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 SEPTEMBER 30, 2000
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 OCTOBER 31, 2000
$.01 par value 21,419,745
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOME PROPERTIES OF NEW YORK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
ASSETS (Unaudited) (Note 1)
Real estate:
Land $230,014 $194,468
Buildings, improvements and equipment 1,507,766 1,286,285
1,737,780 1,480,753
Less: accumulated depreciation (139,226) (101,904)
Real estate, net 1,598,554 1,378,849
Cash and cash equivalents 46,816 4,742
Cash in escrows 33,975 28,281
Accounts receivable 8,188 6,842
Prepaid expenses 13,892 9,423
Deposits 4,598 897
Investment in and advances to affiliates 55,905 63,450
Deferred charges 3,631 2,610
Other assets 9,971 8,523
Total assets $1,775,530 $1,503,617
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $765,803 $618,901
Line of Credit - 50,800
Accounts payable 18,223 11,765
Accrued interest payable 4,433 3,839
Accrued expenses and other liabilities 5,498 6,391
Security deposits 17,563 14,918
Total liabilities 811,520 706,614
Minority interest 369,105 299,880
8.36% Series B convertible cumulative preferred stock,
liquidation preference of $25.00 per share; 2,000,000 shares
issued and outstanding, net of issuance costs 48,733 48,733
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000 shares authorized:
9.0% Series A convertible cumulative preferred stock,
liquidation preference of $21.00 per share; 1,666,667 shares 35,000 35,000
issued and outstanding
8.75% Series C convertible cumulative preferred stock,
preference of $100 per share; 600,000 shares issued and
outstanding liquidation 59,500 -
8.775% Series D convertible cumulative preferred stock,
liquidation preference of $100 per share; 250,000 shares 25,000 -
issued and outstanding
Common stock, $.01 par value; 80,000,000 shares authorized;
21,268,029 and 19,598,464 shares issued and outstanding at
September 30, 2000 and December 31, 1999, respectively 212 196
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Additional paid-in capital 484,117 461,345
Distributions in excess of accumulated earnings ( 48,040) ( 38,294)
Officer and director notes for stock purchases ( 9,617) ( 9,857)
Total stockholders' equity 546,172 448,390
Total liabilities and stockholders' equity $1,775,530 $1,503,617
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Revenues:
Rental income $218,039 $151,523
Property other income 8,080 4,507
Interest and dividend income 6,035 5,349
Other income 381 2,220
Total revenues 232,535 163,599
Expenses:
Operating and maintenance 92,862 67,360
General and administrative 9,799 7,291
Interest 41,522 27,358
Depreciation and amortization 37,795 25,527
Loss on available-for-sale securities - 2,123
Non-recurring acquisition expense - 6,225
Total expenses 181,978 135,884
Income before gain (loss) on disposition of
property, minority interest and
extraordinary item 50,557 27,715
Gain (loss) on disposition of property (417) 457
Income before minority interest and
extraordinary item 50,140 28,172
Minority interest 19,219 10,866
Income before extraordinary item 30,921 17,306
Extraordinary item, prepayment penalties,
net of $78 allocated to minority interest - (96)
Net income 30,921 17,210
Preferred dividends (8,252) -
Net income available to common shareholders $22,669 $17,210
Basic earnings per share data:
Income before extraordinary item $1.11 $.94
Extraordinary item - (.01)
Net income $1.11 $.93
Diluted earnings per share data:
Income before extraordinary item $1.10 $.93
Extraordinary item - -
Net income $1.10 $.93
Weighted average number of shares
outstanding:
Basic 20,412,401 18,458,819
Diluted 20,539,321 18,566,521
</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 SEPTEMBER 30, 2000 AND 1999
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Revenues:
Rental income $76,303 $62,150
Property other income 2,999 1,819
Interest and dividend income 2,400 1,537
Other income 305 672
Total revenues 82,007 66,178
Expenses:
Operating and maintenance 31,250 26,398
General and administrative 3,479 2,964
Interest 14,132 11,681
Depreciation and amortization 13,188 9,667
Non-recurring acquisition expense - 6,225
Total expenses 62,049 56,935
Income before gain on disposition of
property, 19,958 9,243
minority interest and extraordinary item
Gain on disposition of property 45 -
Income before minority interest and
extraordinary item 20,003 9,243
Minority interest 7,658 4,137
Income before extraordinary item 12,345 5,106
Extraordinary item, prepayment penalties, net
of $78 allocated to minority interest - (96)
Net income 12,345 5,010
Preferred dividends (3,790) -
Net income available for common shareholders $8,555 $5,010
Basic earnings per share data:
Income before extraordinary item $.41 $.27
Extraordinary item - (.01)
Net income $.41 $.26
Diluted earnings per share data:
Income before extraordinary item $.40 $.27
Extraordinary item - (.01)
Net income $.40 $.26
Weighted average number of shares
outstanding:
Basic 20,994,835 19,047,696
Diluted 21,174,053 19,192,769
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Cash flows from operating activities:
Net income $30,921 $17,210
Adjustments to reconcile net income to net
cash provided by operating activities:
Equity in income of HP Management and Conifer 1,511 ( 329)
Realty
Income allocated to minority interest 19,219 10,866
Extraordinary item allocated to minority interest - ( 78)
Depreciation and amortization 38,213 26,113
Unrealized loss on available-for-sale securities - ( 1,607)
(Gain) loss on disposition of property 417 ( 457)
Changes in assets and liabilities:
Other assets ( 6,482) 8,094
Accounts payable and accrued liabilities 8,804 13,036
Total adjustments 61,682 55,638
Net cash provided by operating activities 92,603 72,848
Cash flows used in investing activities:
Purchase of properties, net of mortgage notes
assumed and UPREIT Units issued ( 55,844) (104,890)
Additions to properties ( 56,598) ( 37,300)
Deposits on property ( 3,701) ( 332)
Advances to affiliates ( 28,858) ( 31,665)
Payments on advances to affiliates 34,892 22,331
Other 4,889 1,099
Net cash used in investing activities (105,220) (150,757)
Cash flows from financing activities:
Proceeds from the sale of preferred stock, net 82,666 48,741
Proceeds from sale of common stock 40,684 40,650
Purchase of treasury stock - ( 2,578)
Proceeds from mortgage notes payable 84,432 32,978
Payments of mortgage notes payable ( 31,371) ( 34,581)
Proceeds from line of credit 23,500 73,700
Payments on line of credit ( 74,300) ( 53,900)
Additions to deferred loan costs ( 1,441) ( 522)
Additions to and payments received from cash escrows ( 5,694) ( 11,838)
Dividends and distributions paid ( 63,785) ( 41,010)
Net cash provided by (used in) financing activities 54,691 51,640
Net increase in cash and cash equivalents 42,074 ( 26,269)
Cash and cash equivalents:
Beginning of period 4,742 33,446
End of period $46,816 $ 7,177
Supplemental disclosure of cash flow information:
Cash paid for interest $40,508 $ 24,510
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. UNAUDITED INTERIM FINANCIAL STATEMENTS
The interim condensed 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/A, as
filed with the Securities and Exchange Commission on May 22, 2000.
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, rehabilitation and development of
residential apartment communities in the Northeastern, Mid-Atlantic and
Midwestern United States. As of September 30, 2000, the Company operated
314 apartment communities with 49,024 apartments. Of this total, the
Company owned 139 communities, consisting of 37,198 apartments, managed
as general partner 8,225 apartments and fee managed 3,601 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 61.7% (55.0% at September 30, 1999) partnership
interest in the Operating Partnership. The remaining 38.3% (45.0% at
September 30, 1999) 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 available to
common shareholders divided by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential
dilution that could occur from common shares issuable through stock-based
compensation including stock options and the conversion of any cumulative
convertible preferred stock. The exchange of an Operating Partnership
Unit for common stock will have no effect on diluted EPS as unitholders
and stockholders effectively share equally in the net income of the
Operating Partnership. Net income available to common shareholders is
the same for both the basic and diluted calculation.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONT'D
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
3. EARNINGS PER COMMON SHARE CONT'D
The reconciliation of the basic weighted average shares outstanding and
diluted weighted average shares outstanding for the nine and three months
ended September 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Basic weighted average number of shares
outstanding 20,412,401 18,458,819 20,994,835 19,047,696
Effect of dilutive stock options 126,920 107,702 179,218 145,073
Diluted weighted average number
of shares outstanding 20,539,321 18,566,521 21,174,053 19,192,769
</TABLE>
Unexercised stock options and warrants to purchase 963,740 and 713,900 shares
of the Company's common stock were not included in the computations of
diluted EPS because the options' exercise prices were greater than the
average market price of the company's stock during the nine month period
ended September 30, 2000 and 1999, respectively. For the nine month period
ended September 30, 2000, the 1,666,667 shares of the 9% Series A
convertible cumulative preferred stock ("Series A Preferred"), the
2,000,000 shares of 8.36% Series B convertible cumulative preferred stock
("Series B Preferred"), the 600,000 shares of 8.75% Series C convertible
cumulative preferred stock ("Series C Preferred") and the 250,000 shares
of 8.775% Series D convertible cumulative preferred stock ("Series D
Preferred") on an as-converted basis has an antidilutive effect and is
not included in the computation of diluted EPS.
4. OTHER INCOME
Other income (loss) for the nine and three months ended September 30,
2000 and 1999 is summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Management fees $1,308 $1,180 $442 $446
Development fees 498 601 258 210
Other 87 109 46 56
Management Companies (1,512) 330 ( 441) (40)
$ 381 $2,220 $305 $672
</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% of the economic interest in the
Management Companies. The Company's share of income from the Management
Companies for the nine and three months ended September 30, 2000 and 1999
is summarized as follows:
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Management fees $2,728 $2,827 $1,042 $ 974
Development fees 3,163 3,829 1,054 1,184
Miscellaneous 66 78 23 40
General and administrative ( 5,681) (5,259) (1,921) (1,787)
Interest expense ( 1,425) ( 766) ( 509) ( 324)
Other expenses ( 443) ( 362) ( 154) ( 129)
Net income (loss) ($1,592) $347 ( $465) ( $42)
Company's share ($1,512) $330 ( $441) ( $40)
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONT'D
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
5. SEGMENT REPORTING
The Company is engaged in one primary business segment - the ownership
and management of market rate apartment communities (segregated as Core
and Non-core properties). Company management views each apartment
community as a separate component of the operating segment.
Non-segment revenue to reconcile total revenue consists of unconsolidated
management and development fees and interest income. Non-segment assets
to reconcile to total assets include cash and cash equivalents, cash in
escrows, accounts receivable, prepaid expenses, deposits, investments in
and advances to affiliates, deferred charges and other assets.
Core properties consist of all apartment communities which have been
owned more than one full calendar year. Therefore, the 2000 Core
represents communities owned as of January 1, 1999. Non-core properties
consist of apartment communities acquired during 1999 and 2000, such that
full year comparable operating results are not available.
The accounting policies of the segments are the same as those described
in Note 1.
The Company assesses and measures segment operating results based on a
performance measure referred to as Funds from Operations ("FFO"). The
National Association of Real Estate Investment Trusts defines FFO as net
income (loss), before gains (losses) from the sale of property,
extraordinary items, plus real estate depreciation including adjustments
for unconsolidated partnerships and joint ventures. FFO is not a measure
of operating results or cash flows from operating activities as measured
by generally accepted accounting principles and it is not indicative of
cash available to fund cash needs and should not be considered an
alternative to cash flows as a measure of liquidity.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
5. SEGMENT REPORTING (CONTINUED)
THE REVENUES, PROFIT (LOSS), AND ASSETS FOR THE REPORTABLE SEGMENT ARE
SUMMARIZED AS FOLLOWS FOR THE NINE AND THREE MONTHS ENDED SEPTEMBER 30,
2000, AND 1999.
<TABLE>
<CAPTION>
NINE MONTHS THREE MONTHS
2000 1999 2000 1999
<S> <C> <C> <C> <C>
REVENUES
Apartments owned
Core properties $144,684 $136,132 $ 49,195 $46,095
Non-core properties 81,435 19,898 30,107 17,874
Reconciling items 6,416 7,569 2,705 2,209
Total Revenue $232,535 $163,599 $ 82,007 $66,178
PROFIT (LOSS)
Funds from operations:
Apartments owned
Core properties 83,122 76,838 29,229 26,867
Non-core properties 50,135 11,832 18,823 10,704
Reconciling items 6,416 7,569 2,705 2,209
Segment contribution to FFO 139,673 96,239 50,757 39,780
General & administrative expenses ( 9,799) ( 7,291) ( 3,479) ( 2,964)
Interest expense (41,522) (27,358) (14,132) (11,681)
Unconsolidated depreciation 340 368 99 147
Non-real estate depreciation/amort. ( 390) ( 229) ( 139) ( 93)
Funds from Operations 88,302 61,729 33,106 25,189
Depreciation - apartments owned (37,405) (25,298) (13,049) ( 9,574)
Loss on available-for-sale securities - ( 2,123) - -
Non-recurring acquisition expense - ( 6,225) - ( 6,225)
Unconsolidated depreciation ( 340) ( 368) ( 99) ( 147)
Gain (Loss) on disposition of properties ( 417) 457 45 -
Minority interest in earnings (19,219) (10,866) ( 7,658) ( 4,137)
Extraordinary items, net of minority - ( 96) - ( 96)
interest
Net Income $30,921 $17,210 $12,345 $ 5,010
ASSETS - As of September 30, 2000 and 1999
Apartments owned $1,598,554 $1,340,979
Reconciling items 176,976 130,700
Total Assets $1,775,530 $1,471,679
</TABLE>
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
6. PRO FORMA FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Pro Forma Combined Statement of Operations FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2000
<S> <C> <C> <C>
Home
Properties Pro Forma Company
HISTORICAL ADJUSTMENT PRO FORMA
Revenue:
Rental income $218,039 $ 9,108 $227,147
Property other income 8,080 296 8,376
Interest and dividend income 6,035 - 6,035
Other income 381 - 381
Total Revenues 232,535 9,404 241,939
Expenses:
Operating and Maintenance 92,862 3,806 96,668
General and administrative 9,799 282 10,081
Interest 41,522 2,369 43,891
Depreciation and amortization 37,795 1,554 39,349
Total Expenses 181,978 8,011 189,989
Income before loss on disposition of property
and minority interest 50,557 $1,393 51,950
Loss on disposition of property ( 417) ( 417)
Income before minority interest 50,140 51,533
Minority Interest 19,219 20,436
Net income 30,921 31,097
Preferred dividends (8,252) ( 8,252)
Net income available to common shareholders $22,669 $22,845
Net income per common share - Basic $1.12
- Diluted $1.11
Weighted average number of
shares outstanding - Basic 20,412,401
- Diluted 20,539,321
</TABLE>
The pro forma information was prepared as if the transactions related to
the acquisition of the Old Friends Apartments (on February 1, 2000, 51
units for $2,000), the Gateside Portfolio (on March 15, 2000, 2,113 units
for $135,200), the Detroit Communities (on March 22, 2000, 360 units for
$14,400), Elmwood Terrace Apartments (on June 30, 2000, 504 units for
$20,600), East Meadows Apartments (on August 1, 2000, 150 units for
$13,000), Southbay Manor (on September 11, 2000, 61 units for $3,000),
Bayberry Apartments (on September 30, 2000, 120 units for $5,700) and
Hampton Court Apartments (on September 30, 2000, 182 units for $6,000)
had occurred on January 1, 2000.
Adjustments to the pro forma combined statements of operations for the
nine months ended September 30, 2000, consist principally of providing
net property operating activity and recording interest, depreciation and
amortization from January 1, 2000 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 September 30, 2000 and
1999 and for the nine 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
the common and preferred stockholders and Operating Partnership unitholders,
capital improvements and repairs and maintenance for the properties,
acquisition of additional properties, property development and debt repayments.
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 be adequate to meet all
operating requirements and make distributions to its stockholders in accordance
with the provisions of the Internal Revenue Code, as amended, applicable to
REITs.
As of September 30, 2000 the Company had an unsecured line of credit from M & T
Bank of $100 million with no balance outstanding. Borrowings under the line
of credit bear interest at 1.25% over the one-month LIBOR rate. Accordingly,
increases in interest rates will increase the Company's interest expense and as
a result will effect the Company's results of operations and financial
condition. The unsecured credit facility was extended two years to September,
2002, with no material changes to the financial terms.
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 facility, 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 September 30, 2000, the Company owned twenty-six properties
with 4,266 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 was no activity during 1999. During the first nine
months of 2000, $60 million of preferred shares and $7.3 million of warrants
were issued from this shelf registration in various private offerings. The
available balance on the shelf at September 30, 2000 is $266.4 million.
On September 30, 1999, the Company completed the sale of $50 million of Series
B preferred in a private transaction with GE Capital. On December 22, 1999,
the Class A limited partnership interests held by the State of Michigan
Retirement Systems (originally issued in December, 1996 for $35 million) were
converted to Series A Preferred.
During the second quarter of 2000, the Company completed the sale of $65
million of Series C Preferred through a private transaction with affiliates of
Prudential Real Estate Investors, Teachers Insurance and Annuity of America,
AEW Capital Management, and the Pacific Life Insurance Company. In addition,
the Company issued warrants to purchase 240,000 common shares at a price of
$30.25 per share, expiring in five years. In addition, the Company completed
the sale of $25 million of Series D Preferred through a private transaction
with The Equitable Life Assurance Society of the United States.
The issuance of UPREIT Units for property acquisitions continues to be a
significant source of capital. During 1999, 8,147 apartment units in four
separate transactions were acquired for a total cost of $389 million using
UPREIT Units valued at approximately $149 million, with the balance paid in
cash or assumed debt. During the first nine months of 2000, 3,391 apartment
units in six separate transactions were acquired for a total cost of $187.7
million using UPREIT Units valued at approximately $57 million, with the
balance paid in cash or assumed debt.
During 1999, over $49 million of common stock was issued under the Company's
DRIP. An additional $40.4 million has been raised through the DRIP program
during the first nine months of 2000.
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 1999, the Company repurchased
125,300 shares at a cost of $3.0 million, with remaining authorization to buy
back up to 795,100 shares of common stock. No additional shares were
repurchased during the first nine months of 2000. On October 24, 2000, the
board approved a 1,000,000 share increase in management's authorization to buy
back outstanding common stock. With the release of third quarter earnings, the
Company included a supplemental schedule computing net asset value per share.
With the stock trading during late October and early November in the $26-$27
range, the Company intends to pursue opportunities to repurchase shares at
a discount to the underlying net asset value.
As of September 30, 2000, the weighted average rate of interest on mortgage
debt is 7.4% and the weighted average maturity is approximately 11 years.
Approximately 99% 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.
<PAGE>
The following table sets forth information regarding the mortgage indebtedness
at June 30, 2000.
<TABLE>
<CAPTION>
PRINCIPAL
INTEREST BALANCE AS OF
RATE % AS OF MATURITY SEPT. 30, 2000
COMMUNITIES LOCATION SEPTEMBER 30, 2000 DATE (000'S)
<S> <C> <C> <C> <C>
FIXED RATE:
Philadelphia (2 properties) Philadelphia, PA 8.5000 11/01/01 4,622
Royal Gardens Piscataway, NJ 7.6600 08/01/02 11,164
The Colony Mount Prospect, IL 7.6000 08/01/02 15,952
Bayberry Place Detroit, MI 9.7500 10/01/02 2,526
New York (4 properties) Upstate, NY 7.7500 11/01/02 18,927
Broadlawn Bryn Mawr, PA 8.1700 08/01/03 11,854
Curren Terrace Norristown, PA 8.3550 10/01/03 9,332
Elmwood Terrace Frederick, MD 8.2500 11/01/03 4,648
Racquet Club Levittown, PA 7.6250 11/01/03 11,830
Rolling Park Baltimore, MD 7.8750 11/01/03 2,754
Sherry Lake Conshohocken, PA 7.8750 01/01/04 6,312
Glen Manor Glenolden, PA 8.1250 05/01/04 3,601
Colonies Steger, IL 8.8750 05/01/04 12,122
William Henry Malvern, PA 7.6400 10/01/05 14,228
Idylwood Cheektowaga, NY 8.6250 11/01/05 9,147
Carriage Hill Dearborn, MI 7.3600 01/01/06 3,782
Carriage Park Dearborn, MI 7.4800 01/01/06 5,449
Cherry Hill Village Dearborn, MI 7.9900 01/01/06 4,439
Castle Club Morrisville, PA 9.5500 03/01/05 3,719
Mid-Island* Bay-Shore, NY 7.5000 05/01/06 6,675
Newcastle* Rochester, NY 7.9000 07/31/06 6,000
Country Village Bel Air, MD 8.3850 08/01/06 6,555
Hampton Court Detroit, MI 8.8750 09/01/06 3,601
Raintree Tonawanda, NY 8.5000 11/01/06 6,212
Woodgate Spencerport, NY 7.8650 01/01/07 3,377
Strawberry Hill Baltimore, MD 8.2550 05/01/07 2,039
Seminary Towers Alexandria, VA 8.3100 07/01/07 4,957
Pavilion Rockville, MD 7.4500 01/01/08 3,894
Maple Lane South Bend, IN 7.2050 01/01/08 5,912
Valley Park South Bethlehem, PA 6.9300 01/01/08 9,879
Hamlet Court Rochester, NY 7.1100 02/01/08 1,744
Candlewood Apartments Mishawaka, IN 7.0200 02/01/08 7,678
Detroit (10 properties) Detroit, MI 7.5100 06/01/08 47,921
Canterbury Baltimore, MD 7.6700 06/01/08 2,167
Sherwood Gardens Levittown, PA 6.9800 07/01/08 3,037
Golf Club West Chester, PA 6.5850 12/01/08 16,959
Mansion House Bryn Mawr, PA 7.5000 01/01/09 683
Philadelphia (4 properties) Philadelphia, PA 8.0000 07/28/09 15,750
Old Friends Baltimore, MD 6.7300 08/01/09 2,388
Multi-Property (7) Various 7.5750 05/01/10 45,400
Conifer Village Baldwinsville, NY 7.2000 06/01/10 2,445
Philadelphia (2 properties) Philadelphia, PA 7.5000 10/01/10 39,032
Ridgeway Lansdowne, PA 8.3750 11/01/10 1,121
Multi-Property (3) Various 7.2500 01/01/11 32,978
Multi-Property (7) Various 6.1600 01/01/11 58,881
Timbercroft Owings Mills, MD 8.5000 05/01/11 912
Timbercroft Owings Mills, MD 8.0000 02/01/12 1,226
Village Square Glen Burnie, MD 7.0000 11/01/12 1,013
Baltimore (2 properties) Baltimore, MD 6.9900 05/01/13 19,828
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL
INTEREST BALANCE AS OF
RATE % AS OF MATURITY SEPT. 30, 2000
COMMUNITIES LOCATION SEPTEMBER 30, 2000 DATE (000'S)
<S> <C> <C> <C> <C>
Multi-Property (22) Various 6.4750 08/31/13 100,000
Deerfield Woods Dearborn, MI 7.0000 01/01/14 3,428
Springwells Dearborn, MI 8.0000 07/01/15 11,404
Pines of Perinton Fairport, NY 8.5000 05/01/18 8,517
Canterbury Baltimore, MD 8.2500 06/01/18 6,693
Pavilion Rockville, MD 8.0000 11/01/18 8,769
Bonnie Ridge Baltimore, MD 6.6000 12/15/18 19,106
Timbercroft Owings Mills, MD 8.3750 06/01/19 5,744
Canterbury Baltimore, MD 7.5000 09/01/19 3,660
Fairways at Village Green Tonawanda, NY 8.2300 10/01/19 4,284
Raintree Island Tonawanda, NY 8.5000 04/30/20 1,145
Chestnut Crossing Newark, DE 9.3400 07/01/20 9,852
Macomb Manor Dearborn, MI 8.6300 06/01/21 4,040
Village Square Glen Burnie, MD 8.1250 08/01/21 6,518
Doub Meadow Hagerstown, MD 7.5000 10/01/21 2,877
Canterbury Baltimore, MD 7.5000 11/01/21 2,552
Shakespeare Park Randallstown, MD 7.5000 01/01/24 2,603
Gateway Village Jessup, MD 8.0000 05/01/30 6,370
Owings Run Owings Mills, MD 8.0000 10/01/35 17,603
Owings Run Owings Mills, MD 8.0000 06/01/36 14,671
756,508
VARIABLE RATE:
Springcreek/Meadows Dansville, NY 10.0000 08/01/04 3,050
Maple Lane South Bend, IN 5.8000 07/27/07 6,245
$765,803
</TABLE>
* The interest rate on these mortgages will convert to a variable rate on
various dates between 2001 and 2003 and continue until maturity.
<PAGE>
RESULTS OF OPERATIONS
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 TO THE SAME PERIOD IN 1999
The Company had 95 apartment communities with 23,530 units which were owned
during both of the nine and three month periods being presented (the "Core
Properties"). The Company has acquired an additional 44 apartment communities
with 13,668 units during 1999 and 2000 (the "Acquired Communities"). The
inclusion of these Acquired Communities generally accounted for the significant
changes in operating results for the nine and three months ended September 30,
2000.
A summary of the Core Property net operating income is as follows:
<TABLE>
<CAPTION>
NINE MONTHS Three Months
2000 1999 % CHG 2000 1999 % CHG
<S> <C> <C> <C> <C> <C> <C>
Rent $139,460,000 $132,044,000 5.6% $47,351,000 $44,676,000 6.0%
Property other income 5,224,000 4,088,000 27.8% 1,844,000 1,419,000 30.0%
Total income 144,684,000 136,132,000 6.3% 49,195,000 46,095,000 6.7%
Operating and
Maintenance ( 61,562,000) ( 59,294,000) (3.8%) (19,966,000) (19,228,000) (3.8%)
Net operating income $ 83,122,000 $76,838,000 8.2% $29,229,000 $26,867,000 8.8%
</TABLE>
Of the $66,516,000 increase in rental income, $59,100,000 is attributable to
the Acquired Communities. The balance of this increase, which is from the Core
Properties, was the result of an increase of 5.6% in weighted average rental
rates, less a decrease in occupancy from 94.7 to 94.6%.
Of the $3,573,000 increase in property other income, $2,437,000 is attributable
to the Acquired Communities, with $1,136,000 representing a 27.8% increase for
the Core Properties. This increase reflects increased laundry,
furniture/corporate/cable rental activity, application fees, late charges and
interest income on escrow deposits.
Interest and dividend income increased $686,000, with interest income from
increased levels of financing to affiliates partially offset by a reduction of
$714,000 in dividend income from an investment in available-for-sale
securities.
Other income decreased by $1,839,000 due primarily to a decreased level of
development activity. The decreased development fees are attributable to
reserves recorded for advances, construction overruns and a reduction in the
success rate of receiving tax credit allocations for New York State development
projects.
After six months of numerous meetings and discussions with various interested
parties, the Company has reached an agreement in principle to sell its
affordable development operations, including a development pipeline in excess
of 30 properties, to a management ream led by employee-director Richard Crossed
at an amount which approximates book value. Mr. Crossed will resign as an
officer and director to devote his full time to the new company. The
financial impact of this sale to 2001 could be an additional $.02 per share
dilution. Additional detail on this transaction will be available after a
contract is signed. However, there can be no assurances that the deal will
be consummated.
Of the $25,502,000 increase in operating and maintenance expenses, $23,234,000
is attributable to the Acquired Communities. The balance for the Core
Properties represents a 3.8% increase over 1999. The major areas of increase
in the Core Properties occurred in personnel expense and real estate taxes.
The Company includes heat in the monthly rent at approximately 70% of the
units. All of these properties use natural gas, except for two which use
heating oil. The Company estimates that increased natural gas prices could
reduce earnings by $.02 per share in the fourth quarter of 2000 and $.06 per
share in 2001, which should show up largely in the first quarter of next year.
If higher utility costs persist, the Company plans to pass this cost on to
residents in the form of further rent increases as leases are renewed.
General and administrative expense increased in 2000 by $2,508,000, or 34%.
General and administrative expenses as a percentage of total revenues was 4.2%
for 2000 and 4.5% for 1999.
<PAGE>
During the second quarter of 2000, the Company sold, at a loss of $417,000, a
150-unit community located in Pittsburgh, Pennsylvania.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER, 2000 TO THE SAME PERIOD IN 1999
Of the $14,153,000 increase in rental income, $11,478,000 is attributable to
the Acquired Communities. The balance of this increase, which is from the Core
Properties, was the result of an increase of 5.6% in weighted average rental
rates, plus an increase in occupancy from 94.6% to 94.9%.
Of the $1,180,000 increase in property other income, $755,000 is attributable
to the Acquired Communities, with $425,000 representing a 30.0% increase for
the Core Properties. This increase reflects increased laundry,
furniture/corporate/cable revenue, application fees, late charges and interest
income on escrow deposits.
Interest and dividend income increased $863,000, primarily attributable to an
increase in construction loans and advances made to affiliated tax credit
development partnerships of $480,000 in addition to $383,000 increased earnings
from invested cash reserves.
Leverage remained relatively constant at 37% of total market capitalization
during the quarter, below the Company's target of 40%. In addition, the quarter
started and ended with over $40 million of cash on hand. Both of these
factors contributed to expected short-term dilution to earnings for the quarter
of $.01 per share. Expected activity from acquisitions in the fourth quarter
will utilize the cash on hand and bring leverage back towards 40% by year end.
Of the $4,852,000 increase in operating and maintenance expenses, $4,114,000 is
attributable to the Acquired Communities. The balance for the Core Properties
represents a 3.8% increase over 1999. The major areas of increase occurred in
personnel, advertising, real estate taxes, utilities and office and telephone.
These expense increases were offset in part by savings in repairs and
maintenance.
FUNDS FROM OPERATIONS
Management considers funds from operations ("FFO") to be an appropriate measure
of performance of an equity REIT. Effective January 1, 2000 the National
Association of Real Estate Investment Trusts ("NAREIT") clarified the White
Paper definition of FFO as 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.
For the nine months ended September 30, 1999, the Company's previously reported
FFO excluded a nonrecurring loss on available-for-sale securities of $2,123 and
a non-recurring acquisition expense of $6,225,000 in conformance with the
NAREIT definition of FFO calculations then in place ("Original Definition").
The Company has adopted NAREIT's new FFO calculation, pursuant to NAREIT's
White Paper dated October 1999, which modifies the FFO calculation to include
certain nonrecurring charges ("Clarified Definition"). Although both FFO
calculations are presented in the table below, the Company believes the
comparison of FFO using the Original Definition represents the best guide to
investors of comparable operations and growth between years.
<PAGE>
The calculation of FFO for the previous six quarters are presented below:
<TABLE>
<CAPTION>
Sept. 30 June 30 March 31 Dec. 31 Sept. 30 June 30
2000 2000 2000 1999 1999 1999
<S> <C> <C> <C> <C> <C> <C>
Net income available to common
Shareholders $8,555 $7,559 $6,554 $7,931 $5,010 $6,191
Preferred dividends 3,790 2,534 1,928 1,141 - -
Minority interest 7,658 6,401 5,160 6,524 4,137 3,386
Extraordinary item - - - - 96 -
Non-recurring acquisition
expense - - - - 6,225 -
Depreciation from real property 13,049 12,734 11,622 11,717 9,574 8,247
Depreciation from real property
from unconsolidated entities 99 98 143 90 147 153
(Gain) Loss from sale of (45) 462 - - - 1,650*
property
FFO (original definition) 33,106 29,788 $25,407 $27,403 $25,189 $19,627
Non-recurring acquisition
expense - - - - (6,225) -
Loss on available-for-sale
securities - - - - - ( 2,123)
FFO (clarified definition) 33,106 $29,788 $25,407 $27,403 $18,964 $17,504
Weighted average common
shares/units outstanding:
Basic 36,820.1 35,846.3 34,123.2 35,116.1 34,485.9 28,530.2
Diluted 43,162.4 40,249.9 37,586.7 36,904.1 34,630.9 28,634.8
</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.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company is evaluating the time period over which it recognizes revenue
relating to development fees earned relative to its affordable housing
activities in connection with Staff Accounting Bulletin 101. An adjustment, if
any, is not expected to have a material effect on reported results of
operations or financial position.
INFLATION
Substantially all of the leases at the communities are for a term of one year
or less, which enables the Company to seek increased rents upon renewal of
existing leases or commencement of new leases. These short-term leases
minimize the potential adverse effect of inflation on rental income, although
residents may leave without penalty at the end of their lease terms and may do
so if rents are increased significantly.
DECLARATION OF DIVIDEND
On October 24, 2000, the Board of Directors approved a dividend of $.57 per
share for the period from July 1, 2000 to September 30, 2000. This is the
equivalent of an annual distribution of $2.28 per share. The dividend is
payable November 22, 2000 to shareholders of record on November 14, 2000.
SUBSEQUENT EVENTS
On October 25, 2000, the Company acquired 371 apartment units in one community
located in suburban Chicago, Illinois. The total purchase price of $17.5
million was paid by assuming $10.7 million of debt with the balance of $6.8
million coming from cash on hand.
On November 1, 2000, the Company acquired 429 units in five communities located
in the town of Patchogue on Long Island. The total purchase price of $26.5
million was paid from cash on hand.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RATE RISK
See Note 4 -- Mortgage Notes Payable in the Consolidated Financial Statements
concerning interest rate risk as contained in the Company's Form 10-K/A, as
filed with the Securities and Exchange Commission on May 22, 2000.
<PAGE>
PART II - OTHER INFORMATION
HOME PROPERTIES OF NEW YORK, INC.
ITEM 6. EXHIBITS AND REPORTS OR FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K:
- Form 8K was filed on October 26, 2000, date of report
October 26, 2000, with respect to Items 7 and 9 disclosures
regarding the Registrant's Press Release announcing its results
for the third quarter of 2000 and its third quarter 2000
investor conference call.
<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: NOVEMBER 9, 2000
By: /s/ David P. Gardner
---------------------------------------------
David P. Gardner
Vice President
Chief Financial Officer and Treasurer
Date: NOVEMBER 9, 2000
By: /S/ DAVID P. GARDNER
---------------------------------------------
David P. Gardner
Vice President
Chief Financial Officer and Treasurer
