Road 10,180 0.03658% Stamford, CT 06903 Michael Glick 1035 Fifth Avenue 18,664 0.06707% New York, New York 10028 Ronnie Glick 1035 Fifth Avenue 1,696 0.00610% Apartment 14B New York, New York 10028 Shelley Mendell 1040 Park Avenue 1,500 0.00539% New York, New York 10028 Claire Morse 840 Lee Street 5,090 0.01829% Brookline, MA 02445-5915 Enid Morse 840 Park Avenue 5,090 0.01829% #7/8A New York, New York 10021 Lester Morse, Jr. 840 Park Avenue 19,088 0.06860% #7/8A New York, New York 10021 Richard Morse 240 Lee Street 6,999 0.02515% Brookline, MA 02445 ___________________________________________________________ Leslie G. Berman 1100 Reisterstown Road #202 39,094 0.14049% Baltimore, MD 21208 ___________________________________________________________ Carriage Hill Apartments Limited c/o Biltmore Properties Corporation 97,594 0.35073% Partnership 2025 West Long Lake Road Suite 104 Troy, Michigan 48098 Carriage Park Development c/o Biltmore Properties Corporation 127,976 0.45991% 2025 West Long Lake Road Suite 104 Troy, Michigan 48098 Cherry Hill Village Limited Partnership c/o Biltmore Properties Corporation 114,621 0.41192% 2025 West Long Lake Road Suite 104 Troy, Michigan 48098 ___________________________________________________________ William S. Beinecke 99 Park Avenue 1,946 0.00699% Suite 2200 New York, New York 10016 Robert K. Kraft c/o Chestnut Hill Management Corp. 1,946 0.00699% One Boston Place Boston, MA 02108 Robert J. Sharp 121 Middlebrook Farm Road 1,946 0.00699% Wilton, CT 06897 Estate of Ross D. Siragusa c/o Melvyn H. Schneider 11,672 0.04195% Altschuler, Melvoin & Glass, LLP 2029 Century Park East Suite 3100 ___________________________________________ Los Angeles, CA 90007 Patricia D. Moore Trust No. 413 51267 Windsor Manor Court 4,447 0.01598% South Bend, IN 46530 ___________________________________________________________ TOTAL UNITS/INTERESTS 27,826,037.899
EX-21 8 EXHIBIT 21 SUBSIDIARIES OF HOME PROPERTIES OF NEW YORK, INC. As of December 31, 1998 1. Home Properties of New York, L.P., a New York limited partnership. 2. Through Home Properties of New York, L.P. (the "Operating Partnership"), Home Properties of New York, Inc. has interests in the following entities: - The Operating Partnership owns 990 shares of non-voting common stock of Home Properties Management, Inc., a Maryland corporation. Officers and directors of Home Properties own 52 shares of voting common stock of Home Properties Management, Inc. Such shares represent all of the outstanding common stock of Home Properties Management, Inc. - The Operating Partnership owns 891 shares of non-voting common stock of Conifer Realty Corporation, a Maryland corporation. Officers and directors of Home Properties own 48 shares of voting stock of Conifer Realty Corporation. Such shares represent all of the outstanding common stock of Conifer Realty Corporation. - The Operating Partnership is the immediate parent of 10 partnerships formed in the State of New York and 1 in the Commonwealth of Pennsylvania that engage in the business of owning and operating multifamily residential property in the United States. - The Operating Partnership is the sole member of 3 Michigan, 8 Maryland and 8 New York limited liability companies that engage in the business of owning and operating multifamily residential property in the United States. 3. Home Properties Trust, a Maryland real estate investment trust. EX-23 9 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements on Forms S-3 (Nos. 33-96004, 333-37229, 333-46243, 333-2672, 333-2674, 333-58799, 333-67733, 333-64069 and 333-52601) and on Forms S-8 (Nos. 333-05705, 333- 12551, 333-58801 and 333-60731) of our report dated January 30, 1999 of our audits of the consolidated financial statements of Home Properties of New York, Inc. as of December 31, 1998 and 1997 and for the three years ended December 31, 1998, which report is included in the Annual Report on Form 10-K. We also consent to the reference to our firm under the caption "Experts." /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Rochester, New York March 19, 1999 EX-27 10
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HOME PROPERTIES OF NEW YORK, INC.'S FINANCIAL STATEMENTS CONTAINED IN ITS DECEMBER 31, 1998 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATMEENTS. 1,000 U.S. DOLLARS 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 1 33,446 0 6,269 0 0 0 940,788 65,627 1,012,235 0 418,942 0 0 177 361,779 1,012,235 0 149,243 0 93,012 0 0 23,980 32,251 0 19,648 0 (960) 0 18,688 1.34 1.33
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