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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997
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 (I.R.S. Employer
of incorporation or organization) Identification Number)
850 CLINTON SQUARE
ROCHESTER, NEW YORK 14604
(Address of principal executive offices)
Registrant's telephone number, including area code: (716) 546-4900
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
Common Stock, $.01 par value New York Stock Exchange
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES x No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
The aggregate market value of the shares of common stock held by non-affiliates
(based upon the closing sale price on the New York Stock Exchange) on February
24, 1998 was approximately $251,582,804. As of February 24, 1998, there were
9,754,902.634 shares of common stock, $.01 par value outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None
HOME PROPERTIES OF NEW YORK, INC.
TABLE OF CONTENTS
PART I.
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item X. Executive Officers and Key Employees
PART II.
Item 5. Market of the Registrant's Common Equity
and Related Shareholder Matters
Item 6. Selected Financial and Operating Information
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure
PART III.
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Item 13. Certain Relationships and Related Transactions
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
Page 2
PART I
Item 1. Business
The Company
Home Properties of New York, Inc. ("Home Properties" or the "Company")
is a self-administered and self-managed real estate investment trust
("REIT") that owns, manages, acquires and develops apartment
communities in the Northeastern, Mid-Atlantic and Midwestern United
States. It was formed to continue and expand the operations of Home
Leasing Corporation ("Home Leasing"). The Company completed an initial
public offering of 5,408,000 shares of common stock (the "IPO") on
August 4, 1994.
The Company conducts its business through Home Properties of New York,
L.P. (the "Operating Partnership"), a New York limited partnership in
which the Company held a 56.1% partnership interest as of December 31,
1997 (68.2% at December 31, 1996) and two management companies (the
"Management Companies") - Home Properties Management, Inc. ("HP
Management") and Conifer Realty Corporation ("Conifer Realty"), both
of which are Maryland corporations.
Home Properties, through its affiliates described above, and as of
December 31, 1997, operated 158 communities with 21,316 apartment
units (the "Owned Properties"). Of these, 14,048 units in 63
communities are owned outright, 4,782 units are managed by the Company
as general partner, and 2,486 units are managed for other owners
(primarily affiliates) (collectively, the "Managed Properties"). The
Management Companies are also involved in the development and
redevelopment of government-assisted apartment communities and certain
other development activities.
The Owned Properties and the Managed Properties (collectively, the
"Properties") are concentrated in the following market areas:
AS OF 12/31/97 MANAGING GENERAL
PARTNER
MARKET AREA TOTAL OWNED FEE MANAGED
---------------------- ---------------- ----------------- ------------------ -------------------
Detroit, MI 4,502 3,482 0 1,020
Buffalo, NY 2,675 2,519 156 0
Rochester, NY 4,414 2,467 1,339 608
Philadelphia, PA 1,750 1,750 0 0
Syracuse, NY 3,095 1,564 1,271 260
Long Island, NY 600 600 0 0
Hudson Valley, NY 726 584 142 0
Northern NJ 550 550 0 0
Bethlehem, PA 384 384 0 0
Pittsburgh, PA 148 148 0 0
Columbus, OH 1,044 0 1,044 0
Albany, NY 764 0 254 510
Watertown, NY 664 0 576 88
TOTAL UNITS 21,316 14,048 4,782 2,486
Page 3
In addition, since December 31, 1997, the Company acquired 967
additional units as follows: 310 units in a suburb of South Bend,
Indiana, 110 units in a suburb of Philadelphia, 254 units in
Alexandria, Virginia and 293 units apartment in Arlington, Virginia.
The Company's mission is to provide investors with dependable, above
average returns and to be the first choice of renters in its chosen
markets. The Company's strategy for accomplishing its mission is to:
(i) acquire, reposition and operate multifamily apartment properties
in its target markets; (ii) continue the development and redevelopment
of apartment communities utilizing various forms of government
assistance programs; and (iii) maintain its focus on customer
satisfaction by serving the Company's residents with integrity and
respect and providing value and service that exceeds expectations.
Structure
The Company was formed in November, 1993 as a Maryland corporation and
is the general partner of the Operating Partnership. On December 31,
1997, it owned a 56.1% interest in the Operating Partnership - one
percent as general partner and the remainder as a limited partner
through its wholly owned subsidiary Home Properties Trust. The other
limited partner interests (the "Units") in the Operating Partnership
are owned by the officers of the Company and certain individuals who
acquired Units in the Operating Partnership as partial consideration
for their interests in entities owning apartment communities purchased
by the Operating Partnership. In addition, on December 30, 1996, the
State of Michigan Retirement Systems acquired 1,666,667 Class A
Interests in the Operating Partnership (at December 31, 1997 this
represented a 10% interest).
The Operating Partnership is a New York limited partnership formed in
December, 1993. Holders of Units in the Operating Partnership may
redeem a Unit for one share of the Company's common stock or cash
equal to the fair market value at the time of the redemption, at the
option of the Company. The Company currently anticipates that it will
issue shares of common stock rather than pay cash in connection with
such redemptions. Management expects that it will continue to utilize
Units as partial consideration for a significant portion of its
acquisition properties.
Both of the Management Companies were formed to comply with the
technical requirements of federal income tax laws. Both are Maryland
corporations. HP Management was formed in January, 1994 and Conifer
Realty was formed in December, 1995. The Operating Partnership holds
99% of the economic interest in both Management Companies, with Nelson
and Norman Leenhouts (the "Leenhoutses") holding the remaining one
percent interest in HP Management and the Leenhoutses and Richard J.
Crossed, holding the remaining one percent interest in Conifer Realty.
The Management Companies manage, for a fee, certain of the
residential, commercial and development activities of the Company and
provide construction, development and redevelopment services for the
Company.
In September 1997, Home Properties Trust ("QRS") was formed as a
Maryland real estate trust and as a qualified REIT subsidiary, with
100% of its shares being owned by the Company. The QRS has been
admitted as a limited partner of the Operating Partnership and the
Company has transferred all but one percent of its interest in the
Operating Partnership to the QRS.
Page 4
The Company currently has approximately 1,100 employees and its
executive offices are located at 850 Clinton Square, Rochester, New
York 14604. Its telephone number is (716) 546-4900.
Operating Strategies
The Company will continue to focus on enhancing the investment returns
of its Properties by: (i) continuing to utilize its written "Pledge"
of customer satisfaction that is the foundation on which the Company
is building its name-brand recognition; (ii) acquiring apartment
communities at prices below new construction costs and repositioning
those properties for long-term growth; (iii) reinforcing its
decentralized company orientation by encouraging employees' personal
improvement and by providing extensive training; (iv) readily adopting
new technology so that the time spent on administration can be
decreased and the time spent attracting and serving residents can be
increased; (v) enhancing the quality of living for the Company's
residents by improving the quality of service and physical amenities
available at each community every year; and (vi) engaging in
aggressive cost controls and taking advantage of volume discounts,
thus benefiting from economies of scale while constantly improving the
level of customer service.
Acquisition and Development Strategies
The Company's strategy is to make acquisitions in geographic regions
that have similar climates, easy access to the Company's headquarters,
enough apartments available for acquisition to achieve a critical mass
and minimal investment ownership by other apartment REITs. Targeted
stock and a stable or growing job market. The Company expects that its
growth will be primarily in select metropolitan areas within the
Northeast, Mid-Atlantic and Midwest United States.
In addition, the Company intends to continue to develop and re-develop
apartment communities utilizing various government programs. These
activities are expected to generate development fees, ongoing
management and incentive management fees and participation in residual
value for the Company. They also increase the Company's volume
purchasing ability, provide a pipeline for future acquisitions and
re-development opportunities and position the Company to build market
rate communities when and if it becomes economically attractive.
Financing and Capital Strategies
The Company intends to adhere to the following financing policies: (i)
maintaining a ratio of debt-to-total market capitalization (total debt
of the Company as a percentage of the market value of outstanding
common stock and Units plus total debt) of approximately 50% or less;
(ii) utilizing primarily fixed rate debt; (iii) varying debt
maturities to avoid significant exposure to interest rate changes upon
refinancing; and (iv) maintaining a line of credit so that it can
respond quickly to acquisition opportunities.
On December 31, 1997, the Company's debt was approximately $219
million and the debt to total capitalization ratio was 33% based on
the year-end closing price of the Company's stock at $27.1875. The
weighted average interest rate on the Company's mortgage debt
Page 5
as of
December 31, 1997 was 7.7% and the weighted average maturity was 7.6
years. Debt maturities are staggered. As of December 31, 1997, the
Company had an unsecured line of credit of $50 million for acquisition
and other corporate purposes with an interest rate of LIBOR plus
1.25%. As of December 31, 1997, the available balance on the line of
credit was $41,250,000. As of February 20, 1998, the amount available
on the line was $46,750,000.
The Company also intends to continue to structure creative equity
transactions to raise capital with limited transaction costs. During
1997, under its shelf registration, the Company issued $15 million of
common shares sold to two institutional investors and $26 million of
common shares placed through an investment banking firm.
In addition, approximately $36.4 million was raised in 1997 through
the sale of newly issued stock under the Company's Dividend
Reinvestment, Stock Purchase, Resident Stock Purchase and Employee
Stock Purchase Plan (the "Stock Purchase Plan"). This $36.4 million
includes approximately $4.5 million from the sale of stock to the
Company's officers and directors in transactions where the Company
loaned 50% of the stock purchase price and arranged bank financing for
the remaining 50%. The Stock Purchase Plan provides a 3% discount from
the current market price for existing shareholders and has provided a
steady source of capital to fund the Company's continued growth.
In addition, management expects to continue to fund a significant
portion of its continued growth by taking advantage of its UPREIT
structure and using Units as currency in acquisition transactions. The
Company utilized approximately $106 million worth of Units as partial
consideration in acquisition transactions during 1997.
Competition
The Company competes with other multifamily developers and other real
estate companies in seeking properties for acquisition, potential
residents and land for development. The Company's Properties are
primarily in developed areas where there are other properties of the
same type which directly compete for residents. The Company, however,
believes that its focus on service and resident satisfaction and its
focus on attracting senior residents will enable it to maintain its
historic occupancy levels. The Company also believes that the moderate
level of new construction of multifamily properties in its markets in
1997 will not have a material adverse effect on its turnover rates or
ability to increase rents and minimize operating expenses. To date,
the Company has faced limited competition in acquiring properties from
other REIT's or other operators from outside the region. However,
other apartment REITs are becoming more interested in the Company's
markets and the Company may encounter competition from others as it
seeks attractive properties in a broader geographic area. Given the
perceived depth of available opportunities, management does not
believe that increased competition will pose a significant problem.
Page 6
Regulation
Many laws and governmental regulations are applicable to the
Properties and changes in the laws and regulations, or their
interpretation by agencies and the courts, occur frequently. Under the
Americans with Disabilities Act of 1990 (the "ADA"), all places of
public accommodation are required to meet certain federal requirements
related to access and use by disabled persons. In addition, the Fair
Housing Amendments Act of 1988 (the "FHAA") requires apartment
communities first occupied after March 13, 1990 to be accessible to
the handicapped. Non-compliance with the ADA or the FHAA could result
in the imposition of fines or an award of damages to private
litigants. Management believes that the Owned Properties are
substantially in compliance with present ADA and FHAA requirements.
Under various laws and regulations relating to the protection of the
environment, an owner of real estate may be held liable for the costs
of removal or remediation of certain hazardous or toxic substances
located on or in its property. These laws often impose liability
without regard to whether the owner was responsible for, or even knew
of, the presence of such substances. The presence of such substances
may adversely affect the owner's ability to rent or sell the property
or use the property as collateral. Independent environmental
consultants have conducted "Phase I" environmental audits (which
involve visual inspection but not soil or groundwater analysis) on
substantially all of the Owned Properties. Phase I audit reports did
not reveal any environmental liability that would have a material
adverse effect on the Company. In addition, the Company is not aware
of any environmental liability that management believes would have a
material adverse effect on the Company. There is no assurance that
Phase I reports would reveal all environmental liabilities or that
environmental conditions not known to the Company may exist now or in
the future which would result in liability to the Company for
remediation or fines, either under existing laws and regulations or
future changes to such requirements.
Under the Federal Fair Housing Act and state fair housing laws,
discrimination on the basis of certain protected classes is
prohibited. Violation of these laws can result in the award of
significant damage award to victims. The Company has a strong policy
against any kind of discriminatory behavior and trains its employees
to avoid discrimination or the appearance of discrimination. There is
no assurance, however, that an employee will not violate the Company's
policy against discrimination and thus violate fair housing laws. This
could subject the Company to legal actions and the possible imposition
of damage awards.
Item 2. Properties
As of December 31, 1997, the Owned Properties consisted of 63
multifamily residential properties containing 14,048 apartment units
and a 35,000 square foot ancillary shopping center located adjacent to
a multifamily property. At the time of the IPO, Home Properties owned
11 multifamily properties containing 3,065 apartment units.
Simultaneous with the closing of the IPO, it acquired an additional
four properties containing 926 units. In 1994, Home Properties
purchased two additional communities having 472 units, in 1995 it
purchased three communities having 1,061 apartment units, in 1996 it
purchased ten additional communities having 1,652 apartment units and
in 1997 it purchased 35 additional communities having 7,496 apartment
units. In 1997, the Company sold a 604 unit in Columbus, Ohio to a
partnership that the Operating Partnership serves as general partner
with the property to be rehabilitated using tax credits and tax exempt
bonds. Also
Page 7
in 1997, the Company sold its only manufactured home
community consisting of 202 sites in Buffalo and a 20 unit apartment
community in Syracuse, New York.
From the time of the IPO to December 31, 1997, the Company therefore
experienced a net increase of 458% in the number of apartment units it
owned. In addition, during the first quarter of 1998, the Operating
Partnership has acquired four additional properties, representing an
increase of 967 Units.
The Owned Properties are located in established markets and are
well-maintained and well-leased. Average economic occupancy at the
Owned Properties held throughout 1996 and 1997 was 95.3% for 1997. The
Owned Properties are generally two and three story garden style
apartment buildings in landscaped settings and a majority are of brick
or other masonry construction. The Company believes that its strategic
focus on appealing to mature residents and the quality of the services
it provides to such residents result in low turnover. The turnover at
the Owned Properties owned as of December 31, 1997 was approximately
40% for 1997, which is significantly below the national average for
garden apartments.
Management believes the Company was able to increase occupancies and
achieve rental rate growth in excess of inflationary levels in 1997
due to physical upgrades made to the Owned Properties, increased
marketing efforts and repositioning activities undertaken at its
recent acquisitions.
Resident leases are generally for one year terms and security deposits
equal to one month's rent are generally required.
Certain of the Owned Properties secure mortgage loans. See Note 4 to
the Consolidated Financial Statements contained herein.
The table on the following pages illustrates certain of the important
characteristics of the Owned Properties as of December 31, 1997.
Page 8
COMMUNITY (2) (3) (4) (4)
CHARACTERISTICS
Communities Wholly # Age Average 1997 1997 1997 1996 1997 1996
Owned Avg
and Market of In Year Apt Size % Mature % Resident Average % Average % Avg Mo Mo Rental
Rental Rate
Managed by Home Area Apts Years Acq (Sq Ft) Residents Turnover Occupancy Occupancy Rate per Apt per Apt
Properties
Core Portfolio (1)
Garden Village NY-Buffalo 315 26 1994 850 64% 22% 98.1% 96.2% 584 565
Idylwood NY-Buffalo 720 28 1995 700 10% 48% 95.6% 93.5% 539 517
Raintree Island NY-Buffalo 504 26 1985 704 61% 41% 94.9% 94.1% 576 561
Williamstowne Village NY-Buffalo 528 26 1985 708 100% 16% 96.8% 97.3% 592 575
1600 Elmwood NY-Rochester 210 38 1983 891 11% 45% 95.9% 93.0% 742 720
Brook Hill NY-Rochester 192 26 1994 999 23% 40% 96.3% 94.8% 745 716
Finger Lakes Manor NY-Rochester 153 27 1983 924 52% 38% 96.6% 92.4% 669 662
Hamlet Court NY-Rochester 98 27 1996 696 48% 28% 93.3% 95.9% 595 581
The Meadows NY-Rochester 113 27 1984 890 43% 27% 94.4% 93.0% 593 580
Newcastle Apartments NY-Rochester 197 23 1982 873 20% 52% 91.0% 92.8% 659 628
Northgate Manor NY-Rochester 224 35 1994 800 30% 38% 93.9% 92.6% 579 562
Perinton Manor NY-Rochester 224 28 1982 928 53% 24% 96.1% 94.2% 698 683
Riverton Knolls NY-Rochester 240 24 1983 911 10% 59% 97.0% 93.2% 689 663
Spanish Gardens NY-Rochester 220 24 1994 1,030 30% 35% 94.8% 92.8% 593 584
Springcreek NY-Rochester 82 25 1984 913 83% 26% 96.5% 94.4% 531 522
Candlewood Gardens NY-Syracuse 126 27 1996 855 37% 39% 96.7% 96.0% 456 438
Conifer Village NY-Syracuse 199 19 1994 499 95% 14% 100.0% 99.9% 566 553
Fairview Heights NY-Syracuse 210 34 1985 798 5% 77% 92.1% 92.0% 704 691
Harborside Manor NY-Syracuse 281 25 1995 823 18% 51% 94.1% 92.6% 547 529
Pearl Street NY-Syracuse 60 27 1995 855 19% 53% 94.7% 93.5% 453 437
Village Green NY-Syracuse 248 9 1994 908 16% 57% 91.5% 90.6% 583 575
Westminster Place NY-Syracuse 240 26 1996 913 7% 60% 93.0% 93.3% 546 516
Core Portfolio
Total/Weighted Avg 5,384 26 812 39% 40% 95.3% 94.1% 600 582
Recently Acquired
Portfolio
Canterbury Square MI-Detroit 336 26 1997 789 14% NA 99.3% NA 608 NA
Charter Square MI-Detroit 494 27 1997 914 23% NA 96.9% NA 668 NA
Fordham Green MI-Detroit 146 22 1997 869 24% NA 92.9% NA 660 NA
Golfview Manor MI-Detroit 44 39 1997 662 12% NA 99.2% NA 426 NA
Greentrees Apartments MI-Detroit 288 27 1997 863 23% NA 96.0% NA 528 NA
Kingsley Apartments MI-Detroit 328 28 1997 792 39% NA 94.2% NA 564 NA
Oak Park Manor MI-Detroit 298 43 1997 887 11% NA 97.9% NA 568 NA
Parkview Gardens MI-Detroit 483 44 1997 731 3% NA 95.8% NA 445 NA
Scotsdale Apartments MI-Detroit 376 23 1997 790 21% NA 97.3% NA 559 NA
Southpointe Square MI-Detroit 224 27 1997 776 20% NA 98.8% NA 528 NA
Stephenson House MI-Detroit 128 31 1997 668 13% NA 97.4% NA 534 NA
Woodland Gardens MI-Detroit 337 32 1997 719 9% NA 97.1% NA 600 NA
Page 9
COMMUNITY (2) (3) (4) (4)
CHARACTERISTICS
Communities Wholly Owned # Age Average 1997 1997 1997 1996 1997 1996
and Market of In Year Apt Size % Mature % Resident Average % Average % Avg Mo Avg Mo
Rental Rental
Rate Per
Managed by Home Area Apts Years Acq (Sq Ft) Residents Turnover Occupancy Occupancy Rate per Apt Apt
Properties
Royal Gardens NJ-Northern 550 30 1997 800 9% NA 96.2% NA 724 NA
Emerson Square NY-Buffalo 96 28 1997 650 44% NA 78.6% NA 484 NA
Fairway Apartments NY-Buffalo 32 37 1997 900 20% NA 39.1% NA 509 NA
Paradise Lane at NY-Buffalo 324 26 1997 676 26% NA 79.6% NA 498 NA
Raintree
Carriage Hill NY-Hudson 140 25 1996 845 18% 56% 93.1% 92.6% 734 725
Valley
Cornwall Park NY-Hudson 75 31 1996 1,320 15% 40% 87.1% 92.0% 827 785
Valley
Lakeshore Villas NY-Hudson 152 23 1996 956 11% 88% 95.3% 90.8% 605 592
Valley
Sunset Gardens NY-Hudson 217 27 1996 662 12% 43% 92.9% 87.2% 559 549
Valley
Lake Grove NY-Long Island 368 28 1997 879 20% NA 96.0% NA 774 NA
Mid-Island Estates NY-Long Island 232 33 1997 690 31% NA 97.2% NA 758 NA
1600 East Avenue NY-Rochester 164 39 1997 800 95% NA 83.4% NA 1205 NA
Hill Court South NY-Rochester 95 34 1997 730 61% NA 95.8% NA 554 NA
Ivy Ridge Apartments NY-Rochester 135 34 1997 740 44% NA 83.2% NA 547 NA
Woodgate Place NY-Rochester 120 25 1997 1,100 8% NA 93.9% NA 637 NA
Fairways at Village NY-Syracuse 200 12 1996 908 25% 54% 89.6% 78.7% 563 542
Green
Valley Park South PA-Bethlehem 384 25 1996 987 36% 35% 92.9% 92.6% 708 677
Chesterfield Apartments PA-Philadelphia 247 25 1997 812 16% NA 94.2% NA 616 NA
Curren Terrace PA-Philadelphia 318 27 1997 782 6% NA 96.0% NA 662 NA
Executive House PA-Philadelphia 100 33 1997 696 48% NA 90.2% NA 637 NA
Glen Manor PA-Philadelphia 174 22 1997 667 22% NA 99.0% NA 557 NA
Harmark Village Square PA-Philadelphia 128 25 1997 795 14% NA 94.7% NA 582 NA
Lansdowne Group-Karen PA-Philadelphia 49 35 1997 844 44% NA 91.7% NA * NA
Court
Lansdowne Group-Landon
Court PA-Philadelphia 44 28 1997 873 44% NA 91.7% NA * NA
Lansdowne
Group-Patricia Court PA-Philadelphia 66 30 1997 838 44% NA 91.7% NA * NA
Lansdowne
Group-Marshall PA-Philadelphia 63 69 1997 653 44% NA 91.7% NA 605 NA
House* (6)
New Orleans Park PA-Philadelphia 308 27 1997 693 20% NA 96.2% NA 559 NA
Springwood Apartments PA-Philadelphia 77 24 1997 755 31% NA 87.9% NA 543 NA
Valley View Apartments PA-Philadelphia 176 25 1997 769 9% NA 88.1% NA 574 NA
Cloverleaf Village PA-Pittsburgh 148 40 1997 716 30% NA 97.8% NA 484 NA
Recently Acquired
Total/Weighted Avg 8,664 29 803 22% 94.0% 88.9% 605 632
- ------------------------------------------------------------------------------------- ------------------------------------
Owned Portfolio
Total/Weighted Avg (5) 14,048 28 806 29% 0% 94.5% 93.2% 603 591
- ------------------------------------------------------------------------------------- ------------------------------------
(1) Core Portfolio represents the 5,384 apartment units owned consistently
throughout 1996 and 1997.
(2) "Mature Residents" is the percentage of residents 55 years or older as of
12/31/97.
(3) "%Resident Turnover" reflects, on an annual basis, the number of move-outs
divided by the total number of apartment units.
(4) "Average % Occupancy" is the economic occupancy. For the Core Portfolio,
this is a 12-month average. For communities acquired during 1996 and 1997,
this is the average occupancy from the date of acquisition.
(5) The total does not include Candlewood Apartments, South Bend, IN, acquired
2/10/98, Cedar Glen Apartments, Philadelphia, acquired 3/2/98 or the
following properties disposed of during 1997: Wedgewood Village, Conifer
Court and Waterfalls Village.
(6) The Landsdowne Group consolidated figures are reflected in the Marshall
House line.
Page 10
Property Development
Management believes that new construction of market rate multifamily
apartments is not economically feasible in most of its markets.
Therefore, Home Properties' development and redevelopment activities
are expected to be focused on government-assisted multifamily
residential housing. Through it predecessors, the Company has been
developing affordable housing for over 20 years. Management
anticipates that this experience, coupled with the financial and
property management strengths of the Company, will enable the Company
to remain a regional leader in the affordable housing arena.
Management also believes that the Company's expertise in the full
continuum of government-assisted and market rate housing provides the
Company with the flexibility to react to changing economic conditions
through all phases of economic cycles.
In 1997, construction activities for four communities with 1,049 units
were started; two communities with 125 units were completed; and three
additional communities with 159 units received allocations for future
development. Management is optimistic about prospects for continued
growth due to possible changes in the regulatory programs and the
Company's broadened geographic reach.
Healthy changes in government-assisted housing programs also appear to
be underway. Legislative increases to the allocations for Low-Income
Housing Tax Credit Program (LIHTC) and tax exempt bond financing have
been proposed. Direct rental subsidies under the Section 8 housing
program are being scaled back, which in some instances may put
pressure on owners of Section 8 housing units. Management feels that
this may afford opportunities for the Company as these properties are
refinanced or repositioned.
Low Income Housing Tax Credit Program. Since its inception in 1986,
the LIHTC program has been responsible for the creation or
rehabilitation of more than 900,000 rental units for low or moderate
income Americans. This amounts to approximately 40% of all multifamily
apartments produced in the last decade. Under this program, states are
authorized to allocate federal tax credits as an incentive for
developers to build rental housing for low income households. Each
state has received an allocation of tax credits from the Internal
Revenue Service in an amount equal to $1.25 per state resident. This
amount has not been adjusted for over a decade. However, legislation
has recently been introduced to increase the housing credit
allocations by 40% to $1.75 per capita, with indexing for future
inflation. It is expected that the cap boost, if adopted, will
generate the construction of an additional 30,000 units of affordable
housing each year.
Although REITs do not pay income taxes at the corporate level, the
Company benefits from the credits by structuring transactions where
the Operating Partnership serves as the managing general partner and
limited partners contribute substantial equity in exchange for the tax
credits. Most of the economic benefits of management and ownership
remain with the Company, including:
* Substantial developer fee income
* Receipt of a majority of the project cash flow after debt service
as "incentive management fees"
* Reasonable property management fees
* Participation in future equity build-up
* Control of the real estate as the managing general partner
Page 11
Tax Exempt Bond Financing. The increased competition for tax credits
has led developers to the tax exempt bond market for financing.
Projects can be financed with tax exempt bonds if they meet a
threshold of having at least 20% of the units rented to households at
50% of the area median income, or 40% of the units at 60% of the area
median income. The bond program provides a reduced level of tax
credits, automatically, without the need to go through the competitive
allocation process for tax credits. While this program has
historically not been as competitive, the recent increasing popularity
has resulted in most states running out of their available tax exempt
bond allocations. Legislation has also been introduced to
significantly increase the volume cap levels for tax-exempt bonds.
During 1997, the Company sold Wedgewood Apartments, a 604-unit Section
8 apartment community to an affiliated partnership, and acquired the
neighboring 264-unit adjacent property in the same affiliated
partnership. The properties are being substantially rehabilitated with
the support of tax credits and low interest rate exempt bond
financing.
HUD Section 8 Program. In 1998, it is expected that the Department of
Housing and Urban Development (HUD) will renew expiring Section 8
contracts on 1.8 million units that house 4.4 million low income
people. Within a decade, virtually all of HUD's roughly three million
Section 8 project and tenant-based contracts will be converted to
one-year terms. Announced reductions in the amounts of these direct
rental subsidies will have a negative financial impact on many of
these communities. Some will qualify for restructuring or write-downs
of mortgage debt. Many of these properties will need to be recycled
into other programs or repositioned to compete as market rate
communities. The Company's financial strength and expertise in this
area could lead to attractive investment opportunities as these
properties are sold or restructured. Currently, the Company holds only
one Section 8 community in its owned portfolio, Conifer Village, where
the rental subsidy contract on 198 units extends for several more
years.
Property Management
As of December 31, 1997, the Managed Properties consist of: (i) 4,782
apartment units where Home Properties is the general partner of the
entity that owns the property; (ii) 2,486 apartment units managed for
others; (iii) commercial properties which contain approximately 1.7
million square feet of gross leasable area; (iv) a master planned
community known as Gananda; (v) a 140-lot Planned Unit Development
known as College Greene; (vi) a 202-lot Planned Unit Development known
as Riverton; (vii) a nursing home which is leased to a hospital for
which the Company provides limited management services; and (viii) 153
acres of vacant land in Old Brookside, the development of which, if it
occurs, will be managed by HP Management. Management fees are based on
a percentage of rental revenues or costs and, in certain cases,
revenues from sales. The Company may pursue the management of
additional properties not owned by the Company, but will only do so
when such additional properties can be effectively and efficiently
managed in conjunction with other properties owned or managed by Home
Properties.
The commercial properties consist of: (i) approximately 1,025,000
square feet of office space; (ii) approximately 400,000 square feet of
retail space; (iii) approximately 75,000 square feet of industrial
space; and (iv) approximately 164,000 square feet of warehouse space.
Page 12
Supplemental Property Information
At December 31, 1997, none of the Properties have an individual net
book value equal to or greater than ten percent of the total assets of
the Company or would have accounted for ten percent or more of the
Company's aggregate gross revenues for 1997.
Item 3. Legal Proceedings
The Company is a party to a variety of legal proceedings arising in
the ordinary course of business. All such proceedings, taken together,
are not expected to have a material adverse effect on the Company.
Most of such proceedings are covered by liability insurance. To
management's knowledge, no material litigation is threatened against
the Company.
Item 4. Submission of Matters to Vote of Security Holders
None.
Page 13
Item X. Executive Officers and Key Employees
The following table sets forth the six executive officers and certain
of the key employees of the Company, together with their respective
ages (as of February 28, 1998), positions and offices.
Name Age Position
Norman P. Leenhouts 62 Chairman, Co-Chief Executive
Officer and Director of Home
Properties, Chairman and
Director of HP Management and
Director of Conifer Realty
Nelson B. Leenhouts 62 President, Co-Chief Executive
Officer and Director of Home
Properties, President, Chief
Executive Officer and Director of
HP Management and Director and Vice
President of Conifer Realty.
Richard J. Crossed 58 Executive Vice President and
Director of Home Properties and
President, Chief Executive Officer
and Director of Conifer Realty
Amy L. Tait 39 Executive Vice President and
Director of Home Properties and
Director of HP Management
David P. Gardner 42 Vice President, Chief Financial
Officer and Treasurer of Home
Properties, Conifer Realty and HP
Management
Ann M. McCormick 41 Vice President, General Counsel and
Secretary of Home Properties and HP
Management
William E. Beach 51 Vice President, Commercial Property
Management of Home Properties and
HP Management
C. Terence Butwid 53 Vice President, Development of Home
Properties and Executive Vice
President of Conifer Realty
Lavonne R. Childs 35 Vice President, Property Management
of Home Properties
Scott A. Doyle 37 Vice President, Property Management
of Home Properties
Kathleen M. Dunham 52 Vice President, Residential
Property Management of Home
Properties and Conifer Realty
Page 14
Name Age Position
Johanna A. Falk 33 Vice President, Marketing of Home
Properties
John H. Fennessey 59 Vice President, Development of Home
Properties and Conifer Realty
Timothy A. Florczak 42 Vice President, Residential
Property Management of Home
Properties
Thomas L. Fountain 39 Vice President, Commercial Property
Management of Home Properties and
Conifer Realty
Timothy Fournier 37 Vice President, Development of Home
Properties and Executive Vice
President of Conifer Realty
Laurie Leenhouts 41 Vice President, Residential
Property Marketing of Home
Properties
Robert J. Luken 33 Vice President and Controller of
Home Properties
Paul O'Leary 45 Vice President, Acquisitions and
Due Diligence of Home Properties
John Oster 48 Vice President, Development of Home
Properties and Conifer Realty
Dale C. Prunoske 46 Vice President, Development of Home
Properties and Conifer Realty
John E. Smith 47 Vice President, Acquisitions of
Home Properties
Richard J. Struzzi 44 Vice President, Development of Home
Properties and HP Management
Robert C. Tait 40 Vice President, Commercial Property
Management of Home Properties and
HP Management
Information regarding Richard Crossed, Nelson and Norman Leenhouts and
Amy Tait is set forth below under "Board of Directors" in Item 10.
Page 15
David P. Gardner has served as Vice President and Chief Financial
Officer of the Company, HP Management and Conifer Realty since their
inception. Mr. Gardner joined Home Leasing Corporation in 1984 as Vice
President and Controller. In 1989, he was named Treasurer of Home
Leasing and Chief Financial Officer in December, 1993. From 1977 until
joining Home Leasing, Mr. Gardner was an accountant at Cortland L.
Brovitz & Co. Mr. Gardner is a graduate of the Rochester Institute of
Technology and is a Certified Public Accountant.
Ann M. McCormick has served as Vice President, General Counsel and
Secretary of the Company and HP Management since their inception. Mrs.
McCormick joined Home Leasing in 1987 and was named Vice President,
Secretary and General Counsel in 1991. Prior to joining Home Leasing,
she was an associate with the law firm of Nixon, Hargrave, Devans &
Doyle. Mrs. McCormick is a graduate of Colgate University and holds a
Juris Doctor from Cornell University.
William E. Beach has served as Vice President of the Company and HP
Management since their inception. He joined Home Leasing in 1972 as a
Vice President. Mr. Beach is a graduate of Syracuse University and is
a Certified Property Manager (CPM) as designated by the Institute of
Real Estate Management.
C. Terence Butwid has served as Vice President of the Company and
Executive Vice President of Conifer Realty since 1996. He joined
Conifer in 1990 as a Vice President. Prior to joining Conifer, Mr.
Butwid was employed by Chase Lincoln First Bank as Vice President and
Manager of Corporate Banking National Accounts. He was also President
of Ontario Capital Management. Mr. Butwid is a graduate of Bowling
Greene State University. He has an MBA from American University and
graduated from The National School of Credit and Financial Management
at Dartmouth College.
Lavonne R. Childs has served as Vice President of the Company since
1997. She joined Home Properties in December of 1996 as a Regional
Property Manager. Mrs. Childs has been in property management for 14
years. Prior to joining Home Properties, she worked with Walden
Residential, United Dominion Realty Trust and Winthrop Management.
Scott A. Doyle has served as Vice President of the Company since 1997.
He joined Home Properties in 1996 as a Regional Property Manager. Mr.
Doyle has been in property management for 14 years. Prior to joining
Home Properties he worked with CMH Properties, Inc., Rivercrest Realty
Associates and Arcadia Management Company. Mr. Doyle is a graduate of
S.U.N.Y. at Plattsburgh, New York.
Kathleen M. Dunham has served as Vice President of the Company and
Conifer Realty since 1996. She joined Conifer in 1980 and was named
Vice President in 1990. Ms. Dunham is a Certified Property Manager
(CPM) candidate with the Institute of Real Estate Management.
Page 16
Johanna A. Falk has served as a Vice President of the Company since
1997. She joined the Company in 1995 as an investor relations
specialist. Prior to joining the Company, Mrs. Falk was employed as a
marketing manager at Bausch & Lomb Incorporated and Champion Products,
Inc. and as a financial analyst at Kidder Peabody. She is a graduate
of Cornell University and holds a Masters Degree in Business
Administration from the Wharton School of The University of
Pennsylvania.
John H. Fennessey has served as Vice President of the Company and
Conifer Realty since 1996. He joined Conifer in 1975 as a founder and
Vice President, responsible for the operation of Conifer's Syracuse
office. Prior to joining Conifer, he was a Project Director with the
New York State Urban Development Corporation. Mr. Fennessey is a
graduate of Harpur College and holds a Masters Degree in regional
planning from the Maxwell School, Syracuse University. He is a Charter
Member of the American Institute of Certified Planners (AICP).
Timothy A. Florczak has served as a Vice President of the Company
since its inception. He joined Home Leasing in 1985 as a Vice
President. Prior to joining Home Leasing, Mr. Florczak was Vice
President of Accounting of Marc Equity Corporation. Mr. Florczak is a
graduate of the State University of New York at Buffalo.
Thomas L. Fountain, Jr. Has served as a Vice President of the Company
and Conifer Realty since 1996 and as a Vice President of HP Management
since 1997. He joined Conifer in 1994 as the Director of Commercial
Properties. Prior to joining Conifer, Mr. Fountain was the Leasing
Manager for Faber Management Services, Inc. and Vice President of
Asset Management for Realty Diversified Services, Inc. Mr. Fountain is
a graduate of West Virginia University.
Timothy Fournier has served as Vice President of Home Properties and
Executive Vice President of Conifer Realty since 1996. He joined
Conifer in 1986 as Vice President of Finance. Prior to joining
Conifer, Mr. Fournier was an accountant at Coopers & Lybrand. Mr.
Fournier is a graduate of New Hampshire College and is a Certified
Public Accountant.
Laurie Leenhouts has served as a Vice President of the Company since
its inception. She joined Home Leasing in 1987 and has served as a
Vice President since 1992. Ms. Leenhouts is a graduate of the
University of Rochester. She is the daughter of Norman Leenhouts.
Robert J. Luken has served as Controller of the Company since 1996 and
as a Vice President since 1997. Prior to joining the Company, he was
the Controller of Bell Corp. of Rochester and an Audit Supervisor for
Coopers & Lybrand. Mr. Luken is a graduate of St. John Fisher College
and is a Certified Public Accountant.
Paul O'Leary has served as a Vice President of the Company since its
inception. He joined Home Leasing in 1974 and has served as Vice
President of Home Leasing since 1978. Mr. O'Leary is a graduate of
Syracuse University and is a Certified Property Manager (CPM) as
designated by the Institute of Real Estate Management.
John Oster has served as Vice President of the Company and Conifer
Realty since 1996. He joined Conifer as a Vice President in 1988.
Before joining Conifer, Mr. Oster was
Page 17
Director of Operations for the
New York State Division of Housing and Community Renewal. He is a
graduate of Hamilton College.
Dale C. Prunoske has served as a Vice President of the Company and
Conifer Realty since 1996. He joined Conifer in 1994 as a Vice
President. Prior to joining Conifer, he worked for Continuing
Development Services. He is a graduate of and holds a Master of Public
Administration Degree from the State University of New York at
Brockport.
John E. Smith joined Home Properties as Vice President of Acquisitions
in 1997. Prior to joining the Company, Mr. Smith was general manager
for Direct Response Marketing, Inc. and Executive Vice President for
The Equity Network, Inc. Mr. Smith has been a commercial real estate
broker for the past 20 years, a Certified Commercial Investment Member
(CCIM) since 1982, a New York State Certified Instructor and has
taught real estate courses in four states.
Richard J. Struzzi has served as a Vice President of the Company and
HP Management since their inception. He joined Home Leasing in 1983 as
a Vice President. Mr. Struzzi is a graduate of the State University of
New York at Potsdam and holds a Masters Degree in Public School
Administration from St. Lawrence University. He is the son-in-law of
Nelson Leenhouts.
Robert C. Tait has served as a Vice President of the Company and HP
Management since their inception. He joined Home Leasing in 1989 and
served as a Vice President of Home Leasing since 1992. Prior to
joining Home Leasing, he was a manufacturing/industrial engineer with
Moscom Corp. Mr. Tait is a graduate of Princeton University and holds
a Masters Degree in Business Administration from Boston University.
Married to Amy L. Tait, he is the son-in-law of Norman Leenhouts.
Page 18
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The Common Stock has been traded on the New York Stock Exchange
("NYSE") under the symbol "HME" since July 28, 1994. The following
table sets forth for the previous two years the quarterly high and low
sales prices per share reported on the NYSE, as well as all
distributions paid.
High Low Distribution
1996
First Quarter $20-5/8 $17-1/8 $.42
Second Quarter $21 $19-1/4 $.42
Third Quarter $20-5/8 $19-3/8 $.42
Fourth Quarter $22-5/8 $19-7/8 $.43
1997
First Quarter $25-1/4 $22 $.43
Second Quarter $23-1/2 $20-1/4 $.43
Third Quarter $26 $21-9/16 $.43
Fourth Quarter $28-5/16 $25-5/8 $.45
1998
January 1, 1998 to
March 17, 1998 $28-1/16 $24-15/16 $.45
As of March 17, 1998, the Company had approximately 1,700
shareholders. It has historically paid distributions on a quarterly
basis in the months of February, May, August and November. The Credit
Agreement relating to the Company's $50 million line of credit
provides that the Company may not pay any distribution if a
distribution when added to other distributions paid during the three
immediately preceding fiscal quarters exceeds the greater of: (i) 90%
of funds from operatons and 110% of cash available for distribution;
and (ii) the amounts required to maintain the Company's status as a
REIT.
Page 19
Item 6. Selected Financial Data
The following table sets forth selected financial and operating data
on a historical basis for the Company and the Original Properties and
should be read in conjunction with the financial statements appearing
elsewhere in this Form 10-K.
COMPANY ORIG. PROPERTIES*
------------------------------------------------ -----------------------
8/4/94 1/1/94
Through Through
1997 1996 1995 12/31/94 8/3/94 1993
(In thousands, except per share and property data)
Revenues:
Rental Income $64,002 $42,214 $31,705 $10,995 $11,526 $19,189
Other Income 5,695 3,456 2,596 948 494 783
Property management income (1) - - - - 834 1,448
TOTAL REVENUES 69,697 45,670 34,301 11,943 12,854 21,420
Expenses:
Operating and maintenance 31,317 21,859 15,911 5,267 6,329 10,035
Property management (1) - - - - 625 1,139
General & administrative 2,255 1,482 1,200 400 407 680
Interest 11,967 9,208 6,432 1,444 3,126 5,113
Depreciation & amortization 11,200 8,077 6,258 2,191 1,584 2,656
TOTAL EXPENSES 56,739 40,626 29,801 9,302 12,071 19,623
Income before loss on disposition of
property, minority interest and 12,958 5,044 4,500 2,641 783 1,797
extraordinary item
Loss on disposition of property 1,283 - - - - -
Income before minority interest and
extraordinary item 11,675 5,044 4,500 2,641 783 1,797
Minority interest 4,248 897 455 256 - -
Income before extraordinary item 7,427 4,147 4,045 2,385 783 1,797
Extraordinary item, prepayment penalties,
net of allocation to minority interest (1,037) - (1,249) (2,498) - -
Net income (loss) $6,390 $4,147 $2,796 $(113) $783 $1,797
Net income (loss) per common share:
Basic $ .86 $ .74 $ .52 ($ .02) N/A N/A
Diluted $ .84 $ .74 $ .52 ($ .02) N/A N/A
Cash dividends declared per common
share $ 1.74 $ 1.69 $ 1.66 $ .26 N/A N/A
Balance Sheet Data:
Real estate, before accumulated $525,128 $261,773 $198,203 $162,991 $77,371 $76,646
depreciation
Total assets 543,823 248,631 181,462 148,709 60,014 59,490
Total debt 218,846 105,176 91,119 52,816 57,952 58,583
Stockholders' equity/Owners' (deficit) 151,432 83,030 75,780 81,941 (2,741) (2,591)
Other Data:
Funds from Operations (2) $24,345 $13,384 $11,025 $4,822 $2,348 $4,402
Cash available for distribution (3) $21,142 $11,022 $ 9,348 $4,369 $1,885 $3,608
Net cash provided by (used in) operating $27,285 $14,241 $ 9,811 $3,151 $2,527 $4,188
activities
Net cash provided by (used in) investing ($102,460) ($25,641) ($21,348) ($71,110) ($1,168) ($1,350)
activities
Net cash provided by (used in) financing $77,461 $12,111 $10,714 $68,315 ($1,689) ($2,881)
activities
Weighted average number of shares
outstanding:
Basic 7,415,888 5,601,027 5,408,474 5,408,230 N/A N/A
Diluted 7,558,167 5,633,004 5,408,474 5,408,230 N/A N/A
Total communities owned at end of period 63 28 20 19 12 12
Total apartment units owned at end of 14,048 7,176 5,650 4,744 3,065 3,065
period
*The Original Properties is not a legal entity but rather a combination of
twelve entities which were wholly owned by the predecessor corporation and its
affiliates prior to the Company's initial public offering on August 4, 1994.
Page 20
Item 6. Selected Financial Data (continued)
(1) Property management income and expense represents the management activities
of Home Leasing Corporation prior to the formation of HP Management.
(2) Management considers Funds from Operations to be an appropriate measure of
the performance of an equity REIT. Effective January 1, 1996, the Company
has adopted NAREIT's revised White Paper definition of calculating funds
from operations (New FFO). All prior periods presented have been restated
to conform to New FFO. "Funds from Operations" is generally defined by
NAREIT as net income (loss) before gains (losses) from the sale of property
plus real estate depreciation, including adjustments for unconsolidated
partnerships and joint ventures. Funds from Operations does not represent
cash generated from operating activities in accordance with GAAP and is not
necessarily indicative of cash available to fund cash needs. Funds from
Operations 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. Funds from Operations does not actually represent the cash made
available to investors in the periods presented.
Funds from Operations is calculated as follows:
8/4/94 1/1/94
Through Through
1997 1996 1995 12/31/94 8/3/94 1993
Net income (loss) $ 6,390 $ 4,147 $ 2,796 ($ 113) $ 783 $1,797
Depreciation - real property* 11,387 8,332 6,525 2,181 1,565 2,605
Loss on disposition of property 1,283 8 - - - -
Minority interest 4,248 897 455 256 - -
Extraordinary item (prepayment penalties) 1,037 - 1,249 2,498 - -
Funds from Operations $24,345 $13,384 $11,025 $4,822 $2,348 $4,402
Weighted average shares/units:
Basic 11,373.9 6,813.2 6,015.1 5,983.6 N/A N/A
Diluted 11,516.1 6,845.1 6,015.1 5,983.6 N/A N/A
*Includes amounts passed through from unconsolidated investments.
The FFO presentation above may not be comparable to other similarly titled
measures of FFO of other REITs.
Page 21
Quarterly information on Funds from Operations for the two most recent years is
as follows:
1996 1st 2nd 3rd 4th Total
Funds from
Operations before
minority interest $2,749 $ 3,078 $ 3,647 $ 3,910 $13,384
Weighted Average
Shares/Units:
Basic 6,612.8 6,617.6 6,849.4 7,168.4 6,813.2
Diluted 6,613.8 6,655.7 6,886.8 7,223.9 6,845.1
1997
Funds from
Operations before
minority interest $4,150 $ 5,143 $ 6,136 $8,916 $24,345
Weighted Average
Shares/Units:
Basic 9,254.7 10,139.1 10,827.1 15,215.1 11,373.9
Diluted 9,397.6 10,229.5 10,950.1 15,417.7 11,516.1
(3) Cash Available for Distribution is defined as Funds from Operations less an
annual reserve for anticipated recurring, non-revenue generating
capitalized costs of $350 ($300 for 1993-1995) per apartment unit, $94 per
manufactured home site and $.25 per square foot for the 35,000 square foot
ancillary convenient shopping area at Wedgewood. It is the Company's
policy to fund its investing activities and financing activities with the
proceeds of its Line of Credit or new debt or by the issuance of additional
Units in the Operating Partnership.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Overview
The following discussion is based primarily on the Consolidated
Financial Statements of Home Properties of New York, Inc.. This should
be read in conjunction with the financial statements appearing
elsewhere in this report. Certain capitalized terms, as used herein,
are defined in the Notes to the Consolidated Financial Statements.
The Company 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
December 31, 1997, the Company operated 158 apartment communities with
21,316 apartments. Of this total, the Company owned 63 communities,
consisting of 14,048 apartments, managed as general partner 67
partnerships that owned 4,782 apartments and fee managed 2,486
apartments for affiliates and third parties. The Company also fee
manages 1.7 million square feet of office and retail properties.
This annual report 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, the weather and other conditions that might affect
operating expenses, the
Page 22
timely completion of repositioning activities,
the actual pace of acquisitions, and continued access to capital to
fund growth.
Results of Operations
Comparison of year ended December 31, 1997 to year ended December 31,
1996.
The Company owned 22 communities with 5,384 apartment units throughout
1996 and 1997 where comparable operating results are available for the
years presented (the "Core Properties"), including 464 units in three
communities acquired January 1, 1996. For the year ending December 31,
1997, the Core Properties showed an increase in rental revenues of
4.4% and a net operating income increase of 8.4% over the 1996
year-end period. Property level operating expense increases were held
to 0.7%. Average economic occupancy for the Core Properties increased
to 95.3% from 94.1%, with average monthly rental rates increasing 3.1%
to $600. A summary of the Core Property net operating income is as
follows:
1997 1996 % Change
Rent $37,099,000 $35,540,000 4.4%
Property Other Income 1,235,000 1,135,000 8.8%
Total Income 38,334,000 36,675,000 4.5%
Operating and Maintenance (18,663,000) (18,527,000) (0.7%)
Net Operating Income $19,671,000 $18,148,000 8.4%
During 1997, the Company acquired a total of 7,496 apartment units in
35 newly acquired communities (the "1997 Communities"). In addition,
the Company experienced full year results for the 1,168 apartment
units in six newly acquired apartment communities (the "1996
Communities") acquired after January 1, 1996. The inclusion of these
acquired communities generally accounted for the significant changes
in operating results for the year ended December 31, 1997.
The Company also disposed of two communities with 624 apartment units
and a 202-site manufactured home community, all of which had partial
results in 1997 and full year results during 1996 (the "1997 Disposed
Communities"). Of the two apartment communities, a 604 unit community
was sold September 23, 1997 and a 20 unit community was sold on
December 15, 1997. The manufactured home community was sold on
December 19, 1997. The loss on disposition of these properties totaled
$1,283,000.
For the year ended December 31, 1997, operating income (income before
loss on disposition of property, minority interest and extraordinary
item) increased by $7,914,000 when compared to the year ended December
31, 1996. The increase was primarily attributable to the following
factors: an increase in rental income of $21,788,000 and an increase
in other income of $2,239,000. These changes were partially offset by
an increase in operating and maintenance expense of $9,458,000, an
increase in general and administrative expense of $773,000, an
increase in interest expense of $2,759,000 and an increase in
depreciation and amortization of $3,123,000.
Page 23
Of the $21,788,000 increase in rental income, $5,430,000 is
attributable to the 1996 Communities and $15,528,000 is attributable
to the 1997 Communities, offset in part by a $729,000 reduction
attributable to the 1997 Disposed Communities. The balance is a 4.4%
increase from the Core Properties due primarily to an increase of 3.1%
in weighted average rental rates, plus an increase in occupancy from
94.1% to 95.3%.
Property other income, which consists primarily of income from
operation of laundry facilities, administrative fees, garage and
carport rentals and miscellaneous charges to residents, increased in
1997 by $1,197,000. Of this increase, $121,000 is attributable to the
1996 Communities, $560,000 is attributable to the 1997 Communities and
$100,000 represents an 8.8% increase from the Core Properties. In
addition, $416,000 represents the increase in the net results for
limited partnerships accounted for on the equity method.
Other income increased in 1997 by $1,042,000. The change was primarily
attributable to an increase in interest income of $1,553,000 on
construction loans and advances made to affiliated tax credit
development partnerships. Partially offsetting this are decreases in
the following: development fee income recognized directly by the
Company of $349,000 from communities developed under the federal
government's Low Income Housing Tax Credit Program where the Company
is a general partner, $112,000 from decreased management fees from
residential properties and $50,000 from the decrease of the net
results from the Management Companies.
Of the $9,458,000 increase in operating and maintenance expenses,
$2,706,000 is attributable to the 1996 Communities, $6,917,000 is
attributable to the 1997 Communities and a reduction of $301,000 is
attributable to the 1997 Disposed Communities. The balance for the
Core Properties, or $136,000, represents a 0.7% increase over 1996.
The major areas of increase in the Core Properties occurred in
personnel and real estate taxes. Helping to offset this expense
increase were reductions to insurance and advertising expenses.
The operating expense ratio (the ratio of operating and maintenance
expense compared to rental and property other income) for the Core
Properties was 48.7% and 50.5% for 1997 and 1996, respectively. This
1.8% reduction reflects cost reductions through operating efficiencies
and economies of scale inherent in the management of a larger
portfolio of communities. In general, the Company's operating expense
ratio is higher than that experienced in other parts of the country
due to relatively high real estate taxes in New York State and the
Company's practice, typical in its markets, of including heating
expenses in base rent.
General and administrative expenses increased in 1997 by $773,000, or
52% from $1,482,000 in 1996 to $2,255,000 in 1997. As the Company
expands geographically, travel and lodging expenses have increased,
along with expenses associated with new and expanding regional
offices. In addition, personnel costs have increased to handle the
growing owned portfolio, which increased in size by 96% as of December
31, 1997 compared to a year ago. General and administrative expenses
as a percentage of total revenues remained constant at a level of 3.2%
for both 1997 and 1996.
Interest expense increased in 1997 by $2,759,000 as a result of the
acquisition of the 1997 Communities and full year interest expense for
the 1996 Communities. The 1996 Communities, costing in excess of
$41,000,000, were acquired substantially with assumed or new debt. The
1997 Communities, costing in excess of $266,000,000, were
Page 24
acquired
with $87,000,000 of assumed debt, in addition to the use of UPREIT
Units. Amortization relating to interest rate reduction agreements of
$335,000 was included in interest expense during 1997 and 1996. In
addition, amortization from deferred charges relating to the financing
of properties totaling $276,000 and $277,000 was included in interest
expense for 1997 and 1996, respectively.
Comparison of year ended December 31, 1996 to year ended December 31,
1995.
The Company owned 18 properties consisting of 4,463 apartment units
acquired prior to January 1, 1995 where comparable operating results
are available for the years presented (the "Core Properties"). For the
year ending December 31, 1996, the Core Properties showed an increase
in rental revenues of 4.2% and a net operating income increase of 3.3%
over the 1995 year-end period. Property level operating expense
increases were 5.3%, primarily attributable to significant increased
utility costs associated with severe winter weather during the first
two quarters of 1996. Average economic occupancy for the Core
Properties increased to 94.3% from 93.5%, with average monthly rental
rates increasing 3.3% to $583.
During 1996, the Company acquired a total of 1,652 apartment units
(including 484 apartment units acquired on January 1, 1996) in ten
newly acquired communities (the "1996 Communities"). In addition, the
Company experienced full year results for the 1,061 apartment units in
three newly acquired apartment communities (the "1995 Communities")
acquired during 1995. The inclusion of these acquired communities
generally accounted for the significant changes in operating results
for the year ended December 31, 1996.
For the year ended December 31, 1996, operating income increased by
$544,000 when compared to the year ended December 31, 1995. The
increase was primarily attributable to the following factors: an
increase in rental income of $10,509,000 and an increase in other
income of $860,000. These changes were partially offset by an increase
in operating and maintenance expense of $5,948,000, an increase in
general and administrative expense of $282,000, an increase in
interest expense of $2,776,000 and an increase in depreciation and
amortization of $1,819,000.
Of the $10,509,000 increase in rental income, $4,106,000 is
attributable to the 1995 Communities and $5,176,000 is attributable to
the 1996 Communities. The balance is a 4.2% increase from the Core
Properties due primarily to an increase of 3.3% in weighted average
rental rates, plus an increase in occupancy from 93.5% to 94.3%.
Other income increased in 1996 by $897,000. Of this increase, $322,000
is from development fee income from eight apartment communities
developed under the federal government's Low Income Housing Tax Credit
Program where the Company is a general partner. In addition, other
significant components include $179,000 from increased interest
income, $168,000 from increased management fees from residential
properties and $107,000 from the increase of the net results from the
Management Companies.
Of the $5,948,000 increase in operating and maintenance expenses,
$2,370,000 is attributable to the 1995 Communities and $2,821,000 is
attributable to the 1996 Communities. The balance for the Core
Properties, or $757,000, represents a 5.3% increase over 1995. The
major area of increase in the Core Properties occurred in utilities,
personnel and snow removal costs due to the severe winter weather and
a cooler
Page 25
spring experienced in 1996 compared to an unusually mild
1995. The operating expense ratio for the Core Properties was 48.6%
and 48.2% for 1996 and 1995, respectively.
General and administrative expenses increased in 1996 by $282,000, or
24% from $1,200,000 in 1995 to $1,482,000 in 1996. These increases are
primarily due to increased corporate personnel. However, general and
administrative expenses as a percentage of total revenues decreased
from 3.5% in 1995 to 3.2% in 1996 as a result of increased
efficiencies from the economies of scale.
Interest expense increased in 1996 by $2,776,000 as a result of the
acquisition of the 1996 Communities and full year interest expense for
the 1995 Communities. The 1995 Communities, costing in excess of
$25,000,000, were acquired substantially with assumed or new debt. The
1996 Communities, costing in excess of $54,000,000, were acquired with
$44,000,000 of assumed new debt, in addition to the use of UPREIT
Units. Amortization relating to interest rate reduction agreements of
$335,000 was included in interest expense during 1996 and 1995. In
addition, amortization from deferred charges relating to the financing
of properties totaling $255,000 and $321,000 was included in interest
expense for 1996 and 1995, respectively.
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 debt repayments. The Company may also engage
in transactions whereby it acquires equity ownership in other public
or private companies that own portfolios of apartment communities.
Those transactions may be part of a strategy to acquire all of the
equity ownership in those other companies.
The Company intends to meet its short-term liquidity requirements
through net cash flows provided by operating activities and the 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, applicable to REITs.
To the extent that the Company does not satisfy its long-term
liquidity requirements through net cash flows provided by operating
activities and the line of credit described below, it intends to
satisfy such requirements through the issuance of UPREIT Units,
proceeds from the Dividend Reinvestment Plan, property debt financing,
or issuing additional common shares or shares of the Company's
preferred stock. As of December 31, 1997, the Company owned twenty
properties, with 3,806 apartment units, which were unencumbered by
debt.
As of February 28, 1997, the Company's Form S-3 Registration Statement
was declared effective relating to the issuance of up to $100 million
of shares of common stock or other securities. During 1997,
$41,000,000 of common shares were issued under this shelf registration
including $15,000,000 sold directly to two institutional investors and
$26,000,000 placed with an investment banking firm which was
immediately resold to the public.
Page 26
The issuance of UPREIT Units for property acquisitions continues to be
a significant source of capital. During 1997, 5,636 apartment units in
four separate transactions were acquired for a total cost of
$195,000,000, using UPREIT Units valued in excess of $106,000,000 with
the balance paid in cash or assumed debt.
In May, 1997, the Company's Board of Directors approved a stock
repurchase program under which the Company may repurchase up to one
million shares of its outstanding common stock. The Board's action did
not establish a target price or a specific timetable for repurchase.
In June, 1997, the Company repurchased 20,000 shares at a cost of
$426,000, reflecting a stock price which Company management felt was
an attractive investment opportunity.
In November, 1995, the Company established a Dividend Reinvestment
Plan. The Plan provides the stockholders of the Company an opportunity
to automatically invest their cash dividends at a discount of 3% from
the market price. In addition, eligible participants may make monthly
payments or other voluntary cash investments in shares of common
stock, typically purchased at discounts of up to 3%. During 1997, over
$36,400,000 was raised through this program, including over $4,500,000
from officers and directors financed partially by a Company loan of
$2,262,000.
The Company has an unsecured line of credit of $50 million, with an
available balance at December 31, 1997 of $41,250,000. Borrowings
under the line bear interest at 1.25% over the one-month LIBOR rate or
at a money market rate as quoted on a daily basis by the lending
institutions. The line of credit expires on September 4, 1999, with a
one year extension at the Company's option. As of February 20, 1998,
the amount available on the line of credit has increased to
$46,750,000.
As of December 31, 1997, debt represented 33% of the Company's total
market capitalization compared to 34% one year ago. This measurement
at year end is misleading due to the large amount of equity raised on
December 30, 1996 relative to the Company's total market
capitalization. The results show a reduction from 46% during 1996 to
36% in 1997 when comparing the weighted average debt-to-market
capitalization for each year. This deleveraging had a dilutive effect
on Funds from Operations of approximately 8 cents per share.
As of December 31, 1997, the weighted average rate of interest on the
Company's mortgage debt is 7.7% and the weighted average maturity of
such indebtedness is 7.6 years. Floating rate debt has been reduced at
year end to only 4% of outstanding debt at December 31, 1997. This
limits the exposure to changes in interest rates, minimizing the
effect of interest rate fluctuations on results of operations and
financial condition. Floating rate debt represented 2% of outstanding
debt on February 20, 1998.
The Company's net cash provided by operating activities increased from
$14,241,000 for the year ended December 31, 1996 to $27,285,000 for
the year ended December 31, 1997. The increase was principally due to
the acquisition of the 1996 and 1997 Communities, offset by the
prepayment penalties incurred in 1997 accounted for as an
extraordinary item.
Net cash used in investing activities increased from $25,641,000 in
1996 to $102,460,000 in 1997, resulting from a higher level of
acquisitions in 1997 (6,872 apartment units, net of sales) than in
1996 (1,652 apartment units).
Page 27
The Company's net cash provided by financing activities increased from
$12,111,000 in 1996 to $77,461,000 in 1997. The major source of
financing in 1996 was $59,795,000 of proceeds from sales of shares of
common stock and partnership interests which were used to repay debt
by $21,792,000 and fund property acquisitions and additions. In 1997,
proceeds from the sale of common stock and net debt proceeds totalling
$101,162,000 were used to fund property acquisitions and additions.
Capital Improvements
Total capital improvement expenditures increased from $8,843,000 in
1996 to $15,962,000 in 1997. Of the $15,962,000 expenditures,
$4,820,000 is attributable to the 1997 Communities, $4,370,000 is
attributable to the 1996 Communities and $540,000 is attributable to
the 1997 Disposed Communities. The balance of $6,232,000 is allocated
between the Core Properties of $6,048,000 and $184,000 for corporate
office expenditures.
Recurring, non-revenue enhancing capital replacements typically
include carpeting and tile, appliances, HVAC equipment, new roofs,
site improvements and various exterior building improvements. Funding
for these capital replacements are provided by cash flows from
operating activities. The Company estimates that during 1997,
approximately $350 per unit was spent on capital replacements to
maintain the condition of its properties.
In 1997, $4,263,000 in capital expenditures for the Core Properties
was incurred to fund non-recurring, revenue enhancing upgrades,
including the following: construction of three new community centers;
the installation of new windows and other energy conservation
measures; and the modernization of approximately 460 kitchens and
bathrooms. Management believes that these upgrades contributed
significantly towards achieving 8.4% average growth in net operating
income at the Core Properties in 1997. In addition, over $8,000,000 in
substantial rehabilitations was incurred on 1997 and 1996 acquisition
properties as part of management's acquisition and repositioning
strategies. The pace of capital replacements was accelerated to
improve the overall competitive condition of the properties. Funding
for these capital improvements was provided by the line of credit and
equity proceeds.
During 1998, management expects that the communities will benefit
further from improvements completed in 1997 and plans to continue to
fund similar non-recurring, revenue enhancing upgrades in addition to
normal capital replacements, estimated to increase to $375 per unit in
1998.
Impact of the Year-2000 on System Processing
The study of the Year-2000 issue, undertaken by the Company's
information systems department, is nearly complete with some
additional testing and conversion to upgraded software and hardware
required. The Company has addressed this issue with key vendors
supplying two material software applications who have confirmed either
current compliance or indicated future compliance in a timely manner.
Management's assessment of the Year-2000 issue is that it will not
have a material impact on the Company's business operations,
liquidity, financial position or results of operations.
Page 28
Environmental Issues
Phase I environmental audits have been completed on substantially all
of the Company's wholly owned properties. There are no recorded
amounts resulting from environmental liabilities as there are no known
contingencies with respect thereto. Furthermore, no condition is known
to exist that would give rise to a liability for site restoration or
other costs that may be incurred with respect to the sale or disposal
of a property.
Recent Accounting Pronouncements
During June, 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130), which requires that an enterprise
report the change in its net assets from nonowner sources by major
components and as a single total. The Board also issued Statements of
Financial Accounting Standards No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (SFAS 131), which establishes
annual and interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services,
geographic areas and major customers. Adoption of these statements
will not impact the Company's consolidated financial position, results
of operations or cash flows, and any effect will be limited to the
form and content of its disclosures. Both statements are effective for
fiscal years beginning after December 15, 1997, with earlier
application permitted.
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.
Item 8. Financial Statements and Supplemental Data
The financial statements and supplementary data are listed under Item
14(a) and filed as part of this report on the pages indicated.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
Page 29
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The Board of Directors (the "Board") currently consists of eleven
members. The terms for all of the directors of Home Properties expire
at the 1998
Shareholders' Meeting.
The information sets forth, as of February 28, 1998, for each director
of the Company such director's name, experience during the last five
years, other directorships held, age and the year such director was
first elected as director of the Company.
Year First
Name of Director Age Elected Director
Burton S. August, Sr. 82 1994
William Balderston, III 70 1994
Richard J. Crossed 58 1996
Alan L. Gosule 57 1996
Leonard F. Helbig, III 52 1994
Roger W. Kober 64 1994
Nelson B. Leenhouts 62 1993
Norman Leenhouts 62 1993
Clifford W. Smith, Jr. 51 1994
Paul L. Smith 62 1994
Amy L. Tait 39 1993
Burton S. August, Sr. Has been a director of the Company since August,
1994. Mr. August is currently a director of Monro Muffler Brake, Inc.,
a publicly traded company where Mr. August served as Vice President
from 1969 until he retired in 1980. Mr. August is also a trustee
emeritus of Rochester Institute of Technology, a trustee of Strong
Museum and a trustee of the Otetiana Council Boy Scouts of America.
William Balderston, III has been a director of the Company since
August, 1994. From 1991 to the end of 1992, he was an Executive Vice
President of The Chase Manhattan Bank, N.A. From 1986 to 1991, he was
President and Chief Executive Officer of Chase Lincoln First Bank,
N.A., which was merged into The Chase Manhattan Bank, N.A. He is a
director of Bausch & Lomb Incorporated and Rochester Gas and Electric
Corporation, as well as a Trustee of the University of Rochester. Mr.
Balderston is a graduate of Dartmouth College.
Page 30
Richard J. Crossed has served as an Executive Vice President and as a
director of the Company and as a director, President and Chief
Executive Officer of Conifer Realty since January 1, 1996. He served
as President and Chief Executive Officer of Conifer Development, Inc.
and C.O.F. (formerly Conifer Realty, Inc.) (collectively, "Conifer")
from 1985. Prior to becoming President of Conifer, he served as
Director of Development for Conifer. Mr. Crossed is a director of St.
Joseph's Villa and is active in many housing organizations. He has
served on the N Credit Task Force. Mr. Crossed is a graduate of
Bellarmine College.ew York State Housing Turnkey Task Force and New
York State Low-Income Housing Tax Credit Task Force. Mr. Crossed is a
graduate of Bellarmine College.
Alan L. Gosule, has been a director of the Company since December,
1996. Mr. Gosule has been a partner in the law firm of Roger & Wells
LLP, New York, New York, since August, 1991 and prior to that time was
a partner in the law firm of Gaston & Snow. He serves as Chairman of
the Rogers & Wells LLP Tax Department and Real Estate Securities
practice group. Mr. Gosule is a graduate of Boston University and its
Law School and received a LL.M. from Georgetown University. Mr. Gosule
also serves on the Boards of Directors of 15 funds of the Northstar
Mutual Funds, the Simpson Housing Limited Partnership, F.C. Putnam
Investment Management Company and CORE Cap, Inc.. Rogers & Wells LLP
acted as counsel to Coopers & Lybrand, LLP in its capacity as advisor
to the State Treasurer of the State of Michigan in connection with its
investment of retirement funds in the Operating Partnership and Mr.
Gosule was the nominee of the State Treasurer under the terms of the
investment agreements with the State of Michigan.
Leonard F. Helbig, III has been a director of the Company since
August, 1994. Mr. Helbig has served as Executive Managing Director of
the Asset Services and Financial Services Groups and a Director of
Cushman & Wakefield since 1984. He joined Cushman & Wakefield in 1980
and is also a member of that firm's Executive and National Management
Committees. Mr. Helbig is a member of the Urban Land Institute, the
Pension Real Estate Association and the International Council of
Shopping Centers. Mr. Helbig is a graduate of LaSalle University and
holds the MAI designation of the American Institute of Real Estate
Appraisers.
Roger W. Kober has been a director of the Company since August, 1994.
Mr. Kober is currently a director of Rochester Gas and Electric
Corporation where he was employed from 1965 until his retirement on
January 1, 1998. From March, 1996 until January 1, 1998 Mr. Kober
served as Chairman and Chief Executive Officer of Rochester Gas and
Electric Corporation. He is also a member of the Board of Trustees of
Rochester Institute of Technology . Mr. Kober is a graduate of
Clarkson College and holds a Masters Degree in Engineering from
Rochester Institute of Technology.
Nelson B. Leenhouts has served as President, Co-Chief Executive
Officer and a director of the Company since its inception in 1993. He
has also served as President and Chief Executive Officer of HP
Management since its formation and has been a director of Conifer
Realty since its formation and has recently been appointed a Vice
President of Conifer Realty. Nelson Leenhouts was the founder, and a
co-owner, together with Norman Leenhouts, of Home Leasing, and served
as President of Home Leasing from 1967. He is a director of Hauser
Corporation. Nelson Leenhouts is a graduate of the University of
Rochester. He is the twin brother of Norman Leenhouts.
Norman P. Leenhouts has served as Chairman of the Board of Directors,
Co-Chief Executive Officer and a director of the Company since its
inception in 1993. He has also
Page 31
served as Chairman of the Board of HP
Management and as a director of Conifer Realty since their formation.
Norman Leenhouts is a co-owner, together with Nelson Leenhouts, of
Home Leasing and served as Chairman of Home Leasing from 1971. He is a
director of Hauser Corporation and Rochester Downtown Development
Corporation. He also serves on the Board of Trustees of Roberts
Wesleyan College. He is a graduate of the University of Rochester and
is a certified public accountant. He is the twin brother of Nelson
Leenhouts.
Clifford W. Smith, Jr. Has been a director of the Company since
August, 1994. Mr. Smith has been the Clarey Professor of Finance of
the William E. Simon Graduate School of Business Administration of the
University of Rochester since 1988. He has written numerous books,
monographs, articles and papers on a variety of financial, capital
markets, risk management and accounting topics and has held a variety
of editorial positions on a number of journals. Mr. Smith is a
graduate of Emory University and holds a Doctor of Economics from the
University of North Carolina at Chapel Hill.
Paul L. Smith has been a director of the Company since August, 1994.
Mr. Smith was a director, Senior Vice President and the Chief
Financial Officer of the Eastman Kodak Company from 1983 until he
retired in 1993. He is currently a member of the Board of Trustees of
the George Eastman House, GeVa Theatre and Ohio Wesleyan University.
Mr. Smith also serves on the Boards of Directors of Performance
Technologies, Inc., BioWorks, Inc. and Canandaigua Brands, Inc. Mr.
Smith is a graduate of Ohio Wesleyan University and holds an MBA
Degree in finance from Northwestern University.
Amy L. Tait has served as Executive Vice President and a director of
the Company since its inception in 1993. She has also served as a
director of HP Management since its formation. Mrs. Tait joined Home
Leasing in 1983 and has had several positions, including Senior and
Executive Vice President and Chief Operating Officer. She currently
serves on the M & T Bank Advisory Board and the boards of the United
Way of Rochester and GeVa Theatre. Mrs. Tait is a graduate of
Princeton University and holds a Masters Degree in Business
Administration from the William E. Simon Graduate School of Business
Administration of the University of Rochester. She is the daughter of
Norman Leenhouts.
See Item X in Part I hereof for information regarding executive
officers of the Company.
Compliance with Section 16(a) of the Securities Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") requires the Company's executive officers and
directors, and persons who own more than 10% of a registered class of
the Company's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission and
the New York Stock Exchange. Officers, directors and greater than 10%
shareholders are required to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that
no other reports were required during the fiscal year ended December
31, 1997, all Section 16(a) filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners
were satisfied.
Page 32
Item 11. Executive Compensation
The following table sets forth the cash compensation paid during
1995,1996 and 1997 to the Company's Co-Chief Executive Officers and
other four most highly compensated executive officers.
Summary Compensation Table
Long-Term
Compensation Awards
Shares
Annual Compensation Underlying
Name and Principal Position Year Salary Bonus Options
Norman P. Leenhouts 1995 $132,000 $ 0 0
Chairman and Co-Chief Executive Officer 1996 145,200 59,702 7,338 sh.(2)
1997 159,720 143,109 15,000 sh.(3)
Nelson B. Leenhouts 1995 $132,000 $ 0 0
President and Co-Chief Executive Officer 1996 145,200 59,702 7,338 sh.(2)
1997 159,720 143,109 15,000 sh.(3)
Richard J. Crossed 1996(1) $145,200 $ 59,702 7,338 sh.(2)
Executive Vice President 1997 159,720 143,109 15,000 sh.(3)
Amy L. Tait 1995 $ 7,917 $ 0 0
Executive Vice President 1996 103,000 42,351 5,206 sh.(2)
1997 110,725 99,210 10,000 sh.(3)
David P. Gardner 1995 $ 73,500 $ 0 0
Vice President, Treasurer and Chief Financial Officer 1996 86,000 18,564 2,174 sh.(2)
1997 91,000 40,768 5,000 sh.(3)
Ann M. McCormick, Esq. 1995 $ 71,000 $ 0 0
Vice President, General Counsel and Secretary 1996 84,000 18,996 2,123 sh.(2)
1997 90,000 42,336 5,000 sh.(3)
(1) Mr. Crossed was not employed by the Company in 1995.
(2) These options were granted under the Company's Stock Benefit Plan in
connection with the purchase of the Company's common stock under the
Director, Officer and Employee Stock Purchase and Loan Program described
below. The options are exercisable for ten years at $20.50 per share and
vest over five years.
(3) These options were granted under the Company's Stock Benefit Plan and are
exercisable for ten years at $26.50 per share and vest over five years.
Page 33
Option Grants in Fiscal Year 1997
The following table sets forth certain information relating to the options
granted with respect to fiscal year ended December 31, 1997. The columns
labeled "Potential Realizable Value" are based on hypothetical 5% and 10%
growth assumptions in accordance with the rules of the Securities and
Exchange Commission. The Company cannot predict the actual growth rate of
the Common Stock.
Option Grants In Last Fiscal Year*
Individual Grants
Percent of
Number of Total Options Potential Realizable Value
Shares Granted to at Assumed Annual Rates of
Underlying Employees Exercise of Stock Price Appreciation
Name Options in Fiscal Base Price Expiration for Option Term
Granted Year ($/sh) Date 5% 10%
Norman P. Leenhouts 15,000 12.87% $26.50 10/28/2007 $249,976 $699,387
Nelson B. Leenhouts 15,000 12.87% $26.50 10/28/2007 $249,976 $699,387
Richard J. Crossed 15,000 12.87% $26.50 10/28/2007 $249,976 $699,387
Amy L. Tait 10,000 8.58% $26.50 10/28/2007 $166,651 $466,258
David P. Gardner 5,000 4.29% $26.50 10/28/2007 $ 83,325 $233,129
Ann M. McCormick 5,000 4.29% $26.50 10/28/2007 $ 83,325 $233,129
* Stock appreciation rights were not granted in 1997
Page 24
Option Exercises and Year-End Option Values
No options were exercised by the named Executive Officers in 1997. The following
table sets forth the value of options held at the end of 1997 by the Company's
named Executive Officers.
Fiscal Year-End Option Values(1)
Number of Number of Shares Value of Unexercised in-the-
Shares Underlying Unexercised Money Options at
Acquired on Value Options at Fiscal Year-End FiscalYear-End (2)
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
Norman P. Leenhouts 0 0 89,467 sh. 20,871 sh. $730,310 $ 49,574
Nelson B. Leenhouts 0 0 89,467 sh. 20,871 sh. $730,310 $ 49,574
Richard J. Crossed 0 0 89,467 sh. 20,871 sh. $730,310 $ 49,574
Amy L. Tait 0 0 53,841sh. 39,364 sh. $439,262 $322,929
David P. Gardner 0 0 9,435 sh. 12,739 sh. $ 76,596 $ 64,192
Ann M. McCormick 0 0 9,425 sh. 12,698 sh. $ 76,529 $ 63,918
(1) Stock appreciation rights were not granted in 1997.
(2) Based on the closing price of the Common Stock on the NYSE on December 31,
1997 of $27.1875 less the per Share exercise price of the options.
Employment Agreements
Norman and Nelson Leenhouts entered into employment agreements with the Company
prior to its initial public offering providing for an initial term of five years
commencing August 4, 1994. The agreements provide for the employment of
Norman P. Leenhouts as Chairman of the Board and Co-Chief Executive Officer of
the Company at an annual base salary of $120,000 and Nelson B. Leenhouts as
President and Co-Chief Executive Officer of the Company and President and Chief
Executive Officer of HP Management at an annual base salary of $120,000. The
base salaries under each employment agreement automatically increase by 10% each
year starting January 1, 1995. In addition, the employment agreements also
provide that if employment is terminated by the Company or not renewed without
cause, or terminated by the executive for good reason at any time, then the
executive is entitled to receive a severance payment equal to the executive's
annual base salary and incentive compensation for the preceding year multiplied
by two or the number of years remaining of the initial term, whichever is
greater. The employment agreements for Norman and Nelson Leenhouts have been
amended to provide that they will receive incentive compensation pursuant to the
Company's Incentive Compensation Plan as it may be revised by the Compensation
Committee from time to time, rather than as originally provided in the
employment agreements. For 1997, the formula contained in their Employment
Agreements would have resulted in higher bonuses.
Pursuant to their respective employment agreements with the Company, Norman and
Nelson Leenhouts are each subject to a covenant not to compete with the Company
during the term of his employment and, if either is terminated by the Company
for cause or resigns without good reason, for two years thereafter. The
covenants prohibit Norman and Nelson Leenhouts from
Page 35
participating in the
management, operation or control of any multifamily residential business which
is competitive with the business of the Company, except that they, individually
and through Home Leasing and its affiliates, may continue to own and develop the
properties managed by HP Management. The Leenhoutses have also agreed that any
commercial property which may be developed by them will be managed by HP
Management subject to the approval of the outside members of the Board of
Directors.
Richard J. Crossed also entered into an Employment Agreement with the Company,
effective January 1, 1996. The terms of that agreement are substantially the
same as the employment agreements entered into by Norman and Nelson Leenhouts as
described above. The initial term is for five years and identical termination
provisions are provided. In his employment agreement, Mr. Crossed has agreed not
to compete with the Company during the term of his employment and, if he is
terminated by the Company for cause or resigns without good reason, for three
years thereafter.
Incentive Compensation Plan
The Company's incentive compensation plan (the "Incentive Plan") for officers
and key employees of the Company was amended for 1997 to provide that eligible
officer and key employees may earn a cash bonus ranging from 0% to 100% of base
salary based on increases in the Company's Funds from Operations ("FFO") per
Share. The 1997 Incentive Plan provides for a bonus pool to be established as
follows:
Percent of Growth
Growth in FFO/Share Contributed to Bonus Pool
First 2% 0%
Next 1% 20%
Next 1% 30%
Next 1% 40%
Growth Over 5% 50%
A factor is applied to each eligible participant's salary, ranging from 1% to
10%, to determine the split of the bonus pool. The factor applied to the
salaries of Norman and Nelson Leenhouts, Richard Crossed and Amy Tait is 10%,
with the maximum bonus payable to them being 100% of their base salary. The
factor applied to the salaries of David Gardner and Ann McCormick is 5%, with
the maximum bonus payable to them being 50% of their base salary.
Director, Officer and Employee Stock Purchase and Loan Program
In August 1996, the Board of Directors approved a Director, Officer and Employee
Stock Purchase and Loan Program (the "Stock Purchase Program"). Pursuant to the
Stock Purchase Program, each officer and director of the Company was eligible to
receive loans for the purchase of Common Stock under the Company's Dividend
Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock
Purchase Plan ("DRIP") and receive options to purchase Common Stock under the
Company's Stock Benefit Plan. The 1996 phase of the Stock Purchase Program
provided for loans up to a formula amount for each officer based on salary and
bonus category and up to $60,000 for each independent director. The Company
loaned approximately 50% of the purchase price and arranged loans from a
commercial bank, guaranteed by the Company, for the balance. The 1996 phase of
the Stock Purchase Program also provided for the issuance of stock options to
purchase .25 shares of Common Stock at the
Page 36
fair market value on the date of
issuance ($20.50) for each share of Common Stock purchased. With respect to the
1996 phase of the Stock Purchase Program, eighteen officers purchased 190,345
shares of Common Stock and received 47,592 options to purchase Common Stock at
an exercise price of $20.50 vesting over five years. The six independent
directors purchased an aggregate of 18,198 shares of Common Stock and received
options to purchase 4,554 shares of Common Stock for $20.50 per share vesting
over five years. The Company loaned the directors and officers an aggregate of
$2,063,469 maturing on August 31, 2016 with simple interest at 7%. The Company
also guaranteed bank loans totaling $2,033,180 repayable from the quarterly
dividends on the stock and the proceeds of any sale of the stock and agreed to
pay the commercial lender an interest rate differential equal to .94% per annum
of the outstanding loans in order to bring the interest rate on the commercial
portion of the loan to 7%. The Company guarantee has subsequently been returned
by the commercial lender and is no longer in effect.
In October, 1997, the Board of Directors approved an additional loan pursuant to
the Stock Purchase Program. The 1997 loans were made on substantially the same
basis as the 1996 loans with the Company loaning approximately 50% of the
purchase price and arranging loans from a commercial bank for the balance. The
primary difference was that: (i) no Company guarantee was provided to the
commercial lender; (ii) no options were issued in connection with the 1997 phase
of the Stock Purchase Program; and (iii) interest on the Company loans is to be
paid currently from one-half of the dividends on the stock rather than accruing
as was the case with the 1996 phase of the Stock Purchase Program. The Company
agreed to pay the commercial lender an interest rate differential payment on
each loan equal to .84% per annum of the outstanding balance in order to bring
the interest rate on the commercial portion of the loan down to 6.7%, the
dividend yield on the Company's common stock on the date that the loan was
closed. The interest rate on the Company portion of the loan was also 6.7%. With
respect to the 1997 portion of the Stock Purchase Program, 21 officers purchased
157,302 shares of Common Stock and 5 of the Independent Directors purchased
12,380 shares in the aggregate. The Company loaned the directors, officers and
employees an aggregate of $2,262,283 maturing on the earlier of the maturity of
the 1996 phase of the Stock Purchase Program or November 30, 2017.
The Company is seeking shareholder approval for the issuance of up to 500,000
shares of Common Stock on terms similar to the Stock Purchase Program. If such
approval is received, the Company in the future will be able to loan one hundred
percent of the amount necessary to purchase up to 500,000 shares of Common Stock
to eligible officers and employees and 50% of the amount to non-employee
directors under the current Federal Reserve Board margin rules.
Compensation of Directors
In 1997, the Company paid its directors who are not employees of the Company
annual compensation of $10,000 plus $1,000 per day for attendance (in person or
by telephone) at Board and committee meetings. Directors of the Company who are
employees of the Company do not receive any compensation for their services as
directors. All directors are reimbursed for their expenses incurred in attending
directors' meetings. Pursuant to the Company's Stock Benefit Plan, each
non-employee director was granted options to purchase 3,500 shares of Common
Stock immediately following the annual meeting of stockholders in 1997 and will
be granted options to purchase 3,500 shares immediately following the annual
meeting of stockholders in 1998 and 1999. The options have an exercise price
equal to the fair market value of the Company's Common Stock on the date of
grant. Subject to stockholder approval
Page 37
of a proposal regarding the annual stock
grants to Directors (the "Directors' Stock Grant Plan"), in lieu of an increase
in the cash compensation paid to Independent Directors, the Board has approved
the grant to each Independent Director of an additional 150 shares of Common
Stock. The Board shall determine the number of additional shares to be awarded
to Independent Directors as of the first of the following calendar years.
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
During the fiscal year 1997, the Compensation Committee was comprised of Burton
S. August, Sr., William Balderston, III, Alan L. Gosule and Clifford W. Smith,
Jr. None of them have ever been an officer of the Company or any of its
subsidiaries. Each of the Compensation Committee members as well as each of the
other independent directors other than Paul L. Smith, participated in the
Company's Stock Purchase Program on November 10, 1997 and purchased 2,476 shares
of Common Stock through the Company's DRIP for $26.6629 per share (3% below the
five-day average market value as provided in that plan). The purchases were
financed 50% by a loan from the Company due on the earlier of the maturity of
the 1996 note under the Stock Purchase Program or November 30, 2017 and 50% by a
loan from a commercial bank arranged by the Company. Both loans bear interest at
6.7% and the Company agreed to pay the commercial lender an interest rate
differential equal to .84% per annum of the outstanding loan in order to bring
the interest rate to 6.7%.
Page 38
Item 12. Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth information as of February 24, 1998
regarding the beneficial ownership of shares of Common Stock by (i)
directors, nominees and certain executive officers of Home Properties,
and (ii) directors, nominees and executive officers of Home Properties
as a group, and (iii) each person known by the Company to be the
beneficial owner of more than a 5% interest in the Company. The table
also includes information relating to the number and percentage of
shares of Common Stock and partnership units of the Operating
Partnership ("Units") beneficially owned by the persons included in
(i) and (ii) above (such Units are exchangeable into shares, or cash
at the election of the independent directors of the Company). In
preparing this table, the Company has relied on information supplied
by its officers, directors, Nominees and certain stockholders, and
upon information contained in filings with the SEC.
Name and Address Number of Shares Percentage of Number of Shares/ Percentage of
of Beneficial Owner Beneficially Owned Outstanding Shares (2) Units Owned Shares/Units
Norman P. Leenhouts.................... 142,182(1) 1.44% 411,342(1)(3) 4.0%(4)
Nelson B. Leenhouts.................... 135,622(1) 1.38% 404,534(1)(3) 4.0%(4)
Richard J. Crossed..................... 144,281(5) 1.46% 386,849 (5) 3.8%(4)
Amy L. Tait............................ 96,929(6) * 110,672(6) 1.1%(4)
Burton S. August, Sr................... 36,661(8) * 40,907(7)(8) *
William Balderston, III................ 19,750(7) * 19,750(7) *
Alan L. Gosule......................... 3,688(9) * 3,688(9) *
Leonard Helbig, III.................... 20,393(7) * 20,393(7) *
Roger W. Kober......................... 19,414(7) * 19,414(7) *
Clifford W. Smith, Jr.................. 23,491(7) * 23,491(7) *
Paul L. Smith.......................... 14,685(10) * 14,685(10) *
David P. Gardner....................... 24,955 (11) * 28,461 (11) *
Ann M. McCormick....................... 24,667 (12) * 26,969 (12) *
All executive officers and directors
as a group (13 persons)................ 706,718(13) 6.95%(13) 1,511,155(3)(13) 13.8%(15)
Page 39
Name and Address Number of Shares Percentage of
of Beneficial Owner Beneficially Owned Outstanding Shares
Capital Growth Management....................... 317,000(16) 3.25%
Limited Partnership
One International Place
Boston, MA 02110
Miller Anderson & Sherrerd...................... 482,292(17) 4.94%
One Tower Bridge
West Conshohocken, PA 19428
and
Morgan Stanley Dean Witter Discover & Co.
1585 Broadway
New York, NY 10036
Palisade Capital Management L.L.C............... 987,400(18) 10.12%
1 Bridge Plaza, Suite 695
Fort Lee, NJ 07024
FMR Corp........................................ 603,800 (19) 6.19%
82 Devonshire St.
Boston, MA 02106
State Treasurer, State of Michigan.............. 1,666,667(20) 14.60%
Bureau of Investments
Department of Treasury
Treasury Building, Box 15128
Lansing, MI 48901
* Less than 1%
(1) Includes 89,467 shares which may be acquired upon the exercise of currently
exercisable options by each of Norman and Nelson Leenhouts.
(2) Assumes that all options included with respect to the person have been
exercised. The total number of shares outstanding used in calculating the
percentage assumes that none of the options held by any other person have
been exercised.
(3) Includes Units owned by Home Leasing and Leenhouts Ventures. Norman
Leenhouts and Nelson Leenhouts are each directors, officers and 50%
stockholders of Home Leasing and each owns 50% of Leenhouts Ventures.
Includes 50,000 Units owned by the respective spouses of each of Norman and
Nelson Leenhouts as to which they disclaim beneficial ownership.
(4) Assumes that all options included with respect to the person have been
exercised and all Units included with respect to the person have been
exchanged for shares of Common Stock. The total number of shares
outstanding used in calculating the percentage assumes that none of the
options held by any other person have been exercised and that none of the
Units held by any other person have been exchanged for shares.
(5) Includes 89,467 shares which may be acquired upon the exercise of currently
exercisable options. Also includes Mr. Crossed's proportionate share of
Units owned by Conifer and its affiliates.
(6) Includes 53,841 shares which may be acquired upon the exercise of currently
exercisable options. Also includes 5,654 shares owned by Mrs. Tait's spouse
as to which she disclaims beneficial ownership. Mrs. Tait shares voting and
dispositive power with respect to 2,548 Units with her spouse.
(7) Includes 12,652 shares which may be acquired upon the exercise of currently
exercisable options.
(8) Includes 12,500 shares owned by immediate family members of Mr. August as
to which he disclaims beneficial ownership.
(9) Includes 3,500 shares which may be acquired upon the exercise of currently
exercisable options.
(10) Includes 9,652 shares which may be acquired upon the exercise of currently
exercisable options.
(11) Includes 9,435 shares which may be acquired upon the exercise of currently
exercisable options.
(12) Includes 9,425 shares which may be acquired upon the exercise of currently
exercisable options.
(13) Includes 417,514 shares which may be acquired upon the exercise of
immediately exercisable options.
(14) Assumes that all exercisable options included with respect to all listed
persons have been exercised.
(15) Assumes that all exercisable options included with respect to all listed
persons have been exercised and that all Units included with respect to all
listed persons have been exchanged for shares of Common Stock.
(16) Based on a report on Schedule 13G, dated February 11, 1997, reflecting that
Capital Growth Management Limited Partnership has shared dispositive and
sole voting power with respect to shares held in client accounts, as to
which Capital Growth disclaims beneficial ownership.
(17) Based on a report on Schedule 13G, dated February 11, 1998 filed jointly on
behalf of Miller Anderson & Sherrerd and Morgan Stanley Dean Witter
Discover & Co., reflecting that the two Investment Advisors have shared
voting and dispositive power with respect to 482,292 shares.
(18) Based on a report in Schedule 13G, dated December 10, 1997, reflecting that
Palisade Capital Management, L.L.C. holds the shares on behalf of clients
in accounts over which Palisade has sole voting and dispositive power.
(19) Based on a report on Schedule 13G dated February 14, 1998, filed jointly on
behalf of FMR Corp., Edward C. Johnson 3d and Abigail P. Johnson reflecting
that FMR Corp. has shared voting and dispositive power with respect to all
of such shares and sole voting power with respect to 117,200 of such
shares.
Page 40
(20) Based on a report on Form 13D, dated January 6, 1997, reflecting that the
State Treasurer, State of Michigan and the individual members of the
Michigan Department of Treasury's Bureau of Investments, which manages the
investments for four state-sponsored retirement systems: Public School
Retirement System, State Employees' Retirement System, Michigan State
Police Retirement System and Judges' Retirement System acquired a Class A
Limited Partnership Interest in the Operating Partnership which is
convertible, at the option of the State of Michigan, into 1,666,667 shares
of common stock, subject to adjustment, over which the State Treasurer
would have sole voting and dispositive power.
Item 13. Certain Relationships and Related Transactions.
Directors and executive officers of the Company received loans from the
Company of 50% of the purchase price of shares of Common Stock purchased by
them in connection with the Company's Executive and Director Stock Purchase
and Loan Program described above and commercial bank loans for the balance.
As of March 17, 1998, the indebtedness to the Company of each of the named
executive officers is: each of Messrs. Leenhouts and Crossed - $643,643,
Mrs. Tait - $206,000, Mr. Gardner - $186,981 and Mrs. McCormick - $183,743.
Home Leasing, in consideration of a portion of the Units and cash received
by it in connection with the formation of the Company, assigned to HP
Management certain management contracts between it and certain entities of
which it is a general partner. As a general partner of those entities, Home
Leasing Corporation (and, indirectly, Norman and Nelson Leenhouts) has an
ongoing interest in such management contracts. In addition, Conifer
assigned to the Company and its affiliates certain management contracts
between Conifer and entities in which it is the general partner. As a
general partner, Conifer (and indirectly, Richard Crossed) has an ongoing
interest in such management contracts.
Page 41
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1 and 2. Financial Statements and Schedules
The financial statements and schedules listed below are filed as
part of this annual report on the pages indicated.
HOME PROPERTIES OF NEW YORK, INC.
Consolidated Financial Statements
Page
Report of Independent Accountants F-2
Consolidated Balance Sheets
as of December 31, 1997 & 1996 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
Schedule III:
Real Estate and Accumulated Depreciation F-23
(a) 3. Exhibits
2.1 Agreement among Home Properties of New York, Inc. and Philip J. Solondz,
Daniel Solondz and Julia Weinstein relating to Royal Gardens I, together
with Amendment No. 1.
2.2 Agreement among Home Properties of New York, Inc. and Philip Solondz and
Daniel Solondz relating to Royal Gardens II, together with Amendment No. 1.
2.3 Purchase and Sale Agreement dated July 25, 1997 by and between Home
Properties of New York, L.P. and Louis S. and Molly S. Wolk Foundation.
2.4 Purchase and Sale Agreement dated April 30, 1997 between Home Properties of
New York, L.P. and Briggs Wedgewood Associates, L.P.
Page 42
2.5 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties
of New York, L.P. and Chesfield Partnerhsip.
2.6 Agreement and Plan of Merger dated July 31, 1997 between Home Properties of
New York, L.P. and Valspring Partnership.
2.7 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties
of New York, L.P. and Exmark Partnerhsip.
2.8 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties
of New York, L.P. and New Orleans East Limited Partnership.
2.9 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties
of New York, L.P. and Glenvwk Partnership.
2.10 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties
of New York, L.P. and PK Partnership.
2.11 First Amendment to Agreement and Plan of Merger, dated September 1, 1997
between Home Properties of New York, L.P. and PK Partnerhsip and its
partners.
2.12 First Amendment to Agreement and Plan of Merger, dated September 1, 1997
between Home Properties of New York, L.P. and NOP Corp. and Norpark
Partnership.
2.13 Contribution Agreement dated July 31, 1997 between Home Properties of New
York, L.P. and Lamar Partnership.
2.14 Agreement and Plan of Merger, dated July 31, 1997 between Home Properties
of New York, L.P. and Curren Partnership.
2.15 Contribution Agreement, dated October __, 1997 between Home Properties of
New York, L.P. and Berger/Lewiston Associates Limited Partnership;
Stephenson-Madison Heights Company Limited Partnership; Kingsley-Moravian
Company Limited Partnership; Woodland Garden Apartments Limited
Partnership; B&L Realty Investments Limited Partnership; Southpointe Square
Apartments Limited Partnership; Greentrees Apartments limited Partnership;
Big Beaver-Rochester Properties Limited Partnership; Century Realty
Investment Company Limited Partnership.
2.16 Agreement among Home Properties of New York, L.P. and Erie Partners, L.L.C.
relating to Woodgate Place Apartments, together with Amendment No. 1
Page 43
2.17 Agreement among Home Properties of New York, L.P. and Mid-Island Limited
Partnership relating to Mid-Island Estates, together with Amendment No. 1.
2.16 Purchase and Sale Agreement among Home Properties of New York, L.P. and
Anthony M. Palumbo and Daniel Palumbo.
2.19 Purchase and Sale Agreements dated June 17, 1997 among Home Properties of
New York, L.P. and various individuals relating to Hill Court Apartments
South and Hudson Arms Apartments, together with a letter amendment dated
September 24, 1997.
2.20 Contract of Sale, dated October 20,1997 between Home Properties of New
York, L.P. and Hudson Palisades Associates relating to Cloverleaf
Apartments.
2.21 Contribution Agreement, dated November 127, 1997 among Home Properties of
New York, L.P. and various trusts relating to Scotsdale Apartments.
2.22 Contribution Agreement, dated November 7, 1997 among Home Properties of New
York, L.P. and Donald Schefmeyer and Stephen W. Hall relating to Candlewood
Apartments, together with Amendment No. One dated December 3, 1997.
3.1 Articles of Incorporation of Home Properties of New York, Inc.
3.2 Articles of Amendment and Restatement of Articles of Incorporation of Home
Properties of New York, Inc.
3.3 Amended and Restated By-Laws of Home Properties of New York, Inc. (Revised
12/30/96).
4.1 Form of certificate representing Shares of Common Stock.
4.2 Agreement of Home Properties of New York, Inc. to file instruments defining
the rights of holders of long-term debt of it or its subsidiaries with the
Commission upon request.
4.3 Credit Agreement between Manufacturers and Traders Trust Company, Home
Properties of New York, L.P. and Properties of New York, Inc.
4.4 Amendment Agreement between Manufacturers and Traders Trust Company, Home
Properties of New York, L.P. and Home Properties of New York, Inc. amending
the Credit Agreement.
4.5 Mortgage Spreader, Consolidation and Modification Agreement between
Manufacturers and Traders Trust Company and Home Properties of New York,
L.P., together with form of Mortgage, Assignment of Leases and Rents and
Security Agreement incorporated therein by reference.
4.6 Mortgage Note made by Home Properties of New York, L.P. payable to
Manufacturers and Traders Trust Company in the principal amount of
$12,298,000.
4.7 Demand Grid Note, dated August 22, 1995, from Home Properties of New York,
L.P. to Manufacturers and Traders Trust Company in the maximum principal
amount of $15,000,000.
4.8 Spreader, Consolidation, Modification and Extension Agreement between Home
Properties of New York, L.P. and John Hancock Mutual Life Insurance
Company, dated as of October 26, 1995, relating to indebtedness in the
principal amount of $20,500,000.
4.9 Demand Grid Note, dated August 22, 1996 from the Operating Partnership to
Manufacturers and Traders Trust Company in the maximum principal amount of
$25,000,000.
Page 44
4.10 Demand Grid Note, dated March 5, 1997 from the Operating Partnership to
Manufacturers and Traders Trust Company in the maximum principal amount of
$35,000,000.
4.11 Amended and Restated Stock Benefit Plan of Home Properties of New York,
Inc. 4.12 Amended and Restate Dividend Reinvestment, Stock Purchase,
Resident Stock Purchase and Employee Stock Purchase Plan.
10.1 Second Amended and Restated Agreement of Limited Partnership of Home
Properties of New York, L.P.
10.2 Amendments No. One through Eight to the Second Amended and Restated
Agreement of Limited Partnership of Home Properties of New York, L.P.
10.3 Articles of Incorporation of Home Properties Management, Inc.
10.4 By-Laws of Home Properties Management, Inc.
10.5 Articles of Incorporation of Conifer Realty Corporation.
10.6 By-Laws of Conifer Realty Corporation.
10.7 Employment Agreement between Home Properties of New York, L.P. and Norman
P.Leenhouts.
10.8 Employment Agreement between Home Properties of New York, L.P. and Nelson
B. Leenhouts.
10.9 Employment Agreement between Home Properties of New York, L.P. and Richard
J. Crossed.
10.10Indemnification Agreement between Home Properties of New York, Inc. and
certain officers and directors.
10.11Indemnification Agreement between Home Properties of New York, Inc. and
Richard J. Crossed.
10.12Indemnification Agreement between Home Properties of New York, Inc. and
Alan L. Gosule.
10.13Home Properties of New York, Inc. 1994 Stock Benefit Plan.
10.14Registration Rights Agreement among Home Properties of New York, Inc., Home
Leasing Corporation, Leenhouts Ventures, Norman P. Leenhouts, Nelson B.
Leenhouts, Amy L. Tait, David P. Gardner, Ann M. McCormick, William E.
Beach, Paul O'Leary, Richard J. Struzzi, Robert C. Tait, Timothy A.
Florczak and Laurie Tones.
10.15Lockup Agreements by Home Properties of New York, Inc. and Conifer Realty,
Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and
John F. Fennessey.
Page 45
10.16Contribution Agreement between Home Properties of New York, L.P. and
Conifer Realty, Inc., Conifer Development, Inc., .Richard J. Crossed, Peter
J. Obourn and John H. Fennessey.
10.17Amendment to Contribution Agreement between Home Properties of New York,
L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J.
Crossed, Peter J. Obourn and John H. Fennessey.
10.18Agreement of Operating Sublease, dated October 1, 1986, among KAM, Inc.,
Morris Massry and Raintree Island Associates, as amended by Letter
Agreement Supplementing Operating Sublease dated October 1, 1986.
10.19Second Amended and Restated Incentive Compensation Plan of Home Properties
of New York, Inc.
10.20Indemnification and Pledge Agreement between Home Properties of New York,
L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J.
Crossed, Peter J. Obourn and John H. Fennessey.
10.21Form of Term Promissory Note payable to Home Properties of New York, Inc.
by officers and directors in association with the Executive and Director
Stock Purchase and Loan Program.
10.22Form of Pledge Security Agreement executed by officers and directors in
connection with Executive and Director Stock Purchase and Loan Program.
10.23Schedule of Participants, loan amounts and shares issued in connection
with the Executive and Director Stock Purchase and Loan Program.
10.24Guaranty by Home Properties of New York , Inc. and Home Properties of New
York, L.P. to The Chase Manhattan Bank of the loans from The Chase
Manhattan Bank to officers and directors in connection with the Executive
and Director Stock Purchase and Loan Program.
10.25Subordination Agreement between Home Properties of New York, Inc. and The
Chase Manhattan Bank relating to the Executive and Director Stock Purchase
and Loan Program.
10.26Partnership Interest Purchase Agreement, dated as of December 23, 1996
among Home Properties of New York, Inc., Home Properties of New York, L.P.
and State of Michigan Retirement Systems.
10.27Registration Rights Agreement, dated as of December 23, 1996 between Home
Properties of New York, Inc. and State of Michigan Retirement Systems.
10.28Lock-Up Agreement, dated December 23, 1996 between Home Properties of New
York, Inc. and State of Michigan Retirement Systems.
10.29Contract of Sale between Lake Grove Associates Corp. and Home Properties
of New York, L.P., dated December 17, 1996, relating to the Lake Grove
Apartments. . 10.30 Credit Agreement dated as of September 4, 1997 among
Home Properties of New York, L.P. and The Chase Manhattan Bank, as
Administrative Agent, Chase Securities Inc., as Arranger, Manufacturers and
Traders Trust Company, as Co-Agent.
Page 46
10.31Amendment No. One, to Credit Agreement, dated as of September 4, 1997,
among Home Properties of New York, L.P., a New York limited partnership,
the Lenders party hereto, The Chase Manhattan Bank, as Administrative
Agent, and Manufacturers and Traders Trust Company, as Co-Agent.
10.32Promissory Note, dated September 4, 1997 from Home Properties of New York,
L.P. to The Chase Manhattan Bank.
10.33Promissory Note, dated September 4, 1997 from Home Properties of New York,
L.P. to Manufacturers and Traders Trust Company.
11 Computation of Per Share Earnings Schedule
21 List of Subsidiaries of Home Properties of New York, Inc.
23 Consent of Coopers & Lybrand
27 Financial Data Schedule
27.1 Restated Financial Data Schedule for the nine months ended September 30,
1997
27.2 Restated Financial Data Schedule for the six months ended June 30, 1997
27.3 Restated Financial Data Schedule for the three months ended March 31, 1997
27.4 Restated Financial Data Schedule for the year ended December 31, 1996
27.5 Restated Financial Data Schedule for the nine months ended September 30,
1996
27.6 Restated Financial Data Schedule for the six months ended June 30, 1996
27.7 Restated Financial Data Schedule for the three months ended March 31, 1996
Page 47
A Form 8-K, dated October 28, 1997, was filed on December 23, 1997 with respect
to Item 5 optional disclosure as to the increase of 800,000 in authorized shares
under the company's Dividend Reinvestment, Stock Purchase, Resident Stock
Purchase and Employee Stock Purchase Plan.
Amendment No. 1 to Form 8-K, dated September 30, 1997, was filed on December 30,
1997 and included the following financial statements:
* Audited statement of revenues and certain expenses of 1600 East Avenue
Apartments for the three years ended December 31, 1996;
* Audited statement of revenues and certain expenses of the Palumbo
Properties for the year ended December 31, 1996;
* Pro forma condensed consolidated balance sheet of the Company as of
September 30, 1997 and related notes (unaudited);
* Pro forma consolidated statement of operations of the Company for the
nine months ended September 30, 1997 and for the year ended December
31, 1996 (unaudited);
* Notes to the pro forma consolidated statement of operations of the
Company for the nine months ended September 30, 1997 and for the year
ended December 31, 1996 (unaudited).
Amendment No. 1 to Form 8-K, dated October 7, 1997 was filed January 12, 1998
and included the following financial statements:
* Audited statement of revenues and certain expenses of the Detroit
Acquisition Properties for the year ended December 31, 1996;
* Pro forma condensed consolidated balance sheet of the Company as of
September 30, 1997 and related notes (unaudited);
* Pro forma condensed consolidated statement of operations of the
Company for the nine months ended September 30, 1997 and for the year
ended December 31, 1996 (unaudited);
* Notes to the pro forma consolidated statement of operations of the
Company for the nine months ended September 30, 1997 and for the year
ended December 31, 1996 (unaudited).
A Form 8-K dated October 31, 1997 was filed on February 20, 1998 reporting
on the acquisition of several properties.
(c) Exhibits
See Item 14(a)(3) above.
(d) Financial Statement Schedules
See Index to Financial Statements attached hereto on page
F-1 of this Form 10-K.
Page 48
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Home Properties of New York, Inc. certifies that it has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HOME PROPERTIES OF NEW YORK, INC.
By: /s/ Norman P. Leenhouts
Norman P. Leenhouts
Chairman of the Board, Co-Chief
Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons on behalf of Home Properties of New
York, Inc. and in the capacities and on the dates indicated.
Signature Title Date
/s/ Norman P. Leenhouts Director, Chairman of the March 23, 1998
Norman P. Leenhouts Board of Directors and
Co-Chief Executive
Officer (Co-Principal
Executive Officer)
/s/ Nelson B. Leenhouts Director, President March 23, 1998
Nelson B. Leenhouts and Co-Chief Executive
Officer (Co-Principal
Executive Officer)
/s/ Richard J. Crossed Director, Executive Vice March 23, 1998
Richard J. Crossed President
/s/ Amy L. Tait Director, Executive Vice March 23, 1998
Amy L. Tait President
/s/ David P. Gardner Vice President, Chief Financial March 23, 1998
David P. Gardner Officer and Treasurer
(Principal Financial and
Accounting Officer)
Page 49
Signature Title Date
/s/ Burton S. August, Sr. Director March 23, 1998
Burton S. August, Sr.
/s/ William Balderston, III Director March 23, 1998
William Balderston, III
/s/ Alan L. Gosule Director March 23, 1998
Alan L. Gosule
/s/ Leonard F. Helbig, III Director March 23, 1998
Leonard F. Helbig, III
/s/ Roger W. Kober Director March 23, 1998
Roger W. Kober
/s/ Clifford W. Smith, Jr. Director March 23, 1998
Clifford W. Smith, Jr.
/s/ Paul L. Smith Director March 23, 1998
Paul L. Smith
Page 50
HOME PROPERTIES OF NEW YORK, INC.
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Page
Report of Independent Accountants F-2
Consolidated Balance Sheets
as of December 31, 1997 & 1996 F-3
Consolidated Statements of Operations
for the Years Ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Stockholders' Equity
for the Years Ended December 31, 1997, 1996 and 1995 F-5
Consolidated Statements of Cash Flows
for the Years Ended December 31, 1997, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
Schedule III:
Real Estate and Accumulated Depreciation F-23
Page F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Home Properties of New York, Inc.
We have audited the accompanying consolidated financial statements and the
financial statement schedule of Home Properties of New York, Inc. listed in item
14(a) of this Form 10-K. These financial statements and the financial statement
schedule are the responsibility of the Home Properties of New York, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Home Properties of
New York, Inc. as of December 31, 1997 and 1996, and the consolidated results of
operations and cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ Coopers & Lybrand L.L.P.
Rochester, New York
February 2, 1998
Page F-2
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 and 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1997 1996
ASSETS
Real estate:
Land $ 62,640 $ 15,080
Buildings, improvements and equipment 462,488 246,693
525,128 261,773
Less: accumulated depreciation ( 46,531) ( 40,237)
Real estate, net 478,597 221,536
Cash and cash equivalents 3,809 1,523
Cash in escrows 10,211 5,637
Accounts receivable 3,531 2,185
Prepaid expenses 5,305 2,496
Deposit 605 1,900
Investment in and advances to affiliates 35,585 8,254
Deferred charges 1,637 1,616
Other assets 4,543 3,484
Total assets $543,823 $248,631
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $210,096 $105,176
Line of Credit 8,750 -
Accounts payable 5,082 2,024
Accrued interest payable 1,077 601
Accrued expenses and other liabilities 4,374 2,525
Security deposits 6,165 2,545
Total liabilities 235,544 112,871
Minority interest 156,847 52,730
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Common stock, $.01 par value; 30,000,000
shares authorized; 9,317,556 and 6,144,498 shares
issued and outstanding at December 31, 1997 and
1996, respectively 93 61
Excess stock, $.01 par value; 10,000,000
shares authorized; no shares issued - -
Additional paid-in capital 176,021 98,092
Distributions in excess of accumulated earnings ( 19,700) ( 13,062)
Treasury stock, at cost, 20,000 shares ( 426) -
Officer and director notes for stock purchases ( 4,556) ( 2,061)
Total stockholders' equity 151,432 83,030
Total liabilities and stockholders' equity $543,823 $248,631
The accompanying notes are an integral part of these consolidated financial
statements.
Page F-3
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1997 1996 1995
Revenues:
Rental income $64,002 $42,214 $31,705
Property other income 2,222 1,025 1,062
Other income 3,473 2,431 1,534
Total Revenues 69,697 45,670 34,301
Expenses:
Operating and maintenance 31,317 21,859 15,911
General and administrative 2,255 1,482 1,200
Interest 11,967 9,208 6,432
Depreciation and amortization 11,200 8,077 6,258
Total Expenses 56,739 40,626 29,801
Income before loss on disposition of
property, minority interest and
extraordinary item 12,958 5,044 4,500
Loss on disposition of property 1,283 - -
Income before minority interest and
extraordinary item 11,675 5,044 4,500
Minority interest 4,248 897 455
Income before extraordinary item 7,427 4,147 4,045
Extraordinary item, prepayment
penalties, net of $737 in 1997 and
$141 in 1995 allocated to minority
interest (1,037) - (1,249)
Net Income $ 6,390 $ 4,147 $ 2,796
Basic earnings per share data:
Income before extraordinary item $ 1.00 $ .74 $ .75
Extraordinary item ($ .14) - ($ .23)
Net income $ .86 $ .74 $ .52
Diluted earnings per share data:
Income before extraordinary item $ .98 $ .74 $ .75
Extraordinary item ($ .14) - ($ .23)
Net income $ .84 $ .74 $ .52
Weighted average number of shares outstanding:
Basic 7,415,888 5,601,027 5,408,474
Diluted 7,558,167 5,633,004 5,408,474
The accompanying notes are an integral part of these consolidated financial
statements.
Page F-4
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Officer/
Distributions Director
Additional in Excess of Notes for
Common Stock Paid-In Accumulated Treasury Stock
Shares Amount Capital Earnings Stock Purchase
Balance, January 1, 1995 5,408,434 $54 $ 83,406 ($ 1,519) $ - $ -
Issuance of common stock 383 7
Net income 2,796
Dividends paid ($1.66 per share) ( 8,964)
Balance, December 31, 1995 5,408,817 54 83,413 ( 7,687) - -
Issuance of common stock, net 735,681 7 14,679 ( 2,061)
Net income 4,147
Dividends paid ($1.69 per share) ( 9,522)
Balance, December 31, 1996 6,144,498 61 98,092 ( 13,062) - ( 2,061)
Issuance of common stock, net 3,128,750 31 77,087 ( 2,272)
Interest on notes for stock ( 223)
purchase
Net income 6,390
Conversion of UPREIT Units for stock 44,308 1 842
Purchase of treasury stock (426)
Dividends paid ($1.74 per share) ( 13,028)
Balance, December 31, 1997 9,317,556 $93 $176,021 ( $19,700) $ (426) ($4,556)
The accompanying notes are an integral part of these consolidated financial
statements.
Page F-5
HOME PROPERTIES OF NEW YORK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(IN THOUSANDS)
1997 1996 1995
Cash flows from operating activities:
Net income $ 6,390 $ 4,147 $ 2,796
Adjustments to reconcile net income to net
cash provided by operating activities:
Extraordinary item - deferred loan costs - - 624
Equity in income of HP Management and Conifer Realty ( 92) (142) (35)
Income allocated to minority interest 4,248 897 455
Extraordinary item allocated to minority interest ( 737) - (141)
Depreciation and amortization 11,938 8,667 6,914
Loss on disposition of property 1,283 - -
Changes in assets and liabilities:
Other assets ( 4,748) (1,199) (1,652)
Accounts payable and accrued liabilities 9,003 1,871 850
Total adjustments 20,895 10,094 7,015
Net cash provided by operating activities 27,285 14,241 9,811
Cash flows used in investing activities:
Purchase of properties, net of mortgage notes assumed
and UPREIT Units issued ( 71,876) (14,026) (9,402)
Additions to properties ( 15,962) (8,843) (8,179)
Deposit on property ( 605) (1,900) -
Advances to affiliates ( 41,121) (15,379) (5,697)
Payments on advances to affiliates 13,791 14,507 1,930
Proceeds from sale of properties 13,313 - -
Net cash used in investing activities (102,460) (25,641) (21,348)
Cash flows from financing activities:
Proceeds from sale of common stock 74,625 12,625 7
Purchase of treasury stock ( 426) - -
Proceeds from mortgage notes payable 72,175 4,530 45,292
Payments of mortgage notes payable ( 54,388) (21,822) (28,429)
Proceeds from line of credit 153,650 34,030 17,677
Payments on line of credit (144,900) (38,530) (13,177)
Additions to deferred loan costs ( 762) (243) (882)
Additions to cash escrows ( 4,574) (1,883) 196
Dividends and distributions paid ( 17,939) (11,537) (9,970)
Capital contribution to minority interest - 34,941 -
Net cash provided by financing activities 77,461 12,111 10,714
Net increase (decrease) in cash 2,286 711 (823)
Cash and cash equivalents:
Beginning of year 1,523 812 1,635
End of year $ 3,809 $ 1,523 $ 812
The accompanying notes are an integral part of these consolidated financial
statements.
Page F-6
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1 ORGANIZATION AND BASIS OF PRESENTATION
Organization
Home Properties of New York, Inc. (the " Company " ) was formed in
November 1993, as a Maryland corporation and is engaged primarily in
the ownership, management, acquisition and development of residential
apartment communities in the Northeastern, Mid-Atlantic and Midwestern
United States. As of December 31, 1997, the Company operated 158
apartment communities with 21,316 apartments. Of this total, the
Company owned 63 communities, consisting of 14,048 apartments, managed
as general partner 67 partnerships that owned 4,782 apartments and fee
managed 2,486 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 56.1% (68.2% at December 31, 1996)
general partnership interest in the Operating Partnership. The
remaining 43.9% (31.8% at December 31, 1996) is reflected as Minority
Interest in these consolidated financial statements. Investments in
which the Company does not have control are presented on the equity
method. All significant intercompany balances and transactions have
been eliminated in these consolidated financial statements.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Real Estate
Real estate is recorded at the lower of cost or net realizable value.
Costs related to the acquisition, development, construction and
improvement of properties are capitalized. Interest costs are
capitalized until construction is substantially complete. When retired
or otherwise disposed of, the related cost and accumulated
depreciation are cleared from the respective accounts and the net
difference, less any amount realized from disposition, is reflected in
income. There was $63 of interest capitalized in 1996. Ordinary
repairs and maintenance are expensed as incurred.
The Company quarterly reviews its properties in accordance with the
Statement of Financial Accounting Standards No. 121 "Accounting for
the Impairment of Long Lived Assets" to determine if its carrying
costs will be recovered from future operating cash flows. In cases
where the Company does not expect to recover its carrying costs, the
Company recognizes an impairment loss. No such losses have been
recognized to date.
Depreciation
Properties are depreciated using a straight-line method over the
estimated useful lives of the assets as follows: buildings,
improvements and equipment - 5-40 years; and tenant improvements -
life of related lease. Depreciation expense charged to operations was
$11,104, $7,979 and $6,499 for the years ended December 31, 1997, 1996
and 1995, respectively.
Page F-7
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, cash and
cash equivalents include all cash and highly liquid investments
purchased with original maturities of three months or less. The
Company estimates that the fair value of cash equivalents approximates
the carrying value due to the relatively short maturity of these
instruments.
Cash in Escrows
Cash in escrows consists of cash restricted under the terms of various
loan agreements to be used for the payment of property taxes and
insurance as well as required replacement reserves and tenant security
deposits for residential properties.
Deferred Charges
Costs relating to the financing of properties and interest rate
reduction agreements are deferred and amortized over the life of the
related agreement. The straight-line method, which approximates the
effective interest method, is used to amortize all financing costs.
The range of the terms of the agreements are from 1-32 years.
Accumulated amortization was $1,791 and $1,349 as of December 31, 1997
and 1996, respectively.
Goodwill
Goodwill, included in other assets, represents the excess of the
purchase price of acquired companies over the estimated fair value of
the tangible and intangible net assets acquired. Goodwill is being
amortized on a straight-line basis over forty years. Accumulated
amortization was $181 and $85 as of December 31, 1997 and 1996,
respectively.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Advertising
Advertising expenses are charged to operations during the year in
which they were incurred. Advertising expenses incurred and charged to
operations were approximately $1,291, $1,256 and $870 for the years
ended December 31, 1997, 1996 and 1995, respectively.
Page F-8
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue Recognition
The Operating Partnership leases its residential properties under
leases with terms generally one year or less. Rental income is
recognized when earned. Property other income, which consists
primarily of income from operation of laundry facilities,
administrative fees, garage and carport rentals and miscellaneous
charges to residents, is recognized when earned.
The Operating Partnership receives development and other fee income
from properties in the development phase. This fee income is
recognized on the percentage of completion method.
Income Taxes
The Company has elected to be taxed as a real estate investment trust
( " REIT " ) under the Internal Revenue Code of 1986, as amended,
commencing with the taxable year ended December 31, 1994. As a result,
the Company generally will not be subject to Federal or State income
taxation at the corporate level to the extent it distributes annually
at least 95% of its REIT taxable income to its shareholders and
satisfies certain other requirements. Accordingly, no provision has
been made for federal income taxes in the accompanying consolidated
financial statements for the years ended December 31, 1997, 1996 and
1995. Stockholders are taxed on dividends and must report such
dividends as either ordinary income, capital gains, or as return of
capital.
Earnings Per Common Share
The Company has adopted Statement of Financial Accounting Standards
(SFAS) No. 128, "Earnings per Share", which was issued by the
Financial Accounting Standards Board in February, 1997. SFAS No. 128
requires dual presentation of basic earnings per share (EPS) and
diluted EPS on the face of all statements of earnings for periods
ending after December 15, 1997. Basic 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. Reported EPS in prior periods have been
restated to conform with the provisions of SFAS No. 128.
Page F-9
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Earnings Per Common Share (Continued)
Income before extraordinary item, extraordinary item and net income
are 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 years ended
December 31, 1997, 1996 and 1995 is as follows:
1997 1996 1995
Basic weighted average number of shares outstanding 7,415,888 5,601,027 5,408,474
Effect of dilutive stock options 142,279 31,977 -
Diluted weighted average number of shares outstanding 7,558,167 5,633,004 5,408,474
Unexercised stock options to purchase 116,500, 52,146, and 447,532
shares of the Company's common stock were not included in the
computations of diluted EPS because the options' exercise prices were
greater than the average market price of the Company's stock during
the years ended December 31, 1997, 1996 and 1995, respectively.
Account Reclassifications
Certain account balances at December 31, 1996 and December 31, 1995
were reclassified to conform to account classifications used by the
Company at December 31, 1997. These changes had no effect on reported
results of operations or financial position.
Recent Accounting Pronouncements
During June, 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS 130), which requires that an enterprise
report the change in its net assets from nonowner sources by major
components and as a single total. The Board also issued Statements of
Financial Accounting Standards No. 131, "Disclosures about Segments of
an Enterprise and Related Information" (SFAS 131), which establishes
annual and interim reporting standards for an enterprise's operating
segments and related disclosures about its products, services,
geographic areas, and major customers. Adoption of these statements
will not impact the Company's consolidated financial position, results
of operations or cash flows, and any effect will be limited to the
form and content of its disclosures. Both statements are effective for
fiscal years beginning after December 15, 1997, with earlier
application permitted.
Page F-10
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
3 INVESTMENT IN AND ADVANCES TO AFFILIATES
The Company has investments in and advances to approximately 70
limited partnerships where the Company acts as managing general
partner. In addition, there are investments in other affiliated
entities. The following is summarized financial information for the
investment in and advances to affiliates as of and for the years ended
December 31, 1997 and 1996:
1997 1996
Balance Sheets:
Real estate, net $141,625 $117,838
Other assets 23,319 21,441
Total assets $164,944 $139,279
Mortgage notes payable $113,380 $115,175
Advances from general partner 27,577 3,447
Other liabilities 11,946 9,635
Partners' equity 12,041 11,022
Total liabilities and partners'
equity $164,944 $139,279
1997 1996 1995
Operations:
Gross revenues $ 26,536 $22,495 $ 3,643
Operating expenses (13,817) (11,628) (2,374)
Mortgage interest expense (6,699) (5,417) (836)
Depreciation and amortization (7,359) (6,325) (368)
Net income (loss) $ (1,339) $ (875) $ 65
Company's share (included in
property other income) $ 193 $ (223) $ 168
Reconciliation of interests in the underlying net assets to the
Company's carrying value of property investments in and advances to
affiliates:
1997 1996
Partners' equity, as above $12,041 $11,022
Equity of other partners 9,982 9,180
Company's share of investments in limited
partnerships 2,059 1,842
Advances to limited partnerships, as above 27,577 3,447
Company's investment in and advances to limited
partnerships 29,636 5,289
Company's investment in Management Companies
(see Note 8) 607 514
Company's advances to Management Companies 5,342 2,451
Carrying value of investments in and advances to
affiliates $35,585 $ 8,254
Page F-11
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4 MORTGAGE NOTES PAYABLE
Mortgage notes, collateralized by certain properties, are as follows:
December 31 Current Fixed Maturity
1997 1996 Interest Rate Date
Unsecured note payable $ 38 $ 261 2.50 1998
Landon Court 1,195 - 7.75 1998
Conifer Court - 412 10.53 N/A
Perinton & Riverton 11,983 12,087 6.75 * 2000
Westminster 3,230 3,230 7.22 * 2000
Philadelphia (4 properties) 10,437 - 8.50 2001
Philadelphia (2 properties) 3,043 - 8.00 2001
New York (4 properties) 19,867 20,172 7.75 2002
Royal Gardens 11,919 - 7.66 2002
Williamstowne Village 9,868 9,980 7.37 * 2002
Chesterfield 6,825 - 8.25 2003
Curren Terrace 9,731 - 8.355 2003
Fairview & Finger Lakes 8,008 8,090 7.71 * 2003
Glen Manor 3,752 - 8.125 2004
Springcreek & Meadows 3,200 3,254 7.63 * 2004
Idylwood 9,390 9,468 8.625 2005
Mid-Island Estates 6,675 - 7.25 * 2006
Newcastle 6,150 6,250 6.00 * 2006
Raintree Island 6,495 6,582 8.50 2006
Woodgate Place 3,473 - 7.865 2007
Detroit Portfolio (10 properties) 50,000 - 7.51 2008
Hamlet Court 1,812 1,832 8.25 * 2008
Valley Park South 10,175 9,650 6.93 2008
Conifer Village 2,910 3,045 7.20 2010
Harborside 4,207 5,061 8.92 2014
Fairways at Village Green 4,513 4,584 8.23 2019
Raintree Island 1,200 1,218 8.50 2020
Total/Average $210,096 $105,176 7.68
*The interest rate on these mortgages will convert to a variable rate
on various dates between 1999 and 2003 and continue until maturity.
Principal payments on the mortgage notes payable for years subsequent
to December 31, 1997 are as follows:
1998 $ 4,231
1999 3,393
2000 18,202
2001 15,463
2002 40,900
Thereafter 127,907
$210,096
Page F-12
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
4 MORTGAGE NOTES PAYABLE (Continued)
The Company determines the fair value of the mortgage notes payable
based on the discounted future cash flows at a discount rate that
approximates the Company's current effective borrowing rate for
comparable loans. Based on this analysis, the Company has determined
that the fair value of the mortgage notes payable approximates
$217,594 at December 31, 1997.
The Company has incurred prepayment penalties on debt restructurings
which are accounted for as extraordinary items in the statement of
operations. Prepayment penalties were approximately $1,774 and $1,390
for the years ended December 31, 1997 and 1995, respectively. The 1997
paydowns totaled $34,626 from one debt instrument which was financed
by one new borrowing of $50,000. The 1995 paydowns totaled $39,080
from six debt instruments, which were financed by three new borrowings
in excess of $40,000.
5 LINE OF CREDIT
As of December 31, 1997, the Company had an unsecured line of credit
of $50,000 with an available balance of $41,250. The line of credit
expires on September 4, 1999, with a one year extension at the
Company's option. Borrowings bear interest at 1.25% over the one-month
LIBOR rate or at a money market rate as quoted on a daily basis by the
lending institutions. The weighted average daily money market interest
rate (the rate used by the Company) for the month of December, 1997
was 6.86%.
6 MINORITY INTEREST
The changes in minority interest for the two years ended December 31,
1997 are as follows:
1997 1996
Balance, beginning of year $ 52,730 $ 8,739
Issuance of UPREIT Units associated
with property acquisitions 106,359 10,168
Proceeds from private placement,
net of associated costs - 34,941
Exchange of Units for Shares (843) -
Net income 3,511 897
Distributions ( 4,910) (2,015)
Balance, end of year $156,847 $52,730
7 STOCKHOLDERS' EQUITY
Dividend Reinvestment Plan
In November, 1995, the Company adopted the Dividend Reinvestment,
Stock Purchase, Resident Stock Purchase and Employee Stock Purchase
Plan (the " Plan " ). The Plan provides the stockholders of the
Company an opportunity to automatically invest their cash dividends at
a discount of 3% from the market price. In addition, eligible
participants may make monthly or other voluntary cash investments,
also typically at a discount of 3% from the market price, in shares of
common stock. A total of $34 million and $12 million, net of officer
and director notes, was raised through this program during 1997 and
1996, respectively.
Page F-13
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
7 STOCKHOLDERS' EQUITY (Continued)
Officer and Director Notes for Stock Purchases
On August 12, 1996, eighteen officers and the six independent
directors purchased an aggregate of 208,543 shares of common stock
through the Plan at the price of $19.79. The purchases were financed
50% from a bank loan and 50% by a recourse loan from the Company. The
Company loans bear interest at 7% per annum and mature in August,
2016. The Company loans are subordinate to the above-referenced bank
loans, and are collateralized by pledges of the 208,543 common shares.
The loans are expected to be repaid from the regular quarterly
dividends paid on the shares of common stock pledged, after the
corresponding bank loans are paid in full.
On November 10, 1997, twenty-one officers and five of the independent
directors purchased an aggregate of 169,682 shares of common stock
through the Plan at the price of $26.66. The purchases were financed
50% from a bank loan and 50% by a recourse loan from the Company. The
Company loans bear interest at 6.7% per annum and mature in November,
2017. The Company loans are subordinate to the above-referenced bank
loans, and are collateralized by pledges of the 169,682 common shares.
The loans are expected to be repaid from the regular quarterly
dividends paid on the shares of common stock pledged, after the
corresponding bank loans are paid in full.
Dividends
Stockholders are taxed on dividends and must report such dividends as
either ordinary income, capital gains, or as return of capital. The
appropriate amount of each per common share is as follows:
Ordinary Income Return of Capital
1995 46.2% 53.8%
1996 51.1% 48.9%
1997 50.1% 49.9%
Operating Partnership Units/Interests
Units in the Operating Partnership ("UPREIT Units") are exchangeable
on a one-for-one basis into common shares. On December 30, 1996, $35
million was raised in a private placement through the sale of a Class
A Limited Partnership Interest to a state pension fund. The interest,
which can be converted into 1,666,667 shares of common stock, will
receive a preferred return equal to the greater of: (a) 9.25% on the
original investment during the first two years declining to 9.0%
thereafter, or (b) the actual dividends paid to common shareholders on
1,666,667 shares. Any unconverted interest can be redeemed without
premium by the Company after ten years. Proceeds of the transaction
were used to fund acquisitions and reduce debt.
At December 31, 1997, 9,317,556 common shares and 7,301,741 UPREIT
Units/interests were outstanding, for a total of 16,619,297.
Page F-14
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8 MANAGEMENT COMPANIES
Certain property management, leasing and development activities are
performed by Home Properties Management, Inc. and Conifer Realty Corp.
(the "Management Companies"). The Management Companies issued
non-voting common stock to the Operating Partnership in exchange for
management contracts for residential, commercial, and development
managed properties and certain other assets. This exchange entitles
the Operating Partnership to receive 99% of the economic interest of
each Management Company. The remaining 1% economic interest and voting
stock were issued to certain inside directors of the Company.
The Management Companies receive development, construction and other
fee income from properties in the development phase. This fee income
is recognized on the percentage of completion method. The Management
Companies are accounted for under the equity method.
The Management Companies provide property management and
administrative services to certain real estate and other entities. In
consideration for these services, the Management Companies receive
monthly management fees generally based on a percentage of revenues or
costs incurred. Management fees are recognized as revenue when they
are earned.
The Company's share of income from the Management Companies was $92,
$142 and $35 for the years ended December 31, 1997, 1996 and 1995,
respectively. Summarized combined financial information of the
Management Companies at and for the years ended December 31, 1997,
1996 and 1995 is as follows:
1997 1996 1995
Management fees $3,141 $2,942 $1,043
Development and construction
management fees 3,010 1,971 320
General and administrative (5,561) (4,448) (1,226)
Other expenses ( 497) ( 322) ( 101)
Net income $ 93 $ 143 $ 36
Total assets $6,037 $3,279 $ 646
Total liabilities $5,428 $2,762 $ 430
Page F-15
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
9 TRANSACTIONS WITH AFFILIATES
The Company and the Management Companies recognized management and
development fee revenue, interest income and other miscellaneous
income from affiliated entities of $8,427, $6,170 and $2,291 for the
years ended December 31, 1997, 1996 and 1995, respectively.
The Company leases its corporate office space from an affiliate. The
lease requires an annual base rent of $248 through the August, 2000
lease expiration. The lease also requires the Company to pay a pro
rata portion of property improvements, real estate taxes and common
area maintenance. Rental expense was $387, $349 and $237 for the years
ended December 31, 1997, 1996 and 1995, respectively.
From time to time, the Company advances funds as needed to the
Management Companies which totaled $5,342 and $2,451 at December 31,
1997 and 1996, respectively, and bear interest at 1% over prime.
10 COMMITMENTS AND CONTINGENCIES
Ground Lease
The Company has a non-cancelable operating ground lease for one of its
properties. The lease expires May 1, 2020, with options to extend the
term of the lease for two successive terms of twenty-five years each.
The lease provides for contingent rental payments based on certain
variable factors. The lease also requires the lessee to pay real
estate taxes, insurance and certain other operating expenses
applicable to the leased property. Ground lease expense was $180, $174
and $169 including contingent rents of $110, $104 and $99 for the
years ended December 31, 1997, 1996 and 1995, respectively. At
December 31, 1997, future minimum rental payments required under the
lease are $70 per year until the lease expires.
401(K) Savings Plan
The Company participates in a contributory savings plan. Under the
plan, the Company will match 75% of the first 4% of participant
contributions. Expenses under this plan for the periods presented were
not material.
Employment Agreements
The Operating Partnership entered into five-year employment agreements
with two executives on August 4, 1994 and one executive on January 1,
1996. Each executive had a base salary of $160 in 1997, and for each
subsequent year the base salary shall be 10% in excess of the base
salary for the preceding year. The executives are also entitled to
receive incentive compensation pursuant to the Company's Incentive
Compensation Plan as it may be revised by the Compensation Committee
from time to time.
Page F-16
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10 COMMITMENTS AND CONTINGENCIES (Continued)
Incentive Compensation Plan
Effective January 1, 1996, the Incentive Compensation Plan provides
that eligible officers and key employees may earn a cash bonus based
on increases in funds from operations. No cash bonuses will be payable
under the Incentive Compensation Plan unless the increase in funds
from operations per share, after giving effect to the bonuses, is
equal to or greater than 2%. The bonus expense charged to operations
was $1,193, $495 and $0 for the years ended December 31, 1997, 1996
and 1995, respectively.
Contingencies
The Company is subject to various legal proceedings and claims that
arise in the ordinary course of business. These matters are generally
covered by insurance. While the resolution of these matters cannot be
predicted with certainty, management believes that the final outcome
of such legal proceedings and claims will not have a material adverse
effect on the Company's liquidity, financial position or results of
operations.
Debt Covenants
The line of credit loan agreement contains restrictions which, among
other things, require maintenance of certain financial ratios and
limit the payment of dividends. At December 31, 1997, the Company was
in compliance with these covenants.
Prior Property Acquisitions
In connection with a property acquisition which closed on September
23, 1997, the Company is obligated for six months from the closing
date to redeem the issued UPREIT Units for cash at the original
closing price of $24.28 per Unit. If all redemption options were
exercised, the total liability would be $15,490.
In connection with a 1996 transaction, the Company is obligated to pay
additional consideration in UPREIT Units if development fee income
exceeds target levels over the first five years. Management does not
anticipate the issuance of these UPREIT Units to have a material
adverse effect on the Company's liquidity, financial position or
results of operations.
In connection with various UPREIT transactions, the Company has agreed
to maintain certain levels of nonrecourse debt associated with the
contributed properties acquired. In addition, the Company is
restricted in its ability to sell certain contributed properties (39%
of the owned portfolio) for a period of time unless in a tax deferred
Internal Revenue Code Section 1031 like-kind exchange.
Page F-17
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10 COMMITMENTS AND CONTINGENCIES (Continued)
Guarantees
The Company has guaranteed temporary construction financing totaling
$931 associated with one entity and a total of $2,482 of additional
debt associated with five entities where the Company is the general
partner. In addition, the Company has guaranteed the Low Income
Housing Tax Credit to limited partners in thirty-one partnerships
totaling approximately $22,000. As of December 31, 1997, there were no
known conditions that would make such payments necessary.
The Company guarantees the successful construction of properties
developed under the federal government's Low Income Housing Tax Credit
Program. The outstanding guarantee at December 31, 1997 is
approximately $21,500. In addition, the Company, acting as general
partner in certain partnerships, is obligated to advance funds to meet
partnership operating deficits.
11 STOCK BENEFIT PLAN
The Company has adopted the 1994 Stock Benefit Plan as Amended (the "
Plan " ). Plan participants include officers, non-employee directors,
and key employees of the Company. The Company has reserved 946,000
shares for issuance to officers and employees and 154,000 shares for
issuance to non-employee directors. Options granted to officers and
employees of the Company vest 20% for each year of service until 100%
vested on the fifth anniversary. Certain officers' options (264,000)
and directors' options (78,500) vest immediately upon grant. The
exercise price per share for stock options may not be less than 100%
of the fair market value of a share of common stock on the date the
stock option is granted (110% of the fair market value in the case of
incentive stock options granted to employees who hold more than 10% of
the voting power of the Company's common stock). During 1996, 144,000
of the total options granted had an exercise price greater than the
fair market value of the stock at the date of the grant. The weighted
average fair value of these options was $0.78. Options granted to
directors and employees who hold more than 10% of the voting power of
the Company expire after five years from the date of grant. All other
options expire after ten years from the date of grant. The Plan also
allows for the grant of stock appreciation rights and restricted stock
awards, however, there were none granted at December 31, 1997. At
December 31, 1997, 179,999 and 75,500 common shares were available for
future grant of options or awards under the Plan for officers and
employees and non-employee directors, respectively.
Page F-18
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11 STOCK BENEFIT PLAN (Continued)
Details of stock option activity during 1997, 1996 and 1995 are as
follows:
Number Option Price
of Shares Per Share
Options outstanding at January 1, 1995 429,532 $19.00
(194,000 shares exercisable)
Granted, 1995 18,000 17.875
Cancelled, 1995 ( 2,000) 19.00
Options outstanding at December 31, 1995 445,532 17.875-19.00
(258,527 shares exercisable)
Granted, 1996 255,146 19.00-20.50
Cancelled, 1996 ( 2,900) 19.00
Options outstanding at December 31, 1996 697,778 17.875-20.50
(411,053 shares exercisable)
Granted, 1997 141,823 22.75-26.50
Exercised, 1997 ( 3,499) 19.00
Cancelled, 1997 ( 600) 19.00
Options outstanding at December 31, 1997 835,502 $17.875-$26.50
(507,809 shares exercisable)
The following table summarizes information about options outstanding
at December 31, 1997:
Weighted
Average Weighted Weighted
Remaining Average Average
Year Number Contractual Fair Value Number Exercise
Granted Outstanding Life of Options Exercisable Price
1994 422,533 6 N/A 329,880 $19.000
1995 18,000 2 $1.39 18,000 17.875
1996 253,146 8 $1.01 135,429 19.167
1997 141,823 9 $1.59 24,500 22.750
Totals 835,502 7 507,809 $19.186
Page F-19
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11 STOCK BENEFIT PLAN (Continued)
The Company has adopted the disclosure only provisions of Financial
Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." Accordingly, no compensation cost has been recognized
for the stock option plan. Had compensation for the Company's stock
option plan been determined based on the fair value at the date of
grant for awards in 1997, 1996 and 1995, the Company's proforma net
income and proforma earnings per share would have been $6,299, $4,031
and $2,771, and $.85, $.72 and $.51, respectively. The fair value of
each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions used
for grants in 1997, 1996 and 1995: dividend yield of 9.315%; expected
volatility of 18.97%; forfeiture rate of 5%; and expected lives of 7.5
years for options with a lifetime of ten years, and five years for
options with a lifetime of five years. The interest rate used in the
option-pricing model is based on a risk free interest rate ranging
from 5.25% to 6.87%.
12 PROPERTY ACQUISITIONS
For the years ended December 31, 1997, 1996 and 1995, the Company has
acquired the communities listed below:
Cost of
Market Date Year Number Cost of Acquisition
Community Area Acquired Constructed of Units Acquis. Per Unit
Idylwood (1) Buffalo 1/6/95 1969 720 17,627 $25
Pearl Street Syracuse 5/16/95 1969 60 1,238 21
Candlewood (2) Syracuse 12/4/95 1969 126 2,950 23
Conifer Court Syracuse 1/1/96 1963 20 703 35
Hamlet Court Rochester 1/1/96 1971 98 2,702 28
Westminster Syracuse 1/1/96 1972 240 6,623 28
Village Green (Fairways) Syracuse 3/5/96 1986 200 5,246 26
Carriage Hill Hudson Valley 7/16/96 1973 140 4,396 31
Cornwall Park Hudson Valley 7/16/96 1967 75 3,386 45
Lakeshore Villa Hudson Valley 7/16/96 1975 152 4,421 29
Sunset Gardens Hudson Valley 7/16/96 1968-71 217 5,357 25
Valley Park South Bethlehem 11/22/96 1971-73 384 18,914 49
Lake Grove Long Island 2/3/97 1969 368 19,312 53
Royal Gardens Northern NJ 5/28/97 1967 550 19,567 34
Woodgate Place Rochester 6/30/97 1972 120 4,277 36
Mid-Island Estates Long Island 7/1/97 1961-66 232 10,756 46
1600 East Avenue Rochester 9/18/97 1958 164 9,520 58
11 Property Portfolio Philadelphia 9/23/97 1928-82 1,750 63,714 36
3 Property Portfolio Buffalo 10/15/97 1960-72 452 11,307 25
12 Property Portfolio Detroit 10/29/97 1953-75 3,106 105,055 34
Hill Court South/Ivy Ridge Rochester 10/31/97 1963 230 6,647 29
Cloverleaf Pittsburgh 11/4/97 1957 148 3,038 21
Scotsdale Detroit 11/26/97 1974 376 13,606 36
(1) The acquisition of Idylwood occurred in stages, with 44% being
acquired on January 6, 1995 and the balance on September 7, 1995. The
56% acquired in September was subject to a lease entitling the
Operating Partnership to all items of income and expense effective
January 1, 1995. The acquisition was accounted for on the equity
method until the final closing date in September, 1995.
(2) Operation of Candlewood commenced December 4, 1995 subject to a net
lease agreement. This acquisition was accounted for on the equity
method until the final closing date of January 5, 1996.
Page F-20
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
12 PROPERTY ACQUISITIONS (Continued)
Proforma Financial Information (Unaudited)
The following unaudited proforma information was prepared as if the
1997 transactions related to the acquisitions of 35 apartment
communities in eleven separate transactions had occurred on January 1,
1996. The proforma financial information is based upon the historical
consolidated financial statements and is not necessarily indicative of
the consolidated results which actually would have occurred if the
transactions had been consummated at the beginning of 1996, nor does
it purport to represent the results of operations for future periods.
For the years ended
December 31,
1997 1996
Total revenues $106,387 $ 96,082
Income before extraordinary item 9,637 6,372
Net income 8,600 6,372
Per share data:
Income before extraordinary item:
Basic $1.30 $1.14
Diluted $1.28 $1.13
Net income:
Basic $1.16 $1.14
Diluted $1.14 $1.13
Weighted average numbers of shares outstanding:
Basic 7,415,888 5,601,027
Diluted 7,558,167 5,633,004
13 SUPPLEMENTAL CASH FLOW DISCLOSURES
For the years ended December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995
Cash paid for interest $ 10,880 $ 8,441 $ 5,739
Mortgage loans assumed associated with
property acquisitions 87,134 35,849 14,694
Issuance of UPREIT Units associated
with property and other acquisitions 106,359 10,168 453
Raintree capitalized lease affecting real
estate and leasehold liability - - 1,719
Shares issued in exchange for officer
and director notes 2,495 2,061 -
Page F-21
HOME PROPERTIES OF NEW YORK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
14 SUBSEQUENT EVENT
On February 9, 1998, the Operating Partnership acquired Candlewood
Apartments, a 310 unit apartment community located in South Bend, Indiana
for $13,350. The purchase was funded by a $8,000 new mortgage, $4,881 in
UPREIT Units and the balance in cash.
15 QUARTERLY FINANCIAL STATEMENT INFORMATION (UNAUDITED)
Quarterly financial information for the years ended December 31, 1997 and
1996 are as follows:
1997
First Second Third Fourth
Revenues $13,842 $14,464 $16,801 $24,590
Income before minority interest
and extraordinary item 1,841 2,678 1,251 5,905
Minority interest 572 802 423 2,451
Extraordinary item, net of minority
interest N/A N/A N/A ( 1,037)
Net income 1,269 1,876 828 2,417
Basic earnings per share:
Income before extraordinary item .20 .27 .11 .39
Extraordinary item N/A N/A N/A (.12)
Net income .20 .27 .11 .27
Diluted earnings per share:
Income before extraordinary item .19 .26 .11 .38
Extraordinary item N/A N/A N/A (.11)
Net income .19 .26 .11 .27
Full year per share data does not equal the sum of the quarterly data
due to the combination of seasonality and a growing number of shares
outstanding.
1996
First Second Third Fourth
Revenues $10,540 $10,706 $11,816 $12,608
Income before minority interest
and extraordinary item 810 1,122 1,626 1,486
Minority interest 147 194 285 271
Net income 663 928 1,341 1,215
Basic earnings per share .12 .17 .24 .21
Diluted earnings per share .12 .17 .24 .20
Page F-22
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
Total
Costs Cost,
Capitalized Bldgs. Net of
Initial Cost Subse- Improve Accumu- Year
Buildings, quent to ments, lated of
Encum- Improvements Adjust- Acqui- & Equip- Accumulated Depre- Acqui-
brances Land & Equipment ments(a) sition Land ment Total(b) Depreciation ciation sition
Brook Hill Apartments 4,942 330 7,920 1,191 330 9,111 9,441 971 8,470 1994
Candlewood Apartments 387 2,592 116 387 2,708 3,095 174 2,921 1996
Canterbury Square 8,610 2,352 10,790 30 2,352 10,820 13,172 64 13,108 1997
Carriage Hill Apartments 570 3,826 657 570 4,483 5,053 213 4,840 1996
Charter Square 9,670 3,952 18,245 32 3,952 18,277 22,229 107 22,122 1997
Chesterfield Apartments 6,825 1,482 8,206 61 1,482 8,267 9,749 64 9,685 1997
Cloverleaf Village 370 2,668 30 370 2,698 3,068 16 3,052 1997
Conifer Village
Apartments 2,910 358 8,555 125 358 8,680 9,038 891 8,147 1994
Cornwall Park Townhouses 439 2,947 1,621 439 4,568 5,007 193 4,814 1996
Curren Terrace 9,731 1,908 10,956 64 1,908 11,020 12,928 85 12,843 1997
Emerson Square 384 2,018 98 384 2,116 2,500 19 2,481 1997
Executive House 2,583 600 3,420 37 600 3,457 4,057 31 4,026 1997
Fairview Heights &
Fairview Manor 4,004 580 5,305 2,828 1,180 580 9,313 9,893 3,146 6,747 1985
Fairway Apartments 128 673 44 128 717 845 6 839 1997
Finger Lakes Manor
Apartments 4,004 200 4,536 1,882 855 200 7,273 7,473 2,325 5,148 1983
Fordham Green 3,185 876 5,280 22 876 5,302 6,178 27 6,151 1997
Garden Village
Apartments 4,652 354 8,546 1,005 354 9,551 9,905 1,198 8,707 1994
Glen Manor 3,752 1,044 4,494 13 1,044 4,507 5,551 32 5,519 1997
Golfview Manor 335 110 541 5 110 546 656 4 652 1997
Greentrees Apartments 5,050 1,152 8,607 10 1,152 8,617 9,769 44 9,725 1997
Hamlet Court Apartments 1,812 351 2,351 106 351 2,457 2,808 157 2,651 1996
Harborside Manor 4,207 250 6,113 1,480 250 7,593 7,843 750 7,093 1995
Hill Court South 333 2,428 5 333 2,433 2,766 15 2,751 1997
Idylwood Apartments 9,390 700 16,927 3,863 700 20,790 21,490 1,821 19,669 1995
Ivy Ridge Apartments 438 3,449 46 438 3,495 3,933 21 3,912 1997
Kingsley Apartments 6,885 1,640 11,670 15 1,640 11,685 13,325 69 13,256 1997
Lake Grove 7,360 11,952 1,985 7,360 13,937 21,297 392 20,905 1997
Lakeshore Villa
Apartments 573 3,848 1,024 573 4,872 5,445 201 5,244 1996
Lansdowne Group - Karen
Court 1,314 294 1,654 5 294 1,659 1,953 15 1,938 1997
Lansdowne Group -
Landon Court 1,195 264 1,444 4 264 1,448 1,712 13 1,699 1997
Lansdowne Group -
Marshall House 378 1,617 15 378 1,632 2,010 15 1,995 1997
Lansdowne Group -
Patricia Court 1,729 396 2,229 6 396 2,235 2,631 20 2,611 1997
Meadows Apartments 1,984 208 2,776 1,216 914 208 4,906 5,114 1,666 3,448 1984
Mid-Island Estates 6,675 4,176 6,580 102 4,176 6,682 10,858 120 10,738 1997
Page F-23
HOME PROPERTIES OF NEW YORK, INC. SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
Total
Costs Cost,
Capitalized Bldgs. Net of
Initial Cost Subse- Improve Accumu- Year
Buildings, quent to ments, lated of
Encum- Improvements Adjust- Acqui- & Equip- Accumulated Depre- Acqui-
brances Land & Equipment ments(a) sition Land ment Total(b) Depreciation ciation sition
Newcastle Apartments 6,150 197 4,007 3,684 2,038 197 9,729 9,926 3,053 6,873 1982
New Orleans Park 1,848 8,886 278 1,848 9,164 11,012 72 10,940 1997
Northgate Manor
Apartments 290 6,987 1,472 290 8,459 8,749 942 7,807 1994
Oak Park Manor 5,370 1,192 9,187 9 1,192 9,196 10,388 54 10,334 1997
Paradise Lane at
Raintree 972 7,132 445 972 7,577 8,549 63 8,486 1997
Parkview Gardens 1,207 7,200 26 1,207 7,226 8,433 46 8,387 1997
Pearl Street 49 1,189 103 49 1,292 1,341 112 1,229 1995
Perinton Manor
Apartments 6,267 224 6,120 3,629 1,231 224 10,980 11,204 3,579 7,625 1982
Raintree Island
Apartments 7,695 - 6,654 3,217 5,200 - 15,071 15,071 3,748 11,323 1985
Riverton Knolls
Apartments 5,716 240 6,640 2,523 2,142 240 11,305 11,545 4,288 7,257 1983
Royal Gardens 11,919 5,500 14,067 989 5,500 15,056 20,556 247 20,309 1997
1600 East Avenue 1,000 8,520 45 1,000 8,565 9,565 100 9,465 1997
1600 Elmwood Avenue
Apartments 5,427 303 5,698 3,339 1,869 299 10,910 11,209 4,268 6,941 1983
Scotsdale Apartments 1,692 11,914 2 1,692 11,916 13,608 31 13,577 1997
Southpointe Square 2,850 896 4,609 9 896 4,618 5,514 28 5,486 1997
Spanish Gardens
Apartments 373 9,263 1,553 398 10,791 11,189 1,133 10,056 1994
Springcreek Apartments 1,216 128 1,702 745 461 128 2,908 3,036 1,020 2,016 1984
Springwood Apartments 1,515 462 1,770 8 462 1,778 2,240 16 2,224 1997
Stephenson House 1,575 640 2,407 10 640 2,417 3,057 15 3,042 1997
Sunset Gardens
Apartments 696 4,661 630 696 5,291 5,987 252 5,735 1996
Valley Park South
Apartments 10,175 2,459 16,454 204 2,459 16,658 19,117 591 18,526 1996
Valley View Apartments 3,434 1,056 4,959 88 1,056 5,047 6,103 40 6,063 1997
Village Green Apartments 9,359 1,043 13,283 2,589 1,103 15,812 16,915 1,313 15,602 1994-1996
Vilage Square Apartments 2,905 768 3,581 19 768 3,600 4,368 28 4,340 1997
Wedgewood Shopping
Center 100 504 15 227 100 746 846 291 555 1986
Westminster Apartments 3,230 860 5,763 336 860 6,099 6,959 399 6,560 1996
Williamstowne Village
Apartments 9,868 390 9,748 5,115 2,417 390 17,280 17,670 5,518 12,152 1985
Woodgate Place 3,473 480 3,797 246 480 4,043 4,523 61 4,462 1997
Woodland Gardens 6,470 2,022 10,479 16 2,022 10,495 12,517 62 12,455 1997
Other Assets - 907 - 125 107 535 604 1,139 276 863
210,058 62,931 392,344 28,318 41,535 62,640 462,488 525,128 46,531 478,597
(a) Represents the excess of fair value over the historical cost of partnership
interests as a result of the application of purchase accounting for the
acquisition of non-controlled interests.
(b) The aggregate cost for Federal Income Tax purposes was approximately
$455,000.
Page F-24
HOME PROPERTIES OF NEW YORK, INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(IN THOUSANDS)
Depreciation and amortization of the Company's investments in buildings and
improvements reflected in the consolidated statements of operations are
calculated over the estimated useful lives of the assets as follows:
Buildings and improvements 5-40 years
Tenant improvements Life of related lease
The changes in total real estate assets for the three years ended December 31,
1997, are as follows:
1997 1996 1995
Balance, beginning of year $261,773 $198,203 $162,991
New property acquisition 266,799 54,727 26,956
Additions 15,962 8,843 8,256
Disposals and retirements (19,406) - -
Balance, end of year $525,128 $261,773 $198,203
The changes in accumulated depreciation for the three years ended December 31,
1997, are as follows:
1997 1996 1995
Balance, beginning of year $40,237 $32,258 $25,759
Depreciation for the year 11,104 7,979 6,499
Disposals and retirements (4,810) - -
Balance, end of year $46,531 $40,237 $32,258
Page F-25
HOME PROPERTIES OF NEW YORK, INC.
FORM 10-K
For Fiscal Year Ended December 31, 1997
Exhibit Index
Exhibit Exhibit Location
Number
2.1 Agreement among Home Properties of New York, Incorporated by reference to the
Inc. and Philip J. Solondz, Daniel Solondz Form 8-K filed by Home
and Julia Weinstein relating to Royal Gardens Properties of New York, Inc.
I, together with Amendment No. 1 dated 6/6/97 (the
"6/6/97 8-K")
2.2 Agreement among Home Properties of New York, Incorporated by reference to the
Inc. and Philip Solondz and Daniel Solondz 6/6/97 8-K
relating to Royal Gardens II, together with
Amendment No. 1
2.3 Purchase and Sale Agreement dated July 25, Incorporated by reference to the
1997 by and between Home Properties of New Form 8-K filed by Home
York, L.P. and Louis S. and Molly S. Wolk Properties Of New York, Inc.,
Foundation. dated 10/6/97 (the "10/9/97
8-K").
2.4 Purchase and Sale Agreement dated April 30, Incorporated by reference to the
1997between Home Properties of New York, L.P. 10/9/97 8-K.
and Briggs Wedgewood Associates, L.P.
2.5 Agreement and Plan of Merger, dated July 31, Incorporated by reference to the
1997 between Home Properties of New York, 10/9/97 8-K.
L.P. and Chesfield Partnerhsip.
2.6 Agreement and Plan of Merger dated July 31, Incorporated by reference to the
1997 between Home Properties of New York, 10/9/97 8-K.
L.P. andValspring Partnership.
2.7 Agreement and Plan of Merger, dated July 31, Incorporated by reference to the
1997 between Home Properties of New York, 10/9/97 8-K
L.P. and Exmark Partnerhsip.
2.8 Agreement and Plan of Merger, dated July 31, Incorporated by reference to the
1997 between Home Properties of New York, 10/9/97 8-K.
L.P. and New Orleans East Limited Partnership.
2.9 Agreement and Plan of Merger, dated July 31, Incorporated by reference to the
1997 between Home Properties of New York, 10/9/97 8-K.
L.P. Glenvwk Partnership.
2.10 Agreement and Plan of Merger, dated July 31, Incorporated by reference to the
1997 between Home Properties of New York, 10/9/97 8-K.
L.P. and PK Partnership.
2.11 First Amendment to Agreement and Plan of Incorporated by reference to the
Merger, dated September 1, 1997 between Home 10/9/97 8-K.
Propertiesof New York, L.P. and PK
Partnerhsip and its partners.
2.12 First Amendment to Agreement and Plan of Incorporated by reference to the
Merger, dated September 1, 1997 between Home 10/9/97 8-K.
Properties of New York, L.P. and NOP Corp.
and Norpark Partnership.
2.13 Contribution Agreement dated July 31, 1997 Incorporated by reference to the
between Home Properties of New York, L.P. 10/9/97 8-K.
and Lamar Partnership.
2.14 Agreement and Plan of Merger, dated July 31, Incorporated by reference to the
1997 between Home Properties of New York, Form 8-K filed by Home
L.P. and Curren Partnership. Properties Of New York, Inc.,
dated 10/3/97.
2.15 Contribution Agreement, dated October __, Incorporated by reference to the
1997between Home Properties of New York, L.P. Form 8-K filed by Home dated
andBerger/Lewiston Associates Limited 10/7/97.
Partnership; Stephenson-Madison Heights
Company LimitedPartnership; Kingsley-Moravian
Company Limited Partnership; Woodland Garden
Apartments Limited
Partnership; B&L Realty Investments
Limited Partnership; Southpointe Square
Apartments Limited Partnership; Greentrees
Apartments limited Partnership; Big
Beaver-Rochester Properties Limited
Partnership; Century Realty Investment
Company Limited Partnership.
2.16 Agreement among Home Properties of New York, Incorporated by reference to the
L.P. and Erie Partners, L.L.C. relating to the Form 8-K filed by Home
Woodgate PlaceApartments, together with Properties of New York, Inc.,
Amendment No. 1 dated10/31/97 (the "10/31/97
8-K").
2.17 Agreement among Home Properties of New York, Incorporated by reference to the
L.P. and Mid-Island Limited Partnership 10/31/97 8-K.
relating to Mid-Island
Estates, together with Amendment No. 1.
2.18 Purchase and Sale Agreement among Home Incorporated by reference to the
Properties of New York, L.P. and Anthony M. 10/31/97 8-K.
Palumbo and Daniel Palumbo.
2.19 Purchase and Sale Agreements dated June 17, Incorporated by reference to the
1997 among Home Properties of New York, Form 8-K filed by Home
L.P. and various individuals relating to Hill Properties of New York, Inc.,
Court Apartments South and Hudson Arms dated 2/20/98 (the "2/20/98
Apartments, together with a letter 8-K").
amendment dated September 24, 1997.
2.20 Contract of Sale, dated October 20,1997 Incorporated by reference to the
between Home Properties of New York, L.P. and 2/20/98 8-K.
Hudson Palisades Associates relating to
Cloverleaf Apartments.
2.21 Contribution Agreement, dated November 127, Incorporated by reference to the
1997 among Home Properties of New 2/20/98 8-K.
York, L.P. and various trusts relating to
Scotsdale Apartments.
2.22 Contribution Agreement, dated November 7, Incorporated by reference to the
1997among Home Properties of New York, L.P. 2/20/98 8-K
and Donald H. Schefmeyer and Stephen
W. Hall relating to Candlewood Apartments,
together with Amendment
No. One dated December 3, 1997.
3.1 Articles of Incorporation of Home Properties Incorporated by reference to
of New York, Inc. Home Properties of New York,
Inc. Registration Statement on
Form S-11, File No. 33-78862
(the "S-11Registration
Statement").
3.2 Articles of Amendment and Restatement of Incorporated by reference to
Articlesof Incorporation of Home Properties S-11 Registration Statement
of New York, Inc. .
3.3 Amended and Restated By-Laws of Home Incorporated by reference to the
Properties of New York, Inc. (Revised Form 8-K filed by Home
12/30/96). Properties of New York, Inc.
dated December 23, 1996 (the
"12/23/96 8- K").
4.1 Form of certificate representing Shares of Incorporated by reference to the
Common Stock. Form 10- K filed by Home
Properties of New York, Inc. for
the period ended 12/31/94 (the
"12/31/94 10-K").
4.2 Agreement of Home Properties of New York Incorporated by reference to
Inc. to file instruments defining the rights 12/31/94 10-K.
of
holders of long-term debt of it or
its subsidiaries with the
Commission upon request.
4.3 Credit Agreement between Manufacturers Incorporated by reference to the
Traders Trust Company Home Properties of New Form 10- Q filed by Home
York, L.P. and Home Properties of New York, Home Properties of New York,
Inc. Inc. Properties of New York,
Inc. for the quarterly period
ended 6/30/94 (the "6/30/94
10-Q").
4.4 Amendment Agreement between Manufacturers and Incorporated by reference t the
Traders Trust Company, Home Properties of New 12/31/94 10-K/
York, L.P. and Home Properties of New York,
Inc. amending the Credit Agreement
4.5 Mortgage Spreader, Consolidation and Incorporated by reference to the
Modification Agreement between 6/30/94 10-Q.
Manufacturers and Traders Trust Company and
Home Properties of New York, L.P.,
together with form of Mortgage, Assignment
of Leases and Rents and Security Agreement
incorporated therein by reference.
4.6 Mortgage Note made by Home Properties Incorporated by reference to the
of New York, L.P. payable to Manufacturers 6/30/94 10-Q.
and Traders Trust Company in the principal
amount of $12,298,000.
4.7 Demand Grid Note, dated August 22, 1995, Incorporated by reference to the
fromHome Properties of New York, L.P. to Form 10-K filed by Home
Manufacturers and Traders Trust Company in Properties of New York, Inc. for
the maximum principal amount of 15,000,000. the period ended 12/31/95 (the
"12/31/95 10-K").
4.8 8 Spreader, Consolidation, Incorporated by reference to
Modification and Extension Agreement between 12/31/95 10-K.
Home Properties of New YorkL.P. and John
Hancock Mutual Life Insurance Company,
dated as of October 26, 1995, relating to
indebtedness in the principal amount of
$20,500,000.
4.9 Demand Grid Note, dated August 22, 1996 from Incorporated by reference to the
theOperating Partnership to Manufacturers and Form 10-K filed by Home
Traders Trust Company in the maximum principal Properties of New York, Inc. For
amount of $25,000,000. the period ended 12/31/96 (the
"12/31/96 10-K").
4.10 Demand Grid Note, dated March 5, 1997 from Incorporated by reference to the
Operating Partnership to Manufacturers the 12/31/96 10-K.
andTraders Trust Company in the maximum
principal amount of $35,000,000.
4.11 Amended and Restated Stock Benefit Plan of Incorporated by reference to the
Home Properties of New York, Inc. 6/6/97 8-K.
4.12 Amended and Restate Dividend Reinvestment, Incorporated by reference to the
Stock Purchase, Resident Stock Purchase and Form 8-K filed by Home
Employee Properties Of New York, Inc.,
Stock Purchase Plan. dated 12/23/97.
Second Amended and Restated Agreement of Incorporated by reference to the
10.1 Limited Partnership of Home Properties of New Form 8-K of Home Properties of
York, L.P. New York, Inc. dated 9/26/97
(the "(9/26/97 8-K").
10.2 2 Amendments No. One through Eight to the Pages ____ to _______.
Second Amended and Restated Agreement of
LimitedPartnership of Home Properties of New
York, L.P.
10.3 Articles of Incorporation of Home Incorporated by reference to .
Properties Management, Inc to S-11Registration Statement.
10.4 By-Laws of Home Properties Management, Inc Incorporated by reference to
S-11 . Registration Statement.
10.5 Articles of Incorporation of Conifer Realty Incorporated by reference to the
Corporation 12/31/95 10-K.
10.6 By-Laws of Conifer Realty Corporation. Incorporated by reference to
12/31/95 10-K.
10.7 Employment Agreement between Home Properties Incorporated by reference to
of New York, L.P. and Norman P.Leenhouts. 6/30/94 10-Q.
10.8 Employment Agreement between Home Properties Incorporated by reference to the
of New York, L.P. and Nelson B. Leenhouts 6/30/94 10-Q.
10.9 Employment Agreement between Home Properties Incorporated by reference to
of New York, L.P. and Richard J. Crossed. 12/31/95 10-K.
10.10 Indemnification Agreement between Home Incorporated by reference to the
Properties of New York, Inc. and certain 6/30/94 10-Q.
officers and directors.
10.11 Indemnification Agreement between Incorporated by reference to
Home Properties of New York, Inc. and 12/31/95 10-K.
Richard J. Crossed.
.
10.l2 Indemnification Agreement between Home Incorporated by reference to
Properties of New York, Inc. and Alan L. 12/31/96 10-K.
Gosule.
10.13 Home Properties of New York, Inc. 1994 Stock Incorporated by reference to
Benefit Plan. S-11 Registration Statement.
10.14 Registration Rights Agreement among Home Incorporated by reference to the
Properties of New York, Inc., Home 6/30/94 10-Q.
LeasingCorporation, Leenhouts Ventures,
Norman P. Leenhouts, Nelson B. Leenhouts, Amy
L. Tait, David P. Gardner, Ann M. McCormick,
William Beach, Paul O'Leary, Richard J.
Struzzi, Robert C. Tait,
Timothy A. Florczak and Laurie Tones.
10.15 Lockup Agreements by Home Properties of New Incorporated by reference to
York, Inc. and Conifer Realty, Inc., 12/31/95 10- K.
ConiferDevelopment, Inc., Richard J. Crossed,
Peter J. Obourn and John F. Fennessey.
10.16 Contribution Agreement between Home Incorporated by reference to the
Properties of New York, L.P. and Conifer Form 8- K filed by Home
Realty, Inc.Conifer Development, Properties ofNew York, Inc.,
Inc.,.Richard J. Crossed, Peter J. Obourn and dated September 14, 1995.
John H. Fennessey.
10.17 Amendment to Contribution Agreement between Incorporated by reference to the
Home Properties of New York, L.P. and Conifer Form 8- K filed by Home
Realty, Inc., Conifer Development, Inc., Properties of New York, Inc.,
Richard J. Crossed, Peter J. Obourn and John dated January 9, 1996.
H. Fennessey
10.18 Agreement of Operating Sublease, Incorporated by reference to
dated October1, 1986, among KAM, Inc., S-11 Registration Statement.
Morris Massry and Raintree Island Associates,
as amended by Letter
Agreement Supplementing Operating Sublease
dated October 1, 1986.
10.19 Second Amended and Restated Incentive Incorporated by reference to
Compensation Plan of Home Properties of New 12/31/95 10-K.
York, Inc.
10.20 Indemnification and Pledge Agreement between Incorporated by reference to
Home Properties of New York, L.P. and 12/31/95 10- K.
ConiferRealty, Inc., Conifer Development,
Inc., Richard J. Crossed, Peter J. Obourn and
John H. Fennessey.
10.21 Form of Term Promissory Note payable to Incorporated by reference to
HomeProperties of New York, Inc. by officers 12/31/96 10-K.
and directors in association with the
Executive and Director Stock Purchase and
Loan Program.
10.22 Form of Pledge Security Agreement executed by Incorporated by reference to
officers and directors in connection with 12/31/96 10-K.
Executive and Director Stock Purchase and
Loan Program.
10.23 Schedule of Participants, loan amounts and Incorporated by reference to
shares issued in connection with the 12/31/96 10-K.
Executive and Director Stock Purchase and
Loan Program.
10.24 Guaranty by Home Properties of New York , Incorporated by reference to
Inc. and Home Properties of New York, L.P. to 12/31/96 10-K.
The Chase Manhattan Bank of the loans from
The Chase Manhattan Bank to officers and
directors in connection with the Executive
and Director Stock Purchase and Loan Program.
10.25 Subordination Agreement between Home Incorporated by reference to
Properties of New York, Inc. and The Chase 12/31/96 10-K.
Manhattan Bank relating to the Executive and
Director Stock Purchase
and Loan Program.
10.26 Partnership Interest Purchase Agreement, Incorporated by reference to
dated as of December 23, 1996 among Home 12/23/96 8- K.
Properties of New York, Inc., Home Properties
of New York, L.P. and State
of Michigan Retirement Systems.
10.27 Registration Rights Agreement, dated as of Incorporated by reference to
December 23, 1996 between Home Properties of 12/23/96 8-K.
New York, Inc. and State of Michigan
Retirement Systems.
10.28 Lock-Up Agreement, dated December 23, 1996 Incorporated by reference to
between Home Properties of New York, Inc. and 12/23/96 8-K.
State of Michigan
Retirement Systems.
10.29 Contract of Sale between Lake Grove Incorporated by reference to
Associates Corp. and Home Properties of New 12/31/96 10-K.
York, L.P., dated December 17, 1996, relating
to the Lake GroveApartments.
10.30 Credit Agreement dated as of September 4, Incorporated by reference to
1997 among Home Properties of New York, L.P. 10/9/97 8-K.
and The Chase Manhattan Bank, as
Administrative Agent, Chase Securities Inc.,
as Arranger, Manufacturers and TradersTrust
Company, as Co-Agent.
10.31 Amendment No. One, to Credit Agreement, Incorporated by reference to
dated as ofSeptember 4, 1997, among Home 10/9/97 8-K.
Properties of New York, L.P., a New York
limited partnership, the Lenders hereto, The
Chase Manhattan Bank, as Administrative
Agent, and Manufacturers and Traders Trust
Company,as Co-Agent.
10.32 Promissory Note, dated September 4, 1997 from Incorporated by reference to
Home Properties of New York, L.P. to The 10/9/97 8-K.
Chase Manhattan Bank.
10.33 Promissory Note, dated September 4, 1997 Incorporated by reference to
from Home Properties of New York, L.P. to 10/9/97 8-K.
Manufacturers and TradersTrust Company.
11 Computation of Per Share Earnings Schedule Page ______
21 List of Subsidiaries of Home Properties of Page ______
New York, Inc.
23 Consent of Coopers & Lybrand Page _______
27 Financial Data Schedule Page ______
27.1 Restated Financial Data Schedule for the nine Page _____
month sended September 30, 1997
27.2 Restated Financial Data Schedule for the six Page _____
months ended June 30, 1997
27.3 Restated Financial Data Schedule for the Page _____
three months ended March 31,1997
27.4 Restated Financial Data Schedule for the year Page _____
ended December 31, 1996
27.5 Restated Financial Data Schedule for the nine Page _____
months ended September 30, 1996
27.6 Restated Financial Data Schedule for the six Page _____
months ended June 30, 1996
27.7 Restated Financial Data Schedule for the Page _____
three monthsended March 31,1996