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, 2001
-------------------------------------------
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 1-13136
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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: (585) 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 February
22, 2002 was approximately $794,950,800. As of February 22, 2002, there were
24,968,808 shares of common stock, $.01 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement to be issued in connection with the Company's 2002 Annual
Meeting of Stockholders is incorporated by reference into Items 11, 12 and 13 of
Part III of this Report.
1
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 4A. 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
2
PART I
Item 1. Business
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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, rehabilitates and develops
apartment communities. The Company's properties are regionally focused
in the Northeastern, Mid-Atlantic and Midwestern United States. It was
formed in November, 1993, 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 60.0% partnership interest as of December 31,
2001 (57.6% at December 31, 2000) (such interest has been calculated as
the percentage of outstanding common shares divided by the total
outstanding common shares and Operating Partnership Units outstanding)
and two management companies (together, the "Management Companies") -
Home Properties Management, Inc. ("HP Management") and Home Properties
Resident Services, Inc. ("HPRS") (formerly Conifer Realty Corporation),
both of which are Maryland corporations.
Home Properties, through its affiliates described above, as of December
31, 2001, operated 293 communities with 49,745 apartment units. Of
these, 39,007 units in 143 communities are owned outright (the "Owned
Properties"), 8,035 units in 132 communities are managed and partially
owned by the Company as general partner, and 2,703 units in 18
communities are managed for other owners (collectively, the "Managed
Properties"). The Management Companies and the Operating Partnership,
prior to 2001, were also involved in certain development activities.
The Owned Properties and the Managed Properties (collectively, the
"Properties") are concentrated in the following market areas:
Apts. Managed
Apts. As Apts. Apt.
Market Area Owned General Partner Fee Managed Totals
----------- ----- --------------- ----------- ------
Baltimore, MD 6,322 0 2,158 8,480
Philadelphia/Lehigh Valley, PA 6,276 0 0 6,276
Detroit, MI 5,694 0 108 5,802
Suburban Washington, DC 4,277 0 0 4,277
Rochester, NY 2,565 1,747 365 4,677
Northern New Jersey 2,520 352 0 2,872
Chicago, IL 2,242 0 0 2,242
Long Island, NY 1,933 0 0 1,933
Buffalo, NY 1,644 156 0 1,800
Syracuse, NY 1,565 1,486 0 3,051
South Bend, IN 706 168 0 874
Albany/Hudson Valley, NY 684 777 61 1,522
Central VA 664 0 0 664
Portland, ME 595 0 0 595
Hamden, CT 498 0 0 498
Delaware 432 0 0 432
Columbus, OH 242 948 0 1,190
Western PA 148 2,401 11 2,560
-------- ----- ------- ------
Total # of Units 39,007 8,035 2,703 49,745
======== ===== ======= ======
Total Number of Communities 143 132 18 293
3
The Company's mission is to maximize shareholder value by acquiring,
rehabilitating, and managing apartment communities while enhancing the
quality of life for its residents, improving the broader communities in
which the Company operates, providing employees with opportunities for
growth and accomplishment, and demonstrating personal integrity and
dedication at all times.
The Company's business strategies include: (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; and (iii)
maintaining a conservative capital structure with cost effective 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,
2001, it owned a 62.9% interest in the Operating Partnership - one
percent as sole general partner and the remainder as a limited partner
through its wholly owned subsidiary, Home Properties Trust. A portion
of the limited partner interests held by Home Properties Trust as of
December 31, 2001 consisted of all of the Series B, C, D, and E Limited
Partnership Units (3,150,000 units, or 7.3% of the total). Those
preferred interests in the Operating Partnership have rights and
preferences that mirror the rights and preferences of the holders of
the related series of preferred shares in the Company held by GE
Capital Equity Investment, Inc., an affiliate of Prudential Real Estate
Investors, Teachers Insurance and Annuity Association of America,
affiliates of AEW Capital Management and Pacific Life Insurance
Company, and The Equitable Life Assurance Society of the United States.
The remaining units (23,579,226 or 54.6% of the total) held by Home
Properties Trust have basically the same rights as the other limited
partner interests (the "Units") in the Operating Partnership. Those
other Units are owned by certain individuals who received Units in the
Operating Partnership as partial consideration for their interests in
entities owning apartment communities purchased by the Operating
Partnership, as well as certain officers of the Company.
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. Management expects that it will continue to utilize
Units as a form of consideration for a significant portion of its
acquisition properties.
Both of the Management Companies are Maryland corporations and,
effective January 1, 2001, both converted to taxable REIT subsidiaries
under the Tax Relief Extension Act of 1999. HP Management was formed in
January, 1994 and HPRS was formed in December, 1995. As of December 31,
2001, the Operating Partnership held 95% of the economic interest in HP
Management and 99% of the economic interest in HPRS. Nelson and Norman
Leenhouts (the "Leenhoutses") hold the remaining five percent and one
percent interest, respectively. 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 2,000 employees and its
executive offices are located at 850 Clinton Square, Rochester, New
York 14604. Its telephone number is (585) 546-4900.
4
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) recycling assets by disposing of properties that
have reached their potential or are less efficient to operate due to
size or remote location; (iii) reinforcing its decentralized company
philosophy by encouraging employees' personal improvement and by
providing extensive training; (iv) 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; (v) readily
adopting new technology so that the time and cost spent on
administration can be minimized and the time spent attracting and
serving residents can be maximized; (vi) continuing to utilize its
written "Pledge" of customer satisfaction that is the foundation on
which the Company has built its name-brand recognition; and (vii)
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, Sale and Development Strategies
--------------------------------------------
The Company's core strategy is to grow primarily through 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 stable or moderate job growth. The Company
expects that its growth will be focused in select metropolitan areas
within the Northeast, Mid-Atlantic and Midwestern regions of the United
States, where it has already established a presence. The six major
metropolitan areas the Company will focus on include Baltimore/
Washington, Boston, Chicago, Detroit, New York, and Philadelphia. The
Company expects to maintain or grow existing portfolios in other
markets as economic/market conditions permit. Continued geographic
specialization is expected to have a greater impact on operating
efficiencies versus widespread accumulation of properties. The Company
will continue to pursue the acquisition of individual properties as
well as multi-property portfolios. It may also consider strategic
investments in other apartment companies.
During 2001, the Company completed the sale of 14 communities with a
total of 2,855 units for a total consideration of approximately $122
million. The properties sold were either in slower growth markets or
less efficient to operate due to their remote locations and/or smaller
size Over 50% of the properties sold were in the Upstate New York
Region. The Company was able to achieve targeted price levels and
reinvest the proceeds at higher returns. The Company reinvested
proceeds by repurchasing 1.2 million common shares and UPREIT Units at
an aggregate cost of $32.5 million, or an average of $27.08 per
share/unit. In addition, the Company recycled the proceeds from those
properties that were expected to produce an unleveraged internal rate
of return ("IRR") from 9% to 10% with the purchase of properties
expected to produce an unleveraged IRR of at least 12%. Several of the
properties sold were originally acquired through UPREIT transactions;
as a result, Section 1031 exchanges were used to defer taxable gains of
the UPREIT investor.
The Company will continue to contemplate the sale of several of its
mature communities. The Company has identified seven communities with
over 1,700 units for potential sale during 2002. The total estimated
value of these communities is $100 million. The communities are spread
over several markets, where they are less efficient to operate due to
their remote locations and/or their small size. The Company will not
sell these properties; however, unless it achieves targeted prices at
levels which would allow it to reinvest the proceeds at higher returns
by making acquisitions with repositioning potential. Several of these
properties were originally acquired through UPREIT transactions, so
that sales will have to be matched with suitable acquisitions using tax
deferred exchanges.
5
Effective December 31, 2000, the Company sold its affordable housing
development operations to Conifer, LLC. With the growth in the
Company's owned portfolio of market-rate properties, the Company
concluded that the affordable development activities required a
disproportionate allocation of financial and management resources. The
Company intends to minimize its involvement in the complex development
and re-development of apartment communities utilizing various
government programs. However, the Company retained the property
management operations for 8,325 apartment units in 136 existing
affordable communities. These activities are expected to generate
ongoing management fees, incentive management fees and participation
in residual value. They also increase the Company's volume purchasing
ability, and position the Company to build market rate or affordable
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
diluted 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, 2001, the Company's debt was approximately $993
million and the debt-to-total market capitalization ratio was 41%
based on the year-end closing price of the Company's stock of $31.60.
The weighted average interest rate on the Company's mortgage debt as
of December 31, 2001 was 7.2% and the weighted average maturity was
approximately ten years. Debt maturities are staggered, ranging from
August, 2002, through June, 2036. As of December 31, 2001, the Company
had an unsecured line of credit facility from M&T Bank of $100
million. This facility is available for acquisition and other
corporate purposes and bears an interest rate at 1.25% over the
one-month LIBOR rate. As of December 31, 2001, there was $33 million
in outstanding borrowings on the line of credit.
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 issued
approximately $19 million worth of Units as partial consideration in
acquisition transactions during 2001.
The Company also intends to continue to pursue other equity
transactions to raise capital with limited transaction costs. In 2000,
an aggregate of $115 million of Series C, D and E Convertible
Cumulative Preferred Stock ("Series C Preferred", "Series D Preferred"
and "Series E Preferred") was issued in four private sales to an
affiliate of Prudential Real Estate Investors, Teachers Insurance and
Annuity Association of America, an affiliate of AEW Capital
Management, and Pacific Life Insurance Company, and The Equitable Life
Assurance Society of the United States.
The Company raised approximately $32 million in 2001 under its
Dividend Reinvestment and Direct Stock Purchase Plan (the "Dividend
Reinvestment Plan"). Effective April 10, 2001, the Dividend
Reinvestment Plan was amended to reduce the discount from the current
market price from 3% to 2%. The maximum amount that can be invested
without the Company's prior approval was reduced from $5,000 to
$1,000. These changes were implemented to minimize amounts raised
under the Dividend Reinvestment Plan at a time when the Company's
common stock was trading below the Company's estimate of net asset
value.
In 2001, the Company also announced a 1,000,000 share increase in
management's authorization to buy back the Company's outstanding
common stock. Shares may be repurchased through the open market or in
privately-negotiated transactions. The Company's strategy is to
opportunistically repurchase shares at a discount to its underlying
net asset value, thereby continuing to build value for long-term
shareholders. In 2001, the Company repurchased 754,600 of its shares
of common stock for an aggregate price of $20,600,000 (an average of
6
$27.32 per share) and 436,700 UPREIT Units at an aggregate cost of
$11,900,000 (an average of $27.25 per unit).
Competition
-----------
The Company competes with other multifamily owners and operators and
other real estate companies in seeking properties for acquisition, and
potential residents. 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 will enable it to
continue to maintain its occupancy levels. The Company also believes
that the moderate level of new construction of multifamily properties
in its markets in 2001 will not have a material adverse effect on its
turnover rates, occupancies or ability to increase rents and minimize
operating expenses. To date, the Company has faced limited competition
in acquiring properties from other REITs or other operators from
outside its regional focus. The Company may encounter competition as
it seeks attractive properties in broader geographic areas. Given the
perceived depth of available opportunities, management does not
believe that increased competition will result in the Company's not
being able to meet its growth expectations.
Market Environment
------------------
From the IPO through 2000, the markets in which Home Properties
operates could be characterized as stable, with moderate levels of job
growth. During 2001, the national recession resulted in negative job
growth for both the country as a whole and the Company's markets. The
Company's markets compared favorably to national averages, with a 0.4%
reduction in jobs verses a 0.8% reduction nationally.
New construction in the Company's markets is low, relative to the
existing multifamily housing stock and, for the past two decades, has
been limited, with most of the existing housing stock built before
1980. Zoning restrictions, a scarcity of land and high construction
costs make new development difficult to justify in many of the
Company's markets. In 2001, Home Properties' markets represented 18%
of the total estimated existing U.S. multifamily housing stock, but
only 11% of the country's estimated net new supply of multifamily
housing units. In addition, after considering the obsolescence of
older communities and the conversion of rental housing to condominiums
or co-ops, historically, the net increase in the multifamily rental
housing stock in the Company's markets represented only a fraction of
the estimated number of new units needed to satisfy increased demand.
In 2001, the recession reversed historical trends, with a net
oversupply created.
In 2000, net new multifamily supply as a percent of net new
multifamily demand in the Home Properties markets was approximately
49%, compared to a national average of 98%. In 2001, both the national
and the Company's markets have resulted in an estimated oversupply.
The 2001 demand (oversupply) for the Company's markets relative to
estimated net new multifamily supply still compares favorably to
national averages.
The third to the last column in the Multifamily Supply and Demand
table on page 10 shows the net new multifamily supply as percent of
existing multifamily housing stock. In the Company's markets, net new
supply only represents 0.6% of the existing multifamily housing stock.
This compares to the national average net new multifamily supply
estimates at 0.9% of the multifamily housing stock.
The information on the Market Demographics table on page 9 was
compiled by the Company from the sources indicated on the table. The
methods 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.
7
Market Demographics
December December 2001
Job Job Multifamily
Growth Growth 2001 Units as a % of 2001
% of 2001 Trailing Trailing December Median Total Multifamily
MSA Market Area Owned Number of 12 Months 12 Months Unemployment Home Housing Housing
Units Households % Change Actual Rate Value Stock(4) Stock (5)
--------------------------------------------------------------------------------------------------------------------------
Baltimore, MD 16.2% 986,132 (0.2%) (2,400) 4.6% 135,791 18.5% 195,517
Eastern PA (1) 16.1% 2,152,817 (0.5%) (14,900) 4.4% 139,280 15.4% 358,676
Detroit, MI 14.6% 1,705,100 (1.9%) (42,700) 5.2% 111,224 15.8% 286,065
Northern VA/DC 11.0% 1,880,198 1.0% 27,600 5.7% 206,556 30.5% 619,894
Downstate NY (2) 6.7% 1,575,811 0.2% 4,900 3.6% 272,201 14.4% 247,788
Rochester, NY 6.6% 422,892 (1.7%) (9,300) 5.3% 103,405 13.3% 60,274
Northern NJ (3) 6.5% 2,133,193 (0.2%) (6,800) 4.4% 235,687 18.4% 425,089
Chicago, IL 5.8% 2,998,772 (1.0%) (41,700) 5.8% 163,964 28.2% 904,000
Buffalo, NY 4.2% 471,554 (0.6%) (3,500) 5.5% 90,947 10.8% 54,720
Syracuse, NY 4.0% 276,390 (0.5%) (1,900) 5.2% 88,732 14.9% 45,475
South Bend, IN 1.8% 101,016 (0.6%) (800) 4.9% 78,228 12.7% 13,780
Central/Southern VA 1.7% 989,880 (0.1%) (1,000) 3.6% 110,869 18.7% 201,092
Portland, ME 1.5% 99,448 2.3% 3,600 3.8% 168,040 15.9% 18,172
Hamden, CT 1.3% 208,457 0.0% 100 3.1% 204,861 19.8% 45,331
Delaware 1.1% 225,394 (0.8%) (2,700) 3.1% 140,102 17.5% 42,048
Columbus, OH 0.6% 598,649 (0.3%) (2,900) 3.2% 115,349 19.6% 126,376
Pittsburgh, PA 0.4% 976,329 (0.5%) (6,000) 4.2% 76,284 12.9% 137,378
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Home Properties Markets 100.0% 17,802,032 (0.4%) (100,400) 4.3% 143,619 17.4% 3,776,290
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United States 107,023,920 (0.8%) (1,106,000) 5.8% 116,054 17.7% 21,175,897
(5) see footnote subsequent page
(1) Eastern Pennsylvania is defined for this report as Philadelphia,
PA MSA & Allentown-Bethlehem-Easton MSA.
(2) Downstate New York is defined for this report as the Hudson Valley
Region of Dutchess Co MSA, Newburgh NY-PA MSA, Putnam & Ulster
Counties; Long Island, NY (Nassau-Suffolk MSA); Westchester County
MSA; & Rockland County MSA.
(3) Northern New Jersey is defined for this report as
Middlesex-Somerset-Hunterdon MSA, Bergen-Passaic MSA,
Monmouth-Ocean MSA, & Newark MSA.
(4) Based on the 1990 U.S. Census figures.
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 collected is data available as of February 19, 2002 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.
Claritas Inc. is a leading provider of precision marketing solutions
and related products/services.
U.S. Census Bureau's parent federal agency is the U.S. Dept. of
Commerce, which promotes American business and trade.
8
Multifamily Supply and Demand
Estimated Estimated
Estimated Net New Net New
Estimated Estimated 2001 Multifamily Multifamily
2001 Estimated 2001 New Supply as a Supply as a Expected Expected
New 2001 Net New Multifamily % of New % of New Excess Excess
MSA Market Area Supply of Multifamily Multifamily Household Multifamily Multifamily (Oversupply) Revenue
Multifamily/(6)/Obsolescence/(7)/ Supply/(8)/ Demand/(9)/ Demand Stock Demand /(10)/ Growth /(11)/
------------------------------------------------------------------------------------------------------------------------------------
Baltimore, MD 1,730 978 752 (296) (254.1%) 0.4% (1,048) (0.5%)
Eastern PA /(1)/ 2,656 1,793 863 (1,526) (56.5%) 0.2% (2,389) (0.7%)
Detroit, MI 2,564 1,430 1,134 (4,508) (25.1%) 0.4% (5,642) (2.0%)
Northern VA/DC 8,929 3,099 5,830 5,614 103.8% 0.9% (215) (0.0%)
Downstate NY /(2)/ 2,106 1,239 867 471 184.2% 0.3% (396) (0.2%)
Rochester, NY 329 301 27 (826) (3.3%) 0.0% (853) (1.4%)
Northern NJ /(3)/ 2,701 2,125 575 (832) (69.1%) 0.1% (1,408) (0.3%)
Chicago, IL 9,719 4,520 5,198 (7,853) (66.2%) 0.6% (13,052) (1.4%)
Buffalo, NY 554 274 280 (253) (110.9%) 0.5% (533) (1.0%)
Syracuse, NY 104 227 (124) (189) 65.6% (0.3%) (65) (0.1%)
South Bend, IN 74 69 5 (68) (7.7%) 0.0% (73) (0.5%)
Central/Southern VA 2,518 1,005 1,513 (125) (1214.9%) 0.8% (1,638) (0.8%)
Portland, ME 117 91 26 382 6.8% 0.1% 356 2.0%
Hamden, CT 119 227 (108) 13 (815.0%) (0.2%) 121 0.3%
Delaware 679 210 469 (316) (148.6%) 1.1% (785) (1.9%)
Columbus, OH 4,132 632 3,500 (379) (922.2%) 2.8% (3,879) (3.1%)
Pittsburgh, PA 1,534 687 847 (516) (164.3%) 0.6% (1,363) (1.0%)
------------------------------------------------------------------------------------------------------------------------------------
Home Properties Markets 40,564 18,881 21,683 (11,424) (189.8%) 0.6% (33,106) (0.9%)
------------------------------------------------------------------------------------------------------------------------------------
United States 305,282 105,879 199,402 (130,602) (152.7%) 0.9% (330,004) (1.6%)
(1)-(4) see footnotes prior page
(5) 2001 Multifamily Housing Stock = 2001 total housing stock multiplied by the
% of multifamily housing stock in each MSA market (based on 1990 U.S. Census
figures).
(6) Estimated 2001 New Supply of Multifamily = Multifamily permits (2001 figures
U.S. Census Bureau, Mfg. & Constr. Div., 5+ permits only) adjusted by the
average % of permits resulting in a construction start (estimated at 95%).
(7) Estimated 2001 Multifamily Obsolescence = 0.5% of 2001 multifamily housing
stock.
(8) 2001 Net New Multifamily Supply = Estimated 2001 New Supply of Multifamily -
Estimated 2001 multifamily obsolescence. (9) 2001 New Multifamily Household
Demand = Trailing 12 month job growth (Nonfarm, not seasonally adjusted payroll
employment figures) (12/31/00-12/31/01) multiplied by the expected % of new
household formations resulting from new jobs (66.7%) and the % of multifamily
households in each market (based on 1990 U.S. Census figures).
(10) Expected Excess Demand = Estimated 2001 New Multifamily Household Demand -
Estimated 2001 Net New Multifamily Supply.
(11) Expected Excess Revenue Growth = Expected Excess Demand divided by 2001
Multifamily Housing Stock.
9
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 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, 2001, the Owned Properties consisted of 143
multifamily residential properties containing 39,007 apartment units.
At the time of the IPO (August 4, 1994), 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 the time just prior to the IPO to December 31, 2001, the
Company experienced a compounded annualized growth rate of 41% in the
number of apartment units it owned. In 2001, Home Properties acquired
2,820 apartment units in 10 communities for a total purchase price of
approximately $212 million. Also in 2001, the Company sold 14
communities with a total of 2,855 units for total consideration of $122
million.
The Owned Properties are generally located in established markets in
suburban neighborhoods and are well maintained and well leased. Average
economic occupancy at the Owned Properties held throughout 2000 and
2001 was 93.7% for 2001. The Owned Properties are typically 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 middle income and
senior residents and the quality of the services it provides to such
residents results in low turnover. Average turnover at the Owned
Properties was approximately 45% for 2001, which is significantly below
the national average of 65% for garden apartments.
10
Resident leases are generally for one year terms. Security deposits
equal to one month's rent are generally required.
Certain of the Owned Properties secure mortgage loans. See Schedule III
contained herein (F-34 to F-38).
The table on the following pages illustrates certain of the important
characteristics of the Owned Properties as of December 31, 2001.
11
Communities Wholly Owned
and Managed by Home Properties
(2) (3) (4)
# Age Average 2001 2001 2001
Of In Year Apt Size % Mature % Resident Average %
Regional Area Apts Years Acq (Sq Ft) Residents Turnover Occupancy
------------------- ---------------------------------------------------------------------
Core Communities (1)
CT - Hamden Apple Hill Apartments 498 30 1998 789 22% 52% 95%
DE HP of Newark 432 34 1999 856 8% 48% 84%
IL - Chicago Colonies Apartments 672 28 1998 656 12% 61% 94%
IL - Chicago Colony Apartments 783 29 1999 704 5% 56% 94%
IN - South Bend Candlewood Apartments 310 17 1998 1,000 53% 58% 91%
IN - South Bend Maple Lane 396 19 1999 950 77% 41% 84%
MD - Baltimore Bonnie Ridge 966 36 1999 1,023 50% 48% 94%
MD - Baltimore Canterbury Apartments 618 24 1999 933 12% 46% 96%
MD - Baltimore Carriage House Apartments 50 36 1998 786 19% 40% 92%
MD - Baltimore Country Village Apartments 344 31 1998 868 20% 56% 91%
MD - Baltimore Falcon Crest 396 33 1999 993 13% 66% 94%
MD - Baltimore Gateway Village 132 13 1999 965 4% 52% 96%
MD - Baltimore Morningside Heights Apartments 1,050 37 1998 870 8% 40% 94%
MD - Baltimore Owings Run 504 6 1999 1,142 5% 54% 95%
MD - Baltimore Rolling Park Apartments 144 29 1998 1,125 10% 37% 92%
MD - Baltimore Selford Townhomes 102 15 1999 1,115 4% 55% 93%
MD - Baltimore Shakespeare Park 82 19 1999 833 82% 9% 99%
MD - Baltimore Timbercroft Townhomes 284 30 1999 990 15% 13% 99%
MD - Baltimore Village Square 370 34 1999 1,045 10% 45% 97%
ME - Portland Mill Co. Gardens 96 51 1998 550 20% 37% 98%
ME - Portland Redbank Village 500 58 1998 836 25% 29% 95%
MI - Detroit Canterbury Square 336 30 1997 789 8% 53% 94%
MI - Detroit Carriage Hill Apartments 168 36 1998 783 65% 49% 95%
MI - Detroit Carriage Park Apartments 256 35 1998 777 40% 47% 96%
MI - Detroit Charter Square 494 31 1997 914 55% 51% 93%
MI - Detroit Cherry Hill Club Apartments 164 30 1998 878 6% 52% 93%
MI - Detroit Cherry Hill Village Apartments 224 36 1998 742 35% 51% 92%
MI - Detroit Fordham Green 146 26 1997 869 10% 61% 94%
MI - Detroit Golfview Manor 44 43 1997 662 34% 55% 95%
MI - Detroit Greentrees Apartments 288 31 1997 863 6% 53% 94%
MI - Detroit Kingsley Apartments 328 32 1997 792 15% 53% 91%
MI - Detroit Lakes Apartments 434 15 1999 948 2% 72% 89%
MI - Detroit Oak Park Manor 298 47 1997 887 10% 44% 94%
MI - Detroit Parkview Gardens 483 48 1997 731 25% 43% 94%
MI - Detroit Scotsdale Apartments 376 27 1997 790 47% 41% 97%
MI - Detroit Southpointe Square 224 31 1997 776 16% 46% 93%
MI - Detroit Springwells Park 303 61 1999 1,014 16% 54% 93%
MI - Detroit Stephenson House 128 35 1997 668 12% 57% 92%
MI - Detroit Woodland Gardens 337 36 1997 719 4% 58% 94%
NJ - Northern East Hill Gardens 33 44 1998 695 36% 55% 93%
NJ - Northern Lakeview Apartments 106 33 1998 492 21% 25% 98%
NJ - Northern Oak Manor Apartments 77 46 1998 775 20% 29% 97%
NJ - Northern Pleasant View Gardens Apartments 1,142 34 1998 745 5% 30% 94%
NJ - Northern Pleasure Bay Apartments 270 31 1998 667 15% 30% 95%
2000 2001 2000 12/31/01
Average % Avg Mo Rent Avg Mo Rent Total Cost
Regional Area Occupancy Rate per Apt Rate per Apt (000)
------------------- ----------------------------------------------------
CT - Hamden Core Communities (1)
DE Apple Hill Apartments 95% $899 $804 $29,041
IL - Chicago HP of Newark 89% $674 $592 $24,214
IL - Chicago Colonies Apartments 91% 640 602 $30,483
IN - South Bend Colony Apartments 98% 832 782 $46,664
IN - South Bend Candlewood Apartments 91% 681 660 $14,991
MD - Baltimore Maple Lane 90% 652 629 $19,423
MD - Baltimore Bonnie Ridge 88% 883 863 $57,671
MD - Baltimore Canterbury Apartments 97% 679 628 $27,098
MD - Baltimore Carriage House Apartments 96% 583 537 $ 1,415
MD - Baltimore Country Village Apartments 95% 712 645 $16,513
MD - Baltimore Falcon Crest 89% 737 674 $17,001
MD - Baltimore Gateway Village 98% 887 804 $ 8,167
MD - Baltimore Morningside Heights Apartments 93% 669 617 $46,720
MD - Baltimore Owings Run 93% 924 860 $38,558
MD - Baltimore Rolling Park Apartments 96% 714 654 $ 6,616
MD - Baltimore Selford Townhomes 96% 922 814 $ 6,328
MD - Baltimore Shakespeare Park 199% 610 616 $ 4,088
MD - Baltimore Timbercroft Townhomes 00% 650 623 $ 8,932
ME - Portland Village Square 97% 778 704 $17,225
ME - Portland Mill Co. Gardens 97% 597 546 $ 2,630
MI - Detroit Redbank Village 94% 655 604 $19,335
MI - Detroit Canterbury Square 98% 746 702 $15,424
MI - Detroit Carriage Hill Apartments 98% 761 720 $ 7,856
MI - Detroit Carriage Park Apartments 96% 707 671 $11,798
MI - Detroit Charter Square 97% 825 773 $26,577
MI - Detroit Cherry Hill Club Apartments 96% 619 587 $ 6,501
MI - Detroit Cherry Hill Village Apartments 96% 694 656 $ 9,461
MI - Detroit Fordham Green 93% 833 783 $ 7,576
MI - Detroit Golfview Manor 94% 532 499 $ 801
MI - Detroit Greentrees Apartments 92% 644 606 $11,737
MI - Detroit Kingsley Apartments 94% 681 647 $15,797
MI - Detroit Lakes Apartments 96% 912 859 $27,643
MI - Detroit Oak Park Manor 98% 727 680 $12,127
MI - Detroit Parkview Gardens 95% 592 563 $10,118
MI - Detroit Scotsdale Apartments 97% 672 635 $15,125
MI - Detroit Southpointe Square 96% 627 594 $ 6,617
MI - Detroit Springwells Park 95% 957 917 $20,817
MI - Detroit Stephenson House 93% 662 634 $ 3,693
MI - Detroit Woodland Gardens 96% 735 689 $15,260
NJ - Northern East Hill Gardens 99% 1059 910 $ 2,334
NJ - Northern Lakeview Apartments 98% 916 844 $ 6,664
NJ - Northern Oak Manor Apartments 99% 1,332 1,185 $ 5,964
NJ - Northern Pleasant View Gardens Apartments 95% 884 799 $63,216
NJ - Northern Pleasure Bay Apartments 97% 735 672 $10,387
12
(2) (3) (4)
# Age Average 2001 2001 2001 2000
Of In Year Apt Size % Mature % Resident Average % Average %
Regional Area Apts Years Acq (Sq Ft) Residents Tumover Occupancy Occupancy
---------------- ---------------------------------------------------------------------
NJ - Northern Royal Gardens 550 34 1997 800 10% 25% 97% 96%
NJ - Northern Wayne Village 275 37 1998 725 49% 24% 96% 97%
NJ - Northern Windsor Realty 67 49 1998 675 15% 39% 95% 95%
NY - Alb/Hudson Valley Carriage Hill 140 29 1996 845 30% 66% 97% 96%
NY - Alb/Hudson Valley Cornwall Park 75 35 1996 1,320 13% 64% 94% 96%
NY - Alb/Hudson Valley Lakeshore Villas 152 27 1996 956 2% 57% 95% 93%
NY - Alb/Hudson Valley Patricia Apartments 100 28 1998 770 18% 31% 96% 98%
NY - Alb/Hudson Valley Sunset Gardens 217 31 1996 662 11% 61% 95% 89%
NY - Buffalo Emerson Square 96 32 1997 650 29% 33% 98% 98%
NY - Buffalo Idylwood 720 32 1995 700 10% 66% 95% 96%
NY - Buffalo Paradise Lane at Raintree 324 30 1997 676 10% 50% 96% 98%
NY - Buffalo Raintree Island 504 30 1985 704 23% 44% 97% 97%
NY - Long Island Coventry Village 94 27 1998 718 20% 32% 97% 97%
NY - Long Island Lake Grove 368 32 1997 879 21% 40% 97% 95%
NY - Long Island Mid-Island Estates 232 37 1997 690 15% 27% 97% 97%
NY - Rochester 1600 East Avenue 164 43 1997 800 46% 47% 75% 77%
NY - Rochester 1600 Elmwood 210 42 1983 891 16% 58% 93% 93%
NY - Rochester Brook Hill 192 30 1994 999 8% 48% 95% 94%
NY - Rochester Finger Lakes Manor 153 31 1983 924 34% 65% 87% 92%
NY - Rochester Newcastle Apartments 197 27 1982 873 23% 51% 92% 91%
NY - Rochester Northgate, Manor 224 39 1994 800 13% 31% 85% 86%
NY - Rochester Perinton Manor 224 32 1982 928 34% 46% 94% 96%
NY - Rochester Pines of Perinton 508 25 1998 818 25% 31% 97% 98%
NY - Rochester Riverton Knolls 240 28 1983 911 3% 42% 86% 85%
NY - Rochester Spanish Gardens 220 28 1994 1,030 30% 31% 93% 94%
NY - Rochester The Meadows 113 31 1984 890 48% 43% 97% 96%
NY - Rochester Woodgate Place 120 29 1997 1,100 6% 55% 96% 96%
NY - Syracuse Candlewood Gardens 126 31 1996 855 20% 40% 95% 97%
NY - Syracuse Conifer Village 199 23 1994 499 95% 12% 100% 100%
NY - Syracuse Fairview Heights 210 38 1965 798 5% 37% 94% 94%
NY - Syracuse Harborside Manor 281 29 1995 823 8% 49% 94% 95%
NY - Syracuse Pearl Street 60 31 1995 855 2% 60% 86% 91%
NY - Syracuse Village Green 448 16 1994 908 29% 34% 89% 92%
NY - Syracuse Westminster Place 240 30 1996 913 30% 59% 95% 96%
OH - Columbus Weston Gardens 242 29 1998 804 5% 80% 85% 89%
PA - Philadelphia Arbor Crossing 134 33 1999 667 25% 35% 95% 96%
PA - Philadelphia Beechwood Gardens 160 35 1998 775 12% 33% 93% 96%
PA - Philadelphia Cedar Glen Apartments 110 35 1998 726 15% 53% 92% 92%
PA - Philadelphia Chesterfield Apartments 247 29 1997 812 10% 55% 94% 96%
PA - Philadelphia Curren Terrace 318 31 1997 782 10% 50% 93% 94%
PA - Philadelphia Executive House 100 37 1997 696 50% 49% 97% 95%
PA - Philadelphia Glen Brook 173 39 1999 689 20% 29% 97% 96%
PA - Philadelphia Glen Manor 174 26 1997 667 25% 51% 95% 96%
PA - Philadelphia Hill Brook Place 274 34 1999 709 10% 46% 97% 97%
PA - Philadelphia Lansdowne Group-
Karen Court(5) 49 39 1997 844
PA - Philadelphia Lansdowne Group-
Landon Court(5) 44 32 1997 873
2001 2000 12/31/01
Avg Mo. Rent Avg Mo Rent Total Cost
Regional Area Rate per Apt Rate per Apt (000)
---------------- ------------ ------------ ----------
NJ - Northern Royal Gardens 902 847 $27,933
NJ - Northern Wayne Village 940 861 $17,727
NJ - Northern Windsor Realty 884 805 $ 4,466
NY - Alb/Hudson Valley Carriage Hill 939 837 $ 6,343
NY - Alb/Hudson Valley Cornwall Park 1,388 1,194 $ 6,562
NY - Alb/Hudson Valley Lakeshore Villas 814 708 $ 6,977
NY - Alb/Hudson Valley Patricia Apartments 1025 916 $ 5,971
NY - Alb/Hudson Valley Sunset Gardens 707 646 $ 7,602
NY - Buffalo Emerson Square 593 566 $ 3,349
NY - Buffalo Idylwood 619 594 $23,847
NY - Buffalo Paradise Lane at Raintree 629 603 $11,473
NY - Buffalo Raintree Island 649 625 $17,814
NY - Long Island Coventry Village 1092 994 $ 4,823
NY - Long Island Lake Grove 1120 992 $27,379
NY - Long Island Mid-Island Estates 956 888 $13,004
NY - Rochester 1600 East Avenue 1,334 1,320 $14,000
NY - Rochester 1600 Elmwood 856 823 $12,336
NY - Rochester Brook Hill 860 843 $11,564
NY - Rochester Finger Lakes Manor 773 745 $ 8,561
NY - Rochester Newcastle Apartments 743 719 $11,160
NY - Rochester Northgate, Manor 675 650 $10,653
NY - Rochester Perinton Manor 791 764 $12,061
NY - Rochester Pines of Perinton 522 522 $ 9,882
NY - Rochester Riverton Knolls 848 820 $14,049
NY - Rochester Spanish Gardens 665 641 $12,489
NY - Rochester The Meadows 667 641 $ 5,527
NY - Rochester Woodgate Place 757 727 $ 5,705
NY - Syracuse Candlewood Gardens 540 518 $ 3,714
NY - Syracuse Conifer Village 566 566 $ 9,361
NY - Syracuse Fairview Heights 813 780 $10,905
NY - Syracuse Harborside Manor 620 595 $ 9,484
NY - Syracuse Pearl Street 534 511 $ 1,736
NY - Syracuse Village Green 654 630 $18,363
NY - Syracuse Westminster Place 611 576 $ 8,501
OH - Columbus Weston Gardens 546 513 $ 8,568
PA - Philadelphia Arbor Crossing 701 659 $ 6,134
PA - Philadelphia Beechwood Gardens 683 625 $ 5,220
PA - Philadelphia Cedar Glen Apartments 521 462 $ 3,739
PA - Philadelphia Chesterfield Apartments 765 714 $12,643
PA - Philadelphia Curren Terrace 800 756 $17,057
PA - Philadelphia Executive House 832 798 $ 6,249
PA - Philadelphia Glen Brook 676 634 $ 7,125
PA - Philadelphia Glen Manor 671 616 $ 6,642
PA - Philadelphia Hill Brook Place 699 652 $12,802
PA - Philadelphia Lansdowne Group-
Karen Court(5)
PA - Philadelphia Lansdowne Group-
Landon Court(5)
13
Communities Wholly Owned
and Managed by Home Properties
(2) (3) (4)
# Age Average 2001 2001 2001
Of In Year Apt Size % Mature % Resident Average %
Regional Area Apts Years Acq (Sq Ft) Residents Tumover Occupancy
---------------- -----------------------------------------------------------------------
PA - Philadelphia Lansdowne Group-Marshall House (5) 63 73 1997 653 27% 46% 92%
PA - Philadelphia Lansdowne Group-Patricia Court (5) 66 34 1997 838
PA - Philadelphia New Orleans Park 308 31 1997 693 18% 46% 93%
PA - Philadelphia Racquet Club East Apartments 467 31 1998 850 14% 39% 96%
PA - Philadelphia Racquet Club South 103 33 1999 821 8% 51% 95%
PA - Philadelphia Ridgeway Court 66 29 1999 800 15% 58% 90%
PA - Philadelphia Ridley Brook 244 40 1999 731 28% 33% 98%
PA - Philadelphia Sherry Lake Apartments 298 37 1998 811 20% 39% 96%
PA - Philadelphia Springwood Apartments 77 28 1997 755 35% 75% 88%
PA - Philadelphia Valley Park South 384 29 1996 987 25% 57% 94%
PA - Philadelphia Valley View Apartments 176 29 1997 769 20% 80% 94%
PA - Philadelphia Village Square 128 29 1997 795 15% 68% 92%
PA - Western Cloverleaf Village 148 44 1997 716 25% 50% 89%
VA - Central Carriage Hill 664 35 1999 949 91% 20% 93%
VA - Suburban DC Braddock Lee Apartments 254 47 1998 758 15% 31% 95%
VA - Suburban DC Manor, The 198 28 1999 844 5% 49% 95%
VA - Suburban DC Park Shirlington Apartments 294 47 1998 758 12% 29% 97%
VA - Suburban DC Pavilion Apartments 432 34 1999 951 40% 31% 91%
VA - Suburban DC Seminary Hill 296 42 1999 884 4% 40% 94%
VA - Suburban DC Seminary Towers 548 38 1999 875 12% 43% 94%
VA - Suburban DC Tamarron Apartments 132 15 1999 1,097 9% 44% 97%
Core Communities Total/Weighted Avg 30,802 33 837 21% 45% 94%
2000 2001 2000 12/31/01
Average % Avg Mo Rent Avg Mo Rent Total Cost
Regional Area Occupancy Rate per Apt Rate per Apt (000)
---------------- ------------------------------------------------
PA - Philadelphia Lansdowne Group-Marshall House (5) 95% 695 652 $ 9,792
PA - Philadelphia Lansdowne Group-Patricia Court (5)
PA - Philadelphia New Orleans Park 95% 704 657 $ 15,465
PA - Philadelphia Racquet Club East Apartments 96% 846 802 $ 28,023
PA - Philadelphia Racquet Club South 93% 728 668 $ 5,306
PA - Philadelphia Ridgeway Court 93% 683 645 $ 2,430
PA - Philadelphia Ridley Brook 98% 715 669 $ 11,054
PA - Philadelphia Sherry Lake Apartments 96% 954 888 $ 20,570
PA - Philadelphia Springwood Apartments 92% 663 629 $ 3,153
PA - Philadelphia Valley Park South 96% 859 792 $ 22,134
PA - Philadelphia Valley View Apartments 93% 724 688 $ 8,707
PA - Philadelphia Village Square 95% 797 733 $ 6 ,662
PA - Western Cloverleaf Village 89% 595 572 $ 5,015
VA - Central Carriage Hill 95% 763 763 $ 38,609
VA - Suburban DC Braddock Lee Apartments 94% 950 839 $ 15,996
VA - Suburban DC Manor, The 93% 860 754 $ 8,822
VA - Suburban DC Park Shirlington Apartments 96% 979 872 $ 18,328
VA - Suburban DC Pavilion Apartments 95% 1,224 1,115 $ 41,494
VA - Suburban DC Seminary Hill 94% 999 886 $ 15,155
VA - Suburban DC Seminary Towers 94% 1015 896 $ 31,200
VA - Suburban DC Tamarron Apartments 99% 933 875 $ 10,140
Core Communities Total/Weighted Avg 94% $ 776 $ 724 $1,536,161
(1) "Core Communities" represents the 30,802 apartment units owned consistently
throughout 2000 and 2001.
(2) "Mature Residents" is the percentage of residents aged 55 years or older as
of December 31, 2001.
(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, 2000 and 2001. For communities acquired during 2000 and
2001, this is the average occupancy from the date of acquisition.
(5) The Lansdowne Group consolidated figures are reflected in the Marshall
House line.
14
Communities Wholly Owned
and Managed by Home Properties
2001 2000
Avg Avg
Mo Mo.
(2) (3) (4) Rent Rent
# Age Average 2001 2001 2001 2000 Rate Rate 12/31/01
of in Year Apt Size % Mature % Resident Average % Average % per per Total Cost
Regional Area Apts Years Acq (Sq Ft) Residents Turnover Occupancy Occupancy Apt. Apt. (000)
-------------- ---- ----- --- ------- --------- -------- --------- --------- ---- --- -----
2000 Acquisition
Communities
IL - Chicago Blackhawk 371 41 2000 860 9% 46% 97% 96% $ 795 $ 742 $ 19,521
IL - Chicago Cypress Place 192 32 2000 855 12% 37% 96% 100% 840 634 $ 11,126
MD - Baltimore Old Friends 51 114 2000 834 2% 55% 94% 96% 718 666 $ 2,320
MI - Detroit Bayberry 120 35 2000 950 10% 53% 94% 98% 765 725 $ 6,284
MI - Detroit Deerfield Woods 144 26 2000 800 31% 40% 96% 98% 752 707 $ 6,396
MI - Detroit Hampton Court 182 30 2000 972 5% 73% 89% 89% 610 577 $ 7,255
MI - Detroit Macomb Manor 217 33 2000 867 20% 35% 97% 97% 648 625 $ 9,390
NY - Long Island Bayview/Colonial 160 35 2000 882 45% 37% 93% 98% 872 782 $ 11,469
NY - Long Island Eastwinds 96 36 2000 888 45% 48% 88% 97% 887 781 $ 7,000
NY - Long Island Maple Tree 84 51 2000 937 45% 33% 91% 97% 945 829 $ 5,874
NY - Long Island Ryder Apartments 24 41 2000 817 45% 29% 95% 96% 924 850 $ 1,632
NY - Long Island Southbay Manor 61 42 2000 849 45% 66% 77% 90% 1,083 875 $ 4,987
NY - Long Island Terry Apartments 65 26 2000 722 60% 25% 95% 98% 903 806 $ 4,268
PA - Philadelphia Home Properties
of Bryn Mawr 316 51 2000 900 25% 55% 91% 95% 936 837 $ 27,076
PA - Philadelphia Home Properties of
Castle Club 158 35 2000 974 10% 34% 98% 98% 741 693 $ 10,940
PA - Philadelphia Home Properties of
Devon 628 39 2000 1299 1% 45% 92% 94% 996 891 $ 50,044
PA - Philadelphia Home Properties of
Golf Club 399 33 2000 821 10% 55% 91% 93% 897 804 $ 31,456
PA - Philadelphia William Henry 363 31 2000 900 20% 38% 88% 95% 950 831 $ 31,229
PA - Philadelphia Home Properties of
Trexler Park 249 28 2000 1000 15% 66% 91% 95% 906 808 $ 18,526
VA - Suburban DC East Meadow 150 31 2000 1035 20% 59% 96% 98% 1,148 1,018 $ 13,261
VA - Suburban DC Elmwood Terrace 504 29 2000 1038 18% 45% 91% 92% 709 657 $ 21,863
VA - Suburban DC Orleans Village 851 34 2000 1040 8% 39% 96% 99% 1,035 966 $ 72,629
2000 Total/Weighted
Average 5,385 39 978 16% 46% 93% 96% $ 886 $ 802 $374,545
(1) "Core Communities" represents the 30,802 apartment units owned consistently
throughout 2000 and 2001.
(2) "Mature Residents" is the percentage of residents aged 55 years or older as
of December 31, 2001.
(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, 2000 and 2001. For communities acquired during 2000 and
2001, this is the average occupancy from the date of acquisition.
(5) The Lansdowne Group consolidated figures are reflected in the Marshall House
line.
15
Communities Wholly Owned
and Managed by Home Properties
2001 2000
Avg Avg
Mo Mo.
(2) (3) (4) Rent Rent
# Age Average 2001 2001 2001 2000 Rate Rate 12/31/01
of in Year Apt Size % Mature % Resident Average % Average % per per Total Cost
Regional Area Apts Years Acq (Sq Ft) Residents Turnover Occupancy Occupancy Apt. Apt. (000)
-------------- ---- ----- --- ------- --------- -------- --------- --------- ---- --- -----
2001 Acquisition
Communities
IL - Chicago Courtyards 224 30 2001 673 5% 51% 95% N/A $ 798 N/A $ 13,251
MD - Baltimore Fenland Field 234 31 2001 934 10% 48% 95% N/A 851 N/A $ 14,783
MD - Baltimore Mill Town Village
Apartments 384 28 2001 812 7% 46% 86% N/A 579 N/A $ 18,191
MD - Baltimore The Manor 435 32 2001 1017 10% 44% 97% N/A 1,004 N/A $ 36,594
MD - Baltimore Woodholme Manor 176 32 2001 825 10% 36% 95% N/A 552 N/A $ 6,167
NY - Long Island Devonshire Hills 297 33 2001 803 45% 22% 94% N/A 1,610 N/A $ 47,911
NY - Long Island Southern Meadows 452 30 2001 810 45% 50% 97% N/A 1,146 N/A $ 41,056
VA - Suburban DC Virginia Village 344 34 2001 1028 6% 64% 89% N/A 1,053 N/A $ 28,345
VA - Suburban DC Wellington Lakes 160 30 2001 675 7% 83% 95% N/A 679 N/A $ 6,491
VA - Suburban DC Wellington Woods 114 29 2001 688 4% 47% 98% N/A 691 N/A $ 4,638
2001 Total/Weighted
Average 2,820 31 884 18% 48% 94% N/A $ 896 N/A $ 217,427
Owned Portfolio
Total/Weighted Avg 39,007 25 860 20% 45% 94% 94% $ 798 $736 $2,128,134
(1) "Core Communities" represents the 30,802 apartment units owned consistently
throughout 2000 and 2001.
(2) "Mature Residents" is the percentage of residents aged 55 years or older as
of December 31, 2001.
(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, 2000 and 2001. For communities acquired during 2000 and
2001, this is the average occupancy from the date of acquisition.
(5) The Lansdowne Group consolidated figures are reflected in the Marshall House
line.
16
Property Development
--------------------
Management believes that new construction of market rate multifamily
apartments is not economically feasible in most of its markets.
Therefore, Home Properties' prior development and redevelopment
activities were limited to 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.
Effective December 31, 2000, the Company sold its affordable housing
development operations to Conifer, LLC. Conifer, LLC is led by Richard
J. Crossed, a former Executive Vice President and former director of
the Company. The Company retained property management operations for
8,325 apartment units in 136 existing affordable communities.
The Company has retained the ability to develop new communities, both
affordable and market rate, but does not plan to focus on this
activity. Rather, it plans to engage in development activity only on a
very selective basis.
Property Management
-------------------
As of December 31, 2001, the Managed Properties consist of: (i) 8,035
apartment units where Home Properties is the general partner of the
entity that owns the property; (ii) 2,703 apartment units managed for
others; (iii) commercial properties managed for an affiliate which
contain approximately 2.2 million square feet of gross leasable area;
(iv) a master planned community managed for an affiliate known as
Gananda; (v) a 140-lot Planned Unit Development managed for an
affiliate known as College Greene; (vi) a 202-lot Planned Unit
Development managed for an affiliate 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 table on the following pages details managed communities broken
down by market area.
17
Managed Communities by Market Area
----------------------------------
Communities Managed as General Partner
Community Name City # of
-------------- ----
Apts.
----
UPSTATE NEW YORK
Buffalo, NY Area
Linda Lane Apartments Cheektowaga 156
Rochester, NY Area
Abraham Lincoln Rochester 69
Ambassador Apartments Rochester 54
Chevy Place Rochester 77
College Greene Senior Apartments N. Chili 110
East Court Apartments Rochester 85
Ellis Hollow Ithaca 100
Evergreen Hills Macedon 232
Fort Hill Canandaigua 57
Geneva Garden Apartments Geneva 53
Highland Park Dundee 91
Huntington Park Apartments Rochester 75
Jefferson Park Fairport 69
Lima Manor Apartments Lima 32
Linderman Creek Ithaca 56
Monica Place Rochester 21
Nichols Schoolhouse Apartments Nichols 13
Sandy Creek Albion 24
Springside Meadows Apartments West Henrietta 54
St. Bernard's Park Rochester 59
St. Bernard's Park II Rochester 88
St. Michael's Senior Housing Rochester 28
Totiakton Manor Honeoye Falls 56
Village Square Painted Post 75
Walnut Hill Dundee 59
Washington Park Castile 24
YWCA Rochester 86
Syracuse, NY Area
Candlelight Lane Apartments Liverpool 244
Canton Manor Apartments Canton 30
Champion Apartments West Carthage 32
Champion Apartments II West Carthage 32
Church Street Apartments Port Byron 39
Circle Drive Apartments I Sidney 32
Circle Drive Apartments II Sidney 24
Hunters Run Dexter 40
LaFarge Senior Housing Lafargeville 24
Ledges Evans Mills 100
Lenox Landing Syracuse 32
Macartovin Utica 66
Mayrose Apartments Oneonta 32
Meadowview I Central Square 60
Meadowview II Central Square 46
Meadowview III Central Square 24
Northcliffe Apartments Cortland 58
Norwich Senior Housing Norwich 32
Oak Square Apartments Oneonta 30
Penet Square Apartments Lafargeville 24
Pontiac Terrace Apartments Oswego 70
Read Memorial Senior Apartments Hancock 28
Schoolhouse Apartments Waterville 56
Schoolhouse Gardens Groton 28
Sherburne Senior Housing Sherburne 29
Wedgewood Apartments Kirkville 70
Wedgewood II Senior Apartments Kirkville 24
Windsor Place Apartments N. Syracuse 180
Albany/Hudson Valley NY Area
Adam Lawrence Apts Corinth 40
Albert Carriere Apartments Rouses Point 56
Apple Meadow Village Hudson 48
Apple Meadow Village II Hudson 10
Black Brook Senior Housing Au Sable Forks 24
Bonnie View Terrace Apts Wilmington 24
Albany/Hudson Valley NY Area (Continued)
Cynthia Meadows Greenwich 36
Communities Managed as General Partner
Community Name City # of
-------------- ----
Apts.
----
Greencourt Apartments Mt. Vernon 76
Hillside Terrace Poughkeepsie 64
Lakeside Manor Apartments Schroon Lake 24
Louis Apartments Coxsackie 24
Maple Ridge Senior Housing Malone 40
Peppertree Apartments Coxsackie 24
Peppertree Park Coxsackie 24
Riverwood Apartments I Stillwater 24
Riverwood Apartments II Stillwater 24
Roderick Rock Senior Housing Rouses Point 24
South 15th Apartments Mt. Vernon 66
Terrace View Apartments Yonkers 48
Trinity Senior Apartments Yonkers 45
Webster Manor Apts Malone 32
Other New York State Areas
Managed Out of the Erie, PA Office
Arcade Manor Arcade 24
Belmont Village Court Belmont 24
Blairview Apartments Blairsville 42
Bolivar Manor Bolivar 24
Canisteo Manor Canisteo 24
Carrollton Heights Limestone 18
Cattaraugus Manor Cattaraugus 24
Little Valley Estates Little Valley 24
Maple Apartments Alfred 24
Maple Leaf Apartments Franklinville 24
Portville Manor Portville 24
Portville Square Portville 24
Yorkshire Corners Delevan 24
WESTERN PENNSYLVANIA
Erie, PA Area
Arlington Manor Greenville 48
Brandy Spring Apartments Mercer 40
Bridgeview Apartments Emlenton 36
Connellsville Heights Connellsville 36
Creekside Apartments Leechburg 30
Derry Round House Derry 26
Freedom Apartments Ford City 28
Green Meadow Apartments (Knolls) Pittsburgh 1,072
Greenwood Apartments Mt. Pleasant 36
Harrison City Commons Harrison City 38
Independence Apartments Mt. Pleasant 28
Lake City Apartments Lake City 44
Lake Street Apartments Girard 32
Liberty Apartments Brookville 28
Lincoln Woods Apartments Warren 44
Little Creek (Isabella Estates) Saxonburg 26
Mercer Manor Mercer 26
Millwood Arms Ford City 28
Oswayo Apartments Shinglehouse 18
Parkview Apartments Brookway 24
Rivercourt Apartments Tionesta 18
Scottdale Plaza Apartments Scottdale 22
Seneca Woods Apartments Seneca 40
Sheffield Country Manor Sheffield 24
Silver Maples Apartments Ulysses 24
Summit Manor Cresson 24
Taylor Terrace W. Pittsburgh 30
Tionesta Manor Tionesta 36
Tower View Apartments Tower City 25
Townview Apartments St. Mary's 36
Tremont Station Tremont 24
Washington Street Apartments Conneautville 30
Woodside Apartments Grove City 32
Wright Village Sandy Lake 24
INDIANA
Dunedin Apartments South Bend 168
18
Communities Managed as General Partner
Community Name City # of
-------------- ---- Apts.
-----
NORTHERN/CENTRAL OHIO
Briggs/Wedgewood Apartments Columbus 868
Sunset West Apartments Conneaut 40
Villas of Geneva Geneva 40
NEW JERSEY
Leland Gardens Plainfield 256
Millstream Apartments Washington 96
Township
Total Communities Managed
as General Partner
8,035
--------------------------------------------------------------------------------
Communities Fee Managed
Community Name City # of
-------------- ---- Apts.
UPSTATE NEW YORK
Rochester, NY Area
Bernard Housing Dansville 32
Fight Village Rochester 246
Glen Valley Apartments Watkins Glen 32
Hudson Housing Rochester 55
Albany, NY Area
Council Meadows Burnt Hills 25
Green Meadow Apts Chester 36
WESTERN PENNSYLVANIA
Erie, PA Area
Rose Square Connellsville 11
BALTIMORE, MD
2400 Pennsylvania Avenue Washington 103
Allenbee Garden Apartments Forestville 36
Annapolis Roads Apartments Annapolis 282
Chesapeake Bay Apartments Annapolis 108
Dunfield Townhomes Baltimore 312
Fox Hall Baltimore 720
Green Ridge House Greenbelt 101
Hyattsville House Hyattsville 65
Silver Hill Gardens Suitland 324
Towne Crest Apartments Gaithersburg 107
DETROIT, MI
Woodward Heights Apartments Royal Oak 108
Total Communities Fee Managed 2,703
19
Supplemental Property Information
---------------------------------
At December 31, 2001, 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 2001.
Item 3. Legal Proceedings
------ -----------------
The Company is a party to certain legal proceedings. All such
proceedings, taken together, are not expected to have a material
adverse effect on the Company's liquidity, financial position or
results of operations. The Company is also subject to a variety of
legal actions for personal injury or property damage arising in the
ordinary course of its business, most of which are covered by
liability 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.
Item 4. Submission of Matters to Vote of Security Holders
------ -------------------------------------------------
None.
Item 4A. Executive Officers and Key Employees
------- ------------------------------------
The following table sets forth, as of February 25, 2002, the eight
executive officers and certain of the key employees of the Company,
together with their respective ages, positions and offices.
Name Age Position
----- --- --------------
Norman P. Leenhouts 66 Chairman, Co-Chief Executive Officer and Director of
Home Properties, Chairman and Director of HP Management and
Chairman and Director of HP Resident Services
Nelson B. Leenhouts 66 President, Co-Chief Executive Officer and Director of
Home Properties, President, Chief Executive Officer and Director
of HP Management and Director and President of HP Resident
Services
Edward J. Pettinella 50 Executive Vice President and Director of Home Properties
David P. Gardner 46 Senior Vice President and Chief Financial Officer of
Home Properties, HP Resident Services and HP Management
Ann M. McCormick 45 Senior Vice President, General Counsel and Secretary of
Home Properties and HP Management and General Counsel and
Secretary of HP Resident Services
Scott A. Doyle 40 Senior Vice President, Residential Property Management of
Home Properties
Johanna A. Falk 37 Senior Vice President, Information Systems of Home Properties
John E. Smith 51 Senior Vice President, Acquisitions of Home Properties
20
Name Age Position
----- --- --------------
Robert J. Luken 37 Vice President, Treasurer and Controller of Home Properties, HP
Resident Services and HP Management
William E. Beach 55 Vice President, Commercial Property Management of Home Properties
and HP Management
William L. Brown 58 Vice President, Residential Property Management of Home Properties
Lavonne R. Childs 39 Vice President, Web Assisted HP Resident Services of
Home Properties
Charis W. Copin 52 Vice President, Investor Relations
Douglas Erdman 43 Vice President, Residential Property Management of Home Properties
Rhonda Finehout 51 Vice President, Residential Property Management of
Home Properties and HP Resident Services
Timothy A. Florczak 46 Vice President, Education
Mildred R. Hemstetter 66 Vice President, Residential Property Management
Marianne Holman 48 Vice President, Residential Property Management
Gerald B. Korn 55 Vice President, Mortgage Finance of Home Properties
Laurie Leenhouts 45 Vice President, Residential Property Design of Home Properties
and HP Management
Paul O'Leary 50 Vice President, Acquisitions and Due Diligence of Home Properties
Bernard J. Quinn 45 Vice President, Residential Property Management of Home Properties
James E. Quinn, Jr. 46 Vice President, Residential Property Management of Home Properties
Alan Regan 38 Vice President, Affordable Housing
Janine M. Schue 39 Vice President, Human Resources
Richard J. Struzzi 48 Vice President, Development of Home Properties and HP Management
Kathleen Suher 34 Vice President, Assistant Counsel
Robert C. Tait 44 Vice President, Commercial Property Management of Home Properties
and HP Management
21
Name Age Position
---- --- --------
Marilyn Thomas 51 Vice President, Residential Property Management
of Home Properties and HP Resident Services
Linda Vicari 39 Vice President, Residential Property Management
Information regarding Nelson and Norman Leenhouts and Edward Pettinella
is set forth below under "Board of Directors" in Item 10.
David P. Gardner has served as Senior Vice President of the Company
since 2000, and Vice President and Chief Financial Officer of HP
Management and HP Resident Services 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 Senior Vice President since 2000, and
Vice President and General Counsel and Secretary of the Company and HP
Management since their inception. She has also served as Secretary and
General Counsel of HP Resident Services since 1998 and as a Vice
President since December, 2000. 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 Peabody LLP. Mrs. McCormick is a graduate of Colgate
University and holds a Juris Doctor from Cornell University.
Scott A. Doyle has served as Senior Vice President since 2000, and Vice
President of the Company since 1997. He has also served as a Vice
President of HP Resident Services since December, 2000. He joined Home
Properties in 1996 as a Regional Property Manager. Mr. Doyle has been
in property management for 17 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.
Johanna A. Falk has served as a Senior Vice President since 2000, and
Vice President of the Company since 1997. She has also served as a Vice
President of HP Resident Services since December, 2000. She joined the
Company in 1995 as an investor relations specialist and is currently
responsible for the Information Systems Department. 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 E. Smith joined Home Properties as Vice President of Acquisitions
in 1997 and was elected a Senior Vice President in 2001. 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 was Director of Investment Properties at Hunt Commercial
Real Estate for 20 years. He has been a Certified Commercial Investment
Member (CCIM) since 1982, a New York State Certified Instructor and has
taught commercial real estate courses in four states.
Robert J. Luken has served as Treasurer of the Company since 2000, and
Controller since 1996 and as a Vice President since 1997. He has also
served as a Vice President and Controller of HP Resident Services and
HP Management since 1998. Prior to joining the Company, he was the
Controller of Bell Corp. of Rochester and an Audit Supervisor for
PricewaterhouseCoopers LLP. Mr. Luken is a graduate of St. John Fisher
College and is a Certified Public Accountant.
22
Mr. Luken serves on the Finance Committee of the Ronald McDonald House
Charities in Rochester, New York.
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.
William L. Brown has served as a Vice President of the Company since
2000. He joined the Company in 1998 when the Company acquired the
multi-family assets owned by the Siegel Organization in Baltimore,
Maryland. Mr. Brown had served as an Executive Vice President of the
Siegel Organization since 1970. He is a graduate of the University of
Baltimore.
Lavonne R. Childs has served as Vice President of the Company since
1997 and as Vice President, Web Assisted HP Resident Services since
August, 2000. She has also served as a Vice President of HP Resident
Services since December, 2000. 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.
Charis W. Copin has served as Vice President of the Company since
2001. She joined Home Properties in 2001 as Director of Investor
Relations. Prior to joining the Company, she was Director of Investor
Relations at PSC Inc. since 1996. She had previously held various
senior management positions in Marketing, Corporate and Investor
Relations, and Strategic Planning at RCSB Financial, Inc., the holding
company for Rochester Community Savings Bank. Ms. Copin holds an MBA
from the Rochester Institute of Technology and a BA from St. Lawrence
University.
Douglas F. Erdman has served as Vice President of the Company since
1999. He has also served as a Vice President of HP Resident Services
since December, 2000. Prior to joining Home Properties, he was
President of Community Realty Company, Inc., a Washington D.C. based
real estate firm providing commercial and multi-family property
management, commercial leasing, brokerage, general contracting, and
real estate development services. Mr. Erdman is a graduate of Towson
University, is a Certified Property Manager (CPM) and holds real
estate brokers licenses in Maryland, Virginia and Washington D. C. Mr.
Erdman serves on the Multi-housing Council of the Urban Land Institute
and on the Board of Directors of JFGH, an organization of group homes
for disabled adults.
Rhonda K. Finehout has served as a Vice President of the Company and HP
Resident Services 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.
Mildred R. Hemstetter has served as a Vice President of the Company
since 2001. Prior to joining Home Properties in 1999, she had served
as Vice President of Property Management for The Macks-Fidler
Organization in Baltimore, Maryland for 40 years. Ms. Hemstetter is
the Regional Leader for the Mid-Atlantic, Baltimore Region. She also
serves on the Maryland Multi- Housing Association Executive Board, is
a Senior Registered Apartment Manager, and a HUD Certified Assisted
Housing Manager.
23
Marianne C. Holman has served as a Vice President of the Company since
2001. She joined the Company in 1999 and served as a Property Manager
for the Detroit Region until January, 2001, when she was promoted to
Regional Leader. Ms. Holman has been in property management for 18
years. Prior to joining the Company, she worked with Equity Residential
Properties. Ms. Holman is a licensed Michigan real estate broker, a
Certified Property Manager (CPM) candidate as designated by the
Institute of Real Estate Management, and serves on the board of the
Property Management Council of Michigan.
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 is a graduate of the Rochester Institute of
Technology.
Laurie A. 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.
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.
Bernard J. Quinn has served as Vice President of the Company since
2000. He joined the Company in 1997 and served as a Property Manager in
the Philadelphia region until 2000 when he was appointed Regional
Leader of the New Jersey region. Prior to joining the Company, Mr.
Quinn was employed by Mill Creek Realty in Philadelphia. Mr. Quinn has
a Pennsylvania real estate license and is a graduate of Villanova
University. He serves on the Board of Directors of the New Jersey
Apartment Association.
James E. Quinn, Jr. has served as Vice President of the Company since
1998. He has also served as Vice President of HP Resident Services
since 2000. 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 Mill Creek Realty Group. Mr. Quinn is a licensed
Pennsylvania real estate broker and is a graduate of Drexel
University. He serves on the Board of Directors as Treasurer of the
Apartment Association of Greater Philadelphia.
Alan Regan has served as Vice President of the Company since 2001. He
joined the Company in 2000 as Director of Affordable Housing. Prior to
joining Home Properties, Mr. Regan was the Chief Operating Officer
with Landsman Development Corporation. Mr. Regan is a graduate of
Fredonia State College.
Janine M. Schue has served as a Vice President of the Company since
February, 2002, after joining the Company in October of 2001. Prior to
joining the Company, she was employed by NetSetGo as Vice President of
Human Resources and prior to that by Wegmans Food Markets, Inc. as
Director of Human Resources. Ms. Schue is a graduate of the State
University of New York at Albany and holds a Masters of Education.
Richard J. Struzzi has served as a Vice President of the Company and HP
Management since their inception. He has also served as a Vice
President of HP Resident Services since December, 2000. 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.
24
Kathleen K. Suher joined the Company as in-house counsel in 1998 and was
named Vice President in 2001. Prior to joining Home Properties, she was
an associate with the law firm of Nixon Peabody LLP, specializing in
real estate. Mrs. Suher is a graduate of the University of Rochester and
holds a Juris Doctor from Syracuse University College of Law.
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 Director Amy L. Tait, he is the
son-in-law of Norman Leenhouts.
Marilyn Thomas has served as a Vice President of the Company and HP
Resident Services since 1999. She joined the Company in 1998. Prior to
joining Home Properties, Mrs. Thomas was a Vice President at
Patterson-Erie Corporation for 15 years, working in the affordable
housing, market rate apartment and development areas. Mrs. Thomas is a
licensed Pennsylvania real estate broker and has been a Certified
Property Manager since 1988.
Linda Vicari has served as Vice President of the Company since February,
2002. She joined the Company in November of 2000 as a Regional Leader
for the Pittsburgh/Ohio Region. Ms. Vicari holds a Bachelors degree in
Business Management and Economics from the State University of New York
at Fredonia. She is a Certified Property Manager (CPM) and is the
Charity Liaison of the Executive Council for the Pittsburgh Chapter of
the Institute of Real Estate Management. Ms. Vicari has worked in the
residential property management industry for 20 years, serving areas
spanning ten states.
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
---- --- ------------
2000
----
First Quarter $29.00 $25.75 $.53
Second Quarter $30.00 $26.50 $.53
Third Quarter $31.56 $28.19 $.53
Fourth Quarter $28.94 $25.56 $.57
2001
----
First Quarter $28.63 $25.89 $.57
Second Quarter $30.21 $27.50 $.57
Third Quarter $32.26 $29.00 $.57
Fourth Quarter $33.42 $29.63 $.60
As of February 22, 2002, the Company had approximately 5,800
shareholders of record, 24,968,808 common shares (plus 15,981,163 UPREIT
Units convertible into 15,981,163 common shares and Preferred Stock
convertible into 4,605,943 common shares) were outstanding, and the
closing price was $32.70. It is the Company's policy to pay dividends.
The Company has historically paid dividends on a quarterly basis in the
months of February, May, August and November. The Credit Agreement
relating to the Company's $100 million line of credit provides 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.
25
Item 6. Selected Financial Data
-----------------------
The following table sets forth selected financial and operating data on a
historical basis for the Company and should be read in conjunction with the
financial statements appearing elsewhere in this Form 10-K (amounts in
thousands, except per share data).
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Revenues:
Rental Income $ 348,914 $ 298,860 $ 217,591 $ 137,557 $ 64,002
Other Income 18,609 20,188 16,872 11,686 5,695
------------ ------------ ------------ ------------ ------------
TOTAL REVENUES 367,523 319,048 234,463 149,243 69,697
------------ ------------ ------------ ------------ ------------
Expenses:
Operating and maintenance 145,558 128,034 95,200 63,136 31,317
General & administrative 18,614 13,235 10,696 6,685 2,255
Interest 66,446 56,792 39,558 23,980 11,967
Depreciation & amortization 64,890 52,430 37,350 23,191 11,200
Loss on available-for-sale
securities -- -- 2,123 -- --
Non-recurring acquisition expense -- -- 6,225 -- --
------------ ------------ ------------ ------------ ------------
TOTAL EXPENSES 295,508 250,491 191,152 116,992 56,739
------------ ------------ ------------ ------------ ------------
Income before gain (loss) on
disposition of property and
business, minority interest
and extraordinary item 72,015 68,557 43,311 32,251 12,958
Gain (loss) on disposition of
property and business 26,241 (1,386) 457 -- (1,283)
------------ ------------ ------------ ------------ ------------
Income before minority interest
and extraordinary item 98,256 67,171 43,768 32,251 11,675
Minority interest 33,682 25,715 17,390 12,603 4,248
------------ ------------ ------------ ------------ ------------
Income before extraordinary item 64,574 41,456 26,378 19,648 7,427
Extraordinary item, prepayment
penalties, net of allocation
to minority interest (68) -- (96) (960) (1,037)
------------ ------------ ------------ ------------ ------------
Net income before preferred
dividends 64,506 41,456 26,282 18,688 6,390
Preferred dividends (17,681) (12,178) (1,153) -- --
------------ ------------ ------------ ------------ ------------
Net income available to common
shareholders $ 46,825 $ 29,278 $ 25,129 $ 18,688 $ 6,390
============ ============ ============ ============ ============
Net income before extraordinary item
per common share:
Basic $ 2.12 $ 1.42 $ 1.35 $ 1.41 $ 1.00
============ ============ ============ ============ ============
Diluted $ 2.11 $ 1.41 $ 1.34 $ 1.40 $ .98
============ ============ ============ ============ ============
Net income per common share:
Basic $ 2.12 $ 1.42 $ 1.34 $ 1.34 $ .86
============ ============ ============ ============ ============
Diluted $ 2.11 $ 1.41 $ 1.34 $ 1.33 $ .84
============ ============ ============ ============ ============
Cash dividends declared per
common share $ 2.31 $ 2.16 $ 1.97 $ 1.83 $ 1.74
============ ============ ============ ============ ============
Balance Sheet Data:
Real estate, before accumulated
depreciation $ 2,135,078 $ 1,895,269 $ 1,480,753 $ 940,788 $ 525,128
Total assets 2,063,789 1,871,888 1,503,617 1,012,235 543,823
Total debt 992,858 832,783 669,701 418,942 218,846
Series B convertible cumulative
preferred stock 48,733 48,733 48,733 -- --
Stockholders' equity 620,596 569,528 448,390 361,956 151,432
Other Data:
Funds from Operations (1) $ 136,604 $ 120,854 $ 80,784 $ 55,966 $ 24,345
Cash available for distribution
($ 120,994 $ 107,300 $ 78,707 $ 49,044 $ 21,142
Net cash provided by operating
activities $ 148,389 $ 127,197 $ 90,526 $ 60,548 $ 27,285
Net cash used in investing
activities ($ 139,106) ($ 178,445) ($ 190,892) ($ 297,788) ($ 102,460)
Net cash (used in) provided by
financing activities ($ 9,013) $ 56,955 $ 71,662 $ 266,877 $ 77,461
Weighted average number of
shares outstanding:
Basic 22,101,027 20,639,241 18,697,731 13,898,221 7,415,888
Diluted 22,227,521 20,755,721 18,800,907 14,022,329 7,558,167
Total communities owned at end
of period 143 147 126 96 63
Total apartment units owned at
end of period 39,007 39,041 33,807 23,680 14,048
26
(1) Management considers funds from operations ("FFO") to be an appropriate
measure of performance of an equity REIT. FFO is generally defined as net
income (loss) before gains (losses) from the sale of property and business
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 five years is presented as follows:
2001 2000 1999 1998 1997
---- ---- ---- ---- ----
Net income available to common
shareholders $ 46,825 $ 29,278 $ 25,129 $ 18,688 $ 6,390
Preferred dividends 17,681 12,178 1,153 -- --
Minority interest 33,682 25,715 17,390 12,603 4,248
Extraordinary item 68 -- 96 960 1,037
Depreciation from real property/(1)/ 64,589 52,297 37,473 23,715 11,387
(Gain) loss from sale of property
and business (26,241) 1,386 (457) -- 1,283
-------- -------- -------- -------- --------
FFO $136,604 $120,854 $ 80,784 $ 55,966 $ 24,345
======== ======== ======== ======== ========
Weighted average common shares/units
outstanding:
Basic 37,980.0 35,998.3 31,513.8 22,871.7 11,373.9
======== ======== ======== ======== ========
Diluted 45,063.6 41,128.4 32,044.9 22,995.8 11,516.1
======== ======== ======== ======== ========
/(1)/ Includes amounts passed through from unconsolidated investments.
All REITs may not be using the same definition for FFO. Accordingly, the
above presentation 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:
2001 1st 2nd 3rd 4th Total
---- --- --- --- --- -----
Funds from Operations $ 26,953 $ 34,698 $ 37,818 $ 37,135 $ 136,604
Weighted Average Shares/Units:
Basic 37,581.0 37,461.8 38,010.4 38,849.5 37,980.0
Diluted 39,311.4 44,661.2 45,281.1 45,536.6 45,063.6
2000 1st 2nd 3rd 4th Total
---- --- --- --- --- -----
Funds from Operations
$ 25,407 $ 29,788 $ 33,106 $ 32,553 $ 120,854
Weighted Average Shares/Units:
Basic 34,123.2 35,846.3 36,820.1 37,261.3 35,998.3
Diluted 37,586.7 40,249.9 43,162.4 43,625.1 41,128.4
(2) Cash Available for Distribution is defined as Funds from Operations less an
annual reserve for anticipated recurring, non-revenue generating
capitalized costs of $400 ($375 for 1998-2000, $350 for 1996-1997, and $300
for 1995) per apartment unit. It is the Company's policy to fund its
investing activities and financing activities with the proceeds of its line
of credit, new debt, by the issuance of additional Units in the Operating
Partnership, or proceeds from property dispositions.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
27
Overview
--------
The following discussion should be read in conjunction with
consolidated financial statements, the notes thereto, and the selected
financial data appearing elsewhere in this report. Historical results
and percentage relationships set forth in the consolidated financial
statements, including trends which might appear, should not be taken as
indicative of future operations. The Company considers portions of the
information to be "forward-looking statements" within the meaning of
Section 27A of the Securities Exchange Act of 1933 and Section 21E of
the Securities Exchange Act of 1934, both as amended, with respect to
the Company's expectations for future periods. Forward-looking
statements include, without limitation, statements related to
acquisitions (including any related pro forma financial information)
future capital expenditures, financing sources and availability and the
effects of environmental and other regulations. Although the Company
believes that the expectations reflected in those forward-looking
statements are based upon 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
within anticipated budgets, the actual pace of future acquisitions, and
continued access to capital to fund growth. For this purpose, any
statements contained herein that are not statements of historical fact
should be deemed to be forward-looking statements. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects",
"seeks", "estimates", and similar expressions are intended to identify
forward-looking statements. Readers should exercise caution in
interpreting and relying on forward-looking statements since they
involve known and unknown risks, uncertainties and other factors which
are, in some cases, beyond the Company's control and could materially
affect the Company's actual results, performance or achievements.
The Company is engaged primarily in the ownership, management,
acquisition, rehabilitation and development of residential apartment
communities in the Northeastern, Mid-Atlantic and Midwestern United
States. As of December 31, 2001, the Company operated 293 apartment
communities with 49,745 apartments. Of this total, the Company owned
143 communities, consisting of 39,007 apartments, managed as general
partner 132 partnerships that owned 8,035 apartments and fee managed
2,703 apartments for affiliates and third parties. The Company also fee
manages 2.2 million square feet of office and retail properties.
Results of Operations
---------------------
Comparison of year ended December 31, 2001 to year ended December 31,
2000.
The Company owned 111 communities with 30,802 apartment units
throughout 2000 and 2001 where comparable operating results are
available for the years presented (the "2001 Core Properties"). For the
year ending December 31, 2001, the 2001 Core Properties showed an
increase in rental revenues of 6.2% and a net operating income increase
of 7.7% over the 2000 year-end period. Property level operating
expenses increased 4.3%. Average economic occupancy for the 2001 Core
Properties decreased from 94.4% to 93.7%, with average monthly rental
rates increasing 7.1% to $776.
A summary of the 2001 Core Property net operating income is as follows:
2001 2000 % Change
---- ---- --------
Rent $ 268,620,000 $ 252,863,000 6.2%
Property Other Income 10,461,000 9,741,000 7.4%
--------------- -------------- -----
Total Income 279,081,000 262,604,000 6.3%
Operating and Maintenance (112,969,000) (108,334,000) (4.3%)
--------------- -------------- -----
Net Operating Income $ 166,112,000 $ 154,270,000 7.7%
=============== ============== =====
28
During 2001, the Company acquired a total of 2,820 apartment units in
10 newly-acquired communities (the "2001 Acquisition Communities"). In
addition, the Company experienced a full year results for the 5,384
apartment units in 22 apartment communities (the "2000 Acquisition
Communities") acquired during 2000. The inclusion of these acquired
communities generally accounted for the significant changes in
operating results for the year ended December 31, 2001.
During 2001, the Company also disposed of 14 properties with a total of
2,855 units, which had partial results for 2001 (the "2001 Disposed
Communities").
For the year ended December 31, 2001, operating income (income before
gain on disposition of property and business, minority interest and
extraordinary item) increased by $3,458,000 when compared to the year
ended December 31, 2000. The increase was primarily attributable to the
following factors: an increase in rental income of $50,054,000 and a
decrease in all other income of $1,579,000. These changes were
partially offset by an increase in operating and maintenance expense of
$17,524,000, an increase in general and administrative expense of
$5,379,000, an increase in interest expense of $9,654,000, and an
increase in depreciation and amortization of $12,460,000.
Of the $50,054,000 increase in rental income, $28,989,000 is
attributable to the 2000 Acquisition Communities and $14,032,000 is
attributable to the 2001 Acquisition Communities, offset in part by a
$8,724,000 reduction attributable to the 2001 Disposed Communities. The
balance of $15,757,000 relates to a 6.2% increase from the 2001 Core
Properties due primarily to an increase of 7.1% in weighted average
rental rates, offset by a decrease in average economic occupancy from
94.4% to 93.7%.
In addition to normal rent increases, the Company was successful in
achieving above-normal increases at specific properties where rents
were below the level of the average rent charged by our direct
competition. An additional component of the 7.1% increase in weighted
average rent results from the significant upgrading and repositioning
efforts discussed under the Capital Improvements section of this
report. The Company seeks a minimum 15% internal rate of return for
these revenue enhancing upgrades.
The decrease in average economic occupancy can be attributed to the
decline in general economic conditions during 2001. Same-store
occupancies have averaged approximately 95% for a number of years.
During the second quarter of 2001, the Detroit regional market
experienced softness that was related to a slowdown and announced
lay-offs in the auto industry. A reduction in job growth leads to fewer
household formations, which creates a reduction in demand for rental
housing. During the third and fourth quarters of 2001, it became
obvious that the recession was affecting all of our regions, as well as
our competitors. Occupancy levels dipped to a low of 91.6% for the
month of December.
In January, 2002, one of management's performance measures seemed to
suggest that the Company may have reached the bottom of the decline in
occupancy. Traffic at the communities had increased, and it was the
first month since the end of the second quarter of 2001 that occupancy
levels did not continue to decrease.
In this recessionary economic environment, it is very difficult to
project rental rate and occupancy results. The Company has provided
guidance for 2002, which, at the mid-point of the range, anticipates
same store revenue growth of 6%, including above-average rental
increases from the continued efforts to upgrade the properties.
Occupancy levels are expected to remain low during the first quarter of
2002, averaging 91.8%. Improvement in occupancy is expected each
successive quarter in 2002, producing an expected average for the year
of 93.2%.
Property other income, which consists primarily of income from
operation of laundry facilities, late charges, administrative fees,
garage and carport rentals, net profits from corporate apartments,
cable revenue, pet charges, and miscellaneous charges to residents,
increased in 2001 by
29
$1,930,000. Of this increase, $980,000 is attributable to the 2000
Acquisition Communities, $483,000 is attributable to the 2001
Acquisition Communities and $720,000 represents a 7.4% increase from
the 2001 Core Properties, offset in part by a $271,000 reduction
attributable to the 2001 Disposed Communities.
Interest and dividend income decreased in 2001 by $4,732,000, due
primarily to the Company contributing loans due from affiliates to
HPRS, in March, 2001, described in the next paragraph. Subsequent to
the transfer, the interest income is reported in Other income.
Other income, which reflects the net contribution from management and
development activities after allocating certain overhead and interest
expense, increased by $1,223,000 due primarily to interest income on
loans from affiliated partnerships. The general and administrative
overhead represents an allocation of direct and indirect costs incurred
by the Company estimated by management to be associated with these
activities. In March, 2001, HPRS was recapitalized with a contribution
of $23.7 million of loans to affiliated partnerships by the Company.
This effectively shifted a significant amount of interest income to the
Other income category, where the Company records its share of interest
income through its equity earnings of affiliates.
Of the $17,524,000 increase in operating and maintenance expenses,
$13,256,000 is attributable to the 2000 Acquisition Communities,
$4,418,000 is attributable to the 2001 Acquisition Communities and a
reduction of $4,785,000 is attributable to the 2001 Disposed
Communities. The balance for the 2001 Core Properties, a $4,635,000
increase in operating expenses or 4.3%, is primarily a result of
increases in gas utilities, office and telephone expense, and real
estate taxes, offset in part by decreases in repairs and maintenance,
incentive compensation, and property insurance.
Natural gas costs for the Core Properties were up 43% for the twelve
months, due to extraordinary increases in natural gas prices as well as
lower temperatures in 2001 compared to above-average temperatures in
2000. Looking back the last ten years, the price of natural gas has
been relatively stable. Historically, at the beginning of each heating
season, rates experienced some pressures but start to stabilize at
lower levels in January. The 2000/2001 heating season did not follow
this same pattern. Spot prices per decatherm spiked over $10 in
December, 2000 and January, 2001. This unusual pattern made it more
difficult to execute economically feasible fixed price contracts.
During the first quarter of 2001, the Company experienced extremely
high costs for natural gas, producing a same-store increase in
operating and maintenance costs of 15.1%.
Management believed it was in the Company's best interest to take
advantage of lower natural gas prices and to negotiate fixed price
contracts starting in the Spring of 2001. As of December 31, 2001, the
Company had fixed-price contracts covering 90% of its natural gas
exposure for properties owned by the Company at December 31, 2001. For
the 2002 heating season, the average price per decatherm is
approximately $4.50. Current twelve month strip pricing is about $3.00
per decatherm. If rates do not increase, the Company stands to benefit
from lower pricing, as existing contracts mature and are extended or
renewed. The Company has fixed-price contracts covering 50% of its
natural gas exposure for the 2003 heating season. Risk is further
diversified by staggering contract term expirations.
In October, 2001, the Company resolved a legal claim with an insurance
provider and received a total settlement of $4.9 million. This refund
was allocated to insurance expense in relation to the Company's
estimate of loss spread over the corresponding policy term. The policy
term covered November 1, 2000 to October 31, 2001 and November 1, 2001
to October 31, 2002. The amount of the settlement relating to the
period from November 1, 2000 to December 31, 2001 was estimated to be
$2.2 million, and that amount reduced insurance expense in the fourth
quarter of 2001. The remaining settlement of $2.7 million relates to
the remaining policy period from January 1, 2001, through October 31,
2002, and will be amortized on a straight-line basis over that period.
30
The Company has provided guidance for 2002 which anticipates same store
expense growth at the mid-point of the range of 6.5%. Natural gas costs
are assumed to improve 3%, personnel expense is projected to increase
9%, real estate taxes are expected to increase 6%, and insurance costs
should almost double. Health care increases account for a large part of
the personnel cost increase.
Certain quarterly variations are expected for 2002. The first quarter
expense growth is expected to increase only 2.2% compared to the first
quarter of 2001. This is due to an expected favorable variance in
natural gas heating costs. The fourth quarter of 2002 is expected to
increase over 12% compared to the same period in 2001. This is due to
an expected significant negative variance for insurance expense. As
previously discussed, the fourth quarter of 2001 reflected a large
insurance settlement effectively recognizing the benefit for the
previous fourteen months in the fourth quarter, which will produce a
significant variance for comparison purposes.
The operating expense ratio (the ratio of operating and maintenance
expense compared to rental and property other income) for the 2001 Core
Properties was 40.5% and 41.3% for 2001 and 2000, respectively. This
0.8% reduction is a result of the 6.3% increase in total rental and
property other income achieved through ongoing efforts to upgrade and
reposition properties for maximum potential. 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 2001 by $5,379,000, or
41% from $13,235,000 in 2000 to $18,614,000 in 2001. As the Company
expands geographically, the increases reflect increased efforts in
serving residents and employees through new and expanded initiatives,
including a help desk, call center, and an education department. In
addition, the increase can be attributed to overhead costs, which had,
historically, been allocated to the Company's affordable housing
development business, which was sold in 2000 and the net results of
which were reported in other income. The percentage of general and
administrative expenses compared to total revenue was 5.1% for 2001
compared to 4.1% for 2000.
Interest expense increased in 2001 by $9,654,000 as a result of the
acquisition of the 2001 Acquisition Communities and a full year of
interest expense for the 2000 Acquisition Communities. The 2000
Acquisition Communities, costing in excess of $322,000,000, were
financed with $163,000,000 of assumed debt in addition to the use of
UPREIT Units. The 2001 Acquisition Communities, costing in excess of
$212,000,000, were financed with $68,000,000 of assumed debt, in
addition to the use of UPREIT Units. During 2001, the Company
refinanced $52,000,000 in existing mortgage debt resulting in new
borrowings in excess of $131,000,000. In addition, amortization from
deferred charges relating to the financing of properties totaling
$632,000 and $566,000 was included in interest expense for 2001 and
2000, respectively.
Depreciation and amortization expense increased $12,460,000 due to the
depreciation on the 2001 Acquisition Communities, the 2000 Acquisition
Communities, the additions to the Core Properties, net of the 2001
Disposition Communities.
During 2001, the Company reported a gain on disposition of property and
business of $26,241,000. This includes the disposition of 14 apartment
communities with 2,855 units in six separate transactions for a total
sales price of $122,000,000.
Minority interest increased $7,967,000 due to the increase in income
allocated to the OP Unitholders, which is attributable to the 2001
Acquisition Communities, the 2000 Acquisition Communities, net of the
2001 Disposition Communities, and the gain on disposition of property
and business.
31
Net income increased $23,050,000 or 56% primarily attributed to the
results of the 2001 Acquisition Communities, the 2001 Acquisition
Communities, net of the 2001 Disposition Communities, as previously
discussed and the gain on disposition of property and business.
Comparison of year ended December 31, 2000 to year ended December 31,
1999.
The Company owned 95 communities with 23,530 apartment units throughout
1999 and 2000 where comparable operating results were available for the
years presented (the "2000 Core Properties"). For the year ending
December 31, 2000, the 2000 Core Properties showed an increase in
rental revenues of 5.8% and a net operating income increase of 7.6%
over the 1999 year-end period. Property level operating expenses
increased 5.3%. Average economic occupancy for the 2000 Core Properties
increased from 94.6% to 94.7%, with average monthly rental rates
increasing 5.7% to $701.
A summary of the 2000 Core Property net operating income is as follows:
2000 1999 % Change
---- ---- --------
Rent $ 187,491,000 $ 177,286,000 5.8%
Property Other Income 7,412,000 5,606,000 32.2%
-------------- -------------- -----
Total Income 194,903,000 182,892,000 6.6%
Operating and Maintenance (83,756,000) (79,570,000) (5.3%)
-------------- -------------- -----
Net Operating Income $ 111,147,000 $ 103,322,000 7.6%
============== ============== =====
During 2000, the Company acquired the "2000 Acquisition Communities"
and also experienced a full year of results for the 10,127 apartment
units in 30 apartment communities (the "1999 Acquisition Communities")
acquired during 1999. The inclusion of these acquired communities
generally accounted for the significant changes in operating results
for the year ended December 31, 2000.
The Company also disposed of one property during 2000, a 150-unit
community located in Pittsburgh, Pennsylvania, which had partial
results for 2000 (the "2000 Disposed Community").
For the year ended December 31, 2000, operating income (income before
loss on disposition of property and business, minority interest and
extraordinary item) increased by $25,246,000 when compared to the year
ended December 31, 1999. The increase was primarily attributable to the
following factors: an increase in rental income of $81,269,000 and an
increase in all other income of $3,316,000. These changes were
partially offset by an increase in operating and maintenance expense of
$32,834,000, an increase in general and administrative expense of
$2,539,000, an increase in interest expense of $17,234,000, an increase
in depreciation and amortization of $15,080,000 and loss on
available-for-sale securities and non-recurring acquisition expense
totaling $8,348,000 affecting only 1999.
Of the $81,269,000 increase in rental income, $47,376,000 is
attributable to the 1999 Acquisition Communities and $24,204,000 is
attributable to the 2000 Acquisition Communities, offset in part by a
$516,000 reduction attributable to the 2000 Disposed Community. The
balance of $10,205,000 is a 5.8% increase from the 2000 Core Properties
due primarily to an increase of 5.7% in weighted average rental rates,
plus an increase in average economic occupancy from 94.6% to 94.7%.
Property other income, which consists primarily of income from
operation of laundry facilities, administrative fees, garage and
carport rentals, net profits from corporate apartments and
miscellaneous charges to residents, increased in 2000 by $4,511,000. Of
this increase, $1,847,000 is attributable to the 1999 Acquisition
Communities, $884,000 is attributable to the 2000 Acquisition
Communities and $1,806,000 represents a 32.2% increase from the 2000
Core Properties, offset in part by a $26,000 reduction attributable to
the 2000 Disposed Community.
32
The increase for the 2000 Core Properties included a one-time benefit
from a favorable insurance settlement of $239,000. Without the affect
of the settlement, property other income would have increased 28%.
Interest and dividend income increased in 2000 by $654,000, primarily
attributable to an increase in loans to one of the Company's Management
Companies used to acquire land held in inventory for future
development, as well as increased levels of cash reserves invested.
Dividend income of $714,000 in 1999 from investments in marketable
securities did not continue in 2000.
Other income reflects the net contribution from management and
development activities after allocating certain overhead and interest
expense. The net contribution decreased by $1,849,000, or 64% from 1999
to 2000. The decrease is due primarily to a decrease in gross
development fee revenues of $1,462,000. Effective December 31, 2000,
the Company sold its affordable housing development business to the key
personnel who ran the division for approximately $6,700,000.
Of the $32,834,000 increase in operating and maintenance expenses,
$20,354,000 is attributable to the 1999 Acquisition Communities,
$8,604,000 is attributable to the 2000 Acquisition Communities and a
reduction of $310,000 is attributable to the 2000 Disposed Community.
The balance for the 2000 Core Properties, a $4,186,000 increase in
operating expenses or 5.3%, is primarily a result of increases in gas
utilities, personnel expenses, property insurance and real estate
taxes.
Increases in utility expenses were a large contributor to operating and
maintenance expense increases for the year and, as previously
discussed, continued to unfavorably affect results in 2001. Natural gas
prices were very volatile in 2000. As previously discussed, over the
last ten years, the price of natural gas has been relatively stable
and, at the beginning of each heating season, rates experienced some
pressures but started to stabilize at lower levels around January. The
1999/2000 heating season did not follow this same pattern. This unusual
pattern made it more difficult to execute economically feasible fixed
price contracts.
The months of December, 2000 and January, 2001 yielded prices for
natural gas topping out at over $10 per decatherm. For deliveries in
March, 2001 the price was reduced to approximately $5.00 per decatherm.
As a result, the Company negotiated fixed price contracts starting in
the Spring of 2001 for close to 90% of its exposure for the 2001/2002
heating season.
Management believed at that time that these higher expenses would
eventually be absorbed by our residents. As discussed in the Comparison
of year ended December 31, 2001 to year ended December 31, 2000, rent
increases were passed on to residents as leases (which typically have a
one year term) were renewed.
The operating expense ratio (the ratio of operating and maintenance
expense compared to rental and property other income) for the 2000 Core
Properties was 43.0% and 43.5% for 2000 and 1999, respectively. This
0.5% reduction is a result of the 6.6% increase in total rental and
property other income achieved through ongoing efforts to upgrade and
reposition properties for maximum potential. 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 2000 by $2,539,000, or
24% from $10,696,000 in 1999 to $13,235,000 in 2000. 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 15% as of December 31, 2000
compared to December 31, 1999. The percentage of G&A compared to total
revenue was 4.1% for 2000 compared to 4.6% for 1999.
33
Interest expense increased in 2000 by $17,234,000 as a result of the
acquisition of the 2000 Acquisition Communities and a full year of
interest expense for the 1999 Acquisition Communities. The 1999
Acquisition Communities, costing in excess of $480,000,000, were
financed with $203,000,000 of assumed debt in addition to the use of
UPREIT Units. The 2000 Acquisition Communities, costing in excess of
$322,000,000, were financed with $163,000,000 of assumed debt, in
addition to the use of UPREIT Units. In addition, amortization from
deferred charges relating to the financing of properties totaling
$566,000 and $516,000 was included in interest expense for 2000 and
1999, respectively.
Depreciation and amortization expense increased $15,080,000 due to the
depreciation on the 2000 Acquisition Communities, the 1999 Acquisition
Communities, and the additions to the 2000 Core Properties.
During 2000, the Company reported a loss on disposition of property of
$1,386,000. This included $417,000 from the sale of Payne Hill in
Pittsburgh, $924,000 from the sale of the affordable housing
development business and $45,000 from the sale of a general partnership
interest.
Minority interest increased $8,325,000 due to the increase in income
allocated to the OP Unitholders, which is attributable to the 2000
Acquisition Communities, the 1999 Acquisition Communities, and the loss
on disposition of property and business.
Net income increased $15,174,000 or 58% primarily attributed to the
results of the 2000 Acquisition Communities, the 1999 Acquisition
Communities, as previously discussed, net of the loss on disposition of
property and business.
Liquidity and Capital Resources
-------------------------------
The Company's principal liquidity demands are expected to be
distributions to the common and preferred stockholders and Operating
Partnership Unitholders, capital improvements and repairs and
maintenance for the properties, acquisition of additional properties,
stock repurchases and debt repayments. The Company may also engage in
transactions whereby it acquires equity ownership in other public or
private companies that own and manage portfolios of apartment
communities. Management anticipates the acquisition of properties in
the range of $200 to $300 million in 2002.
The Company intends to meet its short-term liquidity requirements
through net cash flows provided by operating activities and the line of
credit, as described below. The Company considers its ability to
generate cash to be adequate to meet all operating requirements and
make distributions to its stockholders in accordance with the
provisions of the Internal Revenue Code, as amended, applicable to
REITs.
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 ("DRIP"), proceeds from the sale of
properties, property debt financing, or issuing additional common
shares, shares of the Company's preferred stock, or other securities.
As of December 31, 2001, the Company owned 27 properties, with 4,948
apartment units, which were unencumbered by debt.
In addition, an increase in a source of liquidity will be from the sale
of properties. Since its IPO through 2000, the Company had sold only a
few small properties. During 2001, the Company sold 14 communities for
a total sales price of $122 million. The Company was able to sell these
properties at an average capitalization rate of 9.2% and reinvest in
the acquisition of properties with more growth potential at an expected
first year cap rate of 9.3%. Management believes that the Company will
strategically dispose of assets aggregating between $50 and $100
million in 2002.
34
In May, 1998, the Company's Form S-3 Registration Statement was
declared effective relating to the issuance of up to $400 million of
common stock, preferred stock or other securities. The available
balance on the shelf registration statement at December 31, 2001 was
$227,390,000.
In December, 1999, the Class A limited partnership interests held by
the State of Michigan Retirement Systems (originally issued in
December, 1996 for $35 million) were converted to Series A Convertible
Cumulative Preferred shares ("Series A Preferred Shares") which
retained the same material rights and preferences that were associated
with the limited partnership interests. On November 28, 2001, the
Series A Preferred Shares were converted to common shares. The
conversion had no effect on reported results of operations.
In September, 1999, the Company completed the sale of $50 million of
Series B Preferred Stock in a private transaction with GE Capital. The
Series B Preferred stock carries an annual dividend rate equal to the
greater of 8.36% or the actual dividend paid on the Company's common
shares into which the preferred shares can be converted. The stock has
a liquidation preference of $25.00 per share, a conversion price of
$29.77 per share, and a five-year, non-call provision. On February 14,
2002, 1,000,000 shares of the Series B Preferred stock were converted
to 839,771 common shares. The conversion will have no effect on the
reported results of operations.
In May and June, 2000, the Company completed the sale of $60 million of
Series C Preferred Stock in a private transaction with affiliates of
Prudential Real Estate Investors ("Prudential"), Teachers Insurance and
Annuity Association of America ("Teachers"), affiliates of AEW Capital
Management and Pacific Life Insurance Company. The Series C Preferred
Stock carries an annual dividend rate equal to the greater of 8.75% or
the actual dividend paid on the Company's common shares into which the
preferred shares can be converted. The stock has a conversion price of
$30.25 per share and a five-year, non-call provision. As part of the
Series C Preferred Stock transaction, the Company also issued 240,000
warrants to purchase common shares at a price of $30.25 per share,
expiring in five years.
In June, 2000, the Company completed the sale of $25 million of Series
D Preferred Stock in a private transaction with The Equitable Life
Assurance Society of the United States. The Series D Preferred Stock
carries an annual dividend rate equal to the greater of 8.775% or the
actual dividend paid on the Company's common shares into which the
preferred shares can be converted. The stock has a conversion price of
$30 per share and a five-year, non-call provision.
In December, 2000, the Company completed the sale of $30 million of
Series E Preferred Stock in a private transaction, again with
affiliates of Prudential and Teachers. The Series E Preferred Stock
carries an annual dividend rate equal to the greater of 8.55% or the
actual dividend paid on the Company's common shares into which the
preferred shares can be converted. The stock has a conversion price of
$31.60 per share and a five-year, non-call provision. In addition, as
part of the Series E Preferred Stock transaction, the Company issued
warrants to purchase 285,000 common shares at a price of $31.60 per
share, expiring in five years.
In 2000, the Company obtained an investment grade rating from Fitch,
Inc. The Company was assigned an initial corporate credit rating of
"BBB" (Triple-B), with a rating of "BBB-" (Triple-B Minus) for Series C
through E convertible Preferred Stock.
The issuance of UPREIT Units for property acquisitions continues to be
a significant source of capital for the Company. During 2001, 520
apartment units in two separate transactions were acquired for a total
cost of $33,000,000, using UPREIT Units valued at approximately
$19,000,000 with the balance paid in cash or assumed debt. During 2000,
3,583 apartment units in eight separate transactions were acquired for
a total cost of $203,000,000, using UPREIT Units valued at
approximately $59,000,000 with the balance paid in cash or assumed
debt.
In 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 and
35
UPREIT Units. The Board's action did not establish a target price or a
specific timetable for repurchase. At December 31, 1999, there was
approval remaining to purchase 795,100 shares. In 2000, the Board of
Directors approved a 1,000,000-share increase in the stock repurchase
program. During 2000, the Company repurchased 468,600 shares at a cost
of $12,664,000. In 2001, the Board of Directors approved a
1,000,000-share increase in the stock repurchase program. During 2001,
the Company repurchased 754,000 shares and 436,700 UPREIT Units at a
cost of $20,600,000 and $11,900,000, respectively. Approval to
repurchase 1,135,800 shares of common stock and UPREIT Units remains at
December 31, 2001.
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, which have varied between 2% and 3%.
During 2000, $57,000,000 of common stock was issued under this plan,
with an additional $32,000,000 of common stock issued in 2001.
The DRIP was amended, effective April 10, 2001, in order to reduce
management's perceived dilution from issuing new shares at or below the
underlying net asset value. The discount on reinvested dividends and
optional cash purchases was reduced from 3% to 2%. The maximum monthly
investment (without receiving approval from the Company) was reduced
from $5,000 to $1,000. As expected, these changes significantly reduced
participation in the Plan. Management will continue to monitor the
relationship between the Company's stock price and estimated net asset
value. During times when this difference is small, management has the
flexibility to issue waivers to DRIP participants to provide for
investments in excess of the $1,000 maximum monthly investment. In
connection with the announcement of the February, 2002 dividend, the
Company announced such waivers will be considered beginning with the
March 2002 optional cash purchase, since management believes the stock
is trading at or above its estimate of net asset value.
As of December 31, 2001, the Company had an unsecured line of credit
from M&T Bank with a borrowing capacity of $100,000,000 and $32,500,000
outstanding. Borrowings under the facility bear interest at 1.25% over
the one-month LIBOR rate. The line of credit expires on September 1,
2002. The Company is evaluating alternatives to replace or extend the
line of credit after September 1, 2002.
As of December 31, 2001, the weighted average rate of interest on the
Company's mortgage debt was 7.2% and the weighted average maturity of
such indebtedness was approximately ten years. Mortgage debt of $960
million was outstanding with 99% at fixed rates of interest with
staggered maturities. This limits the exposure to changes in interest
rates, minimizing the effect of interest rate fluctuations on the
Company's results of operations and cash flows.
The Company's net cash provided by operating activities increased from
$127,217,000 for the year ended December 31, 2000 to $148,389,000 for
the year ended December 31, 2001. The increase was principally due to
the acquisition of the 2000 and 2001 Acquisition Communities, net of
2001 Disposition Communities.
Net cash used in investing activities decreased from $178,465,000 in
2000 to $139,106,000 in 2001. The level of properties purchased
decreased in 2001 to $212 million from $328 million, the amount of
mortgages assumed and UPREIT units issued decreased by $135 million,
additions to properties increase $38 million, while proceeds from the
sale of properties increased $103 million, such that the net cash used
in investing activities decreased, accounting for most of the year over
year decrease.
The Company's net cash provided by (used in) financing activities
decreased from providing $56,955,000 in 2000 to using $9,013,000 in
2001. The major source of financing in 2001 was $8,423,000 of proceeds
from sales of common stock, net of the purchase of treasury stock and
36
UPREIT Units and $92,268,000 in net debt proceeds, used to fund property
acquisitions and improvements. In 2000, proceeds from the sale of preferred
stock and common stock totaling $168,462,000 were used to fund property
acquisitions and additions. Due to the lower number of acquisitions in
2001, such funding was not needed in 2001.
On February 4, 2002, the Board of Directors approved a dividend of $.60 per
share for the period from October 1, 2001 to December 31, 2001. This is the
equivalent of an annual distribution of $2.40 per share. The dividend is
payable February 26, 2002 to shareholders of record on February 15, 2002.
Off-Balance Sheet Investments
-----------------------------
The Company has investments in and advances to approximately 132 limited
partnerships where the Company acts as the managing general partner. The
Company accounts for these investments on the equity method of accounting,
recording its share of the net income or loss based upon the terms of the
partnership agreement. To the extent that it is determined that the limited
partners cannot absorb their share of the losses, if any, the general
partner will record the limited partners share of such losses.
The Company has guaranteed the low income housing tax credits to the
limited partners for a period of five years in 42 partnerships totaling
approximately $48,500,000. Such guarantee requires the Company to operate
the properties in compliance with Internal Revenue Code Section 42 for 15
years. In addition, acting as the general partner in certain partnerships,
the Company is obligated to advance funds to meet partnership operating
deficits. However, such funding requirements cease after a five year
period. Should operating deficits continue to occur, the Company would
determine on an individual partnership basis if it is in the best interest
of the Company to continue to fund these deficits.
These partnerships are funded with non-recourse financing. The Company's
proportionate share of non-recourse financing was $6,800,000 at December
31, 2001. The Company has guaranteed a total of $606,000 of debt associated
with two of these partnerships. In addition, the Company, including the
Management Companies, has provided loans and advances to certain of the
partnerships aggregating $25,245,000 at December 31, 2001. The Company
assesses the financial status and cash flow of each of the partnerships at
each balance sheet date in order to assess recoverability of its investment
in and advances to these affiliates.
The Company believes the properties operations conform to the applicable
requirements as set forth above and do not anticipate any payment on the
guarantees described above.
Summarized balance sheet information relating to these partnerships is as
follows (amounts are in thousands):
2001 2000
---- ----
Balance Sheets:
Real estate, net $280,864 $293,616
Other assets 36,579 34,023
-------- --------
Total assets $317,443 $327,639
======== ========
Mortgage notes payable $253,798 $257,834
Advances from affiliates 25,245 21,957
Other liabilities 18,140 18,558
Partners' equity 20,260 29,290
-------- --------
Total liabilities and partners' equity $317,443 $327,639
======== ========
Acquisitions and Dispositions
-----------------------------
37
In 2001, the Company acquired a total of 10 communities with a total of
2,820 units for total consideration of $212,000,000, or an average of
approximately $75,200 per unit. For the same time period, the Company sold
14 properties with a total of 2,855 units for total consideration of
$122,400,000, or an average of $42,900 per unit. The weighted average
expected first year cap rate of the 2001 Acquisition Communities was 9.3%
and of the 2001 Disposed Communities was 9.2%. The weighted average
unleveraged internal rate of return (IRR) during the Company's ownership
for the properties sold was 15.8%.
Although the Company has acquired properties every year since its initial
public offering in 1994, 2001 was the first year of its asset disposition
program. The Company's management was very pleased with the success of its
strategy to recycle assets by disposing of properties that have reached
their potential or are less efficient to operate due to size or remote
location, while acquiring properties in targeted geographic regions with
higher future growth characteristics. The Company indicated that the timing
of sales and acquisitions worked well to avoid dilution and a negative
spread in initial cap rates.
In January, 2002, the Company sold six communities with a total of 339
units in Eastern Pennsylvania and Baltimore, Maryland for total
consideration of $13,600,000, or an average of $41,100 per unit. The
expected weighted average first year cap rate on these sales is 10.5%
(before a reserve for capital expenditures). A gain on sale of
approximately $500,000 is expected to be reported in the first quarter of
2002 from these sales.
Contractual Obligations and other Commitments
---------------------------------------------
The primary obligations of the Company relate to its borrowings under the
line of credit and mortgage notes payable. The $32,500,000 outstanding
under the line of credit matures in September, 2002. The $960,000,000 in
mortgage notes payable have varying maturities ranging from 1 to 11 years.
The principal payments on the mortgage notes payable for the years
subsequent to December 31, 2001 are as follows: $53,378,000 - 2002,
$26,359,000 - 2003, $36,675,000 - 2004, $41,870,000 - 2005, $68,485,000 -
2006 and $733,591,000 - thereafter. 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. At December 31, 2001, future
minimum rental payments required under the lease are $70 per year until the
lease expires.
As discussed in the section entitled "Off-Balance Sheet Investments," the
Company has the following guarantees or commitments relating to its equity
method partnership investments: a) guarantee for a total of $606,000 of
debt associated with two of partnerships, b) guarantee of the low income
housing tax credits to the limited partners for a period of five years in
42 partnerships totaling approximately $48,500,000, and c) the Company is
obligated to advance funds to meet partnership operating deficits for a
five year period for certain partnerships. The Company believes the
properties operations conform to the applicable requirements as set forth
above and do not anticipate any payment on the guarantees described above.
Capital Improvements
--------------------
Total capital improvement expenditures increased from $92,603,000 in 2000
to $130,468,000 in 2001. Of the $130,468,000 in total 2001 expenditures,
$37,140,000 is attributable to the 2000 Acquisition Communities, $3,111,000
is attributable to the 2001 Acquisition Communities, and $2,969,000 is
attributable to the 2001 Disposition Communities. Of the remaining
$87,248,000, $85,001,000 relates to the 2001 Core Properties and $2,247,000
relates to corporate office expenditures.
Costs related to the acquisition, development, construction and improvement
of properties are capitalized. Recurring, capital replacements typically
include carpeting and tile, appliances, HVAC equipment, new roofs, site
improvements and various exterior building improvements. Non-
38
recurring upgrades include, among other items, community centers, new
appliances, new windows, kitchens and bathrooms. Interest costs are
capitalized until construction is substantially complete. Ordinary repairs
and maintenance that do not extend the life of the asset are expensed as
incurred. The Company's financial statements are impacted by its
capitalization policies. Other companies may have different policies.
Funding for the above described capital replacements are provided by cash
flows from operating activities. The Company estimates that during 2001,
approximately $400 per unit was spent on capital replacements to maintain
the condition of its properties.
The schedule below summarizes the breakdown of capital improvements:
Non-recurring
Recurring Capital Revenue Enhancing Combined Capital
Replacements Upgrades Improvements
------------ -------- ------------
2001 Core Properties $12,321,000 $ 72,680,000 $ 85,001,000
2000 Acquisition Communities 2,154,000 34,986,000 37,140,000
2001 Acquisition Communities 515,000 2,596,000 3,111,000
2001 Disposition Communities 566,000 2,403,000 2,969,000
Corporate office expenditures* N/A N/A 2,247,000
----------- ------------ ------------
$15,556,000 $112,665,000 $130,468,000
=========== ============ ============
*No distinction is made between recurring or non-recurring expenditures for
the corporate office.
The $112,665,000 incurred to fund non-recurring, revenue enhancing upgrades
included, among other items, the following: construction of seven new
community centers; nearly 21,000 new windows; and the modernization of
approximately 4,300 kitchens and 5,100 bathrooms. Management believes that
these upgrades contributed significantly towards achieving 7.7% average
growth in net operating income at the 2001 Core Properties. For the
combined 2001 and 2000 Acquisition Communities, substantial rehabilitations
were 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 as quickly as possible.
Funding for these capital improvements was provided by the line of credit
and equity proceeds.
During 2002, management expects that the communities' revenue growth will
benefit further from improvements completed in 2001 and plans to continue
to fund similar non-recurring, revenue enhancing upgrades. Management
anticipates expenditures of $96 million in 2002, in addition to normal
capital replacements. The Company selected J.D. Edwards as a platform for
the new back office accounting system. The capital outlay during 2002 is
estimated to be $1.5 million. The system will be fully implemented around
mid-year and should streamline the reporting process as well as provide
improved management information.
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 material liability for site restoration or other costs that may be
incurred with respect to the sale or disposal of a property.
New Accounting Pronouncements
-----------------------------
On June 29, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 (SFAS 141), Business
Combinations, and No. 142 (SFAS 142), Goodwill and Other Intangible Assets.
The provisions of SFAS 141 require the use of purchase accounting for all
business combinations and the separate allocation of purchase price to
intangible assets if specific criteria are met. The provisions of SFAS 142
state that
39
goodwill and intangible assets with indefinite useful lives should not be
amortized but rather tested at least annually for impairment. Intangible
assets that have finite useful lives should continue to be amortized over
their estimated useful lives. SFAS 142 also provides specific guidance for
testing goodwill and intangible assets for impairment. The Company does not
anticipate that these standards will have a material impact on the
Company's financial position, results of operations, or cash flows. The
provisions of SFAS No. 141 apply to all business combinations initiated
after June 30, 2001. The Company will adopt FAS 142 effective January 1,
2002.
In October 2001, the FASB issued Statement of Financial Accounting Standard
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets. This standard harmonizes the accounting for
impaired assets and resolves some of the implementation issues as
originally described in SFAS 121. It retains the fundamental provisions of
Statement 121 for (a) recognition and measurement of the impairment of
long-lived assets to be held and used and (b) measurement of long-lived
assets to be disposed of by sale. It also retains the basic provisions for
presenting discontinued operations in the income statement but broadens the
scope to include a component of an entity rather than a segment of a
business. The Company will adopt this standard effective January 1, 2002.
The Company does not expect this pronouncement to have a material impact on
the Company's financial position, results of operations, or cash flows.
Economic Conditions
-------------------
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.
Historically, real estate has been subject to a wide range of cyclical
economic conditions, which affect various real estate sectors and
geographic regions with differing intensities and at different times. In
2001, many regions of the United States have experienced varying degrees of
economic recession; and the tragic events of September 11, 2001 accelerated
certain recessionary trends, such as the cost of obtaining sufficient
property and liability insurance coverage, short term interest rates, and a
temporary reduction in occupancy. The Company believes, however, that these
tragic events did not have a material effect on the Company's portfolio,
given our property type and the geographic regions in which we are located.
We will continue to review our business strategy and do not anticipate any
changes in strategy or material effects in financial performance.
Contingency
-----------
The Company has recently undergone a state tax audit. The state has
assessed taxes of $469,000 for the 1998 and 1999 tax years under audit. If
the state's position is applied to all tax years through December 31, 2001,
the assessment would be $1.8 million. The Company believes the assessment
and the state's underlying position is not supportable by the law nor
consistent with previously provided interpretative guidance from the office
of the State Secretary of Revenue. The Company has been advised that it has
meritorious positions for its previous tax filings. As a result, no amounts
were accrued by the Company as of December 31, 2001.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary market risk exposure is interest rate risk. At
December 31, 2001 and 2000, approximately 96% and 99%, respectively, of the
Company's debt bore interest at fixed rates with a weighted average
maturity of approximately 10 and 11 years, respectively, and a weighted
average interest rate of approximately 7.27% and 7.41%, respectively,
including the $35 million of debt swapped to a fixed rate. The remainder of
the Company's debt bears interest at variable rates with a weighted average
maturity of approximately 1 year and 6 years, respectively,
40
and a weighted average interest rate of 3.27% and 6.54%, respectively, at
December 31, 2001 and 2000. The Company does not intend to utilize
permanent variable rate debt to acquire properties in the future. On
occasion, the Company may assume variable rate debt or use its line of
credit in connection with a property acquisition with the intention to swap
to or refinance with fixed rate debt. The Company believes, however, that
in no event would increases in interest expense as a result of inflation
significantly impact the Company's distributable cash flow.
At December 31, 2001 and 2000, the interest rate risk on $35 million of
such variable rate debt has been mitigated through the use of interest rate
swap agreements (the "Swaps") with major financial institutions. The
Company is exposed to credit risk in the event of non-performance by the
counter-parties to the Swaps. The Company believes it mitigates its credit
risk by entering into these Swaps with major financial institutions. The
Swaps effectively convert an aggregate of $35 million in variable rate
mortgages to fixed rates of 5.91%, 7.66%, 8.40% and 8.22%.
At December 31, 2001 and 2000, the fair value of the Company's fixed rate
debt, including the $35 million which was swapped to a fixed rate, amounted
to a liability of $958 million and $859 million compared to its carrying
amount of $960 million and $833 million, respectively. The Company
estimates that a 100 basis point decrease in market interest rates at
December 31, 2001 would have changed the fair value of the Company's fixed
rate debt to a liability of $1,016 million.
The Company intends to continuously monitor and actively manage interest
costs on its variable rate debt portfolio and may enter into swap positions
based upon market fluctuations. In addition, the Company believes that it
has the ability to obtain funds through additional equity offerings or the
issuance of UPREIT Units. Accordingly, the cost of obtaining such interest
rate protection agreements in relation to the Company's access to capital
markets will continue to be evaluated. The Company has not, and does not
plan to, enter into any derivative financial instruments for trading or
speculative purposes. As of December 31, 2001, the Company had no other
material exposure to market risk.
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.
41
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The Board of Directors (the "Board") currently consists of twelve
members. The terms for all of the directors of Home Properties expire
at the 2002 Shareholders' Meeting.
The information sets forth, as of February 25, 2002, 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. 86 1994
William Balderston, III 74 1994
Alan L. Gosule 61 1996
Leonard F. Helbig, III 56 1994
Roger W. Kober 68 1994
Nelson B. Leenhouts 66 1993
Norman Leenhouts 66 1993
Edward J. Pettinella 50 2001
Albert H. Small 76 1999
Clifford W. Smith, Jr. 55 1994
Paul L. Smith 66 1994
Amy L. Tait 43 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 Honorary Chairman of
the Board of Trustees of Rochester Institute of Technology, on the
Board of Directors of Park Ridge Health Systems and Hillside
Children's Center Foundation, on the cabinet of the Al Sigl Center, on
the Finance Committee of the United Way of Greater Rochester, and is 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
Senior Trustee of the University of Rochester and a member of the Board
of Governors of the University of Rochester Medical Center. Mr.
Balderston is also a Trustee of the Genesee Country Village Museum, as
well as a member of the Board of the Genesee Valley Conservancy. Mr.
Balderston is a graduate of Dartmouth 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 Clifford Chance
Rogers & 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 Clifford Chance 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 an LL.M. from
Georgetown University. Mr. Gosule also serves on the Boards of
Directors of the Simpson Housing Limited Partnership, F.L. Putnam
Investment Management Company, Colonnade Partners, and America First
Mortgage Investments, Inc. Clifford Chance Rogers & Wells LLP acted as
counsel to PricewaterhouseCoopers LLP in its capacity as advisor to
the State Treasurer of the State of Michigan in connection with its
investment of retirement funds in
42
Home Properties of New York, L.P. (the "Operating Partnership"). Mr.
Gosule was the nominee of the State Treasurer under the terms of the
investment agreements relating to that transaction. Those retirement
funds divested their interest in Home Properties in 2001 and no longer
have the right to nominate a board member. Mr. Gosule is expected to
continue to serve as a nominee of the Board of Directors.
Leonard F. Helbig, III has been a director of the Company since August,
1994. Since 1999 Mr. Helbig has served as President, Financial Services
for Cushman & Wakefield. Prior to that, Mr. Helbig was the Executive
Managing Director of the Asset Services and Financial Services Groups
since 1984. He joined Cushman & Wakefield in 1980 and is also a member
of that firm's Board of Directors and Executive Committee. 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 RGS Energy Corporation and its
wholly owned subsidiary, Rochester Gas and Electric Corporation. He was
employed by Rochester Gas and Electric Corporation 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 and a director of HP
Management since its formation. He has been a director of HP Resident
Services since its formation, President since 2000 and a Vice President
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 and a member
of the Board of Directors of the National Multi Housing Council. 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 since its formation. He has been a director of HP Resident
Services since its formation and Chairman since 2000. 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 and
is a member of the Board of Trustees of the University of Rochester and
Roberts Wesleyan College. He is a graduate of the University of
Rochester and is a certified public accountant. He is the twin brother
of Nelson Leenhouts.
Edward J. Pettinella has served as a Director and Executive Vice
President of the Company since February, 2001. From 1997 until
February, 2001, Mr. Pettinella served as President, Charter One Bank
(NY Division) and Executive Vice President of Charter One Financial,
Inc. From 1980 through 1997, Mr. Pettinella served in several
managerial capacities for Rochester Community Savings Bank, Rochester,
NY, including the positions of Chief Operating Officer and Chief
Financial Officer. Mr. Pettinella serves on the Board of Directors of
the United Way of Greater Rochester, State University at Geneseo,
Geneseo Foundation, Syracuse University School of Business, Rochester
Chamber of Commerce, Rochester Economic Development Corporation, and
the Memorial Art Gallery. Mr. Pettinella is a graduate of the State
University at Geneseo and holds an MBA from Syracuse University.
43
Albert H. Small has been a director of the Company since July, 1999.
Mr. Small, who has been active in the construction industry for 50
years, is President of Southern Engineering Corporation. Mr. Small is a
member of the Urban Land Institute, National Association of Home
Builders and currently serves on the Board of Directors of the National
Symphony Orchestra, National Advisory Board Music Associates of Aspen,
Department of State Diplomatic Rooms Endowment Fund, James Madison
Council of the Library of Congress, Tudor Place Foundation, The Life
Guard of Mount Vernon, Historical Society of Washington, DC and the
National Archives Foundation. Mr. Small is a graduate of the University
of Virginia. In connection with the acquisition of a portfolio of
properties located in the suburban markets surrounding Washington,
D.C., Mr. Small and others received approximately 4,086,000 of
operating partnership units in Home Properties of New York, L.P. Mr.
Small is the nominee of the former owners of that portfolio under the
terms of the acquisition documents.
Clifford W. Smith, Jr. has been a director of the Company since
August, 1994. Mr. Smith is the Epstein Professor of Finance of the
William E. Simon Graduate School of Business Administration of the
University of Rochester, where he has been on the faculty since 1974.
He has written numerous books and articles on a variety of financial,
capital markets and risk management topics and has held editorial
positions for a variety of journals. Mr. Smith is a graduate of Emory
University and has a PhD 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 director of Performance
Technologies, Inc. and Constellation Brands, Inc. He is also a member
of the Board of Trustees of the George Eastman House and Ohio Wesleyan
University. 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 a director of the Company since its inception
in 1993. Effective February 15, 2001, Mrs. Tait resigned her full-time
position as Executive Vice President of the Company and as a director
of HP Management. She is currently the principal of Tait Realty
Advisors, LLC, and continued as a consultant in the Company pursuant to
a consulting agreement that terminated on February 15, 2002. Mrs. Tait
joined Home Leasing in 1983 and held several positions with the
Company, 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, Princeton Club of
Rochester, the Al Sigl Center, and The Commission Project. Mrs. Tait is
a graduate of Princeton University and holds an MBA from the William E.
Simon Graduate School of Business Administration of the University of
Rochester. She is the daughter of Norman Leenhouts.
See Item 4A 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, 2001, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners
were satisfied.
44
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 7, 2002 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 7, 2002 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 7, 2002 under "Certain Relationships and Transactions", which proxy
statement will be filed within 120 days after the end of the Company's
fiscal year.
45
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
------- ---------------------------------------------------------------
(a) 1 and 2. Financial Statements and Schedule
The financial statements and schedule 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, 2001 and 2000 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 2001, 2000 and 1999 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 2001, 2000 and 1999 F-5
Consolidated Statements of Comprehensive Income
for the Years Ended December 31, 2001, 2000 and 1999 F-6
Consolidated Statements of Cash Flows
for the Years Ended December 31, 2001, 2000 and 1999 F-7
Notes to Consolidated Financial Statements F-8
Schedule III:
Real Estate and Accumulated Depreciation F-34
(a) 3. Exhibits
Exhibit
Number Exhibit
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
46
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. 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 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 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 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 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
47
2.26 Contract of Sale between Lake Grove Associates Corp. and Home
Properties of New York L.P., dated December 17, 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 relating to the Kaplan Portfolio
with schedule setting forth material details in which documents differ
from form
2.29 Form of Contribution Agreement dated June 7, 1999, relating to the CRC
Portfolio with schedule setting forth material details in which
documents differ from form
2.30 Form of Contribution Agreement relating to the Mid-Atlantic Portfolio
with schedule setting forth material details in which documents differ
from form
2.31 Contribution Agreement among Home Properties of New York, L.P., Leonard
Klorfine, Ridley Brook Associates and the Greenacres Associates
2.32 Purchase and Sale Agreement among Home Properties of New York, L.P. and
Chicago Colony Apartments Associates
2.33 Contribution Agreement among Home Properties of New York, L.P.,
Gateside-Bryn Mawr Company, L.P., Willgold Company, Gateside-Trexler
Company, Gateside-Five Points Company, Stafford Arms, Gateside-
Queensgate Company, Gateside Malvern Company, King Road Associates and
Cottonwood Associates
2.34 Form of Contribution Agreement between Old Friends Limited Partnership
and Home Properties of New York, L.P. and Home Properties of New York,
Inc., along with Amendments Number 1 and 2 thereto
2.35 Form of Contribution Agreement between Deerfield Woods Venture Limited
Partnership and Home Properties of New York, L.P.
2.36 Form of Contribution Agreement between Macomb Apartments Limited
Partnership and Home Properties of New York, L.P.
2.37 Form of Contribution Agreement between Home Properties of New York,
L.P. and Elmwood Venture Limited Partnership
2.38 Form of Sale Purchase and Escrow Agreement between Bank of America as
Trustee and Home Properties of New York, L.P.
2.39 Form of Contribution Agreement between Home Properties of New York,
L.P., Home Properties of New York, Inc. and S&S Realty, a New York
General Partnership (South Bay)
2.40 Form of Contribution Agreement between Hampton Glen Apartments Limited
Partnership and Home Properties of New York, L.P.
2.41 Form of Contribution Agreement between Home Properties of New York,
L.P. and Axtell Road Limited Partnership
2.42 Form of Contribution Agreement between Elk Grove Terrace II and III,
L.P., Elk Grove Terrace, L.P. and Home Properties of New York, L.P.
3.1 Articles of Amendment and Restatement of 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 Articles of Amendment of the Articles of Incorporation of Home
Properties of New York, Inc.
3.4 Amended and Restated Articles Supplementary of Series A Senior
Convertible Preferred Stock of Home Properties of New York, Inc.
48
3.5 Series B Convertible Cumulative Preferred Stock Articles Supplementary
to the Amended and Restated Articles of Incorporation of Home
Properties of New York, Inc.
3.6 Series C Convertible Cumulative Preferred Stock Articles Supplementary
to the Amended and Restated Articles of Incorporation of Home
Properties of New York, Inc.
3.7 Series D Convertible Cumulative Preferred Stock Articles Supplementary
to the Amended and Restated Articles of Incorporation of Home
Properties of New York, Inc.
3.8 Series E Convertible Cumulative Preferred Stock Articles Supplementary
to the Amended and Restated Articles of Incorporation of Home
Properties of New York, Inc.
3.9 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 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 Plan
4.16 Home Properties of New York, Inc., Home Properties of New York, L.P.
Executive Retention Plan
4.17 Home Properties of New York, Inc. Deferred Bonus Plan
4.18 Fourth Amended and Restated Dividend Reinvestment, Stock Purchase,
Resident Stock Purchase and Employee Stock Purchase Plan
49
4.19 Directors Deferred Compensation Plan
4.20 Agency Fee and Warrant Agreement
4.21 Form of Warrant
4.22 Agency Fee and Warrant Agreement, Amendment No.1
4.23 Home Properties of New York, Inc. Amendment Number One to the Amended
and Restated Stock Benefit Plan
4.24 Fifth Amended and Restated Dividend Reinvestment, Stock Purchase,
Resident Stock Purchase and Employee Stock Purchase Plan
4.25 Sixth Amended and Restated Dividend Reinvestment and Direct Stock
Purchase Plan
4.26 Home Properties of New York, Inc. Amendment Number Two to the Amended
and Restated Stock Benefit Plan
4.27 Amendment No. One to Home Properties of New York, Inc. Deferred Bonus
Plan
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 Articles of Amendment to the Articles of Incorporation of Conifer
Realty Corporation Changing the name to Home Properties Resident
Services, Inc.
10.7 By-Laws of Conifer Realty Corporation
10.8 Home Properties Trust Declaration of Trust, dated September 19, 1997
10.9 Employment Agreement between Home Properties of New York, L.P. and
Norman P. Leenhouts
10.10 Amendments No. One, Two and Three to the Employment Agreement between
Home Properties of New York, L.P. and Norman P. Leenhouts
10.11 Employment Agreement between Home Properties of New York, L.P. and
Nelson B. Leenhouts
10.12 Amendments No. One, Two and Three to the Employment Agreement between
Home Properties of New York, L.P. and Nelson B. Leenhouts
10.13 Indemnification Agreement between Home Properties of New York, Inc. and
certain officers and directors
10.14 Indemnification Agreement between Home Properties of New York, Inc. and
Richard J. Crossed
10.15 Indemnification Agreement between Home Properties of New York, Inc. and
Alan L. Gosule
10.16 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 Beach, Paul O'Leary, Richard J. Struzzi, Robert C. Tait,
Timothy A. Florczak and Laurie Tones
10.17 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
50
10.18 Form of Term Promissory Note payable to Home Properties of New
York, by officers and directors in association with the Executive
and Director Stock Purchase and Loan Program
10.19 Form of Pledge Security Agreement executed by officers and directors in
connection with Executive and Director Stock Purchase and Loan Program
10.20 Schedule of Participants, loan amounts and shares issued in connection
with the Executive and Director Stock Purchase and Loan Program
10.21 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
10.22 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
10.23 Registration Rights Agreement, dated as of December 23, 1996 between
Home Properties of New York, Inc. and State of Michigan Retirement
Systems
10.24 Lock-Up Agreement, dated December 23, 1996 between Home Properties of
New York, Inc. and State of Michigan Retirement Systems
10.25 Agreement dated as of April 13, 1998 between Home Properties of
New York, Inc. and the Treasurer of the State of Michigan
10.26 Amendment No. Nine to the Second Amended and Restated Agreement of
Limited Partnership of the Operating Partnership
10.27 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
10.28 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
10.29 Second Amendment to Master Credit Facility Agreement, dated as of
August 30, 1999 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
10.30 Amendments Nos. Ten through Seventeen to the Second Amended and
Restated Limited Partnership Agreement
10.31 Amendments Nos. Eighteen through Twenty- Five to the Second Amended and
Restated Limited Partnership Agreement
10.32 Credit Agreement, dated 8/23/99 between Home Properties of New York,
L.P., the Lenders, Party hereto and Manufacturers and Traders Trust
Company as Administrative Agent
10.33 Amendment No. Twenty-Seven to the Second Amended and Restated Limited
Partnership Agreement
10.34 Amendments Nos. Twenty-Six and Twenty-Eight through Thirty to the
Second Amended and Restated Limited Partnership Agreement
10.35 Registration Rights Agreement between Home Properties of New York, Inc.
and GE Capital Equity Investment, Inc., dated 9/29/99
10.36 Amendment to Partnership Interest Purchase Agreement and Exchange
Agreement
10.37 2000 Stock Benefit Plan
51
10.38 Purchase Agreement between Home Properties of New York, Inc., The
Prudential Insurance Company of America and Teachers Insurance And
Annuity Association of America
10.39 Purchase Agreement between Home Properties of New York, Inc. and The
Equitable Life Assurance Society of the United States
10.40 Purchase Agreement between Home Properties of New York, Inc. and the
Pacific Life Insurance Company and AEW Capital Management
10.41 Home Properties of New York, L.P. Amendment Number One to Executive
Retention Plan
10.42 Amendments No. Thirty-One and Thirty-Two to the Second Amended and
Restated Limited Partnership Agreement
10.43 Form of Purchase and Sale Agreement between Blackhawk Apartments
Limited Partnership and Home Properties of New York, L.P.
10.44 Form of Purchase and Sale Agreement between Home Properties of New
York, L.P. and Caesar Figoni
10.45 Form of Real Estate Purchase Agreement between Smith Property Holdings
Orleans, LLC and Home Properties of New York, L.P.
10.46 Purchase Agreement between Home Properties of New York, Inc., The
Prudential Insurance Company of America and Teachers Insurance and
Annuity Association of America
10.47 Employment Agreement between Home Properties of New York, L.P., Home
Properties of New York Inc. and Edward J. Pettinella, and Amendment No.
One, thereto
10.48 Consulting Agreement between Home Properties of New York, L.P. and Amy
L. Tait
10.49 Amendment No. Thirty Three to the Second Amended and Restated Limited
Partnership Agreement
10.50 Amendment No. Thirty Five to the Second Amended and Restated Limited
Partnership Agreement
10.51 Amendment No. Forty Two to the Second Amended and Restated Limited
Partnership Agreement
10.52 Amendments Nos. Thirty Four, Thirty Six through Forty One, Forty Three
and Forty Four to the Second Amended and Restated Limited Partnership
Agreement
10.53 Purchase and Sale Agreement among Home Properties of New York, L.P.,
Conifer Realty Corporation and Conifer Realty LLC, and Amendments Nos.
One and Two thereto.
10.54 Purchase and Sale Agreement by and between Sandalwood Co-Op, Inc. and
Home Properties of New York, L.P., dated April 12, 2001
10.55 Contribution Agreement by and among Home Properties of New York, L.P.
and Lincolnia Limited Partnership, dated April 30, 2001
10.56 Purchase and Sale Agreement between Windsor at Hauppauge Limited
Partnership and Home Properties of New York, L.P., dated as of May,
2001
10.57 Amendment Nos. Forty-Five through Fifty-One to the Second Amendment and
Restated Limited Partnership Agreement
10.58 Home Properties of New York, Inc. Amendment No. One to 2000 Stock
Benefit Plan
10.59 Home Properties of New York, Inc. Amendment No. Two to 2000 Stock
Benefit Plan
11 Computation of Per Share Earnings Schedule
21 List of Subsidiaries of Home Properties of New York, Inc.
23 Consent of PricewaterhouseCoopers LLP
52
99 Additional Exhibits - Debt Summary Schedule
53
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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.
/s/ Norman P. Leenhouts
------------------------------------------------
Norman P. Leenhouts
Director, Chairman of the Board of Directors and
Co-Chief Executive Officer
(Co-Principal Executive Officer)
Date: February 27, 2002
Pursuant to the requirements of the Securities Exchange Act of 1934, the 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 February 27, 2002
----------------------- Board of Directors and
Norman P. Leenhouts Co-Chief Executive Officer
(Co-Principal Executive Officer)
/s/ Nelson B. Leenhouts Director, President and February 27, 2002
----------------------- Co-Chief Executive Officer
Nelson B. Leenhouts (Co-Principal Executive Officer)
/s/ Edward J. Pettinella Director, Executive Vice President February 27, 2002
---------------------------
Edward J. Pettinella
/s/ David P. Gardner Senior Vice President, Chief Financial February 27, 2002
--------------------------- Officer (Principal Financial and
David P. Gardner Accounting Officer)
/s/ Robert J. Luken Vice President, Treasurer and Controller February 27, 2002
---------------------------
Robert J. Luken
/s/ Burton S. August, Sr. Director February 27, 2002
---------------------------
Burton S. August, Sr.
/s/ William Balderston, III Director February 27, 2002
---------------------------
William Balderston, III
/s/ Alan L. Gosule Director February 27, 2002
---------------------------
Alan L. Gosule
/s/ Leonard F. Helbig, III Director February 27, 2002
---------------------------
54
Leonard F. Helbig, III
/s/ Roger W. Kober Director February 27, 2002
---------------------------
Roger W. Kober
/s/ Albert H. Small Director February 27, 2002
---------------------------
Albert H. Small
/s/ Clifford W. Smith, Jr. Director February 27, 2002
---------------------------
Clifford W. Smith, Jr.
/s/ Paul L. Smith Director February 27, 2002
------------------
Paul L. Smith
/s/ Amy L. Tait Director February 27, 2002
---------------------------
Amy L. Tait
55
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, 2001 and 2000 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 2001, 2000 and 1999 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 2001, 2000 and 1999 F-5
Consolidated Statements of Comprehensive Income
for the Years Ended December 31, 2001, 2000 and 1999 F-6
Consolidated Statements of Cash Flows
for the Years Ended December 31, 2001, 2000 and 1999 F-7
Notes to Consolidated Financial Statements F-8
Schedule III:
Real Estate and Accumulated Depreciation F-34
All other schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
F-1
Report of Independent Accountants
To the Board of Directors and Shareholders of
Home Properties of New York, Inc.:
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) and (2) on page 46 present fairly, in all material
respects, the financial position of Home Properties of New York, Inc. and its
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 2001 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement
schedule listed in the index appearing under Item 14(a)(1) and (2) on page 46
presents fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
These financial statements and the financial statement schedule are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements and the financial statement schedule based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, 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 our opinion.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
January 30, 2002
F-2
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2001 and 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2001 2000
---- ----
ASSETS
Real estate:
Land $ 287,473 $ 247,483
Buildings, improvements and equipment 1,847,605 1,647,786
---------- ----------
2,135,078 1,895,269
Less: accumulated depreciation ( 201,564) ( 153,324)
---------- ----------
Real estate, net 1,933,514 1,741,945
Cash and cash equivalents 10,719 10,449
Cash in escrows 39,230 36,676
Accounts receivable 8,423 11,510
Prepaid expenses 17,640 13,505
Investment in and advances to affiliates 42,870 45,048
Deferred charges, net 5,279 3,825
Other assets, net 6,114 8,930
---------- ----------
Total assets $2,063,789 $1,871,888
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $ 960,358 $832,783
Line of credit 32,500 -
Accounts payable 21,838 18,577
Accrued interest payable 5,782 5,236
Accrued expenses and other liabilities 13,180 7,197
Security deposits 18,948 18,290
---------- ----------
Total liabilities 1,052,606 882,083
---------- ----------
Commitments and contingencies
Minority interest 341,854 371,544
---------- ----------
8.36% Series B convertible cumulative preferred stock, liquidation
preference of $25.00 per share; 2,000,000 shares issued and
outstanding, net of issuance costs 48,733 48,733
---------- ----------
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized;
1,150,000 and 2,816,667 shares issued and outstanding
at December 31, 2001 and 2000, respectively 114,000 149,000
Common stock, $.01 par value; 80,000,000 shares authorized;
24,010,855 and 21,565,681 shares issued and
outstanding at December 31, 2001 and 2000, respectively 240 216
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Additional paid-in capital 572,273 483,453
Distributions in excess of accumulated earnings ( 57,768) ( 53,517)
Accumulated other comprehensive loss ( 532) -
Officer and director notes for stock purchases ( 7,617) ( 9,624)
---------- ----------
Total stockholders' equity 620,596 569,528
---------- ----------
Total liabilities and stockholders' equity $2,063,789 $1,871,888
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
F-3
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2001 2000 1999
---- ---- ----
Revenues:
Rental income $ 348,914 $ 298,860 $ 217,591
Property other income 13,319 11,389 6,878
Interest and dividend income 3,014 7,746 7,092
Other income 2,276 1,053 2,902
----------- ------------ -----------
Total Revenues 367,523 319,048 234,463
----------- ------------ -----------
Expenses:
Operating and maintenance 145,558 128,034 95,200
General and administrative 18,614 13,235 10,696
Interest 66,446 56,792 39,558
Depreciation and amortization 64,890 52,430 37,350
Loss on available-for-sale securities - - 2,123
Non-recurring acquisition expense - - 6,225
----------- ------------ -----------
Total Expenses 295,508 250,491 191,152
----------- ------------ -----------
Income before gain (loss) on disposition of property and
business, minority interest and extraordinary item 72,015 68,557 43,311
Gain (loss) on disposition of property and business 26,241 (1,386) 457
----------- ------------ -----------
Income before minority interest and extraordinary item 98,256 67,171 43,768
Minority interest 33,682 25,715 17,390
----------- ------------ -----------
Income before extraordinary item 64,574 41,456 26,378
Extraordinary item, prepayment
penalties, net of $48 in 2001 and $78 in 1999
allocated to minority interest ( 68) - ( 96)
----------- ------------ -----------
Net income 64,506 41,456 26,282
Preferred dividends ( 17,681) ( 12,178) ( 1,153)
----------- ------------ -----------
Net income available to common shareholders $ 46,825 $ 29,278 $ 25,129
=========== ============ ===========
Basic earnings per share data:
Income before extraordinary item $ 2.12 $ 1.42 $ 1.35
Extraordinary item - - ($ .01)
----------- ------------ -----------
Net income available to common shareholders $ 2.12 $ 1.42 $ 1.34
=========== ============ ===========
Diluted earnings per share data:
Income before extraordinary item $ 2.11 $ 1.41 $ 1.35
Extraordinary item - - ($ .01)
----------- ------------ -----------
Net income available to common shareholders $ 2.11 $ 1.41 $ 1.34
=========== ============ ===========
Weighted average number of shares outstanding:
Basic 22,101,027 20,639,241 18,697,731
=========== ============ ===========
Diluted 22,227,521 20,755,721 18,800,907
=========== ============ ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Officer/
Preferred Distributions Accumulated Director
Stock at Common Stock Additional in Excess of Other Notes for
Liquidation ------------ Paid-In Accumulated Comprehensive Treasury Stock
Preference Share Amount Capital Earnings Income Stock Purchase
---------- ----- ------ ------- -------- ------ ----- --------
Balance, January 1, 1999 $ - 17,635,000 $177 $401,814 ($26,622) ($1,607) ($1,863) ($9,943)
Issuance of common stock, net 2,025,288 20 50,290
Conversion of partnership
interest for 1,666,667 shares
of Series A Preferred stock 35,000 448
Payments on notes for stock purchase 226
Interest receivable on notes for
stock purchase (140)
Net income 26,282
Change in unrealized loss on
available-for-sale securities 1,607
Conversion of UPREIT Units for
stock 63,476 1 1,322
Purchase and retirement of
treasury stock (125,300) (2) (4,835) 1,863
Adjustment of minority interest 12,306
Preferred dividends (1,057)
Dividends paid ($1.97 per share) (36,897)
--------- ---------- ---- -------- -------- ------- ------- --------
Balance, December 31, 1999 35,000 19,598,464 196 461,345 (38,294) - - (9,857)
Issuance of common stock, net 2,108,275 21 55,914
Issuance of preferred stock, net 114,000 (1,706)
Payments on notes for stock
purchase 375
Interest receivable on notes for
stock purchase (142)
Net income 41,456
Conversion of UPREIT Units for
stock 327,542 3 7,385
Purchase and retirement of
treasury stock (468,600) (4) (12,660)
Adjustment of minority interest (26,825)
Preferred dividends (12,179)
Dividends paid ($2.16 per share) (44,500)
--------- ---------- ---- -------- -------- ------- ------- --------
Balance, December 31, 2000 149,000 21,565,681 216 483,453 (53,517) - - (9,624)
Issuance of common stock, net 1,448,815 14 38,920
Conversion of preferred stock
for common stock (35,000) 1,666,667 17 34,983
Payments on notes for stock
purchase 1,812
Interest receivable on notes for
stock purchase 195
Net income 64,506
Change in fair value of hedge
instruments, net of minority
interest (532)
Conversion of UPREIT Units for
stock 83,692 1 1,909
Purchase and retirement of
treasury stock (754,000) (8) (20,613)
Adjustment of minority interest 33,621
Preferred dividends (17,681)
Dividends paid ($2.31 per share) (51,076)
--------- ---------- ---- -------- -------- ------- ------- --------
Balance, December 31, 2001 $ 114,000 24,010,855 $240 $572,273 ($57,768) ($532) $ - ($7,617)
========= ========== ==== ======== ======== ======= ======= ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)
2001 2000 1999
---- ---- ----
Net income $64,506 $41,456 $26,282
------- ------- -------
Other comprehensive income (loss):
Cumulative effect of accounting change (Note 11) (339) - -
Change in fair value of hedged instruments (193) - -
Change in unrealized loss on available-for-sale securities
- - 1,607
------- ------- -------
Other comprehensive income (loss), net of minority interest
(532) - 1,607
------- ------- -------
Net comprehensive income $63,974 $41,456 $27,889
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(IN THOUSANDS)
2001 2000 1999
---- ---- ----
Cash flows from operating activities:
Net income $ 64,506 $ 41,456 $ 26,282
------- -------- --------
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in (income) loss of affiliates (123) 1,746 (201)
Income allocated to minority interest 33,682 25,715 17,390
Extraordinary item allocated to minority interest (48) - (78)
Depreciation and amortization 65,521 52,995 38,066
Loss on available-for-sale securities - - 2,123
(Gain) loss on disposition of property and business (26,241) 1,386 (457)
Changes in assets and liabilities:
Other assets 1,564 (8,468) (3,606)
Accounts payable and accrued liabilities 9,528 12,387 10,285
-------- -------- --------
Total adjustments 83,883 85,761 63,522
-------- -------- --------
Net cash provided by operating activities 148,389 127,217 89,804
-------- -------- --------
Cash flows used in investing activities:
Purchase of properties and other assets, net of mortgage
notes assumed and UPREIT Units issued (126,385) (106,438) (130,789)
Additions to properties (130,468) (92,603) (61,034)
Advances to affiliates (15,257) (33,481) (48,888)
Payments on advances to affiliates 17,558 42,311 39,916
Proceeds from sale of properties and business, net 115,446 11,746 1,099
Sale of available-for-sale securities - - 9,526
-------- -------- --------
Net cash used in investing activities (139,106) (178,465) (190,170)
-------- -------- --------
Cash flows from financing activities:
Proceeds from sale of preferred stock, net - 112,294 48,733
Proceeds from sale of common stock, net 40,943 56,168 50,397
Purchase of treasury stock (20,621) (12,664) (2,974)
Purchase of UPREIT Units (11,899) - -
Proceeds from mortgage notes payable 132,397 84,432 32,978
Payments of mortgage notes payable (72,629) (33,517) (36,345)
Proceeds from line of credit 171,500 97,000 104,700
Payments on line of credit (139,000) (147,800) (53,900)
Payments of deferred loan costs (2,086) (1,781) (576)
Additions to cash escrows, net (2,554) (8,395) (10,850)
Dividends and distributions paid (105,064) (88,782) (60,501)
-------- -------- --------
Net cash (used in) provided by financing activities (9,013) 56,955 71,662
-------- -------- --------
Net increase (decrease) in cash and cash equivalents 270 5,707 (28,704)
Cash and cash equivalents:
Beginning of year 10,449 4,742 33,446
-------- -------- --------
End of year $ 10,719 $ 10,449 $ 4,742
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
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, rehabilitation and development
of residential 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, 2001, the Company operated
293 apartment communities with 49,745 apartments. Of this total, the
Company owned 143 communities, consisting of 39,007 apartments, managed
as general partner 132 partnerships that owned 8,035 apartments and fee
managed 2,703 apartments for affiliates and third parties. The Company
also fee managed 2.2 million square feet of office and retail
properties.
Basis of Presentation
The accompanying consolidated financial statements include the accounts
of the Company and its 60.0% (57.6% at December 31, 2000) partnership
interest in the Operating Partnership. Such interest has been
calculated as the percentage of outstanding common shares divided by
the total outstanding common shares and Operating Partnership Units
("UPREIT Units") outstanding. The remaining 40.0% (42.4% at December
31, 2000) 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 the Company.
Investments in entities where the Company has the ability to exercise
significant influence over but does not have financial and operating
control are accounted for using the equity method. All significant
intercompany balances and transactions have been eliminated in these
consolidated financial statements.
The Company accounts for its investment as managing general partner
("GP") in unconsolidated limited partnerships ("LP") using the equity
method of accounting. As managing GP of the LP, the Company has the
ability to exercise significant influence over operating and financial
policies. This influence is evident in the terms of the respective
partnership agreements, participation in policy-making processes, and
the employment of its management personnel. However, the Company does
not have a controlling interest in the respective LPs. The limited
partners have significant rights, such as the right to replace the
general partner (for cause) and the right to approve the sale or
refinancing of the assets of the respective partnership in accordance
with the partnership agreement.
The Company records its allocable share of the respective partnership's
income or loss based on the terms of the agreement. To the extent it is
determined that the LPs cannot absorb their share of the losses, if
any, the GP will record the LPs share of such losses.
F-8
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate
Real estate is recorded at cost. Costs related to the acquisition,
development, construction and improvement of properties are
capitalized. Recurring capital replacements typically include carpeting
and tile, appliances, HVAC equipment, new roofs, site improvements and
various exterior building improvements. Non-recurring upgrades include,
among other items, community centers, new appliances, new windows,
kitchens and bathrooms. Interest costs are capitalized until
construction is substantially complete. There was $520, $260, and $263
of interest capitalized in 2001, 2000 and 1999, respectively. When
retired or otherwise disposed of, the related asset cost and
accumulated depreciation are cleared from the respective accounts and
the net difference, less any amount realized from disposition, is
reflected in income. Ordinary repairs and maintenance that do not
extend the life of the asset are expensed as incurred.
Management reviews its long-lived assets used in operations for
impairment when there is an event or change in circumstances that
indicates an impairment in value. An asset is considered impaired when
the undiscounted future cash flows are not sufficient to recover the
asset's carrying value. If such impairment is present, an impairment
loss is recognized based on the excess of the carrying amount of the
asset over its fair value. No such losses have been recognized to date.
The Company records impairment losses and reduces the carrying amounts
of assets held for sale when the carrying amounts exceed the estimated
selling proceeds less the costs to sell.
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
$64,684, $52,221, and $37,176 for the years ended December 31, 2001,
2000 and 1999, respectively.
Cash and Cash Equivalents
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.
F-9
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Deferred Charges
Costs relating to the financing of properties are deferred and
amortized over the life of the related financing agreement. The
straight-line method, which approximates the effective interest method,
is used to amortize all financing costs; such amortization is reflected
as interest expense in the consolidated statement of operations. The
range of the terms of the agreements are from 1-23 years. Accumulated
amortization was $1,548 and $1,270, as of December 31, 2001 and 2000,
respectively.
Intangible Assets
Intangible assets of $4,942 and $7,501 at December 31, 2001 and 2000,
respectively, included in Other Assets, consist primarily of property
management contracts obtained through the acquisition of real estate
management businesses, which are amortized on the straight-line basis
over their estimated useful lives of 40 years. The carrying value of
intangible assets is periodically reviewed by the Company and
impairments are recognized when the expected future operating cash
flows derived from such intangible assets is less than their carrying
value. Accumulated amortization was $888 and $684 as of December 31,
2001 and 2000, respectively.
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.
Property management fees are recognized when earned based on a
contractual percentage of net monthly cash collected on rental income.
Prior to 2001, the Operating Partnership earned development and other
fee income from properties in the development phase. This fee income is
recognized on the percentage of completion method.
Gains on Real Estate Sales
Gains from sales of operating properties are recognized using the full
accrual method in accordance with the provisions of Statement of
Financial Accounting Standards No. 66, Accounting for Real Estate
Sales, provided that various criteria relating to the terms of sale and
any subsequent involvement by the Company with the properties sold are
met.
Advertising
Advertising expenses are charged to operations during the year in which
they were incurred. Advertising expenses incurred and charged to
operations were approximately $5,486, $5,366, and $3,966 for the years
ended December 31, 2001, 2000 and 1999, respectively.
F-10
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Insurance Settlement
In October, 2001, the Company resolved a legal claim with an insurance
provider and received a total settlement of $4.9 million. This refund
was allocated to insurance expense in relation to the Company's
estimate of loss spread over the corresponding policy term. The policy
term covered November 1, 2000 to October 31, 2001 and November 1, 2001
to October 31, 2002. The amount of the settlement relating to the
period from November 1, 2000 to December 31, 2001 was estimated to be
$2.2 million, and that amount reduced insurance expense in the fourth
quarter of 2001. The remaining settlement of $2.7 million relates to
the remaining policy period from January 1, 2001, through October 31,
2002, and will be amortized on a straight-line basis over that period.
Federal 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 90% (95% in years prior to 2001) of its REIT taxable income to
its shareholders and satisfies certain other requirements. For the
years ended December 31, 2001, 2000 and 1999, the Company distributed
100% of its taxable income; accordingly, no provision has been made for
federal income taxes in the accompanying consolidated financial
statements. Stockholders are taxed on dividends and must report such
dividends as either ordinary income, capital gains, or as return of
capital.
The tax basis of assets is less than the amounts reported in the
accompanying consolidated financial statements by approximately $202
million and $188 million at December 31, 2001 and 2000, respectively.
The following table reconciles net income to taxable income for the
years ended December 31, 2001, 2000 and 1999:
2001 2000 1999
---- ---- ----
Net income $ 64,506 $41,456 $26,282
Less: Net income of Taxable REIT Subsidiaries
included above ( 62) 1,791 ( 156)
-------- ------- -------
Net income from REIT operations 64,444 43,247 26,126
Add: Book depreciation and amortization 64,888 52,430 37,349
Less: Tax depreciation and amortization (66,915) (57,128) (42,271)
Book/tax difference on gains/losses from capital
transactions (7,514) - 6,226
Other book/tax differences, net ( 2,303) ( 1,873) 825
-------- ------- -------
Taxable income before adjustments 52,600 36,676 28,255
Less: Capital gains ( 26,241) 1,386 ( 457)
-------- ------- -------
Adjusted taxable income subject to 90% (95% in 2000 and
1999) dividend requirement $ 26,359 $38,062 $27,798
======== ======= =======
The Company made actual distributions in excess of 100% of the taxable
income before capital gains. All adjustments to net income from REIT
operations are net of amounts attributable to minority interest and
taxable REIT subsidiaries.
F-11
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Share
Basic Earnings Per Share ("EPS") is computed as net income available to
common shareholders divided by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through
stock-based compensation including stock options and the conversion of
any cumulative convertible preferred stock. The exchange of an
Operating Partnership Unit for common stock will have no effect on
diluted EPS as unitholders and stockholders effectively share equally
in the net income of the Operating Partnership.
Income before extraordinary item, extraordinary item and net income
available to common shareholders are the same for both the basic and
diluted calculation. The reconciliation of the basic and diluted
earnings per share for the years ended December 31, 2001, 2000 and
1999, is as follows:
2001 2000 1999
---- ---- ----
Net Income $ 64,506 $ 41,456 $ 26,282
Less: Preferred dividends ( 17,681) (12,178) (1,153)
---------- ------------ -----------
Net income available to common shareholders $ 46,825 $ 29,278 $ 25,129
========== ============ ===========
Basic weighted average number of shares
outstanding 22,101,027 20,639,241 18,697,731
Effect of dilutive stock options 126,494 116,480 103,176
---------- ------------ -----------
Diluted weighted average number of shares
outstanding 22,227,521 20,755,721 18,800,907
========== ============ ===========
Basic earnings per share $ 2.12 $ 1.42 $ 1.34
========== ============ ===========
Diluted earnings per share $ 2.11 $ 1.41 $ 1.34
========== ============ ===========
Unexercised stock options to purchase 1,732,656, 1,270,300, and 713,600
(including warrants of 525,000 issued with the Series C and E Preferred
Stock issuance for 2001 and 2000) 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, 2001, 2000 and
1999, respectively. For the year ended December 31, 2001, the 4,816,667
shares of the Series A (prior to the November 27, 2001 conversion), B,
C, D and E Convertible Cumulative Preferred Stock (7,112,381 common
stock equivalents) on an as-converted basis has an antidilutive effect
and is not included in the computation of diluted EPS.
F-12
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Reclassification
Certain reclassifications have been made to the 2000 and 1999
consolidated financial statements to conform to the 2001 presentation.
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.
New Accounting Pronouncements
On June 29, 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 141 (SFAS 141),
Business Combinations, and No. 142 (SFAS 142), Goodwill and Other
Intangible Assets. The provisions of SFAS 141 require the use of
purchase accounting for all business combinations and the separate
allocation of purchase price to intangible assets if specific criteria
are met. The provisions of SFAS 142 provide that goodwill and
intangible assets with indefinite useful lives should not be amortized
but rather tested at least annually for impairment. Intangible assets
that have finite useful lives should continue to be amortized over
their estimated useful lives. SFAS 142 also provides specific guidance
for testing goodwill and intangible assets for impairment. The Company
does not anticipate that these standards will have a material impact on
the Company's financial position, results of operations, or cash flows.
The provisions of SFAS No. 141 apply to all business combinations
initiated after June 30, 2001. The Company will adopt FAS 142 effective
January 1, 2002.
In October 2001, the FASB issued Statement of Financial Accounting
Standard No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", which addresses financial accounting and reporting
for the impairment or disposal of long-lived assets. This standard
harmonizes the accounting for impaired assets and resolves some of the
implementation issues of SFAS 121. It retains the fundamental
provisions of Statement 121 for (a) recognition and measurement of the
impairment of long-lived assets to be held and used and (b) measurement
of long-lived assets to be disposed of by sale. It also retains the
basic provisions for presenting discontinued operations in the income
statement but broadens the scope to include a component of an entity
rather than a segment of a business. The Company will adopt this
standard effective January 1, 2002. The Company does not expect this
pronouncement to have a material impact on the Company's financial
position, results of operations, or cash flows.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3 INVESTMENT IN AND ADVANCES TO AFFILIATES
The Company has investments in and advances to approximately 132
limited partnerships where the Company acts as the managing general
partner. In addition, there are investments in other affiliated
entities (see Note 4). The following is summarized financial
information for the
F-13
investment in and advances to affiliates carried under the equity
method of accounting, excluding the Management Companies discussed in
Note 4, as of December 31, 2001 and 2000 and for each of the three
years ended December 31, 2001.
2001 2000
---- ----
Balance Sheets:
Real estate, net $280,864 $293,616
Other assets 36,579 34,023
-------- --------
Total assets $317,443 $327,639
======== ========
Mortgage notes payable $253,798 $257,834
Advances from affiliates 25,245 21,957
Other liabilities 18,140 18,558
Partners' equity 20,260 29,290
-------- --------
Total liabilities and partners' equity $317,443 $327,639
======== ========
The Company's proportionate share of mortgage notes payable was $6,800
at December 31, 2001. The mortgage notes payable are all non-recourse
to the affiliated partnership and the Company.
2001 2000 1999
---- ---- ----
Operations:
Gross revenues $ 46,972 $44,053 $42,059
Operating expenses (29,704) ( 26,627) (26,683)
Mortgage interest expense (11,529) ((12,198) (10,398)
Depreciation and amortization (13,606) ( 12,964) (11,257)
-------- ------- -------
Net loss ($ 7,867) ($ 7,736) ($ 6,279)
======== ======= =======
Company's share (included in property other income) $ 62 $ 45 $ 45
======== ======= =======
Reconciliation of interests in the underlying net assets to the
Company's carrying value of investments in and advances to affiliates:
2001 2000
---- ----
Partners' equity, as above $20,260 $29,290
Equity of other partners 15,821 24,217
------- -------
Company's share of investments in limited partnerships 4,439 5,073
Advances to limited partnerships, as above - 21,957
------- -------
Company's investment in and advances to limited partnerships 4,439 27,030
Company's investment in Management Companies (see Note 4) 22,477 (1,516)
Company's advances to Management Companies 15,954 19,534
------- -------
Carrying value of investments in and advances to affiliates $42,870 $45,048
======= =======
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4 MANAGEMENT COMPANIES
Certain property management, leasing and development activities are
performed by Home Properties Management, Inc. and Home Properties
Resident Services, Inc. (formerly Conifer Realty Corp.) (together the
"Management Companies"). Both are Maryland corporations and, effective
January 1, 2001, elected to convert to taxable REIT subsidiaries under
the Tax Relief Extension Act of 1999. The Operating Partnership owns
non-voting common stock in the Management Companies which entitles it
to receive 95% and 99% of the economic interest
F-14
in Home Properties Management, Inc. and Home Properties Resident
Services, respectively. Effective March 1, 2001, the Company
recapitalized Home Properties Resident Services, Inc. by contributing
to capital $23.7 million of loans due from affiliated partnerships.
Simultaneous with the recapitalization, the Company increased its
effective economic interest from 95% to 99% diluting the economic
interest held by certain of the Company's officers and inside
directors. The Company's share of income from the Management Companies,
included in Other Income in the consolidated statement of operations,
for the twelve months ended December 31, 2001, 2000 and 1999, is
summarized as follows:
2001 2000 1999
---- ---- ----
Management fees $ 3,397 $ 3,716 $ 3,778
Development and construction management fees - 3,991 5,567
Interest income 1,627 - -
General and administrative (3,244) (7,364) (7,449)
Interest expense (1,390) (1,937) (1,242)
Other expenses (330) (292) (490)
------- ------- -------
Net income (loss) $ 60 ($ 1,886) $ 164
======= ======= =======
Company's share $ 61 ($ 1,791) $ 156
======= ======= =======
Total assets $38,602 $21,965 $21,699
======= ======= =======
Total liabilities $16,296 $23,526 $21,375
======= ======= =======
The general and administrative expenses reflected above represent an
allocation of direct and indirect costs incurred by the Company
estimated by management to be associated with the operations of the
Management Companies.
Included in assets of the Management Companies are notes and other
receivables due from affiliated partnerships (Note 3) of approximately
$25,000 and $0 at December 31, 2001 and 2000, respectively. The
interest rates of the notes receivable include both fixed and variable
rate terms. The variable rate loans are at one percent over the Prime
rate of interest. The fixed rate agreements range from 8.47% to 8.75%
per annum. The maturity dates for these notes receivable range from
2002 to 2032.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5 MORTGAGE NOTES PAYABLE
The Company's mortgage notes payable are summarized as follows:
2001 2000
---- ----
Fixed rate mortgage notes payable $954,203 $823,488
Variable rate mortgage notes payable 6,155 9,295
-------- --------
Total mortgage notes payable $960,358 $832,783
======== ========
Mortgage notes payable are collateralized by certain apartment
communities and mature at various dates from August, 2002, through
June, 2036. The weighted average interest rate of the Company's
variable rate notes and credit facility was 3.27% and 6.54% at December
31, 2001
F-15
and 2000, respectively. The weighted average interest rate of the
Company's fixed rate notes was 7.27% and 7.41% at December 31, 2001 and
2000, respectively.
Principal payments on the mortgage notes payable for years subsequent
to December 31, 2001 are as follows:
2002 $ 53,378
2003 26,359
2004 36,675
2005 41,870
2006 68,485
Thereafter 733,591
--------
$960,358
========
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 $958,452
and $858,743, at December 31, 2001 and 2000, respectively.
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 $116, $0, and $174
for the years ended December 31, 2001, 2000 and 1999, respectively. The
2001 repayments on eight debt instruments totaled $51,969 and were
refinanced by eleven new borrowings in excess of $131,370. The 2000
repayments on two debt instruments totaled $25,067 and were refinanced
by two new borrowings in excess of $39,000.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6 LINE OF CREDIT
As of December 31, 2001, the Company had an unsecured line of credit
from M & T Bank of $100 million with $32.5 million outstanding.
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 line of
credit expires on September 1, 2002. The Company is evaluating
alternatives to replace or extend the line of credit after September 1,
2002. The LIBOR interest rate was 1.93% at December 31, 2001.
7 MINORITY INTEREST
Minority interest in the Company relates to the interest in the
Operating Partnership not owned by Home Properties of New York, Inc.
Holders of UPREIT Units 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.
F-16
The changes in minority interest for the three years ended December 31
are as follows:
2001 2000 1999
---- ---- ----
Balance, beginning of year $371,544 $299,880 $204,709
Issuance of UPREIT Units associated with
property acquisitions 19,133 58,616 149,483
Adjustment between minority interest and
stockholders' equity (33,621) 26,825 (12,306)
Exchange of UPREIT Units for Common Shares (1,910) (7,387) (1,323)
Repurchase of UPREIT Units (10,233) - -
Exchange of partnership interests for Series A
Preferred Stock - - (35,448)
Net income 33,634 25,714 17,312
Accumulated other comprehensive loss (388) - -
Distributions (36,305) (32,104) (22,547)
-------- -------- --------
Balance, end of year $341,854 $371,544 $299,880
======== ======== ========
8 PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Common Stock
In 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 and UPREIT Units. The Board's action
did not establish a target price or a specific timetable for
repurchase. At December 31, 1999, there was approval remaining to
purchase 795,100 shares. In 2000, the Board of Directors approved a
1,000,000-share increase in the stock repurchase program. During 2000,
the Company repurchased 468,600 shares at a cost of $12,664,000. In
2001, the Board of Directors approved a 1,000,000-share increase in the
stock repurchase program. During 2001, the Company repurchased 754,000
shares and 436,700 UPREIT Units at a cost of $20,600,000 and
$11,900,000, respectively. Approval to repurchase 1,135,800 shares of
common stock and UPREIT Units remains at December 31, 2001.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8 PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Continued)
Preferred Stock
On December 22, 1999, the holder of the Class A limited partnership
interests converted its ownership to 9% Series A convertible cumulative
preferred stock ("Series A Preferred Shares"), liquidation preference
of $21.00 per Common Share, total shares outstanding of 1,666,667. The
conversion to preferred stock occurred at the Company's request and
permits the Operating Partnership to continue to use favorable tax
depreciation methods. The Series A Preferred Shares were convertible at
any time by the holder on a one-for-one basis into Common Shares. On
November 28, 2001, the Series A Preferred Shares were converted to
common shares. The conversion had no effect on reported results of
operations.
On September 30, 1999, the Company privately placed 2,000,000 of its
8.36% Series B convertible cumulative preferred stock ("Series B
Preferred Shares"), $25 liquidation preference per share. This offering
generated net proceeds of approximately $48.7 million after offering
costs of $1.3 million. The net proceeds were used to pay down Company
borrowings. The Series B Preferred Shares are convertible at any time
by the holder into Common Shares at a conversion price of $29.77 per
Common Share, equivalent to a conversion ratio of .8398 Common Shares
for
F-17
each Series B Preferred Share (equivalent to 1,679,543 Common
Shares assuming 100% converted). The Series B Preferred Shares are
non-callable for five years. Each Series B Preferred Share will receive
the greater of a quarterly distribution of $0.5225 per share or the
dividend paid on a share of common stock on an as converted basis. The
Company has determined that the Series B Preferred Shares contain
certain contingent provisions that could cause such shares to be
redeemable at the option of the holder and has presented this class of
preferred stock outside of stockholders' equity.
In May and June of 2000, the Company privately placed 600,000 of its
8.75% Series C convertible cumulative preferred stock ("Series C
Preferred Shares"), $100 liquidation preference per share. This
offering generated net proceeds of approximately $60 million. The net
proceeds were used to fund acquisitions and property upgrades. The
Series C Preferred shares are convertible at any time by the holder
into Common Shares at a conversion price of $30.25 per Common Share,
equivalent to a conversion ratio of 3.3058 Common Shares for each
Series C Preferred share (equivalent to 1,983,471 Common shares
assuming 100% converted). The Series C Preferred shares are
non-callable for five years. Each Series C Preferred share will receive
the greater of a quarterly distribution of $2.1875 per share or the
dividend paid on a share of common stock on an as-converted basis. The
Company also issued 240,000 additional warrants to purchase common
shares at a price of $30.25 per share, expiring in 2005.
In June, 2000, the Company privately placed 250,000 of its 8.78% Series
D convertible cumulative preferred stock ("Series D Preferred Shares"),
$100 liquidation preference per share. This offering generated net
proceeds of approximately $25 million. The net proceeds were used to
fund Company acquisitions and property upgrades. The Series D Preferred
Shares are convertible at any time by the holder into Common Shares at
a conversion price of $30.00 per Common Share, equivalent to a
conversion ratio of 3.333 Common Shares for each Series D Preferred
share (equivalent to 833,333 Common Shares assuming 100% converted).
The Series D Preferred shares are non-callable for five years. Each
Series D Preferred share will receive the greater of a quarterly
distribution of $2.195 per share or the dividend paid on a share of
common stock on an as-converted basis.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8 PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Continued)
Preferred Stock (Continued)
In December, 2000, the Company privately placed 300,000 of its 8.55%
Series E convertible cumulative preferred stock ("Series E Preferred
Shares"), $100 liquidation preference per share. This offering
generated net proceeds of approximately $30 million. The net proceeds
were used to pay down Company borrowings. The Series E Preferred Shares
are convertible at any time by the holder into Common Shares at a
conversion price of $31.60 per Common Share, equivalent to a conversion
ratio of 3.1646 Common Shares for each Series E Preferred Share
(equivalent to 949,367 Common Shares assuming 100% converted). The
Series E Preferred Shares are non-callable for five years. Each Series
E Preferred Share will receive the greater of a quarterly distribution
of $2.1375 per share or the dividend paid on a share of common stock on
an as-converted basis. In addition, the Company issued warrants to
purchase 285,000 common shares at a price of $31.60 per share, expiring
in 2005.
Dividend Reinvestment Plan
The Company has a Dividend Reinvestment, Stock Purchase, Resident Stock
Purchase and Employee Stock Purchase Plan (the "DRIP" ). The DRIP
provides the stockholders, employees and residents of the Company an
opportunity to automatically invest their cash dividends at a
F-18
discount of 3% from the market price. In addition, eligible
participants may make monthly or other voluntary cash investments, also
typically at a discount, which has varied between 2% and 3% from the
market price, in shares of common stock. In response to a perceived
dilution from issuing new shares at or below the underlying net asset
value, effective April 10, 2001, the DRIP was amended to reduce the
share purchase discount from the current market price from 3% to 2%.
The maximum amount that can be invested without the Company's prior
permission was also reduced from $5,000 to $1,000. A total of $32
million, $57 million, and $49 million was raised through this program
during 2001, 2000 and 1999, respectively.
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 paid 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.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8 PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Continued)
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, on a
recourse basis, 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.
On February 1, 2001, one officer purchased an aggregate of 75,000
shares of common stock through the Stock Purchase Plan at the price of
$26.20. The purchases were financed by a recourse loan from the
Company. The loan is collateralized by pledges of the common stock,
F-19
bears interest at 8% per annum and matures on February 15, 2021. The
loan was repaid in full on January 25, 2002.
Dividends
Stockholders are taxed on dividends and must report such dividends as
either ordinary income, capital gains, or as return of capital. The
Company has declared a $2.31 distribution per common share during its
most recent fiscal year (Cusip 437306103). Pursuant to Internal Revenue
Code Section 857 (b) (3) (C), for the year ended December 31, 2001, the
Company designates the following cash distributions to holders of
common shares as capital gain dividends, in the amounts set forth in
the table following on the next page:
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
8 PREFERRED STOCK AND STOCKHOLDERS' EQUITY (Continued)
Dividends (Continued)
Distribution Type
----------------------------------------------------
20% Unrecap-
Distri- Ordinary Long-Term tured
Declaration Record Payable butions Taxable Return of Capital Sec. 1250
Dates Dates Dates Per Share Dividend Capital Gain Gain
---------------------------------------------------------------------------------------------------------
2/7/2001 2/19/2001 2/27/2001 $0.57 78.5% 6.8% 5.3% 9.4%
5/1/2001 5/14/2001 5/24/2001 $0.57 78.5% 6.8% 5.3% 9.4%
7/31/2001 8/16/2001 8/28/2001 $0.57 78.5% 6.8% 5.3% 9.4%
10/30/2001 11/15/2001 11/27/2001 $0.60 78.5% 6.8% 5.3% 9.4%
----- ----- ---- ---- ----
TOTALS $2.31 78.5% 6.8% 5.3% 9.4%
===== ===== ==== ==== ====
The appropriate amount of each common share for 1999 and 2000 is as
follows:
Ordinary Income Return of Capital
--------------- -----------------
1999 85.6% 14.4%
2000 91.0% 9.0%
Total Shares/Units Outstanding
At December 31, 2001, 24,010,855 common shares, 5,445,714 convertible
preferred shares (assuming a conversion of the Preferred Shares) and
16,002,076 UPREIT Units were outstanding for a total of 45,458,645
common share equivalents.
9 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 1,596,000
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 (149,100) 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
F-20
the case of
incentive stock options granted to employees who hold more than 10% of
the voting power of the Company's common stock). 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. At December 31, 2001, 335,397 and 346 common shares were
available for future grant of options or awards under the Plan for
officers and employees and non-employee directors, respectively.
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9 STOCK BENEFIT PLAN (Continued)
On February 1, 2000, the Company adopted the 2000 Stock Benefit Plan
(the "2000 Plan"). Plan participants have been expanded to include
directors, officers, regional managers and on-site property managers.
It is expected that all future awards of stock options and restricted
stock will be granted under the 2000 Plan. The 2000 Plan limits the
number of shares issuable under the plan to 2.2 million, of which
200,000 are to be available for issuance to the non-employee directors.
At December 31, 2001, 703,484 and 99,240 common shares were available
for future grant of options or awards under the 2000 plan for officers
and employees and non-employee directors, respectively.
Details of stock option activity during 2001, 2000 and 1999 are as
follows:
Weighted Average
Number Exercise Price
of Options Per Option
---------- ----------
Options outstanding at January 1, 1999 800,863 $21.94
(395,441 shares exercisable)
Granted, 1999 610,400 $27.06
Exercised, 1999 ( 96,643) $19.06
Cancelled, 1999 ( 49,187) $25.41
------------
Options outstanding at December 31, 1999 1,265,433 $24.50
(448,820 shares exercisable)
Granted, 2000 752,720 $31.27
Exercised, 2000 ( 150,008) $19.38
Cancelled, 2000 ( 71,480) $28.32
------------
Options outstanding at December 31, 2000 1,796,665 $26.34
(519,434 shares exercisable)
Granted, 2001 857,430 $29.60
Exercised, 2001 ( 187,698) $22.59
Cancelled, 2001 ( 361,295) $28.78
-----------
Options outstanding at December 31, 2001 2,105,102 $28.69
=========
(764,819 shares exercisable)
F-21
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9 STOCK BENEFIT PLAN (Continued)
The following table summarizes information about options outstanding at
December 31, 2001:
Weighted
Average Weighted Weighted
Remaining Average Average Exercise
Year Number Contractual Fair Value Exercise Number Price Range
Granted Outstanding Life of Options Price Exercisable Per Option
------- ----------- ---- ---------- ----- ----------- ----------
1994 75,015 3 N/A $19.000 75,015 $19.00
1996 27,309 4 $1.02 19.959 27,309 $19.00-$20.50
1997 89,002 5 $1.56 25.687 74,137 $22.75-$26.50
1998 115,760 6 $1.37 25.785 71,820 $25.125-$27.06
1999 398,260 7 $1.57 26.947 169,840 $25.688-$27.25
2000 567,046 8 $1.88 30.969 161,998 $28.313-$31.375
2001 832,710 9 $1.64 27.566 165,000 $27.01-$31.60
------- - ------- ------- -------------
Totals 2,105,102 7 $26.662 745,119 $19.00-$31.60
========= = ======= ======= =============
The Company has adopted the disclosure only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, the Company
does not recognize compensation cost for stock options when the option
exercise price equals or exceeds the market value on the date of grant.
The compensation cost that would have been recorded had the Company
adopted the accounting provisions of SFAS 123, relative to the
above-mentioned awards was $834, $489 and $217 for 2001, 2000 and 1999,
respectively. The Company's proforma net income before preferred
dividends and proforma basic earnings per common share would have been
$63,672, $40,956, and $26,063 and $2.08, $1.39, and $1.33,
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 2001, 2000 and 1999: dividend
yield of 9.40%; expected volatility of 19.03%; 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 5.43% to 6.87%.
In 2001, the Company granted 20,600 shares of restricted stock. The
restricted stock was granted to key employees of the Company and vests
100% on the fifth anniversary of the date of grant. The restricted
shares were granted at price ranges of $27.01 to $30.15 per share.
Total compensation cost recorded for the year ended December 31, 2001
for the restricted share grants was $95,600.
10 SEGMENT REPORTING
The Company is engaged in the ownership and management of market rate
apartment communities. Each apartment community is considered a
separate operating segment. Each segment on a stand alone basis is less
than 10% of the revenues, profit or loss, and assets of the combined
reported operating segments. The operating segments are aggregated and
segregated as Core and Non-core properties.
F-22
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
10 SEGMENT REPORTING (Continued)
Non-segment revenue to reconcile total revenue consists of
unconsolidated management and development fees and interest income.
Non-segment assets to reconcile to total assets include cash and cash
equivalents, cash in escrows, accounts receivable, prepaid expenses,
investments in and advances to affiliates, deferred charges and other
assets.
Core properties consist of all apartment communities which have been
owned more than one full calendar year. Therefore, the Core Properties
represent communities owned as of January 1, 2000. Non-core properties
consist of apartment communities acquired during 2000 and 2001, such
that full year comparable operating results are not available.
The accounting policies of the segments are the same as those described
in Notes 1 and 2.
The Company assesses and measures segment operating results based on a
performance measure referred to as Funds from Operations ("FFO"). FFO
is generally defined as net income (loss), before gains (losses) from
the sale of property and business, extraordinary items, plus real
estate depreciation including adjustments for unconsolidated
partnerships and joint ventures. For the year ended December 31, 1999,
the Company's previously reported FFO excluded a non-recurring loss on
available-for-sale securities of $2,123 and a non-recurring acquisition
expense of $6,225. 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. Other companies may calculate
similarly titled performance measures in a different manner.
F-23
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
10 SEGMENT REPORTING (Continued)
The revenues, profit (loss), and assets for each of the reportable
segments are summarized as follows for the years ended December 31,
2001, 2000 and 1999.
2001 2000 1999
---- ---- ----
Revenues
--------
Apartments owned
Core properties $ 279,081 $ 262,604 $224,469
Non-core properties 83,152 47,645 -
Reconciling items 5,290 8,799 9,994
----------- ------------- ----------
Total Revenue $ 367,523 $ 319,048 $234,463
=========== ============= ==========
Profit (loss)
-------------
Funds from operations:
Apartments owned
Core properties $ 166,112 $ 154,270 $129,269
Non-core properties 50,563 27,945 -
Reconciling items 5,290 8,799 9,994
----------- ------------- ----------
Segment contribution to FFO 221,965 191,014 139,263
General & administrative expenses ( 18,614) ( 13,235) ( 10,696)
Interest expense ( 66,446) ( 56,792) ( 39,558)
Depreciation of unconsolidated affiliates 338 383 458
Non-real estate depreciation/amort. ( 639) ( 516) ( 335)
----------- ------------- ----------
Funds from Operations 136,604 120,854 89,132
Depreciation - apartments owned (64,251) ( 51,914) (37,015)
Depreciation of unconsolidated affiliates ( 338) ( 383) ( 458)
Non-recurring acquisition expense - - ( 6,225)
Loss on available-for-sale securities - - ( 2,123)
Gain (loss) on disposition of properties and
business 26,241 ( 1,386) 457
Minority interest in earnings (33,682) ( 25,715) (17,390)
Extraordinary items, net of minority interest ( 68) - ( 96)
----------- ------------- ----------
Net Income $64,506 $ 41,456 $ 26,282
=========== ============= ==========
Assets
------
Apartments owned
Core properties $1,351,724 $1,316,695
Non-core properties 581,790 425,250
Reconciling items 130,275 129,943
----------- ------------
Total Assets $2,063,789 $1,871,888
=========== =============
Real Estate Capital Expenditures
--------------------------------
New property acquisitions $ 213,325 $ 328,021
Additions to properties
Core properties 85,001 54,041
Non-core properties 45,467 38,562
Increase in real estate associated with the
purchase of UPREIT Units 1,666 -
----------- -------------
Total Real Estate Capital Expenditures $ 345,459 $ 420,624
=========== =============
F-24
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11 DERIVATIVE FINANCIAL INSTRUMENTS
The Company has entered into interest rate swaps to minimize
significant unplanned fluctuations in earnings that are caused by
interest rate volatility. The Company does not utilize these
arrangements for trading or speculative purposes. The principal risk to
the Company through its interest rate hedging strategy is the potential
inability of the financial institutions from which the interest rate
protection was purchased to cover all of their obligations. To mitigate
this exposure, the Company purchases its interest rate swaps from
either the institution that holds the debt or from institutions with a
minimum A- credit rating.
All derivatives, which have historically been limited to interest rates
swaps designated as cash flow hedges, are recognized on the balance
sheet at their fair value. On the date that the Company enters into an
interest rate swap, it designates the derivative as a hedge of the
variability of cash flows that are to be received or paid in connection
with a recognized liability. To the extent effective, subsequent
changes in the fair value of a derivative designated as a cash flow
hedge are recorded in other comprehensive income, until earnings are
affected by the variability of cash flows of the hedged transaction.
Any hedge ineffectiveness will be reported in interest expense in the
consolidated statement of operations.
The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk-management objective
and strategy for undertaking various hedge transactions. The Company
formally assesses (both at the hedge's inception and on an ongoing
basis) whether the derivatives that are used in hedging transactions
have been highly effective in offsetting changes in the cash flows of
the hedged items and whether those derivatives may be expected to
remain highly effective in future periods. Should it be determined that
a derivative is not (or has ceased to be) highly effective as a hedge,
the Company will discontinue hedge accounting prospectively.
The Company has four interest rate swaps that effectively convert
variable rate debt to fixed rate debt. The notional amount amortizes in
conjunction with the principal payments of the hedged items. The terms
as follows:
Original
Notional Amount Fixed Interest Rate Variable Interest Rate Maturity Date
--------------- ------------------- ---------------------- -------------
$17,600,000 5.91% LIBOR + 1.60% June 24, 2004
$12,000,000 7.66% LIBOR + 1.25% August 1, 2002
$3,000,000 8.22% LIBOR + 1.40% June 25, 2007
$4,625,000 8.40% LIBOR + 1.40% June 25, 2007
On January 1, 2001, the Company adopted Statement of Financial
Accounting Standards No. 133 (SFAS 133), Accounting for Derivative
Instruments and Hedging Activities. At that time, the Company
designated all of its interest rate swaps as cash flow hedges in
accordance with the requirements of SFAS 133. The aggregate fair value
of the derivatives on January 1, 2001 was $583, prior to the allocation
of minority interest, and was recorded as a liability on the
consolidated balance sheet with an offset to other comprehensive income
representing the cumulative effect of the transition adjustment
pursuant to the provisions of Accounting Principles Board Opinion No.
20, Accounting Changes.
F-25
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11 DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
As of December 31, 2001, the aggregate fair value of the Company's
interest rate swaps was $920, prior to the allocation of minority
interest, and is included in accrued expenses and other liabilities in
the consolidated balance sheets. For the twelve months ending December
31, 2001, as the critical terms of the interest rate swaps and the
hedged items are the same, no ineffectiveness was recorded in the
consolidated statements of operations. All components of the interest
rate swaps were included in the assessment of hedge effectiveness. The
Company expects that within the next twelve months it will reclassify
as a charge to earnings $838, prior to the allocation of minority
interest, of the amount recorded in accumulated other comprehensive
loss. The fair value of the interest rate swaps is based upon the
estimate of amounts the Company would receive or pay to terminate the
contract at the reporting date and is estimated using interest rate
market pricing models.
12 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 $8,174, $15,088, and $15,199 for the years
ended December 31, 2001, 2000 and 1999, respectively. The Company had
accounts receivable outstanding due from affiliated entities of $2,629
and $3,279 at December 31, 2001 and 2000, respectively.
A director and former officer of the Company provided consulting
services to the Company during 2001 for fees approximating $271.
In 1997, certain officers and inside directors of the Company entered
into a lease termination agreement with the Company. The agreement
provided for a contingent termination fee based on the performance of
the underlying property. In 2001, amounts of $350 became payable to the
Company under the terms of the agreement. This amount was classified in
Other Property Income in the Consolidated Statement of Operations.
The Company leases its corporate office space from an affiliate. The
lease requires an annual base rent of $663 through December, 2002, $802
for the year ended 2003, and $872 for the year ended 2004. 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 $956, $712, and $698 for the years ended December 31, 2001,
2000 and 1999, respectively.
From time to time, the Company advances funds as needed to the
Management Companies which totaled $15,954 and $19,534 at December 31,
2001 and 2000, respectively, and bear interest at 1% over prime.
F-26
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
13 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 $211, $201, and $194
including contingent rents of $141, $131, and $124 for the years ended
December 31, 2001, 2000 and 1999, respectively. At December 31, 2001,
future minimum rental payments required under the lease are $70 per
year until the lease expires.
401(K) Savings Plan
The Company sponsors 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 $893, $512, and $398 for the
years ended December 31, 2001, 2000 and 1999, respectively.
Incentive Compensation Plan
The Incentive Compensation Plan provides that eligible officers and key
employees may earn a cash bonus based on increases in FFO per
share/unit (computed based on the diluted shares/units outstanding). No
cash bonuses are payable under the Incentive Compensation Plan unless
the increase in FFO per share, after giving effect to the bonuses, was
equal to or greater than 5%. The Board of Directors used its
discretionary authority to approve a bonus for 2001 even though FFO
growth per share was less than 5%. The bonus expense charged to
operations (including that portion allocated to the Management
Companies) was $725, $103, and $2,190 for the years ended December 31,
2001, 2000 and 1999, respectively.
Contingencies
The Company is party to certain legal proceedings. All such
proceedings, taken together, are not expected to have a material
adverse effect on the Company. The Company is also subject to a variety
of legal actions for personal injury or property damage arising in the
ordinary course of its business, most of which are covered by liability
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.
The Company has recently undergone a state tax audit. The state has
assessed taxes of $469 for the 1998 and 1999 tax years under audit. If
the state's position is applied to all tax years through December 31,
2001, the assessment would be $1,800 . The Company believes the
assessment and the state's underlying position is not supportable by
the law nor consistent with previously provided interpretative guidance
from the office of the State Secretary of Revenue. The Company has been
advised that it has meritorious positions for its previous tax filings.
As a result, no amounts were accrued by the Company as of December 31,
2001.
F-27
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
13 COMMITMENTS AND CONTINGENCIES (Continued)
Contingencies
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 (59% of the owned portfolio) for a
period of time except through a tax deferred Internal Revenue Code Section
1031 like-kind exchange.
Debt Covenants
The line of credit loan agreement contain restrictions which, among other
things, require maintenance of certain financial ratios and limit the
payment of dividends.
Guarantees
The Company has guaranteed a total of $606 of debt associated with two
entities where the Company is the general partner. All other mortgage notes
payable of affiliates are non-recourse debt to the limited partnerships and
the Company. In addition, the Company has guaranteed the Low Income Housing
Tax Credits to limited partners in 42 partnerships totaling approximately
$48,500. As of December 31, 2001, there were no known conditions that would
make such payments necessary. 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.
F-28
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
14 PROPERTY ACQUISITIONS
For the years ended December 31, 2001, 2000 and 1999, 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
--------- ---- -------- ----------- -------- ------- --------
The Manor Northern VA 02/19/99 1973 198 $ 7,119 $ 36
Ridgeway Court Philadelphia 02/26/99 1972 66 $ 2,156 $ 33
Springwells Park Detroit 04/08/99 1940-66 303 $ 18,355 $ 61
Sherwood Gardens Philadelphia 05/27/99 1968 103 $ 4,198 $ 41
7 Property Portfolio Various 07/01/99 1959-82 3,722 $176,607 $ 47
Maple Lane South Bend 07/09/99 1982-89 396 $ 17,542 $ 44
12 Property Portfolio Mid-Atlantic 07/15/99 1964-96 3,297 $154,168 $ 47
4 Property Portfolio Philadelphia 07/28/99 1962-68 825 $ 32,534 $ 39
The Colony Chicago 09/01/99 1972-78 783 $ 41,887 $ 53
The Lakes Detroit 11/05/99 1986 434 $ 25,907 $ 60
Old Friends Baltimore 02/01/00 1887 51 $ 2,138 $ 39
6 Property Portfolio Philadelphia 03/15/00 1940-75 2,113 $141,195 $ 64
2 Property Portfolio Detroit 03/22/00 1969-74 360 $ 14,394 $ 40
Elmwood Terrace Baltimore 06/30/00 1972 504 $ 20,605 $ 41
East Meadow Northern VA 08/01/00 1971 150 $ 13,053 $ 87
Southbay Manor Long Island 09/11/00 1959 61 $ 3,054 $ 49
Hampton Court Detroit 09/29/00 1972 182 $ 5,889 $ 33
Bayberry Detroit 09/29/00 1967 120 $ 5,840 $ 47
Blackhawk Chicago 10/20/00 1971 371 $ 17,542 $ 47
5 Property Portfolio Long Island 11/01/00 1955-75 429 $ 26,968 $ 62
Orleans Village Northern VA 11/16/00 1967 851 $ 67,404 $ 79
Cypress Place Chicago 12/27/00 1969 192 $ 10,075 $ 53
Woodholme Manor Baltimore 03/30/01 1969 176 $ 5,805 $ 33
Virginia Village Northern VA 05/31/01 1967 344 $ 27,044 $ 79
Mill Towne Village Baltimore 05/31/01 1973 384 $ 17,558 $ 46
Southern Meadows Long Island 06/29/01 1971 452 $ 40,866 $ 90
Devonshire Hills Long Island 07/16/01 1968 297 $ 47,049 $ 158
Fenland Field Baltimore 08/01/01 1970 234 $ 14,540 $ 62
Courtyard Village Chicago 08/29/01 1971 224 $ 12,887 $ 58
Manor Baltimore 08/31/01 1969 435 $ 36,384 $ 84
2 Property Portfolio Northern VA 10/24/01 1971-72 274 $ 11,076 $ 40
F-29
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
15 PROFORMA CONDENSED FINANCIAL INFORMATION
The Company acquired ten apartment communities ("2001 Acquired
Communities") with 2,820 units in nine unrelated transactions during the
twelve-month period ended December 31, 2001. The total purchase price
(including closing costs) of $212 million equates to approximately $76,000
per unit. Consideration for the communities included $68 million of assumed
debt, $19 million of UPREIT Units, and $126 million of cash.
In addition, the Company disposed of fourteen apartment communities ("2001
Disposed Properties") with 2,855 units in six unrelated transactions during
the twelve-month period ended December 31, 2001. The total selling price
(including closing costs) of $122 million resulted in $26 million of gain
on sale of real estate.
The following unaudited proforma information was prepared as if (i) the
2001 transactions related to the acquisition of the "2001 Acquired
Communities" had occurred on January 1, 2000, (ii) the 2000 transactions
related to the acquisitions of 22 apartment communities in twelve separate
transactions had occurred on January 1, 1999, (iii) the 1999 transactions
related to the acquisition of 30 apartment communities in ten transactions
had occurred on January 1, 1999, (iv) the disposition of the "2001 Disposed
Properties" had occurred on January 1, 2000, and (v) the $115 million
Series B, C, D and E Preferred stock offerings had occurred on January 1,
1999. The proforma financial information is presented for informational
purposes only and may not be indicative of what actual results of
operations would have been had if the transactions been consummated as
indicated, nor does it purport to represent the results of operations for
future periods. Adjustments to the proforma condensed combined statement of
operations for the twelve months ended December 31, 2001 and 2000, consist
principally of providing for the net operating activity and recording
interest, depreciation and amortization from January 1, 1999 to the
acquisition date.
For the years ended
December 31,
(unaudited)
2001 2000 1999
---- ---- ----
Total revenues $ 370,900 $ 351,868 $ 283,036
Income before extraordinary item 63,247 62,290 32,915
Net income available to common shareholders 45,566 44,301 31,662
Per common share data:
Income before extraordinary item:
Basic $ 2.06 $ 2.15 $ 1.70
Diluted $ 2.05 $ 2.13 $ 1.69
Net income:
Basic $ 2.06 $ 2.15 $ 1.69
Diluted $ 2.05 $ 2.13 $ 1.68
Weighted average numbers of shares outstanding:
Basic 22,101,027 20,639,241 18,697,731
Diluted 22,227,521 20,755,721 18,800,907
F-30
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
16 SUPPLEMENTAL CASH FLOW DISCLOSURES
Supplemental cash flow information including non cash financing and
investing activities for the years ended December 31, 2001, 2000 and 1999
are as follows:
2001 2000 1999
---- ---- ----
Cash paid for interest $ 65,268 $ 54,829 $ 36,967
Mortgage loans assumed associated with property acquisitions 67,807 162,967 203,326
Issuance of UPREIT Units associated with property and other
acquisitions 19,133 58,616 149,488
Notes issued in exchange for officer and director stock purchases 1,965 - -
Exchange of UPREIT Units for common/preferred shares 1,910 7,388 36,771
Fair value of hedge instruments 920 - -
Transfer of notes receivable due from affiliates in exchange for
additional equity in affiliates 23,699 - -
17 GAIN (LOSS) ON DISPOSITION OF PROPERTY AND BUSINESS
During 2001, the Company disposed of fourteen apartment communities with
2,855 units in six unrelated transactions and two general partnership
interests. The total sales price of $122 million equates to $43,000 per
unit. The total gain on sale of these transactions amounted to
approximately $26 million.
During 2000, the Company disposed of one apartment community with 150 units
and one general partnership interest, in two separate transactions for a
total loss on disposition of $462. In addition, effective December 31,
2000, the Company sold its affordable housing development business to the
management of that business. The selling price was approximately $6.7
million and a loss on sale of $924 was recorded.
F-31
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
18 QUARTERLY FINANCIAL STATEMENT INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 2001
and 2000 are as follows:
2001
----
First Second Third Fourth
----- ------ ----- ------
Revenues $88,215 $90,152 $94,445 $94,711
Income before minority interest
and extraordinary item 11,964 32,233 30,106 23,953
Minority interest 3,132 11,615 10,811 8,124
Extraordinary item, net of minority
interest N/A N/A N/A (68)
Net income available to common
shareholders 4,335 16,121 14,797 11,572
Basic earnings per common share:
Income before extraordinary item .20 .74 .67 .51
Extraordinary item N/A N/A N/A N/A
Net income .20 .74 .67 .51
Diluted earnings per common share:
Income before extraordinary item .20 .71 .66 .50
Extraordinary item N/A N/A N/A N/A
Net income .20 .71 .66 .50
2000
----
First Second Third Fourth
----- ------ ----- ------
Revenues $72,364 $78,164 $82,007 $86,513
Income before minority interest
and extraordinary item 13,642 16,494 20,003 17,031
Minority interest 5,160 6,401 7,658 6,495
Extraordinary item, net of minority
interest N/A N/A N/A N/A
Net income available to common
shareholders 6,554 7,559 8,555 6,610
Basic earnings per common share:
Income before extraordinary item .33 .37 .41 .31
Extraordinary item N/A N/A N/A N/A
Net income .33 .37 .41 .31
Diluted earnings per common share:
Income before extraordinary item .33 .37 .40 .31
Extraordinary item N/A N/A N/A N/A
Net income .33 .37 .40 .31
Full year per share data does not equal the sum of the quarterly data
due to the impact of the convertible preferred securities on the
quarterly results and not the year to date amounts.
F-32
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
19 SUBSEQUENT EVENTS
On January 24, 2002, the Company sold six apartment communities with
339 units in two unrelated transactions. The total sales price of $13.6
million equates to $41,000 per unit. Total gain on sale of this
transaction is expected to be approximately $0.5 million and will be
recorded in the first quarter of 2002.
F-33
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(IN THOUSANDS)
Initial Cost Costs Total Cost Total Cost,
Buildings, Capitalized Buildings, Net of
Encum- Improvements Adjust- Subsequent to Improvements Accumulated Accumulated Year of
Community brances Land &Equipment ments(a) Acquisition Land &Equipment Total(b) Depreciation Depreciation Acquisition
--------- ------- ---- ---------- ------------------- ---- ---------- -------- ------------ ------------ -----------
Apple Hill $3,486 $20,347 $5,208 $3,486 $25,555 $29,041 $2,938 $26,103 1998
Arbor Crossing $2,608 1,072 4,329 733 1,072 5,062 6,134 413 5,721 1999
Bayberry Place 2,454 1,440 4,400 444 1,440 4,844 6,284 169 6,115 2000
Bayview/Colonial 5,977 1,600 8,471 1,399 1,600 9,869 11,469 310 11,159 2000
Beechwood 560 3,442 1,218 560 4,660 5,220 551 4,669 1998
Blackhawk 10,604 2,968 14,578 1,975 2,968 16,553 19,521 528 18,993 2000
Bonnie Ridge 18,401 4,830 42,769 10,071 4,830 52,841 57,671 3,736 53,934 1999
Braddock Lee 9,549 3,810 8,842 3,344 3,810 12,186 15,996 1,644 14,352 1998
Brook Hill 4,581 330 7,920 3,314 330 11,234 11,564 2,592 8,972 1994
Candlewood 387 2,592 734 387 3,327 3,714 641 3,072 1996
Candlewood, IN 7,495 1,550 11,956 1,485 1,550 13,441 14,991 1,492 13,500 1998
Canterbury -MD 14,601 4,944 21,384 769 4,944 22,154 27,098 1,522 25,576 1999
Canterbury Square 6,372 2,352 10,791 2,281 2,352 13,072 15,424 1,932 13,492 1997
Carriage Hill 570 3,827 1,946 570 5,773 6,343 1,055 5,288 1996
Carriage Hill - MI 3,676 840 5,974 1,041 840 7,016 7,856 817 7,039 1998
Carriage Hill - VA 19,896 3,984 33,138 1,487 3,984 34,625 38,609 2,315 36,294 1999
Carriage House 250 860 305 250 1,165 1,415 150 1,265 1998
Carriage Park 5,300 1,280 8,184 2,334 1,280 10,518 11,798 1,289 10,509 1998
Castle Club 3,632 948 8,909 1,083 948 9,992 10,940 486 10,454 2000
Cedar Glen 715 2,018 1,006 715 3,024 3,739 383 3,355 1998
Charter Square 10,763 3,952 18,247 4,378 3,952 22,625 26,577 3,136 23,441 1997
Cherry Hill Club 2,818 492 4,096 1,912 492 6,009 6,501 738 5,763 1998
Cherry Hill Village 4,367 1,120 6,835 1,506 1,120 8,341 9,461 916 8,544 1998
Chesterfield 6,708 1,482 8,206 2,955 1,482 11,161 12,643 1,465 11,178 1997
Cloverleaf 370 2,668 1,978 370 4,645 5,015 719 4,296 1997
Colonies 22,388 1,680 21,350 7,453 1,680 28,803 30,483 3,321 27,161 1998
Colony Apartments 15,502 7,830 34,121 4,713 7,830 38,834 46,664 2,384 44,279 1999
Conifer Village 2,270 358 8,555 448 358 9,003 9,361 2,220 7,141 1994
Cornwall Pk. 439 2,947 3,176 439 6,123 6,562 1,063 5,499 1996
Country Village 6,461 2,236 11,149 3,128 2,236 14,277 16,513 1,652 14,861 1998
Courtyards Village 5,328 3,360 9,823 68 3,360 9,891 13,251 160 13,091 2001
Coventry Village 784 2,328 1,711 784 4,039 4,823 458 4,365 1998
Curren Ter. 9,119 1,908 10,957 4,193 1,908 15,149 17,057 1,980 15,077 1997
Cypress Place 6,507 2,304 7,841 981 2,304 8,822 11,126 290 10,837 2000
Deerfield Woods 3,348 864 4,877 655 864 5,532 6,396 269 6,127 2000
Devonshire Hills 25,080 14,850 32,934 128 14,850 33,061 47,911 544 47,367 2001
East Hill 231 1,560 542 231 2,103 2,334 245 2,088 1998
East Meadow 7,140 2,250 10,803 208 2,250 11,011 13,261 384 12,877 2000
F-34
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(IN THOUSANDS)
Initial Cost Costs Total Cost
Buildings, Capitalized Buildings,
Encum- Improvements Adjust- Subsequent to Improvements Accumulated
Community brances Land & Equipment ments(a) Acquisition Land & Equipment Total(b) Depreciation
--------- ------- ---- ----------- -------- ----------- ---- ----------- -------- ------------
East Winds 960 5,079 960 960 6,040 7,000 191
Elmwood Terrace 4,560 6,048 14,564 1,251 6,048 15,815 21,863 677
Emerson Sq. 384 2,019 945 384 2,965 3,349 532
Executive 2,806 600 3,420 2,230 600 5,649 6,249 785
Fairview 580 5,305 2,828 2,192 580 10,325 10,905 4,494
Falcon Crest 13,102 2,772 11,116 3,113 2,772 14,229 17,001 1,240
Fenland Field 3,510 11,046 227 3,510 11,273 14,783 140
Finger Lakes 3,415 200 4,536 1,882 1,943 200 8,361 8,561 3,072
Fordham Green 2,949 802 5,280 1,494 802 6,774 7,576 853
Gateway Village 7,331 1,320 6,621 226 1,320 6,847 8,167 463
Glen Brook 3,008 1,414 4,815 897 1,414 5,711 7,125 407
Glen Manor 3,521 1,044 4,517 1,081 1,044 5,598 6,642 660
Golfview Manor 316 110 542 149 110 691 801 111
Greentrees 4,732 1,152 8,608 1,977 1,152 10,585 11,737 1,347
Hampton Court 3,524 1,252 4,615 1,388 1,252 6,003 7,255 341
Harborside 250 6,113 3,121 250 9,234 9,484 2,223
Hill Brook Place 5,462 2,192 9,118 1,493 2,192 10,610 12,802 701
HP of Bryn Mawr 12,927 3,160 17,907 6,009 3,160 23,916 27,076 1,200
HP of Devon 28,892 6,280 35,545 8,219 6,280 43,764 50,044 2,208
HP of Golf Club 16,690 3,990 21,236 6,231 3,990 27,466 31,456 1,291
HP of Newark 9,624 2,592 12,713 8,909 2,592 21,622 24,214 1,354
HP of Trexler Park 10,140 2,490 13,802 2,235 2,490 16,036 18,526 780
Idylwood 9,012 700 16,927 6,220 700 23,147 23,847 5,254
Kingsley 6,454 1,640 11,671 2,486 1,640 14,157 15,797 1,972
Lake Grove 27,675 7,360 11,952 8,067 7,360 20,019 27,379 2,938
Lakeshore 573 3,849 2,555 573 6,404 6,977 1,038
Lakeview 3,954 636 4,552 1,475 636 6,028 6,664 746
Lansdowne 1,332 6,947 1,513 1,332 8,460 9,792 1,215
Macomb Manor 3,948 1,296 7,357 737 1,296 8,094 9,390 377
Manor Apts. 5,600 1,386 5,738 1,698 1,386 7,436 8,822 805
Maple Lane 11,976 2,547 14,975 1,900 2,547 16,876 19,423 1,163
Maple Tree 840 4,445 589 840 5,034 5,874 163
Meadows 3,504 208 2,776 1,216 1,327 208 5,319 5,527 2,130
Mid-Island 6,675 4,159 6,567 2,278 4,159 8,845 13,004 1,446
Mill Company 1,911 384 1,671 576 384 2,246 2,630 286
Mill Towne Village 8,530 3,840 13,741 611 3,840 14,351 18,191 283
Morningside 19,360 6,147 28,699 11,874 6,147 40,573 46,720 4,815
New Orleans 7,311 1,848 8,886 4,731 1,848 13,617 15,465 1,738
Newcastle 6,000 197 4,007 3,684 3,272 197 10,963 11,160 4,598
Total Cost,
Net of
Accumulated Year of
Community Depreciation Acquisition
--------- ------------ -----------
East Winds 6,808 2000
Elmwood Terrace 21,186 2000
Emerson Sq. 2,816 1997
Executive 5,465 1997
Fairview 6,411 1985
Falcon Crest 15,761 1999
Fenland Field 14,642 2001
Finger Lakes 5,489 1983
Fordham Green 6,723 1997
Gateway Village 7,705 1999
Glen Brook 6,719 1999
Glen Manor 5,982 1997
Golfview Manor 690 1997
Greentrees 10,390 1997
Hampton Court 6,914 2000
Harborside 7,260 1995
Hill Brook Place 12,101 1999
HP of Bryn Mawr 25,876 2000
HP of Devon 47,836 2000
HP of Golf Club 30,166 2000
HP of Newark 22,860 1999
HP of Trexler Park 17,747 2000
Idylwood 18,594 1995
Kingsley 13,825 1997
Lake Grove 24,441 1997
Lakeshore 5,938 1996
Lakeview 5,918 1998
Lansdowne 8,577 1997
Macomb Manor 9,013 2000
Manor Apts. 8,017 1999
Maple Lane 18,260 1999
Maple Tree 5,711 2000
Meadows 3,397 1984
Mid-Island 11,558 1997
Mill Company 2,344 1998
Mill Towne Village 17,909 2001
Morningside 41,905 1998
New Orleans 13,727 1997
Newcastle 6,562 1982
F-35
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(IN THOUSANDS)
Initial Cost Costs Total Cost
Buildings, Capitalized Buildings,
Encum- Improvements Adjust- Subsequent to Improvements
Community brances Land & Equipment ments(a) Acquisition Land & Equipment Total(b)
--------- ------- ---- ----------- -------- ----------- ---- ----------- --------
Northgate 289 6,987 3,377 289 10,364 10,653
Oak Manor 4,878 616 4,111 1,236 616 5,348 5,964
Oak Park Manor 5,032 1,192 9,188 1,747 1,192 10,935 12,127
Old Friends 2,335 255 1,889 176 255 2,065 2,320
Orleans Village 43,745 8,510 58,912 5,208 8,510 64,119 72,629
Owings Run 32,060 5,537 32,622 399 5,537 33,021 38,558
Paradise 972 7,134 3,368 972 10,501 11,473
Park Shirlington 12,023 4,410 10,180 3,738 4,410 13,918 18,328
Parkview Garden 8,000 1,207 7,201 1,710 1,207 8,911 10,118
Patricia 600 4,196 1,175 600 5,371 5,971
Pavilion 12,324 5,184 25,314 10,996 5,184 36,310 41,494
Pearl Street 49 1,189 498 49 1,687 1,736
Perinton 224 6,120 3,629 2,088 224 11,837 12,061
Pines of Perinton 8,235 1,524 7,139 1,220 1,524 8,358 9,882
Pleasant View 43,534 5,710 47,816 9,690 5,710 57,506 63,216
Pleasure Bay 5,985 1,620 6,234 2,533 1,620 8,767 10,387
Racquet Club 22,739 1,868 23,107 3,048 1,868 26,155 28,023
Racquet Club South 2,995 309 3,891 1,107 309 4,997 5,306
Raintree 7,175 - 6,654 3,217 7,943 - 17,814 17,814
Redbank Village 11,615 2,000 14,030 3,305 2,000 17,335 19,335
Ridgeway Ct. 1,029 330 1,826 274 330 2,100 2,430
Ridley Brook 4,671 1,952 7,719 1,383 1,952 9,102 11,054
Riverton 5,980 240 6,640 2,523 4,646 240 13,809 14,049
Rolling Park 5,303 720 5,033 863 720 5,896 6,616
Royal Garden 10,766 5,500 14,067 8,365 5,500 22,433 27,933
Ryder Terrace 240 1,270 122 240 1,392 1,632
1600 East 1,000 8,527 4,474 1,000 13,000 14,000
1600 Elmwood 5,030 299 5,698 3,339 3,000 299 12,037 12,336
Scotsdale 9,916 1,692 11,920 1,514 1,692 13,433 15,125
Selford Townhomes 3,960 1,224 4,200 903 1,224 5,104 6,328
Seminary Hill 9,900 2,960 10,194 2,001 2,960 12,195 15,155
Seminary Towers 22,105 5,480 19,348 6,372 5,480 25,720 31,200
Shakespeare Park 2,549 492 3,433 163 492 3,596 4,088
Sherry Lake 6,062 2,396 15,616 2,557 2,396 18,174 20,570
South Bay 1,098 1,958 1,931 1,098 3,889 4,987
Southern Meadows 20,478 9,040 31,874 141 9,040 32,016 41,056
Southpointe Sq. 2,669 896 4,610 1,111 896 5,721 6,617
Spanish Gard. 5,600 398 9,263 2,828 398 12,091 12,489
Springwells Park 11,095 1,515 16,840 2,462 1,515 19,302 20,817
Total Cost,
Net of
Accumulated Accumulated Year of
Community Depreciation Depreciation Acquisition
--------- ------------ ------------ -----------
Northgate 2,600 8,053 1994
Oak Manor 687 5,277 1998
Oak Park Manor 1,562 10,565 1997
Old Friends 109 2,211 2000
Orleans Village 2,020 70,610 2000
Owings Run 2,168 36,390 1999
Paradise 1,847 9,626 1997
Park Shirlington 1,914 16,414 1998
Parkview Garden 1,382 8,736 1997
Patricia 614 5,357 1998
Pavilion 2,173 39,321 1999
Pearl Street 353 1,383 1995
Perinton 5,028 7,033 1982
Pines of Perinton 967 8,915 1998
Pleasant View 7,062 56,154 1998
Pleasure Bay 895 9,493 1998
Racquet Club 2,744 25,279 1998
Racquet Club South 498 4,809 1999
Raintree 6,101 11,712 1985
Redbank Village 2,056 17,279 1998
Ridgeway Ct. 212 2,218 1999
Ridley Brook 644 10,411 1999
Riverton 5,703 8,346 1983
Rolling Park 592 6,023 1998
Royal Garden 3,403 24,530 1997
Ryder Terrace 42 1,590 2000
1600 East 1,819 12,181 1997
1600 Elmwood 5,550 6,786 1983
Scotsdale 1,735 13,390 1997
Selford Townhomes 358 5,970 1999
Seminary Hill 814 14,341 1999
Seminary Towers 1,724 29,476 1999
Shakespeare Park 242 3,846 1999
Sherry Lake 1,900 18,670 1998
South Bay 135 4,852 2000
Southern Meadows 472 40,584 2001
Southpointe Sq. 867 5,750 1997
Spanish Gard. 2,827 9,662 1994
Springwells Park 1,432 19,385 1999
F-36
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(IN THOUSANDS)
Initial Costs
Cost Capitalized Total Cost
Buildings, Subsequent Buildings,
Encum- Improvements Adjust- to Improvements Accumulated
Community brances Land & Equipment ments(a) Acquisition Land & Equipment Total(b) Depreciation
--------- ------- ---- ----------- -------- ----------- ---- ----------- -------- -------------
Springwood 1,578 462 1,770 921 462 2,691 3,153 413
Stephenson House 1,477 640 2,407 646 640 3,053 3,693 459
Sunset Gard 696 4,663 2,243 696 6,906 7,602 1,178
Tamarron 5,200 1,320 8,474 347 1,320 8,820 10,140 584
Terry Apartments 1,909 650 3,439 178 650 3,618 4,268 250
The Lakes 2,821 23,086 1,736 2,821 24,822 27,643 1,487
The Manor (MD) 8,700 27,699 195 8,700 27,894 36,594 393
Timbercroft 7,559 1,704 6,826 403 1,704 7,228 8,932 513
Valley Park 13,508 2,459 16,753 2,922 2,459 19,675 22,134 2,958
Valley View 4,143 1,056 4,960 2,690 1,056 7,651 8,707 1,024
Village Green 8,654 1,103 13,283 3,977 1,103 17,260 18,363 3,834
Village Square-MD 7,306 2,590 13,306 1,329 2,590 14,635 17,225 1,039
Village Square-PA 3,535 768 3,582 2,312 768 5,894 6,662 806
Virginia Village 9,551 5,160 21,903 1,282 5,160 23,185 28,345 511
Wayne Village 10,938 1,925 12,895 2,907 1,925 15,802 17,727 1,975
Wellington Lakes 7,914 1,600 4,868 23 1,600 4,891 6,491 --
Wellington Woods 1,140 3,468 30 1,140 3,498 4,638 --
Westminster 861 5,763 1,878 861 7,640 8,501 1,426
Weston 847 4,736 2,985 847 7,721 8,568 992
William Henry 13,981 4,666 2,214 24,349 4,666 26,563 31,229 1,234
Windsor Rlty 2,146 402 3,300 764 402 4,064 4,466 496
Woodgate 3,327 480 3,797 1,428 480 5,225 5,705 790
Woodholme Manor 3,929 1,232 4,599 336 1,232 4,935 6,167 131
Woodland Garden 6,061 2,022 10,480 2,758 2,022 13,238 15,260 1,839
Other Assets 6,944 6,944 6,944 1,037
-------- ---------- ---------- --------- -------- ---------- ---------- ---------- ----------
$960,358 $ 287,473 $1,459,526 $ 22,318 $365,761 $ 287,543 $1,847,605 $2,135,078 $ 201,564
======== ========== ========== ========= ======== ========== ========== ========== ==========
Total Cost,
Net of
Accumulated Year of
Community Depreciation Acquisition
--------- ------------ -----------
Springwood 2,740 1997
Stephenson House 3,234 1997
Sunset Gard 6,424 1996
Tamarron 9,557 1999
Terry Apartments 4,017 2000
The Lakes 26,156 1999
The Manor (MD) 36,201 2001
Timbercroft 8,419 1999
Valley Park 19,176 1996
Valley View 7,683 1997
Village Green 14,528 1994-1996
Village Square-MD 16,186 1999
Village Square-PA 5,856 1997
Virginia Village 27,834 2001
Wayne Village 15,752 1998
Wellington Lakes 6,491 2001
Wellington Woods 4,638 2001
Westminster 7,075 1996
Weston 7,576 1998
William Henry 29,995 2000
Windsor Rlty 3,970 1998
Woodgate 4,915 1997
Woodholme Manor 6,036 2001
Woodland Garden 13,422 1997
Other Assets 5,907
-----------
$ 1,933,514
===========
(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
$1,732,000.
F-37
SCHEDULE III
HOME PROPERTIES OF NEW YORK, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2001
(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,
2001, are as follows:
2001 2000 1999
---- ---- ----
Balance, beginning of year $ 1,895,269 $ 1,480,753 $ 940,788
New property acquisition 213,325 328,021 480,473
Additions 130,468 92,603 61,034
Increase in real estate associated
with the purchase of UPREIT Units 1,666 -- --
Disposals and retirements (105,650) (6,108) (1,542)
----------- ----------- -----------
Balance, end of year $ 2,135,078 $ 1,895,269 $ 1,480,753
=========== =========== ===========
The changes in accumulated depreciation for the three years ended December 31,
1999, are as follows:
2001 2000 1999
---- ---- ----
Balance, beginning of year $ 153,324 $ 101,904 $ 65,627
Depreciation for the year 64,684 52,221 37,177
Disposals and retirements (16,444) (801) (900)
----------- ----------- -----------
Balance, end of year $ 201,564 $ 153,324 $ 101,904
=========== =========== ===========
F-38
HOME PROPERTIES OF NEW YORK, INC.
FORM 10-K
For Fiscal Year Ended December 31, 2001
Exhibit Index
Exhibit Exhibit Location
Number
2.1 Agreement among Home Properties of New Incorporated by reference to
York, Inc. and Philip J. Solondz, the Form 8- K filed by Home
Daniel Solondz and Julia Weinstein Properties of New York, Inc.
Relating to Royal Gardens I, together with dated 6/6/97
Amendment No. 1 (the "6/6/97 8-K")
2.2 Agreement among Home Properties of New Incorporated by reference to
York, Inc and Philip Solondz and Daniel the 6/6/97 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
1997 by and between Home Properties of New the Form 8-K filed Home
York, L.P. and Louis S. and Molly S. Wolk Properties of New York, Inc.
Foundation dated 9/26/97 (the "9/26/97
8-K")
2.4 Purchase and Sale Agreement dated April 30, Incorporated by reference to
1997 between Home Properties of New York the 9/26/97 8-K
L.P. and Briggs Wedgewood Associates, L.P.
2.5 Agreement and Plan of Merger, dated July Incorporated by reference to
31, 1997 between Home Properties of New the 9/26/97 8-K
York, L.P. and Chesfield Partnership
2.6 Agreement and Plan of Merger dated July 31, Incorporated by reference to
1997 between Home Properties of New York, the 9/26/97 8-K
L.P. and Valspring Partnership
2.7 Agreement and Plan of Merger, dated July Incorporated by reference to
31, 1997 between Home Properties of New the 9/26/97 8-K
York, L.P. and Exmark Partnership
2.8 Agreement and Plan of Merger, dated July Incorporated by reference to
31, 1997 between Home Properties of New the 9/26/97 8-K
York, L.P. and New Orleans East Limited
Partnership
2.9 Agreement and Plan of Merger, dated July Incorporated by reference to
31, 1997 between Home Properties of New the 9/26/97 8-K
York, L.P. Glenvwk Partnership
2.10 Agreement and Plan of Merger, dated July Incorporated by reference to
31, 1997 between Home Properties of New the 9/26/97 8-K
York, L.P. and PK Partnership
2.11 First Amendment to Agreement and Plan of Incorporated by reference to
Merger, dated September 1, 1997 between the 9/26/97 8-K
Home Properties of New York, L.P. and PK
Partnership and its partners
2.12 First Amendment to Agreement and Plan of Incorporated by reference to
Merger, dated September 1, 1997 between the 9/26/97 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
between Home Properties of New York, L.P. the 9/26/97 8-K
and Lamar Partnership
2.14 Agreement and Plan of Merger, dated July Incorporated by reference to
31, 1997 between Home Properties of New the Form 8-K filed by Home
York, L.P. and Curren Partnership New York, Inc., dated
10/3/97. dated 10/3/97
2.15 Contribution Agreement, dated October __, Incorporated by reference
1997 between Home Properties of New York to the Form 8-K
between Home Properties of New York, L.P. filed by Home Properties of
and Berger/Lewiston Associates Limited New York, Inc. dated 10/7/97
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, Incorporated by reference to
L.P. and Erie Partners, L.L.C. Relating the Form 8-K
to Woodgate Place Apartments, filed by Home Properties of
together with Amendment No. 1 dated 10/31/97 (the "10/31/97
8-K")
2.17 Agreement among Home Properties of New York, Incorporated by reference to
L.P. and Mid-Island Limited Partnership the 10/31/97 8-K
relating to Mid-Island Estates, together
with Amendment No. 1
2.18 Purchase and Sale Agreement among Home Incorporated by reference to
Properties of New York, L.P. and the 10/31/97 8-K
Anthony M. Palumbo and Daniel
Palumbo
2.19 Purchase and Sale Agreements dated June 17, Incorporated by reference to
1997 among Home Properties of New York, the Form 8-K filed by Home
L.P. and various individuals relating to Properties of New York, Inc.
Hill Court Apartments and Hudson Arms dated 2/20/98 (the "2/20/98
Apartments together with a letter 8-K")
Amendment dated September 24, 1997
2.20 Contract of Sale, dated October 20, 1997 Incorporated by reference to
between Home Properties of New York, L.P. the 2/20/98 8-K
and Hudson Palisades Associates relating to
Cloverleaf Apartments
2.21 Contribution Agreement, dated November 17, Incorporated by reference to
1997 among Home Properties of New York, the 2/20/98 8-K
L.P. and various trusts relating to
Scotsdale Apartments
2.22 Contribution Agreement, dated November 7, Incorporated by reference to
1997 among Home Properties of New York, the 2/20/98 8-K
L.P. 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
26, 1997 among Home Properties of New York, the Form 8-K filed by Home
L.P. and Cedar Glen Associates Properties of New York, Inc.
on 3/24/98 (the
"3/24/98 8-K")
2.24 Contribution Agreement dated March 2, 1998 Incorporated by reference to
among Home Properties of New York, L.P., the 3/24/98 8-K
Braddock Lee Limited Partnership and Tower
Construction Group, LLC
2.25 Contribution Agreement dated March 2, 1998 Incorporated by reference to
among Home Properties of New York, L.P., the 3/24/98 8-K
Park Shirlington Limited Partnership and
Tower Construction Group, LLC
2.26 Contract of Sale between Lake Grove Incorporated by reference to
Associates Corp. and Home Properties of the Form 10-K filed by Home
New York L.P., dated December 17, 1996, Properties of New York, Inc.
relating to the Lake Grove Apartments for the year ended 12/31/96
(the "12/31/96 10K")
2.27 Form of Contribution Agreement among Home Incorporated by reference to
Properties of New York, L.P. and the Form 8-K filed by Home
Strawberry Hill Apartment Company LLLP, Properties of New York, Inc.
Country Village Limited Partnership, on 5/22/98 (the "5/22/98
Morningside Six, LLLP, 8-K")
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 Incorporated by reference to
relating to the Kaplan Portfolio with the 5/22/98 8-K
schedule setting forth material details in
which documents differ from form
2.29 Form of Contribution Agreement dated June 7, Incorporated by reference to
1999, relating to the CRC Portfolio with the Form 8-K filed by Home
schedule setting forth material details in Properties of New York, Inc.
which documents differ from form on 7/2/99 (the "7/22/99
8-K")
2.30 Form of Contribution Agreement relating to Incorporated by reference to
the Mid-Atlantic Portfolio with schedule the Form 8-K filed by Home
setting forth material details in which Properties of New York, Inc.
documents differ from form on 7/30/99
2.31 Contribution Agreement among Home Incorporated by reference to
Properties of New York, L.P., Leonard the Form 8-K filed by Home
Klorfine, Ridley Brook Associates and Properties of New York, Inc.
the Greenacres Associates on 10/5/99 (the "10/5/99
8-K")
2.32 Purchase and Sale Agreement among Home Incorporated by reference to
Properties of New York, L.P. and Chicago the 10/5/99 8-K
Colony Apartments Associates
2.33 Contribution Agreement among Home Incorporated by reference to
Properties of New York, L.P., the Form 8-K filed
Gateside-Bryn Mawr Company, L.P., by Home Properties of New
Willgold Company, Gateside-Trexler York, Inc. on 4/5/00
Company, Gateside-Five Points Company,
Stafford Arms, Gateside-Queensgate Company,
Gateside Malvern Company, King Road
Associates and Cottonwood Associates
2.34 Form of Contribution Agreement between Old Incorporated by reference to
Friends Limited Partnership and Home the Form 8-K/A filed by Home
Properties of New York, L.P. and Home Properties of New York, Inc.
Properties of New York, Inc., along with on 12/5/00 (the "12/5/00
Amendments Number 1 and 2 thereto
2.35 Form of Contribution Agreement between Incorporated by reference to
Deerfield Woods Venture Limited the 12/5/00 8-K/A
Partnership and Home Properties of
New York, L.P.
2.36 Form of Contribution Agreement between Incorporated by reference to
Macomb Apartments Limited Partnership the 12/5/00 8-K/A
and Home Properties of New York, L.P.
2.37 Form of Contribution Agreement between Incorporated by reference to
Home Properties of New York, L.P. and the 12/5/00 8-K/A
Elmwood Venture Limited Partnership
2.38 Form of Sale Purchase and Escrow Agreement Incorporated by reference to
between Bank of America as Trustee and Home the 12/5/00 8-K/A
Properties of New York, L.P.
2.39 Form of Contribution Agreement between Home Incorporated by reference to
Properties of New York, L.P., Home the 12/5/00 8-K/A
Properties of New York, Inc. and S&S
Realty, a New York General Partnership
(South Bay)
2.40 Form of Contribution Agreement between Incorporated by reference to
Hampton Glen Apartments Limited Partnership the 12/5/00 8-K/A
and Home Properties of New York, L.P.
2.41 Form of Contribution Agreement between Home Incorporated by reference to
Properties of New York, L.P. and Axtell the 12/5/00 8-K/A
Road Limited Partnership
2.42 Form of Contribution Agreement between Elk Incorporated by reference
Grove Terrace II and III, L.P., Elk Grove to the Form 8-K filed
Terrace, L.P. and Home Properties of New by Home Properties of
York, L.P. New York, Inc. on 1/10/01
3.1 Articles of Amendment and Restatement of Incorporated by reference to
Articles of Incorporation of Home Home Properties of New York,
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
Incorporation of Home Properties of New the Home Properties of
York, Inc. New York, Inc.
Registration
Statement on Form S-3
File No. 333-52601 filed
May 14, 1998 (the "5/14/98
S-3")
3.3 Articles of Amendment of the Articles of Incorporated by reference to
Incorporation of Home Properties of New 7/2/99 8-K
York, Inc.
3.4 Amended and Restated Articles Supplementary Incorporated by reference to
of Series A Senior Convertible Preferred the Home Properties of New
Stock of Home Properties of New York, Inc. York, Inc. Registration
Statement on Form S-3,
File No. 333-93761, filed
12/29/99 (the "12/29/99
S-3")
3.5 Series B Convertible Cumulative Preferred Incorporated by reference to
Stock Articles Supplementary to the Amended the Home Properties of New
and Restated Articles of Incorporation of York, Inc. Registration
Home Properties of New York, Inc. Statement on Form S-3,
File No. 333-92023, filed
12/3/99
3.6 Series C Convertible Cumulative Preferred Incorporated by reference to
Stock Articles Supplementary to the Amended the Form 8-K filed by Home
and Restated Articles of Incorporation of filed by Home Properties of
Home Properties of New York, Inc. New York, Inc. on 5/22/00
(the "5/22/00 8-K")
3.7 Series D Convertible Cumulative Preferred Incorporated by reference to
Stock Articles Supplementary to the Amended the Form 8-K filed by Home
and Restated Articles of Incorporation of Properties of New York, Inc.
Home Properties of New York, Inc. on 6/12/00 (the "6/12/00
8-K")
3.8 Series E Convertible Cumulative Preferred Incorporated by reference to
Stock Articles Supplementary to the Amended the Form 8-K filed by Home
and Restated Articles of Incorporation of Properties of New York, Inc.
Home Properties of New York, Inc. on 12/22/00 (the "12/22/00
8-K)
3.9 Amended and Restated By-Laws of Home Incorporated by reference to
Properties of New York, Inc. (Revised the Form 8-K filed by Home
12/30/96) Properties of New York, Inc.
dated December 23, 1996
(the "12/23/96 8- K")
4.1 Form of certificate representing Shares of Incorporated by reference to
Common Stock the Form 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
Inc. to file instruments defining the 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
Traders Trust Company, Home Properties of the Form 10-Q filed by Home
New York, L.P. and Home Properties of New Properties of New York, Inc.
York, Inc. for the quarterly period
ended 6/30/94 (the "6/30/94
10-Q")
4.4 Amendment Agreement between Manufacturers Incorporated by reference to
and Traders Trust Company, Home the 12/31/94 10-K
Properties 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
Modification Agreement between the 6/30/94 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
of New York, L.P. payable to the 6/30/94 10-Q
Manufacturers and Traders Trust
Company in the principal amount
of $12,298,000
4.7 Spreader, Consolidation, Modification Incorporated by reference to
and Extension Agreement between Home the Form 10-K filed by Home
Properties of New York, L.P. and Properties New York, Inc. for
John Hancock Mutual Life Insurance the period ended 12/31/95 (the
Company, dated as of October 26, 1995, "12/31/95 10-K")
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. Incorporated by reference to
the 6/6/97 8-K
4.9 Amended and Restated Dividend Incorporated by reference to
Reinvestment, Stock Purchase, Resident the Form 8-K filed by Home
Stock Purchase and Employee Stock Properties of New York, Inc.,
Purchase Plan dated 12/23/97
4.10 Amendment No. One to Amended and Restated Incorporated by reference to
Dividend Reinvestment, Stock Purchase, the Home Properties of New
Resident Stock Purchase and Employee Stock York, Inc. Registration
Purchase Plan Statement on Form S-3,
File 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
Dividend Reinvestment, Stock Purchase, the Home Properties of New
Resident Stock Purchase and Employee Stock York Inc. Registration
Purchase Plan Statement on Form S-3,
File 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
Stock Purchase, Resident Stock Purchase and Home Properties of New York,
Employee Stock Purchase Plan Inc. Form 10-Q for the Quarter
ended 6/30/98 (the "6/30/98
10-Q")
4.13 Amendment No. Three to Amended and Incorporated by reference to
Restated Dividend Reinvestment, Stock the Home Properties of New
Purchase, Resident Stock Purchase and York, Inc. Registration
Employee Stock Purchase Plan Statement on Form S-3,
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
Purchase and Loan Plan 5/22/98 8-K
4.16 Home Properties of New York, Inc., Home Incorporated by reference to
Properties of New York, L.P. Executive the 7/2/99 8-K
Retention Plan
4.17 Home Properties of New York, Inc. Incorporated by reference to
Deferred Bonus Plan the 7/2/99 8-K
4.18 Fourth Amended and Restated Dividend Incorporated by reference to
Reinvestment, Stock Purchase, Resident the Registration Statement
Stock Purchase and Employee Stock Purchase on Form S-3, File No.
Plan 333-94815 filed on 1/18/2000
4.19 Directors Deferred Compensation Plan Incorporated by reference to
the Home Properties of New
York, Inc. Form 10-K for the
period ended 12/31/99
(the "12/31/99 10-K")
4.20 Agency Fee and Warrant Agreement Incorporated by reference to
the Form 8-K/A filed by Home
Properties of New York, Inc.
on 6/9/00
(the "6/9/00 8-K/A")
4.21 Form of Warrant Incorporated by reference to
the 6/9/00 8-K/A
4.22 Agency Fee and Warrant Agreement, Amendment Incorporated by reference to
No.1 the Form 8-K filed by Home
Properties of New York, Inc.
on 6/30/00
(the "6/30/00 8-K")
4.23 Home Properties of New York, Inc. Amendment Incorporated by reference to
Number One to the Amended and Restated the Form 10-Q
Stock Benefit Plan of Home Properties of New
York, Inc. for the quarter
ended 3/31/00 (the "3/31/00
10-Q")
4.24 Fifth Amended and Restated Dividend Incorporated by reference
Reinvestment, Stock Purchase, Resident to the Registration
Stock Purchase and Employee Stock Purchase Statement on Form S-3, file
Plan No. 333-54160, filed 1/23/01
4.25 Sixth Amended and Restated Dividend Incorporated by reference to
Reinvestment and Direct Stock Purchase Plan the Form 10-K filed by Home
Properties of New York,
Inc., for the annual
period ended 12/31/00
(the "12/31/00 10-K")
4.26 Home Properties of New York, Inc. Filed herewith
Amendment Number Two to the Amended and
Restated Stock Benefit Plan
4.27 Amendment No. One to Home Properties Filed herewith
of New York, Inc. Deferred Bonus Plan
10.1 Second Amended and Restated Agreement Incorporated by reference
Limited Partnership of Home Properties of to the 9/26/97 8-K
New York, L.P.
10.2 Amendments No. One through Eight to the Incorporated by reference
Second Amended and Restated Agreement of to Form 10-K of Home
Limited Partnership of Home Properties of Properties of New York,
New York, L.P. Inc. for the period ended
12/31/97 (the "12/31/97
10-K")
10.3 Articles of Incorporation of Home Incorporated by reference
Properties Management, Inc. to the S-11 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
Corporation to 12/31/95 10-K
10.6 Articles of Amendment to the Incorporated by reference
Articles of Incorporation of Conifer to the 12/31/00 10-K
Realty Corporation Changing the name to
Home Properties Resident Services, Inc.
10.7 By-Laws of Conifer Realty Corporation Incorporated by reference
to the 12/31/95 10-K
10.8 Home Properties Trust Declaration of Trust, Incorporated by reference
dated September 19, 1997 to the 9/26/97 8-K
10.9 Employment Agreement between Home Incorporated by reference
Properties of New York, L.P. and Norman to the 6/30/94 10-Q
P. Leenhouts
10.10 Amendments No. One, Two and Three to the Incorporated by reference
Employment Agreement between Home to the Form 10-K filed by
Properties of New York, L.P. and Norman P. Home Properties of New
Leenhouts York, Inc.for the year
ended 12/31/98 (the "12/
31/98 10-K")
10.11 Employment Agreement between Home Incorporated by reference
Properties of New York, L.P. and Nelson B. to the 6/30/94 10-Q
Leenhouts
10.12 Amendments No. One, Two and Three to the Incorporated by reference
Employment Agreement between Home to the 12/31/98 10-K
Properties of New York, L.P. and Nelson B.
Leenhouts
10.13 Indemnification Agreement between Home Incorporated by reference
Properties of New York, Inc. and certain to the 6/30/94 10-Q
officers and directors
10.14 Indemnification Agreement between Home Incorporated by reference to
Properties of New York, Inc. and Richard J. the 12/31/95 10-K
Crossed
10.15 Indemnification Agreement between Home Incorporated by reference to
Properties of New York, Inc. and Alan L. the 12/31/96 10-K
Gosule
10.16 Registration Rights Agreement among Home Incorporated by reference to
Properties of New York, Inc., Home Leasing the 6/30/94 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
10.17 Agreement of Operating Sublease, dated Incorporated by reference to
October 1, 1986, among KAM, Inc., Morris the S-11 Registration
Massry and Raintree Island Associates, as Statement
amended by Letter Agreement Supplementing
Operating Sublease dated October 1, 1986
10.18 Form of Term Promissory Note payable to Incorporated by reference to
Home Properties of New York, by the 12/31/96 10-K
officers and directors in association with
the Executive and Director Stock Purchase
and Loan Program
10.19 Form of Pledge Security Agreement executed Incorporated by reference to
by officers and directors in connection the 12/31/96 10-K
with Executive and Director Stock Purchase
and Loan Program
10.20 Schedule of Participants, loan amounts and Incorporated by reference to
shares issued in connection with the the 12/31/96 10-K
Executive and Director Stock Purchase and
Loan Program
10.21 Subordination Agreement between Home Incorporated by reference to
Properties of New York, Inc. and The Chase the 12/31/96 10-K
Manhattan Bank relating to the Executive
and Director Stock Purchase and Loan
Program
10.22 Partnership Interest Purchase Agreement, Incorporated by reference to
dated as of December 23, 1996 among Home the 12/23/96 8-K
Properties of New York, Inc., Home
Properties of New York, L.P. and State
of Michigan Retirement Systems
10.23 Registration Rights Agreement, dated as of Incorporated by reference to
December 23, 1996 between Home Properties the 12/23/96 8-K
of New York, Inc. and State of Michigan
Retirement Systems
10.24 Lock-Up Agreement, dated December 23, 1996 Incorporated by reference to
between Home Properties of New York, Inc. the 12/23/96 8-K
and State of Michigan Retirement Systems
10.25 Agreement dated as of April 13, 1998 Incorporated by reference to
between Home Properties of New York, Inc. the Home Properties of New
and the Treasurer of the State of Michigan York, Inc. Form 8-K
filed 4/15/98 (the "4/15/98
8-K")
10.26 Amendment No. Nine to the Second Amended Incorporated by reference to
and Restated Agreement of Limited 5/14/98 S-3
Partnership of the Operating Partnership
10.27 Master Credit Facility Agreement by and Incorporated by reference to
among Home Properties of New York, Inc., the Home Properties of New
Home Properties of New York, L.P., Home York, Inc. Form 10-Q for the
Properties WMF I LLC and Home Properties quarter ended 9/30/98 (the
of New York, L.P. and P-K Partnership "9/30/98 Form 10-Q")
doing business as Patricia Court and
Karen Court and WMF Washington Mortgage
Corp., dated as of August 28, 1998
10.28 First Amendment to Master Credit Facility Incorporated by reference to
Agreement, dated as of December 11, 1998 the 12/31/98 10-K
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
10.29 Second Amendment to Master Credit Facility Incorporated by reference to
Agreement, dated as of August 30, 1999 the 12/31/99 10-K
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
10.30 Amendments Nos. Ten through Seventeen to Incorporated by reference to
the Second Amended and Restated Limited the 12/31/98 10-K
Partnership Agreement
10.31 Amendments Nos. Eighteen through Twenty- Incorporated by reference to
Five to the Second Amended and Restated the Home Properties of New
Limited Partnership Agreement York, Inc. Form 10-Q for the
quarter ended 9/30/99
(the "9/30/99 10-Q")
10.32 Credit Agreement, dated 8/23/99 between Incorporated by reference to
Home Properties of New York, L.P., the the 9/30/99 10-Q
Lenders, Party hereto and Manufacturers and
Traders Trust Company as Administrative
Agent
10.33 Amendment No. Twenty-Seven to the Second Incorporated by reference to
Amended and Restated Limited Partnership the 12/29/99 S-3
Agreement
10.34 Amendments Nos. Twenty-Six and Twenty-Eight Incorporated by reference to
through Thirty to the Second Amended and the 12/31/99 10-K
Restated Limited Partnership Agreement
10.35 Registration Rights Agreement between Home Incorporated by reference to
Properties of New York, Inc. and GE Capital the 12/31/99 10-K
Equity Investment, Inc., dated 9/29/99
10.36 Amendment to Partnership Interest Purchase Incorporated by reference to
Agreement and Exchange Agreement the 12/29/99 S-3
10.37 2000 Stock Benefit Plan Incorporated by reference to
the 12/31/99 10-K
10.38 Purchase Agreement between Home Properties Incorporated by reference to
of New York, Inc., The Prudential Insurance 5/22/00 8-K
Company of America and Teachers Insurance
And Annuity Association of America
10.39 Purchase Agreement between Home Properties Incorporated by reference
of New York, Inc. and The Equitable Life to the 6/12/00 8-K
Assurance Society of the United States
10.40 Purchase Agreement between Home Properties Incorporated by reference to
of New York, Inc. and the Pacific Life the 6/3/00 8-K
Insurance Company and AEW Capital
Management
10.41 Home Properties of New York, L.P. Amendment Incorporated by reference to
Number One to Executive Retention Plan the 3/31/00 10-Q
10.42 Amendments No. Thirty-One and Thirty-Two to Incorporated by reference to
the Second Amended and Restated Limited the 3/31/00 10-Q
Partnership Agreement
10.43 Form of Purchase and Sale Agreement between Incorporated by reference to
Blackhawk Apartments Limited Partnership the 12/5/00 8-K/A
and Home Properties of New York, L.P.
10.44 Form of Purchase and Sale Agreement between Incorporated by reference to
Home Properties of New York, L.P. and the 12/5/00 8-K/A
Caesar Figoni
10.45 Form of Real Estate Purchase Agreement Incorporated by reference
between Smith Property Holdings Orleans, to the 12/5/00 8-K/A
LLC and Home Properties of New York, L.P.
10.46 Purchase Agreement between Home Properties Incorporated by reference
of New York, Inc., The Prudential Insurance to the 12/22/00 8-K
Company of America and Teachers Insurance
and Annuity Association of America
10.47 Employment Agreement between Home Incorporated by reference
Properties of New York, L.P., Home to the 12/31/00 10-K
Properties of New York Inc. and Edward
J. Pettinella, and Amendment No. One,
thereto
10.48 Consulting Agreement between Home Incorporated by reference
Properties of New York, L.P. and to the 12/31/00 10-K
Amy L. Tait
10.49 Amendment No. Thirty Three to the Second Incorporated by reference
Amended and Restated Limited Partnership to the 12/31/00 10-K
Agreement
10.50 Amendment No. Thirty Five to the Second Incorporated by reference
Amended and Restated Limited Partnership to the 12/31/00 10-K
Agreement
10.51 Amendment No. Forty Two to the Second Incorporated by reference
Amended and Restated Limited Partnership to the 12/31/00 10-K
Agreement
10.52 Amendments Nos. Thirty Four, Thirty Six Incorporated by reference
through Forty One, Forty Three and Forty to the 12/31/00 10-K
Four to the Second Amended and Restated
Limited Partnership Agreement
10.53 Purchase and Sale Agreement among Home Incorporated by reference
Properties of New York, L.P., Conifer to the 12/31/00 10-K
Realty Corporation and Conifer Realty LLC,
and Amendments Nos. One and Two thereto.
10.54 Purchase and Sale Agreement by and between Incorporated by reference
Sandalwood Co-Op, Inc. and Home Properties to the Form 8-K filed by
of New York, L.P., dated April 12, 2001 Home Properties of New York,
Inc., dated August 3, 2001
(the "8/3/01 8-K")
10.55 Contribution Agreement by and among Incorporated by reference
Home Properties of New York, L.P. and to the 8/3/01 8-K
Lincolnia Limited Partnership,
dated April 30, 2001
10.56 Purchase and Sale Agreement between Windsor Incorporated by reference
at Hauppauge Limited Partnership and Home to the 8/3/01 8-K
Properties of New York, L.P., dated as of
May, 2001
10.57 Amendment Nos. Forty-Five through Fifty-One Filed herewith
to the Second Amendment and Restated
Limited Partnership Agreement
10.58 Home Properties of New York, Inc. Amendment Filed herewith
No. One to 2000 Stock Benefit Plan
10.59 Home Properties of New York, Inc. Amendment Filed herewith
No. Two to 2000 Stock Benefit Plan
11 Computation of Per Share Earnings Schedule Filed herewith
21 List of Subsidiaries of Home Properties of Filed herewith
New York, Inc.
23 Consent of PricewaterhouseCoopers LLP Filed herewith
99 Additional Exhibits - Debt Summary Schedule Filed herewith