Home Properties Reports Second Quarter 2014 Results and Announces Quarterly Dividend

 Home Properties Reports Second Quarter 2014 Results and Announces Quarterly
                                   Dividend

-Positive Portfolio Operating Trends

-Exiting New Development Business

-Reaffirming Commitment to Existing Markets

PR Newswire

ROCHESTER, N.Y., July 31, 2014

ROCHESTER, N.Y., July 31, 2014 /PRNewswire/ --Home Properties, Inc. (NYSE:
HME) today reported financial results for the quarter and six months ended
June 30, 2014. All per share results are reported on a diluted basis.

Home Properties

Results for the Quarter

  oEarnings per share ("EPS") was $0.39 per share, as compared to $0.51 per
    share in the second quarter of 2013. The decrease in EPS is primarily
    attributable to one-time charges of approximately $3.8 million incurred in
    connection with the Company's exit from the business of developing new
    apartment communities, as described in detail below, and lower gains on
    the disposition of property in 2014.
  oFunds from Operations ("FFO") was $1.04 per share, as compared to $1.11
    per share in the prior year period. The decrease in FFO is primarily
    attributable to the $3.8 million charges related to the Company's exit
    from new development.
  oOperating Funds from Operations ("OFFO") was $1.11 per share, as compared
    to $1.11 per share in the prior year period.

Results for the Six Months

  oEPS was $1.18 per share, as compared to $1.50 per share in the first six
    months of 2013.
  oFFO was $2.04 per share, as compared to $2.17 per share in the prior year
    period.
  oOFFO was $2.10 per share, as compared to $2.17 per share in the prior year
    period.

Definitions of FFO and OFFO, and reconciliations of GAAP net income to these
measures, are provided in the financial data section of this release.

"The past four months have been very active at Home Properties, as we continue
to focus on the creation of stockholder value throughout the organization,"
said Edward J. Pettinella, President and Chief Executive Officer. "Our
property management team has been successful in their efforts to increase
rents and occupancy, and I am encouraged by improving portfolio trends in the
second quarter, with new leases executed at rents 3.0% higher than expiring
leases and renewals 3.2% higher. We are making significant strides in
occupancy as well, with a 40 basis point improvement over the first quarter of
2014. The acquisition of two apartment communities was completed and we are on
pace to meet our goal of acquiring $150 to $250 million of properties in
2014."

Pettinella continued: "After thoughtful consideration and deliberation, we
decided to exit the new development business. We believe that this change in
strategy is a positive one as it simplifies the investment story for Home
Properties, reduces risk, and allows management to spend more time on what
Home does best – own, operate, acquire, and reposition Class C/B apartment
communities.

We also completed our review of existing and potential new markets. We
identified no new markets for expansion and are reaffirming our commitment to
the markets in which we operate today."

Same-Property Operating Results ^ (1)

                             Second Quarter 2014       Second Quarter 2014
                             Compared to               Compared to

                             Second Quarter 2013       First Quarter 2014
Rental Income                2.4 % increase            1.5% increase
Total Revenues               2.4% increase             0.1% decrease
Property Level
 Operating Expenses        2.0% increase             9.7% decrease
Net Operating Income ("NOI") 2.6% increase             6.1% increase
Average Physical             95.4%, or a               95.4%, or a
 Occupancy^(2)             40 basis point decrease   40 basis point increase
Average Monthly Rental Rates 2.8% increase to $1,323   1.0% increase to $1,323
^(1) For 115 core properties containing 39,915 apartment units owned since
January 1, 2013

^(2) Average physical occupancy – defined as the number of occupied
apartment units divided by total apartment units

For the six months ended June 30, 2014, same-property total revenues increased
2.6% and property level operating expenses increased 5.5%, resulting in a 0.9%
increase in NOI, as compared to the first six months of 2013. The increase in
property level operating expenses is largely the result of costs incurred in
the first quarter of 2014 related to record severe winter weather in the
majority of the Company's operating markets.

Exit from New Development Business
The Company announced today that it is exiting the business of developing new
apartment communities. The two projects currently under construction will be
completed – Eleven55 Ripley in Silver Spring, Maryland and The Courts at
Spring Mill Station in Conshohocken, Pennsylvania. No additional new apartment
communities will be started.

"We have created significant value through our development activities and are
very proud of the seven Class A projects developed and currently valued at
more than $530 million," commented Mr. Pettinella. "However, we believe that
it is in the best interest of the Company's stockholders for us to dissolve
our new development platform and focus 100% on our core differentiating
strategy of acquiring and redeveloping mature apartment communities."

In the second quarter of 2014, the Company recognized a non-cash charge for
the impairment in value of land parcels that will not be developed and other
related charges of approximately $3.8million. This one-time charge does not
negatively impact OFFO. Net severance charges in connection with the
elimination of development employee positions, totaling approximately
$1.8million, will be expensed over the third and fourth quarters of 2014 and
the first quarter of 2015. In addition, the Company expects to recognize
approximately $1.2 million of interest expense related to land and
predevelopment carrying costs in the third and fourth quarters of 2014 that
would have otherwise been capitalized.

The Company anticipates that gains on the sale of its remaining development
land parcels over the course of the next year will be equal to or greater than
the combined impairment and severance charges and interest expense triggered
by its exit from the new development business.

Commitment to Existing Markets
In the normal course of operating its business, the Company conducts periodic
reviews of potential new markets in conjunction with a thorough review of its
existing footprint. The process begins with a review of data and analysis
provided by third party consultants, followed by significant research
completed by internal personnel, including visits to the various markets,
meetings with brokers and property owners, and the completion of underwriting
analysis. This process was recently completed and the Company identified no
new markets that meet its investment requirements; therefore, it has no plans
to enter into any new markets.

Today, the Company is reaffirming its commitment to the existing HME markets
of Baltimore, Boston, Chicago, Southeast Florida, Long Island, Northern New
Jersey, Philadelphia and Washington,D.C. and will continue to seek
acquisition opportunities in all of these markets.

Acquisitions
On June 19, the Company acquired The Preserve at Milltown in Downingtown,
Pennsylvania. The 376-unit garden apartment community is located 33 miles
northwest of Philadelphia in Chester County near Downingtown Station, which
provides train access to Philadelphia, NewYork City and surrounding
communities. The Preserve also has excellent access to employment centers and
services.

The Preserve was built in 1975 and consists of 23 two-story buildings with
brick and vinyl exteriors, balconies and pitched roofs. During the first three
years of ownership, the Company expects to invest a total of $3.6 million in
interior renovations, upgrading 15% of the community's apartments each year as
leases expire.

At closing, The Preserve was 93.4% occupied at monthly rents averaging $1,084
per unit. The Company expects a 6.3% first year capitalization rate on its
investment after allocating 2.7% of rental revenues for management and
overhead expenses and before normalized capital expenditures.

On July 30, the Company acquired Willowbrook Apartments in Jeffersonville,
Pennsylvania. The 248-unit garden apartment community is located in Montgomery
County in the King of Prussia/Valley Forge area. Willowbrook has immediate
access to employment centers and a wide range of cultural, entertainment and
recreational opportunities.

Willowbrook was built in 1972 and consists of eight two-story buildings with
stucco veneer exteriors, vinyl siding accents on the gables, and pitched
roofs. During the first three years of ownership, the Company expects to
invest a total of $2.3 million in interior renovations, adding in-unit laundry
equipment and upgrades as leases expire.

At closing, Willowbrook was 96% occupied at monthly rents averaging $1,230 per
unit. The Company expects a 6.8% first year capitalization rate on its
investment after allocating 2.7% of rental revenues for management and
overhead expenses and before normalized capital expenditures.

Capital Markets
On June 30, the Company repaid two fixed rate mortgages:

  oa $31.7 million 5.27% fixed rate mortgage with a July 1, 2014 maturity
    date and
  oa $10.3 million 5.25% fixed rate mortgage with a September 1, 2028
    maturity date.

Both properties have been added to the Company's unencumbered asset pool.

As of June 30, 2014:

  oThe Company had approximately $9 million of cash on hand and an additional
    $162 million of available capacity on its corporate credit facility.
  oUnencumbered assets represented 55.7% of total undepreciated assets, up
    from 51.9% at December 31, 2013.
  oThe Company's ratio of debt-to-total market capitalization was 35.8%.
  oTotal debt of $2.4 billion was outstanding at a weighted average interest
    rate of 4.3% and staggered maturities averaging 4 years.
  oApproximately 87% of totaled indebtedness was at fixed rates.
  oInterest coverage for the quarter was 4.0 times and the fixed charge ratio
    was 3.7 times.

2014 Guidance
Based on actual year-to-date results and expectations for the balance of the
year, the Company has decreased the midpoint of its prior FFO guidance by
$0.13 per share, to $4.35, and the range of FFO per share to $4.31 to $4.39.
Quarterly 2014 FFO per share guidance is as follows: third quarter range of
$1.11 to $1.15 and fourth quarter range of $1.16 to $1.20.

The midpoint of 2014 OFFO per share guidance has been decreased by $0.07 per
share to $4.42 with a range of $4.38 to $4.46. Quarterly guidance for the
balance of the year is equal to the FFO ranges provided above.

A significant portion of the reduction in guidance is directly attributable to
the Company's exit from the new development business: $0.10 for FFO and $0.04
for OFFO. In addition, extreme weather conditions experienced in the first
quarter of 2014 resulted in delays in completing units in the two development
projects currently under construction, resulting in reduced NOI from these
properties of $0.02 per share for both FFO and OFFO. Guidance for operating
results from CoreProperties, G&A, and interest expense have been reduced by
$0.01 per share for the balance of the year.

A reconciliation of May 1 to current guidance is provided below:

FULL YEAR 2014 GUIDANCE^(1)
                                           Per Share
                                           FFO                   OFFO
May 1, 2014 Guidance                       $ 4.48               $ 4.49
Change to Guidance as a result of second
quarter actual results:
Impairment and other charges related to    $ (0.06)              NA
exit from new development business
Changes to third and fourth quarter
Guidance:
Amounts triggered due to exit from new
development business
 Severance                            $ (0.02)              $ (0.02)
 Reduced capitalized interest on land
parcels previously designated for          $ (0.02)              $ (0.02)
development
Delayed NOI from two development projects  $ (0.02)              $ (0.02)
under construction
Normal operations – NOI, interest expense, $ (0.01)              $ (0.01)
G&A
Current Guidance                           $ 4.35               $ 4.42
^(1) Represents the mid-point of Guidance range; additional details included
in quarterly Supplemental Information available at www.homeproperties.com in
the Investors section.

Dividend Declared
The Company announced a regular cash dividend on the Company's common shares
of $0.73per share for the quarter ended June 30, 2014. The dividend is
payable on August 27, 2014 to shareholders of record on August 13, 2014 and is
equivalent to an annualized rate of $2.92 per share. The current annual
dividend represents a 4.4% yield based on the July 30 closing price of $66.69.
Home Properties' common stock will begin trading ex-dividend on August 11,
2014.

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

Second Quarter Earnings Conference Call
The Company will conduct a conference call and simultaneous webcast tomorrow
at 11:00AMET to review and comment on the information reported in this
release. The webcast, which includes audio and a slide presentation, will be
available, live at 11:00 AM and archived by 1:00 PM, through the "Investors"
section of the Company's website, www.homeproperties.com. For live audio-only
participation, please dial 800-913-1647 (International 212-231-2900).

Third Quarter Conference/Event Schedule
Home Properties is scheduled to participate in the Bank of America Merrill
Lynch 2014 Global Real Estate Conference on September 10-11 in New York City,
the BMO Capital Markets 9th Annual North American Real Estate Conference on
September 15-16 in Chicago, and the Western New York Investors Conference on
September 26 in Buffalo, New York. Presentation materials will be available at
www.homeproperties.com in the "Investors" section.

Third Quarter Earnings Release and Conference Call
The Company's third quarter 2014 financial results are scheduled to be
released after the stock market closes on Thursday, October 30, 2014. A
conference call, which will be simultaneously webcast, is scheduled for
Friday, October 31, 2014 at 11:00 AM ET. It will be accessible following the
instructions for the current quarter's conference call.

Forward-Looking Statements
This release contains forward-looking statements. Although the Company
believes expectations reflected in such forward-looking statements are based
on reasonable assumptions, it can give no assurance that its expectations will
be achieved. Factors that may cause actual results to differ are described
under the heading "Risk Factors" in the Company's Annual Report on Form 10-K
and in other filings with the Securities and Exchange Commission and include
general economic and local real estate conditions, weather and other
conditions that might affect operating expenses, the timely completion of
repositioning and new development activities within anticipated budgets, the
actual pace of future acquisitions and dispositions, and continued access to
capital to fund growth. The Company assumes no obligation to update or
supplement forward-looking statements because of subsequent events.

About Home Properties
Home Properties is a publicly traded apartment real estate investment trust
that owns, operates, acquires and rehabilitates apartment communities
primarily in suburbs of major metropolitan areas in selected Northeast and
Mid-Atlantic markets. An S&P 400 Company, Home Properties owns and operates
121 communities containing 42,198 apartment units. For more information, visit
Home Properties' website at www.homeproperties.com.



HOME PROPERTIES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data – Unaudited)
                                Three Months Ended      Six Months Ended
                                June 30                 June 30
                                2014        2013        2014        2013
Rental income                   $ 155,022   $ 149,313   $ 307,375   $ 296,607
Property other income           13,170      12,828      28,730      27,008
Other income                    179         215         321         464
 Total revenues               168,371     162,356     336,426     324,079
Operating and maintenance       60,302      57,942      126,761     118,000
General and administrative      7,127       7,337       16,384      16,420
Interest                        25,196      28,690      50,523      58,685
Depreciation and amortization   45,167      42,002      89,546      83,414
Other expenses                  274         16          282         32
Impairment and other charges    3,842       -           3,842       -
 Total expenses               141,908     135,987     287,338     276,551
Income from continuing          26,463      26,369      49,088      47,528
operations
Discontinued operations
 Income (loss) from           -           1,385       40          2,193
discontinued operations
 Gain on disposition of       -           4,645       31,306      45,004
property
Discontinued operations         -           6,030       31,346      47,197
Net income                      26,463      32,399      80,434      94,725
Net income attributable to      (3,994)     (5,363)     (12,174)    (15,809)
noncontrolling interest
Net income attributable to      $  22,469  $  27,036  $  68,260  $  78,916
common stockholders
Reconciliation from net income
attributable to
common stockholders to Funds
From Operations:
Net income attributable to      $  22,469  $  27,036  $ 68,260   $ 78,916
common stockholders
Real property depreciation and  44,587      42,695      88,676      85,360
amortization
Noncontrolling interest         3,994       5,363       12,174      15,809
Gain on disposition of property -           (4,645)     (31,306)    (45,004)
FFO - basic and diluted, as     71,050      70,449      137,804     135,081
defined by NAREIT
Loss from early extinguishment
of debt in connection with sale -           -           802         1,416
of real estate
FFO - basic and diluted (1)     $  71,050  $  70,449  $ 138,606   $ 136,497

^(1) Pursuant to the updated guidance for Funds From Operations provided by
the Board of Governors of the National Association of Real Estate Investment
Trusts ("NAREIT"), FFO is defined as net income (computed in accordance with
accounting principles generally accepted in the United States of America
("GAAP")) excluding gains or losses from disposition of property, impairment
write-downs of depreciable real estate, noncontrolling interest and
extraordinary items plus depreciation from real property. The Company adds
back debt extinguishment costs and other one-time costs incurred as a result
of repaying property specific debt triggered upon sale of a property. Because
of the limitations of the FFO definition as published by NAREIT as set forth
above, the Company has made certain interpretations in applying the
definition. The Company believes all adjustments not specifically provided for
are consistent with the definition. Other similarly titled measures may not be
calculated in the same manner.



HOME PROPERTIES, INC.
SUMMARY CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data – Unaudited)
                                      Three Months Ended  Six Months Ended
                                      June 30             June 30
                                      2014      2013      2014       2013
FFO – basic and diluted               $ 71,050  $ 70,449  $ 138,606  $ 136,497
FFO – basic and diluted               $ 71,050  $ 70,449  $ 138,606  $ 136,497
Acquisition costs of closed deals     274       16        282        32
included in other expenses
Impairment and other charges          3,842     -         3,842      -
Operating FFO (2)                     $ 75,166  $ 70,465  $ 142,730  $ 136,529
FFO – basic and diluted               $ 71,050  $ 70,449  $ 138,606  $ 136,497
Recurring non-revenue generating      (9,094)   (8,901)   (18,225)   (17,934)
capital expenses
AFFO (3)                              $ 61,956  $ 61,548  $ 120,381  $ 118,563
Operating FFO                         $ 75,166  $ 70,465  $ 142,730  $ 136,529
Recurring non-revenue generating      (9,094)   (8,901)   (18,225)   (17,934)
capital expenses
Operating AFFO (2) (3)                $ 66,072  $ 61,564  $ 124,505  $ 118,595
Weighted average shares/units
outstanding:
 Shares – basic                     57,247.9  52,299.4  57,162.3   51,954.6
 Shares – diluted                   57,795.1  52,922.0  57,660.2   52,581.5
 Shares/units – basic ^(4)          67,452.0  62,695.4  67,379.1   62,366.2
 Shares/units – diluted ^(4)        67,999.3  63,318.0  67,877.0   62,993.0
Per share/unit:
 Net income – basic                 $0.39     $0.52     $1.19      $1.52
 Net income – diluted               $0.39     $0.51     $1.18      $1.50
 FFO – basic                        $1.05     $1.12     $2.06      $2.19
 FFO – diluted                      $1.04     $1.11     $2.04      $2.17
 Operating FFO ^ (2)                $1.11     $1.11     $2.10      $2.17
 AFFO ^(3)                          $0.91     $0.97     $1.77      $1.88
 Operating AFFO ^ (2) (3)           $0.97     $0.97     $1.83      $1.88
 Common Dividend paid               $0.73     $0.70     $1.46      $1.40

^(2) Operating FFO is defined as FFO adjusted for the addback of
acquisition costs on closed deals and land impairment costs.

^(3) Adjusted Funds From Operations ("AFFO") is defined as FFO less an
annual reserve for anticipated recurring, non-revenue generating capitalized
costs of $900 and $848 per apartment unit in 2014 and 2013, respectively. The
resulting sum is divided by the weighted average shares/units on a diluted
basis to arrive at AFFO per share/unit.

^(4) Basic includes common stock outstanding plus operating partnership
units in Home Properties, L.P., which can be converted into shares of common
stock. Diluted includes additional common stock equivalents.



HOME PROPERTIES, INC.
SUMMARY CONSOLIDATED BALANCE SHEETS
(in thousands - Unaudited)
                                       June 30, 2014  December 31, 2013

                                       $   812,204  $   786,868
Land
Land held for sale                     13,734         -
Construction in progress               136,957        187,976
Buildings, improvements and equipment  4,680,578      4,645,921
                                       5,643,473      5,620,765
Accumulated depreciation               (1,303,082)    (1,243,243)
Real estate, net                       4,340,391      4,377,522
Cash and cash equivalents              9,382          9,853
Cash in escrows                        26,451         23,738
Accounts receivable                    12,973         14,937
Prepaid expenses                       11,264         22,089
Deferred charges                       10,281         11,945
Other assets                           3,484          7,793
Total assets                           $ 4,414,226   $ 4,467,877
Mortgage notes payable                 $ 1,675,731   $ 1,814,217
Unsecured notes payable                450,000        450,000
Unsecured line of credit               282,500        193,000
Accounts payable                       28,919         27,540
Accrued interest payable               7,757          8,392
Accrued expenses and other liabilities 33,817         33,936
Security deposits                      18,930         18,479
Total liabilities                      2,497,654      2,545,564
Common stockholders' equity            1,628,360      1,629,253
Noncontrolling interest                288,212        293,060
Total equity                           1,916,572      1,922,313
Total liabilities and equity           $ 4,414,226   $ 4,467,877
Total shares/units outstanding:
Common stock                           57,330.6       56,961.6
Operating partnership units            10,201.0       10,287.2
                                       67,531.6       67,248.8



Logo- http://photos.prnewswire.com/prnh/20101026/NY89070LOGO

SOURCE Home Properties, Inc.

Website: http://www.homeproperties.com
Contact: David P. Gardner, Executive Vice President and Chief Financial
Officer, (585) 246-4113, Shelly J. Doran, Vice President, Investor Relations,
(585) 295-4227
 
Press spacebar to pause and continue. Press esc to stop.