As filed with the Securities and Exchange Commission on
October 6, 1997
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
______________________
HOME PROPERTIES OF NEW YORK, INC.
(Exact name of registrant as specified in charter)
________________________
Maryland 16-1455126
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
850 Clinton Square
Rochester, New York 14604
(716) 546-4900
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
___________________
Ann M. McCormick, Esq.
Vice President, Secretary and General Counsel
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
(716) 246-4105
(Name, address, including zip code,
and telephone number, including area
code, of agent for service)
___________________
Copies to:
Deborah McLean Quinn, Esq.
Nixon, Hargrave, Devans & Doyle LLP
900 Clinton Square
Rochester, New York 14604
(716) 263-1307
________________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection
with dividend or interest reinvestment plans, check the following box.
/x/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of
the earlier registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
CALCULATION OF REGISTRATION FEE
Title of Each Proposed Proposed Amount
Class of Amount to Maximum Maximum of
Securities to be Offering Price Aggregate Registra-
be Registered Registered Per Share Offering Price tion Fee
- -------------- ----------- -------------- -------------- -------------
Common Stock 1,216,508 sh $25.75 $31,325,081 $9,492.45
par value $.01
(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 and based upon the
average of the high and low prices reported on the New York Stock Exchange
on September 30, 1997 of $25.75.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states
that this Registration Statement shall thereafter become effective in
accordance with Section 8(a) of the Securities Act of 1933 or until this
Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
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PROSPECTUS
1,216,508 Shares
HOME PROPERTIES OF NEW YORK, INC.
COMMON STOCK
($.01 par value)
___________________
All of the shares of the common stock, par value $.01 per share
(the "Common Stock") of Home Properties of New York, Inc. ("Home Properties"
or the "Company") offered hereby are being offered by the Selling Shareholders
of Home Properties. See "Selling Shareholders." The Company will not receive
any proceeds from the sale of the shares offered hereby. The Common Stock is
listed on the New York Stock Exchange under the symbol "HME". On October 2,
1997, the closing price of the Common Stock on the New York Stock Exchange was
$26 7/16 per share.
_______________
Home Properties is a self-administered, self-managed, fully
integrated real estate investment trust. Home Properties conducts
substantially all of its business and owns all of its properties through Home
Properties of New York, L.P. (the "Operating Partnership"). To comply with
certain technical requirements of the Internal Revenue Code of 1986, as amended
(the "Code") applicable to real estate investment trusts ("REITs"), the
Operating Partnership carries out portions of its property management and
development activities through management companies beneficially owned by the
Operating Partnership but controlled by one or more officers of Home Properties
(collectively, the "Management Companies").
The shares offered hereby may be offered and sold from time to
time as market conditions permit on the New York Stock Exchange, or otherwise,
at prices and terms then prevailing, at prices related to the then-current
market price, or in negotiated transactions. The shares may be sold by one or
more of the following methods, without limitation: (a) a block trade in which
a broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate a
transaction; (b) purchases by a broker or a dealer as principal and resale by
such broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; and (d) face-to-face transactions between sellers and purchasers
without a broker or dealer. In effecting sales, brokers or dealers engaged by
one or more of the Selling Shareholders may arrange for other brokers or
dealers to participate. Such brokers or dealers may receive commissions or
discounts from Selling Shareholders in amounts to be negotiated. Such brokers
and dealers and any other participating brokers or dealers may be deemed
"underwriters" under the Securities Act of 1933, as amended (the "Securities
Act").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
___________
The date of this Prospectus is October 6, 1997
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ADDITIONAL INFORMATION
Home Properties has filed with the Securities and Exchange Commission
(the "Commission"), 450 Fifth Street, N.W., Washington, D.C. 20549, a
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"), and the rules and regulations promulgated
thereunder, with respect to the common stock offered pursuant to this
Prospectus. This Prospectus, which is part of the Registration Statement,
does not contain all of the information set forth in the Registration
Statement and the exhibits thereto. For further information with respect
to the Company and the Common Stock, reference is made to the Registration
Statement and such exhibits, copies of which may be examined without charge
at, or obtained upon payment of prescribed fees from, the Public Reference
Section of the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and will also be available for inspection and
copying at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and at 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511.
Home Properties is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports and proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copied at the locations described above.
Copies of such materials can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
Home Properties at http://www.sec.gov. In addition, the Common Stock is
listed on the New York Stock Exchange and similar information concerning
Home Properties can be inspected at the New York Stock Exchange, 20 Broad
Street, New York, New York 10005.
Home Properties furnishes its stockholders with annual reports
containing audited financial statements with a report thereon by its
independent public accountants.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, which have been filed by Home Properties
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
are incorporated in this Prospectus Supplement by reference: The Company's
Annual Report on form 10-K for the fiscal year ended December 31, 1996; the
Company's Quarterly Reports on Form 10-Q for the quarterly periods ending
March 30, 1997 and June 30, 1997; the Company's Current Reports on Form 8-K
dated January 7, 1997, as amended on February 4, 1997, dated June 6, 1997,
as amended on August 11, 1997, dated July 7, 1997, dated September 25, 1997
and dated October 2, 1997
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and all other reports filed by the Company pursuant to Section 13(a) of the
Exchange Act since December 31, 1996. Documents incorporated herein by
reference are available to any shareholder of the Company, on written or
oral request, without charge, from the Company. Requests should be
directed to David P. Gardner, Chief Financial Officer, Home Properties of
New York, Inc., 850 Clinton Square, Rochester, New York 14604, telephone
(716) 546-4900. Copies of documents so requested will be sent by first
class mail, postage paid.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior
to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
references in and to be a part of this Prospectus from the date of filing
of such reports and documents (provided, however, that the information
referred to in Instruction 8 to Item 402(a)(3) of Regulation S-K
promulgated by the Securities and Exchange Commission is not incorporated
herein by reference).
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in the Registration Statement containing this
Prospectus or in any other subsequently filed documents which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this
Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom a copy of this Prospectus has been delivered, upon the written or
oral request of any such person, a copy of any and all of the documents
referred to above which have been or may be incorporated in this Prospectus
by reference, other than exhibits to those documents. Requests should be
directed to: David P. Gardner, Chief Financial Officer, Home Properties of
New York, Inc., 850 Clinton Square, Rochester, New York 14604 (716) 546-
4900.
THE COMPANY
As used in this section, the terms "Home Properties" and "Company",
includes Home Properties of New York, Inc., a Maryland corporation, Home
Properties of New York, L.P., a New York limited partnership, and the
Management Companies.
Home Properties of New York, Inc. (the "Company" or "Home Properties")
is a self-managed real estate investment trust which manages 134
communities with 16,004 apartment units. Of these, 9,756 units in 44
communities are owned outright, 4,782 units are
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managed by the Company as general partner and 1,466 are managed for other
owners, primarily affiliates of the Company. The majority of the
communities are located throughout New York, with additional holdings in
Pennsylvania, Ohio, and New Jersey. Home Properties also owns a 202-site
manufactured home community and manages 1.6 million square feet of
commercial space. Home Properties conducts substantially all of its
business and owns all of its properties through Home Properties of New
York, L.P. (the "Operating Partnership"), of which the Company is the
general partner. The Company is also the sole shareholder of Home
Properties Trust (the "QRS"), a Maryland real estate trust, which is a
limited partner of the Operating Partnership. To comply with certain
technical requirements of the Internal Revenue Code, the Operating
Partnership carries out portions of its property management and development
activities through management companies beneficially owned by the Operating
Partnership or controlled by one or more officers of Home Properties (the
"Management Companies").
The Company's executive offices are located at 850 Clinton Square,
Rochester, New York 14604. Its telephone number is (716) 546-4900.
USE OF PROCEEDS
The Company will not receive any cash proceeds as a result of this
offering. The Company will, however, acquire additional partnership units
in the Operating Partnership in exchange for the shares of Common Stock
issued to the Selling Shareholders which are being sold hereunder. See
"Selling Shareholders" below.
DESCRIPTION OF CAPITAL STOCK
General
The authorized capital stock of Home Properties consists of 30 million
shares of Common Stock, par value $.01 per share ("Common Stock"), 10
million shares of excess stock ("Excess Stock"), par value $.01 per share,
and 10 million shares of preferred stock ("Preferred Stock"), par value
$.01 per share. The following summary description of the Common Stock sets
forth certain general terms and conditions of the capital stock of Home
Properties. The descriptions below do not purport to be complete and are
qualified entirely by reference to Home Properties' Articles of Amendment
and Restatement of Articles of Incorporation, as amended ("Articles of
Incorporation").
Common Stock
All shares of Common Stock offered will be duly authorized, fully
paid, and nonassessable. Holders of the Common Stock will have no
conversion, redemption, sinking fund or preemptive
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rights; however, shares of Common Stock will automatically convert into
shares of Excess Stock as described below. Under the Maryland General
Corporation Law ("MGCL"), stockholders are generally not liable for Home
Properties' debts or obligations, and the holders of shares will not be
liable for further calls or assessments by Home Properties. Subject to the
provisions of Home Properties' Articles of Incorporation regarding Excess
Stock described below, all shares of Common Stock have equal dividend,
distribution, liquidation and other rights and will have no preference or
exchange rights.
Subject to the right of any holders of Preferred Stock to receive
preferential distributions, the holders of the shares of Common Stock will
be entitled to receive distributions in the form of dividends if and when
declared by the Board of Directors of Home Properties out of funds legally
available therefor, and, upon liquidation of Home Properties, each
outstanding share of Common Stock will be entitled to participate pro rata
in the assets remaining after payment of, or adequate provision for, all
known debts and liabilities of Home Properties, including debts and
liabilities arising out of its status as general partner of the Operating
Partnership, and any liquidation preference of issued and outstanding
Preferred Stock. Home Properties intends to continue paying quarterly
distributions.
The holder of each outstanding share of Common Stock will be entitled
to one vote on all matters presented to stockholders for a vote, subject to
the provisions of Home Properties' Articles of Incorporation regarding
Excess Stock described below. As described below, the Board of Directors
of Home Properties may, in the future, grant holders of one or more series
of Preferred Stock the right to vote with respect to certain matters when
it fixes the attributes of such series of Preferred Stock. Pursuant to the
MGCL, Home Properties cannot dissolve, amend its charter, merge with
another entity, sell all or substantially all its assets, engage in a share
exchange or engage in similar transactions unless such action is approved
by stockholders holding a majority of the outstanding shares entitled to
vote on such matter. In addition, the Amended and Restated Partnership
Agreement of the Operating Partnership (the "Partnership Agreement")
requires that any merger or sale of all or substantially all of the assets
of Operating Partnership be approved by partners holding a majority of the
outstanding Units, excluding Operating Partnership Units held by Home
Properties. Home Properties' Articles of Incorporation provide that its
Bylaws may be amended by its Board of Directors.
The holder of each outstanding share of Common Stock will be entitled
to one vote in the election of directors who serve for terms of one year.
Holders of the shares of Common Stock will have no right to cumulative
voting for the election of directors. Consequently, at each annual meeting
of stockholders, the holders of a majority of the shares entitled to vote
in the election of directors will be able to elect all of the directors.
Directors may be removed only for cause and only with the affirmative vote
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of the holders of a majority of the shares entitled to vote in the election
of directors.
Preferred Stock
Preferred Stock may be issued from time to time, in one or more
series, as authorized by the Board of Directors of Home Properties. The
Board of Directors will fix the attributes of any Preferred Stock that it
authorizes for issuance. Because the Board of Directors has the power to
establish the preferences and rights of each series of Preferred Stock, it
may afford the holders of any series of Preferred Stock preferences, powers
and rights, voting or otherwise, senior to the rights of holders of shares
of Common Stock. The issuance of Preferred Stock could have the effect of
delaying or preventing a change in control of Home Properties.
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of Home Properties, then, before any distribution or
payment shall be made to the holders of any shares of Common Stock, any
Excess Shares or any other class or series of capital stock of Home
Properties ranking junior to any outstanding Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of
Home Properties, the holders of shares of each series of Preferred Stock
shall be entitled to receive out of assets of Home Properties legally
available for distribution to shareholders liquidating distributions in the
amount of the liquidation preference per share, plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid dividends for prior dividend periods if
such shares of Preferred Stock do not have cumulative dividend). After
payment of the full amount of the liquidating distributions to which they
are entitled, the holders of shares of Preferred Stock will have no right
or claim to any of the remaining assets of Home Properties. In the event
that, upon any such voluntary or involuntary liquidation, dissolution or
winding up, the available assets of Home Properties are insufficient to pay
the amount of the liquidating distributions on all outstanding shares of
Preferred Stock and the corresponding amounts payable on all shares of
other classes or series of capital stock of Home Properties ranking on a
parity with such shares of Preferred Stock in the distribution of assets,
then the holders of such shares of Preferred Stock and all other such
classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.
Restrictions on Transfer
Ownership Limits. Home Properties' Articles of Incorporation contain
certain restrictions on the number of shares of capital stock that
stockholders may own. For Home Properties to qualify as a REIT under the
Code, no more than 50% in value of its outstanding shares of capital stock
may be owned,
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directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of a taxable year or
during a proportionate part of a shorter taxable year. The capital stock
must also be beneficially owned by 100 or more persons during at least
335 days of a taxable year or during a proportionate part of a shorter
taxable year. Because Home Properties expects to continue to qualify as a
REIT, its Articles of Incorporation contain restrictions on the ownership
and transfer of shares of its capital stock intended to ensure compliance
with these requirements.
Subject to certain exceptions specified in the Articles of
Incorporation, no holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 8.0% (the "Ownership Limit")
of the value of the issued and outstanding shares of capital stock of Home
Properties. Stockholders ("Existing Holders") whose holdings exceeded the
Ownership Limit immediately after Home Properties' initial public offering
of its Common Stock, assuming that all Units of the Operating Partnership
are counted as shares of Common Stock, are permitted to continue to hold
the number of shares they held on such date and may acquire additional
shares of capital stock upon (i) the exchange of Units for Shares, (ii) the
exercise of stock options or receipt of grants of shares of capital stock
pursuant to a stock benefit plan, (iii) the acquisition of shares of
capital stock pursuant to a dividend reinvestment plan, (iv) the transfer
of shares of capital stock from another Existing Holder or the estate of an
Existing Holder by devise, gift or otherwise, or (v) the foreclosure on a
pledge of shares of capital stock; provided, no such acquisition may cause
any Existing Holder to own, directly or by attribution, more than 17.5%
(the "Existing Holder Limit") of the issued and outstanding Shares, subject
to certain additional restrictions. The Board of Directors of Home
Properties may increase or decrease the Ownership Limit and Existing Holder
Limit from time to time, but may not do so to the extent that after giving
effect to such increase or decrease (i) five beneficial owners of Shares
could beneficially own in the aggregate more than 49.5% of the aggregate
value of the outstanding capital stock of Home Properties or (ii) any
beneficial owner of capital stock would violate the Ownership Limit or
Existing Holder Limit as a result of a decrease. The Board of Directors
may waive the Ownership Limit or the Existing Holder Limit with respect to
a holder if such holder provides evidence acceptable to the Board of
Directors that such holder's ownership will not jeopardize Home Properties'
status as a REIT.
Any transfer of outstanding capital stock of Home Properties
("Outstanding Stock") that would (i) cause any holder, directly or by
attribution, to own capital stock having a value in excess of the Ownership
Limit or Existing Holder Limit, (ii) result in shares of capital stock
other than Excess Stock, if any, to be owned by fewer than 100 persons,
(iii) result in Home Properties being closely held within the meaning of
section 856(h) of the Code, or (iv) otherwise prevent Home Properties from
satisfying any criteria necessary for it to qualify as a REIT, is null and
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void, and the purported transferee acquires no rights to such Outstanding
Stock.
Outstanding Stock owned by or attributable to a stockholder or shares
of Outstanding Stock purportedly transferred to a stockholder which cause
such stockholder or any other stockholder to own shares of capital stock in
excess of the Ownership Limit or Existing Holder Limit will automatically
convert into shares of Excess Stock. Such Excess Stock will be transferred
by operation of law to a separate trust, with Home Properties acting as
trustee, for the exclusive benefit of the person or persons to whom such
Outstanding Stock may be ultimately transferred without violating the
Ownership Limit or Existing Holder Limit. Excess Stock is not treasury
stock, but rather constitutes a separate class of issued and outstanding
stock of Home Properties. While the Excess Stock is held in trust, it will
not be entitled to vote, will not be considered for purposes of any
stockholder vote or the determination of a quorum for such vote and will
not be entitled to participate in dividends or other distributions. Any
record owner or purported transferee of Outstanding Stock which has
converted into Excess Stock (the "Excess Holder") who receives a dividend
or distribution prior to the discovery by Home Properties that such
Outstanding Stock has been converted into Excess Stock must repay such
dividend or distribution upon demand. While Excess Stock is held in trust,
Home Properties will have the right to purchase it from the trust for the
lesser of (i) the price paid for the Outstanding Stock which converted into
Excess Stock by the Excess Holder (or the market value of the Outstanding
Stock on the date of conversion if no consideration was given for the
Outstanding Stock) or (ii) the market price of shares of capital stock
equivalent to the Outstanding Stock which converted into Excess Stock (as
determined in the manner set forth in the Articles of Incorporation) on the
date Home Properties exercises its option to purchase. Home Properties
must exercise this right within the 90-day period beginning on the date on
which it receives written notice of the transfer or other event resulting
in the conversion of Outstanding Stock into Excess Stock. Upon the
liquidation of Home Properties, distributions will be made with respect to
such Excess Stock as if it consisted of the Outstanding Stock from which it
was converted.
Any Excess Holder, with respect to each trust created upon the
conversion of Outstanding Stock into Excess Stock, may designate any
individual as a beneficiary of such trust; provided, such person would be
permitted to own the Outstanding Stock which converted into the Excess
Stock held by the trust under the Ownership Limit or Existing Holder Limit
and the consideration paid to such Excess Holder in exchange for
designating such person as the beneficiary is not in excess of the price
paid for the Outstanding Stock which converted into Excess Stock by the
Excess Holder (or the market value of the Outstanding Stock on the date of
conversion if no consideration was given for the Outstanding Stock). Home
Properties' redemption right must have expired or been waived prior to such
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designation. Immediately upon the designation of a permitted beneficiary,
the Excess Stock, if any, will automatically convert into shares of the
Outstanding Stock from which it was converted and Home Properties as
trustee of the trust will transfer such shares, if any, and any proceeds
from redemption or liquidation to the beneficiary.
If the restrictions on ownership and transfer, conversion provisions
or trust arrangements in Home Properties' Articles of Incorporation are
determined to be void or invalid by virtue of any legal decision, statute,
rule or regulation, then the Excess Holder of any Outstanding Stock that
would have converted into shares of Excess Stock if the conversion
provisions of the Articles of Incorporation were enforceable and valid
shall be deemed to have acted as an agent on behalf of Home Properties in
acquiring such Outstanding Stock and to hold such Outstanding Stock on
behalf of Home Properties unless Home Properties waives its right to this
remedy.
The foregoing ownership and transfer limitations may have the effect
of precluding acquisition of control of Home Properties without the consent
of its Board of Directors. All certificates representing shares of capital
stock will bear a legend referring to the restrictions described above.
The foregoing restrictions on transferability and ownership will not apply
if the Board of Directors determines, and the stockholders concur, that it
is no longer in the best interests of Home Properties to attempt to
qualify, or to continue to qualify, as a REIT. Approval of the limited
partners of the Operating Partnership to terminate REIT status is also
required.
Ownership Reports. Every owner of more than 5% of the issued and
outstanding shares of capital stock of Home Properties must file a written
notice with Home Properties containing the information specified in the
Articles of Incorporation no later than January 31 of each year. In
addition, each stockholder shall, upon demand, be required to disclose to
Home Properties in writing such information as Home Properties may request
in order to determine the effect of such stockholder's direct, indirect and
attributed ownership of shares of capital stock on Home Properties' status
as a REIT or to comply with any requirements of any taxing authority or
other governmental agency.
Certain Other Provisions of Maryland Law and Charter Documents
The following discussion summarizes certain provisions of MGCL and
Home Properties' Articles of Incorporation and Bylaws. This summary does
not purport to be complete and is subject to and qualified in its entirety
by reference to the Articles of Incorporation and Bylaws, copies of which
are filed as exhibits to the Registration Statement of which this
Prospectus constitutes a part. See "Additional Information."
Limitation of Liability and Indemnification. The Articles of
Incorporation and Bylaws limit the liability of directors and
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officers to Home Properties and its stockholders to the fullest extent
permitted from time to time by the MGCL and require Home Properties to
indemnify its directors, officers and certain other parties to the fullest
extent permitted from time to time by the MGCL.
Business Combinations. Under the MGCL, certain "business
combinations" (including a merger, consolidation, share exchange or, in
certain circumstances, an asset transfer or issuance or reclassification of
equity securities) between a Maryland corporation and any person who
beneficially owns 10% or more of the voting power of the outstanding voting
stock of the corporation or an affiliate or associate of the corporation
who, at any time within the two-year period immediately prior to the date
in question, was the beneficial owner, directly or indirectly, of 10% or
more of the voting power of the then-outstanding voting stock of the
corporation (an "Interested Stockholder") or an affiliate thereof, are
prohibited for five years after the most recent date on which the
Interested Stockholder became an Interested Stockholder. Thereafter, in
addition to any other required vote, any such business combination must be
recommended by the board of directors of such corporation and approved by
the affirmative vote of at least (i) 80% of the votes entitled to be cast
by holders of outstanding shares of voting stock of the corporation, voting
together as a single voting group, and (ii) two-thirds of the votes
entitled to be cast by holders of voting stock of the corporation (other
than voting stock held by the Interested Stockholder who will, or whose
affiliate will, be a party to the business combination or by an affiliate
or associate of the Interested Stockholder) voting together as a single
voting group. The extraordinary voting provisions do not apply if, among
other things, the corporation's stockholders receive a price for their
shares determined in accordance with the MGCL and the consideration is
received in cash or in the same form as previously paid by the Interested
Stockholder for its shares. These provisions of the MGCL do not apply,
however, to business combinations that are approved or exempted by the
board of directors of the corporation prior to the time that the Interested
Stockholder becomes an Interested Stockholder. The Articles of
Incorporation of Home Properties contain a provision exempting from these
provisions of the MGCL any business combination involving the Leenhoutses
(or their affiliates) or any other person acting in concert or as a group
with any of the foregoing persons.
Control Share Acquisitions. The MGCL provides that "control shares"
of a Maryland corporation acquired in a "control share acquisition" have no
voting rights except to the extent approved by the affirmative vote of
two-thirds of the votes entitled to be cast on the matter other than
"interested shares" (shares of stock in respect of which any of the
following persons is entitled to exercise or direct the exercise of the
voting power of shares of stock of the corporation in the election of
directors: an "acquiring person," an officer of the corporation or an
employee of the corporation who is also a director).
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"Control shares" are shares of stock which, if aggregated with all other
such shares of stock owned by the acquiring person, or in respect of which
such person is entitled to exercise or direct the exercise of voting power
of shares of stock of the corporation in electing directors within one of
the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, or (iii) a
majority of more of all voting power. Control shares do not include shares
the acquiring person is entitled to vote as a result of having previously
obtained stockholder approval. The control share acquisition statute does
not apply to shares acquired in a merger, consolidation or share exchange
if the corporation is a party to the transaction, or to acquisitions
approved or exempted by the charter or bylaws of the corporation.
A person who has made or proposes to make a control share acquisition,
under certain conditions (including an undertaking to pay expenses), may
compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights of the
control shares upon delivery of an acquiring person statement containing
certain information required by the MGCL, including a representation that
the acquiring person has the financial capacity to make the proposed
control share acquisition, and a written undertaking to pay the
corporation's expenses of the special meeting (other than the expenses of
those opposing approval of the voting rights). If no request for a meeting
is made, the corporation may itself present the question at any
stockholders meeting.
If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by the
MGCL, then, subject to certain conditions and limitations, the corporation
may redeem any or all of the control shares (except those for which voting
rights have previously been approved) for fair value, determined without
regard to the absence of voting rights for control shares, as of the date
of the last control share acquisition or, if a stockholder meeting is held,
as of the date of the meeting of stockholders at which the voting rights of
such shares are considered and not approved. If voting rights for control
shares are approved at a stockholders' meeting before the control share
acquisition and the acquiring person becomes entitled to exercise or direct
the exercise of a majority or more of all voting power, all other
stockholders may exercise rights of objecting shareholders under Maryland
law to receive the fair value of their Shares. The fair value of the
Shares for such purposes may not be less than the highest price per share
paid by the acquiring person in the control share acquisition. Certain
limitations and restrictions otherwise applicable to the exercise of
objecting shareholders' rights do not apply in the context of a control
share acquisition.
The Articles of Incorporation contain a provision exempting from the
control share acquisition statute any and all acquisitions to the extent
that such acquisitions would not
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violate the Ownership Limit or Existing Owner Limit. There can be no
assurance that such provision will not be amended or eliminated at any
point in the future.
FEDERAL INCOME TAX CONSIDERATIONS
Introductory Notes
The following discussion summarizes certain federal income tax
considerations that may be relevant to a prospective holder of shares of
Common Stock. Nixon, Hargrave, Devans & Doyle LLP has acted as tax counsel
to Home Properties in connection with its formation and its election to be
taxed as a REIT, has reviewed the following discussion and is of the
opinion that it fairly summarizes the federal income tax considerations
that are likely to be material to a holder of Shares. The following
discussion is not exhaustive of all possible tax considerations and does
not give a detailed discussion of any state, local or foreign tax
considerations. This discussion does not address all of the aspects of
federal income taxation that may be relevant to stockholders in light of
their particular circumstances or to certain types of stockholders subject
to special treatment under the federal income tax laws (including insurance
companies, tax-exempt entities, financial institutions or broker-dealers,
foreign corporations and persons who are not citizens or residents of the
United States).
This discussion contains a general summary of certain Code sections
that govern the federal income tax treatment of a REIT and its
stockholders. These sections of the Code are highly technical and complex.
This summary is qualified in its entirety by the applicable Code
provisions, the Treasury Regulations promulgated thereunder and
administrative and judicial interpretations thereof. Home Properties has
not sought or obtained any ruling from the Internal Revenue Service or any
opinions of counsel specifically related to the tax matters described
below.
The Taxpayer Relief Act of 1997 was signed into law on August 5, 1997.
Since the Taxpayer Relief Act of 1997 was recently enacted, and since
the IRS has not yet issued regulations under it, certain aspects of
its application to REITs are unclear. Stockholders should consult their
tax advisors regarding changes made by the Taxpayer Relief Act of 1997 on
REITs.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN
TAX ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE
PURCHASE, OWNERSHIP AND SALE OF SHARES OF COMMON STOCK AND THE ELECTION BY
HOME PROPERTIES TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING
THE FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH
PURCHASE, OWNERSHIP, SALE, AND ELECTION AND OF POTENTIAL CHANGES IN
APPLICABLE TAX LAWS.
Taxation of Home Properties as a REIT
Home Properties has elected to be taxed as a REIT under Sections 856
through 860 of the Code commencing with its taxable year ending December
31, 1994. Home Properties believes that, it is organized and operates in
such a manner as to qualify for taxation as a REIT under the Code, and Home
Properties intends to
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continue to operate in such a manner. No assurance, however, can be given
that Home Properties has operated or will operate in a manner so as to
qualify or remain qualified as a REIT.
Home Properties was organized in conformity with the requirements for
qualification as a REIT, and its method of operation has enabled it to meet
the requirements for qualification and taxation as a REIT under the Code.
This opinion is based on certain assumptions and is conditioned upon
certain representations made by Home Properties as to certain factual
matters relating to Home Properties' organization, manner of operation,
income and assets. Nixon, Hargrave, Devans & Doyle LLP is not aware of any
facts or circumstances that are inconsistent with these assumptions and
representations. Home Properties' qualification and taxation as a REIT
will depend upon Home Properties' satisfaction of the requirements
necessary to be classified as a REIT, discussed below, on a continuing
basis. Nixon, Hargrave, Devans & Doyle LLP will not review compliance
with these tests on a continuing basis. Therefore, no assurance can be
given that Home Properties will satisfy such tests on a continuing basis.
See "- Requirements for Qualification - Failure to Qualify" below.
If Home Properties qualifies for taxation as a REIT, it generally will
not be subject to federal corporate income taxes on net income that it
currently distributes to its stockholders. This treatment substantially
eliminates the "double taxation" (at the corporate and stockholder levels)
that generally results from investment in a regular corporation. However,
Home Properties will be subject to federal income tax in the following
circumstances. First, Home Properties will be taxed at regular corporate
rates on any undistributed REIT taxable income, including undistributed net
capital gains. Second, under certain circumstances, Home Properties may be
subject to the "alternative minimum tax" on its items of tax preference.
Third, if Home Properties has (i) net income from the sale or other
disposition of "foreclosure property" (which is, in general, property
acquired by Home Properties by foreclosure or otherwise on default on a
loan secured by the property) which is held primarily for sale to customers
in the ordinary course of business or (ii) other nonqualifying income from
foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if Home Properties has net income from
prohibited transactions (which are, in general, certain sales or other
dispositions of property (other than foreclosure property) held primarily
for sale to customers in the ordinary course of business), such income will
be subject to a 100% tax. Fifth, if Home Properties should fail to satisfy
the 75% gross income test or the 95% gross income test (as discussed in
"Requirements for Qualification - Income Tests" below), and has nonetheless
maintained its qualification as a REIT because certain other requirements
have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which Home Properties fails
the 75% or 95% test, multiplied by a fraction intended to reflect Home
Properties' profitability.
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Sixth, if Home Properties should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year,
(ii) 95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from prior years, Home Properties would be
subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed. Seventh, if Home Properties disposes of
any asset acquired from a C corporation (i.e., a corporation generally
subject to full corporate level tax) in a transaction in which the basis of
the asset in Home Properties' hands is determined by reference to the basis
of the asset (or any other property) in the hands of the C corporation, and
Home Properties recognizes gain on the disposition of such asset during the
10-year period beginning on the date on which such asset was acquired by
the Company, then, to the extent of such property's "built-in" gain (the
excess of the fair market value of such property at the time of acquisition
by Home Properties over the adjusted basis in such property at such time),
such gain will be subject to tax at the highest regular corporate rate
applicable.
For taxable years beginning after August 5, 1997, the Taxpayer Relief Act
of 1997 permits a REIT to designate the amount of its undistributed net
long-term capital gains received during the taxable year which its stockholders
are to include in their taxable income as long-term capital gains by a notice
mailed to stockholders within 60 days after the end of the taxable year (or
in a notice mailed with its annual report for the taxable year). If Home
Properties made this designation, the stockholders would include in their
income as long-term capital gains their proportionate share of the
undistributed long-term capital gains as designated by Home Properties. Home
Properties would pay income tax on such retained net long-term capital gains
and the stockholders would be deemed to have paid their proportionate share of
the tax, which would be credited to the stockholders. The basis of the
stockholders' shares would be increased by the amount of the undistributed
long-term capital gains (less the amount of capital gains tax paid by the
REIT) included in the stockholders' long-term capital gains.
Requirements for Qualification.
Generally. To qualify as a REIT, an entity must be a corporation,
trust or association: (1) which is managed by one or more trustees or
directors; (2) the beneficial ownership of which is evidenced by
transferable shares or by transferable certificates of beneficial interest;
(3) which would be taxable as a domestic corporation but for Sections 856
through 859 of the Code; (4) which is neither a financial institution nor
an insurance company subject to certain provisions of the Code; (5) the
beneficial ownership of which is held by 100 or more persons; (6) during
the last half of each taxable year not more than 50% in value of the
outstanding stock of which is owned, directly or indirectly, by five or
fewer individuals (as defined in the Code to include certain entities); and
(7) which meets certain other tests, described below, regarding the nature
of its income and assets. The Code provides that conditions (1) to (4),
inclusive, must be met during the entire taxable year and that condition
(5) must be met during at least 335 days of a taxable year of 12 months, or
during a proportionate part of a taxable year of less than 12 months.
Electing REIT treatment requires that the entity adopt a calendar year
accounting period.
Home Properties satisfies the requirements set forth above. In
addition, Home Properties' Articles of Incorporation provide restrictions
regarding the transfer of its shares that are intended to assist Home
Properties in continuing to satisfy the share ownership requirements
described in (5) and (6) above. See "Description of Capital Stock -
Restrictions on Transfer."
In the case of a REIT which is a partner in a partnership, Treasury
Regulations provide that the REIT is deemed to own its proportionate share
of the assets of the partnership and is deemed to be entitled to the income
of the partnership attributable to such share. In addition, the character
of the
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assets and gross income of the partnership retain the same character in the
hands of the REIT for purposes of Section 856 of the Code, including
satisfying the gross income tests and asset tests. Thus, Home Properties'
proportionate share of the assets, liabilities and items of income of the
Operating Partnership and the partnerships, if any, in which the Operating
Partnership will have an interest will be treated as assets, liabilities
and items of Home Properties for purposes of applying the requirements
described herein.
Income Tests. In order to maintain qualification as a REIT, there are
three gross income requirements that must be satisfied annually. First, at
least 75% of the REIT's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain
circumstances, interest) or from certain types of temporary investments.
Second, at least 95% of the REIT's gross income (excluding gross income
from prohibited transactions) for each taxable year must be derived from
such real property investments, and from dividends, interest and gain from
the sale or disposition of stock or securities, or from any combination of
the foregoing. Third, short-term gain from the sale or other disposition
of stock or securities, gain from prohibited trasnactions and gain on the
sale or other dispostion of real property held for less than four years
(apart from involuntary conversions and sales of foreclosure property)
must represent less than 30% of the REIT's gross income (including gross
income from prohibited transactions) for each taxable year. For taxable years
beginning after August 5, 1997, the 30% gross income tax is no longer
applicable.
Rents received by Home Properties will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described
above only if several conditions are met. First, the amount of rent must
not be based in whole or in part on the income or profits of any person.
However, an amount received or accrued generally will not be excluded from
the term "rents from real property" solely by reason of being based on a
fixed percentage or percentages of receipts of sales. Second, the Code
provides that rents received from a resident will not qualify as "rents
from real property" in satisfying the gross income tests if the Company, or
an owner of 10% or more of the Company, directly or constructively owns 10%
or more of such tenant (a "Related Party Tenant"). Third, if rent
attributable to personal property, leased in connection with a lease of
real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will
not qualify as "rents from real property." Finally, for rents received to
qualify as "rents from real property," Home Properties generally must not
operate or manage the property or furnish or render services to tenants,
other than through an "independent contractor" who is adequately
compensated and from whom Home Properties derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent
the services provided by Home Properties are "usually or customarily
rendered" in connection with the rental of space for occupancy only (such
as furnishing water, heat, light and air conditioning, and cleaning
windows, public entrances and lobbies) and are not otherwise considered
"rendered to the occupant."
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It is expected that Home Properties' real estate investments will
continue to give rise to income that will enable it to satisfy all of the
income tests described above. Substantially all of Home Properties' income
will be derived from its interest in the Operating Partnership, which will,
for the most part, qualify as "rents from real property" for purposes of
the 75% and the 95% gross income tests.
The Operating Partnership does not and does not anticipate charging
more than a de minimis amount of rent that is based in whole or in part on
the income or profits of any person (except by reason of being based on a
percentage of receipts or sales, as described above). The Operating
Partnership does not anticipate receiving rents in excess of a de minimis
amount from Related Party Tenants. The Operating Partnership does not
anticipate holding a lease on any property in which rents attributable to
personal property constitute greater than 15% of the total rents received
under the lease. Neither Home Properties nor the Operating Partnership
will knowingly directly perform services considered to be rendered to the
occupant of property. The Operating Partnership will perform all
development, construction and leasing services for, and will operate and
manage, the properties owned by it directly without using an "independent
contractor." Management believes that the only material services to be
provided to lessees of these properties will be those usually or
customarily rendered in connection with the rental of space for occupancy
only. Home Properties does not anticipate that the Operating Partnership
will provide services that might be considered rendered primarily for the
convenience of the occupants of the property.
For taxable years beginning after August 5, 1997, the Taxpayer Relief
Act of 1997 permits a REIT to render a de minimus amount of otherwise
impermissable services to tenants, or in connection with the management of
property, and still treat amounts received with respect to that property as
rent. The value of such services must not exceed 1% of all amounts received
or accrued during the year, directly or indirectly, from the property. The
amount received for any such impermissable service or management operation
for this purpose will be deemed to be not less than 150% of the direct
cost to the REIT in furnishing or rendering the service or management
operation.
The Operating Partnership owns all of the non-voting common stock of
the Management Companies, corporations that are taxable as regular
corporations. The Management Companies will perform management,
development, construction and leasing services for certain properties not
owned by the Company. The income earned by and taxed to the Management
Companies would be nonqualifying income if earned by Home Properties
through the Operating Partnership. As a result of the corporate structure,
the income will be earned by and taxed to the Management Companies and will
be received by the Operating Partnership only indirectly as dividends that
qualify under the 95% test.
If Home Properties fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a
REIT for such year if it is entitled to relief under certain provisions of
the Code. These relief provisions generally will be available if Home
Properties' failure to meet such tests was due to reasonable cause and not
due to willful neglect, Home Properties attaches a schedule of the sources
of its income to its return, and any income information on the schedules
was not due to fraud with intent to evade tax. It is not possible,
however, to state whether in all circumstances Home Properties would be
entitled to the benefit of these relief provisions. As discussed above in
"Generally," even
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if these relief provisions apply, a tax would be imposed with respect to
the excess net income.
Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of Home Properties' total assets must be
represented by real estate assets, cash and cash items (including
receivables) and government securities. For this purpose real estate
assets include (i) Home Properties' allocable share of real estate assets
held by the Operating Partnership and partnerships in which the Operating
Partnership owns an interest or held by "qualified REIT subsidiaries" of
Home Properties and (ii) stock or debt instruments held for not more than
one year purchased with the proceeds of a stock offering or long-term (at
least five-year) debt offering of the Company. Second, not more than 25%
of Home Properties' total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included in
the 25% asset class, the value of any one issuer's securities owned by Home
Properties may not exceed 5% of the value of Home Properties' total assets,
and Home Properties may not own more than 10% of any one issuer's
outstanding voting securities (excluding securities of a qualified REIT
subsidiary or another REIT).
Home Properties anticipates that it will continue to be able to comply
with these asset tests. Home Properties is deemed to hold directly its
proportionate share of all real estate and other assets of the Operating
Partnership and should be considered to hold its proportionate share of all
assets deemed owned by the Operating Partnership through its ownership of
partnership interests in other partnerships. As a result, Home Properties
plans to hold more than 75% of its assets as real estate assets. In
addition, Home Properties does not plan to hold any securities representing
more than 10% of any one issuer's voting securities, other than any
qualified REIT subsidiary, nor securities of any one issuer exceeding 5% of
the value of Home Properties' gross assets (determined in accordance with
generally accepted accounting principles). As previously discussed, Home
Properties is deemed to own its proportionate share of the assets of a
partnership in which it is a partner so that the partnership interest,
itself, is not a security for purposes of this asset test.
The Operating Partnership owns all of the nonvoting common stock of
the Management Companies. The Operating Partnership does not own any of
the voting securities of the Management Companies. Management believes
that Home Properties' interest in the securities of the Management
Companies through the Operating Partnership does not exceed 5% of the total
value of Home Properties' assets. No independent appraisals have been
obtained. Counsel, in rendering its opinion as to the qualification of
Home Properties as a REIT, is relying on the conclusions of management
regarding the value of such securities of the Management Companies.
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After initially meeting the asset tests at the close of any quarter,
Home Properties will not lose its status as a REIT for failure to satisfy
the asset tests at the end of a later quarter solely by reason of changes
in asset values. If the failure to satisfy the asset tests results from an
acquisition of securities or other property during a quarter, the failure
can be cured by disposition of sufficient nonqualifying assets within 30
days after the close of that quarter. Home Properties intends to maintain
adequate records of the value of its assets to ensure compliance with the
asset tests, and to take such other action within 30 days after the close
of any quarter as may be required to cure any noncompliance. However,
there can be no assurance that such other action will always be successful.
Annual Distribution Requirements. The Company, in order to qualify as
a REIT, is required to distribute dividends (other than capital gain
dividends) to its stockholders in an amount at least equal to (a) the sum
of (i) 95% of Home Properties' "REIT taxable income" (computed without
regard to the dividends paid deduction and the REIT's net capital gain) and
(ii) 95% of the net income (after tax), if any, from foreclosure property,
minus (b) the sum of certain items of noncash income. Such distributions
must be paid in the taxable year to which they relate, or in the following
taxable year if declared before Home Properties timely files its tax return
for such year and if paid on or before the first regular dividend payment
after such declaration. To the extent that Home Properties does not
distribute all of its net capital gain or distributes at least 95%, but
less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax on the undistributed amount at regular capital gains and
ordinary corporate tax rates. Furthermore, if Home Properties should fail
to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year; (ii) 95% of its REIT capital gain
income for such year, and (iii) any undistributed taxable income from prior
periods, Home Properties would be subject to a 4% excise tax on the excess
of such required distribution over the amounts actually distributed.
Under the Taxpayer Relief Act of 1997, Home Properties will be
able, under certain circumstances in taxable years beginning after August
5, 1997, to retain net long-term capital gains and pay tax on them.
See "Taxation of Home Properties as a REIT."
Home Properties intends to continue to make timely distributions
sufficient to satisfy the annual distribution requirements. In this
regard, the Partnership Agreement of the Operating Partnership authorizes
the Company, as general partner, to take such steps as may be necessary to
cause the Operating Partnership to distribute to its partners an amount
sufficient to permit Home Properties to meet these distribution
requirements. It is possible, however, that the Company, from time to
time, may not have sufficient cash or other liquid assets to meet the 95%
distribution requirement due to timing differences between the actual
receipt of income and actual payment of deductible expenses and the
inclusion of such income and deduction of such expenses in arriving at
taxable income of the Company, or if the amount of nondeductible expenses
such as principal amortization or capital expenditures exceed the amount of
noncash deductions. In the event that such timing differences occur, in
order to meet
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the 95% distribution requirement, Home Properties may cause the Operating
Partnership to arrange for short-term, or possibly long-term, borrowing to
permit the payment of required dividends. If the amount of nondeductible
expenses exceeds noncash deductions, the Operating Partnership may
refinance its indebtedness to reduce principal payments and borrow funds
for capital expenditures.
Under certain circumstances, Home Properties may be able to rectify a
failure to meet the distribution requirement for a year by paying
"deficiency dividends" to stockholders in a later year that may be included
in Home Properties' deduction for dividends paid for the earlier year.
Thus, Home Properties may be able to avoid being taxed on amounts
distributed as deficiency dividends; however, Home Properties will be
required to pay interest to the IRS based upon the amount of any deduction
taken for deficiency dividends.
Failure to Qualify. If Home Properties fails to qualify for taxation
as a REIT in any taxable year and the relief provisions do not apply, Home
Properties will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates.
Distributions to stockholders in any year in which Home Properties fails to
qualify will not be deductible by the Company, nor will they be required to
be made. In such event, to the extent of current and accumulated earnings
and profits, distributions to stockholders will be taxable as ordinary
income to the extent of current and accumulated earnings and profits, and,
subject to certain limitations in the Code, corporate distributees may be
eligible to claim the dividends received deduction. Unless entitled to
relief under specific statutory provisions, Home Properties also will be
disqualified from taxation as a REIT for the four taxable years following
the year during which qualification was lost. If is not possible to state
whether in all circumstances Home Properties would be entitled to such
statutory relief.
Taxation of Stockholders
Taxation of Taxable Domestic Stockholders. As long as Home Properties
qualifies as a REIT, distributions made to Home Properties' taxable
domestic stockholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will be taken into account
by them as ordinary income and will not be eligible for the dividends
received deduction for corporations. Distributions that are designated as
capital gain dividends will be taxed as long-term capital gains (to the
extent they do not exceed Home Properties' actual net capital gain for the
taxable year) without regard to the period for which the stockholder has
held its stock. However, corporate stockholders may be required to treat
up to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current and accumulated earnings and profits
will not be taxable to a stockholder to the extent that they do not exceed
the adjusted basis of the stockholder's shares, but rather will
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reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a stockholder's shares, they
will be included in income as long-term capital gain (or short-term capital
gain if the shares have been held for one year or less), assuming the
shares are a capital asset in the hands of the stockholder. In addition,
any dividend declared by Home Properties in October, November or December
of any year payable to a stockholder of record on a specific date in any
such month shall be treated as both paid by Home Properties and received by
the stockholder on December 31 of such year, provided that the dividend is
actually paid by Home Properties during January of the following calendar
year. Stockholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company.
Under the Taxpayer Relief Act of 1997, Home Properties may, for
taxable years beginning after August 5, 1997, be able to give notice to its
stockholders that an amount of the undistributed net long-term capital gains
for a year will be includable in the income of stockholders, with a related
credit for the tax paid by Home Properties on those gains. See "Taxation of
Home Properties as a REIT>"
In general, any loss upon a sale or exchange of shares by a
stockholder who has held such shares for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss
to the extent of distributions from Home Properties required to be treated
by such stockholder as long-term capital gain.
The Taxpayer Relief Act of 1997 made certain changes with respect to
taxation of long-term capital gains earned by taxpayers other than
corporations. In general, assets sold after July 29, 1997 by an individual
will be subject to a maximum tax rate on net long-term capital gains (the
excess of net long-term capital gain over short-term capital loss) of 20% if
the shares were held for at least eighteen months. Capital gain on the
disposition of assets on or after July 29, 1997 held for more than one year
but less than eighteen months at the time of disposition will be taxed at a
maximum rate of 28%. Other transition rules may also apply. A maximum
federal income tax rate of 25% applies to "unrecaptured section 1250 gain."
"Unrecaptured 1250 gain" generally includes the long-term capital gain realized
on (i) the sale after May 6, 1997 of a real property asset described in
Section 1250 of the Code or (ii) the sale after July 28, 1997 of a real
property asset described in Section 1250 of the Code which the taxpayer
held for more than eighteen months, but in each case not in excess of the
amount of depreciation (less the gain, if any, treated as ordinary income
under Section 1250) taken on such asset. In certain cases, an 18% maximum
rate will apply instead after December 31, 2000.
Since the Taxpayer Relief Act of 1997 was enacted recently and no
regulations have yet been issued, the applicablility of these new provisions
to gains earned by REITs is unclear. The Act authorizes the IRS to adopt
regulations, which may be retroactive, to pass-through entities, including
REITs. Stockholders should consult with their tax advisors with regard to
the impact of the Taxpayer Relief Act of 1997 on the taxation of capital gains
and capital gains dividends.
Distributions from Home Properties and gain from the disposition of
shares will not ordinarily be treated as passive activity income, and
therefore, stockholders generally will not be able to apply any "passive
losses" against such income. Dividends from Home Properties (to the extent
they do not constitute a return of capital) and gain from the disposition
of shares generally will be treated as investment income for purposes of
the investment interest limitation.
Home Properties will report to its domestic stockholders and the IRS
the amount of dividends paid during each calendar year, and the amount of
tax withheld, if any, with respect thereto. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of
31% with respect to dividends paid unless such holder (a) is a corporation
or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. A
stockholder who does not provide Home Properties with its correct taxpayer
identification number may also be subject to penalties imposed by the IRS.
Any amount paid as backup withholding will be creditable against the
stockholder's income tax liability. In addition, Home Properties may be
required to withhold a portion of capital gain distributions made to any
stockholders who fail to certify their non-foreign status to the Company.
See "Taxation of Foreign Stockholders" below.
Taxation of Tax-Exempt Stockholders. The IRS has ruled that amounts
distributed by a REIT to a tax-exempt employees' pension trust do not
constitute "unrelated business taxable income" ("UBTI"). Although rulings
are merely interpretations of law by
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the IRS and may be revoked or modified, based upon this ruling and the
analysis therein, distributions by Home Properties to a stockholder that is
a tax-exempt entity should also not constitute UBTI, provided that the tax-
exempt entity has not financed the acquisition of shares of Common Stock
with "acquisition indebtedness" within the meaning of the Code and the
shares are not otherwise used in an unrelated trade or business of the tax-
exempt entity.
Congress has enacted legislation which includes a provision that
requires qualified trusts that hold more than 10% (by value) of the
interests in a REIT to treat a percentage of REIT dividends as UBTI. The
requirement applies only if (i) the qualification of the REIT depends upon
the application of a "look-through" exception to the restriction on REIT
stockholdings by five or fewer individuals, including qualified trusts (see
"Description of Capital Stock - Restrictions on Transfer"), and (ii) the
REIT is "predominantly held" by qualified trusts. The qualification of
Home Properties as a REIT currently does not depend upon application of the
"look-through" exception and Home Properties currently is not
"predominantly held" by qualified trusts.
Income Taxation of the Operating Partnership,
the Underlying Partnerships and Their Partners
The following discussion summarizes certain federal income tax
considerations applicable to Home Properties' investment in the Operating
Partnership.
Classification of the Operating Partnership. Home Properties will be
entitled to include in its income its distributive share of the income and
to deduct its distributive share of the losses of the Operating Partnership
(including the Operating Partnership's share of the income or losses of any
partnerships in which it owns an interest) only if the Operating
Partnership is classified for federal income tax purposes as a partnership
rather than an association taxable as a corporation. On December 17, 1996,
the IRS issued final Treasury Regulations regarding the classification of
business entities (known as the "check-the-box" rules) which changed the
process for electing business tax status.
The new Treasury Regulations, which were effective January 1, 1997,
replaced the former rules for classifying business organizations with a
simpler elective classification system that generally allows eligible
entities to choose to be taxed as partnerships or corporations. Under the
Treasury Regulations, a limited partnership which qualifies as an eligible
entity will generally be allowed to choose to be taxed as a partnership or
a corporation. The default classification for an existing entity is the
classification that the entity claimed immediately prior to January 1,
1997. Alternatively, an eligible entity may affirmatively elect its
classification. An entity's default classification continues until the
entity elects to change its
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classification by means of an affirmative election. Because the Operating
Partnership was classified as a partnership as of December 31, 1996, the
Operating Partnership will be treated as a partnership for federal income
tax purposes for periods after December 31, 1996 pursuant to the new
Treasury Regulations. The Operating Partnership plans to confirm this tax
treatment by electing to be treated as a partnership under the Treasury
Regulations.
The Treasury Regulations state that the IRS will not challenge the
prior classification of an existing eligible entity for periods before
January 1, 1997 if: (1) the entity had a reasonable basis for its claimed
classification; (2) the entity and all of its partners recognized the tax
consequences of any change in the entity's classification within 60 months
before January 1, 1997; and (3) neither the entity nor any member had been
notified in writing on or before May 8, 1996, that the classification was
under examination by the IRS. Requirements (2) and (3) described in this
paragraph are either not relevant to, or have been satisfied by, the
Operating Partnership. Accordingly, the Operating Partnership's claimed
classification as a partnership for periods prior to January 1, 1997 will
be respected if the Operating Partnership had a reasonable basis for such
classification.
In determining whether a reasonable basis for partnership
classification existed for periods prior to January 1, 1997, it is
necessary to review the former classification rules, under which an
organization formed as a partnership will be treated as a partnership for
federal income tax purposes rather than as a corporation only if it has no
more than two of the four corporate characteristics that the Treasury
Regulations use to distinguish a partnership from a corporation for tax
purposes. These four characteristics are continuity of life,
centralization of management, limited liability, and free transferability
of interests.
The Operating Partnership has not requested, nor does it intend to
request, a ruling from the IRS that it will be treated as a partnership for
federal income tax purposes. In the opinion of Nixon, Hargrave, Devans &
Doyle LLP, which is based on the provisions of the partnership agreement of
the Operating Partnership and on certain factual assumptions and
representations of the Company, the Operating Partnership has a reasonable
basis for its claim to be classified as a partnership for federal income
tax purposes and therefore should be taxed as a partnership rather than an
association taxable as a corporation for periods prior to January 1, 1997.
Nixon, Hargrave, Devans & Doyle LLP's opinion is not binding on the IRS or
the courts.
If for any reason the Operating Partnership was taxable as a
corporation rather than as a partnership for federal income tax purposes,
Home Properties would not be able to satisfy the income and asset
requirements for REIT status. See "- Requirements for Qualification -
Income Tests" and "- Requirements for
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Qualification - Asset Tests." In addition, any change in the Operating
Partnership's status for tax purposes might be treated as a taxable event,
in which case Home Properties might incur a tax liability without any
related cash distribution. See "- Requirements for Qualification - Annual
Distribution Requirements." Further, items of income and deduction of the
Operating Partnership would not pass through to its partners, and its
partners would be treated as stockholders for tax purposes. The Operating
Partnership would be required to pay income tax at corporate tax rates on
its net income, and distributions to its partners would constitute
dividends that would not be deductible in computing the Operating
Partnership's taxable income.
Partners, Not Partnerships, Subject to Tax. A partnership is not a
taxable entity for federal income tax purposes. Rather, a partner is
required to take into account its allocable share of a partnership's
income, gains, losses, deductions and credits for any taxable year of the
partnership ending within or with the taxable year of the partner, without
regard to whether the partner has received or will receive any
distributions from the partnership.
Partnership Allocations. Although a partnership agreement will
generally determine the allocation of income and losses among partners,
such allocations may be disregarded for tax purposes under section 704(b)
of the Code if they do not have substantial economic effect. If an
allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the
partners' interests in the partnership, which will be determined by taking
into account all of the facts and circumstances relating to the economic
arrangement of the partners with respect to such item. The Operating
Partnership's allocations of taxable income and loss are intended to comply
with the requirements of section 704(b) of the Code and the Treasury
Regulations promulgated thereunder.
Tax Allocations with Respect to the Properties. When property is
contributed to a partnership in exchange for an interest in the
partnership, the partnership generally takes a carryover basis in that
property for tax purposes equal to the adjusted basis of the contributing
partners in the property, rather than a basis equal to the fair market
value of the property at the time of contribution. Pursuant to section
704(c) of the Code, income, gain, loss and deduction attributable to such
contributed property must be allocated in a manner such that the
contributing partner is charged with, or benefits from, respectively, the
unrealized gain or unrealized loss associated with the property at the time
of the contribution. The amount of such unrealized gain or unrealized loss
is generally equal to the difference between the fair market value of the
contributed property at the time of contribution and the adjusted tax basis
of such property at the time of contribution (a "Book-Tax Difference").
Such allocations are solely for federal income tax
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purposes and do not affect the book capital accounts or other economic or
legal arrangements among the partners.
The partners of the Operating Partnership other than Home Properties
(the "Contributing Partners") are deemed to have contributed general or
limited partnership interests in other partnerships owning multifamily
residential properties which were acquired by Operating Partnership and
which may have had an adjusted tax basis which is less than the fair market
value of such interests (the "Contributed Interests"). Upon the merger or
dissolution of the such partnerships and the transfer of the properties to
the Operating Partnership, the Contributing Partners were deemed to have
contributed the portion of the properties represented by the Contributed
Interests (the "Contributed Property") to the Operating Partnership, and
the Operating Partnership's tax basis in the Contributed Property will be
the tax basis of the Contributing Partners in the Contributed Interests.
Because the Contributed Property has a Book-Tax Difference, the Operating
Partnership Agreement will require allocations to be made in a manner
consistent with section 704(c) of the Code.
Under these special rules, the Contributing Partners may be allocated
lower amounts of depreciation deductions for tax purposes with respect to
the Contributed Property than the amount of such deductions that would be
allocated to them if such Contributed Property had a tax basis equal to its
fair market value at the time of contribution. In addition, in the event
of the disposition of any of the Contributed Property, all income
attributable to the Book-Tax Difference of such Contributed Property
generally will be allocated to the Contributing Partners, and Home
Properties generally will be allocated only its share of capital gains
attributable to appreciation, if any, occurring after the contribution of
the Contributed Property. These allocations will tend to eliminate the
Book-Tax Differences with respect to the Contributed Property over the life
of the Operating Partnership. However, the special allocation rules of
Section 704(c) may not entirely eliminate the Book-Tax Difference on an
annual basis or with respect to a specific taxable transaction such as a
sale. Thus, the carryover basis of the Contributed Property in the hands
of the Operating Partnership could cause Home Properties (i) to be
allocated lower amounts of depreciation and other deductions for tax
purposes than would be allocated to Home Properties if the Contributed
Property had a tax basis equal to its fair market value at the time of
contribution, and (ii) possibly to be allocated taxable gain in the event
of a sale of Contributed Property in excess of the economic or book income
allocated to Home Properties as a result of such sale. These allocations
possibly could cause Home Properties to recognize taxable income in excess
of cash proceeds, which might adversely affect its ability to comply with
the REIT distribution requirements. See " - Requirements for Qualification
- - Annual Distribution Requirements."
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<PAGE>
Depreciation. The Operating Partnership's assets other than cash will
consist largely of property treated as purchased by the Operating
Partnership. The Operating Partnership has an aggregate basis in the
assets of each partnership it acquires equal to the sum of the purchase
price paid for the partnership interests. To the extent that the Operating
Partnership's basis in a piece of depreciable property exceeds the basis of
the property when it was held by the acquired partnership, such basis
should in effect be treated as a newly acquired, separate asset and
entitled to 39-year depreciation.
Section 704(c) of the Code requires that depreciation as well as gain
and loss be allocated in a manner so as to take into account the variation
between the fair market value and tax basis of the property contributed.
Similarly, amortization on intangible contracts for services contributed to
the Operating Partnership will be allocated as required by section 704(c)
of the Code. Depreciation with respect to any property purchased by the
Operating Partnership subsequent to the admission of its partners will be
allocated among the partners in accordance with their respective percentage
interests in the Operating Partnership.
Sale of Partnership Property. Generally, any gain realized by a
partnership on the sale of property held by the partnership for more than
one year will be long-term capital gain, except for any portion of such
gain that is treated as depreciation or cost recovery recapture. However,
under the REIT Requirements, Home Properties' share as a partner of any
gain realized by the Operating Partnership on the sale of any property held
as inventory or other property held primarily for sale to customers in the
ordinary course of a trade or business will be treated as income from a
prohibited transaction that is subject to a 100% penalty tax. See "-
Taxation of Home Properties as a REIT." Such prohibited transaction income
will also have an adverse effect upon Home Properties' ability to satisfy
the income tests for REIT status. See "- Requirements for Qualification -
Income Tests." Under existing law, whether property is held as inventory
or primarily for sale to customers in the ordinary course of a trade or
business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. A safe harbor to
avoid classification as a prohibited transaction exists as to real estate
assets held for the production of rental income by a REIT for at least four
years where in any taxable year the REIT has made no more than seven sales
of property or, in the alternative, the aggregate of the adjusted bases of
all properties sold does not exceed 10% of the adjusted bases of all of the
REIT's properties during the year and the expenditures includible in a
property's basis made during the four-year period prior to disposition must
not exceed 30% of the property's net sales price. The Operating
Partnership intends to hold its properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating and leasing the properties and to make such
occasional sales of the properties, including
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adjoining land, as are consistent with Home Properties' and the Operating
Partnership's investment objectives. No assurance can be given, however,
that every property sale by the Operating Partnership will constitute a
sale of property held for investment.
Other Tax Considerations
The Management Companies. A portion of the amounts to be used to fund
distributions to stockholders is expected to come from the Management
Companies through dividends on stock of the Management Companies to be held
by the Operating Partnership. The Management Companies do not qualify as a
REITs and will pay federal, state and local tax income taxes on its net
income at normal corporate tax rates. Home Properties expects that the
Management Companies' income, after deducting its expenses, will not give
rise to significant corporate tax liabilities. The amount of corporate tax
liability will increase if the IRS disallows the items of expense which
Home Properties expects to be allocated to the Management Companies.
The QRS. The QRS is treated together with the Company as a single
entity for federal tax purposes.
State and Local Tax Considerations. Home Properties and the
Management Companies will, and Home Properties' stockholders may, be
subject to state or local taxation in various states or local
jurisdictions, including those in which the Company, its stockholders or
the Operating Partnership transact business or reside. The state and local
tax treatment of Home Properties and its stockholders may not conform to
the federal income tax consequences discussed above. Consequently,
prospective stockholders should consult their own tax advisors regarding
the effect of state and local tax laws on their investment in the Company.
Possible Federal Tax Developments. The rules dealing with federal
income taxation are constantly under review by the IRS, the Treasury
Department and Congress. New federal tax legislation or other provisions
may be enacted into law or new interpretations, rulings or Treasury
Regulations could be adopted, all of which could affect the taxation of
Home Properties or of its stockholders. No prediction can be made as to
the likelihood of passage of any new tax legislation or other provisions
either directly or indirectly affecting Home Properties or its
stockholders. Consequently, the tax treatment described herein may be
modified prospectively or retroactively by legislative, judicial or
administrative action.
SELLING SHAREHOLDERS
The partners of the Operating Partnership may from time to time tender
their Units of limited partnership interest to the Operating Partnership.
The Company may give notice to such partners that the Company will acquire
such Units in exchange for
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<PAGE>
shares of Common Stock (the "LP Purchase Right"). All of the shares being
offered hereby are being sold by the partners in the Operating Partnership
who may acquire shares of Common Stock in exchange for their Units pursuant
to the LP Purchase Right (all of such persons being collectively referred
to as the "Selling Shareholders"). Although none of the Selling
Shareholders has indicated a present intent to tender their Units which
would trigger the Company's right to issue shares of Common Stock to them
under the LP Purchase Right, the Company is required, pursuant to the terms
of various registration rights agreements, to file the registration
statement of which this Prospectus forms a part registering such shares for
resale under the Securities Act. The Company is bearing all costs of this
registration. The Company will not receive any proceeds from the sale of
the shares offered hereby.
The following tables set forth certain information regarding the
Selling Shareholders' ownership of Units and the number of shares of Common
Stock which may be issued pursuant to the LP Purchase Right which are
registered for resale. Because the Selling Shareholders may sell all, some
or none of the shares registered for resale, no estimate can be made
concerning the number shares of Common Stock issued in exchange for Units
that will be offered hereby or the number of shares or Units that each
Selling Shareholder will own upon completion of the offering contemplated
by this Prospectus. The relationships between certain of the Selling
Shareholders and Home Properties are described as of the date of this
Prospectus. Such relationships may change, and information contained in
subsequent reports filed with the Commission by Home Properties relating to
such relationships is incorporated herein by reference and may supersede
the information set forth herein. See "Documents Incorporated by
Reference".
Number of Shares
Units Owned Registered for Sale
Name Prior to Offering(1) in Offering
- ------------------- ------------------- -------------------
Peter B. Baker 4,871 4,871
Nadine L. Barna 4,042 4,042
John F. Barna 5,977 5,977
Robert W. Beecher,
Trustee 12,339 12,339
Robert E. & Barbara
T. Buce 1,282 1,282
Andrew J. Capelli 3,344 3,344
Thomas J. Carroll 8,305 8,305
Vincent J. Cannella
Living Trust 4,635 4,635
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<PAGE>
John J. Chopack 444 444
Harris R. Chorney 705 705
Ralph W. Clermont 1,324 1,324
Thomas J. Coffey 662 662
Barbara G. Collins 1,324 1,324
Charles T. Collins 5,942 5,942
John D. Collins 6,227 6,227
Patricia A. Collins 388 388
Veronica A. Conway 3,571 3,571
Michael A. Conway 6,227 6,227
Mildred M. Cozine 1,986 1,986
William J. Cozine 6,663 6,663
Kenneth Daly 1,104 1,104
Anthony J. Del Tufo 462 462
Jack C. Dixon 3,589 3,589
Priscilla M. Elder 5,788 5,788
Frank A. Farnesi 1,496 1,496
Marie A. Farnesi 662 662
Doris E. Ficca 776 776
John J. Ficca, Jr. 11,393 11,393
John & Doris Ficca 5,295 5,295
Alfred W. Fiore 444 444
Carol T. Fish 5,605 5,605
Joseph H. Fisher 10,600 10,600
John A. Flack 642 642
F. David Fowler 1,821 1,821
James L. Goble 11,228 11,228
LaVonne B. Graese Trust 49,321 49,321
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<PAGE>
John F. Green 4,237 4,237
James J. Grifferty 23,515 23,515
John M. Guinan 778 778
M. Candace Guinan 773 773
William A. Hasler 923 923
Paul M. Henkels 2,247 2,247
Maxine S. Holton 6,418 6,418
Thomas L. Holton 8,136 8,136
Charles T. Hopkins 6,202 6,202
Robert D. Huth 571 571
Richard Isserman 4,428 4,428
Thomas F. Keaveney 10,216 10,216
Patrick W. Kenny 642 642
Donald P. Kern 1,821 1,821
Joan L. Kern 2,388 2,388
Frank Kilkenny 5,884 5,884
Janet T. Klion 7,608 7,608
Howard J. Krongard 8,387 8,387
Robert W. Lambert 4,428 4,428
Bruce R. Lesser 462 462
Louis E. Levy 23,586 23,586
Sandra H. Levy 5,000 5,000
Robert J. Logan, Trustee 2,835 2,835
Jerome Lowengrub 9,311 9,311
David F. Martin 4,511 4,511
Joan J. Martin 388 388
Roderick C. McGeary 3,710 3,710
Robert G. McGregor 8,335 8,335
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<PAGE>
Thomas J. McParland 5,070 5,070
Michael Meltzer 887 887
Martin F. Mertz 7,551 7,551
Bernard J. Milano 662 662
Mill Creek Realty
Retirement Savings 308 308
Neil J. Miotto 1,679 1,679
Burton M. Mirsky 4,216 4,216
Herbert E. Morse 897 897
S. Thomas Moser 3,079 3,079
Lawrence M. Mullen 786 786
Thomas J. Murphy 923 923
Mary Jane & Jay Patchen 1,324 1,324
L. Glenn Perry 5,392 5,392
Michael C. Plansky 802 802
James T. & Dorothy Powers 4,158 4,158
Henry A. Quinn 145,383 145,383
Raymond James & Assoc. 1,552 1,552
Michael G. Regan 10,984 10,984
Lavoy Robison 2,469 2,469
Susan R. Ross 1,786 1,786
Eugene G. Schorr 444 444
David M. Seiden 5,027 5,027
Stanley L. Seiden 1,427 1,427
Dorothy L. Shanahan 3,711 3,711
John T. Shanahan 16,442 16,442
Thomas M. Shanley 786 786
William Simon 12,212 12,212
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<PAGE>
Edward F. Smith 2,194 2,194
Dallas E. Smith 222 222
Daniel Solondz 261,678 261,678
Gaby Solondz 1997 Trust
dated 9/1/97 25,000 25,000
Philip J. Solondz 236,678 236,678
Harold I. Steinberg 2,855 2,855
Denis J. Taura 8,892 8,892
Shaileen & Timothy Tracy 1,100 1,100
Timothy P. Tracy Pension Trust 1,552 1,552
Edward W. Trott 4,176 4,176
William F. VanFossan 1,571 1,571
Katharine E. Van Riper 9,311 9,311
Peter F. Viera 923 923
Eileen M. Walsh 449 449
Lillian D. Walsh 2,835 2,835
Christopher H. Washburn 1,333 1,333
Julia Weinstein 56,051 56,051
Sam Yellen 9,938 9,938
Thomas J. Yoho 1,572 1,572
PLAN OF DISTRIBUTION
The shares offered hereby may be offered and sold from time to time as
market conditions permit on the New York Stock Exchange, or otherwise, at
prices and terms then prevailing, at prices related to the then-current
market price, or in negotiated transactions. The shares may be sold by one
or more of the following methods, without limitation: (a) a block trade in
which a broker or dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate a transaction; (b) purchases by a broker or a dealer as
principal and resale by such broker or dealer for its account pursuant to
this Prospectus; (c) ordinary brokerage transactions and transactions in
which the broker solicits purchasers; and (d) face-to-face transactions
between
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<PAGE>
sellers and purchasers without a broker or dealer. In effecting sales,
brokers or dealers engaged by one or more of the Selling Shareholders may
arrange for other brokers or dealers to participate. Such brokers or
dealers may receive commissions or discounts from Selling Shareholders in
amounts to be negotiated. Such brokers and dealers and any other
participating brokers or dealers may be deemed "underwriters" under the
Securities Act.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Nixon, Hargrave, Devans & Doyle LLP. In
addition, Nixon, Hargrave, Devans & Doyle LLP will provide an opinion with
respect to certain tax matters which form the basis of the discussion under
"Federal Income Tax Considerations".
EXPERTS
The financial statements incorporated by reference in this Prospectus
or elsewhere in the Registration Statement have been incorporated herein in
reliance on the reports audited by Coopers & Lybrand LLP, independent
accountants, given on the authority of that firm as experts in accounting
and auditing.
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<PAGE>
No dealer, salesperson or other
individual has been authorized
to give any information or make
any representations not
contained in this Prospectus in
connection with the offering 1,216,508 Shares
covered by this Prospectus. If
given or made, such information
or representations must not be HOME PROPERTIES
relied upon as having been OF
authorized by the Company. This NEW YORK, INC.
Prospectus does not constitute
an offer to sell, or a
solicitation of an offer to buy, Common Stock
the Common Stock in any
jurisdiction where, or to any
person to whom, it is unlawful
to make any such offer or
solicitation. Neither the
delivery of this Prospectus nor
any sale made hereunder shall, Prospectus
under any circumstances, create
an implication that there has
not been any change in the facts October 6, 1997
set forth in this Prospectus or
in the affairs of the Company
since the date hereof.
SUMMARY
TABLE OF CONTENTS
PAGE
Additional Information
Documents Incorporated
by Reference
The Company
Use of Proceeds
Description of
Capital Stock
Federal Income Tax
Considerations
Selling Shareholders
Plan of Distribution
Legal Matters
Experts
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table is an itemized listing of expenses to be incurred by
the Company in connection with the issuance and distribution of the shares
of Common Stock being registered hereby, other than discounts and
commissions:
SEC Registration Fee $ 9,492.45
NYSE Listing Fee 2,000.00*
Legal Fees and Expenses 2,000.00*
Accounting Fees and Expenses 1,000.00*
Miscellaneous 2,000.00*
-------------
Total $ 16,492.45*
*Estimate
Item 15. Indemnification of Directors and Officers
The Company's officers and directors are and will be indemnified under
Maryland law, the Articles of Incorporation of Home Properties and the
Partnership Agreement ("Operating Partnership Agreement") of Home
Properties of New York, L.P., a New York limited partnership of which the
Company is the general partner, against certain liabilities. The Articles
of Incorporation require the Company to indemnify its directors and
officers to the fullest extent permitted from time to time by the laws of
Maryland. The Bylaws contain provisions which implement the
indemnification provisions of the Articles of Incorporation.
The Maryland General Corporation Law ("MGCL") permits a corporation to
indemnify its directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by
them in connection with any proceeding to which they may be made a party by
reason of their service in those or other capacities unless it is
established that the act or omission of the director or officer was
material to the matter giving rise to the proceeding and was committed in
bad faith or was the result of active and deliberate dishonesty, or the
director or officer actually received an improper personal benefit in
money, property or services, or in the case of any criminal proceeding, the
director or officer had reasonable cause to believe that the act or
omission was unlawful. No amendment of the Articles of Incorporation of
Home Properties shall limit or eliminate the right to indemnification
provided with respect to acts or omissions occurring prior to such
amendment or repeal. Maryland law permits Home Properties to provide
indemnification to an officer to the same extent as a
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<PAGE>
director, although additional indemnification may be provided if such
officer is not also a director.
The MGCL permits the articles of incorporation of a Maryland
corporation to include a provision limiting the liability of its directors
and officers to the corporation and its stockholders for money damages,
subject to specified restrictions. The MGCL does not, however, permit the
liability of directors and officers to the corporation or its stockholders
to be limited to the extent that (1) it is proved that the person actually
received an improper benefit or profit in money, property or services (to
the extent such benefit or profit was received) or (2) a judgment or other
final adjudication adverse to such person is entered in a proceeding based
on a finding that the person's action, or failure to act, was the result of
active and deliberate dishonesty and was material to the cause of action
adjudicated in the proceeding. The Articles of Incorporation of Home
Properties contain a provision consistent with the MGCL. No amendment of
the Articles of Incorporation shall limit or eliminate the limitation of
liability with respect to acts or omissions occurring prior to such
amendment or repeal.
The Operating Partnership Agreement also provides for indemnification
of Home Properties and its officers and directors to the same extent
indemnification is provided to officers and directors of the Company in its
Articles of Incorporation, and limits the liability of Home Properties and
its officers and directors to the Operating Partnership and its partners to
the same extent liability of officers and directors of the Company to Home
Properties and its stockholders is limited under Home Properties' Articles
of Incorporation.
Home Properties has entered into indemnification agreements with each
of Home Properties' directors and certain of its officers. The
indemnification agreements require, among other things, that Home
Properties indemnify its directors and those officers to the fullest extent
permitted by law, and advance to the directors and officers all related
expenses, subject to reimbursement if it is subsequently determined that
indemnification is not permitted. Home Properties also must indemnify and
advance all expenses incurred by directors and officers seeking to enforce
their rights under the indemnification agreements, and cover directors and
officers under Home Properties' directors' and officers' liability
insurance. Although the form of indemnification agreement offers
substantially the same scope of coverage afforded by provisions in the
Articles of Incorporation and the Bylaws and the Operating Partnership
Agreement of the Operating Partnership, it provides greater assurance to
directors and officers that indemnification will be available, because, as
a contract, it cannot be modified unilaterally in the future by the Board
of Directors or by the stockholders to eliminate the rights it provides.
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<PAGE>
Home Properties has purchased insurance under a policy that insures
both Home Properties and its officers and directors against exposure and
liability normally insured against under such policies, including exposure
on the indemnities described above.
Item 16. Exhibits
5.1 Opinion of Nixon, Hargrave, Devans & Doyle LLP as to legality of
common stock*
8.1 Opinion of Nixon, Hargrave, Devans & Doyle LLP as to certain tax
matters
23.1 Consent of Nixon, Hargrave, Devans & Doyle LLP (included as part of
Exhibits 5.1 and 8.1)
23.2 Consent of Coopers & Lybrand LLP*
25 Power of Attorney (included on signature page)
* Included with this filing.
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that
II-3
<PAGE>
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) For purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(4) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information in the registration statement.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Rochester, New York, on the 3rd
day of October, 1997.
HOME PROPERTIES OF NEW YORK, INC.
By: /S/ AMY L. TAIT
Amy L. Tait
Executive Vice President
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby severally constitutes and appoints Norman P.
Leenhouts, Nelson B. Leenhouts, Richard J. Crossed and Amy L. Tait, and
each of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to the Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto such
attorney-in-fact and agents, and each of them, full power and authority to
do and person each and every act and thing requisite or necessary that he
might do in person.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/Norman P. Leenhouts Director, Chairman October 3, 1997
Norman P. Leenhouts and Co-Chief Executive Officer
(Principal Executive Officer)
/s/ Nelson B. Leenhouts Director, President October 3, 1997
Nelson B. Leenhouts and Co-Chief Executive Officer
(Principal Executive Officer)
/s/ Richard J. Crossed Director, Executive Vice October 3, 1997
Richard J. Crossed President
/s/ Amy L. Tait Director, Executive Vice October 3, 1997
Amy L. Tait President and Chief Operating Officer
II-5
<PAGE>
/s/ David P. Gardner Vice President,Chief Financial October 3,1997
David P. Gardner Officer and Treasurer
(Principal Financial and
Accounting Officer)
/s/ Burton S. August, Sr. Director October 3, 1997
Burton S. August, Sr.
/s/ William Balderston, III Director October 3, 1997
William Balderston, III
/s/ Leonard F. Helbig, III Director October 3, 1997
Leonard F. Helbig, III
/s/ Alan L. Gosule Director October 3, 1997
Alan L. Gosule
/s/ Roger W. Kober Director October 3, 1997
Roger W. Kober
/s/ Clifford W. Smith, Jr. Director October 3, 1997
Clifford W. Smith, Jr.
/s/ Paul L. Smith Director October 3, 1997
Paul L. Smith
II-6
<PAGE>
EXHIBIT INDEX
Home Properties of New York, Inc. (the "Company")
Registration Statement on Form S-3 No. 333-______
NUMBER DESCRIPTION LOCATION
5.1 Opinion of Nixon,Hargrave, Devans & Doyle LLP *
regarding the legality of the Common Stock
being registered
8.1 Opinion of Nixon, Hargrave, Devans & To be filed
Doyle LLP regarding certain tax matters
23.1 Consent of Nixon, Hargrave, Devans & Included
Doyle LLP with
Exhibits 5.1
and 8.1
23.2 Consent of Coopers & Lybrand LLP *
24 Power of Attorney Included on
signature
page
* Filed herewith
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<PAGE>
Exhibit 5.1
Nixon, Hargrave, Devans & Doyle LLP
Attorneys and Counsellors at Law
Clinton Square
Post Office Box 1051
Rochester, New York 14603-1051
(716) 263-1000
Fax: (716)263-1600
October 3, 1997
Home Properties of New York, Inc.
850 Clinton Square
Rochester, New York 14604
Gentlemen:
We have acted as counsel to Home Properties of New York, Inc. (the
"Company") in connection with the Registration Statement on Form S-3, filed on
October 3, 1997, by the Company with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, relating to the resale by the
holders thereof of up to 1,216,508 shares of Common Stock of the Company, par
value $.01 issuable to partners of Home Properties of New York, L.P. (the
"Operating Partnership") upon the exercise of certain rights with respect to
their interests in the Operating Partnership.
We have examined the originals or copies, certified or otherwise
identified to our satisfaction, of all such records of the Company and the
Operating Partnership and all such agreements, certificates of public
officials, certificates of officers or other representatives of the Company,
and such other documents, certificates and corporate or other records as we
have deemed necessary or appropriate as a basis for the opinions set forth
herein, including (i) the Articles of Amendment and Restatement of the Articles
of Incorporation of the Company, as amended to the date hereof, (ii) the
Amended and Restated By-Laws of the Company, as amended to the date hereof,
(iii) certified copies of certain resolutions duly adopted by the Board of
Directors and stockholders of the Company, and (iv) the Second Amended and
Restated Agreement of Limited Partnership of the Operating Partnership, as
amended (the "Partnership Agreement").
Based upon the foregoing, it is our opinion that the shares of
Common Stock have been duly authorized, and, after the Common Stock shall have
been issued and delivered as described in such Registration Statement and the
Partnership Agreement and the consideration therefor shall have been received
by the Company, such shares of Common Stock will be validly issued, fully paid
and nonassessable.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
above-referenced Registration Statement and to the use of our name as it
appears under the caption "Legal Matters" in the prospectus contained in such
Registration Statement.
Very truly yours,
/s/ Nixon, Hargrave, Devans &
Doyle LLP
<PAGE>
Exhibit 23.2
Consent of Independent Accountants
We consent to the incorporation by reference in this Registration
Statement on Form S-3 (No. 333-_________) to be filed by Home Properties of New
York, Inc. of our reports, (1) dated February 3, 1997, on our audits of the
consolidated financial statements and financial statement schedule of Home
Properties of New York, Inc. as of December 31, 1996 and 1995 and for the years
ended December 31, 1996 and 1995, and the period from August 4, 1994 through
December 31, 1994 and the combined results of operations and cash flows of the
Original Properties for the period January 1, 1994 through August 3, 1994,
which report is included in the 1996 Annual Report on Form 10-K (2) dated
January 22, 1997 and January 24, 1997 on our audits of Hudson Valley Properties
and Valley Park South Apartments, respectively, for the year ended December 31,
1995, which reports are included in Form 8-K/A Amendment No. 1, dated January
5, 1997 and filed on February 4, 1997 and (3) dated July 15, 1997 and July 22,
1997 on our audits of Royal Gardens Apartments and Lake Grove Apartments,
respectively for the years ended December 31, 1996 and March 31, 1996,
respectively, which reports are included in Form 8 K/A Amendment No. 1, dated
June 6, 1997 and filed on August 11, 1997. We also consent to the reference to
our firm under the caption "Experts".
/s/Coopers & Lybrand L.L.P.
Rochester, New York
October 3, 1997
