<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13136
HOME PROPERTIES OF NEW YORK, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 16-1455126
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
850 CLINTON SQUARE, ROCHESTER, NEW YORK 14604
(Address of principal executive offices) (Zip Code)
(716) 546-4900
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former
year, if changed since last report)
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
CLASS OF COMMON STOCK OUTSTANDING AT JULY 31, 1999
$.01 par value 18,970,323
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998
---- ----
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
Real estate:
Land $ 122,058 $ 119,221
Buildings, improvements and equipment 870,671 821,567
---------- ----------
992,729 940,788
Less: accumulated depreciation ( 81,112) ( 65,627)
---------- ----------
Real estate, net 911,617 875,161
Cash and cash equivalents 48,188 33,446
Cash in escrows 18,375 17,431
Accounts receivable 5,497 6,269
Prepaid expenses 4,639 6,155
Deposits 4,368 175
Investments in and advances to affiliates 49,643 54,229
Deferred financing costs 2,431 2,749
Other assets 7,330 16,620
---------- ----------
Total assets $1,052,088 $1,012,235
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $ 432,852 $ 418,942
Line of credit - -
Accounts payable 6,209 8,300
Accrued interest payable 2,612 1,962
Accrued expenses and other liabilities 3,391 4,962
Security deposits 11,805 11,404
---------- ----------
Total liabilities 456,869 445,570
---------- ----------
Minority interest 207,166 204,709
---------- ----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Common stock, $.01 par value; 50,000,000
shares authorized; 18,893,569 and 17,635,000 shares
issued and outstanding at June 30, 1999 and
December 31, 1998, respectively 189 177
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Additional paid-in capital 430,793 401,814
Distributions in excess of accumulated earnings ( 33,122) ( 26,622)
Unrealized loss on available-for-sale securities - ( 1,607)
Treasury stock, at cost, 0 and 79,600 shares
at June 30, 1999 and December 31, 1998, respectively - ( 1,863)
Officer and director notes for stock purchases ( 9,807) ( 9,943)
---------- ----------
Total stockholders' equity 388,053 361,956
---------- ----------
Total liabilities and stockholders' equity $1,052,088 $1,012,235
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW York, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Revenues: ---- ----
Rental income $ 89,374 $ 54,464
Property other income 2,689 1,346
Interest and dividend income 3,812 2,161
Other income 1,548 1,114
---------- ----------
Total revenues 97,423 59,085
---------- ----------
Expenses:
Operating and maintenance 40,963 25,637
General and administrative 4,327 2,544
Interest 15,676 9,087
Depreciation and amortization 15,860 8,899
Loss on available-for-sale securities 2,123 -
---------- ----------
Total expenses 78,949 46,167
---------- ----------
Income before gain on disposition of property,
minority interest and extraordinary item 18,474 12,918
Gain on disposition of property 457 -
---------- ----------
Income before minority interest and
extraordinary item 18,931 12,918
Minority interest 6,729 5,469
---------- ----------
Income before extraordinary item 12,202 7,449
Extraordinary item, prepayment penalties, net
of $205 allocated to minority interest - (290)
---------- ----------
Net income $ 12,202 $ 7,159
========== ==========
Basic earnings per share data:
Income before extraordinary item $.67 $.67
Extraordinary item - (.03)
---------- ----------
Net income $.67 $.64
========== ==========
Diluted earnings per share data:
Income before extraordinary item $.67 $.66
Extraordinary item - (.03)
---------- ----------
Net income $.67 $.63
========== ==========
Weighted average number of shares
outstanding:
Basic 18,159,499 11,108,109
========== ==========
Diluted 18,252,321 11,297,673
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW York, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
---- ----
Revenues:
Rental income $ 45,431 $ 29,370
Property other income 1,386 844
Interest and dividend income 1,917 1,247
Other income 906 851
---------- ----------
Total revenues 49,640 32,312
---------- ----------
Expenses:
Operating and maintenance 19,963 13,497
General and administrative 2,171 1,335
Interest 7,960 4,689
Depreciation and amortization 8,319 4,820
Loss on available-for-sale securities 2,123 -
---------- ----------
Total expenses 40,536 24,341
---------- ----------
Income before gain on disposition of property,
minority interest and extraordinary item 9,104 7,971
Gain on disposition of property 473 -
---------- ----------
Income before minority interest and
extraordinary item 9,577 7,971
Minority interest 3,386 3,297
---------- ----------
Income before extraordinary item 6,191 4,674
Extraordinary item, prepayment penalties, net
of $205 allocated to minority interest - (290)
---------- ----------
Net income $ 6,191 $ 4,384
========== ==========
Basic earnings per share data:
Income before extraordinary item $.34 $.37
Extraordinary item - (.02)
---------- ----------
Net income $.34 $.35
========== ==========
Diluted earnings per share data:
Income before extraordinary item $.33 $.37
Extraordinary item - (.02)
---------- ----------
Net income $.33 $.35
========== ==========
Weighted average number of shares
outstanding - Basic
18,444,084 12,497,802
========== ==========
- Diluted 18,548,646 12,686,401
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW York, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $12,202 $ 7,159
------- -------
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of HP Management and Conifer Realty ( 370) ( 20)
Income allocated to minority interest 6,729 5,469
Extraordinary item allocated to minority interest - ( 205)
Depreciation and amortization 16,286 9,228
Unrealized loss on available-for-sale securities ( 1,607) -
Gain/loss on disposition of property ( 457) -
Changes in assets and liabilities:
Other assets 15,520 ( 2,557)
Accounts payable and accrued liabilities ( 2,611) 269
------- -------
Total adjustments 33,490 12,184
------- -------
Net cash provided by operating activities 45,692 19,343
------- -------
Cash flows used in investing activities:
Purchase of properties, net of mortgage notes assumed
and UPREIT Units issued (12,063) (60,875)
Additions to properties (21,057) (15,636)
Deposits on property ( 4,193) ( 2,930)
Advances to affiliates (13,889) (13,251)
Payments on advances to affiliates 18,895 18,016
Other 1,099 -
------- -------
Net cash used in investing activities (31,208) (74,676)
------- -------
Cash flows from financing activities:
Proceeds from sale of common stock 33,049 156,054
Purchase of treasury stock ( 2,578) -
Proceeds from mortgage notes payable - 28,600
Payments of mortgage notes payable ( 2,128) (18,209)
Proceeds from line of credit - 33,000
Payments on line of credit - (41,750)
Additions to deferred loan costs ( 108) ( 73)
Additions to and payments received from cash escrows ( 944) ( 1,747)
Dividends and distributions paid (27,033) (16,250)
Net cash provided by (used in) financing activities 258 139,625
------- -------
Net increase in cash 14,742 84,292
Cash and cash equivalents:
Beginning of period 33,446 3,809
------- -------
End of period $ 48,188 $ 88,101
======== ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 14,600 $ 9,149
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW York, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim consolidated financial statements of Home
Properties of New York, Inc. (the "Company") are prepared
pursuant to the requirements for reporting on Form 10-Q.
Accordingly, certain disclosures accompanying annual financial
statements prepared in accordance with generally accepted
accounting principles are omitted. The year-end balance sheet
data was derived from audited financial statements, but does
not include all disclosures required by generally accepted
accounting principles. In the opinion of management, all
adjustments, consisting solely of normal recurring adjustments,
necessary for the fair presentation of the consolidated
financial statements for the interim periods have been
included. The current period's results of operations are not
necessarily indicative of results which ultimately may be
achieved for the year. The interim consolidated financial
statements and notes thereto should be read in conjunction with
the financial statements and notes thereto included in the
Company's Form 10-K, as filed with the Securities and Exchange
Commission on March 17, 1999.
2. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Home Properties of New York, Inc. (the " Company " ) was formed
in November 1993, as a Maryland corporation and is engaged
primarily in the ownership, management, acquisition and
development of residential apartment communities in the
Northeastern, Mid-Atlantic and Midwestern United States. As of
June 30, 1999, the Company operated 259 apartment communities
with 33,935 apartments. Of this total, the Company owned 100
communities, consisting of 24,350 apartments, managed as
general partner 7,710 apartments and fee managed 1,875
apartments for affiliates and third parties. The Company also
fee manages 1.7 million square feet of office and retail
properties.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of the Company and its 65.2% (63.4% at June 30, 1998)
general partnership interest in the Operating Partnership. The
remaining 34.8% (36.6% at June 30, 1998) is reflected as
Minority Interest in these consolidated financial statements.
For financing purposes, the Company has formed a limited
liability company (the "LLC") and a partnership (the "Financing
Partnership") which beneficially own certain apartment
communities encumbered by mortgage indebtedness. The LLC is
wholly owned by the Operating Partnership. The Financing
Partnership is owned 99.9% by the Operating Partnership and .1%
by Home Properties Trust, a wholly owned qualified REIT
subsidiary (QRS) of Home Properties of New York, Inc. All
significant intercompany balances and transactions have been
eliminated in these consolidated financial statements.
3. EARNINGS PER COMMON SHARE
Basic earnings per share ("EPS") is computed as net income
divided by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through
stock-based compensation including stock options. The exchange
of an Operating Partnership Unit for common stock will have no
effect on diluted EPS as unitholders and stockholders
effectively share equally in the net income of the Operating
Partnership.
<PAGE>
HOME PROPERTIES OF NEW York, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. EARNINGS PER COMMON SHARE CONT'D
Net income is the same for both the basic and diluted
calculation. The reconciliation of the basic weighted
average shares outstanding and diluted weighted average
shares outstanding for the six and three months ended June
30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
---------------------- -----------------------
1999 1998 1999 1998
<S> <C> <C> <C> <C>
---- ---- ---- ----
Basic weighted average number of shares
outstanding 18,159,499 11,108,109 18,444,084 12,497,802
Effect of dilutive stock options 92,822 189,564 104,562 188,599
---------- ---------- ---------- ----------
Diluted weighted average number
of shares outstanding 18,252,321 11,297,673 18,548,646 12,686,401
========== ========== ========== ==========
</TABLE>
4. COMPREHENSIVE INCOME
Total comprehensive income for the six and three months ended
June 30, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
---------------- --------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $12,202 $7,159 $6,191 $4,384
Comprehensive income:
Unrealized loss on available-for-sale
securities - - - -
------- ------ ------ ------
Net comprehensive income $12,202 $7,159 $6,191 $4,384
======= ====== ====== ======
</TABLE>
1. OTHER INCOME
Other income for the six and three months ended June 30,
1999 and 1998 is summarized as follows:
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
-------------- -----------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Management fees $ 734 $ 605 $360 $334
Development fees 391 387 329 216
Other 53 101 25 72
Management Companies 370 21 192 229
------ ------ ---- ----
$1,548 $1,114 $906 $851
====== ====== ==== ====
</TABLE>
Certain property management, leasing and development activities
are performed by Home Properties Management, Inc. and Conifer
Realty Corporation (the "Management Companies"). The Operating
Partnership owns non-voting common stock in the Management
Companies which entitles the Operating Partnership to receive
95% (99% in 1998) of the economic interest in the Management
Companies. The Company's share of income from the Management
Companies for the six and three months ended June 30 1999 and
1998 is summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
---------------- --------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Management fees $ 1,853 $ 1,588 $ 931 $ 795
Development fees 2,645 2,169 1,343 1,215
Miscellaneous 38 49 3 23
General and administrative (3,472) (3,342) (1,718) (1,553)
Interest expense ( 442) ( 297) ( 240) ( 167)
Other expenses ( 233) ( 146) ( 117) ( 82)
------- ------- ------- -------
Net income $ 389 $ 21 $ 202 $ 231
======= ======= ======= =======
Company's share $ 370 $ 21 $ 192 $ 229
======= ======= ======= =======
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW York, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONT'D
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. SEGMENT REPORTING
Effective January 1, 1998, the Company has adopted the
Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 131 "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131). The Company
has engaged in two primary business segments - the ownership
and management of market rate apartment communities and the
management and development of government assisted housing.
Company management views each apartment community as a separate
component of the operating segment. The Company's two
reportable segments are managed separately as each requires
different operating strategies and management expertise. There
are no material intersegment sales or transfers.
Non-segment revenue to reconcile total revenue consists of
unconsolidated management and development fees and interest
income. Non-segment assets to reconcile to total assets
include cash, cash in escrows, accounts receivable, prepaid
expenses, deposits, investments in and advances to affiliates,
deferred charges and other assets.
The Company assesses and measures segment operating
results based on FFO.
The revenues, profit (loss), and assets for each of the
reportable segments are summarized as follows for the six and
three months ended June 30, 1999 and 1998.
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
--------------------- ---------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES
Apartments owned $ 92,063 $ 55,810 $46,817 $ 30,214
Management & development fees 5,714 4,899 2,990 2,655
Reconciling items ( 354) ( 1,624) ( 167) ( 557)
---------- -------- ------- --------
Total Revenue 97,423 59,085 $49,640 $ 32,312
========== ======== ======= ========
PROFIT (LOSS)
Funds from operations:
Apartments owned $ 51,100 $ 30,173 $26,854 $ 16,717
Management & development fees 1,548 1,114 906 851
Reconciling items 3,812 2,161 1,917 1,247
---------- -------- -------- --------
Segment contribution to FFO 56,460 33,448 29,677 18,815
General & administrative expenses ( 4,327) ( 2,544) ( 2,171) ( 1,335)
Interest expense ( 15,676) ( 9,087) ( 7,960) ( 4,689)
Unconsolidated depreciation 221 268 153 72
Non-real estate depreciation/amort. ( 136) ( 91) ( 72) ( 50)
---------- -------- -------- --------
Funds from Operations 36,542 21,994 19,627 12,813
Depreciation - apartments owned ( 15,724) ( 8,808) ( 8,247) ( 4,770)
Unconsolidated depreciation ( 221) ( 268) ( 153) ( 72)
Gain on disposition of properties 457 - 473 -
Loss on available-for-sale securities ( 2,123) - ( 2,123) -
Minority interest in earnings ( 6,729) ( 5,469) ( 3,386) ( 3,297)
Extraordinary items, net of minority
interest - ( 290) - ( 290)
---------- -------- ------- --------
Net Income $ 12,202 $ 7,159 $ 6,191 $ 4,384
========== ======== ======= ========
ASSETS
Apartments owned $ 911,617 $628,564
Apartments managed 644 627
Reconciling items 139,827 152,444
---------- --------
Total Assets $1,052,088 $781,635
========== ========
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
7. PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Pro Forma Combined Statement of Operations FOR THE SIX
MONTHS ENDED JUNE 30, 1999
-----------------------------------
Home
Properties Pro Forma Company
HISTORICAL ADJUSTMENT PRO FORMA
---------- ---------- ----------
<S> <C> <C> <C>
Revenue:
Rental income $ 89,374 $ 1,359 $ 90,733
Property other income 2,689 40 2,729
Interest and dividend income 3,812 - 3,812
Other income 1,548 - 1,548
---------- ---------- ----------
Total Revenues 97,423 1,399 98,822
---------- ---------- ----------
Expenses:
Operating and Maintenance 40,963 422 41,385
General and administrative 4,327 42 4,369
Interest 15,676 430 16,106
Depreciation and amortization 15,860 211 16,071
Loss on available-for-sale securities 2,123 - 2,123
---------- ---------- ----------
Total Expenses 78,949 1,105 80,054
---------- ---------- ----------
Income before gain on disposition of property
and minority interest 18,474 294 18,768
Gain on disposition of property 457 - 457
---------- ---------- ----------
Income before minority Interest $ 18,931 $ 294 $ 19,225
========== ==========
Minority interest 6,869
----------
Net income $ 12,356
==========
Net income per common share - Basic $0.68
==========
- Diluted $0.68
==========
Weighted average number of
shares outstanding - Basic 18,159,499
==========
- Diluted 18,252,321
==========
</TABLE>
The pro forma information was prepared as if the transactions
related to the acquisition of the Manor Apartments (on February
18, 1999, 198 units for $7,200), Ridgeway Court Apartments (on
February 22, 1999, 66 units for $2,150), Springwell Park
Apartments (on April 7, 1999, 303 units for $18,200), and
Sherwood Gardens Apartments (on May 27, 1999, 103 units for
$4,100) had occurred on January 1, 1999.
Adjustments to the pro forma combined statements of operations
for the six months ended June 30, 1999, consist principally of
providing net property operating activity and recording
interest, depreciation and amortization from January 1, 1999 to
the acquisition date.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion is based primarily on the consolidated
financial statements of Home Properties of New York, Inc. as of June
30, 1999 and 1998 and for the six and three month periods then
ended. This information should be read in conjunction with the
accompanying consolidated financial statements and notes thereto.
FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements. Although the
Company believes expectations reflected in such forward-looking
statements are based on reasonable assumptions, it can give no
assurance that its expectations will be achieved. Factors that may
cause actual results to differ include general economic and local
real estate conditions, other conditions that might affect operating
expenses, the timely completion of repositioning and current
development activities within anticipated budgets, the actual pace
of future acquisitions and developments and continued access to
capital to fund growth.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity demands are expected to be
distributions to stockholders, capital improvements and repairs and
maintenance for the properties, acquisition of additional
properties, property development and scheduled debt maturities.
The Company intends to meet its short-term liquidity requirements
through net cash flows provided by operating activities and its
unsecured line of credit. The Company considers its ability to
generate cash to continue to be adequate to meet all operating
requirements and make distributions to its stockholders in
accordance with the provisions of the Internal Revenue Code, as
amended, to enable the Company to qualify as a REIT.
As of June 30, 1999 the Company had an unsecured line of credit from
Chase Manhattan Bank of $50 million and a $50 million supplemental
unsecured revolving credit facility with M&T Bank, both with no
outstanding balances. Borrowings under the line of credit bear
interest at 1.25% over the one-month LIBOR rate. Accordingly,
increases in interest rates will increase the Company's interest
expense and as a result will effect the Company's results of
operations and financial condition. The unsecured credit facilities
expire on September 4, 1999, with a one year extension at the
Company's option. It is anticipated that the Company will elect
the one-year extension.
To the extent that the Company does not satisfy its long-term
liquidity requirements through net cash flows provided by operating
activities and its credit facilities, it intends to satisfy such
requirements through the issuance of UPREIT units, proceeds from the
Dividend Reinvestment Plan ("DRIP"), long term secured or unsecured
indebtedness, or the issuance of additional equity securities. As
of June 30, 1999, the Company owned twenty-four properties with
3,907 apartment units, which were unencumbered by debt.
In May, 1998, the Company's Form S-3 Registration Statement was
declared effective relating to the issuance of up to $414 million of
shares of common stock or other securities. During 1998, $125.6
million of common shares were issued from this and a previous shelf
registration in various public and private offerings. There has
been no activity during 1999 relative to this shelf. The available
balance on the shelf at June 30, 1999 is $333.7 million.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION CONT'D
The issuance of UPREIT Units for property acquisitions continues to
be a significant source of capital. During 1998, 4,512 apartment
units in eight separate transactions were acquired for a total cost
of $176 million using UPREIT Units valued at approximately $71
million, with the balance paid in cash or assumed debt. From
January 1, 1999 to July 31, 1999, 8,147 apartment units in four
separate transactions were acquired for a total cost of $389 million
using UPREIT units valued at approximately $148 million, with the
balance paid in cash or assumed debt.
During 1998, over $72 million of common stock was issued under the
Company's DRIP, approximately twice the level of the previous year.
An additional $33.2 million has been raised through the DRIP program
during the first seven months of 1999.
The Company's Board of Directors approved a stock repurchase program
under which the Company may repurchase up to one million shares of
its outstanding common stock. The Board's action did not establish
a target price or a specific timetable for repurchase. During 1998,
the Company repurchased 59,600 shares at a cost of $1.4 million. An
additional 109,600 shares were repurchased during the first six
months of 1999 at a cost of $2.6 million. During the second quarter
of 1999, all shares repuchased through this program, which had been
held as Treasury Stock, have been retired.
As of June 30, 1999, the weighted average rate of interest on
mortgage debt is 7.2% and the weighted average maturity is
approximately 10 years. All of the debt is fixed rate. This limits
the exposure to changes in interest rates, minimizing the effect on
results of operations and financial condition. As of July 31, 1999,
variable rate debt represents 11% of total debt outstanding.
<PAGE>
The following table sets forth information regarding the mortgage
indebtedness at June 30, 1999.
<TABLE>
<CAPTION>
Principal
Interest Balance as of
Rate as of Maturity June 30, 1999
COMMUNITIES LOCATION JUNE 30, 1999 DATE (000'S)
- ----------- -------- ------------- -------- -------------
FIXED RATE
<S> <C> <C> <C> <C>
Perinton and Riverton Rochester, NY 6.75% (1) 09/01/00 11,813
Springwood Philadelphia, PA 8.50% 11/01/01 1,463
Valley View Philadelphia, PA 8.50% 11/01/01 3,317
Royal Gardens Piscataway, NJ 7.66% 08/01/02 11,524
Brook Hill Rochester, NY 7.75% 11/01/02 4,824
Garden Village Buffalo, NY 7.75% 11/01/02 4,540
1600 Elmwood Rochester, NY 7.75% 11/01/02 5,297
Village Green Syracuse, NY 7.75% 11/01/02 4,730
Racquet Club Philadelphia, PA 7.63% 11/01/03 12,053
Curren Terrace Philadelphia, PA 8.36% 11/01/03 9,525
Rolling Park Baltimore, MD 7.88% 11/01/03 2,836
Sherry Lake Philadelphia, PA 7.88% 01/01/04 6,539
Glen Manor Philadelphia, PA 8.13% 05/01/04 3,674
Colonies Chicago, IL 8.88% 05/01/04 12,424
Springcreek/Meadows Rochester, NY 7.63% (2) 08/01/04 3,130
Idylwood Buffalo, NY 8.63% 11/01/05 9,268
Carriage Hill Dearborn, MI 7.36% 01/01/06 3,878
Carriage Park Dearborn, MI 7.48% 01/01/06 5,586
Cherry Hill Dearborn, MI 7.99% 01/01/06 4,503
Mid Island Estates Bay Shore, NY 7.50% (3) 05/01/06 6,675
Newcastle Rochester, NY 6.00% (4) 07/31/06 6,150
Country Village Baltimore, MD 8.39% 08/01/06 6,639
Raintree Island Buffalo, NY 8.50% 11/01/06 6,349
Woodgate Place Rochester, NY 7.87% 01/01/07 3,423
Strawberry Hill Baltimore, MD 8.26% 05/01/07 2,064
Valley Park South Bethlehem, PA 6.93% 01/01/08 10,024
Hamlet Court Rochester, NY 7.11% 02/01/08 1,779
Candlewood South Bend, ID 7.02% 03/01/08 7,846
Multi-property Detroit, MI 7.51% 06/01/08 48,919
Sherwood Gardens Philadelphia, PA 6.98% 07/01/08 3,074
Conifer Village Syracuse, NY 7.20% 06/01/10 2,610
Ridgeway Court Philadelphia, PA 8.38% 11/01/10 1,204
Multi-property Various 6.16% 01/01/11 58,881
Morningside and
Carriage Hill Baltimore, MD 6.99% 05/01/13 20,257
Multi-property Various 6.48% 08/31/13 100,000
Springwell Park Dearborn, MI 8.00% 07/01/15 11,684
Pines of Perinton Rochester, NY 8.50% 05/01/18 8,783
Village Green
(Fairways) Syracuse, NY 8.23% 10/01/19 4,395
Raintree Island Buffalo, NY 8.50% 05/01/20 1,172
-------
432,852
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Interest Balance as of
Rate as of Maturity June 30, 1999
COMMUNITIES LOCATION JUNE 30, 1999 DATE (000'S)
- -------------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C>
LINE OF CREDIT
Unsecured N/A 30 day LIBOR+1.25% On demand 0
--------
$432,852
========
</TABLE>
(1) Fixed through August 4, 1999, then prime +.5% until maturity.
(2) Fixed through July 31, 2000, then prime +.5% until maturity.
(3) Fixed through March 31, 2001; then 7.75% until maturity.
(4) Fixed through July 31, 1999, then variable.
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1999 TO THE SAME PERIOD IN
1998
The Company had 62 apartment communities with 14,048 units which
were owned during both of the six and three month periods being
presented (the "Core Properties"). The Company has acquired an
additional 38 apartment communities with 10,302 units during 1998
and 1999 (the "Acquired Communities"). The inclusion of these
Acquired Communities generally accounted for the significant changes
in operating results for the six and three months ended June 30,
1999.
A summary of the Core Property net operating income is as follows:
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
----------------------------------- ------------------------------------
1999 1998 % CHG 1999 1998 % CHG
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Rent $52,048,000 $49,071,000 6.1% $26,094,000 $24,680,000 5.7%
Property other income 1,567,000 1,360,000 15.2% 816,000 721,000 13.2%
----------- ----------- ----- ----------- ----------- -----
Total income 53,615,000 50,431,000 6.3% 26,910,000 25,401,000 5.9%
Operating and
Maintenance (24,699,000) (23,619,000) (4.6%) (11,840,000) (11,684,000) (1.3%)
----------- ----------- ----- ----------- ----------- -----
Net operating income $28,916,000 $26,812,000 7.8% $15,070,000 $13,717,000 9.9%
=========== =========== ===== =========== =========== =====
</TABLE>
Of the $34,910,000 increase in rental income, $31,933,000 is
attributable to the Acquired Communities. The balance of this
increase, which is from the Core Properties, was the result of an
increase of 4.6% in weighted average rental rates, plus an increase
in occupancy from 93.4% to 94.7%.
Of the $1,343,000 increase in property other income, $1,007,000 is
attributable to the Acquired Communities, with $207,000 representing
a 15.2% increase for the Core Properties. This increase reflects
increased laundry and furniture/corporate rental activity. The
balance, a $129,000 increase, is from the Company's share of
income/loss from various general partnership interests.
Interest and dividend income increased $1,651,000, primarily
attributable to an increase in construction loans and advances made
to affiliated tax credit development partnerships, as well as
$714,000 in dividend income from an investment in available-for-sale
securities.
Other income increased by $434,000 due primarily to an increased
level of management and development activity.
<PAGE>
Of the $15,326,000 increase in operating and maintenance expenses,
$14,246,000 is attributable to the Acquired Communities. The
balance for the Core Properties represents a 4.6% increase over
1998. The major areas of increase in the Core Properties occurred
in utilities, personnel and snow removal costs. All of these items
were affected by a more normal winter following the unusually mild
winter weather experienced in 1998. Most of the personnel increase
results from the normal 26 week pay periods in 1999 compared to only
25 in 1998. This negative variance will reverse itself during the
third quarter of 1999.
General and administrative expense increased in 1999 by $1,783,000,
or 70%. General and administrative expenses as a percentage of total
revenues was 4.4% for 1999 and 4.3% for 1998.
During the second quarter of 1999, the Company disposed of its only
retail property at a gain. A 35,000 square foot shopping center in
Columbus, Ohio was sold for approximately $1,000,000 resulting in a
gain on disposition of approximately $500,000. In addition, the
Company liquidated its original $11.6 million investment in the
common stock of Associated Estates Realty Corporation (NYSE: AEC),
recognizing a loss of $2,123,000.
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1999 TO THE SAME PERIOD IN
1998
Of the $16,061,000 increase in rental income, $14,647,000 is
attributable to the Acquired Communities. The balance of this
increase, which is from the Core Properties, was the result of an
increase of 4.7% in weighted average rental rates, plus an increase
in occupancy from 93.5% to 94.4%.
Of the $542,000 increase in property other income, $475,000 is
attributable to the Acquired Communities, with $95,000 representing
a 13.2% increase for the Core Properties. This increase reflects
increased laundry and furniture/corporate rental activity. The
balance, a ($28,000) decrease, is from the Company's share of
income/loss from various general partnership interests.
Interest and dividend income increased $670,000, primarily
attributable to an increase in construction loans and advances made
to affiliated tax credit development partnerships, as well as
$319,000 in dividend income from an investment in available-for-sale
securities.
Of the 6,466,000 increase in operating and maintenance expenses,
$6,310,000 is attributable to the Acquired Communities. The balance
for the Core Properties represents a 1.3% increase over 1998. The
major areas of increase occurred in real estate taxes and snow
removal costs, offset in part by reductions in advertising expenses
and utility costs.
FUNDS FROM OPERATIONS
Management considers funds from operations ("FFO") to be an
appropriate measure of performance of an equity REIT. The National
Association of Real Estate Investment Trusts ("NAREIT") revised
White Paper definition of FFO is income (loss) before gains (losses)
from the sale of property and extraordinary items, before minority
interest in the Operating Partnership, plus real estate
depreciation. Management believes that in order to facilitate a
clear understanding of the combined historical operating results of
the Company, FFO should be considered in conjunction with net income
as presented in the consolidated financial statements included
elsewhere herein. FFO does not represent cash generated from
operating activities in accordance with generally accepted
accounting principles and is not necessarily indicative of cash
available to fund cash needs. FFO should not be considered as an
alternative to net income as an indication of the Company's
performance or to cash flow as a measure of liquidity.
<PAGE>
The calculation of FFO for the previous six quarters are presented
below:
<TABLE>
<CAPTION>
June 30, March 31 Dec. 31 Sept. 30 June 30 March 31
1999 1999 1998 1998 1998 1998
-------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Net income $ 6,191 $ 6,011 $ 5,388 $ 6,141 $ 4,384 $ 2,775
Minority interest 3,386 3,343 3,408 3,726 3,297 2,172
Extraordinary item - - 514 156 290 -
Non-recurring interest amortization - - - 294 - -
Depreciation from real property 8,247 7,477 8,183 5,991 4,770 4,038
Depreciation from real property
from unconsolidated entities 153 84 393 72 72 196
(Gain) Loss from sale of property 1,650* - - - - -
-------- -------- -------- -------- -------- --------
FFO $ 19,627 $ 16,915 $ 17,886 $ 16,380 $ 12,813 $ 9,181
======== ======== ======== ======== ======== ========
Weighted average common shares/
units outstanding - Basic 28,530.2 27,810.1 27,129.4 25,603.7 21,312.3 17,303.6
======== ======== ======== ======== ======== ========
- Diluted 28,634.8 27,898.4 27,245.7 25,746.9 21,500.9 17,501.1
======== ======== ======== ======== ======== ========
</TABLE>
*Includes the loss from disposition of property investment
separately disclosed as loss on available-for-sale securities.
All REITs may not be using the strict White Paper definition for new
FFO. Accordingly, the above presentation may not be comparable to
other similarly titled measures of FFO of other REITs.
IMPACT OF THE YEAR-2000 ON SYSTEM PROCESSING
The Year 2000 ("Y2K") problem concerns the inability of information
systems to properly recognize and process date-sensitive information
beyond January 1, 2000. As a result, the Y2K problem can affect any
system that uses date data, including mainframes, PCs, and embedded
microprocessors that control security systems, call-processing
systems, building climate systems, elevators, office equipment and
even fire alarms. All references to percent complete below are as
of 8/1/99.
The Company's State of Readiness
The Company began addressing the Y2K issue in September 1997. As
such it divided its review into two segments: business critical and
mission critical systems. Business critical systems are those with
the potential to affect the financial and operational infrastructure
of the Company. Mission critical are those systems with a potential
to affect the delivery of electricity and natural gas to our
residents, commercial tenants and employees and the safety of
residents, commercial tenants and employees.
Recognizing that the mission critical systems rely heavily on public
service vendors, the Company's focus to date has been on business
critical systems under the assumption that market forces and
regulatory agencies would encourage and monitor the compliance of
the telecommunications, utilities and emergency service industries.
The Company has set up systems to monitor the progress of mission
critical service providers and will develop contingency plans,
possibly in coordination with industry organizations, as needed, to
minimize the possibility that the Y2K problem would disrupt the
lives of its residents, commercial tenants and employees.
The Company relies exclusively on micro computers (PC's). PC's
exist in the corporate office, regional offices and at the
communities. The Company is 95% complete with its review and
modification of corporate office systems towards Y2K compliance.
Outstanding projects include: upgrading the voicemail system and
installing Y2K compliant modules of non-critical property management
software. Specifically, the software vendors have advised the
Company that the property management, accounts payable and general
ledger software and payroll software is compliant. The Company will
continue a dialog with all software service providers so that any
additional upgrades can be completed as necessary.
<PAGE>
The Company is 85% complete with its review and modification of
regional office systems and 65% complete with its review and
modification of community based systems. The Company has one and
one-half full-time employees dedicated to upgrading regional offices
and community based systems. Additional information systems
employees will assist as needed. The Company anticipates its
regional office systems and its community based systems will be
tested for compliance by September ,1999.
Once all hardware and software components are believed to be Y2K
ready, the Company plans to periodically match its systems'
inventory against hardware and software component manufacturer
upgrade releases to assure that its systems have the most current
Y2K upgrades (including any properties acquired).
The ability of the Company to successfully transact monetary
exchanges is key to continued successful operation. For this
reason, all financial institutions which the Company has a
relationship were identified and queried for Y2K readiness status
during the second quarter of 1999. The Company's significant
relationships are with regional and national financial institutions
which are also subject to the oversight of various federal
regulatory agencies for their Y2K compliance. The Company
anticipates full compliance based on the responses received to date.
Delivery of goods and services (i.e., building and elevator access,
security systems, HVAC, life safety, etc.) to the Company's
communities and offices must continue to be provided without
interruption. The Company mailed surveys to all critical suppliers
in July, 1999 and expects to know their Y2K readiness status by
September, 1999.
Contingency Plans
Testing will begin in August 1999 to determine the Company's
business critical system readiness. Based on testing results,
contingency plans may be put in place.
Risks
Since the Company's major source of income is rental payments under
term leases at communities located in different municipalities,
the failure of business critical systems at any one community is not
expected to have a material adverse effect on the Company's
financial condition, results of operations and liquidity. Given the
complexity and general uncertainty of the Y2K issues in the gas,
electric, telecommunications, banking and related industries, even
the most comprehensive program, however, cannot assure that
unforeseen problems will not occur. The Company therefore is unable
at this time to determine whether any unforeseen impacts could have
a material effect on the Company's financial condition. The Company
believes that upon the full implementation of our upgraded business
system and assuming Y2K compliance of our public service vendors,
the possibility of significant interruptions of normal operations
should not be material.
Costs
The total cost of the Company's Y2K activities, which is estimated at
$675,000, is not expected to have a material effect on the Company's
financial position. Approximately $500,000 has been expended as of
August 1, 1999. The remaining expenditures to be incurred will be
funded from operations. A majority of these costs are an
acceleration of the amounts the Company would anticipate incurring
to upgrade business systems, regardless of the Y2K problem,
considering the evolution of technology and the requirements for
running newly acquired and improved system applications.
INFLATION
Substantially all of the leases at the communities are for a term of
one year or less, which enables the Company to seek increased rents
upon renewal of existing leases or commencement of new leases.
These short-term leases minimize the potential adverse effect of
inflation on rental income, although residents may leave without
penalty at the end of their lease terms and may do so if rents are
increased significantly.
<PAGE>
DECLARATION OF DIVIDEND
On August 3, 1999, the Board of Directors approved a dividend of
$.48 per share for the period from April 1, 1999 to June 30, 1999.
This is the equivalent of an annual distribution of $1.92 per share.
The dividend is payable August 26, 1999 to shareholders of record on
August 17, 1999.
SUBSEQUENT EVENTS
On July 1, 1999, the Company acquired seven properties with 3,722
apartment units in suburban markets surrounding Washington, D.C.,
Baltimore, Maryland and Richmond, Virginia. The total purchase
price and closing costs of $180.6 million included the assumption of
existing debt of approximately $57 million, issuance of UPREIT units
valued at $106 million, plus cash of $17.6 million.
On July 9, 1999 the Company acquired 396 apartment units in one
community located in South Bend, Indiana. The total purchase price
and closing costs of $17.4 million included the assumption of
existing debt of approximately $12.4 million plus cash of $5
million.
On July 15, 1999, the Company acquired twelve properties with 3,297
apartment units in suburban markets surrounding Baltimore, Maryland
and Wilmington, Delaware. The total purchase price and closing
costs of $157.5 million included the assumption of existing debt of
$85.9 million, issuance of UPREIT units valued at $29.2 million,
plus cash of $42.4 million.
On July 28, 1999, the Company acquired four properties with 825
apartment units in Philadelphia, Pennsylvania. The total purchase
price and closing costs of $32.3 million included the issuance of
UPREIT units valued at $7.9 million, seller financing of $15.8
million, plus cash of $8.6 million.
On July 30, 1999, the Company acquired substantially all of the
development business of Community Investment Strategies, Inc. (CIS),
an affordable housing development company located in New Brunswick,
New Jersey for $1.7 million - paid entirely with UPREIT units.
<PAGE>
PART II - OTHER INFORMATION
HOME PROPERTIES OF NEW YORK, INC.
ITEM 6. EXHIBITS AND REPORTS OR FORM 8-K
(a) Exhibits: There are no exhibits which are filed with, or
incorporated by reference, to this report.
(b) Reports or Form 8-K:
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HOME PROPERTIES OF NEW YORK, INC.
(Registrant)
Date: AUGUST 16, 1999
---------------------------
By: /S/ DAVID P. GARDNER
---------------------------
David P. Gardner
Vice President
Chief Financial Officer and Treasurer
Date: AUGUST 16, 1999
---------------------------
By: /S/ DAVID P. GARDNER
---------------------------
David P. Gardner
Vice President
Chief Financial Officer and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
HOME PROPERTIES OF NEW YORK, INC.'S FINANCIAL STATEMENTS CONTAINED IN ITS
JUNE 30, 1999 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 48,188
<SECURITIES> 0
<RECEIVABLES> 5,497
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 992,729
<DEPRECIATION> 81,112
<TOTAL-ASSETS> 1,052,088
<CURRENT-LIABILITIES> 0
<BONDS> 432,852
0
0
<COMMON> 189
<OTHER-SE> 387,864
<TOTAL-LIABILITY-AND-EQUITY> 1,052,088
<SALES> 0
<TOTAL-REVENUES> 97,423
<CGS> 0
<TOTAL-COSTS> 63,273
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,676
<INCOME-PRETAX> 18,931
<INCOME-TAX> 0
<INCOME-CONTINUING> 12,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 12,202
<EPS-BASIC> .67
<EPS-DILUTED> .67
</TABLE>
