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, 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
--------
(State or other jurisdiction of incorporation or organization)
16-1455126
(IRS Employer Identification 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
$.01 par value
Outstanding at July 31, 2000
20,835,028
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HOME PROPERTIES OF NEW YORK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 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 $220,424 $194,468
Buildings, improvements and equipment 1,466,149 1,286,285
---------- ----------
1,686,573 1,480,753
Less: accumulated depreciation (126,095) (101,904)
----------- ----------
Real estate, net 1,560,478 1,378,849
Cash and cash equivalents 45,026 4,742
Cash in escrows 34,728 28,281
Accounts receivable 7,632 6,842
Prepaid expenses 6,400 9,423
Deposits 959 897
Investment in and advances to affiliates 65,917 63,450
Deferred charges 3,133 2,610
Other assets 10,012 8,523
------------- --------------
Total assets $1,734,285 $1,503,617
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $747,955 $618,901
Line of Credit - 50,800
Accounts payable 11,852 11,765
Accrued interest payable 4,557 3,839
Accrued expenses and other liabilities 6,113 6,391
Security deposits 17,264 14,918
------------ -----------
Total liabilities 787,741 706,614
----------- ----------
Minority interest 365,226 299,880
----------- ----------
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, liquidation
preference of $100 per share; 600,000 shares issued and outstanding 59,500 -
8.775% Series D convertible cumulative preferred stock, liquidation
preference of $100 per share; 250,000 shares issued and outstanding 25,000 -
Common stock, $.01 par value; 80,000,000 shares authorized;
20,687,609 and 19,598,464 shares issued and outstanding at
June 30, 2000 and December 31, 1999, respectively 206 196
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Additional paid-in capital 468,161 461,345
Distributions in excess of accumulated earnings (45,487) ( 38,294)
Officer and director notes for stock purchases ( 9,795) ( 9,857)
-------------- --------------
Total stockholders' equity 532,585 448,390
------------- ------------
Total liabilities and stockholders' equity $1,734,285 $1,503,617
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Rental income $141,736 $89,374
Property other income 5,081 2,689
Interest and dividend income 3,635 3,812
Other income 76 1,548
------------ -----------
Total revenues 150,528 97,423
------------ -----------
Expenses:
Operating and maintenance 61,613 40,963
General and administrative 6,320 4,327
Interest 27,390 15,676
Depreciation and amortization 24,607 15,860
Loss on available-for-sale securities - 2,123
------------ -----------
Total expenses 119,930 78,949
------------ -----------
Income before gain (loss) on disposition of
property and minority interest 30,598 18,474
Gain (loss) on disposition of property (462) 457
------------ -----------
Income before minority interest 30,136 18,931
Minority interest 11,561 6,729
------------ ------------
Net income 18,575 12,202
Preferred dividends (4,462) -
----------- ------------
Net income available to common shareholders $14,113 $12,202
============ =============
Per share data:
Net income - Basic $ .70 $.67
===== ====
- Diluted $ .70 $.67
===== ====
Weighted average number of shares
outstanding - Basic 20,117,984 18,159,499
========== ==========
- Diluted 20,247,104 18,252,321
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Rental income $73,891 $45,431
Property other income 2,788 1,386
Interest and dividend income 2,008 1,917
Other income (loss) (523) 906
-------------- --------------
Total revenues 78,164 49,640
----------- -----------
Expenses:
Operating and maintenance 30,658 19,963
General and administrative 3,198 2,171
Interest 14,485 7,960
Depreciation and amortization 12,867 8,319
Loss on available-for-sale securities - 2,123
----------- ------------
Total expenses 61,208 40,536
----------- -----------
Income before gain (loss) on disposition of
property and minority interest 16,956 9,104
Gain (loss) on disposition of property (462) 473
------------- ------------
Income before minority interest 16,494 9,577
Minority interest 6,401 3,386
------------ ------------
Net income 10,093 6,191
Preferred dividends ( 2,534) -
------------ ------------
Net income available to common shareholders $7,559 $ 6,191
=========== ===========
Per share data:
Net income - Basic $ .37 $.34
===== ====
- Diluted $ .37 $.33
===== ====
Weighted average number of shares
outstanding - Basic 20,407,253 18,444,084
========== ==========
- Diluted 20,558,159 18,548,646
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
HOME PROPERTIES OF NEW YORK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $18,575 $12,202
------- -------
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in income of HP Management and Conifer Realty 1,070 ( 370)
Income allocated to minority interest 11,561 6,729
Depreciation and amortization 24,877 16,286
Unrealized loss on available-for-sale securities - ( 1,607)
(Gain) loss on disposition of property 462 ( 457)
Changes in assets and liabilities:
Other assets 1,582 15,520
Accounts payable and accrued liabilities 2,874 ( 2,611)
--------- ---------
Total adjustments 42,426 33,490
-------- --------
Net cash provided by operating activities 61,001 45,692
-------- -------
Cash flows used in investing activities:
Purchase of properties, net of mortgage notes assumed
and UPREIT Units issued ( 40,014) ( 12,063)
Additions to properties ( 33,108) ( 21,057)
Deposits on property ( 62) ( 4,193)
Advances to affiliates ( 17,064) ( 13,889)
Payments on advances to affiliates 13,527 18,895
Other 4,844 1,099
---------- ---------
Net cash used in investing activities ( 71,877) ( 31,208)
-------- --------
Cash flows from financing activities:
Proceeds from the sale of preferred stock, net 82,751 -
Proceeds from sale of common stock 25,858 33,049
Purchase of treasury stock - ( 2,578)
Proceeds from mortgage notes payable 45,400 -
Payments of mortgage notes payable ( 4,055) ( 2,128)
Proceeds from line of credit 23,500 -
Payments on line of credit (74,300) -
Additions to deferred loan costs ( 796) ( 108)
Additions to and payments received from cash escrows ( 6,447) ( 944)
Dividends and distributions paid (40,751) (27,033)
-------- -------
Net cash provided by (used in) financing activities 51,160 258
-------- --------
Net increase in cash and cash equivalents 40,284 14,742
Cash and cash equivalents:
Beginning of period 4,742 33,446
-------- --------
End of period $45,026 $48,188
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest $26,400 $ 14,600
======= ========
</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 June 30, 2000, the Company operated
304 apartment communities with 47,399 apartments. Of this total, the
Company owned 135 communities, consisting of 36,685 apartments, managed
as general partner 8,145 apartments and fee managed 2,569 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% (65.2% at June 30, 1999) partnership
interest in the Operating Partnership. The remaining 38.3% (34.8% at
June 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 six and three
months ended June 30, 2000 and 1999 is as follows:
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Six Months Three Months
2000 1999 2000 1999
---- ---- ---- ----
Basic weighted average number of shares
outstanding 20,117,984 18,159,499 20,407,253 18,444,084
Effect of dilutive stock options 129,120 92,822 150,906 104,562
---------- ---------- ---------- ----------
Diluted weighted average number
of shares outstanding 20,247,104 18,252,321 20,558,159 18,548,646
========== ========== ========== ==========
</TABLE>
Unexercised stock options to purchase 21,600 and 162,500 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 six month period ended
June 30, 2000 and 1999, respectively. For the six month period ended
June 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 six and three months ended June 30, 2000
and 1999 is summarized as follows:
<TABLE>
<CAPTION>
Six Months Three Months
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Management fees $866 $734 $427 $360
Development fees 240 391 ( 71) 329
Other 41 53 16 25
Management Companies (1,071) 370 ( 895) 192
------- ----- ------ -----
$ 76 $1,548 ($523) $906
====== ====== ====== ====
</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 six and three months ended June 30, 2000
and 1999 is summarized as follows:
<TABLE>
<CAPTION>
Six Months Three Months
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Management fees $1,686 $1,853 $818 $931
Development fees 2,109 2,645 747 1,343
Miscellaneous 43 38 34 3
General and administrative ( 3,760) (3,472) (1,905) (1,718)
Interest expense ( 916) ( 442) ( 488) ( 240)
Other expenses ( 289) ( 233) ( 148) ( 117)
-------- -------- -------- --------
Net income (loss) ($1,127) $389 ( $942) $202
-------- ---- ------- ----
Company's share ($1,071) $370 ( $895) $192
======== ==== ======= ====
</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 December 31, 1998. 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 six and three months ended June 30, 2000,
and 1999.
<TABLE>
<CAPTION>
Six Months Three Months
---------- ------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Apartments owned
Core properties $95,490 $90,037 $ 48,353 $45,301
Non-core properties 51,327 2,026 28,326 1,516
Reconciling items 3,711 5,360 1,485 2,823
---------- --------- ---------- ----------
Total Revenue $150,528 $97,423 $ 78,164 $ 49,640
======== ======= ======== ========
Profit (loss)
Funds from operations:
Apartments owned
Core properties 53,893 49,971 28,343 25,991
Non-core properties 31,311 1,129 17,678 863
Reconciling items 3,711 5,360 1,485 2,823
--------- ------- -------- --------
Segment contribution to FFO 88,915 56,460 47,506 29,677
General & administrative expenses ( 6,320) ( 4,327) ( 3,198) ( 2,171)
Interest expense (27,390) (15,676) ( 14,485) ( 7,960)
Unconsolidated depreciation 241 221 98 153
Non-real estate depreciation/amort. ( 251) ( 136) ( 133) ( 72)
---------- --------- ---------- -----------
Funds from Operations 55,195 36,542 29,788 19,627
Depreciation - apartments owned (24,356) (15,724) (12,734) ( 8,247)
Loss on available-for-sale securities - ( 2,123) - ( 2,123)
Unconsolidated depreciation ( 241) ( 221) ( 98) ( 153)
Gain (Loss) on disposition of properties ( 462) 457 ( 462) 473
Minority interest in earnings (11,561) ( 6,729) ( 6,401) ( 3,386)
-------- --------- -------- --------
Net Income $18,575 $12,202 $10,093 $ 6,191
======= ======= ======= =======
Assets - As of June 30, 2000 and 1999
------
Apartments owned $1,560,478 $911,617
Reconciling items 173,807 140,471
------------ ------------
Total Assets $1,734,285 $1,052,088
========== ==========
</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 Six Months Ended June 30, 2000
------------------------------------------
Home
Properties Pro Forma Company
Historical Adjustment Pro Forma
---------- ---------- ---------
<S> <C> <C> <C>
Revenue:
Rental income $141,736 $ 6,273 $148,009
Property other income 5,081 224 5,305
Interest and dividend income 3,635 - 3,635
Other income 76 - 76
------------ ------------ ---------
Total Revenues 150,528 6,497 157,025
-------- -------- --------
Expenses:
Operating and Maintenance 61,613 2,494 64,107
General and administrative 6,320 195 6,515
Interest 27,390 1,942 29,332
Depreciation and amortization 24,607 1,079 25,686
--------- -------- --------
Total Expenses 119,930 5,710 125,640
-------- ------- --------
Income before loss on disposition of property
and minority interest 30,598 $ 787 31,385
=======
Loss on disposition of property 462 462
---------- ----------
Income before minority interest 30,136 30,923
Minority Interest 11,561 12,388
-------- -------
Net income 18,575 18,535
Preferred dividends (4,462) (4,462)
---------- --------
Net income available to common shareholders $14,113 $14,073
======= =======
Net income per common share - Basic $0.70
=====
- Diluted $0.70
=====
Weighted average number of
shares outstanding - Basic 20,117,984
==========
- Diluted 20,247,104
==========
</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) and Elmwood Terrace Apartments (on June 30, 2000,
504 units for $20,600) had occurred on January 1, 2000.
Adjustments to the pro forma combined statements of operations for the
six months ended June 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 June 30, 2000 and
1999 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
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 June 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 the Company's option, at either 1.25% over the one-month LIBOR
rate or at a money market rate as quoted on a daily basis by the lending
institution. 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 expires on
September 4, 2000.
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 June 30, 2000, the Company owned twenty-four properties with
4,055 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 six 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 June 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.
On May 21, 2000, the Company completed the sale of $40 million of Series C
Preferred through a private transaction with affiliates of Prudential Real
Estate Investors and Teachers Insurance and Annuity of America. In addition, the
Company issued warrants to purchase 160,000 common shares at a price of $30.25
per share, expiring in five years.
On June 5, 2000, 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.
On June 19, 2000, the Company completed the sale of $20 million of Series C
Preferred through a private transaction with affiliates of AEW Capital
Management and the Pacific Life Insurance Company. The Company also issued
80,000 additional warrants to purchase common shares at a price of $30.25 per
share, expiring in five years.
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 six months of 2000, 3,028 apartment units in
three separate transactions were acquired for a total cost of $173 million using
UPREIT Units valued at approximately $51 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 $25.2 million has been raised through the DRIP program
during the first six 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. No additional shares were repurchased during the first
six months of 2000.
As of June 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 June 30, 2000
Communities Location June 30, 2000 Date (000's)
----------- -------- ------------- ---- -------
<S> <C> <C> <C> <C>
Fixed Rate:
Philadelphia (2 properties) Philadelphia, PA 8.0000 10/01/00 $25,168
Philadelphia (2 properties) Philadelphia, PA 8.5000 11/01/01 4,655
Royal Gardens Piscataway, NJ 7.6600 08/01/02 11,238
The Colony Mount Prospect, IL 7.6000 08/01/02 16,037
New York (4 properties) Upstate, NY 7.7500 11/01/02 19,023
Broadlawn Bryn Mawr, PA 8.1700 08/01/03 11,907
Elmwood Terrace Frederick, MD 8.2500 11/01/03 4,665
Racquet Club Levittown, PA 7.6250 11/01/03 11,876
Curren Terrace Norristown, PA 8.3550 11/01/03 9,372
Rolling Park Baltimore, MD 7.8750 11/01/03 2,771
Sherry Lake Conshohocken, PA 7.8750 01/01/04 6,359
Glen Manor Glenolden, PA 8.1250 05/01/04 3,617
Colonies Steger, IL 8.8750 05/01/04 12,185
Springcreek/Mendon Dansville, NY 7.6300 08/01/04 * 3,062
William Henry Malvern, PA 7.6400 10/01/05 14,274
Idylwood Cheektowaga, NY 8.6250 11/01/05 9,172
Carriage Hill Dearborn, MI 7.3600 01/01/06 3,802
Carriage Park Dearborn, MI 7.4800 01/01/06 5,478
Cherry Hill Village Dearborn, MI 7.9900 01/01/06 4,452
Castle Club Morrisville, PA 9.5500 03/01/05 3,735
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 6,572
Raintree Tonawanda, NY 8.5000 11/01/06 6,240
Woodgate Spencerport, NY 7.8650 01/01/07 3,387
Strawberry Hill Baltimore, MD 8.2550 05/01/07 2,044
Seminary Towers Alexandria, VA 8.3100 07/01/07 5.041
Pavilion Rockville, MD 7.4500 01/01/08 3,905
Maple Lane South Bend, IN 7.2050 01/01/08 5,929
Valley Park South Bethlehem, PA 6.9300 01/01/08 9,909
Hamlet Court Rochester, NY 7.1100 02/01/08 1,751
Candlewood Apartments Mishawaka, IN 7.0200 02/01/08 7,713
Detroit (10 properties) Detroit, MI 7.5100 06/01/08 48,129
Canterbury Baltimore, MD 7.6700 06/01/08 2,179
Sherwood Gardens Levittown, PA 6.9800 07/01/08 3,044
Golf Club West Chester, PA 6.5850 12/01/08 17,010
Mansion House Bryn Mawr, PA 7.5000 01/01/09 686
Philadelphia (4 properties) Philadelphia, PA 8.0000 07/28/09 15,750
Old Friends Baltimore, MD 6.7300 08/01/09 2,398
Multi-Property (7) Various 7.5750 05/01/10 45,400
Conifer Village Baldwinsville, NY 7.2000 06/01/10 2,445
Ridgeway Lansdowne, PA 8.3750 11/01/10 1,139
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 05/01/11 925
Timbercroft Owings Mills, MD 8.0000 02/01/12 1,242
Village Square Glen Burnie, MD 7.0000 11/01/12 1,027
Baltimore (2 properties) Baltimore, MD 6.9900 05/01/13 19,917
Multi-Property (22) Various 6.4750 08/31/13 100,000
Deerfield Woods Dearborn, MI 7.0000 01/01/14 3,443
Springwells Dearborn, MI 8.0000 07/01/15 11,463
Pines of Perinton Fairport, NY 8.5000 05/01/18 8,572
Canterbury Baltimore, MD 8.2500 06/01/18 6,736
Pavilion Rockville, MD 8.0000 11/01/18 8,822
Bonnie Ridge Baltimore, MD 6.6000 12/15/18 19,240
Timbercroft Owings Mills, MD 8.3750 06/01/19 5,775
Canterbury Baltimore, MD 7.5000 09/01/19 3,681
Fairways at Village Green Tonawanda, NY 8.2300 10/01/19 4,307
Raintree Island Tonawanda, NY 8.5000 04/30/20 1,150
Chestnut Crossing Newark, DE 9.3400 07/01/20 9,895
Macomb Manor Dearborn, MI 8.6300 06/01/21 4,058
Village Square Glen Burnie, MD 8.1250 08/01/21 6,548
Doub Meadow Hagerstown, MD 7.5000 10/01/21 2,891
Canterbury Baltimore, MD 7.5000 11/01/21 2,564
Shakespeare Park Randallstown, MD 7.5000 01/01/24 2,614
Gateway Village Jessup, MD 8.0000 05/01/30 6,383
Owings Run Owings Mills, MD 8.0000 10/01/35 17,625
Owings Run Owings Mills, MD 8.0000 06/01/36 14,689
------
741,620
-------
Variable Rate:
Maple Lane South Bend, IN 5.050 07/27/07 6,335
------
$747,955
========
</TABLE>
* The interest rate on these mortgages will convert to a variable rate on
various dates between 2000 and 2003 and continue until maturity.
<PAGE>
Results of Operations
Comparison of six months ended June 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 six and three month periods being presented (the "Core
Properties"). The Company has acquired an additional 40 apartment communities
with 13,155 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 six and three months ended June 30, 2000.
A summary of the Core Property net operating income is as follows:
<TABLE>
<CAPTION>
Six Months Three Months
---------- ------------
2000 1999 % Chg 2000 1999 % Chg
---- ---- ----- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Rent $92,109,000 $87,368,000 5.4% $46,575,000 $43,919,000 6.0%
Property other income 3,381,000 2,669,000 26.7% 1,778,000 1,382,000 28.7%
------------- ----------- ------- ------------- ------------ -----
Total income 95,490,000 90,037,000 6.1% 48,353,000 45,301,000 6.7%
Operating and
Maintenance ( 41,597,000) (40,066,000) (3.8%) (20,010,000) (19,310,000) (3.6%)
----------- ----------- ------ ------------ ------------ ------
Net operating income $53,893,000 $49,971,000 7.8% $28,343,000 $25,991,000 9.0%
=========== =========== ==== =========== =========== ====
</TABLE>
Of the $52,362,000 increase in rental income, $47,621,000 is attributable to the
Acquired Communities. The balance of this increase, which is from the Core
Properties, was the result of an increase of 5.7% in weighted average rental
rates, less a decrease in occupancy from 94.7 to 94.5%.
Of the $2,392,000 increase in property other income, $1,680,000 is attributable
to the Acquired Communities, with $712,000 representing a 26.7% 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 decreased $177,000, with interest income from
increased levels of financing to affiliates more than offset by a reduction of
$714,000 in dividend income from an investment in available-for-sale securities.
Other income decreased by $1,472,000 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.
Of the $20,650,000 increase in operating and maintenance expenses, $19,119,000
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 repairs and maintenance, personnel and real estate taxes,
offset by a savings in advertising and snow removal costs.
General and administrative expense increased in 2000 by $1,993,000, or 46%.
General and administrative expenses as a percentage of total revenues was 4.2%
for 2000 and 4.4% for 1999.
During the second quarter of 2000, the Company sold, at a loss of $462,000, a
150-unit community located in Pittsburgh, Pennsylvania.
Comparison of three months ended June 30, 2000 to the same period in 1999
Of the $28,460,000 increase in rental income, $25,804,000 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 $1,402,000 increase in property other income, $1,006,000 is attributable
to the Acquired Communities, with $396,000 representing a 28.7% 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 $91,000,
primarily attributable to an increase in construction loans and advances made to
affiliated tax credit development partnerships, offset by a reduction of
$319,000 in dividend income from an investment in available-for-sale securities.
Of the $10,695,000 increase in operating and maintenance expenses, $9,995,000 is
attributable to the Acquired Communities. The balance for the Core Properties
represents a 3.6% increase over 1999. The major areas of increase occurred in
repairs and maintenance, personnel, and property insurance, offset in part by
reductions in advertising expenses and snow removal costs.
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 six months ended June 30, 1999, the Company's previously reported FFO
excluded a nonrecurring loss on available-for-sale securities of $2,123 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.
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
2000 2000 1999 1999 1999 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net income available to common
Shareholders $7,559 $6,554 $7,931 $5,010 $6,191 $6,011
Preferred dividends 2,534 1,928 1,141 - - -
Minority interest 6,401 5,160 6,524 4,137 3,386 3,343
Extraordinary item - - - 96 - -
Non-recurring acquisition -
expense - - - 6,225 -
Depreciation from real property 12,734 11,622 11,717 9,574 8,247 7,477
Depreciation from real property
from unconsolidated entities 98 143 90 147 153 84
Loss from sale of property 462 - - - 1,650 * -
-------- -------- -------- ------- ------- -------
FFO (original definition) 29,788 $25,407 $27,403 $25,189 $19,627 $16,915
Non-recurring acquisition
expense - - - (6,225) - -
Loss on available-for-sale
securities - - - - ( 2,123) -
------------ ------------ ------------- ------------ --------- -------
FFO (clarified definition) $29,788 $25,407 $27,403 $18,964 $17,504 $16,915
======= ======= ======== ======= ======= =======
Weighted average common shares/units
outstanding:
Basic 35,846.3 34,123.2 35,116.1 34,485.9 28,530.2 27,810.1
======== ======== ======== ======== ======== ========
Diluted 40,249.9 37,586.7 36,904.1 34,630.9 28,634.8 27,898.4
======== ======== ======== ======== ======== ========
</TABLE>
* Includes the loss from disposition of property investment separately disclosed
as loss on available-for-sale securities.
<PAGE>
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 concerned the inability of information systems to
properly recognize and process date-sensitive information beyond January 1,
2000. As a result, the Y2K problem could have affected 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 fire alarms.
Since January 1, 2000 and the critical leap year date, the Company has not
experienced any disruption to its business operations as a result of Y2K
compliance problems. One software application displayed the wrong date in a
non-critical field. The date display is purely cosmetic and an updated version
was installed during the first quarter of 2000. The Company will continue to
monitor the operation of its computers and microprocessor controlled systems for
any Y2K related problems.
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 August 1, 2000, the Board of Directors approved a dividend of $.53 per share
for the period from April 1, 2000 to June 30, 2000. This is the equivalent of an
annual distribution of $2.12 per share. The dividend is payable August 24, 2000
to shareholders of record on August 14, 2000.
<PAGE>
PART II - OTHER INFORMATION
HOME PROPERTIES OF NEW YORK, INC.
Item 6. Exhibits and Reports or Form 8-K
(a) Exhibits:
10.1 Amendment No. Thirty-Three to the Second Amended and Restated Limited
Partnership Agreement.
10.2 Amendment No. Thirty-Five to the Second Amended and Restated Limited
Partnership Agreement.
10.3 Amendment Nos. Thirty-Four and Thirty-Six to the Second Amended
and Restated Limited Partnership Agreement.
27 Financial Data Schedule
(b) Reports on Form 8-K:
- Form 8K was filed on May 22, 2000, date of report May 19, 2000
with respect to Items 5 and 7 disclosures regarding the
Registrant's entering into a Purchase Agreement for the
issuance of 200,000 shares of Series C Cumulative Convertible
Preferred Stock.
- Form 8K was filed on June 12, 2000, date of report June 2,
2000, with respect to Items 5 and 7 disclosures regarding the
Registrant's entering into a Purchase Agreement for the
issuance of 250,000 shares of Series D Cumulative Convertible
Preferred Stock.
- Form 8K was filed on June 30, 2000, date of report June 13,
2000, with respect to Items 5 and 7 disclosures regarding the
Registrant's entering into a Purchase Agreement for the
issuance of 200,000 shares of Series C Cumulative Convertible
Preferred Stock.
<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 10, 2000
-------------------------------
By: /s/ David P. Gardner
----------------------------------
David P. Gardner
Vice President
Chief Financial Officer and Treasurer
Date: August 10, 2000
-----------------------------
By: /s/ David P. Gardner
----------------------------------
David P. Gardner
Vice President
Chief Financial Officer and Treasurer
