-----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, VZh4J4YZ2wAf1WAs3SVlca7CsYcttW0G8BVLhU4DJhFVw+zAq/BzHNJ4ovdy0ori 29oGE/M5ee2xA6wUYjAXgw== 0000923118-99-000006.txt : 19990518 0000923118-99-000006.hdr.sgml : 19990518 ACCESSION NUMBER: 0000923118-99-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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-Q SEC ACT: SEC FILE NUMBER: 001-13136 FILM NUMBER: 99625883 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-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 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 of (IRS Employer Identification incorporation or organization) Number) 850 CLINTON SQUARE, ROCHESTER, NEW YORK 14604 --------------------------------------------- (Address of principal executive offices) (Zip Code) (716) 546-4900 -------------- (Registrant's telephone number, including area code) N/A --- (Former name, former address and former year, if changed since last report) Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ------ ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class of Common Stock Outstanding at April 30, 1999 --------------------- ----------------------------- $.01 par value 18,119,976 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED BALANCE SHEETS MARCH 31, 1999 AND DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1999 1998 ---- ---- (Unaudited) (Note 1) ASSETS Real estate: Land $120,867 $119,221 Buildings, improvements and equipment 837,339 821,567 -------- -------- 958,206 940,788 Less: accumulated depreciation ( 73,133) ( 65,627) --------- -------- Real estate, net 885,073 875,161 Cash and cash equivalents 27,341 33,446 Cash in escrows 17,006 17,431 Accounts receivable 5,583 6,269 Prepaid expenses 8,325 6,155 Deposits 688 175 Investments in and advances to affiliates 52,832 54,229 Deferred financing costs 2,538 2,749 Other assets 15,971 16,620 ---------- ---------- Total assets $1,015,357 $1,012,235 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes payable $419,185 $418,942 Line of credit - - Accounts payable 7,836 8,300 Accrued interest payable 2,307 1,962 Accrued expenses and other liabilities 3,166 4,962 Security deposits 11,452 11,404 ---------- ---------- Total liabilities 443,946 445,570 ---------- ---------- Minority interest 203,240 204,709 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; 18,032,655 and 17,635,000 shares issued and outstanding at March 31, 1999 and December 31, 1998, respectively 182 177 Excess stock, $.01 par value; 10,000,000 shares authorized; no shares issued - - Additional paid-in capital 413,524 401,814 Distributions in excess of accumulated earnings ( 29,492) ( 26,622) Unrealized loss on available- for-sale securities ( 2,360) ( 1,607) Treasury stock, at cost, 158,200 and 79,600 shares at March 31, 1999 and December 31, 1998, respectively ( 3,726) ( 1,863) Officer and director notes for stock purchases ( 9,957) ( 9,943) ---------- ---------- Total stockholders' equity 368,171 361,956 ---------- ---------- Total liabilities and stockholders' equity $1,015,357 $1,012,235 ========== ========== The accompanying notes are an integral part of these consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1999 1998 ---- ---- Revenues: Rental income $43,943 $25,094 Property other income 1,286 502 Interest and dividend income 1,895 914 Other income 642 263 ------- ------- Total revenues 47,766 26,773 Expenses: Operating and maintenance 20,999 12,140 General and administrative 2,156 1,209 Interest 7,716 4,398 Depreciation and amortization 7,541 4,079 ------- ------- Total expenses 38,412 21,826 ------- ------- Income before minority interest 9,354 4,947 Minority interest 3,343 2,172 ------- ------- Net income $6,011 $ 2,775 ======= ======= Per share data: Net income - Basic $.34 $.29 ======= ======= - Diluted $.33 $.28 ======= ======= Weighted average number of shares outstanding - Basic 17,871,753 9,702,975 ========== ========= - Diluted 17,960,058 9,900,451 ========== =========
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 THREE MONTHS ENDED MARCH 31, 1999 AND 1998 (UNAUDITED, IN THOUSANDS) 1999 1998 ---- ---- Cash flows from operating activities: Net income $6,011 $2,775 ------ ------ Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of HP Management and Conifer Realty ( 178) 208 Income allocated to minority interest 3,343 2,172 Depreciation and amortization 7,753 4,239 Unrealized loss on available-for- sale securities 1,169 - Loss on disposition of property 16 - Changes in assets and liabilities: Other assets ( 2,446) ( 2,260) Accounts payable and accrued liabilities ( 1,867) ( 762) ------- ------- Total adjustments 7,790 3,597 ------- ------- Net cash provided by operating activities 13,801 6,372 ------- ------- Cash flows used in investing activities: Purchase of properties, net of mortgage notes assumed and UPREIT Units issued ( 8,055) ( 35,644) Additions to properties ( 8,218) ( 6,808) Deposits on property ( 513) ( 2,051) Advances to affiliates ( 5,975) ( 6,068) Payments on advances to affiliates 7,550 5,366 Other 59 - ------- ------- Net cash used in investing activities (15,152) ( 45,205) ------- ------- Cash flows from financing activities: Proceeds from sale of common stock 11,031 24,650 Purchase of treasury stock ( 1,863) - Proceeds from mortgage notes payable - 8,000 Payments of mortgage notes payable ( 982) ( 720) Proceeds from line of credit - 33,000 Payments on line of credit - ( 19,500) Additions to deferred loan costs ( 2) ( 21) Additions to and payments received from cash escrows 425 ( 300) Dividends and distributions paid (13,363) ( 7,264) ------- ------- Net cash provided by (used in) financing activities ( 4,754) 37,845 ------- ------- Net decrease in cash ( 6,105) ( 988) Cash and cash equivalents: Beginning of period 33,446 3,809 ------- ------- End of period $27,341 $ 2,821 ======= ======= Supplemental disclosure of cash flow information: Cash paid for interest $ 7,422 $ 4,157 ======== ======= The accompanying notes are an integral part of these consolidated financial statements. HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1. Unaudited Interim Financial Statements -------------------------------------- The interim consolidated financial statements of Home Properties of New York, Inc. (the "Company") are prepared pursuant to the requirements for reporting on Form 10-Q. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with generally accepted accounting principles are omitted. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the consolidated financial statements for the interim periods have been included. The current period's results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim consolidated financial statements and notes thereto should be read in conjunction with the financial statements and notes thereto included in the Company's Form 10-K, as filed with the Securities and Exchange Commission on March 17, 1999. 2. Organization and Basis of Presentation -------------------------------------- Organization Home Properties of New York, Inc. (the "Company") was formed in November 1993, as a Maryland corporation and is engaged primarily in the ownership, management, acquisition and development of residential apartment communities in the Northeastern, Mid-Atlantic and Midwestern United States. As of March 31, 1999, the Company operated 261 apartment communities with 34,493 apartments. Of this total, the Company owned 98 communities, consisting of 23,944 apartments, managed as general partner 7,738 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. Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its 64.4% (55.0% at March 31, 1998) general partnership interest in the Operating Partnership. The remaining 35.6% (45.0% at March 31, 1998) is reflected as Minority Interest in these consolidated financial statements. For financing purposes, the Company has formed a limited liability company (the "LLC") and a partnership (the "Financing Partnership") which beneficially own certain apartment communities encumbered by mortgage indebtedness. The LLC is wholly owned by the Operating Partnership. The Financing Partnership is owned 99.9% by the Operating Partnership and .1% by Home Properties Trust, a wholly owned qualified REIT subsidiary (QRS) of Home Properties of New York, Inc. All significant intercompany balances and transactions have been eliminated in these consolidated financial statements. 3. Earnings Per Common Share ------------------------- Basic earnings per share ("EPS") is computed as net income 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 CONT'D (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 3. Earnings Per Common Share Cont'd -------------------------------- Net income is 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 three months ended March 31, 1999 and 1998 is as follows: 1999 1998 ---- ---- Basic weighted average number of shares outstanding 17,871,753 9,702,975 Effect of dilutive stock options 88,305 197,476 ---------- --------- Diluted weighted average number of shares outstanding 17,960,058 9,900,451 ========== ========= 4. Comprehensive Income -------------------- Total comprehensive income for the three months ended March 31, 1999 and 1998 is as follows: 1999 1998 ---- ---- Net income $6,011 $2,775 Comprehensive income: Unrealized loss on available- for-sale securities before minority interest (1,169) - ------ ------ Net comprehensive income $4,842 $2,775 ====== ====== 5. Other Income ------------ Other income for the three months ended March 31, 1999 and 1998 is summarized as follows: 1999 1998 ---- ---- Management fees $374 $271 Development fees 62 171 Other 28 29 Management Companies 178 ( 208) ---- ---- $642 $263 ==== ==== Certain property management, leasing and development activities are performed by Home Properties Management, Inc. and Conifer Realty Corporation (the "Management Companies"). The Operating Partnership owns non-voting common stock in the Management Companies which entitles the Operating Partnership to receive 95% (99% in 1998) of the economic interest in the Management Companies. The Company's share of income from the Management Companies for the three months ended March 31, 1999 and 1998 is summarized as follows: 1999 1998 ---- ---- Management fees $922 $793 Development fees 1,303 954 Miscellaneous 35 26 General and administrative (1,754) (1,789) Interest expense ( 202) ( 130) Other expenses ( 116) ( 64) ----- ----- Net income $188 ($ 210) ===== ===== Company's share $178 ($ 208) HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 6. 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. The Company assesses and measures segment operating results based on FFO. The revenues, profit (loss), and assets for each of the reportable segments are summarized as follows for the three months ended March 31, 1999 and 1998. 1999 1998 ---- ---- Revenues - -------- Apartments owned $45,229 $25,596 Management & development fees 2,724 2,244 Reconciling items ( 187) ( 1,067) ------ ------ Total Revenue $47,766 $26,773 Profit(loss) - ----------- Funds from operations: Apartments owned $24,230 $13,456 Management & development fees 642 263 Reconciling items 1,895 914 ------ ------ Segment contribution to FFO 26,767 14,633 General & administrative expenses ( 2,156) ( 1,209) Interest expense ( 7,716) ( 4,398) Unconsolidated depreciation 84 196 Non-real estate depreciation/amort. ( 64) ( 41) ------ ------ Funds from Operations 16,915 9,181 Depreciation - apartments owned ( 7,477) ( 4,038) Unconsolidated depreciation ( 84) ( 196) Minority interest in earnings ( 3,343) ( 2,172) ------ ------ Net Income $ 6,011 $ 2,775 ====== ====== Assets - ------ Apartments owned $885,073 $548,169 Apartments managed 566 398 Reconciling items 129,718 69,523 ------- ------- Total Assets $1,015,357 $618,090 ========= ======== HOME PROPERTIES OF NEW YORK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 7. Pro Forma Financial Information ------------------------------- Pro Forma Combined Statement of Operations For the Three Months Ended March 31, 1999 ------------------------------------------ Home Properties Pro Forma Company Historical Adjustment Pro Forma ---------- ---------- --------- Revenue: Rental income $43,943 $ 260 $44,203 Property other income 1,286 7 1,293 Interest and dividend income 1,895 1,895 Other income 642 642 ------ ----- ------- Total Revenues 47,766 267 48,033 Expenses: Operating and Maintenance 20,999 85 21,084 General and administrative 2,156 8 2,164 Interest 7,716 80 7,796 Depreciation and amortization 7,541 28 7,569 ------ ----- ------- Total Expenses 38,412 201 38,613 ------ ----- ------- Income before minority interest $ 9,354 $ 66 9,420 ====== ===== Minority Interest 3,372 ----- Net income $ 6,048 ====== Net income per common share - Basic $0.34 ====== - Diluted $0.34 ====== Weighted average number of shares outstanding - Basic 17,871,753 ========== - Diluted 17,960,058 ========== The pro forma information was prepared as if the transactions related to the acquisition of the Manor Apartments (on February 18, 1999, 198 units for $7,200) and Ridgeway Court Apartments (on February 22, 1999, 66 units for $2,150) had occurred on January 1, 1999. Adjustments to the pro forma combined statements of operations for the three months ended March 31, 1999, consist principally of providing net property operating activity and recording interest, depreciation and amortization from January 1, 1999 to the acquisition date. HOME PROPERTIES OF NEW YORK, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion is based primarily on the consolidated financial statements of Home Properties of New York, Inc. as of March 31, 1999 and 1998 and for the three month periods then ended. This information should be read in conjunction with the accompanying consolidated financial statements and notes thereto. Forward-Looking Statements - -------------------------- This discussion contains forward-looking statements. Although the Company believes expectations reflected in such forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be achieved. Factors that may cause actual results to differ include general economic and local real estate conditions, other conditions that might affect operating expenses, the timely completion of repositioning and current development activities within anticipated budgets, the actual pace of future acquisitions and developments and continued access to capital to fund growth. Liquidity and Capital Resources - ------------------------------- The Company's principal liquidity demands are expected to be distributions to stockholders, capital improvements and repairs and maintenance for the properties, acquisition of additional properties, property development and scheduled debt maturities. The Company intends to meet its short-term liquidity requirements through net cash flows provided by operating activities and its unsecured line of credit. The Company considers its ability to generate cash to 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, to enable the Company to qualify as a REIT. As of March 31, 1999 the Company had an unsecured line of credit from Chase Manhattan Bank of $50 million and a $50 million supplemental unsecured revolving credit facility with M&T Bank, both with no outstanding balances. Borrowings under the line of credit bear interest at 1.25% over the one-month LIBOR rate. Accordingly, increases in interest rates will increase the Company's interest expense and as a result will effect the Company's results of operations and financial condition. The unsecured credit facilities expire on September 4, 1999, with a one year extension at the Company's option. To the extent that the Company does not satisfy its long-term liquidity requirements through net cash flows provided by operating activities and its credit facilities, it intends to satisfy such requirements through the issuance of UPREIT units, proceeds from the Dividend Reinvestment Plan ("DRIP"), long term secured or unsecured indebtedness, or the issuance of additional equity securities. As of March 31, 1999, the Company owned twenty-four properties with 3,907 apartment units, which were unencumbered by debt. In May, 1998, the Company's Form S-3 Registration Statement was declared effective relating to the issuance of up to $414 million of shares of common stock or other securities. During 1998, $125.6 million of common shares were issued from this and a previous shelf registration in various public and private offerings. There has been no activity during 1999 relative to this shelf. The available balance on the shelf at March 31, 1999 is $333.7 million. HOME PROPERTIES OF NEW YORK, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION CONT'D 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 million using UPREIT Units valued at approximately $71 million, with the balance paid in cash or assumed debt.. During 1998, over $72 million of common stock was issued under the Company's DRIP, approximately twice the level of the previous year. An additional $12 million has been raised through the DRIP program during the first four months of 1999. The Company's Board of Directors approved a stock repurchase program under which the Company may repurchase up to one million shares of its outstanding common stock. The Board's action did not establish a target price or a specific timetable for repurchase. During 1998, the Company repurchased 59,600 shares at a cost of $1.4 million. An additional 78,600 shares were repurchased during the first quarter of 1999 at a cost of $1.9 million. As of March 31, 1999, the weighted average rate of interest on mortgage debt is 7.2% and the weighted average maturity is approximately 10 years. All of the debt is fixed rate. This limits the exposure to changes in interest rates, minimizing the effect on results of operations and financial condition. The following table sets forth information regarding the mortgage indebtedness at March 31, 1999. Principal Interest Balance as of Rate as of Maturity March 31,1999 Communities Location March 31, 1999 Date (000's) - ----------- -------- -------------- -------- ------------- Fixed Rate - ---------- Perinton and Riverton Rochester, NY 6.75% (1) 09/01/00 11,842 Springwood Philadelphia, PA 8.50% 11/01/01 1,472 Valley View Philadelphia, PA 8.50% 11/01/01 3,338 Royal Gardens Piscataway, NJ 7.66% 08/01/02 11,570 Brook Hill Rochester, NY 7.75% 11/01/02 4,839 Garden Village Buffalo, NY 7.75% 11/01/02 4,554 1600 Elmwood Rochester, NY 7.75% 11/01/02 5,313 Village Green Syracuse, NY 7.75% 11/01/02 4,744 Racquet Club Philadelphia, PA 7.63% 11/01/03 12,094 Curren Terrace Philadelphia, PA 8.36% 11/01/03 9,561 Rolling Park Baltimore, MD 7.88% 11/01/03 2,851 Sherry Lake Philadelphia, PA 7.88% 01/01/04 6,582 Glen Manor Philadelphia, PA 8.13% 05/01/04 3,688 Colonies Chicago, IL 8.88% 05/01/04 12,480 Springcreek/ Meadows Rochester, NY 7.63% (2) 08/01/04 3,147 Idylwood Buffalo, NY 8.63% 11/01/05 9,283 Carriage Hill Dearborn, MI 7.36% 01/01/06 3,896 Carriage Park Dearborn, MI 7.48% 01/01/06 5,612 Cherry Hill Dearborn, MI 7.99% 01/01/06 4,515 Mid Island Estates Bay Shore, NY 7.50% (3) 05/01/06 6,675 Newcastle Rochester, NY 6.00% (4) 07/31/06 6,150 Country Village Baltimore, MD 8.39% 08/01/06 6,655 Raintree Island Buffalo, NY 8.50% 11/01/06 6,374 Woodgate Place Rochester, NY 7.87% 01/01/07 3,432 Strawberry Hill Baltimore, MD 8.26% 05/01/07 2,068 Valley Park South Bethlehem, PA 6.93% 01/01/08 10,052 Hamlet Court Rochester, NY 7.11% 02/01/08 1,785 Candlewood South Bend, ID 7.02% 03/01/08 7,878 Multi-property Detroit, MI 7.51% 06/01/08 49,108 Conifer Village Syracuse, NY 7.20% 06/01/10 2,765 Ridgeway Court Philadelphia, PA 8.38% 11/01/10 1,220 Multi-property Various 6.16% 01/01/11 58,881 Morningside and Carriage Hill Baltimore, MD 6.99% 05/01/13 20,339 Multi-property Various 6.48% 08/31/13 100,000 Pines of Perinton Rochester, NY 8.50% 05/01/18 8,829 Village Green (Fairways) Syracuse, NY 8.23% 10/01/19 4,416 Raintree Island Buffalo, NY 8.50% 05/01/20 1,177 ------- 419,185 Principal Interest Balance as of Rate as of Maturity March 31,1999 Communities Location March 31, 1999 Date (000's) - ----------- -------- -------------- -------- ------------- Line of Credit - -------------- Unsecured N/A 30 day LIBOR+1.25% On demand 0 $419,185 ======== (1) Fixed through August 4, 1999, then prime +.5% until maturity. (2) Fixed through July 31, 2000, then prime +.5% until maturity. (3) Fixed through March 31, 2001; then 7.75% until maturity. (4) Fixed through July 31, 1999, then variable. Results of Operations - --------------------- Comparison of three months ended March 31, 1999 to the same period in 1998 The Company had 62 apartment communities with 14,048 units and one small ancillary convenience shopping area which were owned during both of the three month periods being presented (the "Core Properties"). The Company has acquired an additional 36 apartment communities with 9,896 units during 1998 and 1999 (the "Acquired Communities"). The inclusion of these Acquired Communities generally accounted for the significant changes in operating results for three months ended March 31, 1999. A summary of the Core Property net operating income is as follows: 1999 1998 %Change ---- ---- ------- Rent $26,002,000 $24,439,000 6.4% Property other income 750,000 640,000 17.2% ---------- ---------- ------- Total income 26,752,000 25,079,000 6.7% Operating and Maintenance ( 12,879,000) ( 11,944,000) (7.8%) ---------- ---------- ---- Net operating income $13,873,000 $13,135,000 5.6% =========== =========== ==== Of the $18,849,000 increase in rental income, $17,286,000 is attributable to the Acquired Communities. The balance of this increase, which is from the Core Properties, was the result of an increase of 4.6% in weighted average rental rates, plus an increase in occupancy from 93.4% to 95.0%. Of the $784,000 increase in property other income, $533,000 is attributable to the Acquired Communities, with $110,000 representing a 17.2% increase for the Core Properties. This increase reflects increased laundry and furniture/corporate rental activity. The balance, a $141,000 increase, is from the Company's share of income/loss from various general partnership interests. Interest and dividend income increased $981,000, primarily attributable to an increase in construction loans and advances made to affiliated tax credit development partnerships, as well as $395,000 in dividend income from an investment in available-for-sale securities. Other income increased by $379,000 due primarily to an increased level of management and development activity. Of the $8,859,000 increase in operating and maintenance expenses, $7,924,000 is attributable to the Acquired Communities. The balance for the Core Properties represents a 7.8% increase over 1998. The major areas of increase in the Core Properties occurred in utilities, personnel and snow removal costs. All of these items were affected based on a more normal winter following the unusually mild winter weather experienced in 1998. Most of the personnel increase results from the normal 13 week pay periods in 1999 compared to only 12 in 1998. This negative variance will reverse itself during the third quarter of 1999. General and administrative expense increased in 1999 by $947,000, or 78%. General and administrative expenses as a percentage of total revenues was 4.5% for both periods presented. Funds From Operations - --------------------- Management considers funds from operations ("FFO") to be an appropriate measure of performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") revised White Paper definition of FFO is income (loss) before gains (losses) from the sale of property and extraordinary items, before minority interest in the Operating Partnership, plus real estate depreciation. Management believes that in order to facilitate a clear understanding of the combined historical operating results of the Company, FFO should be considered in conjunction with net income as presented in the consolidated financial statements included elsewhere herein. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles and is not necessarily indicative of cash available to fund cash needs. FFO should not be considered as an alternative to net income as an indication of the Company's performance or to cash flow as a measure of liquidity. The calculation of FFO for the previous six quarters are presented below:
March 31 Dec. 31 Sept. 30 June 30 March 31 Dec. 31 1999 1998 1998 1998 1998 1997 -------- ------- -------- ------- -------- ------- Net income $6,011 $5,388 $6,141 $4,384 $2,775 $2,417 Minority interest 3,343 3,408 3,726 3,297 2,172 2,451 Extraordinary item - 514 156 290 - 1,037 Non-recurring interest amortization - - 294 - - - Depreciation from real property 7,477 8,183 5,991 4,770 4,038 3,715 Depreciation from real property from unconsolidated entities 84 393 72 72 196 168 (Gain) Loss from sale of property - - - - - (872) ----- ----- ----- ----- ------ ------ FFO $16,915 $17,886 $16,380 $12,813 $9,181 $8,916 ====== ====== ====== ====== ====== ====== Weighted average common shares/units outstanding - Basic 27,810.1 27,129.4 25,603.7 21,312.3 17,303.6 15,215.0 - Diluted 27,898.4 27,245.7 25,746.9 21,500.9 17,501.1 15,417.7
All REITs may not be using the strict White Paper definition for new FFO. Accordingly, the above presentation may not be comparable to other similarly titled measures of FFO of other REITs. Impact of the Year-2000 on System Processing - -------------------------------------------- The Year 2000 ("Y2K") problem 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 5/1/99. 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 75% complete with its review and modification of regional office systems and 45% 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. 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. 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. 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, 1999 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. 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 $400,000 has been expended as of May 1, 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. Inflation - --------- Substantially all of the leases at the communities are for a term of one year or less, which enables the Company to seek increased rents upon renewal of existing leases or commencement of new leases. These short-term leases minimize the potential adverse effect of inflation on rental income, although residents may leave without penalty at the end of their lease terms and may do so if rents are increased significantly. Declaration of Dividend - ----------------------- On May 4, 1999, the Board of Directors approved a dividend of $.48 per share for the period from January 1, 1999 to March 31, 1999. This is the equivalent of an annual distribution of $1.92 per share. The dividend is payable May 27, 1999 to shareholders of record on May 18, 1999. Subsequent Events - ----------------- On April 8, 1999, the Company acquired 303 apartment units in one community located in Dearborn, Michigan. The total purchase price and closing costs of $18.2 million included the assumption of existing debt of approximately $11.7 million plus the issuance of UPREIT units valued at approximately $3.9 million, plus cash of $2.6 million. On April 29, 1999 the Company announced that it had entered into various agreements to purchase three different apartment portfolios from private sellers. The portfolios are primarily located in the suburban Washington, D.C. Baltimore and Philadelphia markets and contain a combined total of 7,968 apartment units. If all three transactions are consummated, total consideration of $370 million plus closing costs will be paid in the form of UPREIT Units, assumed debt and cash. The transactions are subject to certain approvals and conditions. There can be no assurances that these conditions will be satisfied. PART II - OTHER INFORMATION HOME PROPERTIES OF NEW YORK, INC. Item 6. Exhibits and Reports or Form 8-K - ----------------------------------------- (a)Exhibits: There are no exhibits which are filed with, or incorporated by reference, to this report. (b)Reports or Form 8-K: None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOME PROPERTIES OF NEW YORK, INC. (Registrant) Date: May 17, 1999 By: /s/ David P. Gardner ----------------------------- David P. Gardner Vice President Chief Financial Officer and Treasurer Date: May 17, 1999 By: /s/ David P. Gardner ------------------------------ David P. Gardner Vice President Chief Financial Officer and Treasurer -----END PRIVACY-ENHANCED MESSAGE-----